<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
- --- 1934.
For the period ended June 30, 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 000-26133
STREAMLINE.COM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3187302
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27 DARTMOUTH STREET
WESTWOOD, MASSACHUSETTS 02090
(Address of principal executive offices)
(781) 407-1900
(Registrant's telephone number, including area code)
NONE
(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)
Yes X No
--- ---
(2) has been subject to such filing requirements for the past 90 days
Yes No X
--- ---
As of July 31, 1999, there were 18,391,130 shares outstanding of the
Company's common stock, $0.01 per value per share.
<PAGE>
STREAMLINE.COM, INC.
INDEX
<TABLE>
<CAPTION>
ITEM PAGE
NUMBER NUMBER
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1998
and June 30, 1999....................................................... 3
Consolidated Statements of Operations for the three months ended
June 30, 1998 and 1999 and for the six months
ended June 30, 1998 and 1999............................................ 5
Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and 1999............................................ 7
Notes to the Unaudited Consolidated Financial Statements................ 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 10
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds................................... 19
Item 4. Submission of Matters to a Vote of Security Holders......................... 19
Item 5. Other Items................................................................. 20
Item 6. Exhibits and Reports on Form 8-K............................................ 20
SIGNATURE................................................................... 21
</TABLE>
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
STREAMLINE.COM, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------- -------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and marketable securities.......................... $12,593 $45,048
Accounts receivable, net of allowance for doubtful accounts of $25 at
December 31, 1998 and $23 at June 30, 1999.............................. 88 440
Inventory................................................................. 324 595
Prepaid expenses and other current assets................................. 149 594
------- -------
Total current assets.................................................. 13,153 46,677
Property and equipment, net............................................... 3,663 5,811
Purchased and capitalized software, net................................... 2,025 2,555
Goodwill, net of accumulated amortization................................. 992 871
Other assets, net......................................................... 232 334
------- -------
Total assets.......................................................... $20,066 $56,248
------- -------
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Capital lease obligations................................................. $ 236 $ 356
Accounts payable.......................................................... 447 2,101
Accrued expenses.......................................................... 408 1,079
------- -------
Total current liabilities............................................. 1,092 3,536
------- -------
Long-term portion of capital lease obligations.............................. 381 765
------- -------
Redeemable convertible preferred stock ($1.00 par value);
Authorized: 680,000 at December 31, 1998, and none at June 30, 1999
Issued and outstanding: 368,570 shares issued and outstanding at
December 31, 1998 and none at June 30, 1999............................. 37,186 --
------- -------
Stockholders' (deficit) equity:
Preferred stock, $0.01 par value; 5,000,000 authorized and none
outstanding at June 30, 1999, and none authorized or outstanding at
December 31, 1998..................................................... -- --
Common stock, $0.01 par value;
3
<PAGE>
Authorized: 22,700,000 at December 31, 1998, and 50,000,000 at
June 30, 1999
Issued and outstanding: 3,699,539 shares issued and 3,665,539
outstanding at December 31, 1998 and 17,892,648 shares issued and
17,858,648 outstanding at June 30, 1999.............................. 37 179
Additional paid-in capital................................................. 5,060 82,770
Treasury stock, at cost: 34,000 shares at December 31, 1998 and March 31,
1999..................................................................... (238) (238)
Accumulated deficit........................................................ (23,453) (30,764)
------- -------
Total stockholders' (deficit) equity.................................. (18,593) 51,947
------- -------
Total liabilities, redeemable convertible preferred stock
and stockholders' (deficit) equity.................................. $20,066 $56,248
------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THE CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
STREAMLINE.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1998 1999
---- ----
<S> <C> <C>
Revenue:
Product and service revenue, net .......... $ 1,401 $ 3,119
Subscription fees ......................... 94 234
Advertising, research and marketing fees .. 159 278
----------- -----------
Total revenue ................................ 1,654 3,631
----------- -----------
Operating expenses:
Cost of revenue ........................... 1,206 2,452
Fulfillment center operations ............. 1,009 1,852
Sales and marketing ....................... 328 843
Technology systems and development ........ 664 975
General and administrative ................ 951 1,553
----------- -----------
Total operating expenses ..................... 4,158 7,675
----------- -----------
Loss from operations ...................... (2,504) (4,044)
Other income (expense):
Interest income ........................... 36 105
Interest expense .......................... (245) (110)
----------- -----------
Total other income (expense), net ............ (209) (5)
----------- -----------
Loss before minority interest ................ (2,713) (4,049)
Minority interest in net loss of consolidated
subsidiary ................................ 67 --
----------- -----------
Net loss ..................................... (2,646) (4,049)
----------- -----------
Dividends on preferred stock 263
Net loss attributable to common stockholders . $ (2,646) $ (4,312)
----------- -----------
Basic and diluted net loss per common share .. $ (0.76) $ (0.76)
Shares used in computing basic and diluted net
loss per common share ..................... 3,497,389 5,693,600
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THE CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
STREAMLINE.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1998 1999
---- ----
<S> <C> <C>
Revenue:
Product and service revenue, net .......... $ 2,473 $ 5,687
Subscription fees ......................... 171 421
Advertising, research and marketing fees .. 212 510
----------- -----------
Total revenue ................................ 2,856 6,618
----------- -----------
Operating expenses:
Cost of revenue ........................... 2,102 4,473
Fulfillment center operations ............. 1,955 3,237
Sales and marketing ....................... 613 1,458
Technology systems and development ........ 1,300 1,804
General and administrative ................ 1,914 3,059
----------- -----------
Total operating expenses ..................... 7,884 14,031
----------- -----------
Loss from operations ...................... (5,028) (7,413)
Other income (expense):
Interest income ........................... 36 227
Interest expense .......................... (285) (126)
----------- -----------
Total other income (expense), net ............ (249) 102
----------- -----------
Loss before minority interest and
extraordinary item ........................ (5,277) (7,311)
Minority interest in net loss of consolidated
subsidiary ................................ 138 --
Net loss ..................................... $ (5,139) $ (7,311)
----------- -----------
----------- -----------
Dividends on preferred stock ................. -- 549
Net loss attributable to common stockholders . $ (5,139) $ (7,860)
----------- -----------
Basic and diluted net loss per common share .. $ (1.47) $ (1.68)
Shares used in computing basic and diluted net
loss per common share ..................... 3,497,032 4,685,165
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THE CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
STREAMLINE.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
1998 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss ..................................... $ (5,139) $ (7,311)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ............. 729 1,094
Amortization of discount on notes payable . 36 --
Amortization of goodwill and other assets . 118 206
Minority interest in net loss of
consolidated subsidiary ................. (138) --
Changes in assets and liabilities
Accounts receivable ..................... (172) (352)
Inventory ............................... (6) (271)
Prepaid expenses and other current assets 325 (445)
Other assets ............................ (144) (102)
Accounts payable ........................ (610) 1,654
Accrued expenses ........................ 257 671
-------- --------
Net cash used in operating activities ........... (4,744) (4,856)
-------- --------
Cash flows from investing activities:
Purchases of property and equipment .......... (318) (2,008)
Additions to purchased and capitalized
software .................................. (726) (1,091)
-------- --------
Net cash used in investing activities ........... (1,043) (3,099)
-------- --------
Cash flows from financing activities:
Proceeds from sale of common stock ........... -- 40,545
Proceeds from the exercise of stock options .. 2 36
Dividend payments on preferred stock ......... -- --
Proceeds from notes payable-related party .... 600 --
Proceeds from notes payable .................. 7,000 --
Principal payments on capital lease
obligations ............................... (117) (171)
-------- --------
Net cash provided by financing activities ....... 7,485 40,410
-------- --------
Net increase in cash, cash equivalents and
marketable securities ........................ 1,698 32,455
Cash, cash equivalents and marketable
securities, beginning of period ............. 1,446 12,593
-------- --------
Cash, cash equivalents and marketable
securities, end of period ................... $ 3,144 $ 45,048
-------- --------
Supplemental non-cash transactions:
Assets acquired with capital lease obligations $ 315 $ 675
Issuance and remeasurement of warrants in
connection with capitalized assets ........ (32) --
Issuance of warrants in connection with debt . 525 --
Issuance of common stock for services provided 35 --
7
<PAGE>
Dividends accrued on preferred stock ......... -- 549
Issuance of warrants in connection with
financing commitment ...................... -- 472
Reduction in deferred financing costs related
to rescission of warrants in connection
with financing commitment ................. (387)
Conversion of preferred stock into common stock
stock ..................................... -- 37,731
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THE CONSOLIDATED FINANCIAL STATEMENTS.
