Attached files
| file | filename |
|---|---|
| 8-K/A - FORM 8-K/A FINANCIAL STATEMENTS AND EXHIBITS - TALEO CORP | form_8ka.htm |
| EX-99.1 - WORLDWIDE COMPENSATION 2008 FINANCIAL STATEMENTS - TALEO CORP | exhibit_99-1.htm |
| EX-23.1 - CONSENT INDEPENDENT ACCOUNTANTS - TALEO CORP | exhibit_23-1.htm |
| EX-99.3 - PRO FORM FINANCIAL INFORMATION - TALEO CORP | exhibit_99-3.htm |
EXHIBIT
99.2
WORLDWIDE COMPENSATION,
INC.
Reviewed
Financial Statements
September
30, 2009 and 2008
|
WORLDWIDE COMPENSATION,
INC.
|
||||
|
Balance
Sheet
|
||||
|
September
30, 2009
|
||||
|
ASSETS
|
||||
|
Cash
and cash equivalents
|
$ | 477,387 | ||
|
Accounts
receivable
|
354,159 | |||
|
Prepaid
expenses
|
97,296 | |||
|
Total
current assets
|
928,842 | |||
|
Property
and equipment, net
|
142,435 | |||
|
Other
assets
|
2,700 | |||
|
Total
assets
|
$ | 1,073,977 | ||
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
||||
|
Current
liabilities:
|
||||
|
Accounts
payable
|
$ | 206,130 | ||
|
Accrued
liabilities
|
194,661 | |||
|
Obligation
to repurchase common shares
|
210,972 | |||
|
Deferred
revenue
|
1,739,220 | |||
|
Total
current liabilities
|
2,350,983 | |||
|
Long
term liabilities:
|
||||
|
Deferred
revenue
|
690,589 | |||
|
Total
liabilities
|
3,041,572 | |||
|
Commitments
and contingencies
|
||||
|
Shareholders'
equity:
|
||||
|
Preferred
stock:
|
||||
|
Series
B, no par, 5,102,040 shares authorized, issued, and
|
||||
|
outstanding
at September 30, 2009 (Aggregate
|
||||
|
liquidation
preference of $2,500,000)
|
2,479,449 | |||
|
Series
A, no par, 7,597,882 shares authorized, issued, and
|
||||
|
outstanding
at September 30, 2009 (Aggregate
|
||||
|
liquidation
preference of $1,873,638)
|
1,812,082 | |||
|
Common
stock, no par, 35,000,000 shares authorized,
|
||||
|
19,360,080
shares issued and outstanding
|
||||
|
at
September 30, 2009
|
149,980 | |||
|
Additional
paid-in capital
|
20,796 | |||
|
Accumulated
deficit
|
(6,429,902 | ) | ||
|
Total
shareholders' equity
|
(1,967,595 | ) | ||
|
Total
liabilities and shareholders' equity
|
$ | 1,073,977 | ||
|
WORLDWIDE COMPENSATION,
INC.
|
||||||||
|
Statement
of Income and Expense
|
||||||||
|
(Reviewed)
|
||||||||
|
Nine
Months Ended
|
||||||||
|
September
30,
|
||||||||
|
2009
|
2008
|
|||||||
|
Revenues
|
$ | 590,210 | $ | 135,340 | ||||
|
Operating
expenses
|
3,117,875 | 2,174,222 | ||||||
|
Net
loss
|
$ | (2,527,665 | ) | $ | (2,038,882 | ) | ||
|
The
accompanying notes are an integral part of these financial
statements
|
||||||||
|
Statement
of Shareholders' Deficit
|
||||||||||||||||||||||||||||||||||||
|
(Reviewed)
|
||||||||||||||||||||||||||||||||||||
|
Additional
|
Total
|
|||||||||||||||||||||||||||||||||||
|
Preferred
Stock
|
Common
Stock
|
Paid-In
|
Accumulated
|
Shareholders'
|
||||||||||||||||||||||||||||||||
|
Series
B Shares
|
Amount
|
Series
A Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Deficit
|
||||||||||||||||||||||||||||
|
Balances
at December 31, 2008
|
5,102,040 | $ | 2,479,449 | 7,597,882 | $ | 1,812,082 | 18,245,080 | $ | 31,102 | $ | 12,267 | $ | (3,902,237 | ) | $ | 432,663 | ||||||||||||||||||||
|
Issuance
of common stock for services
|
- | - | - | - | 1,115,000 | 246,000 | - | - | 246,000 | |||||||||||||||||||||||||||
|
Net
reclassification of unvested shares
|
||||||||||||||||||||||||||||||||||||
|
subject
to repurchase to liabilities
|
- | - | - | - | - | (127,122 | ) | - | - | (127,122 | ) | |||||||||||||||||||||||||
|
Stock
based compensation
|
- | - | - | - | - | - | 8,529 | - | 8,529 | |||||||||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | - | - | (2,527,665 | ) | (2,527,665 | ) | |||||||||||||||||||||||||
|
Balances
at September 30, 2009
|
5,102,040 | $ | 2,479,449 | 7,597,882 | $ | 1,812,082 | 19,360,080 | $ | 149,980 | $ | 20,796 | $ | (6,429,902 | ) | $ | (1,967,595 | ) | |||||||||||||||||||
|
The
accompanying notes are an integral part of these financial
statements
|
||||||||||||||||||||||||||||||||||||
|
WORLDWIDE COMPENSATION,
INC.
