<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 2000,
Or
[ ] Transition Report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______ to ______
Commission File Number: 000-29037
EMERGE INTERACTIVE, INC.
------------------------
(Exact name of registrant as specified in its charter)
Delaware 65-0534535
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10315 102nd Terrace Sebastian, Florida 32958
--------------------------------------------
(Address of principal executive offices)
(561) 589-7331
--------------
Registrant's telephone number, including area code:
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days: YES [X] NO [ ]
The number of shares of the registrant's common stock, $0.008 par value,
outstanding as of November 7, 2000 was 34,794,896. There were 29,100,451 shares
of Class A common stock outstanding and 5,694,445 shares of Class B common
outstanding as of this date.
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<PAGE> 2
EMERGE INTERACTIVE, INC.
FORM 10-Q QUARTERLY REPORT
(For Three Months Ended and Nine Months Ended September 30, 2000)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of December 31, 1999 and September 30,
2000....................................................................................................... 3
Condensed Consolidated Statements of Operations for the three months ended September
30, 1999 and 2000.......................................................................................... 5
Condensed Consolidated Statements of Operations for the nine months ended September
30, 1999 and 2000.......................................................................................... 6
Condensed Consolidated Statement of Stockholders' Equity for the nine months ended
September 30, 2000......................................................................................... 7
Condensed Consolidated Statements of Cash Flows for the nine months ended September
30, 1999 and 2000.......................................................................................... 8
Notes to Condensed Consolidated Financial Statements....................................................... 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................................................. 16
Item 3. Quantitative and Qualitative Disclosures about Market Risk................................................. 25
Part II OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................................... 25
Item 2. Changes in Securities and Use of Proceeds.................................................................. 25
Item 4. Submission of Matters to a Vote of Security Holders........................................................ 27
Item 6. Exhibits and Reports on Form 8-K........................................................................... 27
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EMERGE INTERACTIVE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,316,497 $ 21,737,251
Short term investments -- 1,290,000
Trade accounts receivable, net 1,144,133 32,946,638
Inventories (note 3) 1,201,203 4,314,184
Cattle deposits 473,859 4,339,640
Prepaid expenses 71,078 1,222,964
Net assets of discontinued operations 297,003 --
Other current assets 136,349 365
Due from related parties (note 4) -- 10,839,357
------------ ------------
Total current assets 15,640,122 76,690,399
Property and equipment, net 1,895,754 15,495,162
Capitalized offering costs 447,644 --
Investment in Turnkey Computer Systems, Inc. 1,822,833 1,822,833
Intangible assets, net 5,955,360 58,176,410
------------ ------------
Total assets $ 25,761,713 $152,184,804
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of capital lease obligation $ 82,320 $ 140,726
Note payable 500,000 10,079
Accounts payable 1,187,900 20,701,268
Accrued liabilities:
Purchase consideration (note 7) -- 6,675,000
Salaries and benefits 967,749 817,788
Other 818,041 851,645
Advance payments from customers 222,750 1,253,585
Due to related parties (note 4) 12,053,715 3,917,701
------------ ------------
Total current liabilities 15,832,475 34,367,792
Capital lease obligation, excluding current installments 224,068 167,163
Note payable 400,000 --
------------ ------------
Total liabilities 16,456,543 34,534,955
------------ ------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
<TABLE>
<S> <C> <C>
Redeemable Class A common stock, issued and outstanding 62,500 shares
in 1999 and -0- shares in 2000 414,339 --
Stockholders' equity:
Preferred stock, $.01 par value, authorized 15,000,000 shares:
Series A preferred stock, (aggregate involuntary liquidation
preference of $8,030,675 in 1999 and $0 in 2000), designated
6,500,000 shares, issued and outstanding 6,443,606 shares in 1999
and -0- shares in 2000 64,436 --
Series B junior preferred stock, (aggregate involuntary liquidation
preference of $5,281,316 in 1999 and $0 in 2000), designated
2,400,000 shares, issued and outstanding 2,400,000 in 1999 and
-0- shares in 2000 24,000 --
Series C preferred stock, (aggregate liquidation preference of
$5,891,781 in 1999 and $0 in 2000), designated 1,300,000 shares,
issued and outstanding 1,100,000 in 1999 and -0- shares in 2000 11,000 --
Series D preferred stock, (aggregate liquidation preference of
$41,823,749 in 1999 and $0 in 2000), designated 4,555,556 shares,
issued and outstanding 4,555,556 shares in 1999 and -0- shares in 2000 45,556 --
Common stock, $.008 par value, authorized 100,000,000 shares:
Class A common stock, designated 92,711,110 shares, issued and
outstanding 7,046,444 shares in 1999 and
29,099,139 shares in 2000 56,372 232,793
Class B common stock, designated 7,288,890 shares, no shares issued
and outstanding in 1999, 5,694,445 shares issued and outstanding
in 2000 -- 45,556
Additional paid-in capital 62,312,315 193,306,097
Accumulated deficit (32,375,926) (53,058,725)
Subscription receivable from Internet Capital Group, Inc. (21,188,320) (22,830,794)
Unearned compensation (58,602) (45,078)
-------------- --------------
Total stockholders' equity 8,890,831 117,649,849
-------------- --------------
Total liabilities and stockholders' equity $ 25,761,713 $ 152,184,804
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
EMERGE INTERACTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
SEPTEMBER 30,
1999 2000
------------ ------------
<S> <C> <C>
Revenue (including sales to related parties of approximately $0 in 1999
and $119,700,000 in 2000, note 4) $ 15,760,392 $277,350,736
Cost of revenue (including purchases from related parties of approximately
$0 in 1999 and $20,500,000 in 2000, note 4) 15,684,926 273,644,888
------------ ------------
Gross profit 75,466 3,705,848
Operating expenses:
Selling, general and administrative 3,286,561 11,447,317
Research and development 1,305,829 826,687
------------ ------------
Total operating expenses 4,592,390 12,274,004
------------ ------------
Operating loss (4,516,924) (8,568,156)
Interest and other income (expense), net (167,958) 1,290,363
------------ ------------
Net loss $ (4,684,882) $ (7,277,793)
============ ============
Net loss per common share - basic and diluted $ (0.67) $ (0.21)
============ ============
Weighted average number of common shares outstanding - basic and diluted 6,985,960 34,553,454
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
EMERGE INTERACTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1999 2000
------------ ------------
<S> <C> <C>
Revenue (including sales to related parties of approximately $0 in 1999 and
$178,200,000 in 2000, note 4) $ 18,338,645 $476,319,721
Cost of revenue (including purchases from related parties of approximately
$0 in 1999 and $36,400,000 in 2000, note 4) 18,282,330 470,903,797
------------ ------------
Gross profit 56,315 5,415,924
Operating expenses:
Selling, general and administrative (note 6) 7,539,689 27,144,052
Research and development 2,756,262 3,339,932
------------ ------------
Total operating expenses 10,295,951 30,483,984
------------ ------------
Operating loss from continuing operations (10,239,636) (25,068,060)
Interest and other income (expense), net (442,969) 4,300,627
------------ ------------
Loss from continuing operations (10,682,605) (20,767,433)
Income from operations of discontinued transportation segment 10,420 84,634
------------ ------------
Net loss $(10,672,185) $(20,682,799)
============ ============
Net loss per common share - basic and diluted $ (1.59) $ (0.68)
============ ============
Weighted average number of common shares outstanding - basic and diluted 6,709,854 30,604,604
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
EMERGE INTERACTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCK PREFERRED STOCK
SERIES A SERIES B
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Balances at December 31, 1999 6,443,606 64,436 2,400,000 24,000
Conversion of Series A preferred stock for 8,054,508 (6,443,606) (64,436) -- --
shares of Class A common stock
Conversion of Series B preferred stock for 3,000,000 -- -- (2,400,000) (24,000)
shares of Class A common stock
Conversion of Series C preferred stock for 1,375,000 -- -- -- --
shares of Class A common stock
Conversion of Series D preferred stock for 5,694,445 -- -- -- --
shares of Class B common stock
Sale of Class A common stock in connection with initial -- -- -- --
public offering
Issuance of 1,632,310 shares of Class A Common Stock in -- -- -- --
connection with business combinations (note 7)
Exercise of stock options -- -- -- --
Exercise of Turnkey's put right for 62,500 shares of -- -- -- --
Class A common stock
Accretion to redemption value of note receivable -- -- -- --
from Internet Capital Group, Inc.
