EXHIBIT 99.1 - FINANCIAL STATEMENTS
OF BUSINESS ACQUIRED
Report of Independent Auditors
The Board of Directors and Stockholders
Logistics.com, Inc.
We have audited the accompanying consolidated balance sheets of Logistics.com,
Inc. as of December 31, 2002 and 2001, and the related consolidated statements
of operations, preferred stock and stockholders' deficit and cash flows for the
year ended December 31, 2002 and period from August 25, 2001 to December 31,
2001 (Successor Period) and the period from January 1, 2001 to August 24, 2001
(Predecessor Period). These financial statements are the responsibility of
Logistics.com's management. Our responsibility is to express an opinion on these
financial statements based upon our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Logistics.com, Inc.
as of December 31, 2002 and 2001, and the results of its operations and its cash
flows for the year ended December 31, 2002 and the period from August 25, 2001
to December 31, 2001 (Successor Period) and the period from January 1, 2001 to
August 24, 2001 (Predecessor Period), in conformity with accounting principles
generally accepted in the United States.
As discussed in Note 2 to the consolidated financial statements, in 2002 the
Company ceased amortization of goodwill and intangible assets with indefinite
lives in accordance with the Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets."
ERNST & YOUNG LLP
Exhibit 99.1
Page 1 of 31
Boston, Massachusetts
March 7, 2003
Logistics.com, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
DECEMBER 31 DECEMBER 31 SEPTEMBER 30
2002 2001 2002
----------- ----------- ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 297 $ 2,058 $ 1,477
Accounts receivable, net of allowance for doubtful accounts of
$516, $533, and $636 as of December 31, 2002, 2001, and
September 30, 2002, respectively 2,333 1,510 1,495
Other current assets 536 326 525
-------- -------- --------
Total current assets 3,166 3,894 3,497
Property and equipment, net 1,268 3,160 1,427
Goodwill and other intangible assets, net 5,458 6,514 5,695
-------- -------- --------
Total assets $ 9,892 $ 13,568 $ 10,619
======== ======== ========
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 540 $ 439 $ 898
Accrued expenses 3,965 2,535 3,203
Deferred revenue 3,609 1,339 2,896
Deposits 2,835 -- --
Note payable 5,500 -- 5,500
Convertible notes payable 12,087 -- --
-------- -------- --------
Total current liabilities 28,536 4,313 12,497
Note payable - long term -- 5,500 --
Convertible notes payable - long term -- 4,319 10,958
Commitments (Note 13)
Preferred stock
Series A redeemable convertible preferred stock, $0.00001
par value; 3,000 shares authorized, issued and outstanding,
at redemption value 30,000 30,000 30,000
Series B-1 convertible preferred stock, $0.00001 par value;
395 shares authorized, issued and outstanding, at
liquidation value 3,966 3,966 3,966
Series B-2 convertible preferred stock, $0.00001 par value;
241 shares authorized, issued and outstanding, at
liquidation value 4,724 4,724 4,724
Series C redeemable convertible preferred stock, $0.00001
par value; 1,213 shares authorized, issued and outstanding,
at redemption value 16,917 15,717 16,785
Stockholders' deficit:
Common stock, $0.00001 par value; 15,800 shares authorized;
6,196 shares issued and outstanding at December 31, 2001 and
December 31, 2002 -- -- --
Additional paid-in capital 3,944 1,868 4,138
Deferred compensation (631) (985) (754)
Notes receivable from stockholders (458) (475) (463)
Accumulated deficit (77,106) (55,379) (71,232)
-------- -------- --------
Total stockholders' deficit (74,251) (54,971) (68,311)
-------- -------- --------
Total liabilities, preferred stock and stockholders' deficit $ 9,892 $ 13,568 $ 10,619
======== ======== ========
See accompanying notes.
Page 2 of 31
Logistics.com, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share data)
SUCCESSOR | PREDECESSOR
YEAR ENDED PERIOD FROM | PERIOD FROM
DECEMBER 31, AUGUST 25, 2001 | JANUARY 1, 2001 NINE MONTHS ENDED
2002 TO DECEMBER 31, | TO AUGUST 24, SEPTEMBER 30,
2001 | 2001 2002
------------ --------------- | --------------- -----------------
| (unaudited)
|
Revenues: |
Product $ 2,640 $ 558 | $ 1,665 $ 1,687
Service 5,176 2,484 | 3,648 3,632
---------- ---------- | -------- ----------
Total revenues 7,816 3,042 | 5,313 5,319
|
Cost of revenues 5,323 2,187 | 4,349 4,601
---------- ---------- | -------- ----------
Gross profit 2,493 855 | 964 718
|
Operating expenses: |
Research and development 7,752 3,537 | 8,831 5,915
Sales and marketing 4,051 1,754 | 6,119 2,772
General and administrative 5,055 1,378 | 2,307 2,670
Stock-based compensation 284 100 | 365 223
Restructuring charge 320 1,267 | 336 320
Amortization of goodwill and other intangible assets 1,056 1,167 | 4,083 817
Impairment of goodwill -- -- | 5,879 --
---------- ---------- | -------- ----------
Total operating expenses 18,518 9,203 | 27,920 12,717
|
Loss from operations (16,025) (8,348) | (26,956) (11,999)
|
Interest expense, net (5,702) (729) | (329) (3,851)
---------- ---------- | -------- ----------
|
Net loss (21,727) (9,077) | (27,285) (15,850)
|
Accretion of Preferred Stock (1,200) (5,370) | (467) (900)
---------- ---------- | -------- ----------
|
Net loss attributable to common stockholders $ (22,927) $ (14,447) | $(27,752) $ (16,750)
========== ========== | ======== ==========
|
Basic and diluted loss per common share $(3,700.29) $(2,331.67) | $(2,699.66)
========== ========== | ==========
|
Basic and diluted weighted average common shares |
outstanding 6,196 6,196 | 6,196
========== ========== | ==========
See accompanying notes.
Page 3 of 31
Logistics.com, Inc.
