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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER: 000-28271
THE KNOT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3895178
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
462 BROADWAY, 6TH FLOOR
NEW YORK, NEW YORK 10013
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICER AND ZIP CODE)
(212) 219-8555
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Check whether the registrant: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during the
preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No |_|
As of August 11, 2000, there were 14,614,140 shares of the
registrant's common stock outstanding.
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Number
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PART I FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of June 30, 2000 and
December 31, 1999....................................................................... 3
Condensed Consolidated Statements of Operations for the three and six months
ended June 30, 2000 and 1999............................................................ 4
Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 2000 and 1999............................................................ 5
Notes to Condensed Consolidated Financial Statements.................................... 6
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations... 9
Item 3: Quantitative and Qualitative Disclosures About Market Risk.............................. 26
PART II OTHER INFORMATION
Item 1: Legal Proceedings....................................................................... 26
Item 2: Changes in Securities and Use of Proceeds............................................... 26
Item 3: Defaults Upon Senior Securities......................................................... 26
Item 4: Submission of Matters to a Vote of Security Holders..................................... 26
Item 5: Other Information....................................................................... 27
Item 6: Exhibits and Reports on Form 8-K........................................................ 27
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ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
THE KNOT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2000 1999*
(UNAUDITED)
---------------- ----------------
ASSETS
Current assets:
Cash and cash equivalents .................................................. $ 22,606,598 $ 40,006,175
Short-term investments...................................................... - 501,000
Accounts receivable, net of allowance of $1,217,000 and $133,000, respectively 7,551,552 1,333,158
Inventories................................................................. 674,577 478,345
Deferred production and marketing costs..................................... 1,992,860 -
Other current assets........................................................ 828,269 671,519
---------------- --------------
Total current assets........................................................... 33,653,856 42,990,197
Property and equipment, net.................................................... 3,614,958 1,554,373
Intangible assets, net......................................................... 10,090,840 541,638
Other assets................................................................... 405,680 399,792
----------------- --------------
Total assets................................................................... $ 47,765,334 $ 45,486,000
================= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses....................................... $ 4,000,013 $ 1,444,578
Note payable................................................................ 1,724,811 -
Deferred revenue............................................................ 3,716,413 408,934
Current portion of long term debt........................................... 73,313 -
----------------- --------------
Total current liabilities...................................................... 9,514,550 1,853,512
Long term debt................................................................. 412,904 -
Other liabilities.............................................................. 126,551 57,093
----------------- --------------
Total liabilities.............................................................. 10,054,005 1,910,605
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; 100,000,000 shares authorized; 14,600,182 and
14,510,612 shares issued and outstanding
at June 30, 2000 and December 31, 1999, respectively..................... 146,001 145,106
Additional paid-in-capital.................................................. 59,865,695 60,206,664
Deferred compensation....................................................... (1,396,358) (2,262,974)
Deferred sales and marketing................................................ (1,633,061) (1,959,677)
Accumulated deficit......................................................... (19,270,948) (12,553,724)
----------------- --------------
Total stockholders' equity..................................................... 37,711,329 43,575,395
----------------- --------------
Total liabilities and stockholders' equity..................................... $ 47,765,334 $ 45,486,000
================= ==============
* The condensed consolidated balance sheet as of December 31, 1999 has been
derived from the audited financial statements at that date, but does not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See accompanying notes.
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THE KNOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------------------------------
2000 1999 2000 1999
---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
Net revenues $ 6,856,799 $ 543,545 $10,575,831 $ 737,977
Cost of revenues 1,856,457 188,225 3,011,285 241,445
-----------------------------------------------------------------------------
Gross profit 5,000,342 355,320 7,564,546 496,532
Operating expenses:
Product and content development 1,591,028 464,311 2,536,039 864,678
Sales and marketing 4,418,988 787,484 7,249,688 1,493,831
General and administrative 2,175,271 620,989 3,745,755 1,041,269
Non cash compensation 237,892 213,347 502,310 342,259
Non cash sales and marketing 163,308 - 326,616 -
Depreciation and amortization 582,535 105,603 836,816 174,740
-----------------------------------------------------------------------------
Total operating expenses
9,169,022 2,191,734 15,197,224 3,916,777
-----------------------------------------------------------------------------
Loss from operations
(4,168,680) (1,836,414) (7,632,678) (3,420,245)
Interest income, net 343,003 109,389 915,454 99,669
-----------------------------------------------------------------------------
Net loss $(3,825,677) $(1,727,025) $(6,717,224) $(3,320,576)
=============================================================================
Net loss per share - basic and diluted: $ (0.26) $ (0.56) $ (0.46) $ (1.09)
=============================================================================
Weighted average number of shares
used in calculating basic and diluted
net loss per share 14,590,310 3,078,119 14,554,652 3,056,725
See accompanying notes.
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THE KNOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
-------------------------
2000 1999
---- ----
OPERATING ACTIVITIES
Net loss ............................................................. $ (6,717,224) $ (3,320,576)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization...................................... 410,242 93,687
Amortization of goodwill........................................... 426,574 80,962
Amortization of deferred compensation.............................. 502,310 342,259
Amortization of deferred sales and marketing....................... 326,616 -
Reserve for returns................................................ 303,584 -
Allowance for doubtful accounts.................................... 218,878 150,000
Changes in operating assets and liabilities:
Accounts receivable................................................ (3,285,140) (208,885)
Inventories........................................................ (196,232) (573,313)
Deferred production and marketing expenses......................... (670,131) -
Other current assets............................................... 138,760 (91,373)
Other assets....................................................... 8,667 (106,054)
Accounts payable and accrued expenses.............................. 1,207,649 775,351
Deferred revenue................................................... 1,304,529 501,357
Other liabilities.................................................. 69,458 -
-------------- ---------------
Net cash used in operating activities................................. (5,951,460) (2,356,585)
INVESTING ACTIVITIES
Purchases of property and equipment................................... (1,935,230) (965,974)
Loan receivable....................................................... - (50,000)
Acquisition of businesses, net of acquired cash....................... (9,529,791) -
Maturity of short term investments.................................... 619,514 -
-------------- ---------------
Net cash used in investing activities................................. (10,845,507) (1,015,974)
FINANCING ACTIVITIES
Proceeds from short term borrowings................................... 200,000 750,000
Repayment of short term borrowings.................................... (311,754) (525,000)
Financing costs....................................................... (515,088) (127,509)
Proceeds from issuance of convertible preferred stock................. - 15,000,000
Proceeds from exercise of stock options............................... 24,232 -
-------------- ---------------
Net cash (used in) provided by financing activities................... (602,610) 15,097,491
Increase/(decrease) in cash and cash equivalents...................... (17,399,577) 11,724,932
Cash and cash equivalents at beginning of period...................... 40,006,175 1,037,589
-------------- ---------------
Cash and cash equivalents at end of period............................ $ 22,606,598 $ 12,762,521
============== ===============
See accompanying notes.
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THE KNOT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying financial information presented is unaudited, but in
the opinion of management of The Knot, Inc. ("Company"), contains all
adjustments (consisting only of normal recurring adjustments) which
the Company considers necessary for the fair presentation of the
financial position for the periods shown. The financial statements
included herein have been prepared in accordance with generally
accepted accounting principles. All information includes adjustments
to historical results (consisting only of normal recurring entries)
necessary for a fair presentation and, in our opinion, have been
prepared on the same basis as the audited financial statements.
Certain historical financial information has been reclassified to
conform with current presentation. These financial statements should
be read in conjunction with the Company's audited financial
statements and accompanying notes for the year ended December 31,
1999 included in the Company's Form 10-K as filed with the Securities
and Exchange Commission.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts
of The Knot and its wholly owned subsidiaries. The condensed
consolidated financial statements for the three and six months ended
June 30, 2000 includes the operations of Weddingpages subsequent to
its acquisition as of March 29, 2000. All significant intercompany
accounts and transactions have been eliminated.
USE OF ESTIMATES
Preparing financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. Actual results may differ from
these estimates. Interim results are not necessarily indicative of
results for a full year.
DEFERRED REVENUE AND DEFERRED PRODUCTION AND MARKETING COSTS
Deferred revenue includes payments received or billings in excess of
revenue recognized related to sponsorship, advertising and production
contracts as well as advances received against future royalties to be
earned related to book publishing contracts. In addition, revenue and
certain related production and marketing costs from producing
magazines are deferred until publication, at which time all material
services relating to the magazine have been performed.
NET REVENUES BY TYPE
Net revenues by type are as follows:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
TYPE
Sponsorship, advertising
and production $ 2,467,864 $ 418,053 $ 5,042,621 $ 545,208
Merchandise 1,241,745 71,110 2,128,913 82,310
Publishing, travel and other 3,147,190 54,381 3,404,297 110,459
-----------------------------------------------------------
Total $ 6,856,799 $ 543,544 $ 10,575,831 $ 737,977
===========================================================
For the three months ended June 30, 2000 and 1999, merchandise revenue
included outbound shipping and handling charges of approximately
$129,000 and $6,000, respectively. For the six months ended June 30,
2000 and 1999, merchandise revenue included outbound shipping and
handling charges of approximately $230,000 and $7,000, respectively.
