SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 8-K/A PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: January 20, 2000 Date of earliest event reported: November 19, 1999 ASK JEEVES, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation) 000-26521 94-3334199 (Commission File No.) (IRS Employer Identification No.) 5858 HORTON ST., SUITE 350, EMERYVILLE, CA 94608 (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (510) 985-7400 ------------------- ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. The undersigned registrant, Ask Jeeves, Inc., hereby amends the following items, financial statements, exhibits or other portions of the current report on Form 8-K filed on December 2, 1999 related to Ask Jeeves, Inc.'s acquisition of Net Effect Systems, Inc. on November 19, 1999 by means of a merger among Ask Jeeves, Inc., Net Effect Systems, Inc. and Neutral Acquisition Corp., a wholly owned subsidiary of Parent. ITEM 5. OTHER EVENTS Risk Factors that may Affect Results of Operations and Financial Condition. OUR ACQUISITION OF NET EFFECT SYSTEMS, INC. MAY BE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS, DILUTE STOCKHOLDER VALUE OR DIVERT MANAGEMENT ATTENTION We merged with Net Effect Systems, Inc. effective November 19, 1999. We may encounter risks to our business, associated with the assimilation of Net Effect Systems, Inc., including: - - difficulties in assimilation of acquired personnel, operations, technologies or products; - - unanticipated costs associated with the acquisition; - - diversion of management's attention from other business concerns; - - adverse effects on our existing business relationships with our or Net Effect Systems' customers; and - - inability to retain employees of Net Effect Systems. As part of our business strategy, we may in the future seek to acquire or invest in additional businesses, products or technologies that we believe could complement or expand our business, augment our market coverage, enhance our technical capabilities or that may otherwise offer growth opportunities. These future acquisitions could pose the same risks to our business posed by the acquisition of Net Effect Systems described above. In addition, with future acquisitions, we could use substantial portions of our available cash, as all or a portion of the purchase price. We could also issue additional securities as consideration for these acquisitions, which could cause our stockholders to suffer significant dilution. Our acquisition of Net Effect Systems, and any future acquisitions, even if successfully completed, may not generate any additional revenue or provide any benefit to our business. WE MAY NOT ACHIEVE ANTICIPATED ADDITIONAL REVENUES OR BENEFITS AS A RESULT OF OUR ACQUISITION OF NET EFFECT SYSTEMS, INC. With the acquisition of Net Effect Systems, Inc. we seek to extend our ability to provide a live-help service that enables real-time, text-based communication between a company and its online customers. If we are unable to successfully integrate Net Effect Systems, Inc. or create new or enhanced services, we may not achieve the anticipated benefits from our merger with Net Effect Systems, Inc. If we fail to achieve the anticipated benefits from the acquisition, we may incur increased expenses, experience a shortfall in our anticipated revenues and we may not obtain a satisfactory return on our investment. In addition, if any significant number of Net Effect Systems, Inc. employees fail to remain employed with us, we may experience difficulties in achieving the expected benefits of the acquisition. ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED See Exhibit 99.1 for audited financial statements of Net Effect Systems, Inc. (b) PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) The following unaudited pro forma condensed consolidated financial statements give effect to the merger of Ask Jeeves, Inc. with Net Effect Systems, Inc., which was accounted for as a pooling of interests. The unaudited pro forma condensed consolidated balance sheet presents the combined financial position of Ask Jeeves, Inc. and Net Effect Systems, Inc. as of September 30, 1999, assuming that the merger had occurred as of September 30, 1999. Such pro forma information is based upon the historical balance sheet data of Ask Jeeves, Inc. and Net Effect Systems, Inc. as of that date. The unaudited pro forma condensed consolidated statement of operations gives effect to the merger of Ask Jeeves, Inc. and Net Effect Systems, Inc. by combining the results of operations of Ask Jeeves, Inc. and Net Effect Systems, Inc. for the two years ended December 31, 1998 and the nine months ended September 30, 1998 and 1999, on a pooling of interests basis. These unaudited pro forma consolidated financial statements should be read in conjunction with the historical financial statements and notes thereto of Ask Jeeves, Inc. included in the Company's Registration Statement on Form S-1 filed April 30, 1999, as amended and effective June 30, 1999, and its June 30, 1999 and September 30, 1999 quarterly 10Q filings with the Securities and Exchange Commission, and the historical financial statements and notes thereto of Net Effect Systems, Inc. included as exhibits herein. The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the mergers had been consummated at the beginning of the periods presented, nor is it necessarily indicative of future operating results or financial position. ASK JEEVES, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1999 ----------------------------------------------------- PRO FORMA ASK JEEVES NET EFFECT COMBINED --------------- -------------- ------------ Assets Current assets: Cash and cash equivalents .................................... $ 32,516,473 $ 6,128,073 $ 38,644,546 Short-term investments ....................................... 