<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
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 000-24643
DIGITAL RIVER, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 41-1901640
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9625 WEST 76TH STREET, SUITE 150
EDEN PRAIRIE, MINNESOTA 55344
(Address of principal executive offices)
--------------------
(952) 253-1234
(Registrant's telephone number, including area code)
--------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No/ /
Common Stock, $0.01 par value 21,839,593 shares
----------------------------- ----------------------------------
(Class) Outstanding as of May 5, 2000
================================================================================
<PAGE>
DIGITAL RIVER, INC.
Form 10-Q
Index
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
at March 31, 2000 and December 31, 1999.................................................... 3
Condensed Consolidated Statements of Operations
for the three months ended March 31, 2000 and 1999......................................... 4
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2000 and 1999......................................... 5
Notes to Condensed Consolidated Financial Statements....................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.............................................................................. 8
Item 3. Qualitative and Quantitative Disclosure about Market Risk.................................. 12
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.................................................. 13
Item 6. Exhibits and Reports on Form 8-K........................................................... 13
SIGNATURES............................................................................................ 14
Exhibit Index......................................................................................... 15
</TABLE>
2.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DIGITAL RIVER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------------- --------------
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 22,384 $ 15,120
Short-term investments 7,952 24,387
Accounts receivable, net 1,829 2,455
Prepaid expenses and other 927 880
--------- ---------
Total current assets 33,092 42,842
PROPERTY AND EQUIPMENT, NET 10,625 7,279
LONG-TERM INVESTMENTS 19,995 14,832
GOODWILL, NET AND OTHER ASSETS 19,882 22,189
--------- ---------
$ 83,594 $ 87,142
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 11,951 $ 11,020
Accrued payroll 1,869 1,909
Other current liabilities 1,944 1,136
--------- ---------
Total current liabilities 15,764 14,065
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding - -
Common Stock, $.01 par value; 45,000,000 shares authorized;
21,030,433 and 20,699,244 shares issued and outstanding 210 207
Additional paid-in capital 125,874 119,445
Deferred compensation (487) (637)
Accumulated deficit (57,767) (45,938)
--------- ---------
Total stockholders' equity 67,830 73,077
--------- ---------
$ 83,594 $ 87,142
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3.
<PAGE>
DIGITAL RIVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data; Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
SALES $ 32,807 $11,707
COST OF SALES 26,143 9,804
-------------- --------------
Gross profit 6,664 1,903
-------------- --------------
OPERATING EXPENSES:
Sales and marketing 6,619 3,622
Product development and operations 6,041 3,564
General and administrative 1,286 955
Amortization of goodwill and acquisition related costs 5,394 -
-------------- --------------
Total operating expenses 19,340 8,141
-------------- --------------
LOSS FROM OPERATIONS (12,676) (6,238)
INTEREST INCOME 685 894
-------------- --------------
Net loss $(11,991) $(5,344)
============== ==============
Basic and diluted net loss per share $ (.58) $ (.27)
============== ==============
Basic and diluted weighted average common shares outstanding
20,775 19,632
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4.
<PAGE>
DIGITAL RIVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands; Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
2000 1999
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(11,991) $ (5,344)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of goodwill and acquisition related costs 5,394 -
Depreciation and amortization 703 344
Deferred compensation expense 150 284
Changes in assets and liabilities:
Accounts receivable and prepaid expense 579 798
Accounts payable 931 955
Other current liabilities 761 (642)
--------- ---------
Net cash used in operating activities (3,473) (3,605)
--------- ---------
INVESTING ACTIVITIES:
Purchases of investments (12,065) (17,055)
Proceeds from sales of investments 23,500 8,000
Purchases of equipment (4,027) (811)
Patent acquisition costs (16) (14)
Payment of deferred costs - (31)
--------- ---------
Net cash provided by (used in) investing activities 7,392 (9,911)
--------- ---------
FINANCING ACTIVITIES:
Sales of Common Stock 3,345 458
--------- ---------
Net cash provided by financing activities 3,345 458
--------- ---------
Net increase (decrease) in cash and cash equivalents 7,264 (13,058)
CASH AND CASH EQUIVALENTS, beginning of period 15,120 63,503
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 22,384 $ 50,445
========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Issuance of Common Stock in connection with earn-out payments $ 3,093 $ -
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5.
