PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(3)
(To Prospectus dated February 11, 1998) Registration No. 333-45487
- --------------------------------------------------------------------------------
1,000,000 Shares
DISPATCH MANAGEMENT SERVICES CORP.
Common Stock
- --------------------------------------------------------------------------------
On April 7, 1998, the Company acquired all of the outstanding capital
stock (the "Acquisition") of Delta Air & Road Transport PLC ("Delta") from its
sole shareholders (the "Shareholders"). Delta, headquartered in London, has over
forty offices located throughout the United Kingdom. It is engaged primarily in
on-demand and scheduled delivery services, and reported 1997 revenues of
approximately $33 million. The business of Delta will continue to be operated by
the Registrant.
The Acquisition was consummated in accordance with the terms of an
agreement dated April 7, 1998 among the Registrant, Delta and the Shareholders.
The consideration paid by the Registrant in connection with the Acquisition was
$21.7 million in cash. An additional $3 million may be paid contingent upon
certain performance criteria being met.
April 22, 1998
<PAGE>
INDEX TO FINANCIAL STATEMENTS
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OF DISPATCH MANAGEMENT
SERVICES CORP. FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1997
Introduction To Unaudited Pro Form Combined Financial Statements.......F-1
Pro Form Combined Balance Sheet (Unaudited)............................F-2
Pro Form Combined Statement of Operations (Unaudited)..................F-3
Notes to Unaudited Pro Form Combined Financial Statements..............F-6
<PAGE>
DISPATCH MANAGEMENT SERVICES CORP.
INTRODUCTION TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements give
effect to the acquisitions by Dispatch Management Services Corp. (the "Company")
of the outstanding capital stock of the Founding Companies. The Company
acquired, in separate combination transactions (the "Combinations") in exchange
for cash and shares of Common Stock, certain courier firms simultaneously with
and as a condition to the closing of the Company's initial public offering (the
"Offering") during February 1998. The acquisitions were accounted for using the
purchase method of accounting. The Company was identified as the accounting
acquiror. The unaudited pro forma combined financial statements also give effect
to the acquistion of Delta Air & Road Transport (Delta) which was consummated on
April 7, 1998 and was accounted for using the purchase method of accounting.
The unaudited pro forma combined balance sheet gives effect to the
Combinations, the Offering, and the acquisition of Delta as if they had occurred
on September 30, 1997. The unaudited pro forma combined statements of operations
give effect to these transactions as if they had occurred on January 1, 1996.
The purchase price has been allocated to the historical assets and liabilities
based on their respective carrying values, with the exception of acquired in
process research and development (R&D) activities and acquired internally
developed technology, as the carrying values are deemed to represent the fair
value of these assets and liabilities. The fair market value of the in process
R&D and internally developed technology was determined based on a detailed
analysis prepared by the Company. The allocation of the purchase price is
considered preliminary until such time as the closing of the Offering and
consummation of the Combinations. The Company does not anticipate that the final
allocation of purchase price will differ significantly from that presented in
the pro forma combined financial statements.
The Company has preliminarily analyzed the savings that it expects to
realize from reductions in salaries and certain benefits to the stockholders of
the Founding Companies and Delta. To the extent the stockholders and management
of the Founding Companies and Delta have agreed prospectively to reductions in
salary, bonuses, and benefits, these net reductions have been reflected in the
pro forma combined statement of operations. With respect to other potential cost
savings, the Company has not and cannot quantify these savings. It is
anticipated that these savings will be partially offset by the costs of being a
publicly held company and the incremental increase in costs related to the
Company's new management. However, these costs, like the savings that they
offset, cannot be quantified accurately. Neither the anticipated savings nor the
anticipated costs have been included in the pro forma combined financial
statements of the Company.
The pro forma adjustments are based on estimates, available information
and certain assumptions and may be revised as additional information becomes
available. The pro forma financial data do not purport to represent what the
Company's financial position or results of operations would actually have been
if such transactions in fact had occurred on those dates and are not necessarily
representative of the Company's financial position or results of operations for
any future period. Since the Founding Companies and Delta were not under common
control or management, historical combined results may not be comparable to, or
indicative of, future performance. The unaudited pro forma combined financial
statements should be read in conjunction with the other financial statements and
notes thereto included elsewhere in this Prospectus. See "Risk Factors" included
elsewhere herein.
F-1
<PAGE>
Dispatch Management Services Corp.
Pro Forma Combined Balance Sheet
September 30, 1997
(Unaudited)
(000's)
<TABLE>
<CAPTION>
ASSETS DMS West One Aero
---------------------------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents 820 1,064 109
Accounts receivable, net 24 5,256 1,349
Prepaid and other current assets 3,153 272
---------------------------------
Total current assets 3,997 6,320 1,730
Property and equipment, net 32 3,169 407
Other assets 339 120
Goodwill, net 276
---------------------------------
Total assets 4,644 9,609 2,137
=================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short term debt 857 108
Accounts payable 4,392 400
Accrued expenses 2,534 461
Other current liabilities 55 2,884
Payable to shareholders of founding co.
---------------------------------
Total current liabilities 3,446 4,392 3,853
Long-term debt, less current maturities 2,265
Other long term liabilities 675
---------------------------------
Total liabilities 3,446 6,657 4,528
Stockholders' equity
Preferred Stock 2
Common Stock 9 120 200
Treasury stock
Additional paid-in capital 1,402
Retained earnings (215) 2,832 (2,591)
---------------------------------
Total stockholders' equity 1,198 2,952 (2,391)
---------------------------------
Total liabilities and stockholders' equity 4,644 9,609 2,137
=================================
<CAPTION>
Security American Eagle Atlantic Washington
ASSETS EarlyBird Bullit Despatch Endeavors Freight Express
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents 3 71 95 7 85
Accounts receivable, net 3,002 878 3,134 736 924 800
Prepaid and other current assets 1,456 21 71 103 159
---------------------------------------------------------------------------
Total current assets 4,461 970 3,134 902 1,034 1,044
Property and equipment, net 127 95 166 238 688 458
Other assets 112 13 0 31 183 36
Goodwill, net
---------------------------------------------------------------------------
Total assets 4,700 1,078 3,300 1,171 1,905 1,538
===========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short term debt 1,539 188 350 260 658
Accounts payable 675 181 1,998 413 696 241
Accrued expenses 1,009 89 96 68
Other current liabilities 254 24 173 275 332
Payable to shareholders of founding co.