Net loss -- -- -- --
Non cash compensation -- -- -- --
Amortization of unearned compensation -- -- -- --
---------- ------- ---------- -------
Balances at September 30, 2000 -- -- -- --
========== ======= ========== =======
<CAPTION>
PREFERRED STOCK PREFERRED STOCK
SERIES C SERIES D
----------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Balances at December 31, 1999 1,100,000 11,000 4,555,556 45,556
Conversion of Series A preferred stock for 8,054,508 -- -- -- --
shares of Class A common stock
Conversion of Series B preferred stock for 3,000,000 -- -- -- --
shares of Class A common stock
Conversion of Series C preferred stock for 1,375,000 (1,100,000) (11,000) -- --
shares of Class A common stock
Conversion of Series D preferred stock for 5,694,445 -- -- (4,555,556) (45,556)
shares of Class B common stock
Sale of Class A common stock in connection with initial -- -- -- --
public offering
Issuance of 1,632,310 shares of Class A Common Stock in -- -- -- --
connection with business combinations (note 7)
Exercise of stock options -- -- -- --
Exercise of Turnkey's put right for 62,500 shares of -- -- -- --
Class A common stock
Accretion to redemption value of note receivable -- -- -- --
from Internet Capital Group, Inc.
Net loss -- -- -- --
Non cash compensation -- -- -- --
Amortization of unearned compensation -- -- -- --
---------- ------- ---------- -------
Balances at September 30, 2000 -- -- -- --
========== ======= ========== =======
<CAPTION>
COMMON STOCK COMMON STOCK
CLASS A CLASS B
---------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------- --------- --------
<S> <C> <C> <C> <C>
Balances at December 31, 1999 7,046,444 56,372 -- --
Conversion of Series A preferred stock for 8,054,508 8,054,508 64,436 -- --
shares of Class A common stock
Conversion of Series B preferred stock for 3,000,000 3,000,000 24,000 -- --
shares of Class A common stock
Conversion of Series C preferred stock for 1,375,000 1,375,000 11,000 -- --
shares of Class A common stock
Conversion of Series D preferred stock for 5,694,445 5,694,445 45,556
shares of Class B common stock
Sale of Class A common stock in connection with initial 7,675,000 61,400 -- --
public offering
Issuance of 1,632,310 shares of Class A Common Stock in 1,632,310 13,058 -- --
connection with business combinations (note 7)
Exercise of stock options 253,377 2,027 -- --
Exercise of Turnkey's put right for 62,500 shares of 62,500 500 -- --
Class A common stock
Accretion to redemption value of note receivable -- -- -- --
from Internet Capital Group, Inc.
Net loss -- -- -- --
Non cash compensation -- -- -- --
Amortization of unearned compensation -- -- -- --
---------- ------- --------- ---------
Balances at September 30, 2000 29,099,139 232,793 5,694,445 45,556
========== ======= ========= =========
<CAPTION>
ADDITIONAL NOTE RECEIVABLE
PAID IN CUMULATED FROM INTERNET
CAPITAL DEFICIT CAPITAL GROUP, INC.
----------- ----------- -------------------
<S> <C> <C> <C>
Balances at December 31, 1999 62,312,315 (32,375,926) (21,188,320)
Conversion of Series A preferred stock for 8,054,508 -- -- --
shares of Class A common stock
Conversion of Series B preferred stock for 3,000,000 -- -- --
shares of Class A common stock
Conversion of Series C preferred stock for 1,375,000 -- -- --
shares of Class A common stock
Conversion of Series D preferred stock for 5,694,445 -- -- --
shares of Class B common stock
Sale of Class A common stock in connection with initial 107,138,544 -- --
public offering
Issuance of 1,632,310 shares of Class A Common Stock in 21,789,442 -- --
connection with business combinations (note 7)
Exercise of stock options 312,689 -- --
Exercise of Turnkey's put right for 62,500 shares of 413,839 -- --
Class A common stock
Accretion to redemption value of note receivable -- -- (1,642,474)
from Internet Capital Group, Inc.
Net loss -- (20,682,799) --
Non cash compensation 1,339,268 -- --
Amortization of unearned compensation -- -- --
----------- ----------- -----------
Balances at September 30, 2000 193,306,097 (53,058,725) (22,830,794)
=========== =========== ===========
<CAPTION>
UNEARNED
COMPENSATION TOTAL
------------ --------------
<S> <C> <C>
Balances at December 31, 1999 (58,602) 8,890,831
Conversion of Series A preferred stock for 8,054,508 -- --
shares of Class A common stock
Conversion of Series B preferred stock for 3,000,000 -- --
shares of Class A common stock
Conversion of Series C preferred stock for 1,375,000 -- --
shares of Class A common stock
Conversion of Series D preferred stock for 5,694,445 -- --
shares of Class B common stock
Sale of Class A common stock in connection with initial -- 107,199,944
public offering
Issuance of 1,632,310 shares of Class A Common Stock in -- 21,802,500
connection with business combinations (note 7)
Exercise of stock options -- 314,716
Exercise of Turnkey's put right for 62,500 shares of -- 414,339
Class A common stock
Accretion to redemption value of note receivable -- (1,642,474)
from Internet Capital Group, Inc.
Net loss -- (20,682,799)
Non cash compensation -- 1,339,268
Amortization of unearned compensation 13,524 13,524
---------- ------------
Balances at September 30, 2000 (45,078) 117,649,849
========== ============
</TABLE>
7
<PAGE> 8
EMERGE INTERACTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
(UNAUDITED)
<TABLE>
<CAPTION>
1999 2000
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(10,672,185) $(20,682,799)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,176,431 5,897,287
Accretion to redemption value of note receivable -- (1,642,474)
Non cash compensation -- 1,339,268
Amortization of unearned compensation 9,017 13,524
Changes in operating assets and liabilities:
Trade accounts receivable, net (2,405,456) (31,802,505)
Inventories 51,428 (2,702,287)
Cattle deposits (489,760) (3,865,781)
Prepaid expenses and other assets (75,405) (1,015,902)
Net assets of discontinued operations -- 297,003
Due from related parties, net -- (7,576,027)
Accounts payable and accrued liabilities 1,253,616 19,289,369
Advance payments from customers 619,270 1,030,835
------------ ------------
Net cash used in operating activities (10,533,044) (41,420,489)
------------ ------------
Cash flows from investing activities:
Investment in Turnkey Computer Systems, Inc. (22,833) --
Business combinations, net of cash acquired (1,799,263) (33,081,917)
Proceeds from discontinued operations 1,825,407 --
Purchase of short term investments -- (1,290,000)
Purchase of property and equipment (1,228,432) (10,143,412)
------------ ------------
Net cash used in investing activities (1,225,121) (44,515,329)
------------ ------------
Cash flows from financing activities:
Net borrowings (payments) from (to) related parties 8,218,623 (11,399,344)
Payment on note payable -- (900,000)
Payments on capital lease obligations (58,280) (306,388)
Offering costs (341,967) --
Net proceeds from issuance of preferred stock 5,500,000 --
Net proceeds from issuance of common stock 89,655 107,962,304
------------ ------------
Net cash provided by financing activities 13,408,031 95,356,572
------------ ------------
Net change in cash 1,649,866 9,420,754
Cash and cash equivalents, beginning of period 268 12,316,497
------------ ------------
Cash and cash equivalents, end of period $ 1,650,134 $ 21,737,251
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
8
<PAGE> 9
EMERGE INTERACTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
(UNAUDITED)
<TABLE>
<CAPTION>
1999 2000
------------ ------------
<S> <C> <C>
Supplemental disclosures:
Cash paid for interest $ 20,628 $ 359,721
Issuance of Class A common stock in connection with
business combinations (note 7) 1,170,000 21,802,500
Liabilities incurred in connection with business
combinations (note 7) -- 6,675,000
Conversion of Series A, B, and C preferred stock and
redeemable Class A common stock into Class A
common stock -- 513,775
Conversion of Series D preferred stock into Class B
common stock -- 45,556
</TABLE>
See accompanying notes to condensed consolidated financial statements.
9
<PAGE> 10
EMERGE INTERACTIVE, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) ORGANIZATION
(a) Basis of Presentation
The condensed consolidated financial statements include the
accounts of eMerge Interactive, Inc. and its wholly-owned
subsidiaries, Cyberstockyard, Inc. ("Cyberstockyard"), a
Mississippi corporation, eMerge San Saba, Inc., eMerge
Okolona, Inc. and eMerge Gaffney, Inc., all Delaware
corporations. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The Company's condensed consolidated balance sheet as of
December 31, 1999, has been derived from the Company's audited
balance sheet as of that date. The Company's condensed
consolidated financial statements as of and for the three
months ended and nine months ended September 30, 2000 and
1999, have not been audited. In the opinion of management, the
unaudited condensed consolidated financial statements include
all adjustments and accruals (consisting of normal recurring
adjustments) necessary to present fairly the Company's
financial position as of September 30, 2000, and the results
of its operations and cash flows for the periods ended
September 30, 1999 and 2000.