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NET LOSS PER SHARE
The Company computes net loss per share in accordance with SFAS No.
128, "Earnings per Share." Basic net loss per share is computed by
dividing net loss by the weighted average number of common shares
outstanding during the period. Diluted net loss per share adjusts
basic loss per share for the effects of convertible securities, stock
options and other potentially dilutive financial instruments, only in
the periods in which such effect is dilutive. There were no dilutive
securities in any of the periods presented herein.
3. ACQUISITIONS
Pursuant to an Agreement and Plan of Merger (the "Merger Agreement"),
dated as of February 1, 2000, by and among the Company, Knot
Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of the Company ("Buyer"), and Weddingpages, Inc., a
Delaware corporation ("Weddingpages"), Buyer merged with and into
Weddingpages on March 29, 2000, with Weddingpages as the surviving
Corporation (the "Merger").
The Merger was affected through the conversion of each share of common
stock and Class A common stock of Weddingpages (each, a "Common
Stock") outstanding immediately prior to the consummation of the
Merger into the right to receive in cash an amount equal to $1.78. Of
that $1.78 per share, $0.10 per share is held in an escrow account
pursuant to the terms of an escrow arrangement described in the Merger
Agreement. The amount retained in the escrow account is subject to
certain deductions in the event of third party claims against certain
indemnified parties. The aggregate purchase price of $10.0 million
consisted of approximately $9.2 million for the common stock and
related common stock options of Weddingpages, inclusive of $700,000
paid to the former Chief Executive Officer of Weddingpages in
consideration for the execution of a non-compete agreement and
approximately $775,000 of other costs associated with the acquisition.
Results of operations for Weddingpages have been included with
those of the Company subsequent to the acquisition date.
Unaudited pro forma data for the Company for the six months ended
June 30, 2000 and June 30, 1999 given effect to the acquisition of
Weddingpages, as if it had occurred on January 1, 1999 are show
below. The pro forma information does not necessarily reflect the
actual results that would have been achieved, nor is it necessarily
indicative of future consolidated results of the Company.
SIX MONTHS ENDED JUNE 30,
-------------------------
2000 1999
---- ----
in thousands,
except per share data
Net revenue $ 11,282 $ 6,421
Net loss $ (7,541) $ (3,810)
Net loss per share $ (0.52) $ (1.25)
4. NOTE PAYABLE
The Company has a $2,500,000 line of credit with a bank that expires
December 2000 and bears an interest rate equal to prime plus 0.5%.
There was an outstanding balance of $1,724,811 as of June 30, 2000.
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5. LONG TERM DEBT
Long-term debt as of June 30, 2000:
Market purchase note due in annual installments of $60,000 through
October 2008, based on imputed interest of 8.75%.....................................$367,040
9.0% equipment installment note, due in monthly installments
of $4,566 through December 2002.......................................................119,177
-------
Total long-term debt.................................................................$486,217
Less current portion of long-term debt.................................................73,313
Long term debt, excluding current portion............................................$412,904
========
Maturities of long-term obligations for the five years ending June 30,
2005 are as follows: 2001, $73,313; 2002, $83,209; 2003, $62,951;
2004, $39,446; 2005, $42,898 and $184,400 thereafter.
6. RELATED PARTY TRANSACTIONS
On May 1, 2000 the Company entered into an International Anchor Tenant
Agreement with America Online, Inc. ("AOL"), whereby the Company
received distribution within AOL and its affiliates within
international markets. The agreement expires on May 1, 2003 and
provides for quarterly carriage fees payable over the term of the
agreement in the amount of $215,000 per quarter through February 1,
2001, increasing to $287,500 per quarter through February 1, 2002, and
increasing to $372,500 per quarter through February 1, 2003.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction
with our financial statements and related notes included elsewhere in this
report. This discussion contains forward-looking statements based on our
current expectations, assumptions, estimates and projections about the Company
and our industry. These forward-looking statements involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in such forward-looking statements as a result of certain factors,
as more fully described in this section and elsewhere in this report. We
undertake no obligation to update publicly any forward-looking statements for
any reason, even if new information becomes available or other events occur in
the future.
OVERVIEW
The Knot is a global life events media and services company. As the
leading online wedding destination on the World Wide Web and the primary
wedding content provider on America Online and several other of AOL's leading
brands, including AOL.com, Netscape Netcenter and CompuServe, The Knot combines
comprehensive content and an active online community with wedding-related
commerce. Our online sites provide full-service offerings targeted at the
planning needs of today's brides and grooms. We believe that our sites enable
our users to overcome the many challenges of the wedding planning process by
providing a one-stop solution. In addition, we provide advertisers and vendors
with targeted access to couples actively seeking information and making
meaningful buying decisions relating to all aspects of this significant life
event.
We also service the wedding market through a series of books and a
wedding fashion magazine called Wedding Gowns. During February 2000, we
launched the premiere issue of Wedding Gowns, which is being sold on newsstands
across the nation. These traditional forms of media provide cross-promotional
opportunities and assist us in increasing our brand awareness and our online
audience.
The Knot commenced operations in May 1996 and launched our website in
July 1997. We launched The Knot Registry, our online gift registry, in
November 1998. In July 1999, we acquired the assets of Bridalink.com, an
Internet wedding supply store, and the common stock of Click Trips, Inc., an
online travel agency. In addition, in July 1999, we entered into a strategic
alliance with Weddingpages, Inc., the leading publisher of regional wedding
magazines serving engaged couples and wedding professionals in over 50
company-owned and franchised major U.S. markets. In August 1999, we acquired
the assets of Wedding Photographers Network, an online searchable database of
local wedding photographers.
In March 2000, we announced our first international alliance with H.
Stern, a major international jeweler and specialty retailer, to create a new
50/50 joint venture named The Knot Brasil. The new company will launch a
Portuguese-language wedding Web site and gift registry in Brazil, where H.
Stern's headquarters is based, targeting the country's annual to-be-wed market
of over one million couples.
Also in March 2000, we acquired Weddingpages, Inc., the leading
publisher of regional wedding magazines, which provides us with a veteran
salesforce in over 50 company-owned and franchised major U.S. markets. To
further emphasize its local dominance, Weddingpages belongs to many industry
associations and attends over 2,000 local and national bridal shows annually.
In April 2000, we announced the launch of The Knot New York, our first
in-depth local area on our web site dedicated to providing extensive services
and content for region-specific wedding planning. Through our acquisition of
Weddingpages, we offer online vendor listings throughout the United States and
have plans to roll out comprehensive local content areas similar to The Knot
New York over the coming months. Through our local market expansion, we are
able to influence many of the wedding-related decisions and purchases made on
the local level.
In May 2000, we expanded our long-term relationship with America
Online globally. The Knot will have the premier presence in weddings areas
across the AOL International online services, including those in Brazil, the
U.K., France, Germany, Hong Kong, Japan, Australia and Canada, as well as some
of AOL's other international brands. As part of our global strategy, we plan to
feature our joint ventures' sites on the AOL International online services as
each site is launched.
Also in May 2000, we announced a European joint venture with Gerard
Bedouk Holding (GBH), the largest wedding media company in Europe, to launch
several wedding websites in the European Community. This European
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joint venture, which will be based outside of Paris, plans to launch its first
site in France featuring The Knot's interactive planning tools, extensive
bridal gown search, and editorial content. GBH publishes a bi-monthly wedding
trade magazine and three consumer wedding magazines, Mariee in France and
Wedding Dresses in the U.K. and the U.S. GBH also produces two annual wedding
shows in Paris. Through our relationship with GBH, we expect The Knot brand
will gain broad exposure in Europe. GBH will promote the joint venture in its
consumer and trade publications and bridal shows.
The Knot derives revenues from the sale of online sponsorship,
advertising and production contracts. We also derive revenues from the sale of
merchandise, from publishing and from the sale of travel packages.
Sponsorship revenues are derived principally from contracts currently
ranging up to thirty-six months. Sponsorships are designed to integrate
advertising with specific online editorial content. Sponsors can purchase the
exclusive right to promote products or services on a specific editorial area
and can purchase a special feature on our sites.
Advertising revenues are derived principally from short-term contracts
that typically range from one month up to one year. Advertising contracts
include banner advertisements and online listings for local wedding vendors.
Certain sponsorship and advertising contracts provide for the delivery
of a minimum number of impressions. Impressions are the featuring of a
sponsor's advertisement, banner, link or other form of content on our sites. To
date, we have recognized our sponsorship and advertising revenues over the
duration of the contracts on a straight line basis as we have exceeded minimum
guaranteed impressions. To the extent that minimum guaranteed impressions are
not met, we are generally obligated to extend the period of the contract until
the guaranteed impressions are achieved. If this were to occur, we would defer
and recognize the corresponding revenues over the extended period.
