<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FIRST AMENDMENT TO
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MAY 19, 2000
IXL ENTERPRISES, INC.
(EXACT NAME OF REGISTRANT SPECIFIED IN CHARTER)
DELAWARE 000-26167 58-2234342
(STATE OF (COMMISSION (IRS EMPLOYER
INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
1900 EMERY STREET
ATLANTA, GA 30318
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(800) 573-5544
(REGISTRANT'S TELEPHONE NUMBER)
<PAGE> 2
TABLE OF CONTENTS
--------------------------------------------------------------------------------
8-K OTHER DOC
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
<TABLE>
<S> <C> <C>
(a) Financial Statements of Business Acquired
- Years ended December 31, 1999 and 1998 with
Report of Independent Auditors 3-20
- Unaudited quarters ended March 31, 2000 and 1999 21-25
(b) Unaudited Pro Forma Consolidated Financial Information 26-30
Signature 31
Exhibit 23.1 Consent of Ernst & Young LLP related to the Financial
Statements of Interactive Corporate
Communications, Inc. 32
</TABLE>
2
<PAGE> 3
Item 7 (a) Financial Statements of Business Acquired
Interactive Corporate Communications, Inc.
Financial Statements
Years ended December 31, 1999 and 1998
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors ............................................ 4
Balance Sheets ............................................................ 5
Statements of Operations .................................................. 6
Statements of Stockholders' Deficiency .................................... 7
Statements of Cash Flows .................................................. 8
Notes to Financial Statements ............................................. 9-20
</TABLE>
3
<PAGE> 4
Report of Independent Auditors
To the Board Members of
Interactive Corporate Communications, Inc.
We have audited the accompanying balance sheets of Interactive Corporate
Communications, Inc. (the "Company") as of December 31, 1999 and 1998, and the
related statements of operations, stockholders' deficiency and cash flows for
the years then ended. 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company at December 31,
1999 and 1998, and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States.
/s/ Ernst & Young LLP
New York, New York
January 21, 2000
4
<PAGE> 5
Interactive Corporate Communications, Inc.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 564,506 $ 146,568
Accounts receivable, net of allowance for doubtful accounts
of $101,000 at December 31, 1999 and $0 at December 31, 1998 553,507 101,577
Unbilled accounts receivable 311,435 --
Prepaid expenses and other current assets 333,415 --
-------------------------------
Total current assets 1,762,863 248,145
Deferred financing costs -- 91,500
Fixed assets, net of accumulated depreciation of $168,310
and $24,028, respectively 815,655 84,721
Other assets 121,828 13,374
-------------------------------
Total assets $ 2,700,346 $ 437,740
===============================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current liabilities:
Accounts payable $ 802,789 $ 77,788
Accrued expenses 478,759 --
Line of credit -- 24,920
Directors' loans 400,000 203,848
Deferred revenue 548,294 73,500
Current portion of capital lease obligations 246,092 25,415
Convertible note payable -- 300,000
-------------------------------
Total current liabilities 2,475,934 705,471
Capital lease obligations 308,751 64,106
Deferred rent 76,313 13,406
-------------------------------
Total liabilities 2,860,998 782,983
Commitments and contingencies
Stockholders' deficiency:
Series A convertible preferred stock, $.001 par value, 375,000 shares
authorized; no shares and 375,000 shares issued and outstanding at
December 31, 1999 and 1998, respectively, stated at liquidation value -- 375,000
Series B redeemable convertible preferred stock, $.001 par value, 375,000
shares authorized; no and 375,000 shares issued and outstanding at
December 31, 1999 and 1998, respectively, stated at redemption value -- 375,000
Common stock--$.001 par value, 30,000,000 shares authorized,
12,043,513 and 3,973,393 shares issued and outstanding at
December 31, 1999 and 1998, respectively 12,043 3,973
Additional paid-in capital 7,255,875 741,377
Accumulated deficit (7,428,570) (1,840,593)
-------------------------------
Total stockholders' deficiency (160,652) (345,243)
-------------------------------
Total liabilities and stockholders' deficiency $ 2,700,346 $ 437,740
===============================
</TABLE>
See accompanying notes.
5
<PAGE> 6
Interactive Corporate Communications, Inc.
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998
-----------------------------------
<S> <C> <C>
Revenues $ 1,628,809 $ 240,762
Selling, general and administrative expenses 7,046,838 1,153,501
Depreciation 144,282 20,650
-----------------------------------
Operating loss (5,562,311) (933,389)
Other income:
Interest income 97,780 3,236
Interest expense (123,124) (57,661)
-----------------------------------
Loss before provision for taxes and extraordinary item (5,587,655) (987,814)
Provision for taxes 322 325
-----------------------------------
Loss before extraordinary item (5,587,977) (988,139)
Extraordinary loss -- 275,298
-----------------------------------
Net loss $ (5,587,977) $ (1,263,437)
===================================
</TABLE>
See accompanying notes.
6
<PAGE> 7
Interactive Corporate Communications, Inc.