Results of interim periods are not necessarily indicative of
the results to be expected during the remainder of the current
year or for any future period. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been omitted or condensed. The accounting
policies used in preparing these consolidated financial
statements are the same as those described in our Form 10-K
and the consolidated financial statements incorporated by
reference therein.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Revenue Recognition
The Company generates the majority of its revenue from cattle
sales transactions where it acts as either a principal or
agent in the purchase and sale of cattle. For cattle sales
transactions where the Company is the primary obligor in the
arrangement, the Company purchases cattle from the seller,
records the cattle as inventory until delivered to an accepted
buyer and is exposed to both the inventory and credit risk
that results from the transaction. In these types of
transactions, the Company records the gross revenue earned and
related product costs incurred. For cattle sales transactions
in which the Company is not the primary obligor, it generally
earns a fee upon sale of the cattle which is based on weight
or number of cattle. In these types of transactions, the
Company records the fee received as revenue. For all other
products and services offered by the Company, the Company acts
as a principal to the transaction and gross revenue and
related product cost are recognized as products are shipped or
services are provided.
In December 1999, the Securities and Exchange Commission (the
"SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"),
"Revenue Recognition in Financial Statements." SAB 101 was
followed by Staff Accounting Bulletin No. 101A,
"Implementation Issues Related to SAB 101," in March 2000 and
by Staff Accounting Bulletin No. 101B, "Second Amendment:
Revenue Recognition in Financial Statements" ("SAB 101B"), in
June 2000. In October 2000, the SEC issued a Frequently Asked
Questions and Answers document to provide additional guidance.
These documents summarize certain views of the SEC regarding
applying generally accepted accounting principles to revenue
recognition in financial statements. The SEC has provided this
guidance due, in part, to the large number of revenue
recognition issues that registrants encounter.
10
<PAGE> 11
Management believes that its current revenue recognition
principles comply with SAB 101 and does not believe that
adoption of SAB 101 will have a material impact on its
financial position or results of operations.
(b) Net Loss Per Share
Net loss per share is computed in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share," by dividing the net loss allocable to common
stockholders (net loss less accretion related to redeemable
Class A common stock) by the weighted average number of shares
of common stock outstanding less the shares of redeemable
Class A common stock. The Company's stock options (2,488,494
at September 30, 1999 and 3,810,294 at September 30, 2000) and
convertible preferred stock (9,943,606 at September 30, 1999
and 0 at September 30, 2000), have not been used in the
calculation of diluted net loss per share because to do so
would be anti-dilutive. As such, the numerator and the
denominator used in computing both basic and diluted net loss
per share allocable to common stockholders are equal.
(c) Capitalized Software Costs
The Company accounts for the software components of its
websites in accordance with the American Institute of
Certified Public Accountants' Statement of Position ("SOP")
98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use". Accordingly, certain costs to
develop internal-use computer software are capitalized after
the Company has completed a preliminary project assessment and
management, with relevant authority, commits to funding the
related software project and it is probable that the project
will be completed and the software will be used to perform the
function intended. As of September 30, 2000, approximately
$700,000 has been capitalized and is included in property and
equipment in the accompanying condensed consolidated balance
sheets. These costs related to the Company's internet site
development and will be amortized to operations over the
assets' estimated useful life of three years upon completion
of the application development stage.
(d) Cash Equivalents
For the purposes of the statement of cash flows, the Company
considers all short term investments with a purchase to
maturity of three months or less to be cash equivalents.
As of September 30, 2000, the Company had approximately $15.3
million of highly liquid debt instruments with maturities of
less than three months included in cash equivalents and
$1,290,000 of certificates of deposit with maturities of less
than six months included in short term investments. The
Company accounts for all of these investments in accordance
with SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities". As of September 30, 2000, all of the
Company's cash equivalents and short term investments were
classified as held-to-maturity and their amortized cost
approximated fair value due to their short term nature.
(3) INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
1999 2000
---------- ----------
<S> <C> <C>
Raw materials $ 658,454 $ 275,894
Work-in-process 139,187 --
Cattle 403,562 3,773,102
Other -- 265,188
---------- ----------
$1,201,203 $4,314,184
========== ==========
</TABLE>
11
<PAGE> 12
(4) RELATED PARTY TRANSACTIONS
Amounts due from related parties consist of:
<TABLE>
<CAPTION>
1999 2000
------------ ------------
<S> <C> <C>
Eastern Livestock, Inc. $ -- $ 5,396,247
Employees and shareholders -- 5,443,110
------------ ------------
$ -- $ 10,839,357
============ ============
</TABLE>
Amounts due to related parties consist of:
<TABLE>
<CAPTION>
1999 2000
------------ ------------
<S> <C> <C>
XL Vision $ 1,668,317 $ 642,256
Safeguard Scientifics, Inc. and Safeguard Delaware,
Inc
Eastern Livestock, Inc. 10,385,398 12,115
Employees and shareholders -- 269,822
-- 2,993,508
------------ ------------
$ 12,053,715 $ 3,917,701
============ ============
</TABLE>
In connection with the acquisition of Eastern Livestock, Inc.'s
("Eastern") rollover business during May 2000, the Company has entered
into various transactions during the ordinary course of business with
Eastern's former shareholders and their related entities. The former
shareholders, who are now employees and shareholders of the Company,
continue to provide services and support to the Company pursuant to a
Supply and Support Agreement dated May 1, 2000. This agreement requires
the former shareholders and their related entities to assist the
Company in obtaining cattle inventory supplies and to use their best
efforts to cause customers to purchase cattle inventory from the
Company. In addition, the agreement calls for the former shareholders
and their related entities to continue conducting any and all
activities and types of transactions with the Company throughout the
term of the agreement. All such activities and transactions are
provided to the Company on an arm's length and fair value basis
pursuant to this agreement.
For the three and nine months ended September 30, 2000, the Company had
cattle sales to related parties of approximately $119,700,000 and
$178,200,000, respectively, and purchases of cattle from related
parties of approximately $20,500,000 and $36,400,000, respectively.
(5) SEGMENT INFORMATION
12
<PAGE> 13
The Company's reportable segments consist of cattle sales and other
products and services. The gross profit (loss) associated with cattle
sales and the related prospects for this portion of the Company's
business differs from the rest of the Company's products and service
offerings.
The following summarizes revenue, cost of revenue and gross profit
(loss) information related to the Company's two operating segments:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
----------------------------------- -----------------------------------
1999 2000 1999 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Cattle $ 15,281,907 $276,745,885 $ 17,022,862 $474,564,732
Other 478,485 604,851 1,315,783 1,754,989
------------ ------------ ------------ ------------
Total $ 15,760,392 $277,350,736 $ 18,338,645 $476,319,721
============ ============ ============ ============
Cost of revenue:
Cattle $ 15,123,056 $272,988,081 $ 16,852,085 $469,070,148
Other 561,870 656,807 1,430,245 1,833,649
------------ ------------ ------------ ------------
Total $ 15,684,926 $273,644,888 $ 18,282,330 $470,903,797
============ ============ ============ ============
Gross profit (loss):
Cattle $ 158,851 $ 3,757,804 $ 170,777 $ 5,494,584
Other (83,385) (51,956) (114,462) (78,660)
------------ ------------ ------------ ------------
Total $ 75,466 $ 3,705,848 $ 56,315 $ 5,415,924
============ ============ ============ ============
</TABLE>
The Company's assets and other statement of operations data are not
allocated to a segment.
(6) STOCK PLAN
A summary of stock option transactions for the nine months ended
September 30, 2000, follows:
<TABLE>
<CAPTION>
WEIGHTED
RANGE OF WEIGHTED AVERAGE
EXERCISE AVERAGE REMAINING
PRICE PER EXERCISE CONTRACTUAL
SHARES SHARES PRICE LIFE (IN YEARS)
--------- -------------- -------- ---------------
<S> <C> <C> <C> <C>
Balance outstanding, December 31,
1999 2,769,116 $ 0.80 - 11.20 $ 2.93 9.01
====
Granted 1,407,376 10.56 - 62.38 17.74
Exercised (253,363) 0.80 - 6.40 1.24
Cancelled (112,835) 1.60 - 16.97 8.14
--------- -------------- ------ ----
Balance outstanding, September 30,
2000 3,810,294 $ 0.80 - 62.38 $ 8.36 8.73
========= ============== ====== ====
</TABLE>
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<PAGE> 14
For the three and nine months ended September 30, 2000, the Company
recognized $0 and $1,339,268 of unearned compensation expense,
respectively, resulting from the accelerated vesting of stock options.
This amount is included in selling, general and administrative expenses
within the condensed consolidated statements of operations.