|
||||||||
|
Statement
of Cash Flows
|
||||||||
|
(Reviewed)
|
||||||||
|
Nine
Months Ended
|
||||||||
|
September
30,
|
||||||||
|
2009
|
2008
|
|||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
loss
|
$
|
(2,527,665)
|
$
|
(2,038,882)
|
||||
|
Adjustments
to reconcile net loss to net cash
|
||||||||
|
used
by operating activities:
|
||||||||
|
Depreciation
and amortization
|
24,000
|
24,549
|
||||||
|
Interest
on notes converted to convertible preferred stock
|
-
|
1,662
|
||||||
|
Non-cash
stock based compensation
|
8,529
|
10,284
|
||||||
|
Issuance
of common stock for services
|
246,000
|
83,850
|
||||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Accounts
receivable
|
(294,159)
|
(520,270)
|
||||||
|
Prepaid
expenses and other assets
|
(88,258)
|
(52,674)
|
||||||
|
Accounts
payable
|
119,595
|
61,990
|
||||||
|
Accrued
liabilities
|
81,777
|
79,414
|
||||||
|
Deferred
revenue
|
1,186,000
|
969,295
|
||||||
|
Due
to officers
|
-
|
(2,132)
|
||||||
|
Net
cash used by operating activities
|
(1,244,181)
|
(1,382,914)
|
||||||
|
Cash
flows from investing activities:
|
||||||||
|
Purchase
of property and equipment
|
(28,739)
|
(45,468)
|
||||||
|
Net
cash used by investing activities
|
(28,739)
|
(45,468)
|
||||||
|
Cash
flows from financing activities:
|
||||||||
|
Proceeds
from notes payable
|
-
|
200,000
|
||||||
|
Proceeds
from issuance of preferred stock, net of issuance costs
|
-
|
2,277,787
|
||||||
|
Net
cash provided by financing activities
|
-
|
2,477,787
|
||||||
|
Increase
(decrease) in cash and cash equivalents
|
(1,272,920)
|
1,049,405
|
||||||
|
Cash
and cash equivalents, beginning of period
|
1,750,307
|
996,178
|
||||||
|
Cash
and cash equivalents, end of period
|
$
|
477,387
|
$
|
2,045,583
|
||||
|
Supplemental disclosure of cash flow
information
|
||||||||
|
Cash
paid for income taxes
|
$
|
800
|
$
|
800
|
||||
|
Supplemental disclosure of non-cash
transactions
|
||||||||
|
Obligation
to repurchase common shares
|
$
|
127,122
|
$
|
83,850
|
||||
|
Conversion
of principal and accrued interest on convertible notes
|
||||||||
|
to
Series B convertible preferred stock
|
$
|
-
|
$
|
201,662
|
||||
|
Marketing
consideration received in exchange for services
|
$
|
110,830
|
$
|
100,000
|
||||
|
The
accompanying notes are an integral part of these financial
statements
|
||||||||
Note 1 -
Organization:
Business activity -
Worldwide Compensation, Inc. (the “Company”) was incorporated in the state of
California in 2006. The Company is a fully integrated global
compensation and software provider that enables companies to align and reward
people worldwide. The Company maintains one location in
California.