---------------------------------------------------------------------------
Total current liabilities 3,477 482 1,998 1,032 1,299 1,231
Long-term debt, less current maturities 1,617 253 40 297 83
Other long term liabilities 258 122 241
---------------------------------------------------------------------------
Total liabilities 5,094 735 1,998 1,330 1,718 1,555
Stockholders' equity
Preferred Stock
Common Stock 5 25 1,989 1 15 249
Treasury stock (1,331) (148) (262)
Additional paid-in capital 69 2,459 5 74
Retained earnings 863 466 (3,146) (165) 360 (266)
---------------------------------------------------------------------------
Total stockholders' equity (394) 343 1,302 (159) 187 (17)
---------------------------------------------------------------------------
Total liabilities and stockholders' equity 4,700 1,078 3,300 1,171 1,905 1,538
===========================================================================
<CAPTION>
Nat'l 1 800 Battery
ASSETS MLQ Express Kangaroo Messenger Fleetfoot Fleetway Denver Point
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents 36 5 77 40 47 4
Accounts receivable, net 817 381 435 295 218 151 143
Prepaid and other current assets 68 15 8 3 6 5
---------------------------------------------------------------------------------
Total current assets 921 401 520 338 218 204 152
Property and equipment, net 171 138 70 103 66 74 5
Other assets 100 9 61 456 41 42
Goodwill, net
---------------------------------------------------------------------------------
Total assets 1,192 548 590 502 740 319 199
=================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short term debt 56 182 160 32
Accounts payable 44 28 12 490 29 5
Accrued expenses 202 127 57
Other current liabilities 429 82 129 24 23
Payable to shareholders of founding co.
---------------------------------------------------------------------------------
Total current liabilities 675 166 129 321 490 270 60
Long-term debt, less current maturities 73 383 149 23 30
Other long term liabilities 391 22
---------------------------------------------------------------------------------
Total liabilities 675 630 512 492 513 300 60
Stockholders' equity
Preferred Stock
Common Stock 2 50 320 125
Treasury stock (126)
Additional paid-in capital 18 109 33
Retained earnings 499 (191) 76 53 (93) (106) 139
---------------------------------------------------------------------------------
Total stockholders' equity 517 (82) 78 10 227 19 139
---------------------------------------------------------------------------------
Total liabilities and stockholders' equity 1,192 548 590 502 740 319 199
=================================================================================
<CAPTION>
Express Profall 1 800
ASSETS Messenger 1-800-CourLA Boston A&W Courier Deadline Zoom A Courier
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents 42 3 133 16 88
Accounts receivable, net 165 176 104 217 145 1,377 902
Prepaid and other current assets 12 2 12 46 19 40 114
----------------------------------------------------------------------------------
Total current assets 177 220 119 396 164 1,433 1,104
Property and equipment, net 54 70 74 59 8 47 222
Other assets 99 78 2 4 415 63
Goodwill, net
----------------------------------------------------------------------------------
Total assets 330 290 271 457 176 1,895 1,389
==================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short term debt 39 73 900 161
Accounts payable 44 24 85 86 71 498 82
Accrued expenses 59 70 23 43 157 180
Other current liabilities 39 561 228 67 186 0
Payable to shareholders of founding co.
----------------------------------------------------------------------------------
Total current liabilities 181 655 181 314 181 1,741 423
Long-term debt, less current maturities 33 2 26
Other long term liabilities 9 0
----------------------------------------------------------------------------------
Total liabilities 223 655 181 314 181 1,743 449
Stockholders' equity
Preferred Stock
Common Stock 1 10 1 3 1 19 2
Treasury stock
Additional paid-in capital 106 65 89 58
Retained earnings (440) 82 (6) 133 938
----------------------------------------------------------------------------------
Total stockholders' equity 107 (365) 90 143 (5) 152 940
----------------------------------------------------------------------------------
Total liabilities and stockholders' equity 330 290 271 457 176 1,895 1,389
==================================================================================
<CAPTION>
Other
S-Car-Go Delta Air & Road Founding
ASSETS Studebaker Zap Courier Transport Companies
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents 1 12 102 18 295
Accounts receivable, net 79 154 254 6,441 1,047
Prepaid and other current assets 9 334 21
-------------------------------------------------------------
Total current assets 80 175 356 6,793 1,363
Property and equipment, net 28 43 30 1,082 330
Other assets 2 108 15 54
Goodwill, net
-------------------------------------------------------------
Total assets 110 326 401 7,875 1,747
=============================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short term debt 14 13 73 322
Accounts payable 3 6 32 2,355 127
Accrued expenses 8 24 62 1,885 158
Other current liabilities 73 73 119 55
Payable to shareholders of founding co.
