SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of earliest event reported: November 16, 1999
-----------------
Internet Capital Group, Inc.
----------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-26929 23-2996071
- ---------------------- ------- ----------
State of Incorporation (Commission File Number) (IRS Employer Identification
No.)
435 Devon Park Drive, Building 800, Wayne, PA 19087
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(Address of principal executive offices) (Zip Code)
(610) 989-0111
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(Registrant's telephone number)
Item 2. Acquisition of Assets.
---------------------
On November 16, 1999 Internet Capital Group, Inc. (the "Company")
acquired an interest in eMerge Interactive, Inc., a Delaware corporation
("eMerge"), pursuant to the Securities Purchase Agreement (the "Purchase
Agreement") dated as of October 27, 1999 by and among the Company, eMerge and J
Technologies, LLC, a South Dakota limited liability company ("J Technologies").
eMerge is a diverse Internet-based provider of e-commerce, information services
and technology solutions for the animal industry, primarily the cattle segment.
Pursuant to the Purchase Agreement, the Company acquired from eMerge
4,555,556 shares of eMerge Series D Preferred Stock and a warrant to purchase
911,111 shares of eMerge Class B Common Stock. Pursuant to the Purchase
Agreement, the Company also purchased 1,000,000 shares of eMerge Class A Common
Stock from J Technologies. The aggregate purchase price for the stock and the
warrant, which was established through arms-length negotiation, was $50,000,000,
composed of $27,000,000 in cash and a promissory note for $23,000,000. The cash
portion of the purchase price was funded from the Company's existing cash. The
promissory note is non interest-bearing and is due and payable one year after
issuance; provided, however, that in the event that eMerge does not consummate a
public offering of its Common Stock by March 15, 2000, eMerge can require the
Company to prepay up to $5,000,000 in principal on or after March 25, 2000.
Each share of eMerge Series D Preferred Stock will convert into one
share of eMerge Class B Common Stock upon the Company's election, completion of
an initial public offering of eMerge's Common Stock or a specified vote of the
holders of all Preferred Stock. Each of the Company's shares of Class B Common
Stock will convert into one share of Class A Common Stock upon transfer to a
non-affiliate of the Company. Each share of eMerge Series D Preferred Stock and
each share of eMerge Class B Common Stock is entitled to two and one half votes.
Each share of eMerge Class A Common Stock is entitled to one vote. The Company
currently has beneficial ownership (assuming conversion of each share of
Preferred Stock) of 30.7% of the eMerge Common Stock and has 45.9% of the voting
power with respect to eMerge. The Company may exercise the warrant during the
three-year period beginning upon the first to occur of an initial public
offering of eMerge's Common Stock, the closing of new equity financing from
private investors of at least $20,000,000 and the one-year anniversary of the
issuance of the warrant. The exercise price will equal the purchase price per
share to investors in the first to occur of the initial public offering or
private equity financing described in the preceding sentence or, if the one-year
anniversary of the issuance of the warrant occurs first, $9.00 per share.
Douglas A. Alexander, one of the directors of eMerge, is an executive
officer of the Company. E. Michael Forgash, one of the directors of eMerge, is
also a member of the board of directors of the Company. Safeguard Scientifics,
Inc., a Delaware corporation ("Safeguard"), may be considered a promoter of the
Company. Safeguard and its related parties own approximately 14.3% of the
outstanding shares of the Company, and approximately 47.5% of the outstanding
shares of eMerge. Additionally, the Company and Safeguard entered into the Joint
Venture Agreement dated as of October 27, 1999 (the "Joint Venture Agreement")
Pages 2 of 28 Pages
pursuant to which they agreed, among other things, to vote their shares of
eMerge to elect two designees of the Company and two designees of Safeguard to
the board of directors of eMerge and to attempt to agree on mutually beneficial
courses of action. Additionally, the Joint Venture Agreement provides for rights
of first refusal with respect to certain sales of eMerge securities.
In connection with the consummation of the Purchase Agreement, the
Company also entered into a Stockholder Agreement dated as of November 16, 1999
with eMerge and certain stockholders of eMerge, including Safeguard and certain
of its affiliates (the "Stockholder Agreement"). The Stockholder Agreement
provides for, among other things, restrictions on the transferability of
securities and co-sale, drag-along and preemptive rights. The Stockholders
Agreement terminates upon an initial public offering of eMerge's Common Stock.
The Company and eMerge are also parties to a Registration Rights Agreement dated
as of November 16, 1999 (the "Registration Rights Agreement"). Pursuant to the
Registration Rights Agreement, eMerge granted the Company certain demand and
piggyback registration rights.
Pages 3 of 28 Pages
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
------------------------------------------------------------------
(a) Financial Statements of Business Acquired
Independent Auditors' Report
To the Board of Directors of
eMerge Interactive, Inc.:
We have audited the accompanying consolidated balance sheets of eMerge
Interactive, Inc. as of December 31, 1997 and 1998 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for
each of the years in the three-year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of eMerge Interactive,
Inc. at December 31, 1997 and 1998 and the results of their operations and
their cash flows for each of the years in the three-year period ended December
31, 1998 in conformity with generally accepted accounting principles.
KPMG LLP
Orlando, Florida
April 20, 1999
Pages 4 of 28 Pages
EMERGE INTERACTIVE, INC.
Consolidated Balance Sheets
(Unaudited)
December 31, December 31, September 30,
1997 1998 1999
------------ ------------ -------------
Assets
Current assets:
Cash................................. $ 400 $ 268 $ 1,650,134
Trade accounts receivable............ -- 368,421 2,790,427
Inventories (note 3)................. 635,963 706,557 655,129
Cattle deposits...................... -- -- 489,760
Prepaid expenses..................... 33,642 27,837 103,242
Net assets of discontinued operations
(note 12)........................... 1,066,804 2,285,341 390,336
----------- ------------ ------------
Total current assets................. 1,736,809 3,388,424 6,079,028
Property and equipment, net (note 4).. 428,140 513,837 1,711,404
Capitalized offering costs............ -- -- 341,967
Investment in Turnkey Computer
Systems, Inc. (note 12).............. -- -- 1,831,133
Intangibles, net (note 5)............. -- 2,699,828 6,273,309
----------- ------------ ------------
Total assets....................... $ 2,164,949 $ 6,602,089 $ 16,236,841
=========== ============ ============
Liabilities and Stockholders' Equity
(Deficit)
Current liabilities:
Current installments of capital lease
obligation with related party (note
9).................................. $ -- $ 79,852 $ 83,917
Note payable (note 12)............... -- -- 500,000
Accounts payable..................... 725,369 423,946 1,633,132
Accrued liabilities:
Salaries and benefits................ 175,597 283,103 908,271
Other................................ 98,704 319,989 1,435,987
Advance payments from customers...... -- -- 619,270
Due to related parties (notes 9
and 12)............................. 8,040,304 5,187,334 13,405,957
----------- ------------ ------------
Total current liabilities............ 9,039,974 6,294,224 18,586,534
Capital lease obligation with related
party, excluding current installments
(note 9)............................. -- 305,018 242,673
Note payable (note 12)................ -- -- 900,000
----------- ------------ ------------
Total liabilities.................... 9,039,974 6,599,242 19,729,207
----------- ------------ ------------
Commitments and contingencies (notes
11 and 12)
Class A common stock subject to a put
(note 12)............................ -- -- 400,000
----------- ------------ ------------
Stockholders' equity (deficit) (notes
6, 8 and 12):
Preferred stock, $.01 par value,
authorized 15,000,000 shares:
Series A preferred stock, (aggregate
involuntary liquidation preference
of $6,741,954 in 1997 and
$7,386,314 in 1998), designated
6,500,000 shares, issued and
outstanding 6,443,606 shares in
1997, 1998 and 1999................. 64,436 64,436 64,436
Series B junior preferred stock,
(aggregate involuntary liquidation
preference of $-0- in 1997 and
$4,801,315 in 1998), designated
2,400,000 shares, issued and
outstanding -0- shares in 1997 and
2,400,000 shares in 1998 and 1999... -- 24,000 24,000
Series C preferred stock, designated
1,300,000 shares, issued and
outstanding -0- shares in 1997 and
1998 and 1,100,000 shares in 1999... -- -- 11,000
Series D preferred stock, designated
4,555,556 shares, no shares issued
and outstanding in 1997, 1998 and
1999................................ -- -- --
Common stock, $.01 par value,
authorized 100,000,000 shares:
Class A common stock, designated
92,711,110 shares, issued and
outstanding 2,606,500 shares in
1997, 4,676,500 shares in 1998 and
5,616,155 shares in 1999............ 26,065 46,765 55,662
Class B common stock, designated
7,288,890 shares; no shares issued
and outstanding in 1997, 1998 and
1999................................ -- -- --
Additional paid-in capital........... 1,982,986 16,648,286 23,468,470
Accumulated deficit.................. (8,948,512) (16,780,640) (27,452,825)
Unearned compensation................ -- -- (63,109)
----------- ------------ ------------
Total stockholders' equity
(deficit)......................... (6,875,025) 2,847 (3,892,366)
----------- ------------ ------------
Total liabilities and stockholders'
equity (deficit).................. $ 2,164,949 $ 6,602,089 $ 16,236,841
=========== ============ ============
See accompanying notes to consolidated financial statements.
