SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
NOVEMBER 12, 1999
-------------------------------------
Date of Report
(Date of earliest event reported)
SHOPNOW.COM INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
WASHINGTON 000-26707 91-1628103
- -------------------- --------------------------- --------------------
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation)
411 FIRST AVENUE SOUTH, SUITE 200 NORTH
SEATTLE, WA 98104
- --------------------------------------------------------------------------------
(Address of principal executive offices, including zip code)
(206) 223-1996
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
This Amendment No. 1 to the Current Report on Form 8-K dated November
12, 1999 of ShopNow.com Inc. relates to ShopNow's acquisition of SpeedyClick,
Corp., a California corporation, pursuant to an Agreement and Plan of Merger
among ShopNow, Racer Acquisition, Inc., a Washington corporation and
wholly-owned subsidiary of ShopNow, SpeedyClick, and Farid Tabibzadeh, Majid
Tabibzadeh and Shahab Emrani, principal shareholders of SpeedyClick. The purpose
of this amendment is to provide the financial statements of SpeedyClick required
by Item 7(a) of Form 8-K and the pro forma financial information required by
Item 7(b) of Form 8-K, which information was excluded from the original filing
in reliance upon Item 7(a)(4) of Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED (AUDITED, EXCEPT
WHERE OTHERWISE NOTED):
(i) Report of Arthur Andersen LLP, dated November 24, 1999.
(ii) SpeedyClick, Corp. Balance Sheets as of December 31, 1998 and
September 30, 1999 (unaudited).
(iii) SpeedyClick, Corp. Statements of Operations for the period
from September 1, 1998 (inception) to December 31, 1998 and
the nine months ended September 30, 1999 (unaudited).
(iv) SpeedyClick, Corp. Statements of Stockholders' Deficit for the
period from September 1, 1998 (inception) to December 31, 1998
and for the nine months ended September 30, 1999 (unaudited).
(v) SpeedyClick, Corp. Statements of Cash Flows for the period
from September 1, 1998 (inception) to December 31, 1998 and
the nine months ended September 30, 1999 (unaudited).
(vi) SpeedyClick, Corp. Notes to Financial Statements.
(b) PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
(i) Pro Forma Combined Balance Sheet as of September 30, 1999.
(ii) Pro Forma Combined Statement of Operations for the year ended
December 31, 1998.
(iii) Pro Forma Combined Statement of Operations for the nine months
ended September 30, 1999.
(iv) Notes to Pro Forma Combined Financial Statements.
(c) EXHIBITS
2.1 Agreement and Plan of Merger dated as of November 10, 1999,
among ShopNow.com Inc., Racer Acquisition, Inc., SpeedyClick,
Corp. and the Principal Shareholders of SpeedyClick, Corp.
(incorporated by reference to ShopNow's Current Report on Form
8-K filed November 24, 1999).
23.1 Consent of Arthur Andersen LLP, independent public accountants.
-1-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ShopNow.com Inc.:
We have audited the accompanying balance sheet of SpeedyClick, Corp. (a
California corporation) as of December 31, 1998, and the related statements of
operations, stockholders' deficit and cash flows for the period from inception
(September 1, 1998) to December 31, 1998. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides 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 SpeedyClick, Corp.
as of December 31, 1998, and the results of its operations and its cash flows
for the period from inception (September 1, 1998) to December 31, 1998 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Seattle, Washington,
November 24, 1999
-2-
SPEEDYCLICK, CORP.