-------------------------------------------------------------
Total current liabilities 25 116 240 4,359 662
Long-term debt, less current maturities 52 123
Other long term liabilities 108 35
-------------------------------------------------------------
Total liabilities 25 168 240 4,467 820
Stockholders' equity
Preferred Stock
Common Stock 1 130 34
Treasury stock 0
Additional paid-in capital 162 161
Retained earnings 85 158 160 3,116 732
-------------------------------------------------------------
Total stockholders' equity 85 158 161 3,408 927
-------------------------------------------------------------
Total liabilities and stockholders' equity 110 326 401 7,875 1,747
=============================================================
<CAPTION>
Pro Forma
Merger Pro Forma Offering
ASSETS Adjustments Combined Adjustments As adjusted
----------------------------------------------
<S> <C> <C> <C> <C>
Current assets:
----------------------
Cash and cash equivalents (21,700) (18,527) 19,122 595
----------------------
Accounts receivable, net 29,604 29,604
----------------------
Prepaid and other current assets 5,949 (3,113) 2,836
----------------------------------------------
Total current assets (21,700) 17,026 16,009 33,035
-----------
-----------
Property and equipment, net 273 8,327 8,327
----------------------
Other assets 2,383 14,664 17,047
----------------------
Goodwill, net 89,569 89,845 89,845
-----------
----------------------------------------------
Total assets 68,142 117,581 30,673 148,254
==============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
----------------------
Short term debt 5,985 (1,050) 4,935
----------------------
Accounts payable 13,017 13,017
----------------------
Accrued expenses 7,312 (2,534) 4,778
-----------
Other current liabilities 300 6,385 6,385
-----------
Payable to shareholders of founding co. 45,168 45,168 (45,168) 0
----------------------------------------------
Total current liabilities 45,468 77,867 (48,752) 29,115
----------------------
Long-term debt, less current maturities (1,669) 3,780 0 3,780
----------------------
Other long term liabilities 0 1,861 1,861
----------------------
----------------------------------------------
-----------
Total liabilities 43,799 83,508 (48,752) 34,756
-----------
Stockholders' equity
-----------
Preferred Stock 2 (2)
-----------
Common Stock (3,270) 42 73 115
-----------
Treasury stock 1,867
----------------------
Additional paid-in capital 30,134 34,944 79,354 114,298
----------------------
Retained earnings (4,388) (915) (915)
----------------------------------------------
Total stockholders' equity 24,343 34,073 79,425 113,498
----------------------------------------------
Total liabilities and stockholders' equity 68,142 117,581 30,673 148,254
==============================================
</TABLE>
F-2
<PAGE>
Dispatch Management Services Corp.
Combining Statement Of Operations
For the Nine Months Ended September 30, 1997
(Unaudited)
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
DMS West One Aero
------------------------------------------
<S> <C> <C> <C>
Revenues 220 20,491 9,318
Cost of revenues 13,466 5,624
------------------------------------------
Gross profit 220 7,025 3,694
Operating expenses:
Sales and marketing 0 82 714
General and administrative expenses 324 1,664 1,416
Other operating expenses 0 3,523 1,824
Depreciation and amortization 4 333 131
------------------------------------------
Operating income (loss) (108) 1,423 (391)
Other (income) expense:
Interest expense (income) 4 291 46
Other, net 0 61 (4)
------------------------------------------
Income (loss) before provision for income taxes (112) 1,071 (433)
Provision for income taxes 322
------------------------------------------
Net income (loss) (112) 749 (433)
==========================================
Net income per share
Shares used in computing pro forma net income per share (See Note 5)
<CAPTION>
Security American Eagle
EarlyBird Bullit Despatch Endeavors Atlantic Frt
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 10,995 6,612 7,366 5,222 6,760
Cost of revenues 6,264 3,851 4,350 3,447 4,791
-----------------------------------------------------------------------
Gross profit 4,731 2,761 3,016 1,775 1,969
Operating expenses:
Sales and marketing 280 274 128 1,008 108
General and administrative expenses 102 432 352 1,081 282
Other operating expenses 2,255 1,710 1,526 1,557
Depreciation and amortization 96 5 61 130 219
-----------------------------------------------------------------------
Operating income (loss) 1,998 340 949 (444) (197)
Other (income) expense:
Interest expense (income) 355 76 29 51 50
Other, net (78) (48)
-----------------------------------------------------------------------
Income (loss) before provision for income taxes 1,643 264 920 (417) (199)
Provision for income taxes 70 99 266 (167) (149)
-----------------------------------------------------------------------
Net income (loss) 1,573 165 654 (250) (50)
=======================================================================
Net income per share
Shares used in computing pro forma net income per share (See Note 5)
<CAPTION>
Washington Exp MLQ Express Kangaroo Nat'l Messenger Fleetfoot
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 4,341 4,617 2,140 2,082 1,842
Cost of revenues 2,302 2,752 1,520 1,203 1,177
-----------------------------------------------------------------------
Gross profit 2,039 1,865 620 879 665
Operating expenses:
Sales and marketing 386 190 15 82 17
General and administrative expenses 316 1,396 231 353 224
Other operating expenses 1,216 350 123 287
Depreciation and amortization 83 54 39 15 44
-----------------------------------------------------------------------
Operating income (loss) 38 225 (15) 306 93
Other (income) expense:
Interest expense (income) 70 (36) 6 39
Other, net (16) (4) (31)
-----------------------------------------------------------------------
Income (loss) before provision for income taxes (16) 261 (17) 306 85
Provision for income taxes (7) 5 35
-----------------------------------------------------------------------
Net income (loss) (9) 261 (17) 301 50
=======================================================================
Net income per share
Shares used in computing pro forma net income per share (See Note 5)
<CAPTION>
Express Profall
Fleetway 1800Denver Battery Point Messenger 1-800-CourLA
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 922 904 657 1,447 1,235
Cost of revenues 418 546 334 867 606
-----------------------------------------------------------------------
Gross profit 504 358 323 580 629
Operating expenses:
Sales and marketing 29 45 19 4
General and administrative expenses 96 49 22 276 416
Other operating expenses 249 359 100 217 208
Depreciation and amortization 72 31 11 19 20
