<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 9, 2000
NET VALUE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-26929 23-2996071
-------- ------- ----------
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.
incorporation)
1085 Mission Street
San Francisco, CA 94103
-----------------------
(Address of principal executive office)
Registrant's telephone number, including area code: (415) 335-4700
(Former name or former address, if changed since last report)
<PAGE>
GENERAL EXPLANATION
The purpose of this Report is to amend the registrant's Current Report
on Form 8-K dated May 9, 2000 and filed May 23, 2000, relative to the
acquisition of an interest in the Series A Convertible Preferred Stock of
Webmodal, Inc. This Report amends the information provided under Items 7(a) and
7(b).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Acquired Business
WEBMODAL, INC.
Independent Auditors' Report
Balance Sheets as of December 31, 1999 and March 31, 2000
(unaudited)
Statements of Operations for the period from July 28, 1999 (date
of inception) through December 31, 1999, the three months
ended March 31, 2000 and the period from July 28, 1999
(inception) through March 31, 2000 (unaudited)
Statements of Stockholders' Equity for the period from July 28,
1999 (date of inception) through December 31, 1999 and the three
months ended March 31, 2000 (unaudited)
Statements of Cash Flows for the period from July 28, 1999 (date
of inception) through December 31, 1999, the three months ended
March 31, 2000 and the period from July 28, 1999 (inception)
through March 31, 2000 (unaudited)
Notes to Financial Statements
(b) Pro Forma Condensed Consolidated Financial Statements (Unaudited)
Basis of Presentation
Pro Forma Condensed Consolidated Balance Sheet as of March 31,
2000
Pro Forma Condensed Consolidated Statement of Operations for the
three months ended March 31, 2000
Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1999
(c) Exhibits
10.49 Series A Convertible Preferred Stock Purchase
Agreement by and among Net Value Holdings, Inc.
and Webmodal, Inc., dated May 9, 2000.*
10.50 Investor Rights Agreement dated May 9, 2000 by
and between Webmodal, Inc. and Net Value
Holdings, Inc.*
10.51 Stock Purchase Warrant dated May 9, 2000 by
Webmodal for 170,000 shares of Common Stock of
Net Value Holdings, Inc.*
10.52 Stockholders' Agreement dated May 9, 2000 by
and among Webmodal, Inc., Net Value Holdings,
Inc. and Christopher R. Kravas.*
*Filed as part of the Registrant's current Report on Form 8-K
dated May 9, 2000, filed May 23, 2000, and incorporated herein by
reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NET VALUE HOLDINGS, INC.
By: /s/ Andrew P. Panzo
Dated: July 10, 2000 -------------------------
Andrew P. Panzo
Chief Executive Officer
<PAGE>
FINANCIAL STATEMENTS PROVIDED UNDER ITEM 7(a)
Independent Auditors' Report
The Board of Directors
Webmodal, Inc.:
We have audited the accompanying balance sheet of Webmodal, Inc., (a
development-stage enterprise) as of December 31, 1999, and the related
statements of operations, stockholders' equity, and cash flows for the period
from July 28, 1999 (inception) through December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Webmodal, Inc. (a
development-stage enterprise) as of December 31, 1999, and the results of its
operations and its cash flows for the period from July 28, 1999 (inception)
through December 31, 1999, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
Chicago, Illinois
June 20, 2000
3
<PAGE>
WEBMODAL, INC.
(a development-stage enterprise)
Balance Sheets
December 31, 1999 and March 31, 2000
<TABLE>
<CAPTION>
December 31, March 31,
Assets 1999 2000
(Unaudited)
-------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,437,909 $ 1,551,450
Prepaid expenses and other current assets 6,169 13,139
----------- -----------
Total current assets 1,444,078 1,564,589
Property and equipment, net of accumulated depreciation 16,255 111,873
Website development costs -- 568,220
----------- -----------
Total assets $ 1,460,333 $ 2,244,682
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 44,841 $ 420,114
Accrued expenses 143,649 252,135
----------- -----------
Total current liabilities 188,490 672,249
----------- -----------
Note payable 245,588 245,588
Accrued interest 8,186 13,097
----------- -----------
Total liabilities 442,264 930,934
----------- -----------
Redeemable preferred stock, $1.00 par value; 3,000,000 shares
authorized; none issued and outstanding -- --
Stockholders' equity:
Common stock, $.0001 par value; 10,000,000 shares
authorized; 1,174,900 and 1,264,000 issued and outstanding 117 126
Additional paid-in capital 2,427,407 3,172,132
Deferred compensation (905,209) (826,249)
Deficit accumulated during development stage (504,246) (1,032,261)
----------- -----------
Total stockholders' equity 1,018,069 1,313,748
----------- -----------
Total liabilities and stockholders' equity $ 1,460,333 $ 2,244,682
=========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
WEBMODAL, INC.
