-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GT8a/Mmmatg6fThQuG+VB6PhD62e080RUIxmBGK//U4QKp4rwngfmk1SZvuCQoe1 ivsLQ7X29bTd8iprsJI6fg== 0000350621-01-500024.txt : 20010711 0000350621-01-500024.hdr.sgml : 20010711 ACCESSION NUMBER: 0000350621-01-500024 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010427 ITEM INFORMATION: FILED AS OF DATE: 20010710 FILER: COMPANY DATA: COMPANY CONFORMED NAME: C COR NET CORP CENTRAL INDEX KEY: 0000350621 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 240811591 STATE OF INCORPORATION: PA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-10726 FILM NUMBER: 1678214 BUSINESS ADDRESS: STREET 1: 60 DECIBEL RD CITY: STATE COLLEGE STATE: PA ZIP: 16801 BUSINESS PHONE: 8142382461 MAIL ADDRESS: STREET 1: 60 DECIBEL ROAD CITY: STATE COLLEGE STATE: PA ZIP: 16801 FORMER COMPANY: FORMER CONFORMED NAME: C COR ELECTRONICS INC DATE OF NAME CHANGE: 19920703 8-K/A 1 mf8kaed.txt MOBILEFORCE 07-10-01 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K/A Amendment No. 1 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 27, 2001 C-COR.net Corp. (Exact name of Registrant as specified in its charter) Pennsylvania 0-10726 24-0811591 (State or other jurisdiction of (Commission File (I.R.S. Employer incorporation or organization) Number) Identification No.) 60 Decibel Road, State College, Pennsylvania 16801 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (814) 238-2461 (Former name or former address, if changed since last report.) The purpose of this Form 8-K/A is to amend the Current Report on Form 8-K dated April 27, 2001 and filed on May 11, 2001, to file the required financial statements and pro forma information required in Item 7 - Financial Statements and Exhibits. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS The following financial statements, pro forma financial information and exhibits are filed as part of this report: (a) Financial Statements of MobileForce Technologies, Inc. as of and for the years ended December 31, 2000 and 1999. Report of Independent Accountants Balance Sheets -- As of December 31, 2000 and 1999 Statements of Operations -- Years ended December 31, 2000 and 1999 Statement of Convertible Preferred Stock and Stockholders' Deficit -- Years ended December 31, 2000 and 1999 Statements of Cash Flows -- Years ended December 31, 2000 and 1999 Notes to Financial Statements (b) Pro forma financial information required: Pro Forma Condensed Consolidated Balance Sheet (Unaudited) as of December 29, 2000 with respect to the Registrant and December 31, 2000 with respect to MobileForce Technologies, Inc. Pro Forma Condensed Consolidated Statements of Operations (Unaudited) for the six months ended December 29, 2000 with respect to the Registrant and the six months ended December 31, 2000 with respect to MobileForce Technologies, Inc, and the year ended June 30, 2000 Notes to Pro Forma Condensed Consolidated Financial Statements. (c) Exhibits 2.1 Agreement and Plan of Merger dated as of March 29, 2001, between the Registrant, Broadband Management Solutions, LLC and MobileForce Technologies, Inc. (Incorporated by reference to the Registrant's 8-K dated April 27, 2001 and filed on May 11, 2001. File No. 0-10726) 23 Consent of PricewaterhouseCoopers LLP (San Francisco, CA) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. C-COR.net Corp. (Registrant) Date: July 10, 2001 /s/ William T. Hanelly ---------------------------------------------- William T. Hanelly Vice President-Finance, Secretary and Treasurer MobileForce Technologies, Inc. Financial Statements December 31, 2000 and 1999. MobileForce Technologies, Inc. Financial Statements Contents - -------------------------------------------------------------------------------- Page Report of Independent Accountants 1 Financial Statements: Balance Sheets as of December 31, 2000 and 1999 2 Statements of Operations for the years ended December 31, 2000 and 1999 3 Statement of Convertible Preferred Stock and Stockholders' Deficit for the years ended December 31, 2000 and 1999 4 Statements of Cash Flows for the years ended December 31, 2000 and 1999 5 Notes to Financial Statements 6 Report of Independent Accountants To the Board of Directors and Stockholders of MobileForce Technologies, Inc. In our opinion, the accompanying balance sheets and the related statements of operations, convertible preferred stock and stockholders' deficit, and cash flows present fairly, in all material respects, the financial position of MobileForce Technologies, Inc. at December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. 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 of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP - --------------------------------- San Francisco, California May 15, 2001 MobileForce Technologies, Inc. Balance Sheets - --------------------------------------------------------------------------------
December 31, ----------------------------- 2000 1999 Assets Current assets: Cash and cash equivalents $ 897,440 $ 1,446,307 Accounts receivable 78,560 - Prepaid expenses 148,734 174,189 Loan commitment and other fees 1,701,900 - Other current assets 53,005 43,497 ------------ ------------ Total current assets 2,879,639 1,663,993 Restricted cash 596,086 596,086 Loan commitment and other fees 121,068 - Property and equipment, net 1,942,365 1,584,836 ------------ ------------ Total assets $ 5,539,158 $ 3,844,915 ============ ============ Liabilities, convertible preferred stock and stockholders' deficit Current liabilities: Accounts payable and accrued liabilities $ 1,905,884 $ 1,170,743 Billings and accrued losses on uncompleted contracts in excess of related costs 451,606 708,590 Convertible notes payable to preferred stockholders and accrued interest, net of discount 3,972,131 - Current portion of notes payable 5,077,233 78,503 Current portion of obligations under capital leases 524,533 368,196 Warrants issued to purchase convertible preferred stock 2,875,057 - ------------ ------------ Total current liabilities 14,806,444 2,326,032 Notes payable 866,667 91,775 Obligations under capital leases 593,345 772,606 ------------ ------------ Total liabilities 16,266,456 3,190,413 Commitments and contingencies (Notes 4 and 12) Convertible preferred stock, $0.001 par value; 41,734,636 shares authorized: 34,001,723 and 30,744,426 shares issued and outstanding at December 31, 2000 and 1999, respectively (aggregate liquidation preference of $32,332,897 at December 31, 2000) 31,835,520 25,347,488 Stockholders' deficit Common stock, $0.001 par value; 65,000,000 shares authorized; 1,776,662 and 1,587,267 shares issued and outstanding at December 31, 2000 and 1999, respectively 1,777 1,587 Note receivable from stockholder (89,400) (89,400) Additional paid-in capital 5,448,016 4,821,858 Unearned stock compensation (1,551,462) (2,806,000) Accumulated deficit (46,371,749) (26,621,031) ------------ ------------ Total stockholders' deficit (42,562,818) (24,692,986) ------------ ------------ Total liabilities, convertible preferred stock and stockholders' deficit $ 5,539,158 $ 3,844,915 ============ ============
The accompanying notes are an integral part of these financial statements. 2 MobileForce Technologies, Inc. Statements of Operations - --------------------------------------------------------------------------------
Years Ended December 31, 2000 1999 ------------ ------------ Revenue $ - $ - Contract costs (790,801) (946,000) Cost of services (including stock-based compensation of $26,000 in 2000 and $4,000 in 1999) (550,906) (257,000) ------------ ------------ Gross profit (1,341,707) (1,203,000) ------------ ------------ Research and development (including stock-based compensation of $248,000 in 2000 and $93,000 in 1999) 8,214,351 6,184,873 General and administrative (including stock-based compensation of $969,818 in 2000 and $39,000 in 1999) 4,678,892 2,729,076 Sales and marketing (including stock-based compensation of $217,000 in 2000 and $54,000 in 1999) 3,878,830 1,789,097 ------------ ------------ Total operating expenses 16,772,073 10,703,046 ------------ ------------ Loss from operations (18,113,780) (11,906,046) Interest income 103,642 214,838 Interest expense (1,722,063) (1,659,201) Other income (expense) (18,517) (191,834) ------------ ------------ Net loss $(19,750,718) $(13,542,243) ============ ============
The accompanying notes are an integral part of these financial statements. 3 MobileForce Technologies, Inc. Statement of Convertible Preferred Stock and Stockholders' Deficit - --------------------------------------------------------------------------------