Production revenues are derived from the development of online sites
and tools. Production revenues are recognized when the development is completed
and the online sites and tools are delivered.
To promote our brand on third-party sites, we produce online sites for
third parties featuring both The Knot and the third party. The cost of
production of these sites is included in our operating expenses. In return, we
receive distribution and exposure to their viewers, outbound links to our sites
and, in some circumstances, offline brand marketing. We do not recognize
revenues with respect to these barter transactions.
Merchandise revenues are derived from the sale of merchandise through
Bridalink.com, The Knot Shop and The Knot Registry. Merchandise revenues
include outbound shipping and handling charges. Merchandise revenues are
recognized when products are shipped to customers, reduced by an allowance for
estimated sales returns.
Commencing in the quarter ending June 30, 2000, publishing revenue
includes advertising revenue derived from the publication of regional wedding
magazines by Weddingpages as well as service fees and royalty fees from
producing the Weddingpages magazine for certain franchisees. These revenues and
fees are recognized upon the publication of the magazine at which time all
material services related to the magazine have been performed. Additionally,
publishing revenues are derived from author royalties paid to us related to our
book publishing contract and from sales of magazines. Royalties are recognized
when we have met all contractual obligations, which typically include the
delivery and acceptance of a final manuscript. Revenues from the sale of
magazines are recognized when the products are shipped, reduced by an allowance
for estimated sales returns.
Travel revenues are derived from commissions earned on the sale of
travel packages by our online travel agency, Click Trips, Inc. These revenues
are recognized when the customer commences travel.
We record deferred compensation, net of reversals related to stock
options forfeited, primarily as a result of the issuance of stock options to
employees with exercise prices per share determined for financial reporting
purposes to be below the fair market value per share of our common stock at the
dates of grant. The difference is recorded as a reduction of stockholders'
equity and amortized as non-cash compensation expense on an accelerated method
over the four-year vesting period of the related options.
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RESULTS OF OPERATIONS
Net Revenues
Net revenues increased to $6.9 million and $10.6 million for the three
and six months ended June 30, 2000, respectively, which represents an increase
of $6.3 million and $9.8 million when compared with the corresponding periods
in 1999.
Sponsorship, advertising and production revenues increased to $2.5
million and $5.0 million for the three and six months ended June 30, 2000,
respectively, as compared to $418,000 and $545,000 for the corresponding
periods in 1999. Additional sponsorship and production contracts contributed to
$2.0 million and $4.1 million of the increase for the three and six months
ended June 30, 2000, respectively. We commenced the launch of local vendor
advertising programs in July 1999. Local advertising contributed revenue of
$484,000 and $942,000 for the three and six months ended June 30, 2000,
respectively. Sponsorship, advertising and production revenues amounted to 36%
of our net revenues for the quarter ended June 30, 2000 and 77% for the quarter
ended June 30, 1999. For the six months ended June 30, 2000 and 1999,
sponsorship, advertising and production revenues amounted to 48% and 74%,
respectively. For the quarters ended June 30, 2000 and 1999, our top seven
advertisers accounted for 16% and 65% of our net revenues, respectively. For
the six months ended June 30, 2000 and 1999, our top seven advertisers accounted
for 24% and 62% of our net revenues, respectively. For the six months ended
June 30, 1999, one advertiser accounted for 24% of our total advertising
revenue.
Merchandise revenues amounted to $1.2 million and $2.1 million for the
three and six months ended June 30, 2000, respectively, resulting primarily
from an increase in sales of wedding supplies through Bridalink.com and The
Knot Shop of $898,000 and $1.6 million, respectively. Sales from The Knot
Registry increased $276,000 and $468,000 for the three and six month periods
ended June 30, 2000, respectively, compared to the corresponding periods in
1999. Merchandise revenues amounted to 18% of our net revenues for the quarter
ended June 30, 2000 and 13% of our net revenues for the quarter ended June 30,
1999. For the six months ended June 30, 2000 and 1999, merchandise revenue was
20% and 11% of our net revenue, respectively.
Publishing, travel and other revenues increased to $3.1 million and
$3.4 million for the three and six months ended June 30, 2000, respectively, as
compared to $54,000 and $110,000 for the corresponding periods in 1999. The
increase is primarily attributable to advertising revenue derived from the
publication of regional wedding magazines by Weddingpages as well as service
fees and royalty fees from producing the Weddingpages magazine for certain
franchisees. These revenues and fees commenced in the quarter ending June 30,
2000. Publishing, travel and other revenues accounted for 46% and 10% for the
quarters ended June 30, 2000 and 1999, respectively, and 32% and 15% for the
six months ended June 30, 2000 and 1999, respectively.
Cost of Revenues
Cost of revenues consists of the cost of merchandise sold, including
outbound shipping costs, the costs related to the production of regional
wedding magazines and the Wedding Gowns magazine, payroll and related expenses
for our personnel who are responsible for the production of customized online
sites and tools, and costs of Internet and hosting services.
Cost of revenues increased to $1.9 million and $3.0 million for the
three and six months ended June 30, 2000 from $188,000 and $241,000 for the
corresponding periods in 1999. These increases include $790,000 of cost of
revenue related to the production of regional wedding magazines commencing in
the second quarter ending June 30, 2000. Cost of revenues from the sale of
wedding supplies were $629,000 and $1.1 million for the three and six month
period ended June 30, 2000, respectively, with no cost of revenues for the
corresponding periods in 1999. The sale of wedding supplies was initiated in
July, 1999. Cost of revenues from the sales of merchandise through The
Knot Registry increased by $209,000 and $373,000 for the three and six month
periods ended June 30, 2000, respectively, primarily due to increased sales. As
a percentage of our net revenues, cost of revenues decreased to 27% for the
quarter ended June 30, 2000 from 35% for the quarter ended June 30, 1999. For
the six month period, cost of revenues decreased to 28% from 33% of our net
revenue for the corresponding periods.
Product and Content Development
Product and content development expenses consist of payroll and
related expenses for creative personnel, information technology and expenses
for third-party software developers and contract programmers.
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Product and content development expenses increased to $1.6 million and
$2.5 million for the three and six month periods ended June 30, 2000,
respectively, from $464,000 and $865,000 for the corresponding periods in 1999.
The increase for the three and six months ended June 30, 2000 was primarily
attributable to a $783,000 and $1.3 million increase, respectively, resulting
from hiring additional staff to enhance the content and functionality of our
sites. In addition, for the three and six months ended June 30, 2000, there was
an increase of $195,000 in product and content expenses resulting from the
acquisition of Weddingpages, primarily personnel costs.
As a percentage of our net revenues, product and content development
expenses decreased to 23% for the quarter ended June 30, 2000 from 85% for the
quarter ended June 30, 1999. For the six month period, product and content
development expenses decreased to 24% from 117%. We believe that significant
investments in product and content development are required to remain
competitive and, therefore, expect that our product and content development
expenses will continue to increase in absolute dollars for the foreseeable
future.
Sales and Marketing
Sales and marketing expenses consist primarily of payroll and related
expenses for sales and marketing, customer service and public relations
personnel, as well as expenditures for our AOL anchor tenant agreements,
advertising and promotional activities and fulfillment and distribution of
merchandise.
Sales and marketing expenses increased to $4.4 million and $7.2
million for the three and six month periods ended June 30, 2000, respectively,
from $787,000 and $1.5 million for the corresponding periods in 1999. There was
an increase in personnel and related costs of $2.4 million and $3.2 million for
the three and six months ended June 30, 2000, respectively, related to
additional sales, marketing and customer service personnel and higher
commissions as a result of increased revenues. These increased personnel and
related costs include, for both periods, $1.6 million in expenses related to
the local sales force of Weddingpages. Additionally, there was an increase of
$529,000 and $984,000 for the three and six month period ended June 30, 2000 in
promotional expenses. As a percentage of our net revenues, sales and marketing
expenses decreased to 64% for the quarter ended June 30, 2000 from 145% for the
quarter ended June 30, 1999. For the six months ended June 30, 2000 and 1999,
sales and marketing expenses decreased to 69% from 202%, respectively.
We believe that significant investments in sales and marketing
personnel and programs are required to remain competitive and to build our
brand both online and offline and, therefore, that our sales and marketing
expenses will continue to increase in absolute dollars for the foreseeable
future.
General and Administrative
General and administrative expenses consist primarily of payroll and
related expenses for our executive management, finance and administrative
personnel, legal and accounting fees, facilities costs and insurance expenses.