(a development-stage enterprise)
Statements of Operations
Period from July 28, 1999 (inception) through December 31, 1999, three
months ended March 31, 2000, and period from July 28, 1999 (inception) through
March 31, 2000
<TABLE>
<CAPTION>
Period from Period from
July 28, 1999 July 28, 1999
(inception) Three months (inception)
through ended through
December 31, March 31, March 31,
1999 2000 2000
(Unaudited) (Unaudited)
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues $ -- $ -- $ --
---------- ---------- ------------
Operating expenses:
Administration 338,589 500,521 839,110
Website development costs 162,182 41,587 203,769
Depreciation 1,208 2,342 3,550
---------- ---------- ------------
Total operating expenses 501,979 544,450 1,046,429
---------- ---------- ------------
Other income (expense):
Interest income 5,919 21,346 27,265
Interest expense (8,186) (4,911) (13,097)
---------- ---------- ------------
Net loss $ (504,246) $ (528,015) $ (1,032,261)
========== ========== ============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
WEBMODAL, INC.
(a development-stage enterprise)
Statements of Stockholders' Equity
Period from July 28, 1999 (inception) through December 31, 1999
and three months ended March 31, 2000
<TABLE>
<CAPTION>
Deficit
accumulated
Common stock Additional during the Total
------------------- paid-in development Deferred stockholders'
Shares Amount capital stage compensation equity
------ ------ ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at July 28, 1999
(date of inception) -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock for cash
in formation of the Company 1,000,000 100 29,312 -- -- 29,412
Issuance of common stock for cash 174,900 17 1,445,443 -- -- 1,445,460
Deferred compensation related
to options -- -- 947,554 -- (947,554) --
Compensation expense related
to options -- -- -- -- 42,345 42,345
Consulting expense related to options -- -- 5,098 -- -- 5,098
Net loss -- -- -- (504,246) (504,246)
--------- ----- ----------- ------------ ---------- -----------
Balance at December 31, 1999 1,174,900 117 2,427,407 (504,246) (905,209) 1,018,069
--------- ----- ----------- ------------ ---------- -----------
Issuance of common stock in exchange
for services (unaudited) 13,200 1 109,090 -- -- 109,091
Issuance of common stock for cash
(unaudited) 75,900 8 627,249 -- -- 627,257
Compensation expense related
to options (unaudited) -- -- -- -- 78,960 78,960
Consulting expense related to
options (unaudited) -- -- 8,386 -- -- 8,386
Net loss (unaudited) -- -- -- (528,015) -- (528,015)
--------- ----- ----------- ------------ ---------- -----------
Balance at March 31, 2000 (unaudited) 1,264,000 $ 126 $ 3,172,132 $ (1,032,261) $ (826,249) $ 1,313,748
========= ===== =========== ============ ========== ===========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
WEBMODAL, INC.
(a development-stage enterprise)
Statements of Cash Flows
Period from July 28, 1999 (inception) through December 31, 1999, three
months ended March 31, 2000 and period from July 28, 1999 (inception) through
December 31, 1999
<TABLE>
<CAPTION>
Period from Period from
July 28, 1999 July 28, 1999
(inception) Three months (inception)
through ended through
December 31, 1999 March 31, 2000 March 31, 2000
(Unaudited) (Unaudited)
----------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (504,246) $ (528,015) $(1,032,261)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation 1,208 2,342 3,550
Common stock/options issued in lieu of cash
payment for professional services 5,098 117,477 122,575
Compensation expense related to options 42,345 78,960 121,305
Changes in assets and liabilities:
Prepaid assets and other current assets (6,169) (6,970) (13,139)
Accounts payable 44,841 375,273 420,114
Accrued expenses 143,649 108,486 252,135
Accrued interest 8,186 4,911 13,097
----------- ----------- -----------
Net cash provided by (used in)
operating activities (265,088) 152,464 (112,624)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (17,463) (97,960) (115,423)
Website development costs capitalized -- (568,220) (568,220)
----------- ----------- -----------
Net cash used in investing activities (17,463) (666,180) (683,643)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of note payable 245,588 -- 245,588
Proceeds from issuance of common stock 1,474,872 627,257 2,102,129
----------- ----------- -----------
Net cash provided by financing activites 1,720,460 627,257 2,347,717
----------- ----------- -----------
Net increase in cash 1,437,909 113,541 1,551,450
Cash at beginning of period -- 1,437,909 --
----------- ----------- -----------
Cash at end of period $ 1,437,909 $ 1,551,450 $ 1,551,450
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ -- $ -- $ --
Cash paid for taxes $ -- $ -- $ --
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
WEBMODAL, INC.
