SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000 OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-5305
VelocityHSI, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-3360232
- ---------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2175 N. California Blvd,
Suite 810
Walnut Creek, CA 94596
- ---------------------------------------- ----------------------
(Address of principal office) (Zip Code)
(925) 952-5600
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- ------
Number of shares of common stock
outstanding as of November 10, 2000 13,408,651
VELOCITYHSI, INC.
INDEX TO FORM 10-Q
September 30, 2000
Page No.
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PART I FINANCIAL INFORMATION
ITEM 1:
Unaudited Statements of Operations - three months ended September
30, 2000 and 1999 2
Unaudited Statements of Operations - nine months ended September 30,
2000 and the period from March 1, 1999 (inception) to September 30, 1999 3
Balance Sheets - September 30, 2000 (unaudited) and December 31, 1999 4
Unaudited Statements of Cash Flows - nine months ended September 30,
2000 and the period from March 1, 1999 (inception) to September 30, 1999 5
Unaudited Statements of Changes in Equity - December 31, 1999 to September
30, 2000 6
Notes to Financial Statements 7
ITEM 2:
Management's Discussion and Analysis of Financial Condition and Results of
Operations 16
ITEM 3:
Quantitative and Qualitative Disclosures about Market Risk 21
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings 22
ITEM 2 Changes in Securities and Use of Proceeds 22
ITEM 3 Defaults Upon Senior Securities 22
ITEM 4 Submission of Matters to a Vote of Security Holders 22
ITEM 5 Other Information 22
ITEM 6 Exhibits and Reports on Form 8-K 22
PART I FINANCIAL INFORMATION
ITEM 1 - Financial Statements
- -------------------------------------------------------------------------------
VelocityHSI, Inc.
Statements of Operations (unaudited)
- -------------------------------------------------------------------------------
Three months Three months
ended ended
September 30, September 30,
2000 1999
------------------ -------------------
Revenues
Subscription fees $ 118,367 $ 42,070
------------------ -------------------
Operating expenses
Cost of services, including depreciation of $373,303 and $26,721
for the three months ended September 30, 2000 and 1999,
respectively 952,320 49,903
Sales and marketing 576,823 -
Product development 652,747 -
General and administrative (including $48,932 and $0 of
depreciation for the three months ended
September 30, 2000 and 1999, respectively) 1,462,934 -
Amortization of deferred compensation and other stock
compensation expense 411,258 -
------------------ -------------------
Total operating expenses 4,056,082 49,903
------------------ -------------------
Operating (loss) (3,937,715) (7,833)
Non-operating expense:
Transaction costs related to spin-off 3,006,279 -
Interest to BRE Properties, Inc. 3,082 -
Taxes 800 -
------------------ -------------------
Net (loss) $(6,947,876) $ (7,833)
================== ===================
Basic and diluted pro forma net loss per share (note 6) $ (0.79) $ N/A
================== ===================
Weighted average pro forma common shares used in computing
basic and diluted pro forma net loss per share (note 6) 8,777,398 N/A
================== ===================
See notes to financial statements
2
VelocityHSI, Inc.
Statements of Operations (unaudited)
- --------------------------------------------------------------------------------
Nine months March 1
ended (inception) to
September 30, September 30,
2000 1999
------------- -------------
Revenues
Subscription fees $ 300,745 $ 69,860
------------- -------------
Operating expenses
Cost of services, including depreciation of $761,514 and $43,235
for the nine months ended September 30, 2000 and the period
from March 1 to September 30, 1999, respectively 1,851,855 152,294
Sales and marketing 755,273 -
Product development 652,747 -
General and administrative (including $48,932 and $0 of
depreciation for the nine months ended September 30, 2000 and
the period from March 1 to September 30, 1999, respectively) 2,177,378 -
Amortization of deferred compensation and other stock
compensation expense 411,258 -
------------- -------------
Total operating expenses 5,848,511 152,294
------------- -------------
Operating (loss) (5,547,766) (82,434)
Non-operating expense:
Transaction costs related to spin-off 3,006,279 -
Interest to BRE Properties, Inc. 3,082 -
Taxes 800 -
------------- -------------
Net (loss) $ (8,557,927) $ (82,434)
============= =============
Basic and diluted pro forma net loss per share (note 6) $ (1.87) $ N/A
============= =============
Weighted average pro forma common shares used in computing
basic and diluted pro forma net loss per share (note 6) 4,584,130 N/A
============= =============
See notes to financial statements
3
VelocityHSI, Inc.
Balance Sheets
- ----------------------------------------------------------------------------------------------------------------
September 30, December 31,
2000 1999
(Unaudited) (Audited)
----------------- ------------------
ASSETS
Cash $ 500 $ -
On-site equipment, net of accumulated depreciation
of $810,445 at September 30, 2000 and $105,069 at December 31,
1999, respectively 5,243,453 857,350
Equipment held for contracted deployment 1,931,611 -
Software development costs 976,544 29,650
Other assets 339,522 -
----------------- -----------------
TOTAL ASSETS $ 8,491,630 $ 887,000
================= =================
LIABILITIES AND EQUITY
Liabilities
Accounts payable and accrued expenses $ 1,292,802 $ -
Advances from BRE Properties, Inc. (note 9) 1,623,031 -
----------------- -----------------
Total liabilities 2,915,833 -
----------------- -----------------
Equity
Intracompany account - 1,094,911
Preferred Stock, $0.01 par value; 50,000,000 shares authorized and
no shares issued or outstanding - -
Common stock, $0.01 par value; 100,000,000 shares authorized and
13,408,588 shares issued and outstanding at September 30, 2000 134,086 -
Additional paid in capital 16,985,967 -
Deferred compensation (2,778,418) -
Accumulated deficit (8,765,838) (207,911)
----------------- -----------------
Total Equity 5,575,797 887,000
----------------- -----------------
TOTAL LIABILITIES AND EQUITY $ 8,491,630 $ 887,000
================= =================
See notes to financial statements
4
VelocityHSI, Inc.
