<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: February 14, 2000
(Date of earliest event reported: December 15, 1999)
RAZORFISH, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-25847 13-3804503
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
107 Grand Street, 3rd Floor, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
(212) 966-5960
(Registrant's telephone number, including area code)
Not applicable.
(Former name or former address, if changed since last report)
<PAGE> 2
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
The undersigned Registrant hereby amends Item 7 of its current report on
Form 8-K dated December 15, 1999 to read in its entirety as follows:
(a) Financial Statements of Acquired Companies.
Report of Independent Accountants
To the Shareholder of
Lee Hunt Associates, Inc.:
In our opinion, the accompanying balance sheets and the related statements of
operations, shareholder's equity (deficit) and cash flows present fairly, in
all material respects, the financial position of Lee Hunt Associates, Inc. at
December 31, 1998, and the results of its operations and its cash flows for the
year then ended, in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
As explained in Note 1, on December 1, 1999, 100% of the Company's common stock
was acquired by Razorfish, Inc.
Boston, Massachusetts PricewaterhouseCoopers LLP
January 27, 2000
<PAGE> 3
LEE HUNT ASSOCIATES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, SEPTEMBER 30,
1998 1999
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 19,503 $ 706,554
Marketable securities 50,718 --
Accounts receivable, net of allowance for doubtful accounts of $101,352
at December 31, 1998 and September 30, 1999, respectively 878,016 1,865,004
Prepaid expenses and other current assets 97,307 145,703
----------- -----------
Total current assets 1,045,544 2,717,261
Property and equipment, less accumulated depreciation of $603,436 and
$779,329, at December 31, 1998 and September 30, 1999, respectively 1,171,869 1,001,892
Other assets 87,495 85,576
----------- -----------
Total assets $ 2,304,908 $ 3,804,729
----------- -----------
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued expenses $ 2,014,932 $ 3,565,970
Bank note payable 425,000 225,000
Current maturities of long-term debt 160,566 119,648
Loan payable to officer/shareholder 161,887 530,007
Deferred rent 215,266 240,840
Deferred revenue 219,440 128,506
Other current liabilities 22,227 7,897
----------- -----------
Total current liabilities 3,219,318 4,817,868
Long-term debt, less current maturities 117,427 69,874
----------- -----------
Total liabilities 3,336,745 4,887,742
----------- -----------
SHAREHOLDER'S EQUITY (DEFICIT)
Common stock, $.01 par value; 1,000 shares authorized 100 shares issued and
outstanding at December 31, 1998 and September 30, 1999, respectively 1 1
Additional paid-in capital 109,173 109,173
Accumulated deficit (1,156,695) (1,192,187)
Unrealized gain on marketable securities available for sale 15,684 --
----------- -----------
Total shareholder's equity (deficit) (1,031,837) (1,083,013)
----------- -----------
Total liabilities and shareholder's equity (deficit) $ 2,304,908 $ 3,804,729
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 4
LEE HUNT ASSOCIATES, INC.
TATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED FOR THE NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Revenue $ 11,928,659 $ 12,676,579 $ 9,561,419
Production costs 9,960,739 10,606,733 7,505,169
------------ ------------ ------------
Gross profit 1,967,920 2,069,846 2,056,250
Selling, general and administrative expenses 3,582,301 2,065,181 2,645,432
------------ ------------ ------------
(Loss) income from operations (1,614,381) 4,665 (589,182)
------------ ------------ ------------
Other income (expense):
Interest and dividend income 5,322 2,287 2,509
Gain on sale of marketable securities -- 31,579 --
Interest expense (88,847) (74,023) (64,668)
------------ ------------ ------------
(Loss) income before income taxes (1,697,906) (35,492) (651,341)
Provision for income taxes -- -- --
------------ ------------ ------------
Net (loss) income $ (1,697,906) $ (35,492) $ (651,341)
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
LEE HUNT ASSOCIATES, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------ RETAINED UNREALIZED TOTAL
NUMBER ADDITIONAL EARNINGS GAIN (LOSS) ON SHAREHOLDER'S
OF PAID-IN (ACCUMULATED MARKETABLE EQUITY
SHARES AMOUNT CAPITAL DEFICIT) SECURITIES (DEFICIT)
------ ------ ------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 100 $ 1 $ 109,173 $ 541,211 $ (14,128) $ 636,257
Adjustment for unrealized
gain on marketable
securities available for sale 29,812 29,812
Net loss (1,697,906) (1,697,906)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 100 1 109,173 (1,156,695) 15,684 (1,031,837)
Sale of marketable
security (15,684) (15,684)
Net loss (35,492) (35,492)
----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30,
1999 (unaudited) 100 $ 1 $ 109,173 $(1,192,187) $ -- $(1,083,013)
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 6
LEE HUNT ASSOCIATES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE (UNAUDITED)
YEAR ENDED FOR THE NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities
Net (loss) income $(1,697,906) $ (35,492) $ (651,341)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 245,949 175,893 184,464
Provision for doubtful accounts 101,352 -- 101,352
Gain on sale of marketable security -- (31,579) --
Changes in operating assets and liabilities:
Accounts receivable 594,118 (986,988) 729,742
Unbilled revenue -- -- (28,246)
Prepaid expenses and other current assets 96,099 (48,396) (78,087)
Other assets -- 1,919 --
Accounts payable and accrued expenses 854,626 1,551,038 281,051
Other current liabilities (157) (14,330) (22,384)
Deferred rent 68,227 25,574 60,142
Deferred revenue 29,708 (90,934) (189,732)
Customer deposits (137,336) -- (137,336)
----------- ----------- -----------
Net cash provided by operating activities 154,680 546,705 249,625
----------- ----------- -----------
Cash flows (used in) provided by investing activities:
Purchase of property and plant (250,123) (5,916) (228,744)
Proceeds from sale of marketable securities -- 66,613 --
----------- ----------- -----------
Net cash (used in) provided by investing activities (250,123) 60,697 (228,744)
----------- ----------- -----------
Cash flows (used in) provided by financing activities:
Proceeds from bank note -- 425,000 --
Principal payments on bank note payable (25,000) (625,000) --
Proceeds from officer/shareholder loan payable -- 500,000 --
Principal payments on officer/shareholder loan payable (28,756) (131,880) (24,115)
Principal payments on long-term debt (75,898) (88,471) (48,450)
----------- ----------- -----------
Net cash (used in) provided by financing activities (129,654) 79,649 (72,565)
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (225,097) 687,051 (51,684)
Cash and cash equivalents, beginning of period 244,600 19,503 244,600
----------- ----------- -----------
Cash and cash equivalents, end of period $ 19,503 $ 706,554 $ 192,916
----------- ----------- -----------
Supplemental disclosure
Interest paid $ 88,847 $ 74,023 $ 56,385
Income taxes paid $ 70,873 $ -- $ 70,873
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 7
1. ORGANIZATION
Lee Hunt Associates, Inc., (the "Company"), was incorporated on May 11,
1990, under the laws of the State of New York. The Company is located
in New York City, and its principal activity is branding, strategic
marketing and creative production for the entertainment industry.
