<PAGE> 1
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
AUGUST 12, 1998
-------------------------------------------
Date of Report
(Date of earliest event reported)
AMAZON.COM, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
DELAWARE 000-22513 91-1646860
- ---------------------------------- --------------------------------- ----------------------------------
(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
</TABLE>
1516 SECOND AVENUE, SEATTLE, WASHINGTON 98101
- --------------------------------------------------------------------------------
(Address of principal executive offices, including Zip Code)
(206) 622-2335
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 12, 1998, pursuant to an Agreement and Plan of Merger dated
as of August 3, 1998 (the "Junglee Merger Agreement"), by and among Amazon.com,
Inc., a Delaware corporation ("Amazon.com"), Junglee Corp., a Delaware
corporation ("Junglee") and AJ Acquisition, Inc., a Delaware corporation and
wholly owned subsidiary of Amazon.com ("Junglee Merger Sub"), Amazon.com
acquired all of the outstanding capital stock of Junglee and Junglee Merger Sub
merged with and into Junglee, with Junglee as the surviving corporation (the
"Junglee Merger").
Junglee, founded in June 1996 and based in Sunnyvale, California, has
developed World Wide Web-based virtual database technology to help consumers
find products on the Internet.
Amazon.com will issue approximately 1,600,000 shares of Amazon.com
common stock, par value $.01 per share ("Amazon.com Common Stock"), and assume
all outstanding options in connection with the acquisition of Junglee, pursuant
to the formula set forth below.
Pursuant to the terms of the Junglee Merger Agreement, at the effective
time of the Junglee Merger, each issued and outstanding share of Junglee common
stock, par value $.001 per share (the "Junglee Common Stock"), including each
share of Junglee Common Stock issued upon conversion of each issued and
outstanding share of Junglee Series A Preferred Stock, par value $.001 per
share, Series B Preferred Stock, par value $.001 per share, and Series C
Preferred Stock, par value $.001 per share (together with the Junglee Common
Stock, the "Junglee Capital Stock"), other than shares of Junglee Capital Stock,
if any, for which dissenters' rights have been or will be perfected in
compliance with the applicable laws of the State of Delaware and the State of
California, was converted into the right to receive that number of shares of
Amazon.com Common Stock, determined by dividing (i) 1,891,568 by (ii) the total
number of shares of Junglee Capital Stock outstanding immediately prior to the
effective time on a fully diluted basis, assuming all outstanding options and
warrants to purchase shares of Junglee Capital Stock have been validly exercised
and issued prior to the effective time (the "Junglee Exchange Ratio").
In addition, each option to purchase shares of Junglee Common Stock
outstanding at the effective time of the Junglee Merger was assumed by
Amazon.com and will be treated as an option to purchase that number of
Amazon.com Common Shares equal to the product of the Junglee Exchange Ratio and
the number of shares of Junglee Common Stock subject to such option. A warrant
to purchase shares of
<PAGE> 3
Junglee Capital Stock was assumed by Amazon.com and constitutes a warrant to
acquire that number of shares of Amazon.com Common Stock equal to the product of
the Junglee Exchange Ratio and the number of shares of Junglee Capital Stock
subject to such warrant.
The Junglee Merger will be accounted for under the purchase method of
accounting.
Pursuant to the Junglee Merger Agreement, Junglee and its stockholders
have agreed to indemnify and hold Amazon.com and the surviving corporation
harmless for any losses that may be suffered by Amazon.com or its affiliates
arising out of or in connection with any inaccuracy in, or misrepresentation or
breach of, any representation or warranty made by Junglee in the Junglee Merger
Agreement and related agreements, or any failure by Junglee to perform its
obligations under the Junglee Merger Agreement and related agreements.
Approximately 190,000 of the shares of Amazon.com Common Stock issued in
connection with the Junglee Merger will be deposited with an escrow agent to
secure such indemnification obligations.
Pursuant to an Investor Rights Agreement, dated as of August 12, 1998
(the "Junglee Investor Rights Agreement"), by and between Amazon.com and the
stockholders of Junglee, Amazon.com has agreed to prepare and file with the
Securities and Exchange Commission (the "SEC"), within 90 days of the effective
time of the Junglee Merger, a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended, covering the resale of the Amazon.com Common
Shares issued in the Junglee Merger and to use its best efforts to have the
Registration Statement declared effective by the SEC as promptly as practicable
thereafter.
The Junglee Merger Agreement and the Junglee Investor Rights Agreement
(together with the Junglee Merger Agreement, the "Junglee Agreements"), each of
which was filed as an exhibit to Amazon's Current Report on Form 8-K dated
August 3, 1998, are incorporated herein by reference. The descriptions of the
Junglee Agreements herein do not purport to be complete and are qualified in
their entirety by the provisions of the Junglee Agreements.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
Audited Financial Statements:
<PAGE> 4
(i) Report of Deloitte & Touche LLP, dated
February 6, 1998.