<PAGE>
DIGITAL RIVER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The unaudited condensed consolidated financial statements included herein
reflect all adjustments, consisting only of normal recurring adjustments, which
in the opinion of management are necessary to fairly state the Company's
consolidated financial position, results of operations and cash flows for the
periods presented. These condensed consolidated financial statements should be
read in conjunction with the Company's audited consolidated financial statements
included in the Company's Form 10-K for the year ended December 31, 1999 as
filed with the Securities and Exchange Commission. The results of operations for
the period ended March 31, 2000 are not necessarily indicative of the results to
be expected for any subsequent quarter or for the entire fiscal year ending
December 31, 2000. The December 31, 1999 balance sheet was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles.
2. PRINCIPLES OF CONSOLIDATION:
The condensed consolidated financial statements include the accounts of
Digital River, Inc. and its wholly owned subsidiaries. All intercompany balances
and transactions have been eliminated.
3. NET LOSS PER SHARE:
Basic loss per share is computed using the weighted-average number of
common shares outstanding excluding contingently issuable or returnable shares,
and diluted loss per share is computed using the weighted-average number of
common shares outstanding and dilutive potential common shares outstanding. As a
result of the losses incurred by the Company for the three months ended March
31, 2000 and 1999, respectively, all potential common shares were anti-dilutive
and were excluded from the diluted net loss per share calculations.
The following table summarizes securities outstanding as of each period end
which were not included in the calculation of diluted net loss per share since
their inclusion would be anti-dilutive:
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
---------------- ----------------
<S> <C> <C>
Common Stock warrants 357,753 388,513
Common Stock options 3,685,251 2,524,607
</TABLE>
4. ACQUISITIONS AND EARN-OUT ARRANGEMENTS:
Former employees of Maagnum Internet Group, which the Company purchased in
April 1999, received earn-out payments of 124,349 shares of Common Stock valued
at $3,093,000 in the quarter ended March 31, 2000. The Company charged such
amount to compensation expense and this is included as amortization of goodwill
and acquisition related costs in the accompanying Condensed Consolidated
Statements of Operations. This amount would have increased general and
administrative expense had it been reported outside of that caption.
During 1999, the Company acquired four companies that were accounted for
under the purchase method. The following unaudited pro forma condensed results
of operations for the three months ended March 31, 1999 has been prepared as if
each of the acquisitions had occurred on January 1, 1999:
6.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1999
----------------------
(In Thousands)
<S> <C>
Sales $ 14,615
Loss from operations (8,422)
Net loss (7,588)
Basic and diluted loss per share (.37)
</TABLE>
This financial information does not purport to represent results that would
actually have been obtained if the transactions had been in effect on January 1,
1999 or any future results that may in fact be realized.
5. SEGMENT INFORMATION:
The Company has two operating segments under the guidelines of SFAS No.
131, Software and Digital Commerce Services and E-Business Services, which have
been identified as components of the Company which are reviewed regularly by
management to determine resource allocation and assess performance. This is the
first disclosure of segments as Software and Digital Commerce Services
represented substantially all operations in 1999. Unallocated corporate items
consist of goodwill amortization, acquisition related costs and interest income
for operational results and consist of certain cash, investments and goodwill
for total assets. Segment information is as follows:
<TABLE>
<CAPTION>
Software and E-Business Unallocated
Digital Commerce Services Corporate
Services Division Division Items Consolidated
-------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Sales $ 32,054 $ 753 - $ 32,807
Gross profit 6,129 535 - 6,664
Loss from operations (2,460) (4,822) (5,394) (12,676)
Net loss (2,460) (4,822) (4,709) (11,991)
Total assets 11,879 4,176 67,539 83,594
</TABLE>
6. STOCKHOLDERS' EQUITY:
In February 2000, the Company's Board of Directors approved amending the
1999 Non-Officer Stock Option Plan, wherein the number of shares of Common Stock
available for grants was increased to 2,250,000 shares from 1,300,000 shares.
7.
