SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): April 16, 1999
Spyglass, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-26074 37-1258139
(Commission File Number) (IRS Employer Identification No.)
Naperville Corporate Center
1240 East Diehl Road, 4th Floor
Naperville, IL 60563
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (630) 505-
1010
N/A
(Former name or former address, if changed since last report)
<PAGE>
SPYGLASS, INC.
FORM 8-K/A
Spyglass, Inc. ("Spyglass") filed a current report on Form 8-K dated
April 16, 1999 (the "Current Report") pertaining to the acquistion
of all of the issued capital stock of Navitel Communications, Inc.
("Navitel"). At the time of the filing of the Current Report, it was
impractical for Spyglass to provide financial statements and pro
forma financial information for Navitel. Pursuant to the instructions
for Item 7 of the Form 8-K, Spyglass hereby amends Item 7 of the
Current Report to include the previously omitted information, as
follows:
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Business Acquired
The following documents appear as Exhibit 99.01 to this current
report on Form 8-K/A and are incorporated herein by reference:
Navitel Communications, Inc. audited financial statements as of
September 30, 1998 and 1997 and for the years ended September
30, 1998, 1997 and the period from inception (May 21, 1996)
through September 30, 1996 and unaudited financial statements as
of March 31, 1999 and for the six months ended March 31, 1999
and 1998.
(b) Pro Forma Financial Information
The following documents appear as Exhibit 99.02 to this Current
Report on Form 8-K/A and are incorporated herein by reference:
(i) Unaudited Pro Forma Condensed Combined Balance Sheet
as of September 30, 1998
(ii) Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended September 30, 1998
(iii)Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended September 30, 1997
(iv) Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended September 30, 1996
(v) Unaudited Pro Forma Condensed Combined Balance Sheet
as of March 31, 1999
(vi) Unaudited Pro Forma Condensed Combined Statement of
Operations for the six months ended March 31, 1999
(vii)Notes to the Unaudited Pro Forma Condensed Combined
Financial Information
(c) Exhibits
23.01 Consent of Ernst & Young LLP, Independent Auditors
99.01 Financial Statements of Navitel Communications Inc.
99.02 Unaudited Pro Forma Condensed Combined Financial
Information
<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.
Spyglass, Inc.
Registrant
Date: June 29, 1999 /s/ Gary Vilchick
Gary Vilchick
Executive Vice President,
Finance, Administration and
Operations and Chief
Financial Officer
<PAGE>
Exhibit Index
23.01 Consent of Ernst & Young LLP, Independent Auditors
99.01 Financial Statements of Navitel Communications, Inc.
99.02 Unaudited Pro Forma Condensed Combined Financial
Information
<PAGE>
Exhibit 23.01
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements of Spyglass, Inc. on Form S-8 (Nos. 33-95162, 333-2312,
333-04357, 333-40831 and 333-47121) of our report dated June 21,
1999, with respect to the financial statements of Navitel
Communications, Inc. for the years ended September 30, 1998 and 1997,
and the period from inception (May 21, 1996) through September 30,
1996 included in this Form 8-K/A.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
June 25, 1999
<PAGE> 1
Exhibit 99.01
Navitel Communications, Inc.
Index to Financial Statements
Report of Ernst & Young
LLP........................................... 2
Balance Sheets as of September 30, 1998 and
1997........................................... 3
Statements of Operations for the Years Ended
September 30,1998, 1997 and 1996............... 4
Statements of Changes in Stockholders' Equity
(Deficit) for the Years Ended September 30,
1998, 1997 and 1996............................ 5
Statements of Cash Flows for the Years Ended
September 30, 1998,1997 and 1996............... 6
Notes to Financial Statements.................. 7
Balance Sheets as of March 31, 1999(Unaudited)
and September 30, 1998......................... 14
Statements of Operations for the Six Months
Ended March 31, 1998 and 1997 (Unaudited)...... 15
Statements of Cash Flows for the Six Months
Ended March 31, 1998 and 1997(Unaudited)....... 16
Notes to Financial Statements- March 31, 1999
(Unaudited).............................. 17
<PAGE> 2
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of Navitel Communications,
Inc.
We have audited the balance sheets of Navitel Communications, Inc. as
of September 30, 1998 and 1997, and the related statements of
operations, changes in shareholders' equity (deficit), and cash flows
for each of the years ended September 30, 1998 and 1997 and from the
period May 21 through September 30, 1996. These financial statements
are the responsibility of the company's management. Our
responsibility is to express and opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance 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 audit provides 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 Navitel
Communications, Inc. at September 30, 1998 and 1997, and the results
of their operations and their cash flows for each of the years ended
September 30, 1998 and 1997 and from the period May 21 through
September 30, 1996 in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Chicago, Illinois
June 21, 1999
<PAGE> 3
Navitel Communications, Inc.
Balance Sheets
<TABLE>
<C> <C> <C>
(In thousands, except share and September 30,
per share amounts) 1998 1997
---------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 51 $ 1,256
Prepaid expenses and other current assets 26 6
-------- -------
Total current assets 79 1,262
Properties and equipment, net 303 196
Other assets 23 10
-------- -------
Total Assets $ 405 $ 1,468
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 184 $ 226
Accrued compensation and related benefits 159 610
Deferred revenue 75 -
Research and development funding advance 144 -
Accrued expenses and other liabilities 112 37
-------- -------
Total current liabilities 674 873
Total liabilities 674 873
Stockholders' equity (deficit):
Preferred stock:
Series A preferred stock, $.001 par value;
1,831,494 shares authorized, issued and
outstanding 2 2
Series B preferred stock, $.001 par value;
2,489,619 shares authorized, issued and
outstanding 2 2
Series C preferred stock, $.001 par value;
4,819,278 and 3,614,458 shares authorized,
issued and outstanding, respectively 5 4
Common stock, $.001 par value; 50,000,000
shares authorized, 10,606,246 and
10,150,000 shares issued and outstanding,
respectively 11 10
Additional paid-in capital 6,651 5,501
Accumulated deficit (6,940) (4,924)
--------- --------
Total stockholders' (deficit) equity (269) 595
-------- --------
Total Liabilities and Stockholders'
Equity (Deficit) $ 405 $ 1,468
======== ========
</TABLE>
See accompanying Notes to Financial Statements
<PAGE> 4
Navitel Communications, Inc.
