-----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, SUlOaOrUckDv0dAJtiYjkBmqJ0Etv3H2UDjdCZjzeYDipv4spNdlJrGP+4IxFTW+ 5IOucROzSrjBDl+F8X88bQ== 0000950144-01-505222.txt : 20010808 0000950144-01-505222.hdr.sgml : 20010808 ACCESSION NUMBER: 0000950144-01-505222 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010327 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20010807 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S TECHNOLOGIES INC CENTRAL INDEX KEY: 0000810130 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 731284747 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-15960 FILM NUMBER: 1700157 BUSINESS ADDRESS: STREET 1: 1130 CONNECTICUT AVE NW STREET 2: SUITE 700 CITY: WASHINGTON STATE: DC ZIP: 20036 BUSINESS PHONE: 7705654311 MAIL ADDRESS: STREET 1: 3901 ROSWELL ROAD STREET 2: SUITE 300 CITY: MARIETTA STATE: GA ZIP: 30062 FORMER COMPANY: FORMER CONFORMED NAME: CAREAMERICA INC DATE OF NAME CHANGE: 19890720 8-K/A 1 g70740e8-ka.txt U.S. TECHNOLOGIES, INC. 1 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 March 27, 2001 Date of Report (Date of earliest event reported) U.S. Technologies Inc. (Exact name of Registrant as Specified in Charter) Delaware 0-15960 73-1284747 (State or Other (Commission (IRS Employer Jurisdiction of Incorporation) File Number) Identification No.) 1130 Connecticut Ave., NW, Suite 700, Washington, DC 20036 (Address of principal executive offices including zip code) (202) 466-3100 (Registrant's telephone number, including area code) Not applicable (Former name or address, if changed since last report) 2 INFORMATION TO BE INCLUDED IN THE REPORT INTRODUCTION On April 11, 2001, U.S. Technologies Inc., a Delaware corporation (the "Company"), filed a Form 8-K (which it amended on May 25, 2001) to report the consummation of its March 27, 2001 acquisition of Yazam.com Inc., substantially in accordance with the Agreement and Plan of Merger, dated February 21, 2001, as amended March 22, 2001, among U.S. Technologies Inc., U.S. Technologies Acquisition Co. and Yazam.com Inc. By this amendment, the Company is filing the audited financial statements of Yazam and the unaudited pro forma financial statements of the Company required by items (a) and (b) in Item 7 of Form 8-K. -2- 3 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS a. Financial Statements of Business Acquired. Audited Financial Statements of Yazam.com Inc. as of December 31, 2000 and December 31, 1999. b. Pro Forma Financial Information Unaudited Pro Forma Consolidated Financial Statements as of December 31, 2000. c. Exhibits. 99.1 Audited Financial Statements of Yazam.com Inc. as of December 31, 2000 and December 31, 1999. 99.2 U.S. Technologies Pro Forma Condensed Consolidated Financial Statements (Unaudited).
-3- 4 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. U.S. TECHNOLOGIES INC. By: /s/ Gregory Earls ----------------------------------------- Gregory Earls Chairman and Chief Executive Officer Dated: August 7, 2001 Washington, DC -4- EX-99.1 3 g70740ex99-1.txt AUDITED FINANCIAL STATEMENTS OF YAZAM.COM, INC. 1 EXHIBIT 99.1 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Yazam.com, Inc. and Subsidiaries New York, NY We have audited the accompanying consolidated balance sheets of Yazam.com, Inc. and Subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, changes in stockholders' equity, and cash flow for the year ended December 31, 2000 and for the period April 15, 1999 (inception) through December 31, 1999. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Yazam.com, Inc. and Subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for the year ended December 31, 2000 and for the period April 15, 1999 (inception) through December 31, 1999, in conformity with accounting principles generally accepted in the United States. /s/ Radin Glass & Co., LLP Certified Public Accountants New York, New York July 6, 2001 F-1 2 YAZAM.COM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND 1999
2000 1999 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 34,780,839 $ 3,122,568 Restricted cash 646,524 616,877 Fees and other receivables 1,263,799 187,816 Subscription receivable, preferred stock -- 10,000,000 Prepaid expenses and other current assets 441,835 135,621 ------------ ------------ Total Current Assets 37,132,997 14,062,882 ------------ ------------ PROPERTY AND EQUIPMENT, Net 1,918,728 90,874 ------------ ------------ OTHER ASSETS: Investments in portfolio companies 1,631,258 460,000 Security deposits 770,905 30,000 Goodwill, net 1,634,394 -- ------------ ------------ Total Other Assets 4,036,557 490,000 ------------ ------------ TOTAL ASSETS $ 43,088,282 $ 14,643,756 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 3,613,477 $ 1,128,520 Due to investors 466,413 616,877 ------------ ------------ TOTAL LIABILITIES 4,079,890 1,745,397 ------------ ------------ COMMITMENTS AND CONTINGENCIES -- -- STOCKHOLDERS' EQUITY: Series A convertible preferred stock, $2.00 stated value, $0.0001 par value; 2,000,000 shares authorized, issued and outstanding 4,000,000 4,000,000 Series B convertible preferred stock, $2.00 stated value, $0.0001 par value; 5,000,000 shares authorized, issued and outstanding 10,000,000 10,000,000 Series C convertible preferred stock, $6.00 stated value, $0.0001 par value; 12,416,667 shares authorized, 11,858,333 shares issued and outstanding 71,150,000 -- Common stock, $0.0001 par value, 40,000,000 shares authorized, 19,881,775 and 16,716,600 shares issued, 17,490,177 and 16,200,002 shares outstanding, respectively 1,989 1,672 Additional paid-in capital 9,587,864 4,449,925 Deferred compensation (346,391) -- Foreign currency translation adjustments 77,741 -- Treasury stock, at cost, 2,391,598 and 516,598 shares, respectively (10,750,052) (52) Accumulated deficit (44,712,759) (5,553,186) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 39,008,392 12,898,359 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 43,088,282 $ 14,643,756 ============ ============
See notes to financial statements. F-2 3 YAZAM.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
