<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: August 31, 1999
(Date of earliest event reported: August 3, 1999)
XOOM.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-25139 88-0361536
- ------------------------------- ----------------------- ------------------
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
300 Montgomery Street, Suite 300, San Francisco, California 94104
- ----------------------------------------------------------- ---------------
(Address of Principal Executive Offices) (Zip Code)
(415) 288-2500
--------------
(Registrant's telephone number, including area code)
Not applicable.
---------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
On August 5, 1999, XOOM.com, Inc. filed with the Securities and Exchange
Commission a Current Report on Form 8-K (the "Form 8-K") with respect to the
acquisition of LiquidMarket, Inc. on August 3, 1999. This amendment is being
filed for the purpose of including financial statements and pro forma
financial information and should be read in conjunction with the Form 8-K.
(a) Financial Statements of LiquidMarket, Inc.
The following documents appear as Exhibit 99.1 to this Current Report on
Form 8-K/A and are incorporated herein by reference:
(i) LiquidMarket, Inc. audited financial statements as of
December 31, 1998 and for the period June 12, 1998, date of inception,
through December 31, 1998.
(ii) LiquidMarket, Inc. unaudited financial statements as of June 30,
1999 and for the six months ended June 30, 1999.
(b) Pro Forma Financial Information.
The following documents appear as Exhibit 99.2 to this Current Report on
Form 8-K/A and are incorporated herein by reference:
Unaudited Pro Forma Condensed Combined Financial Information as of June
30, 1999 and for the six months ended June 30, 1999 and for the year ended
December 31, 1998.
(c) Exhibits
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
99.1 Financial Statements of LiquidMarket, Inc.
99.2 Unaudited Pro Forma Condensed Combined Financial Information.
<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.
XOOM.COM, INC.
By: /s/ John Harbottle
---------------------------------------
John Harbottle
Vice President, Finance,
Chief Financial Officer and Secretary
Date: August 31, 1999
<PAGE>
EXHIBIT 23.1
CONSENT TO INDEPENDENT ACCOUNTANTS
We consent to the inclusion on Form 8-K/A of Xoom.com dated August 31, 1999,
of our report dated April 16, 1999, except for Note 8 as to which the date is
July 15, 1999 relating to the financial statements of LiquidMarket, Inc.
/s/ PRICEWATERHOUSECOOPERS LLP
Woodland Hills, California
September 1, 1999
<PAGE>
REPORT OF PRICEWATERHOUSECOOPERS LLP, INDEPENDENT ACCOUNTANTS
To the Shareholders of
LiquidMarket, Inc.
In our opinion, the accompanying balance sheet of LiquidMarket, Inc. (A
Company In The Developmental Stage) (the "Company") and the related statements
of operations, shareholders' equity and cash flows present fairly, in all
material respects, the financial position of the Company as of December 31,
1998, and the results of its operations and its cash flows for the period June
12, 1998 (Date of Inception) through December 31, 1998, in conformity with
generally accepted accounting principles. 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 audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's negative cash flows from operations and
limited capital resources raise substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
addressed in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Woodland Hills, California
April 16, 1999, except for Note 8 as to which
the date is July 15, 1999
1
<PAGE>
LIQUIDMARKET, INC.
(A COMPANY IN THE DEVELOPMENTAL STAGE)
BALANCE SHEET
ASSETS:
<TABLE>
<CAPTION>
DECEMBER
31, JUNE 30,
1998 1999
----------- ----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................... $1,528,264 $ 598,800
Prepaid and other current assets.................................. 10,722 5,562
----------- ----------
Total current assets............................................ 1,538,986 604,362
Property and equipment, net......................................... 305,424 328,444
----------- ----------
Total assets.................................................... $1,844,410 $ 932,806
----------- ----------
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable.................................................. $ 179,341 $ 113,493
Accrued liabilities and other..................................... 30,407 90,295
----------- ----------
Total liabilities............................................... 209,748 203,788
----------- ----------
Commitments and contingencies (Note 5)
Shareholders' equity:
Series A Convertible Preferred Stock: $0.001 par value
(liquidation value $800,000); 3,200,000 shares authorized,
issued and outstanding.......................................... 3,200 3,200
Series B Convertible Preferred Stock: $0.001 par value
(liquidation value $1,500,000); 2,000,000 and 2,250,000 shares
authorized, issued and outstanding at December 31, 1998 and June
30, 1999 (unaudited)............................................ 2,000 2,250
Common stock: $0.001 par value; 15,000,000 shares authorized;
3,600,000 shares issued and outstanding......................... 3,600 3,600
Additional paid-in capital........................................ 2,400,800 3,267,350
Unearned compensation............................................. (99,350) (185,294)
Accumulated deficit............................................... (675,588) (2,362,088)
----------- ----------
Total shareholders' equity...................................... 1,634,662 729,018
----------- ----------
Total liabilities and shareholders' equity...................... $1,844,410 $ 932,806
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
LIQUIDMARKET, INC.