On December 1, 1999, 100% of the Company's common stock was acquired by
Razorfish, Inc. in exchange for Razorfish, Inc. Class A common stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The major accounting and reporting policies which have been followed in
preparing the accompanying financial statements are as follows:
REVENUE RECOGNITION
Revenues from production contracts are recognized on the percentage of
completion method, measured by the percentage of cost incurred to date
to estimated total cost for each contract. The Company considers total
costs to be the best available measure of progress on these contracts.
Deferred revenue consists of amounts billed at a rate in excess of
revenues recognized to date. Unbilled revenue represents revenues
recognized on production contracts in excess of billing dates.
Provisions for estimated losses on uncompleted contracts are made in
the period in which such losses are determined.
PRODUCTION COSTS
Production costs include external direct costs associated with the
production contracts and the salaries and related costs of all
production personnel.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
MARKETABLE SECURITIES
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS No. 115) in 1995. All marketable securities
are classified as "available for sale" and, accordingly, are reported
at fair value as of the balance sheet date, with net unrealized gains
and losses reported as a component of stockholder's equity. The cost of
securities is based on the specific identification method.
The following is a summary of available-for-sale securities at December
31, 1998:
<TABLE>
<CAPTION>
GROSS ESTIMATED
UNREALIZED FAIR
COST GAINS VALUE
<S> <C> <C> <C>
Equity securities $ 35,034 $ 15,684 $ 50,718
--------- ---------- ----------
</TABLE>
For the year ended December 31, 1998, there were no realized gains on
sales of available-for-sale securities. CONCENTRATION OF CREDIT RISK
Substantially all of the Company's business activity and related
accounts receivable is with clients operating in the
entertainment industry, none of which are collateralized.
For the year ended December 31, 1998, three customers accounted for 43%
of total revenues.
6
<PAGE> 8
Accounts receivable as of December 31, 1998 consisted of five customers
that represented 58% of total accounts receivable.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of all current assets and liabilities approximate
fair value due to the short-term maturity of these financial
instruments. The carrying amount of long-term debt approximates fair
value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, net of accumulated
depreciation and amortization. Property and equipment are depreciated
on a straight-line basis over estimated useful lives of five to
thirty-nine years. Leasehold improvements and equipment held under
capital leases are amortized utilizing the straight-line method over
the lesser of the estimated useful life of the asset or lease term.
COMPREHENSIVE INCOME
During 1998, the Company adopted SFAS No. 130 "Reporting Comprehensive
Income," which established standards for reporting and displaying
comprehensive income and its components in a financial statement that
is displayed with the same prominence as other financial statements.
The components of comprehensive income are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED FOR THE NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999 1998
<S> <C> <C> <C>
Net (loss) income $(1,697,906) $ (35,492) $ (651,341)
Unrealized gain (loss) on
marketable securities
available for sale 29,812 -- (12,440)
Comprehensive (loss) income $(1,668,094) $ (35,492) $ (663,781)
=========== =========== ===========
</TABLE>
INCOME TAXES
Effective January 1, 1997, the Company and its shareholder have elected
to be taxed under the provisions of subchapter "S" of the Internal
Revenue Code. Accordingly, no federal income tax will be imposed upon
the Company. Instead, the income derived therefrom will be taxed
directly to the individual shareholder. A similar election has been
made in the State of New York, for which the Company has incurred only
minimum taxes. The City of New York does not recognize such an
election.
7
<PAGE> 9
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions, specifically for the allowance for doubtful accounts
and the useful lives of fixed assets, that affect the reported amounts
of assets and liabilities, the 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.
UNAUDITED FINANCIAL STATEMENTS
The financial information as of September 30, 1999 and for the nine
months ended September 30, 1999 and 1998 is unaudited. The unaudited
financial information included herein as of September 30, 1999 and for
the nine months ended September 30, 1999 and 1998 have been prepared in
accordance with generally accepted accounting principles for interim
consolidated financial statements. In the opinion of the Company, these
unaudited financial statements reflect all adjustments necessary,
consisting of normal recurring adjustments, for a fair presentation of
such data on a basis consistent with that of the audited data presented
herein. The consolidated results for interim periods are not
necessarily indicative of the results expected for a full year.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 consist of the following:
<TABLE>
<S> <C> <C>
Equipment $1,112,427
Furniture and fixtures 254,310
Leasehold improvements 408,568
----------
1,775,305
Less: accumulated depreciation 603,436
----------
$1,171,869
----------
</TABLE>
Depreciation and amortization was $245,949 for the year ended December
31, 1998. As of December 31, 1998, the cost of equipment under capital
leases was $398,897, and the related accumulated amortization was
$125,604.
8
<PAGE> 10
4. LONG-TERM DEBT
Long-term debt at December 31, 1998, which consists of capital leases
for equipment and insurance loans, is as follows:
<TABLE>
<S> <C>
Insurance financing loans due in monthly installments
through April 1999 with an interest rate of 9.4% per annum $ 39,944
Various equipment financing loans due in monthly
installments through July 2001 with interest rates
ranging from 8.88% to 12.67 % per annum 238,049
--------
277,993
Less: current maturities 160,566
--------
Long-term portion $117,427
--------
</TABLE>
<TABLE>
<S> <C>
1999 $160,566
2000 77,889
2001 39,538
--------
Total $277,993
--------
</TABLE>
Aggregate maturities of long-term debt for the year ending December 31,
1998 is as follows:
<TABLE>
<S> <C>
Insurance financing loans due in monthly installments
through April 1999 with an interest rate of 9.4% per annum $ 39,944
Various equipment financing loans due in monthly
installments through July 2001 with interest rates
ranging from 8.88% to 12.67 % per annum 238,049
--------
277,993
Less: current maturities 160,566
--------
Long-term portion $117,427
--------
</TABLE>
<TABLE>
<S> <C>
1999 $160,566
2000 77,889
2001 39,538
--------
Total $277,993
--------
</TABLE>
5. BANK NOTE PAYABLE
The Company's bank line of credit, with a New York bank, was converted
to a secured offering basis loan during 1998. Interest on both the
secured offering basis loan and line of credit is compounded at 1.5%
above the bank's prime rate on the daily outstanding balance which was
9.25% at December 31, 1998. The loan payable is personally guaranteed
by the Company's shareholder and collateralized by certain equipment.