Convertible Note Preferred Stock Common Stock Receivable Additional --------------- ------------ from Paid-In Shares Amount Shares Amount Stockholder Capital ---------- ---------- --------- -------- ------------- ----------- Balance at December 31, 1998 15,214,090 $ 10,122,719 619,350 $ 619 $ -- $ 102,031 Issuance of Series D convertible preferred stock, net of issuance costs of $305,567 15,530,336 15,224,769 -- -- -- -- Issuance of common stock upon exercise of stock options -- -- 967,917 968 (89,400) 107,970 Issuance of convertible preferred stock warrants -- -- -- -- -- 1,615,857 Unearned stock compensation -- -- -- -- -- 2,996,000 Amortization of unearned stock compensation -- -- -- -- -- -- Net and comprehensive loss -- -- -- -- -- -- ---------- ------------ --------- -------- --------- ---------- Balance at December 31, 1999 30,744,426 25,347,488 1,587,267 1,587 (89,400) 4,821,858 Issuance of Series E convertible preferred stock, net of issuance costs of $26,562 3,257,297 6,488,032 -- -- -- -- Issuance of common stock upon exercise of stock options -- -- 189,395 190 -- 28,220 Issuance of convertible preferred stock warrants -- -- -- -- -- 391,658 Unearned stock compensation -- -- -- -- -- 206,280 Amortization of unearned stock compensation -- -- -- -- -- -- Net and comprehensive loss -- -- -- -- -- -- ---------- ------------ --------- -------- --------- ---------- Balance at December 31, 2000 34,001,723 $ 31,835,520 1,776,662 $ 1,777 $ (89,400) $5,448,016 ========== ============ ========= ======== ========= ==========
Unearned Stock Total Compen- Accumulated Stockholders' sation Deficit Deficit ------------ ------------ ------------- Balance at December 31, 1998 $ -- $(13,078,788) $(12,976,138) Issuance of Series D convertible preferred stock, net of issuance costs of $305,567 -- -- -- Issuance of common stock upon exercise of stock options -- -- 19,538 Issuance of convertible preferred stock warrants -- -- 1,615,857 Unearned stock compensation (2,996,000) -- -- Amortization of unearned stock compensation 190,000 -- 190,000 Net and comprehensive loss -- (13,542,243) (13,542,243) ---------- ----------- ----------- Balance at December 31, 1999 (2,806,000) (26,621,031) (24,692,986) Issuance of Series E convertible preferred stock, net of issuance costs of $26,562 -- -- -- Issuance of common stock upon exercise of stock options -- -- 28,410 Issuance of convertible preferred stock warrants -- -- 391,658 Unearned stock compensation (206,280) -- Amortization of unearned stock compensation 1,460,818 -- 1,460,818 Net and comprehensive loss -- (19,750,718) (19,750,718) ---------- ----------- ----------- Balance at December 31, 2000 $ (1,551,462) $(46,371,749) $(42,562,818) ============ ============ ============
The accompanying notes are an integral part of these financial statements. 4 MobileForce Technologies, Inc. Statements of Cash Flows - --------------------------------------------------------------------------------
Years Ended December 31, 2000 1999 ------------ ------------- Cash flows from operating activities Net loss $(19,750,718) $ (13,542,243) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 774,548 494,956 Warrants issued, primarily for debt financing 636,718 1,453,957 Amortization of unearned stock compensation 1,460,818 190,000 Loss on disposal of equipment 294,422 185,000 Interest expense on notes payable to stockholders converted to preferred stock 161,700 79,424 Changes in operating assets and liabilities: Accounts receivable (78,560) - Prepaid expenses and other current assets 15,947 (129,875) Accounts payable and accrued liabilities 735,141 467,919 Billings and accrued losses on uncompleted contracts in excess of related costs (256,984) 501,814 ------------ ------------- Net cash used in operating activities (16,006,968) (10,299,048) ------------ ------------- Cash flows from investing activities Increase in restricted cash - (456,086) Purchases of property and equipment (1,023,380) (523,474) ------------ ------------- Net cash used in investing activities (1,023,380) (979,560) ------------ ------------- Cash flows from financing activities Proceeds from notes payable 1,500,000 - Repayments of notes payable (84,228) (79,274) Proceeds from convertible notes payable to preferred stockholders 4,611,934 657,000 Proceeds from borrowings under bank lines of credit 5,000,000 1,500,000 Repayments of bank lines of credit (633,333) (2,070,000) Payments under capital lease obligations (429,334) (148,629) Proceeds from issuance of convertible preferred stock, net of cash issuance costs 6,488,032 12,846,280 Proceeds from issuance of common stock 28,410 19,538 ------------ ------------- Net cash provided by financing activities 16,481,481 12,724,915 ------------ ------------- Increase (decrease) in cash and cash equivalents (548,867) 1,446,307 Cash and cash equivalents, beginning of period 1,446,307 - ------------ ------------- Cash and cash equivalents, end of period $ 897,440 $ 1,446,307 ============ ============= Supplemental disclosures Cash paid during the year for interest $ 449,431 $ 54,279 ============ ============= Noncash investing and financing activities Acquisition of furniture and equipment under capital leases $ 406,410 $ 815,796 ============ ============= Conversion of notes payable to stockholders and accrued interest to Series D convertible preferred stock $ - $ 2,533,849 ============ =============
The accompanying notes are an integral part of these financial statements. 5 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- 1. The Company MobileForce Technologies, Inc. (the "Company") develops and markets workforce management systems that improve the scheduling, routing and dispatch of field service representatives ("FSRs"). The Company's software applications can be used by a variety of service-driven industries that include cable television/satellite, telecommunications, utilities and other field service providers. The Company currently markets its system primarily to the cable television industry and had two customer installations under contracts and numerous field trials in progress at December 31, 2000. The Company is incorporated in Delaware. In late 1999, the Company began operations in Broomfield, Colorado for the research and development of an Internet-based service order management system. As a result of financing constraints and management's decision to refocus the Company on its core workforce management product, the operations located in Broomfield, Colorado were shut down in November 2000. The write-off of assets and severance costs, all of which were paid in 2000, associated with the closure of operations in Broomfield were $275,585 and $120,000, respectively. In December 2000, the Company agreed, in principle, with C-COR.net Corp, a Pennsylvania corporation, ("C-COR") for the sale of the Company by merger, and obtained $7,250,000 in debt financing from C-COR through April 6, 2001. On March 29, 2001, the Company and C-COR executed an Agreement and Plan of Merger (the "Merger Agreement"). On April 27, 2001, the merger (the "Merger") was consummated and, pursuant to the Merger Agreement, a subsidiary of C-COR was merged into the Company, with the Company as the surviving entity and a wholly-owned subsidiary of C-COR. On April 30, 2001, the Company changed its name to Broadband Management Solutions, LLC (dba MobileForce Technologies). The Company has incurred substantial operating losses and negative cash flows from operations since inception. Management anticipates losses and negative cash flows will continue for the foreseeable future because of insufficient revenues, additional costs of developing products, and sales and marketing activities. C-COR has committed to fund the Company's operating plan through the end of the earn-out period specified in the Merger Agreement of April 30, 2002. 2. Summary of Significant Accounting Policies Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents and restricted cash The Company considers all investments with a maturity of three months or less at purchase to be cash equivalents. Included in cash and cash equivalents at December 31, 1999 is a certificate of deposit which amounted to $1,085,374. Cash equivalents are stated at cost, which approximates fair value. Restricted cash represents time deposits held at financial institutions as collateral on certain of the Company's lease and service agreements with terms greater than a one-year period (see Note 4). 