Consolidated Statements of Preferred Stock and Stockholders' Deficit
(in thousands, except share data)
SERIES A SERIES C |
REDEEMABLE REDEEMABLE | SERIES B-1 AND B-2
PREFERRED STOCK PREFERRED STOCK | PREFERRED STOCK COMMON STOCK
------------------ ----------------- | ------------------ -----------------
SHARES AMOUNT SHARES AMOUNT | SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ | ------- ------- ------ ------
|
|
Balance at January 1, 2001 3,000 $30,000 -- $ -- | 636 $ 6,186 6,696 $--
Issuance of Series C |
redeemable convertible |
preferred stock, net of |
issuance costs of $171 -- -- 1,213 14,829 | -- -- -- --
Exercise of common |
stock options -- -- -- -- | -- -- -- --
Accretion of redeemable |
convertible preferred |
stock dividends -- -- -- 467 | -- -- -- --
Amortization of stock- |
based compensation -- -- -- -- | -- -- -- --
Repurchase of receivable |
from employee |
stockholder -- -- -- -- | -- -- (500) --
Repayments of notes receivable |
from stockholders -- -- -- -- | -- -- -- --
Net loss -- -- -- -- | -- -- -- --
----- ------- ----- ------- | --- ------- ------ ---
Balance at August 24, 2001,
Predecessor period 3,000 30,000 1,213 15,296 636 6,186 6,196 --
Impact of step acquisition -- $ -- -- $ -- -- $(2,445) -- $--
Reversal of deferred stock-
based compensation from
cancellation of Logistics.com
option plan -- -- -- -- -- -- -- --
Deferred stock-based
compensation related to
restricted stock grants -- -- -- -- -- -- -- --
NOTES
ADDITIONAL RECEIVABLE
PAID-IN DEFERRED FROM ACCUMULATED
CAPITAL COMPENSATION STOCKHOLDERS DEFICIT TOTAL
---------- ------------ ------------ ----------- --------
Balance at December 31, 2000 $ 13,527 $(2,788) $(2,992) $(26,453) $(12,520)
Issuance of Series C
redeemable convertible
preferred stock, including
issuance costs of $171 -- -- -- -- --
Exercise of common
stock options 3 -- -- -- 3
Accretion of redeemable
convertible preferred
stock dividends (467) -- -- -- (467)
Amortization of stock-
based compensation (16) 381 -- -- 365
Repurchase of receivable
from employee
stockholder (3,580) 1,080 2,500 -- --
Repayments of notes receivable
from stockholders -- -- 11 -- 11
Net loss -- -- -- (27,285) (27,285)
-------- ------- ------- -------- --------
Balance at August 24, 2001,
Predecessor period 9,467 (1,327) (481) (53,738) (39,893)
Impact of step acquisition $ (4,991) $ -- $ -- $ 7,436 $ 2,445
Reversal of deferred stock-
based compensation from
cancellation of Logistics.com
option plan (1,287) 1,287 -- -- --
Deferred stock-based
compensation related to
restricted stock grants 1,137 (1,137) -- -- --
See accompanying notes.
Page 4 of 31
Logistics.com, Inc.
Consolidated Statement of Preferred Stock
and Stockholders' Deficit (continued)
(in thousands, except share data)
SERIES A SERIES C |
REDEEMABLE REDEEMABLE SERIES B-1 AND B-2 |
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK | COMMON STOCK
------------------ ----------------- ------------------ | -----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT | SHARES AMOUNT
------ ------ ------ ------ ------- ------- | ------ ------
|
|
Accretion of Series B preferred |
stock to liquidation value -- -- -- -- -- 4,949 | -- --
Accretion of Series C redeemable |
convertible preferred stock |
dividends -- -- -- 421 -- -- | -- --
Amortization of stock-based |
compensation -- -- -- -- -- -- | -- --
Issuance of equity warrant |
issued in connection with |
convertible notes -- -- -- -- -- -- | -- --
Repayments of notes receivable |
from stockholders -- -- -- -- -- -- | -- --
Net loss -- -- -- -- -- -- | -- --
----- ------- ----- ------- --- ------ | ----- ----
|
Balance at December 31, 2001 3,000 30,000 1,213 15,717 636 8,690 | 6,196 --
|
Accretion of redeemable |
convertible preferred |
stock dividends -- -- -- 1,200 -- -- | -- --
Amortization of stock- |
based compensation -- -- -- -- -- -- | -- --
Issuance of equity warrant |
issued in connection |
with convertible notes -- -- -- -- -- -- | -- --
Repayments of notes receivable |
from stockholders -- -- -- -- -- -- | -- --
Net loss -- -- -- -- -- -- | -- --
|
----- ------- ----- ------- --- ------ | ----- ----
Balance at December 31, 2002 3,000 $30,000 1,213 $16,917 636 $8,690 | 6,196 $--
===== ======= ===== ======= === ====== | ===== ====
|
NOTES
ADDITIONAL RECEIVABLE
PAID-IN DEFERRED FROM ACCUMULATED
CAPITAL COMPENSATION STOCKHOLDERS DEFICIT TOTAL
---------- ------------ ------------ ----------- --------
Accretion of Series B preferred
stock to liquidation value (4,949) -- -- -- (4,949)
Accretion of Series C redeemable
convertible preferred stock
dividends (421) -- -- -- (421)
Amortization of stock-based
compensation (92) 192 -- -- 100
Issuance of equity warrant
issued in connection with
convertible notes 3,004 -- -- -- 3,004
Repayments of notes receivable
from stockholders -- -- 6 -- 6
Net loss -- -- -- (9,077) (9,077)
------- ----- ----- -------- --------
Balance at December 31, 2001 1,868 (985) (475) (55,379) (54,971)
Accretion of redeemable
convertible preferred
stock dividends (1,200) -- -- -- (1,200)
Amortization of stock-
based compensation (70) 354 -- -- 284
Issuance of equity warrant
issued in connection
with convertible notes 3,346 -- -- -- 3,346
Repayments of notes receivable
from stockholders -- -- 17 -- 17
Net loss -- -- -- (21,727) (21,727)
------- ----- ----- -------- --------
Balance at December 31, 2002 $ 3,944 $(631) $(458) $(77,106) $(74,251)
======= ===== ===== ======== ========
See accompanying notes.
Page 5 of 31
Logistics.com, Inc.
Consolidated Statements of Cash Flows
(in thousands)
SUCCESSOR PERIOD | PREDECESSOR PERIOD
FROM | FROM
YEAR ENDED AUGUST 25, 2001 | JANUARY 1, 2001 NINE MONTHS ENDED
DECEMBER 31, TO DECEMBER 31, | TO AUGUST 24, SEPTEMBER 30,
2002 2001 | 2001 2002
------------ ---------------- | ------------------ -----------------
| (Unaudited)
|
OPERATING ACTIVITIES |
Net loss $(21,727) $(9,077) | $(27,285) $(15,850)
Adjustments to reconcile net loss to net cash used in |
operating activities: |
Depreciation and amortization 3,975 2,368 | 6,116 3,155
Stock-based compensation expense 284 100 | 365 223
Non-cash interest expense 3,343 345 | -- 2,212
Impairment of goodwill -- -- | 5,879
Changes in operating assets and liabilities: |
Accounts receivable (823) (710) | 1,168 15
Other current assets (210) 330 | (445) (199)
Accounts payable 101 (1,410) | (2,607) 459
Accrued expenses 1,431 346 | (301) 668
Deferred revenue 2,270 946 | (181) 1,556
-------- ------- | -------- --------
Net cash used in operating activities (11,356) (6,762) | (17,291) (7,761)
|
INVESTING ACTIVITIES |
Purchase of property and equipment (1,029) (38) | (2,394) (604)
Cash paid for acquisition, net of cash received -- -- | 433 --
-------- ------- | -------- --------
Net cash used in investing activities (1,029) (38) | (1,961) (604)
|
FINANCING ACTIVITIES |
Net proceeds from issuance of Preferred Stock -- -- | 14,829 --
Proceeds from issuance of convertible notes payable 7,772 6,978 | -- 7,772
Deposit on business combination 2,835 -- | -- --
Interest on notes receivable from stockholders 17 6 | 107 12
Proceeds from issuance of common stock -- -- | 3 --
-------- ------- | -------- --------
Net cash provided by financing activities 10,624 6,984 | 14,939 7,784
-------- ------- | -------- --------
|
Net increase (decrease) in cash and cash equivalents (1,761) 184 | (4,313) (581)
Cash and cash equivalents at beginning of period 2,058 1,874 | 6,187 2,058
-------- ------- | -------- --------
|
Cash and cash equivalents at end of period $ 297 $ 2,058 | $ 1,874 $ 1,477
======== ======= | ======== =======
See accompanying notes
Exhibit 99.1
Page 6 of 31
Logistics.com, Inc.