General and administrative expenses increased to $2.2 million and $3.7
million for the three and six months ended June 30, 2000, respectively, from
$621,000 and $1.0 million for corresponding periods in 1999. Administrative
personnel costs increased $472,000 and $1.0 million for the three and six month
periods ended June 30, 2000, respectively, including, for both periods,
$119,000 in related expenses for Weddingpages personnel. There was a $331,000
and $544,000 increase in professional fees and insurance, and a $130,000 and
$270,000 increase related to the build out of our facilities for the three and
six month periods ended June 30, 2000, respectively. As a percentage of our net
revenues, general and administrative expenses decreased to 32% for the three
months ended June 30, 2000 from 114% for the three months ended June 30, 1999.
General and administrative expenses decreased to 35% from 141% for the six
months ended June 30, 2000 and 1999, respectively.
We expect our general and administrative expenses to increase in
absolute dollars for the foreseeable future as we continue to hire personnel
and incur expenses to build our administrative infrastructure to support the
growth of our business and our operations as a public company.
Non-Cash Compensation
We recorded no deferred compensation during the three and six months
ended June 30, 2000. Amortization of deferred compensation increased to
$238,000 and $502,000 during the three and six months ended June 30, 2000
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from $213,000 and $342,000 for the three and six months ended June 30, 1999.
Non-cash compensation decreased to 3% of net revenue from 39% for the three
months ended June 30, 2000 and 1999, respectively. For the six months ended
June 30, 2000 and 1999, non-cash compensation was 5% and 46% of our net
revenues, respectively.
Non-Cash Sales and Marketing
We recorded deferred sales and marketing of $2.3 million, related to
the issuance of a warrant to AOL in connection with our amended anchor tenant
agreement in July 1999. Amortization of deferred sales and marketing was
$163,000 and $327,000 for the three and six months ended June 30, 2000,
respectively, or 2% and 3% of respective net revenues.
Depreciation and Amortization
Depreciation and amortization expenses consist of depreciation and
amortization of property and equipment and amortization of intangible assets
related to acquisitions.
Depreciation and amortization expenses increased to $583,000 and
$837,000 for the three and six month periods ended June 30, 2000 from $106,000
and $175,000 for the corresponding periods in 1999. This increase was primarily
due to a $184,000 and a $307,000 increase in depreciation as a result of an
increase in property and equipment purchases and leasehold improvements, an
additional $343,000 and $426,000 of amortization of intangible assets related
to acquisitions, and an increase in amortization of capitalized software of
$56,000 and $103,000 respectively, for the three and six month periods. As a
percentage of net revenues, depreciation and amortization expense decreased to
8% from 19% for the three month periods ending June 30, 2000 and 1999,
respectively, and to 8% from 24% for the six months ended June 30, 2000 and
1999, respectively.
Interest Income
Interest income net of interest expense increased to $343,000 and
$915,000 for the three and six months ended June 30, 2000, as compared to
$109,000 and $100,000 for the corresponding periods in 1999. The increase is
primarily a result of the investment of the net proceeds from our initial
public offering of common stock.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, our cash and cash equivalents amounted to $22.6
million. We currently invest primarily in short-term debt instruments that are
highly liquid, of high-quality investment grade, and have maturities of less
than three months with the intent to make such funds readily available for
operating purposes.
Net cash used in operating activities was $6.0 million for the six
months ended June 30, 2000. This resulted primarily from the loss for the
period, as adjusted for depreciation and amortization of $1.7 million, increases
in accounts receivable of $3.3 million, and increases in deferred production
and marketing expenses of $670,000, partially offset by increases in accounts
payable and accrued expenses of $1.2 million, and deferred revenue of $1.3
million. Net cash used in operating activities was $2.4 million for the six
months ended June 30, 1999 due primarily to the net loss for the quarter, as
adjusted for depreciation and amortization of $517,000, increases in
inventories of $573,000, partially offset by increases in accounts payable and
accrued expenses of $775,000 and deferred revenue of $501,000.
Net cash used in investing activities was $10.8 million for the six
months ended June 30, 2000, primarily due to cash paid for the acquisition of
Weddingpages of $9.5 million and purchases of property and equipment of
approximately $1.9 million partially offset by the maturity of short-term
investments of $620,000. Net cash used in investing activities was $1.0 million
for the six months ended June 30, 1999 as a result of purchases of property and
equipment.
Net cash used in financing activities was $603,000 for the six months
ended June 30, 2000, primarily due to the payment of expenses related to our
initial public offering and net reductions in our short term borrowings.
These expenses were offset, in part, by proceeds from the exercise of stock
options. Net cash provided by financing activities was $15.1 million for the
six months ended June 30, 1999, due to the proceeds from the issuance of
convertible preferred stock.
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Although we have no material commitments for capital expenditures,
capital expenditures have increased by $1.0 million for the six months ended
June 30, 2000 compared to the same period in 1999, consistent with the growth
of operations and staffing. We anticipate that increases in capital expenditures
will continue for the foreseeable future as a result of increased growth.
As of June 30, 2000, we had commitments under non-cancelable operating
leases amounting to $6.9 million, of which $654,000 will be due on or before
June 30, 2001.
As of June 30, 2000, we had commitments under an amended anchor tenant
agreement with AOL and an additional anchor tenant agreement with AOL
International in the amount of $6.3 million of which approximately $2.1 million
will be due on or before June 30, 2001.
On March 29, 2000, we completed our acquisition of Weddingpages
through the merger of a wholly-owned subsidiary of ours with and into
Weddingpages, with Weddingpages surviving the merger. Under the terms of the
agreement, the merger was affected through the conversion of each share of
common stock and class A common stock of Weddingpages outstanding into $1.78
for an aggregate purchase price, including related costs, of approximately
$10.0 million. We used a portion of the proceeds received from our initial
public offering to consummate the acquisition.
We currently believe that our current cash and cash equivalents will
be sufficient to fund our working capital and capital expenditure requirements
for at least the next 12 months. We intend to continue to pursue acquisitions
of, or investments in, complimentary businesses, services and technologies,
expand our sales and marketing programs and conduct more aggressive brand
promotions. We cannot assure you that additional funding, if required, will be
available to us in amounts or on terms acceptable to us. If sufficient funds
are not available or are not available on acceptable terms, our ability to fund
our expansion, take advantage of acquisition opportunities, develop or enhance
our services or products, or otherwise respond to competitive pressures would
be significantly limited. Those limitations would materially and adversely
affect our business, results of operations and financial condition.
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RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
Important Factors Regarding Forward-Looking Statements
In addition to other information in this Quarterly Report on Form 10-Q
and in the documents we are incorporating by reference, the following risk
factors should be carefully considered in evaluating our business because such
factors currently have a significant impact or may have a significant impact on
our business, operating results or financial condition. This quarterly report
on Form 10-Q contains forward-looking statements that have been made
pursuant to the provisions of the Private Securities Litigation Reform Act of
1995. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below and
elsewhere in this quarterly report.
RISKS RELATED TO OUR BUSINESS
WE HAVE AN UNPROVEN BUSINESS MODEL AND IT IS UNCERTAIN WHETHER ONLINE
WEDDING-RELATED SITES CAN GENERATE SUFFICIENT REVENUES TO SURVIVE.
A majority of our model for conducting business and generating revenues is
new and unproven. Our business model depends upon our ability to generate
revenue streams from multiple sources through our online sites, including:
- - Internet sponsorship and advertising fees from third parties; and
- - online sales of wedding gifts, supplies and honeymoon travel packages
It is uncertain whether wedding-related online sites that rely on
attracting sponsors and advertisers, as well as people to purchase wedding
gifts and supplies, can generate sufficient revenues to survive. For our
business to be successful, we must provide users with an acceptable blend of
products, information, services and community offerings that will attract
wedding consumers to our online sites frequently. In addition, we must provide
sponsors, advertisers and vendors the opportunity to reach these wedding
consumers. We provide our services to users without charge and we may not be
able to generate sufficient revenues to pay for these services. Accordingly, we
are not certain that our business model will be successful or that we can
sustain revenue growth or be profitable.
WE HAVE A LIMITED OPERATING HISTORY AND EXPECT TO ENCOUNTER DIFFICULTIES FACED
BY EARLY STAGE COMPANIES IN THE INTERNET ADVERTISING AND ONLINE WEDDING
MARKETS.
We commenced operations in May 1996 and recorded our first revenues in
September 1996, immediately following the launch of our first online property.
Accordingly, we have only a limited operating history with which you can
evaluate our business and prospects. An investor in our common stock must
consider the risks and difficulties frequently encountered by early stage
companies in new and rapidly evolving markets, such as the Internet advertising
and online wedding markets. These risks include our ability to:
- - increase the audience on our sites;
- - broaden awareness of our brand;
- - strengthen user-loyalty;
- - offer compelling content;
- - maintain our leadership in generating traffic;
- - maintain our current, and develop new, strategic relationships;
- - attract a large number of advertisers from a variety of industries;
- - respond effectively to competitive pressures;
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- - generate revenues from the sale of merchandise and e-commerce;
- - integrate our recent acquisitions into our existing operations;
- - continue to develop and upgrade our technology; and
- - attract, integrate, retain and motivate qualified personnel.
