SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 20, 1998
CYBEAR, INC.
------------
(Exact name of registrant as specified in its charter)
DELAWARE 333-24671 13-3936988
---------- ----------- -----------
State or other (Commission (IRS Employer
jurisdiction of File Number Identification No.)
incorporation
5000 BLUE LAKE DRIVE, BOCA RATON, FLORIDA 33431
------------------------------------------ ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (561) 994-1270
---------------
1997 CORP. 315 WEST 106TH STREET, NEW YORK, NEW YORK 10025
-------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 1. CHANGES IN CONTROL OF REGISTRANT.
At a Special Meeting of the Stockholders of 1997 Corp. (the
"Registrant") held on November 19,1998, the Stockholders of the Registrant
approved and adopted the Merger Agreement and Plan of Reorganization, dated as
of July 15, 1998 (the "Merger Agreement"), among the Registrant, CyBear, Inc., a
Florida corporation ("CyBear"), Andrx Corporation ("Andrx"), and CyBear Capital
Corp. On November 20, 1998 pursuant to the Merger Agreement, a newly formed
subsidiary of the Registrant, CyBear Capital Corp., ("Mergerco") was merged with
and into CyBear (the "Merger") and the Registrant acquired from the current
shareholders of CyBear all of the outstanding capital stock of CyBear. As a
result of the Merger, the separate existence and corporate organization of
Mergerco ceased and CyBear became a wholly owned subsidiary of the Registrant
There was no change in the ownership of the 270,000 shares of the Registrant
Common Stock outstanding immediately prior to the Acquisition (after giving
effect to a five-for-one Common Stock dividend payable on each of the 45,000
currently outstanding shares of the Registrant). As required by Rule 419
promulgated pursuant to the Securities Act of 1933, as amended, stockholders of
the Registrant were required to reconfirm their purchase of the Registrant's
shares and each stockholder who rejected or failed to approve the Merger
Agreement was paid his or her pro rata share of the funds deposited in the Rule
419 escrow account at Continental Stock Transfer and Trust Company, or
approximately $5.10 per share. Funds were returned for a total of 100 shares.
All outstanding CyBear Common Shares were cancelled and were converted
by virtue of the Merger into a total of 13,000,000 the Registrant Shares. All
presently outstanding employee stock options of CyBear were assumed by the
Registrant.
The result of the Merger was that the holders of CyBear's Common Stock
immediately prior to the consummation of the Merger Transaction own
approximately 98% of the Registrant's Common Stock and the Registrant's original
shareholders own 2% of the Registrant's Common Stock. Anda Generics, Inc., a
subsidiary of Andrx, owns 12,536,667 shares of the Registrant and John Klein,
Chairman of the Registrant, owns 333,333 shares of the Registrant's Common
Stock. Pursuant to the Merger Agreement, effective upon the Merger, the
directors and officers of CyBear became directors and officers of the Registrant
and the former officers of the Registrant resigned. The current officers and
directors of CyBear are:
Alan P. Cohen Director
John H. Klein Chairman and Director
Edward E. Goldman, M.D. President, Chief Executive Officer and Director
Debra s. Richman Executive Vice President--Business Development
Scott Lodin Vice President, General Counsel, Secretary and
Director
Angelo C. Malahias Vice President and Chief Financial Officer
Upon consummation of the Merger the name of the Registrant was changed to
"CyBear Inc." and the name of CyBear was changed to "CyBear Inc. (FL)".
The Acquisition was effected pursuant to the Florida Business
Corporation Law and is intended to be a tax-free reorganization under Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended.
There are no arrangements known to the Registrant that may result in a
subsequent change of control of the Registrant.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Financial Statements of CyBear, Inc.
<PAGE>
Report of Independent Accountants *
Balance Sheet as of December 31, 1997*
Statement of Operations for the period from February 5, 1997
(inception) to December 31, 1997*
Statement of Shareholders' Deficit for the period from February 5, 1997
(inception) to December 31, 1997*
Statement of Cash Flows for the period from February 5, 1997
(inception) to December 31, 1997*
Notes to Financial Statements*
Balance Sheet as of September 30, 1998
Statement of Operations for the nine months ended September 30, 1998
Statement of Shareholders' Deficit for the nine months ended September
30, 1998
Statement of Cash Flows for the nine months ended September 30, 1998
(b) PRO FORMA FINANCIAL INFORMATION
Pro Forma Statement of Operations for the year ended December 31, 1997
Pro Forma Balance Sheet as of September 30, 1998
Pro Forma Statement of Operations for the nine months ended September
30, 1998
(c) Exhibits.
2 Merger Agreement and Plan of Reorganization dated as of July 15, 1998
among 1997 Corp.,CyBear, Inc. and CyBear Capital Corp.**
- -------------------
* Incorporated by reference to Post-Effective Amendment No. 4 to
Registrant's Registration Statement on Form SB-2 filed on October 20,
1998
** Incorporated by reference to Post-Effective Amendment No. 2 to
Registrant's Registration Statement on Form SB-2 filed on July 28,
1998
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CYBEAR, INC.