Statements of Operations
Period from
Inception (May 21,
Year ended September 30, 1996) through
(In thousands) 1998 1997 September 30, 1996
------------------------------------------------------------------------
<TABLE>
<C> <C> <C> <C>
Service revenues $ 675 $ - $ -
Cost of service revenues 339 - -
------ ------ ------
Gross profit 336 - -
Operating expenses:
Research and development, net
of funding received of
$1,606, $250 and $0,
respectively 1,497 3,124 413
General and administrative 884 1,196 101
------ ------ ------
Total operating expenses 2,381 4,320 514
------ ------ ------
Loss from operations (2,045) (4,320) (514)
Other income (expense), net 29 (96) 6
------ ------- ------
Net loss $(2,016) $(4,416) $ (508)
</TABLE>
See accompanying Notes to Financial Statements
<PAGE> 5
Navitel Communications, Inc.
Statement of Changes in Stockholders' Equity (Deficit)
<TABLE>
<C> <C> <C> <C> <C> <C> <C>
Series A Series B Series C Additional
Preferred Preferred Preferred Common Paid-in Accumulated
(In thousands) Stock Stock Stock Stock Capital Deficit
-------------------------------------------------------------------------------------
Issuance of common
stock $ - $ - $ - $ 10 $ - $ -
Net loss (508)
------- ------- ------ ------ ------ -------
Balance at September
30,1996 - - - 10 - (508)
Conversion of
convertible notes to
Series A preferred
stock 2 914
Conversion of
convertible notes to
Series B preferred
stock 2 1,591
Issuance of Series C
preferred stock 4 2,996
Net loss (4,416)
------- ------- ------ ------ ------ -------
Balance at September
30, 1997 2 2 4 10 5,501 (4,924)
Issuance of Series C
preferred stock 1 999
Exercise of common
stock options 1 11
Issuance of warrants
to purchase common
stock 42
Stock-based
compensation 98
Net loss (2,016)
------- ------- ------ ------- ------ -------
Balance at September
30, 1998 $ 2 $ 2 $ 5 $ 11 $6,651 $(6,940)
======= ======= ====== ======= ====== ========
</TABLE>
See accompanying Notes to Financial Statements
<PAGE> 6
Navitel Communications, Inc.
Statements of Cash Flows
Period from
Inception (May 21,
Year ended September 30, 1996) through
(In thousands) 1998 1997 September 30, 1996
--------------------------------------------------------------------------
<TABLE>
<C> <C> <C> <C>
Cash flows from operating
activities:
Net loss $ (2,016) $ (4,416) $ (508)
Adjustments to reconcile net
loss to net cash
used in operating activities:
Depreciation 104 10 -
Stock-based compensation 98 - -
Issuance of warrants to purchase
common stock in exchange for
non-cash consideration 42 - -
Changes in operating assets and
liabilities:
Prepaid expenses, other current
assets and other assets (35) (8) (8)
Accounts payable (42) 115 111
Accrued compensation and related
benefits (451) 585 25
Deferred revenue 75 - -
Research and development funding
advance 144 - -
Accrued expenses and other
liabilities 75 37 -
-------- -------- ------
Net cash used in operating
activities (2,006) (3,677) (380)
--------- -------- ------
Cash flows from investing
activities:
Purchases of fixed assets (211) (194) (12)
--------- -------- ------
Net cash used by investing
activities (211) (194) (12)
-------- -------- ------
Cash flows from financing
activities:
Proceeds from issuance of
convertible notes payable - 2,009 500
Proceeds from issuance of
preferred stock 1,000 3,000 -
Proceeds from issuance of common
stock 12 - 10
-------- -------- ------
Net cash provided by financing
activites 1,012 5,009 510
-------- -------- ------
Net (decrease) increase in cash
and cash equivalents (1,205) 1,138 118 118
Cash and cash equivalents at
beginning of period 1,256 118 -
--------- -------- ------
Cash and cash equivalents at end
of period $ 51 $ 1,256 $ 118
======== ======== ======
</TABLE>
See accompanying Notes to Financial Statements
<PAGE> 7
Notes to Financial Statements
Note 1. Organization and Significant Accounting Policies
Operations
Navitel Communications, Inc. ("Navitel" or the "Company"), a
California Corporation, was incorporated on May 21, 1996. Located in
Menlo Park, California, the Company is engaged in the business of
Internet telephony and software development focused on Internet
technology for non-PC devices. The Company is currently developing an
Internet screen phone software application platform for Microsoft
Corporation ("Microsoft").
Acquisition of the Company
On March 31, 1999, the Company signed a definitive agreement to be
acquired by Spyglass, Inc. ("Spyglass"). On April 16, 1999, Spyglass
acquired all of the issued and outstanding capital stock of the
Company. This transaction was effected through the exchange of
1,148,520 shares of common stock of Spyglass for all of the issued and
outstanding capital stock of the Company. In addition, the Company's
option holders received equivalent options for shares of Spyglass
common stock in exchange for their outstanding options for common
stock of the Company.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
Cash
Cash and cash equivalents consist of cash and highly liquid
investments with original maturities of three months or less. The
Company is exposed to credit risk in the event of default by the
financial institutions to the extent of the amounts recorded on the
balance sheet in excess of the amounts that are insured by the FDIC.
As of September 30, 1998 and 1997 cash equivalents consisted
principally of money market funds.