As a result of our limited operating history, we do not have
historical financial data for a significant number of periods upon which to
forecast our revenues and results of operations.
These risks could negatively impact our financial condition if left
unaddressed. For more information on the effects of some of these risks, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
WE HAVE A HISTORY OF SIGNIFICANT LOSSES SINCE OUR INCEPTION AND EXPECT TO INCUR
SIGNIFICANT LOSSES FOR THE FORESEEABLE FUTURE.
We have not achieved profitability and expect to continue to incur
significant losses and negative cash flow for the foreseeable future. We
incurred net losses of $752,000 for the period from May 2, 1996 (inception)
through December 31, 1996, $1.1 million for the year ended December 31, 1997,
$1.5 million for the year ended December 31, 1998, $9.2 million for the year
ended December 31, 1999 and $6.7 million for the six months ended June 30,
2000. As of June 30, 2000, our accumulated deficit was $19.3 million. We also
expect to continue to incur significant operating expenses and capital
expenditures and, as a result, we will need to generate significant revenues to
achieve and maintain profitability. Even if we do achieve profitability, we
cannot assure you that we can sustain or increase profitability on a quarterly
or annual basis in the future. Failure to achieve or maintain profitability may
materially and adversely affect the market price of our common stock. For more
information on our losses and the effects of our expenses on our financial
performance, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
WE LACK SIGNIFICANT REVENUES AND MAY BE UNABLE TO ADJUST SPENDING QUICKLY
ENOUGH TO OFFSET ANY UNEXPECTED REVENUE SHORTFALL.
Our revenues for the foreseeable future will remain dependent on user
traffic levels and advertising activity both online and offline and the
expansion of our e-commerce activity. In addition, we plan to expand and
develop content and to upgrade and enhance our technology and infrastructure to
support our growth. We incur a significant percentage of our expenses, such as
employee compensation and rent, prior to generating revenues associated with
those expenses. Moreover, our expense levels are based, in part, on our
expectation of future revenues. We may be unable to adjust spending quickly
enough to offset any unexpected revenue shortfall. If we have a shortfall in
revenues in relation to our growth in expenses, then our results of operations
would be materially and adversely affected. For more information on our net
revenues and the effects of our expenses on our financial performance, see
"Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
OUR QUARTERLY REVENUES AND OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT
FLUCTUATION AND THESE FLUCTUATIONS MAY ADVERSELY AFFECT THE TRADING PRICE OF
OUR COMMON STOCK.
Our quarterly revenues and operating results have fluctuated
significantly in the past and are expected to continue to fluctuate
significantly in the future as a result of a variety of factors, many of which
are outside our control. These factors include:
- - the level of online usage and traffic on our website;
- - demand for online and offline advertising;
- - seasonal trends in both online usage and advertising placements;
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- - the addition or loss of advertisers;
- - the advertising budgeting cycles of specific advertisers;
- - the number of users that purchase merchandise from us;
- - the magazine publishing cycle of Weddingpages;
- - the amount and timing of capital expenditures and other costs relating to
the expansion of our operations, including those related to acquisitions;
- - the introduction of new sites and services by us or our competitors;
- - changes in our pricing policies or the pricing policies of our
competitors;
- - general economic conditions; and economic conditions specific to the
Internet, electronic commerce, online and offline media.
We do not believe that period-to-period comparisons of our operating
results are necessarily meaningful and you should not rely upon these
comparisons as indicators of our future performance.
Due to the foregoing factors, it is possible that our results of
operations in one or more future quarters may fall below the expectations of
securities analysts and investors. In such event, the trading price of our
common stock is likely to decline.
OUR FINANCIAL CONDITION AND REVENUES WOULD BE ADVERSELY AFFECTED IF TRAFFIC ON
OUR AOL SITE DECREASED OR IF CARRIAGE OF OUR SITES ON AOL WAS DISCONTINUED.
AOL has accounted for a significant portion of our online traffic to
date. During the second quarter of 2000, approximately 18% of our users were
customers of AOL's Internet services. If the financial condition and operations
of AOL were to deteriorate significantly, or if the traffic on our AOL site
were to substantially decrease, our revenues could be adversely affected.
In addition, our anchor tenant agreement with AOL expires on January
6, 2003. AOL may extend it for an additional two years, but does not have any
obligation to extend or renew the agreement. Through the AOL agreement, we
provide content on America Online, AOL.com, AOL Hometown, Netscape and
CompuServe. Under the terms of the agreement, AOL may terminate the agreement
without cause only with respect to our carriage on AOL Hometown, Netscape, and
CompuServe upon 30 days' prior written notice. If the carrying of our sites on
AOL is discontinued, we would lose members, sponsors and advertisers and our
business, results of operations and financial condition would be materially and
adversely affected.
BECAUSE WEDDINGS OCCUR MORE FREQUENTLY IN THE SECOND AND THIRD QUARTERS OF THE
CALENDAR YEAR, OUR OPERATING RESULTS MAY FLUCTUATE DUE TO SEASONAL FACTORS.
Seasonal and cyclical patterns may affect our revenues. In 1998, 20%
of weddings occurred in the first quarter, 26% occurred in the second quarter,
30% occurred in the third quarter and 24% occurred in the fourth quarter.
Because we launched The Knot Registry in November 1998 and acquired Bridalink
in July 1999, we have limited experience generating merchandise revenues.
Therefore, we have been unable to determine whether our merchandise revenues
are affected by seasonal fluctuations in the number of weddings. In addition,
we believe that advertising sales in traditional media, such as television and
radio, and print generally are lower in the first and third calendar quarters
of each year. Historically, we have experienced increases in our traffic during
the first and second quarters of the year. As a result of these factors, we may
experience fluctuations in our revenues from quarter to quarter.
WE MAY BE UNABLE TO CONTINUE TO BUILD AWARENESS OF THE KNOT BRAND NAME WHICH
WOULD NEGATIVELY IMPACT OUR BUSINESS AND CAUSE OUR SPONSORSHIP AND ADVERTISING
REVENUES TO DECLINE.
Building recognition of our brand is critical to attracting and
expanding our online user base and our offline readership. Because we plan to
continue building brand recognition, we may find it necessary to accelerate
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expenditures on our sales and marketing efforts or otherwise increase our
financial commitment to creating and maintaining brand awareness. Our failure
to successfully promote and maintain our brand would adversely affect our
business and cause us to incur significant expenses in promoting our brand
without an associated increase in our net revenues.
IF WE CANNOT PROTECT OUR DOMAIN NAMES, IT WILL IMPAIR OUR ABILITY TO BRAND
SUCCESSFULLY THE KNOT.
We currently hold various Web domain names, including www.theknot.com.
The acquisition and maintenance of domain names generally is regulated by
Internet regulatory bodies. The regulation of domain names in the United States
and in foreign countries is subject to change. Governing bodies may establish
additional top-level domains, appoint additional domain name registrars or
modify the requirements for holding domain names. As a result, we may be unable
to acquire or maintain relevant domain names in all countries in which we
conduct business. Furthermore, it is unclear whether laws protecting trademarks
and similar proprietary rights will be extended to protect domain names.
Therefore, we may be unable to prevent third parties from acquiring domain
names that are similar to, infringe upon or otherwise decrease the value of our
trademarks and other proprietary rights. We may not successfully carry out our
business strategy of establishing a strong brand for The Knot if we cannot
prevent others from using similar domain names or trademarks. This could impair
our ability to increase market share and revenues.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE NOT ABLE TO SUCCESSFULLY
INTEGRATE OUR RECENT AND ANY FUTURE ACQUISITIONS.
In March 2000, we acquired Weddingpages, Inc., a publisher of local
wedding publications. We may not be able to successfully integrate and expand
the Weddingpages business model. In addition, we may still encounter difficulty
integrating the personnel, operations, technology and software of this acquired
business. These difficulties could disrupt our ongoing business, distract our
management and employees, increase our expenses and adversely affect our
results of operations.
In the future, we may acquire, or invest in, complementary companies,
products or technologies. Acquisitions and investments involve numerous risks,
including:
- - difficulties in integrating operations, technologies, products and
personnel;
- - diversion of financial and management resources from existing operations;
- - risks of entering new markets;
- - potential loss of key employees; and
- - inability to generate sufficient revenues to offset acquisition or
investment costs.
THE COSTS ASSOCIATED WITH POTENTIAL ACQUISITIONS OR STRATEGIC ALLIANCES COULD
DILUTE YOUR INVESTMENT OR ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
To pay for an acquisition or to enter into a strategic alliance, we
might use equity securities, debt, cash, or a combination of the foregoing. If
we use equity securities, our stockholders may experience dilution. In
addition, an acquisition may involve non-recurring charges or involve
amortization of significant amounts of goodwill. The related increases in
expenses could adversely affect our results of operations. Any such
acquisitions or strategic alliances may require us to obtain additional equity
or debt financing, which may not be available on commercially acceptable terms,
if at all.
