<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 0-28088
STYLECLICK.COM INC.
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(Exact Name of Registrant as Specified in its Charter)
California 95-4145930
----------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
3861 Sepulveda Blvd., Culver City 90230
----------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
(310) 751-2100
----------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter periods 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
--- ---
The number of outstanding shares of the registrant's common stock, as of May 11,
2000, was 7,724,930.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Styleclick.com Inc.
Condensed Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
<S>
Assets <C> <C>
Current assets:
Cash and cash equivalents $ 2,368,897 $ 1,395,991
Accounts receivable, net of allowance for
doubtful accounts of $257,229 and
$242,229 at March 31, 2000 and
December 31, 1999, respectively 488,488 799,862
Deferred royalties 632,991 632,988
Deferred advertising and promotion 467,500 467,496
Prepaid expenses and other current assets 1,637,983 1,793,181
------------ ------------
Total current assets 5,595,859 5,089,518
Capitalized computer software development
costs, net of accumulated amortization
of $8,078,376 and $7,880,904 at
March 31, 2000 and December 31, 1999,
respectively 2,455,856 2,294,914
Fixed assets, net of accumulated depreciation
of $2,031,792 and $1,823,850 at March 31,
2000 and December 31, 1999, respectively 2,594,412 2,600,458
Deferred royalties, non-current 4,272,691 4,430,942
Deferred advertising and promotion,
non-current 428,542 545,421
Other assets 85,663 85,663
------------ ------------
Total assets $ 15,433,023 $ 15,046,916
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Borrowings under line of credit $ 5,000,000 $ -
Interest Payable 46,233 -
Accounts payable and accrued expenses 2,659,646 1,778,728
Deferred income 139,800 196,718
------------ ------------
Total current liabilities 7,845,679 1,975,446
Commitments
Stockholders' equity:
Common stock; no par value; 15,000,000
shares authorized, 7,724,930 shares and
7,673,515 shares issued and outstanding
at March 31, 2000 and December 31, 1999 43,674,057 43,216,747
Accumulated deficit (36,086,713) (30,145,277)
------------ ------------
Total stockholders' equity 7,587,344 13,071,470
------------ ------------
Total liabilities and stockholders' equity $ 15,433,023 $ 15,046,916
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
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Styleclick.com Inc.
Condensed Statements Of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
------------ ------------
<S> <C> <C>
Net revenues
Product sales $ 106,574 $ 3,141,033
Service revenues 1,145,139 648,844
------------ ------------
1,251,713 3,789,877
Cost of sales
Product sales - 104,471
Service revenues 179,053 14,540
------------ ------------
179,053 119,011
------------ ------------
Gross profit 1,072,660 3,670,866
Operating costs and expenses:
Selling, general and administrative 4,123,977 2,420,061
Research and product development 1,290,329 1,661,086
Merger related costs 1,368,453 -
Amortization of software development costs 197,472 623,170
------------ ------------
Total operating costs and expenses 6,980,231 4,704,317
------------ ------------
Operating loss (5,907,571) (1,033,451)
Other income (expense):
Investment income 12,368 48,113
Interest expense (46,233) -
------------ ------------
Total other income (expense) (33,865) 48,113
------------ ------------
Net loss $ (5,941,436) $ (985,338)
============ ============
Basic loss per share $ (0.77) $ (0.16)
============ ============
Diluted loss per share $ (0.77) $ (0.16)
============ ============
Weighted average shares outstanding 7,712,905 6,156,502
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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Styleclick.com Inc.
