Exhibit 99.3
Ajuba Solutions, Inc.
Unaudited Balance Sheet -- As of September 30, 2000
September 30, 2000
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(unaudited)
Assets
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Current Assets:
Cash and cash equivalents $ 1,619,614
Accounts receivable, net of allowance
for doubtful accounts of $53,998 361,409
Prepaid expenses and other current assets 75,282
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Total current assets 2,056,305
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Property and Equipment, at cost:
Furniture and equipment 271,391
Software and computers 812,432
Capital improvements 214,300
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1,298,123
Less: Accumulated depreciation and amortization (395,676)
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902,447
Other Assets 199,055
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Total assets $ 3,157,807
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Liabilities and Shareholders' Deficit
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Current Liabilities:
Accounts payable $ 372,639
Accrued liabilities 497,587
Deferred revenue 394,993
Long-term debt, current portion 1,701,821
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Total current liabilities 2,967,040
Long-term debt, net of current portion 1,149,284
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Total liabilities 4,116,324
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Commitments (Note 5)
Shareholders' Deficit:
Series A convertible preferred stock, no par value; aggregate liquidation
preference of $1,060,000:
Authorized--2,120,000 shares; Outstanding--2,120,000 shares 1,048,570
Series B convertible preferred stock, no par value; aggregate liquidation
preference of $3,510,620:
Authorized--3,000,000 shares; Outstanding--2,854,163 shares 3,464,902
Series C convertible preferred stock, no par value; aggregate liquidation 5,832,856
preference of $8,162,906
Authorized--3,000,000 shares; Outstanding--2,039,458 shares
Common stock, no par value:
Authorized--15,120,000 share; Outstanding--5,607,934 shares 499,066
Notes receivable from shareholders (328,977)
Accumulated deficit (11,474,934)
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Total shareholders' equity, (deficit) (958,518)
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Total liabilities and shareholders' equity $ 3,157,807
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The accompanying notes are an integral part of these
unaudited financial statements.
Ajuba Solutions, Inc.
Unaudited Statement of Operations
Nine Months Ended September 30,
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1999 2000
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(unaudited)
Revenue $ 1,816,128 $ 1,443,444
Cost of Revenue 565,598 901,036
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Gross profit 1,250,530 542,408
Operating Expenses:
General and administrative 672,657 2,843,206
Sales and marketing 1,629,859 1,880,587
Research and development 1,357,893 2,798,556
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Loss from operations (2,409,879) (6,979,941)
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Other Income (Expense):
Interest expense (7,322) (260,766)
Interest income 80,667 59,062
Other expense (state and other taxes) (1,901) (11,127)
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Total other income, net 71,444 (212,831)
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Net Loss $ (2,338,435) $ (7,192,772)
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The accompanying notes are an integral part of these financial statements.
Ajuba Solutions, Inc.
Unaudited
Statement of Cash Flows
Nine Months Ended September 30, 2000
Nine Months Ended September 30
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1999 2000
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(Unaudited)
Cash Flows from Operating Activities:
Net loss $ (2,338,435) $ (7,192,772)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 81,087 237,745
Provision for doubtful accounts (5,000) (36,321)
Changes in assets and liabilities:
Accounts receivable (253,869) (12,079)
Prepaid expenses and other current assets (132,070) (18,977)
Accounts payable 35,929 226,216
Accrued liabilities 268,229 (170)
Deferred revenue (55,393) 112,012
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Net cash used in operating activities (2,399,522) (6,660,188)
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Cash Flows from Investing Activities:
Purchase of property and equipment (300,307) (667,987)
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Cash Flows from Financing Activities:
Repayment of long-term debt (96,303) (203,330)
Proceeds from issuance of common stock 13,941 5,864,460
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Net cash provided by financing activities (82,362) 5,661,130
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Net Decrease in Cash and Cash Equivalents (2,782,191) (1,667,046)
Cash and Cash Equivalents at Beginning of Year 4,070,095 3,286,661
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Cash and Cash Equivalents at End of Year $ 1,287,904 $ 1,619,614
================= =================
The accompanying notes are an integral part of these unaudited financial
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statements.
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Ajuba Solutions, Inc.
Notes to Unaudited Financial Statements
September 30, 2000
1. Organization
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Ajuba Solutions Inc. as Scriptics Corporation (the "Company") was incorporated
in the state of California on January 8, 1998 and is a leading supplier of
solutions for automating, managing and customizing high-value business-to-
business relationships over the Internet. Their flagship product, Scriptics
Connect, leverages the Internet and XML to connect an organization's
applications directly to trading communities and to the business systems of
partners. The Company also offers a full range of professional services to
create complete business-to-business integration solutions. Scriptics
Corporation changed its name to Ajuba Solutions on June 13, 2000.
The Company is subject to the risks and challenges associated with companies in
a comparable stage of development, including: dependence on key individuals,
competition from substitute products and from larger companies, successful
marketing of its products and acceptance of its technology, successful
development of product enhancements on a continuing basis and the need for
adequate financing to support future growth.