Statements of Stockholders' Deficiency
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
SERIES B
SERIES A CONVERTIBLE REDEEMABLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK
-------------------- ---------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 -- $ -- -- $ -- 3,225,933 $ 3,226
Sale of common stock -- -- -- -- 279,531 279
Conversion of note payable--related party -- -- -- -- 27,526 27
Issuance of common stock for services -- -- -- -- 29,835 30
Conversion of notes payable -- -- -- -- 410,568 411
Sale of Series A convertible preferred stock 375,000 375,000 -- -- -- --
Sale of Series B redeemable convertible
preferred stock -- -- 375,000 375,000 -- --
Issuance of warrants in connection with sale
of convertible notes -- -- -- -- -- --
Issuance of stock options to board members -- -- -- -- -- --
Net loss -- -- -- -- -- --
---------------------------------------------------------------------------
Balance at December 31, 1998 375,000 375,000 375,000 375,000 3,973,393 3,973
Issuance of common stock in private
placement and related warrants -- -- -- -- 6,394,900 6,395
Conversion of note to common stock -- -- -- -- 300,000 300
Conversion of Series A convertible preferred
stock to common stock (375,000) (375,000) -- -- 1,000,000 1,000
Conversion of Series B redeemable
convertible preferred stock to
common stock -- -- (375,000) (375,000) 375,000 375
Issuance of warrants in connection with note
payable -- -- -- -- -- --
Exercise of stock options -- -- -- -- 220 --
Deferred compensation
Net loss -- -- --
---------------------------------------------------------------------------
Balance at December 31, 1999 -- $ -- -- $ -- 12,043,513 $ 12,043
===========================================================================
<CAPTION>
ADDITIONAL
PAID-IN ACCUMULATED
CAPITAL DEFICIT TOTAL
---------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1997 $ 105,980 $ (577,156) $ (467,950)
Sale of common stock 165,405 -- 165,684
Conversion of note payable--related party 14,973 -- 15,000
Issuance of common stock for services 15,132 -- 15,162
Conversion of notes payable 274,887 -- 275,298
Sale of Series A convertible preferred stock -- -- 375,000
Sale of Series B redeemable convertible
preferred stock -- -- 375,000
Issuance of warrants in connection with sale
of convertible notes 102,000 -- 102,000
Issuance of stock options to board members 63,000 -- 63,000
Net loss -- (1,263,437) (1,263,437)
---------------------------------------------
Balance at December 31, 1998 741,377 (1,840,593) (345,243)
Issuance of common stock in private
placement and related warrants 5,458,443 -- 5,464,838
Conversion of note to common stock 299,700 -- 300,000
Conversion of Series A convertible preferred
stock to common stock 374,000 -- --
Conversion of Series B redeemable
convertible preferred stock to
common stock 374,625 -- --
Issuance of warrants in connection with note
payable 4,000 -- 4,000
Exercise of stock options 220 -- 220
Deferred compensation 3,510 -- 3,510
Net loss -- (5,587,977) (5,587,977)
---------------------------------------------
Balance at December 31, 1999 $ 7,255,875 $ (7,428,570) $ (160,652)
=============================================
</TABLE>
See accompanying notes.
7
<PAGE> 8
Interactive Corporate Communications, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998
-----------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (5,587,977) $ (1,263,437)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 144,282 20,650
Bad debt expense 100,751 --
Issuance of common stock and options for services -- 78,162
Extraordinary loss on prepayment of notes payable -- 275,298
Amortization of deferred financing costs 91,500 10,500
Amortization of deferred compensation 3,510
Changes in operating assets and liabilities:
Accounts receivable (552,681) (101,577)
Unbilled accounts receivable (311,435) --
Prepaid expenses and other (329,415) (13,374)
Other assets (108,454) --
Accounts payable 725,001 67,298
Accrued expenses 478,759 --
Accrued interest on convertible debt -- 25,298
Accrued interest on loans from directors (58,105) 21,863
Deferred revenue 474,794 59,700
Deferred rent 62,907 13,406
-----------------------------------
Net cash used in operating activities (4,866,563) (806,213)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (329,152) --
-----------------------------------
Net cash used in investing activities (329,152) --
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowing under line of credit -- 21,200
Repayments under line of credit (24,920) --
Borrowings under convertible note -- 300,000
Borrowings from officers 400,000 4,150
Principal payments to directors (145,743) (154,171)
Principal payments of capital lease obligations (80,742) (8,317)
Prepayment of penalty of convertible note payable -- (275,298)
Proceeds from issuance of common stock, net 5,464,838 165,684
Proceeds from issuance of Series A convertible preferred stock -- 375,000
Proceeds from issuance of Series B redeemable convertible preferred stock -- 375,000
Proceeds from notes payable--related party -- 15,000
Proceeds from the exercise of stock options 220 --
-----------------------------------
Net cash provided by financing activities 5,613,653 818,248
-----------------------------------
Net increase in cash and cash equivalents 417,938 12,035
Cash and cash equivalents at beginning of year 146,568 134,533
-----------------------------------
Cash and cash equivalents at end of year $ 564,506 $ 146,568
===================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND NONCASH
INVESTING AND FINANCING ACTIVITIES
Cash paid during the year for:
Interest paid $ 89,729 $ --
===================================
Income taxes paid $ 322 $ 325
===================================
Property acquired through capital leases $ 546,064 $ 97,838
===================================
Warrants issued for notes payable $ 4,000 $ 102,000
===================================
Conversion of preferred stock to common stock $ 750,000 $ --
===================================
Conversion of notes and accrued interest thereon to common stock $ 300,000 $ 290,298
===================================
</TABLE>
See accompanying notes to financial statements
8
<PAGE> 9
Interactive Corporate Communications, Inc.
Notes to Financial Statements
December 31, 1999
1. SUMMARY OF ACCOUNTING POLICIES
ORGANIZATION AND MERGER
Interactive Corporate Communications, Inc. (the "Company") was incorporated
under the laws of New York in August 1995. The Company develops, sells and
markets software to corporations that enables their employees to manage their
own benefits over an intranet, extranet or the Internet. The Company operates
under the name "iClick".