IF THE USE OF THE INTERNET AS AN ADVERTISING AND MARKETING MEDIUM FAILS TO
DEVELOP OR DEVELOPS MORE SLOWLY THAN WE EXPECT, OUR FUTURE REVENUES AND
PROSPECTS WOULD BE MATERIALLY AND ADVERSELY AFFECTED.
Our future success depends in part on a significant increase in the
use of the Internet as an advertising and marketing medium. Sponsorship,
advertising and production revenues constituted 48% of our net revenue for the
six months ended June 30, 2000, 71% of our net revenues for the year ended
December 31, 1999 and 82% of our net revenues for the year ended December 31,
1998. The Internet advertising market is new and rapidly evolving, and it
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cannot yet be compared with traditional advertising media to gauge its
effectiveness. As a result, demand for and market acceptance of Internet
advertising solutions are uncertain. Many of our current and potential
customers have little or no experience with Internet advertising and have
allocated only a limited portion of their advertising and marketing budgets to
Internet activities. The adoption of Internet advertising, particularly by
entities that have historically relied upon traditional methods of advertising
and marketing, requires the acceptance of a new way of advertising and
marketing. These customers may find Internet advertising to be less effective
for meeting their business needs than traditional methods of advertising and
marketing. Furthermore, there are software programs that limit or prevent
advertising from being delivered to a user's computer. Widespread adoption of
this software by users would significantly undermine the commercial viability
of Internet advertising.
WE DEPEND ON A LIMITED NUMBER OF ONLINE SPONSORS AND ADVERTISERS AND THE LOSS
OF A NUMBER OF THESE WOULD RESULT IN A DECLINE IN OUR REVENUES.
We derive online sponsorship revenues from contracts ranging up to
three years and advertising revenues principally from short-term advertising
contracts. We depend on a limited number of online sponsors and advertisers for
a significant part of our net revenues. Consequently, the loss of any of these
online sponsors or advertisers would cause our revenues to decline. For the six
months ended June 30, 2000 and for the year ended December 31, 1999, no single
sponsor or advertiser accounted for 10% or more of our net revenues.
We anticipate that our future results of operations will continue to
depend to a significant extent upon revenues from a limited number of online
sponsors and advertisers. In addition, we anticipate that such online sponsors
and advertisers will continue to vary over time. To achieve our long-term
goals, we will need to attract additional significant online sponsors and
advertisers on an ongoing basis. If we fail to enter into a sufficient number
of large contracts during a particular period, our revenues for that period
would be adversely affected. For more information on our advertising revenues,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
OUR BUSINESS AND PROSPECTS WOULD SUFFER IF WE ARE UNABLE TO PROTECT AND ENFORCE
OUR INTELLECTUAL PROPERTY RIGHTS.
We rely solely upon copyright, trade secret and trademark law and
assignment of invention and confidentiality agreements to protect our
proprietary technology, processes, content and other intellectual property to
the extent that protection is sought or secured at all. We cannot assure you
that any steps we might take will be adequate to protect against infringement
and misappropriation of our intellectual property by third parties. Similarly,
we cannot assure you that third parties will not be able to independently
develop similar or superior technology, processes, content or other
intellectual property. The unauthorized reproduction or other misappropriation
of our intellectual property rights could enable third parties to benefit from
our technology without paying us for it. If this occurs, our business and
prospects would be materially and adversely affected. In addition, disputes
concerning the ownership or rights to use intellectual property could be costly
and time consuming to litigate, may distract management from other tasks of
operating the business, and may result in our loss of significant rights and
the loss of our ability to operate our business.
OUR PRODUCTS AND SERVICES MAY INFRINGE ON INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES AND ANY INFRINGEMENT COULD REQUIRE US TO INCUR SUBSTANTIAL COSTS AND
DISTRACT OUR MANAGEMENT.
Although we avoid infringing known proprietary rights of third
parties, including licensed content, we may be subject to claims alleging
infringement of third-party proprietary rights. If we are subject to claims of
infringement or are infringing the rights of third parties, we may not be able
to obtain licenses to use those rights on commercially reasonable terms, if at
all. In that event, we would need to undertake substantial reengineering to
continue our online offerings. Any effort to undertake such reengineering might
not be successful. Furthermore, a party making such a claim could secure a
judgment that requires us to pay substantial damages. A judgment could also
include an injunction or other court order that could prevent us from selling
our products. Any claim of infringement could cause us to incur substantial
costs defending against the claim, even if the claim is invalid, and could
distract our management from our business.
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WE DEPEND UPON QVC TO PROVIDE US WAREHOUSING, FULFILLMENT AND DISTRIBUTION
SERVICES, AND SYSTEM FAILURES OR OTHER PROBLEMS AT QVC COULD CAUSE US TO LOSE
CUSTOMERS AND REVENUES.
We have a services agreement with QVC to warehouse, fulfill and
arrange for distribution of approximately 95% of our products. Our agreement
with QVC expires in December 2003. QVC does not have any obligation to renew
this agreement. If QVC's ability to provide us with these services in a timely
fashion or at all is impaired, whether through labor shortage, slow down or
stoppage, deteriorating financial or business condition, system failures or for
any other reason, or if the services agreement is not renewed, we would not be
able, at least temporarily, to sell or ship our products to our customers. We
may be unable to engage alternative warehousing, fulfillment and distribution
services on a timely basis or upon terms favorable to us.
WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL FINANCING NECESSARY TO EXECUTE OUR
BUSINESS STRATEGY.
We currently believe that the net proceeds from our initial public
offering, together with our current cash and cash equivalents, will be
sufficient to fund our working capital and capital expenditure requirements for
at least the next 12 months. To the extent we require additional funds to
support our operations or the expansion of our business, we may need to sell
additional equity, issue debt or convertible securities or obtain credit
facilities through financial institutions. We cannot assure you that additional
funding, if required, will be available to us in amounts or on terms acceptable
to us. If sufficient funds are not available or are not available on acceptable
terms, our ability to fund our expansion, take advantage of acquisition
opportunities, develop or enhance our services or products, or otherwise
respond to competitive pressures would be significantly limited.
INCREASED COMPETITION IN OUR MARKETS COULD REDUCE OUR MARKET SHARE, THE NUMBER
OF OUR ADVERTISERS, OUR ADVERTISING REVENUES AND OUR MARGINS.
The Internet advertising and online wedding markets are new and
rapidly evolving. Additionally, both the internet advertising and online
wedding markets and the wedding magazine publishing markets are intensely
competitive, and we expect such competition to intensify in the future.
We face competition for members, users, readers and advertisers from
the following areas:
- - online services or Web sites targeted at brides and grooms as well as the
online sites of retail stores, manufacturers and regional wedding
directories;
- - bridal magazines, such as Bride's and Modern Bride; and
- - online and retail stores offering gift registries, especially from
retailers offering specific bridal gift registries.
We expect competition to increase because of the business
opportunities presented by the growth of the Internet and e-commerce. Our
competition may also intensify as a result of industry consolidation and a lack
of substantial barriers to entry. Many of our current and potential competitors
have longer operating histories, significantly greater financial, technical and
marketing resources, greater name recognition and substantially larger user,
membership or readership bases than we have and, therefore, have a
significantly greater ability to attract advertisers, users and readers. In
addition, many of our competitors may be able to respond more quickly than we
can to new or emerging technologies and changes in Internet user requirements,
as well as devote greater resources than we can to the development, promotion
and sale of services.
There can be no assurance that our current or potential competitors
will not develop products and services comparable or superior to those that we
develop or adapt more quickly than we do to new technologies, evolving industry
trends or changing Internet user preferences. Increased competition could
result in price reductions, lower margins or loss of market share. In addition,
as we expand internationally, we may face additional competition. There can be
no assurance that we will be able to compete successfully against current and
future competitors.
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IF SALES TO SPONSORS OR ADVERTISERS FORECASTED IN A PARTICULAR PERIOD ARE
DELAYED OR DO NOT OTHERWISE OCCUR, OUR RESULTS OF OPERATIONS FOR A PARTICULAR
PERIOD WOULD BE MATERIALLY AND ADVERSELY AFFECTED.
The time between the date of initial contact with a potential sponsor
or advertiser and the execution of a contract with the sponsor or advertiser is
often lengthy, typically ranging from six weeks for smaller agreements to six
months for larger agreements, and is subject to delays over which we have
little or no control, including:
- - customers' budgetary constraints;
- - customers' internal acceptance reviews;
- - the success and continued internal support of advertisers' and
sponsors' own development efforts; and
- - the possibility of cancellation or delay of projects by advertisers or
sponsors.
During the sales cycle, we may expend substantial funds and management
resources in advance of generating sponsorship or advertising revenues.
Accordingly, if sales to advertisers or sponsors forecasted in a particular
period are delayed or do not otherwise occur, we would generate less
sponsorship and advertising revenues during that period and our results of
operations for that period would suffer.