By:/s/ EDWARD E. GOLDMAN
--------------------------------------------
Edward E. Goldman
President, Chief Executive Officer
and Director
Dated: December 7, 1998
3
<PAGE>
<TABLE>
<CAPTION>
CYBEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,000 $ 1,000
Prepaid expenses 134,570 30,707
Deferred merger costs 31,709 --
--------------- --------------
Total current assets 167,279 31,707
Property and equipment, net 308,133 189,065
Software license, net 159,897 160,000
Software development costs, net 70,000 --
Other assets 4,415 14,684
--------------- ---------------
Total assets $ 709,724 $ 395,456
=============== ===============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 238,306 $ 64,813
Accrued payroll and employee benefits 162,243 76,533
Due to Andrx Corporation 3,779,178 1,268,773
--------------- --------------
Total current liabilities 4,179,727 1,410,119
--------------- --------------
Commitments and contingencies (Notes 5 and 9)
Shareholders' deficit:
Convertible preferred stock, $.001 par value;
1,000,000 shares authorized, none issued and
outstanding -- --
Common stock, $.001 par value; 25,000,000
shares authorized, 13,000,000 shares issued
and outstanding 13,000 13,000
Additional paid-in capital 543,226 530,906
Accumulated deficit (4,026,229) (1,558,569)
--------------- --------------
Total shareholders' deficit (3,470,003) (1,014,663)
--------------- --------------
Total liabilities and shareholders' deficit $ 709,724 $ 395,456
=============== ===============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
F-1
<PAGE>
<TABLE>
<CAPTION>
CYBEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
CUMULATIVE FROM FOR THE PERIOD FROM FOR THE PERIOD FROM
FEBRUARY 5, 1997 FEBRUARY 5, 1997 FEBRUARY 5, 1997
(INCEPTION) TO (INCEPTION) TO FOR THE NINE MONTHS (INCEPTION) TO
SEPTEMBER 30, 1998 DECEMBER 31, 1997 ENDED SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
------------------ ------------------- ------------------------ ------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Software development services to
Andrx Corporation $ 95,927 $ 95,927 $ -- $ 95,927
---------------- ------------------- ------------------------ ------------------
Operating expenses:
Software development 2,866,377 1,502,370 1,364,007 1,019,197
General and administrative 1,082,300 123,906 958,394 89,713
---------------- ------------------- ------------------------ ------------------
Total operating expenses 3,948,677 1,626,276 2,322,401 1,108,910
---------------- ------------------- ------------------------ ------------------
Loss from operations (3,852,750) (1,530,349) (2,322,401) (1,012,983)
Interest expense on due to
Andrx Corporation (173,479) (28,220) (145,259) (8,629)
---------------- ------------------- ------------------------ ------------------
Net loss $ (4,026,229) $ (1,558,569) $ (2,467,660) (1,021,612)
================ =================== ======================== ==================
Basic and diluted net loss per share $ (0.31) $ (0.12) $ (0.19) $ (0.08)
================ =================== ======================== ==================
Basic and diluted weighted average
shares of common stock outstanding 12,873,201 12,768,303 13,000,000 12,720,252
================ =================== ======================== ==================
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements these statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
CYBEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' DEFICIT
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL TOTAL
--------------- ------------- PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT DEFICIT
------ ------ ------ ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
FEBRUARY 5, 1997 (INCEPTION) -- $ -- -- $ -- $ -- $ -- $ --
Issuance of shares
of common stock to Andrx
Corporation as promoter -- -- 12,870,000 12,870 487,130 -- 500,000
Issuance of shares of
convertible preferred stock 130,000 130 -- -- 29,870 -- 30,000
Shares of common stock
issued in connection
with conversion of shares
of convertible preferred
stock (130,000) (130) 130,000 130 -- -- --
Options granted to
consultants -- -- -- -- 13,906 -- 13,906
Net loss -- -- -- -- -- (1,558,569) (1,558,569)
---------- --------- ------------ --------- ----------- ---------- -----------
BALANCE, DECEMBER 31, 1997 -- -- 13,000,000 13,000 530,906 (1,558,569) (1,014,663)
Options granted to
consultants (unaudited) -- -- -- -- 12,320 -- 12,320
Net loss (unaudited) -- -- -- -- -- (2,467,660) (2,467,660)
---------- --------- ------------ --------- ----------- ---------- -----------
BALANCE, SEPTEMBER 30, 1998
(unaudited) -- $ -- 13,000,000 $ 13,000 $ 543,226 $(4,026,229) $(3,470,003)
========== ========= ============ ========= =========== ========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
CYBEAR, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
CUMULATIVE FROM FOR THE PERIOD FROM FOR THE PERIOD FROM
FEBRUARY 5, 1997 FEBRUARY 5, 1997 FOR THE FEBRUARY 5, 1997
(INCEPTION) TO (INCEPTION) TO NINE MONTHS ENDED (INCEPTION) TO
SEPTEMBER 30, 1998 DECEMBER 31, 1997 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
------------------ ---------------- ------------------ ------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (4,026,229) $ (1,558,569) $ (2,467,660) $ (1,021,612)
Adjustments to reconcile net loss to net cash used
in operating activities
Depreciation and amortization 128,784 51,470 77,314 36,025
Options granted to consultants 26,226 13,906 12,320 9,713
Change in operating assets and liabilities
Prepaid expenses (134,570) (30,707) (103,863) (2,100)
Deferred merger costs (31,709) -- (31,709) --
Other assets (4,415) (14,684) 10,269 (11,467)
Accounts payable 238,306 64,813 173,493 137,783
Accrued payroll and employee benefits 162,243 76,533 85,710 25,771
----------------- --------------- ----------------- ------------------
Net cash used in operating activities (3,641,364) (1,397,238) (2,244,126) (825,887)
----------------- --------------- ----------------- ------------------
Cash flows from investing activities:
Purchases of property and equipment (436,814) (240,535) (196,279) (224,242)
Purchase of software license (160,000) (160,000) -- (160,000)
