Form 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED OCTOBER 31, 1997
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 000-29518
SHOPPING.COM
--------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0733679
------------------ --------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2101 EAST COAST HIGHWAY, CORONA DEL MAR, CA 92625
------------------------------------------- -----------
(Address of Principal Executive Offices) (Zip Code)
(714) 640-4393
---------------------------
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes ..... No ..X..
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Class Shares Outstanding at January 9, 1998
----- -------------------------------------
Common Stock 4,002,000
Transitional Small Business Disclosure Format
(Check One): Yes ..... No ..X..
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FORM 10-QSB
For the Quarterly Period Ended October 31, 1997
Item Page
- ---- ----
PART I. FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS 3
Balance Sheet at October 31, 1997 3
Statements of Operation for the three and nine months
ended October 31, 1997 and 1996 4
Statements of Cash Flows for the nine months ended
October 31, 1997 and 1996 5
Notes to Financial Statements 6
2. MANAGEMENT DISCUSSION AND ANALYSIS 9
General 9
Results of Operation 11
Liquidity and Capital Resources 13
PART II. OTHER INFORMATION
1. Legal Proceedings 27
2. Changes in Securities 27
3. Defaults Upon Senior Securities 27
4. Submission of Matters to a Vote of Security Holders 28
5. Other Information 28
6. Exhibits and Reports on Form 8-K 28
Signature 29
Exhibit Index 30
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SHOPPING.COM
(A Development Stage Company)
BALANCE SHEET
As of October 31, 1997
(unaudited)
October 31
1997
----------
ASSETS
Current assets
Cash $ 166,192
Accounts/advances receivable 174,747
Prepaid expenses 263,672
-----------
Total Current assets 604,611
Furniture and equipment, net 1,401,552
Purchased Software 750,000
Loan origination fees 168,639
Deferred offering costs 57,226
Other assets 105,814
-----------
Total assets $ 3,087,842
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes Payable $ 1,960,000
Current portion of capital lease obligation 10,152
Accounts payable 1,009,176
Other accrued liabilities 11,268
-----------
Total current liabilities 2,990,596
Capital lease obligation, net of current portion 74,200
-----------
Total liabilities 3,064,796
-----------
Commitments
Shareholders' equity
Preferred stock, Series A convertible, no par
value, 1,500,000 shares authorized, 1,500,000
shares issued and outstanding 300,000
Preferred stock, Series B convertible, no par
value, 4,000,000 shares authorized, 1,073,000
shares issued and outstanding 1,489,781
Common stock, no par value, 8,000,000 shares
authorized, 2,831,000 shares issued and outstanding 829,050
Deficit accumulated during development stage (2,595,785)
-----------
Total shareholders' equity 23,046
-----------
Total liabilities and shareholders' equity $ 3,087,842
===========
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<TABLE>
SHOPPING.COM
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<CAPTION>
Nine Months Ended Three Months Ended
October 31 October 31
97 96 97 96
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 376,822 $ -- $ 321,281 $ --
Cost of Sales 357,246 -- 306,738 --
----------- ----------- ----------- -----------
Gross Profit 19,576 -- 14,543 --
Operating Expenses 2,370,315 79,391 1,300,107 9,000
----------- ----------- ----------- -----------
Loss from Operations (2,350,738) (79,391) (1,285,564) (9,000)
Other Expenses
Interest Expense 43,349 -- 36,811 --
----------- ----------- ----------- -----------
Total Other Expenses 43,349 -- 36,811 --
----------- ----------- ----------- -----------
Net Loss $(2,394,088) $ (79,391) $(1,322,375) $ (9,000)
=========== =========== =========== ===========
Net Loss Per Share $ (0.35) $ (0.01) $ (0.19) $ (0.00)
=========== =========== =========== ===========
Weighted Average Shares
Outstanding 6,809,588 6,809,588 6,809,588 6,809,588
=========== =========== =========== ===========
</TABLE>
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SHOPPING.COM
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Nine Months Ended October 31, 1997 and 1996
(unaudited)
Nine Months Nine Months
Ended Ended
October 31 October 31
1997 1996
---------- ----------
Cash flows from operating activities
Net loss $(2,394,088) $ (79,391)
Adjustments to reconcile not loss to
net cash used in operating activities
Depreciation of furniture and equipment 71,622 903
Amortization of loan origination fees 65,361 --
Expense recognized from issuing common
stock below market value 6,000 --
Issuance of Common Stock to pay expenses 48,000 --
(Increase) in prepaid expenses (263,672) --
(Increase) in other assets (101,858) --
(Increase) in accounts/advances receivable (174,747) --
Increase in accounts payable 973,191 --
Decrease in other accrued liabilities (20,577) --
----------- -----------
Net cash used in operating activities (1,790,768) (78,488)
----------- -----------
Cash flows from investing activities
Purchase of furniture and equipment (1,370,816) (13,411)
----------- -----------
Net cash used in investing activities (1,370,816) (13,411)
=========== ===========
Cash flows from financing activities
Payments on note payable-related party (50,000) --
Issuance of notes payable 1,960,000 --
Payment of loan origination fees (234,000) --
Payments on Capital Leases (5,842) --
Proceeds from the issuance of preferred
stock, Series A 200,000 --
Proceeds from the issuance of preferred
stock, Series B 1,489,781 --
Payment of offering costs (57,226) --
Proceeds from the issuance of common stock 25,000 --
Capital Contribution -- 91,899
----------- -----------
Net cash provided by financing activities 3,327,713 91,899
----------- -----------
Net increase in cash 166,129 --
Cash, beginning of period 63 --
----------- -----------
Cash, end of period $ 166,192 $ --
=========== ===========
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SHOPPING.COM
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1: GENERAL
As contemplated by the Securities and Exchange Commission under Item 310(b) of
Regulation S-B, the accompanying financial statements and footnotes have been
condensed and therefore do not contain all disclosures required by generally
accepted accounting principles. The interim financial data are unaudited;
however, in the opinion of Shopping.com (the "Company" or "Shopping.com"), the
interim data include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the interim
periods. Results for interim periods are not necessarily indicative of those to
be expected for the full year.