-----------------------------------------------------------------------
Operating income (loss) 58 (126) 171 64 (15)
Other (income) expense:
Interest expense (income) 16 16 2 12 19
Other, net (3) (17) (40)
-----------------------------------------------------------------------
Income (loss) before provision for income taxes 45 (125) 169 52 6
Provision for income taxes
-----------------------------------------------------------------------
Net income (loss) 45 (125) 169 52 6
=======================================================================
Net income per share
Shares used in computing pro forma net income per share (See Note 5)
<CAPTION>
A&W
1 800 Boston Couriers Deadline Zoom A Courier
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 1,071 1,270 962 6,524 5,367
Cost of revenues 666 770 663 4,964 3,091
-----------------------------------------------------------------------
Gross profit 405 500 299 1,560 2,276
Operating expenses:
Sales and marketing 27 72 121 194 531
General and administrative expenses 84 198 121 592 422
Other operating expenses 178 184 133 951 1,016
Depreciation and amortization 35 11 142 48
-----------------------------------------------------------------------
Operating income (loss) 81 35 (76) (319) 259
Other (income) expense:
Interest expense (income) 7 (3) 73 11
Other, net 1 (72) (17) 11
---------------------------
-----------------------------------------------------------------------
Income (loss) before provision for income taxes 73 38 (4) (375) 237
Provision for income taxes 8 90
-----------------------------------------------------------------------
Net income (loss) 73 30 (4) (375) 147
=======================================================================
Net income per share
Shares used in computing pro forma net income per share (See Note 5)
<CAPTION>
Other
S-Car-Go Delta Air & Road Founding
Studebaker Zap Courier Transport Companies
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 309 593 1,251 24,736 7,282
Cost of revenues 179 299 710 15,322 4,457
-----------------------------------------------------------------------
Gross profit 130 294 541 9,414 2,825
Operating expenses:
Sales and marketing 15 55 95 252 183
General and administrative expenses 32 31 185 2,620 781
Other operating expenses 30 84 126 4,726 1,284
Depreciation and amortization 9 10 11 244 117
-----------------------------------------------------------------------
Operating income (loss) 44 114 124 1,572 460
Other (income) expense:
Interest expense (income) 1 5 5 51
Other, net (2) (2) 106
-----------------------------------------------------------------------
Income (loss) before provision for income taxes 43 111 119 1,574 303
Provision for income taxes 52 479 11
-----------------------------------------------------------------------
Net income (loss) 43 111 67 1,095 292
=======================================================================
Net income per share
Shares used in computing pro forma net income per share (See Note 5)
</TABLE>
Pro Forma Pro Forma
Adjustments Combined
---------------------------
Revenues 136,536
Cost of revenues 84,639
---------------------------
Gross profit 51,897
Operating expenses:
Sales and marketing 4,926
General and administrative expenses (1,496) 12,602
Other operating expenses 24,216
Depreciation and amortization 1,900 3,894
---------------------------
Operating income (loss) (404) 6,259
Other (income) expense:
Interest expense (income) 1,196
Other, net (155)
---------------------------
Income (loss) before provision for income taxes (404) 5,218
Provision for income taxes 1,464 2,578
------------- ------------
Net income (loss) (1,868) 2,640
===========================
Net income per share $ 0.23
============
Shares used in computing pro forma net income
per share (See Note 5) 11,462,526
============
F-3
<PAGE>
Dispatch Management Services Corp.
Combining Statement of Operations
For the Year Ended December 31, 1996
(Unaudited)
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
West Security
One Aero Early Bird Bullit Despatch
-----------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 24,148 10,998 22,894 7,696 9,440
Cost of Revenues 16,029 6,333 15,860 4,639 7,146
-----------------------------------------
Gross profit 8,119 4,665 7,034 3,057 2,294
Operating expenses:
Sales and marketing 1,119 900 1,072 358
General and administrative expenses 2,112 902 670 642 998
Other operating expenses 2,838 2,853 5,436 2,116
Depreciation and amortization 298 119 195 6
-----------------------------------------
Operating income (loss) 1,752 (109) (339) (65) 1,296
Other (income) expense:
Interest expense 369 56 219 107 21
Other, net (2) 34 85 (56)
-----------------------------------------
Income (loss) before provision for income taxes 1,385 (199) (643) (116) 1,275
Provision for income taxes 360 0 2 (33) 382
-----------------------------------------
Net income (loss) 1,025 (199) (645) (83) 893
=========================================
Net income per share
Shares used in computing pro forma net income
per share (See Note 5)
<CAPTION>
American
Eagle Atlantic Washington MLQ Nat'l 1 800
Endeavors Freight Express Express Kangaroo Messenger Fleetfoot Fleetway Denver
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues 8,536 8,728 5,800 5,310 2,650 2,413 2,172 1,048 1,247
Cost of Revenues 5,293 5,941 3,164 3,296 1,878 1,446 1,332 558 764
--------------------------------------------------------------------------------------
Gross profit 3,243 2,787 2,636 2,014 772 967 840 490 483
Operating expenses:
Sales and marketing 1,535 105 483 233 27 86 368 58
General and administrative expenses 940 693 390 991 265 454 24 572 58
Other operating expenses 2,232 1,532 579 405 154 250 298
Depreciation and amortization 174 270 91 94 50 13 66 36
--------------------------------------------------------------------------------------
Operating income (loss) 594 (513) 140 117 25 260 132 (82) 33
Other (income) expense:
Interest expense 62 83 70 43 10 57 22 19
Other, net 33 36 (18) (38) (2) (34) 4
--------------------------------------------------------------------------------------
Income (loss) before provision for income taxes 499 (632) 88 112 17 260 109 (104) 10
Provision for income taxes 200 (123) 38 32 5 (54)
--------------------------------------------------------------------------------------
Net income (loss) 299 (509) 50 80 17 255 163 (104) 10
======================================================================================
Net income per share
Shares used in computing pro forma net income
per share (See Note 5)
<CAPTION>
Battery Express Profall 800 A&W
Point Messenger 1-800-CourLA1 Boston Couriers Deadline Zoom A Courier
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues 732 1,612 1,212 1,343 1,560 1,177 8,404 6,020
Cost of Revenues 397 986 687 897 940 753 6,314 3,447
------------------------------------------------------------------------------