In April 2000, the Company entered into a definitive agreement to merge with
CFN, Inc. whereby all of the Company's common stock will be exchanged for shares
of CFN, Inc.'s common stock. The Company expects the merger to be completed in
May 2000.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Should the merger with CFN, Inc. not
be consummated, the Company would require additional financing to continue as a
going concern.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Substantially all of the
Company's cash and cash equivalents are held at one financial institution.
FIXED ASSETS
Fixed assets are stated at cost and depreciated over their estimated useful
lives by the straight-line method for financial reporting and by accelerated
methods for income tax purposes.
Expenditures for maintenance and repairs are expensed as incurred
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, a loss is recognized for the difference between the fair
value and carrying value of the asset.
9
<PAGE> 10
Interactive Corporate Communications, Inc.
Notes to Financial Statements (continued)
1. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
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 disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash, cash equivalents and trade account
receivable. Concentrations credit risk with respect to trade receivables are
limited due to the performance by the Company of ongoing customer credit
evaluations. Management regularly monitors the creditworthiness of its customers
and believes that it has adequately provided for any exposure to potential
credit losses.
The Company maintains cash balances in bank accounts at institutions insured by
the Federal Deposit Insurance Corporation up to $100,000. One of the Company's
accounts is in excess of $100,000.
REVENUE RECOGNITION
Product license revenue is recognized after delivery of the product, and when
the collection of the resulting receivables is reasonably assured. Maintenance
revenue, whether bundled with product license or priced separately, is
recognized ratably over the maintenance period. Maintenance agreements with
clients are typically one year in duration. Installation revenue is recognized
on a completed contract basis.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), prescribes accounting and reporting standards for
all stock-based compensation plans, including employee stock options, restricted
stock, employee stock
10
<PAGE> 11
Interactive Corporate Communications, Inc.
Notes to Financial Statements (continued)
1. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
purchase plans and stock appreciation rights. SFAS 123 requires compensation
expense to be recorded (i) using the fair value method or (ii) using existing
accounting rules prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), and related
interpretations with pro forma disclosure of what net income (loss) would have
been had the Company adopted the fair value method. The Company accounts for its
stock-based compensation plans in accordance with the provisions of APB 25.
SOFTWARE DEVELOPMENT COSTS
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for Costs of Computer Software to be Sold, Leased or Otherwise
Marketed," the Company capitalizes costs incurred to develop new software
products upon determination that technological feasibility has been established
for the product. Costs incurred prior to the establishment of technological
feasibility are charged to expense. All software development costs incurred to
date have been expensed by the Company.
RESEARCH AND DEVELOPMENT COSTS
The Company expenses research and development costs as incurred. Selling,
general and administrative expenses include research and development costs of
$1,326,062 and $445,406 for the years ended December 31, 1999 and 1998,
respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been determined using
available market information or other appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop estimates of fair value. Consequently, the estimates are not necessarily
indicative of the amounts that could be realized or would be paid in a current
market exchange.
For notes payable which are short term or have variable interest rates, fair
values are based on carrying values. As the notes payable at December 31, 1999
and 1998 were short term, the fair value of the notes payable approximates their
carrying value, due to their short term nature.
11
<PAGE> 12
Interactive Corporate Communications, Inc.
Notes to Financial Statements (continued)
1. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
In June 1998, the Financial Accounting Standards Boards issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133").
This statement establishes accounting and reporting standards requiring that
every derivative instrument (including certain derivative instruments embedded
in other contracts) be recorded on the balance sheet as either an asset or
liability measured at its fair value. This statement requires that changes in
the derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows derivative's gains and losses to offset related results on the hedge item
in the income statement, and requires a company to formally document, designate
and asses the effectiveness of transactions that receive hedge accounting. This
statement is effective for fiscal years beginning after June 15, 2000 and cannot
be applied retroactively. The Company believes that the adoption of this
standard will not have a material effect on the Company's consolidated results
of operations or financial position due to their limited use of derivatives.
2. FIXED ASSETS
Major classes of property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31 ESTIMATED
1999 1998 USEFUL LIVES
--------- ----------- ------------
<S> <C> <C> <C>
Furniture and fixtures $ 246,577 $ 2,878 7 years
Equipment 559,059 105,871 3 years
Software 178,329 -- 3 years
--------- ---------
983,965 108,749
Less accumulated depreciation and
amortization (168,310) (24,028)
--------- ---------
$ 815,655 $ 84,721
========= =========
</TABLE>
Fixed assets under capital leases aggregate approximately $643,900 and $97,800
at December 31, 1999 and 1998, respectively. The accumulated amortization
related to these assets under capital leases is approximately $69,500 at
December 31, 1999 and $16,300 at December 31, 1998.
12
<PAGE> 13
Interactive Corporate Communications, Inc.
Notes to Financial Statements (continued)
3. LINE OF CREDIT
At December 31, 1998, the Company maintained a line of credit with a bank under
which it could borrow up to $25,000 at the bank's prime rate plus 1%. As of
December 31, 1998, the Company had $24,920 outstanding under such line. This
line of credit was not renewed in 1999.
4. CONVERTIBLE NOTES PAYABLE
In October 1997, the Company issued $250,000 in convertible notes payable (the
"Convertible Notes"). The Convertible Notes bore interest at 12% per annum and
were due 36 months from the date of issuance.
In accordance with the terms of the Convertible Notes, upon the occurrence of
certain events, the holders of the Convertible Notes were entitled to shares of
common stock as well as repayment of the principal and interest due under the
Convertible Notes. In August 1998, such events occurred and the Convertible Note
holders received 410,568 shares of Company common stock and the principal and
interest due under the Convertible Notes of approximately $275,000. The Company
recorded such payment as an extraordinary loss on the early extinguishment of
debt.