6 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- Concentrations of credit risk The Company has several customer installations in progress as of December 31, 2000 pursuant to contracts with cable television companies located in the United States and Canada. The Company performs ongoing credit evaluations of these customers and generally does not require collateral. Revenue recognition The Company applies the revenue recognition guidance of AICPA Statement of Position 97-2, Software Revenue Recognition, as amended, to its license arrangements. Based on such guidance, the Company has determined that contract accounting is most appropriate for certain of its current license arrangements and has therefore referred to Accounting Research Bulletin 45, Long-Term Construction-Type Contracts, for revenue recognition associated with such contracts, and utilized the relevant guidance in AICPA Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. Revenues from mobile workforce management solutions license contracts are recognized on the completed-contract method as the arrangements represent the Company's initial installations, and the Company did not have the ability to reasonably estimate contract costs at the inception of the contracts. Under the completed-contract method, revenue is recognized when the contract is completed, and all direct costs and related revenues are deferred until that time. Deferred revenue under these contracts represents only amounts billed and totaled $2,854,000 and $2,335,000 at December 31, 2000 and 1999, respectively. Contract costs consist primarily of direct labor and applicable benefits, travel and other direct costs, and equipment costs. The entire amount of an estimated loss on a contract is accrued at the time a loss on a contract is projected. Actual losses may differ from these estimates. As of December 31, 2000, the Company had three such license arrangements. In addition, the Company had four arrangements with customers to provide field trials of its hosted mobile workforce management solutions. These hosted arrangements consist of design, implementation and trial service phases. All such arrangements were in the design or implementation phases at December 31, 2000, during which the arrangements are cancelable by either party and related costs are expensed as incurred to cost of services. Payments received under these arrangements can typically be applied against future amounts payable to the Company if the customer decides to continue its use of the hosted solutions and enters into a binding contract. Accordingly, cash received under these trial arrangements is treated as deferred revenue until the trial period is completed, at which time the Company determines the appropriate revenue recognition treatment based on whether the arrangement is extended and the terms of any such extension. Software development costs Costs incurred in the development of new technology are included in research and development and expensed as incurred. Costs incurred subsequent to the attainment of technological feasibility, which the Company defines as the completion of a working model, are capitalized until the product is available for general release to customers, and then subsequently reported at the lower of unamortized cost or net realizable value. Under this guidance, the Company has expensed all software development costs since inception. 7 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- Property and equipment Property and equipment are stated at cost. Additions, improvements and major renewals are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets, principally over three years for computer equipment and seven years for furniture and fixtures. Equipment under capital leases and leasehold improvements are depreciated over the shorter of the life of the lease or the asset. Impairment of long-lived assets The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate an impairment has occurred and undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of the assets. The impairment loss is then based on the excess of the carrying amount over the fair value of the assets. Income taxes Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. Stock-based compensation The Company accounts for employee stock options in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB No. 25"), and has adopted the "disclosure only" alternative described in Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123") - see Note 9. Under APB No. 25, unearned compensation is based on the difference, if any, on the date of the grant, between the fair value of the Company's common stock and the option exercise price. Unearned compensation is amortized over the vesting period. The Company accounts for stock issued to non-employees in accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force No. 96-18, Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring or in Conjunction with Selling Goods and Services. The Company accounts for stock warrants granted in connection with debt issuances in accordance with Accounting Principles Board Opinion No. 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants ("APB No. 14"). APB No. 14 requires that the proceeds from an issuance of debt with warrants be allocated between the two securities based on their relative fair values at the time of issuance. The portion of the proceeds ascribed to the warrants is recorded as a liability or additional paid-in capital, as appropriate, with the resulting debt discount amortized to interest expense. 8 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- Comprehensive income (loss) The Company does not have components of other comprehensive income (loss). Accordingly, comprehensive loss is the same as net loss for the years ended December 31, 2000 and 1999. Reclassifications Certain financial statement amounts as of and for the year ended December 31, 1999 have been reclassified to conform to the 2000 presentation. Such reclassifications had no impact on the Company's reported net loss for the year ended December 31, 1999 or its stockholders' deficit as of December 31, 1999. Recently issued accounting pronouncements In June 1998, the Financial Accounting Standards Board, issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"), as amended by SFAS Nos. 137 and 138. SFAS No. 133 establishes new standards of accounting and reporting for derivatives instruments and hedging activities. SFAS No. 133 requires that all derivatives be recognized at fair value on the balance sheet, and that the corresponding gains or losses be reported either in the statement of operations or as a component of comprehensive income, depending on the type of hedging relationship that exists. SFAS No. 133 will be effective for fiscal years beginning after June 15, 2000. Management believes that SFAS No. 133 will not have a material impact on the Company's financial position, results of operations or cash flows. In December 1999, the Securities and Exchange Commission (the "SEC") issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB 101"), which provides guidance for revenue recognition in certain circumstances. SAB 101 is applicable to public companies commencing in the fourth quarter of the year ended December 31, 2000. The adoption of SAB 101 did not have a material impact on the Company's financial position, results of operations or cash flows. In March 2000, the Financial Accounting Standards Board issued Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation - an interpretation of APB Opinion No. 25 ("FIN No. 44"). FIN No. 44 clarifies the application of APB No. 25 for (a) the definition of an employee for purposes of applying APB No. 25, (b) the criteria for determining whether a plan qualifies as a non-compensatory plan, (c) the accounting consequences of various modifications to the terms of a previously fixed stock option or award, and (d) the accounting for an exchange of stock compensation awards in a business combination. FIN No. 44 is effective July 1, 2000, but certain conclusions cover specific events that occur after either December 15, 1998 or January 12, 2000. The adoption of FIN No. 44 did not have a material impact on the Company's financial position, results of operations or cash flows. On March 20, 2001, the Emerging Issues Task Force reached a final consensus on Issue 00-19, Determination of Whether Share Settlement Is within the Control of the Issuer for Purposes of Applying Issue No. 96-13, ("EITF No. 00-19"). EITF No. 00-19 addresses the balance sheet classification and measurement of derivative financial instruments indexed to, and potentially settled in, a company's own stock, and generally specifies that contracts that require settlement in shares are considered equity instruments and contracts that require net-cash settlement are liabilities reported at current fair value. As required by EITF No. 00-19, the Company has applied the guidance therein to 9 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- warrants issued to purchase its convertible preferred stock granted or substantially modified subsequent to September 20, 2000 (see Note 8). Application of EITF No. 00-19 to warrants issued prior to September 20, 2000 is required as of June 30, 2001. As discussed in Note 8, all warrants were terminated or exercised at the time of the acquisition of the Company by C-COR, or assumed by C-COR. 3. Balance Sheet Components Property and equipment consists of the following:
December 31, --------------------------- 2000 1999 Building and leasehold improvements $ 189,901 $ 323,618 Computer equipment 2,775,723 2,053,572 Office equipment 84,199 45,602 Furniture and fixtures 134,561 107,988 Equipment at customer sites 337,071 -- ------------ ----------- 3,521,455 2,530,780 Less accumulated depreciation and amortization (1,579,090) (945,944) ------------ ----------- Property and equipment, net $ 1,942,365 $ 1,584,836 ============ ===========
Accounts payable and accrued liabilities consist of the following:
December 31, ----------------------- 2000 1999 Accounts payable $ 920,774 $ 283,436 Accrued compensation and benefits 731,459 496,944 Other accrued liabilities 253,651 390,363 ----------- ----------- Accounts payable and accrued liabilities $1,905,884 $1,170,743 =========== ===========
4. Commitments The Company leases its office space under a noncancelable operating lease with an original term of 74 months. The lease contains a renewal option after the initial term concludes in September 2005, and provisions adjusting the lease payments based on changes in operating costs of the office space. The Company is also obligated under capital leases expiring at various dates through 2004. These leases contain renewal options and certain leases contain purchase options. At December 31, 2000 and 1999, the cost of assets acquired under capital leases was $1,650,383 and $1,243,973, respectively, consisting primarily of computer equipment. Accumulated amortization related to these assets was $581,723 and $425,436 at December 31, 2000 and 1999, respectively. 10 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- The future minimum lease payments arising under capital and operating leases subsequent to December 31, 2000 are as follows:
Year Ending Capital Operating December 31, Leases Leases Total 2001 $ 627,023 $ 302,600 $ 929,623 2002 426,545 310,165 736,710 2003 207,074 317,919 524,993 2004 16,969 325,867 342,836 2005 -- 249,305 249,305 --------- ---------- ----------- Total minimum lease payments 1,277,611 $ 1,505,856 $ 2,783,467 =========== =========== Less amounts representing interest (159,733) --------- Obligation under capital leases at December 31, 2000 1,117,878 Less current portion (524,533) --------- Long-term portion $ 593,345 =========
Rent expense for the years ended December 31, 2000 and 1999 was $473,470 and $300,222, respectively. On April 27, 2001, immediately upon the closing of the Merger (see Note 1), capital lease obligations which totaled $665,153 at December 31, 2000 were repaid in full. 5. Notes Payable and Lines of Credit In March 1997, the Company entered into a line of credit agreement with a bank which provided for borrowings of up to $600,000. On December 28, 1998, the line of credit was converted to a bridge loan increasing the facility to $1,100,000 with a maturity date of the earlier of February 28, 1999 or the closing of the Series D convertible preferred stock sale, at which time all outstanding principal and remaining interest under the bridge loan became due and payable. Outstanding borrowings bore interest at the bank's prime rate plus 2% (10.5% at December 31, 1998), payable monthly, and were collateralized by the Company's encumbered assets. Outstanding borrowings under this arrangement were fully repaid in 1999, at which point the arrangement was terminated. In July 1998, the Company entered into a Loan and Security Agreement with a leasing company. The promissory notes executed under this agreement (the "Notes") accrue interest at 10.5% per annum, are to be repaid in monthly installments of principal and interest over 42 months and are collateralized by the fixed assets of the Company not under lease. As of December 31, 2000 and 1999, principal amounts outstanding under the Notes totaled $77,233 and $161,461, respectively. On April 27, 2001, immediately upon the closing of the Merger (see Note 1), the Notes were repaid in full. 11 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- In December 1998, the Company entered into a loan and security agreement with a bank which provided the Company with an $800,000 revolving line of credit. In early 1999, the line of credit was amended to increase to $1,500,000 with a maturity date of February 28, 1999. Outstanding borrowings bore interest at the bank's prime rate plus 1% (8.75% at December 31, 1998), payable monthly. A replacement note was issued on February 24, 1999 which extended the maturity date until the Series D preferred stock funding was completed in March 1999, at which time the line of credit arrangement was terminated. On January 19, 2000, the Company entered into a $2,500,000 Loan and Security Agreement with a financial institution. Borrowings of $1,500,000 and $1,000,000 were made under this arrangement on January 19, 2000 and February 25, 2000, respectively. The borrowings are repayable monthly, in 30 equal installments, beginning three months from the borrowing date, and bear interest at 14.4% and 14.55% per annum, respectively. The amount outstanding under this arrangement was $1,866,667 at December 31, 2000. On April 27, 2001, immediately upon closing of the Merger (see Note 1), this debt was repaid in full. On September 26, 2000, the Company entered into a $2,000,000 Loan and Security Agreement with another financial institution. Available borrowings under this arrangement were increased by $500,000 on December 14, 2000. The $500,000 loan obtained on December 14, 2000 is guaranteed and sub-guaranteed by certain of the Company's preferred stockholders. These borrowings bear interest at the prime rate, plus 3% per annum (12.5% at December 31, 2000). The notes were originally payable, with accrued interest, on January 14, 2001. This maturity date was initially extended to February 14, 2001, and the loans were repaid in full on March 30, 2001 with loan proceeds obtained from C-COR. In conjunction with the Merger, the Company issued notes to C-COR totaling $7,250,000 through April 6, 2001, of which $1,500,000 was outstanding on December 31, 2000, with interest rates of prime plus 3% (12.5% at December 31, 2000) (see Note 1). The loans mature on March 31, 2002, and are subordinated to the debt obligations to financial institutions described above. The notes are convertible into the Company's Series E convertible preferred stock at $1.00 per share if certain conditions are met, including termination of the merger with C-COR. Additionally, upon a conversion of the notes, C-COR would be entitled to receive warrants to purchase up to 3,625,000 shares of the Company's Series E convertible preferred stock at an exercise price of $1.00 per share. The above notes payable are collateralized by substantially all of the Company's assets, and the related debt agreements contain certain covenants that restrict the Company's ability to make investments or distributions, incur or guarantee additional indebtedness, and sell assets. Future principal payments due under these notes payable as of December 31, 2000 are as follows: 2001: $5,077,233; 2002: $866,667. 12 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- 6. Convertible Notes Payable to Preferred Stockholders and Customer In September 1998, the Company issued convertible notes payable to holders of the Company's Series B and Series C convertible preferred stock. The notes accrued interest at 8% per annum and were scheduled to convert to the Company's Series D convertible preferred stock. At December 31, 1998, the principal amount outstanding under the notes payable was $1,797,425. Additional convertible notes of $657,000 were issued in March 1999. All notes and accrued interest were converted to Series D convertible preferred stock upon the first sale of Series D convertible preferred stock in March 1999. On July 27, 2000 and November 13, 2000, the Company issued convertible notes payable totaling $3,366,470 and $1,245,464, respectively, to certain of its preferred stockholders, which remained outstanding at December 31, 2000. Included in the July 27, 2000 borrowings is a $200,000 note payable to one of the Company's customers who is not a shareholder. The convertible notes accrue interest at 10% per annum, payable at maturity, and mature one year from the respective issuance dates. Accrued interest was $161,700 at December 31, 2000. The notes and accrued interest are automatically convertible into the Company's convertible preferred stock upon the close of the Company's next round of preferred stock financing of at least $3,400,000. The notes and accrued interest are convertible into a number of preferred shares based on the price per share of the financing. On April 27, 2001, immediately upon closing of the Merger (see Note 1), the notes were repaid in full. In connection with the issuance of convertible notes during 2000, the Company issued warrants to purchase convertible preferred stock to the lenders (Note 8). The portion of the debt proceeds attributed to the warrants was recorded as a debt discount and is being amortized over the term of the debt. The unamortized discount totaled $801,503 at December 31, 2000. The effective interest rates on the July 27, 2000 and November 13, 2000 borrowings are 28.4% and 51.3%, respectively. 7. Convertible Preferred Stock Convertible preferred stock consists of the following at December 31, 2000:
Aggregate Shares Shares Issued Liquidation Series Authorized and Outstanding Preference B 9,953,226 9,510,000 $ 4,755,000 C 5,781,410 5,704,090 5,532,967 D 19,000,000 15,530,336 15,530,336 E 7,000,000 3,257,297 6,514,594 ---------- ---------- ------------ 41,734,636 34,001,723 $32,332,897 ========== ========== ============
The convertible preferred stock is issuable in series and the Board of Directors is authorized to determine the rights, preferences and terms of each series. Effective January 12, 2001, the Series E convertible preferred stock was repriced to $1.00 per share, and an additional 3,257,297 shares were issued to the existing holders of Series E convertible preferred stock. 13 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- On April 18, 2001, the Company's articles of incorporation were amended to provide for 93,000,000 and 69,734,636 authorized shares of common stock and convertible preferred stock, respectively. Dividends The holders of Series B, Series C, Series D and Series E convertible preferred stock, in preference to the holders of any other capital stock of the Company, are entitled to receive, when and as declared by the Board of Directors, but only out of funds that are legally available, non-cumulative dividends at the rate of $0.045, $0.0873, $0.09 and $0.18 ($0.09 effective January 12, 2001) per annum on each outstanding share of Series B, Series C, Series D and Series E convertible preferred stock, respectively (as adjusted for any stock dividends, combinations or splits with respect to such shares). No dividends have been declared or paid through December 31, 2000. Conversion Each share of preferred stock, at the option of the holder, is convertible into the number of fully-paid and nonassessable shares of common stock at the conversion rate. The initial conversion rate per share of the Series B, Series C, Series D and Series E convertible preferred stock is 1:1. The conversion rate is subject to adjustment under specified terms and conditions. Shares of the convertible preferred stock will automatically convert into shares of common stock, based on the then-effective conversion price, at any time upon the affirmative vote of the holders of at least sixty percent of the outstanding shares of the preferred series, or immediately upon the closing of a firmly underwritten public offering, pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of common stock for the account of the Company in which the per share price is at least $5.00 (as adjusted for stock splits, recapitalization and the like), and the gross cash proceeds to the Company (before underwriting discounts, commissions and fees) are at least $20,000,000. Liquidation preference In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of convertible preferred stock are entitled to receive, prior and in preference to any distribution of the assets of the Company to the holders of common stock, by reason of their ownership, an amount equal to the sum of $0.50 for each share of Series B convertible preferred stock, $0.97 for each share of Series C convertible preferred stock, $1.00 for each share of Series D convertible preferred stock, and $2.00 ($1.00 effective January 12, 2001) for each share of Series E convertible preferred stock, plus any declared but unpaid dividends with respect to such shares. After payment of the full liquidation preference of the preferred stockholders, the holders of common stock are entitled to receive an amount equal to $0.05 per share. The remaining assets, if any, are to be distributed ratably to the holders of common and preferred stock on an as-if-converted to common stock basis. Effective April 18, 2001, the holders of common stock are entitled to receive, prior and in preference to any distributions of any assets of the Company to the holders of convertible preferred stock, an amount equal to $0.15 for each outstanding common share. Furthermore, the $0.05 per share payable to the holders of common stock, after the payment of the preferred stockholders' preference, was eliminated. 14 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- If, upon the occurrence of a liquidation event, the assets and funds distributed among the holders of the convertible preferred stock are insufficient to permit the payment to such holders of the full preferential amount, then all assets and funds of the Company legally available for distribution are to be distributed ratably among the holders of the convertible preferred stock, in proportion to the preferential amount each such holder is otherwise entitled to receive. For purposes of determining liquidation preferences, a merger or consolidation of the Company into another entity in which the stockholders of the Company own less than 50% of the voting stock of the surviving company, or the sale, transfer or lease of substantially all assets of the Company, will be deemed a liquidation, dissolution, or winding up of the Company. These liquidation characteristics provide for mandatory redemption and, accordingly, the convertible preferred stock has been classified outside of stockholders' deficit in the Company's balance sheet. Voting A holder of convertible preferred stock is entitled to the number of votes equal to the number of shares of common stock into which each share of convertible preferred stock could be converted, and has voting rights and powers equal to the voting rights and powers of a common stockholder. Antidilution provisions The conversion price of the convertible preferred stock is subject to adjustment to prevent dilution in the event that the Company issues additional shares of convertible preferred stock, common stock or common stock equivalents at a purchase price less than the then-effective conversion price, provided, however, that without triggering antidilution adjustments, the Company may issue to directors, officers, employees or consultants shares of common stock that are reserved for issuance under the 1997 Stock Plan or in connection with financing or other transactions which involve consideration and which are approved by the Board of Directors. Reserved shares As of December 31, 2000, a total of 8,124,920 of the Company's convertible preferred stock was reserved for issuance upon exercise of outstanding warrants. 15 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- 8. Warrants to Purchase Convertible Preferred Stock As of December 31, 2000, warrants to purchase shares of convertible preferred stock of the Company were outstanding and, unless otherwise indicated below, fully exercisable as follows:
Exercise Number of Price Period(s) of Issue Series Warrants Per Share Expiration Period(s) March 1997 B 43,226 $0.50 February 2007 June - July 1998 C 77,320 $0.97 June - July 2008 March 1999-January 2000 D 2,968,900 $1.00 September 2003 - September 2009 July - November 2000 E 2,535,474 $1.00 July 2005 - August 2010 December 2000 E 2,500,000 $0.20 December 2005 --------- 8,124,920 =========
In connection with the issuance of convertible notes payable to its stockholders in September 1998 (Note 6), the Company issued warrants to the noteholders to purchase shares of the Company's convertible preferred stock, with additional warrants to be issued if the Series D convertible preferred stock offering did not close by November 1998. Under this arrangement, the Company issued 718,970 warrants to purchase Series D convertible preferred stock at an exercise price of $1.00 per share and an expiration date of September 2003. The portion of the note proceeds ascribed to the warrants was recorded as interest expense and totaled approximately $414,000 in 1999. In connection with the conversion of a line of credit to a bridge loan in December 1998 (Note 5), the Company granted warrants to the lender to purchase 132,000 shares of Series D convertible preferred stock at an exercise price of $1.00 per share. The warrants expire the earlier of December 2008 or five years after the date of an IPO. The value ascribed to the warrants of approximately $96,000 was recorded to interest expense in 1999. In connection with guarantees provided by certain stockholders in connection with the Company's $800,000 revolving credit line (Note 5), in January 1999, the Company issued warrants to purchase 1,135,365 shares of the Company's Series D convertible preferred stock with an exercise price of $1.00 per share and an expiration date of January 2004. The value ascribed to these warrants of approximately $715,000 was recorded as interest expense in 1999. Pursuant to the terms of the Company's related party financing arrangements, 407,000 warrants to purchase Series D convertible preferred stock were issued to stockholders who provided convertible notes payable financing in March 1999 (Note 6). The warrants have an exercise price of $1.00 per share and expire in March 2004. The portion of the notes proceeds attributed to these warrants of approximately $184,000 was recorded as interest expense in 1999. In connection with the issuance of Series D convertible preferred stock in March 1999, the Company granted 256,250 warrants to purchase Series D convertible preferred stock as consideration for arranging the financing, with an exercise price of $1.00 per share and an expiration in March 2004. The fair value of these warrants of $161,500 was treated as a cost of stock issuance. 