Software development costs (70,000) -- (70,000) --
----------------- --------------- ----------------- ------------------
Net cash used in investing activities (666,814) (400,535) (266,279) (384,242)
----------------- --------------- ----------------- ------------------
Cash flows from financing activities:
Proceeds from issuance of shares of common stock 500,000 500,000 -- 500,000
Proceeds from promissory note issued for purchase
of shares of convertible preferred stock 30,000 30,000 -- 15,000
Proceeds from due to Andrx Corporation 3,779,178 1,268,773 2,510,405 701,105
----------------- --------------- ----------------- ------------------
Net cash provided by financing activities 4,309,178 1,798,773 2,510,405 1,216,105
----------------- --------------- ----------------- ------------------
Net increase in cash 1,000 1,000 -- 5,976
Cash, beginning of period -- -- 1,000 --
----------------- --------------- ----------------- ------------------
Cash, end of period $ 1,000 $ 1,000 $ 1,000 $ 5,976
================= =============== ================= ==================
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-4
<PAGE>
CYBEAR, INC.
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION)
TO DECEMBER 31, 1997
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND THE PERIOD FROM FEBRUARY 5, 1997
(INCEPTION) TO SEPTEMBER 30, 1997
(1) GENERAL
CyBear, Inc. ("CyBear" or the "Company"), a Florida corporation in the
development stage, was incorporated on February 5, 1997. CyBear, Inc. is a 99%
owned subsidiary of Andrx Corporation ("Andrx"). CyBear is a healthcare
communications technology company developing technology and products that will
address communication and information problems within the healthcare community.
The Company is developing a suite of Internet-based productivity software
applications and communication networks for the healthcare industry. These
connectivity products will feature electronic management tools for
prescriptions, patient referrals, laboratory test submission and reporting,
hospital admissions, and other healthcare related activities. In addition,
CyBear will also market a healthcare Internet service provider ("ISP") for the
healthcare community. From February 5, 1997 (inception) through December 31,
1997, the Company's principal activities have consisted of developing its
products and providing software development services to Andrx.
MANAGEMENT'S PLANS
From February 5, 1997 (inception) through September 30, 1998, the
Company has incurred a net loss of $4,026,229 and has been dependent upon
funding from Andrx. Management anticipates incurring additional net losses in
the near term, as the focus of the Company's business is to develop its
products. Andrx is committed to the required funding of the Company's future
operations under a credit agreement with the Company.
The Company has not yet completed third-party testing of the basic
connectivity product platform or the development or testing of certain system
enhancements. The Company will be required to commit considerable time, effort
and resources to finalize such development and adapt its software to satisfy
specific requirements of potential customers. As of September 30, 1998, CyBear's
planned ISP is in development and will require substantial resources prior to
its commercial introduction.
The likelihood of the success of the Company must be considered in
light of the problems, expenses, complications and delays frequently encountered
in connection with the development of new business ventures. CyBear's business
risks include its limited operating history, the emerging and competitive nature
of its markets, the rapid technology change in its industry, changes in
government regulations, dependence on network infrastructure and
telecommunications carriers, dependence on a limited number of key personnel and
market acceptance and profitability of its products. In addition, the Company
utilizes software and related technologies throughout its businesses that may be
affected by the date change in the year 2000. The Company is in the process of
evaluating the full scope and related costs to insure that its systems,
third-party software and technologies it utilizes will not be affected by the
date change in the year 2000. At this time, the expenses associated with this
assessment and potential remediation plan cannot be determined.
F-5
<PAGE>
CYBEAR, INC.
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION)
TO DECEMBER 31, 1997
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND THE PERIOD FROM FEBRUARY 5, 1997
(INCEPTION) TO SEPTEMBER 30, 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
PROPERTY AND EQUIPMENT, NET
Property and equipment is recorded at cost less accumulated
depreciation or amortization. Depreciation or amortization is provided using the
straight-line method over the following estimated useful lives:
Computer hardware and software 3 years
Furniture and fixtures 5 years
Leasehold improvements Lesser of useful life or term of lease
Major renewals and betterments are capitalized, while maintenance and
repairs are expensed as incurred.
SOFTWARE LICENSE
CyBear has entered into an agreement with a third party to license the
use of their software to be utilized in the Company's Internet-based software
applications at a minimum of 600 customer sites for an unlimited period of time.
The license is capitalized and will be amortized on a per site basis using the
straight-line method over an estimated life of three years from the date of
installation of such software applications at customer sites. As of December 31,
1997, there had not been any site installations and, accordingly, no
amortization expense was recorded.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company utilizes the provisions of Financial Accounting Standards
Board ("FASB") Statement on Financial Accounting Standards ("SFAS") No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" which requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstance indicate that the carrying amount of
an asset may not be recoverable. To determine a loss, if any, to be
F-6
<PAGE>
CYBEAR, INC.