On December 4, 1998, the Company issued $300,000 in convertible notes payable to
preferred stockholders of the Company (the "December Notes"). The December Notes
bore interest at 8% per annum and were due on December 4, 1999. In accordance
with the terms of the December Notes, if the Company raised $2.5 million or more
through the sale of its common stock, the December Notes were automatically
converted into shares of common stock, at an equivalent price per share. In the
first quarter of 1999, in conjunction with the sale of common stock, (see Note
6) the December Notes were converted into 300,000 shares of common stock. In
connection with the issuance of the December Notes, the December Note holders
also received warrants to purchase 300,000 shares of the Company's common stock
at an exercise price of $1 per share which are exercisable for the longer of a
seven-year period from the date of issuance or three years from an initial
public offering occurring in such seven-year period. The Company recorded
$102,000 in deferred financing costs in connection with the issuance of such
warrants.
13
<PAGE> 14
Interactive Corporate Communications, Inc.
Notes to Financial Statements (continued)
5. LOANS FROM DIRECTORS
At December 31, 1998 the Company had loans payable to three of its directors,
who are also common stockholders, which bore interest at 8%. During 1999 the
principal and interest on these loans were paid in full.
In December 1999, the Company issued promissory notes in the amount of $100,000
each to four of its directors. These notes bear interest at 12% and have payment
terms whereby the loans plus accrued interest will be repaid in June 2000. In
conjunction with these loans, the Company issued warrants to each of the holders
of the notes to purchase 50,000 shares of the Company's common stock at an
exercise price of $4.00 per share, which are exercisable for a period which
expires on the latter of the seventh anniversary of the Company's next private
equity financing yielding $2.5 million or more or three years from an initial
public offering in such seven year period. The warrants were valued at $4,000,
which is being amortized over the term of the loans.
6. STOCKHOLDERS' DEFICIENCY
PREFERRED STOCK
In August 1998, the Company issued 750,000 shares of convertible preferred stock
at $1 per share of which 375,000 shares had been designated Series A and 375,000
shares were Series B (collectively referred to as the "Preferred Shares").
The Preferred Shares had preference of $1 per share in the event of liquidation,
as defined. The Series A Preferred Shares were convertible into the Company's
common stock at any time by the holder and would automatically be converted if
the Company completed an equity financing in excess of $2.0 million. The Series
B Preferred Shares were convertible into the Company's common stock at any time
by the option of the holder and automatically upon the closing of either an
initial public offering of the Company's common stock or an equity financing of
$4.5 million or more. Subject to certain anti-dilution rights, the Series A and
Series B Preferred Shares were convertible into common stock on a .375 for 1 and
1 for 1 basis, respectively.
The Series B Preferred Shares were mandatorily redeemable at the option of the
holder in August 2003 or earlier if the Company completes an equity financing in
excess of $3.0 million. The holders of the Preferred Shares were entitled to six
votes for every share of
14
<PAGE> 15
Interactive Corporate Communications, Inc.
Notes to Financial Statements (continued)
6. STOCKHOLDERS' DEFICIENCY (CONTINUED)
common stock that the Preferred Shares were convertible into and had the right
to approve certain transactions.
In the first quarter of 1999, the Company sold an aggregate of 6,394,900 shares
of common stock at $1 per share. In addition all of the Series A, Series B, and
December Notes converted into 1,675,000 shares of common stock in the first
quarter of 1999. The Company incurred approximately $930,000 in expenses in
connection with such sale of common stock. After conversion, the Company has no
shares of preferred stock issued and outstanding.
In connection with the sale of common stock, the Company issued to the placement
agent warrants to purchase 1,338,980 shares of common stock with an exercise
price of $1.00 per share. The warrants expire on the later of February 2006 or
three years from an initial public offering of the Company's common stock if the
initial public offering occurs prior to February 2006.
RECAPITALIZATION
In August 1998, the Company split its common stock on a 23,000 for 1 basis. The
accompanying financial statements give retroactive effect to such split.
ISSUANCE OF COMMON STOCK
During 1998, the Company issued 29,835 shares of its common stock in exchange
for services valued at $15,162. In addition, during 1998, the Company sold
279,531 shares of its common stock for cash of $165,684.
STOCK OPTIONS
The Company initially reserved 207,000 shares of its common stock for issuance
in connection with stock options granted to employees and directors.
In addition, the Company has adopted a 1998 Performance Equity Plan which
authorizes the granting of incentive awards of up to 2,000,000 shares of common
stock to directors, employees, independent contractors and consultants,
consisting of stock options, stock appreciation rights, restricted stock,
deferred stock and other stock-based awards.
15
<PAGE> 16
Interactive Corporate Communications, Inc.
Notes to Financial Statements (continued)
6. STOCKHOLDERS' DEFICIENCY (CONTINUED)
A summary of stock option activity of the Company is as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
----------- ----------------
<S> <C> <C>
Outstanding at December 31, 1997 207,000 $0.34
Granted 355,000 1.00
----------
Outstanding at December 31, 1998 562,000 --
Granted 1,557,500 1.00
Exercised (220) 1.00
Cancelled (33,780) 1.00
----------
Outstanding at December 31, 1999 2,085,500
==========
</TABLE>
The following table summarizes the status of the stock options outstanding and
exercisable at December 31, 1999:
<TABLE>
<CAPTION>
STOCK OPTIONS OUTSTANDING
-------------------------
WEIGHTED- NUMBER OF
REMAINING STOCK
EXERCISE NUMBER CONTRACTUAL OPTIONS
PRICES OF OPTIONS LIFE EXERCISABLE
-------- ---------- ----------- -----------
<S> <C> <C> <C>
$ 0.34 207,000 8.5 184,000
$ 1.00 1,878,500 9.5 564,500
---------- --------
2,085,500 748,500
========== ========
</TABLE>
At December 31, 1999 and 1998 748,500 and 167,500 options, respectively were
exercisable with weighted average exercise prices of $0.84 and $0.72,
respectively.