For the Period April 15, 1999 For the Year (Inception) Ended Through December 31, 2000 December 31, 1999 ----------------- ----------------- REVENUES: Fee income $ 2,157,198 $ 175,000 Interest income 2,100,309 18,123 ------------ ------------ 4,257,507 193,123 ------------ ------------ EXPENSES: Compensation expense 10,225,681 4,606,367 Other general and administrative 5,255,869 290,237 Professional fees 3,750,826 161,646 Marketing 3,515,627 687,382 Loss from investees 2,134,708 -- Depreciation and amortization 1,313,448 677 Write-off of uncollectible receivable 298,005 -- Asset impairment 16,922,916 -- ------------ ------------ 43,417,080 5,746,309 ------------ ------------ NET LOSS $(39,159,573) $ (5,553,186) ============ ============
See notes to financial statements. F-3 4 YAZAM.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
PREFERRED STOCK COMMON STOCK TREASURY STOCK ------------------------- ------------------- --------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------ ---------- -------------- Balance - April 15, 1999 (Inception) -- $ -- -- $ -- -- $ -- Issuance of shares to founders 2,411 24 Issuance of shares to key employee 375 4 Stock split 16,713,814 1,644 Redemption of common stock 516,598 (52) Issuance of Series A preferred stock 2,000,000 4,000,000 Issuance of Series B preferred stock 5,000,000 10,000,000 Costs of raising capital-preferred stock Net loss ---------- ------------ ---------- ------ ---------- -------------- Balance - December 31, 1999 7,000,000 $ 14,000,000 16,716,600 $1,672 516,598 $ (52) Issuance of stock in connection with First Tuesday merger 1,317,675 132 Issuance of stock in connection with Gregory merger 350,000 35 Issuance of stock in connection with Todo merger 700,000 70 Issuance of Series C preferred stock 9,983,333 59,900,000 Sale and exchange 1,875,000 11,250,000 1,875,000 (10,750,000) Costs of raising capital-preferred stock Issuance of options for compensation Amortization of deferred compensation Exercise of options 797,500 80 Foreign currency translation adjustment Net loss ---------- ------------ ---------- ------ ---------- -------------- Balance - December 31, 2000 18,858,333 $ 85,150,000 19,881,775 $1,989 2,391,598 $ (10,750,052) ========== ============ ========== ====== ========== ============== ACCUMULATED OTHER ADDITIONAL DEFERRED ACCUMULATED COMPREHENSIVE PAID-IN CAPITAL COMPENSATION DEFICITS INCOME* TOTAL --------------- ------------ ------------ ------------- ------------ Balance - April 15, 1999 (Inception) $ -- $ -- $ -- $ -- $ -- Issuance of shares to founders 24 Issuance of shares to key employee 4,499,996 4,500,000 Stock split (221) 1,423 Redemption of common stock (52) Issuance of Series A preferred stock 4,000,000 Issuance of Series B preferred stock 10,000,000 Costs of raising capital-preferred stock (49,850) (49,850) Net loss (5,553,186) (5,553,186) ------------ ---------- ------------ -------- ------------ Balance - December 31, 1999 $ 4,449,925 $ -- $ (5,553,186) $ -- 12,898,359 Issuance of stock in connection with First Tuesday merger 2,108,148 2,108,280 Issuance of stock in connection with Gregory merger 559,965 560,000 Issuance of stock in connection with Todo merger 860,930 861,000 Issuance of Series C preferred stock 59,900,000 Sale and exchange 500,000 Costs of raising capital-preferred stock (311,716) (311,716) Issuance of options for compensation 1,761,192 (1,761,192) -- Amortization of deferred compensation 1,414,801 1,414,801 Exercise of options 159,420 159,500 Foreign currency translation adjustment 77,741 77,741 Net loss (39,159,573) (39,159,573) ------------ ---------- ------------ -------- ------------ Balance - December 31, 2000 $ 9,587,864 $ (346,391) $(44,712,759) $ 77,741 $ 39,008,392 ============ ========== ============ ======== ============
* Comprehensive income (loss) equals net loss plus other comprehensive income which approximated $(39,082,000) in 2000. See notes to financial statements. F-4 5 YAZAM.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Period April 15, 1999 For the Year (Inception) Ended Through December 31, 2000 December 31, 1999 ----------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(39,159,573) $ (5,553,186) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 1,313,448 677 Stock-based compensation 2,002,302 4,501,395 Write-off of uncollectible receivable 298,005 -- Assets impairment 16,922,916 -- Loss from investees 2,134,708 -- Changes in operating assets and liabilities: Fees and other receivables (1,373,988) (187,816) Prepaid expenses and others (329,141) (135,621) Security deposits (740,905) (30,000) Accounts payable and accrued expenses 2,484,957 1,128,520 Due to investors (150,465) 616,877 ------------ ------------ CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES (16,597,736) 340,846 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (2,480,143) (91,551) Investments in portfolio companies (9,717,967) (460,000) Payments for acquisitions (8,313,767) -- Net changes in restricted cash (29,647) (616,877) Capitalization of website development costs (940,494) -- ------------ ------------ CASH FLOW USED IN INVESTING ACTIVITIES (21,482,018) (1,168,428) ------------ ------------ CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: Proceeds from issuance of preferred stock 70,650,000 4,000,000 Purchase of treasury stock (10,750,000) -- Costs of raising capital-preferred stock (311,716) (49,850) Collection on subscription receivable 10,000,000 -- Proceeds from issuance of common stock 72,000 -- ------------ ------------ CASH FLOW PROVIDED BY FINANCING ACTIVITIES 69,660,284 3,950,150 ------------ ------------ NET EFFECT OF EXCHANGE RATE CHANGES ON CASH 77,741 -- ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 31,658,271 3,122,568 CASH AND EQUIVALENTS, Beginning 3,122,568 -- ------------ ------------ CASH AND EQUIVALENTS, Ending $ 34,780,839 $ 3,122,568 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the periods for: Interest $ -- $ -- ============ ============ Taxes $ -- $ -- ============ ============ Non-cash investing and financing activities: Stock issued for acquisitions $ 3,529,280 $ -- ============ ============ Issuance of preferred stock for subscription receivable $ -- $ 10,000,000 ============ ============