(ii) Junglee Corp. Balance Sheets as of December
31, 1997 and 1996.
(iii) Junglee Corp. Statements of Operations for
the year ended December 31, 1997 and period
from June 3, 1996 (inception) to December
31, 1996.
(iv) Junglee Corp. Statements of Stockholders'
Equity for the year ended December 31, 1997
and period from June 3, 1996 (inception) to
December 31, 1996.
(v) Junglee Corp. Statements of Cash Flows for
the year ended December 31, 1997 and period
from June 3, 1996 (inception) to December
31, 1996.
(vi) Junglee Corp. Notes to Financial Statements
for the year ended December 31, 1997 and
period from June 3, 1996 (inception) to
December 31, 1996.
Condensed Financial Statements (unaudited):
(i) Junglee Corp. Balance Sheet as of June 30,
1998 (unaudited) and December 31, 1997.
(ii) Junglee Corp. Statements of Operations for
the six month periods ended June 30, 1998
and 1997 (unaudited).
(iii) Junglee Corp. Statements of Cash Flows for
the six month periods ended June 30, 1998
and 1997 (unaudited).
(iv) Jungle Corp. Notes to Financial Statements
for the six month periods ended June 30,
1998 and 1997 (unaudited).
(b) Pro Forma Financial Information
The required pro forma financial information with respect to the
Junglee Merger is not available as of the date of this Current Report on Form
8-K. The pro forma financial information will be filed as soon as practicable
and not later than 60 days from the date on which this Form 8-K must be filed in
accordance with paragraph 4 of Item 7(a) of Form 8-K.
<PAGE> 5
(c) Exhibits
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger dated as of August 3 1998, by and among
Amazon.com, Inc., AJ Acquisition, Inc. and Junglee Corp. (incorporated
by reference from Amazon.com, Inc.'s Current Report on Form 8-K dated
August 3, 1998).
23.1 Independent Auditors' Consent
99.1 Form of Investor Rights Agreement by and between Amazon.com, Inc. and
the stockholders of Junglee Corp. named therein (incorporated by
reference from Amazon.com, Inc.'s Current Report on Form 8-K dated
August 3, 1998).
</TABLE>
<PAGE> 6
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Junglee Corp.:
We have audited the accompanying balance sheets of Junglee Corp. as of December
31, 1997 and 1996, and the related statements of operations, stockholders'
equity and cash flows for the year ended December 31, 1997 and for the period
from June 3, 1996 (inception) to December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Junglee Corp. at December 31, 1997 and 1996,
and the results of its operations and its cash flows for the above-stated
periods then ended in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
San Jose, California
February 6, 1998
<PAGE> 7
JUNGLEE CORP.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1997 1996
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 1,576,716 $ 2,415,200
Short-term investments -- 977,957
Accounts receivable (net of allowance of $57,177) 386,068 --
Accounts receivable from related party 128,525 --
Other current assets 77,036 16,187
----------- -----------
Total current assets 2,168,345 3,409,344
PROPERTY AND EQUIPMENT, Net 727,234 318,915
NOTE RECEIVABLE FROM OFFICER 124,054 --
RESTRICTED CASH 60,000 60,000
OTHER ASSETS 6,605 --
----------- -----------
TOTAL $ 3,086,238 $ 3,788,259
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 90,949 $ 77,756
Accrued compensation and related benefits 93,385 29,376
Other accrued liabilities 254,439 110,835
Deferred revenue 457,692 --
Deferred revenue from related party -- 100,000
Current portion - line of credit 200,000 17,769
----------- -----------
Total current liabilities 1,096,465 335,736
----------- -----------
LINE OF CREDIT 179,310 48,866
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.001 par value (liquidation preference
of $6,382,067):
Series A: 1,150,000 shares designated, issued and outstanding 566,495 566,495
Series B: 2,000,000 shares designated; shares issued and outstanding:
1997, 1,943,666; 1996, 1,191,666 5,915,572 3,564,238
Common stock, $.001 par value: 12,000,000 shares authorized;
shares outstanding: 1997, 6,962,500; 1996, 6,825,000 420,610 15,335
Notes receivable from sale of common stock (149,700) --
Accumulated deficit (4,942,514) (742,411)
----------- -----------
Total stockholders' equity 1,810,463 3,403,657
----------- -----------
TOTAL $ 3,086,238 $ 3,788,259
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE> 8
JUNGLEE CORP.
