<PAGE>
Exhibit 99.1
STREAMLINE.COM, INC.
CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
<PAGE>
STREAMLINE.COM, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND JANUARY 1, 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 2000
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19,834 $ 14,561
Marketable securities -- 20,746
Accounts receivable, net of allowance for doubtful accounts of none
at December 31, 1998 and $88 at January 1, 2000 102 455
Inventory 651 1,179
Prepaid expenses and other current assets 304 1,693
-------- ---------
Total current assets 20,891 38,634
Property and equipment, net 4,068 13,351
Purchased and capitalized software, net 2,234 4,547
Goodwill, net of accumulated amortization 1,086 818
Other assets, net 336 7,691
-------- ---------
Total assets $ 28,615 $ 65,041
======== =========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Capital lease obligations $ 323 $ 1,139
Accounts payable 533 3,030
Accrued expenses 1,140 2,319
Notes payable -- 7,432
-------- ---------
Total current liabilities 1,996 13,920
-------- ---------
Long-term portion of capital lease obligations 489 5,701
Commitments and contingencies (Note 14)
Redeemable convertible preferred stock ($1.00 par value);
Authorized: 680,000 at December 31, 1998 and January 1, 2000
Issued and outstanding: 368,570 shares issued and outstanding at
December 31, 1998 and none issued and outstanding at January 1, 2000 37,186 --
Stockholders' (deficit) equity:
Common stock, $.01 par value; authorized: 22,700,000 at December 31,
1998 and 50,000,000 at January 1, 2000
Issued and outstanding: 7,376,876 shares issued and 7,342,876
outstanding at December 31, 1998 and 22,143,260 issued and
22,109,260 outstanding at January 1, 2000 74 221
Additional paid-in capital 19,092 101,888
Treasury stock, at cost: 34,000 shares at December 31, 1998 and
January 1, 2000 (238) (238)
Accumulated other comprehensive loss -- (8)
Accumulated deficit (29,984) (56,443)
-------- ---------
Total stockholders' (deficit) equity (11,056) 45,420
-------- ---------
Total liabilities, redeemable convertible preferred stock
and stockholders' (deficit) equity $ 28,615 $ 65,041
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
STREAMLINE.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998 AND JANUARY 1, 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C> <C>
Revenue:
Product and service revenue, net $ 5,582 $ 11,456 $ 20,458
Subscription and delivery fees 211 543 804
Advertising, research and marketing fees 721 529 1,200
----------- ----------- ------------
Total revenue 6,514 12,528 22,462
----------- ----------- ------------
Operating expenses:
Cost of revenue 4,953 8,965 15,745
Fulfillment center operations 4,151 6,337 11,529
Technology systems and development 1,966 3,500 4,957
Sales and marketing 1,751 2,179 6,549
General and administrative 4,117 5,660 11,138
----------- ----------- ------------
Total operating expenses 16,938 26,641 49,918
----------- ----------- ------------
Loss from operations (10,424) (14,113) (27,456)
Other (expense) income:
Interest income 62 329 1,501
Interest expense (70) (626) (425)
Other (87) 1 (79)
----------- ----------- ------------
Total other (expense) income, net (95) (296) 997
----------- ----------- ------------
Loss before minority interest and extraordinary item (10,519) (14,409) (26,459)
Minority interest in net loss of consolidated subsidiary 265 138 --
----------- ----------- ------------
Loss before extraordinary item (10,254) (14,271) (26,459)
Extraordinary item - loss on early redemption of debt -- 744 --
----------- ----------- ------------
Net loss $ (10,254) $ (15,015) $ (26,459)
=========== =========== ============
Dividends on preferred stock 157 329 549
Net loss attributable to common stockholders $ (10,411) $ (15,344) $ (27,008)
=========== =========== ============
Basic and diluted net loss per common share $ (2.10) $ (2.63) $ (1.77)
Shares used in computing basic and diluted net loss
per common share 4,961,973 5,833,236 15,233,460
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
STREAMLINE.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998 AND JANUARY 1, 2000 (IN
THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE
LOSS
COMMON STOCK ------------- TOTAL
------------ ADDITIONAL UNREALIZED LOSS STOCKHOLDERS'
$0.01 PAR PAID-IN TREASURY ON MARKETABLE ACCUMULATED EQUITY
SHARES VALUE CAPITAL STOCK SECURITIES DEFICIT (DEFICIT)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 3,284,625 $ 33 $ 1,553 $ (3,765) $ (2,179)
Adjustment to reflect the
pooling of interests (Note 2) 1,442,203 14 2,388 (950) 1,452
---------- ------ --------- -------- ---------
Adjusted Balance, December 31, 1996 4,726,828 47 3,941 (4,715) (727)
Issuance of common stock 307,459 3 1,560 1,563
Dividends on preferred stock (157) (157)
Issuance of warrants for the purchase of
common stock in exchange for goods
and services 738 738
Issuance of options for the purchase of
common stock in exchange for goods
and services 11 11
Options exercised 77,550 1 89 90
Repurchase of common stock (29,000 shares) $(203) (203)
Change in interest in consolidated
subsidiary 480 480
Net loss (10,254) (10,254)
---------- ------ --------- ----- -------- ----------
Balance, December 31, 1997 5,111,837 51 6,662 (203) (14,969) (8,459)
Dividends on preferred stock (329) (329)
Issuance of warrants in connection with
notes payable 525 525
Reduction in value of warrants granted in
1997 in exchange for goods and services (67) (67)
Issuance of common stock and warrants for
the purchase of common stock in exchange
for goods and services 12,500 516 516
Issuance of options and warrants for the
purchase of common stock 14 14
Options and warrants exercised 94,343 2 173 175
Common stock issued to acquire minority
interest 126,424 1 505 506
Issuance of common stock 2,031,772 20 11,093 11,113
Treasury stock acquired in connection with
forgiveness of notes receivable (5,000
shares) (35) (35)
Net loss (15,015) (15,015)
---------- ------ --------- ----- --------- ---------
Balance, December 31, 1998 7,376,876 74 19,092 (238) (29,984) (11,056)
Dividends on preferred stock (549) (549)
Issuance of warrants in connection with
financing commitment 472 472
Reduction in deferred financing costs
related to recission of warrants in
connection with financing commitment (387) (387)
Issuance of common stock 4,998,482 50 49,934 49,984
Stock issuance costs (4,992) (4,992)
Conversion of preferred stock 9,673,109 97 37,638 37,735
Issuance of options and warrants for
the purchase of common stock in exchange
for goods and services 438 438
Options and warrants exercised 94,793 242 242
Comprehensive loss:
Unrealized loss on marketable securities $ (8)
Net loss (26,459)
Total comprehensive loss (26,467)
---------- ------ --------- ----- ---------- --------- ----------
Balance, January 1, 2000 22,143,260 $ 221 $ 101,888 $(238) $ (8) $ (56,443) $ 45,420
---------- ------ --------- ----- ---------- --------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
STREAMLINE.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998 AND JANUARY 1, 2000 (IN
THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(10,254) $(15,015) $(26,459)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 807 1,701 2,900
Noncash loss and impairment on fixed assets 10 325 7
Amortization of discount on notes payable -- 525 --
Loss on disposal of fixed assets 86 120 --
Amortization of goodwill and other assets 166 282 353
Bad debt expense -- 7 142
Noncash charge for options and warrants 11 11 --
Issuance of warrants for the purchase of common stock in exchange
for consulting services 330 447 438
Noncash charge for forgiveness of debt 300 -- --
Minority interest in net loss of consolidated subsidiary (265) (139) --
Changes in assets and liabilities:
Accounts receivable (73) (18) (495)
Inventory (91) (187) (528)
Prepaid expenses and other current assets (219) 151 (1,389)
Other assets (9) (254) (897)
Accounts payable 679 (769) 2,497
Accrued expenses 569 471 1,179
-------- -------- --------
Net cash used in operating activities (7,953) (12,342) (22,252)
-------- -------- --------
Cash flows from investing activities:
Purchases of marketable securities -- -- (29,867)
Proceeds from sale of marketable securities -- -- 9,113
Change in other assets -- -- (6,458)
Purchases of property and equipment (1,563) (1,005) (4,196)
Additions to purchased and capitalized software (1,413) (1,420) (3,714)
-------- -------- --------
Net cash used in investing activities (2,976) (2,425) (35,122)
-------- -------- --------
Cash flows from financing activities:
Proceeds from sale of common stock 1,563 11,117 49,984
Proceeds from sale of common stock of subsidiary 400 -- --
Proceeds from sale of preferred stock 9,000 22,857 --
Proceeds from the exercise of stock options and warrants 90 173 242
