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EXHIBIT 99.1 - FINANCIAL STATEMENTS
OF BUSINESS ACQUIRED
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Intrepa, L.L.C. and Subsidiary:
We have audited the accompanying consolidated balance sheet of
INTREPA, L.L.C. AND SUBSIDIARY as of September 30, 2000 and the related
consolidated statements of operations, members' capital, and cash flows for the
nine months ended September 30, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Intrepa, L.L.C. and
subsidiary as of September 30, 2000 and the results of their operations and
their cash flows for the nine months ended September 30, 2000 in conformity with
accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
December 15, 2000
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INTREPA, L.L.C. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30,
2000
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ASSETS
Current assets:
Cash and cash equivalents ....................................... $ 786,225
Accounts receivable, net of a $150,000 allowance for doubtful
accounts ................................................... 2,204,154
Other current assets ............................................ 123,383
------------
Total current assets ....................................... 3,113,762
------------
Property and equipment:
Property and equipment .......................................... 1,061,494
Less accumulated depreciation .............................. (202,379)
------------
Property and equipment, net ..................................... 859,115
------------
Intangible assets, net of accumulated amortization of $594,264 ....... 2,377,070
Other assets ......................................................... 4,529
------------
Total assets ............................................... $ 6,354,476
============
LIABILITIES AND MEMBERS' CAPITAL
Current liabilities:
Accounts payable ................................................ $ 303,321
Accrued compensation and benefits ............................... 1,135,346
Accrued liabilities ............................................. 578,150
Deferred revenue ................................................ 2,301,435
Note payable, current ........................................... 666,668
------------
Total current liabilities .................................. 4,984,920
------------
Note payable ......................................................... 1,333,332
Withheld employee investments ........................................ 205,465
Members' capital:
Members' capital ................................................ 3,512,000
Accumulated deficit ............................................. (3,681,241)
------------
Total members' capital ..................................... (169,241)
------------
Total liabilities and members' capital ..................... $ 6,354,476
============
The accompanying notes are an integral part of this
consolidated balance sheet.
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INTREPA, L.L.C. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000
-------------------------
Revenue:
Software license ....................... $ 2,023,187
Services ............................... 4,817,848
Hardware ............................... 246,582
------------
Total revenue ..................... 7,087,617
------------
Cost of revenue:
Software license ....................... 445,698
Services ............................... 1,750,204
------------
Total cost of revenue ............. 2,195,902
------------
Gross margin ................................ 4,891,715
------------
Operating expenses:
Research and development ............... 2,270,337
Sales and marketing .................... 3,244,100
General and administrative ............. 2,512,565
------------
Total operating expenses .......... 8,027,002
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Loss from operations ........................ (3,135,287)
Other expense, net .......................... (63,031)
------------
Net loss .................................... $ (3,198,318)
============
The accompanying notes are an integral part of this
consolidated statement.
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INTREPA, L.L.C. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF MEMBERS' CAPITAL
MEMBERS' CAPITAL
------------------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
-------- ------------ ------------ ------------
Balance, January 1, 2000 ............... 300,000 $ 2,505,000 $ (482,923) $ 2,022,077
Members' capital contributions ....... 105,700 1,057,000 -- 1,057,000
Distribution ......................... -- (50,000) -- (50,000)
Net loss ............................. -- -- (3,198,318) (3,198,318)
-------- ------------ ------------ ------------
Balance, September 30, 2000 ............ 405,700 $ 3,512,000 $ (3,681,241) $ (169,241)
======== ============ ============ ============
The accompanying notes are an integral part of this
consolidated statement.
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INTREPA, L.L.C. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000
-------------------------
Cash flows from operating activities:
Net loss ........................................................ $ (3,198,318)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization ................................. 617,646
Changes in operating assets and liabilities:
Accounts receivable, net .................................... (1,286,551)
Other assets ................................................ (58,091)
Accounts payable ............................................ 111,757
Accrued liabilities ......................................... 1,199,101
Deferred revenue ............................................ 505,005
------------
Net cash used in operating activities ................................ (2,109,451)
------------
Cash flows from investing activities:
Purchases of property and equipment ............................. (434,611)
------------
Net cash used in investing activities ................................ (434,611)
------------
Cash flows from financing activities:
Withheld employee investments ................................... 187,623
Members' capital contributions, net ............................. 1,007,000
------------
Net cash provided by financing activities ............................ 1,194,623
------------
Decrease in cash and cash equivalents ................................ (1,349,439)
Cash and cash equivalents, beginning of year ......................... 2,135,664
------------
Cash and cash equivalents, end of year ............................... $ 786,225
============
The accompanying notes are an integral part of this
consolidated statement.