16 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- Pursuant to a loan agreement dated January 19, 2000 (Note 5), the Company issued a warrant to the lender to purchase 287,500 shares of the Company's Series D convertible preferred stock at an exercise price of $1.00 per share. The warrant expires in January 2007. The value ascribed to the warrants totaled approximately $404,000, of which $139,778 was amortized as interest expense in 2000. In connection with the issuance of convertible notes to certain of its preferred stockholders and a customer in July 2000 (Note 6), the Company issued warrants to the noteholders to purchase 841,618 shares of the Company's Series E convertible preferred stock at an exercise price equal to the price per share of the Company's next round of preferred stock financing with proceeds of at least $3,400,000 (a "Financing"), or $2.00 per share if a Financing does not occur. The $2.00 per share pricing was amended to $1.00 per share in November 2000. The warrants are exercisable commencing on the date of a Financing and expire the earlier of July 2005, the closing of an initial public offering with proceeds of at least $20,000,000 and a price per share of at least $5.00, or a change in control, as defined. The portion of the debt proceeds originally attributed to the warrants totaled approximately $620,000, of which $265,084 was recorded as interest expense in 2000. As required by the terms of the loan agreement dated September 26, 2000 (Note 5), the Company issued warrants to the lenders to purchase 350,000 shares of Series E convertible preferred stock at an exercise price of $1.50 per share. The warrants expire in September 2007. The value ascribed to the warrants totaled approximately $313,000, of which $162,293 was recorded as interest expense in 2000. Pursuant to the agreement, as a result of the extension of the loan maturity date to February 14, 2001, and the Company's inability to payoff the debt by such extended due date, the Company issued warrants to the lenders to purchase an additional 500,000 shares of Series E convertible preferred stock at an exercise price of $1.00 per share, and the exercise price of the warrants previously issued to the lenders was amended to $1.00 per share in November 2000. The value attributed to this additional warrant coverage was approximately $84,000, of which $42,000 was recorded as interest expense in 2000. In connection with the issuance of convertible notes to certain preferred stockholders in November 2000 (Note 6), the Company issued warrants to such stockholders to purchase 1,337,607 shares of the Company's Series E convertible preferred stock at an exercise price equal to the price per share of a Financing, or $1.00 per share if a Financing does not occur. The warrants are exercisable commencing on the date of a Financing and expire the earlier of November 2005, the closing of an initial public offering with proceeds of at least $20,000,000 and a price per share of at least $5.00, or a change in control, as defined. The portion of the debt proceeds attributed to the warrants totaled approximately $514,000, of which $67,585 was amortized as interest expense in 2000. In connection with debt guarantees provided in December 2000 by certain stockholders (Note 5), the Company issued warrants to the stockholders to purchase 2,500,000 shares of Series E convertible preferred stock at an exercise price of $0.20 per share. The warrants are exercisable commencing on the date of a Financing and expire the earlier of December 2005, the closing of an initial public offering with proceeds of at least $20,000,000 and a price per share of at least $5.00, or a change in control, as defined. The value ascribed to the warrants totaled approximately $1,620,000, of which $259,811 was recorded as interest expense in 2000. The Company has issued warrants to various other parties, primarily lessors. The values of such warrants were not material. No warrants have been exercised through December 31, 2000. 17 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- As discussed in Note 2, the Company has applied the guidance in EITF No. 00-19 to warrants granted or modified subsequent to September 20, 2000, which resulted in such warrants being classified as current liabilities as of December 31, 2000. The decrease in fair value of these warrants as of December 31, 2000 of $275,887 was recorded as other income. As a result of, or in connection with the Merger (see Note 1), warrants to purchase 1,098,550 shares of Series E convertible preferred stock were exercised at $0.20 per share, and all of the Company's remaining outstanding warrants were terminated, except for warrants issued to a lender and a lessor to purchase in the aggregate 77,320 shares of Series C convertible preferred stock, 287,500 shares of Series D convertible preferred stock, and 6,250 shares of Series E convertible preferred stock. The fair values of warrants to purchase convertible preferred stock, that were either recorded as expense or utilized in the allocation of the proceeds of debt issued with such warrants, were estimated using the Black-Scholes option pricing model, with the following significant estimates and assumptions: 2000 1999 Expected life of warrants Maximum contractual life Maximum contractual life (5-7 years) (5-10 years) Expected dividend yield 0% 0% Estimated volatility 75% 75% Risk-free interest rate 5.19% - 6.75% 4.78% - 6.32% 9. Stock-Based Compensation The Company's 1997 Stock Plan (the "Plan") covers certain directors, employees and consultants. The Plan provides for the granting of options to purchase shares of the Company's common stock. Under the Plan, two types of options may be granted: Incentive Stock Options ("ISOs") and Non-Qualified Stock Options ("NQSOs"). The ISOs may be granted at a price per share not less than the fair market value at the date of grant. The NQSOs may be granted at a price per share not less than 85% of the fair market value at the date of grant. Options granted under the Plan are immediately exercisable, generally vest over four years at a rate of 25% on the one-year anniversary of the option grant and then monthly over the remaining three years, and expire ten years after the date of grant. Common stock obtained upon early exercise is restricted subject to the same vesting provisions. Common stock subject to repurchase totaled 450,000 shares at December 31, 2000 at a repurchase price of $0.15 per share. 18 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- At December 31, 2000, 2,660,117 options were available for future grant and the Company had reserved 8,450,000 shares of common stock for issuance under the Plan. The table below summarizes the Company's stock option activity under the Plan:
Year Ended December 31, ------------------------------------------------- 2000 1999 ------------------------ ----------------------- Weighted Weighted Average Average Exercise Exercise Number of Price Number of Price Shares per Share Shares per Share Options outstanding at January 1 4,416,015 $ 0.13 3,314,515 $ 0.10 Granted 2,708,070 0.49 2,735,500 0.15 Exercised (189,395) 0.15 (967,917) 0.11 Cancelled (2,504,104) 0.39 (666,083) 0.07 --------- ------ --------- ------ Options outstanding at December 31 4,430,586 $ 0.20 4,416,015 $ 0.13 ========= ====== ========= ======
The following table summarizes information concerning currently outstanding and exercisable and vested options at December 31, 2000:
Outstanding and Exercisable Vested -------------------------------------------- -------------------------- Weighted Weighted Weighted Average Average Average Remaining Exercise Exercise Exercise Price Contractual Price Per Price Per Per Share Shares Life (Years) Share Shares Share $0.05 693,496 6.63 $0.05 665,756 $0.05 $0.15 2,888,340 8.09 $0.15 2,049,329 $0.15 $0.50 848,750 9.43 $0.50 65 $0.50 --------- --------- 4,430,586 $0.20 2,715,150 $0.13 ========= =========