Stock issuance costs -- -- (4,992)
Purchases of treasury stock (203) -- --
Dividend payments on preferred stock (360) -- --
Issuance of notes receivable -- (35) --
Proceeds from notes payable - related party -- 600 --
Payments on notes payable - related party -- (600) --
Proceeds from notes payable 731 7,926 7,432
Payments on notes payable (163) (8,618) --
Principal payments on capital lease obligations (125) (266) (565)
-------- -------- --------
Net cash provided by financing activities 10,933 33,154 52,101
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
STREAMLINE.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998 AND JANUARY 1, 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C> <C>
Net increase (decrease) in cash and cash equivalents $ 4 $ 18,387 $ (5,273)
Cash and cash equivalents, beginning of year 1,443 1,447 19,834
====== ======== ========
Cash and cash equivalents, end of year $1,447 $ 19,834 $ 14,561
====== ======== ========
Supplemental information:
Cash paid for interest $ 67 $ 552 $ 425
Noncash financing and investing transactions:
Assets acquired with capital lease obligations $ 267 $ 497 $ 6,630
Issuance of subsidiary's stock and warrants in connection with
acquisition (Note 5) 485 -- --
Assumption of liabilities in connection with acquisition (Note 5) 370 -- --
Issuance of common stock in connection with purchase of minority
interest (Note 5) -- 506 --
Issuance and measurement of warrants in connection with
capitalized assets (Note 12) 408 (34) --
Issuance of warrants in connection with debt (Note 7) -- 525 --
Issuance of common stock for services provided -- 35 --
Common stock received in consideration of note receivable (Note 10) -- 35 --
Dividends accrued on preferred stock (Note 9) 157 329 549
Conversion of preferred stock into common stock (Note 9) -- -- 37,735
Issuance of warrants in connection with financing commitment (Note 9) -- -- 472
Reduction in deferred financing costs related to recission of
warrants in connection with financing commitment (Note 12) -- -- (387)
Unrealized loss on marketable securities -- -- (8)
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS AND MANAGEMENTS' PLANS
Streamline.com, Inc. ("Streamline.com" or the "Company") was
incorporated in the State of Delaware in 1993 and provides
Internet-based ordering and home delivery of a wide range of goods and
services to consumers. The Company seeks to simplify the shopping
chores of busy suburban families who place a high value on their time
and demand service excellence. The Company consolidates products and
services currently offered by various suppliers into a single weekly
delivery to its consumers, thus minimizing their need to make frequent
trips to multiple physical stores. During 1999, the Company provided
its products and services from three service centers in the greater
Boston, MA, Washington, D.C. and Chicago, IL suburbs that it intended
to replicate in other markets nationwide. Additionally, the Company
has working relationships with various consumer packaged goods
companies to perform market research on consumer purchasing behavior.
The Company has incurred cumulative losses through January 1, 2000 of
approximately $56.4 million and continues to have recurring operating
losses and negative cash flows from operating activities. The Company
expects to incur additional losses and will require additional
financing early in the first quarter of 2001 to continue its
operations.
The Company's initial plans for 2000 were based upon an aggressive
expansion strategy including the introduction of several new facilities
and the acquisition of a significant number of new customers by
year end. In addition, the 2000 plan included funding the operating
losses of the Chicago fulfillment center, which was acquired in
connection with Streamline.com's merger with Scotty's on January 5,
2000 (see Note 2). In order to implement the 2000 plan, the Company
anticipated the need for additional financing and engaged an investment
banker to assist in securing additional private funding which the
Company had expected to receive by the end of the second fiscal
quarter.
In the event the Company was unable to secure additional financing, an
alternative plan was developed to significantly reduce cash
expenditures including delaying the capital expenditure costs and
pre-opening expenses for the planned facilities. In such
circumstances, the Company would significantly reduce marketing
expenditures, reduce corporate headcount costs including all incentive
compensation and reduce consulting and other miscellaneous spending.
Furthermore, most corporate capital projects would be postponed until
additional financing was obtained and the Company would pursue
financing for certain asset purchases which were not originally
anticipated to be financed.
The Company continued with its expansion strategy including the opening
of the New Jersey facility, entering into a lease for the Minnesota
facility and continued use of external marketing resources. In
addition, cash expenditures through the first half of 2000 were higher
than initially anticipated. This was primarily a result of higher
marketing costs associated with the opening of the New Jersey location,
lower than expected sales associated with lower customer acquisition
and the unexpected increase in the second quarter in the collateral
requirements associated with lease financing resulting in the Company
funding the majority of these purchases with working capital. Late in
the second quarter, in reaction to the inability to secure additional
financing and the increase in cash spending associated with these
items, the Company began to implement an alternative plan including the
delay of most external marketing activities, the delay of opening
certain facilities, deferral of corporate headcount increases, deferral
of discretionary capital technology and reduced consulting spending.
However, the timing of implementation of these initiatives would not
result in the Company having sufficient cash flow savings to fund
operations through the year.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
The Company continued its efforts to obtain a strategic or financing
alternative in the second and third quarters. This effort resulted in
the Company entering into a transaction during the third quarter of
2000, pursuant to which the Company sold to Peapod, Inc. substantially
all of the assets and operations of their facilities in Washington,
D.C. and Chicago for $11.6 million and Peapod assumed certain capital
and operating lease obligations. See Note 17. With the sale of these
two facilities, the Company has shifted their focus from national
expansion to expansion within existing regional markets. As a result
of the disposition of operations in those locations, the Company
has implemented additional cost controlling initiatives including a
hiring freeze, reduction in marketing spending, further reduction of
corporate administrative costs and all non-essential capital
expenditures. The Company expects that the proceeds received should be
able to fund operations through the end of the year. If financing is
not received early in the first quarter of 2001, the Company will be
unable to continue operations. However, depending on the Company's
ability to generate sufficient increases in revenues or reduce certain
costs, the Company may need cash for operations prior to that time.
The Company has limited options, beyond those currently being
implemented to reduce cash expenditures. The Company is still actively
pursuing financing and other strategic alternatives, however, no
definitive arrangements exist at this time. The Company has terminated
their relationship with their investment banker, but does not believe
this will affect the Company's ability to enter into a strategic or
financing transaction.
The accompanying financial statements have been prepared on a
going-concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
2. ACQUISITION OF SCOTTY'S
On October 18, 1999, the Company signed a merger agreement with
Scotty's. On January 5, 2000, the Company acquired Scotty's by merging
it into the Company pursuant to the Agreement and Plan of Merger and
Reorganization, dated as of October 18, 1999 (the "Merger Agreement").
The transaction was accounted for as a pooling of interests. The
Company issued approximately 3,710,000 shares of its common stock in
exchange for all of the common stock of Scotty's. Additionally,
outstanding warrants and options to acquire Scotty's common stock were
converted into warrants and options to acquire a total of approximately
598,000 shares of Streamline common stock. Under the terms of the
merger agreement, each share of Scotty's common stock was exchanged for
0.3984 shares of Streamline.com common stock.