NOTE 2: FURNITURE AND EQUIPMENT
Furniture and equipment consist of the following:
October 31, 1997
----------------
Computer Hardware $ 814,077
Computer Software 417,480
Furniture & equipment 195,555
Leasehold improvements 47,338
----------
$1,474,450
Less: Accumulated depreciation 72,898
----------
$1,401,552
==========
NOTE 3: ADVANCES - OFFICERS/STOCKHOLDERS
During the third quarter of 1997, an officer was advanced a total of $48,595
from the Company. In January 1998, the officer repaid the Company for the
advance.
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NOTE 4: STOCKHOLDERS EQUITY
Issuance of Common Stock
- ------------------------
In September 1997, En Pointe Technologies, Inc. ("En Pointe") granted the
Company a license to En Pointe's proprietary EPIC Software for five years in
exchange for 250,000 shares of the Company's Common Stock valued at $3.00 per
share. The Company has agreed to pay an annual maintenance and upgrade fee of
$100,000. The initial annual fee is to be paid concurrent with the funding of
the $600,000 subordinated notes.
In December 1997, the Company issued 1,300,000 shares of common stock raising
$10,289,000 of net proceeds to the Company in the Company's initial public
offering.
Issuance of Series B Preferred Stock
- ------------------------------------
In August 1997, the Company sold 8,333 shares of its Series B Preferred Stock in
a private placement at a price of $3.00 per share to Ms. Webster, the Company's
Chief Financial Officer and Secretary. In connection therewith, Ms. Webster was
issued five year warrants to purchase 4,166 shares of Common Stock with an
exercise price of $3.00 per share as well as registration rights providing for
one demand and unlimited piggyback registration rights.
Also in August 1997, 193,167 shares of Series B Preferred Stock were issued. In
connection therewith, five year warrants were issued to purchase 96,583 shares
(including those issued to Ms. Webster) of Common Stock with an exercise price
of $3.00 per share as well as registration rights providing for one demand and
unlimited piggyback registration rights.
The Series A and Series B Preferred Stock issued and outstanding prior to the
Company's initial public offering were converted into Common Stock in connection
with that offering.
NOTE 5: PROMISSORY NOTES
On September 15, 1997, En Pointe made an investment in the Company by purchasing
$600,000 of subordinated notes. In connection therewith, the Company issued
399,600 warrants to purchase the Company's Common Stock at $2.25 per share. As a
result of these warrants being issued with an exercise price less than the fair
market value of similar warrants, the Company will recognize additional
financing cost of $299,700 over the nine month term of this subordinated note
with the unamortized portion at the closing of the IPO being expensed
immediately.
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This Company has issued $1,750,000 of Promissory Notes, which have a due date of
nine months from the date of issuance or on the closing of the initial public
offering, whichever is earlier. The Promissory Notes are unsecured, subordinated
and carry an interest rate of 10% per annum.
In the private placement of the Promissory Notes, warrants to purchase 660 were
issued for each $1,000 principal of a Promissory Note, which warrants are
exercisable until May 31, 2002 at an exercise price of $3.00 per share of Common
Stock.
Following the Company's initial public offering, all of the Company's Promissory
Notes were paid in full.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the Company's financial
statements and the related notes thereto appearing elsewhere herein. The Company
is not providing any comparison of its results of operations because the Company
is in an early stage of development, and such comparisons would not be
meaningful.
FORWARD LOOKING STATEMENTS
The statements contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations include "forward looking"
information within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as amended,
and are subject to the safe harbor created by those sections. The actual future
results of the Company could differ materially from those projected in the
forward looking information. For a discussion of certain factors that could
cause actual results to differ materially from those projected by the forward
looking information, see "Factors That May Affect Future Performance" herein.
GENERAL
Shopping.com began operations in February 1996, was incorporated on November 22,
1996 and commenced selling on the Internet on July 11, 1997. The Company is an
innovative Internet-based electronic wholesaler/retailer ("wholetailer")
specializing in retail marketing a broad range of products and services at
wholesale prices to both consumer and trade customers. Utilizing proprietary
technology, the Company has designed a fully-scalable systems architecture for
the Internet shopping marketplace.
The Company has assembled an experienced management team to design, develop and
implement the Company's strategic business plan. This group combines the
experiences of:
o Executives with extensive background in both retail and
warehouse/discount store formats.
o Executives who have experience in computer and information systems
design and development.
o Directors with entrepreneurial skills who currently oversee and manage
their own existing companies.
The Company has only recently begun generating sales, thus making an evaluation
of the Company and its prospects difficult to calculate. The Company anticipates
that sales from the Company's Web site will constitute substantially all of the
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Company's sales. Over the next twelve months, the Company intends to increase
its revenues by pursuing an aggressive advertising and marketing campaign aimed
at attracting customers to shop on its Web Site and to co-brand with other
commercial partners which will help increase the Company's brand name
recognition as well as increase traffic on the Company's Web Site.
The Company may need to raise additional capital from public or private equity
or debt sources in order to sustain operations or achieve planned expansion.
There can be no assurance that such additional funds will be available or that,
if available, such additional funds will be on terms acceptable to the Company.