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 AND PERIOD FROM
JUNE 3, 1996 (INCEPTION) TO DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
REVENUES (Note 9):
License $ 985,495 $ --
Maintenance and other services 230,860 --
----------- -----------
Total net revenues 1,216,355 --
----------- -----------
OPERATING EXPENSES:
Cost of revenues 578,887 --
Research and development 2,580,795 439,469
Selling and marketing 1,545,687 70,520
General and administrative 832,998 242,077
----------- -----------
LOSS FROM OPERATIONS 4,322,012 752,066
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 156,436 19,367
Interest expense (30,998) --
Other expense (3,529) (9,712)
----------- -----------
Total other income - net 121,909 9,655
----------- -----------
NET LOSS $ 4,200,103 $ 742,411
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE> 9
JUNGLEE CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1997 AND PERIOD FROM
JUNE 3, 1996 (INCEPTION) TO DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONVERTIBLE CONVERTIBLE
PREFERRED STOCK - SERIES A PREFERRED STOCK - SERIES B COMMON STOCK
-------------------------- --------------------------- ------------
SHARES AMOUNT SHARES AMOUNT SHARES
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock for cash to founders
at $.001 per share in June 1996 -- $ -- -- $ -- 6,435,000
Issuance of Series A preferred stock for cash at
$0.50 per share, net of issuance costs
in July 1996 1,150,000 $ 566,495 -- -- --
Issuance of common stock upon exercise
of options for cash at $.01 per share
in October 1996 -- -- -- -- 390,000
Grant of 60,000 options for consulting services
in November 1996 (see Note 5) -- -- -- -- --
Issuance of Series B preferred stock for cash at
$3.00 per share, net of issuance costs:
In November 1996 -- -- 833,333 2,492,474 --
In December 1996 -- -- 358,333 1,071,764 --
Net loss -- -- -- -- --
----------- ----------- ----------- ----------- -----------
BALANCES, December 31, 1996 1,150,000 566,495 1,191,666 3,564,238 6,825,000
Grant of option to purchase 750,000 shares of
Series B preferred stock at $3.00 per share in
January 1997 (see Note 9) -- -- -- 100,000 --
Issuance of common stock for cash:
In March 1997 at $0.30 per share -- -- -- -- 750,000
In November 1997 at $0.50 per share -- -- -- -- 62,500
Repurchase of founder common stock at $.001
per share in July 1997 -- -- -- -- (975,000)
Issuance of common stock for cash and notes in
November 1997 at $0.50 per share 300,000
Issuance of Series B preferred stock for cash at
$3.00 per share, net of issuance costs:
In June 1997 -- -- 750,000 2,245,346 --
In November 1997 -- -- 2,000 5,988 --
Net loss -- -- -- -- --
----------- ----------- ----------- ----------- -----------
BALANCES, December 31, 1997 1,150,000 $ 566,495 1,943,666 $ 5,915,572 6,962,500
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
NOTE
COMMON STOCK RECEIVABLE
------------ FROM SALE OF ACCUMULATED
AMOUNT COMMON STOCK DEFICIT TOTAL
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Issuance of common stock for cash to founders
at $.001 per share in June 1996 $ 6,435 $ -- $ -- $ 6,435
Issuance of Series A preferred stock for cash at
$0.50 per share, net of issuance costs
in July 1996 -- -- -- 566,495
Issuance of common stock upon exercise
of options for cash at $.01 per share
in October 1996 3,900 -- -- 3,900
Grant of 60,000 options for consulting services
in November 1996 (see Note 5) 5,000 -- -- 5,000
Issuance of Series B preferred stock for cash at
$3.00 per share, net of issuance costs:
In November 1996 -- -- -- 2,492,474
In December 1996 -- -- -- 1,071,764
Net loss -- -- (742,411) (742,411)
----------- ----------- ----------- -----------
BALANCES, December 31, 1996 15,335 -- (742,411) 3,403,657
Grant of option to purchase 750,000 shares of
Series B preferred stock at $3.00 per share in
January 1997 (see Note 9) -- -- -- 100,000
Issuance of common stock for cash:
In March 1997 at $0.30 per share 225,000 -- -- 225,000
In November 1997 at $0.50 per share 31,250 -- -- 31,250
Repurchase of founder common stock at $.001
per share in July 1997 (975) -- -- (975)
Issuance of common stock for cash and notes in
November 1997 at $0.50 per share 150,000 (149,700) 300
Issuance of Series B preferred stock for cash at
$3.00 per share, net of issuance costs:
In June 1997 -- -- -- 2,245,346
In November 1997 -- -- -- 5,988
Net loss -- -- (4,200,103) (4,200,103)
----------- ----------- ----------- -----------
BALANCES, December 31, 1997 $ 420,610 $ (149,700) $(4,942,514) $ 1,810,463
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE> 10
JUNGLEE CORP.