(7) ACQUISITIONS
On May 1, 2000, the Company closed on an Agreement for the Purchase and
Sale of Assets with Eastern Livestock Co. ("Eastern"), and its
shareholders. Eastern engages in buying cattle for immediate or
short-term resale ("the rollover business"). The purchase of the
rollover business included acquisition of all tangible and intangible
systems used in the conduct or operation of the business, all furniture
and/or equipment and systems associated with the business, and any
presence on the World Wide Web, including email addresses, maintained
by or on behalf of Eastern in connection with the rollover business.
The purchase price for these assets consisted of (i) $17,000,000 in
cash, (ii) 1,215,913 shares of eMerge common stock valued at
$14,500,000 and (iii) $4,500,000 in cash to be paid one year after the
closing date or earlier upon certain events occurring. The acquisition
was accounted for as a purchase and the estimated excess of the
purchase price over the fair value of net assets acquired of
approximately $36,100,000 was recorded as intangible and is being
amortized over five years.
On June 1, 2000, the Company closed on an Agreement for the Purchase
and Sale of Assets with W.P. Land and Livestock, Inc. d/b/a Jordan
Cattle Auction ("Jordan") and its shareholders. In connection with this
purchase, the Company acquired all of the tangible and intangible
property of W.P. Land and Livestock relating to its business of
purchasing and reselling of cattle through auction as well as any
presence on the World Wide Web maintained by or on behalf of W.P. Land
and Livestock, including the page located at URL
http://www.jordancattle.com, and any email addresses used in connection
with the business. The purchase price for these assets was $2,864,748
in cash. Concurrent with the purchase and sale of assets, the Company
also closed on a Contract for Sale and Purchase of Real Estate with the
shareholders of W.P. Land and Livestock. The Company purchased three
parcels of land and buildings used in the above described business for
a purchase price of $3,472,000 in cash. The acquisition was accounted
for as a purchase and the estimated excess of the purchase price over
the fair value of net assets acquired of approximately $3,900,000 was
recorded as intangible and is being amortized over five years.
On July 24, 2000, the Company closed on an Agreement for the Purchase
and Sale of Assets with the sole owner of the E4 Cattle Business ("Ed
Edens Farms") for the purchase of certain tangible and intangible
assets. Ed Edens Farms engages in the buying of cattle for immediate or
short-term resale. In connection with the purchase and sale of assets,
the Company also closed on a Contract for Sale and Purchase of Real
Estate with the Edens Family Trust for the purchase of land and
associated buildings and improvements used in the above described
business. The purchase price for these assets, including real estate,
consisted of (i) $2,250,000 in cash, and (ii) 83,858 shares of eMerge's
common stock valued at $1,000,000. The acquisition was accounted for as
a purchase and the estimated excess of the purchase price over the fair
value of net assets acquired of approximately $2,200,000 was recorded
as intangible and is being amortized over five years.
On August 18, 2000, the Company closed on an Agreement for the Purchase
and Sale of Assets with LeMaster Livestock, Inc. ("LeMaster") and its
shareholders for the purchase of certain tangible and intangible
assets. LeMaster engages in the buying of cattle for immediate or
short-term resale. In connection with the purchase and sale of assets,
the Company also closed on a Contract for Sale and Purchase of Real
Estate with the shareholders of LeMaster for the
14
<PAGE> 15
purchase of land and associated buildings and improvements used in the
above described business. The purchase price for these assets,
including real estate, consisted of (i) $3,065,442 in cash, (ii)
125,819 shares of eMerge's common stock valued at $2,240,000, and (iii)
$300,000 in cash to be paid one year after the closing date or earlier
based upon the occurrence of certain events. The acquisition was
accounted for as a purchase and the estimated excess of the purchase
price over the fair value of net assets acquired of approximately
$5,215,000 was recorded as intangible and is being amortized over five
years.
On August 28, 2000, the Company closed on an Agreement for the Purchase
and Sale of Assets with the sole owner of Mountain Plains Video
Contract Auction ("Mountain Plains") for the purchase of certain
intangible assets. Mountain Plains provides video auction services to
sellers of cattle and generates commissions from the sellers upon the
sale of their cattle through an affiliated auction facility. The
purchase price for these assets consisted of (i) $750,000 in cash, and
(ii) 12,743 shares of eMerge's common stock valued at $250,000. The
acquisition was accounted for as a purchase and the estimated excess of
the purchase price over the fair value of net assets acquired of
approximately $1,053,000 was recorded as intangible and is being
amortized over five years.
On August 31, 2000, the Company closed on an Agreement for the Purchase
and Sale of Assets with McMahan Order Buying Company ("McMahan") and
its sole shareholder for the purchase of certain tangible and
intangible assets. McMahan engages in the buying of cattle for
immediate or short-term resale. The purchase price for these assets
consisted of (i) $1,802,500 in cash, (ii) 104,392 shares of eMerge's
common stock valued at $1,812,500, and (iii) $10,000 in cash to be paid
in January 2001. The acquisition was accounted for as a purchase and
the estimated excess of the purchase price over the fair value of net
assets acquired of approximately $3,628,000 was recorded as intangible
and is being amortized over five years.
On September 1, 2000, the Company closed on an Agreement for the
Purchase and Sale of Assets with RPT Land & Cattle Company ("Thigpen")
for the purchase of certain tangible and intangible assets. Thigpen
engages in the buying of cattle for immediate or short-term resale. In
connection with the purchase and sale of assets, the Company also
entered into a Contract for Sale and Purchase of Real Estate with
Robert Thigpen, Jr. for the purchase of land and associated buildings
and improvements used in the above described business. The real estate
portion of the transaction subsequently closed on November 9, 2000. The
purchase price for these assets, including real estate, consisted of
(i) $3,344,642 in cash, and (ii) 89,585 shares of eMerge's common stock
valued at $2,000,000. The acquisition was accounted for as a purchase
and the estimated excess of the purchase price over the fair value of
net assets acquired of approximately $4,614,000 was recorded as
intangible and is being amortized over five years.
The results of operations of the acquired companies are included in the
condensed consolidated statements of operations since the respective
dates of acquisition.
The following unaudited proforma financial information presents the
combined results of operations of eMerge, Eastern, Jordan, Ed Edens
Farms, LeMaster, Mountain Plains, McMahan, and Thigpen, as if the
acquisitions occurred on January 1, 1999, after giving effect to
certain adjustments, including amortization of goodwill. The unaudited
pro forma financial information does not necessarily reflect the
results of operations that would have occurred had these entities
constituted a single entity during such periods.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- -------------------------------
1999 2000 1999 2000
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue $ 268,640,781 $ 313,981,059 $ 690,214,967 $ 839,772,063
Net loss (4,557,644) (7,640,390) (13,646,793) (24,146,280)
Net loss per share $ (0.53) $ (0.22) $ (1.64) $ (0.77)
</TABLE>
15
<PAGE> 16
(8) SUBSEQUENT EVENTS
On October 1, 2000, the Company acquired an additional 11% of the
common stock of Turnkey Computer Systems, Inc. ("Turnkey") for
$1,265,000 in cash. The Company now has direct ownership in 30% of the
issued and outstanding capital stock of Turnkey.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read together with the consolidated financial statements
and the related notes included elsewhere in this report.
FORWARD LOOKING STATEMENTS
In addition to historical information, this report contains statements
that constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements can be identified by
the use of predictive, future tense or forward-looking terminology, such as
"anticipates," "believes," "estimates," "expects," "intends," "may," "will" and
words of similar meaning. These statements include statements regarding, among
other things, our electronic commerce strategy, acquisition and expansion
strategy, product and service development, projected capital expenditures,
liquidity and capital, development of additional revenue sources, expansion into
new market segments, technological advancement, ability to develop "brand"
awareness and the market acceptance of the Internet as a medium of commerce.
These statements are based on management's current expectations and are subject
to a number of uncertainties and risks that could cause actual results to differ
significantly from those described in the forward-looking statements, including
the acceptance by our customers of electronic commerce as a means of conducting
business, our ability to grow revenue, our ability to increase margins, our
ability to implement our acquisition and expansion strategy, the impact of
competition on pricing, general economic conditions, employee turnover, the
impact of litigation and other factors. Other factors that may cause such a
difference include, but are not limited to, those discussed in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in "Factors Affecting Our Business, Financial Condition and
Results of Operation," as well as those discussed elsewhere in this report and
as set forth from time to time in our other public filings and public
statements. Readers of this report are cautioned to consider these risks and
uncertainties and to not place undue reliance on these forward-looking
statements.
