EXHIBIT 99.1
SILVERSTREAM SOFTWARE, INC.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
SilverStream Software, Inc.
We have audited the accompanying consolidated balance sheets of SilverStream
Software, Inc. as of December 31, 2001 and 2000, and the related consolidated
statements of operations, redeemable convertible preferred stock and
stockholders' equity (deficit), and cash flows for each of the three years in
the period ended December 31, 2001. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of SilverStream
Software, Inc. at December 31, 2001 and 2000, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
February 12, 2002
SILVERSTREAM SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
2001 2000
------------- ---------
Assets
Current assets:
Cash and cash equivalents..................................................$87,931,955 $86,480,910
Marketable securities.......................................................45,789,557 104,848,077
Accounts receivable; net of allowances of $2,038,177 and $1,055,472 at
December 31, 2001 and 2000, respectively................................. 9,513,441 25,652,513
Other receivables..............................................................453,650 1,614,832
Prepaid expenses.............................................................2,296,662 2,945,184
--------- ------------
Total current assets................................................145,985,265 221,541,516
Furniture, equipment and leasehold improvements, net..........................10,524,565 11,234,943
Other assets.................................................................. - 2,080,500
Intangible assets, net........................................................42,754,990 78,881,365
---------- -----------
Total assets........................................................$199,264,820 $313,738,324
============ ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable...........................................................$.4,106,373 $ 3,864,815
Accrued expenses............................................................11,110,440 16,168,727
Deferred revenue.............................................................5,737,387 11,337,795
Current portion of long-term debt and obligations under capital leases.........208,334 1,867,735
------- -----------
Total current liabilities............................................21,162,534 33,239,072
Long-term debt and obligations under capital leases, less current portion... - 358,325
Common stock, $.001 par value - authorized 100,000,000 shares; issued
and outstanding 22,351,524 at December 31, 2001 and 21,053,626 at
December 31, 2000......................................................... 22,352 21,054
Additional paid-in capital...................................................374,543,087 364,067,512
Deferred compensation.........................................................(8,199,964) (11,292,604)
Accumulated deficit.........................................................(187,710,487) (72,526,756)
Accumulated other comprehensive loss............................................(521,202) (96,779)
Notes receivable from stockholders ............................................ (31,500) (31,500)
----------- -----------
Total stockholders' equity..........................................178,102,286 280,140,927
----------- -----------
Total liabilities and stockholders' equity..........................$199,264,820 $313,738,324
============ ============
See accompanying notes.
SILVERSTREAM SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
2001 2000 1999
------------- ------------- ---------
Revenue:
Software license.................................... $31,743,619 $40,859,059 $13,825,676
Services............................................ 36,190,935 39,724,938 9,238,731
----------- ----------- -----------
Total revenue............................... 67,934,554 80,583,997 23,064,407
Cost of revenue:
Software license.................................... 508,219 2,500,859 1,412,175
Services............................................ 42,899,877 35,056,758 10,252,589
----------- ----------- -----------
Total cost of revenue....................... 43,408,096 37,557,617 11,664,764
----------- ----------- -----------
Gross profit.......................................... 24,526,458 43,026,380 11,399,643
Operating expenses:
Sales and marketing................................. 44,615,602 44,071,348 20,419,430
Research and development............................ 19,430,635 14,576,892 7,090,691
General and administrative.......................... 16,002,735 11,231,198 4,300,713
Compensation charge for issuance of stock options... 3,092,640 2,329,018 438,594
Amortization of goodwill............................ 18,158,754 11,309,025 384,729
Impairment of goodwill.............................. 34,843,509 - -
Special charges..................................... 10,657,681 - -
In-process research and development charge.......... - - 1,986,659
----------- ----------- -----------
Total operating expenses.................... 146,801,556 83,517,481 34,620,816
----------- ----------- -----------
Loss from operations.................................. (122,275,098) (40,491,101) (23,221,173)
Other income, net..................................... 7,091,367 12,125,364 1,231,880
------------ ------------ ------------
Net loss.............................................. $(115,183,731) $(28,365,737) $(21,989,293)
Beneficial conversion feature in Series D preferred
stock................................................. - - (263,158)
------------ ----------- ------------
Net loss applicable to common stockholders............ $(115,183,731) $(28,365,737) $(22,252,451)
============= ============ ============
Basic and diluted net loss per share applicable to
common stockholders.................................. $ (5.27) $ (1.44) $ (2.64)
============ ============= =============
Weighted-average common shares used in computing basic
and diluted net loss per share applicable to common
stockholders.......................................... 21,859,723 19,697,498 8,419,116
See accompanying notes.
SILVERSTREAM SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS EQUITY (DEFICIT)
Redeemable
Convertible Convertible
Preferred Stock Preferred Stock Common Stock
Shares Amount Shares Amount Shares Amount
Balance at December 31, 1998.............. 5,183,988 $11,638,005 1,922,588 $16,856,323 5,206,779 $ 5,207
Issuance of Series D preferred stock in
March, April and May 1999 (net of issuance
costs of $22,000)......................... 1,552,632 14,727,997
Repurchase and retirement of common stock
in March 1999............................ (10,754) (11)
Exercise of stock options................. 130,181 129
Issuance of common stock in June, July,
August and December 1999.................. 3,704,456 3,705
Conversion of redeemable convertible
preferred stock in August 1999............ (5,183,988) (11,638,050)(3,475,220) (31,584,320) 8,659,208 8,659
Deferred compensation on grant of stock
options.................................
Amortization of deferred compensation.....
Net Loss
Currency translation adjustment...........
Comprehensive loss........................
------- -------- ------- -------- -------- --------
Balance at December 31, 1999.............. - - - - 17,689,870 17,689
Issuance of common stock in secondary
offering................................ 1,775,851 1,776
Issuance of common stock and stock options
in acquisitions of subsidiaries......... 1,233,398 1,234
Issuance of common stock in connection with
employee stock purchase plan ............ 75,945 76
Exercise of stock options ................. 278,562 279
Deferred compensation on grant of stock
options .................................