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997 AND PERIOD FROM JUNE 3, 1996 (INCEPTION)
TO DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,200,103) $ (742,411)
Reconciliation of net loss to net cash used in operating
activities:
Depreciation 213,084 16,997
Compensation expense related to grant of options 100,000 5,000
Changes in operating assets and liabilities:
Accounts receivable (386,068) --
Accounts receivable from related party (128,525) --
Other current assets (60,849) (16,187)
Accounts payable 13,193 77,756
Accrued compensation and related benefits 64,009 29,376
Other accrued liabilities 143,604 110,835
Deferred revenue 457,692 --
Deferred revenue from related party (100,000) 100,000
----------- -----------
Net cash used in operating activities (3,883,963) (418,634)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (621,403) (335,912)
Purchases of short-term investments (982,489) (977,957)
Proceeds from maturity of short-term investments 1,960,446 --
----------- -----------
Net cash provided by (used in) investing activities 356,554 (1,313,869)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Note receivable from officer (135,000) --
Collection on note receivable from officer 10,946 --
Proceeds from borrowings 433,365 66,635
Repayments of borrowings (120,690) --
Sale of Series A preferred stock, net of issuance costs -- 566,495
Sale of Series B preferred stock, net of issuance costs 2,251,334 3,564,238
Sale of common stock 255,575 10,335
Other assets (6,605) (60,000)
----------- -----------
Net cash provided by financing activities 2,688,925 4,147,703
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (838,484) 2,415,200
CASH AND EQUIVALENTS, Beginning of period 2,415,200 --
----------- -----------
CASH AND EQUIVALENTS, End of period $ 1,576,716 $ 2,415,200
=========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES -
Common stock issued for notes receivable $ 149,700 $ --
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid for interest $ 30,998 $ --
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE> 11
JUNGLEE CORP.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND PERIOD FROM JUNE 3, 1996 (INCEPTION)
TO DECEMBER 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Junglee Corp. was incorporated in Delaware on June 3, 1996
to develop and market software to enable database query capability on
multiple disparate data sources. The Company's software has applicability
to the internet, intranet and other enterprise computing environments. The
Company was considered a development stage company until the first quarter
of 1997 when it began generating operating revenues.
CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES - 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 disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of expenses during the reporting period. Such estimates
include the estimated useful life of property and equipment and certain
accrued liabilities. Actual results could differ from those estimates.
The Company participates in a dynamic high technology industry, and
management believes that changes in any of the following areas, among
others, could have a material adverse affect on the Company's future
financial position or results of operations: ability to obtain additional
financing; market demand for products under development by the Company;
increased competition; and the ability to attract and retain employees
necessary to support its growth.
CASH AND EQUIVALENTS consists of highly liquid debt investments with
original maturities of 90 days or less.
SHORT-TERM INVESTMENTS - The Company's short-term investments consist of
corporate debt securities with original maturities of more than three
months and less than one year. All of the Company's investments are
classified as available-for-sale, and are stated at amortized cost
(specific identification basis), which approximates fair market value.
There were no realized gains or losses in 1997 or 1996.
PROPERTY AND EQUIPMENT are stated at cost. Depreciation is provided using
the straight-line method over estimated useful lives of three to five
years.
SOFTWARE DEVELOPMENT COSTS - The costs for the development of new software
products are expensed as incurred until technological feasibility has been
established, at which time any additional costs would be capitalized in
accordance with Statement of Financial Accounting Standards No. 86.
Because the Company believes its current process for developing software
is essentially completed concurrently with the establishment of
technological feasibility, no costs have been capitalized to date.
<PAGE> 12
REVENUE RECOGNITION - Revenue from software licenses is recognized upon
shipment only if no significant vendor obligations remain and collection
of resulting receivables is deemed probable. Maintenance contracts
generally require the Company to provide technical support and software
updates to customers. Maintenance contract revenue is recognized ratably
over the term of the maintenance contract. Training and consulting revenue
is recognized as the work is performed. Royalty revenues are earned and
recognized in the period reported by the customers or when cash is
received.
DEFERRED REVENUE represents payments received from customers for future
services to be performed.
STOCK-BASED COMPENSATION - The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with APB No. 25,
"Accounting for Stock Issued to Employees."
INCOME TAXES - Deferred tax liabilities and assets are recognized for the
expected future tax consequences of temporary differences between
financial statement carrying amounts and the tax bases of assets and
liabilities and net operating loss and tax credit carryforwards. Deferred
tax assets are reduced by a valuation allowance to amounts expected to be
realized.
RECENTLY ISSUED ACCOUNTING STANDARDS - In October 1997, Statement of
Position 97-2, Software Revenue Recognition (SOP 97-2) was issued, which
revises the accounting for recognizing revenue on software transactions.
SOP 97-2 is effective for the Company beginning January 1, 1998.
Management believes that the adoption of SOP 97-2 will not have a
significant impact on the Company's financial statements.