Pages 5 of 28 Pages
EMERGE INTERACTIVE, INC.
Consolidated Statements of Operations
(Unaudited)
Nine Months Ended
Years ended December 31, September 30,
------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ------------
Revenue (note 10)....... $ -- $ -- $ 1,792,471 $ 1,106,452 $ 18,338,645
Cost of revenue......... -- -- 2,623,447 1,628,757 18,282,330
----------- ----------- ----------- ----------- ------------
Gross profit
(loss)............. -- -- (830,976) (522,305) 56,315
----------- ----------- ----------- ----------- ------------
Operating expenses:
Selling, general and
administrative (note
9)................... -- 627,606 3,659,810 2,427,944 7,539,689
Research and
development.......... -- 727,753 1,109,382 759,434 2,756,262
----------- ----------- ----------- ----------- ------------
Total operating
expenses........... -- 1,355,359 4,769,192 3,187,378 10,295,951
----------- ----------- ----------- ----------- ------------
Profit (loss) from
continuing operations.. -- (1,355,359) (5,600,168) (3,709,683) (10,239,636)
Interest expense (note
9)..................... -- (141,167) (331,594) (231,000) (458,624)
Other income............ -- -- -- -- 15,655
----------- ----------- ----------- ----------- ------------
Profit (loss) from
continuing
operations before
income taxes....... -- (1,496,526) (5,931,762) (3,940,683) (10,682,605)
Income tax expense
(benefit) (note 7)..... -- -- -- -- --
----------- ----------- ----------- ----------- ------------
Profit (loss) from
continuing
operations......... -- (1,496,526) (5,931,762) (3,940,683) (10,682,605)
Discontinued operations
(note 12):
Income (loss) from
operations of
discontinued
transportation
segment (note 9)..... (1,719,492) (3,987,097) (1,808,951) (1,721,060) 10,420
Loss on disposal of
transportation
segment.............. -- -- (91,415) -- --
----------- ----------- ----------- ----------- ------------
Net profit (loss)....... $(1,719,492) $(5,483,623) $(7,832,128) $(5,661,743) $(10,672,185)
=========== =========== =========== =========== ============
See accompanying notes to consolidated financial statements.
Pages 6 of 28 Pages
EMERGE INTERACTIVE, INC.
Consolidated Statements of Stockholders' Equity (Deficit)
Preferred
Preferred Stock Preferred Stock Preferred Stock Stock Common Stock Common Stock
Series A Series B Series C Series D Class A Class B
----------------- ----------------- ----------------- ------------- ----------------- -------------
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
--------- ------- --------- ------- --------- ------- ------ ------ --------- ------- ------ ------
Balances at
December 31,
1995............ -- $ -- -- $ -- -- $ -- -- $-- 1,000 $ 10 -- $--
Issuance of
common stock to
XL Vision, Inc.,
for cash at $.01
per share....... -- -- -- -- -- -- -- -- 199,000 1,990 -- --
Issuance of
common stock for
cash at $.01 per
share........... -- -- -- -- -- -- -- -- 140,000 1,400 -- --
Exercise of
stock options
for cash at $.01
per share....... -- -- -- -- -- -- -- -- 20,000 200 -- --
Net profit
(loss).......... -- -- -- -- -- -- -- -- -- -- -- --
--------- ------- --------- ------- --------- ------- --- --- --------- ------- --- ---
Balances at
December 31,
1996............ -- -- -- -- -- -- -- -- 360,000 3,600 -- --
Issuance of
common stock to
XL Vision, Inc.,
for cash at $.01
per share (note
9).............. -- -- -- -- -- -- -- -- 2,246,500 22,465 -- --
Sale of Series A
preferred stock
for cash at
$1.00 per share
(note 6)........ 6,443,606 64,436 -- -- -- -- -- -- -- -- -- --
Transfer of
technology by XL
Vision, Inc.
(note 9)........ -- -- -- -- -- -- -- -- -- -- -- --
Net profit
(loss).......... -- -- -- -- -- -- -- -- -- -- -- --
--------- ------- --------- ------- --------- ------- --- --- --------- ------- --- ---
Balances at
December 31,
1997............ 6,443,606 64,436 -- -- -- -- -- -- 2,606,500 26,065 -- --
Contribution of
debt to equity
by XL Vision,
Inc. (note 9)... -- -- -- -- -- -- -- -- -- -- -- --
Issuance of
Series B
preferred stock
in exchange for
contribution of
debt to equity
by XL Vision,
Inc. at $2.00
per share (notes
6 and 9)........ -- -- 2,400,000 24,000 -- -- -- -- -- -- -- --
Issuance of
common stock in
connection with
Nutri-Charge
transaction at
$1.00 per share
(note 5)........ -- -- -- -- -- -- -- -- 2,070,000 20,700 -- --
Contribution of
put rights by XL
Vision, Inc.
(note 5)........ -- -- -- -- -- -- -- -- -- -- -- --
Net profit
(loss).......... -- -- -- -- -- -- -- -- -- -- -- --
--------- ------- --------- ------- --------- ------- --- --- --------- ------- --- ---
Balances at
December 31,
1998............ 6,443,606 64,436 2,400,000 24,000 -- -- -- -- 4,676,500 46,765 -- --
Exercise of
stock options
for cash at
$1.00 per share
(unaudited)..... -- -- -- -- -- -- -- -- 87,280 873 -- --
Issuance of
common stock in
connection with
CIN transaction
at $1.20 per
share (note 12)
(unaudited)..... -- -- -- -- -- -- -- -- 600,000 6,000 -- --
Issuance of
common stock in
connection with
Cyberstockyard
transaction at
$2.25 per share
(note 12)
(unaudited)..... -- -- -- -- -- -- -- -- 200,000 2,000 -- --
Issuance of
Series C
preferred stock
at $5.00 per
share (note 12)
(unaudited)..... -- -- -- -- 1,100,000 11,000 -- -- -- -- -- --
Exercise of
stock options
for cash at
$1.00 per share
(unaudited)..... -- -- -- -- -- -- -- -- 2,375 24 -- --
Issuance of
common stock in
connection with
Turnkey Computer
Systems, Inc at
$8.00 per share
(note 12)
(unaudited)..... -- -- -- -- -- -- -- -- 50,000 500 -- --
Reclassification
of common stock
subject to a put
(note 12)
(unaudited)..... -- -- -- -- -- -- -- -- -- (500) -- --
Put on Class A
common stock
issued in
connection with
Turnkey Computer
Systems, Inc.
(note 12)
(unaudited)..... -- -- -- -- -- -- -- -- -- -- -- --
Net profit
(loss)
(unaudited)..... -- -- -- -- -- -- -- -- -- -- -- --
Unearned
compensation
(note 8)
(unaudited)..... -- -- -- -- -- -- -- -- -- -- -- --
Amortization of
unearned
compensation
(note 8)
(unaudited)..... -- -- -- -- -- -- -- -- -- -- -- --
--------- ------- --------- ------- --------- ------- --- --- --------- ------- --- ---
Balances at
September 30,
1999
(unaudited)..... 6,443,606 $64,436 2,400,000 $24,000 1,100,000 $11,000 -- $-- 5,616,155 $55,662 -- $--
========= ======= ========= ======= ========= ======= === === ========= ======= === ===
Additional
Paid-in Accumulated Unearned
Capital Deficit Compensation Total
------------ ------------- ------------ ------------
Balances at
December 31,
1995............ $ 3,816 $ (1,745,397) $ -- $(1,741,571)
Issuance of
common stock to
XL Vision, Inc.,
for cash at $.01
per share....... -- -- -- 1,990
Issuance of
common stock for
cash at $.01 per
share........... -- -- -- 1,400
Exercise of
stock options
for cash at $.01
per share....... -- -- -- 200
Net profit
(loss).......... -- (1,719,492) -- (1,719,492)
------------ ------------- ------------ ------------
Balances at
December 31,
1996............ 3,816 (3,464,889) -- (3,457,473)
Issuance of
common stock to
XL Vision, Inc.,
for cash at $.01
per share (note
9).............. -- -- -- 22,465
Sale of Series A
preferred stock
for cash at
$1.00 per share
(note 6)........ 6,379,170 -- -- 6,443,606
Transfer of
technology by XL
Vision, Inc.
(note 9)........ (4,400,000) -- -- (4,400,000)
Net profit
(loss).......... -- (5,483,623) -- (5,483,623)
------------ ------------- ------------ ------------
Balances at
December 31,
1997............ 1,982,986 (8,948,512) -- (6,875,025)
Contribution of
debt to equity
by XL Vision,
Inc. (note 9)... 7,500,000 -- -- 7,500,000
Issuance of
Series B
preferred stock
in exchange for
contribution of
debt to equity
by XL Vision,
Inc. at $2.00
per share (notes
6 and 9)........ 4,776,000 -- -- 4,800,000
Issuance of
common stock in
connection with
Nutri-Charge
transaction at
$1.00 per share
(note 5)........ 2,049,300 -- -- 2,070,000
Contribution of
put rights by XL
Vision, Inc.
