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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 OCTOBER 1, 1999 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: 000-26303
VIANT CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 77-0427302
(State or Other Jurisdiction (I.R.S. Employer
Incorporation or Organization) Identification No.)
89 SOUTH STREET, BOSTON, MA 02111
(Address of Principal Executive (Zip Code)
Offices)
617-531-3700
(Registrant's Telephone Number, Including Area Code)
NA
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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 October 1, 1999 there were 21,472,981 shares of Common Stock, $.001
par value, outstanding.
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VIANT CORPORATION
Form 10-Q
Table of Contents
October 1, 1999
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Operations for the Three and Nine
Months Ended September 30, 1998 and October 1, 1999......... 1
Balance Sheet as of January 1, 1999 and
October 1, 1999............................................. 2
Statement of Cash Flows for the Nine Months
Ended September 30, 1998 and October 1, 1999................ 3
Notes to Financial Statements............................... 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 5
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.................... 10
Signatures .......................................................... 11
Exhibit 27.1......................................................... 12
</TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
VIANT CORPORATION
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------------------------------------------------
--------------------------------- ---------------------------------
SEPT. 30, OCT. 1, SEPT. 30, OCT. 1,
1998 1999 1998 1999
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Net revenues .................................................. $ 5,302 $ 18,751 $ 13,907 $ 37,625
-------- -------- -------- --------
Operating expenses:
Professional services ..................................... 2,999 8,440 7,598 18,542
Sales and marketing ....................................... 805 1,770 2,022 4,647
General and administrative ................................ 2,740 6,701 6,667 14,998
Research and development .................................. 389 932 852 2,472
-------- -------- -------- --------
Total operating expenses .............................. 6,933 17,843 17,139 40,659
-------- -------- -------- --------
Income (loss) from operations ............................... (1,631) 908 (3,232) (3,034)
Interest and other income (expense), net .................... (79) 660 (62) 722
-------- -------- -------- --------
Net income (loss) ............................................. $ (1,710) $ 1,568 $ (3,294) $ (2,312)
======== ======== ======== ========
Net income (loss) per share:
Basic ........................................... $ (0.46) $ 0.07 $ (0.90) $ (0.21)
Diluted ......................................... $ (0.46) $ 0.06 $ (0.90) $ (0.21)
Shares used in computing net income (loss) per share:
Basic ........................................... 3,684 21,409 3,664 10,845
Diluted ......................................... 3,684 25,990 3,664 10,845
Pro forma net income (loss) per share:
Basic ........................................... $ (0.12) $ 0.07 $ (0.24) $ (0.12)
Diluted ......................................... $ (0.12) $ 0.06 $ (0.24) $ (0.12)
Shares used in computing pro forma net income (loss) per share:
Basic ........................................... 13,691 21,409 13,670 18,904
Diluted ......................................... 13,691 25,990 13,670 18,904
</TABLE>
The accompanying notes are an integral part of these financial statements.
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VIANT CORPORATION
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
January 1, 1999 October 1, 1999
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................. $ 18,209 $ 61,500
Short-term investments ..................................... 602 1,376
Accounts receivable, net ................................... 5,472 13,614
Prepaid expenses and other current assets .................. 1,190 1,441
-------- --------
Total current assets ..................................... 25,473 77,931
Property and equipment, net .................................. 4,048 5,736
Other assets ................................................. 232 239
-------- --------
Total assets ............................................. $ 29,753 $ 83,906
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .......................... $ 2,850 $ --
Current portion of capital lease obligation ................ 416 591
Accounts payable ........................................... 626 3,347
Accrued expenses ........................................... 2,907 8,038
Deferred revenues .......................................... 1,052 1,955
-------- --------
Total current liabilities ................................ 7,851 13,931
Long-term debt, less current portion ......................... 603 --
Capital lease obligations, less current portion .............. 1,634 1,690
-------- --------
Total liabilities ........................................ 10,088 15,621
-------- --------
Stockholders' equity:
Convertible preferred stock:
Series D: no par value; 3,240,000 and 0 shares
authorized, respectively; 3,167,100 and 0 shares
issued and outstanding, respectively ................... 20,125 --
Series A: no par value; 5,746,874 and 0 shares
authorized, respectively; 5,746,874 and 0
shares issued and outstanding, respectively ............ 3,047 --
Series B: no par value; 1,499,925 and 0 shares
authorized, respectively; 1,499,925 and 0
shares issued and outstanding, respectively ............ 987 --
Series C: no par value; 2,830,408 and 0 shares
authorized, respectively; 2,759,625 and 0
shares issued and outstanding, respectively ............ 7,977 --