16
<PAGE> 17
Interactive Corporate Communications, Inc.
Notes to Financial Statements (continued)
6. STOCKHOLDERS' DEFICIENCY (CONTINUED)
The weighted average fair value of options granted was $0.22 for the year ended
December 31, 1999. Pro forma information regarding net loss and loss per share
has been determined as if the Company had accounted for employee stock options
under the fair value method. The fair value of the stock options was estimated
at the date of grant using the Black-Scholes option pricing model with the
following assumptions for vested and nonvested options:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
---------- --------
<S> <C> <C>
ASSUMPTIONS
Average risk-free interest rate 4.57%-6.46% 6-6.4%
Dividend yield - -
Average life 5 YEARS 5 years
Expected volatility - -
</TABLE>
Because the Company's employee stock options have characteristics significantly
different from those of publicly 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 employee stock options.
Had compensation cost for the Company's option agreements been determined based
on the fair value of its options at the grant dates, as prescribed by SFAS 123,
the Company's net loss would not have been materially different from amounts
reported for the year ended December 31, 1998. For the year ended December 31,
1999, pro forma net loss would have been approximately $5,667,000.
7. INCOME TAXES
The Company previously filed federal and state income tax returns under
Subchapter S of the Internal Revenue Code in which its income was previously
reportable by and taxed to its stockholders. The Subchapter S status was
terminated effective September 1998.
17
<PAGE> 18
Interactive Corporate Communications, Inc.
Notes to Financial Statements (continued)
7. INCOME TAXES (CONTINUED)
The Company accounts for income taxes using the liability method and deferred
taxes are recognized in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Deferred income taxes result
from differences between the financial statements and tax bases of certain
assets. A valuation allowance has been recognized to fully offset a deferred tax
asset relating to net operating loss carryforwards.
At December 31, 1999, the Company had net operating loss carryforwards of
approximately $5.6 million expiring in 2019.
8. LETTERS OF CREDIT
Outstanding letters of credit issued as security as required by one vendors
amounted to approximately $355,000 at December 31, 1999. Such amounts were
secured by assets under capital leases.
9. COMMITMENTS
The Company has entered into various capital leases with original terms of
thirty-six months or less.
Future annual minimum lease payments for the capitalized leases are as follows:
<TABLE>
<S> <C>
Year ending December 31:
2000 $ 254,851
2001 236,747
2002 147,057
----------
Total minimum future rental payments 638,655
Amount representing interest at 10.8% (83,812)
----------
Less: capital lease obligation current (246,092)
----------
Capital lease obligation -- non current $ 308,751
==========
</TABLE>
18
<PAGE> 19
Interactive Corporate Communications, Inc.
Notes to Financial Statements (continued)
9. COMMITMENTS (CONTINUED)
The Company is obligated to make payments under noncancelable operating leases
through 2004. The minimum annual rental commitments under these noncancelable
operating leases are as follows:
<TABLE>
<S> <C>
Year ending December 31:
2000 $ 257,000
2001 416,000
2002 418,000
2003 425,000
2004 425,000
Thereafter 761,000
-----------
$ 2,702,000
===========
</TABLE>
Total rent expense charged to operations for the years ended December 31, 1999
and 1998 was approximately $144,000 and $24,500, respectively.
10. CREDIT RISK
Four customers represented approximately 78% of accounts receivable at December
31, 1999 Four customers represented 60% of total revenues for the year ended
December 31, 1999. Three customers represented approximately 97% of accounts
receivable at December 31, 1998 and two of these customers represented
approximately 83% of total revenues for the year ended December 31, 1998.
11. SUBSEQUENT EVENT
In the first quarter of 2000, the Company issued promissory notes in the amount
of $1,035,000. These promissory notes bear interest at 12% and are payable in
2000. In conjunction with these notes, the Company issued warrants to purchase
an aggregate of 467,500 shares of its common stock at $4.00 per share, which are
exercisable for a period which expires on the seventh anniversary of the closing
of the Company's next private equity financing yielding $2.5 million or more or
three years from an initial public offering in such seven year period.
19
<PAGE> 20
Interactive Corporate Communications, Inc.
Notes to Financial Statements (continued)
11. SUBSEQUENT EVENT (CONTINUED)
The Company also issued a promissory note in the amount of $400,000 which bears
interest at 9% and is due in March 2001. In conjunction with this note, the
Company issued a warrant to purchase 80,000 shares of its common stock at $5.00
per share which is exercisable for a seven-year period from the date of
issuance.
12 YEAR 2000 ISSUE (UNAUDITED)
The Company has not incurred any significant costs specifically attributable to
resolving the Year 2000 issue. The Company has not encountered any Year 2000
issues or other disruptions in its computer applications as a result of the Year
2000 issue.
20
<PAGE> 21
INTERACTIVE CORPORATE COMMUNICATIONS, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF
MARCH 31, DECEMBER 31,
2000 1999
------------- ----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 345 $ 565
Accounts receivable, net 360 554
Unbilled accounts receivable 419 311
Prepaid expense and other 465 333
-------------------------
Total current assets 1,589 1,763
Fixed assets, net 840 815
Other noncurrent assets 272 122
-------------------------
Total assets $ 2,701 $ 2,700
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 804 $ 803
Accrued expenses 456 479
Deferred revenue 692 548
Directors' and employees' loans 1,835 400
Notes payable 1,000 --
Current portion of capital lease obligations 202 246
-------------------------
Total current liabilities 4,989 2,476
Deferred rent 158 76
Capital lease obligations 322 309
-------------------------
Total liabilities 5,469 2,861
-------------------------
Common stock 12 12
Additional paid-in capital 7,256 7,256
Accumulated deficit (10,036) (7,429)
-------------------------
Total stockholders' deficit (2,768) (161)
-------------------------
Total liabilities & stockholders' deficit $ 2,701 $ 2,700
=========================
</TABLE>
See accompanying notes.