<PAGE>
Subsequent to March 31, 2000, the Company's stockholders approved amending
the Articles of Incorporation to increase the number of authorized shares of
Common Stock from 45,000,000 to 60,000,000 shares. The stockholders also
approved a measure to establish an Employee Stock Purchase Plan and reserved
200,000 shares for issuance under the plan.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE COMPANY NOTES THAT, EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED
HEREIN, THE MATTERS DISCUSSED BELOW CONTAIN FORWARD-LOOKING STATEMENTS WHICH
INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE
THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY, OR INDUSTRY
RESULTS, TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE
COMPANY EXPRESSLY DISCLAIMS ANY OBLIGATION TO UPDATE THIS INFORMATION OR
PUBLICLY RELEASE ANY REVISION OR REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE
OF THIS REPORT. SUCH FACTORS INCLUDE, AMONG OTHERS: THE COMPANY'S LIMITED
OPERATING HISTORY AND VARIABILITY OF OPERATING RESULTS, EXPECTATION OF FUTURE
LOSSES, RISKS ASSOCIATED WITH ELECTRONIC SOFTWARE DELIVERY, DEPENDENCE ON THE
INTERNET AND GROWTH IN ELECTRONIC COMMERCE AND INTERNET INFRASTRUCTURE
DEVELOPMENT, DEPENDENCE ON SOFTWARE PUBLISHERS, DEPENDENCE ON ONLINE RETAILERS,
SYSTEM DEVELOPMENT AND ELECTRONIC COMMERCE SECURITY RISKS, RAPID TECHNOLOGICAL
CHANGES, COMPETITION IN THE ELECTRONIC COMMERCE INDUSTRY, THE IMPORTANCE OF
ATTRACTING AND RETAINING PERSONNEL, MANAGEMENT OF THE COMPANY'S GROWTH,
INTEGRATION OF ACQUIRED COMPANIES, DEPENDENCE ON KEY EMPLOYEES AND OTHER RISK
FACTORS REFERENCED IN THE COMPANY'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1999.
OVERVIEW
The Company is a leading provider of comprehensive electronic commerce
outsourcing solutions. The Company was incorporated in February 1994 and
commenced offering products for sale through its clients' Web stores in August
1996. From inception through August 1996, the Company had no sales, and its
activities related primarily to the development of its Commerce Network Server
("CNS") technology related to electronic commerce. In 1996, the Company began to
focus its business development efforts on the software industry, building its
inventory of software products through contracts with software publishers. In
1997, the Company began to develop software distribution relationships through
contracts with online retailers. As of March 31, 2000, the Company had
approximately 5,600 software publisher clients and 1,400 online retailer clients
that are served by the Software and Digital Commerce Services Division. In late
1998, the Company began to offer its comprehensive electronic commerce
outsourcing services in the form of a transaction fee-based e-commerce service
to clients outside of the software industry. As of March 31, 2000, the Company
had 29 client contracts under its E-Business Services Division.
The Company derives its revenue primarily from sales of third-party
software. The Company has contractual relationships with its software publisher
and online retailer clients which obligate the Company to pay to the client a
specified percentage of each sale. Revenues from the sale of software products,
net of estimated returns, are recognized upon either delivery through electronic
software delivery ("ESD") or shipment of the physical product to the end-user.
The amount payable to the software publisher or online retailer is reported as
cost of sales. The Company bears full credit risk with respect to substantially
all sales. For e-commerce services offered under the E-Business Services
division, the Company derives its revenue from development fees, transaction
processing and hosting fees as well as service fees. Most E-Business Services
revenue is recognized as services are performed, except for annual fees and
certain integration fees which are recognized evenly over the term of the
contract. The Company generated less than 3% and 8% of its revenue and gross
profit, respectively, for
8.
<PAGE>
the quarter ended March 31, 2000 from E-Business Services. There can be no
assurance that the Company will derive any significant revenue from E-Business
Services in the future.
The Company has a limited operating history upon which investors may
evaluate its business and prospects. Since inception, the Company has incurred
significant losses, and as of March 31, 2000, had an accumulated deficit of
approximately $57.8 million. The Company intends to expend significant financial
and management resources on the development of additional services, sales and
marketing, technology and operations to support larger-scale operations and
greater service offerings, particularly with regards to the E-Business Services
division. As a result, the Company expects to incur additional losses and
continued negative cash flow from operations for the foreseeable future, and
such losses are anticipated to increase significantly from current levels. There
can be no assurance that the Company's sales will increase or even continue at
their current level or that the Company will achieve or maintain profitability
or generate cash from operations in future periods. 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 electronic commerce. To
address these risks, the Company must, among other things, maintain existing and
develop new relationships with software publishers, online retailers and
E-Business Services clients, implement and successfully execute its business and
marketing strategy, continue to develop and upgrade its technology and
transaction-processing systems, 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 would have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company's current and future expense levels are based
largely on its planned operations and estimates of future sales. Sales and
operating results generally depend on the volume and timing of 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 sales would have an immediate adverse effect on the
Company's business, financial condition and results of operations. In view of
the rapidly evolving nature of the Company's business and its limited operating
history, the Company is unable to accurately forecast its sales and believes
that period-to-period comparisons of its operating results are not necessarily
meaningful and should not be relied upon as an indication of future performance.
9.