The consolidated financial statements of the Company have been prepared
to give retroactive effect to the acquisition of Scotty's on January 5,
2000. Generally accepted accounting principles proscribe giving effect
to a consummated business combination accounted for by the pooling of
interests method in financial statements that do not include the date
of consummation. These financial statements do not extend through the
date of consummation; however, these now will become the historical
consolidated financial statements of the Company. Scotty's common
stock, warrants and options have been retroactively restated in
connection with the merger to reflect the merger exchange ratio of
0.3984.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. In 1998, the Company
purchased the remaining minority interest in its subsidiary (see Note
5). All significant intercompany transactions have been eliminated.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
CHANGE IN YEAR-END
As of October 2, 1999, the Company began reporting its earnings on a
retail calendar, using four 13-week quarters. The Company's year-end
will be on the Saturday closest to the 31st day of December. This
change would not have had a material impact on prior reported results.
REVENUE RECOGNITION
Product and service revenue is recognized upon delivery of goods and
services to the customer. Advertising, research and marketing fees are
recognized over the life of the contract or as the services are
performed. Subscription revenues are billed and recognized monthly.
CUSTOMER ACQUISITION COSTS AND PRE-OPENING COSTS
Customer acquisition costs and pre-opening costs are expensed as
incurred.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less at the time of purchase to be
cash equivalents. The Company invests its excess cash in money market
funds and marketable securities that are subject to minimal credit and
market risk. Cash equivalents at December 31, 1998 and January 1, 2000
included approximately $19,395 and $1,643, respectively, in money
market funds.
MARKETABLE SECURITIES
Marketable securities include high-grade commercial paper and corporate
bonds. Debt and equity securities are classified as available-for-sale
to support current operations or to take advantage of other investment
opportunities. These securities are stated at cost plus accrued
interest which approximates fair market value and all mature within one
year. The amortized cost of debt securities is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization and accretion as well as interest are included in interest
income. The Company's investments in debt and equity securities are
diversified among high-credit quality securities in accordance with the
Company's investment policy. Securities available-for-sale are carried
at fair value, with the unrealized gains and losses reported as a
separate component of stockholders' equity and comprehensive loss. The
Company has not had any investments that qualify as trading securities.
For the purpose of computing realized gains and losses, cost is
identified on a specific identification basis.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated over their
estimated useful lives of three to ten years using the straight-line
method. Assets held under capital leases are amortized over the shorter
of the lease life or the estimated useful life of the asset. Repairs
and maintenance costs are expensed as incurred. Upon retirement or
sale, the cost of the assets disposed and the related accumulated
depreciation are removed from the accounts and any resulting gain or
loss is included in the results of operations.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
PURCHASED SOFTWARE, CAPITALIZED SOFTWARE AND TECHNOLOGY SYSTEMS AND
DEVELOPMENT
Purchased third-party software and related implementation costs are
recorded at cost and are amortized over their estimated useful lives,
typically three years using the straight-line method. Internal and
external costs incurred related to the application development stage of
internal use software are capitalized and amortized over their
estimated useful lives, typically three years using the straight-line
method. Amortization expense related to purchased and capitalized
software is included in technology systems and development expense.
Technology development costs are charged to technology systems and
development expense as incurred. Technology development costs include
internal and external costs incurred in the development and enhancement
of software used internally or used in connection with services
provided by the Company that do not otherwise qualify for
capitalization, the costs of maintenance and minor enhancements and the
costs associated with maintaining and supporting internal information
systems.
The Company capitalized approximately $1,385 and $3,714 for purchased
and capitalized software for the years ended December 31, 1998 and
January 1, 2000, respectively. Accumulated amortization for purchased
and capitalized software was approximately $216, $919 and $2,256 at
December 31, 1997 and 1998, and January 1, 2000, respectively.
GOODWILL
Goodwill is being amortized on a straight-line basis over a five-year
term. The Company periodically evaluates the possible impairment of
long-lived assets, including goodwill, whenever events or changes in
circumstances indicate that the carrying value of the assets may not be
recoverable. If such an event occurred, the Company would project the
future undiscounted cash flows expected to result from the asset. If
such projections indicated that the carrying value would not be
recoverable, the Company would reduce the carrying value of the asset
by the estimated excess of such value over future projected discounted
cash flows. Amortization expense for goodwill was approximately $157,
$181 and $268 for the years ended December 31, 1997 and 1998, and
January 1, 2000, respectively. Accumulated amortization at December 31,
1998 and January 1, 2000 was $337 and $605, respectively.
YEAR 2000 COSTS
Costs of modifying computer software to ensure Year 2000 compliance are
expensed as incurred.
ADVERTISING
The Company expenses costs related to advertising as incurred.
Advertising expense was approximately $787, $1,257 and $4,929 for the
years ended December 31, 1997 and 1998, and January 1, 2000,
respectively.
INVENTORY
The Company values all of its inventories at the lower of cost or
market value. Cost is determined on an average cost basis. All
inventory items represent finished goods.
INCOME TAXES
The Company provides for income taxes under the liability method that
requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in
the financial statements or tax returns. Deferred tax liabilities and
assets are determined based on the difference between financial
statement and tax bases of assets and liabilities, as measured by the
current tax rates. Under this method, a valuation allowance is required
against net deferred tax assets if, based upon the available evidence,
it is more likely than not that some or all of the deferred tax assets
will not be realized.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
Management periodically evaluates the recoverability of deferred tax
assets and the level of the adequacy of the valuation allowance. At
such time as it is determined that it is more likely than not that
deferred tax assets are realizable, the valuation allowance will be
appropriately reduced.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based awards to employees using the
intrinsic value method as prescribed by Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. Accordingly, no compensation expense is
recorded for options issued to employees in fixed amounts with fixed
exercise prices at least equal to the fair market value of the
Company's common stock at the date of grant. The Company has adopted
the disclosure only provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation"
(Note 11). Stock-based awards, including warrants to nonemployees, are
accounted for at their fair value.
RISKS AND UNCERTAINTIES AND USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The Company has a limited operating history (also see Note 1), has
never achieved profitability and is therefore subject to the risks and
uncertainties such as the uncertain nature of the markets in which the
Company competes and the risk that the Company may be unable to manage
any future growth successfully.
In addition, the Company is subject to the risks encountered by
companies relying on the continued growth of on-line commerce and
Internet infrastructure. The risks include the use of the Internet as
viable commercial marketplace and the potentially inadequate
development of the necessary network infrastructure.
FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash, cash
equivalents, and marketable securities. As of December 31, 1998 and
January 1, 2000, the financial instruments' carrying values
approximated fair value (see Note 4). The Company primarily invests its
excess cash with high credit quality financial institutions including
primarily commercial paper and corporate bonds. The Company has not
experienced any significant losses on its cash, cash equivalents or
marketable securities.
NET LOSS PER SHARE
The Company computes basic and diluted net loss per share in accordance
with SFAS No. 128, "Earnings Per Share." Basic net loss per share is
computed by dividing net loss attributable to common stockholders by
the weighted average number of shares of common stock outstanding for
the period. Diluted loss per share does not differ from basic loss per
share since potential common shares from conversion of preferred stock,
stock options and warrants are antidilutive for all periods presented.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
Basic and diluted loss per share were calculated as follows:
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C> <C>
Numerator:
Loss before extraordinary item $ (10,254) $ (14,271) $ (26,459)
Dividends on preferred stock 157 329 549
----------- ----------- ------------
Loss attributable to common stockholders
before extraordinary item (10,411) (14,600) (27,008)
Extraordinary item -- 744 --
----------- ----------- ------------
Net loss attributable to common
stockholders $ (10,411) $ (15,344) $ (27,008)
=========== =========== ============
Denominator:
Weighted average common shares
outstanding 4,961,973 5,833,236 15,233,460
Basic and diluted net loss per common share:
Loss per common share before
extraordinary item $ (2.10) $ (2.50) $ (1.77)
Extraordinary item -- (0.13) --
----------- ----------- ------------
Net loss per common share $ (2.10) $ (2.63) $ (1.77)
=========== =========== ============
</TABLE>
Outstanding options of 828,328, 840,398 and 2,449,539 as of December
31, 1997 and 1998 and January 1, 2000, respectively, were not included
in the diluted loss per share computation because their effect would be
antidilutive. Outstanding warrants of 595,074, 1,043,861 and 1,008,861
as of December 31, 1997 and 1998 and January 1, 2000, respectively,
were not included in the diluted loss per share calculation because
their effect would be antidilutive. From January 2, 2000 through
February 9, 2000, the Company granted 600,350 options under the Company
stock option plans. All grants were issued at exercise prices equal to
the fair market value of the common stock.