21
<PAGE> 22
INTERACTIVE CORPORATE COMMUNICATIONS, INC.
Statement of Operations
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
2000 1999
------- -------
<S> <C> <C>
Revenues $ 198 $ 256
Selling, general and administrative expenses 2,691 1,005
Depreciation and amortization 70 1
---------------------------
Operating loss (2,563) (750)
Other income:
Interest income 4 5
Interest expense (48) (3)
---------------------------
Loss before provision for taxes (2,607) (748)
Provision for taxes -- --
---------------------------
Net loss $(2,607) $ (748)
===========================
</TABLE>
See accompanying notes
22
<PAGE> 23
INTERACTIVE CORPORATE COMMUNICATIONS, INC.
Statements of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
2000 1999
------- -------
<S> <C> <C>
CASH FLOWS USED FOR OPERATING ACTIVITIES
Net loss (2,607) (748)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 70 1
Bad debt expense (22) --
Amortization of deferred financing costs 92
Changes in operating assets and liabilities:
Accounts receivable 216 (62)
Unbilled accounts receivable (107) (83)
Prepaid expenses and other assets (282) (18)
Accounts payable and accrued expenses 59 155
Deferred revenue 144 3
------- -------
Net cash used for operating activities (2,529) (660)
------- -------
CASH FLOWS USED FOR INVESTING ACTIVITIES
Purchases of property and equipment (54) (14)
------- -------
Net cash used for investing activities (54) (14)
------- -------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Principal payments on capital lease obligations (72) (17)
Borrowings from officers and employees 1,435 --
Proceeds from issuance of common stock, net -- 5,465
Proceeds from notes payable 1,000 --
Principal payments to directors -- (138)
Repayments on line of credit -- (25)
------- -------
Net cash provided by financing activities 2,363 5,285
------- -------
Net (decrease) increase in cash and cash equivalents (220) 4,611
Cash at beginning of period 565 146
------- -------
Cash at end of period $ 345 $ 4,757
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND NONCASH INVESTING AND
FINANCING ACTIVITIES Cash paid during the period for:
Interest paid 15 3
Property acquired through capital leases 41 41
Conversion of preferred stock to common stock -- 750
Conversion of notes to common stock -- 300
</TABLE>
See accompanying notes
23
<PAGE> 24
INTERACTIVE CORPORATE COMMUNICATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND MERGER
Interactive Corporate Communications, Inc. (the "Company") was incorporated
under the laws of New York in August 1995. The Company develops, sells and
markets software to corporations that enables their employees to manage their
own benefits over an intranet, extranet or the Internet. The Company operates
under the name "iClick".
In April 2000, the Company entered into a definitive agreement to be purchased
by Consumer Financial Network, Inc. ("CFN") whereby all of the Company's common
stock was exchanged for shares of CFN, Inc.'s common stock. The acquisition by
CFN was completed in May 2000.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission regarding interim financial reporting. Accordingly, they do not
contain all of the information and footnotes required by generally accepted
accounting principles for complete financial statements and should be read in
conjunction with the audited financial statements and notes thereto included
elsewhere in this document. In the opinion of management, the accompanying
unaudited financial statements reflect all adjustments (consisting of only
normal recurring adjustments) considered necessary for a fair presentation of
the Company's financial condition as of March 31, 2000, the results of its
operations for the three month periods ended March 31, 2000 and 1999 and its
cash flows for the three month periods ended March 31, 2000 and 1999. Operating
results for the three month period ended March 31, 2000 are not necessarily
indicative of the operating results that may be expected for the year ending
December 31, 2000.
3. DEBT
In the first quarter of 2000, the Company issued promissory notes in the amount
of $1,035,000. These promissory notes had interest rates at 12% and were payable
in 2000. In conjunction with these notes, the Company issued warrants to
purchase an aggregate of 467,500 shares of its common stock at $4.00 per share,
which were exercisable for a period which expired on the seventh anniversary of
the closing of the Company's next private equity financing yielding $2.5 million
or more or three years from the date of an initial public offering within the
seven year period. The Company also issued a promissory note in the amount of
$400,000 which bears interest at 9% and was due in March 2001. In conjunction
with this note, the Company issued a warrant to purchase 80,000 shares of its
common stock
24
<PAGE> 25
Interactive Corporate Communications, Inc.
Notes to Condensed Financial Statements (Continued)
at $5.00 per share which was exercisable for a seven-year period from the date
of issuance. Upon the acquisition of the Company by CFN in May 2000, this
outstanding debt was repaid by CFN and the related warrant agreements were
converted to equivalent warrants in CFN.
During the first quarter, CFN lent the Company $1.0 million under a promissory
note.
4. SUBSEQUENT EVENT
In May 2000 the Company was acquired by CFN by exchanging the then outstanding
equity interests of iClick for approximately 16,688,472 shares of common stock
of CFN and warrants to purchase approximately 3,412,980 shares of CFN common
stock. In addition, the outstanding Directors' and Employees' loans of
approximately $1.8 million plus accrued interest were also repaid by CFN at
closing.
25
<PAGE> 26
(b) Unaudited Pro Forma Consolidated Financial Information.