Statements of Cash Flows (unaudited)
- ------------------------------------------------------------------------------------------------------------------
Nine months March 1
ended (inception) to
September 30, September 30,
2000 1999
--------------- ----------------
Net Loss $ (8,557,927) $ (82,434)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 1,234,861 43,235
Payments accounted for as deferred compensation (1,250,000) -
Decrease in other assets 47,756 -
Increase in accounts payable and accrued expenses 547,111 -
------------- --------------
Net Cash Used in Operating Activities: (7,978,199) (39,199)
------------- --------------
Investing Activities:
Purchase of on-site equipment (4,450,857) (514,956)
Purchase of equipment held for contracted deployment (1,931,611) -
Additions to software development costs (946,894) -
------------- --------------
Net Cash Used in Investing Activities: (7,329,362) (514,956)
------------- --------------
Financing Activities:
Increase in advances from BRE Properties, Inc. post spin-off 1,623,031 -
Issuance of Common stock for cash:
Pre spin-off advances from BRE Properties, Inc. converted to
equity 11,937,483 554,155
VelocityHSI employees 826,472 -
Exercise of stock options and other 808,575 -
Issuance of warrants for cash proceeds 112,500 -
------------- --------------
Net Cash Provided by Financing Activities: 15,308,061 554,155
------------- --------------
Net increase in Cash 500 -
Beginning Balance - -
------------- --------------
Ending Balance $ 500 $ -
============= ==============
Supplemental disclosure of cash flow information:
Cash paid for interest $ - $ -
Cash paid for taxes 800 -
Supplemental disclosure of non-cash investing and financing
transactions:
Issuance of shares to BRE Properties, Inc. for conversion of
advances to equity $ 13,032,394 $ -
Deferred compensation:
Issuance of shares, subject to vesting, to BRE Properties, Inc.
founders for services 987,513
Issuance of shares, subject to vesting, to VelocityHSI, Inc.
founders for services 1,205,271
See notes to financial statements
5
VelocityHSI, Inc.
Statements of Changes in Equity (unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
Additional
Number Intra- Common Paid in Deferred Accumulated
of Shares company Stock Capital Compensation Deficit Total
----------- ----------- --------- ------------- -------------- ------------ -----------
Balance at December 31, 1999 $ 1,094,911 $ (207,911) $ 887,000
Additional advances 5,687,266 5,687,266
Net loss (1,610,051) (1,610,051)
----------- ------------ --------- ------------- -------------- ------------ -----------
Balance at June 30, 2000 - 6,782,177 - - - (1,817,962) 4,964,215
----------- ------------ --------- ------------- -------------- ------------ -----------
Additional advances 6,250,217 6,250,217
Net loss (604,212) (604,212)
----------- ------------ --------- ------------- -------------- ------------ -----------
Balance at August 7, 2000 - 13,032,394 - - - (2,422,174) 10,610,220
----------- ------------ --------- ------------- -------------- ------------ -----------
Issuance of common stock:
BRE Properties, Inc. 10,430,061 $(13,032,394) $ 104,301 $ 12,928,093 $ -
VelocityHSI and BRE
Properties, Inc. employees 2,116,816 21,168 839,740 860,908
Exercise of stock options 680,364 6,804 697,047 703,851
BRE Properties Investors, LLC 181,347 1,813 215,803 217,616
Issuance of warrants 112,500 112,500
Deferred officers bonuses (1,250,000) (1,250,000)
Deferred stock compensation 2,192,784 (2,192,784) -
Amortization of deferred
compensation expense & other 664,366 664,366
Net loss (6,343,664) (6,343,664)
----------- ------------ --------- ------------- -------------- ------------ -----------
Balance at September 30, 2000 13,408,588 $ - $ 134,086 $ 16,985,967 $ (2,778,418) $ (8,765,838) $ 5,575,797
=========== ============ ========= ============= ============== ============ ===========
See notes to financial statements
6
VelocityHSI, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
- --------------------------------------------------------------------------------
September 30, 2000
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared by
VelocityHSI, Inc. (the "Company" or "VelocityHSI") in accordance with the
instructions to Form 10-Q and should be read in conjunction with the Company's
audited financial statements, included in the Company's Registration Statement
on Form S-1 (registration number 333-36162). In the opinion of management, all
adjustments (consisting of normal recurring adjustments only) have been made
that are necessary for a fair statement of the financial position and the
results for the interim periods presented herein. Interim results are not
necessarily indicative of results for a full fiscal year.
2. Description of Business and Form of Organization
VelocityHSI provides high-speed Internet access to the multifamily
apartment industry.
The business referred to as VelocityHSI commenced operations on March 1,
1999 as a separate activity of BRE Properties, Inc. ("BRE"), a real estate
investment trust. In April 2000, BRE formed a Delaware corporation, VelocityHSI,
Inc., which had no assets or liabilities until August 7, 2000. On August 7,
2000, the operations and assets of VelocityHSI were transferred from BRE to
VelocityHSI, Inc. in exchange for VelocityHSI stock. Some employees of BRE then
joined VelocityHSI. On August 15, 2000, BRE distributed approximately 87% of the
shares received from VelocityHSI to BRE common shareholders and retained the
balance. In addition, the holders of stock options in BRE received options in
VelocityHSI as an anti-dilution mechanism. In related issuances of securities,
VelocityHSI sold shares of its common stock subject to vesting requirements and
forfeiture provisions to seven of its officers, issued, without consideration,
shares of its common stock subject to vesting requirements and forfeiture
provisions to six employees of BRE, and offered to sell to the holders of units
in BRE Property Investors LLC other than BRE, one share of VelocityHSI common
stock for each five shares of BRE common stock issuable to the unit holder upon
exchange of the units held by the unit holder. The table below summarizes the
shares of VelocityHSI common stock issued during this transaction:
Shares
------
Shares issued to BRE common shareholders in the distribution........... 9,066,383
Shares issued in related transactions to:
BRE option holders................................................ 570,364
Unit holders in BRE Property Investors LLC........................ 181,347
VelocityHSI and BRE employees..................................... 2,116,816
----------
2,868,527
----------
Shares retained by BRE................................................. 1,363,678
----------
Total VelocityHSI shares outstanding as a result of the spin-off....... 13,298,588
==========
7
BRE funded the costs associated with this distribution, including legal,
accounting and other professional fees, in the form of intracompany advances,
which were converted into an equity contribution on August 7, 2000, the date of
BRE's contribution of net assets to VelocityHSI.