The outstanding balance at December 31, 1998 was $425,000.
6. RELATED PARTY TRANSACTIONS
The Company has an unsecured demand loan payable to its
officer/shareholder with no definite terms of repayment. Interest is
being paid at an annual rate of 6%. The outstanding balances at
December 31, 1998 and September 30, 1999 were $161,887 an $530,007,
respectively.
9
<PAGE> 11
7. LEASE COMMITMENTS
The Company rents office space under noncancelable operating leases
expiring September 30, 2007. At December 31, 1998 the minimum lease
payments under the terms of the lease agreements are as follows:
<TABLE>
<S> <C>
1999 $ 316,075
2000 330,629
2001 335,480
2002 335,480
2003 350,034
Thereafter 1,330,819
----------
Total $2,998,517
----------
</TABLE>
Total rent expense for the year ended 1998 was $362,958.
8. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution plan (the "Plan") covering all
of its eligible employees. The Plan was effective from September 1994
and is qualified under Section 401(k) of the Internal Revenue Code.
Employees may begin participation in the Plan on the first day of the
month following meeting eligibility requirements. Employees are
eligible to participate in the Plan when they have completed one year
of service and are 21 years of age or older. Participants are
immediately vested in 100% of employee contributions. The Company does
not make contributions to the Plan.
(b) Pro Forma Financial Information.
UNAUDITED PRO FORMA POOLED FINANCIAL INFORMATION
Financial Statements
The following unaudited pro forma pooled financial statements have been
prepared to give effect to Razorfish's merger with International Integration
Inc. ("i-Cube") and Razorfish's acquisition of Lee Hunt (the mergers), using the
pooling of interests method of accounting. On January 27, 1999 Razorfish
completed a two-for-one common stock split, in the form of a 100% stock
dividend. All share and per share amounts have been adjusted to give retroactive
effect to the two-for-one stock split.
The unaudited pro forma pooled financial statements reflect assumptions
deemed probable by management regarding the mergers. No adjustments to the
unaudited pro forma pooled financial information have been made to account for
different possible results in connection with the foregoing, as management
believes that the impact on such information by the varying outcomes,
individually or in the aggregate, would not be material.
For purposes of the unaudited pro forma pooled statements of operations for
the periods presented, Razorfish and i-Cube's consolidated statements of
operations for the fiscal year ended December 31, 1998 have been combined with
Lee Hunt's consolidated statements of operations for the fiscal years ended
December 31, 1998. Additionally, for purposes of the pro forma pooled statements
of operations, Razorfish and i-Cube's consolidated statements of operations for
the nine month periods ended September 30, 1998 and 1999 have been combined with
Lee Hunt's consolidated statements of operations for the nine month periods
ended September 30, 1998 and 1999, respectively.
<PAGE> 12
Razorfish and i-Cube estimate they will incur combined aggregate direct
transaction costs of approximately $18.8 million associated with the merger.
Razorfish and Lee Hunt estimate they will incur combined aggregate direct
transaction costs of approximately $1.8 million associated with the merger.
These costs generally consist of transaction fees for investment bankers,
attorneys, accountants, costs for integration activities and other related
costs. These nonrecurring transaction costs will be charged to operations upon
consummation of each transaction. An estimate for these charges has been
reflected in the pro forma pooled balance sheet. There can be no assurance that
the combined company will not incur additional charges or that management will
be successful in its efforts to integrate the operations of theses companies.
The unaudited pro forma pooled financial information is presented for
illustrative purposes only and is not necessarily indicative of the financial
position or results of operations that would have actually been reported had the
mergers occurred at the beginning of the periods presented, or as of September
30, 1999, as the case may be, nor is it necessarily indicative of the financial
position or results of operations of the merged companies in the future. Such
unaudited pro forma pooled financial statements are based upon the respective
historical consolidated financial statements of Razorfish, i-Cube and Lee Hunt
included elsewhere in this 8K/A or incorporated in it by reference, and do not
incorporate, nor do they assume, any benefits from cost savings or synergies
that the combined company may realize after the merger.
UNAUDITED PRO FORMA POOLED BALANCE SHEET
September 30, 1999
<TABLE>
<CAPTION>
Pooled
Razorfish, Pooling Razorfish,
Inc. i-Cube Lee Hunt Adjustments Inc.