Properties and Equipment
Properties and equipment are stated at cost less accumulated
depreciation. Depreciation is determined for financial reporting
purposes using the straight-line method over the estimated useful
lives of the assets, which range from two to three years.
Revenue Recognition
The Company recognizes revenues from software development in
accordance with the provisions of Statement of Position ("SOP") 91-1,
Software Revenue Recognition, issued by the American Institute of
Certified Public Accountants ("AICPA"). Service revenues are comprised
of revenues from a professional services agreement with Microsoft.
Revenues from fixed bid professional services performed for Microsoft
relate to certain third party development work and are recognized on
the percentage of completion method. Related costs are reported as a
cost of service revenues.
In October 1997, the AICPA issued SOP No. 97-2, Software Revenue
Recognition, which superseded SOP No. 91-1. The Company has adopted
SOP No. 97-2 which is effective for the Company's fiscal year
beginning October 1, 1998 and provides guidance on applying generally
accepted accounting principles for software revenue recognition
transactions. Based on the Company's interpretation of the
requirements of SOP No. 97-2, application of this statement is not
expected to have a material impact on the Company's revenues.
<PAGE> 8
Research and Development
Research and development costs are expensed as incurred. During fiscal
1998 and 1997, the Company received payments from Microsoft of
$1,606,000 and $250,000, respectively, for funding of software
development for the Internet screen phone. Research and development
expense in these years has been recorded net of these payments.
Accounting for Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees ("APB 25") and
related interpretations in accounting for its employee stock options.
Under APB 25, if the Company's stock option plans are considered fixed
plans, no compensation expense is recognized if the exercise price of
the Company's employee stock options equals the market price of the
underlying stock on the date of grant. If the option grants are not
fixed at an amount at least equal to fair market value, the Company
recognizes compensation expense based on the intrinsic value on the
measurement date.
The Company has included the disclosure provision of Statement of
Financial Accounting Standard ("SFAS") No. 123, Accounting for Stock-
Based Compensation, which requires pro-forma information regarding net
income determined as if the Company had accounted for its employee
stock options under the fair value method of that Statement.
Note 2. Properties and Equipment
Properties and equipment and related accumulated depreciation are as
follows:
September 30,
(In thousands) 1998 1997
----------------------------------------------------------------
<TABLE>
<S> <C> <C>
Computer equipment and software $263 $103
Furniture, fixtures and office
equipment 131 84
Leasehold improvements and other 23 19
---- ----
417 206
Less: Accumulated depreciation (114) (10)
---- ----
Properties and equipment, net $303 $196
==== ====
</TABLE>
Note 3. Microsoft Agreements
In July 1997, the Company entered into a Joint Development and License
Agreement ("July 1997 Agreement") with Microsoft in which the Company
agreed to jointly develop software applications for an Internet
enabled screen phone running on the Windows CE operating system. Both
companies contributed intellectual property, development, management
and marketing resources to the venture and maintained joint ownership
interests in the screen phone software applications as developed.
The July 1997 Agreement called for sharing of all licensing revenues
received by either company related to the screen phone software
applications. It also required Microsoft to make minimum payments to
the Company of $1,000,000 per year for funding of the development
efforts, notwithstanding any licensing revenues received. Neither
company received any licensing revenue during fiscal 1998 or 1997. The
Company received $1,606,000 and $250,000 during Fiscal 1998 and 1997,
respectively, which was recorded as funding for research and
development expenses as received and netted against research and
development expenditures. As of September 30, 1998, the Company's
research and development funding advance liability of $144,000
represented cash received from Microsoft for future research and
development efforts.
In February 1998, the Company entered into an agreement to perform
certain development services on behalf of Microsoft related to Windows
CE and the screen phone software applications for a third-party OEM.
The Company agreed to perform these services for a fixed price of
$750,000 which was recognized using the percentage of completion
method. Development services related to this agreement were
approximately ninety percent complete as of September, 1998. As such,
the Company recognized $675,000 of revenue from this agreement during
Fiscal 1998.
<PAGE> 9
Note 4. Income Taxes
Significant components of the Company's deferred tax assets were as
follows:
September 30,
(In thousands) 1998 1997
-------------------------------------------------------------
<TABLE>
<C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $2,564 $1,708
Research and development tax
credit carryforwards 502 246
Other 117 198
------ ------
Total deferred tax assets 3,183 2,152
Deferred tax asset valuation
allowance (3,183) (2,152)
------ ------
Net deferred tax assets $ - $ -
====== ======
</TABLE>
As of September 30, 1998, the Company had net operating loss
carryforwards for income tax purposes of approximately $6,618,000
which expire in 2010 to 2012. As of September 30, 1998, the Company
had research and development credit carryforwards of approximately
$502,000, which are available to offset future income tax liabilities
and expire in 2010 to 2012.
The valuation allowance increased by $1,031,000 and $1,924,000 for the
fiscal years ended September 30, 1998 and 1997, respectively, and
relates primarily to increases in net operating loss carryforwards.
The Company has established the valuation allowance to defer
recognition of potential tax benefits until such time that operating
results can provide assurance that these tax benefits will be
recognized.
Under the provisions of the Internal Revenue Code, certain substantial
changes in the Company's ownership may result in a limitation on the
amount of net operating loss and tax credit carryforwards available
annually to offset any future taxable income. The amount of this
annual limitation is determined based upon the Company's value prior
to the ownership changes taking place. Subsequent ownership changes,
including the acquisition of the Company by Spyglass, could further
affect the limitation in future years.
Note 5. Convertible Preferred Stock
Series A, B and C Preferred Stock Issuance
On July 1, 1997, the Company issued 1,831,494 shares of Series A
convertible preferred stock, $.001 par value per share, for $915,747.