Going concern - The
accompanying financial statements of Worldwide Compensation, Inc. have been
prepared in accordance with the accounting principles generally accepted in the
United State of America (“GAAP”), which assumes that the Company will continue
as a going concern and which contemplates the realization of assets and
satisfaction of liabilities and commitments in the normal course of business.
Since inception, the Company has accumulated a deficit of approximately $6.4
million and experienced significant negative cash flow from operations during
the nine month periods ending September 30, 2009 and 2008. These factors, among
others, raise substantial doubt about the Company’s ability to continue as a
going concern.
Management
has been able, thus far, to finance the losses and growth of the business
through private equity and debt financing and cash payments from
customers. Management expects operating losses and negative cash
flows to continue for the foreseeable future, but anticipates that losses will
decrease because of revenues generated from the Company’s products and
services. Management believes that it will be able to obtain
additional capital from private equity or from other sources. At September 30,
2009, the Company had approximately $477,000 in cash and cash equivalents. The
Company will need to raise additional capital in order to sustain long-term
operations. However, such sources may not be available on acceptable terms, if
at all.
In light
of these conditions, the Company’s ability to continue as a going concern is
dependent upon its ability to meet financing requirements, and to ultimately
achieve profitable operations. If additional financial resources are
not available, the Company may need to significantly curtail operations or even
cease operations. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.
Acquisition by Taleo
Corporation - On September 14, 2009, the Company entered into an Amended
and Restated Agreement and Plan of Merger (the “Merger Agreement”) to be
acquired by Taleo Corporation (“Taleo”). In January 2010, the acquirer paid
approximately $14 million in cash, in exchange for all of the issued and
outstanding capital stock, options and warrants of the Company that Taleo does
not already own. Fifteen percent (15%) of the consideration has been placed into
escrow for one year following the closing to be held as security for losses
incurred by Taleo in the event of certain breaches of the representations and
warranties contained in the Merger Agreement or certain other events. The
acquisition has been approved by both companies’ boards of
directors.
Note 1 – Organization
(continued):
Acquisition by Taleo Inc.
(continued) - In connection with the execution of the Merger Agreement,
Taleo terminated the purchase option (See Note #5).
Note 2 - Significant
accounting policies:
Use of estimates -
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Risks and
uncertainties - The Company’s products are concentrated in an industry
which is characterized by significant competition, rapid technological advances,
changes in customer requirements and evolving regulatory requirements and
industry standards. The success of the Company depends on
management’s ability to anticipate and to respond quickly and adequately to
technological developments in the industry, and changes in customer requirements
or industry standards. Any significant delays in the development or
introduction of products could have a material adverse effect on the Company’s
business and operating results.
Concentration of credit
risk - Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents and accounts
receivable. Substantially all the Company’s cash and cash equivalents
are held by one financial institution that management believes is of high credit
quality. Such deposits may, at times, exceed federally insured
limits.
Contracts
with four customers accounted for approximately 97% of revenues for the nine
months ended September 30, 2009. Contracts with two customers accounted for
approximately 70%
of revenues for the nine months ended September 30, 2008.
At
September 30, 2009, approximately 91%
of the Company’s accounts receivable is due from four customers.
Management believes that the customer balances are fully
collectible.
Cash and cash
equivalents - The Company considers all highly liquid investments
purchased with an original or remaining maturity of three months or less to be
cash equivalents.
Cash
equivalents are carried at cost which approximates fair value. The Company's
cash and cash equivalents consist of monies held in bank deposits, money market
funds, and high-quality commercial paper with maturity dates of less than three
months.
Accounts receivable -
The Company extends credit to its customers in the normal course of
business. The Company sells its products and services to both direct
customers and distributors. The Company does not require cash
collateral or other security to support customer receivables. The
Company performs on-going credit evaluations of its customers’ financial
condition as well as an analysis of the aging of receivables to estimate
allowances for potential credit losses. The provision for doubtful accounts
is recorded as a charge to operating expense when a potential loss is
identified. Losses are written off against the allowance when
determined to be uncollectible. There is no recorded
allowance as of September 30, 2009.
Impairment of long-lived
assets - The Company evaluates long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment loss would be recognized when the sum of
the undiscounted future net cash flows expected to result from the use of the
asset and its eventual disposition is less than its carrying amount. No
impairments have been recorded to date.
Note 2 - Significant
accounting policies (continued):
Property and
equipment - Property and equipment is stated at cost net of accumulated
depreciation and amortization. Depreciation is calculated using the
straight-line method over the estimated useful lives of the respective assets,
which ranges from three to seven years. Leasehold improvements are
amortized using the straight-line method over the shorter of the lease term or
estimated useful life of the asset.