OUR POTENTIAL INABILITY TO COMPETE EFFECTIVELY IN OUR INDUSTRY FOR QUALIFIED
PERSONNEL COULD HINDER THE SUCCESS OF OUR BUSINESS.
Competition for personnel in the Internet and wedding industries is
intense. We may be unable to retain those employees who are important to the
success of our business. We may also face difficulties attracting, integrating
or retaining other highly qualified employees in the future. We have
experienced, and expect to continue to experience, difficulty in hiring and
retaining highly-skilled employees with appropriate qualifications as a result
of our rapid growth and expansion. If we cannot attract new personnel or retain
and motivate our current personnel, our business may succeed.
SYSTEMS DISRUPTIONS AND FAILURES COULD CAUSE ADVERTISER OR USER DISSATISFACTION
AND COULD REDUCE THE ATTRACTIVENESS OF OUR SITES.
The continuing and uninterrupted performance of our computer systems
is critical to our success. Our advertisers and sponsors, users and members may
become dissatisfied by any systems disruption or failure that interrupts our
ability to provide our services and content to them. Substantial or repeated
system disruption or failures would reduce the attractiveness of our online
sites significantly. Substantially all of our communications hardware and some
of our other computer hardware operations are located at Globix Corporation's
facilities in New York, New York. Fire, floods, earthquakes, power loss,
telecommunications failures, break-ins and similar events could damage these
systems. Computer viruses, electronic break-ins or other similar disruptive
problems could also adversely affect our online sites. Our business could be
materially and adversely affected if our systems were affected by any of these
occurrences. We do not presently have any secondary "off-site" systems or a
formal disaster recovery plan. Our sites must accommodate a high volume of
traffic and deliver frequently updated information. Our sites have in the past
experienced slower response times or decreased traffic. These types of
occurrences in the future could cause users to perceive our sites as not
functioning properly and therefore cause them to use another online site or
other methods to obtain information or services. In addition, our users depend
on Internet service providers, online service providers and other site
operators for access to our online sites. Many of them have experienced
significant outages in the past, and could experience outages, delays and other
difficulties due to system disruptions or failures unrelated to our systems.
Although we carry general liability insurance, our insurance may not cover any
claims by dissatisfied providers or subscribers or may not be adequate to
indemnify us for any liability that may be imposed in the event that a claim
were brought against us. Any system disruption or failure, security breach or
other damage that interrupts or delays our operations could cause us to lose
users, sponsors and advertisers and adversely affect our business and results
of operations.
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WE MAY NOT BE ABLE TO DELIVER VARIOUS SERVICES IF THIRD PARTIES FAIL TO PROVIDE
RELIABLE SOFTWARE, SYSTEMS AND RELATED SERVICES TO US.
We are dependent on various third parties for software, systems and
related services in connection with our hosting and accounting software, data
transmission and security systems. Several of the third parties that provide
software and services to us have a limited operating history and have
relatively new technology. These third parties are dependent on reliable
delivery of services from others. To date, we have not experienced significant
problems with the services that these third parties provide to us. If our
current providers were to experience prolonged systems failures or delays, we
would need to pursue alternative sources of services. Although alternative
sources of these services are available, we may be unable to secure such
services on a timely basis or on terms favorable to us. As a result, we may
experience business disruptions if these third parties fail to provide reliable
software, systems and related services to us.
WE MAY BE LIABLE IF THIRD PARTIES MISAPPROPRIATE OUR USERS' PERSONAL
INFORMATION.
If third parties were able to penetrate our network security or
otherwise misappropriate our users' personal or credit card information, we
could be subject to liability. Our liability could include claims for
unauthorized purchases with credit card information, impersonation or other
similar fraud claims as well as for other misuses of personal information, such
as for unauthorized marketing purposes. These claims could result in costly and
time-consuming litigation which could adversely affect our financial condition.
In addition, the Federal Trade Commission and state agencies have been
investigating various Internet companies regarding their use of personal
information. We could have additional expenses if new regulations regarding the
use of personal information are introduced or if our privacy practices are
investigated.
OUR EXECUTIVE OFFICERS, DIRECTORS AND 5% OR GREATER STOCKHOLDERS EXERCISE
SIGNIFICANT CONTROL OVER ALL MATTERS REQUIRING A STOCKHOLDER VOTE.
As of June 30, 2000, our executive officers, directors and
stockholders who each owned greater than 5% of the common stock, and their
affiliates, in the aggregate, beneficially owned approximately 62% of our
outstanding common stock. As a result, these stockholders are able to exercise
control over all matters requiring approval by our stockholders, including the
election of directors and approval of significant corporate transactions. This
concentration of ownership could also have the effect of delaying or preventing
a change in control.
FUTURE SALES OF OUR COMMON STOCK MAY NEGATIVELY AFFECT OUR STOCK PRICE.
We have a large number of shares of common stock outstanding and
available for resale beginning at various points in time in the future. The
market price of our common stock could decline as a result of sales of a large
number of shares of our common stock in the public market or the perception
that such sales could occur.
OUR STOCK PRICE MAY EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS AND ANY
VOLATILITY IN OUR STOCK PRICE COULD RESULT IN CLAIMS AGAINST US.
Fluctuations in market price and volume are particularly common among
securities of Internet and other technology companies. The market price of our
common stock may fluctuate significantly in response to the following factors,
some of which are beyond our control:
- - variations in quarterly operating results;
- - changes in market valuations of Internet and other technology companies;
- - our announcements of significant contracts, acquisitions, strategic
partnerships, joint ventures or capital commitments;
- - failure to complete significant sponsorship, advertising and merchandise
sales;
- - additions or departures of key personnel;
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- - future sales of common stock; and
- - changes in financial estimates by securities analysts.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
common stock. We may in the future be the target of similar litigation.
Securities litigation could result in substantial costs and divert management's
attention and resources.
WE MAY SPEND THE NET PROCEEDS OF OUR INITIAL PUBLIC OFFERING IN WAYS WITH WHICH
YOU MAY NOT AGREE.
The net proceeds of our initial public offering are not allocated for
specific uses. Our management has broad discretion to spend the net proceeds
from our initial public offering in ways with which investors may not agree.
The failure of our management to apply these funds effectively would result in
unfavorable returns, which could cause the price of our common stock to
decline.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY MAKE IT
DIFFICULT FOR A THIRD PARTY TO ACQUIRE US.
Provisions of our certificate of incorporation, our bylaws and
Delaware law could make it more difficult for a third party to acquire us, even
if doing so might be beneficial to our stockholders.
RISKS RELATED TO THE INTERNET INDUSTRY
IF THE USE OF THE INTERNET AND COMMERCIAL ONLINE SERVICES AS MEDIA FOR COMMERCE
DOES NOT CONTINUE TO GROW, OUR BUSINESS AND PROSPECTS WOULD BE MATERIALLY AND
ADVERSELY AFFECTED.
We cannot assure you that a sufficiently broad base of consumers will
adopt, and continue to use, the Internet and commercial online services as
media for commerce, particularly for purchases of wedding gifts and supplies.
Even if consumers adopt the Internet or commercial online services as a media
for commerce, we cannot be sure that the necessary infrastructure will be in
place to process such transactions. Our long-term viability depends
substantially upon the widespread acceptance and the development of the
Internet or commercial online services as effective media for consumer commerce
and for advertising. Use of the Internet or commercial online services to
effect retail transactions and to advertise is at an early stage of
development. Convincing consumers to purchase wedding gifts and supplies online
may be difficult.
Demand for recently introduced services and products over the Internet
and commercial online services is subject to a high level of uncertainty. Few
proven services and products exist. The development of the Internet and
commercial online services into a viable commercial marketplace is subject to a
number of factors, including:
- - continued growth in the number of users of such services;
- - concerns about transaction security;
- - continued development of the necessary technological infrastructure;
- - development of enabling technologies;
- - uncertain and increasing government regulation; and
- - the development of complementary services and products.
If users experience difficulties because of capacity constraints of
the infrastructure of the Internet and other commercial online services,
potential users may not be able to access our sites and our business and
prospects would be harmed.
To the extent that the Internet and other online services continue to
experience growth in the number of users and frequency of use by consumers
resulting in increased bandwidth demands, there can be no assurance that the
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infrastructure for the Internet and other online services will be able to
support the demands placed upon them. The Internet and other online services
have experienced outages and delays as a result of damage to portions of their
infrastructure, power failures, telecommunication outages, network service
outages and disruptions, natural disasters and vandalism and other misconduct.
Outages or delays, could adversely affect online sites, e-mail and the level of
traffic on all sites. We also depend on online access providers that provide
our users with access to our services. In the past, users have experienced
difficulties due to systems failures unrelated to our systems. In addition, the
Internet or other online services could lose their viability due to delays in
the development or adoption of new standards and protocols required to handle
increased levels of Internet or other online service activity or to increased
governmental regulation. Insufficient availability of telecommunications
services to support the Internet or other online services also could result in
slower response times and negatively impact use of the Internet and other
online services generally, and our sites in particular. If the use of the
Internet and other online services fails to grow or grows more slowly than
expected, if the infrastructure for the Internet and other online services does
not effectively support growth that may occur or if the Internet and other
online services do not become a viable commercial marketplace, we may not
achieve profitability.