BALANCE SHEETS
ASSETS
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ ------------
(unaudited)
CURRENT ASSETS:
Cash $ 4,272 $ 19,454
Accounts receivable, net of allowance of $0 and $11,000 -- 177,288
------------ ------------
Total current assets 4,272 196,742
PROPERTY AND EQUIPMENT, at cost, net of $0 and $19,500 of
accumulated depreciation -- 165,690
OTHER ASSETS 2,477 2,477
------------ ------------
Total assets $ 6,749 $ 364,909
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ -- $ 222,932
Accrued compensation and benefits 10,558 22,345
Accrued expenses -- 29,324
Deferred revenue -- 46,225
Current portion of notes payable and other long-term liabilities -- 44,579
------------ ------------
Total current liabilities 10,558 365,405
NOTES PAYABLE AND OTHER LONG-TERM LIABILITIES, net of
current portion -- 219,782
------------ ------------
Total liabilities 10,558 585,187
------------ ------------
STOCKHOLDERS' DEFICIT:
Preferred stock, no par value; 0 and 1,000,000 shares authorized; 0 and
535,000 shares issued and outstanding; preference in liquidation of
$535,000 at September 30, 1999 -- 535,000
Common stock and paid-in capital, $0.01 par value; 10,000,000 and
7,000,000 shares authorized; 4,999,995 and 5,228,020 issued and
outstanding 31,000 113,803
Accumulated deficit (34,809) (869,081)
------------ ------------
Total stockholders' deficit (3,809) (220,278)
------------ ------------
Total liabilities and stockholders' deficit $ 6,749 $ 364,909
------------ ------------
------------ ------------
The accompanying notes are an integral part of these balance sheets.
-3-
SPEEDYCLICK, CORP.
STATEMENTS OF OPERATIONS
PERIOD FROM
INCEPTION
(SEPTEMBER 1, NINE MONTHS
1998) TO ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
-------------- --------------
(unaudited)
REVENUES $ -- $ 328,435
-------------- --------------
OPERATING EXPENSES:
Sales and marketing 4,188 776,783
General and administrative 2,490 211,874
Research and development 28,131 172,019
-------------- --------------
Total operating expenses 34,809 1,160,676
-------------- --------------
LOSS FROM OPERATIONS (34,809) (832,241)
INTEREST EXPENSE -- (2,031)
-------------- --------------
NET LOSS $ (34,809) $ (834,272)
-------------- --------------
-------------- --------------
The accompanying notes are an integral part of these statements.
-4-
SPEEDYCLICK, CORP.
STATEMENTS OF STOCKHOLDERS' DEFICIT
COMMON STOCK SERIES A PREFERRED STOCK TOTAL
--------------------- ------------------------ ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT DEFICIT DEFICIT
--------- --------- --------- --------- --------- ---------
BALANCES AT INCEPTION -- $ -- -- $ -- $ -- $ --
Issuance of founders stock in
exchange for cash and services
rendered 4,999,995 31,000 -- -- -- 31,000
Net loss -- -- -- -- (34,809) (34,809)
--------- --------- --------- --------- --------- ---------
BALANCES, December 31, 1998 4,999,995 31,000 -- -- (34,809) (3,809)
Additional founders capital
contribution -- 60,000 -- -- -- 60,000
Sales of preferred stock -- -- 435,000 435,000 -- 435,000
Sales of common stock 145,000 14,500 -- -- -- 14,500
Exercise of common stock options 83,025 8,303 -- -- -- 8,303
Conversion of notes payable -- -- 100,000 100,000 -- 100,000
Net loss -- -- -- -- (834,272) (834,272)
--------- --------- --------- --------- --------- ---------
BALANCES, September 30, 1999
(unaudited) 5,228,020 $ 113,803 535,000 $ 535,000 $(869,081) $(220,278)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
The accompanying notes are an integral part of these statements.
-5-
SPEEDYCLICK, CORP.
STATEMENTS OF CASH FLOWS
PERIOD FROM
INCEPTION
(SEPTEMBER 1, NINE MONTHS
1998) TO ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ ------------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (34,809) $ (834,272)
Adjustments to reconcile net loss to net cash used in
operating activities--
Depreciation -- 19,500
Changes in operating assets and liabilities:
Accounts receivable -- (177,288)
Other assets (2,477) --
Accounts payable -- 222,932
Accrued compensation, benefits and expenses 10,558 41,111
Deferred revenue -- 46,225
------------ ------------
Net cash used in operating activities (26,728) (681,792)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment -- (114,257)
------------ ------------
Net cash used in investing activities -- (114,257)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock 9,000 14,500
Sales of Series A preferred stock -- 435,000
Exercise of common stock options -- 8,303
Capital contributions by founders 22,000 60,000
Borrowings on notes payable -- 300,000
Repayments of notes payable -- (6,572)
------------ ------------
Net cash provided by financing activities 31,000 811,231
------------ ------------
NET INCREASE IN CASH 4,272 15,182
CASH, beginning of period -- 4,272
------------ ------------
CASH, end of period $ 4,272 $ 19,454
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND NONCASH
ACTIVITIES:
Cash paid for interest $ -- $ 2,031
Conversion of notes payable into Series A preferred stock $ -- $ 100,000
Property and equipment acquired under notes payable $ -- $ 70,933
The accompanying notes are an integral part of these statements.