OVERVIEW
We are a technology based company providing integration solutions for
the $40 billion U.S. beef-production industry. Our goal is to improve the
nation's beef-production process by adding previously unrealized value to the
supply chain via an information-management infrastructure, an e-marketplace, and
value-enhancing technologies. We believe that by accomplishing our goal, we can
improve the industry's productivity and profitability and help its participants
enhance beef quality, safety and market share. We offer our products and
services to cattle industry participants through our family of integrated web
sites, our proprietary information management application and our direct sales
force. Our business strategy is to utilize our information management,
electronic commerce and technology resources to develop and offer complementary
products and services that reduce inefficiencies throughout the cattle
production chain, improve cattle quality and improve overall productivity in the
cattle industry.
16
<PAGE> 17
Through our value chain integration strategy, we intend to improve
meat quality, meat safety and to positively affect the manufacturing process in
the cattle industry and add previously unrealized value to the nation's beef
supply system. We intend to implement this strategy through our existing
CattleinfoNet business network, which is comprised of our information management
infrastructure, an electronic commerce platform and value enhancing
technologies. As an integral part of our value chain integration strategy, we
intend to enhance the effectiveness and scope of our CattleinfoNet business
network by developing a network of Interactive Facilities, a regional network of
facilities that we previously referred to as "e-market hubs."
We believe that a network of Interactive Facilities will allow us to
more accurately gather, track and analyze information through our information
management infrastructure, more productively operate our electronic commerce
platform and more uniformly implement and monitor our technologies. As a result,
we believe that by combining our CattleinfoNet business network with a network
of Interactive Facilities we will be able to more effectively and rapidly reduce
the inefficiencies in the cattle industry and provide ranchers and producers
with increased product quality, consistency, yield and safety.
Our recent acquisitions of Eastern, Jordan Cattle Auction, Ed Edens
Farms, LeMaster, Mountain Plains, McMahan, and Thigpen are the initial stages of
implementing this strategy. We will continue to aggressively explore additional
acquisitions, licensing and strategic alliance opportunities that provide a
strategic fit for our value integration strategy, in terms of both the
geographic reach and technological assets offered by a potential facility or
partner.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
Revenue increased from $15.8 million for the quarter ended September
30, 1999 to $277.4 million for the quarter ended September 30, 2000. Revenue
from cattle sales increased from $15.3 million for the quarter ended September
30, 1999 to $276.7 million for the quarter ended September 30, 2000. This
increase reflects a higher volume of cattle sales transactions resulting
primarily from our acquisition activities. During the quarter ended September
30, 2000, we sold approximately 632,800 head of cattle versus 29,700 head sold
in the comparable prior year period. Revenue from other products and services
increased by 26% from $478,500 for the quarter ended September 30, 1999 to
$604,800 for the quarter ended September 30, 2000. This increase is due
primarily to higher revenue from the sale of cattle-related products which were
offset in part by a decline in sales of our equine imaging systems. We expect
that cattle revenue will continue to account for the majority of our revenue
base for the foreseeable future.
Cost of revenue consists primarily of the direct cost to acquire
cattle, cattle-related products, and equine imaging systems components. In
addition, cost of revenue also includes the indirect overhead costs, such as
support personnel, facilities costs, telecommunication charges and depreciation,
that are primarily associated with supporting our expanding base of on-line
products and services. Cost of revenue attributed to cattle sales increased from
$15.1 million for the quarter ended September 30, 1999 to $273.0 million for the
quarter ended September 30, 2000. Cost of revenue attributed to other products
and services increased by 17% from $561,900 for the quarter ended September 30,
1999 to $656,800 for the quarter ended September 30, 2000. This increase is due
principally to higher cattle-related product costs and an increase in indirect
overhead costs. We generated a gross profit of $75,500 and $3.7 million for the
quarters ended September 30, 1999 and 2000, respectively. The increase in gross
profit is due primarily to the increase in cattle revenue as cost of goods did
not increase in proportion to the increase in revenue.
Selling, general and administrative expenses increased 245% from $3.3
million for the quarter ended September 30, 1999 to $11.4 million for the
quarter ended September 30, 2000.
Sales and marketing expenses consist primarily of salaries and related
costs for sales and marketing personnel, recruiting and relocation charges,
consulting fees, travel, telephone, depreciation and advertising and trade
shows. Sales and marketing
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<PAGE> 18
expenses increased 220% from $2.0 million for the quarter ended September 30,
1999 to $6.4 million for the quarter ended September 30, 2000. The increase in
sales and marketing expenses is due primarily to costs associated with expanding
the number of personnel within the organization as well as higher consulting,
travel, telephone, depreciation and advertising costs. We anticipate these costs
will continue to increase as we continue to pursue additional sales and
marketing opportunities.
Our general and administrative expenses consist primarily of salaries
and related costs for executive, administrative, and finance personnel,
amortization of intangibles and professional service fees. General and
administrative expenses increased 285% from $1.3 million for the quarter ended
September 30, 1999 to $5.0 million (including intangibles amortization of $2.6
million) for the quarter ended September 30, 2000. The increase was primarily
due to increased amortization of intangibles resulting from acquisitions, higher
expenses associated with expanding the number of personnel within the
organization and increased legal, investor relations, and travel expenses
required to support and grow our business. We expect these expenses to continue
to increase as additional acquisitions are made, personnel are hired, and
expenses are incurred to support future growth.
Our research and development expenses consist primarily of salaries and
related costs, payments to outside consultants, material costs for prototype
imaging systems and, to a lesser extent, depreciation on equipment used for
development. Our expenses decreased 36% from $1.3 million for the quarter ended
September 30, 1999 to $ 826,700 for the quarter ended September 30, 2000. This
decrease was primarily due to lower consulting and salary costs which were
offset in part by an increase in material and supply purchases. We expect these
costs to increase in future periods as we plan to invest heavily to develop and
commercialize new products, expand our offerings and adapt our technologies to
new markets.
Interest and other income (expense), net rose from ($168,000) for the
quarter ended September 30, 1999 to $1.3 million for the quarter ended September
30, 2000. This increase was primarily due to increased interest income generated
by short-term investments and a reduction in interest expense following the
initial public offering and repayment of related party debt. Currently, we
invest the majority of our cash balances in debt instruments of high-quality
corporate issuers.
Due to the losses incurred, we did not recognize income tax expense for
the quarter ended September 30, 1999 or the quarter ended September 30, 2000.
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
Revenue increased from $18.3 million for the nine months ended
September 30, 1999 to $476.3 million for the nine months ended September 30,
2000. Revenue from cattle sales increased from $17.0 million for the nine months
ended September 30, 1999 to $474.5 million for the nine months ended September
30, 2000. This increase reflects a higher volume of cattle sales transactions
brought about primarily through our acquisition activities. During the nine
months ended September 30, 2000, we sold approximately 1.0 million head of
cattle versus 32,800 head sold in the comparable prior year period. Revenue from
other products and services increased by 38% from $1.3 million for the nine
months ended September 30, 1999 to $1.8 million for the nine months ended
September 30, 2000. This increase is due primarily to higher revenue derived
from subscriptions to our comparative feedlot analysis and market information
services, the addition of advertising revenue, and sales of cattle-related
products. The increased revenue derived from other products and services was
partially offset by lower sales of our equine imaging systems and related
inventory. We expect that cattle revenue will continue to account for the
majority of our revenue base for the foreseeable future.
Cost of revenue consists primarily of the direct cost to acquire
cattle, cattle-related products, and equine imaging systems components. In
addition, cost of revenue also includes the indirect overhead costs, such as
support personnel, facilities costs, telecommunication charges and depreciation,
that are associated with the production of the equine imaging system and, more
recently, with supporting our expanding base of on-line products and services.
Cost of revenue attributed to cattle sales increased from $16.9 million for the
nine months ended September 30, 1999 to $469.1 million for the nine months ended
September 30, 2000. Cost of revenue attributed to other products and services
increased by 29% from $1.4 million for the nine months ended September 30, 1999
to $1.8 million for the nine months ended September 30, 2000. This increase is
due principally to higher equine imaging system and related inventory costs,
increased cattle-related product costs, and an increase in indirect overhead.
18
<PAGE> 19
We generated a gross profit of $56,300 and $5.4 million for the nine months
ended September 30, 1999 and 2000, respectively. The increase in gross profit is
due primarily to the increase in cattle revenue as cost of goods did not
increase in proportion to the increase in revenue.
Selling, general and administrative expenses increased 261% from $7.5
million for the nine months ended September 30, 1999 to $27.1 million for the
nine months ended September 30, 2000.