8
<PAGE>
STREAMLINE.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation. The unaudited interim financial statements included
herein have been prepared by the Company, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain notes and
other information normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted from the interim financial statements presented in
this quarterly report on Form 10-Q in accordance with such rules and
regulations. In the opinion of the Company's management, the accompanying
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary to state fairly the financial position of
the Company as of June 30, 1999, and the results of its operations,
comprehensive income and cash flows for the periods indicated. The results
of operations for the periods covered are not necessarily indicative of the
results to be expected for the full year.
These financial statements should be read in conjunction with the audited
financial statements and notes thereto of the Company for the year ended
December 31, 1998, which are included in the Company's Prospectus dated
June 17, 1999, filed with the Securities and Exchange Commission.
2. Reclassifications. Certain prior year balances have been reclassified to
conform with the current year presentation.
3. Initial Public Offering. On June 17, 1999 Streamline completed an initial
public offering of its common stock (the "IPO"). A total of 4,500,000
shares of the Company's common stock were sold at a price of $10.00 per
share, generating gross offering proceeds of $45,000,000. After deducting
$3.15 million in underwriting discounts and approximately $1.35 million in
other related expenses, the net proceeds to the Company were approximately
$40.5 million. Concurrent with the IPO, all of the shares of Series A,
Series B, Series C and Series D redeemable convertible preferred stock
("Preferred Stock") and accrued dividends on the Series D Preferred Stock
were converted into 9,673,121 shares of Streamline's common stock.
9
<PAGE>
4. Net Loss Per Share. Net loss per share is presented under Statement of
Financial Accounting Standards No. 128, "Earnings per Share." In accordance
with this pronouncement, the net loss applicable to common stockholders
includes the accretion of dividends on the Series D Preferred Stock through
the date of conversion to common stock. Weighted average shares outstanding
includes the common stock resulting from the conversion of the Preferred
Stock from the date of conversion through the end of the period.
The following is the calculation of the net loss per share:
<TABLE>
<CAPTION>
Three months ended June 30,
1998 1999
---- ----
<S> <C> <C>
Numerator:
Net loss ...................... $ (2,646) $ (4,049)
Dividends on preferred stock .. -- 263
----------- -----------
Net loss attributable to common
stockholders ............... (2,646) (4,312)
----------- -----------
----------- -----------
Denominator:
Weighted average common shares
outstanding ............... 3,497,389 5,693,600
----------- -----------
Basic and diluted net loss per
common share: $ (0.76) $ (0.76)
----------- -----------
<CAPTION>
Six months ended June 30,
1998 1999
---- ----
Numerator:
Net loss ...................... $ (5,139) $ (7,311)
Dividends on preferred stock .. -- 549
----------- -----------
Net loss attributable to common
stockholders ............... (5,139) (7,860)
----------- -----------
----------- -----------
Denominator:
Weighted average common shares
outstanding ............... 3,497,032 4,685,165
----------- -----------
Basic and diluted net loss per
common share: $ (1.47) $ (1.68)
</TABLE>
Outstanding options of 547,962 and 1,564,133 as of June 30, 1998, and 1999,
respectively, were not included in the diluted loss per share computation
because their effect would be anti-dilutive. Outstanding warrants of 988,714 and
788,714 as of June 30, 1998, and 1999, respectively, were not included in the
diluted loss per share calculation because their effect would be anti-dilutive.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THIS QUARTERLY
REPORT ON FORM 10-Q MAY CONTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, INCLUDING, BUT NOT LIMITED TO, (i) STATEMENTS ABOUT THE
ADEQUACY OF THE COMPANY'S CASH, CASH EQUIVALENTS, OTHER CAPITAL RESOURCES,
INTEREST INCOME AND COSTS ASSOCIATED WITH EXPANSION, AND (ii) CERTAIN STATEMENTS
IDENTIFIED OR QUALIFIED BY WORDS SUCH AS "LIKELY," "WILL," "SUGGESTS," "MAY,"
"WOULD," "COULD," "SHOULD," "EXPECTS," "ANTICIPATES," "ESTIMATES," "PLANS,"
"PROJECTS," "BELIEVES," OR SIMILAR EXPRESSIONS (AND VARIANTS OF SUCH WORDS OR
EXPRESSIONS). THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN REPRESENT THE
COMPANY'S JUDGMENT AS OF THE DATE OF THIS QUARTERLY REPORT ON FORM 10-Q, AND THE
COMPANY CAUTIONS READERS NOT TO PLACE UNDUE RELIANCE ON SUCH STATEMENTS.