Preferred stock, $0.001 par value; 0 and 5,000,000 shares
authorized, respectively; no shares issued and outstanding -- --
Common stock; $0.001 par value; 25,000,000 and
50,000,000 shares authorized, respectively;
4,294,236 and 21,472,981 shares issued and outstanding,
respectively ............................................. 4 21
Additional paid-in capital ................................. 430 83,501
Cumulative translation adjustment .......................... -- (20)
Accumulated deficit ........................................ (12,905) (15,217)
-------- --------
Total stockholders' equity ............................... 19,665 68,285
-------- --------
Total liabilities and stockholders' equity ............... $ 29,753 $ 83,906
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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VIANT CORPORATION
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
SEPT. 30, OCT. 1,
1998 1999
--------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ......................................................... $ (3,294) $ (2,312)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization .................................. 702 1,352
Changes in operating assets and liabilities:
Accounts receivable, net ..................................... (1,384) (8,142)
Prepaid expenses and other assets ............................ (1,086) (258)
Accounts payable ............................................. (878) 2,721
Accrued expenses ............................................. 960 5,131
Deferred revenues ............................................ (355) 903
-------- --------
Net cash used in operating activities ...................... (5,335) (605)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments .............................. (4,940) (4,888)
Maturity of short-term investments ............................... 4,953 4,114
Purchases of property and equipment .............................. (252) (2,601)
-------- --------
Net cash used in investing activities ...................... (239) (3,375)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options .......................... -- 722
Proceeds from issuance of convertible preferred stock, net ....... -- 75
Proceeds from issuance of common stock, net ...................... -- 50,155
Proceeds from borrowings on lines of credit ...................... 1,875 --
Principal payments on borrowings on lines of credit .............. (79) (3,453)
Principal payments on capital lease obligations .................. (154) (208)
-------- --------
Net cash provided by financing activities .................. 1,642 47,291
-------- --------
Effect of exchange rate changes on cash and cash equivalents -- (20)
-------- --------
Net increase (decrease) in cash and cash equivalents ............... (3,932) 43,291
Cash and cash equivalents at beginning of period ................... 5,559 18,209
-------- --------
Cash and cash equivalents at end of period ......................... $ 1,627 $ 61,500
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest ........................................... $ 149 $ 362
NONCASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired under capital lease obligations ............... $ 2,173 $ 439
</TABLE>
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The accompanying notes are an integral part of these financial statements.
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VIANT CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by
Viant Corporation ("Viant" or the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission regarding interim
financial reporting. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements and should be read in conjunction with the
audited financial statements and notes thereto for the year ended January 1,
1999 included in the Company's Registration Statement on Form S-1, as amended
(File No. 333-76049). The accompanying unaudited financial statements reflect
all adjustments (consisting solely of normal, recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of
results for the interim periods presented. The results of operations for the
three and nine month periods ended October 1, 1999 are not necessarily
indicative of the results to be expected for any future period or the full
fiscal year.
During the fourth quarter of 1998, Viant changed its fiscal year to the
52-week period ending on the Friday nearest to the last day of December of
that year. Prior to this, the fiscal year of Viant was the calendar year.
Viant's fiscal year 1998 ended on January 1, 1999.
2. NET INCOME (LOSS) PER SHARE
Viant computes net income (loss) per share in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share."
Basic net income (loss) per share is computed using the weighted average
number of common shares outstanding during the period. Diluted net income
(loss) per share is based upon the weighted average number of shares
outstanding, including common stock equivalents, if dilutive.
Pro forma basic net income (loss) per share is based upon the weighted
average number of common shares outstanding and assumes the conversion of all
outstanding shares of preferred stock into common stock, as if they had
converted immediately upon their issuance. Pro forma diluted net income
(loss) per share is based on the weighted average number of shares
outstanding, including common stock equivalents (stock options and warrants),
if dilutive, and assumes the conversion of preferred stock into common stock
as if they had converted immediately upon issuance. For the loss periods the
assumed exercise of common stock equivalents are anti-dilutive and have been
excluded from the calculation.
3. CAPITAL STOCK
On June 18, 1999, the Company completed an initial public offering of
Common Stock which resulted in the issuance of 3,450,000 shares of Common Stock.
Proceeds to the Company, net of underwriting discounts and costs of the
offering, were approximately $50.2 million.