The Company applies the intrinsic-value method prescribed by APB No. 25 in accounting for employee stock options. Accordingly, unearned stock compensation is recognized only when options are granted with an exercise price less than fair value. Compensation expense is then recognized over the associated service period, which is generally the vesting term. Total unearned compensation expense, net of cancellations, recorded during 2000 and 1999 was $206,280 and $2,966,000, respectively, of which $1,460,818 and $190,000 was amortized to expense in 2000 and 1999, respectively. On January 18, 2001, the Company's Board of Directors approved the repricing, to an exercise price of $0.15 per share, of 799,250 common stock options granted during the year ended December 31, 2000 with an original exercise price of $0.50 per share. 19 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- Fair value disclosures The Company has determined its pro forma net loss in accordance with SFAS No. 123 as if the Company had measured the fair value of its employee stock options using the minimum value method on the date of grant. The weighted average fair values of options granted for the years ended December 31, 2000 and 1999 were $0.23 per share and $1.11 per share, respectively. The minimum values of these options were estimated using a Black-Scholes option pricing model with the following weighted-average assumptions:
2000 1999 Expected dividend yield 0% 0% Risk free interest rate 5.66% 5.94% Expected life of options 4 years 4 years
For purposes of pro forma disclosures, the estimated value of the options is amortized to expense over the four-year average vesting period of the options. The pro forma net loss resulting from compensation cost measured under SFAS No. 123 was $20,092,002 and $13,580,897 for the years ended December 31, 2000 and 1999, respectively. The effects on pro forma disclosure of applying SFAS No. 123 in 2000 and 1999 are not likely to be representative of the effects on reported net income (loss) in future years. 10. Income Taxes The components of net deferred tax assets are as follows:
December 31, ----------------------------- 2000 1999 Net operating loss carryforwards $ 18,620,020 $ 10,854,585 Research and development credit carryforwards 1,739,330 881,649 Deferred revenue and contract costs 192,069 301,364 Other 500,343 (283,598) ----------- ----------- Total deferred tax assets 21,051,762 11,754,000 Less: Valuation allowance (21,051,762) (11,754,000) ----------- ----------- Net deferred tax assets $ -- $ -- =========== ===========
During the years ended December 31, 2000 and 1999, the valuation allowance increased by $9,297,762 and $6,949,000, respectively. The full valuation allowance is the primary reason for the difference between the Company's effective tax rate and the statutory U.S. federal income tax rate. Management believes that, based on a number of factors, it is more likely than not that the deferred tax assets will not be utilized, such that a full valuation allowance has been recorded. These factors include the Company's history of losses, the fact that the market in which the Company competes is characterized by rapidly changing technology; and the lack of carryback capacity 20 MobileForce Technologies, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- to realize deferred tax assets. The Company will continue to assess the realizability of the deferred tax assets based on actual and forecasted operating results. As of December 31, 2000, the Company had net operating loss carryforwards available to reduce its future taxable income of approximately $44,000,000 for both federal and state income tax purposes. The net operating loss carryforwards will expire between 2007 and 2020. As of December 31, 2000, the Company also had research and development credit carryforwards of $1,130,000 and $609,000 for federal and state income tax purposes, respectively, which expire between 2012 and 2020. The Company's ability to utilize its net operating loss carryforwards to offset future taxable income may be subject to restrictions attributable to equity transactions that result in changes in ownership as defined in the Tax Reform Act of 1986. These restrictions may limit, on an annual basis, the Company's future use of its net operating loss carryforwards and research and development tax credit carryforwards. The Company determined that such a change in ownership occurred in early 1997, but has not yet determined the amount of any limitations with respect to net operating loss carryforwards generated prior to this change in control. Utilization of all of the Company's net operating loss carryforwards may be further limited by any future change in control. The amount of such limitations, if any, has not been determined. 11. Retirement Plan On September 1, 1998, the Company established a defined contribution savings plan (the "401(k) Plan") that qualifies under the provisions of Section 401(k) of the Internal Revenue Code and covers all employees of the Company who meet the 401(k) Plan's eligibility requirements. Under the terms of the 401(k) Plan, employees may contribute a portion of their annual compensation up to the maximum allowed by law. The 401(k) Plan provides for discretionary contributions by the Company, the amount of which is determined by the Company's Board of Directors. The Company has made no contributions to the 401(k) Plan through December 31, 2000. 12. Contingencies The Company is involved in a lawsuit that arose in the ordinary course of business. While the Company does not expect the outcome of this matter to be material in relation to its financial condition, results of operations or cash flows, the ultimate outcome of this matter is uncertain. 21 ITEM 7 (b) - PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma condensed consolidated financial statements of C-COR.net Corp.(C-COR or the Company) have been prepared to give effect to the April 27, 2001 acquisition of MobileForce Technologies Inc. (MobileForce) using the purchase method of accounting. Consideration for the acquisition was approximately $9,138,000 consisting of a cash payment of approximately $5,029,000, direct transaction costs and expenses of approximately $738,000 and the assumption by C-COR of MobileForce stock options to purchase 500,000 shares of C-COR's common stock. The unaudited pro forma condensed consolidated balance sheet assumes the acquisition took place in December 2000 and combines C-COR's December 29, 2000 unaudited condensed consolidated balance sheet with MobileForce's December 31, 2000 audited condensed balance sheet. The unaudited pro forma condensed consolidated statements of operations assume that the acquisition took place as of June 26, 1999 and combines C-COR's audited condensed consolidated statement of operations for the year ended June 30, 2000 and MobileForce's unaudited condensed statement of operations for the twelve-month period ended June 30, 2000; and C-COR's unaudited condensed consolidated statement of operations for the six-month period ended December 29, 2000 with the unaudited condensed statement of operations for MobileForce for the six-month period ended December 31, 2000. The acquisition agreement provides for additional cash consideration to be paid to MobileForce stockholders, in an amount not to exceed $13,500,000, if MobileForce secures certain sales order contracts prior to April 30, 2002 and/or achieves certain revenue levels during the period May 1, 2001 through April 30, 2002. This additional cash consideration has not been reflected in the unaudited pro forma condensed consolidated financial statements. In addition, subsequent to the acquisition of MobileForce, C-COR retired approximately $7,900,000 of assumed MobileForce debt. The repayment of such debt has not been reflected in the unaudited pro forma condensed consolidated balance sheet as of December 29, 2000. The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of operating results or financial position that would have occurred if the acquisition had been consummated as of the dates indicated, nor is it necessarily indicative of future operating results or financial position. C-COR.NET CORP. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (IN THOUSANDS) (UNAUDITED)