Amortization of deferred compensation.....
Receipt of amounts due from stockholdere .
Net loss..................................
Currency translation adjustment...........
Comprehensive loss........................
------- -------- ------- -------- -------- --------
Balance at December 31, 2000.............. - - - - 21,053,626 21,054
Issuance of common stock and stock options
in acquisitions of subsidiaries ........ 797,314 797
Issuance of commons stock in connection
with employee stock purchase plan ...... 164,676 165
Exercise of stock options ................ 335,908 336
Amortization of deferred compensation.....
Net loss..................................
Currency translation and investment
valuation adjustment....................
Comprehensive loss........................
--------- --------- --------- ---------- --------- ------
Balance at December 31, 2001.............. - $ - - $ -- 22,351,524 $22,352
========= ========= ========= =========== ========== =======
See accompanying notes.
SILVERSTREAM SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS EQUITY (DEFICIT), continued
Accumulated
Other Notes Total
Additional Comprehensive Receivable Stockholdes'
Paid-in Deferred Accumulated Income from Equity
Capital Compensation (Loss)t Stockholders (Deficit)
Balance at December 31, 1998.............. $ 365,985 $(22,171,726) $(103,500) $(5,047,711)
Issuance of Series D preferred stock in
March, April and May 1999 (net of issuance
costs of $22,000)...................... 14,727,997
Repurchase and retirement of common stock
in March 1999............................. (11)
Exercise of stock options................. 269,852 269,981
Issuance of common stock in June, July,
August and December 1999.....................63,683,752 63,687,457
Conversion of redeemable convertible
preferred stock in August 1999............. 43,213,711 11,638,050
Deferred compensation on grant of stock
options................................... 7,651,953 $(7,651,953) -
Amortization of deferred compensation..... 438,594 438,594
Net Loss (21,989,293) (21,989,293)
Currency translation adjustment........... $ (140,320) (140,320)
---------- -----------
Comprehensive loss........................ (22,129,613)
-------- ---------- --------- ---------- ------- ------------
Balance at December 31, 1999.............. 115,185,253 (7,213,359) (44,161,019) (140,320) (103,500) 63,584,744
Issuance of common stock in secondary
offering................................ 191,594,826 191,596,602
Issuance of common stock and stock options
in acquisitions of subsidiaries............ 48,663,254 48,664,488
Issuance of common stock in connection with
employee stock purchase plan ............... 1,327,427 1,327,503
Exercise of stock options .................. 888,489 888,768
Deferred compensation on grant of stock
options .................................. 6,408,263 (6,408,263) -
Amortization of deferred compensation..... 2,329,018 2,329,018
Receipt of amounts due from stockholdere . 72,000 72,000
Net loss.................................. (28,365,737) (28,365,737)
Currency translation adjustment........... 43,541 43,541
------- --------
Comprehensive loss........................ (28,322,196)
-------- ---------- --------- --------- ------- ------------
Balance at December 31, 2000.............. 364,067,512 (11,292,604) (72,526,756) (96,779) (31,500) 280,140,927
Issuance of common stock and stock options
in acquisitions of subsidiaries .......... 8,835,388 8,836,185
Issuance of commons stock in connection
with employee stock purchase plan ...... 1,180,434 1,180,599
Exercise of stock options ................ 459,753 460,089
Amortization of deferred compensation..... 3,092,640 3,092,640
Net loss.................................. (115,183,731) (115,183,731)
Currency translation and investment
valuation adjustment.................... (424,423) (424,423)
--------- ------ ---------
Comprehensive loss........................ (102,038,641)
------------------------------------------------------------------------------------
Balance at December 31, 2001.............. $ 374,543,087 $(8,199,964) $(187,710,487) $(521,202) $(31,500) $178,102,286
============= ========+===== ============== ========== ========= ============
See accompanying notes.
SILVERSTREAM SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
--------------------
2001 2000 1999
---------- ---------- ---------
Operating activities
Net loss..............................................................$(115,183,731). $(28,365,737) $(21,989,293)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization.........................................22,715,424... 13,874,422 1,673,163
Provision for allowances on accounts receivable..........................982,705... 292,227 287,252
In-process research and development charge.....................................-... - 1,986,659
Compensation charge for issuance of stock options......................3,092,640... 2,329,018 438,594
Impairment of goodwill................................................34,853,509... - -
Non-cash special charges...............................................3,326,013... - -
Changes in operating assets and liabilities:
Accounts receivable.................................................14,883,947... (17,296,990) (3,328,390)
Other receivables....................................................1,172,874... 447,399 (1,832,327)
Prepaid expenses.......................................................213,294... (1,675,542) (722,227)
Other assets.................................................................-... (2,080,500) -
Accounts payable and accrued expenses...............................(2,685,025).. (800,042) 3,556,812
Deferred revenue....................................................(5,784,731).. 6,162,530 2,731,856
----------- ------------ ------------
Net cash used in operating activities..................................(42,413,081).. (27,113,215) (17,197,901)
Investing activities
Purchase of businesses, net of cash acquired...........................(10,200,576).. (11,303,844) (2,834,288)
Purchase of property, plant and equipment...............................(4,192,357).. (10,126,453) (2,208,906)
Sale (purchase) of available-for-sale securities........................59,058,520... (104,601,388) 3,083,913
---------- ------------- ------------
Net cash provided by (used in) investing activities................... 44,665,587 (126,031,685) (1,959,281)
Financing activities
Net proceeds from issuance of preferred stock....................................-... - 14,727,997
Net proceeds from issuance of common stock...............................1,640,688... 193,812,236 50,006,058
Repurchase and retirement of common stock........................................-... - (11)
Payment of note receivable from stockholders.....................................-... 72,000 -
Proceeds from line of credit............................................ - - 750,000
Payments on long-term debt..............................................(2,017,726).. (1,100,773) (551,309)
----------- ------------- -------------
Net cash (used in) provided by financing activities.......................(377,038).. 192,783,463 64,932,735
Effects of exchange rate on cash and cash equivalents.....................(424,423).. 43,541 (175,331)
--------- ------------ -------------
Net increase in cash and cash equivalents................................1,451,045... 39,682,104 45,600,222
Cash and cash equivalents at beginning of year..........................86,480,910... 46,798,806 1,198,584
---------- ------------ ------------
Cash and cash equivalents at end of year..............................$.87,931,955... $ 86,480,910 $ 46,798,806
= ========== ============ ============
Supplemental Information
Cash paid during the period for:
Income taxes......................................................$....270,532... $ 172,341 $ 21,110
= ======= ============ ============
Interest..........................................................$.....49,556... $ 66,867 $ 78,891
= ====== ============ ============
See accompanying notes.