4. COMPREHENSIVE INCOME
Viant adopted SFAS No. 130, "Reporting Comprehensive Income" during
1999. SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components. The adoption of SFAS No. 130 had no
impact on Viant's net income (loss) or stockholders' equity. Total
comprehensive income (loss), which was comprised of net income (loss) and
foreign currency translation adjustments, was $1,548,000 and $(2,332,000) for
the three and nine months ended October 1, 1999, respectively. Total
comprehensive income (loss) was comprised solely of net income (loss) in the
1998 periods.
4
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. A number of
important factors, including those identified under the caption "Risk Factors"
in Viant's registration statement on Form S-1 (SEC File No. 333-76049) which
hereby is incorporated by reference, as well as factors discussed elsewhere in
this form 10-Q, could cause Viant's actual results to differ materially from
those in forward-looking statement or financial information. Actual results may
differ materially from those results for a number of reasons including the
following: (i) Viant's limited operating history; (ii) Viant's ability to
recruit and retain qualified professionals; (iii) Viant's ability to accurately
estimate the time and resources for the performance of our services; (iv)
Viant's loss of a major client; (v) Viant's need for additional capital in the
future, which may not be available; (vi) competitive factors; (vii) Viant's
ability to keep up with technological change; (viii) intellectual property
claims; (ix) international factors. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
projected. All forward-looking statements included in this document are made as
of the date hereof, based on information available to the Company on the date
thereof, and the Company assumes no obligation to update any forward-looking
statements.
OVERVIEW
Viant is a leading Internet professional services firm providing
strategic consulting, creative design and technology services to companies
seeking to capitalize on the Internet. Viant creates value by helping clients
rapidly develop and deploy Internet solutions.
Viant derives substantially all of its revenues from services performed
on a fixed-price, fixed-time basis. Viant generally enters into a Master
Services Agreement with its clients which establishes the legal and general
business terms of the relationship. As specific engagements are identified, the
Company and the client then enter into separate statements of work which outline
the time frame and fees applicable to the specific engagement. Typically these
engagements are of a short predetermined time frame, generally lasting three to
six months. To determine the proposed fixed price for an engagement, Viant uses
an estimation process which takes into account the type and overall complexity
of the project, the anticipated number of consultants needed and their
associated billing rates, and the estimated duration of and risks associated
with the engagement. All fixed-price proposals are approved by a member of
Viant's senior management team. Revenues from fixed-price engagements are
recognized using the percentage of completion method (based on the ratio of
costs incurred to the total estimated project costs). Project costs are based on
the direct payroll and associated fringe benefits of the consultants on the
engagement. Additionally, the finance department personnel meet regularly with
project managers to ensure that the budgeted costs to complete, which are used
to calculate revenue recognition, reflect the actual status of the project and
the anticipated costs to complete. Provisions for estimated losses on contracts
are made during the period in which such losses become probable and can be
reasonably estimated. To date, such losses have not been significant. Viant
reports revenue net of reimbursable expenses.
Viant's revenues and earnings may fluctuate from quarter to quarter
based on such factors within and outside its control, including: the variability
in market demand for the Internet and for Internet professional services, the
length of the sales cycle associated with our service offerings, the number,
size and scope of our projects, and the efficiency with which we utilize our
employees. See "Risk Factors -- Fluctuations in our quarterly revenues and
operating results may lead to reduced prices for our stock." Viant does not
track backlog information. Any information regarding anticipated future revenue
from clients would not be meaningful and potentially misleading to investors.
The number of Viant employees increased from 119 as of December 31,
1997 to 328 as of October 1, 1999. Personnel compensation and facilities costs
represent a high percentage of Viant's operating expenses and are relatively
fixed in advance of each quarter. Accordingly, if revenues do not increase at a
rate equal to expenses, Viant's business, financial condition or results of
operations could be materially and adversely affected. In addition, Viant's
liquidity may also be adversely affected if revenues do not increase at a rate
equal to these additional expenses, to the extent Viant is unable to reduce
operating expenses.
During 1998, Viant changed its fiscal year to the 52-week period ending
on the Friday nearest the last day of December of that year. Prior to this, the
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fiscal year of Viant was the calendar year. All references below to the results
of operations for 1998 are the actual operating results for the fiscal year
ended January 1, 1999.