Gross profit 335 626 525 446 620 424 2,090 2,573
Operating expenses:
Sales and marketing 24 16 27 102 143 173 530
General and administrative expenses 31 277 298 169 289 144 747 430
Other operating expenses 113 246 271 231 228 143 1,317 1,093
Depreciation and amortization 10 47 23 44 10 191 74
------------------------------------------------------------------------------
Operating income (loss) 157 40 (67) (25) (9) (6) (338) 446
Other (income) expense:
Interest expense 16 25 16 2 63 13
Other, net 3 (64) 22 (4) (5) (30) (27)
------------------------------------------------------------------------------
Income (loss) before provision for income taxes 154 24 (28) (63) (7) (1) (371) 460
Provision for income taxes 4 174
------------------------------------------------------------------------------
Net income (loss) 154 24 (28) (63) (11) (1) (371) 286
==============================================================================
Net income per share
Shares used in computing pro forma net income
per share (See Note 5)
<CAPTION>
Delta Air Other
S-Car-Go & Road Founding Pro Forma Pro Forma
Studebaker Zap Courier Transport Companies Adjustments Combined
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues 342 941 1,263 29,021 8,719 (9,705) 165,721
Cost of Revenues 202 653 801 18,079 5,213 (8,448) 104,600
-------------------------------------------------------------------------
Gross profit 140 288 462 10,942 3,506 (1,257) 61,121
Operating expenses:
Sales and marketing 13 63 87 451 240 (769) 7,444
General and administrative expenses 13 39 206 2,944 1,406 (1,982) 14,722
Other operating expenses 31 42 140 5,468 1,472 (2,251) 27,237
Depreciation and amortization 14 3 15 367 173 2,473 4,856
-------------------------------------------------------------------------
Operating income (loss) 69 141 14 1,712 215 1,272 6,862
Other (income) expense:
Interest expense 1 3 2 38 52 1,369
Other, net (7) 92 22
-------------------------------------------------------------------------
Income (loss) before provision for income taxes 68 138 12 1,681 71 1,272 5,471
Provision for income taxes 7 543 0 1,356 2,893
-------------------------------------------------------------------------
Net income (loss) 68 138 5 1,138 71 (84) 2,578
=========================================================================
Net income per share $ 0.22
============
Shares used in computing pro forma net income
per share (See Note 5) 11,462,526
============
</TABLE>
F-4
<PAGE>
Dispatch Management Services Corp.
Combining Statement of Operations
For the Nine Months Ended September 30, 1996
(Unaudited)
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
West One Aero EarlyBird
-----------------------------------
<S> <C> <C> <C>
Revenues 18,838 8,245 16,724
Cost of revenues 12,579 4,730 11,565
-----------------------------------
Gross profit 6,259 3,515 5,159
Operating expenses:
Sales and marketing 78 676 703
General and administrative expenses 1,734 1,129 388
Other operating expenses 2,853 1,681 4,017
Depreciation and amortization 222 80 176
-----------------------------------
Operating income (loss) 1,372 (51) (125)
Other (income) expense:
Interest expense 262 41 208
Other, net 18 24 64
-----------------------------------
Income (loss) before provision for income taxes 1,092 (116) (397)
Provision for income taxes 282 2
-----------------------------------
Net income (loss) 810 (116) (399)
===================================
Net income per share
Shares used in computing pro forma net income
per share (See Note 5)
<CAPTION>
American
Security Eagle Atlantic Washington MLQ
Bullit Despatch Endeavors Freight Express Exprsss Kangaroo
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues 5,879 6,776 6,476 6,192 4,372 3,621 2,001
Cost of revenues 3,466 3,856 4,058 4,465 2,368 2,201 1,398
----------------------------------------------------------------------------------
Gross profit 2,413 2,920 2,418 1,727 2,004 1,420 603
Operating expenses:
Sales and marketing 230 152 1,149 73 359 152 21
General and administrative expenses 401 370 600 393 300 1,171 192
Other operating expenses 1,613 1,341 1,379 1,160 296
Depreciation and amortization 5 62 130 201 53 65 26
----------------------------------------------------------------------------------
Operating income (loss) 164 995 539 (319) 132 32 68
Other (income) expense:
Interest expense 72 27 49 29 44 (14) 7
Other, net 8 16 (13) (2)
----------------------------------------------------------------------------------
Income (loss) before provision for income taxes 92 968 482 (364) 101 46 63
Provision for income taxes 47 274 197 (57) 43
----------------------------------------------------------------------------------
Net income (loss) 45 694 285 (307) 58 46 63
==================================================================================
Net income per share
Shares used in computing pro forma net income
per share (See Note 5)
<CAPTION>
Nat'l Battery Express Profall
Messenger Fleetfoot Fleetway 1-800Denver Point Messenger 1-800-CourLA
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues 1,801 1,565 867 969 532 1,222 850
Cost of revenues 1,116 852 360 567 279 729 489
-----------------------------------------------------------------------------------
Gross profit 685 713 507 402 253 493 361
Operating expenses:
Sales and marketing 68 17 34 42 10 17
General and administrative expenses 329 192 59 41 17 216 232
Other operating expenses 124 354 277 202 81 182 166
Depreciation and amortization 10 48 69 28 7 35 16
-----------------------------------------------------------------------------------
Operating income (loss) 154 102 68 89 138 43 (53)
Other (income) expense:
Interest expense 44 6 15 2 12 19
Other, net (18) 3 (51)
-----------------------------------------------------------------------------------
Income (loss) before provision for income taxes 154 76 62 71 136 31 (21)
Provision for income taxes 3 (61)
-----------------------------------------------------------------------------------
Net income (loss) 151 137 62 71 136 31 (21)
===================================================================================
Net income per share
Shares used in computing pro forma net income
per share (See Note 5)
<CAPTION>
A&W
1 800 Boston Couriers Deadline Zoom A Courier Studebaker Zap
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues 1,023 1,171 824 6,318 4,380 244 448
Cost of revenues 678 683 536 4,954 2,481 140 243
----------------------------------------------------------------------------------
Gross profit 345 488 288 1,364 1,899 104 205
Operating expenses:
Sales and marketing 6 76 103 70 305 10 49
General and administrative expenses 109 222 103 563 292 18 20
Other operating expenses 202 172 103 798 776 25 64
Depreciation and amortization 36 8 178 52 6 3
----------------------------------------------------------------------------------