-6-
SPEEDYCLICK, CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(INFORMATION AS OF AND FOR THE PERIOD ENDED SEPTEMBER 30, 1999 IS UNAUDITED.)
1. ORGANIZATION AND NATURE OF OPERATIONS:
SpeedyClick, Corp., a California corporation, (the Company) was founded
in September 1998 in Glendale, California. The Company operates a website
targeted toward women which offers various games and entertainment.
The website went live in January 1999.
2. SIGNIFICANT ACCOUNTING POLICIES:
UNAUDITED INTERIM FINANCIAL DATA
The unaudited interim financial statements as of September 30, 1999 and
for the nine-month period then ended have been prepared on the same basis as the
audited financial statements and, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial information set forth therein, in accordance with
generally accepted accounting principles.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent 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.
REVENUE RECOGNITION
Revenues are generated primarily from click-through payments,
interactive game sponsorships and e-mailings. The Company uses outside
advertising agencies to obtain a significant portion of its advertising
revenues. Revenues are recognized net of commissions paid to advertising
agencies ratably over the term of the advertising contract or over the course of
the sponsorship.
CASH
Cash consists of deposits in checking and savings accounts. The Company
has no cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist primarily of cash and accounts
receivable.
To date, accounts receivable have been derived from revenues earned
from customers located in the United States. Historically, credit losses have
been minor and within management's expectations.
-7-
PROPERTY AND EQUIPMENT
Property and equipment consists primarily of computer equipment and
furniture and is stated at cost. Depreciation is computed using the
straight-line method over estimated useful lives, which are estimated to be
three years.
SOFTWARE DEVELOPMENT
Under the criteria set forth in Statement of Financial Accounting
Standards (SFAS) No. 86, "Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed," capitalization of software development
costs begins upon the establishment of technological feasibility of the product,
which the Company has defined as the completion of beta testing of a working
product. The establishment of technological feasibility and the ongoing
assessment of the recoverability of these costs require considerable judgment by
management with respect to certain external factors, including, but not limited
to, anticipated future gross product revenues, estimated economic life and
changes in software and hardware technology. Amounts that could have been
capitalized under this statement after consideration of the above factors were
immaterial and, therefore, no software development costs have been capitalized
by the Company to date.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred and consist
primarily of salaries, travel, materials, supplies and contract services.
STOCK COMPENSATION
The Company has adopted the disclosure provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." In accordance with the provisions of SFAS No. 123, the Company
applies Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting for its employee
stock benefits.
3. INCOME TAXES:
At December 31, 1998, a valuation allowance was recognized to offset
the related deferred tax asset of approximately $10,200 due to the uncertainty
of realizing the benefit of the Company's net operating loss carryforward. The
need for this valuation allowance is subject to periodic review. If it is
determined in a future period that it is more likely than not that the tax
benefit of the carryforward will be realized, the reduction of the valuation
allowance will be recorded as a reduction of the Company's income tax expense.
At December 31, 1998, the Company had a net operating loss carryforward
of approximately $27,000, which expires in 2012. Under current tax law, net
operating loss carryforwards available in any given year may be limited upon the
occurrence of certain events, including significant changes in ownership
interests.
4. COMMITMENTS:
The Company operated in space provided to it by a related party for the
period from inception to December 31, 1998, and accordingly, no rent expense was
recorded in the accompanying financial statements. Had such expense been
recorded the effects on the accompanying financial statements would have been
immaterial.
-8-
5. RELATED PARTY TRANSACTIONS:
Since formation, the founders did not receive salaries. Accordingly, no
compensation expense was recorded by the Company. Additionally, certain
operating expenses of the Company were paid on its behalf by the founders and
certain related parties. No amounts funded by related parties have been recorded
in the accompanying financial statements. The amounts funded related to
operating expenses are not estimable and will not be repaid by the Company to
the funding parties.