---------- --------- --------- ----------- ----------
(In thousands except share data)
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents ............ $ 58,232 $ 41,593 $ 706 $ -- $ 100,531
Accounts receivable, net ............. 14,151 12,054 1,865 -- 28,070
Unbilled charges ..................... 6,625 6,173 -- -- 12,798
Prepaid expenses and other current
assets .............................. 1,967 1,771 146 -- 3,884
Deferred tax assets .................. 61 300 -- -- 361
Due from affiliates .................. 365 -- -- -- 365
--------- --------- --------- --------- ---------
Total current assets ................. 81,401 61,891 2,717 -- 146,009
Property and equipment, net ........... 6,307 6,520 1,002 -- 13,829
Intangibles, net ...................... 81,741 -- -- -- 81,741
Deferred tax assets ................... 798 9,541 -- -- 10,339
Other assets .......................... 2,640 1,339 86 -- 4,065
--------- --------- --------- --------- ---------
Total assets ......................... $ 172,887 $ 79,291 $ 3,805 $ -- $ 255,983
========= ========= ========= ========= =========
Current Liabilities:
Accounts payable and accrued
expenses ............................ $ 12,255 $ 9,982 $ 4,329 $ 12,360(b) $ 38,926
Income taxes payable ................. 318 2,646 -- -- 2,964
Deferred rent ........................ 234 -- 241 -- 475
Advanced billings .................... 2,642 753 129 -- 3,524
</TABLE>
<PAGE> 13
<TABLE>
<S> <C> <C> <C> <C> <C>
Current portion of capital lease
obligations ......................... 27 -- -- -- 27
Current portion of long-term
obligations ......................... -- 434 119 -- 553
Deferred tax liabilities ............. 573 -- -- -- 573
--------- --------- --------- --------- ---------
Total current liabilities ............ 16,049 13,815 4,818 12,360 47,042
Long-term debt ........................ 169 1,500 70 -- 1,739
Capital lease obligations ............. 152 -- -- -- 152
Minority interest ..................... 26 -- -- -- 26
Other liabilities ..................... 2,135 -- -- -- 2,135
--------- --------- --------- --------- ---------
Total liabilities .................... 18,531 15,315 4,888 12,360 51,094
--------- --------- --------- --------- ---------
Stockholders' equity:
Preferred stock ...................... -- -- -- -- --
Common stock:
Class A .............................. 508 400 2 (41)(a) 869
Class B .............................. -- -- -- -- --
Note receivable from officer ......... -- (533) -- -- (533)
Additional paid-in capital ........... 152,120 43,858 108 41(a) 196,127
Cumulative foreign currency
translation adjustments ............. 22 88 -- -- 110
Retained earnings .................... 2,294 20,163 (1,193) (12,360) 8,316
Less: Treasury stock ................. (588) -- -- -- (588)
--------- --------- --------- --------- ---------
Total stockholders' equity .......... 154,356 63,976 (1,083) (12,360) 204,899
--------- --------- --------- --------- ---------
Total liabilities and
stockholders' equity ............... $ 172,887 $ 79,291 3,085 $ -- $ 255,983
========= ========= ========= ========= =========
</TABLE>
The accompanying notes and management's assumptions to the unaudited pro forma
pooled
financial statements are integral parts of this statement.
UNAUDITED PRO FORMA POOLED STATEMENT OF OPERATIONS
For The Nine Months Ended September 30, 1999
<TABLE>
<CAPTION>
Razorfish, Pooling Pooled
Inc. i-Cube Lee Hunt Adjustments Razorfish, Inc.
(In thousands except per share data)
---------- --------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues ........................................ $ 46,468 $ 57,047 $ 12,677 $ -- $ 116,192
Project personnel costs ......................... 19,852 25,379 10,607 -- 55,838
--------- --------- --------- ------- ---------
Gross profit .................................... 26,616 31,668 2,070 -- 60,354
Sales and marketing ............................. 2,471 5,561 569 -- 8,601
General and administrative ...................... 17,059 13,816 1,496 -- 32,371
Amortization of
intangibles .................................... 2,529 -- -- -- 2,529
Acquisition costs ............................... -- 3,445 -- -- 3,445
Non-cash compensation
expense ........................................ 162 -- -- -- 162
--------- --------- --------- ------- ---------
Income (loss) from
operations ..................................... 4,395 8,846 5 -- 13,246
Minority interest ............................... (22) -- -- -- (22)
</TABLE>
<PAGE> 14
<TABLE>
<S> <C> <C> <C> <C> <C>
Interest (income), net .......................... (1,385) (1,218) 40 -- (2,563)
--------- --------- --------- ------- ---------
Income (loss) before
income taxes ................................. 5,802 10,064 (35) -- 15,831
Provision for (benefit from)
income taxes ................................... 3,731 3,815 -- -- 7,546
--------- --------- --------- ------- ---------
Net (loss) income ........................... $ 2,071 $ 6,249 (35) $ -- $ 8,285
========= ========= ========= ======= =========
Per share information:
Net income (loss) per
share:
Basic ....................................... $ 0.05 $ 0.16 -- $ -- $ 0.10
========= ========= ========= ======= =========
Diluted ..................................... $ 0.04 $ 0.13 -- $ -- $ 0.09
========= ========= ========= ======= =========
Weighted average common shares outstanding:
Basic ....................................... 45,554 38,766 -- (3,596)(c) 80,724
========= ========= ========= ======= =========
Diluted ..................................... 46,786 46,350 -- (4,544)(c) 88,592
========= ========= ========= ======= =========
</TABLE>
The accompanying notes and management's assumptions to the unaudited pro forma
pooled
financial statements are integral parts of this statement.
UNAUDITED PRO FORMA POOLED STATEMENT OF OPERATIONS
For The Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
Razorfish, Pooling Pooled
Inc. i-Cube Lee Hunt Adjustments Razorfish, Inc.
---------- -------- -------- ----------- ---------------
(In thousands except per share data)
<S> <C> <C> <C> <C> <C>
Revenues ........................................ $ 9,118 $ 41,716 $ 9,561 $ -- $ 60,395
Project personnel costs ......................... 3,930 20,477 7,505 -- 31,912
-------- -------- -------- -------- --------
Gross profit .................................... 5,188 21,239 2,056 -- 28,483
Sales and marketing ............................. 266 3,752 401 -- 4,379
General and administrative ...................... 3,256 10,825 2,244 -- 16,325
Amortization of
intangibles .................................... 65 -- -- -- 65
Acquisition costs ............................... -- 786 -- -- 786
Non-cash compensation
expense ........................................ 1,820 -- -- -- 1,820
-------- -------- -------- -------- --------
Income (loss) from
operations ..................................... (179) 5,876 (589) -- 5,108
Interest (income), net .......................... 165 (759) 62 -- (532)
-------- -------- -------- -------- --------
Income (loss) before
income taxes ................................. (344) 6,635 (651) -- 5,640
Provision for (benefit from)
income taxes ................................... (271) 3,101 -- -- 2,830
-------- -------- -------- -------- --------
Net (loss) income ........................... $ (73) $ 3,534 (651) $ -- $ 2,810
======== ======== ======== ======== ========
Per share information:
Net income (loss) per
</TABLE>
<PAGE> 15
<TABLE>
<S> <C> <C> <C> <C> <C>
share:
Basic ....................................... $ (0.01) $ 0.10 -- $ -- $ 0.06
======== ======== ======== ======== ========
Diluted ..................................... $ (0.01) $ 0.08 -- $ -- $ 0.05
======== ======== ======== ======== ========
Weighted average common shares outstanding:
Basic ....................................... 18,314 33,764 -- (2,970)(c) 49,108
======== ======== ======== ======== ========
Diluted ..................................... 18,314 41,598 -- (3,348)(c) 56,564
======== ======== ======== ======== ========
</TABLE>
The accompanying notes and management's assumptions to the unaudited pro forma
pooled
financial statements are integral parts of this statement.