(a development-stage enterprise)
Notes to Financial Statements
December 31, 1999 and March 31, 2000 (unaudited)
(1) Nature of the Business
Webmodal, Inc. (Webmodal or the Company) was incorporated on July 28, 1999.
Upon completion of its website applications on June 1, 2000, Webmodal is an
Internet-based transportation company that gives shippers the ability to
identify, evaluate, and purchase intermodal transportation services online.
Webmodal uses a fast, data-driven, online interface designed to
dramatically improve upon traditional intermodal marketing processes.
Webmodal's Point-Click-Ship(SM) product gives shippers the ability to input
their specific transportation needs, view a comprehensive list of relevant
intermodal transportation alternatives, and execute orders for
transportation services entirely online at the Company's website
www.webmodal.com.
Since inception, the Company has devoted substantially all of its efforts
to business planning, product development, acquiring operating assets,
raising capital, marketing, and business development activities.
Accordingly, the Company is in the development stage, as defined by the
Statement of Financial Accounting Standards (SFAS) No. 7, Accounting and
Reporting by Development Stage Enterprises.
The Company has incurred losses since inception and expects to incur a loss
in 2000. Should the Company be unable to generate revenue and realize cash
flows from operations in the near term, the Company may require additional
equity or debt financing to meet working capital needs and to fund
operating losses. Although management believes the Company could obtain
such financing, there can be no assurances that such financing will be
available in the future at terms acceptable to the Company.
The Company is subject to risks and uncertainties common to growing
technology-based companies, including technological change, growth and
commercial acceptances of the Internet, dependence on principal products
and third party technology, new product development and performance, new
product introductions and other activities of competitors, and its limited
operating history.
(2) Summary of Significant Accounting Policies
(a) Cash and Cash Equivalents
The Company considers all highly liquid instruments with an original
maturity of three months or less at the time of purchase to be cash
and cash equivalents. Cash equivalents at December 31, 1999 are
invested in money market accounts.
(b) Impairment of Long-lived Assets
In accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, the
Company records impairment of losses on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount.
(c) Property and Equipment
Property and equipment are carried at cost and depreciated using the
straight-line method over the estimated useful lives of the related
assets, which range from three to five years.
8
<PAGE>
WEBMODAL, INC.
(a development-stage enterprise)
Notes to Financial Statements
December 31, 1999 and March 31, 2000 (unaudited)
(d) Computer Software and Website Development
The Company has adopted the provisions of Statement of Position 98-1,
Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use and Emerging Issues Task Force No. 00-2, Accounting
for Web Site Development Costs. Accordingly, certain costs in the
planning development stage of internal-use computer software,
including website development, are expensed as incurred. During the
period from July 28, 1999 (inception) through December 31, 1999,
software development planning costs related to website development of
$162,182 were incurred and expensed.
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
(f) Stock-Based Compensation
The Company applies the provisions of SFAS No. 123, Accounting for
Stock-Based Compensation, which permits entities to recognize as
expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees,
and provide pro forma net income and pro forma net income per share
disclosures as if the fair-value-based method defined in SFAS No. 123
had been applied. The Company has elected to apply the provisions of
APB Opinion No. 25 and provide the pro forma disclosure provisions of
SFAS No. 123.
(g) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the
reported amounts of expenses during the reporting period. Actual
results could differ from those estimates.
(3) Interim Financial Information
The interim financial statements of the Company as of and for the three
months ended March 31, 2000, included herein, have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations relating to
interim financial statements.