INVESTORS ARE CAUTIONED THAT FORWARD-LOOKING STATEMENTS ARE INHERENTLY
UNCERTAIN. ACTUAL PERFORMANCE AND RESULTS OF OPERATIONS MAY DIFFER MATERIALLY
FROM THOSE PROJECTED OR SUGGESTED IN THE FORWARD-LOOKING STATEMENTS DUE TO
CERTAIN RISKS AND UNCERTAINTIES, INCLUDING, BUT NOT LIMITED TO, THE RISKS AND
UNCERTAINTIES DESCRIBED OR DISCUSSED IN THE SECTION "RISK FACTORS" IN THE
COMPANY'S PROSPECTUS DATED JUNE 17, 1999. THESE RISKS INCLUDE, AMONG OTHERS, THE
FOLLOWING:
- RISKS RELATING TO STREAMLINE'S LIMITED OPERATING HISTORY AND HISTORY
OF LOSSES
- RISKS PERTAINING TO OUR ABILITY TO EXECUTE OUR EXPANSION STRATEGY
- RISKS THAT WE MAY HAVE DIFFICULTY RAISING ADDITIONAL CAPITAL
- RISKS ASSOCIATED WITH OUR RELIANCE ON THE GROWTH OF E-COMMERCE AND THE
INFRASTRUCTURE OF THE INTERNET
- RISKS OF INCREASED COMPETITION
- RISKS RELATING TO OUR DEPENDENCE ON CUSTOMER ACCEPTANCE OF DIRECT,
UNATTENDED DELIVERY OF GOODS AND SERVICES
OVERVIEW
Streamline.com, Inc. ("Streamline" or the "Company") simplifies the lives
of busy suburban families by providing Internet-based ordering and home delivery
of a wide range of consumer goods and services such as groceries, household
goods, health and beauty care items, dry cleaning, video rentals and film
processing. Our typical customer tends to be a dual income household with at
least one child and access to the Internet. We also provide consumer packaged
goods companies insight into consumer Internet purchasing behavior to help
facilitate the development of their Internet merchandising capabilities and to
broaden other research and marketing programs.
Streamline has grown rapidly, with revenue increasing to $6.9 million in
1998 from $922,000 in 1996. During this same period, our net loss increased to
$11.4 million in 1998 from $1.8 million in 1996. We expect to continue to incur
losses as we increase expenditures in all areas of operations in order to
execute our business plan. In particular, we expect to incur costs related to:
- expanding into new markets
- increasing our sales and marketing efforts
- continuing our investment in technology
11
<PAGE>
Due to our history of net operating losses, we currently pay no federal or
state income tax. As of December 31, 1998, we had federal and state net
operating loss carry forwards of approximately $22.6 million and $22.4 million,
respectively. These net operating losses are available to offset future income
tax obligations unless federal or state tax law restrictions, such as those
related to an ownership change as defined in the Internal Revenue Code, limit us
from doing so.
HISTORY OF GROWTH
Streamline was founded in April 1993. From 1993 through 1995 we focused
primarily on testing the viability of the consumer home delivery market. We
developed our current business concept during that period.
In 1996 we began offering a full range of products and services to a test
group of approximately 100 customers. In October 1996 we completed the
development of our first consumer resource center in the greater Boston area and
commenced marketing our services.
In 1997 we focused on building our business by:
- expanding our product and service offerings
- negotiating wholesale supply of our products and services
- refining our consumer resource center operations
- developing our website and related ordering technology
- enhancing customer service
- increasing the number of customers served
By the end of 1997 we expanded our customer base to approximately 900
customers and served 30 cities and towns in the greater Boston area. During 1997
we also launched the Consumer Learning Center, which provides consumer packaged
goods companies research and merchandising opportunities. Additionally, in 1997
we acquired substantially all of the assets of Shopping Alternatives, Inc., a
consumer direct company based in the Washington, D.C. area.
In 1998 we increased the number of cities and towns served by our consumer
resource center in the greater Boston area to 38 and continued to market our
services to prospective customers in those areas. As a result, we increased our
customer base to approximately 2,000 customers. By June 30, 1999, our customer
base increased to approximately 3,000 customers.
COMPONENTS OF REVENUE
Streamline has three primary sources of revenue. The majority of our
revenue is generated by the sale of consumer products and services that we
aggregate in our fulfillment center and deliver to our customers' homes on a
weekly basis. We charge our customers set retail prices for the products and
services we supply. Our product and service revenue is comprised of the retail
prices we charge our customers for these products and services. The wholesale
prices we pay our distributors and suppliers for such products and services are
included as a cost of revenue. Our customers also pay us a monthly subscription
fee of $30 which we prorate based on the week of installation or discontinuance
if services are provided for less than a full month. In addition, we receive
advertising, research and marketing fees through arrangements with consumer
packaged goods companies and e-commerce companies. Revenue from products and
services is recognized upon delivery to the customer; subscription fees are
recognized monthly; and advertising, research and marketing fees are recognized
over the life of the applicable arrangement or as services are performed.
12
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
TOTAL REVENUE. Total revenue increased to $3.6 million in the three months ended
June 30, 1999 from $1.7 million in the comparable period ended June 30, 1998, an
increase of 119.5%. This increase was primarily due to the continuing expansion
of our customer base and an increase in the average product and service revenue
per invoice, as well as a corresponding increase in subscription fees.
PRODUCT AND SERVICE REVENUE, NET. Product and service revenue, net is
comprised of the retail prices our customers pay us for the products and
services we sell to them, net of returns. Sale of products and services, net of
returns increased to $3.1 million in the three months ended June 30, 1999 from
$1.4 million in the comparable period ended June 30, 1998, an increase of
122.6%. The increase in revenue was the result of:
- an increase in our customer base to approximately 3,000 at June 30,
1999 from approximately 1,400 at June 30, 1998.
- an increase in the number of invoices for product and service revenue
to approximately 30,000 in the three months ended June 30, 1999 from
approximately 14,000 in the comparable period ended June 30, 1998, an
increase of 114%.
- an increase in average product and service revenue per invoice to
approximately $104 in the three months ended June 30, 1999 from
approximately $101 in the comparable period ended June 30, 1998.
Product and service revenue, net as a percentage of total revenue increased to
85.9% in the three months ended June 30, 1999 from 84.7% in the comparable
period ended June 30, 1999.
SUBSCRIPTION FEES. Streamline customers pay monthly subscription fees in
addition to the amounts paid for the products and services we deliver to their
homes. Revenue from these fees increased to $234,000 in the three months ended
June 30, 1999 from $94,000 in the comparable period ended June 30, 1998, an
increase of 148.9%, due to our expanded customer base. Subscription fees as a
percentage of total revenue increased to 6.4% in the three months ended June 30,
1999 from 5.7% in the comparable period ended June 30, 1998.
ADVERTISING, RESEARCH AND MARKETING FEES. Revenue from advertising,
research and marketing fees includes Consumer Learning Center membership fees
paid by consumer packaged goods companies for the opportunity to participate in
research and marketing programs. Advertising, research and marketing fees
increased to $278,000 in the three months ended June 30, 1999 from $159,000 in
the comparable period ended June 30, 1998, an increase of 74.8%. The increase in
advertising, research and marketing fees is primarily due to an increase in the
number of consumer packaged goods companies that became members of the Consumer
Learning Center. Advertising, research and marketing fees as a percentage of
total revenue decreased to 7.7% in the three months ended June 30, 1999 from
9.6% in the comparable period ended June 30, 1998. This decrease is primarily
due to a proportionally higher increase of product and service revenue and
subscription fees (as a result of an expanded customer base and the increase in
the number of invoices for product and services) compared to the increase in
advertising, research and marketing fees.