Repair
and maintenance costs are expensed as incurred. Depreciation and
amortization expense for each of the nine months ended September 30, 2009 and
2008 was approximately $24,000.
Property
and equipment, net at September 30, 2009 was approximately as
follows:
|
Internet
server infrastructure
|
$ | 105,000 | ||
|
Computer
software
|
54,000 | |||
|
Office
equipment and computers
|
48,000 | |||
| 207,000 | ||||
|
Less:
Accumulated depreciation and amortization
|
(65,000 | ) | ||
|
Property
and equipment, net
|
$ 142,000
|
|||
Income taxes - The
Company accounts for income taxes under the asset and liability method, which
requires that deferred income taxes be provided for temporary differences
between the tax basis of the Company’s assets and liabilities and their
financial statements reported amounts. In addition, deferred tax
assets are recorded for the future benefit of utilizing net operating losses and
research and development credit carry forwards. A valuation allowance
is provided against deferred tax assets unless it is more likely than not that
they will be realized.
The
Company evaluates its tax provisions for any potential uncertain tax positions.
If applicable, the Company accrues for those positions identified which are not
deemed more likely than not to be sustained if challenged. The Company has
elected to defer application of Accounting for Uncertain Tax Positions until
the year ending December 31, 2009.
Revenue recognition -
The Company derives its revenue from fixed subscription fees for access to and
use of its application software as well as from related set up and configuration
fees. These other services are generally sold in conjunction with the
Company’s subscriptions. The Company recognizes revenue when all of the
following conditions have been met: persuasive evidence of an arrangement
exists, delivery has occurred or services have been rendered, the fee is fixed
or determinable, and collectability is probable. If collection is not considered
probable, revenue is recognized when the sales return contingency expires and
fees are collected for the services.
Note 2 - Significant
accounting policies (continued):
Revenue recognition
(continued) - The Company determines whether its arrangements containing
multiple deliverables contain more than one unit of accounting. Multiple element
arrangements require the delivery or performance of multiple products, services
and/or rights to use assets. To qualify as a separate unit of accounting, the
delivered item must have value to the customer on a standalone basis and there
must be objective and reliable evidence of fair value of the undelivered
element. The Company has determined that it does not have objective and reliable
evidence of fair value of each element of its arrangements. As a result, these
other services do not qualify for separate accounting and the Company recognizes
the other services revenue together with the subscription fees ratably over the
non-cancelable term of the subscription agreement. The term commences on the “go
live date” of the customer’s software program and is generally one to five
years.
Stock-based
compensation - Stock based compensation expense for options granted for
the nine months ended September 30, 2009 and 2008 was approximately $9,000 and
$8,000, respectively. As required under previous accounting standards,
there was no stock-based compensation expense recorded related to fair value of
stock options issued to employees prior to January 1, 2006.
The
Company uses the Black-Scholes option pricing model to value its options
issued. The expected life computation is based on historical exercise
patterns and post-vesting termination behavior. The risk-free
interest rate for periods within the contractual life of the award is based on
the U.S. Treasury yield curve in effect at the time of grant. The
Company continues to recognize stock based compensation using the accelerated
multiple-option approach. Because stock-based compensation expense
recognized in the Statement of Income and Expense for the periods ended
September 30, 2009 and 2008 is based on awards ultimately expected to vest, it
has been reduced for estimated forfeitures. Forfeitures are estimated at the
time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates.
The
Company’s determination of fair value of share-based payment awards on the date
of grant using the Black-Scholes option-pricing model is affected by the
Company’s stock price as well as assumptions regarding a number of highly
complex and subjective variables. These variables include, but are not limited
to, the Company’s expected stock price volatility over the term of the awards,
and actual and projected employee stock option exercise behaviors.
Option-pricing models were developed for use in estimating the value of traded
options that have no vesting or hedging restrictions and are fully transferable.
Because the Company’s employee stock options have certain characteristics that
are significantly different from traded options, and because changes in the
subjective assumptions can materially affect the estimated value, in
management’s opinion, the existing valuation models may not provide an accurate
measure of the fair value of the Company’s employee stock options. Although the
fair value of employee stock options is determined using an option-pricing model
that value may not be indicative of the fair value observed in a willing
buyer/willing seller market transaction.
