Digital River 2002 Annual Report Download - page 58

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parties, with the approval of the U.S. Bankruptcy Court, have agreed to continue the hearing on several occasions. The
U.S. Bankruptcy Court is currently scheduled to consider the Post-Closing Amendment on May 23, 2003. Beyond.com
is also asserting that it is entitled to additional shares with a value of $650,000 under the Agreement pursuant to
provisions of the Agreement under which Beyond.com could earn additional consideration post-closing if certain
clients of Beyond.com immediately prior to the closing maintain or establish client relationships with the Company
following the closing. The Company disagrees that any of such shares are due to Beyond.com under the Agreement.
Of the shares issued at closing, 70,000 shares were placed in escrow to secure certain indemnification obligations
contained in the Agreement. The parties agreed to the return of 8,277 shares to the Company to satisfy outstanding
claims under the escrow. An additional 14,482 of these shares are subject to additional outstanding claims and will
remain in escrow pending resolution of such claims; the remaining 47,241 shares have been released to Beyond.com.
In connection with the Company’ s purchase of the FreeMerchant.com assets of Network Commerce in December 2001,
the former owners of Network Commerce received earn-out payments totaling $420,000 during the twelve months
ended December 31, 2002. The Company recorded such amounts as additional goodwill.
In connection with the Company’ s acquisition of all the outstanding stock of RegSoft.com (“Regsoft”) in February
2001, additional goodwill of $2,750,000 was recorded as part of an earn-out agreement during the twelve months ended
December 31, 2002. In consideration for this earn-out, the former stockholders of RegSoft received earn-out payments
of $2,210,000 in November of 2002 and a note payable for the remaining $540,000 which is payable in March of 2003.
This note payable is included in accounts payable in our consolidated balance sheet as of December 31, 2002.
Following is an allocation of the net assets acquired from the acquisitions consummated and amounts paid under
earnout arrangements in 2002 and 2001.
2002 2001
T angible a sse ts...........................................
$
231,00
0
$ 2,906,00
0
L ia bilitie s a ssume d.................................... ( 3,759,000)( 2,063,000)
Customer r e la tionships............................. 4,800,00
0
4,255,00
0
N on-c ompete a gr e ements......................... 100,00
0
1,350,00
0
T ec hnology/tra de name............................. 250,00
0
3,425,00
0
G oodw ill..................................................... 7,425,00
0
8,836,00
0
N et a sse ts ac quire d....................................
$
9,047,00
0
$ 18,079,00
0
The following unaudited pro forma condensed results of operations for 2002, 2001, and 2000 has been prepared as if
each of the acquisitions in 2002 had occurred on January 1, 2001 and as if each of the 2001 acquisitions had occurred
on January 1, 2000.
2002 2001 2000
Revenue..............................................................
$
79,722,000 $ 73,928,000 $ 44,053,000
L oss f rom ope ra tions......................................... ( 3,425,00
0
) ( 39,841,000) ( 72,126,000
)
N et loss................................................................ ( 3,854,00
0
) ( 40,069,000) ( 70,386,000
)
Basic and dilute d loss pe r sha r e.......................
$
( 0.14) $ ( 1.59) $ ( 2.96
)
This financial information does not purport to represent results that would actually have been obtained if the
transactions had been in effect on January 1, 2002, 2001, 2000 as applicable, or any future results that may in fact be
realized.
4. Inc om e Taxes:
The reconciliation of the reported income tax expense to the amount the would result from applying the U.S. federal
statutory rate of 35% to the net loss is as follows:
Year end ed Decem ber 31,
2002 2001 2000
T ax be ne fit a t sta tutor y r ate .......................................................................... $( 179,000) $ ( 6,728,00
0
) $ ( 13,341,000)
Sta te ta xe s, ne t of f eder a l be nef it................................................................. 63,000 ( 1,000,000) ( 1,982,000)
Stock compe nsation de ductions................................................................... — ( 258,000) ( 1,339,000)
N on-de ductible goodw ill a nd ea r n- out c ompensa tion.............................. 712,000 3,255,00
0
3,453,00
0
N on-de ductible e xpense and othe r............................................................... 23,000 585,00
0
285,00
0
Cha nge in valua tion a llow a nc e..................................................................... ( 619,000) 4,146,00
0
12,924,000
T otal ................................................................................................................. $— $
—
$ —