Since the Company anticipates that its operations will incur significant
operating losses for the foreseeable future, the Company believes that its
success will depend upon its ability to obtain sales on its Web site, which
cannot be assured. The Company's ability to generate sales is subject to
substantial uncertainty. The Company's prospects must be considered in light of
the risks, expenses and difficulties frequently encountered by companies in
their early stage of development, particularly companies in new and rapidly
evolving markets such as online commerce. Such risks for the Company include,
but are not limited to, an evolving and unpredictable business model and the
management of growth. To address these risks, the Company must, among other
things, obtain a customer base, implement and successfully execute its business
and marketing strategy, continue to develop and upgrade its technology and
transaction-processing systems, improve its Web site, provide superior customer
service and order fulfillment, respond to competitive developments, and attract,
retain and motivate qualified personnel. There can be no assurance that the
Company will be successful in addressing such risks, and the failure to do so
could have a material adverse effect on the Company's business, prospects,
financial condition and results of operations. Additionally, the Company's lack
of an operating history makes predictions of future operating results difficult
to ascertain. Accordingly, there can be no assurance that the Company will be
able to generate sales, or that the Company will be able to achieve or maintain
profitability. Since inception, the Company has incurred significant losses and,
as of October 31, 1997, had an accumulated deficit of approximately $2.6
million. Following the completion of its initial public offering, the Company
intends to substantially increase its operating expenses in order to, among
other things, fund increased advertising and marketing efforts, expand and
improve its Internet operations and user support capabilities, and develop new
Internet content and applications. The Company expects to continue to incur
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significant operating losses on a quarterly and annual basis for the foreseeable
future. To the extent such increases in operating expenses are not offset by
revenues, the Company will incur greater losses than anticipated.
The Company's quarterly operating results may fluctuate significantly as a
result of a variety of factors many of which are outside of the Company's
control. Factors that may adversely affect the Company's quarterly operating
results include: (i) the Company's ability to obtain and retain customers,
attract new customers at a steady rate, maintain customer satisfaction and to
establish consumer confidence in conducting transactions on the Internet
environment, (ii) the Company's ability to manage fulfillment operations
electronically and without warehouse facilities and establish competitive gross
margins, (iii) the announcement or introduction of new Web sites, services and
products by the Company and its competitors, (iv) price competition or higher
vendor prices, (v) the level of use and consumer acceptance of the Internet and
other online services for the purchase of consumer products such as those
offered by the Company, (vi) the Company's ability to upgrade and develop its
systems and infrastructure and attract new personnel in a timely and effective
manner, (vii) the level of traffic on the Company's Web site, (viii) technical
difficulties, systems downtime or Internet brownouts, (ix) the amount and timing
of operating costs and capital expenditures relating to expansion of the
Company's business, operations and infrastructure, (x) delays in revenue
recognition at the end of a fiscal period as a result of shipping or logistical
problems, (xi) the level of merchandise returns experienced by the Company,
(xii) governmental regulation, (xiii) economic conditions specific to the
Internet and online commerce, (xiv) the risk associated with the year 2000 in
connection with computer programs with which the Company may interact that read
only the last two digits of an annual date, (xv) the risk of credit card fraud
and other types of fraud and theft which may be perpetrated by computer hackers
and on-line thieves, and (xvi) general economic conditions. In seeking to
effectively implement its business plan, the Company may elect, from time to
time, to make certain marketing or acquisition decisions that could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. Due to all of the foregoing factors, it is
likely that in some future quarters, the Company's results of operations may be
below the expectations of securities analysts and shareholders. In such event,
the price of the Company's Common Stock could be materially adversely affected.
RESULTS OF OPERATIONS
Net Sales
Although the Company commenced operations in February 1996, it did not begin
selling products and services on its Web site until July 11, 1997 prior to which
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time it was still in the process of evaluating the technical features of its Web
site. For the nine months ending October 31, 1997, the Company generated
$376,822 of sales. The Company records sales at the time products are shipped to
customers which includes the retail sales price of the product and any shipping
and handling charges billed to its customers. The Company has not yet created a
reserve for sales returns and allowances but anticipates setting up a return and
allowance account. The sole source of funds for the Company from the date of
inception through October 31, 1997, other than the sale of equity and debt
securities, has been from sales of products in the amount of $376,822.
Cost of Sales
Cost of sales include the actual cost the Company pays its vendors for the
products and the actual shipping and handling charges incurred by the Company to
ship products to its customers. The cost of sales for the nine months ending
October 31, 1997 was $357,246, or approximately 94.8% of net sales. The
Company's gross profit margin was approximately 5.2% for the nine months ending
October 31, 1997. The failure to generate sales with sufficient margins to cover
its operating expenses will result in losses and could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations.
Advertising and Marketing Expenses
Advertising and marketing expenses consist primarily of public relations, media
advertising, travel and costs of marketing literature. Advertising and marketing
expenses incurred by the Company for the nine months ending October 31, 1997
were $274,107, or approximately 72.7% of net sales. The Company intends to
significantly increase its advertising and marketing expenses in future periods.
Product Development Expenses
Product development expenses consist primarily of expenses incurred by the
Company during the initial development and creation of its Web site. Product
development expenses include compensation and related expenses, depreciation and
amortization of computer hardware and software, and the cost of acquiring,
designing, developing and editing Web site content. Product development expenses
incurred by the Company for the nine months ending October 31, 1997 were
approximately $399,948 or approximately 106% of net sales. The Company believes
that significant investments in enhancing its Web site will be necessary to
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become and remain competitive. As a result, the Company may continue to incur,
or increase the level of, product development expenses.
General and Administrative Expenses
General and administrative expenses not otherwise attributable to product
development and advertising and marketing expenses consist primarily of
compensation, rent expense, fees for professional services and other general
corporate purposes. General and administrative expenses incurred by the Company
for the nine months ending October 31, 1997 were $1,696,260, or approximately
450% of net sales.
Interest Expense
Interest expense for the nine months ending October 31, 1997 was $43,349 or
11.50% of net sales and is primarily attributable to the Promissory Notes issued
by the Company from inception through October 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity were cash and cash equivalents
derived from private sales of the Company's equity and debt securities.
Capital expenditures from August 1, 1997 through October 31, 1997 were $648,395.
The Company has no material commitments for capital expenditures other than a
capital lease obligation for certain office equipment as of October 31, 1997,
the aggregate amount of which is $84,352. The Company does not anticipate a
substantial increase in its capital expenditures in 1998 consistent with its
anticipated growth.