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INTREPA, L.L.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BACKGROUND
Intrepa, L.L.C. (the "Company") was formed to acquire the business of
developing, selling, and licensing LogisticsPRO software from CIBER, Inc.
("CIBER"). The Company has a wholly owned subsidiary, Intrepa Employment
Company, which leases employees to Intrepa, L.L.C. on an exclusive basis.
On September 30, 1999, the Company acquired the assets and assumed
certain liabilities of CIBER for a purchase price of $2,000,000. Assets acquired
and liabilities assumed were recorded at the estimated fair market value. The
purchase price was in the form of a promissory note, which bears interest at 8%
and is initially secured by a pledge of 60,000 shares of CIBER common stock
owned by certain members of the Company, with such shares to be released as the
promissory note is paid. At the time of the acquisition, the Company agreed to
pay CIBER royalty payments in the amount of 5% of the Company's total revenues
from software license fees for a period of five years to a maximum of
$3,500,000. For the nine months ended September 30, 2000, the Company expensed
$130,681 for this agreement.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash or cash equivalents.
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. Estimates also affect the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
Fair Value of Financial Instruments
The carrying values of cash, accounts receivable, accounts payable, and
other financial instruments included in the accompanying balance sheets
approximate their fair values principally due to the short-term maturities of
these instruments.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of Intrepa, L.L.C. and its subsidiary, Intrepa Employment Company. All material
intercompany transactions have been eliminated.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of accounts receivable.
Collateral or deposits generally are not required from customers who demonstrate
a positive credit record and sound financial condition. The Company maintains
allowances for potential credit losses.
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INTREPA, L.L.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
During the nine months ended September 30, 2000, two customers
accounted for 18% and 12%, respectively, of the Company's total revenue. At
September 30, these two customers had outstanding receivables representing 16%
and 6%, respectively, of total outstanding receivables
Risks Associated with Single Product Line and Technological Advances
The Company currently derives substantially all its revenues from sales
of its LogisticsPRO software and related services and hardware. Any factor
adversely affecting the market for distribution center management systems could
have an adverse effect on the Company's business, financial condition, and
results of operations.
The market for distribution center management systems is subject to
rapid technological change, changing customer needs, frequent new product
introductions, and evolving industry standards that may render existing products
and services obsolete. As a result, the Company's position in this market could
be eroded rapidly by unforeseen changes in customer requirements for application
features, functions, and technologies. The Company's growth and future operating
results will depend, in part, upon its ability to enhance existing applications
and develop and introduce new applications that meet changing customer
requirements, that respond to competitive products and that achieve market
acceptance.
Revenue Recognition
The Company's revenue consists of revenues from the licensing of
software; fees and commissions from consulting, implementation and training
services (collectively, "professional services"), plus customer support services
and software upgrades; and commissions from sales of complementary radio
frequency and computer equipment.
The Company follows Statement of Position No. 97-2, "Software Revenue
Recognition" ("SOP 97-2"), as amended by Statement of Position No. 98-9,
"Software Revenue Recognition, With Respect to Certain Transactions" ("SOP
98-9"). Under SOP 97-2, the Company recognizes software license revenue when the
following criteria are met: (1) a signed contract is obtained; (2) shipment of
the product has occurred; (3) the license fee is fixed and determinable; (4)
collectibility is probable; and (5) remaining obligations under the license
agreement are insignificant. SOP 98-9 requires recognition of revenue using the
"residual method" when (1) there is vendor-specific objective evidence of the
fair values of all undelivered elements in a multiple-element arrangement that
is not accounted for using long-term contract accounting; (2) vendor-specific
objective evidence of fair value does not exist for one or more of the delivered
elements in the arrangement; and (3) all revenue-recognition criteria in SOP
97-2 other than the requirement for vendor-specific objective evidence of the
fair value of each delivered element of the arrangement are satisfied. SOP 98-9
was effective for transactions entered into after March 15, 1999, and the
Company adopted the residual method for such arrangements at that time. For
those contracts that contain significant future obligations, license revenue is
recognized under the percentage of completion method.
The Company's services revenue consists of fees and commissions
generated from professional services, training and customer support and software
upgrades related to the Company's software products. Professional services are
typically contracted for under separate service agreements. Revenue related to
professional services performed by the Company is generally billed on an hourly
basis and revenue is recognized as the services are performed. Revenue related
to training is generally billed in advance based on a fixed price for
established classes and recognized when the training is provided. The Company
receives commissions for professional services performed by CIBER under a
non-exclusive agreement. Revenue related to customer support and software
upgrades are generally paid in advance and recognized ratably over the term of
the agreement, typically 12 months.