Condensed Statements Of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
------------ ------------
<S> <C> <C>
Operating activities
Net loss $ (5,941,436) $ (985,338)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities
Depreciation 207,942 172,712
Amortization of capitalized software
development costs 197,472 623,170
Capitalized computer software
development costs (358,414) (272,961)
Amortization of deferred costs for
services rendered 275,123 10,957
Changes in operating assets and liabilities:
Accounts receivable, net 311,374 (438,111)
Prepaid expenses and other current assets 155,198 (102,751)
Other assets - (41,654)
Interest payable 46,233 -
Accounts payable and accrued expenses 880,918 1,034,059
Deferred income (56,918) 246,347
------------ ------------
Net cash provided by (used in) operating activities (4,282,508) 246,430
Investing activities
Purchase of fixed assets (201,896) (297,514)
------------ ------------
Net cash used in investing activities (201,896) (297,514)
Financing activities
Borrowings under line of credit 5,000,000 -
Stock options exercised 235,750 204,250
Warrants exercised 221,560 -
------------ ------------
Net cash provided by financing activities 5,457,310 204,250
Net increase in cash and cash equivalents 972,906 153,166
------------ ------------
Cash and cash equivalents at beginning of period 1,395,991 6,343,599
------------ ------------
Cash and cash equivalents at end of period $ 2,368,897 $ 6,496,765
============ ============
</TABLE>
<TABLE>
<CAPTION>
Supplemental Cash Flow Information
<S> <C> <C>
Interest paid
$ 0 $ 0
============ ============
Income taxes paid $ 1,442 $ 1,070
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
Styleclick.com Inc.
Notes to Condensed Financial Statements
1. Basis of Presentation
The accompanying unaudited condensed financial statements of Styleclick.com Inc.
("Styleclick" or the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. These adjustments consisted of normal recurring accruals.
Operating results for the first three months of 2000 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2000.
The balance sheet at December 31, 1999 was 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.
For further information, refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended December
31, 1999.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Recently Issued Accounting Pronouncements
In December 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin (SAB) 101, Revenue Recognition in Financial Statements,
further amended by SAB 101A. SAB 101 spells out four basic criteria that must be
met before a company can record revenue and contains numerous examples, in the
form of questions and answers, that illustrate how the SEC staff applies basic
revenue recognition criteria in certain facts and circumstances. SAB 101 also
provides guidance on the disclosures companies should make about their revenue
recognition policies and the impact of events and trends on revenue. SAB 101and
SAB 101A is effective for companies with calendar year-ends in the second
quarter of 2000. The Company analyzed the impact of SAB 101 and does not expect
it to have a material effect on its financial position and results of operation.
4
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Styleclick.com Inc.
Notes to Condensed Financial Statements
2. Borrowings under Line of Credit
In January 2000, the Company and USA Networks, Inc. ("USAi") announced an
agreement to form a new company by merging the Company and Internet Shopping
Network ("ISN"), an indirect wholly owned subsidiary of USAi. The new company,
which will be named Styleclick Inc., will own and operate the combined
properties of the Company and ISN. Under the terms of the agreement, USAi will
also invest $40 million in cash, contribute $10 million in dedicated media and
will receive warrants to purchase additional shares of the new company. Upon
both the closing of the transaction and on a fully diluted basis, USAi will own
approximately 75% of the new company and the Company's stockholders will own
approximately 25%. In the interim, USAi has agreed to extend a $10 million line
of credit to the Company bearing interest at 7.5% per annum. The transaction is
expected to close in the second quarter of 2000. As of March 31, 2000, $5
million have been drawn against the line of credit.
3. Stockholders' Equity
Warrants
In connection with the Company's initial public offering ("IPO") in March 1996,
the Company issued to the principal underwriter unit purchase warrants to
purchase 140,000 units at a per unit exercise price of $6.00. Each unit
consisted of one share of common stock and one redeemable warrant exercisable to
purchase one share of common stock at an exercise price of $9.10 per share. Such
unit purchase warrants are exercisable for a four-year period, which began March
27, 1997. As of March 31, 2000, the underwriter (or assignees of the
underwriter) exercised a portion of the warrants to purchase an aggregate of
121,770 shares of the Company's common stock and 121,770 redeemable common stock
purchase warrants for an aggregate exercise price of $730,620. The underwriter
(or its assignees) further exercised redeemable common stock purchase warrants
to purchase 51,145 shares of the Company's common stock for $465,420.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the financial
statements and the notes thereto appearing elsewhere in this Form 10-Q. This
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including,
but not limited to, those set forth below and elsewhere in this Form 10-Q.
General
The Company is in the business of developing, marketing, and supporting
electronic commerce ("e-commerce") Internet websites, Internet enabled
applications and business and consumer software products based on its
proprietary technology for content management, including modeling and rendering
technology. The Company has three principal product groups: e-commerce Internet
websites, software including CD-ROM products and applications including CAD and
electronic merchandising products, referred to as business software products.