TOTAL OPERATING EXPENSES. Total operating expenses increased to $7.7 million, or
211.4% of total revenues, in the three months ended June 30, 1999 from $4.2
million, or 251.4% of total revenues, in the comparable period ended June 30,
1998, an increase of 84.5%. The increase in operating expenses is a result of an
increase in order volume, and increase in expenses incurred
13
<PAGE>
to support our growing operations. These costs decreased as a percentage of
total revenues due to achieving operational efficiencies and offsetting fixed
costs with higher order volumes.
COST OF REVENUE. The cost of revenue is comprised of wholesale costs of
products and services we sell to our customers and the costs associated with
generating advertising, research and marketing fees. The cost of revenue
increased to $2.5 million, or 67.5% of total revenues, in the three months ended
June 30, 1999 from $1.2 million, or 72.9% of total revenues in the comparable
period ended June 30, 1998, an increase of 103.3%. The improvement in the cost
of revenue as a percentage of total revenues was primarily attributable to both
a higher proportional growth of subscription fees, compared to the two other
revenue streams, and a higher average order size.
FULFILLMENT CENTER OPERATIONS. Expenses attributable to fulfillment center
operations include all costs associated with installing the customer, managing
the facility and processing orders including salaries and wages, employee
benefits, facility rent, utility costs, vehicle expenses and order processing
fees. These expenses increased to $1.9 million, or 51.0% of total revenue, in
the three months ended June 30, 1999 from $1.0 million, or 61.0% of total
revenue, in the comparable period ended June 30, 1998, an increase of 83.5%. The
decrease in fulfillment center expenses as a percentage of total revenue
resulted from controlling operational costs while increasing order volume and
order size. In May 1999, we entered into an agreement with Genco I, Inc., a
national warehouse operations company, to perform the merchandise processing and
picking function at our Westwood, MA consumer resource center.
SALES AND MARKETING. Sales and marketing expenses include general marketing
expenses and the sale and marketing costs associated with acquiring customers.
Sales and marketing expenses increased to $843,000, or 23.2% of total revenue,
for the three months ended June 30, 1999 from $328,000, or 19.8% of total
revenue, for the comparable period ended June 30, 1998, an increase of 157%.
This increase, as well as the higher percentage of total revenue was due to
additional advertising and promotional activities undertaken to acquire new
customers.
TECHNOLOGY SYSTEMS AND DEVELOPMENT. Expenses attributable to technology
systems and development include costs associated with development of technology
prior to capitalization, maintenance, implementation of minor enhancements,
information system personnel and consultants, and amortization of purchased and
capitalized software costs. These expenses increased to $975,000, or 26.9% of
total revenue, for the three months ended June 30, 1999 from $664,000, or 40.2%
of total revenue, for the comparable period ended June 30, 1998, an increase of
46.8%, primarily due to the costs associated with maintaining, enhancing and
integrating our technology systems.
GENERAL AND ADMINISTRATIVE. General and administrative costs include
corporate salaries and wages, employee benefits, corporate facility costs and
depreciation, amortization and general and administrative expenses including
office equipment and supplies, telephone expenses, travel costs and legal, audit
and other consulting fees. These costs increased to $1.6 million, or 42.8% of
total revenues, for the three months ended June 30, 1999 from $951,000, or 57.5%
of total revenues, for the comparable period ended June 30, 1998, an increase of
63.3%, primarily due to the addition of necessary infrastructure to support
continued corporate growth and planned expansion.
OTHER INCOME (EXPENSE), NET. Other expense, net decreased to $5,000 in the
three months ended June 30, 1999 from an expense of $209,000 in the comparable
period ended June 30, 1998, a decrease of 97.6%, primarily due to increased
interest income from higher cash balances and reduced interest costs associated
with the pay down of debt.
14
<PAGE>
MINORITY INTEREST. At June 30, 1998 we held a majority interest in
Streamline Mid-Atlantic, Inc. A portion of Streamline Mid-Atlantic's net losses
were allocated to the minority interest. In November of 1998, we acquired the
remaining minority interest in Streamline Mid-Atlantic and now report its income
or loss in our results of operations.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
TOTAL REVENUE. Total revenue increased to $6.6 million in the six months ended
June 30, 1999 from $2.9 million in the comparable period ended June 30, 1998, an
increase of 131.7%. This increase was primarily due to the continuing expansion
of our customer base, a corresponding increase in subscription fees, and an
increase in fees derived from advertising, research and marketing.
PRODUCT AND SERVICE REVENUE, NET. Sale of products and services, net of
returns increased to $5.7 million in the six months ended June 30, 1999 from
$2.5 million in the comparable period ended June 30, 1998, an increase of
130.0%. The increase in revenue was the result of:
- an increase in our customer base to approximately 3,000 at June 30,
1999 from approximately 1,400 at June 30, 1998.
- an increase in the number of invoices for product and service revenue
to approximately 54,000 in the six months ended June 30, 1999 from
approximately 25,000 in the comparable period ended June 30, 1998, an
increase of 116%.
- an increase in average product and service revenue per invoice to
approximately $105 in the six months ended June 30, 1999 from
approximately $101 in the comparable period ended June 30, 1998.
Product and service revenue, net as a percentage of total revenue decreased to
86.0% in the six months ended June 30, 1999 from 86.6% in the comparable period
ended June 30, 1999.
SUBSCRIPTION FEES. Revenue from subscription fees increased to $421,000 in
the six months ended June 30, 1999 from $171,000 in the comparable period ended
June 30, 1998, an increase of 146.2%, due to our expanded customer base.
Subscription fees as a percentage of total revenue increased to 6.4% in the six
months ended June 30, 1999 from 6.0% in the comparable period ended June 30,
1998.
ADVERTISING, RESEARCH AND MARKETING FEES. Advertising, research and
marketing fees increased to $510,000 in the six months ended June 30, 1999 from
$212,000 in the comparable period ended June 30, 1998, an increase of 140.6%.
These fees as a percentage of total revenue increased to 7.7% in the six months
ended June 30, 1999 from 7.4% in the comparable period ended June 30, 1998. The
increase in advertising, research and marketing fees is primarily due to an
increase in the number of consumer packaged goods companies that became members
of the Consumer Learning Center.