(A COMPANY IN THE DEVELOPMENTAL STAGE)
STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 12, 1998 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1998 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
DECEMBER JUNE 30,
31, 1998 1999
----------- ----------
(UNAUDITED)
<S> <C> <C>
Costs and expenses:
Research and product development.................................. $ 267,529 $ 419,919
Sales and marketing............................................... 192,380 241,621
General and administrative........................................ 211,750 441,446
Amortization of deferred compensation............................. 6,650 593,356
----------- ----------
Loss from operations............................................ (678,309) (1,696,342)
----------- ----------
Other income (expense):
Interest income................................................... 3,521 10,642
----------- ----------
Loss before income tax provision................................ (674,788) (1,685,700)
Income tax provision................................................ 800 800
----------- ----------
Net loss........................................................ $(675,588) $(1,686,500)
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
LIQUIDMARKET, INC.
(A COMPANY IN THE DEVELOPMENTAL STAGE)
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD JUNE 12, 1998 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1998 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
SERIES A CONVERTIBLE SERIES B CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------------- ---------------------- ---------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
--------- ----------- --------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 12, 1998
(Date of Inception).............. -- -- -- -- 3,600,000 $ 3,600 --
Sale of preferred stock for
cash........................... 3,200,000 $ 3,200 -- -- -- $ 796,800
Sale of preferred stock for
cash........................... -- -- 2,000,000 $ 2,000 -- -- 1,498,000
Unearned compensation related to
stock options granted.......... -- -- -- -- -- -- 106,000
Compensation related to stock
options granted................ -- -- -- -- -- -- --
Net loss......................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------- -----------
Balance at December 31, 1998....... 3,200,000 $ 3,200 2,000,000 $ 2,000 3,600,000 $ 3,600 $2,400,800
--------- ----------- --------- ----------- --------- ----------- -----------
--------- ----------- --------- ----------- --------- ----------- -----------
Sale of preferred stock for
cash........................... -- -- 250,000 $ 250 -- -- $ 187,250
Unearned compensation related to
stock options granted.......... -- -- -- -- -- -- 679,300
Compensation related to stock
options granted................ -- -- -- -- -- -- --
Net loss......................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------- -----------
Balance at June 30, 1999
(Unaudited)...................... 3,200,000 $ 3,200 2,250,000 $ 2,250 3,600,000 $ 3,600 $3,267,350
--------- ----------- --------- ----------- --------- ----------- -----------
--------- ----------- --------- ----------- --------- ----------- -----------
<CAPTION>
TOTAL
UNEARNED ACCUMULATED SHAREHOLDERS'
COMPENSATION DEFICIT EQUITY
------------- ------------ -------------
<S> <C> <C> <C>
Balance at June 12, 1998
(Date of Inception).............. -- -- $ 3,600
Sale of preferred stock for
cash........................... -- -- 800,000
Sale of preferred stock for
cash........................... -- -- 1,500,000
Unearned compensation related to
stock options granted.......... $(106,000) -- --
Compensation related to stock
options granted................ 6,650 -- 6,650
Net loss......................... -- $ (675,588) (675,588)
------------- ------------ -------------
Balance at December 31, 1998....... $ (99,350) $ (675,588) $ 1,634,662
------------- ------------ -------------
------------- ------------ -------------
Sale of preferred stock for
cash........................... -- -- $ 187,500
Unearned compensation related to
stock options granted.......... $(679,300) -- --
Compensation related to stock
options granted................ 593,356 -- 593,356
Net loss......................... -- $(1,686,500) $(1,686,500)
------------- ------------ -------------
Balance at June 30, 1999
(Unaudited)...................... $(185,294) $(2,362,088) $ 729,018
------------- ------------ -------------
------------- ------------ -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
LIQUIDMARKET, INC.