22,279,913 -- 22,279,913 Accounts receivable, net ..................................... 6,748,847 147,385 6,896,232 Prepaid expenses and other current assets .................... 2,198,559 184,174 2,382,733 --------------- -------------- ------------- Total current assets ............................................ 63,743,792 6,459,632 70,203,424 Property and equipment, net ..................................... 5,395,390 418,324 5,813,714 Investments ..................................................... 1,997,913 -- 1,997,913 Other assets .................................................... 1,260,457 115,307 1,375,764 --------------- -------------- ------------- Total assets .................................................... $ 72,397,552 $ 6,993,263 $ 79,390,815 --------------- -------------- ------------- --------------- -------------- ------------- Liabilities and Stockholders' Equity Current liabilities: Accounts payable .............................................. $ 2,054,989 $ 200,594 $ 2,255,583 Accrued compensation and related expenses ..................... 3,571,741 465,127 4,036,868 Other accrued liabilities ..................................... 3,403,098 599,084 4,002,182 Deferred revenue .............................................. 2,647,823 126,270 2,774,093 Current portion of capital lease obligations .................. 660,609 -- 660,609 --------------- -------------- ------------- Total current liabilities ....................................... 12,338,260 1,391,075 13,729,335 Capital lease obligations, less current portion ................. 2,196,462 -- 2,196,462 Commitments Stockholders' equity Preferred stock ............................................... -- 12,981,038 12,981,038 Common stock .................................................. 88,596,152 449,831 89,045,983 Deferred stock compensation ................................... (1,737,376) -- (1,737,376) Accumulated deficit ........................................... (28,995,946) (7,828,681) (36,824,627) --------------- -------------- ------------- Total stockholders' equity ...................................... 57,862,830 5,602,188 63,465,018 --------------- -------------- ------------- Total liabilities and stockholders' equity ...................... $ 72,397,552 $ 6,993,263 $ 79,390,815 --------------- -------------- ------------- --------------- -------------- ------------- See accompanying notes to the pro forma condensed consolidated financial information. ASK JEEVES, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1999 -------------------------------------------------- PRO FORMA ASK JEEVES NET EFFECT COMBINED --------------- ---------------- --------------- Revenue Consumer ........................................... $ 7,201,116 $ -- $ 7,201,116 Corporate .......................................... 3,100,329 823,407 3,923,736 --------------- ---------------- --------------- Total Revenues ........................................ 10,301,445 823,407 11,124,852 Cost of Revenue Consumer ........................................... 3,664,856 -- 3,664,856 Corporate .......................................... 3,695,118 957,818 4,652,936 --------------- ---------------- --------------- Total cost of revenues ................................ 7,359,974 957,818 8,317,792 --------------- ---------------- --------------- Gross profit (loss) ................................... 2,941,471 (134,411) 2,807,060 Operating expenses: Product development ................................ 3,460,618 1,852,341 5,312,959 Sales and marketing ................................ 19,269,005 2,065,607 21,334,612 General and administrative ......................... 3,678,456 1,135,926 4,814,382 Amortization of deferred stock compensation ........ 1,470,558 -- 1,470,558 Write-off of in-process technology acquired ......... 360,697 -- 360,697 --------------- ---------------- --------------- Total operating expenses .............................. 28,239,334 5,053,874 33,293,208 --------------- ---------------- --------------- Operating loss ........................................ (25,297,863) (5,188,285) (30,486,148) Interest income ....................................... 1,119,116 182,820 1,301,936 --------------- ---------------- --------------- Net loss before provision for income tax .............. (24,178,747) (5,005,465) (29,184,212) Provision for income taxes ............................ -- 1,616 1,616 --------------- ---------------- --------------- Net loss .............................................. $(24,178,747) $ (5,007,081) $(29,185,828) --------------- ---------------- --------------- --------------- ---------------- --------------- Basic and diluted net loss per share .................. $ (1.49) (3.54) (1.65) --------------- ---------------- --------------- --------------- ---------------- --------------- Weighted average shares outstanding used in computing basic and diluted net loss per share ...... 