The Company's ability to grow will depend in part on the Company's ability to
expand and improve its Internet user support capabilities and develop new Web
site content material. In connection therewith, the Company may need to raise
additional capital in the foreseeable future from public or private equity or
debt sources in order to finance such possible growth within the next fourteen
months. In addition, the Company believes that it may need to raise additional
funds in order to avail itself of unanticipated opportunities (such as more
rapid expansion, acquisitions of complementary businesses or the development of
new products or services), to react to unforeseen difficulties (such as the loss
of key personnel or the rejection by Internet users of the Company's Web site
content) or to otherwise respond to unanticipated competitive pressures. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of the Company's then existing shareholders will be
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reduced. Moreover, shareholders may experience additional and significant
dilution, and such equity securities may have rights, preferences or privileges
senior to those of the Company's Common Stock. There can be no assurance that
additional financing will be available on terms acceptable to the Company. The
Company may be unable to implement its business, sales or marketing plan,
respond to competitive forces or take advantage of perceived business
opportunities, which inability could have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
EMPLOYEES
As of July 31, 1997, the Company employed 34 full time and 10 part time
employees, including nine in Management Information Systems and Research and
Development, two in Marketing and five in Accounting and Administration. As of
October 31, 1997 the number of employees was 45 full time and 16 part time. The
number of employees has since grown to 61 full time and 16 part time employees.
The Company believes that its future success will depend in part on its ability
to attract, hire and maintain qualified personnel. However, the Company believes
there will not be a significant increase over the next twelve months.
Competition for such personnel in the on-line industry is intense. None of the
Company's employees is represented by a labor union, and the Company has never
experienced a work stoppage. The Company believes its relationship with its
employees to be good.
FACTORS THAT MAY AFFECT FUTURE PERFORMANCE
The Company's business, financial condition and results of operations may be
impacted by a number of factors including, without limitation, the factors
discussed below.
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT; ANTICIPATED LOSSES
The Company commenced operations in February 1996, was incorporated on November
22, 1996 and began selling products on its Web site on July 11, 1997.
Accordingly, the Company has a limited operating history on which to base an
evaluation of its business and prospects. The Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving markets such as online commerce. Such
risks for the Company include, but are not limited to, an evolving and
unpredictable business model and the management of growth. To address these
risks, the Company must, among other things, obtain a customer base, implement
and successfully execute its business and marketing strategy, continue to
develop and upgrade its technology and transaction-processing systems, improve
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its Web site, provide superior customer service and order fulfillment, respond
to competitive developments, and attract, retain and motivate qualified
personnel. There can be no assurance that the Company will be successful in
addressing such risks, and the failure to do so could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations.
Since inception, the Company has incurred significant losses, and as of October
31, 1997 had an accumulated deficit of approximately $2.6 million. The Company
believes that its success will depend in large part on its ability to (i) obtain
a brand name position, (ii) provide its customers with outstanding value and a
superior shopping experience through the extensive retail background of its
management team, (iii) achieve sufficient sales volume to realize economies of
scale, and (iv) successfully coordinate the fulfillment of customer orders
without the need to maintain expensive real estate warehousing facilities and
personnel. Accordingly, the Company intends to invest heavily in marketing and
promotion, site development and technology and operating infrastructure
development. The Company also intends to offer attractive pricing programs,
which will reduce its gross margins. Because the Company has relatively low
gross margins, achieving profitability depends upon the Company's ability to
generate and sustain substantially increased sales levels. As a result, the
Company believes that it will incur substantial operating losses for the
foreseeable future, and that the rate at which such losses will be incurred will
increase significantly from current levels.
The Company expects to use a portion of the net proceeds of its initial public
offering to fund its operating losses. If such net proceeds, together with cash
generated by operations, are insufficient to fund future operating losses, the
Company may be required to raise additional funds. There can be no assurance
that such financing will be available, if at all, in amounts or on terms
acceptable to the Company.
The Company incurred a net loss of $201,697 and had negative cash flows from
operations during the year ended January 31, 1997, and had a shareholders'
deficit of $78,647 as of January 31, 1997. As of October 31, 1997 the Company
had net losses totaling $2,595,785 and had negative cash flows from operations.
Management has raised capital during 1997 through private placement offerings of
equity and debt securities and has completed an initial public offering in the
latter part of 1997, which management expects will provide funding to continue
present operations and support future marketing and development activities.
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UNPREDICTABILITY OF FUTURE REVENUES; POTENTIAL FLUCTUATIONS IN QUARTERLY
OPERATING RESULTS; SEASONALITY
As a result of the Company's limited operating history and the emerging nature
of the markets in which it competes, the Company is unable to accurately
forecast its revenues. The Company's current and future expense levels are based
largely on its investment plans and estimates of future revenues. Sales and
operating results generally depend on the volume of, timing of, and ability to
fulfill orders received, which are difficult to forecast. The Company may be
unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall. Accordingly, any significant shortfall in revenues in
relation to the Company's planned expenditures could have an immediate adverse
effect on the Company's business, prospects, financial condition and results of
operations. Further, as a strategic response to changes in the competitive
environment, the Company may from time to time make certain pricing, service or
marketing decisions that could have a material adverse effect on its business,
prospects, financial condition and results of operations.
The Company expects to experience significant fluctuations in its future
quarterly operating results due to a variety of factors, many of which are
outside the Company's control. Factors that may adversely affect the Company's
quarterly operating results include: (i) the Company's ability to obtain and
retain customers, attract new customers at a steady rate, maintain customer
satisfaction and establish consumer confidence in conducting transactions on the
Internet environment, (ii) the Company's ability to manage fulfillment
operations electronically and without warehouse facilities and to establish
competitive gross margins, (iii) the announcement or introduction of new Web
sites, services and products by the Company and its competitors, (iv) price
competition or higher vendor prices, (v) the level of use and consumer
acceptance of the Internet and other online services for the purchase of
consumer products such as those offered by the Company, (vi) the Company's
ability to upgrade and develop its systems and infrastructure and attract new
personnel in a timely and effective manner, (vii) the level of traffic on the
Company's Web site, (viii) technical difficulties, systems downtime or Internet
brownouts, (ix) the amount and timing of operating costs and capital
expenditures relating to expansion of the Company's business, operations and
infrastructure, (x) delays in revenue recognition at the end of a fiscal period
as a result of shipping or logistical problems, (xi) the level of merchandise
returns experienced by the Company, (xii) governmental regulation, (xiii)
economic conditions specific to the Internet and online commerce, and (xiv)
general economic conditions.