TOTAL OPERATING EXPENSES. Total operating expenses increased to $14.0 million,
or 212.0% of total revenues, in the six months ended June 30, 1999 from $7.9
million, or 276.1% of total revenues, in the comparable period ended June 30,
1998, an increase of 77.9%. The increase in operating expenses is a result of an
increase in order volume. These costs decreased as a percentage of total
revenues due to achieving operational efficiencies and offsetting fixed costs
with higher order volumes.
COST OF REVENUE. The cost of revenue increased to $4.5 million, or 67.6% of
total revenues, in the six months ended June 30, 1999 from $2.1 million, or
73.6% of total revenues in
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the comparable period ended June 30, 1998, an increase of 112.8%. The
improvement in the cost of revenue as a percentage of total revenues was
primarily attributable to both a higher proportional growth of subscription
fees, compared to the two other revenue streams, and a higher average order
size.
FULFILLMENT CENTER OPERATIONS. Expenses attributable to fulfillment center
operations increased to $3.2 million, or 48.9% of total revenue, in the six
months ended June 30, 1999 from $2.0 million, or 68.5% of total revenue, in the
comparable period ended June 30, 1998, an increase of 65.6%. The decrease in
fulfillment center expenses as a percentage of total revenue resulted from
controlling operational costs while increasing order volume and order size.
SALES AND MARKETING. Sales and marketing expenses increased to $1.5
million, or 22.0% of total revenue, for the six months ended June 30, 1999 from
$613,000, or 21.5% of total revenue, for the comparable period ended June 30,
1998, an increase of 137.8%. This increase was due to additional advertising and
promotional activities undertaken to acquire new customers.
TECHNOLOGY SYSTEMS AND DEVELOPMENT. Expenses attributable to technology
systems and development increased to $1.8 million, or 27.3% of total revenue,
for the six months ended June 30, 1999 from $1.3, or 45.5% of total revenue, for
the comparable period ended June 30, 1998, an increase of 38.8%, primarily due
to the costs associated with maintaining, enhancing and integrating our
technology systems.
GENERAL AND ADMINISTRATIVE. General and administrative costs increased to
$3.1 million, or 46.2% of total revenues, for the six months ended June 30, 1999
from $1.9 million, or 67.0% of total revenues, for the comparable period ended
June 30, 1998, an increase of 59.8%, primarily due to the addition of necessary
infrastructure to support continued corporate growth and planned expansion.
OTHER INCOME (EXPENSE), NET. Other income (expense), net increased to
income of $102,000 in the six months ended June 30, 1999 from an expense of
$249,000 in the comparable period ended June 30, 1998, an increase of $351,000,
primarily due to increased interest income from higher cash balances and reduced
interest costs associated with the pay down of debt.
MINORITY INTEREST. At June 30, 1998 we held a majority interest in
Streamline Mid-Atlantic, Inc. A portion of Streamline Mid-Atlantic's net losses
were allocated to the minority interest. In November of 1998, we acquired the
remaining minority interest in Streamline Mid-Atlantic and now report its income
or loss in our results of operations.
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LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, we had cash, cash equivalents and marketable securities
of $45.0 million. We currently believe that existing cash and short-term
investment will be sufficient to fund our planned expansion and working capital
needs for at least the next 12 months. We expect that we will require additional
capital financing to support our further expansion.
Operating activities used cash of $4.9 million in the six months ended June
30, 1999, primarily due to the net loss incurred in the period. Investing
activities used cash of $3.1 million in the six months ended June 30, 1999,
primarily due to the purchase of property and equipment to support the expansion
of our operations, and costs associated with purchased and capitalized software
for our customer ordering, warehouse management and financial systems.
Financing activities provided cash of $40.4 million in the six months ended
June 30, 1999, as compared to $7.5 million in the six months ended June 30,
1998. Net proceeds from our initial public offering, net of underwriting
discounts and offering expenses, were approximately $40.5 million. The
underwriters exercised their over-allotment option in July of 1999 resulting in
additional proceeds, net of underwriting discounts and offering expenses, of
approximately $4.6 million. Prior to our initial public offering, we financed
our operations and capital requirements primarily through the sale of redeemable
convertible preferred stock and the issuance of senior discount notes.
We expect to incur operating losses in 1999 from our existing consumer
resource center and from the facility we have leased and plan to open in the
greater Washington, D.C. area in the fourth quarter of 1999. We have currently
budgeted expenditures in 1999 of approximately $4.0 million for costs associated
with leasehold improvements, equipment acquisitions and other asset purchases
related to our new facility. Additionally, we plan to continue to enhance our
technology by upgrading or replacing our financial, warehouse management and
customer information systems. We intend to finance these expenditures from
capital resources and future lease financing. We also plan to open new
facilities in 2000 and beyond which may or may not have similar capital
requirements due to size, configuration, location and other local market
conditions.
Pursuant to a letter agreement dated April 13, 1999, Nordstrom, Inc. agreed
to provide us with financing of up to $10.0 million upon our request.
Nordstrom's commitment terminated upon the closing of our initial public
offering. We issued Nordstrom a warrant to purchase 75,000 shares of common
stock at an exercise price of $7.00 per share in connection with this financing
commitment. We recorded deferred financing costs of approximately $472,000 for
the estimated fair value of the warrant. The fair value was calculated using the
Black-Scholes option pricing model utilizing a common stock fair value of $10.00
per share, the offering price of the common stock in our initial public
offering. By letter dated June 22, 1999, Nordstrom agreed to rescind all of its
rights pursuant to such warrant, effective as of the closing of our initial
public offering, resulting in us reversing the remaining unamortized deferred
financing costs of approximately $387,000. During the three months ended June
30, 1999, we recorded a non-cash financing charge of approximately $85,000 for
the amortization of the deferred financing costs during the period prior to the
termination of Nordstrom's financing commitment.
We do not believe that inflation has had a material effect on Streamline's
operations.
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MARKET RISK
To date, Streamline has not utilized derivative financial instruments or
derivative commodity instruments. We invest our cash in high quality
(i.e.-A1/P1) short term commercial paper and money market funds, which are
subject to minimal credit and market risk, and have no debt. Therefore, we
believe the market risks associated with these financial instruments are
immaterial.
ACQUISITIONS
In 1996 we incorporated our subsidiary Streamline Mid-Atlantic, Inc., for
the purpose of acquiring substantially all of the assets of Shopping
Alternatives, Inc., a consumer direct company based in the Washington, D.C.
area. In 1997 Streamline Mid-Atlantic sold approximately 45% of its common stock
to third parties. In November 1998, we acquired the outstanding minority
interest in Streamline Mid-Atlantic and it once again became a wholly owned
subsidiary. In connection with these transactions we recorded $1.3 million of
goodwill which is being amortized on a straight-line basis over a five-year
term.
YEAR 2000 COMPLIANCE
The Year 2000 problem stems from the fact that many currently installed
computer systems include software and hardware products that are unable to
distinguish 21st century dates from those in the 20th century. As a result,
computer software and hardware used by many companies and governmental agencies
may need to be upgraded to comply with Year 2000 requirements or risk system
failure or miscalculations causing disruptions to normal business activities.