Consolidated Statement of Cash Flows (continued)
SUCCESSOR PERIOD PREDECESSOR PERIOD
FROM FROM
YEAR ENDED AUGUST 25, 2001 JANUARY 1, 2001 NINE MONTHS ENDED
DECEMBER 31, TO DECEMBER 31, TO AUGUST 24, SEPTEMBER 30,
2002 2001 2001 2002
------------ ---------------- ------------------ -----------------
(unaudited)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 329 $ 222 $218 $ 329
======= ====== ==== =====
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Fair value of warrants issued in connection with
the convertible notes payable and related
beneficial conversion value $ 3,346 $3,004 $ -- $3,346
======= ====== ==== ======
Deferred compensation related to restricted stock $ -- $1,137 $ -- $ --
======= ====== ==== ======
Accretion of Series B-1 and B-2 Preferred Stock to
liquidation value $ -- $4,949 $ -- $ --
======= ====== ==== ======
Accretion of Series C Preferred Stock dividends $ 1,200 $ 421 $467 $ 900
======== ====== ==== =====
See accompanying notes.
Exhibit 99.1
Page 7 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
1. NATURE OF BUSINESS
Logistics.com, Inc. (Logistics.com, Logistics or the Company) was incorporated
in Delaware on September 27, 1999. Logistics.com provides logistics solutions to
shippers and transportation providers. Logistics.com's solutions assist in
creating a seamless connection between shippers' and transportation providers'
systems to automatically procure, book and manage transportation transactions.
On July 25, 2001, ICG Holdings, Inc. (ICG) and Logistics.com entered into an
Exchange Offer Agreement under which ICG offered to exchange ICG common stock
for certain outstanding capital stock of Logistics.com. As a result of the
exchange offer, which was completed on August 24, 2001, ICG increased its
ownership interest from approximately 38% to 96% of Logistics.com. Since the
exchange was between ICG and certain Logistics.com stockholders, no
consideration was received by Logistics.com in this transaction (see Note 5).
The accompanying consolidated financial statements and related notes were
prepared in accordance with accounting principles generally accepted in the
United States. The consolidated financial statements are presented for the year
ended December 31, 2002 and the period from August 25, 2001 to December 31, 2001
(successor period) and for the period from January 1, 2001 to August 24, 2001
(predecessor period). The consolidated statements of operations for the year
ended December 31, 2002 and the period from August 25, 2001 to December 31, 2001
are presented on a different cost basis than for the period from January 1, 2001
to August 24, 2001. In accordance with purchase accounting, a portion of the
assets and liabilities of Logistics.com were adjusted proportionally to their
estimated fair values as of the acquisition date based on the additional 58%
interest.
The accompanying financial statements have been prepared assuming Logistics.com
will continue as a going concern, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business.
Logistics.com has incurred losses and negative cash flows from operations since
inception. On December 31, 2002, Manhattan Associates, Inc. ("Manhattan
Associates") purchased substantially all of the assets of Logistics.com (see
Note 14).
Exhibit 99.1
Page 8 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements reflect the operations of Logistics.com
and its wholly-owned subsidiary, QuoteShip.com, Inc. prior to the acquisition by
Manhattan Associates on December 31, 2002. All significant intercompany balances
and transactions have been eliminated.
The preparation of 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 and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The accompanying unaudited consolidated financial statements as of September
30, 2002 and for the nine month period then ended have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information. Accordingly, they do not include all of the
information and footnotes required for complete financial statements. In the
opinion of the Company's management, these consolidated financial statements
contain all adjustments considered necessary for a fair presentation of the
financial position at September 30, 2002, the results of operations for the
nine month period then ended and changes in cash flows for the nine month
period then ended. The results for the nine month period ended September 30,
2002 are not necessarily indicative of the results to be expected for the full
year.
CASH AND CASH EQUIVALENTS
All highly liquid investments purchased with an original maturity of three
months or less are considered to be cash equivalents. Logistics.com invests its
excess cash primarily in money market accounts of major financial institutions.
Accordingly, these investments are subject to minimal credit and market risk.
These investments are carried at cost which approximates fair market value.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially expose Logistics.com to concentrations
of credit risk include cash, cash equivalents, accounts receivable and notes
receivable from stockholders.
Logistics.com invests its cash and cash equivalents in high quality financial
institutions. Logistics.com's customers generally represent large,
credit-worthy customers in a variety of industries, including the
transportation industry. Logistics.com does not require collateral from its
customers. Notes receivable from employee stockholders are due from officers
and senior executives and are collateralized by the stock and personal assets
of the stockholders (see Note 8).
Exhibit 99.1
Page 9 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets or, where
applicable, over the lease term. The cost of additions and improvements are
capitalized, while expenditures for maintenance and repairs are charged to
expense as incurred. Upon retirement or sale, the cost of the disposed assets
and related accumulated depreciation are removed from the accounts, and any
resulting gain or loss is credited or charged to income.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consist of goodwill, workforce-in-place,
trade names and a below market lease arising from the acquisition of businesses.
Intangible assets, including completed technology, are amortized using the
straight-line method over one to six years based on their estimated useful
lives. Goodwill and other long-lived assets are reviewed for impairment whenever
events, such as technological obsolescence, lease termination or other
significant changes in circumstances, indicate that the carrying amount of the
asset may not be recoverable. When such events occur, Logistics.com compares the
carrying amount of the assets to their undiscounted expected future cash flows.
If this comparison indicates that there is impairment, the amount of the
impairment is calculated using discounted expected cash flows using
Logistics.com's weighted average cost of capital. Logistics.com recorded an
impairment charge of $5,879,000 during the period from January 1, 2001 to August
24, 2001 based on the value of the Company as determined in the acquisition by
ICG at August 24, 2001.
REVENUE RECOGNITION
Logistics.com generates revenues from licensing its software and providing
professional services, hosting services, maintenance and customer support
services. Logistics.com executes contracts that govern the terms and conditions
of each software license and maintenance arrangement and each professional
service arrangement. The software may be licensed on either a perpetual or a
term basis. These contracts may be an element in a multiple-element arrangement.
Revenues under multiple-element arrangements, which may include several
different software products or services sold together, are allocated to each
element using the residual method. Logistics.com uses the residual method when
fair value does not exist for one of the delivered elements in an arrangement.
Under the residual method, the fair value of the undelivered elements is
deferred and subsequently recognized.