The Company expects that it will experience seasonality in its business,
reflecting a combination of seasonal fluctuations in Internet usage and
traditional retail seasonality patterns. Internet usage and the rate of Internet
growth may be expected to decline during the summer. Further, sales in the
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traditional retail industry are significantly higher in the quarter of each year
ending January 31 than in the preceding three quarters.
Due to the foregoing factors, in one or more future quarters, the Company's
operating results may fall below the expectations of securities analysts and
investors. In such event, the trading price of the Common Stock would likely be
materially adversely affected.
RISK OF CAPACITY CONSTRAINTS; RELIANCE ON INTERNALLY DEVELOPED SYSTEMS; SYSTEM
DEVELOPMENT RISKS
A key element of the Company's strategy is to generate a high volume of traffic
on, and use of, its Web site. Accordingly, the satisfactory performance,
reliability and availability of the Company's Web site, transaction-processing
systems and network infrastructure are critical to the Company's reputation and
its ability to attract and retain customers, as well as maintain adequate
customer service levels. The Company's revenues depend on the number of visitors
who shop on its Web site and the volume of orders it fulfills. Any system
interruptions that result in the unavailability of the Company's Web site or
reduced order fulfillment performance would reduce the volume of goods sold and
the attractiveness of the Company's product and service offerings. The Company
may experience periodic system interruptions from time to time. Any substantial
increase in the volume of traffic on the Company's Web site or the number of
orders placed by customers will require the Company to expand and upgrade
further its technology, transaction-processing systems and network
infrastructure. There can be no assurance that the Company will be able to
accurately project the rate or timing of increases, if any, in the use of its
Web site or timely expand and upgrade its systems and infrastructure to
accommodate such increases.
The Company uses an internally developed system for its Web site, search engine
and substantially all aspects of transaction processing, including order
management, cash and credit card processing, purchasing, shipping, accounting
and financial systems. Any substantial disruptions or delays in any of its
systems would have a material adverse effect on the Company's business,
prospects, financial condition and results of operations.
RISK OF SYSTEM FAILURE; SINGLE SITE AND ORDER INTERFACE
The Company's success, in particular its ability to successfully receive and
fulfill orders and provide high-quality customer service, largely depends on the
efficient and uninterrupted operation of its computer and communications
hardware systems. Substantially all of the Company's computer and communications
hardware is located at a single leased facility in Corona del Mar, California.
-17-
<PAGE>
Although the Company has redundant and back-up systems onsite and a disaster
recovery plan, the Company's systems and operations may be vulnerable to damage
or interruption from fire, flood, power loss, telecommunications failure,
break-ins, earthquake and similar events. The Company does not carry business
interruption insurance sufficient to compensate fully for any or all losses from
any or all such occasions. Despite the implementation of network security
measures by the Company, including a proprietary firewall, its servers may be
vulnerable to computer viruses, physical or electronic break-ins and similar
disruptions, which could lead to interruptions, delays, loss of data or the
inability to accept and fulfill customer orders. The occurrence of any of the
foregoing risks could have a material adverse effect on the Company's business,
prospects, financial condition and results of operations.
MANAGEMENT OF POTENTIAL GROWTH; NEW MANAGEMENT TEAM; LIMITED SENIOR MANAGEMENT
RESOURCES
The Company has rapidly and significantly expanded its operations, and
anticipates that further significant expansion will be required to address
potential growth in its customer base and market opportunities. This expansion
has placed, and is expected to continue to place, a significant strain on the
Company's management, operations and financial resources. From January 31, 1997
to October 31, 1997, the Company expanded from 4 employees to 45 full time and
16 part time employees, respectively, and has since grown to 61 full time and 16
part time employees. The majority of the Company's senior management joined the
Company within the last several months, and some officers have no prior senior
management experience at public companies. The Company's new employees include a
number of key managerial, technical and operations personnel who have not yet
been fully integrated into the Company's operations. To manage the increase in
personnel and the expected growth of its operations, the Company will be
required to improve existing, and implement new, transaction-processing,
operational and financial systems, procedures and controls, and to train and
manage its already expanded employee base. Although the Company believes that
there will not be a significant increase in the number of employees over the
next twelve months, the Company may be required to increase its finance,
administrative and operations staff. Further, the Company's management will be
required to maintain and expand its relationships with various manufacturers,
distributors, freight companies, other Web sites, other Internet Service
Providers and other third parties necessary to the Company's operations. There
can be no assurance that the Company's current and planned personnel, systems,
procedures and controls will be adequate to support the Company's future
operations, that management will be able to hire, train, retain, motivate and
manage required personnel or that the Company's management will be able to
-18-
<PAGE>
successfully identify, manage and exploit existing and potential market
opportunities. If the Company is unable to manage growth effectively, its
business, prospects, financial condition and results and operations would be
materially adversely affected.
DEPENDENCE ON CONTINUED GROWTH OF ONLINE COMMERCE
The Company's future revenues and any future profits are substantially dependent
upon the widespread acceptance and use of the Internet and other online services
as an effective medium of commerce by consumers. Rapid growth in the use of and
interest in the Web, the Internet and other online services is a recent
phenomenon, and there can be no assurance that acceptance and use will continue
to develop or that a sufficiently broad base of consumers will adopt, and
continue to use, the Internet and other online services as a medium of commerce.
Demand and market acceptance for recently introduced services and products over
the Internet are subject to a high level of uncertainty and there exist few
proven services and products. The Company relies, and will continue to rely, on
consumers who have historically used traditional means of commerce to purchase
merchandise. For the Company to be successful, these consumers must accept and
utilize novel ways of conducting business and exchanging information.