Note 2 - Significant
accounting policies (continued):
Stock-based
compensation (continued)
- The Company accounts for stock-based
compensation arrangements with non-employees based on the estimated fair value
of the equity instrument using the Black-Scholes pricing model. The
value of the equity instrument is charged to earnings over the term of the
related service agreement.
Capitalized software
development costs - Software development costs are accounted for upon the
establishment of technological feasibility and is discontinued when the product
is available for sale. The establishment of technological feasibility and the
ongoing assessment for recoverability of capitalized software development costs
require considerable judgment by management with respect to certain external
factors including, but not limited to, technological feasibility, anticipated
future gross revenues, estimated economic life, and changes in software and
hardware technologies. As of September 30, 2009, the Company did not have any
capitalized software development costs as the costs incurred subsequent to the
establishment of technological feasibility were insignificant.
Research and
development - Costs incurred in research and development are expensed as
incurred. The research and development expense is included in operating expenses
in the Statement of Income and Expense.
Advertising - The
Company expenses advertising costs as incurred. During the nine months ended
September 30, 2009 and 2008, the Company received advertising services from a
customer that were valued at approximately $111,000 and $100,000, respectively.
The advertising services received were exchanged for the Company’s services. The
Company recorded the fair value of the advertising services received in exchange
for Company services as revenue for service consideration received from the
customer and expense for services provided by the customer for the respective
periods.
Recent accounting
pronouncements - In September 2009, the Financial Accounting Standards
Board (“FASB”) approved new accounting guidance for revenue arrangements that
contain multiple components to be delivered to a customer (“deliverable”). This
standard provides guidance for establishing fair value for a deliverable. When
vendor-specific objective evidence or third-party evidence of fair value for
deliverables in an arrangement cannot be determined, companies will be required
to develop a best estimate of the selling price of separate deliverables and
allocate consideration for the arrangement using the relative selling price
method. This guidance is effective as of the beginning of an entity’s fiscal
year that begins after June 15, 2010. However, early adoption is permitted. The
Company is currently evaluating when the Company will adopt the new guidance.
The Company expects this guidance will have a significant impact on the
Company’s revenue recognition policy and financial statements, however, the
Company has not determined the impact as of September 30, 2009.
Note 3 - Income
taxes:
The
Company incurred corporate tax expenses comprised of required minimum tax
payments to applicable tax jurisdictions for the nine months ending September
30, 2009 and 2008. The tax expense of $800 each year has been recorded in
operating expenses, and was based on an estimated annual loss for each full
fiscal year.
The
Company has incurred a net operating loss in each period since inception. Based
on the available objective evidence, management cannot conclude it is more
likely than not that its net deferred tax assets will be fully realizable.
Accordingly, the Company has provided a full valuation allowance against its net
deferred tax assets.
Note 4 - Commitments and
contingencies:
Leases - The Company
leases facilities under an operating lease with unrelated parties. The lease is
on a month-to-month basis. Rent expense for the nine months ended September 30,
2009 and 2008 was approximately $28,000 and $27,000, respectively.
Legal contingencies -
Periodically the Company is involved in certain legal actions and claims arising
in the ordinary course of business. It is the opinion of management that such
litigation and claims will be resolved without a material adverse effect on the
Company's financial position.
Note 5 - Convertible
preferred stock:
During
September 2008, the Company’s Board of Directors approved the issuance of
5,102,040 shares of Series B preferred stock at a purchase price of
approximately $0.49 per share, aggregating approximately $2,500,000 in gross
proceeds.
The
Company’s Board of Directors is authorized to designate the rights and
preferences of each series of preferred stock and to establish the number of
shares in each series. At September 30, 2009, 12,699,922 shares of
preferred stock were authorized by the Company’s articles of incorporation, of
which 7,597,882 shares have been designated as Series A and 5,102,040 shares
have been designated as Series B.
The
rights, preferences and privileges of the convertible preferred stock are as
follows:
Voting - The holders
of the convertible preferred stock are entitled to vote, together with the
holders of common stock, on all matters submitted to the stockholders for a
vote. Each preferred stockholder is entitled to the number of votes
equal to the number of shares of common stock into which each preferred share is
convertible at the time of such vote.
