Exhibit 99.2
Accretive Commerce, Inc. And Subsidiaries
Consolidated Balance Sheets (Unaudited)
June 30, 2007 And 2006
2007 | 2006 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 10,937,000 | $ | 9,623,000 | ||||
Restricted cash | 1,371,000 | 3,241,000 | ||||||
Account receivables, less allowance for doubtful accounts of $751,000 and $560,000, respectively | 8,420,000 | 7,144,000 | ||||||
Escrow receivable | — | 8,061,000 | ||||||
Prepaid expenses and other current assets | 748,000 | 1,343,000 | ||||||
Total current assets | 21,476,000 | 29,412,000 | ||||||
Property and Equipment, net | 5,809,000 | 3,839,000 | ||||||
Goodwill | 3,691,000 | 3,691,000 | ||||||
Deferred Income Taxes | 2,700,000 | 2,700,000 | ||||||
Deposits and Other Assets | 348,000 | 326,000 | ||||||
Total assets | $ | 34,024,000 | $ | 39,968,000 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued expenses | $ | 3,786,000 | $ | 2,927,000 | ||||
Customer deposits and prepayments | 1,737,000 | 1,415,000 | ||||||
Accrued payroll, taxes and bonuses | 1,903,000 | 1,518,000 | ||||||
Accrued transaction costs | — | 1,605,000 | ||||||
Accrued vacation | 761,000 | 238,000 | ||||||
Client advances | — | 1,269,000 | ||||||
Accrued workers’ compensation | 1,488,000 | 1,953,000 | ||||||
Accrued restructuring expenses | 2,341,000 | 326,000 | ||||||
Total current liabilities | 12,016,000 | 11,251,000 | ||||||
Redeemable Preferred Stock | 438,000 | 677,000 | ||||||
Stockholders’ Equity | ||||||||
Common stock | — | — | ||||||
Preferred stock | 2,134,000 | 2,128,000 | ||||||
Common stock - warrants | 2,565,000 | 2,565,000 | ||||||
Additional paid-in capital | 79,178,000 | 79,578,000 | ||||||
83,877,000 | 84,271,000 | |||||||
Note receivable, stockholder and accrued interest | (348,000 | ) | (655,000 | ) | ||||
83,529,000 | 83,616,000 | |||||||
Accumulated deficit | (61,959,000 | ) | (55,576,000 | ) | ||||
Total stockholders’ equity | 21,570,000 | 28,040,000 | ||||||
Total liabilities and stockholders’ equity | $ | 34,024,000 | $ | 39,968,000 | ||||
See Notes to Unaudited Financial Statements
Accretive Commerce, Inc. And Subsidiaries
Consolidated Statements Of Operations (Unaudited)
Six Months Ended June 30, 2007 And 2006
2007 | 2006 | |||||||
Revenue | $ | 41,203,000 | $ | 32,682,000 | ||||
Cost of sales | (29,858,000 | ) | (24,001,000 | ) | ||||
Gross profit | 11,345,000 | 8,681,000 | ||||||
Selling, general and administrative expenses | (9,923,000 | ) | (9,151,000 | ) | ||||
Depreciation and amortization | (795,000 | ) | (823,000 | ) | ||||
Restructuring charge | (2,800,000 | ) | — | |||||
Total operating expenses | (13,518,000 | ) | (9,974,000 | ) | ||||
Operating loss | (2,173,000 | ) | (1,293,000 | ) | ||||
Other income | ||||||||
Gain on sale of asset | 865,000 | — | ||||||
Interest income, net | 22,000 | 305,000 | ||||||
Other (expense) income | (118,000 | ) | 123,000 | |||||
769,000 | 428,000 | |||||||
Loss before income taxes | (1,404,000 | ) | (865,000 | ) | ||||
Income tax benefit (expense) | — | — | ||||||
Net loss | $ | (1,404,000 | ) | $ | (865,000 | ) | ||
See Notes to Unaudited Financial Statements
Accretive Commerce, Inc. And Subsidiaries
Consolidated Statements Of Cash Flows (Unaudited)
Six Months Ended June 30, 2007 And 2006
2007 | 2006 | |||||||
Cash From Operating Activities | ||||||||
Net loss | $ | (1,404,000 | ) | $ | (865,000 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 795,000 | 823,000 | ||||||
Provision for doubtful accounts | 225,000 | (140,000 | ) | |||||
Loss (gain) on sale of assets - Ridgely | (865,000 | ) | — | |||||
Restructuring charge | 2,800,000 | — | ||||||
Interest income related to note receivable, stockholder | (17,000 | ) | — | |||||
Changes in assets and liabilities: | ||||||||
Decrease (increase) in: | ||||||||
Accounts receivables, net | 3,233,000 | 1,837,000 | ||||||
Prepaid expenses and other current assets | 1,256,000 | 1,627,000 | ||||||
Deposits and other assets | (5,000 | ) | 15,000 | |||||
Decrease in: | ||||||||
Accounts payable and accrued expenses | (1,849,000 | ) | (707,000 | ) | ||||
Accrued restructuring charges | (746,000 | ) | (439,000 | ) | ||||
Net cash provided by operating activities | 3,423,000 | 2,151,000 | ||||||