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INTREPA, L.L.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Hardware revenue represents commissions earned on sales of hardware
made by CIBER to Intrepa customers. Under an agreement with CIBER, the Company
is eligible to receive 40% of the gross margin earned by CIBER for sales of
hardware related to the LogisticsPRO product.
Deferred Revenue
Deferred revenue represents amounts collected prior to complete
performance of customer support and software upgrade services and significant
obligations under license agreements.
Returns and Allowances
The Company provides for the costs of returns and product warranty
claims at the time of sale. The Company has not experienced significant returns
or warranty claims to date and, as a result, has not recorded a provision for
the cost of returns and product warranty claims at September 30, 2000.
Property and Equipment
Property and equipment consists of office and computer equipment,
furniture and software. The Company depreciates the cost of office and computer
equipment, furniture and software on a straight-line basis over their estimated
useful lives (three to five years for office and computer equipment, five years
for furniture, three years for software). Depreciation expense for property and
equipment for the nine months ended September 30, 2000 was $171,948.
Property and equipment, at cost, consist of the following:
SEPTEMBER 30,
2000
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Office and computer equipment ..... $ 579,317
Furniture ......................... 248,909
Software .......................... 233,268
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1,061,494
Less accumulated depreciation...... (202,379)
------------
$ 859,115
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INTREPA, L.L.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Intangible Assets
Intangible assets represent the purchase price consideration above the
fair value of the net assets acquired from CIBER. Management has specifically
identified the excess value to be purchased technology in the form of the
acquired LogisticsPRO software. Intangible assets are being amortized on a
straight-line basis over five years. Total amortization expense was $445,698 for
the nine months ended September 30, 2000.
Income Taxes
The Company is a limited liability company. Accordingly, this
consolidated balance sheet and statement of operations does not include a
provision for corporate income taxes. The members are taxed on their
proportionate shares of the Company's taxable income or deduct their
proportionate shares of the Company's taxable loss.
Capitalized Software Development Costs
Research and development expenses are charged to expense as incurred.
Computer software development costs are charged to research and development
expense until technological feasibility is established, after which remaining
software production costs are capitalized in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 86, "Accounting for Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed." The Company has
defined technological feasibility as the point in time at which the Company has
a detailed program design or a working model of the related product, depending
on the type of development efforts. The Company concluded that the amount of
development costs capitalizable under the provisions of SFAS No. 86 was not
material to the financial statements for the nine months ended September 30,
2000. Accordingly, no computer software development costs were capitalized
during the period.
Impairment of Long-Lived and Intangible Assets
The Company periodically reviews the values assigned to long-lived
assets, including property and intangible assets, to determine whether events
and circumstances have occurred which indicate that the remaining estimated
useful lives may warrant revision or that the remaining balances may not be
recoverable. In such reviews, undiscounted cash flows associated with these
assets are compared with their carrying value to determine if a write-down to
fair value is required. Management believes the long-lived and intangible assets
in the accompanying balance sheets are appropriately valued as of September 30,
2000.
Segment Information
The Company operates in a single segment as defined by SFAS No. 131,
"Disclosures about Segments of and Enterprise and Related Information," and does
not have material operations in foreign locations.
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INTREPA, L.L.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for all derivative instruments.
SFAS No. 137 amended SFAS No. 133 to make it effective for fiscal years
beginning after June 15, 2000. In addition, SFAS No. 138, issued in June 2000,
amended SFAS No. 133 in respect to accounting of certain derivative instruments
and hedging activities. One of the changes introduced by SFAS No. 133 is that it
does permit, subject to meeting the appropriate designation and effectiveness
tests, the hedging of anticipated transactions using forward foreign currency
contracts. SFAS No. 133 and the related amendments in SFAS No. 137 and SFAS No.
138 are not expected to have a material impact on the Company's financial
results.
2. NOTE PAYABLE
In connection with its acquisition of the LogisticsPRO assets, the
Company issued a promissory note to CIBER in the principal amount of $2,000,000.