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION)
TO DECEMBER 31, 1997
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND THE PERIOD FROM FEBRUARY 5, 1997
(INCEPTION) TO SEPTEMBER 30, 1997
recognized, the book value of the asset would be compared to the market value or
expected future cash flow value. Such provisions had no impact on the Company's
financial position or results of operations as of or for the period from
February 5, 1997 (inception) to December 31, 1997.
REVENUE RECOGNITION
Software development service revenues which to date have been rendered
to Andrx are recognized at the time the services are rendered.
SOFTWARE DEVELOPMENT COSTS
SFAS No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed", requires capitalization of certain software
development costs subsequent to the establishment of technological feasibility.
Based on the Company's product development process, technological feasibility is
established upon completion of a working model. As of December 31, 1997, the
Company has not yet achieved technological feasibility for its products and as
such, all costs related to software development were expensed as incurred.
START-UP COSTS
All costs to organize the Company and start up its operations are
expensed as incurred.
STOCK-BASED COMPENSATION
Under the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation", companies can either measure the compensation cost of equity
instruments issued to employees under employee compensation plans using a fair
value based method, or can continue to recognize compensation cost using the
intrinsic value method under the provisions of Accounting Principles Board
Opinion ("APB") No. 25. However, if the provisions of APB No. 25 are applied,
pro forma disclosures of net income or loss and earnings or loss per share must
be presented in the financial statements as if the fair value method had been
applied. For the period from February 5, 1997 (inception) to December 31, 1997,
the Company recognized compensation costs for options granted to non-employees
under the provisions of APB No. 25, and the Company has provided the expanded
disclosure required by SFAS No. 123 (See Note 8).
INCOME TAXES
The Company accounts for income taxes pursuant to SFAS No. 109,
"Accounting for Income Taxes". The provisions of SFAS No. 109 require, among
other things, recognition of future tax benefits measured at enacted rates
attributable to the deductible temporary differences between the financial
statement and income tax bases of assets and liabilities and to tax net
operating loss carryforwards to the extent that the realization of said benefits
is "more likely than
F-7
<PAGE>
CYBEAR, INC.
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION)
TO DECEMBER 31, 1997
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND THE PERIOD FROM FEBRUARY 5, 1997
(INCEPTION) TO SEPTEMBER 30, 1997
not". The Company's taxable results are included in the consolidated income tax
return of Andrx (see Note 4).
NET LOSS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share".
SFAS No. 128 supersedes APB No. 15, "Earnings Per Share", and specifies the
computation, presentation and disclosure requirements for earnings or loss per
share. The provisions of SFAS No. 128 are effective for financial statements for
periods ended after December 15, 1997. The Company has adopted the provisions of
SFAS No. 128.
For the period from February 5, 1997 (inception) to December 31, 1997,
basic and diluted net loss per share is based on the weighted average number of
shares of common stock outstanding. Since the effect of common stock equivalents
was antidilutive, all such equivalents were excluded in diluted loss per share.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of due to Andrx approximates fair value due to the
short maturity of this instrument.
COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income", was issued by the FASB
in June 1997. This Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. The Company has adopted the provisions of SFAS No.
130 as of January 1, 1998. The adoption of the provisions of this standard did
not have a material impact on the Company's existing report disclosures.
CyBear's comprehensive losses and net losses are the same for all periods
presented.
BUSINESS SEGMENTS
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", was issued by the FASB in June 1997. This Statement establishes
standards for reporting information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company will adopt the provisions of
SFAS No. 131 for the year ending December 31, 1998. The adoption of the
provisions of this standard will not have a material impact on the Company's
existing reporting disclosures.
F-8
<PAGE>
CYBEAR, INC.
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION)
TO DECEMBER 31, 1997
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND THE PERIOD FROM FEBRUARY 5, 1997
(INCEPTION) TO SEPTEMBER 30, 1997
DERIVATIVES
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued by the FASB in June 1998. SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS No. 133 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 a derivative's gains and
losses to offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15,
1999. A company may also implement the provision of the SFAS No. 133 Statement
as of the beginning of any fiscal quarter after issuance. SFAS No. 133 cannot be
applied retroactively. SFAS No. 133 must be applied to (a) derivative
instruments and (b) certain derivative instruments embedded in hybrid contracts
that were issued, acquired, or substantively modified after December 31, 1997
(and, at the company's election, before January 1, 1998).
The Company has not yet quantified the impacts of adopting SFAS No. 133 on its
financial statements and has not determined the timing of or method of its
adoption of SFAS No. 133.
UNAUDITED FINANCIAL STATEMENTS
The interim financial statements as of September 30, 1998, for the nine
months ended September 30, 1998, for the period from February 5, 1997
(inception) to September 30, 1997 and for the cumulative period from February 5,
1997 (inception) to September 30, 1998 and all related footnote information are
unaudited. In the opinion of management, such unaudited financial statements
have been prepared by CyBear pursuant to the rules and regulations of the
Securities and Exchange Commission. The unaudited financial statements reflect,
in the opinion of management, all material adjustments (which include only
normal recurring adjustments) necessary to present fairly the Company's
financial position and results of operations. The results of operations and cash
flows for the nine months ended September 30, 1998, are not necessarily
indicative of the results of operations or cash flows which may be expected for
the remainder of 1998.