(note 5)........ 340,000 -- -- 340,000
Net profit
(loss).......... -- (7,832,128) -- (7,832,128)
------------ ------------- ------------ ------------
Balances at
December 31,
1998............ 16,648,286 (16,780,640) -- 2,847
Exercise of
stock options
for cash at
$1.00 per share
(unaudited)..... 86,407 -- -- 87,280
Issuance of
common stock in
connection with
CIN transaction
at $1.20 per
share (note 12)
(unaudited)..... 714,000 -- -- 720,000
Issuance of
common stock in
connection with
Cyberstockyard
transaction at
$2.25 per share
(note 12)
(unaudited)..... 448,000 -- -- 450,000
Issuance of
Series C
preferred stock
at $5.00 per
share (note 12)
(unaudited)..... 5,489,000 -- -- 5,500,000
Exercise of
stock options
for cash at
$1.00 per share
(unaudited)..... 2,351 -- -- 2,375
Issuance of
common stock in
connection with
Turnkey Computer
Systems, Inc at
$8.00 per share
(note 12)
(unaudited)..... 399,500 -- -- 400,000
Reclassification
of common stock
subject to a put
(note 12)
(unaudited)..... (399,500) -- -- (400,000)
Put on Class A
common stock
issued in
connection with
Turnkey Computer
Systems, Inc.
(note 12)
(unaudited)..... 8,300 -- -- 8,300
Net profit
(loss)
(unaudited)..... -- (10,672,185) -- (10,672,185)
Unearned
compensation
(note 8)
(unaudited)..... 72,126 -- (72,126) --
Amortization of
unearned
compensation
(note 8)
(unaudited)..... -- -- 9,017 9,017
------------ ------------- ------------ ------------
Balances at
September 30,
1999
(unaudited)..... $23,468,470 $(27,452,825) $(63,109) $(3,892,366)
============ ============= ============ ============
See accompanying notes to consolidated financial statements.
Pages 7 of 28 Pages
EMERGE INTERACTIVE, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
Years ended December 31, September 30,
------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ------------
Cash flows from
operating activities:
Net profit (loss)....... $(1,719,492) $(5,483,623) $(7,832,128) $(5,661,743) $(10,672,185)
Adjustments to reconcile
net profit (loss) to
net cash used in
operating activities:
Depreciation and
amortization.......... 1,503 122,486 438,576 230,964 1,380,940
Amortization of
unearned
compensation.......... -- -- -- -- 9,017
Changes in operating
assets and
liabilities:
Trade accounts
receivable, net....... -- -- (368,421) (138,705) (2,733,765)
Inventories............ -- (635,963) (70,594) (30,741) 51,428
Cattle deposits........ -- -- -- -- (489,760)
Prepaid expenses and
other assets.......... (1,304) (32,338) 5,805 (77,079) (75,405)
Net assets of
discontinued
operations............ (96,209) (853,501) (1,140,425) (1,477,150) 2,137,166
Accounts payable....... 5,675 719,694 (301,423) (32,037) 1,209,186
Accrued liabilities.... 75,542 198,759 328,791 151,016 1,741,166
Advance payments from
customers............. -- -- -- -- 619,270
----------- ----------- ----------- ----------- ------------
Net cash used by
operating
activities........... (1,734,285) (5,964,486) (8,939,819) (7,035,475) (6,822,942)
----------- ----------- ----------- ----------- ------------
Cash flows from
investing activities:
Purchases of property
and equipment.......... (56,861) (506,540) (460,290) (269,831) (1,767,093)
Purchase of
intangibles............ (100,000) -- (431,923) (431,923) (3,145,297)
Investment in Turnkey
Computer Systems,
Inc.................... -- -- -- -- (22,833)
----------- ----------- ----------- ----------- ------------
Net cash used by
investing
activities........... (156,861) (506,540) (892,213) (701,754) (4,935,223)
----------- ----------- ----------- ----------- ------------
Cash flows from
financing activities:
Net borrowings from
related parties........ 1,889,101 3,810 9,447,030 7,737,227 8,218,623
Proceeds from capital
lease financing with
related party.......... -- -- 440,832 -- --
Payments on capital
lease obligations...... -- -- (55,962) -- (58,280)
Offering costs.......... -- -- -- -- (341,967)
Sale of preferred
stock.................. -- 6,443,606 -- -- 5,500,000
Sale of common stock.... 3,590 22,465 -- -- 89,655
----------- ----------- ----------- ----------- ------------
Net cash provided by
financing
activities........... 1,892,691 6,469,881 9,831,900 7,737,227 13,408,031
----------- ----------- ----------- ----------- ------------
Net increase
(decrease) in cash... 1,545 (1,145) (132) (2) 1,649,866
Cash--beginning of
period................. -- 1,545 400 400 268
----------- ----------- ----------- ----------- ------------
Cash--end of period..... $ 1,545 $ 400 $ 268 $ 398 $ 1,650,134
=========== =========== =========== =========== ============
Supplemental
disclosures:
Cash paid for interest.. $ -- $ -- $ 23,594 $ 13,517 $ 20,628
Non-cash investing and
financing activities:
Transfer of technology
by XL Vision, Inc.
(note 9).............. -- 4,400,000 -- -- --
Contribution of debt to
equity by XL Vision,
Inc. (note 9)......... -- -- 7,500,000 -- --
Issuance of preferred
stock in exchange for
contribution of debt
to equity by XL
Vision, Inc. (note
9).................... -- -- 4,800,000 -- --
Non-cash issuance of
Class A common stock
in connection with
Nutri-Charge
transaction (note 5).. -- -- 2,070,000 2,070,000 --
Contribution of put
rights by XL Vision,
Inc. (note 5)......... -- -- 340,000 340,000 --
Issuance of Class A
common stock in
connection with CIN
transaction (note
12)................... -- -- -- -- 720,000
Issuance of Class A
common stock with
Cyberstockyard
transaction (note
12)................... -- -- -- -- 450,000
Issuance of Class A
common stock with
Turnkey Computer
Systems, Inc.
transaction (note
12)................... -- -- -- -- 400,000
Put on Class A common
stock issued in
connection with
Turnkey Computer
Systems, Inc.
transaction (note
12)................... -- -- -- -- 8,300
Issuance of note
payable to Turnkey
Computer Systems, Inc.
(note 12)............. -- -- -- -- 1,400,000
See accompanying notes to consolidated financial statements.
Pages 8 of 28 Pages
EMERGE INTERACTIVE, INC.
Notes to Consolidated Financial Statements
(Information insofar as it relates to September 30, 1999 or the nine months
ended
September 30, 1998 and 1999 is unaudited)
(1) Organization
(a) Overview
eMerge Interactive, Inc. (the "Company") is a Delaware corporation that
was incorporated on September 12, 1994 as Enhanced Vision Systems, a wholly
owned subsidiary of XL Vision, Inc. ("XL Vision"). The Company's name was
changed to eMerge Vision Systems, Inc. on July 16, 1997 and to eMerge
Interactive, Inc. on June 11, 1999.
The Company was incorporated to develop and commercialize infrared
technology focused on the transportation segment. In 1997, the Company entered
a new business segment, animal sciences, by developing an infrared camera
system for use primarily by veterinarians. The Company further expanded its
operations in 1998 by licensing NutriCharge and infrared technology (see note
5) for commercialization. In December 1998, the Company's Board of Directors
decided to dispose of the transportation segment. The Company's AMIRIS thermal
imaging system, which was the sole product sold by the transportation segment,
was sold on January 15, 1999.
(b) Basis of Presentation
The consolidated financial statements as of December 31, 1998 include
the accounts of eMerge Interactive, Inc. and its wholly-owned subsidiary, STS
Agriventures, Ltd. ("STS"), a Canadian corporation. The consolidated financial
statements as of September 30, 1999 also include another wholly-owned
subsidiary, Cyberstockyard, Inc. ("Cyberstockyard").
All significant intercompany balances and transactions have been
eliminated upon consolidation.
(c) Management's Plans
As of September 30, 1999, the Company had a working capital deficiency
of $12,507,506 and stockholders' deficit of $3,892,366. Management expects
additional working capital requirements as the Company continues its marketing
and development efforts for its products. Subsequent to September 30, 1999,
the Company obtained additional equity financing (see note 12). The Company
anticipates that net proceeds from its planned IPO of common stock will be
sufficient to satisfy its operating cash needs for at least eighteen months
following the IPO. Although management believes that its IPO will be
successful, there can be no assurances that it will be achieved or that the
Company will be successful in raising other financing. If the Company is
unable to obtain sufficient additional funds, the Company may have to delay,
scale back or eliminate some or all of its marketing and development
activities.
(2) Summary of Significant Accounting Policies
(a) Revenue Recognition
The Company recognizes revenue in accordance with the terms of the sale
or contract, generally as products are shipped or services are provided. The
Company bears inventory risk until the sales of their products and credit risk
until full payment is received from its customers. In cattle sales
transactions, the
Pages 9 of 28 Pages
EMERGE INTERACTIVE, INC.
Notes to Consolidated Financial Statements--(Continued)
Company purchases cattle from the seller, takes title at shipment and records
the cattle as inventory until delivered to and accepted by the buyer,
typically a 24 to 48 hour period. In both cattle auction and resale
transactions, the Company acts as a principal in purchasing cattle from
suppliers and sales to customers so that the Company recognizes revenue equal
to the amount paid by customers for the cattle.
(b) Inventories
Inventories are stated at standard cost which approximates the lower of
first-in, first-out cost or market.