The interest rate on the note is 8%, and interest payments commenced on March
31, 2000. Principal is payable in equal quarterly installments of $166,667,
commencing on December 31, 2000. If any amounts due on the note payable are not
paid in full when due, then the interest rate on the unpaid portion of the note
will be 12%. The promissory note is secured by a pledge of 60,000 shares of
CIBER common stock owned by certain members. Future minimum principal payments
at September 30, 2000, are as follows:
Year Ended December 31,:
-----------------------
2000 ................... $ 166,667
2001 ................... 666,668
2002 ................... 666,668
2003 ................... 499,997
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Total ............... $ 2,000,000
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3. COMMITMENTS AND CONTINGENCIES
LEASES
Rents charged to expense were approximately $247,159 for the nine
months ended September 30, 2000. Aggregate future minimum lease payments under
the capital lease and noncancellable operating leases as of September 30, 2000
are as follows (in thousands):
OPERATING
Year Ended December 31,: LEASES
----------------------- ----------
2000 ...................... $ 90,294
2001 ...................... 316,152
2002 ...................... 91,032
2003 ...................... 75,860
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Total ................. $ 573,338
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INTREPA, L.L.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
3. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LEGAL MATTERS
Many of the Company's installations involve products that are critical
to the operations of its clients' businesses. Any failure in a Company product
could result in a claim for substantial damages against the Company, regardless
of the Company's responsibility for such failure. Although the Company attempts
to limit contractually its liability for damages arising from product failures
or negligent acts or omissions, there can be no assurance the limitations of
liability set forth in its contracts will be enforceable in all instances.
4. MEMBERS' CAPITAL
In October 1999, the Company established the Intrepa, L.L.C. 1999
Restricted Unit Purchase Plan (the "Plan"). The Plan provides for the sale of
units in the Company at $10.00 per unit in calendar year 2000 and January 2001
to employees and members of the Board of Advisors. The number of units that may
be sold or awarded under this plan may not exceed 180,000 units over year 2000
and 2001. The plan expires on December 31, 2001.
Under the Plan, each participant entered into a unit purchase agreement
that provided for the initial purchase of units. The unit purchase agreement
also provides for withholdings from employee paychecks amounts necessary to
purchase the units in January 2001. Under these agreements, the Company issued
90,700 units during the nine months ended September 30, 2000. At September 30,
2000, the Company had commitments for the sale of 83,900 units at $10.00 per
share in January 2001.
On October 23, 2000, the Company issued the 83,900 units that were
planned to be issued in January 2001. As a result of accelerating the planned
purchase date, the Company will be required to record stock compensation expense
in October 2000 of $4,301,553. The expense amount is based on the difference
between the fair market value at the date of issuance and the $10.00 purchase
price.
5. EMPLOYEE BENEFIT PLAN
The Company sponsors the Intrepa, L.L.C. 401(k) Plan and Trust (the
"401(k) Plan"), a qualified profit sharing plan with a 401(k) feature covering
substantially all employees of the Company. Under the 401(k) Plan's deferred
compensation arrangement, eligible employees who elect to participate in the
401(k) Plan may contribute up to 15% or $10,500 of eligible compensation, as
defined, to the 401(k) Plan. The Company provides for a 50% matching
contribution up to 6% of eligible compensation being contributed after the
participant's first year of employment. During the nine months ended September
30, 2000, the Company made matching contributions to the 401(k) Plan of
$120,668.
6. SUBSEQUENT EVENTS
On October 24, 2000, the Company sold its assets and certain
liabilities to Manhattan Associates, Inc. ("Manhattan"). The purchase price
consisted of $13,000,000 in cash, $7,000,000 in a promissory note (the "Note")
and common stock having a value of $10,000,000. The number of shares of
Manhattan common stock to be issued is based upon the average closing price for
the 20 days prior to the closing date ("Closing Date Average"). The agreement
also provides for the immediate payment of the promissory note to CIBER of
$2,000,000 (see Note 2) plus accrued interest up to $15,000 upon the closing of
the agreement, which was paid on October 24, 2000.
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INTREPA, L.L.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
6. SUBSEQUENT EVENTS (CONTINUED)
Unless prepaid at the option of Manhattan, the Note is payable in four
equal installments of $1,750,000, to be paid every six months beginning on
October 1, 2001 and concluding on April 1, 2003. The Note is subject to interest
at a rate of 8% per year, which is due on the last day of each fiscal quarter of
Manhattan for so long as principal remains outstanding under the Note.
If the average closing price for the 20 days prior to January 1, 2001
("January Average") is more than 20% lower than the Closing Date Average,
Manhattan will issue additional shares of common stock equal to $2,000,000 using
the January Average price less 25% of the shares originally issued. If the
January Average price is more than 20% higher than the Closing Date Average,
then the Company will return that number of shares of Manhattan common stock
equal to 25% of the shares originally issued minus the number of shares with a
$3,000,000 value using the January Average price.
If the average closing price for the 20 days prior to April 1, 2001
("April Average") is more than 20% lower than the Closing Date Average,
Manhattan will issue additional shares of common stock equal to $2,000,000 using
the April Average price less 25% of the shares originally issued. If the April
Average price is more than 20% higher than the Closing Date Average, then the
Company will return that number of shares of Manhattan common stock equal to 25%
of the shares originally issued minus the number of shares with a $3,000,000
value using the April Average price.
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