F-9
<PAGE>
CYBEAR, INC.
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION)
TO DECEMBER 31, 1997
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND THE PERIOD FROM FEBRUARY 5, 1997
(INCEPTION) TO SEPTEMBER 30, 1997
(3) PROPERTY AND EQUIPMENT, NET
Property and equipment is summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------ -------------
(Unaudited)
<S> <C> <C>
Computer hardware and software $ 330,286 $ 164,410
Furniture and fixtures 97,725 73,408
Leasehold improvements 8,803 2,717
------------ -------------
436,814 240,535
Less: accumulated depreciation and amortization (128,681) (51,470)
------------ -------------
Property and equipment, net $ 308,133 $ 189,065
============ =============
</TABLE>
(4) INCOME TAXES
For the period from February 5, 1997 (inception) to December 31, 1997,
the Company was not required to provide for federal or state income taxes due to
its net loss. Under the provisions of SFAS No. 109, the Company has provided a
valuation allowance to reserve against 100% of its net operating loss
carryforwards. The Company's taxable results are included in the consolidated
income tax return of Andrx. The Company and Andrx have a tax allocation
agreement that provides, among other things, for the allocation of federal
income tax liabilities to the Company at the approximate amounts which would
have been computed as if the Company had filed separate tax returns. As of
December 31, 1997, for financial reporting purposes and federal income tax
purposes, the Company has net operating loss carryforwards of approximately $1
million, which if not utilized, will expire in 2012. Net operating loss
carryforwards are subject to review and possible adjustments by the Internal
Revenue Service and may be limited in the event of certain cumulative changes in
the ownership interest of significant shareholders over a three-year period in
excess of 50%.
(5) COMMITMENTS
SOFTWARE LICENSE AGREEMENT
In July 1997, the Company entered into a one-year semi-exclusive
license agreement with the owner of a software application whereby the Company
has agreed to pay the owner an initial up front fee of $100,000 and sliding fees
per site ranging from $40 to $500 based on the number of sites and software
version installed. Such sliding fees are subject to a minimum disbursement of
$5,000 per month. As of December 31, 1997, there were no site installations. For
the period from February 5, 1997 (inception) to December 31, 1997, the Company
has capitalized $160,000 under this agreement of which $130,000 was paid.
F-10
<PAGE>
CYBEAR, INC.
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION)
TO DECEMBER 31, 1997
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND THE PERIOD FROM FEBRUARY 5, 1997
(INCEPTION) TO SEPTEMBER 30, 1997
EMPLOYMENT CONTRACT
The Company has entered into an employment contract with the Company's
Vice President of Technical Development. The contract provides for an annual
base salary, plus stock options, plus a royalty equal to 2% of the net revenue
derived by the Company from the sale, lease or licensing of its software
applications, payable quarterly, provided that the Vice President of Technical
Development remains an employee at the time each such royalty payment is due.
PRODUCT LIABILITY
Software products such as those to be offered by the Company frequently
contain undetected errors or failures when first introduced or as new versions
are released. Testing of the Company's products is particularly challenging
because it is difficult to simulate the wide variety of computing environments
in which the Company's potential customers may deploy these products. There can
be no assurance that defects, errors or difficulties will not cause delays in
product introductions, result in increased costs and diversion of development
resources, require design modifications or decrease market acceptance or
customer satisfaction with the Company's products. In addition, there can be no
assurance that, despite testing by the Company and by potential customers,
errors will not be found after commencement of commercial introduction,
resulting in loss of or delay in market acceptance, which could have a material
adverse effect upon the Company's business, operating results and financial
condition.
OPERATING LEASE
In September 1998, CyBear entered into a lease for 18,400 square feet
of space in Boca Raton, Florida to house its corporate headquarters and network
systems. The lease provides for annual rent of $230,000 and has a five-year term
commencing at the earlier of the completion of improvements to the space or
January 1, 1999 with one five-year renewal option at market rates. Until the
space is completed, CyBear will temporarily occupy 2,750 square feet of space at
the same facility at a monthly rate of $1,250. CyBear will vacate both the
temporary space and the Andrx space when the new space is ready for occupancy.
PREFERRED VENDOR AGREEMENT
In September 1998, CyBear has entered into a three-year strategic
alliance with The IPA Association of America ("TIPAAA"), the nation's leading
trade association focused on physician independent practice associations
("IPA's") whereby CyBear will become the preferred ISP and Internet business
applications provider for TIPAAA. In consideration of its preferred vendor
status, CyBear agreed to make to TIPAAA three $100,000 annual payments and to
grant TIPAAA an option to purchase 100,000 shares of its common stock at an
exercise price of $3.00 per share. The stock options have a five-year term and
vest at the rate of one share for every two TIPAAA physicians that become and
remain a CyBear user for a minimum of three months. The Company will record
charges to earnings for the options that vest.