SILVERSTREAM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business
SilverStream Software, Inc. (the Company) was incorporated on May 8, 1996.
The Company provides software and services for building, deploying and managing
Web-based applications that are scalable, reliable and secure. The Company
markets its software worldwide and has sales offices in the United States,
Canada, United Kingdom, The Netherlands, Belgium, Germany, Norway, The Czech
Republic, France, Luxembourg, Switzerland, Italy, China, Hong Kong, Singapore,
Taiwan and Australia.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its U.S. and international subsidiaries, all of which are wholly owned,
located in North America, Europe, Asia and Australia. All intercompany accounts
and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements reflect the application
of certain significant accounting policies as described in this note and
elsewhere in the accompanying consolidated financial statements and notes.
Reclassifications
Certain amounts from 1999 and 2000 have been reclassified to conform to the
2001 presentation. Such reclassifications did not have a material impact on the
consolidated financial statements.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash Equivalents and Marketable Securities
The Company accounts for cash equivalents and marketable securities in
accordance with Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." Cash
equivalents are short-term, highly liquid investments with original maturity
dates of three months or less. Cash equivalents are carried at cost, which
approximates fair market value. The Company's marketable securities, which, as
of December 31, 2001, consisted of U.S. Government and Federal Agency
obligations, tax-exempt municipal obligations, and investment-grade corporate
bonds, are classified as available-for-sale and are recorded at fair market
value with any unrealized gain or loss recorded in comprehensive loss.
As of December 31, 2001, the Company had a $2,150,000 restriction on its
cash balance, as a result of six secured letters of credit. These letters of
credit were issued by the Company's primary bank to certain landlords as part of
lease negotiations.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist of cash and cash equivalents, marketable
securities, accounts receivable and other receivables. Concentration of credit
risk with respect to cash equivalents and marketable securities is limited as
these assets are primarily U.S. Government and Federal Agency obligations,
tax-exempt municipal obligations and investment-grade corporate bonds with
high-credit, quality financial institutions.
There is no significant concentration of credit risk with respect to
accounts receivable due to the large number of companies comprising the
Company's customer base. On-going credit evaluations of customers' financial
condition are performed and collateral is generally not required. The Company
maintains reserves for potential credit losses and such losses, in the
aggregate, have not
Concentration of Credit Risk (continued)
exceeded management's expectations.
Furniture and Equipment
Furniture and equipment is stated at cost. Depreciation is computed by use
of the straight-line method over the following estimated useful lives:
Leasehold improvements........................ Lesser of remaining
lease-term or useful life
Furniture and fixtures........................ 5 years
Computer equipment and software............... 3 years
Telephone equipment........................... 3 years
Advertising Costs
The Company expenses advertising costs as incurred. Advertising costs were
$2,166,000, $2,521,000 and $805,000 for the years ended December 31, 2001, 2000
and 1999, respectively.
Capitalized Software
Capitalization of software development costs under SFAS No. 86 begins upon
the establishment of technological feasibility. Technological feasibility is
established upon the completion of a working model. The establishment of
technological feasibility and the ongoing assessment of 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. Costs incurred
by the Company between completion of a working model and the point at which the
product is ready for general release have been insignificant. Therefore, through
December 31, 2001, all software research and development costs have been
expensed as incurred.
Revenue Recognition
Revenue recognition from software license fees and from sales of software
products is recognized when persuasive evidence of an arrangement exists,
delivery of the product has occurred, no significant Company obligations with
regard to implementation remain, the fee is fixed or determinable and
collectibility is probable. The Company's software arrangements may contain
multiple elements such as software products, services and post-contract customer
support (PCS). Revenue earned on software arrangements involving multiple
elements which qualify for separate element treatment is allocated to each
element based on the relative fair values of those elements based on vendor
specific objective evidence. For the year ended December 31, 2001, vendor
specific objective evidence is limited to the price charged when the element is
sold separately or, for an element not being sold separately, the price
established by management having the relevant authority. Accordingly, revenue
from software products is recognized when the product is shipped. Revenue from
services is recognized as the services are provided to the customer. Revenue for
PCS is recognized ratably over the term of the agreement.
Customer advances and billed amounts due from customers in excess of revenue
recognized are recorded as deferred revenue and recognized as the services are
delivered.
Revenue derived from arrangements with resellers of the Company's products
is not recognized until the software is shipped to the customer.
Sales to independent software vendors (ISVs) under the Company's former ISV
program were deferred and recognized as product revenue ratably over the
anticipated period of performance for services under the agreement, which was
generally 12 months. During the third quarter of 2001, the Company instituted a
new ISV program (SilverNet Partner Program). The SilverNet Partner Program is a
multiple element arrangement which qualifies for separate element treatment and
accordingly, revenue earned under the SilverNet
Revenue Recognition (continued)
Partner Program is allocated to each element based on the relative fair values
of those elements based on vendor specific objective evidence. Revenue from
software products is recognized when the product is delivered, revenue from
services is recognized as the services are provided to the customer, and revenue
for post-contract customer support is recognized ratably over the term of the
agreement.
Customer returns are estimated and accrued for as a percentage of net
product revenues based upon historical trends.