Also on July 1, 1997, the Company issued 2,489,619 shares of Series B
convertible preferred stock, $.001 par value per share, for
$1,593,356. On July 9, 1997, the Company issued 3,614,458 shares of
its newly authorized Series C convertible preferred stock, $.001 par
value per share for $3,000,000. On May 27, 1998, the Company issued
1,204,820 shares of Series C convertible preferred stock for
$1,000,000.
Conversion Rights
The Series A, B and C preferred stock is convertible, at the option of
the holder, into common stock of the Company based upon a formula
which would result in a 1-for-1 exchange at September 30, 1998. All
outstanding shares of Series A, B and C preferred stock shall
automatically convert to common stock at the request of at least a
majority of the holders of each such series. Accordingly, prior to the
acquisition of the Company by Spyglass (See Note 12), the Company's
Series A, B and C preferred stock was converted to the Company's
common stock at a 1-to-1 ratio.
Dividend Rights
The holders of Series A, B and C preferred stock are entitled to
receive dividends, as determined by and if declared by the Board of
Directors, in preference to the holders of common stock. Series A, B
and C preferred stock dividends are non-cumulative and as of September
30, 1998, no dividends have been declared or paid by the Company.
<PAGE> 10
Voting Rights
Holders of the Series A, B and C preferred stock are entitled to one
vote for each share of common stock into which the respective share of
Series A, B and C preferred stock is then convertible.
Liquidation Rights
In the event of any liquidation, dissolution, merger, sale or winding
up of the Company, the holders of Series C preferred stock, in
preference to the holders of Series A and B preferred stock and common
stock, and the holders of Series A and B preferred stock, on a parity
to each other and in preference to the holders of common stock, are
entitled to receive an amount equal to $0.83, $0.50 and $0.64 per
share, plus any dividends declared but unpaid on such shares,
respectively.
Note 6. Common Stock
Each share of common stock entitles the holder to one vote on all
matters submitted to a vote of the Company's stockholders. Common
stockholders are entitled to receive dividends, when and if declared
by the Board of Directors, subject to any preferential dividend rights
of the preferred stockholders. The majority of the Company's common
stock is subject to a stock restriction agreement which gives the
Company the right of first refusal to acquire all shares to which a
stockholder has received an arms-length purchase offer at the lesser
of the offer price or fair market value. At September 30, 1998, the
Company had 13,917,652 shares of its common stock reserved for
issuance upon conversion of preferred stock and exercise of common
stock warrants and options.
Note 7. Common Stock Purchase Warrants
In connection with the settlement of disputes arising over services
performed by certain vendors, the Company issued to those vendors
33,500 and 200,000 warrants to purchase common stock at an exercise
price of $0.08 on March 30, 1998 and June 11, 1998, respectively. The
Company recorded an expense related to the issuance of these warrants
of $41,638 for the year ended September 30, 1998. Prior to the
acquisition of the Company by Spyglass (See Note 12), the holders of
these common stock purchase warrants exercised their rights to
purchase a combined 233,500 shares of the Company's common stock.
Note 8. 1997 Stock Option Plan
The Board of Directors of Navitel adopted the 1997 Stock Option Plan
(the "Plan") which provides for the grant of incentive stock options
("ISO's") as well as non-statutory stock options. The Compensation
Committee administers the Plan and has sole discretion to grant
options to purchase shares of the Company's common stock. The Board of
Directors determines the term of each option, option price, number of
shares for which each option is granted, whether restrictions will be
imposed on the shares subject to options, and the rate at which each
option is exercisable. The exercise price for options granted will be
determined by the Board of Directors.
The maximum number of shares of common stock which may be issued
pursuant to the 1997 Stock Option Plan is 5,000,000 shares. Options
generally become exercisable over three years, commencing on the one-
year anniversary of the date of grant, and accumulate if not
exercised. As of September 30, 1998, options to purchase
approximately 1,798,408 shares are available for issue.
The above plan enables the Company to grant options to purchase common
stock of the Company to any full or part-time employees, officers,
directors, consultants or independent contractors of the Company.
Stock options entitle the optionee to purchase common stock from the
Company for a specified exercise price during a period specified in
the applicable option agreement.
Furthermore, the above plan stipulates that the exercise price of any
incentive stock option shall not be less than 100% of the fair market
value of the common stock at the date of the grant or less than 110%
of the fair market value in the case of optionees holding more than
10% of the total combined voting power of all classes of stock of the
Company. The exercise price of any non-qualified stock option shall
not be less than 85% of the fair market value of the common stock at
the date of the grant.
<PAGE> 11
The exercise periods of incentive stock options cannot exceed 10 years
from the date of grant. For incentive stock options granted to
optionees holding more than 10% of the total combined voting power of
all classes of stock, the exercise period is limited to a maximum of 5
years. Non-qualified stock options, if any, must be exercised within
the time period set forth in the option agreement but cannot exceed 10
years. Any portion not exercised within the terms as stipulated in
the option agreement shall be forfeited.
The Company records as compensation expense the excess, if any, of the
fair market value of the common stock at the date of option grant over
the option exercise price. Any compensation expense is recognized
during the period of employee service for which the incentive was
awarded. In the year ended September 30, 1998, the Company incurred
expense of $97,163 relating to options granted with an exercise price
below the estimated fair market value of the common stock.
Activity for the years ended September 30, 1998 and 1997 and the
period ended September 30, 1996 was as follows:
September 30,
1998 1997 1996
------------------ ------------------ ----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- ----------------------------------------------------------------------------
<TABLE>
<C> <C> <C> <C> <C> <C> <C>
Outstanding,beginning
of year 2,481,664 $0.02 2,525,000 $0.01 - $ -
Granted 1,151,250 0.08 845,000 0.02 2,525,000 0.01 .