In addition, the Internet and other online services may not be accepted as a
viable commercial marketplace for a number of reasons, including potentially
inadequate development of the necessary network infrastructure or delayed
development of enabling technologies and performance improvements. To the extent
that the Internet and other online services continue to experience significant
growth in the number of users, their frequency of use or an increase in their
bandwidth requirements, there can be no assurance that the infrastructure for
the Internet and other online services will be able to support the demands
placed upon them. In addition, the Internet or other online services could lose
their viability due to delays in the development or adoption of new standards
and protocols required to handle increased levels of Internet or other online
service activity, or due to increased governmental regulation. Changes in or
insufficient availability of telecommunications services to support the Internet
or other online services also could result in slower response times and
adversely affect usage of the Internet and other online services generally and
Shopping.com in particular. If use of the Internet and other online services
does not continue to grow or grows more slowly than expected, if the
infrastructure for the Internet and other online services does not effectively
support growth that may occur, or if the Internet and other online services do
not become a viable commercial marketplace, the Company's business, prospects,
financial condition and results of operations would be materially adversely
affected.
-19-
<PAGE>
RAPID TECHNOLOGICAL CHANGE
To remain competitive, the Company must continue to enhance and improve the
responsiveness, functionality and features of the Shopping.com online store. The
online commerce industry is characterized by rapid technological change, changes
in user and customer requirements and preferences, frequent new product and
service introductions embodying new technologies and the emergence of new
industry standards and practices that could render the Company's existing Web
site and proprietary technology and systems obsolete. The Company's future
success will depend, in part, on its ability to license leading technologies
useful in its business, enhance its existing services, develop new services and
technologies that address the increasingly sophisticated and varied needs of its
prospective customers, and respond to technological advances and emerging
industry standards and practices on a cost-effective and timely basis. The
development of a Web site and other proprietary technology entails significant
technical and business risks. There can be no assurance that the Company will
successfully use new technologies effectively or adapt its Web site, proprietary
technology and transaction-processing systems to customer requirements or
emerging industry standards. If the Company is unable, for technical, legal,
financial or other reasons, to adapt in a timely manner in response to changing
market conditions or customer requirements, its business, prospects, financial
condition and results of operations would be materially adversely affected.
The Company may be interacting with certain computer programs in connection with
credit card transactions and programs used by the Company's vendors and
suppliers. These programs may refer to annual dates only by the last two digits,
e.g., "97" for "1997." Problems are anticipated to arise for many of these
programs in the year 2000. While the Company has taken this problem into account
with respect to its own internal programs, other programs with which the Company
may interact may not have corrected this problem. Such problem could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operation.
DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL
The Company's performance is substantially dependent on the continued services
and on the performance of its senior management and other key personnel,
particularly Robert J. McNulty, its President and Chief Executive Officer, and
Mark S. Winkler, its Chief Information and Technology Officer. The Company's
performance also depends on the Company's ability to retain and motivate its
other officers and key employees. The loss of the services of any of its
executive officers or other key employees could have a material adverse effect
on the Company's business, prospects, financial condition and results of
operations. The Company has recently entered into written employment agreements
with Mr. McNulty for five years and with Mr. Winkler for a period ending May 20,
-20-
<PAGE>
1998. Additionally, a $1,000,000 "key person" life insurance policy on the life
of Mr. McNulty has been issued to the Company. The Company's future success
depends on its ability to identify, attract, hire, train, retain and motivate
other highly skilled technical, managerial, editorial, merchandising, marketing
and customer service personnel. Competition for such personnel is intense, and
there can be no assurance that the Company will be able to successfully attract,
assimilate and retain sufficiently qualified personnel. In particular, the
Company may encounter difficulties in attracting and retaining a sufficient
number of qualified software developers for its Web site and
transaction-processing systems, and there can be no assurance that the Company
will be able to retain and attract such developers. The failure to retain and
attract the necessary technical, managerial, editorial, merchandising, marketing
and customer service personnel could have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
ONLINE COMMERCE SECURITY RISKS
A significant barrier to online commerce and communications is the need for
secure transmission of confidential information over public networks. The
Company relies on encryption and authentication technology licensed from third
parties to provide the security and authentication necessary to effect secure
transmission of confidential information, such as customer credit card numbers.
There can be no assurance that advances in computer capabilities, new
discoveries in the field of cryptography, or other events or developments will
not result in a compromise or breach of the algorithms used by the Company to
protect customer transaction data. A party who is able to circumvent the
Company's security measures could misappropriate confidential information or
cause interruptions in the Company's operations. The Company may be required to
expend significant capital and other resources to protect against such security
breaches or to alleviate problems caused by such breaches. If any such
compromise of the Company's security were to occur, it could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations.
Concerns over the security of transactions conducted on the Internet and other
online services as well as user's desires for privacy may also inhibit the
growth of the Internet and other online services generally, and the Web in
particular, especially as a means of conducting commercial transactions. The
activities of the Company and third-party contractors involve the storage and
transmission of proprietary information, such as credit card numbers and other
confidential information. Any such security breaches could damage the Company's
reputation and expose the Company to a risk of loss, litigation and/or possible
liability. There can be no assurance that the Company's security measures will
prevent security breaches or that failure to prevent such security breaches will
not have a material adverse effect on the Company's business, prospects,
financial condition and results of operations.
-21-
<PAGE>
Merchants on the Internet are subject to the risk of credit card fraud and other
types of theft and fraud perpetrated by hackers and online thieves. Credit card
companies may hold merchants fully responsible for any fraudulent purchases made
when the signature cannot be verified. Although credit card companies and others
are in the process of developing anti-theft and anti-fraud protections, and
while the Company itself is continually monitoring this problem and developing
internal controls, at the present time the risk from such activities could have
a material adverse effect on the Company's business, prospects, financial
condition and results of operation.
