Exhibit 99.1
RESEARCH TRIANGLE COMMERCE, INC.
FINANCIAL STATEMENTS
INDEX
Page
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Financial Statements:
Balance Sheets (unaudited) F-2
Statements of Operations (unaudited) F-3
Statements of Cash Flows (unaudited) F-4
Notes to Financial Statements (unaudited) F-6
F-1
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Research Triangle Commerce, Inc.
Balance Sheet
(unaudited)
(in thousands, except share and per share data)
September 30,
-------------
2000
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Assets
Current assets:
Cash and cash equivalents $2 ,741
Accounts receivable, net of allowance for 909
doubtful accounts of $77
Other receivables 48
Income tax receivable 33
Inventories 159
Prepaid expenses 143
Deferred income taxes -
------------
Total current assets 4,033
Property and equipment, net 1,164
Capitalized software costs, net 51
Other assets 150
------------
Total assets $ 5,398
============
Liabilities, Redeemable Preferred Stock and
Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 339
Accrued expenses 362
Current portion of capital lease obligations 84
Deferred revenue 159
Convertible debenture -
Amounts due to lenders -
------------
Total current liabilities 944
Deferred income taxes -
Long term portion of capital lease obligations 279
Commitments and contingencies
Mandatorily redeemable convertible preferred stock,
no par value;
2,870,000 shares designated, 2,789,650 shares
issued and outstanding (liquidation preference of $3,069) 4,003
Stockholders' equity (deficit):
Common stock, $.00011 par value, 20,000,000
shares authorized, 11,861,979 shares issued
and outstanding 1
Additional paid-in capital 6,339
Retained earnings (accumulated deficit) (6,168)
------------
Total stockholders' equity (deficit) 172
------------
Total liabilities, redeemable preferred
stock and stockholders' equity (deficit) $ 5,398
============
The accompanying notes are an integral part of these financial statements.
F-2
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Research Triangle Commerce, Inc.
Statements of Operations
(unaudited)
(in thousands)
Nine months ended
September 30,
-------------------------
2000 1999
---------- -----------
Revenue:
Services $ 4,874 $ 4,716
Software sales 318 104
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Total revenue 5,192 4,820
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Costs and operating expenses:
Services 4,136 3,855
Software 198 58
Selling, general and 3,606 2,500
administrative
---------- -----------
Total costs and 7,940 6,413
operating expenses
---------- -----------
Income (loss) from operations (2,748) (1,593)
---------- -----------
Interest income (expense):
Interest income 69 24
Interest expense (392) (9)
---------- -----------
Interest expense, net (323) 15
---------- -----------
Income (loss) before income taxes (3,071) (1,578)
Provision (benefit) for income taxes - -
---------- -----------
Net income (loss) (3,071) (1,578)
Accretion of mandatorily redeemable (863) (237)
preferred stock
---------- -----------
Net income (loss) available to $ (3,934) $ (1,815)
common stockholders ========== ===========
The accompanying notes are an integral part of these financial statements.
F-3
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Research Triangle Commerce, Inc.
Statements of Cash Flows
(unaudited)
(in thousands)
Nine months ended
September 30,
---------------------
2000 1999
--------- ---------
Cash flows from operating activities:
Net income (loss) $ (3,071) $ (1,578)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 371 175
Deferred tax expense - 13
Noncash interest expense 333 -
Loss on disposal of property and equipment - -
Bad debt expense 44 15
Changes in operating assets and liabilities:
Accounts receivable 240 (527)
Other receivables (33) (43)
Income tax receivable 8 (135)
Inventories 12 1
Prepaids (57) (86)
Other assets (230) (60)
Accounts payable 121 118
Accrued expenses (221) 193
Deferred revenue 138 16
--------- ---------
Net cash provided by (used in) operating (2,345) (1,898)
activities --------- ---------
Cash flows from investing activities:
Purchase of property and equipment (173) (585)
Cash paid for acquisitions - -
Cash paid for noncompete agreements - (107)
--------- ---------
Net cash used in investing activities (173) (692)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of mandatorily
redeemable preferred stock and warrants - 2,674
Proceeds from exercise of stock options 30 -
Proceeds from line of credit 2,774 1,820
Payments on line of credit (2,774) (1,534)
Proceeds from issuance of notes, 5,000 -
convertible debenture and warrants
Payments on term note - (300)
Payments on capital lease obligations (63) (13)
--------- ---------
Net cash provided by financing activities 4,967 2,647
--------- ---------
Net increase in cash and cash equivalents 2,449 57
Cash and cash equivalents at beginning of year 292 8
--------- ---------
Cash and cash equivalents at end of year $ 2,741 $ 65
========= =========
The accompanying notes are an integral part of these financial statements.