(c) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Amortization of equipment under capital lease is computed
over the shorter of the lease term or the estimated useful life of the related
assets.
(d) Intangibles
Intangibles are stated at amortized cost. Amortization is computed using
the straight-line method over the estimated useful lives of the assets.
(e) Income Taxes
The Company accounts for income taxes using the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(f) Stock-Based Compensation
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply
the provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB Opinion No. 25") and provide pro forma net
income and pro forma earnings per share disclosures for employee stock option
grants as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosure provisions of SFAS No. 123.
(g) Use of Estimates
The preparation of the Company's consolidated financial statements, in
conformity with generally accepted accounting principles, requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent Assets and liabilities and the
reported amounts of revenues and expenses. Actual results could differ from
those estimates.
Pages 10 of 28 Pages
EMERGE INTERACTIVE, INC.
Notes to Consolidated Financial Statements--(Continued)
(h) Estimated Fair Value of Financial Instruments
The carrying value of cash, trade accounts receivable, accounts payable,
accrued liabilities and amounts due to related parties reflected in the
consolidated financial statements approximates fair value due to the short-term
maturity of these instruments.
(i) Interim Financial Information
The consolidated financial statements as of September 30, 1999, and for
the periods ended September 30, 1998 and 1999, are unaudited but reflect
adjustments which are, in the opinion of management, necessary for the fair
presentation of financial position and results of operations. Operating results
for the nine months ended September 30, 1999 are not necessarily indicative of
the results that may be expected for the full year.
(3) Inventories
Inventories consist of:
December 31, (Unaudited)
----------------- September 30,
1997 1998 1999
-------- -------- -------------
Raw materials............................. $346,335 $424,130 $594,337
Work-in-process........................... 289,628 282,427 60,792
-------- -------- --------
$635,963 $706,557 $655,129
======== ======== ========
(4) Property and Equipment
Property and equipment consists of:
December 31,
----------------- Estimated
1997 1998 useful lives
-------- -------- ------------
Engineering and manufacturing equipment.. $258,082 $366,150 5 years
Office and computer equipment............ 179,315 259,462 3 years
Furniture and fixtures................... 67,282 104,706 7 years
Leasehold improvements................... 46,865 46,865 7 years
Automobiles.............................. -- -- 5 years
-------- --------
551,544 777,183
Less accumulated depreciation and
amortization............................ 123,404 263,346
-------- --------
Property and equipment, net.............. $428,140 $513,837
======== ========
Assets under capital lease amounted to $-0- and $440,832 and as of
December 31, 1997 and 1998, respectively. Accumulated amortization for assets
under capital lease totaled approximately $-0- and $152,300 as of December 31,
1997 and 1998, respectively.
Pages 11 of 28 Pages
EMERGE INTERACTIVE, INC.
Notes to Consolidated Financial Statements--(Continued)
(5) Intangibles
Intangibles consists of:
December 31,
--------------- Estimated
1997 1998 useful life
---- ---------- -----------
NutriCharge license........................... $ -- $2,273,538 10 years
Infrared technology license................... -- 568,385 5 years
---- ----------
-- 2,841,923
Less accumulated amortization................. -- 142,095
---- ----------
Intangibles, net.............................. $ -- $2,699,828
==== ==========
On July 29, 1998, the Company acquired licenses for NutriCharge and
infrared technology. The purchase price of $2,841,923 (consisting of $300,000
in cash, 2,070,000 of the Company's Class A common shares valued at $1 per
share, $131,923 in acquisition costs and the estimated fair value of put rights
granted by XL Vision) was allocated to the acquired NutriCharge and infrared
technology licenses based on estimated fair values determined by estimated cash
flows from the underlying licensed product. In connection with the transaction,
XL Vision granted a put right that allows the sellers to require XL Vision to
purchase up to 1,000,000 shares of the Company's Class A common stock at $3.00
per share in the event certain operating targets related to the licensed
product are not met by years four through seven after the transaction. The put
expires at the end of year seven after the transaction. The fair value of the
put was estimated to be $340,000 and was credited to additional paid-in
capital.
(6) Equity
Common Stock
As of December 31, 1998, the Company had authorized the issuance of
100,000,000 shares of common stock.
Class A--In 1999, the Company designated 92,711,110 as Class A common
stock.
Class B--In 1999, the Company designated 7,288,890 shares as Class B
common stock. Holders of Class B common stock are entitled to two and one-half
votes for each share. The shares of Class A and Class B are identical in all
other respects.
Preferred Stock
As of December 31, 1998, the Company had authorized the issuance of
10,000,000 shares of preferred stock and had designated 6,500,000 as Series A
shares, and 2,400,000 as Series B shares. Each share of preferred stock is
convertible into one share of Class A common stock at the option of the holder
or upon the vote of holders of two-thirds of the respective preferred stock
class outstanding except for Series D shares which is convertible at the
offering price into Class B common stock. Preferred stock is automatically
converted into common stock upon a qualified IPO of at least $10 million with a
Company valuation of at least $30 million or upon a public rights offering of
the Company to shareholders of Safeguard Scientifics, Inc. In 1999, the Company
increased the authorized preferred stock to 15,000,000 shares.
Pages 12 of 28 Pages
EMERGE INTERACTIVE, INC.
Notes to Consolidated Financial Statements--(Continued)
Series A--The Series A shares are entitled to a liquidation preference
before any distribution to common stockholders equal to the greater of (a)
$1.00 per share plus an additional $.10 per year (pro rated for partial years)
from July 16, 1997 or (b) the amount which would be distributed if all of the
preferred stock of the Company were converted to Class A common stock prior to
liquidation. The holders of Series A preferred stock are entitled to vote as a
separate class to elect two directors to the Board of Directors of the Company.
Series B--Series B shares are entitled to a liquidation preference before
any distribution to common stockholders equal to the greater of (a) $2.00 per
share plus an additional $.20 for each year (pro rated for partial years) from
December 31, 1998 or until the date of distribution of available assets or (b)
the amount which would be distributed if all of the preferred stock of the
Company were converted to Class A common stock prior to liquidation. Series B
shares are junior to Series A, C and D shares.
Series C--On April 15, 1999, the Company designated 1,300,000 as Series C
shares. Series C shares are entitled to a liquidation preference before any
distribution to common stockholders equal to the greater of (a) $5.00 per share
plus an additional $.50 for each year (pro rated for partial years) from April
15, 1999 or until the date of distribution of available assets or (b) the
amount which would be distributed if all of the preferred stock of the Company
were converted to Class A common stock prior to liquidation. Series C shares
are on parity with Series A and D shares except as to voting rights.
Series D (Unaudited)--On October 26, 1999, the Company designated
4,555,556 shares as Series D shares. Series D shares are entitled to a
liquidation preference before any distribution to common stockholders equal to
the greater of (a) $10.00 per share plus an additional $1.00 for each year (pro
rated for partial years) from August 24, 1999 or until the date of distribution
of available assets or (b) the amount which would be distributed if all the
preferred stock of the Company were converted to Class B common stock prior to
liquidation. Series D shares are on parity with Series A and C shares except as
to voting rights. Series D stockholders are entitled to two and one-half votes
per share.
(7) Income Taxes
Deferred income taxes reflect the net tax effects of temporary difference
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes. Significant components of
the Company's deferred income tax assets and liability are as follows:
December 31,
----------------------
1997 1998
---------- ----------
Deferred tax assets:
Net operating loss carryforwards............... $3,237,000 $5,967,000
Amortization of acquired technology from XL
Vision (note 9)............................... 1,829,000 1,704,000
Research and experimentation tax credits....... 294,000 448,000
Other.......................................... 125,000 596,000
---------- ----------
5,485,000 8,715,000
Less valuation allowance....................... 5,370,000 8,715,000
---------- ----------
Net deferred tax assets...................... 115,000 --
Deferred tax liability:
Imputed interest............................... (115,000) --
---------- ----------
Net deferred tax assets (liability).......... $ -- $ --
========== ==========
Pages 13 of 28 Pages
EMERGE INTERACTIVE, INC.
Notes to Consolidated Financial Statements--(Continued)
The Company has available at December 31, 1998, unused net operating loss
carryforwards of approximately $15,000,000 which may be applied against future
taxable income and expires in years beginning in 2010. The Company also has
approximately $448,000 in research and experimentation credits carryforwards.
The research and experimentation credits, which begin to expire in 2010, can
also be used to offset future regular tax liabilities. A valuation allowance
for deferred tax assets is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
The difference between the "expected" tax benefit (computed by applying
the federal corporate income tax rate of 34% to the loss before income taxes)
and the actual tax benefit is primarily due to the effect of the valuation
allowance.
(8) Stock Plan
In January 1996, the Company adopted an equity compensation plan (the
"1996 Plan") pursuant to which the Company's Board of Directors may grant
shares of common stock or options to acquire common stock to certain directors,
advisors and employees. The Plan authorizes grants of shares or options to
purchase up to 1,735,000 shares of authorized but unissued common stock. Stock
options granted have a maximum term of ten years and have vesting schedules
which are at the discretion of the Compensation Committee of the Board of
Directors and determined on the effective date of the grant.