(6) RELATED PARTY TRANSACTIONS
The Company and Andrx have a corporate services agreement whereby Andrx
provides the Company with various services of its management such as executive
management, accounting and finance, legal, payroll and human resources. For the
period from February 5, 1997 (inception) to December 31, 1997, the Company
incurred amounts for these services based upon mutually agreed upon allocation
methods. Management believes that the amounts incurred for these services
approximate fair market value. Costs for such services were $110,000 for the
period from February 5, 1997 (inception) to December 31, 1997 and $90,000 for
the nine months ended September 30, 1998.
<PAGE>
From February 5, 1997 (inception) to December 31, 1997, the Company
provided Andrx with software development services. The Company charged Andrx
based on mutually agreed upon allocation methods. Software development services
charged to Andrx were $95,927 for the period from February 5, 1997 (inception)
to December 31, 1997.
In February 1997, Andrx entered into an agreement with Group One
Enterprises, Inc. ("Group One"), a shareholder of the Company, whereby Group One
agreed to provide certain consulting services to the Company. The agreement with
Group One was terminated in 1997.
F-11
<PAGE>
CYBEAR, INC.
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION)
TO DECEMBER 31, 1997
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND THE PERIOD FROM FEBRUARY 5, 1997
(INCEPTION) TO SEPTEMBER 30, 1997
Costs incurred for services provided by Group One were $68,000 for the period
from February 5, 1997 (inception) to December 31, 1997.
Due to Andrx on the accompanying balance sheets represents advances
from Andrx to fund the Company's operations and the related accrued interest.
Such advances bear interest at prime (8.5% at December 31, 1997) plus 1/2% and
will be contributed as additional paid-in capital to the Company upon the
consummation of certain transactions, including but not limited to, a merger.
The Company recorded $28,220 in interest expense on these advances for the
period from February 5, 1997 (inception) to December 31, 1997. As of December
31, 1997, the Company has not paid any interest expense on the "Due to Andrx".
The Company and Andrx have a tax allocation agreement that provides,
among other things, for the allocation of federal income tax liabilities to the
Company at the approximate amounts which would have been computed as if the
Company had filed separate tax returns.
(7) CONVERTIBLE PREFERRED STOCK
In February 1997, the Company issued 130,000 shares of convertible
preferred stock to Group One for a promissory note of $30,000. The fair value of
the convertible preferred stock was $0.23 per share as determined by the
Company's Board of Directors. As of December 31, 1997, the promissory note was
paid in full. The preferred stock issued had the same voting and dividend rights
as the common stock but had a liquidation preference and was convertible into
common stock of the Company on a one-fo one basis if the consulting agreement
with Group One was terminated before an initial public offering. The agreement
with Group One was terminated in 1997 and the 130,000 shares of preferred stock
were converted into 130,000 shares of common stock.
(8) STOCK INCENTIVE PLAN
The Company has reserved 1,000,000 shares of its common stock for
issuance under its 1997 Stock Option Plan (the "Plan"). Under the Plan,
incentive and nonqualified stock options are available to directors, officers,
employees or consultants to the Company. The terms of each option agreement are
determined by the Company's Board of Directors or its compensation committee
(the "Committee"). The terms for, and exercise price at which any stock option
may be awarded is to be determined by the Committee. Options granted under the
Plan must be exercised within ten years of the date of grant, unless a shorter
period is designated at the time of grant. Options granted in 1997 vest ratably
over a four year period.
The Company accounts for options granted to employees under the Plan in
accordance with the provisions of APB No. 25. Each stock option has an exercise
price equal to the market price on the date of grant and, accordingly, no
compensation expense has been recorded for any stock option grants to employees.
Had compensation cost for the Company's stock options been
F-12
<PAGE>
CYBEAR, INC.
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION)
TO DECEMBER 31, 1997
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND THE PERIOD FROM FEBRUARY 5, 1997
(INCEPTION) TO SEPTEMBER 30, 1997
based on fair value at the grant dates consistent with the methodologies of SFAS
No. 123, the Company's pro forma basic and diluted net loss and basic and
diluted net loss per share would have been $1,590,717 and $0.12, respectively
for the period from February 5, 1997 (inception) to December 31, 1997.
A summary of the Plan's activity is as follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER EXERCISE EXERCISE REMAINING
OF SHARES PRICE PRICE LIFE
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Options outstanding, February 5, 1997 (inception) -- -- -- --
Granted 350,000 $1.00 $1.00 9.24
--------
Options outstanding, December 31, 1997 350,000 $1.00 $1.00 9.24
Options exercisable, December 31, 1997 -- -- -- --
</TABLE>
The weighted average fair market value per share as of the grant date
was $0.70 for stock options granted during 1997. The fair value of each option
grant was estimated using the Black-Scholes option pricing model with the
following assumptions: expected volatility of 75%; risk-free interest rate of
5.3%; no expected dividends; and expected lives of options of 6.0 years.