VelocityHSI accounted for the net assets transferred to it in connection
with BRE's contribution as a non-reciprocal transfer to owners in accordance
with Accounting Principles Board Opinion No. 29, "Accounting for Nonmonetary
Transactions." Accordingly, the net assets have been carried over to the balance
sheet of VelocityHSI at the same basis as they appeared on the balance sheet of
BRE immediately prior to the transfer.
For convenience in these financial statements, both the division known as
Project Velocity and its legal successor, VelocityHSI, Inc., are referred to
herein as VelocityHSI.
Through September 30, 2000, all revenues of VelocityHSI were generated from
residents located in communities owned by BRE. The loss of BRE as a customer
would have a material adverse effect on VelocityHSI's financial condition and
results of operations.
3. Accounting Policies
Basis of Presentation
The financial statements of VelocityHSI, prior to August 7, 2000, reflect
an activity of a division of BRE prepared on a stand-alone basis. Included
herein, for that period, are charges by BRE to the activity or division for
direct and indirect costs which, in the opinion of management, reflect all costs
of VelocityHSI doing business on such basis.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Software Development Costs
Software development costs are capitalized or expensed in accordance with
Statement of Position No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" and Emerging Issues Task Force Issue No.
00-2, "Accounting for Website Development Costs." Amounts incurred during the
planning and operation stages are expensed as incurred, while amounts incurred
during the product development, Web application and infrastructure development,
and graphics development stages are capitalized. Capitalized amounts are stated
at cost less accumulated amortization. Amortization will be calculated using the
straight-line method over periods not to exceed three years, or less, depending
on management's assessment of the on-going value of such software, beginning at
the time these assets are placed in service. No amortization has been recorded
by VelocityHSI as of September 30, 2000.
8
Equipment
VelocityHSI's equipment is stated at cost, less accumulated depreciation.
System installation costs incurred in order to place the equipment in service at
a property are capitalized as equipment. Costs to install the service for
individual new subscribers are expensed as incurred and included as cost of
services. Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets, which is three years. In the event that a
community cancels our service prior to the respective equipment's full
depreciation, any equipment not able to be redeployed and any other unamortized
costs will be written off at the cancellation date.
In addition to equipment which has been installed on-site, at September 30,
2000, VelocityHSI also maintained an inventory of equipment to be installed at
properties pursuant to work orders of $1,931,611. Once this equipment is
installed at a specific property, depreciation associated with the equipment
will commence.
Impairment of Long-Lived Assets
VelocityHSI records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets. There have been no
events or circumstances to date that indicate that any assets might be impaired.
Sales and Marketing Costs
Sales and marketing costs are expensed in the period incurred.
Product Development Costs
Product development costs consist principally of compensation for the
Company's product development staff, payments to outside contractors and related
expenses associated with the development of the internal customer user
interface.
Prepaid Transaction Costs
Costs, primarily legal and accounting paid to third parties, directly
related to the performance of services in connection with the distribution
(discussed in note 2) were required to be expensed at the time of the
distribution. The total amount of prepaid transaction costs which were expensed
totaled $3,006,279 and is included in non-operating expenses in the Statement of
Operations.
Revenue Recognition
VelocityHSI records monthly subscriber service fees due from apartment
residents as revenue as the services are provided. VelocityHSI also plans to
derive future revenue from advertising on its web sites customized for each
apartment community and from commissions that Web-based businesses would pay
VelocityHSI for completed electronic sales transactions with subscribers.
Advertising revenues will be recognized provided that no significant VelocityHSI
obligations remain at the end of a contract period and collection of the
resulting receivable is probable. VelocityHSI obligations may include guarantees
of minimum amounts of advertising display times.
9
To the extent minimum guaranteed display times are not met, VelocityHSI will
defer recognition of the corresponding revenues until the remaining guaranteed
display levels are achieved. Revenues from electronic commerce transactions will
be recognized by VelocityHSI upon notification from the Web-based businesses of
revenues earned.
Cost of Services
Cost of services includes depreciation of capitalized equipment and related
system installation costs incurred in order to place the equipment in service at
a property. Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets, which is three years. Cost of services
also includes charges for wiring, setup and installation of Internet services
performed by an independent contractor and T-1 access charges related to the
monthly service for individual new subscribers which are expensed as incurred.
Additionally, cost of services includes amounts owed to property owners under
the service agreements which provide access to the residents. As of September
30, 2000, VelocityHSI had two service agreements (including the service
agreement with BRE). The service agreement with BRE is the only such agreement
which generated revenue for the three or nine months ended September 30, 2000.
Income Taxes
Income taxes are computed using the asset and liability method, under which
deferred income tax assets and liabilities are determined based on the
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the currently enacted tax rates and laws. A
valuation allowance is provided for the amount of deferred tax assets that,
based on available evidence, are not expected to be realized.
Stock-based Compensation and Consideration
VelocityHSI accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees" (APB No. 25) and Financial
Accounting Standards Board Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation," an interpretation of APB No. 25, and
complies with the disclosure provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" (SFAS
123). Under APB No. 25, compensation expense is based on the difference, if any,
on the date of the grant, between the estimated fair market value of VelocityHSI
stock and the exercise price.
VelocityHSI accounts for stock issued to non-employees in accordance with
the provisions of SFAS No. 123 and the Emerging Issues Task Force Consensus in
Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services." This statement requires that the calculated fair market value of the
option be expensed over the vesting period of the option.