The Company adopted SOP 97-2, "Software Revenue Recognition" as of January
1, 1998, and SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition,
with Respect to Certain Transactions," as of January 1, 2000. SOP 97-2 and SOP
98-9 provide guidance for recognizing revenue on software transactions and
supersede SOP 91-1.
The Company adopted Staff Accounting Bulletin (SAB) No. 101 "Revenue
Recognition in Financial Statements", as of October 1, 2000. SAB 101 provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements.
The adoption of SOP 97-2, SOP 98-9 and SAB 101 did not have a material
impact on the Company's financial results.
Licensing Agreements
The Company has entered into various licensing agreements with third-party
software and technology companies, primarily for encryption technology,
full-text searching technology and the use of J2EE elements. Royalty payments
under such licensing agreements are based on either a percentage of product
revenue or per unit sales. Royalty expenses, which are charged to cost of
revenue under these license agreements, totaled $225,000, $1,059,000 and
$310,000 for the years ended December 31, 2001, 2000 and 1999, respectively.
Prepaid royalties related to these licensing agreements were $469,000 and
$838,000 at December 31, 2001 and 2000, respectively.
Earnings per Share
The Company computes earnings per share in accordance with SFAS No. 128,
"Earnings per Share". SFAS 128 requires calculation and presentation of basic
and diluted earnings per share. Basic earnings per share is calculated based on
the weighted average number of common shares outstanding and excludes any
dilutive effects of warrants, stock options, common stock subject to repurchase
or other type securities. Diluted earnings per share is calculated based on the
weighted average number of common shares outstanding and the dilutive effect of
warrants, stock options, and related securities. Dilutive securities are
excluded from the diluted earnings per share calculation if their effect is
anti-dilutive.
Income Taxes
The Company provides for income taxes under SFAS No. 109, "Accounting for
Income Taxes." Under SFAS 109, the liability method is used in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax basis of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
Financial Instruments
The fair value of the Company's financial instruments, which include cash
and cash equivalents, marketable securities, accounts receivable, other
receivables, accounts payable and long term debt, are based on assumptions
concerning the amount and timing of estimated future cash flows and assumed
discount rates reflecting varying degrees of perceived risk. The carrying value
of these financial instruments approximated their fair value at December 31,
2001 and 2000 due to the short term nature of these instruments and the variable
interest rate on the long term debt.
Foreign Currency Translations
Financial statements of foreign subsidiaries are translated into U.S.
dollars at the exchange rate as of the balance sheet dates, with the exception
of revenues, costs and expenses. All revenues, costs and expenses are translated
at a weighted-average of exchange rates in effect during the year. Net exchange
gains or losses resulting from the translation of the foreign financial
statements are recorded as a separate component of comprehensive income.
Transaction adjustments for all foreign subsidiaries are included in income.
Accounting for the Impairment of Long-Lived Assets
The carrying value of long-lived assets used in operations, such as goodwill
and furniture, fixtures and leasehold improvements, is periodically reviewed by
the Company based on the expected future undiscounted operating cash flows of
the related asset. If an impairment is indicated, the Company will adjust the
carrying value of the long-lived assets to fair value. During fiscal 2001, the
Company recorded an impairment loss related to goodwill in the amount of $34.8
million.
Stock Compensation Arrangements
The Company adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." As permitted by SFAS No. 123, the
Company has continued to account for employee stock options in accordance with
Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock
Issued to Employees," and related interpretations, and has included the pro
forma disclosures required by SFAS No. 123 for all periods presented.
Comprehensive Income
As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which establishes new rules for the reporting and display
of comprehensive income and its components. SFAS 130 requires unrealized gains
and losses on the Company's available-for-sale securities and the foreign
currency translation adjustments, which prior to adoption were reported
separately in shareholders' equity, to be included in other comprehensive
income.
Segment Reporting
The Company reports segments in accordance with SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." SFAS 131 establishes
standards for the way that public business enterprises report information about
operating segments in interim financial reports. The Company views its
operations and manages its business as one segment: the development and delivery
of Web-based applications, which includes software and related products and
services. Factors used to identify the Company's single operating segment
include the organizational structure of the Company and the financial
information available for evaluation by the chief operating decision maker in
making decisions about how to allocate resources and assess performance.
Disclosure of geographical segment information is included in Note 12.
Recently Issued Accounting Pronouncements
In the first quarter of 2001, the Company adopted SFAS No. 133, "Accounting
for Derivatives and Hedging Activities" as amended by SFAS No. 137 and SFAS No.
138, which establishes accounting and reporting standards for derivative
instruments, including derivative instruments imbedded in other contracts
(collectively referred to as derivatives), and for hedging activities. The
adoption of SFAS No. 133 did not have a material impact on the Company's
financial position or results of operations.
In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 eliminates
the pooling-of-interests method of accounting for business combinations, except
for qualifying business combinations, and further clarifies the criteria to
recognize intangible assets separately from goodwill. SFAS No. 142 eliminates
the amortization of goodwill and indefinite lived intangible assets and requires
periodic review for impairment. The adoption of SFAS No. 141 in July of 2001 did
not have a material impact on the Company's financial position or results of
operations. The Company is currently in the process of evaluating the impact
SFAS No. 142 will have on its financial position and results of operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No.
121, "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of" and provides a single accounting model for long-lived
assets to be disposed of. The Company is currently in the process of evaluating
the impact SFAS No. 144 will have on its financial position and results of
operations.
3. Special Charges
During the second and third quarters of 2001, the Company recorded aggregate
special charges of $11.8 million. Of these charges, approximately $9.7 million
related to the restructuring of the Company's operations; specifically, $3.6
million related to a workforce reduction of approximately 255 employees
(primarily consulting employees), $4.9 million related to office closures (of
which $687,000 represented costs in connection with exiting leased office space
in the United States and Europe, such as costs to refit such space for sublease
tenants and real estate broker fees for the identification of sublease tenants)
net of estimated sublease income and $1.2 million related to the write-down of
assets which became impaired as a result of the restructurings. In addition, the
Company wrote-off a $2.1 million equity investment which the Company considered
to be permanently impaired.