6. SUBSEQUENT EVENTS:
AMENDMENT OF ARTICLES OF INCORPORATION
On April 19, 1999, the Company restated its articles of incorporation
approving, among other things:
- STOCK SPLIT - a 5.55555 for one stock split, which has been
reflected in the accompanying financial statements as if it
had occurred at inception.
- STOCK INCENTIVE PLAN - the SpeedyClick, Corp. 1999 Stock
Incentive Plan (Plan) was approved and a number of awards of
stock options were granted to vest retroactive to the original
hiring date of the employee. 375,000 shares are reserved for
issuance under the Plan. As of September 30, 1999, there were
218,818 options outstanding at prices ranging from $0.01 to
$0.10 per share.
- AUTHORIZED STOCK - The Company was authorized to issue two
classes of stock to be designated, respectively, "Common
Stock" and "Preferred Stock." The total number of shares which
the Company was authorized to issue is 7,000,000 shares of
Common Stock and 1,000,000 shares of Preferred Stock.
BRIDGE LOAN FINANCING
On April 2, 1999, the Company issued a $100,000 convertible promissory
note to an outside investor. The note accrued interest at the rate of five
percent per year until the note was converted into 100,000 shares of Series A
preferred stock on May 10, 1999.
SALE OF SERIES A PREFERRED STOCK
On May 10, 1999, the Company issued 535,000 shares of Series A
Preferred Stock, of which 100,000 shares were issued upon conversion of a bridge
loan, while the remaining were sold for cash. Dividends are payable at a rate of
$.08 per share when declared and are non-cumulative. The holders of these shares
were entitled to receive a preference in liquidation equal to the original
issuance price plus any declared but unpaid dividends.
SALE OF COMMON STOCK
On May 10, 1999, the Company issued 145,000 shares of common stock to
investors at $0.10 per share. These shares have the same rights and preferences
as the previously issued common shares granted at inception.
-9-
NOTES PAYABLE
The Company obtained a $200,000 loan from an outside investor and a
$100,000 loan from one of the founders during August and September 1999. The
$200,000 loan was subsequently converted into 100,000 shares of common stock
prior to the acquisition by ShopNow.com Inc. (ShopNow) on November 12, 1999 as
discussed below. The $100,000 loan was repaid by ShopNow in conjunction with the
acquisition.
CAPITAL LEASES
Subsequent to year-end, the Company obtained a number of computers
under capital leases. As of September 30, 1999, the Company's other long-term
liabilities consist of capital lease obligations. Total capital lease
commitments of the Company as of September 30, 1999 including interest were as
follows:
2000 $ 52,800
2001 14,000
2002 8,000
2003 and thereafter --
----------
$ 74,800
----------
----------
ACQUISITION BY SHOPNOW.COM
On November 12, 1999, the Company was acquired by ShopNow.
-10-
SHOPNOW.COM INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS)
SHOPNOW.COM SPEEDYCLICK,
INC. CORP. ADJUSTMENTS (g) TOTAL
------------ ------------ ------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 2,913 $ 20 $ (3,000) $ (67)
Short-term investments 6,098 -- -- 6,098
Accounts receivable, net 7,911 177 -- 8,088
Unbilled services 1,288 -- -- 1,288
Prepaid expenses and other 2,794 -- -- 2,794
------------ ------------ ------------ ------------
Total current assets 21,004 197 (3,000) 18,201
PROPERTY AND EQUIPMENT, net 12,746 166 -- 12,912
GOODWILL, net 965 -- -- 965
OTHER INTANGIBLE ASSETS, net 18,473 -- 60,660 79,133
INVESTMENT IN MARKETABLE EQUITY SECURITIES
20,764 -- -- 20,764
OTHER ASSETS, net 7,048 2 -- 7,050
------------ ------------ ------------ ------------
Total assets $ 81,000 $ 365 $ 57,660 $ 139,025
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
CURRENT LIABILITIES:
Accounts payable $ 7,801 $ 223 $ -- $ 8,024
Accrued liabilities 6,505 52 -- 6,557
Line of credit 1,000 -- -- 1,000
Current portion of notes and leases 8,110 44 -- 8,154
Customer deposits 6,185 -- -- 6,185
Deferred revenue 6,047 46 -- 6,093
------------ ------------ ------------ ------------
Total current liabilities 35,648 365 36,013
NOTES AND LEASES PAYABLE, less current
portion 5,802 220 -- 6,022
PUT WARRANT LIABILITY 1,369 -- -- 1,369
SHAREHOLDERS' EQUITY:
Convertible preferred stock 89,351 535 (535) 89,351
Common stock 23,414 114 57,326 80,854
Common stock warrants 7,968 -- -- 7,968
Deferred compensation (3,179) -- -- (3,179)
Accumulated other comprehensive loss (2,762) -- -- (2,762)
Accumulated deficit (76,611) (869) 869 (76,611)
------------ ------------ ------------ ------------
Total shareholders' equity 38,181 (220) 57,660 95,621
------------ ------------ ------------ ------------
$ 81,000 $ 365 $ 57,660 $ 139,025
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
See notes to unaudited pro forma combined financial statements.