UNAUDITED PRO FORMA POOLED STATEMENT OF OPERATIONS
For The Year Ended December 31, 1998
<TABLE>
<CAPTION>
Razorfish, Pooling Pooled
Inc. i-Cube Lee Hunt Adjustments Razorfish, Inc.
---------- -------- -------- ----------- ---------------
(In thousands except per share data)
<S> <C> <C> <C> <C> <C>
Revenues ........................................ $ 13,843 $ 56,793 $ 11,929 $ -- $ 82,565
Project personnel costs ......................... 5,973 27,562 9,961 -- 43,496
-------- -------- -------- -------- --------
Gross profit .................................... 7,870 29,231 1,968 -- 39,069
Sales and marketing ............................. 438 5,178 566 -- 6,182
General and administrative ...................... 4,693 14,551 3,016 -- 22,260
Amortization of
intangibles .................................... 107 -- -- -- 107
Acquisition costs ............................... -- 786 -- -- 786
Non-cash compensation
expense ........................................ 1,937 -- -- -- 1,937
-------- -------- -------- -------- --------
Income (loss) from
operations ..................................... 695 8,716 (1,614) -- 7,797
Interest (income), net .......................... 241 (1,218) 84 -- (893)
-------- -------- -------- -------- --------
Income (loss) before
income taxes ................................. 454 9,934 (1,698) -- 8,690
Provision for (benefit from)
income taxes ................................... 455 4,388 -- -- 4,843
-------- -------- -------- -------- --------
Net (loss) income ........................... $ (1) $ 5,546 (1,698) $ -- $ 3,847
======== ======== ======== ======== ========
Per share information:
Net income (loss) per
share:
Basic ....................................... $ (0.00) $ 0.16 -- $ -- $ 0.08
======== ======== ======== ======== ========
Diluted ..................................... $ (0.00) $ 0.13 -- $ -- $ 0.07
======== ======== ======== ======== ========
Weighted average common shares outstanding:
Basic ....................................... 18,448 34,726 -- (3,091)(c) 50,083
======== ======== ======== ======== ========
Diluted ..................................... 18,448 42,650 -- (3,075)(c) 58,023
======== ======== ======== ======== ========
</TABLE>
<PAGE> 16
The accompanying notes and management's assumptions to the unaudited pro forma
pooled financial statements are integral parts of this statement.
NOTES TO UNAUDITED PRO FORMA
POOLED FINANCIAL STATEMENTS
(a) Pro Forma Basis Of Presentation (in thousands except assumed conversion
ratio)
The unaudited pro forma pooled financial statements for the year ended
December 31, 1998 reflect the combination of the financial statements of
Razorfish, i-Cube and Lee Hunt for that year. The unaudited pro forma pooled
statements of operations for the nine month periods ended September 30, 1998 and
1999 reflect the combination of the statements of earnings of Razorfish, i-Cube
and Lee Hunt for those periods. No adjustments have been made in these pro forma
pooled financial statements to conform the accounting policies of the combined
company, as the nature and amounts of such adjustments are deemed insignificant.
These unaudited pro forma combined condensed financial statements reflect the
issuance of 34,946 shares of Razorfish Class A common stock in exchange for an
aggregate of 39,938 shares of i-Cube common stock (outstanding as of September
30, 1999) in connection with that merger, based on an assumed Exchange Ratio of
0.875 and the issuance of 1,250 shares of Razorfish Class A common stock in
exchange for all of the common stock of Lee Hunt in connection with that merger.
Shares of i-Cube common stock outstanding as of September 30, 1999.. 39,938
Exchange Ratio...................................................... 0.875
------
Number of shares of Razorfish Class A common stock exchanged for i-
Cube common stock.................................................. 34,946
Number of shares of Razorfish Class A common stock exchanged for Lee
Hunt common stock.................................................. 1,250
Number of shares of Razorfish Class A common stock outstanding at
September 30, 1999................................................. 50,709
------
Number of shares of Razorfish Class A common stock outstanding at
September 30, 1999 after giving effect to the merger............... 86,905
======
The actual number of shares of Razorfish Class A common stock to be issued in
connection with the merger with i-Cube will be determined at the Effective Time
based on the number of shares of i-Cube common stock outstanding at that date
and the Exchange Ratio.
(b) Pro Forma Combined Balance Sheet
Razorfish and i-Cube estimate they will incur direct transaction costs of
approximately $20.6 million associated with the mergers. These cost generally
consist of transaction fees for investment bankers, attorneys, accountants,
costs for integration activities and other related costs. These nonrecurring
transaction costs will be charged to operations upon consummation of the merger.
These charges have been reflected in the unaudited pro forma combined condensed
balance sheet, net of related income taxes at an assumed rate of 40%.
<PAGE> 17
NOTES TO UNAUDITED PRO FORMA
POOLED FINANCIAL STATEMENTS (Continued)
(c) Pro Forma Earnings Per Share
The following table reconciles the number of shares used in the pro forma
earnings per share computations to the number of shares set forth in Razorfish's
and i-Cube's historical statements of earnings.
