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EXHIBIT 99(B)--PRO FORMA FINANCIAL INFORMATIOn
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following pro forma condensed statements of operations as set forth
herein give effect to the acquisition of Convoy by NEON as if such acquisition
had occurred as of the beginning of the earliest period presented (January 1,
1998) by combining the statements of operations data of (i) the Company and
Convoy for the six months ended June 30, 1999 and (ii) the Company and Convoy
for the year ended December 31, 1998. The acquisition was accounted for under
the purchase method of accounting. The pro forma financial information does not
reflect any potential cost savings which may be obtained following the
acquisition. The pro forma adjustments and assumptions are based on estimates,
evaluations and other data currently available. The pro forma condensed
statements of operations are provided for illustrative purposes only and are not
necessarily indicative of the combined results of operations that would have
been reported had the acquisition occurred on January 1, 1998, nor does it
represent a forecast of the combined future results of operations for any future
period. All information contained herein should be read in conjunction with the
Consolidated Financial Statements and the notes thereto of the Company and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the Company's Form 10-K for the year ended December 31,
1998, the financial statements and notes thereto of Convoy included in the
attached Exhibit to this Form 8-K/A, and the Notes to Unaudited Pro Forma
Statements of Operations.
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NEW ERA OF NETWORKS, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(Unaudited)
CONVOY PRO FORMA
NEON HISTORICAL HISTORICAL COMBINED COMBINED
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, MARCH 31, DECEMBER 31, PRO FORMA DECEMBER 31,
1998 1999 1998 ADJUSTMENTS 1998
--------------- ----------- ------------ ----------- ------------
Revenues:
Software licenses $40,975,703 $ 7,171,891 $ 48,147,594 $ $ 48,147,594
Services and maintenance 24,838,370 3,061,203 27,899,573 27,899,573
----------- ----------- ------------ ----------- ------------
Total revenues 65,814,073 10,233,094 76,047,167 76,047,167
----------- ----------- ------------ ----------- ------------
Cost of revenues:
Costs of software licenses 1,701,458 446,408 2,147,866 2,147,866
Cost of services and maintenance 12,906,012 1,112,809 14,018,821 14,018,821
----------- ----------- ------------ ----------- ------------
Total costs of revenues 14,607,470 1,559,217 16,166,687 16,166,687
----------- ----------- ------------ ----------- ------------
Gross Profit 51,206,603 8,673,877 59,880,480 59,880,480
Operating Expenses:
Sales and marketing 21,941,568 7,774,628 29,716,196 29,716,196
Research and development 15,839,483 1,813,425 17,652,908 17,652,908
General and administrative 6,571,100 2,870,050 9,441,150 9,441,150
Charge for acquired in-process
research and development 17,597,000 -- 17,597,000 17,597,000
Amortization of intangibles 1,778,410 -- 1,778,410 7,962,324(4) 9,740,734
----------- ----------- ------------ ----------- ------------
Total operating expenses 63,727,561 12,458,103 76,185,664 7,962,324 84,147,988
----------- ----------- ------------ ----------- ------------
Loss from operations (12,520,958) (3,784,226) (16,305,184) (7,962,324) (24,267,508)
Other income (expense), net 2,743,746 (319,113) 2,424,633 2,424,633
----------- ----------- ------------ ----------- ------------
Loss before benefit from income taxes (9,777,212) (4,103,339) (13,880,551) (7,962,324) (21,842,875)
Income tax benefit 1,278,400 -- 1,278,400 1,278,400
----------- ----------- ------------ ----------- ------------
Net loss $(8,498,812) $(4,103,339) $(12,602,151) $ (7,962,324) $(20,564,475)
=========== =========== ============ ============ ============
Historical pro forma net loss per
common share, basic and diluted $ (0.38) $ (0.89)
=========== ============
Historical pro forma weighted
average shares of common stock
outstanding, basic and diluted 22,277,472 23,084,587 (2)
============ ============
See accompanying notes to unaudited pro forma statements of operations.