-11-
SHOPNOW.COM INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
FOR THE PERIOD
FROM INCEPTION
(1/1/98 TO (1/1/98 TO (9/1/98) TO
8/8/98) 9/17/98) 12/31/98
SHOPNOW.COM THE INTERNET MEDIA ASSETS, GO SOFTWARE, SPEEDYCLICK,
INC. MALL, INC. INC. INC. CORP.
------------ ------------ ------------ ------------ ------------
REVENUES $ 7,154 $ 175 $ 4,833 $ 1,346 $ --
COST OF REVENUES 5,849 24 2,808 55 --
------------ ------------ ------------ ------------ ------------
Gross margin 1,305 151 2,025 1,291 --
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES:
Sales and marketing 12,183 56 1,365 143 4
General and administrative 3,549 275 318 1,006 3
Research and development 4,370 114 -- 253 28
Amortization of intangible assets 730 -- 1 -- --
Stock-based compensation 182 -- -- -- --
Unusual item - impairment of acquired
technology 5,207 -- -- -- --
------------ ------------ ------------ ------------ ------------
Total operating expenses 26,221 445 1,684 1,402 35
------------ ------------ ------------ ------------ ------------
(LOSS) INCOME FROM OPERATIONS (24,916) (294) 341 (111) (35)
OTHER INCOME (EXPENSE), net 171 (13) 17 41 --
------------ ------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE PROVISION FOR INCOME
TAXES (24,745) (307) 358 (70) (35)
PROVISION FOR INCOME TAXES -- -- -- 17 --
------------ ------------ ------------ ------------ ------------
Net (loss) income $ (24,745) $ (307) $ 358 $ (53) $ (35)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
BASIC AND DILUTED NET LOSS PER SHARE (h) $ (7.01)
------------
------------
WEIGHTED AVERAGE SHARES OUTSTANDING USED TO
COMPUTE BASIC AND DILUTED NET LOSS PER
SHARE 3,532,054
------------
------------
BASIC AND DILUTED PRO FORMA NET LOSS PER
SHARE (h) $ (1.92)
------------
------------
WEIGHTED AVERAGE SHARES USED TO COMPUTE BASIC
AND DILUTED PRO FORMA NET LOSS PER SHARE
12,857,745
------------
------------
PRO FORMA COMBINED
ADJUSTMENTS TOTAL
------------ ------------
REVENUES $ (4,458) (c) $ 9,050
COST OF REVENUES (4,452) (c) 4,284
------------ ------------
Gross margin (6) 4,766
------------ ------------
OPERATING EXPENSES:
Sales and marketing (2,956) (c) 10,795
General and administrative (955) (c) 4,196
Research and development (1,061) (c) 3,704
Amortization of intangible assets 25,862 (a) 26,593
Stock-based compensation -- 182
Unusual item - impairment of acquired
technology -- 5,207
------------ ------------
Total operating expenses 20,890 50,677
------------ ------------
(LOSS) INCOME FROM OPERATIONS (20,896) (45,911)
OTHER INCOME (EXPENSE), net (125) (b) 91
------------ ------------
(LOSS) INCOME BEFORE PROVISION FOR INCOME
TAXES (21,021) (45,820)
PROVISION FOR INCOME TAXES (17) (d) --
------------ ------------
Net (loss) income $ (21,038) $ (45,820)
------------ ------------
------------ ------------
BASIC AND DILUTED NET LOSS PER SHARE (h) $ (4.92)
------------
------------
WEIGHTED AVERAGE SHARES OUTSTANDING USED TO
COMPUTE BASIC AND DILUTED NET LOSS PER
SHARE 9,305,118
------------
------------
BASIC AND DILUTED PRO FORMA NET LOSS
PER SHARE (h) $ (2.46)
------------
------------
WEIGHTED AVERAGE SHARES USED TO
COMPUTE BASIC AND DILUTED PRO FORMA
NET LOSS PER SHARE 18,641,762
------------
------------
See notes to unaudited pro forma combined financial statements.