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, September 30,
------------ ------------------
1998 1998 1999
---- ---- ----
(In thousands except assumed conversion ratio)
<S> <C> <C> <C>
Shares used in calculations:
Historical basic shares--
Razorfish ......................... 18,448 18,314 45,554
------ ------ ------
Historical basic shares--
i-Cube ............................. 34,726 33,764 38,766
Assumed conversion ratio ........... 0.875 0.875 0.875
------ ------ ------
Additional basic shares ............ 30,385 29,544 33,920
------ ------ ------
Additional basic shares--
Lee Hunt .......................... 1,250 1,250 1,250
------ ------ ------
Pro forma combined basic
shares .......................... 50,083 49,108 80,724
====== ====== ======
Historical diluted shares--
Razorfish ......................... 18,448 18,314 46,786
------ ------ ------
Additional diluted shares--
Razorfish stock options ........... 1,006 602 --
------ ------ ------
Historical diluted shares--
i-Cube ............................ 42,650 41,598 46,350
Assumed conversion ratio ........... 0.875 0.875 0.875
------ ------ ------
Additional diluted shares
for merger ........................ 37,319 36,398 40,556
------ ------ ------
Additional diluted shares--
Lee Hunt .......................... 1,250 1,250 1,250
------ ------ ------
Pro forma combined
diluted shares .................. 58,023 56,564 88,592
====== ====== ======
</TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED POOLED
FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated pooled financial
statements for the nine months ended September 30, 1998 and 1999 and for the
year ended December 31, 1998 have been derived from the application of pro forma
adjustments to the historical consolidated financial statements of Razorfish
(after
<PAGE> 18
giving effect to the mergers, using the pooling of interests method of
accounting). The unaudited pro forma condensed consolidated pooled statement of
operations information for the nine months ended September 30, 1998 and 1999 and
the year ended December 31, 1998 gives effect to the acquisitions that Razorfish
completed in 1998 and 1999 as if such transactions had occurred on January 1,
1998 and January 1, 1999.
The unaudited pro forma condensed consolidated financial statements do not
purport to be indicative of what Razorfish's actual results of operations or
financial condition would have been assuming the acquisitions that Razorfish
completed in 1998 and 1999 had been completed on such dates, nor does it purport
to be indicative of results of operations or financial condition that may be
achieved in the future.
Each of the acquisitions discussed in this section that Razorfish completed
in 1998 and 1999 has been accounted for using the purchase method of accounting.
The purchase method of accounting allocates the aggregate purchase price to the
assets acquired and liabilities assumed based upon their respective fair values.
The excess purchase price over the fair value of net assets acquired, which
equals $54.1 million for Spray, $0.8 million for Avalanche Systems, $23.6
million for Fuel/Tonga and an aggregate of $2.8 million for the other
acquisitions, has been allocated to goodwill, customer lists and workforce. The
estimated fair value of the net assets acquired from Spray was determined based
on an independent third-party valuation and management's knowledge of current
industry trends and transactions. Management considers such estimates to be
reasonable.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED POOLED
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1999
<TABLE>
<CAPTION>
Purchase
Accounting Pro Forma
Pooled Pro Forma Pooled
Razorfish, Inc. Fuel/Tonga(a) Adjustments Razorfish, Inc.
--------------- ------------- ----------- ---------------
(In thousands except per share data)
<S> <C> <C> <C> <C>
Revenues .............. $ 116,192 $ 4,782 $ -- $ 120,974
Project personnel
costs ................ 55,838 2,872 -- 58,710
--------- --------- --------- ---------
Gross profit .......... 60,354 1,910 -- 62,264
Sales and marketing ... 8,601 239 -- 8,840
General and
administrative ....... 32,371 855 -- 33,226
Amortization of
intangibles .......... 2,529 -- 788(e) 3,317
Acquisition costs ..... 3,445 -- -- 3,445
Non-cash compensation
expense .............. 162 -- -- 162
--------- --------- --------- ---------
Income (loss) from
operations ........... 13,246 815 (788) 13,273
Minority interest
expense .............. (22) -- -- (22)
Interest (income)
expense, net ......... (2,563) 10 -- (2,553)
--------- --------- --------- ---------
Income (loss) before
income taxes ....... 15,831 805 (788) 15,848
Provision for (benefit
</TABLE>
<PAGE> 19
<TABLE>
<S> <C> <C> <C> <C>
from) income taxes ... 7,546 83 -- 7,629
--------- --------- --------- ---------
Net income (loss) . $ 8,285 $ 722 $ (788) $ 8,219
========= ========= ========= =========
Per share information:
Net income (loss) per
share:
Basic ............. $ 0.10 $ 0.10
========= =========
Diluted ........... $ 0.09 $ 0.09
========= =========
Weighted average
common shares
outstanding
Basic ............. 80,724 1,312(f) 82,036
========= ========= =========
Diluted ........... 88,592 1,312(f) 89,904
========= ========= =========
</TABLE>
The accompanying notes and management's assumptions to the unaudited pro forma
condensed consolidated pooled financial statements are integral parts of this
statement.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
POOLED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
Purchase Accounting
Historical Pro Forma Adjustments
------------------------------------------------ ---------------------------------------
Pooled Pro Forma
Razorfish, Other Pooled
Acquisitions Fuel/ Other Fuel/ Razorfish,
Inc. Spray(c) (d) Tonga(a) Spray Acquisitions Tonga Inc.
--------- -------- ------------ -------- -------- ------------ -------- ----------
(In thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues ............ $ 60,395 $ 10,961 $ 1,729 $ 3,112 $ -- $ -- $ -- $ 76,197
Project personnel
costs .............. 31,912 7,641 1,298 1,953 -- -- -- 42,804
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit ........ 28,483 3,320 431 1,159 -- -- -- 33,393
Sales and marketing . 4,379 509 164 190 -- -- -- 5,242
General and
administrative ..... 16,325 3,782 653 632 -- -- -- 21,392
Amortization of
intangibles ........ 65 219 -- -- 2,179(e) 64(e) 887(e) 3,414
Restructuring costs . 786 -- -- -- -- -- -- 786
Non-cash compensation
expense ............ 1,820 -- -- -- -- -- -- 1,820
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) from
operations ......... 5,108 (1,190) (386) 337 (2,179) (64) (887) 739
Interest (income)
expense, net ....... (532) (83) 5 (1) -- -- -- (611)
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes ...... 5,640 (1,107) (391) 338 (2,179) (64) (887) 1,350
Provision (benefit)
for income taxes ... 2,830 -- (180) 11 -- -- -- (1,350)
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss) .. $ 2,810 $ (1,107) $ (211) $ 327 $ (2,179) $ (64) $ (887) $ 2,701
======== ======== ======== ======== ======== ======== ======== ========
Per share
information:
Net income (loss)
per share:
Basic .............. $ 0.06 $ (0.04)
======== ========
Diluted ............ $ 0.05 $ (0.03)
======== ========
Weighted average
common shares
outstanding:
</TABLE>
<PAGE> 20
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Basic .............. 49,108 19,762(a) 1,312(a) 70,182
======== ======== ======== ========
Diluted ............ 56,564 19,762(a) 1,312(a) 77,638
======== ======== ======== ========
</TABLE>
The accompanying notes and management's assumptions to the unaudited pro forma
condensed consolidated pooled financial statements are integral parts of this
statement.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
POOLED STATEMENT OF OPERATIONS
For The Year Ended December 31, 1998
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments
------------------------------------------------ -------------------------------------- Pro Forma
Pooled Other Pooled
Razorfish, Acquisitions Fuel/ Other Fuel/ Razorfish,
Inc. Spray(c) (d) Tonga(a) Spray Acquisitions Tonga Inc.
