Prospectus Summary
This summary highlights information contained elsewhere in this prospectus. This summary is not complete and does not contain all the information you should consider before buying shares in the offering. You should read the entire prospectus carefully. Unless otherwise indicated, this prospectus assumes that the underwriters have not exercised their option to purchase additional shares and all shares of preferred stock have been automatically converted into shares of common stock.
CrossWorlds Software, Inc.
We are a leading provider of e-business infrastructure software that enables the integration and automation of business processes within enterprises and among trading partners using the Internet. Our products help traditional and emerging businesses leverage the Internet as a platform to increase productivity, improve responsiveness to customer demands and enhance overall competitiveness.
In response to an increasingly competitive business environment, many large companies are pursuing collaborative e-business strategies that require close coordination across internal functions and among trading partners. Examples of these strategies include the use of Internet-based marketplaces and trading exchanges; collaborative supply and demand planning among trading partners; outsourcing of customer service and manufacturing activities to third parties; and inventory management across multiple company divisions and distribution channels. The implementation of these strategies, however, has been hampered by the challenges of integrating incompatible enterprise applications used by multiple business functions and trading partners.
We believe that the market for e-business infrastructure software is comprised of the market for e-business software and the related market for enterprise application integration software. A variety of organizations-- including systems integrators, other information technology service providers, information technology departments within companies, and software vendors--have provided companies with integration solutions in support of e-business initiatives. The market for e-business software, according to Forrester Research, will grow from $121.0 million in 1997 to $3.8 billion in 2002. According to the Yankee Group, the market for data integration tools and enterprise application integration software will grow from $1.6 billion in 1998 to $5.0 billion in 2001. We believe that many of the software products offered by participants in these markets lack key elements of a complete e-business infrastructure solution. Examples of these missing elements include business process support, architectural flexibility and the ability to support e- business strategies.
Our products are based on an enterprise-class architecture that scales to meet the requirements of global organizations and trading networks with large volumes of mission critical transactions. We offer a set of tools that our customers can use to customize and extend their integration solution to fulfill their unique e-business requirements. We also provide pre-built connectivity solutions to leading e-business and enterprise applications, as well as common technology environments, and have developed pre-built components for automating many of the common business processes within the enterprise and among trading partners.
Our business strategy is to be the leading provider of e-business infrastructure software to traditional and emerging companies. Our product strategy focuses on expanding our support for e-business applications and technologies, building connectivity for additional enterprise applications and expanding our set of pre-built business process integration modules. Our sales strategy is to focus on selling our products to customers in selected vertical markets, including technology, industrial manufacturing, process manufacturing and telecommunications.
To support these strategic efforts, we intend to leverage and expand our strategic partnerships with IBM, SAP AG and global systems integrators through technology sharing and cooperative marketing and sales efforts. In addition, we expect our systems integrator partners to provide an increasing portion of the implementation services associated with our products. Since late 1997, when we shipped our first product, we have licensed our products to 47 customers in these markets, including Applied Materials, Inc., Delphi Automotive Systems, E.I. DuPont de Nemours and Company, Ingersoll-Rand Company, Nortel Networks Corporation, Siemens AG, Solar Turbines, Inc., a wholly owned subsidiary of Caterpillar Inc., and U S WEST.
Our principal executive offices are located at 577 Airport Boulevard, Suite 800, Burlingame, California 94010, and our telephone number is (650) 685-9000.
The Offering
Common stock offered by CrossWorlds Software, Inc.... shares Common stock to be outstanding after this offering.......... shares Use of proceeds............... Working capital and general corporate purposes. Proposed Nasdaq National Market symbol................ CWLD The following information is based on 19,696,563 shares outstanding on December 31, 1999. This number excludes 6,793,436 shares of common stock issuable upon exercise of stock options outstanding on December 31, 1999 at a weighted average exercise price of $5.78 per share and 1,064,087 shares of common stock reserved for future issuance under our stock option plan and executive stock plan. This number also excludes 343,431 shares of common stock issuable upon exercise of warrants outstanding on December 31, 1999 at a weighted average exercise price of $5.85 per share.
Our Board of Directors, subsequent to December 31, 1999, approved certain changes to our stock option plan reserves. Effective on the date of completion of this offering, the shares reserved for future issuance under our stock option plans, will be as follows:
. 1997 Stock Plan: 3,000,000 shares.
. 2000 Employee Stock Purchase Plan: 750,000 shares.
. 2000 Directors' Stock Option Plan: 300,000 shares.
The above share reserves replace any stock option reserves existing immediately prior to the date of completion of the offering, which reserves totalled 1,064,087 shares on December 31, 1999.
Additionally, subsequent to December 31, 1999, our Board approved the issuance of warrants to purchase 199,996 shares of common stock at a weighted average exercise price of $11.00 per share.
See "Management-- Stock Plans," "Certain Relationships and Related Transactions" and "Note 5 to Consolidated Financial Statements."
Summary Consolidated Financial Information Year Ended December 31, 1997 1998 1999 (in thousands, except per share data) Consolidated Statement of Operations Data: Revenue........................................ $ 1,108 $ 7,706 $ 19,094 Operating loss................................. (14,118) (41,853) (36,274) Net loss....................................... (13,952) (41,374) (38,186) Pro forma basic and diluted net loss per share......................................... $ (1.70) $ (3.55) $ (2.38) Weighted average shares used in pro forma per share computation............................. 8,201 11,641 16,062 Our software license revenue is generally recognized using the percentage-of- completion method over the respective project implementation cycles, which typically range from three to nine months. Consulting and service revenue is recognized as the services are performed. Maintenance revenue from customer support and product upgrades, including maintenance bundled with original software licenses, are deferred and recognized ratably over the term of the maintenance agreement.
Weighted average shares used in computing pro forma basic and diluted net loss per share includes the shares used in computing basic and diluted net loss per share adjusted for the conversion of preferred stock to common stock, as if the conversion occurred at the date of original issuance.
December 31, 1999 Actual As Adjusted (in thousands) Consolidated Balance Sheet Data: Cash and cash equivalents............................... $12,506 $ Working capital (deficit)............................... (1,052) Total assets............................................ 29,177 Deferred revenue........................................ 13,158 Long-term debt and capital lease obligations, less current portion........................................ 3,513 Total stockholders' equity (deficit).................... (726) Deferred revenue consists primarily of the unrecognized portion of license and maintenance sales contracts. Our deferred revenue balance or changes therein may not be indicative of our total backlog or changes in the ordering patterns of our customers.
The consolidated balance sheet data as of December 31, 1999 is set forth on an actual basis and on an as adjusted basis to reflect the sale of shares of common stock offered at an assumed initial public offering price of $ per share after deducting the estimated underwriting discount and the estimated offering expenses.