Since 1998, the Company has divested many of its products in the business and
consumer software product groups and has shifted its primary business focus to
the emerging Internet e-commerce market. The Company is focusing its technology
on building and deploying e-commerce Internet sites, such as comparative search
and shopping solutions aimed at facilitating businesses' use of e-commerce to
reach consumers in the apparel, footwear, accessories, cosmetics and home
furnishing industries.
Revenues generated from the Company's e-commerce Internet websites include
revenues received in connection with (i) website development and maintenance
fees for services provided to customers in the development and maintenance of
their websites, (ii) project participation fees for vendor participation in the
Company's online shopping Internet websites, (iii) online advertising revenue
for advertising on the Company's online shopping websites, (iv) transactional
revenue from the Company's fulfillment services provided to the Company's online
shopping Internet website participant vendors and (v) product referral fees from
referral of vendor products to Internet consumers through the Company's online
shopping Internet websites. Revenues from project participation fees are
recognized based upon the accomplishment of contractual milestones in a manner
that matches revenue with the related costs. Website development and maintenance
fees and online advertising revenue are recognized over the terms of the
corresponding contracts. Transactional revenue and product referral fees are
recognized based on a percentage of gross revenues from the related
transactions. Transactional revenue is recognized upon notification of shipment
of the vendors' products by the Company's fulfillment warehouse or the
participant vendors. Product referral fees are recognized based upon
notification of the sales information by the Company's vendors, the independent
Internet traffic tracking companies or the Company's online tracking reports.
Revenues generated from the Company's consumer CD-ROM products include revenues
received in connection with sales of the Company's developed consumer CD-ROM
products and vendor participation in the Company's developed CD-ROM
applications. Sales of the products are recognized at the time of shipment.
Revenues from CD-ROM participation fees are recognized based upon the
accomplishment of contractual milestones in a manner that matches revenue with
the related costs.
6
<PAGE>
Revenues generated from the Company's business software products include
revenues received in connection with sales and licenses of the Company's
developed business software products and software maintenance revenues. Sales
and licenses of the products are recognized at the time of shipment. Revenue
generated from software maintenance is recognized on a straight-line basis over
the term of the corresponding contract, which is generally twelve months.
Results of Operations
The following table sets forth selected items from the Company's statements of
operations for the periods ended March 31, 2000 and March 31, 1999 (in
thousands) and the percentages that such items bear to net revenues:
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
2000 1999
------------------ ------------------
<S> <C> <C> <C> <C>
Net revenues
Product sales $ 107 8.5 % $ 3,141 82.9%
Service revenues 1,145 91.5 649 17.1
-------- -------- -------- --------
1,252 100.0 3,790 100.0
Cost of sales
Product sales - 0.0 % 104 2.7%
Service revenues 179 14.3 15 0.4
-------- -------- -------- --------
179 14.3 119 3.1
-------- -------- -------- --------
Gross profit 1,073 85.7 3,671 96.9
Operating costs and expenses:
Selling, general and administrative 4,124 329.4 2,420 63.9
Research and product development 1,290 103.0 1,661 43.8
Merger related costs 1,369 109.4 - 0.0
Amortization of software development
costs 197 15.7 623 16.5
Total operating costs and expenses -------- -------- -------- --------
6,980 557.5 4,704 124.2
-------- -------- -------- --------
Loss from operations (5,907) (471.8 ) (1,033) (27.3 )
Other income (expense) (34) (2.7 ) 48 1.3
-------- -------- -------- --------
Net loss $(5,941) (474.5%) $ (985) (26.0%)
======== ======== ======== ========
</TABLE>
Comparison of Three Months Ended March 31, 2000 and 1999
Net Revenues
Net revenues decreased $2,538,000, or 67%, to $1,252,000 in the first quarter of
2000 from $3,790,000 in the first quarter of 1999 due to (i) a decrease of
$3,059,000 in sales of business software products, (ii) a decrease of $425,000
in revenues from the Company's consumer CD-ROM products and (iii) a decrease of
$15,000 in revenues from training services. These decreases were offset by an
increase of $956,000 in revenues generated from the Company's e-commerce
Internet websites and an increase of $5,000 in maintenance fees.