Segment Information
The Financial Accounting Standards Board issued SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information" ("SFAS 131"), which is
effective for financial statements for periods beginning after December 15,
1997. SFAS 131 establishes standards for the way that public business
enterprises report financial and descriptive information about reportable
10
operating segments in annual financial statements and interim reporting to
shareholders. In adopting the provisions of SFAS 131, VelocityHSI has determined
that it has only one operating and reportable segment; therefore, separate
quarterly segment disclosure has not been provided.
4. Stock Option Plans
The 2000 Equity Incentive Plan ("Plan") provides for the issuance of
Incentive Stock Options, Non-Qualified Stock Options, restricted shares and
other grants. The maximum number of shares that may be issued under the Plan is
3,694,992. The option price may not be less than the fair market value of a
share on the date the option is granted and the option generally vests over four
years.
As a result of BRE's spin-off of VelocityHSI, holders of stock options in
BRE stock option plans received options in VelocityHSI as an anti-dilution
mechanism. The number of VelocityHSI options reflect the common stock spin-off
distribution ratio of one share of VelocityHSI common stock for every five
shares of BRE common stock. The terms of VelocityHSI options received by the BRE
option holders are identical to the BRE options held by the BRE option holders.
The exercise price of each VelocityHSI option was established using the ratio of
the holder's BRE option exercise price to the underlying BRE market value per
share immediately before the distribution. This ratio was then applied to the
VelocityHSI value per share at the time of the distribution to establish the
exercise price of the VelocityHSI option. The VelocityHSI common stock market
value was based on $1.20 per share, the amount determined by the board of
directors of BRE, after consideration of an analysis prepared by an independent
valuation and consulting firm, to represent the fair value of a share of
VelocityHSI common stock at the time of the distribution.
Changes in options outstanding during the period ended September 30, 2000
were as follows:
Weighted
Shares average
under exercise
option price
---------- --------
Balance at January 1, 2000......... - $ -
Granted to BRE option holders on
August 7, 2000................ 694,992 $ 0.91
Granted to VelocityHSI employees... 924,120 $ 1.67
Exercised.......................... (680,364) $ 0.96
---------- --------
Balance at end of period...... 938,748 $ 1.62
========== ========
Exercisable........................ 28,562 $ 0.92
Shares available for granting future
options............................. 2,075,880
At September 30, 2000, the exercise price of shares granted under options
ranged from $0.47 to $4.00, with a weighted average exercise price of $1.34. At
September 30, 2000, there were 477,754 restricted shares issued pursuant to
early exercise of unvested options outstanding under the Plan. These restricted
shares are subject to repurchase by VelocityHSI should such option
11
holders service with VelocityHSI terminate prior to vesting at the lower of the
exercise price or the then current market value.
VelocityHSI has accounted for 107,100 stock options granted to
non-employees during the period from August 7, 2000 to September 30, 2000 under
the fair value method of SFAS 123, "Accounting for Stock Compensation" and
Emerging Issues Task Force Issue No. 96-18, "Accounting for Equity Instruments
with Variable Terms that are Issued for Consideration other than Employee
Services under FASB Statement No. 123" which include recording the options at
fair value. The fair value for these options was estimated as of the date of
grant using a Black-Scholes option pricing model, with the following weighted
average assumptions for the period ended September 30, 2000:
September 30,
2000
------------
Number of options................................ 107,100
Risk-free interest rate.......................... 6.00%
Dividend yield................................... 0.00%
Volatility....................................... 1.080
Weighted average option life..................... 5 years
The total expense recognized relating to these shares for the three months
ended September 30, 2000 was $7,884.
The Black-Scholes option pricing model was developed for use in estimating
the fair market value of traded options that have no vesting restrictions and
are fully transferable. In addition, option valuation models require the input
of highly subjective assumptions, including the expected stock price volatility.
Because the above stock option plans have characteristics significantly
different from those of traded options, and because, in management's opinion,
changes in the subjective input assumptions can materially affect the fair value
estimate, the existing models do not necessarily provide a reliable single
measure of the fair value of the above stock option plans.
5. Issuance of Shares to Non-employees
On August 7, 2000, VelocityHSI issued an aggregate of 395,000 shares of
VelocityHSI common stock to six employees of BRE who were instrumental in the
development of the business of VelocityHSI. These six employees of BRE were not
required to pay for these shares. The shares vest in installments over a period
of 36 months and will be forfeited to us if the person to whom the shares are
issued ceases to be employed by BRE prior to the date of vesting. The Company
has recorded deferred compensation expense for the 395,000 shares of common
stock and will amortize this deferred compensation over the 36-month vesting
period, based on the market value of the shares at period end. As of September
30, 2000, $97,410 of amortization expense has been recognized.
6. Results of Operations Per Share
Historical per share data for the periods ended September 30, 1999 has not
been presented as no common shares were outstanding until August 7, 2000. Prior
to August 7, 2000, the Company operated as a division of BRE. The calculation of
the weighted average number of shares of
12
common stock outstanding for September 30, 2000 includes a pro forma adjustment
to reflect the number of shares that would have been outstanding as if the
shares that were issued on August 7, 2000 had been issued on January 1, 2000, as
adjusted for cash advances for these periods. For the quarter and nine months
ended September 30, 2000, the following table sets forth the computation of
basic and diluted loss per share with respect to results of operations from
continuing operations:
Three months Nine months
ended ended
September 30, September 30,
2000 2000
-------------- -------------
Numerator for basic loss per share income from continuing
operations available to common shareholders.............. $ (6,947,876) $ (8,557,927)
============== =============
Numerator for diluted loss per share.......................... $ (6,947,876) $ (8,557,927)
============== =============
Denominator
Denominator for basic loss per share--weighted average
shares................................................ 8,777,398 4,584,130
Effect of dilutive securities:
Warrants.............................................. 186,822 64,092
Stock options......................................... 64,710 21,727
-------------- -------------
Dilutive potential common shares......................... 251,532 85,819
-------------- -------------
Denominator for diluted loss per share adjusted for
weighted average shares and assumed conversion........ 9,028,930 4,669,949
============== =============
Basic loss per share..................................... $ (.79) $ (1.87)
============== =============
Diluted loss per share................................... $ (.79) $ (1.87)
============== =============
The Company has excluded all warrants and outstanding stock options from
the calculations of diluted net loss per common share because their inclusion
would be anti-dilutive. The total number of shares of common stock subject to
these warrants and stock options excluded from the calculations of diluted net
loss per common share is 2,069,112 for the quarter and nine months ended
September 30, 2000. Such securities, had they been dilutive, would have been
included in the computations of diluted net loss per share using the treasury
stock method. In addition, restricted shares, totaling 2,775,917 have been
excluded from the loss per share denominator because their inclusion would be
antidilutive.