Exercised (456,246) 0.03 - - - -
Forfeited (431,322) 0.06 (888,336) 0.01 - -
--------- ----- --------- ----- --------- -----
Outstanding, end
of year 2,745,346 $0.04 2,481,664 $0.02 2,525,000 $0.01
========= ===== ========= ===== ========= =====
<C> <C> <C> <C>
Weighted average
remaining
contractual life 8.44 9.14 9.98
Options exercisable
at year-end 1,268,960 603,721 -
Weighted average
fair value of
options granted
during the year $0.25 $0.02 $0.01
</TABLE>
A summary of information on stock options outstanding as of September
30, 1998 follows:
Options Outstanding Options Exercisable
-------------------------------------- --------------------
Weighted Weighted Weighted
Range of Average Average Average
Exercise Number Remaining Exercise Number Exercise
Prices Outstanding Contractual Life Price Exercisable Price
----------------------------------------------------------------------
<TABLE>
<C> <C> <C> <C> <C> <C>
$0.01 1,745,000 8.04 $0.01 1,124,909 $0.01
$0.08 1,000,346 9.15 $0.08 144,051 $0.08
--------- ---- ----- --------- -----
$0.01
-$0.08 2,745,346 8.44 $0.04 1,268,960 $0.02
========= ==== ===== ========= =====
</TABLE>
<PAGE> 12
Stock-Based Compensation
Pro-forma information, as required by Statement of Financial
Accounting Standards No. 123, is as follows:
Years Ended September 30, Period Ended September 30,
(In thousands) 1998 1997 1996
--------------------------------------------------------------------------
<TABLE>
<C> <C> <C> <C>
Net loss as reported ($2,016) ($4,416) ($ 508)
====== ====== ======
Pro-forma net loss ($2,209) ($4,625) ($1,134)
====== ====== ======
</TABLE>
In determining the fair value of the options and warrants, the Company
used the minimum value method with the following assumptions for
grants during 1998, 1997 and 1996: no dividend yield or volatility;
risk free interest rate of 4.23%, 6.0% and 6.0%; and a weighted
average expected option term of 5 years. Because changes in the
subjective input assumptions can materially affect the fair value
estimate, the estimated valuations may not necessarily provide a
reliable measure of the fair value of the Company's options.
Note 9. 401(k) Savings Plan
The Company has a salary reduction 401(k) retirement savings plan (the
"Plan") covering substantially all of the Company's employees.
Participating employees may contribute an amount up to 10% of their
eligible compensation, subject to an annual limit. The Company, at
the discretion of the Board of Directors, may make contributions to
the Plan. The Company has not made any contributions to the Plan
through September 30, 1998.
Note 10. Commitments and Contingencies
The Company leases office facilities under non-cancelable operating
lease agreements expiring at various dates through fiscal 2001. At
September 30, 1998, approximate future minimum lease commitments under
these leases were as follows:
Minimum Lease
(In thousands) Commitments
---------------------------------------------------------------------
<TABLE>
<C> <C>
1999 $ 242
2000 155
2001 73
-----
Total $ 470
=====
</TABLE>
Total rent expense under non-cancelable operating leases was
approximately $183,000, $105,000,and $14,000 for the years ended
September 30, 1998, 1997 and 1996, respectively.
Note 11. Significant Customer
In fiscal 1998, sales to a significant customer, Microsoft,
represented 100% of total revenues.
<PAGE> 13
Note 12. Subsequent Events
In November 1998, the Company entered into a Development and License
Agreement ("November 1998 Agreement") with Microsoft which superseded
the July 1997 Joint Development and License Agreement with Microsoft.
The November 1998 Agreement provided for the Company to invoice
Microsoft and recognize service revenues based on the hours incurred
for development services multiplied by the hourly rate for time and
materials in exchange for ownership rights to certain intellectual
property related to the application software development for the
Internet screen phone. As such, costs of engineering resources
related to research and development are now costs of service
revenues. Microsoft also paid $600,000 to the Company as an advance
against certain future services to be performed during the remainder
of the fiscal 1999.
On March 31, 1999, the Company signed a definitive agreement to be
acquired by Spyglass. On April 16, 1999, Spyglass acquired all of the
issued and outstanding capital stock of the Company. This transaction
was effected through the exchange of 1,148,520 shares of common stock
of Spyglass for all of the issued and outstanding capital stock of the
Company. In addition, the Company's option holders received
equivalent options for shares of Spyglass common stock in exchange for
their outstanding options for common stock of the Company.
Prior to the acquisition of the Company by Spyglass, the Company's
Series A, B and C preferred stock was converted to the Company's
common stock at a 1-to-1 ratio. In addition, the holders of certain
common stock purchase warrants exercised their rights to purchase
233,500 shares of the Company's common stock.
<PAGE> 14
Navitel Communications, Inc.
Balance Sheets
(Unaudited)
(In thousands, except share and per March 31, September 30,
share amounts) 1999 1998
---------------------------------------------------------------------
<TABLE>
<C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 566 $ 51
Accounts receivable 381 -
Prepaid expenses and other current assets 41 28
------- ------
Total current assets 988 79
Properties and equipment, net 233 303
Other assets 23 23
------- ------
Total Assets $ 1,244 $ 405
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 121 $ 184
Accrued compensation and related benefits 124 159
Deferred revenue 600 75
Research and development funding advance - 144
Accrued expenses and other liabilities 108 112
------- ------
Total current liabilities 953 674
Total liabilities 953 674
Stockholders' equity (deficit):
Preferred stock:
Series A preferred Stock, $.001 par value;
1,831,494 shares authorized, issued and
outstanding, respectively 2 2
Series B preferred Stock, $.001 par value;
2,489,619 shares authorized, issued and
outstanding, respectively 2 2
Series C preferred Stock, $.001 par value;
4,819,278 shares authorized, issued and
outstanding, respectively 5 5
Common stock, $.001 par value; 50,000,000
shares authorized, 11,278,137 and 10,606,246
shares issued and outstanding, respectively 11 11
Additional paid-in capital 6,692 6,651
Accumulated deficit (6,421) (6,940)
-------- -------
Total stockholders' equity (deficit) 291 (269)
-------- -------
Total Liabilities and Stockholders'
Equity (Deficit) $ 1,244 $ 405
======== =======
</TABLE>
See accompanying Notes to Financial Statements
<PAGE> 15
Navitel Communications, Inc.