We adjust our historical condensed consolidated statement of operations
for the year ended December 31, 1999 and the three months ended March 31, 2000
to arrive at the unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 1999 and the three months ended March
31, 2000 to reflect the results of our acquisition of Interactive Corporate
Communications, Inc. ("ICC") as if the acquisition occurred on January 1, 1999.
We adjust our historical condensed consolidated balance sheet as of
March 31, 2000 to arrive at the unaudited pro forma condensed consolidated
balance sheet as of March 31, 2000 as if the closing of our acquisition of ICC
occurred on March 31, 2000.
The acquisition of ICC has been accounted for using the purchase method
of accounting and accordingly, the purchase price has been allocated to the
tangible and identifiable intangible assets acquired and liabilities assumed on
the basis of their fair values on the acquisition date. The historical carrying
amounts of identified net tangible assets, including cash, accounts receivable,
property and equipment, and accounts payable, approximated their fair values.
Identifiable intangible assets and the purchase price in excess of identified
tangible and intangible net assets acquired have been allocated to goodwill and
are being amortized over their estimated useful lives. Identifiable intangible
assets consist primarily of acquired technology and assembled workforce, which
are both being amortized over a period of three years. Goodwill is being
amortized over five years.
The fair value for accounting purposes of the common stock issued as
consideration for the acquisition of ICC was determined based upon an
independent appraisal of the common stock of Consumer Financial Network ("CFN").
The pro forma condensed consolidated statements of operations are not
necessarily indicative of the results of operations that would have been
achieved had the transaction occurred on January 1, 1999 and should not be
construed as being representative of future results of operations.
- 26 -
<PAGE> 27
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
for the Year Ended December 31, 1999
<TABLE>
<CAPTION>
HISTORICAL ICC PRO FORMA
COMPANY ACQUISITION (1) ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Professional services revenue ....................................... $ 216,493 $ -- $ -- $ 216,493
Other revenue ....................................................... 1,850 1,629 -- 3,479
--------- --------- --------- ---------
Net revenue ..................................... 218,343 1,629 -- 219,972
Professional services expense ....................................... 106,976 -- -- 106,976
Sales and marketing expenses ........................................ 54,130 2,417 -- 56,547
General and administrative expenses ................................. 93,863 4,500 -- 98,363
--------- --------- --------- ---------
Operating loss before stock compensation, depreciation,
and amortization .................................................. (36,626) (5,288) -- (41,914)
Stock-based compensation ............................................ 4,920 -- -- 4,920
Depreciation ........................................................ 12,857 144 -- 13,001
Amortization ........................................................ 18,174 130 20,600(2) 38,904
--------- --------- --------- ---------
Total operating expenses ............................. 290,920 7,191 20,600 318,711
Loss from operations ................................. (72,577) (5,562) (20,600) (98,739)
Other (expense) income, net ......................................... (161) -- 9,480(3) 9,319
Loss on equity investment ........................................... (65) -- -- (65)
Interest income ..................................................... 3,577 97 -- 3,674
Interest expense .................................................... (987) (123) -- (1,110)
--------- --------- --------- ---------
Loss before income taxes ........................ (70,213) (5,588) (11,120) (86,921)
Income tax expense .................................................. -- -- -- --
--------- --------- --------- ---------
Net loss ........................................ (70,213) (5,588) (11,120) (86,921)
Dividends and accretion on mandatorily redeemable preferred stock ... (20,966) -- -- (20,966)
--------- --------- --------- ---------
Net loss available to common stockholders ....... (91,179) $ (5,588) $ (11,120) (107,887)
========= ========= ========= =========
Basic and diluted net loss per common share ......................... $ (2.08) $ (2.47)
========= =========
Weighted average common shares outstanding............................ 43,747 43,747
</TABLE>
27
<PAGE> 28
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
HISTORICAL ICC PRO FORMA
COMPANY ACQUISITION (4) ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Professional services revenue ......................................... $ 102,287 $ -- $ -- $ 102,287
Other revenue ......................................................... 676 198 -- 874
--------- -------- ------- ---------
Net revenue ....................................... 102,963 198 -- 103,161
Professional services expense ......................................... 48,253 -- -- 48,253
Sales and marketing expenses .......................................... 19,141 937 -- 20,078
General and administrative expenses ................................... 38,654 1,754 -- 40,408
--------- -------- ------- ---------
Operating loss before stock compensation, depreciation and
amortization ........................................................ (3,085) (2,493) -- (5,578)
Stock-based compensation .............................................. 3,097 -- -- 3,097
Depreciation .......................................................... 5,022 55 -- 5,077
Amortization .......................................................... 11,404 15 5,150 (2) 16,569
--------- -------- ------- ---------
Total operating expenses ............................... 125,571 2,761 5,150 133,482
Loss from operations ................................... (22,608) (2,563) (5,150) (30,321)
Other (expense) income, net ........................................... (183) -- 2,733 (3) 2,550
Interest income ....................................................... 2,648 4 -- 2,652
Interest expense ...................................................... (483) (48) -- (531)
--------- -------- ------- ---------
Loss before income taxes .......................... (20,626) (2,607) (2,417) (25,650)
Income tax expense .................................................... -- -- -- --
--------- -------- ------- ---------
Net loss .......................................... (20,626) (2,607) (2,417) (25,650)
Dividends and accretion on mandatorily redeemable preferred stock ..... (452) -- -- (452)
--------- -------- ------- ---------
Net loss available to common stockholders ......... (21,078) $ (2,607) $(2,417) (26,102)
========= ======== ======= =========