Exhibit 99.1
Page 10 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION (CONTINUED)
Perpetual software licenses and related services revenue is recognized using
either the percentage-of-completion method of accounting or recognized ratably
over the hosting period when hosting services are provided as part of the
license arrangement. Under the percentage-of completion method, revenue on
contracts which include significant customization or modification of the
software, is recognized as the work progresses in amounts estimated to equal the
actual progress on the contract. In applying this method, Logistics.com measures
each project's percentage-of-completion by the ratio of labor hours incurred to
date to estimated total labor hours to complete the project. Changes in total
estimated costs and anticipated losses, if any, are recognized in the period in
which determined. Revenue related to term software licenses and maintenance
agreements are recognized ratably over the contract period. Professional service
revenue consists primarily of consulting services which are recognized when the
services are provided. Transaction based fees are recognized as revenue is
earned.
Deferred revenue relates primarily to amounts associated with maintenance
contracts, professional services and software license fees billed or paid in
advance of the related revenue recognition.
RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS
Costs incurred in the research and development of Logistics.com's products is
expensed as incurred, except for certain software development costs. Costs
associated with the development of computer software for sale to customers are
expensed as incurred prior to the establishment of technological feasibility.
Costs incurred subsequent to the establishment of technological feasibility and
prior to the general release of the products are capitalized. Research and
development costs associated with the application development stage for
internally developed software is capitalized by Logistics.com. No software
development costs were capitalized for any periods presented as no costs have
met the criteria for capitalization.
Exhibit 99.1
Page 11 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING FOR STOCK-BASED COMPENSATION
Logistics.com accounts for stock-based awards to employees using the intrinsic
value method. Accordingly, compensation expense is recorded for options issued
to employees in fixed amounts and with fixed exercise prices to the extent that
the fair market value of Logistics.com's common stock exceeds the exercise
price of the award at the date of grant. Logistics.com uses the fair value
method in accordance with Statement of Financial Accounting Standards (SFAS)
No. 123, Accounting for Stock-Based Compensation, for disclosure purposes. All
stock-based awards to nonemployees are accounted for at their fair value in
accordance with SFAS No. 123 and Emerging Issues Task Force Issue No. 96-18.
Logistics has computed the pro forma disclosures required under SFAS No. 123
for stock options granted to employees using the Black-Scholes option pricing
model prescribed by SFAS No. 123. There were no options granted in the period
from August 25, 2001 to December 31, 2001 except for those options granted in
connection with the Exchange Program (see Note 3). As the fair value of these
options was included in ICG's purchase price, they are not included in this pro
forma disclosure. The assumptions used for the option pricing model and the
weighted average fair value of options granted are as follows:
JANUARY 1,
2001 TO AUGUST
2002 24, 2001
------- --------------
Risk-free interest rate 4.49% 4.86%
Expected dividend yield N/A N/A
Expected lives 5 YEARS 5 years
Expected volatility 77% 60%
Weighted average fair value of options granted $ 0.30 $ 0.98
Exhibit 99.1
Page 12 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Had compensation expense from employee stock option grants been determined
consistent with SFAS No. 123, net loss would have been as follows (in
thousands):
JANUARY 1,
2001 TO
AUGUST 24,
2002 2001
----------- ----------
Net loss:
As reported $ (21,727) $ (9,077)
Pro forma (21,734) (9,350)
Net loss per share:
As reported $(3,700.29) $(2,331.67)
Pro forma (3,701.42) (2,375,73)
The Black Scholes option pricing model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option pricing models require the input of highly
subjective assumptions, including expected stock price volatility. Because the
Company's stock options have characteristics significantly different from those
of traded options and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the
fair value of its stock options.
INCOME TAXES
Logistics.com accounts for income taxes using the asset and liability method
whereby deferred taxes are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect in the years in which the differences are expected to reverse.
Valuation allowances are provided if, based upon the weighted available
evidence, it is more likely than not that some or all of the deferred tax
assets will not be realized.
Exhibit 99.1
Page 13 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMPREHENSIVE LOSS
Comprehensive loss includes net loss as well as other changes in stockholders'
equity (deficit), except stockholders' investments and distributions and
deferred stock-based consideration. Logistics' comprehensive loss was the same
as its net loss for all periods presented.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Logistics.com's financial instruments consist primarily of cash, cash
equivalents, accounts receivable and debt. The book values of these financial
instruments approximated their respective fair values as of each balance sheet
presented due to their relative short-term maturities.
SIGNIFICANT CUSTOMERS
No customer represented over 10% of total revenues for the year ended December
31, 2002. One customer represented approximately 13% of total revenues for the
period from August 25, 2001 to December 31, 2001. No customer represented over
10% of total revenues for the period from January 1, 2001 to August 24, 2001.
One and two customers represented approximately 11% and 25% of accounts
receivable at December 31, 2002 and 2001, respectively.
NET LOSS PER SHARE
Basic net loss per share is computed by dividing net loss attributable to common
stockholders by the weighted average number of common shares outstanding during
the period. Diluted net loss per share is computed by dividing net loss
available to common stockholders by the shares used in the calculation of basic
net loss per share plus the dilutive effect of common stock equivalents, such as
stock options, warrants and convertible preferred stock, using the treasury
stock method. Common stock equivalents are excluded from the computation of
dilutive net loss per share as their effect is anti-dilutive in all periods
presented.
Exhibit 99.1
Page 14 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2002, the Company adopted SFAS No. 141, "Business
Combinations," and No. 142, "Goodwill and Other Intangible Assets"
(collectively, the Statements). SFAS No. 142 prohibits the amortization of
goodwill and intangibles with indefinite useful lives. SFAS No. 142 requires
that these assets be reviewed by the Company for impairment at least annually
and values reduced as appropriate. Intangible assets with finite lives will
continue to be amortized over their estimated useful lives. The Company has
completed the impairment test and, at December 31, 2002, there was no resulting
impairment. Subsequent impairment losses, if any, will be reflected in operating
results in the income statement of operations. Had the Company been accounting
for its goodwill under SFAS No. 142 for all periods presented, the Company's net
loss (in thousands) and loss per share would have been as follows:
<Table>
<Caption>
SUCCESSOR PREDECESSOR
PERIOD FROM PERIOD FROM
AUGUST 25, JANUARY 1,
2001 TO 2001 TO
DECEMBER 31, AUGUST 24,
2001 2001
---------------------------------------------
Reported net loss $ (9,077) $(27,285)
Add back goodwill amortization 747 2,882
----------------------------------------------
Adjusted net loss $ (8,330) $(24,403)
Basic and diluted loss per share:
Reported net loss $(2,331.67)
Goodwill amortization 120.56
-----------------------------------------------
Adjusted net loss $(2,211.11)
</Table>
Amortization expense on intangible assets including goodwill was approximately
$1,167,000 and $4,082,000 from the Successor Period from August 25, 2001 to
December 31, 2001 and for the Predecessor Period from January 1, 2001 to August
24, 2001, respectively. Estimated amortization expense for each of the years
ending December 31, is presented below (in 000's):
<Table>
2003 $685
2004 490
2005 130
2006 34
</Table>
In June 2002, the Financial Accounting Standards Board (FASB) issued SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No.
146 addresses the accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring).