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NEW ERA OF NETWORKS, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE six MONTHS ENDED JUNE 30, 1999
(Unaudited)
CONVOY PRO FORMA
NEON HISTORICAL HISTORICAL COMBINED COMBINED
SIX MONTHS FIVE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, MAY 31, JUNE 30, PRO FORMA JUNE 30,
1999 1999(1) 1999 ADJUSTMENTS 1999
--------------- ----------- ------------ ----------- ------------
Revenues:
Software licenses $26,232,421 $ 2,291,862 $ 28,524,283 $ $ 28,524,283
Services and maintenance 29,519,530 1,615,498 31,135,028 31,135,028
----------- ----------- ------------ ----------- ------------
Total revenues 55,751,951 3,907,360 59,659,311 59,659,311
----------- ----------- ------------ ----------- ------------
Cost of revenues:
Cost of software licenses 407,114 117,169 524,283 524,283
Cost of services and maintenance 16,518,028 613,660 17,131,688 17,131,688
----------- ----------- ------------ ----------- ------------
Total cost of revenues 16,925,142 730,829 17,655,971 17,655,971
----------- ----------- ------------ ----------- ------------
Gross Profit 38,826,809 3,176,531 42,003,340 42,003,340
Operating Expenses:
Sales and marketing 23,245,915 5,190,758 28,436,673 28,436,673
Research and development 16,210,437 570,201 16,780,638 16,780,638
General and administrative 6,955,579 2,089,181 9,044,760 9,044,760
Amortization of intangibles 5,052,297 -- 5,052,297 3,981,162 (4) 9,033,459
----------- ----------- ------------ ----------- ------------
Total operating expenses 51,464,228 7,850,140 59,314,368 3,981,162 63,295,530
----------- ----------- ------------ ----------- ------------
Loss from operations (12,637,419) (4,673,609) (17,311,028) (3,981,162) (21,292,190)
Other income (expense), net 3,943,212 (368,558) 3,574,654 3,574,654
----------- ----------- ------------ ----------- ------------
Loss before benefit from income taxes (8,694,207) (5,042,167) (13,736,374) (3,981,162) (17,717,536)
Income tax benefit 2,453,650 -- 2,453,650 2,453,650
----------- ----------- ------------ ----------- ------------
Net loss $(6,240,557) $(5,042,167) $(11,282,724) $(3,981,162) $(15,263,886)
=========== =========== ============ =========== ============
Historical and pro forma net loss
per common share, basic and
diluted $ (0.20) $ (0.48)
=========== ============
Historical and pro forma weighted
average shares of Common Stock
outstanding, basic and diluted 31,060,294 31,734,369 (2)
=========== ============
See accompanying notes to unaudited pro forma statements of operations.
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NEW ERA OF NETWORKS, INC.
NOTES TO UNAUDITED PRO FORMA
STATEMENTS OF OPERATIONS
On June 9, 1999, the Company acquired all of the outstanding capital stock
of Convoy Corporation, a Delaware corporation ("Convoy"), by means of the
statutory merger of a wholly owned subsidiary with and into Convoy. Convoy is a
worldwide provider of application integration software for PeopleSoft
applications.
The aggregate consideration paid by the Company was $42,809,000. At closing,
the Company issued 807,115 unregistered shares of its common stock valued at
$36,267,000. The Company also issued 105,333 stock options exercisable for
shares of the Company's common stock to assume all outstanding Convoy stock
options and warrants valued at approximately $4,733,000. Fees and expenses
related to the acquisition were approximately $1,809,000. The acquisition was
accounted for under the purchase method of accounting and, accordingly, the
assets, liabilities and operating results of Convoy have been included in the
accompanying consolidated financial statements from June 1, 1999.
An independent valuation of Convoy's net assets was performed to assist in
the allocation of the purchase price. A portion of the purchase price was
assigned to marketable software products ($8,500,000) and goodwill
($35,903,000), which are being amortized on a straight-line basis over three and
seven-year periods, respectively. Convoy's other assets were valued at
approximately $2,129,000 and its liabilities assumed totaled approximately
$3,723,000.
In August 1999, the Company agreed with the former stockholders of Convoy to
provide additional consideration to more closely reflect the value agreed upon
in the original purchase negotiations. Accordingly, 618,225 shares of the
Company's common stock will be issued to the prior Convoy stockholders subject
to final documentation and approval by the parties. As of the date of this
report, the Company has received approval of the agreement from a number of the
former Convoy stockholders. This adjustment to the purchase consideration will
be reflected in the Company's financial statements for the third quarter of 1999
as a one-time charge to net income of approximately $8,500,000 and has not been
reflected in the accompanying pro forma statements.
The NEON and Convoy statements of operations have been combined for the year
ended December 31, 1998 and the six-month period ended June 30, 1999 for the
presentation of unaudited pro forma statements of operations only. For pro forma
purposes, the historical statements of operations of NEON and Convoy have been
combined as if the acquisition had occurred as of the beginning of the earliest
period presented (January 1, 1998). These unaudited pro forma statements of
operations, including the notes thereto, should be read in conjunction with the
historical consolidated financial statements of NEON and Convoy for the
indicated periods. Certain reclassifications to the Convoy historical financial
statements have been made to conform to the NEON presentation.
NOTE 1. The Convoy acquisition was effective for accounting purposes as of
June 1, 1999, and, accordingly, Convoy's June 1999 results of operations have
been consolidated in NEON's historical Statement of Operations for the six
months ended June 30, 1999.
NOTE 2. The unaudited pro forma net loss per share is based on the actual
weighted average number of shares of NEON common stock outstanding during the
period, adjusted to give effect to 807,115 shares of the Company's common stock
issued pursuant to this acquisition as if they were outstanding from January 1,
1998.
NOTE 3. Reflects the agreement to provide additional consideration to the
former stockholders of Convoy valued at $8,500,000 as discussed above.
NOTE 4. Pro forma adjustments related to the Convoy purchase price
allocation reflects the amortization of intangibles associated with the purchase
of Convoy as if the acquisition was completed as of January 1, 1998.