F-4
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Nine months ended
September 30,
---------------------
2000 1999
--------- ---------
Supplemental cash flow disclosures:
Interest paid $ 49 $ 9
========= =========
Taxes paid $ - $ -
========= =========
Supplemental disclosure of noncash transactions:
Accretion of mandatorily redeemable $ 863 $ 242
preferred stock ========= =========
Conversion of convertible debenture and $ 2,110 $ -
accrued interest ========= =========
Conversion of note payable and accrued $ 5,063 $ -
interest ========= =========
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Research Triangle Commerce, Inc.
Notes Financial Statements
1. Business and Operating Environment
Research Triangle Commerce, Inc. (formerly Research Triangle Consultants
Inc.) (the "Company") is a North Carolina corporation incorporated in
1991. The Company is a vertically integrated provider of education and
consulting services, custom programming, internetworking operations,
software sales and related services that enable organizations to implement
Electronic Commerce ("EC") methodologies to integrate their business
applications, both internally and with external business partners.
In the opinion of management, the accompanying September 30, 1999 and
September 30, 2000 financial statements include all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly the
financial position, results of operations, and cash flows of the Company.
Results for the interim periods are not necessarily indicative of the results
for any other interim period or for the full fiscal year.
2. Summary of Significant Accounting Policies
Concentration of Credit Risk and Significant Customers Financial instruments
which potentially subject the Company to a concentration of credit risk
consist principally of temporary cash and trade receivables. The Company
primarily places its temporary cash with high credit quality financial
institutions. Cash deposits are all in financial institutions in the United
States. The Company performs ongoing credit evaluations to reduce credit risk
and requires no collateral from its customers. Management estimates the
allowance for uncollectible accounts based on its historical experience and
credit evaluation.
At September 30, 2000, two customers accounted for a total of 23% of gross
accounts receivable. For the nine-month period ended September 30, 2000, one
customer accounted for 14% of revenues. For the nine-month period ended
September 30, 1999, one customer accounted for 17% of revenues.
3. Capital Stock
Mandatorily Redeemable Convertible Preferred Stock
Redemption
The redemption value of the Series A Preferred Stock was $12,170,000 as of
September 30, 2000, based on a redemption price per preferred share equal to
the product of (i) an amount equal to two times the sum of the Company's
gross revenues, as defined, for the twelve month calendar period immediately
preceding the date of the notice less all debts and other liabilities of the
Company multiplied by (ii) one (the conversion rate at September 30, 2000)
and then divided (iii) by number of fully diluted common shares of the
Company. The Series A Preferred Stock was initially recorded at $1,669,000 as
of January 22, 1999 based on the cash received, net of issue costs of
$245,000 and the fair value of warrants of $86,000. Additional Series A
Preferred Stock was initially recorded at $918,000 as of April 9, 1999 based
on cash received, net of issue costs of $82,000. The Series A Preferred Stock
was accreted to the redemption value utilizing the interest method. The
accretion was recorded as
F-6
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Research Triangle Commerce, Inc.
Notes Financial Statements
an increase or decrease to additional paid-in capital and an increase or
decrease to the recorded value of the Series A Preferred Stock through
December 2004, the redemption date. The Company recorded decreases to
stockholders' equity of $863,000 and $242,000, respectively, for the nine
months ended September 30, 2000 and 1999, respectively. As a result of the
Merger described in paragraph 4 below, all of the Series A Preferred Stock
was converted into cash and shares of Class A Common Stock of ICC on November
6, 2000.
4. The Merger
The Company and Internet Commerce Corporation ("ICC") entered into an
Agreement and Plan of Merger dated June 14, 2000 (the "Merger Agreement")
pursuant to which the Company would become a wholly-owned subsidiary of ICC
upon consummation of the transactions contemplated by the Merger Agreement.
On August 10, 2000 the Company adopted a Restricted Stock Plan which is
designed to award shares of common stock, on a restricted basis, to certain
individuals, conditioned upon and subject to the closing of a proposed
transaction between the Company and ICC. An RTCI shareholder transferred
825,000 shares of common stock owned by such shareholder to the Restricted
Stock Plan, which shares were subsequently awarded to such individuals as
restricted stock.
On August 15, 2000 the Company issued 2,532,396 shares of common stock to two
investors. The Company converted a $5,000,000 promissory note payable, plus
accrued interest of $63,000, into 1,793,896 shares of common stock and
converted a $2,000,000 convertible debenture, plus $110,000 of accrued
interest, into 738,500 shares of common stock.
5. Subsequent Events
On November 6, 2000, the merger between ICC and the Company was completed.
Under the terms of the Merger Agreement, the Company's outstanding shares of
common stock, including restricted common stock, were converted into
approximately $2.22 million of cash and 2,719,082 shares of ICC Class A
Common Stock and the Company's options and warrants were converted into
options and warrants to receive upon exercise an aggregate of 394,905 shares
of ICC Class A Common Stock and approximately $0.34 million of cash.
F-7