(9) LITIGATION
On March 18, 1998, Andrx received a letter from counsel for Medix
Resources, Inc. ("Medix") and its subsidiary, Cymedix Lynx Corporation
("Cymedix") alleging the theft and unlawful appropriation by Andrx, the Company,
and certain directors, officers and employees of the Company and Andrx of
certain computer medical software and internet medical communications technology
allegedly owned by Cymedix. The letter demands trebled damages totaling $396.6
million pursuant to the civil theft provisions of Florida law, and also alleges
claims under Florida's Racketeer Influenced and Corrupt Organization Act and
certain other provisions of federal and state law. The Company and Andrx believe
that Medix's and Cymedix's accusations and threatened claims have no basis in
substantial fact or legal support and on March 23, 1998, the Company and Andrx
filed a complaint against Medix and Cymedix for libel and slander arising from
the improper public dissemination of the contents of the aforesaid demand letter
with respect to each of the matters set forth in that letter. The Company and
Andrx intend to vigorously prosecute their complaints, which seek damages,
costs, interest and attorneys' fees. On June 2, 1998 Medix, on behalf of
Cymedix, filed a complaint against the Company , Andrx and certain Company and
CyBear directors, officers and employees alleging the theft and unlawful
appropriation of Cymedix' computer medical software for remote online healthcare
Providers and Cymedix' Internet medical communications technology allegedly
owned by Cymedix. Medix is seeking treble damages totaling $396 million. The
Company and
F-13
<PAGE>
CYBEAR, INC.
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION)
TO DECEMBER 31, 1997
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND THE PERIOD FROM FEBRUARY 5, 1997
(INCEPTION) TO SEPTEMBER 30, 1997
Andrx believe that Medix's suit has no basis in substantial fact or legal
support and is without merit, and intend to vigorously defend these claims.
Accordingly, the Company and Andrx believe that the outcome of this lawsuit will
not be material to their results of operations and financial positions. However,
there can be no assurance that CyBear will prevail in this litigation or that an
adverse outcome would not have a material adverse effect on CyBear.
From time to time, the Company may be involved in litigation relating
to claims arising out of its operations in the normal course of business. Except
for the matter disclosed above, the Company is not currently a party to any
other legal proceeding, the adverse outcome of which, individually or in the
aggregate, could reasonably be expected to have a material adverse effect on the
Company's business, operating results and financial condition.
F-14
<PAGE>
CYBEAR, INC.
INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following Unaudited Pro Forma Financial Information includes the
accounts of 1997 Corp. and CyBear, Inc. assuming that all of the 1997 Corp.
stockholders accept the Acquisition Offer. The transaction between 1997 Corp.
and CyBear Inc. is accounted for as a purchase in accordance with accounting
principles generally accepted in the United States.
The following Unaudited Pro Forma Balance Sheet presents the pro forma
combined financial position of CyBear, Inc. as of September 30, 1998 as if the
pending transaction between 1997 Corp. and CyBear, Inc. had been consummated as
of September 30, 1998.
The following Unaudited Pro Forma Statements of Operations for the nine
months ended September 30, 1998 and for the period from February 5, 1997
(inception) for CyBear, Inc. and March 17, 1997 (inception) for 1997 Corp. to
December 31, 1997 present the pro forma results of the combined company as if
the transaction between 1997 Corp. and CyBear, Inc. had been consummated at the
beginning of the period presented.
The unaudited pro forma basic and diluted net loss per share and the
basic and diluted weighted average shares of common stock outstanding of CyBear,
Inc. are determined based on the number of common shares of 1997 Corp. issued in
the Merger Agreement between 1997 Corp. and CyBear, Inc. as if the transaction
had been consummated at the beginning of the period presented.
This Unaudited Pro Forma Financial Information and notes thereto should
be read in conjunction with the respective historical financial statements and
notes thereto of 1997 Corp. and CyBear, Inc. The pro forma information presented
is for informational purposes only and may not necessarily reflect future
results of operations.
F-15
<PAGE>
CYBEAR, INC.
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
1997 CORP. CYBEAR, INC. ADJUSTMENT CYBEAR, INC.
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 1,028 $ 1,000 $ 153,998 (b) $ 156,026
Prepaid expenses -- 134,570 -- 134,570
Deferred merger costs -- 31,709 (31.709)(g) --
---------- ------------ ---------- ----------
Total current assets 1,028 167,279 122,289 290,596
Shareholders escrowed funds 153,998 -- (153,998)(b) --
Property and equipment, net -- 308,133 -- 308,133
Software license, net -- 159,897 -- 159,897
Software development costs, net -- 70,000 -- 70,000
Other assets -- 4,415 -- 4,415
---------- ------------ ---------- ----------
Total assets 155,026 $ 709,724 $ (31,709) $ 833,041
========== ============ ========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 58,641 $ 238,306 $ 10,000 (h) $ 425,238
118,291 (i)
Accrued payroll and employee benefits -- 162,243 -- 162,243
Due to Andrx Corporation -- 3,779,178 (3,779,178)(a) --
---------- ------------ ---------- ----------
Total current liabilities 58,641 4,179,727 (3,650,887) 587,481
---------- ------------ ---------- ----------
Notes payable to directors 3,000 -- -- 3,000
Commitments and contingencies
Shareholders' equity (deficit)(1):
Convertible preferred stock -- -- -- --
Common stock 45 13,000 225 (c) 13,270
13,000 (d)
(13,000)(e)
Additional paid-in capital 210,005 543,226 3,779,178 (a) 4,322,134
(225)(c)
(13,000)(d)
13,000 (e)
(116,665)(f)
(31,709)(g)
(10,000)(h)
(51,676)(i)
Accumulated deficit (116,665) (4,026,229) 116,665 (f) (4,092,844)
(66,615)(i)
---------- ------------ ---------- ----------
Total shareholders' equity
(deficit) 93,385 (3,470,003) 3,619,178 242,560
---------- ------------ ---------- ----------
Total liabilities and shareholders'
equity (deficit) $ 155,026 $ 709,724 $ (31,709) $ 833,041
========== ============ ========== ==========
</TABLE>
(1) 1997 Corp.'s shareholders' equity is redeemable.