Cash From Investing Activities | ||||||||
Purchases of property and equipment | (2,420,000 | ) | (613,000 | ) | ||||
Proceeds from sale of property and equipment | 1,676,000 | — | ||||||
Restricted cash | (15,000 | ) | (33,000 | ) | ||||
Net cash (used in) investing activities | (759,000 | ) | (646,000 | ) | ||||
Net increase in cash and cash equivalents | 2,664,000 | 1,505,000 | ||||||
Cash and cash equivalents, beginning of period | 8,273,000 | 8,118,000 | ||||||
Cash and cash equivalents, end of period | $ | 10,937,000 | $ | 9,623,000 | ||||
See Notes to Unaudited Financial Statements
Accretive Commerce, Inc. and Subsidiaries
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2007 and 2006
NOTE 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Accretive Commerce, Inc. and Subsidiaries (the Company), operating through its divisions and wholly owned operating Subsidiaries (Online Direct and Promotions Distributor Services Corporation), is a provider of outsourced operations solutions to companies engaged in end-to-end direct commerce, generally under long-term contracts. The Company’s services include a complete range of integrated customer relationship management and fulfillment/supply chain services and solutions through the use of technological innovations and proprietary systems. These range from customer-focused offerings including marketing, direct response and direct mail support, to order management and customer care, and the enabling technology infrastructure and solutions throughout the supply chain. As a provider of fulfillment services, the Company offers customer order processing, inventory storage, and shipping and distribution services to third party clients. The Company stores client inventory at its facilities but does not take title nor own the inventory.
Accretive Commerce, Inc. supports direct programs for branded manufacturers, retailers and cataloguers, with products as diverse as apparel, food, electronics and e-tailers. The Company serves both the business and consumer markets through its multi-channel, end-to-end operations business model and works with some of the leading companies in direct retailing and product manufacturing to foster improved customer and trade relationships.
The balance sheets as of June 30, 2007 and 2006 and the statements of operations and cash flows as of and for the six months ended June 30, 2007 and 2006 have been presented without audit. In the opinion of the Company’s management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of financial position, results of operations and cash flows as of and for the six months ended June 30, 2007 and 2006 have been made.
NOTE 2. RESTRUCTURING
On February 14, 2007, the Company announced the closure of the Chattanooga, Tennessee facility effective June 2007. As a result of this closure, the company incurred in June a restructuring charge of $2,800,000. These costs primarily relate to severance and facility shutdown costs.
NOTE 3. GAIN ON SALE OF ASSET
On May 2, 2007 the Company sold its previously closed facility in Ridgely, Maryland for approximately $1,676,000. The Company recognized a gain of $865,000 as a result of this sale.
NOTE 4. RELATED PARTY TRANSACTIONS
Included in operations during the six months ended June 30, 2007 and 2006, are purchases from companies partially owned by a shareholder of the Company of $583,000 and $784,000, respectively, and sales of $239,000 and $1,807,000, respectively. Additionally, the Company has separate operating leases with shareholders of the Company. Expenses under these leases for the six months ended June 30, 2007 and 2006 totaled $7,000 for each period.
NOTE 5. SUBSEQUENT EVENTS
On August 16, 2007, the Company announced it has signed a definitive agreement to sell the company to GSI Commerce Inc., a King of Prussia based e-commerce solutions provider. Under this agreement, which has been approved by the board of directors of both companies, GSI will acquire the Company for $97.5 million in cash.
Related to the sale of the Company, contracts with a supplier to provide data lines, hardware equipment and support services were rescinded. At this time, the amount of liability associated with this early termination is indeterminable.