Dividends - The
holders of the outstanding shares of Series A and B convertible preferred stock
are entitled to receive, when and if declared by the Board of Directors, a
non-cumulative dividend at the annual rate of $0.0197 and $0.0392,
respectively. Such dividends are payable in preference to any
dividends for common stock declared by the Board of Directors. No
dividends have been declared to date.
Conversion - Each
share of Series A and B preferred stock is convertible, at the option of the
holder, into fully paid shares of common stock determined by dividing the
original issue price of $0.2466 and $0.49, respectively, by the conversion
price. The conversion price is equivalent to the original issue price and is
subject to adjustment, as defined by the amended Articles of
Incorporation.
Liquidation - Upon
liquidation, dissolution, or winding up of the Company, the holders of the
Series B convertible preferred stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Company to the holders of shares of common stock or Series A convertible
preferred stock, an amount equal to $0.49, plus any declared but unpaid
dividends on such share (“Series B”). After the payment to Series B, the holders
of the Series A convertible preferred stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets or surplus funds of
the Company to the holders of shares of common stock, an amount equal to
$0.2466, plus any declared but unpaid dividends on such share (“Series A”).
After the payment to Series B and Series A, all remaining assets available for
distribution, if any, shall be distributed ratably among the holders of the
convertible preferred stock and common stock based on the number of shares of
common stock held by each, assuming conversion into common stock of all such
shares, with holders of Series A and B convertible preferred stock not entitled
to receive distributions in excess of $0.7398 and $1.47 per share,
respectively. If available assets are insufficient to pay the full
liquidation preference, the available assets will be distributed pro rata first
to the holders of Series B convertible preferred stock and next to the holders
of Series A convertible preferred stock.
In
connection with the Series B Preferred financing, the Company’s Board of
Directors approved and the Company executed, a Purchase Option Agreement
(“Purchase Option”) with Taleo Corporation, (“Taleo”) exercisable commencing
June 3, 2009 and expiring on December 3, 2009. The Purchase Option is
irrevocable and Taleo has no obligation to exercise the option. In September
2009, the Company entered into a Merger Agreement with Taleo under different
terms than stated in the Purchase Option. (See Note #1)
Note 6 - Common
stock:
The
Company’s Articles of Incorporation authorize the Company to issue 35,000,000
shares of common stock. The Company is required to reserve the amount of common
stock shares necessary to effect the conversion of all outstanding series of
convertible preferred stock.
Reserved shares of common
stock – At September 30, 2009, the Company had reserved shares of common
stock for future issuance as follows:
|
Series
A convertible preferred stock
|
7,597,882 | |||
|
Series
B convertible preferred stock
|
5,102,040 | |||
|
Stock
options outstanding
|
820,000 | |||
|
Stock
options available for grant
|
50,000 | |||
|
Total
shares reserved
|
13,569,922 |
Restricted common
stock - Certain shares of common stock outstanding are under stock
restriction agreements. According to the terms of the agreements, in the event
that a purchaser ceases their relationship with the Company, the Company has the
right to repurchase, at the original purchase price, shares issued and unvested
subject to various vesting terms over four years. As of September 30, 2009 the
Company had 2,130,000 shares subject to repurchase, which were granted from the
2007 Stock Incentive Plan (See Note #7). At September 30, 2009 the company
recorded a liability of approximately $211,000 for the unvested shares subject
to repurchase.
Note 7 - Stock incentive
plan:
In 2007,
the Company established its 2007 Stock Incentive Plan (the “Plan”) which
provides for the granting of stock awards as defined in the Plan to employees,
consultants, officers and directors of the Company. Options granted
under the Plan may be either incentive stock options (“ISOs”) or non-qualified
stock options (“NSOs”). ISOs may be granted only to Company employees
(including officers and directors who are also employees). NSOs may
be granted to Company employees, officers, directors and
consultants. The Company has reserved 3,000,000 shares of common
stock for issuance under the Plan.
To date,
options granted generally have a six year life and vest over four years at a
rate of 25% upon the first anniversary of the issuance date and 1/48th per month
thereafter. Certain option-holders have the right to exercise stock
options prior to vesting. The shares held by these individuals are subject to a
right of repurchase until the full vesting period has concluded. As
of September 30, 2009, no such shares were subject to repurchase.