2. PROPERTY AND EQUIPMENT
At December 31 property and equipment consist of:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Computer equipment $ 681,679 $ 244,210
Furniture and fixtures 72,366 36,282
Software 203,270 55,420
--------- ---------
957,315 335,912
Less accumulated depreciation (230,081) (16,997)
--------- ---------
Property and equipment, net $ 727,234 $ 318,915
========= =========
</TABLE>
3. NOTE RECEIVABLE FROM OFFICER
Amount represents the balance of a $135,000 loan to an officer of the
Company. The note bears interest at the rate of 7.25% per annum and is
secured by a deed of trust encumbering certain real property in favor of
the Company. The principal and any unpaid accrued interest is repayable on
January 20, 2001.
4. RESTRICTED CASH
Restricted cash consists of a $60,000 certificate of deposit with a bank
which is collateral for leasing office space. The lease expires on
November 30, 1999, at which time the funds become unrestricted.
<PAGE> 13
5. FINANCING ARRANGEMENTS
At December 31, 1997, the Company had a $500,000 bank line of credit.
Borrowings under the line of credit are collateralized by equipment and
bear interest at the bank's prime rate (8.5% at December 31, 1997) plus
1.0%. The agreement requires the Company to maintain certain financial
covenants. The Company was in compliance with the covenants at December
31, 1997. There was $379,310 outstanding under the line of credit at
December 31, 1997, which is repayable in the amounts of $200,000 in 1998
and $179,310 in 1999.
6. STOCKHOLDERS' EQUITY
COMMON STOCK
The Company issued common stock to officers and directors pursuant to a
restricted stock purchase agreement. Under the agreement, one fourth of
the shares shall be released from the Company's repurchase option after
one year and then one-forty-eighth each month thereafter. In the event
that the officers' status as an employee of the Company terminates or in
the event the director ceases to serve as a director of the Company at any
time during the vesting period for any reason, the Company has the option
to repurchase, at the original purchase price, any unvested shares as of
the date of termination. During 1997, 975,000 shares were repurchased
pursuant to this agreement. In the event of a change in control of the
Company and constructive termination, all of the unvested shares will be
immediately released from the repurchase option. As of December 31, 1997,
4,010,133 shares of common stock issued to officers and directors are
subject to this repurchase right.
In November 1997, the Company also issued 300,000 shares of restricted
stock at $.50 per share to consultants for services to be rendered. The
consideration received consisted of $300 and a note receivable for
$149,700. Payment of the note is secured by a security interest in the
shares granted to the Company by the consultants. The note receivable
bears interest at 6.24% per annum and is repayable in 2001. The shares are
subject to a right of repurchase which lapses as the shares vest over an
eighteen month period. As of December 31, 1997, all 300,000 shares of
common stock are subject to this repurchase right.
CONVERTIBLE PREFERRED STOCK
During 1996, the Board of Directors authorized and designated 1,150,000
shares of Series A convertible preferred stock and 2,000,000 shares of
Series B convertible preferred stock. In July 1996, the Company sold an
aggregate of 1,150,000 shares of Series A convertible preferred stock,
resulting in net proceeds of $566,495. In November and December of 1996,
the Company sold an aggregate of 1,191,666 shares of Series B convertible
preferred stock, resulting in net proceeds of $3,564,238. In June and
November of 1997, the Company sold an aggregate of 752,000 shares of
Series B convertible preferred stock, resulting in net proceeds of
$2,251,334.
Significant terms of the Series A and B convertible preferred stock are as
follows:
- Each share is convertible, at the option of the holder, into one
share of common stock subject to adjustments for events of dilution
and certain other events. Shares will automatically convert upon an
underwritten public offering of the Company's common stock yielding
proceeds in excess of $10,000,000 at a price of not less than $4.00
per share or upon the approval (by vote or written consent) of the
holders of a majority of the outstanding shares of the preferred
stock.
<PAGE> 14
- Holders of preferred stock are entitled to annual noncumulative
dividends of $0.04 and $0.24 per share for the Series A and B
preferred stock as declared by the Board of Directors before any
dividend is declared on common stock.
- In the event of liquidation, dissolution or winding up of the
Company, the holders of the preferred stock are entitled to receive,
prior to and in preference to any distribution to holders of common
stock, an amount equal to the price at which the preferred was
purchased from the Company plus any declared but unpaid dividends.
- Each share has the same voting rights as the number of shares of
common stock into which it is convertible. The preferred
stockholders, voting as a Series, have the right to elect two out of
six members of the Board of Directors.
- The preferred stockholders have certain registration rights.
STOCK OPTION PLAN
Under the Company's 1996 Employee Stock Option Plan (the Option Plan), the
Company may grant options to purchase up to 2,275,000 shares of common
stock to employees, directors and consultants at prices not less than the
fair market value (as determined by the Board of Directors) at the date of
grant for incentive stock options and not less than 85% of fair market
value for nonstatutory stock options. These options generally vest over a
four-year period and expire no more than ten years from the date of grant.