Statements of Operations
(Unaudited)
Six months ended March 31,
(In thousands) 1999 1998
------------------------------------------------------------------
<TABLE>
<C> <C> <C>
Service revenues $ 2,369 $ 75
Cost of service revenues 1,325 38
------- -------
Gross profit 1,044 37
Operating expenses:
Research and development, net of
funding received of $0 and $250 - 1,155
General and administrative 530 402
------- -------
Total operating expenses 530 1,557
------- -------
Income (loss) from operations 514 (1,520)
Other income, net 5 24
------- -------
Net income (loss) $ 519 $(1,496)
======= =======
</TABLE>
See accompanying Notes to Financial Statements
<PAGE> 16
Navitel Communications, Inc.
Statements of Cash Flows
(Unaudited)
Six months ended March 31,
(In thousands) 1999 1998
---------------------------------------------------------------
<TABLE>
<C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 519 $ (1,496)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation 71 40
Stock-based compensation 24 -
Changes in operating assets and
liabilities:
Accounts receivable (381) -
Prepaid expenses, other current
assets and other assets (13) (28)
Accounts payable (63) 103
Accrued compensation and related
benefits (35) (231)
Deferred revenue 525 675
Research and development funding
advance (144) -
Accrued expenses and other liabilities (4) 6
------- -------
Net cash provided by (used in) operating
activities 499 (931)
------- -------
Cash flows from investing activities:
Purchases of fixed assets (1) (104)
------- -------
Net cash used by investing activities (1) (104)
------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock 17 4
------- -------
Net cash provided by financing activities 17 4
------- -------
Net increase (decrease) in cash and
cash equivalents 515 (1,031)
Cash and cash equivalents at beginning
of period 51 1,256
------- -------
Cash and cash equivalents at end of
period $ 566 $ 225
======= =======
</TABLE>
See accompanying Notes to Financial Statements
<PAGE> 17
Notes to Financial Statements
(Unaudited)
March 31, 1999
Note 1. Basis of Presentation
The accompanying financial statements have been prepared by the
Company in accordance with generally accepted accounting
principles, although certain information and footnote disclosures
normally included in the Company's audited annual financial
statements have been condensed or omitted. In the opinion of
management, the accompanying unaudited financial statements
include all adjustments (consisting only of normal recurring
items) necessary for a fair presentation of the Company's
financial position, results of operations and cash flows at the
dates and for the periods indicated. It is suggested that these
interim financial statements be read in connection with the
audited financial statements for the fiscal years ended September
30, 1998, 1997 and 1996.
The results of operations for the six months ended March 31, 1999
are not necessarily indicative of the results of operations to be
expected for the full fiscal year.
Note 2. Acquisition of the Company
On March 31, 1999, the Company signed a definitive agreement to
be acquired by Spyglass, Inc. ("Spyglass"). On April 16, 1999,
Spyglass acquired all of the issued and outstanding capital stock
of the Company. This transaction was effected through the
exchange of 1,148,520 shares of common stock of Spyglass for all
of the issued and outstanding capital stock of the Company. In
addition, the Company's option holders received equivalent
options for shares of Spyglass common stock in exchange for their
outstanding options for common stock of the Company.
Prior to the merger, the Company's Series A, B and C preferred
stock was converted to the Company's common stock at a 1-to-1
ratio. In addition, the holders of certain common stock purchase
warrants exercised their rights to purchase 233,500 shares of the
Company's common stock.
Note 3. Transaction with Microsoft Corporation
In November 1998, the Company entered into a Development and
License Agreement ("November 1998 Agreement") with Microsoft
which superseded the July 1997 Joint Development and License
Agreement with Microsoft. The November 1998 Agreement provided
for the Company to invoice Microsoft and recognize service
revenues based on the hours incurred for development services
multiplied by the hourly rate for time and materials in exchange
for ownership rights to certain intellectual property related to
the application software development for the Internet screen
phone. As such, costs of engineering resources related to
research and development are now costs of service revenues.
Microsoft also paid $600,000 to the Company as an advance against
certain future services to be performed during the remainder of
the fiscal 1999.
<PAGE>
Exhibit 99.02
Unaudited Pro Forma Condensed Combined Financial Statements
We have provided unaudited condensed combined financial statements of
Spyglass, Inc. ("Spyglass") after giving effect to the merger with
Navitel Communications, Inc. ("Navitel"), which are referred to as
"pro forma" information. In presenting these unaudited pro forma
condensed combined financial statements, we treated our companies as
if they had always been combined for accounting and financial
reporting purposes. This method is known as the "pooling of interests"
method of accounting. These unaudited pro forma condensed combined
financial statements are presented for illustrative purposes only and
may not be indicative of the operating results or financial position
that would have occurred or that will occur after the consummation of
the merger.
We have provided an unaudited pro forma condensed combined balance
sheet as of September 30, 1998. The impact of merger integration costs
to be recognized in the third quarter of fiscal 1999 are not included
in this balance sheet.
We have also provided unaudited pro forma condensed combined
statements of operations for the years ended September 30, 1998, 1997
and 1996 assuming the merger had occurred as of May 21, 1996, the
inception of Navitel Communications. The unaudited pro forma condensed
combined statements of operations for all periods presented exclude
the positive effects of potential cost savings that the companies may
achieve upon combining the resources of Spyglass and Navitel,
transaction costs of approximately $260,000, including legal and
accounting fees, and merger integration costs to be recognized in the
third quarter of fiscal 1999.
The condensed annual historical statements of operations of Spyglass
are derived from its audited consolidated financial statements
previously filed with the Securities and Exchange Commission in
Spyglass' 1998 Annual Report on Form 10-K.