See notes to financial statements. F-5 6 YAZAM.COM INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND PURPOSE Yazam.com, Inc. (the "Company") was formed pursuant to the laws of the State of Delaware on April 15, 1999 for the purpose of investing in privately held, early-stage, technology companies. During the year ended December 31, 2000, the Company raised significant financing (see Note 6) and made a number of investments (see Notes 4 and 7). During the first quarter of 2001, the Company ceased significant operations and was sold on March 27, 2001 (see Note 11). 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: one domestic subsidiary and four foreign subsidiaries. All significant intercompany balances have been eliminated in consolidation. Investments and Impairment Investments consist of investments in privately held companies and are valued under the equity method of accounting in accordance with Accounting Principles Board ("APB") No. 18, The Equity Method of Accounting for Investments in Common Stock. There are no investments which should be covered by Statements of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and Equity Securities. These investments are described in Note 4. During the period from inception to December 31, 2000, the Company made a number of investments in start-up ventures, primarily in the "new economy" or in "dot-com's". The majority of these ventures were unsuccessful and were discontinued by the end of the year ended December 31, 2000. Accordingly, investments deemed to be unsuccessful were written off as impaired under SFAS No. 121, Accounting for Long-Lived Assets and Long-Lived Assets to be Disposed Of. These investments and their concomitant write off are described in Note 4. Foreign Currency Translation The accounts of the Company's foreign subsidiaries are translated utilizing the methodology of SFAS No. 52, Foreign Currency Translation. The balance sheet amounts are translated at year-end currency rates; the income statements and cash flow amounts at average currency rates during the periods. The net exchange gains or losses resulting from the translation of foreign financial statements are accumulated and reported as a separate component of shareholders' equity. Comprehensive Income The Company adopted SFAS No. 130, Reporting Comprehensive Income, in 1999. SFAS No. 130 requires the reporting of comprehensive income in addition to net income from operations. Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make significant 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 reported period. Actual results could differ from those estimates. The evaluations of the investments were a result of estimates. F-6 7 YAZAM.COM INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS Organization Costs Organization costs have been charged to expense as incurred as required by Statement of Position ("SOP") 98-5, Reporting on the Costs of Start-Up Activities. Revenue Recognition Revenues primarily represent fees paid to Gregory FCA (see Note 7). Fees paid by investees in the form of shares were not recorded as revenue as there is no objective means of valuing such shares. Property and Equipment Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the term of the lease or the estimated life of the improvement, whichever is shorter. Whenever assets are sold or retired, their cost and related accumulated depreciation are removed from the appropriate accounts. Any gains and losses on dispositions are recorded in current operations. The carrying values of these assets are tested for impairment as required by SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed (see Note 3 for further information). Fair Value of Financial Instruments The carrying amounts reported in the balance sheets for cash, receivables, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. Income Taxes The Company utilizes the liability method of accounting for income taxes as set forth in SFAS No. 109, Accounting for Income Taxes. Under the liability method, deferred taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years for which the differences are expected to reverse. Employee Stock Options and Shares Issued for Services The Company accounts for employee stock transactions in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees. The Company has adopted the proforma disclosure requirements of SFAS 123, Accounting for Stock-Based Compensation. Accordingly, any excess of fair market value of stock issued to employees over exercise prices has been recorded as compensation expense and additional paid in capital. Software and Website Development Costs Software development costs and web site development costs have been capitalized after design and technological feasibility have been established as required under SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use and Emerging Task Consensus ("ETIF") 00-2, Accounting for Web Site Development Costs. The carrying values of these assets are tested for impairment as required by SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed. As of December 31, 2000, the Company wrote off these costs, as impairment, amounted to $852,951. Fees and Other Receivables Fees and other receivables have been adjusted for all known uncollectible amounts. All accounts recorded on the Company's books at December 31, 2000 and 1999 are deemed collectible. F-7 8 YAZAM.COM INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS Operating Segments SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information, establishes annual and interim reporting standards for an enterprise's operating segments and related disclosures about its products, services, geographic areas and major customers. Under SFAS No. 131, the Company had three segments of operations: Yazam, Gregory FCA and FT (see Notes 1 and 7 for description of business) at December 31, 2000 and one segment at December 31, 1999. A summary of the Company's business activities reported by its three business segments was as follows:
Yazam Gregory FCA FT Total ------------ ----------- ------------ ------------ 2000 Fee income $ 469,750 $1,353,974 $ 333,474 $ 2,157,198 Pretax Profit (Loss) $(35,100,247) $ 272,966 $ (4,332,292) $(39,159,573) Total Assets $ 41,637,387 $ 812,101 $ 638,794 $ 43,088,282 Depreciation and amortization $ 1,210,699 $ 7,765 $ 94,984 $ 1,313,448 Expenditures for property and equipment $ 2,224,570 $ 171,442 $ 84,131 $ 2,480,143
Operations by geographic areas were as follows:
2000 1999 ----------- ----------- FEE INCOME United States $ 1,567,181 $ 160,000 United Kingdom 343,725 -- Israel 154,116 15,000 Japan 92,176 -- ----------- ----------- $ 2,157,198 $ 175,000 =========== =========== TOTAL ASSETS United States $40,461,933 $13,684,505 United Kingdom 1,033,031 -- Israel 1,196,620 959,251 Japan 396,698 -- ----------- ----------- $43,088,282 $14,643,756 =========== ===========
Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company had cash balances in the bank in excess of the maximum amount insured by the FDIC throughout the period. F-8 9 YAZAM.COM INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS 3. PROPERTY AND EQUIPMENT Property and equipment at December 31, 2000 and 1999 consist of the following:
Estimated 2000 1999 Useful Lives ---------- -------- ------------ Computer and office equipment $1,041,764 $ 44,859 3 years Furniture and fixtures 37,786 42,839 7 years Leasehold improvements 1,003,535 3,853 5 - 10 years ---------- -------- 2,083,085 91,551 Less: Accumulated depreciation 164,357 677 ---------- -------- Property and Equipment, Net $1,918,728 $ 90,874 ========== ========
Depreciation expense for the year ended December 31, 2000 and for the period April 15, 1999 (inception) through December 31, 1999 was $247,616 and $677, respectively. In addition, during the year ended December 31, 2000, the Company wrote off property and equipment, as impairment, amounted to $404,673. 4. INVESTMENTS AND RELATED IMPAIRMENT Investments consist of investments in privately held internet services companies' warrants, preferred and/or common stock as follows at December 31, 2000:
Company's Company's share of share of Income (Loss) Income from (Loss) Date of Recorded % of Investment to as of Date of Initial Owner December 31, December 31, Name Investment Country -ship Cost 2000 2000 ------------------------ ------------------- ------- ----- ------------ ------------- ------------ 3G Vision February 2000 Israel 5% $ 65,000 $ (2,888) $ (2,888) Baobob November 2000 Israel 7% 180,000 (29,030) (29,030) CommerceTone* August 2000 U.S. 11% 180,000 (228,063) (228,063) Coremarkets August 2000 U.S. 12% 1,173,578 (775,473) (775,473) GammaSite March 2000 Israel 7% 195,000 (118,973) (118,973) Incepto September 1999 U.K. 7% 182,792 (138,923) (138,923) Phlair November 2000 U.S. 5% 180,000 (14,027) (14,027) Ezface, Inc. February 2000 U.S. 6% 180,000 (150,000) (150,000) Quintessence December 2000 U.S. 1% 180,000 -- -- Selis April 2000 Israel 9% 185,000 (160,952) (160,952) Soneta February 2000 U.S. 7% 540,096 (108,041) (108,041) Travel Bond May 2000 Israel 25% 210,000 (168,838) (168,838) Vship/GC Zone December 1999 U.S. 4% 239,500 (382,928) (239,500) ------------ ------------ ------------ 3,690,966 $ (2,278,136) $ (2,134,708) ============ ============ Square.com - Liquidation Value 75,000 Loss from investees (2,134,708) ------------ Net Investments $ 1,631,258 ============
* The Company invested an additional $220,000 in this investee in the first quarter of 2001. F-9 10 YAZAM.COM INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS As of December 31, 2000, the Company had commitments to invest an additional $1,000,000, which amount was invested by March 9, 2001. During the year ended December 31, 2000, the following investments were written off as impairment in accordance with SFAS No. 121, Accounting for Long-Lived Assets and Long-Lived Assets to be Disposed Of:
Date of Initial Name Investment Function Country Cost ---- --------------- -------- ------- ---------- Ankura September 2000 Internet Services Israel $ 225,020 Envelopes June 2000 Internet Services U.S. 255,040 Impressia May 2000 Internet Services Israel 1,710,015 The Law.com April 2000 Internet Services U.S. 215,000 Configman April 2000 Internet Services U.S. 360,000 VC Village March 2000 Internet Services U.S. 175,000 EMT International March 2000 Internet Services Israel 1,564,808 PrimeShot February 2000 Internet Services U.S. 182,080 Ezsize, Inc. November 2000 Internet Services U.S. 400,020 Square.com, Inc. March 2000 Business Development U.S 174,998 Money Hunt June 2000 Business Development U.S 250,000 iPace Inc. December 1999 Internet Services U.S. 360,020 Gold Names, Inc. December 1999 Internet Services Israel 180,000 Infocharms January 2000 Internet Services U.S. 180,000 Onna.com, Inc. December 1999 Internet Services U.S. 180,000 ---------- $6,412,001 ==========
5. GOODWILL AND RELATED IMPAIRMENT The carrying value of intangibles, as required by SFAS No. 121, is reviewed if the facts and circumstances, such as significant declines in sales, earnings or cash flows, or a material adverse change in the business environment indicate that an impairment may have occurred. If there is an indication of such impairment, an evaluation of the estimated cash flows of the related entity is made, and, if impairment is determined, a write down is made. The Company reviews long-lived assets, certain identifiable assets and any goodwill related to those assets for impairment whenever the conditions indicated in SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, require: a decrease in the market value of an asset, a change in the use of the asset, a change in legal factors or business climate, accumulation of costs significantly in excess of original expectations or a current period loss combined with a history of losses. As of December 31, 2000, the Company wrote down its goodwill to the expected liquidation value. As a result, the Company recorded an impairment of its goodwill of $9,230,364. The remaining goodwill consists of $1,000,000 of FT and $634,394 of Gregory FCA (see Note 7). Goodwill at December 31, 2000 consists of the following:
Estimated Amount Useful Lives ------------ ------------ Goodwill $ 11,843,047 5 Years Less: accumulated amortization 978,289 ------------ 10,864,758 Impairment 9,230,364 ------------ Goodwill, net $ 1,634,394 ============