The accompanying notes to unaudited pro forma financial statements
are an integral part of this balance sheet.
F-16
<PAGE>
CYBEAR, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) FOR CYBEAR, INC. AND
MARCH 17, 1997 (INCEPTION) FOR 1997 CORP. TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
1997 CORP. CYBEAR, INC. PRO FORMA CYBEAR, INC.
FOR THE PERIOD FROM FOR THE PERIOD FROM FOR THE PERIOD FROM
MARCH 17, 1997 FEBRUARY 5, 1997 FEBRUARY 5, 1997
(INCEPTION) TO (INCEPTION) TO (INCEPTION) TO
DECEMBER 31, 1997 DECEMBER 31, 1997 ADJUSTMENT DECEMBER 31, 1997
------------------- ------------------- ---------- ---------------------
<S> <C> <C> <C> <C>
Revenues:
Software development services to
Andrx corporation $ -- $ 95,927 $ -- $ 95,927
------------------- ------------------- ---------- --------------------
Operating expenses:
Software development -- 1,502,370 -- 1,502,370
General and administrative 59,393 123,906 -- 183,299
------------------- ------------------- ---------- --------------------
Total operating expenses 59,393 1,626,276 -- 1,685,669
------------------- ------------------- ---------- --------------------
Loss from operations (59,393) (1,530,349) -- (1,589,742)
Interest income 1,362 -- -- 1,362
Interest expense on due to Andrx
corporation -- (28,220) -- (28,220)
------------------- ------------------- ---------- --------------------
Net loss $ (58,031) $ (1,558,569) $ -- $ (1,616,600)
=================== =================== ========== ====================
Basic and diluted net loss per share $ (0.35) $ (0.12) $ (0.12)(j)
=================== =================== ====================
Basic and diluted weighted average
shares of common stock outstanding 167,043 12,768,303 13,265,306 (j)
=================== =================== ====================
</TABLE>
The accompanying notes to unaudited pro forma financial statements
are an integral part of these statements.
F-17
<PAGE>
CYBEAR, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
1997 CORP. CYBEAR, INC. ADJUSTMENT CYBEAR, INC.
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Revenues:
Software development services to Andrx
Corporation $ -- $ -- $ -- $ --
---------- ------------ ---------- ------------
Operating expenses:
Software development -- 1,364,007 -- 1,364,007
General and administrative 61,270 958,394 ( 45,000)(j) 974,664
---------- ------------ ---------- ------------
Total operating expenses 61,270 2,322,401 (45,000) 2,338,671
---------- ------------ ---------- ------------
Loss from operations (61,270) (2,322,401) 45,000 (2,338,671)
Interest income 2,636 -- -- 2,636
Interest expense on due to Andrx Corporation -- (145,259) -- (145,259)
---------- ------------ ---------- ------------
Net loss $ (58,634) $ (2,467,660) $ 45,000 $ (2,481,294)
========== ============ ========== ============
Basic and diluted net loss per share $ (0.22) $ (0.19) $ (0.19)(k)
========== ============ ============
Basic and diluted weighted average shares of
common stock outstanding 270,000 13,000,000 13,270,000 (k)
========== ============ ============
</TABLE>
The accompanying notes to unaudited pro forma financial statements
are an integral part of these statements.
F-18
<PAGE>
CYBEAR, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(a) Represents CyBear, Inc.'s capital contribution from Andrx Corporation
resulting from the conversion of the due to Andrx Corporation
immediately prior to the consummation of the Merger Agreement.
(b) Represents the release of 1997 Corp.'s shareholders escrowed funds as a
result of the consummation of the Merger Agreement.
(c) Represents the stock split of 1997 Corp.'s 45,000 common shares
outstanding into 270,000 common shares immediately prior to the
consummation of the Merger Agreement. The 6:1 stock split for 1997
Corp. is reflected retroactively for all periods reflected.
(d) Represents the issuance of 13,000,000 common shares of 1997 Corp. to
acquire all the outstanding capital stock of CyBear, Inc. upon
consummation of the Merger.
(e) Represents the elimination of CyBear, Inc.'s common stock.
(f) Represents the elimination of 1997 Corp.'s accumulated deficit.
(g) Represents the reclassification to additional paid-in capital of
$31,709 of transaction costs incurred by CyBear Inc., prior to
September 30, 1998, in connection with the Merger.
(h) Represents an additional $10,000 of transaction costs incurred by 1997
Corp. in connection with the Merger.
(i) Represents an additional $118,291 of transaction costs incurred by
CyBear, Inc. in connection with the Merger.
(j) Represents the reversal of $45,000 of transaction costs expensed by
1997 Corp. in connection with the Merger.
(k) Basic and diluted net loss per share and the basic and diluted weighted
average shares of common stock outstanding of 1997 Corp. are determined
based as if the stock split of 1997 Corp. and the issuance of
13,000,000 common shares of 1997 Corp. had occurred at the beginning of
all periods presented.
F-19