The condensed annual historical statements of operations of Navitel
Communications are derived from its audited financial statements.
<PAGE>
Spyglass, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
as of September 30, 1998
Historical Pro Forma
----------------- -------------------
(In thousands) Spyglass Navitel Adjustment Combined
------------------------ -------- ------- ---------- --------
<TABLE>
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 22,655 $ 51 $ - $ 22,706
Accounts receivable, net 4,704 - - 4,704
Unbilled accounts receivable 902 - - 902
Prepaid expenses and other
current assets 2,461 28 - 2,489
-------- ------ ----- --------
Total current assets 30,722 79 - 30,801
Properties and equipment,net 3,585 303 - 3,888
Other assets 268 23 - 291
-------- ------ ----- --------
Total Assets $ 34,575 $ 405 $ - $ 34,980
======== ====== ===== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 1,493 $ 184 $ - $ 1,677
Royalties payable 541 - - 541
Deferred revenues 786 75 - 861
Accrued compensation and
related benefits 1,466 159 - 1,625
Accrued expenses and other
liabilities 163 256 - 419
-------- ------ ----- --------
Total current liabilities 4,449 674 - 5,123
Long-term deferred revenues 50 - - 50
-------- ------ ----- --------
Total liabilities 4,499 674 - 5,173
Stockholders' equity
(deficit) 30,076 (269) - 29,807
-------- ------ ----- --------
Total Liabilities and
Stockholders' Equity
(Deficit) $ 34,575 $ 405 $ - $ 34,980
======== ====== ===== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined
Financial Statements
<PAGE>
Spyglass, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Year Ended September 30, 1998
Historical Combined
(In thousands, except per ------------------- ---------------------
share amounts) Spyglass Navitel Adjustment Combined
-------------------------- -------- ------- ---------- --------
<TABLE>
<C> <C> <C> <C> <C>
Net revenues:
Internet technology $ 11,661 $ - $ - $ 11,661
Service 8,833 675 - 9,508
-------- ------- ------- --------
Total net revenues 20,494 675 - 21,169
Cost of revenues:
Internet technology 1,843 - - 1,843
Service 3,377 339 - 3,716
-------- ------- ------- --------
Total cost of revenues 5,220 339 - 5,559
-------- ------- ------- --------
Gross profit 15,274 336 - 15,610
Operating expenses and
other:
Sales and marketing 9,101 - - 9,101
Research and development,
net 9,173 1,497 - 10,670
General and
administrative 5,742 884 - 6,626
One-time acquistion costs 496 - - 496
-------- ------- ------- --------
Total operating
expenses and other 24,512 2,381 - 26,893
-------- ------- ------- --------
Loss from operations (9,238) (2,045) - (11,283)
Other income, net 1,222 29 - 1,251
-------- ------- ------- --------
Loss before income taxes (8,016) (2,016) - (10,032)
Income tax benefit - - - -
-------- ------- ------- --------
Net loss $ (8,016) $(2,016) $ - $(10,032)
======== ======= ======= ========
Net loss per common share $ (0.60) $ (0.69)
Net loss per common share $ (0.60) $ (0.69)
Weighted average number of
common shares outstanding
- basic 13,395 14,543
Weighted average number of
common shares outstanding
- diluted 13,395 14,543
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined
Financial Statements
<PAGE>
Spyglass, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Year Ended September 30, 1997
Historical Combined
(In thousands, except per ------------------- --------------------
share amounts) Spyglass Navitel Adjustments Combined
------------------------- -------- ------- ----------- --------
<TABLE>
<C> <C> <C> <C> <C>
Net revenues:
Internet technology $ 17,194 $ - $ - $ 17,194
Service 4,101 - - 4,101
-------- ------ ------- --------
Total net revenues 21,295 - - 21,295
Cost of revenues:
Internet technology 1,535 - - 1,535
Service 1,493 - - 1,493
-------- ------ ------- --------
Total cost of revenues 3,028 - - 3,028
-------- ------ ------- --------
Gross profit 18,267 - - 18,267
Operating expenses and
other:
Sales and marketing 8,311 - - 8,311
Research and development 13,644 3,124 - 16,768
General and administrative 6,769 1,196 - 7,965
Restructuring charge 900 - - 900
------- ------ ------- --------
Total operating expenses
and other 29,624 4,320 - 33,944
------- ------ ------- ---------
Loss from operations (11,357) (4,320) - (15,677)
Other income, net 1,622 (96) - 1,526
------- ------- ------- --------
Loss before income taxes (9,735) (4,416) - (14,151)
Income tax benefit - - - -
------- ------ ------- ---------
Net loss $(9,735) $(4,416) $ - $(14,151)
Net loss per common share
-basic $ (0.81) $ (1.07)
Net loss per common share
-diluted $ (0.81) $ (1.07)
Weighted average number of
common shares outstanding
- basic 12,090 13,238
Weighted average number of
common shares outstanding
- diluted 12,090 13,238
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined
Financial Statements
<PAGE>
Spyglass, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Year Ended September 30, 1996
Historical Combined
(In thousands, except per ------------------- --------------------
share amounts) Spyglass Navitel Adjustments Combined
------------------------- -------- ------- ----------- --------
<TABLE>
<C> <C> <C> <C> <C>
Net revenues:
Internet technology $ 19,466 $ - $ - $ 19,466
Service 2,841 - - 2,841
-------- ------ ------- --------
Total net revenues 22,307 - - 22,307
Cost of revenues:
Internet technology 1,912 - - 1,912
Service 118 - - 118
-------- ------ ------- --------
Total cost of revenues 2,030 - - 2,030
-------- ------ ------- --------
Gross profit 20,277 - - 20,277
Operating expenses:
Sales and marketing 5,963 - - 5,963
Research and development 6,801 413 - 7,214
General and administrative 3,846 101 - 3,947
------- ------ ------- --------
Total operating expenses 16,610 514 - 17,124
------- ------ ------- --------
Income (loss) from
operations 3,667 (514) - 3,153
Other income, net 1,744 6 - 1,750
------- ------- ------- -------
Income (loss) before income
taxes 5,411 (508) - 4,903