COMPREHENSIVE LOSS
The Company's comprehensive loss is the same as the net loss presented
for the years ended December 31, 1997 and 1998. The comprehensive loss
for the year ended January 1, 2000 has been disclosed on the statement
of stockholders' equity and comprehensive loss.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
4. MARKETABLE SECURITIES
The following is a summary of the marketable securities at January 1,
2000 classified as current assets (in thousands):
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED FAIR MARKET
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
Available for sale securities:
Corporate bonds $11,505 $ -- $ (10) $11,495
Commercial paper 9,249 2 -- 9,251
------- ---- -------- -------
$20,754 $ 2 $ (10) $20,746
======= ==== ======== =======
</TABLE>
Gross realized gains and losses on marketable securities were not
significant. The Company did not have any marketable securities at
December 31, 1998.
5. SUBSIDIARY AND MINORITY INTEREST
The Company established Streamline Mid-Atlantic, Inc. ("Mid-Atlantic")
as a wholly-owned subsidiary in February 1997, receiving 2.2 million
common shares of Mid-Atlantic in exchange for $22 cash.
In February 1997, Mid-Atlantic issued 800,000 shares of common stock in
a private offering to third parties, in exchange for net proceeds of
$400. Mid-Atlantic acquired substantially all of the assets and
liabilities of Shopping Alternatives, Inc., a provider of home grocery
services. In the same month, stockholders of Shopping Alternatives
received 970,000 shares of Mid-Atlantic common stock plus warrants to
purchase 30,000 shares of Mid-Atlantic common stock. The value ascribed
to the warrants was nominal. In accordance with the purchase method of
accounting, the purchase price of approximately $855, which includes
approximately $370 of liabilities assumed, was allocated first to the
fair value of the net assets acquired from Shopping Alternatives. The
excess of the purchase price over the fair value of the acquired assets
of approximately $794 was recorded by Mid-Atlantic as acquired
goodwill, in the absence of other intangibles, to be amortized on a
straight-line basis over a period of five years. The accompanying
financial statements for the year ended December 31, 1997 reflect the
resultant change in interest of the Company's ownership of Mid-Atlantic
from 100% to approximately 55%.
In November 1998, the Company acquired the outstanding minority
ownership interest of Mid-Atlantic in a single transaction in which
minority stockholders of Mid-Atlantic received 126,424 shares of the
Company's common stock, $0.01 par value, having a fair value of
approximately $506 at the date of acquisition. In accordance with the
purchase method of accounting, the Company allocated the purchase price
first to the fair value of the net assets of Mid-Atlantic, as of the
date of the transaction. The resulting total goodwill associated with
Mid-Atlantic, representing the excess of the purchase price over the
fair value of the acquired assets of approximately $1,300 at December
31, 1998, is being amortized on a straight-line basis over a period of
five years. Unaudited pro forma combined results as if the acquisition
had occurred at the beginning of either of the fiscal years are not
materially different than the results presented.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
6. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
USEFUL LIVES
IN YEARS 1998 1999
<S> <C> <C> <C>
Computer equipment 3-5 $ 1,005 $ 2,925
Equipment, furniture and fixtures 5-10 2,202 4,952
Vehicles 5 804 2,271
Leasehold improvements 5-10 1,631 6,276
------- -------
5,642 16,424
Accumulated depreciation and amortization (1,574) (3,073)
------- -------
$ 4,068 $13,351
======= =======
</TABLE>
At December 31, 1998 and January 1, 2000, the costs of fixed assets
held under capital leases and included above amounted to approximately
$1,298 and $7,891, respectively, and accumulated amortization related
to such assets amounted to approximately $359 and $542, respectively.
7. DEBT
In April 1998, the Company received proceeds of $7,000 in connection
with the issuance of Senior Discount Notes ("Discount Notes"). The
Company issued 777 units each consisting of a $10 aggregate principal
amount of Discount Notes and 546.88 warrants to purchase common stock.
The $7,770 face amount of the Discount Notes is due April 15, 2001. The
Discount Notes bear interest initially in the form of accretion in the
principal amount outstanding up to the face amount at the rate of 11%
per annum until April 15, 1999. Thereafter, the Discount Notes bear
interest on the face amount at the rate of 12% per annum with interest
payable semiannually until maturity.
In conjunction with the issuance of the Discount Notes, the Company
also issued warrants for the purchase of up to a total of 425,000
shares of the Company's common stock. Warrants to purchase 225,000
shares of common stock at $7.00 per share vested immediately. The
remaining 200,000 warrants vest periodically at varying exercise prices
until 2001 based upon the Company obtaining certain amounts of
financing. All of these warrants expire upon the earlier of April 15,
2005 or five years after a public offering by the Company raising at
least $25,000. The Company recorded approximately $525 of additional
paid-in capital for the fair value of the warrants on the issuance date
as an additional discount associated with the Discount Notes.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
On September 18, 1998, the Company redeemed all of the Discount Notes
at a price of $7,000 plus approximately $334 of interest and $257 for a
call premium with the proceeds from the issuance of the Company's
Series D Preferred Stock (Note 9). In addition, the Company modified
the terms of the warrants issued in connection with this debt such that
the remaining unvested warrants to purchase 200,000 shares of the
common stock expired immediately in exchange for the issuance of 5,000
shares of common stock for $0.1. The redemption resulted in the Company
recording an extraordinary loss on the extinguishment of debt of
approximately $744 including approximately $257 for the call premium,
approximately $452 for the unamortized discount value associated with
the warrants and approximately $35 for the issuance of the common
shares and the remaining deferred financing costs.
On May 15, 1999, the Company entered into a construction loan agreement
with a bank to finance the construction of their new facility (see Note
17). The loan bears interest equal to the Prime rate plus one-half
percent (9% at December 31, 1999), due and payable monthly. The loan
had a maturity date of December 31, 1999; however, it was repaid in
January 2000. The amount outstanding under this agreement was $3,832 at
January 1, 2000.
Concurrently with the construction loan agreement, the Company
converted their outstanding borrowings under the line of credit (see
below) to a note payable with available borrowings of $4,800, maturing
on March 31, 2000. Interest is due and payable monthly. Outstanding
borrowings under this agreement were $3,600 at January 1, 2000.
The Company has a line of credit arrangement with a bank that provides
for maximum borrowings of $1,500 for the year ending December 31, 1998.
Borrowings are secured by substantially all assets. Interest is at
0.25% above the prime interest rate (7.75% as of December 31, 1998).
As of December 31, 1998, the Company had no outstanding borrowings
under the line of credit. The Company was in compliance with all
covenants on December 31, 1997 and 1998 and January 1, 2000.