A summary of option transactions follows:
Weighted
Range of average
exercise Weighted remaining
price per average contractual
Shares share exercise price life (in years)
--------- ---------- -------------- ---------------
Balance outstanding,
December 31, 1996...... 2,500 $ 1.00 $1.00 4.85
====
Granted................ 268,000 1.00 1.00
--------- ---------- -----
Balance outstanding,
December 31, 1997....... 270,500 1.00 1.00 9.64
====
Granted................ 1,354,000 1.00-2.00 1.05
Canceled............... (318,500) 1.00 1.00
--------- ---------- -----
Balance outstanding
December 31, 1998....... 1,306,000 $1.00-2.00 $1.05 9.48
========= ========== ===== ====
At December 31, 1997 and 1998, there were 61,375 and 331,500 shares
exercisable, respectively, at weighted average exercise prices of $1.00 and
$1.02, respectively.
At December 31, 1997 and 1998, 79,500 and 409,000 shares available for
grant, respectively.
Pages 14 of 28 Pages
EMERGE INTERACTIVE, INC.
Notes to Consolidated Financial Statements--(Continued)
The per share weighted-average fair value of stock options granted was $0
in 1996, $0 in 1997 and $0.10 in 1998 on the date of grant using the Black
Scholes option-pricing model with the following weighted-average assumptions:
1996 1997 1998
---- ---- ----
Volatility.............................................. 0% 0% 0%
Dividend paid........................................... 0% 0% 0%
Risk-free interest rate................................. 6.35% 6.11% 4.73%
Expected life in years.................................. 5.77 6.75 5.57
No volatility was assumed due to the use of the Minimum Value Method of
computation for options issued by the Company as a private entity as prescribed
by SFAS No. 123.
All stock options granted, except as noted in the paragraph below, have
been granted to directors or employees with an exercise price equal to the fair
value of the common stock at the date of grant. The Company applies APB Opinion
No. 25 for issuances to directors and employees in accounting for its Plan and,
accordingly, no compensation cost has been recognized in the consolidated
financial statements through December 31, 1998.
On March 19, 1999, the Company granted 288,500 stock options with an
exercise price of $2.00 and a fair value of $2.25. The Company recorded $72,126
of unearned compensation at the date of grant and is amortizing the unearned
compensation over the vesting period. Compensation expense amounted to $9,017
for the nine months ended September 30, 1999.
Had the Company determined compensation cost based on the fair value at
the grant date for its stock options under SFAS No. 123, the Company's net loss
would have increased to the pro forma amounts indicated below:
1996 1997 1998
----------- ----------- -----------
Net loss as reported............... $(1,719,492) $(5,483,623) $(7,832,128)
=========== =========== ===========
Pro forma net loss................. $(1,719,492) $(5,483,623) $(7,964,078)
=========== =========== ===========
(9) Related Party Transactions
Direct Charge Fee
Prior to April 1, 1997 personnel, and other services were provided by XL
Vision and the costs were allocated to the Company. Effective April 1, 1997,
the Company entered into a direct charge fee agreement with XL Vision which
allows for cost-based charges based upon actual hours incurred. Costs allocated
to or service fees charged by XL Vision were approximately $468,000 in 1996,
$720,000 in 1997 and $460,000 in 1998. A portion of the fees in 1998 and all of
the costs and fees in 1996 and 1997 were allocated to the discontinued
transportation segment.
Administrative Services Fee
Effective December 15, 1997, the Company entered into an agreement which
requires accrual of an administrative services fee based upon a percentage of
gross revenues. The fee for administrative support
Pages 15 of 28 Pages
EMERGE INTERACTIVE, INC.
Notes to Consolidated Financial Statements--(Continued)
services, including management consultation, investor relations, legal services
and tax planning, is payable monthly to XL Vision and Safeguard Scientifics,
Inc., the largest shareholder of XL Vision, based upon an aggregate of 1.5% of
gross revenues with such service fees to be not more than $300,000 annually.
Effective August 17, 1999, the agreement was amended such that the
administrative services fee is applied to net contribution margin on cattle
sales and gross revenue for all other sales. The fee is accrued monthly but is
only payable in months during which the Company has achieved positive cash flow
from operations. The agreement extends through December 31, 2002 and continues
thereafter unless terminated by any party. Administrative service fees were
approximately $10,300 in 1997 and $37,200 in 1998.
Technology Fee
On July 15, 1997, the Company entered into an agreement with XL Vision
for the transfer of certain technology that is used by the Company in the sale
of its products for a $4,400,000 note payable. The transfer was accounted for
as a distribution to XL Vision as it represented amounts paid for an asset to
an entity under common control in excess of the cost of such asset. The note
payable bears interest at 7% per annum. Interest expense was $141,167 in 1997
and $308,000 in 1998.
Lease
The Company leases equipment under a capital lease, effective April 20,
1998, with an affiliated entity, XL Realty, Inc. Future minimum lease payments,
including imputed interest at 7.53%, are $79,852 in 1999, $85,765 in 2000,
$92,684 in 2001, $100,154 in 2002 and $26,415 in 2003. Interest expense was
$23,594 in 1998.
The Company has a verbal lease with XL Vision for its facilities. Rent
expense varies based on space occupied by the Company and includes charges for
base rent, repairs and maintenance, telephone and networking expenses, real
estate taxes and insurance. Rent expense was $68,000 in 1996, $354,000 in 1997,
and $1,129,000 in 1998.
Amounts Due to XL Vision, Inc.
Amounts due to XL Vision consists of:
Balance as of December 31, 1996................................... $ 3,636,494
Allocation of costs and funding of working capital to the
Company........................................................ 6,318,405
Technology transfer fee......................................... 4,400,000
Interest charges on technology transferred...................... 141,167
Proceeds from Series A Preferred Stock.......................... (6,443,606)
Issuance of Class A common stock................................ (22,465)
-----------
Balance as of December 31, 1997................................... 8,029,995
Allocation of costs and funding of working capital to the
Company........................................................ 9,120,441
Interest charges on technology transferred...................... 308,000
Contribution of debt to equity.................................. (7,500,000)
Contribution of debt to equity in exchange for Series B
Preferred Stock................................................ (4,800,000)
-----------
Balance as of December 31, 1998................................... $ 5,158,436
===========
The average outstanding balance due to XL Vision was approximately
$2,690,900 in 1996, $6,239,600 in 1997 and $12,782,400 in 1998.
Pages 16 of 28 Pages
EMERGE INTERACTIVE, INC.
Notes to Consolidated Financial Statements--(Continued)
Amounts Due to Safeguard Scientifics, Inc.
As of December 31, 1997 and December 31, 1998, the Company owed Safeguard
Scientifics, Inc. $10,309 and $28,898.
(10) Segment Information
In 1998, the Company adopted SFAS No. 131, which requires the reporting
of segment information using the "management approach" versus the "industry
approach" previously required. The management approach requires the Company to
report certain financial information related to continuing operations that is
provided to the Company's chief operating decision-maker. The Company's chief
operating decision-maker receives revenue and contribution margin (revenue less
direct costs and excluding overhead) by source, and all other statement of
operations data and balance sheet data on a consolidated basis. The Company's
reportable segments consist of cattle sales and animal sciences products and
services. While the Company operates entirely in the animal science
marketplace, the contribution margin associated with cattle sales and the
related prospects for this portion of the Company's business differ from the
rest of the Company's product offerings.
The following summarizes revenue and contribution margin information
related to the Company's two operating segments:
Nine months Nine months
Year ended ended ended
December 31, September 30, September 30,
1998 1998 1999
------------ ------------- -------------
(Unaudited) (Unaudited)
Revenue:
Cattle............................... $ -- $ -- $ 17,022,862
Animal sciences...................... 1,792,471 1,106,452 1,315,783
---------- ----------- ------------
Total................................ $1,792,471 $ 1,106,452 $ 18,338,645
========== =========== ============
Direct costs:
Cattle............................... $ -- $ -- $ 16,860,452
Animal sciences...................... 900,824 603,410 492,115
---------- ----------- ------------
$ 900,824 $ 603,410 $ 17,352,567
========== =========== ============
Contribution margin:
Cattle............................... $ -- $ -- $ 162,410
Animal sciences...................... 891,647 503,042 823,668
---------- ----------- ------------
Total................................ $ 891,647 $ 503,042 $ 986,078
========== =========== ============
The Company's assets, and other statement of operations data are not
allocated to a segment.
(11) Commitments and Contingencies
Voluntary Employee Savings 401(k) Plan
The Company established a voluntary employee savings 401(k) plan in 1997
which is available to all full time employees 21 years or older. The plan
provides for a matching by the Company of the employee's contribution to the
plan for 50% of the first 6% of the employee's annual compensation. The
Company's matching contributions were $6,300 in 1996, $38,195 in 1997 and
$62,108 in 1998.
Pages 17 of 28 Pages
EMERGE INTERACTIVE, INC.
Notes to Consolidated Financial Statements--(Continued)
Royalties
In connection with the NutriCharge license, the Company is obligated to a
royalty of 5% of gross revenues from the sale of NutriCharge products and
infrared technology related to the Company's Canadian license agreement.
The Company is also obligated to a royalty of 6% of net revenues from
product or services related to technology patented by Iowa State University.
(12) Subsequent Events
On January 1, 1999, the Company signed a revolving promissory note with
XL Vision for up to $3,000,000. The revolving promissory note bears interest at
the prime rate plus 1% and is due in full when the Company completes an IPO or
sells all of its assets or stock. The note is included in current liabilities
in the accompanying September 30, 1999 consolidated balance sheet.