Logistics.com will be required to adopt SFAS No. 146 for any exit or disposal
activities that are initiated after December 31, 2002. The adoption of SFAS No.
146 is not expected to have a material impact on the Company's financial
position or results of operations.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN No. 45). FIN No. 45 elaborates on
the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued.
It also clarifies that a guarantor is required to recognize, at the inception
of a guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and initial measurement
provisions of the interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002 and the disclosure
requirements in this interpretation are effective for financial statements of
interim or annual periods ending after December 15, 2002. The adoption of FIN
No. 45 is not expected to have a material impact on Logistics' financial
position or results of operations.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of SFAS Statement No.
123. SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value-based method of accounting for employee stock-based
compensation. These alternative methods will have no impact as Logistics does
not anticipate voluntarily changing to the fair value-based method of
accounting for employee stock-based compensation. SFAS No. 148 also requires
companies that account for employee stock-based compensation under the intrinsic
value-based method to disclose additional footnote information in interim and
annual financial statements, effective for fiscal years ending after December
15, 2002. The requisite disclosure is included in Note 2 to the accompanying
consolidated financial statements.
Exhibit 99.1
Page 15 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities," (FIN No. 46) to clarify the conditions under which
assets, liabilities and activities of another entity should be consolidated
into the financial statements of a company. FIN No. 46 requires the
consolidation of a variable interest entity by a company that bears the
majority of the risk of loss from the variable interest entity's activities, is
entitled to receive a majority of the variable interest entity's residual
returns or both. The provisions of FIN No. 46 are required to be adopted in
fiscal 2003. The adoption of FIN No. 46 is not expected to have a material
impact on Logistics' overall financial position or results of operations.
3. RESTRUCTURING
In 2001 and 2002, in response to unfavorable business conditions primarily
caused by significant declines in capital spending, Logistics implemented
restructuring plans designed to reduce expenses and align its cost structure
with its revised business outlook. The restructuring plans included a workforce
reduction and consolidation of excess facilities.
Logistics' restructuring related activities during the Predecessor period
from January 1, 2001 to August 24, 2001 are summarized as follows, in
thousands:
2001 DECEMBER 31,
PREDECESSOR PERIOD DECEMBER 31 2002
RESTRUCTURING CASH 2001 ACCRUAL CASH ACCRUAL
CHARGES PAYMENTS BALANCE PAYMENTS BALANCE
------------------ -------- ------------ -------- ------------
Workforce reduction .............. $141 $(141) $ -- $ -- $ --
Consolidation of facilities ...... 195 (49) 146 (70) 76
---- ----- ---- ----- ----
Total ............................ $336 $(190) $146 $ (70) $ 76
==== ===== ==== ===== ====
Exhibit 99.1
Page 16 of 31
3. RESTRUCTURING (CONTINUED)
At December 31, 2002, the remaining liability relating to Predecessor
restructuring charges of $76,000 is expected to be paid through October 2003.
Logistics.com's restructuring related activities during the Successor Period are
summarized as follows, in thousands:
2001
SUCCESSOR
PERIOD DECEMBER 31, 2002 DECEMBER 31,
RESTRUCTURING CASH 2001 ACCRUAL RESTRUCTURING CASH 2002 ACCRUAL
CHARGES PAYMENTS BALANCE CHARGES PAYMENTS BALANCE
------------- ---------- ------------- ------------- --------- ------------
Workforce reduction $1,267 $(1,267) $ -- $320 $(320) $ --
4. DETAILS OF FINANCIAL STATEMENT COMPONENTS
ACCOUNTS RECEIVABLE
Accounts receivable consists of the following, in thousands:
DECEMBER 31 DECEMBER 31
2002 2001
----------- -----------
Billed accounts receivable $ 2,675 $ 1,743
Unbilled accounts receivable 174 300
Less: allowance for doubtful accounts (516) (533)
------- -------
$ 2,333 $ 1,510
======= =======
Unbilled accounts receivable represent amounts recorded as revenue on the
percentage-of-completion method which are billable to the customer subsequent
to performance under the terms of the contract, but generally no later than
upon completion of the contract.
Exhibit 99.1
Page 17 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
4. DETAILS OF FINANCIAL STATEMENT COMPONENTS (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment consist of the following, in thousands:
ESTIMATED
USEFUL
LIVES DECEMBER 31 DECEMBER 31
(YEARS) 2002 2001
--------- ----------- -----------
Computer software and equipment 2 $ 7,853 $ 6,824
Furniture and fixtures 5 410 410
Leasehold improvements 3 459 460
------- -------
8,722 7,694
Less: accumulated depreciation (7,454) (4,534)
------- -------
Property and equipment, net $ 1,268 $ 3,160
======= =======
Depreciation expense for the year ended December 31, 2002 and the period from
August 25, 2001 to December 31, 2001 was $2,920 and $1,201, respectively.
Depreciation expense for the period from January 1, 2001 to August 24, 2001 was
$2,034.
ACCRUED EXPENSES
Accrued expenses consist of the following, in thousands:
DECEMBER 31 DECEMBER 31
----------- -----------
2002 2001
----------- -----------
Payroll and related $ 340 $1,114
Sales taxes payable 264 239
Professional fees 396 162
Interest 2,107 229
Restructuring 76 146
Other 783 645
------ ------
$3,966 $2,535
====== ======
Exhibit 99.1
Page 18 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
5. BUSINESS COMBINATIONS
ICG HOLDINGS, INC.
On July 25, 2001, Logistics.com entered into an Exchange Offer Agreement with
ICG (Exchange Offer) under which ICG agreed to exchange shares of ICG common
stock for certain outstanding shares of the Company's Common Stock, Series B-1
Convertible Preferred Stock and Series B-2 Units (which represent Series B-2
Convertible Preferred Stock and a portion of a Warrant to purchase shares of
Company Common Stock) at an exchange ratio per the Exchange Offer. On August 24,
2001, the Exchange Offer was completed resulting in the exchange of 6,155 shares
of Company Common Stock, 276 shares of Series B-1 Convertible Preferred Stock,
55 shares of Series B-2 Convertible Preferred Stock and Warrants to purchase
Logistics.com Common Stock for 2,661,823 shares of ICG common stock. Since the
exchange was between ICG and certain Logistics.com Stockholders, no
consideration was received by Logistics.com in this transaction. The shares of
ICG common stock had a value of $2,263,000 at the time of the transaction for
purchase accounting purposes. As a result of the completion of the Exchange
Offer, ICG ownership of Logistics.com increased from 38% to approximately 96%.
The purchase price includes the value of the ICG common stock of $2,263,000 and
the fair value of employee stock options granted to Logistics employees in
connection with the Exchange Offer of $1,193,000. This aggregate purchase price
of $3,456,000 was allocated to the tangible and intangible assets and
liabilities that ICG acquired based on the fair values at the transaction date.
Because ICG acquired an additional 58% interest as a result of the Exchange
Offer, purchase accounting is only applied to that percentage of assets that
were acquired. Intangible assets include completed technology, customer
relationships, trademarks and goodwill.