Sales and marketing expenses consist primarily of salaries and related
costs for sales and marketing personnel, recruiting and relocation charges,
consulting fees, travel, telephone, depreciation and advertising and trade
shows. Sales and marketing expenses increased 276% from $4.5 million for the
nine months ended September 30, 1999 to $16.9 million for the nine months ended
September 30, 2000, and included non-cash compensation charges of $1.3 million
associated with employee separations during the second quarter of fiscal year
2000. The remaining increase in sales and marketing expenses is due primarily to
costs associated with expanding the number of personnel within the organization
as well as higher consulting, travel, telephone, depreciation and advertising
costs. We expect these costs to continue to increase as we continue to pursue
additional sales and marketing opportunities.
Our general and administrative expenses consist primarily of salaries
and related costs for executive, administrative, and finance personnel,
amortization of intangibles and professional service fees. General and
administrative expenses increased 240% from $3.0 million for the nine months
ended September 30, 1999 to $10.2 million (including intangibles amortization of
$4.5 million) for the nine months ended September 30, 2000. The increase was
primarily due to increased amortization of intangibles resulting from
acquisitions, higher expenses associated with expanding the number of personnel
within the organization and increased legal, investor relations and travel
expenses required to support and grow our business. We expect these expenses to
continue to increase as additional acquisitions are made, personnel are hired,
and expenses are incurred to support future growth.
Our research and development expenses consist primarily of salaries and
related costs, payments to outside consultants, travel, material costs for
prototype imaging systems and, to a lesser extent, depreciation on equipment
used for development. Our expenses increased 18% from $2.8 million for the nine
months ended September 30, 1999 to $3.3 million for the nine months ended
September 30, 2000. This increase was primarily due to higher travel expenses
and increased spending for materials and supplies required to integrate and
expand our product lines such as our online cattle sales and auction software
and Interactive Manager software (formerly referred to as Feedlot Information
System software). We expect these costs to increase as we plan to invest heavily
to develop and commercialize new products, expand our offerings and adapt our
technologies to new markets.
Interest and other income (expense), net rose from ($443,000) for the
nine months ended September 30, 1999 to $4.3 million for the nine months ended
September 30, 2000. This increase was primarily due to increased interest income
generated by short-term investments and a reduction in interest expense
following the initial public offering and repayment of related party debt.
Currently, we invest the majority of our cash balances in debt instruments of
high-quality corporate issuers.
Due to the losses incurred, we did not recognize income tax expense for
the nine months ended September 30, 1999 or the nine months ended September 30,
2000.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, our primary source of liquidity consisted of
cash and highly liquid, high quality debt instruments. Our intent is to make
such funds, which have maturities of less than one year, readily available for
operating purposes. At September 30, 2000, we had cash, cash equivalents, and
short term investments, primarily investments in marketable debt securities and
certificates of deposit, totaling $23.0 million compared to $12.3 million at
December 31, 1999. Subsequent to September 30, 2000, we entered into a common
stock purchase agreement with Turnkey Computer Systems, Inc., that will require
the use of approximately $1.3 million of cash.
19
<PAGE> 20
We have had significant negative cash flows from operating activities
for each fiscal and quarterly period to date. For the nine months ended
September 30, 2000, net cash used in operating activities was $41.4 million and
primarily consisted of net operating losses and increases in trade accounts
receivable, amounts due from related parties (primarily accounts receivable),
inventories, cattle deposits and prepaid expenses. These amounts were offset in
part by increases in accounts payable and customer advances.
Net cash used in investing activities was $44.5 million for the nine
months ended September 30, 2000. Our investing activities included the
acquisitions of Eastern, Jordan, Ed Edens Farms, LeMaster, Mountain Plains,
McMahan and Thigpen for a combined $33.1 million and capital expenditures of
$10.1 million. We expect a continued increase in acquisition activity and
capital expenditures for the foreseeable future as we continue to effect our
business strategy.
Net cash provided by financing activities was $95.3 million for the
nine months ended September 30, 2000. Cash provided by financing activities was
primarily due to our initial public offering and private placement, which raised
net proceeds of $107.1 million, as well as the exercise of stock options. These
amounts were partially offset by related party payments of $10.4 million to
Safeguard Scientifics, Inc. and $1.5 million to XL Vision and the repayment of a
$900,000 note payable due to Turnkey Computer Systems.
On February 10, 2000, we completed our initial public offering and
private placement of 7,675,000 shares of common stock which generated net
proceeds, after deducting underwriting discounts, commissions and other offering
costs, of $107.1 million. Subsequent to the offering, approximately $12.8
million of the proceeds were used to pay amounts due to related parties and
Turnkey Computer Systems and $33.1 million was used for acquisitions of other
businesses. We believe that the net proceeds from the offering, together with
our existing cash, short term investments and subscription receivable, will be
sufficient to meet our working capital and capital expenditure requirements for
at least the next 24 months under our current business plan, which may change.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, Accounting for Derivatives and Hedging Activities, which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. SFAS No.
133 was amended by SFAS No. 137 in June 1999 to require implementation of the
standard beginning January 1, 2001 for the Company. SFAS No. 133 was amended
further by SFAS No. 138 in June 2000. The adoption of SFAS No. 133, as amended,
is not expected to have a material impact on the results of our operations,
financial position or cash flows.
In the ordinary course of our business, we enter into purchase and sale
contracts for cattle that require delivery at a future date. We believe that
these transactions fall under the "normal purchases and normal sales" exception
described within SFAS No. 133, as amended. We also enter into a limited number
of cattle futures transactions. Currently, we do not maintain the documentation
required by the standard to qualify for hedge accounting with respect to cattle
futures transactions. Accordingly, if SFAS No. 133, as amended, was adopted as
of September 30, 2000, we would have recorded a charge to operations of less
than $20,000.
FACTORS AFFECTING OUR BUSINESS, FINANCIAL CONDITION, AND RESULTS OF OPERATIONS
In addition to the other information included in this report and our
other public filings and releases, the following factors should be considered
while evaluating our business, financial condition, results of operations and
prospects:
We have a limited operating history and unproven business model. As a result, we
may not be able to accurately predict future results and our business strategy
may not be successful.
We commenced operations in 1994 and commercially released our initial
product in November 1997. Accordingly, we have only a limited operating history
upon which to evaluate our business. In addition, our business strategy and
revenue model has changed significantly during the past 18 months. Our limited
operating history, combined with our recent shift in business strategy, makes
predicting our future results of operations difficult. Our new business model
has not been tested and, accordingly, we cannot be certain that our business
strategy will be successful.
Specific uncertainties relating to our new business model include our
ability to:
- achieve acceptance of our Web site as a marketplace for
electronic commerce;
- expand the number of cattle producers, feedlots and packers
that utilize our services;
- develop and upgrade our products and technologies more
effectively and rapidly than our competitors; and
- successfully implement our acquisition, sales and marketing
strategies.
We have a history of net losses and expect to continue to incur losses for the
foreseeable future. If we continue to incur losses, our business may not
ultimately be financially viable.
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We have incurred significant net losses since inception. We reported a
net loss of approximately $10.7 million for the nine months ended September 30,
1999, or 58% of total revenue, and a net loss of approximately $20.7 million for
the nine months ended September 30, 2000, or 4% of total revenue. As of
September 30, 2000, we had accumulated net losses totaling approximately $53.1
million. Our operating expenses have increased significantly in each year of our
operation, and we anticipate that such expenses will continue to increase over
the next several years as we expand our operations. Our revenue may not grow or
may not even continue at its current level and, as a result, our financial
condition and results of our operations may be harmed and our business may not
be financially viable in the future.
To achieve profitability, we must successfully address the following
risks:
- lack of commercial acceptance of our Internet cattle
sales and services;
- failure to expand the number of livestock industry
participants using our network;
- failure to obtain access to data from feedlots to
adequately address the information needs of our
customers;
- inability to respond to competitive developments;
- failure to achieve brand recognition;
- failure to introduce new products and services; and
- failure to upgrade and enhance our technologies to
accommodate expanded product and service offerings
and increased customer traffic.
If we are unable to successfully address any of these risks, our
business may be harmed.
The Internet livestock products and services market, including, in particular,
the cattle sales market, is new and uncertain and our business may not develop
as we anticipate.
The Internet market for livestock products and services, including, in
particular, the cattle sales market, has only recently developed, and its
continued development is subject to substantial uncertainty. To date, we have
not realized adequate revenues and gross margins from this market to achieve
profitability. We cannot be assured that this market will continue to develop as
we expect, if at all. Our revenue model depends on the commercial acceptance of
our Internet-based products and services. We do not know if our target customers
will use the Internet as a means of purchasing products and services. Even if
potential customers choose to purchase livestock products and services over the
Internet, they may not choose our online services to do so. If the market for
livestock products and services over the Internet does not develop as we
anticipate, our business and the results of our operations will be harmed.