During the fourth quarter of 2001, the Company determined that the costs to
close certain non-profitable offices would be lower than original estimates,
resulting in a change in estimate of $1.1 million.
A summary of the special charges is as follows:
Office
Closures and
Costs to Exit
Termination Leased Office Asset
Benefits Space Write-Downs Total
2001 Charges $ 3,577 $ 4,867 $ 3,326 $ 11,770
Cash Expenditures (3,512) (804) - (4,316)
Non Cash Charges - - (3,326) (3,326)
Change in Estimate - (1,112) - (1,112)
Balance at December 31, 2001 $ 65 $ 2,951 $ - $ 3,016
Future cash outlays for termination benefits are anticipated to be completed
by the end of the first quarter of fiscal 2002, while future cash outlays for
office closures will continue through June 2006.
Subsequent to December 31, 2001, the Company implemented an additional cost
reduction plan which will result in a special charge of approximately $1.3 to
$2.1 million to be recorded in the first quarter of fiscal 2002. The Company
expects to realize annual cost savings of approximately $37.0 million to $40.0
million as a result of these restructurings.
4. Impairment of Goodwill
As the result of the restructuring actions management took during 2001, the
operating results of the Company's services business through the third quarter
of 2001, and a change in the fourth quarter in the scale and scope of the
Company's services business, SilverStream undertook an evaluation of the
carrying value of our goodwill to determine if impairment existed. The
assessment in that period was also performed in light of significant negative
industry and economic trends impacting the Company's current operations and
expected future growth rates. Such factors, management concluded, would result
in an other than temporary decline in services revenues as a percentage of total
revenues. As a result, during the fourth quarter of 2001, SilverStream recorded
a $34.8 million charge for the impairment of goodwill, based on the amount by
which the carrying amount of the goodwill exceeded the fair value. The writedown
related to all of the goodwill associated with the Company's consulting and
distributorship acquisitions: Power 2000 Inc., Excelnet Systems Limited, Bondi
Software, Inc., E-Party Software, Inc., and Beijing SilverSolutions, Inc. Fair
value was determined based on discounted future cash flows after disaggregating
the assets by grouping them at the lowest level for which there were
identifiable cash flows that were largely independent of the cash flows of other
groups of assets. The assumptions supporting the estimated future cash flows,
including the discount rate and estimated terminal values, reflect management's
best estimates based upon an independent third-party valuation of the Company's
intangible assets. The discount rate was based upon SilverStream's weighted
average cost of capital as adjusted for the risks associated with our
operations.
5. Furniture, Equipment and Leasehold Improvements
Furniture, equipment and leasehold improvements consists of the following:
December 31,
2001 2000
Furniture and fixtures................. $3,761,460 $3,506,487
Computer equipment and software........ 13,943,350 10,936,616
Telephone equipment.................... 466,484 416,696
Leasehold improvements................. 2,244,469 1,688,564
---------- ----------
20,415,763 16,548,363
Less accumulated depreciation.......... (9,891,198) (5,313,420)
---------- ----------
$11,234,943
$10,524,565
6. Accrued Expenses
Accrued expenses include the following:
December 31,
2001 2000
------------- ---------
Fringe benefits.................................... $1,980,275 $3,680,864
Occupancy.......................................... 8,814 241,725
Professional fees.................................. 575,226 317,860
Bonuses............................................ 175,000 563,996
Commissions........................................ 378,911 1,403,551
Sales and VAT taxes payable........................ 676,305 1,257,517
Deferred tax liability............................. - 853,000
Amounts due to owners of acquired businesses....... 3,662,500 7,206,397
Restructuring...................................... 3,016,477 -
Other.............................................. 636,932 643,817
--------- ---------
$11,110,440 $16,168,727
7. Debt
Long-Term Debt
Under terms of a credit facility, negotiated in 1999 and expiring October 1,
2002, borrowings of approximately $750,000 converted fully into a term loan on
October 31, 1999. Such borrowings are secured by substantially all of the
Company's tangible assets. Principal repayments began November 1, 1999 in 36
equal monthly payments. Interest on the loan accrues at prime rate plus 0.5%
(4.75% at December 31, 2001) and is payable monthly in arrears. The outstanding
balance under the facility at December 31, 2001 and 2000 was $208,000 and
$458,000, respectively.
8. Leases
The Company leases office space and certain equipment under non-cancelable
operating leases expiring through February 2006. Some of these leases contain
renewal options. Rent expense charged to operations for the years ended December
31, 2001, 2000 and 1999 was $5,439,000, $3,051,000 and $1,506,000, respectively.
Future minimum payments under non-cancelable operating leases, excluding
amounts related to accrued restructurings, as of December 31, 2001 are as
follows:
Operating
Leases
---------------
---------------
2002...................................... 4,582,270
2003...................................... 4,022,811
2004...................................... 3,889,443
2005...................................... 3,737,187
2006...................................... 3,627,156
2007 and thereafter....................... 848,027
-------------
Total minimum lease payments.............. $ 20,706,894
=============
9. Employee Benefits
1996 Founders Stock Incentive Plan
The Company issued and sold an aggregate of 300,000 shares of common stock
under our Founders' 1996 Stock Incentive Plan pursuant to stock restriction
agreements at the fair value of the stock at the date of issuance. The shares
are issued in the name of the employee, who has all rights of a stockholder,
subject to certain repurchase and transfer provisions. If the employee ceases to
be employed by the Company, the Company shall have the option to repurchase from
the employee a portion of shares based upon a predetermined formula. There were
no shares subject to repurchase at December 31, 2001. An aggregate of 17,875
shares of common stock were subject to repurchase at December 31, 2000.
1997 Stock Incentive Plan
The Company adopted the 1997 Stock Incentive Plan, which was amended and
restated on June 9, 1999, and further amended on May 1, 2001 (as amended and
restated, the 1997 Plan), and which covers all eligible employees, officers,
directors, consultants and advisors. As of December 31, 2001 the Company has
reserved 7,000,000 shares of common stock for issuance under the 1997 Plan.
