SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): June 7, 1999
CYBERSHOP.COM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-23901 13-3979226
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer)
incorporation or organization) Identification No.)
116 Newark Avenue, Jersey City, New Jersey, 07302
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (201) 234-5000
<PAGE>
The undersigned registrant hereby reports the following items related to
the Registrant's acquisition of The Magellan Group, Inc. in a transaction
accounted for as a purchase. The Registrant filed on June 17, 1999 a Current
Report on Form 8-K, which disclosed that the acquisition had been completed. The
Registrant indicated in that report its intention to submit the financial
statements and pro forma financial information prescribed by Rule 3-05 of
Regulation S-X and Article 11 of Regulation S-X, respectively, as a subsequent
amendment to that report, in accordance with Subsection (a)(4) of Item 7 of the
General Instructions for the Current Report on Form 8-K. This Amendment to that
Current Report is being filed to provide that financial information.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
Page
Number
------
Report of Messina, Ceci, Archer & Company, P.C., Independent Auditors F-1
The Magellan Group, Inc. Balance Sheets as of December 26, 1998,
December 27, 1997, and March 27, 1999 (Unaudited) F-2
The Magellan Group, Inc. Statements of Operations for the Years Ended
December 26, 1998, and December 27, 1997 and for the Three Month
Periods ended March 27, 1999 (Unaudited) and March 28, 1998 (Unaudited) F-3
The Magellan Group, Inc. Statements of Cash Flows for the Years Ended
December 26, 1998 and December 27, 1997 and for the Three Month
Periods ended March 27, 1999 (Unaudited) and March 28, 1998 (Unaudited) F-4
Notes to Financial Statements F-5
(b) Pro Forma Financial Information
Unaudited Pro Forma Combined Balance Sheet as of March 31, 1999 F-9
Unaudited Pro Forma Combined Statements of Operations for the Year
Ended December 31, 1998 and for the Three Month Period Ended
March 31, 1999 F-10
Notes to Pro Forma Balance Sheet and Statements of Operations F-12
(a) Exhibits
None.
1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cybershop.com, Inc.
August 13, 1999 By: /s/ Jeffrey Tauber
Jeffrey Tauber
President, Chief Executive Officer and
Chairman of the Board of Directors
2
<PAGE>
Report of Messina, Ceci, Archer & Company PC
To the Board of Directors
The Magellan Group, Inc.
Rowayton, Connecticut
We have audited the accompanying balance sheets of The Magellan Group, Inc. as
of December 26, 1998 and December 27, 1997 and the related statements of
operations and accumulated deficit, and cash flows for the years then ended.
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 The Magellan Group, Inc. as of
December 26, 1998 and December 27, 1997 and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Messina, Ceci, Archer & Company PC
June 23, 1999
Stamford, Connecticut
F-1
<PAGE>
The Magellan Group, Inc.
Balance Sheets
- --------------------------------------------------------------------------------
December 26, December 27, March 27,
1998 1997 1999
----------- ----------- -----------
(Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 53,000 $ 143,000 $ 142,000
Accounts receivable 15,000 89,000 333,000
Inventories 170,000 179,000 199,000
Prepaid expenses 62,000 152,000 62,000
Other 21,000 21,000 --
----------- ----------- -----------
321,000 584,000 736,000
----------- ----------- -----------
Property and Equipment
Office equipment 38,000 38,000 38,000
Accumulated depreciation (31,000) (25,000) (32,000)
----------- ----------- -----------
7,000 13,000 6,000
----------- ----------- -----------
Other assets
Due from officers 88,000 23,000 --
Security deposits 6,000 6,000 10,000
----------- ----------- -----------
94,000 29,000 10,000
----------- ----------- -----------
$ 422,000 $ 626,000 $ 752,000
=========== =========== ===========
Liabilities and Stockholders'
Deficit
Current Liabilities
Accounts payable $ 1,049,000 $ 1,150,000 $ 890,000
Accrued expenses 41,000 70,000 238,000
----------- ----------- -----------
1,090,000 1,220,000 1,128,000
----------- ----------- -----------
Due to officers -- -- 87,000
----------- ----------- -----------
1,090,000 1,220,000 1,215,000
----------- ----------- -----------
Stockholders' Deficit
Common Stock, $.01 par value,
200 shares authorized,
issued and outstanding -- -- --
Additional paid-in capital 12,000 12,000 12,000
Accumulated deficit (680,000) (606,000) (475,000)
----------- ----------- -----------
(668,000) (594,000) (463,000)
----------- ----------- -----------
$ 422,000 $ 626,000 $ 752,000
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
F-2
<PAGE>
The Magellan Group, Inc.