Amortization expense for the year ended December 31, 2000 was $978,289. F-10 11 YAZAM.COM INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS 6. STOCKHOLDERS' EQUITY Authorized Shares The Company's authorized shares consists of 60,000,000 shares, divided into 40,000,000 shares of common stock, par value $.0001 per share, and 20,000,000 shares of preferred stock, par value $.0001 per share. Shares Issued to Key Employee During 1999, in connection with an employment contract with a key employee, the Company issued shares of its common stock to a designated limited liability company equal to 12.5% of the Company's issued and outstanding common stock. Such shares were valued at fair value of the stock at the time of issuance, amounting to $4,500,000 and were reflected as compensation expense. Stock Split During 1999, the Company had a stock split of 6,000 to 1 of its common stock, thus increasing the number of shares issued and outstanding to 16,716,600 shares and decreasing the par value per share to $0.0001 per share. Treasury Stock During 1999, certain founding stockholders redeemed 516,598 (post stock split) of their shares of common stock which the Company recorded as treasury stock at par value. Preferred Series A Stock During 1999, the Company issued 2,000,000 shares of its Preferred Series A Stock at $2.00 per share resulting in total proceeds of $4,000,000. Preferred Series A stockholders are entitled to dividends and distributions equal to those issued to the common shareholders and have a liquidation preference of $2.00 per share. The Company incurred costs of approximately $50,000 in connection with the issuance of Preferred Series A Stock. Preferred Series A Stock is convertible at the option of the holder, at any time, into shares of common stock at a conversion rate of 1 to 1. Preferred Series B Stock On December 31, 1999, an investor subscribed for 5,000,000 shares of the Preferred Series B Stock at $2.00 per share, which was paid on January 18, 2000. Proceeds totaled $10,000,000. Preferred Series B stockholders are entitled to dividends and distributions equal to those issued to the common shareholders and have a liquidation preference of $2.00 per share. Preferred Series B Stock is convertible at the option of the holder, at any time, into shares of common stock at a conversion rate of 1 to 1. Preferred Series C Stock During 2000, a number of investors purchased 11,858,333 shares of the Preferred Series C Stock at $6.00 per share. Proceeds totaled $71,150,000. Preferred Series C stockholders are entitled to dividends and distributions equal to those issued to the common shareholders and have a liquidation preference of $6.00 per share. Preferred Series C Stock is convertible at the option of the holder, at any time, into shares of common stock at a conversion rate of 1 to 1. F-11 12 YAZAM.COM INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS Sale and Exchange At the time of the sale of the Preferred Series C Stock, as part of an agreement with the new investors, a portion of the proceeds was used to repurchase 1,875,000 shares of common stock for $10,750,000. The cost of the repurchase of common shares is recorded as treasury stock. Options During the year ended December 31, 2000, the Company granted to its employees three-year options to purchase 901,423 shares of its common stock with an exercise price less than market value. As a result, the Company recorded deferred compensation of $346,391 and recognized $1,414,801 in compensation expenses for these options. The deferred compensation will be amortized over the vesting period. Furthermore, the Company granted 2,722,749 and 589,500 options to its employees with exercise prices equal to or greater than the market value of the stock at the grant dates during the year ended December 31, 2000 and the period April 15, 1999 (inception) through December 31, 1999, respectively. Weighted average exercise prices for options outstanding at December 31, 2000 and 1999 were $2.11 and $0.20 per share, respectively. In light of the Acquisition (see Note 11), the Company accelerated all outstanding unvested options immediately prior to the effective time of the Acquisition. In order to be eligible for the exercise of the accelerated options, notice of exercise and applicable payment must have been delivered to the Company no later than March 23, 2001, with any unexercised options to be voided. Accordingly, as of March 27, 2001, options to purchase 187,946 shares of common stock were exercised and the unexercised options were voided. The following table summarizes the changes in options outstanding and the related price ranges for shares of the Company's common stock:
Weighted Average SHARES Exercise Price ---------- -------------- Outstanding at December 31, 1998 -- Granted 589,500 $ 0.20 Exercised -- Expired or cancelled -- ---------- Outstanding at December 31, 1999 589,500 $ 0.20 Granted 3,624,172 $ 2.00 Exercised (797,500) $ 0.20 Expired or cancelled -- ---------- Outstanding at December 31, 2000 3,416,172 $ 2.11 ==========
For disclosure purposes in accordance with SFAS No. 123, the fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for stock options granted during the year ended December 31, 2000 and the period April 15, 1999 (inception) through December 31, 1999: annual dividends of $0.00, expected volatility of 0%, risk-free interest rate of 6% and expected life of three years for both periods. The weighted-average fair value of the stock options granted during the year ended December 31, 2000 and the period April 15, 1999 (inception) through December 31, 1999 was $0.53 and $0.03, respectively. If the Company recognized compensation cost for the employee stock option plan in accordance with SFAS No. 123, the Company's pro forma net loss would have been approximately $39,206,000 and $5,553,000 respectively, in the year ended December 31, 2000 and the period April 15, 1999 (inception) through December 31, 1999. F-12 13 YAZAM.COM INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS 7. BUSINESS ACQUISITIONS On July 20, 2000, the Company acquired First Tuesday, Inc. ("FT") through a merger transaction. As consideration for the merger, the Company issued 1,317,675 shares of its common stock, valued at $1.60 per share, and paid $4,559,000 in cash. In addition, the Company incurred acquisition costs of approximately $232,000 in connection with the merger. The total purchase price of approximately $6,900,000 was allocated principally to goodwill, which is being amortized over 5 years. On March 30, 2001, the Company entered into a Stock Purchase Agreement to sell FT for $500,000 in cash and a promissory note in the amount of $500,000, bearing interest at a rate of 5% per annum. FT was the umbrella organization for operations in a number of cities which ran get-togethers for entrepreneurs and service providers in the "dot.com" industries. FT ran the London operation; the other operations were run by entrepreneurs in other cities with a loose affiliation to the umbrella organization. On July 31, 2000, the