RESULTS OF OPERATIONS
The following table sets forth the percentage of revenues of certain items
included in the Company's statement of operations:
VIANT CORPORATION
STATEMENT OF OPERATIONS PERCENTAGES
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ ---------------------------
SEPT. 30, OCT. 1, SEPT. 30, OCT. 1,
1998 1999 1998 1999
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Net revenues ........................... 100 % 100 % 100 % 100 %
---- ---- ---- ----
Operating expenses:
Professional services ................ 57 45 55 49
Sales and marketing .................. 15 9 14 12
General and administrative ........... 52 36 48 40
Research and development ............. 7 5 6 7
---- ---- ---- ----
Total operating expenses ......... 131 95 123 108
---- ---- ---- ----
Income (loss) from operations .......... (31) 5 (23) (8)
Interest and other income (expense), net (1) 3 (1) 2
---- ---- ---- ----
Net income (loss) ...................... (32)% 8 % (24)% (6)%
==== ==== ==== ====
</TABLE>
COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1998 AND OCTOBER 1, 1999
NET REVENUES. Revenues increased 254% from $5.3 million for the third
quarter of 1998 to $18.8 million for the third quarter of 1999. The increase in
net revenues reflected growing demand for Internet professional services and
increases in both the size and number of Viant's client engagements. Revenues
derived from Viant's three largest clients, as a percentage of total net
revenues, increased slightly from 38% for the third quarter of 1998 to 41% for
the third quarter of 1999.
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PROFESSIONAL SERVICES. Professional services expenses consist
primarily of compensation and benefits for employees engaged in the delivery
of Internet professional services and non-reimbursable expenses related to
client projects. Professional services expenses increased 181% from $3.0
million for the third quarter of 1998 to $8.4 million for the third quarter
of 1999. These increases were primarily due to the hiring of additional
professionals during these periods. Professional services expenses decreased
as a percentage of revenues from 57% for the third quarter of 1998 to 45% for
the third quarter of 1999. This decrease is primarily the result of increased
utilization of the professional staff and better planning and execution on
client engagements.
SALES AND MARKETING. Sales and marketing expenses consist primarily
of compensation, benefits and travel costs for employees in the sales and
marketing groups, marketing program costs and an allocation of facilities
costs. Sales and marketing expenses increased $1.0 million or 120% for the
third quarter of 1999 versus the third quarter of 1998. Sales and marketing
expenses decreased as a percentage of revenues from 15% for the third quarter
of 1998 to 9% for the third quarter of 1999. Sales and marketing expense
increases were primarily attributable to an increase in the number of sales
personnel and an overall increase in Viant's marketing and branding efforts.
Viant expects that the dollar amount of sales and marketing expenses will
continue to increase due to increases in advertising and promotional
activities. The decrease as a percentage of revenues is due to higher
revenues generated per sales employee and the significant increase in
revenues for the third quarter of 1999 versus the same period in 1998.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of compensation, benefits and travel costs for employees in Viant's
management, human resources, finance and administration groups, and facilities
costs not allocated to sales and marketing or research and development. General
and administrative expenses increased $4.0 million or 145% for the third quarter
of 1999 versus the third quarter of 1998. These increases were the result of
increased personnel and facilities costs in connection with the opening of
additional offices. General and administrative expenses decreased as a
percentage of revenues from 52% for the third quarter of 1998 to 36% for the
third quarter of 1999. This decrease was the result of higher revenue growth
versus infrastructure support costs and more efficient operations.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of compensation, benefits and an allocation of facilities costs for
employees associated with Viant's innovation groups. The innovation groups
enhance the knowledge and expertise of the strategic consulting, creative
design and technology disciplines. Research and development expenses
increased $.5 million or 140% for the third quarter of 1999 versus the third
quarter of 1998. Research and development expenses decreased as a percentage
of revenue from 7% for the third quarter of 1998 to 5% for the third quarter
of 1999. This decrease was primarily the result of higher revenue growth this
quarter versus research and development expenses.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND OCTOBER 1, 1999
NET REVENUES. Revenues increased 171% from $13.9 million for the first
nine months of 1998 to $37.6 million for the first nine months of 1999. The
increase in net revenues reflected growing demand for Internet professional
services and increases in both the size and number of Viant's client
engagements. Revenues derived from Viant's three largest clients, as a
percentage of total net revenues, decreased slightly from 47% for the first nine
months of 1998 to 44% for the first nine months of 1999.
PROFESSIONAL SERVICES. Professional services expenses increased 144%
from $7.6 million for the first nine months of 1998 to $18.5 million for the
first nine months of 1999. These increases were primarily due to the hiring
of additional professionals during these periods. Professional services
expenses decreased as a percentage of revenues from 55% for the first nine
months of 1998 to 49% for the first nine months of 1999. This decrease is
primarily the result of increased utilization of the professional staff and
better planning and execution on client engagements.