Discontinued Operations
In December 1998, the Company's Board of Directors decided to dispose of
its transportation segment. The Company's AMIRIS thermal imaging system, which
was the sole product sold in the transportation segment, was sold on January
15, 1999 to Sperry Marine, Inc. for approximately $1,900,000. The Company
received $200,000 of cash at closing and will receive the balance upon receipt
of the inventory by Sperry Marine, Inc. The Company is entitled to a royalty of
8% of net AMIRIS system sales, up to a maximum royalty of $4.3 million over a
four year period or up to a maximum royalty of $5.0 million, if $4.3 million is
not received within four years.
Net assets of the discontinued transportation segment consist of:
December 31,
----------------------
1997 1998
---------- ----------
Accounts receivable.............................. $ 145,500 $ 381,435
Inventory, net................................... 1,076,043 2,020,625
Property and equipment, net...................... 22,650 134,098
Intangibles, net................................. 94,444 61,108
Accounts payable................................. (271,833) (80,510)
Accrued liabilities including provision for
operating loss during phase out period of
$72,667 in 1998................................. -- (231,415)
---------- ----------
Net assets................................... $1,066,804 $2,285,341
========== ==========
Note Payable to XL Vision, Inc.
License
In February 1999, the Company signed a license agreement with XL Vision,
granting XL Vision a license to use Company software for the limited purpose of
evaluating whether the software could provide the basis for a new company that
would operate in the agricultural industry. The license agreement terminates on
November 30, 1999. If XL Vision forms a new company, the Company will negotiate
a long-term license
Pages 18 of 28 Pages
EMERGE INTERACTIVE, INC.
Notes to Consolidated Financial Statements--(Continued)
agreement. In addition, XL Vision is obligated to give the Company at least a
25% interest in the new company. The Company is obligated to transfer all
amounts up to 25% of the new company to Lost Pelican, L.L.C.
Acquisitions (Unaudited after April 20, 1999)
On February 24, 1999, the Company acquired substantially all of the
tangible and intangible assets of CIN, LLC d/b/a/ Cattlemen's Information
Network ("CIN"). Immediately after the closing, CIN changed its name to Lost
Pelican, L.L.C. The purchase price for the assets consisted of 600,000 shares
of the Company's Class A common stock valued at $720,000, the assumption of up
to $600,000 of liabilities, a cash payment due in October 1999 of $383,000, and
an agreement to pay the first $350,000 from Internet sales of third party
products over the Company's Web site. In addition, the Company agreed to assume
$177,000 in liabilities related to employee bonuses and an outstanding grant
obligation. CIN is in the business of selling access to its cattle feedlot
performance measurements database.
On March 29, 1999, the Company acquired 100% of the stock of
Cyberstockyard, Inc. The purchase price consisted of 200,000 shares of the
Company's Class A common stock valued at $450,000. Cyberstockyard, Inc. is in
the business of selling cattle through its proprietary auction software over
the Internet.
On May 19, 1999, the Company acquired substantially all of the tangible
and intangible assets of PCC, LLC d/b/a Professional Cattle Consultants, L.L.C.
("PCC") for a cash payment of $1,800,000 and an assumption of approximately
$30,000 of liabilities. PCC is in the business of providing comparative
analysis and market information for the feedlot industry.
The aggregate purchase price of the above acquisitions was approximately
$4,606,600, which included related acquisition costs of approximately $97,000,
and was allocated as follows:
Goodwill..................................................... $4,015,300
Non-compete agreements....................................... 300,000
Equipment.................................................... 358,000
Current assets............................................... 28,300
Current liabilities.......................................... (95,000)
----------
$4,606,600
==========
Goodwill is amortized on a straight-line basis over a period of three to
five years.
Unaudited pro forma information for the Company as if the acquisitions
above had been consummated as of January 1, 1998 and 1999 follows:
Nine months ended
September 30,
------------------------
1998 1999
----------- -----------
Revenue......................................... $ 1,687,077 18,560,565
=========== ===========
Net profit (loss)............................... $(4,987,862) (11,097,329)
=========== ===========
Pages 19 of 28 Pages
EMERGE INTERACTIVE, INC.
Notes to Consolidated Financial Statements--(Continued)
Sale of Series C Preferred Stock (Unaudited)
On May 4, 1999, the Company issued 1,100,000 shares of Series C preferred
stock for $5.00 per share.
Stock Plan (Unaudited)
On May 10, 1999, the Company's stockholders approved the 1999 Equity
Compensation Plan (the "1999 Plan"). Under the 1999 Plan, an additional
1,000,000 shares of authorized, unissued shares of common stock of the Company
are reserved for issuance to employees, advisors and for non-employee members
of the Board of Directors. Option terms under the 1999 Plan may not exceed 10
years.
Note Payable to Safeguard Delaware, Inc. - a Related Party (Unaudited)
On July 21, 1999, the Company obtained a $3,000,000 revolving note
payable from Safeguard Delaware, Inc. ("Safeguard"). The revolving note
payable, as amended in October 1999, bears interest payable monthly at the
prime rate plus 1% and is due November 30, 1999.
In August, September and October 1999, the Company signed demand notes
with interest payable monthly at the prime rate plus 1% with Safeguard for
$2,500,000, $2,000,000 and $2,500,000, respectively. These notes were cancelled
in October 1999, in exchange for a $7,050,000 note due in full on October 25,
2000, the repayment of a promissory note issued concurrently with the sale of
Series D preferred stock or an IPO, whichever is earlier.
Investment in Turnkey Computer Systems, Inc. (Unaudited)
On August 16, 1999, the Company acquired 19% of the common stock of
Turnkey Computer Systems, Inc. ("Turnkey") for 50,000 shares of the Company's
Class A common stock valued at $400,000 and $1,400,000 in cash payable upon the
earlier of the completion of the Company's IPO or $500,000 at December 31,
1999, $500,000 at December 31, 2000 and $400,000 at December 31, 2001. In
addition, the common stock purchase agreement with Turnkey contains a put right
which allows Turnkey to have a one time right to put to the Company its 50,000
common shares with a fixed purchase price of $500,000. The put right can only
be exercised upon a change in control or after December 31, 2001, if the
Company has not completed an IPO. The fair value of the put was estimated to be
$8,300 and was credited to additional paid-in capital.
Sale of Series D Preferred Stock (Unaudited)
On October 26, 1999, the Company agreed to issue 4,555,556 shares of
Series D preferred stock and a warrant to acquire 911,000 shares of Class B
common stock for $38,815,000. Series D preferred shares convert into Class B
common stock at the offering price. The warrants are exercisable at the
Company's IPO price and are valued at $3,325,555. The Company will receive
$18,000,000 in cash in November 1999 and a non-interest bearing, promissory
note in the amount of $23,000,000 due on October 26, 2000. Imputed interest at
9.5% amounts to $2,185,000 over the life of the note.
Registration Statement (Unaudited)
On October 27, 1999, the Company filed a registration statement on Form
S-1 with the Securities and Exchange Commission to register shares of its common
stock.
Pages 20 of 28 Pages
(b) Pro Forma Financial Information
INTERNET CAPITAL GROUP, INC.
Pro Forma Condensed Combined Financial Statements
Basis of Presentation
(Unaudited)
During 1998 and 1999, the Company acquired significant minority ownership
interests in 27 Partner Companies accounted for under the equity method of
accounting. In October 1999, the Company acquired a majority ownership interest
in Purchasing Solutions, Inc. In October 1999, Purchasing Solutions, Inc.
acquired all of the assets of Purchasing Group, Inc. and Integrated Sourcing,
LLC, two related businesses. In November 1999, the Company acquired a
significant minority ownership interest in eMerge Interactive, Inc. for total
purchase consideration of $48.2 million. All acquisitions have been accounted
for using the purchase method of accounting. In addition, the Company
deconsolidated VerticalNet, Inc. subsequent to December 31, 1998 and Breakaway
Solutions, Inc. subsequent to September 30, 1999 due to the decrease in the
Company's voting ownership percentage in each company from above to below 50%.
The unaudited pro forma condensed combined statement of operations for
the year ended December 31, 1998 gives effect to the acquisition of a
significant minority ownership interest in eMerge Interactive, Inc., the
acquisitions of Purchasing Solutions, Inc., Purchasing Group, Inc. and
Integrated Sourcing, LLC, the deconsolidation of VerticalNet, Inc, the 1998 and
1999 acquisitions of significant minority ownership interests in 27 equity
method Partner Companies, and the acquisition of the Company's ownership
interest in Breakaway Solutions, Inc. as a company accounted for under the
equity method as if the transactions had occurred on January 1, 1998. As
Breakaway Solutions, Inc. was initially acquired in the first quarter of 1999,
no pro forma adjustments to the 1998 financial statements are necessary to
reflect its deconsolidation subsequent to September 30, 1999.