9
<PAGE>
WEBMODAL, INC.
(a development-stage enterprise)
Notes to Financial Statements
December 31, 1999 and March 31, 2000 (unaudited)
In the opinion of management, the accompanying unaudited interim financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the Company's financial position,
results of operations and cash flows as of and for the three months ended
March 31, 2000. The accompanying unaudited interim financial statements are
not necessarily indicative of full-year results.
(4) Property and Equipment
Property and equipment consists of the following:
December 31,
1999
------------
Property and equipment:
Office equipment and furniture $ 4,995
Computer equipment 12,468
--------
17,463
Less: accumulated depreciation (1,208)
--------
Property and equipment, net $ 16,255
========
(5) Income Taxes
The provision for income taxes differs from the amounts which would result
by applying the applicable Federal income tax rate to loss before provision
for income taxes for the period from July 28, 1999 (inception) to December
31, 1999 as follows:
<TABLE>
<CAPTION>
Period from
July 28, 1999
(inception)
through
December 31,
1999
-------------
<S> <C>
Expected income tax benefit at the statutory rate $ (171,444)
State tax benefit, net of Federal taxes (21,342)
Nondeductible expenses 20,833
Increase in valuation allowance 171,953
----------
$ --
==========
</TABLE>
10
<PAGE>
WEBMODAL, INC.
(a development-stage enterprise)
Notes to Financial Statements
December 31, 1999 and March 31, 2000 (unaudited)
The tax effect of temporary differences giving rise to significant portions
of the deferred tax assets and liabilities at December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
December 31,
1999
------------------
<S> <C>
Deferred tax assets:
Capitalized start-up and organizational costs $ 156,456
Net operating loss carryforward 16,290
---------
Gross deferred tax assets 172,746
Less valuation allowance (171,953)
---------
Net deferred tax assets 793
---------
Deferred tax liabilities - depreciation (793)
---------
Net deferred income taxes $ --
=========
</TABLE>
The Company has a net operating loss carryforward of approximately $41,970
as of December 31, 1999, which can potentially be carried forward twenty
years and will expire in 2019.
The Company has recorded a full valuation allowance against its net
deferred tax assets since management believes that, after considering all
the available objective evidence, it is more likely than not that these
assets will not be realized.
(6) Note Payable
On August 2, 1999, the Company issued a note payable in the amount of
$245,588. The note is due on August 2, 2009. The unpaid principal balance
of the note bears interest at an annual rate of 8%, payable annually on
August 2 of each year commencing August 2, 2002.
(7) Capital Stock
Stock Split
On September 16, 1999, the Company affected a 100 to 1 stock split on
its then-outstanding shares of common stock. All share information
included in these financial statements has been retroactively adjusted
to reflect the revised authorized capital stock and stock split.
Authorization of Stock
In September 1999, the Company amended and restated its certificate of
incorporation thereby authorizing 100,000 shares of $.0001 par value
common stock.
11
<PAGE>
WEBMODAL, INC.
(a development-stage enterprise)
Notes to Financial Statements
December 31, 1999 and March 31, 2000 (unaudited)
Equity Investments
On July 30, 1999, the Company entered into a shareholders agreement
with an investor. Under the terms of the agreement, the investor has
the right to purchase 180,000 additional shares of the Company's
common stock for total consideration of $1,245,588 which may partly be
paid by the surrender of the note payable discussed in Note (6) above.
The right to purchase these additional shares expired September 30,
1999.
On October 11, 1999, the Company entered into a stock purchase
agreement with an investor. Under the terms of the stock purchase
agreement, the Company issued 12,100 shares of common stock for total
consideration of $100,000.
On December 8, 1999 and December 17, 1999, the Company entered into
stock purchase agreements with investors. Under the terms of the
agreements, the Company issued 62,000 shares of common stock for total
consideration of $512,399 and 100,800 shares of common stock for total
consideration of $833,061, respectively.