The following represents the allocation of the purchase price that has been
pushed down to Logistics.com, in thousands:
Current assets $ 1,955
Property, plant and equipment 2,540
Identified intangibles 1,876
Goodwill 2,449
Employee notes 282
Current liabilities (2,415)
Long term debt (3,231)
-------
$ 3,456
The following unaudited 2001 pro forma financial information presents the
results of operations of Logistics.com as if the acquisition had occurred on
January 1, 2001. The following unaudited pro forma financial information is not
necessarily indicative of the actual results that would have been achieved had
the acquisition actually been consummated as of January 1, 2001, nor is it
necessarily indicative of future results of operations, in thousands:
Revenues $ 8,355
Net Loss $36,889
Net Loss attributable
to common stockholders $37,374
Exhibit 99.1
Page 19 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
5. BUSINESS COMBINATIONS (continued)
SABRE, INC.
In January 2000, Logistics.com acquired certain assets and assumed certain
obligations under customer contracts of the Logistics Group of Sabre, Inc.
(Sabre Logistics Group) for approximately $4,000,000 in cash and the issuance of
a note payable in the amount of $5,500,000 (Note 6). The value of the
acquisition was $9,500,000 based on the fair value of consideration paid, plus
direct acquisition costs. The acquisition has been accounted for using the
purchase method. The purchase price was allocated among the identifiable
tangible and intangible assets based on the fair value of those assets
determined by an independent valuation. Tangible net assets acquired primarily
include accounts receivable and fixed assets. Intangible assets include
completed technology, workforce-in-place, tradenames, below market lease and
goodwill.
QUOTESHIP.COM
In August 2000, Logistics.com acquired all of the outstanding stock of
QuoteShip.com, Inc., a privately held developer of software solutions for
shippers and transportation providers for a total purchase price of $14,124,000
representing the issuance of common and preferred stock, warrants and stock
options valued at $13,921,000, based on the fair value of consideration paid,
plus direct acquisition costs of $203,000. The acquisition was accounted for
using the purchase method. The purchase price was allocated among the
identifiable tangible and intangible assets based on the fair value of those
assets determined by an independent valuation. Tangible net liabilities
acquired include cash, fixed assets, prepaid expenses and other assets,
accounts payable and accrued expenses. Intangible assets include completed
technology, workforce-in-place and goodwill.
Exhibit 99.1
Page 20 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
6. NOTES PAYABLE
In January 2000, Logistics.com issued a promissory note totaling $5,500,000 to
Sabre, Inc. in conjunction with the acquisition of certain assets of the Sabre
Logistics Group (see Note 5). Interest on the promissory note is payable
quarterly at the rate of 8% per annum and the note matures in June 2003. Upon
consummation of an initial public offering on Form S-1, or any equivalent
general registration form, the remaining outstanding principal and accrued but
unpaid interest is due immediately. The note is guaranteed by Logistics.com's
principal investor and is collateralized by all of the assets of Logistics.com.
This note was repaid in full with the proceeds from the sale of the Company to
Manhattan Associates (See Note 14).
On August 24, 2001, Logistics.com entered into a Note and Warrant Purchase
Agreement with ICG and Sands Brothers Capital (Sands Brothers). Under the terms
of the Note and Warrant Purchase Agreement, Logistics.com agreed to sell and ICG
and Sands Brothers agreed to purchase convertible promissory notes (the
Convertible Notes) totaling approximately $10.0 million in a series of closings
through January 2002. This agreement was later amended to allow for an
additional $5.0 million in borrowings. As of December 31, 2002 and 2001, the
Company received proceeds of $14,750,000 and $6,978,000 from convertible notes
payable.
These Convertible Notes accrue interest at 15% per annum and, if not converted
into equity, are due and payable on July 31, 2003. These Convertible Notes are
convertible into either shares of Series C Preferred Stock at a conversion rate
of $12,370.50 per share or the next series of stock issued in a preferred stock
offering with aggregate gross proceeds of at least $5.0 million at a conversion
rate equal to the per share offering price of the newly issued preferred stock.
In connection with the issuance of the Convertible Notes, Logistics.com issued
warrants to the holders of the Convertible Notes. The warrants are exercisable
into either shares of Series C Preferred Stock at a conversion rate of
$12,370.50 per share or the next series of stock issued in a preferred stock
offering with aggregate gross proceeds of at least $5.0 million at a conversion
rate equal to 80% of the per share offering price of the newly issued preferred
stock. The Company recorded the fair value of the warrants issued of $1,673,000
in 2002 and $1,502,000 in the period from August 25, 2001 to December 31, 2001
as a discount to the Convertible Notes.
Exhibit 99.1
Page 21 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
6. NOTES PAYABLE (CONTINUED)
The discount resulted in a lower effective conversion price for the Convertible
Notes. The lower effective conversion price resulted in a beneficial conversion
discount to the Convertible Notes of $1,673,000 in 2002 and $1,502,000 in the
period from August 25, 2001 to December 31, 2001. Logistics.com has recorded a
charge to interest expense of $3,343,000 in 2002 and $345,000 in the period from
August 25, 2001 to December 31, 2001 resulting from the amortization of the
discounts over the maturity period of the Convertible Notes, in accordance with
Emerging Issues Task Force (EITF) No. 27, Application of EITF Issue No. 98-5 to
Certain Convertible Instruments. As of December 31, 2002, the unamortized
warrant and beneficial conversion discount was $2,662,000.
7. CONVERTIBLE PREFERRED STOCK
At December 31, 2002, Logistics.com had outstanding Series A Redeemable
Convertible Preferred Stock (Series A preferred stock), Series B-1 Convertible
Preferred Stock (Series B-1 preferred stock), Series B-2 Convertible Preferred
Stock (Series B-2 preferred stock) and Series C Convertible Preferred Stock
(Series C preferred stock). The preferred stock have the following
characteristics:
VOTING
Holders of Series A, Series B-1, Series B-2 and Series C preferred stock are
entitled to the number of votes equal to the number of common shares into which
the shares of preferred stock may be converted.
DIVIDENDS
Holders of the Series A, Series B-1, Series B-2 and Series C preferred stock are
entitled to receive, out of funds legally available, cash dividends when and if
declared by the Board of Directors. Series A preferred stockholders are entitled
to receive dividends in the amount of $800.00 per share (as adjusted for any
stock dividends, combinations or splits with respect to such shares) per annum.
Series B-1 and Series B-2 preferred stockholders are entitled to receive
dividends at an annual rate of 8% of the respective original issue price of
Series B-1 and Series B-2 preferred stock (as adjusted for stock dividends,
combinations or splits with respect to such shares). The Series A, Series B-1
and Series B-2 dividends shall be noncumulative and payable in cash.
Exhibit 99.1
Page 22 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
7. CONVERTIBLE PREFERRED STOCK (CONTINUED)
Series C preferred stockholders are entitled to receive dividends at an annual
rate of 8% of the original issue price of the Series C preferred stock (as
adjusted for stock dividends, combinations or splits with respect to such
shares), plus the amount of any previously accrued but unpaid dividends. Such
dividends shall be cumulative and accrue from the date of issuance. In the event
of liquidation payments to holders of Series C preferred stock exceeding $37,100
per share as of the liquidation date, any accrued dividends shall not be paid.