7. Issuance of Warrants
On August 15, 2000, Banc of America Mortgage Capital Corporation ("BAMCC")
purchased warrants of VelocityHSI, Inc. for a price of $112,500, giving BAMCC
the right to purchase 450,000 shares of common stock of VelocityHSI. These
warrants may be exercised on or before August 15, 2005 and the exercise price
for these warrants is $1.20 per share which equaled the common stock fair market
value at date of grant.
13
8. Supplemental Information on Third Quarter Operations
The following table represents the pre- and post-spin-off balances of
VelocityHSI (note 2):
August 8 -
July 1 - September 30,
August 7, 2000 2000 Total
-------------- ------------- -------------
Revenues $ 45,425 $ 72,942 $ 118,367
-------------- ------------- -------------
Cost of services 254,657 697,663 952,320
Sales and marketing 45,950 530,873 576,823
Product development - 652,747 652,747
General and administrative 349,030 1,113,904 1,462,934
Amortization of deferred compensation - 411,258 411,258
-------------- ------------- -------------
Total operating expenses 649,637 3,406,445 4,056,082
Non-operating expenses - 3,010,161 3,010,161
-------------- ------------- -------------
Net loss $ (604,212) $ (6,343,664) $ (6,947,876)
============== ============= =============
9. Related Party Transactions
BRE incurred direct and indirect costs and expenses on behalf of
VelocityHSI. These costs and expenses, attributable to VelocityHSI operations,
including payroll costs, have been included in these financial statements
through August 7, 2000. Where appropriate, costs and expenses were allocated to
VelocityHSI by BRE based on BRE's cost, which reflects management's estimate of
what the expenses would have been on a stand-alone basis under arms length
transactions. In the opinion of management, the allocation method is reasonable
and appropriate.
Under an Internet Services Agreement, VelocityHSI is required to pay or
accrue to BRE 10% of revenues generated from services provided to residents of
communities owned by BRE. For the quarter and nine months ended September 30,
2000, the amount expensed relating to BRE's share of revenue was $8,138.
The intracompany account was comprised of amounts earned and incurred by
BRE on behalf of VelocityHSI. This account was converted into VelocityHSI common
stock on August 7, 2000.
On behalf of VelocityHSI, BRE entered into a lease agreement on April 24,
2000 for the rental of office space in Walnut Creek, California. The term of the
lease is through July 1, 2005 and all monthly lease payments will be made by
VelocityHSI. The monthly base rent payments for the lease range between $26,112
and $28,201.
Administrative Services and Reimbursement Agreement
VelocityHSI has entered into an Administrative Services and Reimbursement
Agreement with BRE pursuant to which BRE will provide VelocityHSI with office
space and administrative services in connection with the business operations as
reasonably required of VelocityHSI. BRE has also agreed to provide VelocityHSI
with up to $10 million in funds through September 30, 2001, to finance operating
expenses and the costs of installing equipment at properties which are not owned
by BRE. BRE has further agreed to provide VelocityHSI with funds through
September 30, 2001 to finance the installation of equipment at properties owned
or managed by BRE. Funds advanced by
14
BRE to VelocityHSI subsequent to BRE's contribution of net assets to VelocityHSI
on August 7, 2000, must be repaid by VelocityHSI on or before September 30, 2001
together with interest on periodic unpaid balances at the rate of 9% per year.
As of September 30, 2000, VelocityHSI borrowed $1,623,031 from BRE
consisting of $1,325,384 for general operating expenses and $297,647 for
installations made in BRE properties. The remaining balance which can be
borrowed from BRE with respect to the $10 million loan to fund operating costs
and installations of equipment at properties not owned by BRE was $8,674,616 at
September 30, 2000. Interest associated with this borrowing was $3,082 for the
three months ended September 30, 2000 and is included in the loan balance. In
addition, VelocityHSI is obligated to reimburse BRE for $13,365 for
administrative services for the quarter and nine months ended September 30,
2000.
15
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
- --------------------------------------------------------------------------------
September 30, 2000
OVERVIEW
The business referred to as VelocityHSI commenced operations in March 1999
with limited revenue generating activities conducted mainly on a part-time basis
by several BRE employees. On January 1, 2000, BRE formed a division with
accounting and reporting separate and discrete from all of BRE's other
activities and referred to as "Project Velocity."
In April 2000, BRE formed a corporation, VelocityHSI, Inc., which had no
assets or liabilities until August 7, 2000, when the operations and assets of
Project Velocity were transferred to VelocityHSI in exchange for 10,430,061
shares of common stock of VelocityHSI transferred to BRE.
Monthly subscriber fees comprised 100% of revenues for the periods ended
September 30, 2000 and September 30, 1999. As of September 30, 2000, all of our
subscribers were residents of apartment communities owned by BRE, although we
have entered into an agreement with one property owner other than BRE,
representing 1,000 apartment units. In addition, we have reached an agreement in
principle with another owner for approximately 9,000 units. As of September 30,
2000, the Company has not recorded any revenues from this agreement or the
agreement in principle, and we do not expect any revenues from these
transactions until the first quarter of 2001. However, no assurance can be given
that the Company will receive revenue from these agreements or that a definitive
agreement will be finalized related to the agreement in principle. We are
actively engaged in discussions with other property owners and intend to enter
into agreements with other property owners in the future.