SALES AND MARKETING. Sales and marketing expenses increased
$2.6 million or 130% for the first nine months of 1999 versus the first nine
months of 1998. Sales and marketing expenses decreased as a percentage of
revenues from 14% for the first
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nine months of 1998 to 12% for the first nine months of 1999. Sales and
marketing expense increases were primarily attributable to an increase in the
number of sales personnel and an overall increase in Viant's marketing and
branding efforts. Viant expects that the dollar amount of sales and marketing
expenses will continue to increase due to increases in advertising and
promotional activities. The decrease as a percentage of revenues is due to
higher revenues generated per sales employee and to the significant increase
in revenues for the first nine months of 1999 versus the same period in 1998.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased $8.3 million or 125% for the first nine months of 1999 versus the
first nine months of 1998. These increases were the result of increased
personnel and facilities costs in connection with the opening of additional
offices. General and administrative expenses decreased as a percentage of
revenues from 48% for the first nine months of 1998 to 40% for the first nine
months of 1999. This decrease was the result of higher revenue growth versus
infrastructure support costs and more efficient operations.
RESEARCH AND DEVELOPMENT. Research and development expenses increased
$1.6 million or 190% for the first nine months of 1999 versus the first nine
months of 1998. Research and development expenses increased as a percentage of
revenue from 6% for the first nine months of 1998 to 7% for the first nine
months of 1999. This increase was primarily the result of the addition of two
innovation groups after the first quarter of 1998 and additional personnel for
these innovation groups.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, Viant has funded its operations and investments in
property and equipment through equity financings, bank borrowings and capital
lease financing arrangements. Viant's cash and cash equivalents increased
from $18.2 million at the end of 1998 to $61.5 million as of the end of the
third quarter of 1999. This increase is primarily from the net proceeds of
$50.2 million from the issuance of 3,450,000 shares of common stock in
Viant's initial public offering on June 18, 1999. These proceeds were offset
primarily by cash used for operating activities of $605,000 and for investing
activities of $3.4 million. The cash used for operating activities of
$605,000 is principally made up of $2.3 million in net loss for the first
nine months of 1999 and an $8.1 million increase in accounts receivable
primarily due to increased revenue, offset by a $7.9 million increase in
accounts payables and accrued expenses. Additionally, the cash used for
investing activities primarily reflects Viant's purchases of $2.6 million in
property and equipment.
Viant had a revolving line of credit with a bank which provided for
borrowings of up to $5.0 million. Borrowings under this line of credit, which
expired on July 3, 1999, bore interest at the bank's prime rate plus 0.5%
(8.25% at January 1, 1999). Under the same bank agreement, Viant also had an
equipment line of credit which provided for borrowings of up to $1,250,000,
bore interest at the bank's prime rate plus 1.0% (8.75% at January 1, 1999)
and was repayable in 36 equal monthly installments. Borrowings under the bank
lines of credit could be prepaid in whole or in part without penalty and were
secured by substantially all of Viant's assets. This revolving line of credit
and equipment line were repaid in full and terminated on July 1, 1999. Viant
also has a capital lease facility with a leasing company for total
availability of $3.2 million secured by the capital assets purchased with the
borrowings. Outstanding borrowings under the above credit facility totaled
$2.3 million as of October 1, 1999.
8
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Viant believes that its current cash, cash equivalents and short-term
investments and the net proceeds from this offering will be sufficient to meet
Viant's working capital and capital expenditure requirements for at least the
next 24 months. However, there can be no assurance that Viant will not require
additional financings within this time frame or that such additional financing,
if needed, will be available on terms acceptable to Viant, if at all.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products
worldwide are coded to accept only two-digit entries to identify a year in the
date code field. Consequently, on January 1, 2000, many of these systems could
fail or malfunction because they may not be able to distinguish between the year
1900 and the year 2000. Accordingly, many companies, including Viant and Viant's
clients, potential clients, vendors and strategic partners, may need to upgrade
their systems to comply with applicable Year 2000 requirements.
Because Viant and its clients are dependent, to a very substantial
degree, upon the proper functioning of computer systems, a failure of these
systems to correctly recognize dates beyond January 1, 2000 would disrupt
operations. We may experience operational difficulties caused by undetected
errors or defects in our internal systems. Purchasing patterns of our clients
and potential clients may be affected by Year 2000 issues as companies expend
significant resources to correct their current systems for Year 2000 compliance
and may therefore defer new initiatives until they do so. We may become involved
in disputes regarding Year 2000 problems occurring in solutions we have
developed or implemented or arising from the interactions of our Internet
solutions with other software applications. Year 2000 problems could require us
to incur delays in providing our services to clients and unanticipated expenses.