--------- -------- ------------ -------- -------- ------------ -------- ----------
(In thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues .............. $ 82,565 $ 15,402 $ 1,729 $ 5,351 $ -- $ -- $ -- $ 105,047
Project personnel costs
.................... 43,761 8,879 1,298 3,573 -- -- -- 57,511
--------- -------- --------- -------- -------- -------- -------- ---------
Gross profit .......... 38,804 6,523 431 1,778 -- -- -- 47,536
Sales and marketing ... 6,182 757 164 1,225 -- -- -- 8,328
General and
administrative ....... 21,995 6,995 653 282 -- -- -- 29,925
Amortization of
intangibles .......... 107 331 -- -- 2,905(e) 64(e) 1,182(e) 4,589
Restructuring costs ... 786 -- -- -- -- -- -- 786
Non-cash compensation
expense .............. 1,937 -- -- -- -- -- -- 1,937
--------- -------- --------- -------- -------- -------- -------- ---------
Income (loss) from
operations ........... 7,797 (1,560) (386) 271 (2,905) (64) (1,182) 1,971
Interest (income)
expense, net ......... (893) (84) 5 4 -- -- -- (968)
--------- -------- --------- -------- -------- -------- -------- ---------
Income (loss) before
income taxes ........ 8,690 (1,476) (391) 267 (2,905) (64) (1,182) 2,939
Provision for income
taxes ................ 4,843 -- (181) 8 -- -- -- 4,670
--------- -------- --------- -------- -------- -------- -------- ---------
Net income (loss) .... $ 3,847 $ (1,476) $ (210) $ 259 $ (2,905) $ (64) $ (1,182) $ (1,731)
========= ======== ========= ======== ======== ======== ======== =========
Per share information:
Net income (loss) per
share:
Basic ................ $ 0.08 $ (0.02)
========= =========
Diluted .............. $ 0.07 $ (0.02)
========= =========
Weighted average common
shares outstanding:
Basic ................ 50,083 19,762(c) -- 1,312(b) 71,157
========= ======== ======== ======== =========
Diluted .............. 58,023 19,762(c) -- 1,312(b) 71,157
========= ======== ======== ======== =========
</TABLE>
The accompanying notes and management's assumptions to the unaudited pro forma
condensed consolidated pooled financial statements are integral parts of this
statement.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED POOLED
FINANCIAL STATEMENTS
(a) Fuel/Tonga Acquisition
On September 16, 1999, Razorfish Inc., acquired all of the issued and
outstanding shares of
<PAGE> 21
capital stock of Fuel, Inc. and Tonga, Inc. in exchange for 1,312,000
shares of Class A Common Stock and $750,000 in cash A further contingent
payment will be made if the combined revenue of Fuel and Tonga exceed
$5,800,000. The payment will be equal to 3.8 times the revenue in excess
of $5,800,000 but in no instance will this payment exceed $14,290,000.
Set below is Razorfish's allocation of the purchase price of the Fuel
and Tonga Acquisitions:
<TABLE>
<CAPTION>
Aggregate purchase price (in thousands, except share data):
<S> <C>
Common A shares (Assuming a share price of $17.5 a share and no
contingence payment) ......................................... $ 22,960
Cash .......................................................... 750
--------
23,710
Less: net book value of assets acquired ....................... 356
Add: costs of acquisition ..................................... (250)
--------
Excess of costs over net book value of assets acquired
allocated to goodwill ........................................ $ 23,604
========
</TABLE>
The estimated useful life of the goodwill associated with the
acquisition is assumed to be 20 years.
(b) The following summarizes how the amounts relating to the issuance of
shares in connection with the Fuel/Tonga acquisition were determined:
<TABLE>
<S> <C> <C>
Total Class A Common Stock issued....................... 1,312
Fair market value of common stock per share............. $ 17.50
-------
Total value of Class A Common Stock issued.............. 22,960
Total Class A Common Stock issued....................... 1,312
Par value of Class A Common Stock....................... $0.01
-----
Adjustment to Class A Common Stock...................... 13
-------
Adjustment to additional paid-in capital................ $22,947
=======
</TABLE>
(c) Spray Acquisition
On January 5, 1999, Razorfish acquired all of the issued and
outstanding shares of capital stock of Spray from Spray Ventures and
Communicade in exchange for an aggregate of 19,762,068 shares of Common
Stock (representing 50% of Razorfish's outstanding shares of Common Stock
on a fully diluted basis after giving effect to this acquisition) and 50
shares of non-voting Class B Common Stock. In addition, Communicade
received an option to purchase up to 10% of Razorfish's Common Stock
pursuant to the Stockholders Agreement that was entered into in connection
with this transaction.
Set forth below is Razorfish's allocation of the purchase price of the
Spray acquisition (in thousands):
<TABLE>
<S> <C>
Aggregate purchase price ........................................... $54,940
Less: net book value of assets acquired .......................... 836
</TABLE>
<PAGE> 22
<TABLE>
<S> <C>
-------
Excess of cost over net book value of assets acquired .............. $54,104
=======
Allocation of excess of cost over net book value of assets acquired:
Goodwill ......................................................... $45,604
Customer lists ................................................... 7,600
Workforce ........................................................ 900
-------
Total .......................................................... $54,104
=======
</TABLE>
The allocation of excess cost over net book value of assets
acquired to the intangible assets relating to the Spray acquisition
was determined based upon an independent third-party valuation. The
estimated useful lives are as follows:
<TABLE>
<S> <C>
Goodwill...................................................... 20 years
Customer lists................................................ 16 years
Workforce..................................................... 6 years
</TABLE>
(d) Other acquisitions
Avalanche Systems acquisition
On January 15, 1998, Razorfish purchased a 66 2/3% ownership interest
of a newly formed corporation, Avalanche Solutions, Inc. In connection
with this transaction, Avalanche Solutions acquired substantially all of
the assets of Avalanche Systems, Inc. from Fleet Bank National Association
and Fleet Bank Capital Corporation in a foreclosure sale. These assets
were seized from Avalanche Systems, whose shareholders were the founders
and holders of the remaining 33 1/3% of the capital stock of Avalanche
Solutions. In April 1998, the founders of Avalanche Solutions surrendered
their aggregate 33 1/3% ownership interest in Avalanche Solutions to
Razorfish. The total cash consideration for all stock and net assets
acquired was approximately $1,294,000.