The unaudited pro forma condensed combined statement of operations for
the nine months ended September 30, 1999 gives effect to the acquisition of a
significant minority ownership interest in eMerge Interactive, Inc., the
acquisitions of Purchasing Solutions, Inc., Purchasing Group, Inc. and
Integrated Sourcing, LLC, the 1999 acquisitions of significant minority
ownership interests in 19 equity method Partner Companies, and the acquisition
of the Company's ownership interest in Breakaway Solutions, Inc. as a company
accounted for under the equity method as if the transactions had occurred on
January 1, 1998. As VerticalNet, Inc. was deconsolidated in the first quarter
of 1999, no pro forma adjustments to the consolidated statement of operations
for the nine months ended September 30, 1999 are necessary to reflect its
deconsolidation.
The unaudited pro forma condensed combined balance sheet as of September
30, 1999 gives effect to the acquisition of a significant minority ownership
interest in eMerge Interactive, Inc., the acquisitions of Purchasing Solutions,
Inc., Purchasing Group, Inc. and Integrated Sourcing, LLC, the deconsolidation
of Breakaway Solutions, Inc., and the acquisitions during the period from
October 1, 1999 through November 18, 1999 of significant minority ownership
interests in five new and six existing equity method Partner Companies as if
the transactions had occurred on September 30, 1999.
The unaudited pro forma condensed combined financial statements have been
prepared by the management of the Company and should be read in conjunction
with the Company's historical consolidated financial statements contained
elsewhere herein, and the historical consolidated financial statements of
eMerge Interactive, Inc., Purchasing Group, Inc. and Integrated Sourcing, LLC
which are included elsewhere herein. Since the unaudited pro forma financial
statements which follow are based upon the financial condition and operating
results of eMerge Interactive, Inc., Purchasing Solutions, Inc., Purchasing
Group, Inc., Integrated Sourcing, LLC and the equity method Partner Companies
acquired during periods when they were not under the control or management of
the Company, the information presented may not be indicative of the results
which would have actually been obtained had the acquisitions been completed on
the pro forma dates reflected nor are they indicative of future financial or
operating results. The unaudited pro forma financial information does not give
effect to any synergies that may occur due to the integration of the Company
with Purchasing Solutions, Inc., Purchasing Group, Inc., Integrated Sourcing,
LLC, eMerge Interactive, Inc. and the other equity method Partner Companies.
Pages 21 of 28 Pages
INTERNET CAPITAL GROUP, INC.
Unaudited Pro Forma Condensed Combined Balance Sheet September 30, 1999
Internet
Capital Breakaway Pro Forma Sub- e-Merge Pro Forma
Group, Inc. Deconsolidation Adjustments Total Acquisition Combined
------------ --------------- ------------ ------------ ------------ ------------
Assets
Current Assets
Cash and cash
equivalents........... $186,137,151 $ (7,747,165) $(65,612,408)b $106,523,328 $(27,000,000)a $ 79,523,328
(7,699,800)c
1,445,550 c
Short-term
investments........... 22,845,079 -- -- 22,845,079 -- 22,845,079
Accounts receivable,
less allowance for
doubtful accounts..... 8,531,879 (8,531,879) 2,136,623 c 2,136,623 -- 2,136,623
Prepaid expenses and
other current assets.. 7,024,086 (5,077,192) 4,000,000 c 5,946,894 -- 5,946,894
------------ ------------ ------------ ------------ ------------ ------------
Total current assets... 224,538,195 (21,356,236) (65,730,035) 137,451,924 (27,000,000) 110,451,924
Fixed assets, net...... 6,169,802 (4,465,033) 55,626 c 1,760,395 -- 1,760,395
Ownership interests in
and advances to
Partner Companies..... 168,690,379 -- 65,612,408 b 245,691,816 48,160,000 a 293,851,816
11,389,029 d
Available-for-sale
securities............ 19,233,805 -- -- 19,233,805 -- 19,233,805
Intangible assets,
net................... 22,854,350 (13,731,600) 15,041,425 c 17,302,757 -- 17,302,757
(6,861,418)d
Deferred taxes......... 18,845,639 -- -- 18,845,639 -- 18,845,639
Other.................. 9,895,199 (274,641) -- 9,620,558 -- 9,620,558
------------ ------------ ------------ ------------ ------------ ------------
Total Assets............ $470,227,369 $(39,827,510) $ 19,507,035 $449,906,894 $ 21,160,000 $471,066,894
============ ============ ============ ============ ============ ============
Liabilities and
Shareholders' Equity
Current Liabilities
Current maturities of
long-term debt........ $ 735,885 $ (735,885) $ 4,141,625 c $ 4,141,625 -- $ 4,141,625
Accounts payable....... 4,478,916 (3,720,060) 3,837,799 c 4,596,655 -- 4,596,655
Accrued expenses....... 10,336,185 (6,113,895) -- 4,222,290 -- 4,222,290
Notes payable to
Partner Company....... -- -- -- -- $ 21,160,000 a 21,160,000
Deferred revenue....... 117,523 (117,523) -- -- -- --
Convertible note....... 8,499,942 -- -- 8,499,942 -- 8,499,942
------------ ------------ ------------ ------------ ------------ ------------
Total current
liabilities........... 24,168,451 (10,687,363) 7,979,424 21,460,512 21,160,000 42,620,512
--
Long-term debt......... 1,633,360 (1,633,360) 3,000,000 c 3,000,000 -- 3,000,000
Minority interest...... 25,908,961 -- 4,000,000 c 6,929,785 -- 6,929,785
(22,979,176)d
Shareholders' Equity
Total shareholders'
equity................ 418,516,597 (27,506,787) 27,506,787 d 418,516,597 -- 418,516,597
------------ ------------ ------------ ------------ ------------ ------------
Total Liabilities and
Shareholders' Equity... $470,227,369 $(39,827,510) $ 19,507,035 $449,906,894 $ 21,160,000 $471,066,894
============ ============ ============ ============ ============ ============
See notes to unaudited pro forma condensed combined financial statements
Pages 22 of 28 Pages
INTERNET CAPITAL GROUP, INC.
Unaudited Pro Forma Condensed Combined Statement of Operations for the Year
Ended December 31, 1998
Internet
Capital VerticalNet Pro Forma eMerge Pro Forma
Group, Inc. Deconsolidation Adjustments Sub-Total Acquisition Combined
------------ --------------- ------------ ------------ ------------ ------------
Revenue $ 3,134,769 $ (3,134,769) 6,455,747 f $ 6,455,747 -- $ 6,455,747
------------ ------------ ------------ ------------ ------------ ------------
Operating Expenses
Cost of revenue........ 4,642,528 (4,642,528) -- -- -- --
Selling, general and
administrative........ 15,513,831 (12,001,245) 7,853,901 f 11,366,487 -- 11,366,487
------------ ------------ ------------ ------------ ------------ ------------
Total operating
expenses.............. 20,156,359 (16,643,773) 7,853,901 11,366,487 -- 11,366,487
------------ ------------ ------------ ------------ ------------ ------------
(17,021,590) 13,509,004 (1,398,154) (4,910,740) -- (4,910,740)
Other income, net....... 30,483,177 -- -- 30,483,177 -- 30,483,177
Interest income......... 1,305,787 (212,130) 16,506 f 1,110,163 -- 1,110,163
Interest expense........ (381,199) 297,401 -- (83,798) (1,840,000)e (1,923,798)
------------ ------------ ------------ ------------ ------------ ------------
Income (Loss) Before
Income Taxes, Minority
Interest and Equity
Income (Loss).......... 14,386,175 13,594,275 (1,381,648) 26,598,802 (1,840,000) 24,758,802
Income taxes............ -- -- -- h -- -- h --
Minority interest....... 5,381,640 -- (4,828,981)f,j 552,659 -- 552,659
Equity income (loss).... (5,868,887) -- (58,817,710)g (64,686,597) (14,309,948)e (78,996,545)
------------ ------------ ------------ ------------ ------------ ------------
Net Income (Loss)....... $ 13,898,928 $ 13,594,275 $(65,028,339) $(37,535,136) $(16,149,948) $(53,685,084)
============ ============ ============ ============ ============ ============
Net Income (Loss) Per
Share
Basic.................. $ 0.12 $ (0.48)
Diluted................ $ 0.12 $ (0.48)
Weighted Average Shares
Outstanding
Basic.................. 112,204,578 112,204,578
Diluted................ 112,298,578 112,204,578
Unaudited Pro Forma Condensed Combined Statement of Operations for the Nine
Months Ended September 30, 1999
Internet
Capital Breakaway Pro Forma eMerge Pro Forma
Group, Inc. Deconsolidation Adjustments Sub-Total Acquisition Combined
------------ --------------- ------------ ------------ ------------ ------------
Revenue $ 14,783,096 $(14,743,431) 7,146,689 f 7,186,354 -- $ 7,186,354
------------ ------------ ------------ ------------ ------------ ------------
Operating Expenses
Cost of revenue........ 7,424,594 (7,038,070) -- 386,524 -- 386,524
Selling, general and
administrative........ 31,002,518 (14,722,352) 5,002,096 f,j 21,282,262 -- 21,282,262
------------ ------------ ------------ ------------ ------------ ------------
Total operating
expenses.............. 38,427,112 (21,760,422) 5,002,096 21,668,786 -- 21,668,786
------------ ------------ ------------ ------------ ------------ ------------
(23,644,016) 7,016,991 2,144,593 (14,482,432) -- (14,482,432)
Other income, net....... 47,001,191 (27,607) 15,348 f 46,988,932 -- 46,988,932
Interest income......... 4,176,770 (59,510) -- 4,117,260 -- 4,117,260
Interest expense........ (1,770,324) 53,969 -- (1,716,355) -- (1,716,355)
------------ ------------ ------------ ------------ ------------ ------------
Income (Loss) Before
Income Taxes, Minority
Interest and Equity
Income (Loss).......... 25,763,621 6,983,843 2,159,941 34,907,405 -- 34,907,405
Income taxes............ 12,840,423 -- 10,963,208 f,i 23,803,631 4,269,730 e 28,073,361
Minority interest....... 4,133,057 -- (3,412,725)f,j 720,332 -- 720,332
Equity income (loss).... (49,141,961) -- (33,483,392)g,j (82,625,353) (12,199,229)e (94,824,582)
------------ ------------ ------------ ------------ ------------ ------------
Net Income (Loss)....... $ (6,404,860) $ 6,983,843 $(23,772,968) $(23,193,985) $ (7,929,499) $(31,123,484)
============ ============ ============ ============ ============ ============
Net Income Per Share
Basic.................. $ (0.03) $ (0.17)
Diluted................ $ (0.03) $ (0.17)
Weighted Average Shares
Outstanding
Basic.................. 185,103,758 185,103,758
Diluted................ 185,103,758 185,103,758
See notes to unaudited pro forma condensed combined financial statements.