-13-
SHOPNOW.COM INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(1/1/99 TO (1/1/99 TO
6/15/99) 9/30/99)
SHOPNOW.COM GO SOFTWARE, SPEEDYCLICK, PRO FORMA COMBINED
INC. INC. CORP. ADJUSTMENTS TOTAL
------------ ------------ ------------ ------------ ------------
REVENUES $ 23,537 $ 728 $ 328 $ (9,948)(c)(e) $ 14,645
COST OF REVENUES 19,494 45 -- (11,190)(c) 8,349
------------ ------------ ------------ ------------ ------------
Gross margin 4,043 683 328 1,242 6,296
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES:
Sales and marketing 33,545 172 777 (2,911)(c)(e) 31,583
General and administrative 5,493 514 212 (148)(c)(f) 6,071
Research and development 5,367 182 171 (10)(c) 5,710
Amortization of intangible assets 3,734 -- -- 17,220 (a) 20,954
Stock-based compensation 2,547 -- -- -- 2,547
------------ ------------ ------------ ------------ ------------
Total operating expenses 50,686 868 1,160 14,151 66,865
------------ ------------ ------------ ------------ ------------
(LOSS) INCOME FROM OPERATIONS (46,643) (185) (832) (12,909) (60,569)
OTHER (EXPENSE) INCOME, net (605) 12 (2) (50)(b) (645)
------------ ------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE PROVISION FOR
INCOME TAXES (47,248) (173) (834) (12,959) (61,214)
PROVISION FOR INCOME TAXES -- 12 -- (12)(d) --
------------ ------------ ------------ ------------ ------------
Net (loss) income $ (47,248) $ (161) $ (834) $ (12,971) $ (61,214)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
BASIC AND DILUTED NET LOSS PER
SHARE (h) $ (9.03) $ (6.08)
------------ ------------
------------ ------------
WEIGHTED AVERAGE SHARES
OUTSTANDING USED TO COMPUTE
BASIC AND DILUTED NET LOSS
PER SHARE 5,230,394 10,060,253
------------ ------------
------------ ------------
BASIC AND DILUTED PRO FORMA NET LOSS
PER SHARE (h) $ (2.16) $ (2.39)
------------ ------------
------------ ------------
WEIGHTED AVERAGE SHARES USED TO
COMPUTE BASIC AND DILUTED PRO FORMA
NET LOSS PER SHARE 21,859,604 25,658,841
------------ ------------
------------ ------------
See notes to unaudited pro forma combined financial statements.
-14-
SHOPNOW.COM INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
1. BASIS OF PRESENTATION:
The unaudited pro forma combined balance sheet as of September 30, 1999
gives effect to the acquisition of SpeedyClick, Corp. as if the transaction had
occurred on September 30, 1999. The unaudited pro forma combined statement of
operations for the year ended December 31, 1998 and for the nine months ended
September 30, 1999 gives effect to the acquisitions of Media Assets, Inc., The
Internet Mall, Inc., GO Software, Inc. and SpeedyClick, Corp., and the
disposition of BuySoftware.com, as if these transactions had occurred January 1,
1998.
The pro forma combined financial statements are presented for
illustrative purposes only and should not be construed to be indicative of the
actual combined results of operations as may exist in the future. The pro forma
adjustments are based on the cash and common stock consideration exchanged by
ShopNow.com Inc. for the fair value of the assets acquired and liabilities
assumed.