As of September 30, 2000 the Company has suffered recurring losses from
operations, has an accumulated deficit of approximately $11.5 million, net
shareholders' deficit of approximately $959,000, and negative working capital of
approximately $911,000. Management's current projections indicate that there
will not be sufficient cash flow from operations to satisfy cash requirements
throughout 2000. This factor raises substantial doubt about the Company's
ability to continue as a going concern. Management is in the process of
attempting to raise additional funding. However, there can be no assurance that
they will be successful with such efforts or that any financing will be
sufficient to meet the Company's working capital requirements. These financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
2. Significant Accounting Policies
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Use of Estimates in the Preparation of Financial Statements
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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
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For financial reporting purposes, the Company considers investments with
original maturities of three months or less to be cash equivalents. Cash
equivalents consist principally of money market accounts.
Concentration of Credit Risk
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Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of accounts receivable. The Company
performs periodic credit evaluations of its customers' financial condition
and generally does not require collateral. Seven customers comprised
approximately 62% of the accounts receivable balance at December 31, 1999.
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Property and Equipment
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Property and equipment are stated at cost. Depreciation and amortization is
computed using the straight-line method over the estimated useful lives of the
assets of three to five years or the life of the lease, whichever is shorter.
Stock-Based Compensation
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In accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation," the Company has
elected to measure compensation cost for its plans using the intrinsic value
method of accounting for stock issued to employees, in accordance with
Accounting Principles Board Opinion 25. Pro forma disclosure of net loss is
not reflected in the Notes to the Financial Statements as net income under
the fair value based method of accounting for stock options was not materially
different than stated net loss.
Comprehensive Income
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In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income". SFAS No. 130 was adopted by the Company upon
inception, January 8, 1998. This standard defines comprehensive income as the
changes in equity of an enterprise except those resulting from shareholder
transactions. Comprehensive loss for the nine months ended September 30, 2000,
approximated net loss.
Revenue Recognition
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The Company generates the following types of revenue:
License revenue. License revenue is earned under software license agreements
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to end-users. Revenues from licenses to end users are recognized upon shipment
of the software, provided collectability of the resulting receivable is
probable, the fee is fixed or determinable and contract execution, if
applicable, has occurred. In an acceptance period is required, revenues are
recognized upon the earlier of customer acceptance or the expiration of the
acceptance period.
Service revenue. Services consist of support arrangements and consulting and
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training services. Support agreements generally call for the Company to
provide technical support services and provide the customer with rights to
updates to software. Revenue on support agreements is recognized ratably over
the term of the support agreement. The Company provides consulting and
training services to its customers; revenue from such services is recognized
as the services are performed.
Software Development Costs
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Capitalization of software development costs begins upon the establishment of
technological feasibility of the product, which the Company defines as the
development of a working model and further defines as the development of a
beta version of the software. The establishment of technological feasibility
and the ongoing assessment of the recoverability of these costs requires
considerable judgment by management with respect to certain external factors,
including, but not limited to, anticipated future gross product revenue,
estimated economic life and changes in technology. Such costs are reported at
the lower of unamortized cost or net realizable value. To date, internal
software development costs that were eligible for capitalization have not been
significant and the Company has charged all software development costs to
research and development as incurred.
3 RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative and Hedging Activities," which establishes
accounting and reporting standards for derivative instruments and hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities on the balance sheet and measure those instruments at fair
value. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments - Deferral of the Effective Date of SFAS Statement No. 133" and in
June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative
Instruments - an amendment of SFAS 133, Accounting for Derivative Instruments
and Hedging Activities," As a result of SFAS No. 137, SFAS No. 133 and SFAS No.
138 will be effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. The company does not expect that the adoption of this
standard will have a material impact on its financial position and results of
operations.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation - an Interpretation of APB Opinion No. 25." FIN 44 clarifies the
application of Opinion 25 for (a) the definition of employee for purposes of
applying Opinion 25, (b) the criteria for determining whether a plan qualifies
as a noncompensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. The Company adopted FIN 44 effective July 1, 2000. The adoption of
the provisions of FIN 44 did not have a material effect on the financial
position or results of operations of the Company.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation and
disclosure of revenue in financial filings with the SEC. SAB 101 outlines the
basic criteria that must be met to recognize revenue and provides guidance for
disclosures related to revenue recognition policies. The Company is required to
adopt SAB 101 in the fourth quarter of fiscal 2001. We are in the process of
evaluating the Securities and Exchange Commission's interpretation of SAB 101
but believe that the implementation of SAB 101 will not have a material effect
on the financial position or results of operations of the Company.
4 ACQUISITION BY INTERWOVEN, INC.
In October 2000, Interwoven acquired all of Ajuba's outstanding shares of
Common Stock and Preferred Stock, at which time Ajuba became a wholly-owned
subsidiary of Interwoven.