Under the 1997 Plan, the Company may grant stock options to purchase shares of
the Company's common stock, restricted common stock awards and other stock-based
awards having terms and conditions at the discretion of the Company's Board of
Directors. The prices, terms and vesting periods of stock awards under the 1997
Plan are determined by the Board of Directors at the date of the grant. The 1997
Plan also contains provisions which stipulate that upon an acquisition event the
Board of Directors is authorized to determine that any stock option, restricted
stock or other stock-based award granted under the 1997 Plan may become
immediately exercisable in full or in part.
The Company recorded deferred compensation of $0 and $6,408,000 relating to
option grants during December 31, 2001 and 2000, respectively. Deferred
compensation is being charged ratably to operations over the vesting period of
the options. The Company incurred a charge to operations of $3,093,000,
$2,329,000 and $438,000 for the years ended December 31, 2001, 2000 and 1999,
respectively. For the year ended December 31, 2001, $1,121,000 of this charge
relates to services, $149,000 to sales and marketing, $1,784,000 to research and
development and $39,000 to general and administrative expenses. For the year
ended December 31, 2000, $579,000 of this charge relates to services, $119,000
to sales and marketing, $1,586,000 to research and development and $45,000 to
general and administrative expenses. For the year ended December 31, 1999,
$125,000 of this charge relates to services, $145,000 to sales and marketing,
$130,000 to research and development and $38,000 to general and administrative
expenses.
Assumed Stock Incentive Plans
In connection with the acquisition of certain businesses during the year
ended December 31, 2000 (See Note 14), the Company assumed two stock incentive
plans. Under these plans, the Company has reserved 640,120 shares of common
stock for issuance upon exercise of previously granted options under such plans.
Upon the assumption of these plans, the Company has been prohibited from
granting further awards under such plans.
9. Employee Benefits (continued)
1999 Employee Stock Purchase Plan
In accordance with the 1999 Employee Stock Purchase Plan, eligible employees
may authorize payroll deductions of up to 10% of their compensation (not to
exceed $12,500 in a six-month period) to purchase shares at the lower of 85% of
the fair market value of the Company's common stock at the beginning or end of
the six-month option period. Shares issued to employees under the plan totaled
164,676 during 2001. A total of 300,000 shares of common stock have been
reserved for issuance under the plan. At December 31, 2001, 60,486 shares
remained available for future purchase under the plan and at March 6, 2001,
1,371 shares remained available for future purchase under the plan.
2001 Stock Incentive Plan
The Company adopted the 2001 Stock Incentive Plan, (the 2001 Plan), which
covers all eligible employees and consultants of the Company. Officers and
directors of the Company are not eligible to be granted options under the 2001
Plan. As of December 31, 2001 the Company has reserved 1,000,000 shares of
common stock for issuance under the 2001 Plan. Under the 2001 Plan, the Company
may grant only non-qualified stock options to purchase shares of the Company's
common stock. The prices, terms and vesting periods of stock awards under the
2001 Plan are determined by the Board of Directors at the date of the grant. The
2001 Plan also contains provisions which stipulate that upon an acquisition
event the Board of Directors is authorized to determine that any stock option
granted under the 2001 Plan may become immediately exercisable in full or in
part.
401(k) Plan
The Company has a 401(k) plan (the Plan), whereby eligible employees may
contribute up to 15% of their annual compensation, subject to limitations
established by the Internal Revenue Code of 1986, as amended. The Company may
also contribute a discretionary matching contribution, to each such
participant's deferred compensation equal to a discretionary percentage
determined by the Company. During fiscal 2001, the Company made $300,000 in
discretionary matching contributions. The Company did not make any discretionary
matching contributions during fiscal 2000.
Stock Option Disclosures
The Company has adopted the disclosure provisions only of SFAS 123. The fair
values for these options were estimated at the date of grant using the
Black-Scholes option-pricing model in 2001 and 2000 and the minimum value method
in 1999 with the following assumptions:
Year Ended
December 31,
2001 2000 1999
---- ---- ----
Expected life (years)..................................... 5.63 8.28 8.94
Risk free interest rate................................... 5.00% 5.50% 6.34%
Volatility................................................ 79.08% 505.00% --
Dividend yield............................................ -- -- --
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows:
Year Ended
December 31,
2001 2000 1999
------------- ------------- -------------
Pro forma net loss................... $(118,620,553) $(62,334,652) $(26,713,375)
Pro forma net loss per share......... $ (5.43) $ (3.16) $ (3.17)
Compensation expense under SFAS 123 for 2001, 2000 and 1999 is not
representative of future expense, because it includes three, two and one years
of expense, respectively. In future years, the effect of determining
compensation cost using the fair value method will include additional vesting
and associated expense.