Note 7 - Stock incentive
plan (continued):
The
following table summarizes information about stock options outstanding at
September 30, 2009:
|
|
Outstanding
Options
|
||||
|
Shares
Available
for
Grant
|
Number
of
Shares
|
Weighted-
Average Exercise
Price
|
|||
|
Balance
at January 1, 2009
|
1,165,000
|
820,000
|
$0.05
|
||
|
Restricted
stock awarded
|
(1,115,000)
|
-
|
$0.23
|
||
|
Balance
September 30, 2009
|
50,000
|
820,000
|
$0.09
|
||
|
|
Options
Outstanding
|
Options
Exercisable
|
||||
|
Range
of
Exercise
Prices
|
Number
of
Shares
|
Weighted-
Average
Exercise
Price
|
Weighted-
Average
Life
|
Number
Exercisable
|
Weighted-
Average
Exercise
Price
|
|
|
$0.0
to $0.05
|
200,000
|
$0.05
|
3.8
|
106,370
|
$0.05
|
|
|
$0.05
to $0.10
|
620,000
|
$0.10
|
4.4
|
263,945
|
$0.10
|
|
|
820,000
|
370,315
|
|||||
The
Company calculated the fair value of each option grant on the date of grant
using the following factors:
|
Expected
option life
|
4.25
|
|
|
Forfeiture
rate
|
25%
|
|
|
Expected
volatility
|
100%
|
|
|
Risk
free rate
|
2.5%-4.6%
|
|
|
Dividend
rate
|
0%
|
The
expected term of the options is based on the average period the stock options
are expected to remain outstanding calculated as the midpoint of the options’
vesting term, and contractual expiration period as the Company did not have
sufficient historical information to develop reasonable expectations about the
exercise patterns and the post-vesting employment termination
behavior. The expected stock price volatility assumptions for the
Company’s stock options for the nine months ended September 30, 2009 and 2008
were determined by examining the historical volatilities or industry peers, as
the Company did not have any trading history for its common stock. The risk-free
rate assumption is based on the U.S. Treasury instruments whose term was
consistent with the expected term of the Company’s stock options. The expected
dividend assumption is based on the Company’s history and expectation of
dividend payouts.
The
weighted average fair value of the options granted in 2009 and 2008 was $0.07
and $0.10, respectively. As of September 30, 2009, there was approximately
$25,000 of total unrecognized compensation cost related to non-vested
share-based compensation arrangements granted under the Plan. These
costs are expected to be recognized over a period of approximately three
years.
There
were no stock options granted to non-employees that are not board members during
the nine months ended September 30, 2009 and 2008.
During
the nine months ended September 30, 2009, no stock options were granted. For the
nine months ended September 30, 2008, 895,000
stock options were granted.
Note 8 - Related party
transactions:
The
Company purchased financial and administrative services from RAF Capital, LLC
("RAF”) during 2008. RAF is owned by a member of the Board of
Directors. Amounts paid to RAF for the nine month period ended
September 30, 2008 were approximately $45,000. During 2008 and 2009, the Company
contracted financial and administrative services from a shareholder. Amounts
paid to this shareholder were approximately $29,000 and $12,000 for the nine
month periods ended September 30, 2009 and 2008, respectively.
The
Company contracts engineering services from OMIX, Inc ("OMIX”). OMIX is owned by
a director and member of management. Amounts paid to OMIX for the nine months
ended September 30, 2009 and 2008 were approximately $128,000 and $66,000,
respectively.
Note 8 - Related party
transactions (continued):
The
Company contracts management and operation services from Foghorn Consulting, Inc
("Foghorn”). Foghorn is owned by a member of management. Amounts paid to Foghorn
for the nine months ended September 30, 2009 and 2008 were approximately $94,000
and $58,000, respectively.
The
Company contracts consulting services from Taleo Corporation ("Taleo”) in the
form of a commission agreement. Taleo is an investor in the Company. Amounts
paid to Taleo for commission fees for the nine months ended September 30, 2009
and 2008 was $100,000 and $8,000,
respectively.
Note 9 - Employee benefit
plan:
The
Company has a 401(k) Profit Sharing Plan (the " 401(k) Plan") in which employees
who have met certain service and eligibility requirements may
participate. Each eligible employee may elect to contribute to the
401(k) Plan, and the Company may make discretionary
contributions. The Company did not make any contributions for the
nine months ended September 30, 2009 and 2008.
In
December 2009, the Company’s Board of Directors elected to terminate the 401(k)
Plan in connection with the Merger Agreement with Taleo (See Note 1). The 401(k)
Plan will terminate in accordance with the terms of the Plan agreement.