On January 4, 2000, the Company completed the refinancing of its new
facility in Zurich, Illinois under a sale/leaseback arrangement. The
facility was sold for a net purchase price of approximately $6,500 and
of the proceeds, $3,900 was used to pay the construction loan in full,
$1,300 was received in cash and $1,300 is being held in escrow, pending
receipt of the final releases by the contractors. The transaction has
been accounted for as a sale and, as a result, property, equipment and
land in the amount of the purchase price has been removed from the
Company's books. The remaining costs were recorded as leasehold
improvements and will be amortized over the lease term. The lease has a
term of twenty years and requires minimum annual rent payments of $666,
subject to adjustment for CPI increases every five years. In connection
with this financing, the Company issued warrants for common stock,
which has been recorded as a deferred financing cost.
8. RELATED PARTY TRANSACTIONS
During 1997, the Company paid consulting fees under an agreement with a
marketing firm, the Chief Executive Officer of which is a director of
the Company. Total fees paid under this agreement during 1997 were
approximately $338. Additionally during 1997, the Company issued
warrants valued at $25 to this firm for the purchase of 50,000 shares
of the Company's common stock at an exercise price of $2.04 per share
with an expiration date in 2001.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
During 1997, the Company repurchased 11,500 shares of its common stock
from its Chairman and Chief Executive Officer at a purchase price of
$7.00 per share, which the Company's Board of Directors determined to
be the fair value of those shares at the date of repurchase.
During 1997, 1998, and 1999, the Company paid fees for technology
development and consulting under an agreement with a firm, the Chief
Executive Officer of which is a current director and former officer of
the Company. Fees paid by the Company under this agreement totaled
approximately $1,250, $1,676 and $1,218 in 1997, 1998 and 1999,
respectively. In addition, during 1997 the Company issued warrants
valued at approximately $330 to this firm for the purchase of 50,000
shares of the Company's common stock at an exercise price of $2.04 per
share with an expiration date in 2007. During 1998, the Company issued
additional warrants valued at approximately $447 to this firm for the
purchase of 100,000 shares of its common stock at an exercise price of
$4.00 per share with an expiration date in 2003. Costs associated with
these transactions have been recorded as additions to capitalized
software of approximately $683 and $468 for the years ended December
31, 1998 and January 1, 2000, respectively, and as technology systems
and development expense of $1,440 and $750 for the years ended December
31, 1998 and January 1, 2000, respectively.
During 1998, the Company issued convertible subordinated notes payable
in the amount of $200 to two directors of the Company, and $400 to five
stockholders of the Company, which were redeemed during 1998 at par
value plus accrued interest.
A director of the Company, who is also a shareholder, is employed by
the Company's investment advisory firm. In October 1998, the firm was
paid approximately $600 for fees relating to the sale of stock.
In April 1999, the Company issued warrants valued at approximately $472
to a significant investor for the purchase of 75,000 shares of the
Company's common stock at an exercise price of $7.00 per share, in
connection with a financing commitment. In June 1999, the stockholder
agreed to rescind all of its rights pursuant to this warrant, effective
as of the closing of the initial public offering. In connection with
this rescission, the Company reversed the remaining unamortized
deferred financing costs of approximately $387 at the time of the
initial public offering.
During 1999, the Company paid fees to a technology firm, which is also
an investor. Fees paid by the Company totaled approximately $77.
The Company has capital equipment lease arrangements with one of its
stockholders and its affiliated entities. The Company paid
approximately $69, $198 and $561 in the years ended December 31, 1997
and 1998 and January 1, 2000, respectively, under these capital lease
arrangements. As of December 31, 1998 and January 1, 2000, amounts due
to these related parties are $458 and $716, respectively, and have been
included as capital lease obligations on the balance sheet.
For the years ended December 31, 1997, 1998 and January 1, 2000, the
Company purchased $320, $539 and $558, respectively, of product from a
vendor that is owned by a relative of a management employee and option
holder of the Company.
Certain warrant activity described in Note 12 during the years ended
December 31, 1997 and 1998 and January 1, 2000 was with stockholders of
the Company.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
9. REDEEMABLE CONVERTIBLE PREFERRED STOCK
The following table reflects redeemable convertible preferred stock
activity from December 31, 1996 through January 1, 2000:
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D TOTAL
--------------- -------------- --------------- ---------------- ----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 50,000 $ 5,203 -- $ -- -- $ -- -- $ -- 50,000 $ 5,203
Shares of Series B issued -- -- 80,000 8,000 -- -- -- -- 80,000 8,000
Shares of Series C issued -- -- -- -- 10,000 1,000 -- -- 10,000 1,000
Accrual of Series A dividends -- 157 -- -- -- -- -- -- -- 157
Payment of Series A dividends -- (360) -- -- -- -- -- -- -- (360)
======= ======= ======= ====== ====== ======= ======= ======== ========= ========
Balance at December 31, 1997 50,000 5,000 80,000 8,000 10,000 1,000 -- -- 140,000 14,000
Shares of Series D issued -- -- -- -- -- -- 228,570 22,857 228,570 22,857
Accrual of Series D dividends -- -- -- -- -- -- -- 329 -- 329
------- ------- ------ ------- ------ ------- ------- -------- --------- --------
Balance at December 31, 1998 50,000 5,000 80,000 8,000 10,000 1,000 228,570 23,186 368,570 37,186
Accrual of Series D dividends -- -- -- -- -- -- -- 549 -- 549
Conversion to common stock
in connection with initial
public offering (50,000) (5,000) (80,000) (8,000) (10,000) (1,000) (228,570) (23,735) (368,570) (37,735)
------- ------- ------- ------ ------- ------- -------- -------- -------- --------
Balance at January 1, 2000 -- $ -- -- $ -- -- $ -- -- $ -- -- $ --
======= ======= ======= ====== ====== ======= ======= ======== ========= ========
</TABLE>
During 1997, the Company amended its certificate of incorporation to
amend the rights of the Series A redeemable cumulative convertible
preferred stock ("Series A") and to create two new series of redeemable
convertible preferred stock, designated as Series B (the "Series B")
and Series C (the "Series C"). The Company is authorized to issue up to
100,000 shares of each of these series of preferred stock, and each
series has a par value of $1.00 per share. These series of preferred
stock are not cumulative as to dividends. In connection with the
amendment, the Company made a cash payment of approximately $360
representing the total accrued dividends due to the holders of the
Series A. In addition, the Company issued 80,000 and 10,000 shares of
Series B and Series C, respectively, for gross proceeds of $8,000 and
$1,000, respectively.
During 1998, the Company amended its certificate of incorporation to
amend certain terms of Series A, Series B and Series C and authorize
the issuance of up to 380,000 shares of preferred stock designated as
Series D. In September 1998, the Company issued 228,570 shares of
Series D at $100 per share resulting in gross proceeds of $22,857.
All outstanding shares of redeemable convertible preferred stock were
converted into common stock upon the closing of the Company's initial
public offering on June 17, 1999. Shares of redeemable convertible
preferred stock for all Series, while outstanding, were subject to the
following rights and privileges:
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
REDEMPTION
The Company was required to redeem each series of preferred stock in
the amount of $100 per share plus accumulated and unpaid dividends in
two equal annual installments commencing on the fifth anniversary upon
request by holders of at least two-thirds of such series of preferred
stock. Each holder of preferred stock could elect immediate redemption
upon the sale of substantially all of the Company's capital stock or
assets to a third party. Additionally, a holder of Series D could elect
redemption if the Company had violated certain covenants. However,
stockholders were not entitled to elect redemption if that holder or a
Director nominated by the holder voted its shares in favor of the sale.
As of December 31, 1998, future redemption requirements for the
preferred stock were $2,500, $7,000, $16,093 and $11,593 in the years
ended December 31, 2001, 2002, 2003 and 2004, respectively, plus
additional accrued dividends.