Company acquired Gregory Communications, Inc. ("Gregory") and Financial Communications Associates, Inc. ("FCA") (collectively referred to as "Gregory FCA") through a merger transaction. As consideration for the merger, the Company issued 350,000 shares of its common stock, valued at $1.60 per share, and $450,000 in cash. The Company also incurred acquisition costs of approximately $107,000 in connection with the merger. The purchase price of approximately $1,100,000 was allocated principally to goodwill, which is being amortized over 5 years. Gregory FCA operates a full service investor and media relations agency in the Philadelphia metropolitan area providing direct marketing to institutional investors, security analysts, retail stock brokers and the financial media. On September 1, 2000, the Company acquired Todo Technologies, Inc. ("Todo") through a merger transaction. As consideration for the merger, the Company issued 700,000 shares of its common stock, valued at $1.23 per share, and $550,000 in cash. The Company also incurred acquisition costs of approximately $63,000 in connection with the merger. The purchase price of approximately $1,500,000 was allocated principally to goodwill, which is being amortized over 5 years. In March 2001, the Company entered into an agreement to sell Todo for $100 in cash. As of December 31, 2000, the unamortized goodwill was written off (see Note 10). Todo was acquired for the purpose of investing in privately held, early-stage, technology companies in Japan. The above acquisitions were accounted for using the purchase method. The operations of FT, Gregory FCA and Todo have been included in the accompanying statements of operations since July 20, 2000, July 31, 2000 and September 1, 2000, respectively. The unaudited results of operations, as if FT, Gregory FCA and Todo had been acquired at the beginning of periods ended December 31, 2000 and 1999, are as follows:
2000 1999 ------------ ------------ Net revenues $ 5,504,809 $ 2,038,530 Net loss $(43,845,266) $ (7,662,018)
8. COMMITMENTS AND CONTINGENCIES Leases The Company has certain lease agreements expiring on various dates through September 2010 for its office space in United States, Israel, Japan, and United Kingdom. Rent expense was approximately $355,000 and $37,000 for the year ended December 31, 2000 and for the period April 15, 1999 (inception) through December 31, 1999, respectively. Most of these leases were terminated in connection with the reduction of operations (see Note 1) and the Acquisition (see Note 11). F-13 14 YAZAM.COM INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS The future minimum rental payments to be made under remaining operating leases as of December 31, 2000 are as follows:
For the Year Ending December 31, Amount -------------------------------- ----------- 2001 $ 426,000 2002 371,000 2003 232,000 2004 211,000 2005 211,000 Thereafter 1,002,000
Litigation The Company is subject to litigation from time to time arising in the ordinary course of its business. The Company does not believe that any such litigation is likely, individually or in the aggregate, to have a material adverse effect on the financial condition of the Company. Employment Agreements The Company entered into various employment agreements with its officers and employees. Most of these employment agreements were terminated in connection with the reduction of operations (see Note 1) and the Acquisition (see Note 11). As of December 31, 2000, total future commitments under the active employment agreements approximated $441,000, payable through March 1, 2002. 9. INCOME TAXES The Company accounts for its income taxes under SFAS No. 109, Accounting for Income Taxes, which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carryforwards. At December 31, 2000 and 1999, the Company had net operating loss carryforwards of approximately $34,505,000 and $5,553,000, respectively expiring through 2020. SFAS No. 109 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. At December 31, 2000 and 1999, a valuation allowance for the full amount of the deferred tax asset was recorded because of operating losses incurred and the uncertainties as to the amount of taxable income that would be generated in the future years. The utilization of the Company's net operating loss carryforwards is subject to certain limitations under the provisions of Internal Revenue Code Section 382. As a result of the Acquisition (see Note 11), the Company had a Section 382 "change of ownership" and therefore a limitation on the availability of the net operating loss carryforward. The components of the net deferred tax asset at December 31, 2000 and 1999 consist of the following:
2000 1999 ------------ ---------- Net operating loss carryforwards $ 12,077,000 $1,944,000 Valuation allowance 12,077,000 1,944,000 ------------ ---------- $ -- $ -- ============ ==========
The provision for income taxes differs from the amount computed applying the statutory federal income tax rate to income before income taxes at December 31, 2000 and 1999 as follows:
2000 1999 ------------ ------------ Income tax benefit computed at statutory rate at 35% $(13,706,000) $ (1,943,000) Goodwill amortization and impairment 3,573,000 -- Tax benefit not recognized 10,133,000 1,943,000 ------------ ------------ Provision for income taxes $ -- $ -- ============ ============
F-14 15 YAZAM.COM INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS 10. ASSET IMPAIRMENT/WRITE-OFF The asset impairment/write-off for the year ended December 31, 2000 comprised the following: Write down of FT goodwill $ 7,802,231 Write down of Todo goodwill 1,428,133 Write down of software and website development costs 852,951 Write down of property and equipment 404,673 Write down of investments 6,412,001 Write down of FT investment in a German subsidiary 22,927 ----------- $16,922,916 ===========