STATE OF READINESS
We have begun to assess the corporate systems and operations that we
believe could be affected by the Year 2000 problem. We have focused our Year
2000 review on three areas:
- internal information technology infrastructure
- third-party compliance
- non-information technology systems
INTERNAL INFORMATION TECHNOLOGY INFRASTRUCTURE. Because our consumer and
business systems are essential to our business, financial condition and results
of operations, we began our assessment of these systems prior to other less
critical information technology systems. We use the following information
technology for our internal infrastructure:
- website and Internet ordering systems
- main enterprise systems, such as those used for purchase orders,
invoicing, shipping, warehouse management and accounting
- individual workstations, including personal computers
- network systems
We currently believe that all of our critical systems are Year 2000
compliant. We have received written assurance that our website, ordering systems
and main enterprise systems are Year 2000 compliant. In addition, we are in the
process of implementing a new financial system which is certified Year 2000
compliant by the vendor. We expect this system to be in place by the end of
1999. We are currently conducting Year 2000 compliance testing of our individual
workstations and network systems. To date, we have not discovered Year 2000
problems in these internal systems.
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THIRD-PARTY COMPLIANCE. Streamline's material third party business
relationships include:
- customers who order products and services via the Internet, telephone
and fax
- vendors and suppliers who provide the goods and services that we offer
to our customers
We are unable to predict, and have not attempted to assess, the Year 2000
readiness of our customers or the systems they use to interact with Streamline.
Since our customers order our products and services via the Internet or by
telephone or fax, Streamline's operations would be materially adversely affected
if a significant number of customers were unable to use these devices to place
their orders.
Year 2000 disruptions in the systems or equipment used by our suppliers
could result in our being unable to obtain products and services in a timely
manner. We are in the process of developing a standard survey to help us assess
the Year 2000 readiness or our suppliers, but we have not yet begun to collect
information from these companies.
NON-INFORMATION TECHNOLOGY SYSTEMS. Some non-information technology systems
used in our business, such as HVAC and telephone systems, our truck fleet and
refrigeration and other equipment, may contain date-processing embedded
technology. The Year 2000 problem could cause failures in these assets which
could disrupt our operations. We are currently assessing the Year 2000 readiness
of many of these systems and equipment and expect to have identified and
corrected problems in critical items by September 1999.
COSTS
Streamline's Year 2000 assessment, remediation and testing activities have
been conducted by internal personnel, and we have not recorded the amount of
employee time expended on these tasks. Accordingly, we are unable to determine
the cost of employee time devoted to Year 2000 matters. Until we have further
assessed the Year 2000 readiness of our internal systems and those of third
parties with whom we do business, we will be unable to estimate all of the costs
that we may incur in our Year 2000 compliance efforts. Streamline has funded and
will continue to fund these activities principally through cash flow.
MOST REASONABLE WORST CASE SCENARIO
It is possible that problems related to the Year 2000 could disrupt one or
more of the following systems:
- customer Internet-based ordering
- technology-driven order picking
- inventory replenishment
- credit card settlement
In each case, there is a low technology alternative available which would
allow us to continue to run our business. However, most of the alternatives
would result in increased costs, reduced revenues or service delays, which
should increase our operating losses. Extended disruptions may impact long term
customer and supplier relationships further impacting future profitability.
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CONTINGENCY PLAN
Other than the short-term low technology alternatives discussed above, to
date we have not formulated contingency plans related to the failure of our or a
third-party's systems or equipment should they prove to not be Year 2000
compliant. However, we intend to develop contingency plans to address any Year
2000 compliance problems that we discover through our ongoing assessment,
remediation and testing activities.
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On June 17, 1999 in connection with the Company's initial public offering,
a Registration Statement on From S-1 (Reg. No. 333-76383) was declared effective
by the Securities and Exchange Commission, pursuant to which 4,500,000 shares of
the Company's common stock were offered and sold at a price of $10.00 per share,
generating gross offering proceeds of $45,000,000. The managing underwriters
were Banc of America Securities LLC, PaineWebber Incorporated and Dain Rauscher
Wessels, a division of Dain Rauscher Incorporated. After deducting approximately
$3.15 million in underwriting discounts and $1.35 million in other related
expenses, the net proceeds to the Company were approximately $40.5 million. The
proceeds have been invested in short-term, high quality commercial paper.
On July 16, 1999 the underwriters of the initial public offering exercised
their over-allotment option to purchase an additional 498,482 from the Company
at a price of $10.00 per share, generating gross proceeds of $4,984,820. The net
proceeds to the Company, after deducting the underwriters' discount, was
approximately $4.6 million. The proceeds have been invested in short-term, high
quality commercial paper.
The Company intends to use the net proceeds of the offering to finance the
expansion of its business and for general corporate purposes, including working
capital and capital expenditures. A portion of the net proceeds may also be used
for the acquisition of businesses, products, services or technologies that are
complementary to those of the Company. From time to time, in the ordinary course
of business, the Company may evaluate potential acquisitions of such businesses,
products, services or technologies. However, the Company has no present
understandings, commitments or agreements with respect to any material
acquisition. The use of proceeds set forth above does not represent a material
change in the use of proceeds described in the Company's Registration Statement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
By written consent dated April 15, 1999, the holders of a majority of
outstanding shares of the Company's Series D Convertible Preferred Stock and
common stock approved an amendment to the Company's Certificate of
Incorporation, changing the Company's name to Streamline.com, Inc.
By written consent dated April 29, 1999, the holders of a majority of
outstanding shares of the Company's Series D Convertible Preferred Stock and
common stock, voting as separate classes, approved, among other things, (i) an
amendment and restatement of the Company's Certificate of Incorporation
effecting, among other things, a two-for-one reverse stock split of the
Company's common stock and a second amendment and restatement of the Company's
Certificate of Incorporation to remove provisions no longer in effect following
the Company's initial public offering; (ii) the amendment and restatement of the
Company's 1993 Employee Stock Option Plan and 1993 Director Option Plan; and
(iii) the adoption of the Company's 1999 Employee Stock Purchase Plan.
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ITEM 5. OTHER ITEMS
By unanimous written consent dated August 16, 1999, the Board of Directors
of the Company approved an amendment to the Company's By-Laws, changing the
Company's fiscal year end to the Saturday falling on or most closely to December
31.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Second Amended and Restated Certificate of Incorporation of the
Company.
3.2 Amendment No. 1 to the Amended and Restated By-Laws of the
Company.
10.1 Letter agreement, dated June 22, 1999, between the Company and
Nordstrom, Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
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SIGNATURE
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.
STREAMLINE.COM, INC.