(8) Stock Options
The Company has a Long-Term Stock Incentive Plan (the "Plan") for the
issuance of options to eligible employees, directors and consultants. The
Plan permits the Company to issue options on terms that the Company
determines appropriate, subject to a maximum life of 10 years. Such terms
include the exercise price, number of shares, vesting arrangements and
other terms. The Company applies APB Opinion No. 25 and related
interpretations in accounting for the Plan. Had compensation cost for the
Company's option plan been determined consistent with SFAS No. 123, the net
loss for the period from July 28, 1999 (inception) through December 31,
1999 would have been increased to the pro forma amount indicated below:
Net income (loss):
As reported $ (504,246)
Pro forma (504,551)
==========
For purposes of calculating the compensation cost consistent with SFAS No.
123, the fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1999: dividend yield of 0%,
nominal volatility, average risk free interest rate of 6.0%, and expected
lives of four years.
12
<PAGE>
WEBMODAL, INC.
(a development-stage enterprise)
Notes to Financial Statements
December 31, 1999 and March 31, 2000 (unaudited)
The following is a summary of activity under the Plan:
Weighted-
Options average
outstanding price
----------- ---------
Outstanding at July 28, 1999 -- $ --
Granted 129,900 0.28
Exercised -- --
Canceled -- --
------- ------
Outstanding at December 31, 1999 129,900 0.28
Granted (unaudited) 38,800 8.26
Exercised (unaudited) -- --
Canceled (unaudited) -- --
------- ------
Outstanding at March 31, 2000 (unaudited) 168,700 $ 2.12
======= ======
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------------------ ------------------------------
Weighted
average Weighted Weighted
remaining average average
Number contractual exercise Number exercise
Range of exercise prices of shares life price of shares price
------------------------ -------------- --------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$0.28 129,900 9.86 $0.28 2,825 $0.28
============== =============== ============= ============== ==============
</TABLE>
(9) Deferred Compensation
On November 1, 1999 and December 15, 1999, the Company granted employees
90,400 and 28,200 options, respectively. The aggregate amount of the
estimated fair value of the underlying stock in excess of the strike price
of the options on the dates of grant of $947,554 is being expensed over the
option vesting period, which is monthly vesting over three years.
On November 1, 1999, the Company granted a consultant 11,300 options in
consideration for consulting services over a three-year period. The
consulting expense will be adjusted to the current estimated fair value of
the options.
(10) Subsequent Events
Effective January 1, 2000, the Company implemented a 401(k) savings plan
(the "Savings Plan"). Qualified employees may participate in the Savings
Plan by contributing up to 15% of their gross wages or $10,500 (subject to
change by statutory regulations). The Company may elect to make matching
contributions at the discretion of the Board of Directors of the Company.
13
<PAGE>
WEBMODAL, INC.
(a development-stage enterprise)
Notes to Financial Statements
December 31, 1999 and March 31, 2000 (unaudited)
On January 12, 2000 and January 21, 2000, the Company entered into several
stock purchase agreements with investors. Under the terms of the
agreements, the Company issued 36,200 shares of common stock for total
consideration of $299,175 and 39,700 shares of common stock for total
consideration of $328,082, respectively.
On January 15, 2000, the Company entered into a technology development and
consulting services agreement with a third party. Under the terms of the
agreement, the first $400,000 of consulting services will be paid by
issuing Company common stock at a share price of $8.26. Consulting services
in excess of $400,000 will be paid 1/3 cash and 2/3 deferred cash or 100%
cash, at the election of the Company. This agreement may be terminated by
either party upon 14 days written notice.
On March 3, 2000, the Company entered into a lease agreement for office
space in Southlake, Texas. This agreement is a two-year lease with monthly
base rent of $4,900 plus a pro rata share of operating expenses of
approximately $1,050 per month.
On May 1, 2000, the Company entered into a domestic intermodal
transportation contract with a railway. The terms of the agreement require
$2.5 million of annual transportation services to be purchased from the
railway during the initial annual period. If the Company fails to achieve
this revenue requirement, the Company is liable for 25% of any shortfall.
In addition, in connection with this agreement, the Company established a
$250,000 letter of credit on behalf of the railway.
On May 8, 2000, the Company affected a 100 to 1 stock split on its
then-outstanding shares of common stock. All share information included in
these financial statements has been retroactively adjusted to reflect the
stock split.
On May 9, 2000, the Company amended and restated its certificate of
incorporation thereby authorizing 10,000,000 shares of $.0001 par value
common stock and 3,000,000 shares of $1.00 par value preferred stock, of
which 563,000 were designated as Series A preferred stock. Upon
liquidation, each holder of Series A preferred stock shall be entitled to
receive an amount equal to the original issue price of the Series A
preferred stock plus all accrued and unpaid dividends.