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
<S> <C> <C>
Outstanding, June 3, 1996 (inception) -- $ --
Granted (weighted average fair value of $0.04) 808,019 0.16
Exercised (390,000) 0.01
---------
Outstanding, December 31, 1996 418,019 0.30
Granted (weighted average fair value of $0.07) 1,395,273 0.44
Canceled (262,400) 0.50
---------
Outstanding, December 31, 1997 1,550,892 $0.39
=========
</TABLE>
<PAGE> 15
At December 31, 1997, 344,108 shares were available under the Option Plan
for future grant.
Additional information regarding options outstanding as of December 31,
1997 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------- -------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE (YRS) PRICE EXERCISABLE PRICE
<S> <C> <C> <C> <C> <C>
$0.30 845,292 9.0 $ 0.30 92,017 $ 0.30
0.50 705,600 9.9 0.50 -- --
------------- --------- --------- --------- --------- ---------
$0.30 - $0.50 1,550,892 9.4 $ 0.39 92,017 $ 0.30
</TABLE>
STOCK OPTIONS GRANTED OUTSIDE OF THE STOCK OPTION PLAN
Options to purchase 390,000 shares of common stock at $0.01 per share were
issued to certain Board members in 1996 outside of the 1996 Stock Option
Plan and vest over four years from the date of grant. The options are
immediately exercisable, but are subject to a right of repurchase by the
Company at its original issuance price. The Company's right of repurchase
lapses as the options vest. All such options were exercised in 1996.
In addition, options to purchase 60,000 shares of common stock at $0.30
per share were issued to a nonemployee in November 1996 outside of the
1996 Stock Option Plan and vest immediately. Compensation expense related
to the grant was $5,000 in 1996.
ADDITIONAL STOCK PLAN INFORMATION
Effective for 1996, the Company was required to adopt the disclosure
requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123). SFAS 123 defines a
fair value method of accounting for stock-based compensation awards to
employees. The Company has elected to continue to follow the provisions of
Accounting Principals Board No. 25, "Accounting for Stock Issued to
Employees," and its related interpretations; accordingly, no compensation
expense has been recognized in the financial statements for employee stock
arrangements issued at fair market value.
SFAS 123 requires that the fair value of stock-based awards to employees
be calculated through the use of option pricing models, even though such
models were developed to estimate the fair value of freely tradable, fully
transferable options without vesting restrictions, which significantly
differ from the Company's stock option awards. These models also require
subjective assumptions, including future stock price volatility and
expected time to exercise, which greatly affect the calculated values. The
Company's calculations were made using the Black-Scholes option pricing
model with the following weighted average assumptions: expected life, five
years; stock volatility 0%; risk free interest rate, approximately 6%; and
no dividend payments during the expected term. Forfeitures are recognized
as they occur. If the computed fair value of the 1997 and 1996 awards had
been amortized to expense over the vesting period of the awards, pro forma
net loss would have been approximately $4,215,000 in 1997 and $744,000 in
1996.
<PAGE> 16
STOCK RESERVED FOR ISSUANCE
At December 31, 1997, the Company had reserved shares of common stock for
issuance as follows:
<TABLE>
<S> <C>
Conversion of preferred stock 3,150,000
Issuance under stock option plan 2,275,000
Issuance of stock options granted outside of the stock option plan 450,000
---------
Total 5,875,000
=========
</TABLE>
7. FACILITIES LEASE
The Company leases its facilities under an operating lease that expires in
1999. Rent expense was $118,386 and $27,452 in fiscal 1997 and 1996,
respectively. Future minimum lease payments for fiscal years 1998 and 1999
are $121,482 and $113,960, respectively.
8. INCOME TAXES
No income taxes were provided in fiscal 1997 and 1996 due to the Company's
net losses.
At December 31, 1997, the Company has combined net operating loss
carryforwards of approximately $4,900,000 available to offset future
federal and state taxable income. Such federal and state carryforwards
expire in 2011 and 2004, respectively.
Research and development tax credit carryforwards of approximately $11,000
and $9,000 are available to offset future federal and California income
taxes payable, respectively.
At December 31, 1997, the net deferred tax assets generated by loss and
credit carryforwards and temporary differences of approximately $2,000,000
have been fully reserved due to the uncertainty surrounding the
realization of such benefits. The valuation reserve increased by
approximately $1,300,000 during the year.
The Tax Reform Act of 1986 and California Conformity Act of 1987 impose
substantial restrictions on the utilization of net operating loss and tax
credit carryforwards in the event of an "ownership change," as defined by
the Internal Revenue Code. Any such ownership change could significantly
limit the Company's ability to utilize its tax carryforwards.
9. RELATED PARTY TRANSACTIONS
During 1996, the Company signed a contract with a related company to
develop and license a proprietary computer program. A Director of the
Company is an officer of the related company. At December 31, 1996,
payments in the amount of $100,000 from the related party were deferred as
they related to future services to be performed.