Statements of Operations and Accumulated Deficit
- --------------------------------------------------------------------------------
Years Ended Three Months Ended
December 26, December, 27 March 27, March 28,
1998 1997 1999 1998
----------- ----------- ----------- -----------
(unaudited)
Revenue
Sales $ 5,050,000 $ 5,355,000 $ 1,586,000 $ 1,287,000
Cost of Sales 2,183,000 2,449,000 720,000 605,000
----------- ----------- ----------- -----------
Gross Profit 2,867,000 2,906,000 866,000 682,000
----------- ----------- ----------- -----------
Operating expenses 2,941,000 2,992,000 661,000 767,000
----------- ----------- ----------- -----------
Net Income (Loss) (74,000) (86,000) 205,000 (85,000)
Accumulated Deficit,
beginning (606,000) (520,000) (680,000) (606,000)
----------- ----------- ----------- -----------
Accumulated Deficit,
ending $ (680,000) $ (606,000) $ (475,000) $ (691,000)
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
F-3
<PAGE>
The Magellan Group, Inc.
Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended Three Months Ended
December 26, December, 27 March 27, March 28,
1998 1997 1999 1998
------------ ------------ --------- ---------
(unaudited)
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net income (loss) $ (74,000) $ (86,000) $ 205,000 $ (85,000)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and amortization 6,000 3,000 1,000 1,000
Changes in assets and liabilities:
Accounts receivable 74,000 (69,000) (318,000) (17,000)
Prepaid expenses 90,000 (39,000) -- (1,000)
Other assets -- (21,000) 17,000 --
Security deposits -- 4,000 -- --
Inventories 9,000 (41,000) (29,000) 70,000
Accounts payable (101,000) 283,000 (159,000) (32,000)
Accrued expenses (29,000) 64,000 197,000 (11,000)
--------- --------- --------- ---------
Net Cash Provided by (Used in)
Operating Activities (25,000) 98,000 (86,000) (75,000)
--------- --------- --------- ---------
Cash Flows from Financing Activities
Proceeds from issuance of
common stock -- 1,000 -- --
Due from officers' (65,000) (54,000) 175,000 (18,000)
--------- --------- --------- ---------
Net Cash Provided by (Used in)
Financing Activities (65,000) (53,000) 175,000 (18,000)
--------- --------- --------- ---------
Net Increase (Decrease) in
Cash and Cash Equivalents (90,000) 45,000 89,000 (93,000)
Cash and Cash Equivalents, beginning 143,000 98,000 53,000 143,000
--------- --------- --------- ---------
Cash and Cash Equivalents, ending $ 53,000 $ 143,000 $ 142,000 $ 50,000
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
F-4
<PAGE>
The Magellan Group, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Company and Business Activity
The Company was incorporated in March 1993 in the State of Connecticut and is
engaged in the marketing of high quality products, direct to consumers, in
magazine advertisements and over the internet.
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 assets and 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.
Fiscal Year
The Company's fiscal year ends on the last Saturday in December, which results
in a 52 or 53 week year. The fiscal years ending December 26, 1998 and December
27, 1997, each consisted of 52 weeks.
Interim Financial Statements
The accompanying unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 27, 1999 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1999.
Revenue Recognition
The Company recognizes revenue on product sales when the goods are shipped to
the customer. Outbound shipping and handling charges are included in sales. The
Company records the estimated gross profit which will be lost due to the current
period's shipments being returned in future periods as a reduction of revenues
and cost of sales in the period of shipment.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is charged to
operations over the estimated service lives of the related assets using the
straight-line method. Assets acquired under capital leases and leasehold
improvements are amortized over the life of the lease or the estimated life of
the asset, whichever is less. Depreciation expense for the fiscal year ended
1998 and 1997 was $6,000 and $3,000, respectively.
Income Taxes
The Company, with the consent of its shareholders, has elected under the
Internal Revenue Code to be a subchapter S Corporation. In lieu of federal
corporation income taxes, the shareholders of an S Corporation are taxed on
their proportionate share of the Company's taxable income. Therefore, no
provision or liability for federal taxes has been included in the financial
statements. The Company is subject to state income taxes, which has historically
been insignificant.
F-5
<PAGE>
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the differences between the financial statement
and tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Concentration of Credit Risk
Customers are located throughout North America. Accordingly, management believes
that credit risk related to geographic concentrations is not significant.
Inventory
Inventories are stated at the lower of cost, as determined on a first-in,
first-out (FIFO) basis, or market.
Advertising
The Company expenses the production costs of advertising the first time the
advertising takes place. Direct-response advertising is capitalized and
amortized over its expected period of future benefits.
Direct response advertising consists primarily of magazine advertisements. Each
advertisement carries a unique code which identifies the date and publication.
The capitalized costs of the advertising are amortized over the expected benefit
period following the publication of the magazine in which it appears.