Stock Option Disclosures (continued)
Option activity under the 2001 Plan, 1997 Plan and assumed plans is
summarized below:
Year Ended December 31,
2001 2000 1999
-------------------- -------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
Outstanding, beginning of
Year..................... 5,079,820 $27.99 1,796,969 $14.61 895,175 $ 1.15
Granted.................... 2,774,434 7.01 4,074,666 34.70 1,095,300 23.63
Expired or canceled........ (2,063,974) 23.66 (516,254) 40.60 (63,325) 6.25
Exercised.................. (336,089) 1.30 (275,561) 3.26 (130,181) 2.03
--------- -------- --------
Outstanding, end of year... 5,454,191 20.10 5,079,820 27.99 1,796,969 14.61
========= ========= =========
Exercisable at end of year. 1,744,129 637,568 272,599
Available for future grants 1,092,128 799,032 1,217,325
Weighted-average fair value of
options granted during year $ 7.01 $ 35.80 $ 23.63
The following table presents weighted-average price and life information
about significant option groups outstanding at December 31, 2001:
Options Outstanding Options Exercisable
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
$ 0.00 - $ 5.00 715,804 6.7 Years $ 2.70 317,666 $ 1.96
$ 5.01 - $ 10.00 2,128,952 8.4 Years 6.38 526,098 6.44
$ 10.01 - $ 25.00 989,442 7.0 Years 18.14 265,205 18.19
$ 25.01 - $ 50.00 1,351,045 7.6 Years 39.01 505,579 39.44
$ 50.01 - $ 90.00 139,305 7.3 Years 69.58 64,631 69.73
$ 90.01 - $ 130.00 129,643 6.9 Years 106.15 64,950 106.35
--------------- --------------
$ 0.00 - $130.00 5,454,191 7.7 Years $ 20.10 1,744,129 $ 23.04
10. Preferred Stock
On August 20, 1999, the Company completed an initial public offering in
which the Company sold 3,000,000 shares of its common stock for net proceeds to
the Company of $44,640,000. On August 26, 1999, the Company's underwriters
exercised their over-allotment option, which resulted in the sale of an
additional 450,000 shares of the Company's stock which generated additional
proceeds of $6,696,000, net of issuance costs. Upon closing of the initial
public offering, each outstanding share of the Company's Redeemable Convertible
Preferred Stock and Convertible Preferred Stock was automatically converted into
one share of common stock of the Company resulting in the issuance of 8,659,208
shares of common stock.
11. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and income tax purposes. A valuation allowance has been established to reflect
the uncertainty of future taxable income to utilize available tax loss
carryforwards and other deferred tax assets. Significant components of the
Company's deferred tax assets and liabilities are as follows:
Year Ended
December 31,
2001 2000
------------ --------
Deferred tax assets:
Net operating loss carryforward........................ $45,166,000 $19,978,000
Research and development credit carryforward........... 2,191,000 1,451,000
Deferred revenue....................................... 862,000 2,456,000
Restructuring charge................................... 2,512,000 -
Other.................................................. 1,298,000 1,302,000
Deferred tax liabilities:
Depreciation........................................... (26,000) (210,000)
Amortization........................................... - -
----------- -----------
52,003,000 24,977,000
Less valuation allowance for deferred tax assets....... (52,003,000) (24,977,000)
------------ ------------
Total.................................................... $ -- $ --
=========== ===========
As of December 31, 2001, the Company has net operating loss carryforwards
and research and development tax carryforwards of approximately $112.9 million
and $2.2 million, respectively, available to offset future Federal taxable
income. These carryforwards begin to expire in 2012 and may be subject to
certain limitations. The valuation allowance increased by $27.0 million during
the twelve months ended December 31, 2001, due primarily to the additional
allowance for the Net Operating Losses incurred.
The Company believes that, based upon a number of factors, the available
objective evidence creates sufficient uncertainty regarding the realization of
the deferred tax assets such that a full valuation allowance has been recorded.
The Company will continue to assess the realization of the deferred tax assets
based on actual and forecasted operating results.
12. Segment and Geographic Information
As discussed in Note 2, the Company operates in one business segment: the
development and delivery of Web-based applications that include software and
related products and services. In making this determination, the Company
considered the information which management uses to oversee the Company's
operations as well as the manner in which the business is managed.
Foreign operations in 1999 were conducted in seven countries in Europe and
three countries in the Asia Pacific region. During 2000 and 2001, foreign
operations were expanded. Operations are currently conducted in twelve countries
in Europe, four countries in the Asia Pacific region and in Australia.
Revenues by geographic region are as follows:
Year Ended December 31,
2001 2000 1999
-------------- -----------------------
United States............... $38,467,273 $54,117,423 $14,984,459
Europe...................... 23,393,088 22,642,893 5,700,391
Other....................... 6,074,193 3,823,681 2,379,557
---------- ---------- ----------
Total....................... $67,934,554 $80,583,997 $23,064,407
=========== =========== ===========
Total long lived assets by geographic region are as follows:
December 31,
2001 2000 1999
------------- ------------- ---------
United States............... $51,255,463 $88,643,023 $22,907,826
Europe...................... 1,530,130 1,176,196 529,440
Other....................... 493,962 297,089 107,393
------------ ------------ -------------
Total....................... $53,279,555 $90,116,308 $23,544,659
=========== =========== ===========
12. Segment and Geographic Information (continued)
Net income (loss) by geographic region are as follows:
Year Ended December 31,
2001 2000 1999
------------- ------------- ---------
United States............... $(27,534,929) $(21,840,977)
$(104,742,044)
Foreign subsidiaries........ (10,441,687) (830,808) (148,316)
---------------- ----------- ------------
Total....................... $(115,183,731) $(28,365,737) $(21,989,293)
============== ============= =============
13. Loss Per Share
The following table sets forth the computation of basic and diluted loss per
share:
Year Ended December 31,
2001 2000 1999
-------------- -------------- ---------
Numerator:
Net loss....................... $(115,183,731) $(28,365,737) $(21,989,293)
Beneficial conversion
feature in series D
preferred stock.............. - - (263,158)
------------ ----------- ------------
Net loss applicable to
common stockholders.......... (115,183,731) (28,365,737) (22,252,451)
============ ============ ===========
Denominator:
Weighted average common
shares outstanding........... 21,904,251 20,159,868 9,943,728
Weighted average common
shares subject to
repurchase................... (44,528) (462,370) (1,524,612)
------------ ----------- -----------
Denominator for basic and
diluted loss per share
applicable to common
stockholders................... 21,859,723 19,697,498 8,419,116
============ =========== ===========
Basic and diluted net
loss per share
applicable to common
stockholders................. $ (5.27) $ (1.44) $ (2.64)
============ ============ ============
The Company has excluded all preferred stock, outstanding stock options and
shares subject to repurchase by the Company from the calculation of loss per
share because all such securities are antidilutive for all periods presented.
Shares subject to repurchase by the Company will be included in the computation
of earnings per share when the Company's option to repurchase these shares
expires. Weighted-average options outstanding to purchase 2,668,183, 3,370,090
and 1,332,992 shares of common stock for the years ended December 31, 2001, 2000
and 1999, were not included in the computation of net loss per share because the
effect would be antidilutive. Such securities, had they been dilutive, would
have been included in the computation of diluted net loss per share using the
treasury stock method.