Product sales decreased to $107,000 in the first quarter of 2000 from $3,141,000
in the first quarter of 1999, or 97%. The decrease in product sales is primarily
due to the sales of two of the Company's business software product lines and the
license of certain related technologies for a fee of $3,000,000 in the first
quarter of 1999. Service revenues increased to $1,145,000 in the first quarter
of 2000 from $649,000 in the first quarter of 1999, or 76%. The increase in
service revenues is primarily due to an increase of $956,000 in revenues
generated the Company's e-commerce Internet websites. The decrease in product
sales and the increase in service revenues are more fully described below.
7
<PAGE>
Service revenues generated from the Company's e-commerce Internet websites
increased $956,000, or 162%, to $1,015,000 in the first quarter of 2000 from
$59,000 in the first quarter of 1999. The revenues primarily consisted of
revenues generated from website development and maintenance fees, project
participation fees, online advertising revenue, digital content generation fees,
transactional revenues and product referral fees. The increase in such revenue
was primarily attributable to the fact that the Company shifted its marketing
focus to Internet e-commerce at the beginning of 1999. As such, significant
revenues were not generated during the first quarter of 1999.
Revenues generated from consumer CD-ROM products decreased $425,000, or 99%, to
$4,000 in the first quarter of 2000 from $429,000 in the first quarter of 1999
primarily due to $400,000 in revenue generated in connection with the Company's
developing CD-ROM applications during the first quarter of 1999 compared to no
such revenue generated in the first quarter of 2000. The $400,000 in revenue
generated in the first quarter of 1999 resulted from the completion of
development of one of the CD-ROM applications which had been in development
since 1998. The remaining $25,000 decrease was due to lower CD-ROM participation
revenue generated from the Company's consumer CD-ROM applications in the first
quarter of 2000 as compared to the first quarter of 1999. The decrease in CD-ROM
participation revenues was a result of the Company's strategy to shift its
marketing focus to Internet e-commerce during 1999.
Sales of business software products decreased $3,059,000, or 98%, to $76,000 in
the first quarter of 2000 from $3,135,000 in the first quarter of 1999 primarily
due to the sale of two of the Company's business software product lines and the
license of certain related technologies for an up-front fee of $3,000,000 in the
first quarter of 1999. The sale of these product lines was part of the overall
shift in the Company's primary business focus from the business software product
marketplace to the emerging consumer Internet e-commerce market. After sale of
these product lines, the Company generated less revenue from its business
software products.
Revenues from training services decreased $15,000, or 94%, to $1,000 in the
first quarter of 2000 from $16,000 in the first quarter of 1999 primarily due to
the Company's overall shift in its primary business focus away from the business
software products, as discussed above, from which most training revenues were
generated.
Cost of Sales
Cost of sales are comprised primarily of product fulfillment costs, credit card
processing fees, direct shipping materials and product royalties associated with
the respective revenues. Cost of sales increased $60,000 to $179,000 in the
first quarter of 2000 from $119,000 in the first quarter of 1999 primarily due
to a $158,000 non-cash charge to royalty expense recognized by the Company in
the first quarter of 2000. No such expense was recorded during the first quarter
of 1999. The increase was offset by a decrease of $117,000 in cost of sales
resulting primarily from cost of sales recognized during the first quarter of
1999 in connection with the $3,000,000 sale and license of certain of the
Company's business software products in such quarter. No such cost of sales was
incurred in the first quarter of 2000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $1,704,000, or 70%, to
$4,124,000 in the first quarter of 2000 from $2,420,000 in the first quarter of
1999 due to the increase in the Company's personnel costs and certain other
related costs. Personnel costs increased $551,000, or 58%, to $1,506,000 in the
first quarter of 2000 from $955,000 in the first quarter of 1999. The increase
in personnel costs resulted primarily from the increase in employee head counts
to support the Company's increased operating activities in the first quarter of
8
<PAGE>
2000 as compared to the first quarter of 1999. Certain related costs including
travel, marketing, telephone, office supplies expenses, taxes and licenses,
repair and maintenance and depreciation expense increased $1,216,000, or 121%,
to $2,222,000 in the first quarter of 2000 from $1,006,000 in the first quarter
of 1999. $963,000 of such increase was related to the Company's increased
marketing activities in the first quarter of 2000 to support its new e-commerce
products.