(A COMPANY IN THE DEVELOPMENTAL STAGE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD JUNE 12, 1998 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1998 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
DECEMBER JUNE 30,
31, 1998 1999
----------- ----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss.......................................................... $(675,588) $(1,686,500)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization................................... 24,440 69,529
Amortization of deferred compensation........................... 6,650 593,356
Changes in current assets and liabilities:
Prepaid and other current assets.............................. (10,722) 5,160
Accounts payable.............................................. 179,341 (65,848)
Accrued expenses.............................................. 30,407 59,888
----------- ----------
Net cash used in operating activities....................... (445,472) (1,024,415)
----------- ----------
Cash flows from investing activities:
Capital expenditures.............................................. (329,864) (92,549)
----------- ----------
Net cash used in investing activities....................... (329,864) (92,549)
----------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock............................ 3,600 --
Proceeds from issuance of Series A convertible preferred stock.... 800,000 --
Proceeds from issuance of Series B convertible preferred stock.... 1,500,000 187,500
----------- ----------
Net cash provided by financing activities................... 2,303,600 187,500
----------- ----------
Net increase (decrease) in cash and cash equivalents........ 1,528,264 (929,464)
Cash and cash equivalents at beginning of period.................... -- 1,528,264
----------- ----------
Cash and cash equivalents at end of period.......................... $1,528,264 598,800
----------- ----------
----------- ----------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest........................................................ -- --
Income taxes.................................................... $ 800 $ 800
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
LIQUIDMARKET, INC.
(A COMPANY IN THE DEVELOPMENTAL STAGE)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT BUSINESS RISKS:
NATURE OF BUSINESS
LiquidMarket (the "Company") was incorporated in June 1998 in the State of
Delaware and is engaged in software development. As of December 31, 1998, the
Company is a development stage enterprise, as defined in Financial Accounting
Standards Board Statement No. 7. Since inception, the Company has devoted
substantially all of its efforts toward the development of its product and
establishing new business. The Company's business is extremely competitive and
is characterized by rapid technological change, new product development and a
competitive environment for the attraction and retention of knowledge workers.
The Company is an early stage enterprise and is subject to all the risks
associated with development stage companies.
SIGNIFICANT BUSINESS RISKS
Since its inception, the Company has incurred significant operating losses.
The ability of the Company to successfully carry out its business plan is
primarily dependent upon its ability to (1) obtain sufficient additional
capital, (2) overcome product development issues, and (3) generate significant
revenues and cash flows through the future sales of its primary product.
BASIS OF PRESENTATION
The Company's financial statements for the period June 12, 1998 (Date of
Inception) through December 31, 1998 have been prepared on a going-concern basis
which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. The Company had negative cash
flows from operations of ($445,472), and a net loss and an accumulated deficit
of ($675,588), as of December 31, 1998 and for the period June 12, 1998 (Date of
Inception) through December 31, 1998. The Company expects to incur additional
expenditures to complete and enhance its product. The Company's revenues from
product sales, and its working capital, may not be sufficient to fund its
working capital needs and meet its expansion objectives over the next twelve
months. Management recognizes that the Company may need to obtain additional
financing or consider reductions in its operating costs to enable it to continue
operations with available resources. Management's plans include raising funds
through the sale of additional equity securities, and expect that these efforts
will result in the additional capital needed to fund the Company's operations
and planned expansion. There can be no assurance that these funds will be
sufficient to adequately fund the operations and that the Company will achieve
profitability or positive cash flows.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
In the normal course of preparing financial statements in conformity with
generally accepted accounting principles, management is required 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.
6
<PAGE>
LIQUIDMARKET, INC.
(A COMPANY IN THE DEVELOPMENTAL STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Cash and cash
equivalents are carried at cost, which approximates fair value.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of cash and short-term
investments. The Company invests its excess cash in money market funds with
major financial institution. At times the Company's cash balances may be in
excess of the FDIC Insurance limits.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is computed using the straight-line method based upon
the estimated useful lives of the assets. Leasehold improvements are amortized
over the shorter of the estimated useful life or the life of the lease. Useful
lives are evaluated regularly by management in order to determine recoverability
in light of current technological conditions. Maintenance and repairs are
charged to expense as incurred while renewals and improvements are capitalized.