No dividends or other distributions shall be made with respect to common stock,
until all declared dividends on the Series A, Series B-1, Series B-2 and Series
C preferred stock have been paid. Through December 31, 2002, no dividends have
been declared or paid by Logistics.com.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding-up of the affairs of
Logistics.com, including a merger or sale of substantially all of the assets of
Logistics.com, the holders of Series A, Series B-1, Series B-2 and Series C
preferred stock are entitled to receive, prior to and in preference to holders
of common stock, an amount equal to $10,000, $10,500 and $19,600 and $12,370.50
per share, respectively, plus any declared but unpaid dividends. After the
payment of all liquidation preferences to holders of all series of preferred
stock, the holders of Series A and Series C preferred stock are entitled to
participate with the holders of common stock in the distribution of any
remaining assets. If the remaining assets of Logistics.com are insufficient to
pay the full amounts entitled, the holders of Series A, Series B-1, Series B-2
and Series C preferred stock will share ratably in the distribution of the
remaining assets.
Upon the effective date of the ICG Exchange Offer Agreement, ICG became the
majority holder of Series B-1 and Series B-2 preferred stock. As a result of
ICG's ownership interest, they are able to cause a liquidation event in the form
of a merger or sale of the Company. Consequently, Logistics recorded an
accretion adjustment of $2,619,000 for Series B-1 and $2,330,000 for Series B-2
preferred stock to reflect the preferred stock at its liquidation value and
classify it outside of stockholders' equity in the accompanying consolidated
balance sheet for all periods after August 24, 2001.
Exhibit 99.1
Page 23 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
7. CONVERTIBLE PREFERRED STOCK (CONTINUED)
CONVERSION
Each Series A, Series B-1, Series B-2 and Series C preferred stock may be
converted into common stock at any time, at the option of the stockholder. The
ratio at which the preferred stock converts into common stock is determined by
dividing the original issuance price for the applicable series of preferred
stock by the preferred conversion price in effect at the time of the conversion.
The conversion price as of December 31, 2002 is $10,000 in the case of Series A
preferred stock, $10,050 in the case of Series B-1 preferred stock, $19,600 in
the case of Series B-2 preferred stock and $12,370.50 in the case of Series C
preferred stock. The Series A, Series B and Series C preferred-stock conversion
ratios are subject to varying antidilution adjustments, as defined in the
applicable agreements.
Series A preferred stock is automatically converted into common stock upon (i)
the closing of an initial public offering with net proceeds of at least $40
million and with a price per common share of at least $50,000; or (ii) the
conversion of 66.67% or more of the outstanding Series A preferred stock. Series
B-1 and Series B-2 preferred stock is automatically converted into common stock
upon the closing of an initial public offering with net proceeds of at least $15
million and with a price per common share of at least $39,200.
Series C preferred stock will be automatically converted into common stock upon
(i) the closing of an initial public offering with net proceeds of at least $40
million and with a price per common share of at least $43,297; and (ii) the
conversion of 66.67% or more of the outstanding Series A and Series C preferred
stock.
Exhibit 99.1
Page 24 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
7. CONVERTIBLE PREFERRED STOCK (CONTINUED)
REDEMPTION
Commencing at any time on or after five years from the original issue date and
upon written receipt by Logistics.com of not less than 66.67% of the outstanding
shares of Series A and Series C preferred stock, any or all of the Series A and
Series C preferred stock may be redeemed by the holders. 33.3% of the
outstanding Series A and Series C preferred stock may be redeemed no later than
sixty days after receipt of the written request, an additional 33.3% upon the
first anniversary of the first redemption date, and the remaining outstanding
Series A and Series C preferred stock upon the second anniversary of the first
redemption date. The redemption amount for Series A and Series C preferred stock
is $10,000 and $12,370.50 per share, respectively (as adjusted for any stock
dividends, combinations or splits with respect to such shares) plus all accrued
but unpaid dividends on Series A and Series C preferred stock. The carrying
value of the Series A and Series C preferred stock includes the accretion of
accrued but unpaid dividends, if any, so that the preferred stock is being
reported at its redemption value.
8. COMMON STOCK
As of December 31, 2002, Logistics.com has authorized 15,800 shares of common
stock and 6,600 shares of preferred stock with a $.00001 par value per share.
Each share of common stock entitles the holder to one vote on all matters
submitted to a vote of Logistics.com's stockholders. Common stockholders are
entitled to receive dividends, if any, as may be declared by the Board of
Directors, subject to the preferential dividend rights of the Series A, Series
B-1, Series B-2 and Series C preferred stockholders.
On May 23, 2002, Logistics effected a 1 for 5000 reverse stock split for all
classes of capital stock. The effects of the reverse split have been
retroactively reflected in the consolidated financial statements for all periods
presented.
Exhibit 99.1
Page 25 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
8. COMMON STOCK (CONTINUED)
NOTES RECEIVABLE FROM STOCKHOLDERS
Under the terms of certain stock option agreements, the option holders have the
right to exercise options prior to vesting subject to a repurchase right by
Logistics.com which lapses as the stock options vest. During the year ended
December 31, 2000, stock options for 500 shares of common stock were exercised
at $5,000 per share in exchange for four promissory notes totaling $2,500,000.
The notes accrued interest at rates of 6.22 - 6.8% per annum and all principal
and interest is due on the fifth anniversary of the promissory note date. The
notes and accrued interest were collateralized by the stock and the personal
assets of the stockholders. The notes were subject to variable accounting and,
as such during the period from January 1, 2001 to August 24, 2001, Logistics.com
recorded $127,000 in deferred compensation associated with the notes.
On April 27, 2001, the Series A and Series C preferred stockholders approved a
resolution to cancel the promissory notes outstanding to certain stockholders of
Logistics.com by repurchasing the restricted common stock for the stated amount
of the notes, plus accrued interest. As of the date of cancellation, no amount
of principal or accrued interest had been paid.
In addition, during the year ended December 31, 2000, Logistics.com issued a
note to an officer of Logistics.com in the amount of $500,000. This note is a
non interest-bearing note and is payable in equal monthly installments through
March 2030, provided that the officer remains an employee of Logistics.com
through that time. In the case of voluntary termination of employment, the loan
will be due and payable at the earlier of (i)12 months following termination or
(ii) 90 days following acceptance of full-time employment elsewhere. In the case
of involuntary termination, the loan will be due and payable 90 days following
such termination.
RESTRICTED STOCK
On August 25, 2001, certain employees of Logistics.com were granted an aggregate
of 1,295,000 restricted shares of ICG common stock. These shares vest over a
four-year period. On the date of grant, the shares had an aggregate value of
$1,139,600 which was recorded as deferred compensation and will be expensed over
the four year vesting period. During the period from August 25, 2001 to December
31, 2001 and the year ended December 31, 2002, Logistics recorded $90,000 and
$257,000 of stock based compensation expense, respectively.
Exhibit 99.1
Page 26 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
9. STOCK OPTION PLAN
In 2000, Logistics.com adopted the 2000 Stock Option Plan (the Logistics Plan).