LIQUIDATION
In the event of any liquidation, dissolution, or winding-up of the
Company, the holders of the Series D were entitled to a liquidation
preference of up to $100 per share plus all accrued but unpaid
dividends before any payments are made to the holders of the Series A,
Series B or Series C. After payments to the Series D stockholders, the
holders of the Series A, Series B or Series C were entitled to receive
a liquidation payment of $100 per share and any accumulated and unpaid
dividends. Any assets remaining after such liquidation payment to the
preferred stockholders would be available for distribution ratably to
common stockholders.
DIVIDENDS
The holders of Series D were entitled to cumulative dividend rights at
a rate of 5% per annum of the Series D liquidation preference. The
dividend rights would be payable in cash, as an addition to the
liquidation preference or an issuance of Series D shares at the
discretion of the Company or any combination of the foregoing. Series D
accumulated dividends were to be paid before dividends or distributions
were made to the holders of the Series A, Series B or Series C. The
Company would pay a dividend or distribution on the same terms and at
the same or equivalent rate on each share of Series A, Series B, Series
C and Series D whenever a dividend or distribution was declared or paid
on any shares of the common stock. At December 31, 1998, Series D
stockholders were entitled to cumulative dividends in arrears of
approximately $329. Accrued dividends of $878 were converted to 218,387
shares of common stock in June 1999 in connection with the Company's
initial public offering.
CONVERSION
The number of shares of common stock into which the Series A, Series B,
Series C and Series D were convertible was determined by multiplying
each share by the quotient of $100 divided by the conversion price as
follows: Series A - approximately $2.04 per share; Series B and C -
$7.00 per share; Series D - $4.00 per share. All unpaid dividends were
to be paid upon conversion.
Each share of Series A, Series B and Series C was convertible into the
Company's common stock at the option of the holder at any time prior to
redemption, or would be automatically converted upon the closing of a
public offering of the Company's common stock resulting in a price of
at least $8.00 per share and gross proceeds of at least $25,000,
subject to anti-dilution provisions.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
Each share of Series D was convertible into the Company's common stock
at the option of the holder at any time after the earlier of a
conversion event or March 18, 2000. A conversion event includes any
transaction that would be deemed a liquidation, Mr. DeMello's ceasing
to be an officer, director or consultant of the Company, certain
actions by the Company without a prior affirmative vote by a majority
of the Series D stockholders, a change in persons constituting the
majority of the board of directors or a material adverse change in the
Company's business. Each Series D share would be automatically
converted upon the closing of the first sale of a public offering
resulting in at least $25,000 of gross proceeds for at least $8.00 per
share provided that an investment banker delivers an opinion that deems
the conversion is necessary to facilitate a successful public offering,
or upon a sale of the shares of Series A, Series B, Series C and Series
D redeemable convertible preferred stock ("Preferred Stock") and the
accrued dividends on the Series D Preferred Stock were converted into
9,673,109 shares of common stock.
VOTING
Holders of Series A, Series B, Series C and Series D did not have
voting rights but holders of Series A and Series C, voting together,
and holders of Series B, voting separately, had the right to elect one
director of the Company, or in lieu thereof, one individual as an
observer at all meetings of the Company's board of directors. Holders
of Series D had the right to elect one director of the Company and one
individual as an observer at all meetings of the Company's board of
directors. The Company was required to request the consent of the
Series D stockholders before engaging in certain activities such as the
modification of the rights of the Series D stockholders, a merger or
acquisition, the declaration of dividends for all capital stock and the
issuance of common stock at a price less than $7.00 per share and more
than $4.00 per share.
10. STOCKHOLDERS' EQUITY
COMMON STOCK AND PREFERRED STOCK
The holders of common stock are entitled to one vote for each share
held at all meetings of the stockholders. Dividends on common stock may
be paid out of lawfully available funds as and when determined by the
board of directors, subject to any preferential dividend rights of
preferred shareholders. In April 1999, the Company's board of directors
adopted, and the stockholders approved, effective upon the closing of
an initial public offering, an increase in the authorized capital stock
of the Company to 50,000,000 shares of common stock and 5,000,000
shares of preferred stock, each having a par value of $0.01 per share.
The board of directors is authorized, without further stockholder
approval, to fix or alter the relative rights, preferences,
qualifications, limitations or restrictions thereof, including any
dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting any series or the designation of such
series.
TREASURY STOCK
During 1997, the Company repurchased 29,000 shares of its common stock
from certain employees and directors of the Company for a total of
approximately $203. During 1998, the Company received 5,000 shares of
common stock as consideration for payment of a $35 employee note
receivable.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
ACQUISITION OF SCOTTY'S
Prior to the merger with Streamline, the holder of the 10,000 shares of
Scotty's Series A preferred stock converted those shares into 3,787,879
shares of Scotty's common stock. As part of this conversion, all
dividends previously accrued for the Series A preferred stock were
canceled in connection with terms established at the time the Series A
preferred stock was issued.
STOCK SPLIT
On April 8, 1999, the board of directors declared a 1-for-2 reverse
stock split of common stock. All common shares and per share amounts in
the consolidated financial statements and related footnotes have been
restated to reflect the effect of the reverse stock split for all
periods presented.
INITIAL PUBLIC OFFERING
In June 1999, the Company completed an initial public offering of its
common stock (the "IPO"). A total of 4,998,482 shares of the Company's
common stock were sold at a price of $10.00 per share, including the
exercise of the underwriter's overallotment option in July 1999,
generating gross offering proceeds of approximately $50,000. After
deducting approximately $5,000 in underwriting discounts and other
related expenses, the net proceeds to the Company were approximately
$45,000. 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 9,673,109 shares of Streamline's common
stock.
11. STOCK OPTION PLAN AND EMPLOYEE STOCK PURCHASE PLAN
STOCK OPTION PLANS
On June 10, 1993, the Company adopted two stock option plans. The 1993
Employee Option Plan ("Employee Plan") initially allowed for the
granting of 202,750 shares of either statutory or nonstatutory options
as defined by Section 422 of the Internal Revenue Code. As of December
31, 1998, the Company had authorized 1,500,000 shares to be issued in
connection with the Employee Plan. During 1999, the Company increased
the number of authorized shares to be issued under this plan to
2,500,000. On January 5, 2000, the Company's shareholders approved an
increase in the number of authorized shares under the Employee Plan
from 2,500,000 to 3,000,000 shares, resulting in approximately 466,000
shares available for future grant under this Plan.
The Director Option Plan ("Director Option Plan") allows for the
granting of shares of non-statutory options and is not intended to meet
the requirements of Internal Revenue Code Section 422. As of December
31, 1998, an aggregate of 125,000 shares of common stock has been
reserved for issuance upon the exercise of options available under the
Director Option Plan. During 1999, the Company increased the number of
authorized shares to be issued under this plan to 400,000. As of
January 1, 2000, there were approximately 312,500 shares available for
future grants under the Director Option Plan.
Options are generally granted at a price established by the board of
directors to be not less than the fair market value of the stock on the
date of grant. The options vest at various rates over periods up to
four years and expire up to ten years from the grant date for the
Employee Option Plan and five years from the grant date for the
Director Option Plan.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
The Company has adopted the disclosure only provisions of SFAS No. 123.
Accordingly, no compensation cost has been recognized for stock options
granted at or above fair value. Had compensation cost been determined
based on the fair value at the grant dates for awards in 1997, 1998 and
1999 consistent with the provisions of SFAS No. 123, the Company's pro
forma net loss attributable to common stockholders and pro forma basic
and diluted net loss per common share for fiscal year 1997, 1998 and
1999 would have been as follows:
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C> <C>
Net loss attributable to common stockholder:
As reported $(10,411) $(15,344) $(27,008)
Pro forma (10,566) (15,611) (28,455)
Basic and diluted net loss per common share:
As reported $ (2.10) $ (2.63) $ (1.77)
Pro forma (2.13) (2.68) (1.87)
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model. The following assumptions
were used for grants through the date of the initial public offering
June 18, 1999; no volatility, no dividend yield, and risk-free interest
rate of 5.6% for 1997, 5.3% for 1998 and 5.1% for 1999. The following
assumptions were used for grants subsequent to the initial public
offering: 90% volatility, no dividend yield, and risk free interest
rates of approximately 6.0%. The expected lives for grants in 1997 and
1998 of the Employee and Directors' plans were five and three years,
respectively. The expected lives for grants in 1999 are three years.