Upon the sale or retirement of property and equipment, the accounts are relieved
of the cost and the related accumulated depreciation or amortization, with any
resulting gain or loss included in the Statement of Operations.
SOFTWARE DEVELOPMENT COSTS
Under the provisions of Statement of Financial Accounting Standards ("SFAS")
No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed," the Company is required to capitalize software development
costs when "technological feasibility" of the product has been established and
anticipated future revenues ensure recovery of the capitalized amounts. As of
December 31, 1998, "technological feasibility" had not been reached and,
accordingly, no amount of software development costs have been capitalized.
Costs incurred in the research and development of products are expensed as
incurred.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes.
Under this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement and the tax bases of assets and
liabilities using enacted tax rates in effect for the period in which the
differences are expected to reverse. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be realized.
STOCK-BASED EMPLOYEE COMPENSATION
SFAS No. 123, "Accounting for the Awards of Stock-Based Compensation to
Employees," encourages, but does not require, companies to record compensation
costs for stock-based compensation plans at fair value. The Company has adopted
the disclosure requirements of SFAS No. 123, which involves pro forma
7
<PAGE>
LIQUIDMARKET, INC.
(A COMPANY IN THE DEVELOPMENTAL STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
disclosure of net income under SFAS No. 123, detailed descriptions of plan terms
and assumptions used in valuing stock option grants. The Company has elected to
account for stock-based employee compensation awards in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB No. 25").
COMPREHENSIVE INCOME
Effective June 12, 1998 (Date of Inception the Company adopted the
provisions of SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes standards for reporting comprehensive income and its components in
financial statements. Comprehensive income, as defined, includes all changes in
equity (net assets) during a period from non-owner sources. To date, the Company
has not had any transactions that are required to be reported in comprehensive
income.
INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial amounts as of June 30, 1999 and the six
months then ended, include all adjustments (consisting of normal recurring
entries) which management believes are necessary for a fair presentation of the
financial position and results of operations for the interim period presented.
Certain information and footnotes disclosures normally included in financial
statements prepared in accordance with generally accounting principles have been
condensed or omitted in accordance with quarterly reporting guidelines.
3. PROPERTY AND EQUIPMENT, NET:
Property and equipment at December 31, 1998 and June 30, 1999 consist of the
following:
<TABLE>
<CAPTION>
DECEMBER JUNE 30,
USEFUL LIFE 31, 1998 1999
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment and software............................ 3 years $ 311,349 $ 402,090
Furniture and fixtures..................................... 7 years 16,026 17,834
Leasehold improvements..................................... 1 year 2,489 2,489
----------- -----------
329,864 422,413
Less: Accumulated depreciation............................. 24,440 93,969
----------- -----------
$ 305,424 $ 328,444
----------- -----------
----------- -----------
</TABLE>
4. INCOME TAXES:
The provision for income taxes represents the minimum state franchise taxes.
As of December 31, 1998, the Company has deferred income tax assets of
approximately $256,000, which has been offset by a 100% valuation allowance. The
deferred tax asset is primarily due to the Company's federal and state net
operating loss (NOL's) carryforwards available to offset future taxable income,
if any, of approximately $640,000 which begin to expire in 2013 and 2006 for
federal and state income tax purposes, respectively. However, the ultimate
realization of these NOL's is dependent on future taxable income of the Company,
subject to certain limitations, as defined under Section 382 of the Internal
Revenue Code.
8
<PAGE>
LIQUIDMARKET, INC.
(A COMPANY IN THE DEVELOPMENTAL STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES: (CONTINUED)
As a result of the Company being in the development stage and the net loss
incurred during the period from June 12, 1998 (Date of Inception) through
December 31, 1998, management believes a valuation allowance for the entire
deferred tax asset, after considering deferred tax liabilities, is required.
5. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases its facility under a noncancellable lease through 1999.
The following are the minimum lease payments under this lease:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
Due in fiscal year:
1999.......................................................................... $ 41,288
------------
Minimum lease payments.......................................................... $ 41,288
------------
------------
</TABLE>
Rent expense amounted to $22,478 and $30,966 for the period June 12, 1998
(Date of Inception) through December 31, 1998 and for the six months ended June
30, 1999 (Unaudited), respectively.