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain items from the Company's
consolidated condensed statements of operations as a percentage of total
revenues for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
Sales 100.0% 100.0%
Cost of sales 79.7 83.7
--------------- ---------------
Gross profit 20.3 16.3
--------------- ---------------
Operating expenses:
Sales and marketing 20.2 30.9
Product development and operations 18.4 30.4
General and administrative 3.9 8.2
Amortization of goodwill and acquisition
related costs 16.4 -
--------------- ---------------
Total operating expenses 58.9 69.5
--------------- ---------------
Loss from operations (38.6) (53.2)
--------------- ---------------
Interest income 2.0 7.6
--------------- ---------------
Net loss (36.6)% (45.6)%
=============== ===============
</TABLE>
SALES
Sales increased to $32.8 million for the quarter ended March 31, 2000,
up from $11.7 million for the quarter ended March 31, 1999. The increase was
primarily a result of significant growth in the number of the Company's software
publisher and online retailer clients, increasing market acceptance of ESD and
the introduction of E-Business Services. Substantially all sales in 1999 were in
the Software and Digital Commerce Services segment. International sales
represented approximately 21% and 24% of sales for the three months ended March
31, 2000 and 1999, respectively.
GROSS PROFIT
Cost of sales increased to $26.1 million in the quarter ended March 31,
2000 from $9.8 million in the quarter ended March 31, 1999. This increase
reflects the Company's growth in sales. The Company's gross profit margin
increased significantly in the quarter ended March 31, 2000 due mainly to the
impact of E-Business Services margins (which are significantly higher than those
of Software and Digital Commerce Services), improved margins in shipping
physical goods and an increase in service related fees. The Company believes
that Internet commerce and related services will become more competitive in the
near future. Accordingly, the Company may reduce or alter its pricing structure
and policies in the future and any such change could reduce gross margins.
10.
<PAGE>
SALES AND MARKETING
Sales and marketing expense increased to $6.6 million in the quarter
ended March 31, 2000 from $3.6 million in the quarter ended March 31, 1999. This
increase resulted from expanding the sales and marketing infrastructure required
to increase the number of and provide support to the Company's software
publisher, online retailer and E-Business clients and variable expenses which
increase in relation to sales. The primary components of this increase for the
comparable quarters ended March 31 were an increase in wages and benefits of
$1.1 million, an increase in credit card fees and chargeback costs of $962,000
and an increase in advertising and marketing expenditures of $314,000. As a
percentage of sales, sales and marketing expense decreased to 20.2% in the
quarter ended March 31, 2000 from 30.9% in the quarter ended March 31, 1999,
primarily reflecting the Company's increased sales volume. The Company expects
that sales and marketing expense will continue to increase in absolute dollars
as the Company continues to build its sales and marketing infrastructure and to
develop marketing programs.
PRODUCT DEVELOPMENT AND OPERATIONS
Product development and operations expense increased to $6.0 million in
the quarter ended March 31, 2000 from $3.6 million in the quarter ended March
31,1999. The increase was primarily related to increased personnel and
consulting costs related to developing, enhancing and maintaining the Company's
CNS and related facilities and customer service related personnel costs. The
primary components of this increase for the comparable quarters ended March 31,
were an increase in wages and benefits of $1.0 million and an increase in
consulting costs of $810,000. As a percentage of sales, product development and
operations expense decreased to 18.4% in the quarter ended March 31, 2000 from
30.4% in the quarter ended March 31, 1999. The Company believes that continued
investment in product development and operations is critical to attaining its
strategic objectives and, and as a result, expects product development and
operations expenses will continue to increase in absolute dollars.
GENERAL AND ADMINISTRATIVE
General and administrative expense increased to $1.3 million in the
quarter ended March 31, 2000 from $1.0 million in the quarter ended March 31,
1999. The increase was primarily due to increased personnel and related
expenses. The primary components of this increase for the comparable quarters
ended March 31 were an increase in wages and benefits of $210,000 partially
offset by a decrease in deferred compensation expense of $134,000. As a
percentage of sales, general and administrative expense decreased to 3.9% in the
quarter ended March 31, 2000 from 8.2% in the quarter ended March 31, 1999,
primarily reflecting the Company's growth in sales. The Company expects general
and administrative expense, excluding the impact of deferred compensation
expense, to increase in absolute dollars in the future, particularly as the
Company continues to build infrastructure to support growth and incurs ongoing
costs associated with being a public company. As a percentage of sales, these
expenses are expected to decrease as sales increase.