To address these issues, Viant formed a Year 2000 assessment and
contingency planning committee, called the Y2K Committee, to review both its
information technology systems and its non-information technology systems, and
where necessary, to plan for and supervise the remediation of those systems. The
Y2K Committee is headed by Viant's Chief Technology Officer. Viant has assessed
the Year 2000 readiness of its critical hardware and software systems. The
providers of these systems have either confirmed to Viant that these systems are
Year 2000 compliant or provided the information necessary for Viant to plan and
implement upgrades to make them Year 2000 compliant. Viant has begun to
implement upgrades and test these systems as part of its Year 2000 efforts.
Based on the information received to date from these vendors, Viant believes
this process should be completed by the end of November 1999.
Viant has initiated communication with other significant vendors to
determine the extent to which they are vulnerable to Year 2000 issues. Viant has
completed discussions with these vendors regarding their Year 2000 remediation
plans. Based on discussions to date, Viant believes that the Year 2000 problem
will not materially impact the operations of our significant clients or their
plans to purchase our services.
Based on work done to date, Viant believes that the cost of work and
materials to complete its Year 2000 program will be approximately $120,000, of
which approximately $90,000 has been spent as of October 1, 1999. This includes
the cost of material upgrades, software modifications and related consulting
fees.
Viant's standard master services agreement does not warrant Year 2000
compliance other than the warranties provided by vendors of the software used in
its solutions. Viant has reviewed significant non-standard client contracts to
determine its exposure for failure to provide Year 2000 compliant solutions.
Viant believes these contracts do not provide express warranties for Year 2000
compliance for its solutions. Nevertheless under either contractual arrangement,
Viant may become involved in disputes regarding Year 2000 problems occurring in
solutions it has developed or implemented or arising from the interactions of
its Internet solutions with other software applications. Viant has tested for or
received assurances of Year 2000 compliance for the major software components
used in its client applications. Viant believes that its exposure for failure to
provide Year 2000 compliant products would not have a material impact on its
business or operations.
9
<PAGE>
Viant has developed contingency plans for critical individual
information technology systems and non-information technology systems to address
Year 2000 risks not fully resolved by Viant's Year 2000 program. To the extent
that our assessment has not identified any material noncompliant information
technology systems operated by us or by our vendors, Viant feels the most
reasonably likely worst case Year 2000 scenario is a temporary
telecommunications failure which would impair communications among our offices.
Viant currently has contingency plans in place to address such a disruption in
its telecommunications systems and believes that such a disruption would not
have a material effect on our operations. However, a prolonged
telecommunications failure beyond our control could have a material adverse
effect on our business, results of operations and financial condition.
Viant believes that the Year 2000 risk will not present significant
operational problems for Viant. However, there can be no assurance that our Year
2000 program will prevent any material adverse effect on our operations,
financial condition or customer relations.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On June 17, 1999, the Securities and Exchange Commission declared Viant's
Registration Statement on Form S-1 (File No. 333-71043) effective. On June 23,
1999, Viant closed its offering for an aggregate of 3,450,000 shares of the
Viant's Common Stock at an offering price of $16.00 per share. The managing
underwriters for the offering were Goldman, Sachs & Co. and Credit Suisse First
Boston. Net proceeds to Viant were $50,155,000, after deducting underwriting
discounts and commissions of $3,864,000 and offering expenses of $1,181,000.
None of the expenses incurred in the offering were direct or indirect payments
to directors or officers of Viant or their associates, or to persons owning 10%
or more of Viant's Common Stock or other affiliates of Viant.
The primary purposes of the initial public offering were to increase its
equity capital, create a public market for its common stock and to facilitate
future access by Viant to public equity markets. Viant is using the majority of
the offering's proceeds for general corporate purposes including capital
expenditures and working capital. Viant used $3,453,000 to pay off the credit
facility with its bank which expired on July 3, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27.1 Financial data schedule.
10
<PAGE>
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 thereunto duly authorized.
VIANT CORPORATION
By /s/ Robert L. Gett
-------------------------------------
Robert L. Gett
President and Chief Executive Officer
Director
Date: November 9, 1999
By /s/ M. Dwayne Nesmith
-------------------------------------
M. Dwayne Nesmith
Vice President and
Chief Financial Officer
Date: November 9, 1999
11
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