16,244,563 1,415,312 17,659,875 --------------- ---------------- --------------- --------------- ---------------- --------------- See accompanying notes to the pro forma condensed consolidated financial information. ASK JEEVES, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1998 -------------------------------------------------- PRO FORMA ASK JEEVES NET EFFECT COMBINED --------------- ---------------- --------------- Revenue Consumer ..................................................... $ 155,386 $ -- $ 155,386 Corporate .................................................... 7,500 75,550 83,050 --------------- ---------------- --------------- Total Revenues .................................................. 162,886 75,550 238,436 Cost of Revenue Consumer ..................................................... 285,249 -- 285,249 Corporate .................................................... 111,585 52,133 163,718 --------------- ---------------- --------------- Total cost of revenues .......................................... 396,834 52,133 448,967 --------------- ---------------- --------------- Gross profit/(loss) ............................................. (233,948) 23,417 (210,531) Operating expenses: Product development .......................................... 524,423 358,347 882,770 Sales and marketing .......................................... 588,043 365,080 953,123 General and administrative ................................... 495,524 644,402 1,139,926 --------------- ---------------- --------------- Total operating expenses ........................................ 1,607,990 1,367,829 2,975,819 --------------- ---------------- --------------- Operating loss .................................................. (1,841,938) (1,344,412) (3,186,350) Interest Income ................................................. 14,733 66,255 80,988 --------------- ---------------- --------------- Net loss before provision for income tax ........................ (1,827,205) (1,278,157) (3,105,362) Provision for income taxes ...................................... -- 800 800 --------------- ---------------- --------------- Net loss ........................................................ $(1,827,205) $(1,278,957) $(3,106,162) --------------- ---------------- --------------- --------------- ---------------- --------------- Basic and diluted net loss per share ............................ $ (.24) $ (2.31) $ (.39) --------------- ---------------- --------------- --------------- ---------------- --------------- Weighted average shares outstanding used in computing basic and diluted net loss per share .................................. 7,468,860 552,666 8,021,526 --------------- ---------------- --------------- --------------- ---------------- --------------- See accompanying notes to the pro forma condensed consolidated financial information. ASK JEEVES, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998 -------------------------------------------------- PRO FORMA ASK JEEVES NET EFFECT COMBINED --------------- ---------------- --------------- Revenue Consumer ........................................... $ 577,159 $ -- $ 577,159 Corporate .......................................... 15,500 207,739 223,239 --------------- ---------------- --------------- Total Revenues ........................................ 592,659 207,739 800,398 Cost of Revenue Consumer ........................................... 602,716 -- 602,716 Corporate .......................................... 455,978 340,698 796,676 --------------- ---------------- --------------- Total cost of revenues ................................ 1,058,694 340,698 1,399,392 --------------- ---------------- --------------- Gross profit/(loss) ................................... (466,035) (132,959) (598,994) Operating expenses: Product development ................................ 1,104,193 608,273 1,712,466 Sales and marketing ................................ 1,613,846 687,262 2,301,108 General and administrative ......................... 1,100,921 1,223,063 2,323,984 Amortization of deferred stock compensation ........ 29,010 -- 29,010 --------------- ---------------- --------------- Total operating expenses .............................. 3,847,970 2,518,598 6,366,568 --------------- ---------------- --------------- Operating loss ........................................ (4,314,005) (2,651,557) (6,965,562) Interest Income ....................................... 52,380 107,623 160,003 --------------- ---------------- --------------- Net loss before provision for income tax .............. (4,261,625) (2,543,934) (6,805,559) Provision for income taxes ............................ -- 800 800 --------------- ---------------- --------------- Net loss .............................................. $(4,261,625) $(2,544,734) $(6,806,359) --------------- ---------------- --------------- --------------- ---------------- --------------- Basic and diluted net loss per share .................. $ (.48) $ (3.40) $ (.71) --------------- ---------------- --------------- --------------- ---------------- --------------- Weighted average shares outstanding used in computing basic and diluted net loss per share ...... 8,828,046 749,055 9,577,101 --------------- ---------------- --------------- --------------- ---------------- --------------- See accompanying notes to the pro forma condensed consolidated financial information. ASK JEEVES, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1997 -------------------------------------------------- PRO FORMA ASK JEEVES NET EFFECT COMBINED --------------- ---------------- --------------- Revenue Consumer ........................................... $ -- $ -- $ -- Corporate .......................................... -- 22,603 22,603 --------------- ---------------- --------------- Total Revenues ........................................ -- 22,603 22,603 Cost of Revenue Consumer ........................................... -- -- -- Corporate .......................................... -- -- -- --------------- ---------------- --------------- Total cost of revenues ................................ -- -- -- --------------- ---------------- --------------- Gross profit .......................................... -- 22,603 22,603 Operating expenses: Product development ................................ 319,824 120,916 440,740 Sales and marketing ................................ 17,509 76,705 94,214 General and administrative ......................... 114,651 102,372 217,023 --------------- ---------------- --------------- Total operating expenses .............................. 451,984 299,993 751,977 --------------- ---------------- --------------- --------------- ---------------- --------------- Operating loss ........................................ (451,984) (277,390) (729,374) Interest Income ....................................... 4,207 1,328 5,535 --------------- ---------------- --------------- Net loss before provision for income tax .............. (447,777) (276,062) (723,839) Provision for income taxes ............................ -- 800 800 --------------- ---------------- --------------- Net loss .............................................. $ (447,777) $ (276,862) $ (724,639) --------------- ---------------- --------------- --------------- ---------------- --------------- Basic and diluted net loss per share .................. $ (.13) $ (3.68) $ (.21) --------------- ---------------- --------------- --------------- ---------------- --------------- Weighted average shares outstanding used in computing basic and diluted net loss per share ...... 3,319,187 75,210 3,394,397 --------------- ---------------- --------------- --------------- ---------------- --------------- See accompanying notes to the pro forma condensed consolidated financial information. ASK JEEVES, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION PRO FORMA BASIS OF PRESENTATION The unaudited pro forma condensed consolidated financial statements of Ask Jeeves, Inc. and Net Effect Systems, Inc. gives retroactive effect to the merger, which is being accounted for as a pooling of interests and, as a result, the unaudited pro forma condensed combined balance sheets and statements of operations are presented as if Ask Jeeves, Inc. and Net Effect Systems, Inc. had been combined for all periods presented. The pro forma condensed consolidated financial statements reflect the issuance of a total of 1,631,880 shares of Ask Jeeves, Inc. common stock for all of the outstanding shares of Net Effect. In addition, options to purchase Net Effect Systems, Inc. Common Stock were converted into options to purchase 497,342 shares of Ask Jeeves, Inc. Common Stock. 2. MERGER TRANSACTION COSTS Ask Jeeves, Inc. and Net Effect System, Inc. incurred transaction costs of approximately $6.1 million associated with the merger, including approximately $5.0 million for banker fee and expenses, $330,000 for audit fees and $488,000 for legal fees. There can be no assurance that Ask Jeeves, Inc. will not incur additional charges in subsequent quarters to reflect costs associated with the merger or that management will be successful in their efforts to integrate the operations of the respective companies. 3. PRO FORMA NET LOSS PER SHARE The pro forma consolidated basic and diluted net loss per share is based on the combined weighted average number of common shares of Ask Jeeves, Inc. Common Stock and Net Effect Systems, Inc. Common Stock outstanding for each period using the relevant exchange ratios based on the issuance of 2,129,222 shares of Ask Jeeves, Inc. Common Stock for all of the outstanding shares of Net Effect Systems, Inc. All convertible preferred stock, warrants and employee stock options have been included in the computation of pro forma combined diluted net income per share using the treasury stock method to the extent such instruments are dilutive for the periods presented. (C) EXHIBITS The following Exhibit is filed as part of this report: 2.1 Agreement and Plan of Merger and Reorganization, dated November 14, 1999, by and among Ask Jeeves, Inc., a Delaware corporation, Neutral Acquisition Corp., a Delaware corporation, and Net Effect Systems, Inc., a Delaware corporation (included as Exhibit 2.1 to Parent's Current Report on Form 8-K (File No.000-26521) filed with the Commission on November 14, 1999) 99.1 Supplementary Financial Statements of Net Effect Systems, Inc. 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. ASK JEEVES, INC. Dated: January 20, 2000 By: /s/ Amy Slater ------------------------- AMY SLATER GENERAL COUNSEL AND SECRETARY INDEX TO EXHIBITS 2.1 Agreement and Plan of Merger and Reorganization, dated November 14, 1999, by and among Ask Jeeves, Inc., a Delaware corporation, Neutral Acquisition Corp., a Delaware corporation, and Net Effect Systems, Inc., a Delaware corporation (included as Exhibit 2.1 to Parent's Current Report on Form 8-K (File No. 000-26521) filed with the Commission on November 14, 1999) 99.1 Supplementary Financial Statements of Net Effect Systems, Inc.