The Company shall pay preferential dividends to the holders of Series A
preferred stock, when and if declared, at an annual rate of 8% of the
original purchase. The dividends may be paid, at the discretion of the
Company, in cash or common stock at a price per share equal to the
conversion price of the Series A preferred stock on the payment date of the
dividend. Holders of the Series A preferred stock shall be entitled to
cumulative dividends prior and in preference to the payment of any dividend
or other distribution on the common stock. If after dividends in the full
preferential amount for the Series A preferred stock have been paid or
declared and set apart, then any additional dividends and distributions
declared, shall be declared among the holders of the then outstanding
common stock and Series A preferred stock pro rata according to the number
of shares of common stock held, where holders of shares of Series A
preferred stock will be deemed to hold the greatest whole number of shares
of common stock then issuable upon conversion in full of such shares of
Series A preferred stock.
14
<PAGE>
WEBMODAL, INC.
(a development-stage enterprise)
Notes to Financial Statements
December 31, 1999 and March 31, 2000 (unaudited)
In the event of liquidation, the holders of the Series A preferred stock
shall be entitled to be paid, prior and in preference to any payment or
distribution on any common stock, an amount per share equal to the original
issue price of the Series A preferred stock, plus all accrued but unpaid
dividends. If any funds remain after payment or distribution to the holders
of the Series A preferred stock, the remaining funds shall be distributed
among the holders of the then outstanding common stock and the Series A
preferred stock pro rata according to the number of shares of common stock
held, holders of shares of Series A preferred stock will be deemed to hold
the greatest whole number of shares of common stock then issuable upon
conversion in full of such shares of Series A preferred stock.
Each holder of shares of Series A preferred stock shall be entitled to the
number of votes equal to the number of whole shares of common stock into
which such shares of Series A preferred stock could be converted.
Series A preferred stock may be converted at any time, at the election of
the holder, into the number of shares of common stock which results from
dividing the original issue price by the conversion price. The initial
conversion price is equal to the original issue price. The conversion price
shall be subject to adjustments upon (i) the issuance of additional shares
of common stock as a dividend or other distribution on outstanding common
stock, (ii) a subdivision of the outstanding shares of common stock into a
greater number of shares of common stock, (iii) a combination of the
outstanding shares of common stock into a smaller number of shares of
common stock, (iv) the company pays a dividend or makes another
distribution to the holders of the common stock payable in securities of
the Company other than shares of common stock, (v) the Series A preferred
stock is changed into the same or a different number of shares of any class
or classes of stock, whether by recapitalization, reclassification or
otherwise and (vi) the issuance or sale of additional shares of common
stock for a price that is less than the conversion price for the Series A
preferred stock in effect immediately prior to such issue or sale.
Each share of Series A preferred stock shall automatically be converted
into fully paid and nonassessable shares of common stock, immediately prior
to the closing of the Company's first underwritten public offering in which
the aggregate gross proceeds received equals or exceeds $20 million at an
offering price per share of common stock of not less than four times the
original conversion price per share.
If a qualifying initial public offering (IPO) has not occurred as of the
fourth anniversary of the original issue date, each holder of outstanding
shares of Series A preferred stock may request redemption of all of the
outstanding shares of Series A preferred stock. The redemption price per
share of Series A preferred stock shall be equal to the original issue
price plus all accrued but unpaid dividends.
15
<PAGE>
WEBMODAL, INC.
(a development-stage enterprise)
Notes to Financial Statements
December 31, 1999 and March 31, 2000 (unaudited)
On May 9, 2000, the Company issued 563,000 shares of Series A preferred
stock to a third party, pursuant to the terms of a Series A Convertible
Preferred Stock Purchase Agreement, and a warrant to purchase 170,000
shares of the Company's common stock. The aggregate purchase price for the
stock and the warrant was $4,877,099, comprised of $4,000,000 in cash and
113,174 shares of the third party's common stock valued at $877,099. The
warrants are convertible into common stock at an exercise price of $8.88.