Operating income (loss) (8) 10 (21) (245) 474 45 69
Other (income) expense:
Interest expense 13 (3) 34 8 1 3
Other, net 1 (3) (28) (20)
----------------------------------------------------------------------------------
Income (loss) before provision for income taxes (22) 13 (18) (251) 486 44 66
Provision for income taxes 2 185
----------------------------------------------------------------------------------
Net income (loss) (22) 11 (18) (251) 301 44 66
==================================================================================
Net income per share
Shares used in computing pro forma net income
per share (See Note 5)
<CAPTION>
Delta Air Other
S-Car-Go & Road Founding Pro Forma Pro Forma
Courier Transport Companies Adjustments Combined
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 921 21,972 6,535 (6,879) 123,887
Cost of revenues 536 13,653 3,915 (5,941) 76,956
--------------------------------------------------------------
Gross profit 385 8,319 2,620 (938) 46,931
Operating expenses:
Sales and marketing 75 484 129 (480) 4,608
General and administrative expenses 158 2,152 625 (792) 11,234
Other operating expenses 102 3,996 1,250 (1,789) 21,425
Depreciation and amortization 11 275 134 1,828 3,764
--------------------------------------------------------------
Operating income (loss) 39 1,412 482 295 5,900
Other (income) expense:
Interest expense 1 26 906
Other, net (5) 142 136
--------------------------------------------------------------
Income (loss) before provision for income taxes 38 1,417 314 295 4,858
Provision for income taxes 18 449 13 1,055 2,452
--------------------------------------------------------------
Net income (loss) 20 968 301 (760) 2,406
===============================================================
Net income per share $ 0.21
============
Shares used in computing pro forma net income
per share (See Note 5) 11,462,526
============
</TABLE>
F-5
<PAGE>
DISPATCH MANAGEMENT SERVICES CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Note 1--General
Dispatch Management Services Corp. (the "Company") was recently formed to
create one of the largest providers of urgent, on-demand, point-to-point
delivery services in the world. The Company has conducted no operations other
than in connection with the Offering, and the Combinations and acquired the
Founding Companies concurrently with and as a condition to the closing of the
Offering.
The historical financial statements reflect the financial position and
results of operations of the Company, the Founding Companies and Delta and were
derived from the respective Founding Companies' and Delta's financial statements
where indicated. Information presented for the year ended December 31, 1996
reflects the operating results of the Founding Companies and Delta for such
period except that Bullit Courier Services, West One, Security Despatch, MLQ
Express, Washington Express, National Messenger , Fleetway and Delta operating
results are for the years ended February 28, 1997, September 30, 1996, March 31,
1997, February 28, 1997, September 30, 1996, November 30, 1996, March 31, 1997
and March 31, 1997, respectively. Information presented for the nine months
ended September 30, 1996 and 1997 reflects the operating results of the Founding
Companies and Delta for such period except that West One and Washington Express
operating results are for the nine months ended June 30, 1996 and 1997,
Fleetfoot operating results are for the nine months ended August 31, 1996 and
1997, and Delta operating results are for the nine months ended December 31,
1996 and 1997, respectively. The audited historical financial statements
included elsewhere herein have been included in accordance with Securities and
Exchange Commission Staff Accounting Bulletin No. 80.
Note 2--Acquistion of Founding Companies and Delta
Concurrently and as a condition with the closing of the Offering, the
Company acquired the Founding Companies in separate transactions, in exchange
for cash or shares of its Common Stock or a combination of both. The
acquisitions were accounted for using the purchase method of accounting with the
Company being identified as the accounting acquiror. The Company acquired the
outstanding stock of Delta on April 7, 1998, which was accounted for using the
purchase method of accounting.
The following table sets forth the consideration paid (the "Purchase
Consideration") in cash and in shares of Common Stock to the common stockholders
of each of the Founding Companies and Delta, the allocation of the consideration
to net assets acquired and the resulting goodwill. For purposes of computing the
estimated purchase price for accounting purposes, the value of shares is
determined using an estimated fair value of $9.94 per share, which represents a
discount of 25 percent from the assumed initial public offering price of $13.25
per share due to restrictions on the sale and transferability of the shares
issued. The total purchase consideration does not reflect contingent
consideration related to certain earn out provisions included in the definitive
agreements. These arrangements provide for the Company to pay additional
consideration, based on revenues and operating income targets, of up to $14.7
million in cash, over the eight quarters immediately following the closing of
the Offering. When these amounts are earned they will be recorded as additional
costs of the acquired companies resulting in additional goodwill.
The purchase price has been allocated to the Company's historical assets
and liabilities based on their respective carrying values, with the exception of
acquired in process research and development (R&D) activities and acquired
internally developed technology, as these carrying values are deemed to
represent the fair market value of these assets and liabilities. The fair market
value of the in process R&D and internally developed technology was determined
based on a detailed analysis prepared by the Company. The Company has not
allocated any of the purchase price to other identified intangible assets such
as non-compete agreements and customer lists, as these assets are deemed to have
nominal value and are not considered material. With respect to the customer
lists, the Company has determined that virtually all of the Founding Companies
and Delta operate on an "at will" basis with their customers, and consequently
no value has been allocated to this asset. Additionally, the Company has entered
into non-compete agreements, with Founding Company shareholders, who have also
entered into employment or Brand Manager agreements, as such, management
believes the non-compete agreements have nominal value. Accordingly, the Company
has not allocated a portion of the purchase price to the non-compete agreements.
F-6
<PAGE>
Dispatch Management Services Corp.