The weighted average fair value of options granted was $0.78, $1.03,
and $4.18 per share for the years ended December 31, 1997 and 1998 and
January 1, 2000, respectively. All options granted during the years
ended December 31, 1997 and 1998 and January 1, 2000 were issued at
exercise prices equal to or in excess of the fair market value of the
common stock.
Because the determination of the fair value of all options granted
includes vesting periods over several years and additional option
grants may be made each year, future effects on reported pro forma net
income or net loss may differ from the above pro forma disclosures.
The following table summarizes the activity in the Company's option
plans at December 31, 1997 and 1998 and January 1, 2000, and changes
during the periods then ended:
<TABLE>
<CAPTION>
1997 1998 1999
-------------------- -------------------- ------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period 428,000 $ 1.76 828,328 $ 2.80 840,398 $ 3.59
Granted 487,828 3.44 270,602 4.69 1,907,212 8.64
Exercised (77,500) 1.16 (34,583) 1.79 (59,793) 2.93
Forfeited (10,000) 1.80 (223,949) 2.31 (238,278) 7.23
------- ------ -------- ------ --------- ------
Outstanding at end of period 828,328 $ 2.80 840,398 $ 3.59 2,449,539 $ 7.18
======= ====== ======== ====== ========= ======
Options exercisable at end
of period 175,198 $ 1.77 408,373 $ 2.98 660,613 $ 3.85
======= ====== ======== ====== ========= ======
</TABLE>
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
The following table summarizes information about stock options
outstanding at January 1, 2000:
<TABLE>
<CAPTION>
WEIGHTED
TOTAL AVERAGE
RANGE OF NUMBER REMAINING NUMBER
EXERCISE OF OPTIONS CONTRACTUAL OF OPTIONS
PRICE OUTSTANDING LIFE EXERCISABLE
<S> <C> <C> <C>
$ 1.00 - 4.00 498,607 7.05 430,788
6.50 - 7.53 1,200,256 9.16 226,479
7.63 - 9.56 186,730 9.30 -
10.00 - 13.81 563,946 9.62 3,346
--------- ---- -------
2,449,539 8.81 660,613
========= ==== =======
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
In April 1999, the Company's board of directors and stockholders
approved the 1999 Employee Stock Purchase Plan (the "1999 Purchase
Plan"). The Company has reserved 250,000 shares of common stock for
issuance under the 1999 Purchase Plan. No shares were issued in 1999.
12. COMMON STOCK WARRANTS
The following table summarizes the activity related to warrants at
December 31, 1997 and 1998, and January 1, 2000 and changes during the
periods then ended:
<TABLE>
<CAPTION>
1997 1998 1999
------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period 209,360 $ 2.54 595,074 $ 4.60 1,043,861 $ 5.58
Granted 385,714 5.72 708,547 6.50 75,000 7.00
Exercised - - (59,760) 1.86 (35,000) 1.99
Forfeited - - (200,000) 7.00 (75,000) 7.00
------- ------ --------- ------ --------- ------
Outstanding at end of period 595,074 $ 4.60 1,043,861 $ 5.58 1,008,861 $ 5.58
======= ====== ========= ====== ========= ======
Warrants exercisable at end
of period 353,289 $ 3.34 781,171 $ 5.18 931,088 $ 5.49
======= ====== ========= ====== ========= ======
</TABLE>
The weighted average fair value of warrants granted during 1997, 1998,
and 1999 estimated on the date of grant using the Black-Scholes
option-pricing model was $2.74, $2.64 and $6.29, respectively. The fair
value was estimated using an expected volatility of 50% in 1997 and 80%
in 1998 and 1999, risk free rates of 5.8% to 6.3% in 1997, 4.1% to 5.5%
in 1998, and 4.5% to 6.2% in 1999 and the contractual term of the
warrant.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
The following table summarizes information about warrants outstanding
at January 1, 2000:
<TABLE>
<CAPTION>
WEIGHTED
TOTAL TOTAL AVERAGE
NUMBER NUMBER REMAINING
EXERCISE OF WARRANTS OF WARRANTS CONTRACTUAL
PRICE OUTSTANDING EXERCISABLE LIFE
<S> <C> <C> <C>
$ 1.80 15,000 15,000 1.0
2.04 100,000 100,000 4.6
3.26 99,600 99,600 2.0
4.00 100,000 100,000 4.0
6.63 155,547 77,774 8.0
7.00 538,714 538,714 3.1
--------- ------- ---------
1,008,861 931,088 3.6 years
========= ======= =========
</TABLE>
During 1997, the Company issued warrants for the purchase of a total of
385,714 shares of its common stock at exercise prices ranging from
$2.04 - $7.00 per share and expiration dates from 2001 through 2007.
These warrants were principally issued in lieu of cash consideration
for services provided to the Company. Certain of these warrants were
issued with immediate vesting while some of the warrants had vesting
that was contingent on additional services being provided. In 1997, in
connection with the issuance of these warrants, the Company recorded
$330 of technology systems and development costs, $281 of capitalized
software and $77 of deferred financing costs based upon the appraised
value of the warrants at the date of grant. As of December 31, 1997,
approximately 214,500 of these warrants were subject to vesting upon
certain conditions and are subject to adjustment until the measurement
date is reached. In 1998, the remeasurement of these warrants resulted
in the Company reducing capitalized software recorded in 1997 by
approximately $67. As of December 31, 1998 and January 1, 2000, 107,143
warrants granted in 1997 were subject to vesting upon certain future
events and no significant value has been ascribed to these unvested
warrants.
During 1998, the Company issued warrants for the purchase of a total of
708,547 shares of its common stock at exercise prices ranging from
$4.00 - $7.00 per share as described below.
Warrants for the purchase of 425,000 common shares were issued in
connection with the Discount Notes at an exercise price of $7.00 per
share. These warrants expire upon the earlier of April 15, 2005 or five
years after a public offering by the Company raising at least $25,000.
In connection with the repayment of the Discount Notes, the Company
notified the terms of the warrants issued in association with this debt
such that the remaining unvested warrants to purchase 200,000 shares of
the common stock expired immediately in exchange for the issuance 5,000
shares of common stock for $0.1 (see Note 7).
In addition, the Company issued warrants for the purchase of a total of
100,000 shares of its common stock at an exercise price of $4.00 per
share with an expiration date in 2003 in exchange for services provided
to the Company (see Note 8).
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
The Company issued warrants for the purchase of 28,000 shares of common
stock at an exercise price of $7.00 per share which are all vested as
of December 31, 1998. These warrants expire in 2001. These warrants
were principally issued in lieu of cash consideration for services
provided to the Company. The Company recorded approximately $33 to
capitalized software for the fair value of the warrants.
The Company issued warrants for the purchase of 155,547 shares of its
common stock at an exercise price, subject to adjustment, of $6.63 per
share with an expiration date in 2008. These warrants vest based on the
achievement of certain performance criteria. During 1999, 77,774 of
these warrants vested and, as a result, the Company recorded $337 of
sales and marketing costs. As of January 1, 2000, there are
approximately 77,773 additional warrants that vest upon the achievement
of certain performance criteria. Once this performance criteria is met,
the related fair value will be calculated and the cost recorded in the
year of vesting.