AS OF AS OF DECEMBER 29, 2000 DECEMBER 31, 2000 PRO FORMA PRO FORMA C-COR MOBILEFORCE ADJUSTMENTS COMBINED ----------------- ----------------- ---------------- ------------ ASSETS Current Assets: Cash and cash equivalents $ 88,132 $ 897 $(5,767) (G) $ 83,262 Marketable securities 34,349 - - 34,349 Accounts and notes receivable, net 51,874 79 (1,500) (C) 50,453 Inventories 38,932 - - 38,932 Prepaid and other assets 10,393 1,904 (1,702) (H) 10,595 --------- ------- ------- --------- Total current assets 223,680 2,880 (8,969) 217,591 Property, plant and equipment, net 25,568 1,942 - 27,510 2,213 (A) (1,500) (F) Intangible assets, net 2,313 - 16,600 (B) 19,626 525 (F) Other assets 10,537 717 (121) (H) 11,658 --------- ------- ------- --------- $262,098 $ 5,539 $ 8,748 $ 276,385 ========= ======= ======= ========= LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT) Current Liabilities: Accounts payable $ 29,707 $ 921 $ - $ 30,628 Accrued liabilities & other 13,124 4,311 (2,875) (H) 14,560 Current portion of long-term debt 226 9,574 (1,500) (C) 8,300 --------- ------- ------- --------- Total current liabilities 43,057 14,806 (4,375) 53,488 Long-term debt, less current portion 1,428 1,460 - 2,888 Other liabilities 1,847 - - 1,847 Convertible preferred stock - 31,836 (31,836) (D) - 42,563 (E) (975) (F) Shareholders' equity (deficit) 215,766 (42,563) 3,371 (G) 218,162 --------- ------- ------- --------- $262,098 $ 5,539 $ 8,748 $ 276,385 ========= ======= ======= =========
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. C-COR.NET CORP. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
YEAR YEAR ENDED ENDED JUNE 30, 2000 JUNE 30, 2000 PRO FORMA PRO FORMA C-COR MOBILEFORCE ADJUSTMENTS COMBINED ------------- ------------- ----------- --------- Net sales $283,262 $ - $ - $283,262 Cost of sales 208,546 1,441 - 209,987 -------- --------- ------- --------- Gross margin 74,716 (1,441) - 73,275 Operating expenses: Selling and administrative 33,477 7,156 - 40,633 Research and product development 16,003 7,880 - 23,883 Merger and restructuring costs 9,045 - - 9,045 Amortization of goodwill and other intangibles 103 - 5,771 (A) 5,874 -------- --------- ------- --------- Total operating expenses 58,628 15,036 5,771 79,435 -------- --------- ------- --------- Income (loss) from operations 16,088 (16,477) (5,771) (6,160) Interest and other income (expense), net 3,885 (404) - 3,481 -------- --------- ------- --------- Income (loss) before income taxes 19,973 (16,881) (5,771) (2,679) Income tax expense (benefit) 5,512 - (7,929) (B) (2,417) -------- --------- ------- --------- Income (loss) from continuing operations $ 14,461 $ (16,881) $ 2,158 $ (262) ======== ========= ======= ========= Net income (loss) per share: Basic $ 0.48 $ (0.01) Diluted $ 0.43 $ (0.01) Weighted average common shares and common share equivalents Basic 30,039 - 30,039 Diluted 33,968 - (C) 30,039
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. C-COR.NET CORP. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
SIX MONTHS SIX MONTHS ENDED ENDED DECEMBER 29, 2000 DECEMBER 31, 2000 PRO FORMA PRO FORMA C-COR MOBILEFORCE ADJUSTMENTS COMBINED --------------- ----------------- ----------- --------- Net sales $144,380 $ - $ - $144,380 Cost of sales 105,455 861 - 106,316 -------- --------- ------- ------- Gross margin 38,925 (861) - 38,064 Operating expenses: Selling and administrative 16,250 4,103 - 20,353 Research and product development 8,813 3,746 - 12,559 Merger and restructuring costs 650 - - 650 Amortization of goodwill and other intangibles 123 - 2,886 (A) 3,009 -------- --------- ------- ------- Total operating expenses 25,836 7,849 2,886 36,571 -------- --------- ------- ------- Income (loss) from operations 13,089 (8,710) (2,886) 1,493 Interest and other income (expense), net 3,800 (1,383) - 2,417 -------- --------- ------- ------- Income (loss) before income taxes 16,889 (10,093) (2,886) 3,910 Income tax expense (benefit) 6,791 - (4,543) (B) 2,248 -------- --------- ------- ------- Income (loss) from continuing operations $ 10,098 $ (10,093) $ 1,657 $ 1,662 ======== ========= ======= ======= Net income per share: Basic $ 0.30 $ 0.05 Diluted $ 0.29 $ 0.05 Weighted average common shares and common share equivalents Basic 33,498 - 33,498 Diluted 35,226 458 (C) 35,684
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. C-COR.NET CORP. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) NOTE 1 - ADJUSTMENTS TO THE BALANCE SHEET (A) To reflect the excess of acquisition cost over the estimated fair value of net assets acquired (goodwill). The purchase price and allocation of purchase price are assumed to be the same for income tax purposes on the basis that the Company will file the appropriate tax election necessary to treat the acquisition of MobileForce stock as an asset acquisition under Internal Revenue Code Section 338. This election is voluntary and is not required to be made until 8 1/2 months after the date of the stock acquisition. The Company has not completed the analysis necessary to determine whether or not the election will be filed. The amount of the goodwill and recording of deferred tax assets or liabilities could differ from the amounts presented depending upon this election and these differences could be significant. The purchase price and purchase price allocation are summarized as follows:
Purchase price: Cash paid to MobileForce shareholders $ 5,029 Assumption of MobileForce stock options 3,371 Direct transaction costs and expenses 738 -------- Total purchase price 9,138 Allocated to: Historical book values of MobileForce assets and liabilities (10,727) Fair value adjustments: Other current assets (1,702) Other assets (121) Warrants issued to acquire preferred stock included in liabilities 2,875 Adjustments to reflect the fair market value of acquired intangible assets: Existing technology 6,300 Core technology 4,800 Trade name and trademarks 1,100 Workforce 2,900 In-process technology 1,500 -------- Total allocations 6,925 ----- Excess purchase price over allocation to identifiable assets and liabilities (goodwill) $ 2,213 ======
(B) To reflect the fair market value of acquired intangible assets based upon an independent valuation (see A). (C) To reflect the elimination of an advance to MobileForce by C-COR. (D) To reflect the elimination of convertible preferred stock of MobileForce. (E) To reflect the elimination of shareholders' equity accounts of MobileForce. (F) To reflect the recording by C-COR of the in-process technology charge, net of the related tax benefit. (G) To reflect the consideration paid for the acquisition, which included cash payments to MobileForce shareholders, direct transaction costs and expenses, and the assumption by C-COR of MobileForce stock options to purchase 500,000 shares of C-COR's common stock. (H) To reflect the fair market value adjustments to write-off the carrying value of loan commitment fees and warrants issued to purchase convertible preferred stock. NOTE 2 - ADJUSTMENTS TO THE STATEMENTS OF OPERATIONS (A) To reflect the amortization of goodwill and acquired intangible assets over the estimated useful life of three years. (B) To reflect the tax effect of goodwill amortization and record tax benefits related to net losses of MobileForce on a consolidated basis, using the federal statutory rate of 35%. State tax benefits, if any, have not been provided since management believes it is not more likely than not that the Company would have realized for state income tax purposes a tax benefit for net losses of MobileForce in the periods presented. (C) For the year ended June 30, 2000, stock options of MobileForce assumed by C-COR to purchase 500,000 shares of C-COR common stock have not been included in the computation of diluted net income (loss) per share because inclusion of such stock options would have been antidilutive. For the six-month period ended December 29, 2000, the dilutive effect of these stock options are reflected for the computation of diluted net income per share. NOTE 3 - NONRECURRING CHARGES The $1,500 nonrecurring charge resulting from acquired in-process technology has been reflected in the unaudited pro forma condensed consolidated balance sheet as of December 2000. However, this charge has been excluded from the unaudited pro forma condensed consolidated statement of operations for the year ended June 30, 2000 and the six months ended December 29, 2000. This charge will be included in the actual consolidated statement of operations of C-COR for the fourth quarter ended June 29, 2001. EXHIBIT INDEX DESCRIPTION EXHIBIT NUMBER 2.1 Agreement and Plan of Merger dated as of March 29, 2001, between the Registrant, Broadband Management Solutions, LLC and MobileForce Technologies, Inc. (Incorporated by reference to the Registrant's 8-K dated April 27, 2001 and filed on May 11, 2001. File No. 0-10726) 23 Consent of PricewaterhouseCoopers LLP (San Francisco, CA) EX 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-82697, 333-87909, 333-90011, 333-90589 and 333-32676) and the Registration Statements on Form S-8 (Nos. 2-95959, 33-27440, 33-35208, 33-66590, 333-02505, 333-30982, 333-43592, 333-65805, 333-89067, 333-49826, 333-61226 and 333-64040) of C-COR.net Corp. of our report dated May 15, 2001 relating to the financial statements of MobileForce Technologies, Inc., which appears in this Current Report on Form 8-K of C-COR.net Corp. dated April 27, 2001, as amended on July 10, 2001. PricewaterhouseCoopers LLP - ---------------------------- San Francisco, California July 10, 2001 -----END PRIVACY-ENHANCED MESSAGE-----