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our historical financial statements do not reflect the service fee revenue we
will receive from Daisytek under this new agreement.
Finally, upon completion of this offering, Daisytek will transfer to us
fixed assets and other assets which will be used in our business. We will pay to
Daisytek a portion of the net proceeds of this offering and assume capital and
operating lease obligations related to these assets. Consequently, our
historical financial statements do not reflect this transaction.
In order to show how we evaluate our business internally and how we will
present our financial statements in the future because of our new arrangements
with IBM and Daisytek, we have set forth below an adjusted presentation of our
total historical revenue and cost of revenue. This presentation shows,
retroactively, what our service fee revenue and cost of service fee revenue
would have been if:
- our new agreements with IBM and Daisytek had been in effect during the
periods presented; and
- our acquisition of the assets and liabilities that Daisytek will transfer
to us upon completion of this offering had occurred as of the beginning
of the respective periods presented.
FISCAL YEAR SIX MONTHS
ENDED ENDED
MARCH 31, SEPTEMBER 30,
1999 1999
----------- -------------
(IN THOUSANDS)
(UNAUDITED)
Service fee revenue......................................... $31,510 $19,081
Cost of service fee revenue................................. 18,525 12,107
Service fee gross profit.................................... 12,985 6,974
Service fee gross profit margin............................. 41.2% 36.5%
Based on this presentation, our largest clients for the 1999 fiscal year
would have been Daisytek (65.1%), IBM (13.5%) and Emtec (10.3%), and our largest
clients for the six months ended September 30, 1999 would have been Daisytek
(52.2%), IBM (13.4%) and Emtec (9.4%). In calculating these percentages, we have
considered IBM as our client under our new IBM agreements even though the
service fees arising under these agreements are paid by Daisytek.
This presentation does not reflect what our operating income or net income
would have been during the periods presented.
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