Income tax provision 1,951 - - 1,951
------- ------ ------- -------
Net income (loss) $ 3,460 $ (508) $ - $ 2,952
======= ======== ======= =======
Net income per common share
-basic $ 0.30 $ 0.23
Net income per common share
-diluted $ 0.27 $ 0.21
Weighted average number of
common shares outstanding
- basic 11,620 12,768
Weighted average number of
common shares outstanding
- diluted 12,875 14,023
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined
Financial Statements
<PAGE>
Spyglass, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
as of March 31, 1999
Historical Pro Forma
------------------ --------------------
(In thousands) Spyglass Navitel Adjustment Combined
---------------------------- -------- ------- ---------- --------
<TABLE>
<C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $28,223 $ 566 $ - $28,789
Accounts receivable, net 6,715 381 - 7,096
Unbilled accounts receivable 1,195 - - 1,195
Prepaid expenses and other
current assets 2,961 41 - 3,002
------- ------- ------- -------
Total current assets 39,094 988 - 40,082
Properties and equipment, net 3,040 233 - 3,273
Other assets 122 23 - 145
------- ------- ------- -------
Total Assets $42,256 $ 1,244 $ - $43,500
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,216 $ 121 $ - $ 1,337
Royalties payable 577 - - 577
Deferred revenues 1,038 600 - 1,638
Accrued compensation and
related benefits 1,306 124 - 1,430
Accrued expenses and other
liabilities 196 108 - 304
-------- ------- ------- -------
Total current liabilities 4,333 953 - 5,286
Long-term deferred revenues 316 - - 316
-------- ------- ------- -------
Total liabilities 4,649 953 - 5,602
------- ------- ------- -------
Stockholders' equity 37,607 291 - 37,898
------- ------- ------- -------
Total Liabilities and Stockh $42,256 $ 1,244 $ - $43,500
======= ======= ======= =======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined
Financial Statements
<PAGE>
Spyglass, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Six Months Ended March 31, 1999
Historical Combined
(In thousands, except per ------------------- --------------------
share amounts) Spyglass Navitel Adjustments Combined
------------------------- -------- ------- ----------- --------
<TABLE>
<C> <C> <C> <C> <C>
Net revenues:
Internet technology $ 6,177 $ - $ - $ 6,117
Service 4,705 2,369 - 7,074
-------- ------ ------- --------
Total net revenues 10,822 2,369 - 13,191
Cost of revenues:
Internet technology 771 - - 771
Service 2,551 1,325 - 3,876
-------- ------ ------- --------
Total cost of revenues 3,322 1,325 - 4,647
-------- ------ ------- --------
Gross profit 7,500 1,044 - 8,544
Operating expenses:
Sales and marketing 4,305 - - 4,305
Research and development 3,645 - - 3,645
General and administrative 2,332 530 - 2,682
------- ------ ------- --------
Total operating expenses 10,282 530 - 10,812
------- ------ ------- --------
Income (loss) from
operations (2,782) 514 - (2,268)
Other income, net 680 5 - 685
------- ------- ------- -------
Income (loss) before income
taxes (2,102) 519 - (1,583)
Income tax benefit - - - -
------- ------ ------- -------
Net income (loss) $ (2,102) $ 519 $ - $(1,583)
======== ======= ======= =======
Net loss per common share
-basic $ (0.14) $ (0.10)
Net loss per common share
-diluted $ (0.14) $ (0.10)
Weighted average number of
common shares outstanding
- basic 14,722 15,870
Weighted average number of
common shares outstanding
- diluted 14,722 15,870
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined
Financial Statements
<PAGE>
Spyglass, Inc.
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
1. Basis of Presentation
The unaudited pro forma condensed combined financial statements assume
a business combination between Spyglass and Navitel accounted for
using the pooling of interests method and are based upon the
respective historical financial statements and the accompanying notes
of Spyglass and Navitel.
Each share of Navitel series A, B and C preferred stock was converted
into one share of Navitel common stock just prior to consummation of
the merger. According to the merger agreement, each outstanding share
of Navitel common stock was then converted into the right to receive
.055153 shares of Spyglass common stock.
Although the transaction has been completed, the costs of the merger
can only be estimated at this time. The unaudited pro forma condensed
combined statements of operations for all periods presented exclude
the positive effects of potential cost savings that the companies may
achieve upon combining the resources of Spyglass and Navitel and
estimated transaction costs of approximately $260,000, including legal
and accounting fees to be recognized in the third quarter of fiscal
1999.
The unaudited pro forma condensed combined balance sheets as of March
31, 1999 and September 30, 1998 includes the impact of all
transactions, whether of a recurring or nonrecurring nature, that can
be reasonably estimated and should be reflected as of that date. The
impact of estimated transaction costs to be recognized in the quarter
ended June 30, 1999 are not included in this balance sheet.
2. Pro Forma Adjustments
Stockholders' Equity
Common stock accounts are adjusted for the assumed issuance of
1,148,520 shares of Spyglass common stock in exchange for 20,824,250
shares of Navitel common stock (which includes shares of Navitel
common stock issued upon conversion prior to the merger of Navitel
Series A, B and C preferred stock at the ratio of 1-to-1).
Additional paid-in capital is adjusted for the effects of issuance of
shares of Spyglass common stock having a $0.01 par value per share in
exchange for Navitel preferred stock and Navitel common stock, each
having a $0.001 par value per share.
Statement of Operations
Unaudited pro forma weighted average common shares outstanding for all
periods presented are based upon Spyglass' historical weighted average
shares as adjusted for 1,148,520 shares issued for the acquisition of
Navitel.