The warrant exercise period is May 9, 2000 through May 9, 2005 or upon the
earlier of the third party's redemption of all shares of the Company's
Series A preferred stock, the last business day prior to a qualified IPO,
merger or consolidation of the Company and another entity following which
the shareholders of the Company control less than 50% of the voting
securities of the resulting entity or a sale of all or substantially all of
the Company's assets. In connection with the consummation of the purchase
agreement, the Company also entered into a Stockholders' Agreement and an
Investors Rights Agreement, dated as of May 9, 2000. The Stockholders'
Agreement and the Investors Rights Agreement, taken in the aggregate,
provide for, among other things, restrictions on the transferability of
securities, co-sale, preemptive and registration rights. These agreements
terminate upon a qualified public offering of the Company's common stock.
16
<PAGE>
PRO FORMA FINANCIAL INFORMATION PROVIDED UNDER ITEM 7(b)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
BASIS OF PRESENTATION
On May 9, 2000, Net Value Holdings, Inc. acquired an additional equity interest
in Webmodal for total consideration of $4,877,099 consisting of $4,000,000 cash
and 133,174 shares of our common stock valued at $877,099. This acquisition
increased our approximate voting ownership from 10% to 39% and necessitated a
change from the cost method to the equity method of accounting for our
investment in Webmodal.
The following unaudited pro forma consolidated balance sheet at March 31, 2000
presents our acquisition of additional equity interests in Webmodal as if it had
occurred on March 31, 2000. The unaudited pro forma consolidated statement of
operations for the year ended December 31, 1999 and the three months ended March
31, 2000 presents our acquisition of additional equity interests in Webmodal as
if it had occurred on January 1, 1999 and excludes the historical effect of
discontinued operations. The detailed assumptions used to prepare the unaudited
pro forma condensed consolidated financial information are contained herein. The
unaudited pro forma condensed consolidated financial information reflects the
use of the purchase method of accounting for the acquisition, which for purposes
of this presentation encompasses the purchase of our equity interest in a
business that will be accounted for by the equity method.
The unaudited pro forma condensed consolidated financial information is
presented for illustrative purposes only and is not necessarily indicative of
the financial position or results of operations which would have actually been
reported had the transactions been consummated at the dates mentioned above or
which may be reported in the future. This unaudited pro forma condensed
consolidated financial information is based upon the respective historical
financial statements of Net Value Holdings, Inc. and Webmodal and should be read
in conjunction with those statements and the related notes.
17
<PAGE>
NET VALUE HOLDINGS, INC. and SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 2000
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Assets Historical Adjustments Balance
---------- ----------- ---------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 45,715,612 $(4,000,000)(a) $ 41,715,612
Interest receivable 21,603 -- 21,603
Loans receivable 212,833 -- 212,833
Prepaid expenses and other current assets 202,875 -- 202,875
------------- ----------- ------------
Total current assets 46,152,923 (4,000,000) 42,152,923
Ownership interests in and advances to Affiliate Companies 11,091,706 4,775,937 (a) 15,867,643
Goodwill, net 2,914,980 -- 2,914,980
Furniture and equipment, net 113,219 -- 113,219
Other assets 106,450 -- 106,450
------------- ----------- ------------
$ 60,379,278 $ 775,937 $ 61,155,215
============= =========== ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 367,579 $ -- $ 367,579
Notes and loans payable 12,000 -- 12,000
Convertible promissory notes 28,281 -- 28,281
Long-term debt due within one year 63,165 -- 63,165
Net liabilities of discontinued operations 1,693,807 -- 1,693,807
------------- ----------- ------------
Total current liabilities 2,164,832 -- 2,164,832
------------- ----------- ------------
Redeemable convertible preferred stock, Series C 40,883,087 -- 40,883,087
Accrued preferred stock dividend, Series C 335,895 -- 335,895
------------- ----------- ------------
41,218,982 -- 41,218,982
------------- ----------- ------------
Stockholders' equity:
Common stock, Net Value Inc. 899 -- 899
Common stock, Net Value Holdings 19,281 113 (a) 19,394
Additional paid-in capital 195,662,668 876,986 (a) 196,539,654
Deferred compensation (52,539,583) -- (52,539,583)
Accumulated deficit (126,130,306) (101,162)(a) (126,231,468)
Treasury stock, Net Value Inc. (17,495) -- (17,495)
------------- ----------- ------------
Total stockholders' equity 16,995,464 775,937 17,771,401
------------- ----------- ------------
$ 60,379,278 $ 775,937 $ 61,155,215
============= =========== ============
</TABLE>
Pro Forma Adjustment Legend
(a) Amount represents the total consideration paid to acquire our additional
equity interest in Webmodal and the effect of changing from the cost method
to the equity method of accounting for our investment in Webmodal:
<TABLE>
<CAPTION>
<S> <C>
Consideration paid:
Cash $ 4,000,000
Common stock (113,174 shares) 113
Additional paid-in capital 876,986
Effect of changing from the cost to equity method of accounting:
Accumulated deficit (101,162)
-----------
$ 4,775,937
===========
</TABLE>
The 113,174 shares of our common stock were valued using our closing stock
market price on the date of acquisition of $7.75 per share. The effect of
changing from the cost method to the equity method of accounting for our
investment includes a retroactive adjustment to our accounts based on a
step by step acquisition of our investment.