In April 1999, the Company issued warrants for the purchase of 75,000
shares of common stock at an exercise price of $7.00 per share in
connection with a financing commitment by a current stockholder. The
Company recorded approximately $472 of deferred financing costs for the
estimated fair value of the warrant. In June 1999, the stockholder
agreed to rescind all of its rights pursuant to this warrant, effective
as of the closing of the initial public offering. In connection with
this rescission, the Company reversed the remaining unamortized
deferred financing costs of approximately $387 at the time of the
initial public offering.
13. NONRECURRING CHARGE
The Company planned to relocate its Lake Zurich, IL service center
during 2000. As a result, the Company will incur costs associated with
the termination of its existing leases ($220) as well as the impairment
of property and equipment ($320) since certain assets, including
refrigeration equipment, computer equipment and furniture and fixtures,
cannot be utilized at the new facility. The decision to relocate its
operations was made in 1998, and the related costs, which total $540,
are included in fulfillment center operations and general and
administrative expenses in the accompanying statement of operations for
the year ended December 31, 1998. The amount remaining in accruals at
January 1, 2000 is approximately $219 relating to lease termination
costs, and was subsequently paid after year-end.
In 1997, the Company recorded the write-off of a $300 note receivable
from its former owner, who is also a shareholder. The note receivable
was issued in connection with the purchase of the Company from the
former owner, which occurred in July 1995. The note receivable was to
be canceled on the earlier of (a) his termination of employment other
than for cause, as defined, (b) his death, or (c) on the third
anniversary date of the note. The Company decided to forgive the note
receivable in 1997. The write-off of the note receivable is included in
general and administrative expenses in the accompanying statement of
operations.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
14. COMMITMENTS AND CONTINGENCIES
LEASE OBLIGATIONS
The Company leases its facilities and certain equipment under
noncancelable leases. Future minimum lease obligations at January 1,
2000 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING JANUARY 1, LEASES LEASES
<S> <C> <C>
2001 $ 2,733 $ 2,075
2002 2,692 1,998
2003 2,257 1,667
2004 2,188 1,074
2005 2,103 959
Thereafter 20,587 1,055
-------- --------
Total future payments $ 32,560 8,828
======== --------
Less: amount representing interest 1,988
--------
Present value of capital leases $ 6,840
========
</TABLE>
All capital lease obligations are fully collateralized by the equipment
and are at interest rates ranging from 4% to 20%.
Total rent expense for the years ended December 31, 1997 and 1998 and
January 1, 2000 was approximately $747, $1,112 and $1,520,
respectively.
15. INCOME TAXES
The components of the income tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C> <C>
Deferred provision
Federal $ (2,827) $ (4,329) $ (5,794)
State (521) (820) (3,894)
Change in valuation allowance 3,348 4,964 9,688
Other - 185 -
-------- -------- --------
Total provision $ - $ - $ -
======== ======== ========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Deferred tax assets are approximately $9,773 and $19,461 as
of December 31, 1998 and January 1, 2000, primarily consist of net
operating loss carryforwards, reserves and depreciation, and carry a
full valuation allowance.
As of January 1, 2000, the Company had federal and state net operating
loss carryforwards of approximately $48,074 and state net operating
losses of approximately $47,895. The federal and state net operating
loss carryforwards begin to expire in 2008 and 2000, respectively.
<PAGE>
STREAMLINE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------------
Under the provisions of the Internal Revenue Code, certain substantial
changes in the Company's ownership may have limited, or may limit in
the future, the amount of net operating loss carryforwards which could
be utilized annually to offset future taxable income and income tax
liability. The amount of any annual limitation is determined based upon
the Company's value prior to an ownership change.
16. RETIREMENT SAVINGS PLAN
In 1997, the Company adopted the Streamline 401(k) Plan (the "Plan")
for its employees, which has been qualified under Section 401(k) of the
Internal Revenue Code. Eligible employees are permitted to contribute
to the Plan through payroll deductions within statutory limitations and
subject to any limitations included in the Plan. To date, the Company
has made no contributions to the Plan.
17. SUBSEQUENT EVENTS (UNAUDITED)
On September 7, 2000, the Company sold substantially all of the assets
relating to its operations in Washington D.C. and greater Chicago
markets (the "Transferred Assets") pursuant to an Asset Purchase
Agreement (the "Purchase Agreement") by and among the Company, two of
the Company's wholly-owned subsidiaries and the buyer. Pursuant to the
Purchase Agreement, the buyer agreed to pay the Company $11,600
in cash and to assume certain capital and operating lease obligations
associated with the Transferred Assets. Approximately $1,400 of
the purchase price is being held in escrow by the buyer pending the
Company's satisfaction of certain post-closing obligations and
approximately $200 of the purchase price is being held in escrow to
secure any indemnification obligations of the Company pursuant to
Purchase Agreement.
The Company expects to record a gain of approximately $2,500 in
connection with this transaction. The Company will record this
transaction during the quarter ended September 30, 2000 and will
classify the portion of the gain associated with the sale of the
Chicago operations, historically accounted for as a pooling of
interests, as an extraordinary item. The remaining gain will be
included in other income.
Additionally, in September 2000, the Company terminated the lease for
its Minneapolis facility, resulting on a one-time charge of
approximately $750, of which $350 was a cash payment and the remainder
was the write-off of a deposit.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Streamline.com, Inc.:
In our opinion, based upon our audits and the reports of other
auditors, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity (deficit) and
comprehensive loss and of cash flows present fairly, in all material
respects, the financial position of Streamline.com, Inc. and its subsidiaries
("Streamline") at December 31, 1998 and January 1, 2000, and the results of
their operations and their cash flows for each of the three years in the
period ended January 1, 2000, in conformity with accounting principles
generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. The consolidated financial statements give retroactive effect
to the merger of Beacon Home Direct d/b/a Scotty's Home Market ("Scotty's")
on January 5, 2000 in a transaction accounted for as a pooling of interests,
as described in Note 2 to the consolidated financial statements. We did not
audit the financial statements of Scotty's, which statements reflect total
assets of approximately $8,549,000 at December 31, 1998 and total revenues
of approximately $5,582,000 and $3,880,000 for the two years ended December
31, 1998 and 1997, respectively. Those Scotty's statements were audited by
other auditors whose reports thereon have been furnished to us, and our
opinion expressed herein, insofar as it relates to the amounts included for
Scotty's is based solely on the reports of the other auditors. We conducted
our audits of these statements in accordance with auditing standards
generally accepted in the United States of America which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits and the reports
of other auditors provide a reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has incurred recurring losses from
operations and has a net capital deficiency that raises substantial doubt
about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 9, 2000, except for the pooling described in Note 2,
for which the date is June 23, 2000 and Note 1,
for which the date is September 15, 2000
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Beacon Home Direct, Inc.:
We have audited the accompanying balance sheets of BEACON HOME DIRECT, INC.
(an Illinois corporation) as of December 31, 1998 and 1997, and the related
statements of operations, shareholders' equity and cash flows for the year
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Beacon Home Direct, Inc. as
of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the year ended December 31, 1998, in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
Chicago, Illinois
March 5, 1999
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Beacon Home Direct, Inc.:
We have audited the accompanying balance sheets of BEACON HOME DIRECT, INC.
(an Illinois corporation) as of December 31, 1997 and 1996, and the related
statements of operations, shareholders' equity and cash flows for the year
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Beacon Home Direct, Inc. as
of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
Chicago, Illinois
November 11, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Streamline.com, Inc.:
Our audits of the consolidated financial statements referred to in our report
dated February 9, 2000, except for the pooling described in Note 2, for which
the date is June 23, 2000 and Note 1, for which the date is September 15, 2000
appearing in this Form 8-K also included an audit of the financial statement
schedule listed in Item 7 of this Form 8-K. In our opinion, this financial
statement schedule presents fairly in all material respects the information
set forth therein when read in conjunction with the related consolidated
financial statements.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 9, 2000, except for the pooling described in Note 2, for which
the date is June 23, 2000 and Note 1, for which the date is September 15, 2000