During 1997, $520,529 in total revenues were recognized for services
performed for the related party of which $128,525 is outstanding at
December 31, 1997. Also see Note 10 - Significant Customers.
In January 1997, the Company sold 750,000 shares of its common stock for
cash at $0.30 per share to the related party. The Company also granted the
related party on option to purchase 750,000 shares of Series B preferred
stock at an exercise price of $3.00 per share. The Company recorded an
expense of $100,000 in 1997 for the fair value of this option. In June
1997, the related party exercised this option in its entirety.
<PAGE> 17
In addition to the above transactions, the Company has granted the related
party the right to participate in certain future offerings of the
Company's securities so as to maintain their proportional ownership
interest in the Company on a fully diluted basis.
10. SIGNIFICANT CUSTOMERS
Four customers accounted for 43%, 20%, 14% and 12% of revenues in 1997,
respectively. Four customers accounted for 44%, 22%, 12% and 11% of
accounts receivable at December 31, 1997, respectively.
11. EMPLOYEE BENEFIT PLAN
The Company has established a 401(k) tax-deferred savings plan. Employees
meeting the eligibility requirements, as defined, may contribute specified
percentages of their salaries. The Company has not contributed to the plan
to date.
12. SUBSEQUENT EVENT
In January 1998, the Company sold 932,500 shares of Series C convertible
preferred stock at $5.00 per share for net proceeds of approximately
$4,600,000.
* * * * *
<PAGE> 18
JUNGLEE CORP.
CONDENSED BALANCE SHEET
JUNE 30, 1998 AND DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 4,031,060 $1,576,716
Accounts receivable, net 440,152 386,068
Accounts receivable from related party 160,975 128,525
Other current assets 335,069 77,036
----------- ----------
Total current assets 4,967,256 2,168,345
PROPERTY AND EQUIPMENT, net 1,001,923 727,234
NOTE RECEIVABLE FROM OFFICER 112,785 124,054
RESTRICTED CASH 60,000 60,000
OTHER ASSETS 7,967 6,605
----------- ----------
TOTAL $ 6,149,931 $3,086,238
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 465,157 $ 90,949
Convertible unsecured promissory note 2,004,278 --
Accrued compensation and related benefits 136,581 93,385
Other accrued liabilities 486,816 254,439
Deferred revenue 120,669 457,692
Current portion - line of credit 200,000 200,000
----------- ----------
Total current liabilities 3,413,501 1,096,465
----------- ----------
LINE OF CREDIT 75,862 179,310
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.001 par value
(liquidation preference of $ 11,508,113):
Series A: 1,150,000 shares designated, issued and outstanding 566,495 566,495
Series B: 2,000,000 shares designated: shares issued and 5,933,752 5,915,572
outstanding: 1998, 1,949,726; 1997, 1,943,666
Series C: 2,000,000 shares designated: shares issued and 5,023,616 --
outstanding: 1998, 1,016,787; 1997, none
Common Stock, $.001 par value: 15,000,000 shares authorized; 745,769 420,610
shares outstanding: 1998, 7,419,657; 1997, 6,962,500
Notes receivable from sale of common Stock (149,700) (149,700)
Deferred compensation (277,336) --
Accumulated deficit (9,182,028) (4,942,514)
----------- ----------
Total stockholders' equity 2,660,568 1,810,463
----------- ----------
TOTAL $ 6,149,931 $3,086,238
=========== ==========
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE> 19
JUNGLEE CORP.
CONDENSED STATEMENTS OF OPERATIONS
SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
(Unaudited) (Unaudited)
<S> <C> <C>
REVENUES:
License $ 836,827 $ 625,000
Maintenance and other services 561,377 53,376
----------- -----------
Total net revenues 1,398,204 678,376
----------- -----------
OPERATING EXPENSES:
Cost of revenues 1,295,600 322,852
Research and development 993,052 1,167,148
Selling and marketing 2,480,108 549,300
General and administration 944,201 283,924
----------- -----------
LOSS FROM OPERATIONS (4,314,757) (1,644,848)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 98,237 74,060
Interest expense (20,499) (9,746)
Other expense (2,495) (1,147)
----------- -----------
Total other income - net 75,243 63,167
----------- -----------
NET LOSS $(4,239,514) $(1,581,681)
=========== ===========
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE> 20
JUNGLEE CORP.