18
<PAGE>
NET VALUE HOLDINGS, INC. and SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Three months ended March 31, 2000
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments Balance
------------ ----------- ------------
<S> <C> <C> <C>
Revenue $ -- $ -- $ --
Operating expenses:
Stock-based compensation 5,894,187 -- 5,894,187
General and administrative 2,103,478 -- 2,103,478
------------ --------- ------------
Total operating expenses 7,997,665 -- 7,997,665
Interest income 211,957 -- 211,957
Interest expense 73,776 -- 73,776
------------ --------- ------------
Loss before equity in losses of Affiliate Companies 7,859,484 -- 7,859,484
Equity in losses of Affiliate Companies 298,851 501,004 (a) 799,855
------------ --------- ------------
Net loss from continuing operations 8,158,335 501,004 8,659,339
------------ --------- ------------
Preferred stock dividends 43,052,686 -- 43,052,686
------------ --------- ------------
Net loss to common shareholders from continuing operations $ 51,211,021 $ 501,004 $ 51,712,025
============ ========= ============
Loss per common share from continuing operations $ (3.01) $ (3.02)
============ ============
Shares used in per share calculation 16,986,005 113,174 (b) 17,099,179
============ ========= ============
</TABLE>
Pro Forma Adjustment Legend
(a) Amount represents adjustment to Equity in losses of Affiliate Companies as
follows:
Our proportionate share of Webmodal's net loss $ 203,814
Amortization of the excess investment cost over our
equity in Webmodal's net assets 297,190
---------
$ 501,004
=========
(b) Amount represents the number of shares outstanding as if the additional
issuance of 113,174 shares of our common stock to acquire our equity
interest in Webmodal occured as of January 1, 1999.
19
<PAGE>
NET VALUE HOLDINGS, INC. and SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 1999
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments Balance
------------ ----------- ------------
<S> <C> <C> <C>
Revenue $ -- $ -- $ --
Operating expenses:
Stock-based compensation 7,320,695 -- 7,320,695
General and administrative 3,719,497 -- 3,719,497
------------ ---------- ------------
Total operating expenses 11,040,192 -- 11,040,192
Interest income 60,526 -- 60,526
Interest expense 12,380,157 -- 12,380,157
Financing fees 523,601 -- 523,601
------------ ---------- ------------
Loss before equity in losses of Affiliate Companies 23,883,424 -- 23,883,424
Equity in losses of Affiliate Companies 79,559 1,383,400 (a) 1,462,959
------------ ---------- ------------
Net loss from continuing operations 23,962,983 1,383,400 25,346,383
------------ ---------- ------------
Preferred stock dividends 6,605,261 -- 6,605,261
------------ ---------- ------------
Net loss to common shareholders from continuing operations $ 30,568,244 $1,383,400 $ 31,951,644
============ ========== ============
Loss per common share from continuing operations $ (2.90) $ (2.99)
============ ============
Shares used in per share calculation 10,557,953 113,174 (b) 10,671,127
============ ========== ============
</TABLE>
Pro Forma Adjustment Legend
(a) Amount represents adjustment to Equity in losses of Affiliate Companies as
follows:
Our proportionate share of Webmodal's net loss $ 194,639
Amortization of the excess investment cost over our
equity in Webmodal's net assets 1,188,761
-----------
$ 1,383,400
===========
(b) Amount represents the number of shares outstanding as if the additional
issuance of 113,174 shares of our common stock to acquire our equity
interest in Webmodal occured as of January 1, 1999.
20