Notes to the Unaudited Pro Forma Financial Statements (Continued)
(In Thousands, Except Share Amounts)
NOTE 2--Acquisition of Founding Companies and Delta (Continued)
<TABLE>
<CAPTION>
TOTAL CONSIDERATION
---------------------------------
FAIR MARKET
VALUE OF ADJUSTED ALLOCATION OF
FOUNDING COMPANY SHARES STOCK CASH TOTAL NET ASSETS PURCHASE PRICE GOODWILL
- -------------------------- ---------- ----------- --------- --------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
West One.................. 183,481 $ 1,858 $ 16,672 $ 18,530 $ 2,952 $ 15,578
Aero Special Delivery
Service, Inc............ 270,000 2,734 942 3,676 (2,391) 6,067
Earlybird Courier Service,
LLC..................... 344,370 3,487 9,373 12,860 984 11,876
Bullit Services Inc....... 222,222 2,250 3,722 5,972 343 5,629
Security Despatch
Limited................. 6,918 6,918 1,302 5,616
American Eagle Endeavors,
Inc..................... 315,852 3,198 3,198 (159) 3,357
Atlantic Freight Systems,
Inc..................... 311,111 3,150 3,150 187 2,963
Washington Express
Services, Inc........... 206,815 2,094 2,094 (17) 2,111
MLQ Express, Inc.......... 4,652 4,652 517 4,135
Kangaroo Express.......... 79,926 809 809 (82) 891
National Messenger,
Inc..................... 89,652 908 245 1,153 78 1,075
Fleetfoot Max, Inc........ 94,756 959 959 10 949
Fleetway.................. 149,333 1,512 842 2,354 227 $ 700(a) 687
740(b)
1-800Denver............... 57,333 581 581 19 562
Battery Point............. 31,681 321 321 92 229
Detroit Express........... 55,556 563 563 107 456
1-800Courier LAX.......... 33,333 338 129 467 (365) 832
Expressit Couriers,
Inc..................... 47,111 477 477 90 387
A&W Couriers, Inc......... 55,896 566 566 143 423
Deadline Courier.......... 68,370 692 692 (5) 697
Zoom Courier.............. 148,148 1,500 1,500 152 1,348
A Courier................. 142,222 1,440 1,237 2,677 940 1,737
Michael Studebaker, Sole
Prop.................... 13,326 135 23 158 55 103
Chris Neil, Sole Prop
Zap..................... 35,000 354 354 59 295
S-Car-Go Courier, Inc..... 47,289 479 2 481 161 320
Other Founding
Companies............... 313,291 3,170 411 3,581 927 2,654
Delta 21,700 21,700 3,408 18,292
---------- ----------- --------- --------- ----------- ------ ---------
3,316,074 $ 33,575 $ 66,868 $ 100,443 $ 9,734 $ 1,440 $ 89,269
---------- ----------- --------- --------- ----------- ------ ---------
---------- ----------- --------- --------- ----------- ------ ---------
</TABLE>
a) Represents amount allocated to in process research and development
activities.
(b) Represents amount allocated to acquired internally developed technology.
F-7
<PAGE>
Dispatch Management Services Corp.
Notes to Unaudited Pro Forma Combined Financial Statements (Continued)
(In Thousands, Except Share Amounts)
Note 3--Unaudited Pro Forma Combined Balance Sheet Adjustements
The following table summarizes unaudited pro forma combined balance sheet
adjustments:
<TABLE>
<CAPTION>
Merger Offering Post
Adjust Pro Forma Adjust Merger
ments Adjust ments Adjust
ASSETS ( A ) ( B ) ( C ) ( D ) ments ( E ) ( F ) ( G ) ments
------ ------ ----- ----- --------- -------- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents (21,700) (21,700) 80,004 (59,832) (1,050) 19,122
Accounts receivable, net --
Prepaid and other current assets -- (3,113) (3,113)
------ ------ --- --- ------ ------ ------ ----- ------
Total current assets (21,700) (21,700) 76,891 (59,832) (1,050) 16,009
Property and equipment, net 273 273
Other assets 700 (700) -- 14,664 14,664
Goodwill, net 89,269 300 89,569
------ ------ --- --- ------ ------ ------ ----- ------
Total assets 68,542 (700) 300 68,142 76,891 (45,168) (1,050) 30,673
====== ====== === === ====== ====== ====== ===== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short term debt -- (1,050) (1,050)
Accounts payable --
Accrued expenses -- (2,534) (2,534)
Other current liabilities 300 300
Payable to shareholders of founding co. 45,168 45,168 (45,168) (45,168)
------ ------ --- --- ------ ------ ------ ----- ------
Total current liabilities 45,168 -- 300 45,468 (2,534) (45,168) (1,050) (48,752)
Long-term debt, less current maturities (1,669) (1,669) --
Other long term liabilities -- --
------ ------ --- --- ------ ------ ------ ----- ------
Total liabilities 45,168 (1,669) 300 43,799 (2,534) (45,168) (1,050) (48,752)
Stockholders' equity
Preferred Stock -- -- (2) (2)
Common Stock (3,270) (3,270) 73 73
Treasury stock 1,867 1,867
Additional paid-in capital (45,168) 75,302 30,134 79,354 79,354
Retained earnings (3,688) (700) (4,388) --
------ ------ --- --- ------ ------ ------ ----- ------
Total stockholders' equity (45,168) 70,211 (700) -- 24,343 79,425 -- -- 79,425
Total liabilities and
stockholders' equity 68,542 (700) 300 68,142 76,891 (45,168) (1,050) 30,673
====== ====== === === ====== ====== ====== ===== ======
</TABLE>
F-8
<PAGE>
Dispatch Management Services Corp.
Notes to Unaudited Pro Forma Combined Financial Statements (Continued)
(In Thousands, Except Share Amounts)
Note 3--Unaudited Pro Forma Combined Balance Sheet Adjustements (Continued)
(A) Records the liability for the cash portion of the consideration to be paid
to the stockholders of the Founding Companies in connection with the
Combinations.
(B) Records the purchase of the Founding Companies and Delta, consisting of
$66,868 (net of $14,664 of earnout) in cash and 3,316,074 shares of common stock
valued at $9.94 per share (or $33,575), for a total purchase price of $100,443.