WE MAY BE UNABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGE IN THE INTERNET
INDUSTRY AND THIS MAY HARM OUR BUSINESS.
If we are unable, for technological, legal, financial or other
reasons, to adapt in a timely manner to changing market conditions or customer
requirements, we could lose users and market share to our competitors. The
Internet and e-commerce are characterized by rapid technological change. Sudden
changes in user and customer requirements and preferences, frequent new product
and service introductions embodying new technologies and the emergence of new
industry standards and practices could render our existing online sites and
proprietary technology and systems obsolete. The emerging nature of products
and services in the online wedding market and their rapid evolution will
require that we continually improve the performance, features and reliability
of our online services. Our success will depend, in part, on our ability:
- - to enhance our existing services;
- - to develop and license new services and technology that address the
increasingly sophisticated and varied needs of our prospective customers
and users; and
- - to respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
The development of online sites and other proprietary technology
entails significant technological and business risks and requires substantial
expenditures and lead time. We may be unable to use new technologies
effectively or adapt our online sites, proprietary technology and
transaction-processing systems to customer requirements or emerging industry
standards. Updating our technology internally and licensing new technology from
third parties may require significant additional capital expenditures.
IF WE BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION AND LEGAL
UNCERTAINTIES RELATED TO DOING BUSINESS ONLINE, OUR SPONSORSHIP, ADVERTISING
AND MERCHANDISE REVENUES COULD DECLINE AND OUR BUSINESS AND PROSPECTS COULD
SUFFER.
Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent. Laws and regulations may
be adopted covering issues such as user privacy, pricing, content, taxation and
quality of products and services. Any new legislation could hinder the growth
in use of the Internet and other online services generally and decrease the
acceptance of the Internet and other online services as media of
communications, commerce and advertising. The governments of states and foreign
countries might attempt to regulate our transmissions or levy sales or other
taxes relating to our activities. The laws governing the Internet remain
largely unsettled, even in areas where legislation has been enacted. It may
take years to determine whether and how existing laws such as those governing
intellectual property, privacy, libel and taxation apply to the Internet and
Internet advertising services. In addition, the growth and development of the
market for e-commerce may prompt calls for more stringent consumer protection
laws, both in the United States and abroad, which may impose additional burdens
on companies conducting business online. The adoption or modification of laws
or regulations relating to the
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Internet and other online services could cause our sponsorship, advertising and
merchandise revenues to decline and our business and prospects to suffer.
WE MAY BE SUED FOR INFORMATION RETRIEVED FROM OUR SITES.
We may be subject to claims for defamation, negligence, copyright or
trademark infringement, personal injury or other legal theories relating to the
information we publish on our online sites. These types of claims have been
brought, sometimes successfully, against online services as well as other print
publications in the past. We could also be subject to claims based upon the
content that is accessible from our online sites through links to other online
sites or through content and materials that may be posted by members in chat
rooms or bulletin boards. Our insurance, which covers commercial general
liability, may not adequately protect us against these types of claims.
WE MAY INCUR POTENTIAL PRODUCT LIABILITY FOR PRODUCTS SOLD ONLINE.
Consumers may sue us if any of the products that we sell online are
defective, fail to perform properly or injure the user, or if consumers
experience problems with honeymoon packages purchased through our sites. To
date, we have had limited experience selling products online and developing
relationships with manufacturers or suppliers of such products. We plan to sell
a range of products targeted specifically at brides and grooms through The Knot
Registry, The Knot Shop, Bridalink.com, Click Trips and other e-commerce sites
that we may acquire in the future. Such a strategy involves numerous risks and
uncertainties. Although our agreements with manufacturers and providers of
travel services typically contain provisions intended to limit our exposure to
liability claims, these limitations may not prevent all potential claims.
Liability claims could require us to spend significant time and money in
litigation or to pay significant damages. As a result, any such claims, whether
or not successful, could seriously damage our financial results, reputation and
brand name.
WE COULD FACE ADDITIONAL REGULATORY REQUIREMENTS, TAX LIABILITIES AND OTHER
RISKS AS WE EXPAND INTERNATIONALLY.
We may decide to further expand internationally. To date, we have no
experience in developing localized versions of our sites for international
markets and in marketing and selling internationally. If we decide to further
expand internationally and we cannot overcome these challenges, our business
will suffer. There are additional risks related to doing business in
international markets, such as changes in regulatory requirements, tariffs and
other trade barriers, fluctuations in currency exchange rates, and adverse tax
consequences. In addition, there are likely to be different consumer
preferences and requirements in such markets. Furthermore, we may face
difficulties in staffing and managing any foreign operations. We cannot assure
you that one or more of these factors would not harm any future international
operations.
WE MAY INCUR SIGNIFICANT EXPENSES RELATED TO THE SECURITY OF PERSONAL
INFORMATION ONLINE.
The need to transmit securely confidential information online has been
a significant barrier to e-commerce and online communications. Any
well-publicized compromise of security could deter people from using the
Internet or other online services or from using them to conduct transactions
that involve transmitting confidential information. Because our success depends
on the acceptance of online services and e-commerce, we may incur significant
costs to protect against the threat of security breaches or to alleviate
problems caused by such breaches.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact the financial
position, result of operations, or cash flows of the company due to adverse
changes in financial market prices, including interest rate risk, foreign
currency exchange rate risk, commodity price risk, and other relevant market
rate or price risks.
We are exposed to some market risk through interest rates related to
the investment of our current cash, cash equivalents and short-term investments
of approximately $22.6 million as of June 30, 2000. These funds are generally
invested in highly liquid debt instruments with short-term maturities. As such
instruments mature and the funds are re-invested, we are exposed to changes in
market interest rates. This risk is not considered material and we manage such
risk by continuing to evaluate the best investment rates available for
short-term high quality investments.
We have no activities related to derivative financial instruments or
derivative commodity instruments, and we are not currently subject to foreign
currency exchange risk.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) None.
(b) None.
(c) None.
(d) Use of Proceeds.
On December 1, 1999, the Securities and Exchange Commission
declared effective our Registration Statement on Form S-1
(Registration No. 333-87345). Pursuant to this Registration
Statement, we completed our initial public offering of 3,500,000
shares of our common stock at an initial public offering price of
$10.00 per share on December 7, 1999. On December 31, 1999, an
additional 413,000 shares of common stock subject to the
underwriters' over-allotment option were offered at $10.00 per
share. The aggregate gross proceeds of the shares offered and
sold was $39.1 million. After deducting approximately $2.7
million in underwriting discounts and commissions and $1.7
million in other related expenses, net proceeds of the offering
were approximately $34.7 million. We have used approximately
$19.3 million of the proceeds from our initial public offering
for acquisitions, working capital purposes, capital expenditures
and to fund operating losses. Except for salaries and travel
expenses paid in the normal course of business or distribution
and warehousing fees paid to QVC under our service agreement,
none of these expenses were direct or indirect payments to our
directors, officers, general partners or their associates, to
persons owning ten percent or more of any class of our equity
securities or to our affiliates.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Knot held its 2000 Annual Meeting of Stockholders on May 16,
2000. At that meeting, the stockholders approved the following
proposals: (i) election of John Link and Ann Winblad to the class
of directors whose term expires in 2003, and (ii) selection of
Ernst & Young LLP as independent auditors of The Knot for the
fiscal year ending December 31, 2000.
There were 13,350,583 votes cast for, 36,743 votes cast
against, and zero abstentions in connection
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with the election of John Link and Ann Winblad as directors. The
remainder of the Knot's board of directors remains as previously
reported. There were 13,363,201 votes cast for, 19,982 votes cast
against and 4,143 abstentions in connection with the selection of
Ernst & Young LLP as independent auditors.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
(a) The following exhibits are filed as part of this report:
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
On April 7, 2000, we filed a current report on Form 8-K
announcing the completion of our acquisition of Weddingpages on
March 29, 2000.
On May 12, 2000, we filed an Amended Current Report on Form 8-K/A
including, (i) the balance sheets of Weddingpages as of December
31, 1999 and June 30, 1999 and the related statements of income,
stockholders' equity and cash flows for the six months ended
December 31, 1999 and the year ended June 30, 1999 and (ii) the
pro forma condensed consolidated balance sheet (unaudited) as of
December 31, 1999 and pro forma consolidated statement of
operations (unaudited) for the year ended December 31, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 14, 2000 THE KNOT, INC.
By: /s/ Richard Szefc
------------------------------------------
Richard Szefc
Chief Financial Officer (Principal
Financial Officer and Duly Authorized
Signatory)
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EXHIBIT INDEX
NUMBER DESCRIPTION
- ------ -----------
27.1 Financial Data Schedule
29