INTEREST INCOME
Interest income consists of earnings on the Company's cash, cash
equivalents and investments. The decrease from the prior period was attributable
to lower cash and investment balances in 2000. The Company expects interest
income to decrease in the future as cash is used to fund operations and is used
for investments in infrastructure.
11.
<PAGE>
INCOME TAXES
The Company paid no income taxes in any reported period. The Company
has incurred a net loss for each period since inception. As of March 31, 2000,
the Company had approximately $65.3 million of net operating loss carryforwards
for federal income tax purposes, which expire beginning in 2009. Due to the
uncertainty of future profitability, a valuation allowance equal to the deferred
tax asset has been recorded. Certain changes in ownership that resulted from the
sales of Common and Preferred Stock will limit the future annual realization of
the tax net operating loss carryforwards to a specified percentage under Section
382 of the Internal Revenue Code.
LIQUIDITY AND CAPITAL RESOURCES
In the first three months of 2000, the Company used $3.5 million of
cash to fund operations and made additions of equipment and software totaling
$4.0 million. The Company sold $23.5 million in investments which were partially
offset by $12.1 million in purchases of investments. In addition, the Company
received $3.3 million from stock sales, all of which were through stock option
and warrant exercises.
As of March 31, 2000 the Company had $22.4 million of cash and cash
equivalents, $8.0 million of short-term investments and $20.0 million in
long-term investments. The Company's principal commitments consisted of
obligations outstanding under operating leases. Although the Company has no
material commitments for capital expenditures, it anticipates an increase in the
rate of capital expenditures consistent with its anticipated growth in
operations, infrastructure and personnel. The Company anticipates that it will
expend approximately $20.0 million over the next 21 months on capital
expenditures based on the Company's current anticipated growth rate. The Company
further anticipates that it will expend approximately $25.0 million over the
next 21 months on product development based on the Company's current anticipated
growth rate in operations. The Company may also use cash to acquire or license
technology, products or businesses related to the Company's current business.
The Company also anticipates that it will continue to experience significant
growth in its operating expenses for the foreseeable future and that its
operating expenses will be a material use of the Company's cash resources. The
Company believes that existing sources of liquidity, will provide adequate cash
to fund its operations for at least the next 21 months.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
The Company does not enter into financial instruments for trading or
speculative purposes and does not currently utilize derivative financial
instruments. The operations of the Company are conducted primarily in the United
States and as such are not subject to material foreign currency exchange rate
risk. The Company has no long-term debt.
12.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENTS
------ ------------------------
3.1(1) Amended and Restated Certificate of Incorporation
3.2(1) Bylaws of the Registrant
4.1(1) Specimen Common Stock Certificate
11.1(2) Statement of Computation of Per Share Earnings
27.1 Financial Data Schedule
(1) Filed as an exhibit to the Company's Registration Statement on
Form S-1, File No. 333-56787, declared effective on August 11, 1998,
incorporated herein by reference.
(2) See Note 3 to Condensed Consolidated Financial Statements.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
2000.
13.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 15, 2000 DIGITAL RIVER, INC.
By: /s/ Robert E. Strawman
----------------------
Robert E. Strawman
Chief Financial Officer
(Principal Financial and Accounting Officer)
14.
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENTS
------ ------------------------
3.1(1) Amended and Restated Certificate of Incorporation
3.2(1) Bylaws of the Registrant
4.1(1) Specimen Common Stock Certificate
11.1(2) Statement of Computation of Per Share Earnings
27.1 Financial Data Schedule
(1) Filed as an exhibit to the Company's Registration Statement on
Form S-1, File No. 333-56787, declared effective on August 11, 1998,
incorporated herein by reference.
(2) See Note 3 to Condensed Consolidated Financial Statements.
15.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 22,384
<SECURITIES> 7,952
<RECEIVABLES> 2,527
<ALLOWANCES> 698
<INVENTORY> 101
<CURRENT-ASSETS> 33,092
<PP&E> 13,020
<DEPRECIATION> 2,395
<TOTAL-ASSETS> 83,594
<CURRENT-LIABILITIES> 15,764
<BONDS> 0
0
0
<COMMON> 210
<OTHER-SE> 67,620
<TOTAL-LIABILITY-AND-EQUITY> 83,594
<SALES> 32,807
<TOTAL-REVENUES> 32,807
<CGS> 26,143
<TOTAL-COSTS> 26,143
<OTHER-EXPENSES> 18,832
<LOSS-PROVISION> 508
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (11,991)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,991)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,991)
<EPS-BASIC> (.58)
<EPS-DILUTED> (.58)
</TABLE>