The Logistics Plan provided for the grant of incentive stock options and
nonqualified stock options for the purchase of up to 1,750 shares of
Logistics.com's common stock by officers, employees, consultants and directors
of Logistics.com. The Board of Directors or the Chief Executive Officer, as
appropriate, determines the term of each option, the option exercise price, the
number of shares for which each option is granted and the rate at which each
option is exercisable. Nonqualified stock options may be granted to any officer,
employee, consultant or director. During 2001, the Logistics Plan and its
outstanding options were cancelled in connection with the Exchange Agreement
with ICG. All outstanding options under the Logistics Plan were also cancelled.
In connection with the acquisition of QuoteShip.com, Logistics.com assumed the
outstanding incentive and nonqualified stock options granted under the existing
1999 Stock Option and Stock Issuance Plan (the QuoteShip Plan). The stock
options under the QuoteShip Plan have a term not to exceed ten years and
generally vest over three years, subject to certain acceleration clauses upon a
change of control (including Logistics.com's acquisition of QuoteShip) for
certain employees, directors and advisors. Options held by certain employees who
were former employees of QuoteShip are subject to acceleration of vesting upon a
change of control (including Logistics.com's acquisition of QuoteShip) coupled
with a change in employment status. The QuoteShip Plan was not terminated in
connection with the Exchange Agreement and options issued under this Plan
remained outstanding until they expired during 2002.
Exhibit 99.1
Page 27 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
9. STOCK OPTION PLAN (CONTINUED)
Activity under the Logistics and Quoteship Plans was as follows:
NUMBER OF WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
------------------------------------------------------
Outstanding--January 1, 2001 1,302 $4,850 - 15,450
Granted 100 8,750
Exercised (5) 5,000
Cancelled (47) 5,000 - 15,450
----------------------------
Outstanding--August 24, 2001 1,350 4,850 - 15,450
Cancelled (924) 5,000 - 8,750
----------------------------
Outstanding--December 31, 2001 426 4,850 - 15,450
Expired (426) 4,850 - 15,450
============================
Outstanding and Exercisable--December 31, 2002 -- $ --
============================
Subsequent to the acquisition of Logistics.com by ICG on August 24, 2001,
employees of Logistics participated in ICG's 1999 Equity Compensation Plan (the
ICG Plan). The ICG Plan provides for the grant of incentive stock options and
nonqualified stock options for the purchase of up to 60.0 million shares of
ICG's common stock by officers, employees, consultants and directors of ICG. The
ICG Plan shall be administered by a committee as designated by the ICG Board of
Directors. This committee determines the term of each option, the option
exercise price, the number of shares for which each option is granted and the
rate at which each option is exercisable.
Activity under the ICG Plan was as follows (Option amounts are for the purchase
of ICG common stock):
Outstanding--August 25, 2001 -- $ --
Granted 2,806,500 0.65
Cancelled (247,000) 0.65
---------
Outstanding--December 31, 2001 2,559,500 0.65
Granted 193,500 0.30-0.86
Exercised
Cancelled (862,000) 0.30-0.65
=========
Outstanding--December 31, 2002 1,891,000 $0.30-0.86
=========
Exercisable at December 31, 2002 -- --
=========
Exhibit 99.1
Page 28 of 31
9. STOCK OPTION PLAN (Continued)
The following table summarizes information about stock options outstanding at
December 31, 2002 for the purchase of ICG common stock:
OPTIONS OUTSTANDING
----------------------------------------
WEIGHTED-AVERAGE
RANGE OF EXERCISE NUMBER REMAINING CONTRACTUAL
PRICE OUTSTANDING LIFE (IN YEARS)
- ------------------------------- ----------------- ----------------------
$0.30 95,000 9.4
0.65 1,758,500 8.6
0.86 37,500 9.2
--------
1,891,000
=========
10. 401(K) SAVINGS PLAN
In January 2000, Logistics.com established the Logistics.com, Inc. 401(k) plan
(the 401(k) Plan), a retirement savings plan under Section 401(k) of the
Internal Revenue Code. The 401(k) Plan covers substantially all employees of
Logistics.com and allows participants to defer a portion of their annual
compensation on a pre-tax basis. Company contributions to the 401(k) Plan may
be made at the discretion of the Board of Directors. Logistics.com has not made
any contributions to the 401(k) Plan through December 31, 2002.
11. RELATED PARTY TRANSACTIONS
Subsequent to the Exchange Offer, Logistics has paid certain operating expenses
to ICG including personnel and related costs. Logistics recorded general and
administrative expenses related to these related party transactions of $798,000
for the year ended December 31, 2002. No amounts were recorded for the period
from August 25, 2001 to December 31, 2001.
Exhibit 99.1
Page 29 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
12. INCOME TAXES
Logistics.com had no tax expense for any periods presented due to the operating
loss incurred. As of December 31, 2002, Logistics.com had net operating loss
carryforwards for federal income tax purposes of approximately $32.9 million,
which will expire between 2018 and 2022. Logistics.com also had research and
development tax credit carryforwards of approximately $508,000, which will
expire between 2021 and 2022.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes. Deferred tax assets consisted
of the following:
DECEMBER 31 DECEMBER 31
2002 2001
----------- ------------
Net operating loss carryforwards 12,491 7,533
Tax credit carryforwards 508 252
Accrued expense and deferred revenue 1,636 1,202
Depreciation 874 1,633
Allowance for doubtful accounts 202 196
Valuation allowance (15,711) (10,222)
----------- ------------
-- --
=========== =============
Logistics.com has recorded a full valuation allowance against its deferred tax
assets due to the uncertainty surrounding the realization of these assets as a
result of the losses incurred since inception.
Ownership changes resulting from Logistics.com's issuance of capital stock may
limit the amount of net operating loss carryforwards that can be utilized
annually to offset future taxable income. The amount of annual limitation is
determined based upon Logistics.com's value immediately prior to an ownership
change. Subsequent significant changes in ownership could further affect the
limitations in the future.
13. COMMITMENTS
Logistics.com leases its facility and certain office equipment under
noncancelable operating leases in excess of one year. Future minimum lease
payments due under noncancelable operating leases are $482,000 in 2003 and
$321,000 in 2004. Rent expense was $582,000 in 2002 and $167,000 for the period
from August 25, 2001 to December 31, 2001. Rent expense was $574,000 for the
period from January 1, 2001 to August 24, 2001.
Exhibit 99.1
Page 30 of 31
Logistics.com, Inc.
Notes to Consolidated Financial Statements (continued)
14. SUBSEQUENT EVENT
On December 31, 2002, Logistics.com sold substantially all of its assets to
Manhattan Associates, Inc. (Manhattan) for approximately $20.7 million in cash.
In connection with this transaction, Manhattan advanced a $2.8 million deposit
against the purchase price in December 2002, which is reflected on the
accompanying consolidated balance sheets at December 31, 2002 as deposits. The
effects of the closing of the acquisition are not included in the accompanying
operating results or statement of position at December 31, 2002.
Exhibit 99.1
Page 31 of 31