Pages 23 of 28 Pages
INTERNET CAPITAL GROUP, INC.
Notes to Pro Forma Condensed Combined Financial Statements
(Unaudited)
1 . Basis of presentation
The unaudited pro forma condensed combined balance sheet as of September
30, 1999 gives effect to the acquisitions of Purchasing Solutions, Inc.,
Purchasing Group, Inc. and Integrated Sourcing, LLC, the acquisition of a
significant minority ownership interest in eMerge Interactive, Inc. in November
1999, the deconsolidation of Breakaway Solutions, Inc., and the acquisition of
significant minority ownership interests in five new and six existing equity
method Partner Companies as if the transactions had occurred on September 30,
1999.
The unaudited pro forma condensed combined statement of operations for
the year ended December 31, 1998 gives effect to the acquisitions of Purchasing
Solutions, Inc., Purchasing Group, Inc. and Integrated Sourcing, LLC, the
acquisition of a significant minority ownership interest in eMerge Interactive,
Inc., the deconsolidation of VerticalNet, Inc., the 1998 and 1999 acquisitions
of significant minority ownership interests in 27 equity method Partner
Companies, and the acquisition of the Company's ownership interest in Breakaway
Solutions, Inc. as a company accounted for under the equity method as if the
transactions had occurred on January 1, 1998.
The unaudited pro forma condensed combined statement of operations for
the nine months ended September 30, 1999 gives effect to the acquisitions of
Purchasing Solutions, Inc., Purchasing Group, Inc. and Integrated Sourcing,
LLC, the acquisition of a significant minority ownership interest in eMerge
Interactive, Inc., the deconsolidation of Breakaway Solutions, Inc., the 1999
acquisitions of significant minority ownership interests in 19 equity method
Partner Companies and the acquisition of the Company's ownership interest in
Breakaway Solutions, Inc. as a company accounted for under the equity method,
as if the transactions had occurred on January 1, 1998.
The effects of the acquisitions have been presented using the purchase
method of accounting and accordingly, the purchase price was allocated to the
assets and liabilities assumed based upon management's best preliminary
estimate of fair value with any excess purchase price being allocated to
goodwill or other indentifiable intangibles. The preliminary allocation of the
purchase price will be subject to further adjustments, which are not
anticipated to be material, as the Company and Purchasing Solutions, Inc.
finalize their allocations of purchase price in accordance with generally
accepted accounting principles.
2. Pro Forma Balance Sheet Adjustments
The pro forma balance sheet adjustments as of September 30, 1999 reflect:
(a) The acquisition in November 1999 of a significant minority ownership
interest in eMerge Interactive, Inc. for $48.2 million consisting of
$27.0 million in cash and a $21.2 million note payable due in one
year, net of imputed interest discount of $1.8 million.
(b) The acquisition during the period from October 1, 1999 through
November 18, 1999 of new and additional significant minority
ownership interests in equity method Partner Companies for aggregate
cash consideration of $65.6 million.
(c) The acquisition of Purchasing Group, Inc. and Integrated Sourcing,
LLC for $7.7 million in cash, $6.0 million in a note payable, $1.1
million in other debt, $0.2 million of assumed net liabilities and
$0.2 million in common stock of Purchasing Solutions, Inc. The total
purchase price of approximately $15.2 million was allocated as
follows: cash--$1.4 million, net receivables--$2.1 million, fixed
and other assets--$0.1 million, accounts payables and accruals--$3.8
million and goodwill and intangibles--$15.0 million. Additionally,
approximately $4.0 million is due from another investor and is
reflected as both an other asset and minority interest.
(d) The elimination of $27.5 million for the equity accounts of
Breakaway Solutions, Inc. and the reclassification of the Company's
carrying value of its ownership interest of $11.4 million in
Breakaway Solutions, Inc. to the equity method of accounting from
consolidation.
Pages 24 of 28 Pages
INTERNET CAPITAL GROUP, INC.
Notes to Pro Forma Condensed Combined Financial Statements--(Continued)
(Unaudited)
3. Pro Forma Statements of Operations Adjustments
The pro forma statements of operations adjustments for the year ended
December 31, 1998 and the nine months ended September 30, 1999 consist of:
(e) Equity income (loss) has been adjusted to reflect the Company's
acquisition of a significant minority ownership interest in eMerge
Interactive, Inc. and the related interest in the income (loss) and
amortization of the difference in the Company's carrying value and
ownership interest in the underlying net equity of eMerge
Interactive, Inc. over an estimated useful life of three years. For
the year ended December 31, 1998 and the nine months ended September
30, 1999, equity income (loss) of $14.3 million and $12.2 million
includes $2.4 million and $3.3 million, respectively, of equity
income (loss), and $11.9 million and $8.9 million, respectively, in
amortization of the difference between cost and equity in net
assets. For the nine months ended September 30, 1999, income tax
benefit has been adjusted $4.3 million to reflect the tax effect of
the eMerge Interactive, Inc. pro forma adjustments. Additionally,
$1.8 million of interest expense is reflected during the year ended
December 31, 1998 relating to the imputed interest discount on the
$23.0 million non-interest bearing note. No interest expense is
reflected in 1999 as the note is payable in one year (assumed from
January 1, 1998).
(f) Reflects additional revenue of $6.5 million and $7.1 million,
general and administrative expenses of $7.9 million and $7.3 million
(net of excess executive compensation of approximately $3.0 million
and $3.5 million for the year ended December 31, 1998 and the nine
months ended September 30, 1999, respectively), other income of
$16,506 and $15,348, income tax of $0 and $(34,998), and minority
interest of $(552,659) and $(25,998) related to the acquisitions of
Purchasing Group, Inc. and Integrated Sourcing, LLC. Included in
general and administrative expenses is approximately $5.0 million
and $3.8 million of goodwill amortization during the year ended
December 31, 1998 and the nine months ended September 30, 1999,
respectively, relating to these acquisitions.
(g) Equity income (loss) has been adjusted by $58.8 million and $31.2
million to reflect the Company's ownership interests in the income
(loss) of the equity method Partner Companies and the amortization
of the difference in the Company's carrying value in the Partner
Companies and the Company's ownership interest in the underlying net
equity of the Partner Companies over an estimated useful life of
three years. For the year ended December 31, 1998 and the nine
months ended September 30, 1999, equity income (loss) includes $23.8
million and $12.1 million, respectively, of equity income (loss) and
$35.0 million and $19.1 million, respectively, in amortization of
the difference between cost and equity in net assets.
(h) No income tax provision is required in 1998 due to the Company's tax
status as an LLC.
(i) Income tax benefit has been adjusted $10.9 million for the nine
months ended September 30, 1999 to reflect the tax effect of the pro
forma adjustments.
(j) Reflects elimination of $5.4 million and $3.4 million for the year
ended December 31, 1998 and the nine months ended September 30,
1999, respectively, related to VerticalNet, Inc. and Breakaway
Solutions, Inc. upon their deconsolidation, and the reclass of $2.3
million of amortization of goodwill related to the Company's
acquisition of Breakaway Solutions, Inc. from selling, general and
administrative expense to equity income (loss) upon its
deconsolidation.
Pages 25 of 28 Pages
(c) Exhibits
2.1 - Securities Purchase Agreement dated as of October 27, 1999 among
eMerge Interactive, Inc., Internet Capital Group, Inc. and J
Technologies, LLC. This exhibit contains a list of schedules to the
exhibit, all of which have been omitted. Upon request of the
Securities and Exchange Commission, the Company will furnish a copy to
it supplementally.
23.1 - Consent of Independent Public Accountants
Pages 26 of 28 Pages
SIGNATURE
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.
INTERNET CAPITAL GROUP, INC.
Dated: November 22, 1999 By:/s/ David D. Gathman
---------------------------
David D. Gathman
Chief Financial Officer
Pages 27 of 28 Pages
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Securities Purchase Agreement dated as of
October 27, 1999 among eMerge Interactive,
Inc., Internet Capital Group, Inc. and J
Technologies, LLC
23.1 Consent of Independent Public Accountants
Pages 28 of 28 Pages