2. PRO FORMA ADJUSTMENTS:
(a) To record amortization of intangible assets based on the
excess purchase price. Because Media Assets, Inc. and The Internet Mall, Inc.
were acquired during 1998 and GO Software was acquired on June 15, 1999,
amortization is based on the actual purchase price allocation and computed for
the period from January 1, 1998 to the respective date of acquisition. Because
SpeedyClick, Corp. was acquired on November 12, 1999, the amortization is based
on the estimated purchase price allocation and computed for the period from
January 1, 1998 to the respective date of acquisition.
Seven months of The Internet Mall, Inc. $ 422
Eight months of Media Assets, Inc. 347
Twelve months of GO Software, Inc. 4,798
Twelve months of SpeedyClick, Corp. 20,295
----------
Total 1998 pro forma amortization $ 25,862
----------
----------
Five months of 1999 - GO Software, Inc. $ 1,999
Nine months of 1999 - SpeedyClick, Corp. 15,221
----------
Total 1999 pro forma amortization $ 17,220
----------
----------
All intangible assets are amortized over three years.
(b) To record eight months of interest expense associated with the
note issued as consideration for Media Assets, Inc., totaling $25, and to record
12 and six months of interest expense associated with the GO Software, Inc.
convertible promissory note totaling $100 and $50, respectively.
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(c) To eliminate the results of operations of BuySoftware.com.
Given the Company's continued involvement in certain retailing activities, the
results of BuySoftware.com have been reflected in continuing operations through
June 1999. However, the Company believes that it is meaningful to present the
disposal as if it had occurred as of January 1, 1998. As BuySoftware.com was run
as a separate business segment, the revenues, cost of revenues and operating
expenses directly attributable to the business segment were removed.
(d) To eliminate tax benefits recorded by GO Software, Inc., which
may not be realized by the Company.
(e) To eliminate transactions recognized by SpeedyClick related to
advertising received from ShopNow.com Inc. As the pro forma statements of
operations are prepared as if the merger had occurred on January 1, 1998, these
revenues and the related expense have been eliminated.
(f) To record compensation of SpeedyClick executives per
employment agreements as follows:
1998 - Four months of compensation expense $128
1999 - Nine months of compensation expense $288
These amounts represent compensation above historical levels.
(g) To record the acquisition of SpeedyClick, Corp. for cash of $3
million, 3,799,237 shares of common stock and 157,537 options to purchase shares
of common stock, representing non-cash consideration of approximately $57.4
million.
Purchase price $60,440
Net liabilities assumed 220
-------
Excess purchase price $60,660
=======
(h) Basic and diluted net loss per share is computed by dividing
net loss by the weighted average number of share outstanding during the period
assuming that shares issued for acquisitions were outstanding for the entire
period. Pro forma basic and diluted net loss per share is computed based on the
weighted average number of shares outstanding giving effect to shares issued in
acquisitions as if they were outstanding for the entire period and to the
conversion of convertible preferred stock on an as-if converted basis from the
original issuance date.
3. RECONCILIATION OF HISTORICAL WEIGHTED AVERAGE SHARES TO PRO FORMA
WEIGHTED AVERAGE SHARES:
DECEMBER 31, SEPTEMBER 30,
1998 1999
----------- ------------
Historical 3,532,054 5,230,393
Internet Mall, January 1, 1998 - August 8, 1998 426,024 --
Media Assets, January 1, 1998 - September 17, 1998 424,052 --
GO Software, January 1, 1998 - December 31, 1998; January 1, 1999 - June
15, 1999 1,123,751 1,030,623
SpeedyClick, Corp., January 1, 1998 - December 31, 1998; January 1, 1999 -
September 30, 1999 3,799,237 3,799,237
----------- -----------
Pro forma 9,305,118 10,060,253
----------- -----------
----------- -----------
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
SHOPNOW.COM INC.
Dated: December 3, 1999 By: /s/ Alan D. Koslow
-----------------------------------------
Alan D. Koslow
Executive Vice President, Chief Financial
Officer and General Counsel
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EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
2.1 Agreement and Plan of Merger dated as of November 10, 1999,
among ShopNow.com Inc., Racer Acquisition, Inc., SpeedyClick,
Corp. and the Principal Shareholders of SpeedyClick, Corp.
(incorporated by reference to ShopNow's Current Report on Form
8-K filed November 24, 1999).
23.1 Consent of Arthur Andersen LLP, independent public accountants.
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