11. SUBSEQUENT EVENTS On March 27, 2001, U.S. Technologies Inc. ("UST") acquired the Company through a merger. The purchase price was $22 million in cash plus 27,374 shares of UST's Series F Convertible Preferred Stock, which may be converted into 27,374,000 shares of common stock, and warrants to purchase an aggregate of 8,000,000 shares of UST's common stock at $0.34 per share (the "Acquisition"). UST obtained approximately $28 million of cash held by the Company and certain other assets. 12. ACCOUNTING DEVELOPMENTS In June 2000, the FASB issued SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, which amends the accounting and reporting standards of SFAS No. 133. SFAS No. 133 was previously amended by SFAS No. 137, which deferred the effective date of SFAS No. 133 to fiscal years commencing after June 15, 2000. The Company does not believe that the adoptions of SFAS No. 138 and SFAS No. 133 have a material impact on the Company's results of operations. In March 2000, the FASB issued Interpretation (FIN) No. 44, Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of APB Opinion No. 25, which was effective on July 1, 2000. The Company adopted the provisions of FIN No. 44 as of July 1, 2000. F-15 EX-99.2 4 g70740ex99-2.txt UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL 1 EXHIBIT 99.2 U.S. TECHNOLOGIES INC. INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The unaudited pro forma condensed consolidated financial statements have been prepared to give effect to the purchase on April 12, 2000 and March 27, 2001, respectively, by U.S. Technologies Inc. ("USXX") of all of the outstanding equity interests of E2Enet, Inc. ("E2E") and Yazam.com, Inc. ("Yazam"), both development stage enterprises. The proforma balance sheet is presented as if the acquisition of Yazam occurred on December 31, 2000. The proforma statement of operations is presented as if each of the acquisitions of E2E and Yazam occurred on January 1, 2000. The pro forma condensed consolidated financial statements have been prepared and/or derived from, and should be read in conjunction with, the historical consolidated financial statements and notes thereto of USXX, E2E and Yazam. The unaudited pro forma condensed consolidated balance sheet assumes that all outstanding shares of Yazam common stock and all preferred stock of Yazam were acquired by USXX as of December 31, 2000 and reflect preliminary application of the purchase method of accounting for the acquisition. USXX acquired assets with an estimated fair market value of approximately $32,949,000 and assumed liabilities of approximately $2,015,000 in exchange for payment of $22,000,000 in cash, $7,714,000 of USXX's Series F redeemable convertible preferred stock and $880,000 of USXX's common stock warrants. The Series F preferred shares are redeemable at the option of the holder in the event that a charter amendment authorizing additional common shares is not effected by September 1, 2001, except for those shareholders who waived such redemption right on July 19 and 20, 2001. The unaudited pro forma condensed consolidated balance sheet gives effect to the cash used in the operations of Yazam from January 1, 2001 to March 27, 2001. The application of the purchase method of accounting for the E2E acquisition is already incorporated into the historical consolidated balance sheet of USXX as of December 31, 2000. The unaudited pro forma consolidated statement of operations gives effect to the E2E and Yazam acquisitions as if they had occurred on January 1, 2000 and include appropriate adjustments for amortization and other items related to the transaction, but exclude any potential cost savings. Further, Yazam had effectively curtailed its operations during December 2000 and had begun a process of liquidating its assets prior to the purchase by USXX. The pro forma adjustments are based on preliminary estimates, available information and certain assumptions that management deems appropriate. The unaudited pro forma consolidated financial statements do not purport to represent the consolidated results that would have been obtained had the transaction occurred at the dates indicated, as assumed, nor do they purport to present the results which may be obtained in the future. F-16 2 U.S. TECHNOLOGIES INC. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 2000 (UNAUDITED)
HISTORICAL U.S. --------------------------- TECHNOLOGIES, U.S. INC. TECHNOLOGIES, YAZAM.COM PRO FORMA PRO FORMA INC. INC. ADJUSTMENTS NOTES CONSOLIDATED ------------- ----------- ------------ ----- ------------- ASSETS Current Assets Cash and cash equivalents............. $ 6,110 $35,427,363 $ 22,000,000 (A) $ 5,418,871 (22,000,000) (B) (22,000,000) (D) (8,014,602) (B) Accounts receivable, less allowance... 401,253 1,263,799 1,665,052 Inventories........................... 169,834 -- 169,834 Prepaid expenses...................... 81,848 441,835 523,683 ------------ ----------- ------------ ----------- Total current assets........... 659,045 37,132,997 (30,014,602) 7,777,440 ------------ ----------- ------------ ----------- Property and equipment, net........... 656,820 1,918,728 2,575,548 Other assets: Investment in associated companies.... 3,434,217 1,631,258 5,065,475 Note receivable....................... 90,000 -- 90,000 Security deposits..................... 770,905 770,905 Goodwill.............................. 1,634,394 1,634,394 Other................................. 450 -- 450 ------------ ----------- ------------ ----------- Total other assets............. 3,524,667 4,036,557 0 7,561,224 ------------ ----------- ------------ ----------- Total assets................... $ 4,840,532 $43,088,282 $(30,014,602) $17,914,212 ============ =========== ============ =========== LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities Accounts payable and accrued expenses............................ $ 2,006,571 $ 3,613,477 400,000 (B) $ 6,020,048 Obligation under put option assumed in conjunction with E2E acquisition.... 2,000,010 2,000,010 Due to Yazam shareholders............. 466,413 466,413 Line of credit........................ 197,392 197,392 Notes payable......................... 685,861 685,861 Notes payable Yazam acquisition....... 22,000,000 (A) 0 (22,000,000) (D) ------------ ----------- ------------ ----------- Totals current liabilities..... 4,889,834 4,079,890 400,000 9,369,724 Series F convertible preferred stock.... -- 7,713,790 (B) 7,713,790 Stockholders' equity Common stock.......................... 592,216 1,989 (1,989) (B) 592,216 Convertible preferred stock........... 21,958,689 85,150,000 (85,150,000) (B) 21,958,689 Convertible preferred stock, subscribed but unissued............. 1,199,200 -- 1,199,200 Additional paid in capital............ 27,601,507 9,587,864 (9,587,864) (B) 34,503,787 6,022,280 (C) 880,000 (B) Deferred compensation................. (346,391) 346,391 (B) 0 Accumulated deficit................... (51,400,914) (44,712,759) 44,712,759 (B) (57,423,194) (6,022,280) (C) Foreign currency translation adjustments......................... 77,741 (77,741) (B) 0 Treasury stock, at cost............... (10,750,052) 10,750,052 (B) 0 ------------ ----------- ------------ ----------- Total Stockholders' Equity..... (49,302) 39,008,392 (38,128,392) 830,698 ------------ ----------- ------------ ----------- Total Liabilities and Equity... $ 4,840,532 $43,088,282 $(30,014,602) $17,914,212 ============ =========== ============ ===========