CONDENSED STATEMENTS OF CASHFLOWS
SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(4,239,514) $(1,581,681)
Reconciliation of net loss to net cash used in
operating activities:
Depreciation 184,311 59,998
Compensation expense related to grant of options 25,164 --
Changes in operating assets and liabilities:
Accounts receivable (54,084) (203,500)
Accounts receivable from related party
and other current assets (290,483) (126,552)
Accounts payable 374,208 204,254
Accrued compensation and other accrued liabilities 275,573 100,102
Deferred revenue (337,023) (153,876)
------------ ------------
Net cash used in operations activities (4,061,848) (1,701,255)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (459,000) (298,446)
Proceeds from maturity of short-term investments -- 486,651
Other assets 9,907 (201,452)
----------- ------------
Net cash used in investing activities (449,093) (13,247)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible promissory note 2,004,278 --
Proceeds from borrowings -- 416,124
Repayment of borrowings (103,448) --
Sale of Series B preferred stock, net of issuance costs 18,180 2,246,801
Sale of Series C preferred stock, net of issuance costs 5,023,616 --
Sale of common stock 22,659 225,000
----------- -----------
Net cash provided by financing activities 6,965,285 2,887,925
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,454,344 1,173,423
CASH AND EQUIVALENTS, Beginning of period 1,576,716 2,415,200
------------ ------------
CASH AND EQUIVALENTS, End of period $ 4,031,060 $ 3,588,623
=========== ============
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE> 21
JUNGLEE CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997 (unaudited)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 8-K
and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the six month period ended June 30,
1998 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1998. For further information, refer
to the consolidated financial statements for the year ended December
31, 1997 and the period from June 3, 1996 (inception) to December 31,
1996 and notes thereto included herein.
2. CONVERTIBLE UNSECURED PROMISSORY NOTE:
In June 1998, Junglee Corp. (the "Company") issued a convertible
unsecured promissory note to a significant stockholder of the Company,
in a principal amount of $2,000,000 bearing interest at the rate of
5.5% per annum, due in June 1999 (the "Note"). All principal and
accrued interest under the Note is convertible at the option of the
stockholder into shares of Conversion Stock at the price of the
Conversion Stock. "Conversion Stock" is defined in the Note as the
Company's most senior preferred stock purchased as part of the
Qualified Financing, and if more than one series of preferred stock
purchased as part of the Qualified Financing shares such seniority,
then the particular series of preferred stock with the highest gross
proceeds to the Company shall be the Conversion Stock. "Qualified
Financing" is defined in the Note as the Company's sale, from and after
the date of the Note, of preferred stock for cash capital and/or
retirement of debt securities in one transaction or a series of related
transactions.
3. STOCKHOLDERS' EQUITY:
During the first six months of 1998, the Company sold 1,016,787 shares
of Series C convertible preferred stock at $5.00 per share for net
proceeds of approximately $5,024,000 and increased the number of
authorized shares of common stock to 15,000,000.
In May 1998, the Company adopted the 1998 Equity Incentive Plan (the
"Incentive Plan"). Pursuant to the Incentive Plan, the Company is
authorized to grant options to purchase up to 2,700,000 shares of
common stock to employees, directors and consultants under terms
substantially consistent with the Company's 1996 Employee Stock Option
Plan.
4. SUBSEQUENT EVENT
On August 12, 1998, pursuant to an Agreement and Plan of Merger dated
as of August 3, 1998, by and among Amazon.com, Inc., a Delaware
corporation ("Amazon.com"), the Company, a Delaware corporation, and AJ
Acquisition, Inc., a Delaware corporation and wholly owned subsidiary
of Amazon.com ("Junglee Merger Sub"), Amazon.com acquired all of the
outstanding capital stock of the Company and Junglee Merger Sub merged
with and into the Company, with the Company as the surviving
corporation.
Amazon.com will issue approximately 1,600,000 shares of Amazon.com
common stock, par value $.01 per share, and assume all outstanding
options in connection with the acquisition of the Company.
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMAZON.COM, INC.
(Registrant)
Dated: August 27, 1998 By: /s/ JOY D. COVEY
-----------------------------------
Joy D. Covey
Chief Financial Officer, Vice
President of Finance and
Administration and Secretary
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
2.1 Agreement and Plan of Merger dated as of August 3 1998, by and among
Amazon.com, Inc., AJ Acquisition, Inc. and Junglee Corp. (incorporated
by reference from Amazon.com, Inc.'s Current Report on Form 8-K dated
August 3, 1998).
23.1 Independent Auditors' Consent
99.1 Form of Investor Rights Agreement by and between Amazon.com, Inc.
and certain stockholders of Junglee Corp. named therein
(incorporated by reference from Amazon.com, Inc.'s Current Report on
Form 8-K dated August 3, 1998).
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-28763 on Form S-8 and Nos. 333-56723 and 333-55943 on Form S-4 of
Amazon.com, Inc. of our report dated February 6, 1998, on the financial
statements of Junglee Corp. as of December 31, 1997 and 1996 and for the year
ended December 31, 1997 and for the period from June 3, 1996 (inception) to
December 31, 1996, which report is included in this Current Report on Form 8-K.
Deloitte & Touche LLP
San Jose, California
August 24, 1998