Research and Development
The Company incurred $1,648,000 of research and development expenditures in the
first quarter of 2000, of which $358,000 was capitalized and $1,290,000 was
expensed, compared to $1,934,000 in the first quarter of 1999, of which $273,000
was capitalized and $1,661,000 was expensed. The 15% decrease in research and
development expenditures from the first quarter of 1999 to the first quarter of
2000 was primarily due to the decrease in costs associated with outside contract
services incurred during the first quarter of 1999 as compared to the first
quarter of 2000 in connection with the Company's launch of its Internet shopping
website in April 1999.
Merger Related Costs
The Company incurred $1,369,000 of expense in connection with its merger plan
with Internet Shopping Network, LLC in the first quarter of 2000. No such
expense was incurred in the first quarter of 1999. The $1,369,000 expense was
primarily related to consulting, legal and accounting services.
Amortization of Software Development Costs
The amortization of software development costs decreased $426,000, or 68%, to
$197,000 in the first quarter of 2000 from $623,000 in the first quarter of 1999
primarily due to a $250,000 write-off during the first quarter of 1999 of the
capitalized software costs related to the product lines sold to one of the
Company's competitors in such quarter. No such write-off was made in the first
quarter of 2000. The remaining $176,000 decrease is due to a decrease in
capitalized project costs being amortized in the first quarter of 2000 as
compared to the first quarter of 1999.
Other Income (expense)
Other income (expense) decreased $82,000, to an aggregate expense of $34,000 in
the first quarter of 2000 from aggregate income of $48,000 in the first quarter
of 1999 due to a $36,000 decrease in investment income and a $46,000 increase in
interest expense from the first quarter of 1999 to the first quarter of 2000.
The decrease in investment income resulted from a lower average cash balance
maintained in a money market account in which the Company's fund are maintained
in the first quarter of 2000 as compared to the first quarter of 1999.
Additionally, the Company recorded $46,000 in interest expense during the first
quarter of 2000 in connection with its borrowings under a line of credit. No
such borrowings were incurred during the first quarter of 1999.
Income Taxes
The Company recorded no provision for income taxes during the first quarters of
2000 and 1999 due to net operating losses in both periods.
9
<PAGE>
Liquidity and Capital Resources
The Company's ratio of current assets to current liabilities decreased to 0.7 at
March 31, 2000 from 2.6 at December 31, 1999. The decrease was primarily due to
a 297% increase in the Company's current liabilities balance compared with a 10%
increase in its current assets balance from December 31, 1999 to March 31, 2000.
The 297% increase in current liabilities was primarily due to a total of
$5,000,000 borrowed by the Company during the first quarter of 2000 under the
Company's line of credit and a $880,918 increase in accounts payable and accrued
expenses in the first quarter of 2000. The 10% increase in the current assets
balance was primarily due to a $972,906 increase in cash. The increase was
offset by a $296,374 decrease in accounts receivable and a $155,198 decrease in
prepaid expenses and other current assets.
The Company's cash balance increased $972,906, or 70%, to $2,368,897 at March
31, 2000 from $1,395,991 at December 31, 1999 primarily due to an increase of
$5,000,000 received in connection with the Company's borrowings under its line
of credit, $235,750 received by the Company in connection with stock options
exercised by the Company's employees and $221,560 received by the Company in
connection with warrants exercised by its IPO principal underwriter during the
first quarter of 2000. Such increases were offset by a decrease of $4,282,508
resulting from cash used by the Company in its operating activities and a
decrease of $201,896 resulting from cash used for the purchase of fixed assets.
The Company's accounts receivable balance decreased $296,374, or 28%, to
$745,717 at March 31, 2000 from $1,042,091 at December 31, 1999. The decrease
was primarily due to a $450,000 collection from one of the Company's major
customers during the first quarter of 2000. The decrease resulting from the
$450,000 collection was offset by a $250,000 increase in accounts receivable
from revenue generated in the first quarter of 2000 which had not been collected
as of March 31, 2000.