These acquisitions have been accounted for under the purchase method of
accounting; accordingly, the purchase price has been allocated to the
tangible and intangible assets acquired and liabilities assumed on the
basis of their respective fair values on their respective acquisition
dates. As a result of these acquisitions, Razorfish has recorded goodwill
of approximately $789,000, which is the excess cost of net assets acquired
and is being amortized over a useful life of 20 years. No pro forma
adjustments have been reflected in the accompanying Unaudited Pro Forma
Condensed Consolidated Pooled Statement of Operations for the period of
January 1, 1998 through January 15, 1998 as the effects are immaterial.
CHBi acquisition
On May 21, 1998, Razorfish acquired all of the outstanding stock of
CHBi Limited for cash consideration of $2,028,000. Razorfish is required
to make certain cash earn-out payments to the former shareholders of CHBi
based upon the achievement of targeted operating performance of the
company through May 2001. No earn-out payments have been earned to date.
Further earn-out payments, if
<PAGE> 23
any, will be recorded as additional purchase price and, as such, a
corresponding adjustment to goodwill. This acquisition was accounted for
as a purchase; accordingly, the operating results of CHBi since June 1,
1998 have been included in Razorfish's consolidated financial statements.
Plastic acquisition
On June 26, 1998, Razorfish acquired substantially all of the assets of
Alpha Online, Inc. d/b/a Plastic and Plasticweb for cash consideration of
$686,000. Razorfish is required to make certain cash earn-out payments to
the former shareholders of Plastic based upon the achievement of targeted
operating performance of the company through December 2001. No earn-out
payments have been earned to date. Further earn-out payments, if any, will
be recorded as additional purchase price and, as such, a corresponding
adjustment to goodwill. This acquisition was accounted for as a purchase;
accordingly, the operating results of Plastic since June 1, 1998 have been
included in Razorfish's consolidated financial statements.
Media acquisition
On July 30, 1998, Razorfish acquired substantially all of the assets of
Titus Anspach Group, LLC d/b/a Media for cash consideration of $256,000.
Razorfish is required to make certain cash earn-out payments to the former
shareholders of Media based upon the achievement of targeted operating
performance of the company through December 2001. No earn-out payments
have been earned to date. Further earn-out payments, if any, will be
recorded as additional purchase price and, as such, a corresponding
adjustment to goodwill. This acquisition was accounted for as a purchase;
accordingly, the operating results of Media since August 1, 1998 have been
included in Razorfish's consolidated financial statements.
Sunbather acquisition
On October 26, 1998, Razorfish acquired substantially all of the assets
of Sunbather Limited from an administrator appointed for the company for
cash consideration of $289,653. This acquisition was accounted for as a
purchase; accordingly, the purchase price has been allocated to the
tangible and intangible net assets acquired and liabilities assumed on the
basis of their respective fair values on the acquisition date. The
operating results of Sunbather since October 1, 1998 have been included in
Razorfish's consolidated financial statements.
Set forth below are the unaudited results of operations for the
companies that Razorfish acquired, other than Spray, for the period of
January 1, 1998 through their respective acquisition dates:
For the Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
Total
other
CHBi Sunbather Plastic Media acquisitions
------- --------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Revenues ........... $ 786 $ 499 $ 284 $ 160 $ 1,729
Project personnel
costs ............. 552 373 256 117 1,298
------- ------- ------- ------- -------
</TABLE>
<PAGE> 24
<TABLE>
<S> <C> <C> <C> <C> <C>
Gross profit ....... 234 126 28 43 431
Sales and marketing 125 14 23 2 164
General and
administrative .... 182 272 135 64 653
------- ------- ------- ------- -------
Loss from operations (73) (160) (130) (23) (386)
Interest (income)
expense, net ...... -- 5 -- -- 5
------- ------- ------- ------- -------
Loss before income
taxes ............. (73) (165) (130) (23) (391)
Benefit for income
taxes ............. (46) (69) (54) (11) (180)
------- ------- ------- ------- -------
Net (loss) ......... $ (27) $ (96) $ (76) $ (12) $ (211)
======= ======= ======= ======= =======
</TABLE>
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Total
other
CHBi Sunbather Plastic Media acquisitions
------- --------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Revenues ............ $ 786 $ 499 $ 284 $ 160 $ 1,729
Project personnel
costs .............. 552 373 256 117 1,298
------- ------- ------- ------- -------
Gross profit ........ 234 126 28 43 431
Sales and marketing . 125 14 23 2 164
General and
administrative ..... 182 272 135 64 653
------- ------- ------- ------- -------
Loss from operations (73) (160) (130) (23) (386)
Interest expense, net -- 5 -- -- 5
------- ------- ------- ------- -------
Loss before income
taxes .............. (73) (165) (130) (23) (391)
Benefit for income
taxes .............. (46) (69) (54) (12) (181)
------- ------- ------- ------- -------
Net (loss) .......... $ (27) $ (96) $ (76) $ (11) $ (210)
======= ======= ======= ======= =======
</TABLE>
(e) Amortization of intangibles:
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended September 30,
December 31, ---------------------
1998 1998 1999
------------- --------- --------
<S> <C> <C> <C>
Amortization of Spray
intangibles.................... $2,905 $ 2,179 $ --
Amortization of other
acquisitions' goodwill prior to
their respective acquisition
dates.......................... 64 64 --
Amortization of Fuel/Tonga
intangibles.................... 1,182 887 788
</TABLE>
<PAGE> 25
<TABLE>
<S> <C> <C> <C>
------ --------- -------
Total pro forma goodwill
adjustments.................. $4,151 $ 3,130 $ 788
====== ========= =======
</TABLE>
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.
RAZORFISH, INC.
By: /s/ Jeffrey A. Dachis
-----------------------------
Jeffrey A. Dachis
President and Chief Executive Officer
Date: February 14, 2000
