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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): SEPTEMBER 30, 1998
EXCITE, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation)
<TABLE>
<S> <C>
0-28064 77-0378215
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(Commission (IRS Employer
File Number) Identification No.)
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555 Broadway, Redwood City, CA 94063
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(Address of principal executive offices) (Zip Code)
(650) 568-6000
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name or former address, if changed since last report)
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ITEM 5: OTHER EVENTS
The Company's revenue of $44.0 million for the third quarter ended
September 30, 1998, was nearly triple the $16.0 million for the corresponding
third quarter of 1997. Revenues for the third quarter represented a 33%
sequential increase over the $33.0 million reported in the second quarter
of 1998.
The net loss for the third quarter of 1998 was $6.8 million, or $0.14 per
share, which includes a non-cash charge of $7.6 million as described below.
These results compare to a loss of $8.2 million, or $0.27 per share, for the
corresponding quarter of the prior year.
For the year to date, the Company generated revenue of $100.0 million and a
net loss of $39.7 million, or $0.86 per share. For the corresponding period of
1997, the Company generated revenue of $33.6 million and a net loss of $28.4
million, or $1.07 per share.
After discussions with the Staff of the Securities and Exchange Commission
(the "SEC"), the Company has revised the original accounting for the Netscape
Netcenter ("Netcenter") Agreement and increased the fair value of the warrants
issued to Netscape by $3.8 million. The total consideration of $89.9 million has
been capitalized as Prepaid Netscape Distribution Fees and Trademarks. The
amount capitalized represents the amount of the sum of the prepayments
($70.0 million) and the revised independent valuation of the warrants issued
($19.9 million) from the Netcenter Agreement. The $89.9 million, representing
the combined value of marketing and distribution rights, trademarks and other
exclusivities, which extend over the term of the Netcenter Agreement, will be
recognized ratably over the term of the agreement as distribution services are
received, commencing with the launch of the service in June, 1998.
These changes will result in an additional non-cash charge of $7.6 million,
or $0.15 per share, each quarter over the two-year term of the Netscape
Agreement, which terminates on April 30, 2000. This additional amortization has
been reported as a separate line item on the Company's Consolidated Statements
of Operations.
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EXCITE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA)
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<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Revenues $ 44,004 $ 15,962 $100,010 $ 33,566
Cost of revenues:
Hosting costs 4,447 2,518 10,902 6,054
Royalties and other cost of revenues 3,277 1,145 8,875 2,241
Amortization of purchased technology -- 1,939 -- 6,276
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Total cost of revenues 7,724 5,602 19,777 14,571
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Gross profit 36,280 10,360 80,233 18,995
Operating expenses:
Research and development 8,151 4,332 21,342 11,015
Sales and marketing 16,294 7,858 41,286 21,338
Distribution license fees and data acquisition costs 5,664 3,216 14,829 4,953
General and administrative 4,264 2,837 10,948 5,969
In-process technology -- -- 16,200 2,346
Merger and acquisition related costs, including
amortization of goodwill and other purchased
intangibles 424 530 2,568 1,946
Amortization of prepaid Netscape service 7,574 -- 10,099 --
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Total operating expenses 42,371 18,773 117,272 47,567
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Operating loss (6,091) (8,413) (37,039) (28,572)
Interest income (expense) and other, net (141) 164 (984) 163
Equity share of losses of affiliated company (614) -- (1,644) --
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Net loss $(6,846) $ (8,249) $(39,667) $(28,409)
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Basic and diluted net loss per share (1) $ (0.14) $ (0.27) $ (0.86) $ (1.07)
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Shares used in computing net loss per share (1) 50,339 31,104 46,130 26,463
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(1) All of the share and per share data have been adjusted to reflect the
two-for-one stock split for shareholders of record as of the close of
business on July 6, 1998.
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EXCITE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
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(unaudited) (1)
<S> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and short-term investments $ 40,312 $32,066
Accounts receivable, net 36,922 20,907
Prepaid Netscape distribution costs and trademarks, current portion 43,991 --
Prepaid expenses and other current assets 6,722 2,149
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Total current assets 127,947 55,122
Property and equipment, net 26,471 15,143
Investment in affiliated company 713 --
Prepaid Netscape distribution costs and trademarks 32,758 --
Intangible assets, net 1,446 1,771
Other assets 2,654 4,657
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$191,989 $76,693
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank line of credit and other notes payable 6,100 6,100
Accounts payable 6,781 5,717
Capital lease obligations, current portion 5,771 3,178
Non-lease financing, current portion 1,158 1,176
Related party liabilities 2,008 1,575
Other accrued liabilities 21,646 14,406
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Total current liabilities 43,464 32,152
Capital lease obligations 9,967 3,076
Non-lease financing 2,023 1,613
Convertible note 5,000 5,000
Stockholders' equity 131,535 34,852
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$191,989 $76,693
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(1) Derived from audited consolidated financial statements at December 31, 1997.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXCITE, INC.
Date: October 21, 1998 By: /s/ Robert C. Hood
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Robert C. Hood
Executive Vice President,
Chief Administrative Officer and
Chief Financial Officer
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