Advertising costs capitalized at December 26, 1998 and December 27, 1997 were
$62,000 and $152,000, respectively. Advertising expense was $1,321,000 in 1998
and $1,014,000 in 1997.
NOTE B - INCOME TAXES
The significant components of the deferred tax (benefit) in 1998 are as follows:
Tax benefit of net operating loss carryforward $(1,428) $(15,470)
Valuation allowance 1,428 15,470
------- --------
$ -- $ --
======= ========
The components of the deferred tax asset as of December 26, 1998 is as follows:
Tax benefit of net operating loss carryforward $(16,898) $(15,470)
Valuation allowance 16,898 15,470
-------- --------
$ -- $ --
======== ========
Due to the uncertain realization of the deferred tax asset, the Company has
provided a full valuation allowance. State net operating loss carryforwards of
approximately $360,000 expire through the year 2000.
F-6
<PAGE>
NOTE C - EMPLOYEE 401(k) PLAN
The Company maintains an Employee 401(k) Savings Plan. The plan is a defined
contribution plan administered by the Company covering all eligible employees.
The plan provides for growth in savings through contributions and income from
investments. It is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA), as amended. Plan participants are allowed to
contribute a specified percentage of their base salary.
NOTE D - DUE FROM OFFICER
At December 26, 1998 and December 27, 1997, the Company had a receivable from
its officers in the amount of $88,000 and $23,000, respectively. The receivable
is unsecured with no specific repayment terms.
NOTE E - COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases office space and equipment under various operating leases
expiring though February 2001.
Future minimum lease payments related to the above leases are as follows:
1999 $ 41,000
2000 6,000
2001 2,000
--------
$ 49,000
========
Rent expense under these leases for the fiscal years ended 1998 and 1997 were
$47,000 and $46,000, respectively.
Contingencies
The Company is involved in a legal action arising in the ordinary course of
business. Management is of the opinion that the ultimate outcome of this matter
will not have a material adverse impact on the financial position of the
Company.
F-7
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET AND STATEMENTS OF OPERATIONS
The unaudited pro forma combined balance sheet gives effect to the acquisition
of The Magellan Group, Inc. ("Magellan"), completed by the Company on June 1,
1999, as if it had occurred on March 31, 1999.
The unaudited pro forma combined statement of operations for the year ended
December 31, 1998 gives effect to the acquisition of Magellan as if it had
occurred on January 1, 1998. The unaudited pro forma combined statement of
operations for the three months ended March 31, 1999 gives effect to the
acquisition of Magellan as if it had occurred on January 1, 1998.
The unaudited pro forma combined balance sheet and statements of operations are
based on available information and on certain assumptions and adjustments
described in the accompanying notes which Cybershop believes are reasonable. The
unaudited pro forma combined statements of operations are provided for
informational purposes only and do not purport to present the results of
operations of Cybershop had the transaction assumed therein occurred on or as of
the date indicated, nor is it necessarily indicative of the results of
operations which may be achieved in the future. The unaudited pro forma combined
balance sheet, statements of operations and related notes should be read in
conjunction with the consolidated financial statements of Cybershop filed on its
Form 10-K and the financial statements of Magellan including the notes thereto.
F-8
<PAGE>
Cybershop.com, Inc.
Unaudited Proforma Combined Balance Sheet
As of March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historical Historical Pro Form Pro Forma
Cybershop Magellan Adjustments Combined
------------ ------------ ------------ ------------
(a) (b) (c)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 10,674,000 $ 142,000 $ (5,000,000) (d) 5,816,000
Accounts receivable, net 99,000 333,000 432,000
Inventories 655,000 199,000 854,000
Prepaid expenses and other 536,000 62,000 598,000
------------ ------------ ------------ ------------
Total current assets 11,964,000 736,000 (5,000,000) 7,700,000
Property and equipment, net 1,934,000 6,000 1,940,000
Goodwill, net -- -- 13,682,000 (f) 13,682,000
Other assets 97,000 10,000 107,000
------------ ------------ ------------ ------------
Total assets $ 13,995,000 $ 752,000 $ 8,682,000 $ 23,429,000
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,305,000 $ 890,000 $ -- $ 4,195,000
Accrued liabilities 1,285,000 238,000 94,000 1,617,000
Deferred revenues 56,000 -- 56,000
------------ ------------ ------------ ------------
Total current liabilities 4,646,000 1,128,000 94,000 5,868,000
Due to Officers -- 87,000 87,000
Deferred Rent 78,000 -- 78,000
------------ ------------ ------------ ------------
Total liabilities 4,724,000 1,215,000 94,000 6,033,000
------------ ------------ ------------ ------------
Stockholders' equity:
Common stock 8,000 1,000 (e) 9,000
Additional paid-in capital 18,437,000 12,000 8,112,000 (e) 26,561,000
Accumulated deficit (9,174,000) (475,000) 475,000 (e) (9,174,000)
------------ ------------ ------------ ------------
Total stockholders' equity 9,271,000 (463,000) 8,588,000 17,396,000
------------ ------------ ------------ ------------
Total liabilities and
stockholders' equity $ 13,995,000 $ 752,000 $ 8,682,000 $ 23,429,000
============ ============ ============ ============
</TABLE>
F-9
<PAGE>
Cybershop.com, Inc.