Subscribers pay our subscription fees for our Internet services on a
monthly basis. The subscriber can terminate our service upon 30 days notice. Our
subscribers are not required to sign written contracts to pay for our
subscription fees for any minimum length of time. These subscription fees are
recognized as income is earned. As part of our marketing plan, we may reduce the
charges to potential subscribers as part of special promotions. As of September
30, 2000, we had approximately 1,900 subscribers in 37 apartment communities.
We anticipate that installation expenses will be associated with each new
subscriber. As new subscriber installation costs include significant
expenditures for equipment and system installation costs that include amounts
associated with the infrastructure installation which are initially capitalized,
we expect that an extended period of service will be required to earn revenues
sufficient to recover our initial costs.
RESULTS OF OPERATIONS
Comparison of the three months ended September 30, 2000 and 1999
Revenues totaled $118,367 for the three months ended September 30, 2000 and
$42,070 for the three months ended September 30, 1999. This increase was due to
an increased number of subscribers over the three month period ended September
30, 2000. Revenues consist solely of subscription fees from subscribers to our
monthly Internet access service. Subscription fees vary in amount based on the
level of service a subscriber chooses. In general, the average monthly
subscription fee is approximately $35.00 per month.
Cost of services totaled $952,320 for the three months ended September 30,
2000, an increase of $902,417 over the $49,903 for the three months ended
September 30, 1999. The increases in costs resulted from the addition of 23 new
BRE apartment communities as customers and the addition of more subscribers in
addition to related increases in depreciation of capitalized equipment
installation costs. The costs, excluding depreciation, for the quarter ended
September 30, 2000 consisted of $247,390 in charges for wiring, setup and
installation of apartment
16
infrastructures performed by an independent contractor, T-1 access charges of
$200,144 and, to a lesser extent, commissions to on-site personnel for new
subscriptions, personal property taxes on equipment and a ten percent revenue
commission due to BRE.
Included in costs of services is depreciation expense totaling $373,303 for
the three months ended September 30, 2000 compared to $26,721 for the three
months ended September 30, 1999. The increase of $346,582 is directly related to
the increase in equipment placed in service in 2000. Depreciation expense is
based on the total cost to place the related equipment in service and is
calculated on a straight-line basis over three years. We anticipate our
depreciation expense will increase as we continue to purchase additional
equipment and put this equipment into service. In the event that a multifamily
apartment community cancels our service prior to the respective equipment's full
depreciation, and we are not able to redeploy this equipment at another
multifamily apartment community, these remaining unamortized costs will be
written off at the cancellation date.
Sales and marketing costs totaled $576,823 for three months ended September
30, 2000, an increase of $576,823 over the $0 for the three months ended
September 30, 1999. The increase in sales and marketing costs related largely to
salaries, promotional materials and site assessment surveys. We anticipate
significant ongoing sales and marketing expenses as we market our services to
property owners, managers and potential subscribers.
General and administrative expenses totaled $1,462,934 for the three months
ended September 30, 2000, an increase of $1,462,934 over the $0 for the three
months ended September 30, 1999. The increase resulted from additional direct
and indirect personnel costs of executive and administrative officers and
support personnel, additional facility costs and expenses for travel, printing,
and office supplies incurred in connection with the development of the
VelocityHSI business. General and administrative expenses should continue to
increase over the next 12 months as we hire additional software developers,
sales, marketing and technical personnel to support VelocityHSI as a separate
company without reliance on BRE personnel.
Product development costs totaled $652,747 for the three months ended
September 30, 2000, an increase of $652,747 over the $0 for the three months
ended September 30, 1999. This increase resulted largely from the costs
associated with the prototyping of an internal customer user interface which was
replaced in the third quarter of 2000.
Amortization of deferred compensation totaled $411,258 for the three months
ended September 30, 2000, an increase of $411,258 over the $0 for the three
months ended September 30, 1999. This amortization is primarily associated with
the issuance of shares of restricted common stock to VelocityHSI and BRE
founders during August 2000. Of this total expense, $194,636 relates to general
and administrative employees, $30,356 relates to an employee in the sales and
marketing department, $22,320 relates to employees associated with product
development and $163,946 relates to non-employees and other amortization
expense.
Transaction costs consist of legal and professional fees, financial
printing fees, stock service fees and other costs incurred prior to the August
7, 2000 spin-off of VelocityHSI. Prior to our spin-off, these costs were
included in the asset section of the balance sheet as prepaid transaction costs.
Net loss of $6,947,876 and $7,833 for the three months ended September 30,
2000 and September 30, 1999, respectively, resulted from the costs of services,
sales and marketing costs, depreciation, general and administrative costs and
transaction costs exceeding revenues generated from subscriber service fees.
17
Comparison of the nine months ended September 30, 2000 and the period from March
1 to September 30, 1999
Revenues totaled $300,745 for the nine months ended September 30, 2000 and
$69,860 for the period from March 1 to September 30, 1999. This increase was due
to an increased number of subscribers over the nine month period ended September
30, 2000. Revenues consist solely of subscription fees from subscribers to our
monthly Internet access service. Subscription fees vary in amount based on the
level of service a subscriber chooses.
Cost of services totaled $1,851,855 for the nine months ended September 30,
2000, an increase of $1,699,561 over the $152,294 for the period from March 1 to
September 30, 1999. The increases in cost resulted from the addition of new BRE
apartment communities as customers and the addition of more subscribers during
the nine month period ended September 30, 2000 in addition to related increases
in depreciation of capitalized equipment installation costs. The costs,
excluding depreciation, for the nine months ended September 30, 2000 consisted
of $526,443 in charges for wiring, setup and installation of apartment
infrastructures performed by an independent contractor, T-1 access charges of
$404,800 and, to a lesser extent, commissions to on-site personnel for new
subscriptions, personal property taxes on equipment and a ten percent revenue
commission due to BRE.