August 16, 1999 By: /s/ Richard T. Joseph
---------------------------------------------
Richard T. Joseph,
Chief Financial Officer
(Authorized Officer and Principal
Financial and Accounting Officer)
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EXHIBIT 3.1
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
STREAMLINE.COM, INC.
Incorporated pursuant to a Certificate of
Incorporation initially filed by Skyrock
Services Corporation with the Secretary of State
OF THE STATE OF DELAWARE ON APRIL 16, 1993
Streamline.com, Inc., a Delaware corporation, hereby certifies that this
Second Amended and Restated Certificate of Incorporation has been duly adopted
in accordance with the provisions of Sections 228, 242, and 245 of the General
Corporation Law of the State of Delaware, and notice thereof has been given in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware:
FIRST. The name of the corporation (the "Corporation") is Streamline.com,
Inc.
SECOND. The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent is The
Corporation Trust Corporation.
THIRD. The nature of the business or purposes to be conducted or promoted
by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 55,000,000 shares, consisting
solely of:
50,000,000 shares of common stock, par value $.01 per share ("Common
Stock"); and
5,000,000 shares of preferred stock, par value $.01 per share ("Preferred
Stock").
<PAGE>
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The following is a statement of the powers, designations, preferences,
privileges, and relative rights in respect of each class of capital stock of the
Corporation.
COMMON STOCK.
1. GENERAL. The voting, dividend and liquidation rights of the holders of
Common Stock are subject to and qualified by the rights of the holders of
Preferred Stock.
2. VOTING. The holders of Common Stock are entitled to one vote for each
share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
3. DIVIDENDS. Dividends may be declared and paid on the Common Stock from
funds lawfully available therefor if, as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding shares of Preferred Stock.
4. LIQUIDATION. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding shares
of Preferred Stock.
B. PREFERRED STOCK.
Shares of Preferred Stock may be issued from time to time in one or more
series, each of such series to have such powers, designations, preferences, and
relative, participating, optional, or other special rights, if any, and such
qualifications and restrictions, if any, of such preferences and rights, as are
stated or expressed in the resolution or resolutions of the Board of Directors
providing for such series of Preferred Stock. Different series of Preferred
Stock shall not be construed to constitute different classes of shares for the
purposes of voting by classes unless expressly so provided in such resolution or
resolutions.
Authority is hereby granted to the Board of Directors from time to time to
issue the Preferred Stock in one or more series, and in connection with the
creation of any such series, by resolution or resolutions to determine and fix
the powers, designations, preferences, and relative, participating, optional, or
other special rights, if any, and the qualifications and restrictions, if any,
of such preferences and rights, including without limitation dividend rights,
conversion rights, voting
<PAGE>
-3-
rights (if any), redemption privileges, and liquidation preferences, of such
series of Preferred Stock (which need not be uniform among series), all to the
fullest extent now or hereafter permitted by the General Corporation Law of
Delaware. Without limiting the generality of the foregoing, the resolution or
resolutions providing for the creation or issuance of any series of Preferred
Stock may provide that such series shall be superior to, rank equally with, or
be junior to the Preferred Stock of any other series, all to the fullest extent
permitted by law. No resolution, vote, or consent of the holders of the capital
stock of the Corporation shall be required in connection with the creation or
issuance of any shares of any series of Preferred Stock authorized by and
complying with the conditions of this Second Amended and Restated Certificate of
Incorporation, the right to any such resolution, vote, or consent being
expressly waived by all present and future holders of the capital stock of the
Corporation.
Any resolution or resolutions adopted by the Board of Directors pursuant to
the authority vested in them by this Article Fourth shall be set forth in a
certificate of designation along with the number of shares of stock of such
series as to which the resolution or resolutions shall apply and such
certificate shall be executed, acknowledged, filed, recorded, and shall become
effective, in accordance with ss.103 of the General Corporation Law of the State
of Delaware. Unless otherwise provided in any such resolution or resolutions,
the number of shares of stock of any such series to which such resolution or
resolutions apply may be increased (but not above the total number of authorized
shares of the class) or decreased (but not below the number of shares thereof
then outstanding) by a certificate likewise executed, acknowledged, filed and
recorded, setting forth a statement that a specified increase or decrease
therein has been authorized and directed by a resolution or resolutions likewise
adopted by the Board of Directors. In case the number of such shares shall be
decreased, the number of shares so specified in the certificate shall resume the
status which they had prior to the adoption of the first resolution or
resolutions. When no shares of any such class or series are outstanding, either
because none were issued or because none remain outstanding, a certificate
setting forth a resolution or resolutions adopted by the Board of Directors that
none of the authorized shares of such class or series are outstanding, and that
none will be issued subject to the certificate of designations previously filed
with respect to such class or series, may be executed, acknowledged, filed and
recorded in the same manner as previously described and it shall have the effect
of eliminating from the certificate of incorporation all matters set forth in
the certificate of designations with respect to such class or series of stock.
If no shares of any such class or series established by a resolution or
resolutions adopted by the Board of Directors have been issued, the voting
powers,
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designations, preferences and relative, participating, optional or other rights,
if any, with the qualifications, limitations or restrictions thereof, may be
amended by a resolution or resolutions adopted by the Board of Directors. In the
even of any such amendment, a certificate which (i) states that no shares of
such class or series have been issued, (ii) sets forth the copy of the amending
resolution or resolutions and (iii) if the designation of such class or series
is being changed, indicates the original designation and the new designation,
shall be executed, acknowledged, filed, recorded, and shall become effective, in
accordance with ss.103 of the General Corporation Law of the State of Delaware.
FIFTH. The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation and for defining
and regulating the powers of the Corporation and its directors and stockholders
and are in furtherance and not in limitation of the powers conferred upon the
Corporation by statute:
(a) The Board of Directors shall be divided into three classes of
directors, such classes to be as nearly equal in number of directors as
possible, having staggered three-year terms of office, the term of office
of the directors of the first such class to expire as of the first annual
meeting of the Corporation's stockholders following the closing of the
Corporation's first public offering of shares of Common Stock registered
pursuant to the Securities Act of 1933, as amended, those of the second
class to expire as of the second annual meeting of the Corporation's
stockholders following such closing, and those of the third class as of the
third annual meeting of the Corporation's stockholders following such
closing, such that at each annual meeting of stockholders after such
closing, nominees will stand for election to succeed those directors whose
terms are to expire as of such meeting. Any director serving as such
pursuant to this paragraph (b) of Article FIFTH may be removed only for
cause and only by the vote of the holders of a majority of the shares of
the Corporation's stock entitled to vote for the election of directors.