COMPETITION
The online commerce industry, particularly on the Internet, is new, rapidly
evolving and intensely competitive, which the Company expects to intensify in
the future. Barriers to entry are minimal, allowing current and new competitors
to launch new Web sites at a relatively low cost. The Company currently or
potentially competes with a variety of other companies. These competitors
include: (i) various online vendors of other consumer and trade products and
services such as CUC International, Amazon.com., ONSALE, Peapod, NetGrocer,
iMALL, Internet Shopping Network, Micro Warehouse, CD Now, QVC and Home Shopping
Network, (ii) a number of indirect competitors that specialize in online
commerce or derive a substantial portion of their revenues from online commerce,
including America Online, Microsoft Network, Prodigy and Compuserve, (iii) mail
order catalogue operators such as Speigel, Lands End, and Sharper Image, (iv)
retail and warehouse/discount store operators such as Wal-Mart, Home Depot,
Target and Price/Costco, and (v) other international retail or catalogue
companies which may enter the online commerce industry. Both Wal-Mart and Home
Depot have announced their intention to devote substantial resources to online
commerce at discount prices, which if successful, could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations. However, the Company believes that retail and warehouse/discount
operators will be somewhat restricted in their ability to lower prices by the
need to protect their own pricing strategy to avoid cannibalizing their store
margins.
The Company believes that the principal competitive factors in its market are
price, speed of fulfillment, brand name recognition, wide selection,
personalized services, ease of use, 24-hour accessibility, customer service,
convenience, reliability, quality of search engine tools, and quality of
editorial and other site content. Many of the Company's current and potential
competitors have longer operating histories, larger customer bases, greater
brand name recognition and significantly greater financial, marketing and other
resources than the Company. In addition, online retailers may be acquired by,
receive investments from or enter into other commercial relationships with
larger, well-established and well-financed companies as use of the Internet and
other online services increases. Certain of the Company's competitors may be
-22-
<PAGE>
able to secure merchandise from vendors on more favorable terms, devote greater
resources to marketing and promotional campaigns, adopt more aggressive pricing
or inventory availability policies and devote substantially more resources to
Web site and systems development than the Company. Increased competition may
result in reduced operating margins, loss of market share and a diminished
franchise value. There can be no assurance that the Company will be able to
compete successfully against current and future competitors, and competitive
pressures faced by the Company may have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
Further, as a strategic response to changes in the competitive environment, the
Company may, from time to time, make certain pricing, service or marketing
decisions or acquisitions that could have a material adverse effect on its
business, prospects, financial condition and results of operations. New
technologies and the expansion of existing technologies may increase the
competitive pressures on the Company. In addition, companies that control access
to transactions through network access or Web browsers could promote the
Company's competitors or charge the Company a substantial fee for inclusion.
RELIANCE ON CERTAIN SUPPLIERS AND SHIPPERS
Unlike retail and warehouse/discount store operators and certain online commerce
providers, the Company, as a wholetailer, carries no inventory, has no warehouse
employees or facilities, and relies on rapid fulfillment from its vendors. The
Company has no long-term contracts or arrangements with any of its vendors or
shippers that guarantee the availability of merchandise, the continuation of
particular payment terms, the extension of credit limits or shipping schedules.
There can be no assurance that the Company's current vendors will continue to
sell merchandise to, or that shippers will be able to provide delivery service
for, the Company on current terms or that the Company will be able to establish
new, or extend current, vendor and shipper relationships to insure acquisition
and delivery of merchandise in a timely and efficient manner and on acceptable
commercial terms. If the Company were unable to develop and maintain
relationships with vendors and shippers that would allow it to obtain sufficient
quantities of merchandise on acceptable commercial terms, or in the event of
labor disputes or natural catastrophes, its business, prospects, financial
condition and results of operations would be materially adversely affected.
AVAILABILITY OF MERCHANDISE; VENDOR CREDIT FOR THE COMPANY
Although the Company's merchandising division maintains past relationships with
vendors which it believes will offer competitive sources of supply, and believes
that other sources are available for most merchandise it will sell or may sell
in the future, there can be no assurance that Shopping.com will be able to
obtain the quantity or brand quality of items that management believes are
optimum. The unavailability of certain product lines could adversely impact the
-23-
<PAGE>
Company's operating results. Given its lack of operating history, certain
vendors of products sold by the Company may not be prepared to advance normal
levels of credit to the Company. An unwillingness to extend credit may increase
the amounts of capital required to finance the Company's operations and reduce
returns, if any, on invested capital.
RISKS ASSOCIATED WITH ENTRY INTO NEW BUSINESS AREAS
The Company may choose to expand its operations by developing new Web sites,
promoting new or complementary products or sales formats, expanding the breadth
and depth of products and services offered or expanding its market presence
through relationships with third parties. Although it has no present
understandings, commitments or agreements with respect to any material
acquisitions or investments, the Company may pursue the acquisition of new or
complementary businesses, products or technologies. There can be no assurance
that the Company would be able to expand its efforts and operations in a
cost-effective or timely manner or that any such efforts would increase overall
market acceptance. Furthermore, any new business or Web site launched by the
Company that is not favorably received by consumer or trade customers could
damage the Company's reputation or the Shopping.com brand name. Expansion of the
Company's operations in this manner would also require significant additional
expenses and development, operations and editorial resources and would strain
the Company's management, financial and operational resources. The lack of
market acceptance of such efforts or the Company's inability to generate
satisfactory revenues from such expanded services or products could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations.
LIMITED PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company regards its Shopping.com brand name and related technology as
proprietary and relies primarily on a combination of copyright, trademark, trade
secret and confidential information laws as well as employee and third-party
non-disclosure agreements and other methods to protect its proprietary rights.
There can be no assurance that these protections will be adequate to protect
against technologies that are substantially equivalent or superior to the
Company's technologies. The Company does not currently hold any patents or have
any patent applications pending for itself or its products and has not obtained
Federal registration for any of its trademarks. The Company enters into
non-disclosure and invention assignment agreements with certain of its employees
and also enters into non-disclosure agreements with certain of its consultants
and subcontractors. However, there can be no assurance that such measures will
protect the Company's proprietary technology, or that its competitors will not
develop software with features based upon, or otherwise similar to, the
-24-
<PAGE>
Company's software or that the Company will be able to prevent competitors from
developing similar software.