Basic and diluted net loss per common share ........................... $ (0.29) $ (0.36)
========= =========
Weighted average common shares outstanding ............................ 71,877 71,877
</TABLE>
28
<PAGE> 29
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 2000
<TABLE>
<CAPTION>
HISTORICAL ICC PRO FORMA
COMPANY ACQUISITION(5) ADJUSTMENTS PRO FORMA
---------- ----------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents ...................................................... $221,533 $ 345 $ (4,898)(6) $216,980
Marketable securities .......................................................... 34,814 -- -- 34,814
Accounts receivable, net ....................................................... 79,145 360 -- 79,505
Unbilled revenues .............................................................. 29,866 419 -- 30,285
Prepaid expenses and other assets .............................................. 8,609 465 (1,000)(7) 8,074
-------- ------- --------- --------
Total current assets ............................................ 373,967 1,589 (5,898) 369,658
Property and equipment, net .................................................... 61,576 840 -- 62,416
Intangible assets, net ......................................................... 167,308 94,684 (8) 261,992
Other non-current assets ....................................................... 8,144 272 -- 8,416
-------- ------- --------- --------
Total assets .................................................... $610,995 $ 2,701 $ 88,786 $702,482
======== ======= ========= ========
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY:
Accounts payable ............................................................... $ 8,163 $ 804 $ -- $ 8,967
Deferred revenues .............................................................. 13,839 692 -- 14,531
Accrued liabilities ............................................................ 31,375 456 -- 31,831
Current portion of long-term debt .............................................. 578 3,037 (2,904)(9) 711
-------- ------- --------- --------
Total current liabilities ....................................... 53,955 4,989 (2,904) 56,040
Minority interest in subsidiary ................................................ -- -- 29,809 (10) 29,809
Long-term debt ................................................................. 744 480 -- 1,224
-------- ------- --------- --------
Total liabilities ............................................... 54,699 5,469 26,905 87,073
-------- ------- --------- --------
Mandatorily redeemable preferred stock of subsidiary ........................... 176,311 -- 176,311
Stockholders' equity (deficit) ................................................. 379,985 (2,768) 61,881 (6) 439,098
-------- ------- --------- --------
Total liabilities, mandatorily redeemable preferred stock and
stockholders' equity ....................................... $610,995 $ 2,701 $ 88,786 $ 702,482
======== ======= ========= ========
</TABLE>
29
<PAGE> 30
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following adjustments were applied to iXL's Consolidated Financial
Statements and the financial data of Interactive Corporate Communications, Inc.
("ICC") to arrive at the unaudited Pro Forma Condensed Consolidated Financial
Information.
(1) iXL's subsidiary Consumer Financial Network, Inc. ("CFN") acquired ICC
by issuing CFN's shares of common stock, options, and warrants (note
6). To reflect the historical results of operations for ICC for the
year ended December 31, 1999.
(2) To record amortization expense related to the identifiable intangible
assets and goodwill acquired in connection with the acquisition of ICC
as though the acquisition had occurred on January 1, 1999. Such amounts
are amortized over the estimated useful life of each asset.
Identifiable intangible assets consist primarily of acquired technology
and assembled workforce, which are both being amortized over a period
of three years. Goodwill is being amortized over five years.
(3) As a result of the acquisition of ICC, iXL's ownership in CFN
was reduced to an 85% interest in CFN's common stock. To reflect the
minority interest in the pro forma operating results of CFN.
(4) To reflect the historical results of operations for ICC for the three
months ended March 31, 2000.
(5) Represents the balance sheet of ICC as of March 31, 2000.
(6) Represents the elimination of ICC's stockholders equity, recording of
minority interest (note 10), and the recording of the issuance of
16,670,957 shares of CFN's common stock, 4,691,826 options, and
3,413,980 warrants in connection with the acquisition of ICC. The
purchase price for ICC was computed as follows:
<TABLE>
<S> <C>
Value of shares of common stock issued in the acquisition ............ $63,850,000 (a)
Value of options issued in the acquisition ........................... 15,342,000 (b)
Value of warrant issued in the acquisition ........................... 9,730,000 (c)
Cash paid in conjunction with acquisition ............................ 4,898,000
-----------
Total Purchase Price ......................................... $93,820,000
===========
</TABLE>
---------------
(a) The value of the shares of CFN common stock issued in the
acquisition is based on the issued number of shares of
16,670,957 times a share price of $3.83. The share price used
in this computation is based upon an independent appraisal of
CFN's common stock.
(b) The value of the options issued in the acquisition is based on
the issued number of options of 4,691,826 times a price of
$3.27. Such options have been valued using the Black Scholes
option pricing model.
(c) The value of the warrants issued in the acquisition is based
on the issued number of warrants of 3,413,980 times a price of
$2.85. Such warrants have been valued using the Black Scholes
option pricing model.
(7) Represents the elimination of cash advanced by CFN to ICC.
(8) The fair value of the net tangible assets acquired by iXL's subsidiary
CFN in the acquisition of ICC approximates the net book value of such
assets. The excess of purchase price over the fair value of net assets
acquired was allocated to acquired technology, assembled workforce, and
goodwill. Approximately $7.5 million of the intangible assets has been
allocated to acquired technology and $1.5 million of intangible assets
has been allocated to assembled workforce. Both are being amortized
over a period of three years. The remainder has been allocated to
goodwill and is being amortized over five years.
(9) Repayment of ICC's debt to shareholders of $1,904,000 and the
elimination of short-term debt of $1,000,000 to CFN.
(10) Represents the minority interest in the equity of CFN.
30
<PAGE> 31
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
iXL Enterprises, Inc.
By: /s/ MARK STEELE
---------------------------------
Name: Mark Steele
---------------------------------
Title: Senior Vice President
---------------------------------
Dated: August 4, 2000
31