Included in costs of services is depreciation expense totaling $761,514 for
the nine months ended September 30, 2000 compared to $43,235 for the period from
March 1 to September 30, 1999. The increase of $718,279 is directly related to
the increase in equipment placed in service in 2000 and is calculated on a
straight-line basis over three years.
Sales and marketing costs totaled $755,273 for nine months ended September
30, 2000. For the period from March 1 to September 30, 1999 there were $0 sales
and marketing costs. The increase in sales and marketing costs related largely
to salaries, promotional materials and site assessment surveys.
General and administrative expenses totaled $2,177,378 for the nine months
ended September 30, 2000, an increase of $2,177,378 over the $0 for the period
from March 1 to September 30, 1999. The increase resulted from additional direct
and indirect personnel costs of executive and administrative officers and
support personnel, additional facility costs and expenses for travel, printing,
and office supplies incurred in connection with the development of the
VelocityHSI business.
Product development costs totaled $652,747 for the nine months ended
September 30, 2000, an increase of $652,747 over the $0 for the period from
March 1 to September 30, 1999. This increase resulted largely from the costs
associated with the prototyping of an internal customer user interface which was
replaced in the third quarter of 2000.
Amortization of deferred compensation totaled $411,258 for the nine months
ended September 30, 2000, an increase of $411,258 over the $0 for the period
from March 1 to September 30, 1999. This amortization is primarily associated
with the issuance of shares of restricted common stock to VelocityHSI and BRE
founders during August 2000. Of this total expense, $194,636 relates to general
and administrative employees, $30,356 relates to an employee in the sales and
marketing department, $22,320 relates to employees associated with product
development, and $163,946 relates to non-employees and other expenses.
18
Transaction costs consist of legal and professional fees, financial
printing fees, stock service fees and other costs incurred prior to the August
7, 2000 spin-off of VelocityHSI. Prior to our spin-off, these costs were
included in the asset section of the balance sheet as prepaid transaction costs.
Net loss of $8,557,927 and $82,434 for the nine months ended September 30,
2000 and the period from March 1 to September 30, 1999, respectively, resulted
from the costs of services, sales and marketing costs, depreciation, general and
administrative costs and transaction costs exceeding revenues generated from
subscriber service fees.
Comparison of certain balance sheet accounts for September 30, 2000 and December
31, 1999
On-site equipment totaling $5,243,453 and $857,350 on our balance sheets as
of September 30, 2000 and December 31, 1999, respectively, consisted of hardware
and other equipment used for VelocityHSI services. These amounts are expected to
continue to increase as additional equipment is required to install our services
at new apartment communities.
Software development costs totaling $976,544 and $29,650 on our balance
sheets as of September 30, 2000 and December 31, 1999, respectively, consisted
primarily of salary and consultant expenses incurred in connection with the
development of our Internet applications. There has been no amortization of
these costs, since these projects were under development during the period ended
September 30, 2000. Upon completion of the projects, scheduled for the fourth
quarter of 2000, these costs will be amortized over a term not to exceed three
years.
Liquidity and Capital Resources
Cash used in operating activities, primarily for the payment of operating
expenses, was $7,978,199 and $39,199 for the nine months ended September 30,
2000 and the period from March 1 to September 30, 1999, respectively. We expect
to experience substantial negative cash flow from operating activities through
the end of fiscal year 2000 and beyond, due to the commencement of our business
operations and the implementation of our business plan. Our future cash
requirements as well as our revenues will depend on a number of factors
including: the number of multifamily apartment properties with which we contract
to provide services; the terms of contracts with the multifamily apartment
property owners; subscriber penetration within the multifamily apartment
property; monthly subscription rates; variable installation and setup costs at
each multifamily apartment property and marketing costs.
We incur both system installation costs to place equipment in service at
each property and incremental installation costs to set up each new subscriber
with VelocityHSI. Since we do not charge the property owner or subscribers for
these installation costs, and the monthly subscriber fees generated from service
are earned over a period of time, we experience negative cash flows initially
upon installation.
Our major expenditures to date consisted of hardware and software purchases
and development costs of our Internet services. Net cash used in investing
activities was $7,329,362 and $514,956 for the nine months ended September 30,
2000 and the period from March 1 to September 30, 1999, respectively. The
infrastructure deployment technology solution and cost required to provide
VelocityHSI service to apartment communities varies. In apartments where all of
the individual units' telephone lines terminate in a single, central location
("central communities"), the technology solution may be different than apartment
communities where the individual apartment units' telephone lines do not
terminate in a single location ("non-central communities"). We estimate that
over one-half of the apartment communities which are in the Company's target
market are non-central communities. The cost of infrastructure deployment in
non-central communities may be higher than central communities and the Company
is actively pursuing technology solutions which are cost effective for both
types of apartment communities. However, no assurance can be given that we will
be successful in identifying cost effective technology solutions to all
communities.
Our expenses and capital expenditures prior to August 7, 2000 were financed
with advances from BRE as part of the intracompany equity account. Of the total
$11,937,483 in advances for the nine months ended September 30, 2000, $2,747,750
relate to transaction costs, $3,983,986 relate
19
to operating expenses and $5,205,747 relate to purchases of fixed assets. On
August 7, 2000, we entered into an agreement with BRE pursuant to which BRE has
agreed to provide us with up to $10,000,000 in additional funds through
September 30, 2001 to finance our operating expenses and the costs of installing
equipment at properties which are not owned by BRE. BRE has also agreed to
provide us with funds through September 30, 2001 to finance the installation of
our equipment at properties owned by BRE at an estimated cost of $4,000,000. We
must repay, on or before September 30, 2001, all of the funds advanced to us by
BRE under the agreement, including advances we use to reimburse BRE for
administrative services, together with accrued interest on unpaid balances at
the rate of 9% per year. As of September 30, 2000, BRE had advanced $1,623,031
to us. We currently have no external debt facility or source of funds other than
BRE. The operating expenses and capital expenditures we will incur during the
next 12 months in carrying out our business plan will vary depending upon a
number of factors, including:
. the number of new apartment property owner customers and subscribers
engaged during that period which will determine the amount required for
the acquisition and installation of capital equipment;
. the extent of the changes and developments that may occur during that
period in available technology and user requirements and preferences
that will affect the amount we will be required to spend to develop and
maintain a competitive position in the industry; and
. the cost of attracting new apartment property owner customers and
subscribers.