The Company believes that its products, trademarks and other proprietary rights
do not infringe on the proprietary rights of third parties. The Company has been
displaying its Web site on the Internet without receiving claims from third
parties that its products or names infringe on any proprietary rights of other
parties. However, the Company is a recent entrant in the sale of merchandise on
the Internet, and there can be no assurance that third parties will not assert
infringement claims against the Company in the future with respect to current or
future products, trademarks or other Company works. Such assertion may require
the Company to enter into royalty arrangements or result in costly litigation.
The Company is also dependent upon obtaining additional technology related to
its operations. To the extent new technological developments are unavailable to
the Company on terms acceptable to it, or at all, the Company may be unable to
continue to implement its business and any such inability would have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations.
GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES
The Company is not currently subject to direct regulation by any domestic or
foreign governmental agency, other than regulations applicable to businesses
generally, and laws or regulations directly applicable to access to online
commerce. However, due to the increasing popularity and use of the Internet and
other online services, it is possible that a number of laws and regulations may
be adopted with respect to the Internet or other online services covering issues
such as user privacy, pricing, content, copyrights, distribution and
characteristics and quality of products and services. Furthermore, the growth
and development of the market for online commerce may prompt calls for more
stringent consumer protection laws that may impose additional burdens on those
companies conducting business online. The adoption of any additional laws or
regulations may decrease the growth of the Internet or other online services,
which could, in turn, decrease the demand for the Company's products and
services and increase the Company's cost of doing business, or otherwise have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. Moreover, the applicability to the Internet
and other online services of existing laws in various jurisdictions governing
issues such as property ownership, sales and other taxes, libel and personal
privacy is uncertain and may take years to resolve. Any such new legislation or
regulation, the application of laws and regulations from jurisdictions whose
laws do not currently apply to the Company's business, or the application of
existing laws and regulations to the Internet and other online services could
have a material adverse effect on the Company's business, prospects, financial
condition and results of operations.
-25-
<PAGE>
Permits or licenses may be required from federal, state or local government
authorities to operate or to sell certain products on the Internet. No
assurances can be made that such permits or licenses will be obtainable. The
Company may be required to comply with future national and/or international
legislation and statutes regarding conducting commerce on the Internet in all or
specific countries throughout the world. No assurances can be made that the
Company will be able to comply with such legislation or statutes.
SALES AND OTHER TAXES
The Company does not currently collect sales or other similar taxes with respect
to shipments of goods to consumers into states other than California. However,
one or more states may seek to impose sales tax collection obligations on
out-of-state companies such as the Company which engage in online commerce. In
addition, any new operation in states outside California could subject shipments
into such states to state sales taxes under current or future laws. A successful
assertion by one or more states or any foreign country that the Company should
collect sales or other taxes on the sale of merchandise could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations.
POSSIBLE NEED FOR ADDITIONAL CAPITAL
The Company may be required to seek additional financing in order to sustain
operations or achieve planned expansion. There can be no assurance that such
additional funds will be available or that, if available, such additional funds
will be on terms acceptable to the Company.
-26-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
In July 1997, a former consultant filed a lawsuit seeking damages for
termination of an alleged contractual relationship. The complaint against the
Company and a senior manager alleges breach of consulting agreement, breach of
employment agreement, breach of implied covenant of good faith and fair dealing,
violation of the California Labor Code and prays for economic damages in the
amount of $592,500. The Company intends to cause certain claims for damages to
be stricken and to vigorously defend against the remaining claims.
The Company commenced an action in the Superior Court for Orange County,
California on July 1997 against C-Systems, Inc., a software consulting firm for
breach of contract, fraud and damages. The Company's complaint seeks economic
damages in excess of $1.0 million as well as punitive damages against C-Systems,
Inc. Thereafter, in August 1997, C-Systems, Inc. filed a lawsuit against the
Company in federal court in Massachusetts for breach of contract, copyright
infringement and fraud. The complaint seeks injunctive relief and damages in an
amount to be determined at trial. The amount in dispute on the contract claim is
alleged to be approximately $74,500. The Company's attorneys have filed a motion
to dismiss or transfer the Massachusetts case to California.
In October 1997 Platinum Software Corporation, a computer software company,
filed suit against the Company alleging breach of contract to provide a software
accounting package. The Company rejected the package for breach of warranty and
breach of contract. The complaint prays for damages in the amount of
$103,670.38. The parties have agreed to settle this action.
The Company and the Company's senior management may in the future be involved in
other suits and actions incidental to the Company's business. The Company does
not believe that the resolution of the current suits will result in any material
adverse effect on the financial condition, results of operations or cash flows
of the Company.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
-27-
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
27.1 Financial Data Schedule 1/
(b) Reports on Form 8-K
None.
- --------
1/ This exhibit is being filed electronically in the electronic format
specified by EDGAR.
-28-
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Shopping.com
Date: January 9, 1998 By /s/ Kristine E. Webster
-----------------------------------
Kristine E. Webster
Sr. Vice President, Chief Financial
Officer and Treasurer
-29-
<PAGE>
EXHIBIT INDEX
Exhibit Sequentially
Number Description Numbered Page
- --------------------------------------------------------------------------------
27.1 Financial Data Schedule 1/ 31
- --------
1/ This exhibit is being filed electronically in the electronic format
specified by EDGAR.
-30-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> OCT-31-1997
<CASH> 166,192
<SECURITIES> 0
<RECEIVABLES> 174,747
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 604,611
<PP&E> 1,474,450
<DEPRECIATION> 72,898
<TOTAL-ASSETS> 3,087,842
<CURRENT-LIABILITIES> 2,990,596
<BONDS> 0
0
0
<COMMON> 829,050
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,087,842
<SALES> 376,822
<TOTAL-REVENUES> 376,822
<CGS> 357,246
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,370,325
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,349
<INCOME-PRETAX> (2,394,088)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,394,088)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,394,088)
<EPS-PRIMARY> (0.35)
<EPS-DILUTED> (0.35)
</TABLE>