Unaudited Proforma Combined Statement of Operations
Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historical Historical Acquisition Pro Forma
Cybershop Magellan Adjustments Combined
------------ ------------ ------------ ------------
(g) (h) (c)
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 4,923,000 $ 5,050,000 $ -- $ 9,973,000
Advertising & set up fees 131,000 -- 131,000
------------ ------------ ------------ ------------
Total revenues 5,054,000 5,050,000 10,104,000
Cost of revenues 3,811,000 2,183,000 5,994,000
------------ ------------ ------------ ------------
Gross profit 1,243,000 2,867,000 4,110,000
Operating expenses 10,213,000 2,941,000 2,736,000 (i) 15,890,000
------------ ------------ ------------ ------------
Loss from operations (8,970,000) (74,000) (2,736,000) (11,780,000)
Interest income, net 619,000 -- 619,000
Minority interest 385,000 -- 385,000
------------ ------------ ------------ ------------
Net loss $ (7,966,000) $ (74,000) $ (2,736,000) $(10,776,000)
============ ============ ============ ============
Net loss per share, basic
and diluted $ (1.19) (j) $ (1.40)
Weighted average common
shares outstanding,
basic and diluted 6,677,000 1,000,000 (j) 7,677,000
</TABLE>
F-10
<PAGE>
Cybershop.com, Inc.
Unaudited Proforma Combined Statement of Operations
Three Months Ended March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Cybershop Magellan Adjustments Combined
----------- ----------- ----------- -----------
(k) (l) (c)
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 1,052,000 $ 1,586,000 $ -- $ 2,638,000
Advertising & set up fees 23,000 23,000
----------- ----------- ----------- -----------
Total revenues 1,075,000 1,586,000 2,661,000
Cost of revenues 920,000 720,000 1,640,000
----------- ----------- ----------- -----------
Gross profit 155,000 866,000 1,021,000
Operating expenses 2,247,000 661,000 684,000 (m) 3,592,000
----------- ----------- ----------- -----------
Loss from operations (2,092,000) 205,000 (684,000) (2,571,000)
Interest income, net 122,000 -- 122,000
Minority interest 132,000 -- 132,000
----------- ----------- ----------- -----------
Net income (loss) $(1,838,000) $ 205,000 $ (684,000) $(2,317,000)
=========== =========== =========== ===========
Net loss per share, basic
and diluted $ (0.25) (j) $ (0.27)
Weighted average common
shares outstanding,
basic and diluted 7,493,000 1,000,000 (j) 8,493,000
</TABLE>
F-11
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) Historical Consolidated balance sheet of Cybershop.com, Inc. as of March
31, 1999.
(b) Balance sheet of The Magellan Group, Inc. as of March 31, 1999.
(c) Represents adjustments for the Magellan acquisition based upon a purchase
price of $5,000,000 in cash and an aggregate of 1,000,000 shares of
Cybershop's common stock valued at a price of $8.125 per share which
represents the closing market price of Cybershop's common stock on May 31,
1999. The purchase price has been allocated to the assets and liabilities
acquired based on the estimated fair values of the assets acquired and
liabilities assumed. The former shareholders of Magellan are also entitled
to future earnout payments based upon the profitability of a certain
product.
(d) Represents $5,000,000 in cash paid to the shareholders of Magellan.
(e) Represents the elimination of Magellan's stockholders' equity accounts,
and the issuance of 1,000,000 shares of the Company's common stock valued
at a price of $8.125 per share.
(f) Represents the portion of the purchase price allocated to goodwill which
will be amortized over five years.
(g) Historical Consolidated Statement of Operations for Cybershop for the year
ended December 31, 1998.
(h) Historical Statement of Operations for Magellan for the year ended
December 31, 1998.
(i) Represents a full years amortization of goodwill of $2,736,000.
(j) For the pro forma combined net loss per share, basic and diluted, and the
weighted average share outstanding calculation, 1,000,000 shares of common
stock have been included as if the acquisition had occurred on January 1,
1998.
(k) Historical Consolidated Statement of Operations for Cybershop for the
three months ended March 31, 1999.
(l) Historical Statement of Operations for Magellan for the three months ended
March 31, 1999.
(m) Represents six months amortization of goodwill of $684,000.
F-12