For the nine months ended September 30, 2000, we relied on cattle sales
for over 99% of our revenue and we expect to rely on the success of our cattle
sales and auction services for a significant majority of our revenue for the
foreseeable future. As a result, our ability to achieve commercial acceptance of
our cattle sales is critical to our ability to obtain future revenue. To date,
we have not achieved revenues from cattle sales that are sufficient for us to
determine whether these services will achieve commercial acceptance. Any failure
to successfully gain commercial acceptance of these services would harm our
business and the results of our operations. In addition, as the result of our
dependence on cattle sales, if the demand for beef declines, the demand for our
products and services would likely decline, and our results of operations would
be harmed.
We recently completed significant acquisitions of businesses and technologies
and we may make other business acquisitions in the future, which may be
difficult to integrate into our business and may disrupt or negatively impact
our business.
We recently made, and will continue to make, investments in and
acquisitions of complementary companies, technologies and assets that constitute
critical aspects of our current and future business operations. If we fail to
successfully integrate the operations of these companies, technologies or assets
into our business, we may not be able to successfully execute our business
strategy. In connection with a number of our acquisitions we hire key employees.
The businesses we have acquired generally are critical to our current business
operations and growth strategy.
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<PAGE> 22
Our acquisitions may result in:
- difficulties in assimilating technologies, products,
personnel and operations;
- diversion of our management's attention;
- entering markets in which we have no or limited prior
experience;
- loss of key employees of acquired organizations; and
- capital requirements in excess of what we anticipate.
In the future, acquiring companies, assets or technologies may also
require us to make cash payments, assume debt, incur large write-offs related to
intangible assets and issue equity, which will dilute ownership interest.
If we are unable to manage our growth effectively, our business may be harmed.
We cannot assure that we will be able to effectively or successfully
manage our growth. If we are unable to manage our growth effectively, our
business operations would suffer. We seek to grow by increasing transaction and
subscription volume, adding new products and services and by hiring additional
employees. Our growth is likely to place a significant strain on our resources
and systems. As we continue to increase the scope of our operations, we will
need an effective planning and management process to implement our business
strategy successfully and we will need to implement new and improve existing
systems, procedures and controls. We will also need to expand, train and manage
our workforce.
If we are unable to protect our intellectual property rights, our business and
competitive position will be harmed.
Proprietary rights are important to our success and our competitive
position. We protect our intellectual property through a combination of patent,
copyright, trade secret and trademark law and confidentiality agreements with
third parties. We cannot guarantee that any of our pending patent or trademark
applications will be approved. Even if they are approved, the patents or
trademarks may be challenged by other parties or invalidated. Because brand
recognition is an important component of our business strategy, the protection
of our trademarks is critical to our success. We also depend upon patents
licensed to us by the Canadian government and trade secret law to protect the
proprietary nature of our NutriCharge products. In addition, we depend upon our
proprietary database of industry and client information to provide our clients
with our information services. Despite our efforts to protect our proprietary
rights, unauthorized parties may copy aspects of our products and technology or
obtain access to our confidential proprietary database. Other parties may also
breach confidentiality agreements and other protective contracts. We may not
become aware of these breaches or have adequate remedies available. In addition,
effective copyright, patent and trademark protection may be unavailable in
certain countries to which we might expand our operations.
In technology markets, there is generally frequent and substantial
intellectual property litigation. We may be subject to legal proceedings and
claims, including claims that we infringe third-party proprietary rights. While
we are not aware of any patents, copyrights or other rights that would prevent
us from manufacturing and commercializing our products or services in the United
States and abroad, there can be no assurance that other parties will not assert
infringement claims against us. There also can be no assurance that former
employers of our present and future employees will not claim that our employees
have improperly disclosed confidential or proprietary information to us. Any of
these claims, with or without merit, could subject us to costly litigation and
divert the attention of our personnel.
We typically assume the ownership of cattle sold through our Internet cattle
marketplace and are subject to the risk of loss while we hold title and market
risk.
In the sales transactions conducted through our Internet cattle sales
and auction services network, we typically contract to purchase cattle from a
seller, identify a buyer for the cattle, take title to the cattle from the
seller and then resell the cattle to the buyer. In this process, we enter into a
contract to purchase cattle in advance of entering into a contract to sell the
cattle. Therefore, until we actually complete a sale transaction, we are subject
to the risk that we may be unable to sell cattle that we are contractually
obligated to purchase. In addition, once we purchase the cattle, we assume title
to the cattle for generally up to 48
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<PAGE> 23
hours. As a result, we assume the risk of liability, loss and deterioration in
value of the cattle during that period. As a result, our business may be harmed.
We depend on our key employees for our success. The loss of any of these persons
could harm our ability to compete.
The loss of the services of any key person could harm our business,
including our ability to compete effectively. Our performance also depends on
our ability to attract, retain and motivate additional key officers and
employees. We may be unable to retain our employees or to attract, assimilate
and retain other qualified employees with relevant livestock and electronic
commerce industry skills in the future. If we fail to attract, retain and
motivate qualified employees, our business will be harmed.
We expect our quarterly operating results to fluctuate. If we fail to meet the
expectations of public market analysts and investors, the market price of our
common stock could decline.
We expect that our revenue and operating results will vary in the
future as a result of a number of factors. Our quarterly results of operations
may not meet the expectations of securities analysts and investors, which could
cause the price of our common stock to decline. Our operating results in the
future may not follow any prior trends and should not be relied upon as an
indication of future results. The factors that affect our quarterly operating
results include:
- our ability to retain existing customers and attract
new customers;
- our ability to develop and market new and enhanced
products and services on a timely basis;
- the introduction of new or enhanced Web sites,
products and services by us; and
- continued purchases by our existing customers.
In addition, a number of factors that are beyond our control will also
affect our quarterly operating results, such as:
- demand for our products and services;
- product and price competition;
- the introduction of new or enhanced Web sites,
products and services by our competitors; and
- significant downturns in our targeted markets.
Our quarterly results could fluctuate as a result of seasonal fluctuations in
the cattle industry.
The cattle industry has historically experienced, and may continue to
experience, seasonal fluctuations. These seasonal patterns may cause quarterly
fluctuations in our operating results. In particular, a disproportionate number
of cattle are sold to feedlots during the third and fourth quarters of each
calendar year. Therefore, a greater number of sales transactions occur during
these two calendar quarters. Due to our limited operating history and the recent
changes in our business as a result of acquisitions, it is difficult to predict
the effect that this seasonal pattern will have on our revenue and quarterly
operating results.
Our back-up mechanisms are unproven, and therefore are vulnerable to damage or
interruption which would harm our ability to reliably service our customers.
Our network server, satellites, computers and facilities are vulnerable
to damage or interruption from a number of sources, including fire, flood, power
loss, earthquakes, telecommunications failures, system failures, Internet
brownouts, computer viruses, electronic break-ins and similar disruptions. We
depend on these systems to provide our customers with online cattle sales and
auction services, feedlot and cattle industry analyses, cattle inventory
management tools and the sale of NutriCharge. During the past year, we
experienced a system interruption caused by adverse weather conditions, which
resulted in our system shutting down for approximately 24 hours. We may
experience such an interruption in the future. Any substantial interruptions
could result in the loss of data and could impair our ability to provide our
products and services to customers and to generate
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<PAGE> 24
revenues. Presently, we do not have a formal disaster recovery plan in effect.
Moreover, our business interruption insurance may not be sufficient to
compensate us for losses that may occur if any of our Internet-based services
are interrupted.
Risks associated with the security of transactions and transmitting confidential
information over the Internet may negatively impact our electronic commerce
business.
We believe that concern regarding the security of confidential
information transmitted over the Internet, such as credit card numbers and
proprietary data, may prevent many potential customers from engaging in online
transactions and may harm our business. Despite the measures we intend to take
to enhance our Internet security, our infrastructure is potentially vulnerable
to physical or electronic break-ins, viruses or similar problems. If our
security measures are circumvented, proprietary information could be
misappropriated or our operations could be interrupted. Security breaches that
result in access to confidential information could expose us to a risk of loss
or liability. If we do not adequately address these concerns or face any claims
in connection with a breach of security, our business, financial condition and
operating results could be harmed.
We could face liability for information retrieved from or transmitted through
our Web sites, which could result in high litigation or insurance costs.
As a publisher and distributor of online content, we face potential
liability for defamation, negligence, copyright, patent or trademark
infringement and other claims based on the nature and content of the materials
that we publish or distribute on our Web sites. Any imposition of liability
could negatively impact our reputation and result in increased insurance costs.
Claims have been successfully brought against online services. Although we carry
general liability insurance, our insurance may not cover claims of these types
or may not be adequate to cover us for all liability that may be imposed.
Government regulation and legal uncertainties could result in additional burdens
to doing business on the Internet.