Adjustment also reflects $467 of certain assets which will not be acquired and
$1,669 of certain liabilities which will not be assumed in the Combinations and
the allocation of $700 of the purchase price to acquired research and
development activities (in-process research and development) and $740 of
acquired internally developed software at a Founding Company. The excess
purchase price over the fair value of the net assets acquired is $89,269.
(C) Records the write-off of the acquired in-process research and development
from a Founding Company.
(D) Records the net deferred income tax liability attributable to the temporary
differences between the financial reporting and tax basis of assets and
liabilities held in S Corporations of $300 at certain Founding Companies.
(E) Records the cash proceeds from the issuance of shares of DMS Common Stock
net of estimated offering costs (based on assumed initial public offering of
$13.25 per share) including the underwriters exercise of the overallotment
option during March 1998. Offering costs primarily consist of underwriting
discounts and commissions, accounting fees, legal fees and printing expenses.
(F) Records the cash portion of the consideration paid to the stockholders of
the Founding Companies and Delta in connection with the Combinations ($81,532)
to be paid from proceeds of the Offering and the loan receivable of $14,664
related to earnout.
(G) Records the use of a portion of the proceeds from the Offering to
repaycertain indebtedness of the Company.
Note 4--Unaudied Pro Forma Combined Statements of Operations Adjustements
The following table summarizes unaudited pro forma combined statements of
operations adjustments:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
For the year ended December 31, 1996:
- ---------------------------------------------------------------------------------------------------
Total
Pro Forma
( A ) ( B ) ( C ) ( D ) ( E ) Adjustments
<S> <C> <C> <C> <C> <C> <C>
Revenues (9,705) (9,705)
Cost of Revenues (8,448) (8,448)
----- --- ----- ----- ----- -----
Gross profits (1,257) (1,257)
Operating expenses:
Sales and marketing (769) (769)
General and administrative expenses (1,783) (319) 120 (1,982)
Other operating expenses (2,251) (2,251)
Depreciation and amortization 2,531 (58) 2,473
----- --- ----- ----- ----- -----
Operating income (loss) 1,783 319 (2,531) 1,701 1,272
Other (income) expense:
Interest expense
Other, net
Income (loss) before provision for
----- --- ----- ----- ----- -----
income taxes 1,783 319 (2,531) 1,701 1,272
Provision for income taxes -- 1,356 1,356
- ---------------------------------------------------------------------------------------------------
</TABLE>
F-9
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
----- --- ----- ----- ----- -----
Net income (loss) 1,783 319 (2,531) 1,701 (1,356) (84)
===== === ===== ===== ===== =====
<CAPTION>
For the nine months ended September 30, 1997:
Total
Pro Forma
( A ) ( B ) ( C ) ( D ) ( E ) Adjustments
<S> <C> <C> <C> <C> <C> <C>
Revenues
Cost of revenues
Gross profit
Operating expenses:
Sales and marketing
General and administrative expenses (875) (621) (1,496)
Other operating expenses
Depreciation and amortization 1,900 1,900
----- --- ----- ----- ----- -----
Operating income (loss) 875 621 (1,900) (404)
Other (income) expense:
Interest expense
Other, net
Income (loss) before provision for
----- --- ----- ----- ----- -----
income taxes 875 621 (1,900) (404)
Provision for income taxes 1,464 1,464
----- --- ----- ----- ----- -----
Net income (loss) 875 621 (1,900) (1,464) (1,868)
===== === ===== ===== ===== =====
<CAPTION>
For the nine months ended September 30, 1996:
Total
Pro Forma
( A ) ( B ) ( C ) ( D ) ( E ) Adjustments
<S> <C> <C> <C> <C> <C> <C>
Revenues (6,879) (6,879)
Cost of revenues (5,941) (5,941)
----- --- ----- ----- ----- -----
Gross profit (938) (938)
Operating expenses:
Sales and marketing (480) (480)
General and administrative expenses (600) (67) (125) (792)
Other operating expenses (1,789) (1,789)
Depreciation and amortization 1,900 (72) 1,828
----- --- ----- ----- ----- -----
Operating income (loss) 600 67 (1,900) 1,528 295
Other (income) expense:
Interest expense
Other, net
Income (loss) before provision for
----- --- ----- ----- ----- -----
income taxes 600 67 (1,900) 1,528 295
Provision for income taxes 1,037 1,037
----- --- ----- ----- ----- -----
Net income (loss) 600 67 (1,900) 1,528 (1,037) (742)
===== === ===== ===== ===== =====
- ---------------------------------------------------------------------------------------------------
</TABLE>
F-10
<PAGE>
(A) Reflects the reductions in salaries, bonuses and benefits to the owners of
the Founding Companies to which they have agreed prospectively.
(B) Reflects the reduction in royalty payments made by certain Founding
Companies in accordance with franchise agreements which will be terminated as a
result of the Combinations.
(C) Reflects the amortization of goodwill to be recorded as a result of the
Combinations and the acquisition of Delta over 5 to 40-year estimated lives. The
average amortization period is 33.9 years. The estimated lives were determined
based on an analysis of the individual Founding Companies and Delta, which
included the following factors (a) the length of time the company has been in
business (b) comparable companies within the same industry and (c) the
technology of the company.
(D) Reflects the disposal of a segment of a business at one Founding Company.
Approximately 80% of the segment was disposed of on September 30, 1997 and
management has a formal plan to dispose of the remaining portion of the segment
prior to the close of the Combinations.
(E) Reflects the incremental provision for federal and state income taxes
assuming all entities were subject to federal and state income tax and relating
to the other statements of operations' adjustments assuming a corporate income
tax rate of 38% and that a majority of the goodwill is non-deductible.
Note 5--Unaudited Pro Froma Combined Statements of Operations Adjustements
(Continued)
Includes (i) 1,246,452 shares issued to existing shareholders of the
Company, (ii) 3,316,074 shares issued to the owners of the Founding Companies,
and (iii) 6,900,000 shares sold in the Offering.
F-11