The Company's prepaid expenses and other current assets balance decreased
$155,198, or 9%, to $1,637,983 at March 31, 2000 from $1,793,181 at December 31,
1999 primarily due to a $105,357 decrease in prepaid marketing expense. The
decrease of $105,357 in prepaid marketing expense, was attributable to the
recognition during the first quarter of 2000 of $962,500 of expenses against the
prepaid marketing expenses booked in connection with a two-year e-commerce
marketing agreement entered into by the Company with an Internet portal company
in 1999, offset by an aggregate of $857,143 in prepaid marketing expenses
recorded during the first quarter of 2000.
The Company has borrowed $5,000,000 under its line of credit provided by USA
Networks, Inc. ("USAi") during the first quarter of 2000. No such borrowings
were made in the first quarter of 1999.
The Company's accounts payable and accrued expenses balance increased $880,918,
or 50%, to $2,659,646 at March 31, 2000 from $1,778,728 at December 31, 1999
primarily due to the inclusion of two outstanding invoices in the aggregate
amount of $914,868 in connection with the merger related consulting services in
the accounts payable balance at March 31, 2000. No such invoices were included
in the accounts payable balance at December 31, 1999.
The Company's total shareholders' equity balance decreased $5,484,126, or 42%,
to $7,587,344 at March 31, 2000 from $13,071,470 at December 31, 1999 primarily
due to a net operating loss in the amount of $5,941,434 in the first quarter of
2000. Such decrease was offset by $235,750 in proceeds received from the
exercise of stock options to purchase a total of 25,000 shares of the Company's
common stock by 10 employees and $221,560 in proceeds received from the exercise
of warrants to purchase a total of 51,415 shares of the Company's common stock
by its principal underwriter of its initial public offering during the first
quarter of 2000.
10
<PAGE>
In January 2000, the Company and USAi announced an agreement to form a new
company by merging the Company and Internet Shopping Network ("ISN"), an
indirect wholly owned subsidiary of USAi. The new company will own and operate
the combined properties of the Company and ISN. Under the terms of the
agreement, USAi will also invest $40 million in cash, contribute $10 million in
dedicated media and will receive warrants to purchase additional shares of the
new company. Upon the closing of the transaction on a fully diluted basis, USAi
will own approximately 75% of the new company and the Company's shareholders
will own approximately 25%. In the interim, USAi has extended a $10 million line
of credit to the Company. Consummation of the merger is subject to various
conditions, including approval by the Company's shareholders and the receipt of
required regulatory approvals.
The Company anticipates continuing to use its capital primarily to fund the
activities related to the design, development, marketing, sales and support of
the Company's e-commerce websites. Together with its existing capital, the $10
million credit term provided by USAi and anticipated funds from operations, the
Company believes that its capital resources will be sufficient to provide its
anticipated cash needs for working capital and capital expenditures for at least
the next 9 months. The Company expects the merger to be completed in the second
quarter of 2000. If the merger is not completed and cash generated from
operations is insufficient to satisfy the Company's capital requirements, the
Company may have to sell additional equity or debt securities or obtain credit
facilities, assuming it can do so on acceptable terms.
Forward-Looking Information
Certain statements in this Section and elsewhere in this report are
forward-looking in nature and relate to trends and events that may affect the
Company's future financial position and operating results. Such statements are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The terms "believe," "expect," "anticipate," "intend," and
"project" and similar words or expressions are intended to identify
forward-looking statements. These statements speak only as of the date of this
report. The statements are based on current expectations, are inherently
uncertain, are subject to risks, and should be reviewed with caution. Actual
results and experience may differ materially from the forward-looking statements
as a result of many factors, including changes in economic conditions in the
markets served by the Company, increasing competition, fluctuations in raw
materials and energy prices, and other unanticipated events and conditions. It
is not possible to foresee or identify all such factors. The Company makes no
commitment to update any forward-looking statement or to disclose any facts,
events, or circumstances after the date hereof that may affect the accuracy of
any forward-looking statement.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
None.
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Styleclick.com Inc.
Date: June 22, 2000 By: /s/ MAURIZIO VECCHIONE
--------------------------------
Maurizio Vecchione
President and
Co-Chief Executive Officer
/s/ BARRY HALL
--------------------------------
Barry Hall
Executive Vice President,
Finance and Chief Financial Officer
12
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