F-17 3 U.S. TECHNOLOGIES INC. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET Please refer to the accompanying "Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements". Note (A) Adjustment to record proceeds from bank note to fund cash portion of purchase price. Note bears interest at 6% and matures on April 27, 2001. Note (B) Records the purchase of the remaining assets of Yazam utilizing purchase accounting. The unaudited pro forma consolidated balance sheet assumes that all outstanding shares of Yazam common stock and all preferred stock are acquired by USXX in exchange for $22,000,000 in cash, $7,713,790 in Series F redeemable convertible preferred stock and $880,000 in warrants. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed in connection with the acquisition as if it occurred December 31, 2000: Cash........................................................ $ 5,413,000 Accounts receivable......................................... 1,264,000 Investments in associated companies 3G Vision................................................. 62,000 Baobab.................................................... 151,000 Coremarkets............................................... 350,000 Gammasite................................................. 76,000 Incepto................................................... 44,000 Phlair.................................................... 166,000 EZ Face................................................... 30,000 Quintessence.............................................. 180,000 Selis..................................................... 24,000 Soneta.................................................... 432,000 TravelBond................................................ 41,000 Square.com................................................ 75,000 ------- 1,631,000 Other assets................................................ 4,766,000 Accounts payable and accrued expenses....................... (4,480,000) ----------- $ 8,594,000 ===========
The Pro Forma Condensed Consolidated Balance Sheet gives effect to the cash used in the operations of Yazam from January 1, 2001 to March 27, 2001. Note (C) Adjustment for deemed dividend resulting from beneficial conversion features of the Series F Preferred Stock issued in association with the acquisition of Yazam. Note (D) To retire bridge loan immediately subsequent to closing. F-18 4 U.S. TECHNOLOGIES INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2000 (UNAUDITED)
HISTORICAL --------------------------------------------- U.S. TECHNOLOGIES, E2ENET.COM YAZAM.COM U.S. INC. INC. INC. TECHNOLOGIES, INC. YEAR ENDED (JANUARY 1 - YEAR ENDED PRO FORMA PRO FORMA 12/31/2000 APRIL 12, 2000) 12/31/2000 ADJUSTMENTS NOTES CONSOLIDATED ------------- --------------- ------------ ----------- ----- ------------------ Net sales and revenues.............. 2,671,378 -- 2,157,198 4,828,576 Operating costs and expenses Cost of sales..................... 2,902,444 -- -- 2,902,444 Selling, general and administrative expense.......... 6,423,867 261,015 24,359,456 31,044,338 Impairment of long-lived assets... 12,304,800 -- 16,922,916 29,227,716 ------------ ----------- ------------ ----------- ------------ Total operating costs and expenses.................. 21,631,111 261,015 41,282,372 0 63,174,498 ------------ ----------- ------------ ----------- ------------ Loss from operations................ (18,959,733) (261,015) (39,125,174) 0 (58,345,922) Other expense (income) Interest, net..................... (34,383) 173,284 (2,100,309) 1,304,269 (E) (735,423) (173,284) (E) 95,000 (E) Equity in loss of associated companies....................... 640,350 600,068 2,134,708 3,375,126 Other, net........................ (206,863) -- -- (206,863) ------------ ----------- ------------ ----------- ------------ Total other expense (income).................. 399,104 773,352 34,399 1,225,985 2,432,840 ------------ ----------- ------------ ----------- ------------ Net loss before minority interest in loss of subsidiary................ (19,358,837) (1,034,367) (39,159,573) (1,225,985) (60,778,762) Minority interest in loss of subsidiary........................ (707,740) -- -- (707,740) ------------ ----------- ------------ ----------- ------------ Net loss............................ (18,651,097) (1,034,367) (39,159,573) (1,225,985) (60,071,022) Deemed dividends to preferred shareholders...................... 14,757,650 -- -- 6,022,280 (F) 20,779,930 ------------ ----------- ------------ ----------- ------------ Net loss available to common shareholders...................... $(33,408,747) $(1,034,367) $(39,159,573) $(7,248,265) $(80,850,952) ============ =========== ============ =========== ============ Net loss per common share basic and diluted........................... $ (1.14) $ (2.75) ============ =========== ============ =========== ============ Average common shares outstanding basic and diluted................. 29,408,063 -- -- -- 29,408,063 ============ =========== ============ =========== ============
F-19 5 U.S. TECHNOLOGIES INC. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2000 Please refer to the accompanying "Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements." (E) Adjustment to reduce interest income assuming $22,000,000 cash portion of purchase price is paid out as of January 1, 2000 and unavailable for investment by Yazam, to eliminate interest expense on E2E shareholder notes payable and warrants converted to equity on the date of its acquisition by USXX and to record interest expense on the bridge loan. (F) Adjustment for deemed dividend resulting from beneficial conversion features of the Series F Preferred Stock issued in association with the acquisition of Yazam. F-20 -----END PRIVACY-ENHANCED MESSAGE-----