14. Acquisitions
During 2001, 2000 and 1999, SilverStream completed several acquisitions of
businesses then complementary to the Company's business strategy. These
acquisitions have been accounted for using the purchase method and the results
of operations have been included in the Company's consolidated statement of
operations from the date of acquisition. A summary of each acquisition is as
follows:
Beijing SilverSolutions, Inc. On April 12, 2001, the Company acquired
Beijing SilverSolutions, Inc., a software distributor located in China. The
consideration for the acquisition was approximately $460,000 in cash and
transaction costs. In addition, the Company is obligated to pay further
consideration of up to approximately $150,000 if certain operational objectives
are achieved. The contingent consideration will be recorded as compensation
expense.
14. Acquisitions (continued)
The Wireless Application Software Division of Waptop Holding A/S. On March
1, 2001, the Company acquired the wireless application software division of
Waptop Holding A/S, a Danish holding company. The consideration for the
acquisition was approximately $5.3 million, which consisted of 341,507 shares of
the Company's common stock and $1.3 million in cash and transaction costs. In
addition, the Company is obligated to pay further consideration of up to
approximately $4.0 million if certain operational objectives are achieved.
Through December 31, 2001, SilverStream has paid $2.0 million in cash for such
additional consideration, all of which was accounted for as goodwill.
E-Party Software Inc. On January 26, 2001, the Company acquired E-Party
Software Inc., a software distributor located in Spain. The consideration for
the acquisition was approximately $1.5 million in cash and transaction costs.
Bondi Software, Inc. On December 6, 2000, the Company acquired Bondi
Software, Inc., an e-business services provider. The consideration for the
acquisition was approximately $17.0 million and was completed through the
issuance of 418,198 shares of the Company's common stock and $6.8 million in
cash and transaction costs.
Excelnet Systems Limited. On August 11, 2000, the Company acquired Excelnet
Systems Limited, an e-business services provider. The consideration for the
acquisition was approximately $5.2 million and was completed through the
issuance of 32,620 shares of the Company's common stock and $3.7 million in cash
and transaction costs. In addition, the Company is obligated to pay further
consideration of up to approximately $2.0 million if certain operational
objectives are achieved. Through December 31, 2001, the Company has paid
$225,000 in cash consideration, issued 50,000 shares of common stock at $14.06
per share and recorded a $1.0 million liability for such additional
consideration, all of which was accounted for as goodwill.
eObject, Inc. On April 5, 2000, the Company acquired eObject, Inc., the
developer of "enTellect", a java based framework for the access control,
personalization and metering of corporate resources. The consideration for the
acquisition was approximately $23.2 million, which consisted of 473,581 shares
of the Company's common stock and the payment of transaction costs. In addition,
the Company is obligated to pay further consideration of up to approximately
$5.5 million if certain operational objectives are achieved. Through December
31, 2001, SilverStream has issued 175,000 shares of common stock at $25.38 per
share and paid $1.0 million in cash for such additional consideration, all of
which was accounted for as goodwill.
Power 2000, Inc. On March 31, 2000, the Company acquired Power 2000, Inc.,
an e-business services provider. The consideration for the acquisition was
approximately $15.8 million, which consisted of 134,000 shares of the Company's
common stock along with approximately $5.4 million in cash and transaction
costs.
Gemlogic, Inc. On December 13, 1999, the Company acquired GemLogic, Inc., a
provider of XML software. The consideration for the acquisition was
approximately $12.1 million, which consisted of 114,456 shares of the Company's
common stock and the payment of transaction costs. In addition, the Company is
obligated to pay further consideration of up to approximately $3.5 million if
certain operational objectives are achieved. Through December 31, 2001,
SilverStream has issued 253,940 shares of common stock at prices ranging from
$6.80 to $14.06 per share and recorded a $1.2 million liability for such
additional consideration, all of which was accounted for as goodwill. The
Company recorded a $1.9 million charge for in-process research and development,
representing the value of numerous projects that were in various stages of
development that had not reached technological feasibility. No alternative
future uses were identified prior to reaching technological feasibility. The
purchased research and development was independently valued using the income
approach.
ObjectEra, Inc. On December 13, 1999, the Company acquired ObjectEra, Inc.,
a developer and distributor of a software program known as Object Request Broker
(ORB), for $8.3 million in cash and transaction costs and up to $4.0 million in
additional consideration contingent upon the achievement of certain operational
objectives. Through December 31, 2001, the Company has paid $1.0 million in cash
consideration, issued 151,867 shares of common stock at prices ranging from
$6.49 to $18.12 per share and recorded a $1.4 million liability for such
additional consideration, all of which was accounted for as goodwill.
15. Quarterly Information (unaudited)
A summary of operating results and net loss per share for the quarterly
periods in the two years ended December 31, 2001 is set forth below:
Quarter Ended
March 31 June 30 September 30 December 31
---------------------------- -------------- -------------
Year ended December 31, 2001
Total revenues.............. $22,948,936 $ 20,644,301 $14,632,320 $9,708,997
Gross profit................ 7,109,241 8,227,200 5,387,963 3,802,054
Goodwill impairment......... - - - 34,843,509
Net loss applicable to
common Stockholders......... (19,016,163) (25,364,596) (19,273,600) (51,529,372)
Net loss per share
applicable to common
stockholders -
basic and diluted............ (.89) (1.16) (.87) (2.32)
Year ended December 31, 2000
Total revenues.............. $13,003,345 $18,028,859 $23,500,891 $26,050,902
Gross profit................ 7,148,436 8,375,493 12,482,172 14,054,562
Net loss applicable to
common Stockholders......... (6,609,286) (7,482,001) (6,681,467) (7,592,983)
Net loss per share
applicable to common stockholders -
basic and diluted.............. (.36) (.38) (.33) (.37)