Although we cannot predict with precision the amount required to fund
future operating expenses and capital expenditures, we expect the funding
required to carry out our business plan during the next 12 months to exceed
substantially the funding available from BRE. Consequently, we will be required
to obtain financing from additional sources in order to fund our expected
operations both during the next 12 months and thereafter, including the
repayment on or before September 30, 2001 of advances made by BRE. If we cannot
obtain additional capital, we will be required to reduce our expenditures to a
level that could be financed with advances from BRE and will be unable to repay
the BRE advances on September 30, 2001. A reduction in expenditures would limit
our ability to:
. hire and retain the technical personnel necessary to develop our
products and services;
. hire and retain the marketing personnel necessary to expand our property
owner and customer base beyond BRE and attract new subscribers;
. acquire the equipment necessary to expand or maintain our business;
. respond effectively to competitive products and services; and
. hire necessary management personnel.
We are pursuing additional sources of financing, including debt and equity
financing and borrowings. However, a reduction in expenditures or a failure to
repay the BRE advances when due as a result of our inability to obtain
additional capital may result in a reduction in value of the trading price of
our common stock. Since BRE has not committed to provide us with funds
subsequent to September 30, 2001, if we are unable to obtain additional capital
prior to that date, our business may be materially and adversely affected and we
may be unable to continue our operations after that date. Even if we raise
additional capital it may be dilutive to existing shareholders and if we incur
additional debt the lender may subject us to restrictions which will impair our
ability to develop our business in accordance with our current business plan.
20
We expect to experience negative cash flow from operating activities
through September 30, 2001 and for periods thereafter depending on a variety of
factors. Our future cash requirements as well as our revenues will depend on a
number of factors including: the rate at which subscribers purchase our service;
our effectiveness in developing income sources other than subscription fees; the
cost to install and maintain the service to individual users or apartment
communities; marketing costs, including the costs of providing service to new
customers during an introductory period without charge; and changes in
technology.
Cautionary Statement Regarding Forward-Looking Statements
This Form 10-Q contains forward-looking statements that involve a number of
risks and uncertainties which may cause actual results to differ from those
expensed in such forward-looking statements. Forward-looking statements can be
identified by the use of forward-looking words such as "believes," "expects,"
"may," "will," "plan," "intends," "estimates," "could," "should," "would,"
"continue," "seeks," "pro forma" or "anticipates," or other similar words
(including their use in the negative), or by discussions of strategies, plans or
intentions. These statements include but are not limited to statements under the
captions "Management's Discussion and Analysis of Financial Condition and
Results of Operations" as well as other sections in this Form 10-Q. A number of
factors could cause results to differ materially from those anticipated by the
forward-looking statements, including those discussed under "Management's
Discussion and Analysis of Financial Condition and Results of Operations." Our
forward-looking statements are dependent upon assumptions and estimates that may
prove to be incorrect. Although we believe that the assumptions and estimates
reflected in the forward-looking statements are reasonable, our plans,
intentions or expectations may not be achieved. The cautionary statements made
in this Form 10-Q are intended to be applicable to all related forward-looking
statements wherever they may appear in this Form 10-Q.
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------------------
As of September 30, 2000, the Company's debt structure only included short-
term, fixed rate debt. Although the Company did not have any long-term debt
outstanding at September 30, 2000, the Company is still exposed to indirect
market risk for changes in interest rates. However, the Company does not expect
any material loss with respect to these changes or significant changes in its
business prospects.
21
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 2. Changes in Securities and Use of Proceeds
None.
ITEM 3. Defaults upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
ITEM 5. Other Information
During the quarter, William C. Vinck was named executive vice president and
chief operating officer. Mr. Vinck was previously vice president, operations
support and chief information officer at Omnipoint Communications Services.
In addition, Douglas A. Campillo II, the Company's senior vice president
and chief technical officer has left the Company. His responsibilities have been
transferred to Mr. Vinck until a replacement is found.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Description of Exhibit
------ ----------------------
3.1 Amended and Restated Certificate of Incorporation of
VelocityHSI, Inc.*
3.2 Amended and Restated Bylaws of VelocityHSI, Inc.
3.3 Form of Common Stock Certificate of VelocityHSI, Inc.*
10.1 Contribution and Distribution Agreement between
VelocityHSI, Inc. and BRE Properties, Inc.
10.2 Administrative Services and Reimbursement Agreement
between VelocityHSI, Inc. and BRE Properties, Inc.
10.3 VelocityHSI, Inc. 2000 Equity Incentive Plan
10.4 Internet Service Agreement between VelocityHSI, Inc.
and BRE Properties, Inc.
10.5 Registration Rights Agreement between VelocityHSI, Inc.
and BRE Properties, Inc.
10.6 Tax Allocation Agreement between VelocityHSI, Inc. and
BRE Properties, Inc.
10.7 Employment Agreement of Stephen E. Carlson*
10.8 Employment Agreement of Nancye Miller*
22
10.9 Employment Agreement of William C. Vinck
10.10 Warrant Agreement between VelocityHSI, Inc. and Banc of
America Mortgage Capital Corporation dated August 15,
2000
27 Financial Data Schedule
* Incorporated herein by reference from the Company's Registration
Statement on Form S-1 (File No. 333-36162).
(b) Reports on Form 8-K:
None.
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VELOCITYHSI, INC.
(Registrant)
Date: November 14, 2000 /s/ Charles P. Wingard
----------------- ---------------------------
Charles P. Wingard
Senior Vice President,
Chief Financial Officer
24