The laws governing the Internet remain largely unsettled, even in areas
where there has been some legislative action. It may take years to determine
whether and how existing laws including those governing intellectual property,
privacy, libel and taxation apply to the Internet. Our business, results of
operations and financial condition could be harmed by the adoption or
modification of laws or regulations relating to the Internet that result in the
imposition of additional costs on conducting business over the Internet or
impose additional restrictions on our ability to conduct our business
operations. In 1998, the Internet Tax Freedom Act placed a three-year moratorium
on state and local taxes on Internet access, except for taxes imposed prior to
October 1, 1998, and on taxes that discriminate against online commerce.
However, Congress may not renew this legislation in 2001 and state and local
governments would be able to impose Internet-specific taxes on goods purchased
electronically, in addition to taxes that are otherwise imposed on sales
transactions.
Internet Capital Group, Safeguard and XL Vision will be able to control matters
requiring stockholder approval.
The concentration of ownership of our common stock may delay, deter or
prevent acts that would result in a change of control, which could reduce the
market price of our common stock. Internet Capital Group and Safeguard are
affiliated entities and Safeguard and XL Vision are affiliated entities.
Internet Capital Group, Safeguard and XL Vision together have the power to vote
approximately 63% (as of September 30, 2000) of the aggregate number of votes to
which the holders of our common stock are entitled. As a result, these
stockholders will be able to control all matters requiring stockholder approval.
In addition, currently five of the seven members of our board of
directors also serve as directors and/or officers of Internet Capital Group,
Safeguard or XL Vision. Internet Capital Group has the right to elect two
directors to our board. Under the joint venture agreement, Safeguard and
Internet Capital Group have agreed to vote for two designees of Safeguard and
two designees of Internet Capital Group in all future elections of directors.
Safeguard, XL Vision and Internet Capital Group will therefore have the ability
to significantly influence our management.
Our common stock price is likely to be highly volatile.
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<PAGE> 25
The market price of our common stock, like the market for
Internet-related and technology companies in general, has been and will likely
continue to be highly volatile. Any significant fluctuations in the future might
result in a material decline in the market price of our common stock. These
fluctuations may be caused by factors such as:
- actual or anticipated variations in quarterly
operating results;
- announcements of technological innovations;
- conditions or trends in the cattle industry;
- new sales formats of new products or services;
- changes in or failure by us to meet financial
estimates of securities analysts;
- conditions or trends in the Internet industry;
- announcements by us or our competitors of significant
acquisitions, strategic partnerships or joint
ventures;
- capital commitments;
- additions or departures of key personnel; and
- sales of common stock.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We held no derivative securities as of September 30, 2000. Our exposure
to market risk relates to changes in interest rates and their potential impact
on our investment portfolio. We invest in marketable debt securities that meet
high credit quality standards and limit our credit exposure to any one issue,
issuer and type of investment. At September 30, 2000, our investments consisted
of $15.3 million in cash equivalents with maturities of less than three months
and $1.3 million in certificates of deposit with a maturity of less than six
months. Due to the short-term, conservative nature of our investment portfolio,
a 10% increase or decrease in interest rates would not have a material effect on
our results of operations or the fair value of our portfolio. The impact on our
future results of operations and the future value of our portfolio will depend
largely on the gross amount of our investments.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments in the legal proceedings
previously reported.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
RECENT SALES OF UNREGISTERED SECURITIES
On July 24, 2000, we purchased certain tangible and intangible assets
in connection with the acquisition of Ed Edens Farms. As part of the exchange,
we issued 83,858 shares of our Class A common stock with an aggregate value of
$1,000,000.
On August 18, 2000, we purchased certain tangible and intangible assets
in connection with the acquisition of LeMaster. As part of the exchange, we
issued 125,819 shares of our Class A common stock with an aggregate value of
$2,240,000.
On August 28, 2000, we purchased certain intangible assets in
connection with the acquisition of Mountain Plains. As part of the exchange, we
issued 12,743 shares of our Class A common stock with an aggregate value of
$250,000.
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<PAGE> 26
On August 31, 2000, we purchased certain tangible and intangible assets
in connection with the acquisition of McMahan. As part of the exchange, we
issued 104,392 shares of our Class A common stock with an aggregate value of
$1,812,500.
On September 1, 2000, we purchased certain tangible and intangible
assets in connection with the acquisition of Thigpen. As part of the exchange,
we issued 89,585 shares of our Class A common stock with an aggregate value of
$2,000,000.
All of the above referenced shares were issued pursuant to an exemption
by reason of Section 4(2) of the Securities Act of 1933. The sales were made
without general solicitation or advertising. Each purchaser represented that he,
she, or it was acquiring the shares without a view to distribute and was
afforded an opportunity to review all documents and ask questions of our
officers pertaining to matters they deemed material to an investment in our
Class A common stock.
USE OF PROCEEDS
On February 4, 2000, we commenced an initial public offering of our
common stock. Our registration statement on Form S-1 (File No. 333-89815)
covering the offering of 7,175,000 shares was declared effective on February 3,
2000. As part of the offering, we sold 2,806,000 shares of our class A common
stock at the public offering price to shareholders of Safeguard Scientifics,
Inc., one of our principal stockholders, that owned at least 100 shares of
common stock of Safeguard as of October 20, 1999, and Safeguard sold 694,000 of
its eMerge Interactive shares to its shareholders. In addition, we issued
500,000 shares of class A common stock at $15.00 per share in a private
placement that was completed simultaneously with the offering.
The net proceeds from the offering and the private placement after
deducting discounts, commissions, management fees, finders fees and expenses was
$107,142,769. From the effective date of the registration statement to September
30, 2000, the net proceeds have been used for the following purposes:
<TABLE>
<S> <C>
Temporary investments:
Cash and cash equivalents $ 21,737,251
Short term investments 1,290,000
------------
Subtotal $ 23,027,251
Acquisition of other businesses 33,081,917
Net cash used in operations, working capital 28,283,150
Repayment of indebtedness 12,790,505
Purchase and installation of machinery and equipment 9,959,946
Construction of plant, building and facilities --
Other purposes --
------------
$107,142,769
============
</TABLE>
We have used $12.8 million of the proceeds from this offering for
payments to related parties and Turnkey Computer Systems, Inc., $33.1 million
for the acquisitions of Eastern, Jordan, Ed Edens Farms, LeMaster, Mountain
Plains, McMahan and Thigpen, $10.0 million for capital expenditures, and $28.3
million for general working capital purposes. None of the remaining payments
constituted direct or indirect payments to our directors, officers, general
partners or their associates or to persons owning 10% or more of any class of
our equity securities or to our affiliates.
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<PAGE> 27
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our Annual Meeting of Stockholders on July 19, 2000. At the
meeting, the shareholders voted in favor of the following items listed in the
Proxy Statement dated June 29, 2000:
I. ELECTION OF SEVEN DIRECTORS
The number of votes cast for or withheld with respect to the election
of each of the directors is set forth below:
<TABLE>
<CAPTION>
FOR WITHHELD
---------- --------
<S> <C> <C>
Charles L. Abraham 36,224,645 5,407
John S. Scott, Ph.D. 36,215,110 14,942
Douglas A. Alexander 36,007,660 222,392
Thomas C. Lynch 36,076,651 153,401
John W. Poduska, Sr., Ph.D. 36,224,355 5,697
Anthony A. Ibarguen 36,223,719 6,333
Christopher J. Davis 36,224,609 5,443
</TABLE>
There were no broker non-votes with respect to the election of
directors.
II. AMENDMENT TO 1999 EQUITY COMPENSATION PLAN
The number of votes cast for, against or abstaining with respect to the
proposal to adopt the amendment to the 1999 Equity Compensation Plan is set
forth below:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- ------- -------
<S> <C> <C>
31,216,377 426,114 8,751
</TABLE>
There were 4,578,810 broker non-votes with respect to the amendment to
the 1999 Equity Compensation Plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
<S> <C> <C>
10 eMerge Interactive, Inc. 1999 Equity Compensation Plan *
27 Financial Data Schedule. (for SEC use only) *
</TABLE>
* Filed herewith.
(b) Reports on Form 8-K
On July 14, 2000, the Company filed an amended report on Form 8-K,
pursuant to Item 7, paragraph (a) (4), of such Form, to provide the
financial information required by this item for Eastern Livestock Co.,
Inc. and W.P. Land and Livestock, Inc.
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<PAGE> 28
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: November 14, 2000 eMerge Interactive. Inc.
By:
President, Chief Executive
/s/ Charles L. Abraham Officer and Director (Principal
------------------------- Executive Officer)
Charles L. Abraham
Vice President and Chief Financial
/s/ T. Michael Janney Officer (Principal Financial and
------------------------- Accounting Officer)
T. Michael Janney
28