(b) The Board of Directors shall have the power and authority: (i) to
adopt, amend or repeal By-Laws of the Corporation, subject only to such
limitations, if any, as may be from time to time imposed by other
provisions of this Certificate, by law, or by the By-Laws; and (ii) to the
full extent permitted or not prohibited by law, and without the consent of
or other action by the stockholders, to authorize or create mortgage,
pledges or other liens or encumbrances upon any or all of the assets, real,
personal or
<PAGE>
-5-
mixed, and franchises of the Corporation, including after-acquired
property, and to exercise all of the powers of the Corporation in
connection therewith.
SIXTH. No director of the Corporation shall be personally liable to the
Corporation or to any of its stockholders for monetary damages for breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability; PROVIDED, HOWEVER, that to the extent required from time to time by
applicable law, this Article Sixth shall not eliminate or limit the liability of
a director, to the extent such liability is provided by applicable law, (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
Title 8 of the Delaware Code, or (iv) for any transactions from which the
director derived an improper personal benefit. No amendment to or repeal of this
Article Sixth shall apply to or have any effect on the liability or alleged
liability of any director for or with respect to any acts or omissions of such
director occurring prior to the effective date of such amendment or repeal.
SEVENTH. The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of Delaware, as amended from time to time,
indemnify each person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was, or has agreed to become, a director or officer of the Corporation, or
is or was serving, or has agreed to serve, at the request of the Corporation, as
a director, officer or trustee of, or in a similar capacity with, another
corporation, partnership, joint venture, trust or other enterprise (including
any employee benefit plan), or by reason of any action alleged to have been
taken or omitted in such capacity, against all expenses (including attorneys'
fees), judgements, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom.
Indemnification may include payment by the Corporation of expenses in
defending an action or proceeding in advance of the final disposition of such
action or proceeding upon receipt of an undertaking by the person indemnified to
repay such payment if it is ultimately determined that such person is not
entitled to indemnification under this Article Seventh, which undertaking may be
accepted without reference to the financial ability of such person to make such
repayment.
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The Corporation shall not indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person
unless the initiation thereof was approved by the Board of Directors.
The indemnification rights provided in this Article Seventh (i) shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled under any law, agreement or vote of stockholders or disinterested
directors or otherwise, and (ii) shall inure to the benefit of the heirs,
executors and administrators of such persons. The Corporation may, to the extent
authorized from time to time by its Board of Directors, grant indemnification
rights to other employees or agents of the Corporation or other persons serving
the Corporation and such rights may be equivalent to, or greater or less than,
those set forth in this Article Seventh.
EIGHTH. Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any Class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of ss.391 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of ss.279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such a manner as the said court directs. If a majority of the
number representing three-fourths (3/4ths) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the compromise or arrangement and the said reorganization shall, if
sanctioned by the court to which the said application has been made, be binding
on all creditors or class of creditors, and/or stockholders or class of
stockholders of the Corporation, as the case may be, and also on the
Corporation.
NINTH. The Board of Directors, when considering a tender offer or merger or
acquisition proposal, may take into account factors in addition to potential
economic benefits to stockholders, including without limitation (i) comparison
of the proposed consideration to be received by stockholders in relation to the
then current market price of the
<PAGE>
-7-
Corporation's capital stock, the estimated current value of the Corporation in a
freely negotiated transaction, and the estimated future value of the Corporation
as an independent entity and (ii) the impact of such a transaction on the
employees, suppliers, and customers of the Corporation and its effect on the
communities in which the Corporation operates.
TENTH. Any action required or permitted to be taken by the stockholders of
the Corporation may be taken only at a duly called annual or special meeting of
the stockholders, and not by written consent in lieu of such a meeting, and
special meetings of stockholders may be called only by the Chairman of the Board
of Directors, the President, or a majority of the Board of Directors.
ELEVENTH. The affirmative vote of the holders of at least 67% of the
outstanding voting stock of the Corporation (in addition to any separate class
vote that may in the future be required pursuant to the terms of any outstanding
Preferred Stock) shall be required to amend or repeal the provisions of Articles
Fourth (to the extent it relates to the authority of the Board of Directors to
issue shares of Preferred Stock in one or more series, the terms of which may be
determined by the Board of Directors), Fifth, Seventh, Ninth, Tenth, or Eleventh
of this Second Amended and Restated Certificate of Incorporation or to reduce
the numbers of authorized shares of Common Stock or Preferred Stock.
Executed on July 13, 1999.
STREAMLINE.COM, INC.
By: /s/ TIMOTHY A. DEMELLO
---------------------------------------
Timothy A. DeMello
President
<PAGE>
EXHIBIT 3.2
AMENDMENT NO. 1 TO
AMENDED AND RESTATED
BY-LAWS
OF
STREAMLINE.COM, INC.
1. Section 1.3 is hereby deleted and replaced in its entirety with the
following:
1.3. FISCAL YEAR. The fiscal year of the Company shall end on the Saturday
falling on or most closely to December 31. In any fiscal year in which
there are fifty-three weeks for accounting purposes, each of the first
three fiscal quarters shall consist of thirteen weeks and the fourth fiscal
quarter shall consist of fourteen weeks.
-----------------
<PAGE>
EXHIBIT 10.1
Nordstrom, Inc.
1617 Sixth Avenue
Seattle, WA 98101
June 22, 1999
Streamline.com, Inc.
27 Dartmouth Street
Westwood, MA 02090
Ladies and Gentlemen:
Reference is hereby made to that certain warrant (the "Warrant") to
purchase up to 75,000 shares of common stock of Streamline.com, Inc.
("Streamline") at an exercise price of $7.00 per share, dated as of April 12,
1999, issued by Streamline to Nordstrom, Inc. ("Nordstrom").
Effective upon the closing of Streamline's initial public offering,
Nordstrom hereby rescinds all of its rights pursuant to the Warrant and agrees
to promptly return the Warrant to Streamline for cancellation.
NORDSTROM, INC.
By: /s/ J. DANIEL NORDSTROM
-----------------------------------------
Name: J. Daniel Nordstrom
Title: Co-President
Agreed and Accepted:
STREAMLINE.COM, INC.
By: /s/ TIMOTHY A. DEMELLO
-----------------------
Name: Timothy A. DeMello
Title: President
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<PAGE>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 45,048
<SECURITIES> 0
<RECEIVABLES> 463
<ALLOWANCES> 23
<INVENTORY> 595
<CURRENT-ASSETS> 46,677
<PP&E> 11,829
<DEPRECIATION> (3,463)
<TOTAL-ASSETS> 56,248
<CURRENT-LIABILITIES> 3,536
<BONDS> 0
0
0
<COMMON> 179
<OTHER-SE> 51,768
<TOTAL-LIABILITY-AND-EQUITY> 56,248
<SALES> 5,687
<TOTAL-REVENUES> 6,618
<CGS> 4,356
<TOTAL-COSTS> 117
<OTHER-EXPENSES> 9,558
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 102
<INCOME-PRETAX> (7,311)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,311)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,311)
<EPS-BASIC> (1.68)
<EPS-DILUTED> (1.68)
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