SOFTWARE LICENSE
The Company licenses certain technology for use in its product. Pursuant to
the terms of the agreement, the Company is obligated to pay $55,000 during the
first two years of the term of the agreement. In addition, the Company may
exercise an option to purchase the software for $110,000. Payments previously
made by the Company will be deducted from the purchase price.
6. CAPITALIZATION:
CAPITAL
The authorized capital stock of the Company consists of 15,000,000 shares of
common stock, $.001 par value and 5,450,000 shares of preferred stock, $.001 par
value, of which 3,200,000 shares have been designated as Series A Stock, and
2,250,000 shares have been designated as Series B Stock.
CONVERTIBLE PREFERRED STOCK
Preferred stockholders may at any time elect to convert shares of preferred
stock into common stock. In addition, all outstanding shares of preferred stock
shall automatically be converted into shares of common stock if either (i) the
Company consummates an underwritten initial public offering with gross proceeds
of at least $15,000,000 or (ii) more than 80% of the outstanding shares of
preferred stock have been converted into common stock. Preferred stock shall
initially convert into common stock on a one-for-one basis. The conversion price
of the Series A and B preferred stock shall initially equal $0.25 and $0.75 per
share, respectively, subject to adjustment for stock splits.
The Series A and B preferred stock shall have a liquidation value (the
"Liquidation Value") equal to the per share original cost of $0.25 and $0.75,
respectively. Liquidation value will increase by the amount of
9
<PAGE>
LIQUIDMARKET, INC.
(A COMPANY IN THE DEVELOPMENTAL STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. CAPITALIZATION: (CONTINUED)
any declared but unpaid dividends on the preferred stock. Upon a liquidation,
dissolution or winding-up of the business of the Company, the holders of the
preferred stock shall be entitled to a preference in an amount equal to the
greater of the (i) Liquidation Value (subject to appropriate adjustment in the
event of any stock dividend, stock split, or the like), or (ii) such amount per
share as would have been payable had each share of preferred stock been
converted into common stock prior to such liquidation. A merger or consolidation
of the Company in which the Company is not the surviving entity, or the sale of
all or substantially all of the assets of the Company, shall be considered to be
a liquidation, unless otherwise elected by the holders of a majority of the
outstanding shares of preferred stock.
Each share of Series A and B preferred stock will be entitled to dividends
as declared by the Board of Directors but, in any event, at the same rate as the
common stock with declared dividends paid first to the holders of the Series B
preferred and Series A preferred, then to the holders of the common stock.
The Series A preferred stock will vote with the Series B preferred stock and
the common stock as a single class on all matters (on an as-converted basis).
7. STOCK OPTIONS (ALL INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1999 IS
UNAUDITED):
In October 1998, the Company adopted the 1998 Stock Incentive Plan (the
"Plan") which provides for grants to employees and non-employees of incentive
stock options to purchase up to an aggregate of 2,200,000 shares of common
stock. The options vest 25% at the first-year anniversary from the date of grant
and 2.0833% on a monthly basis thereafter up to a period of 4 years. All options
generally expire after ten years.
For the period June 12, 1998 (Date of Inception) through December 31, 1998,
the Company granted options to purchase 530,000 shares of common stock at an
exercise price of $0.05 per share. The estimated fair value of common stock on
the dates of grant was $0.25 per share. No options were exercisable at December
31, 1998 and options to purchase 1,670,000 shares of common stock remain
available for future grants.
From January 1, 1999 through April 15, 1999, the Company granted options
to employees to purchase 165,000 shares of common stock at an exercise price
of $0.08 per share. The estimated fair value of the common stock on the dates
of grant was $0.75 per share. In addition, in May 1999, the Company entered
into a consulting agreement with a Board member to provide strategic
consulting services in exchange for granting options to purchase 325,000
shares of the Company's common stock at an exercise price of $0.08 per share
vesting in quarterly installments over a one year period. In the event there
is an Acquisition Event (as defined in the Plan) these options become
immediately exercisable in full prior to the Acquisition Event. The estimated
fair value of services to be provided approximates the estimated fair value
of the common stock on the date of grant of approximately $1.83 per share. No
options were exercisable at June 30, 1999 and options to purchase 1,180,000
shares of common stock remain available for future grants.
The fair value of the options granted was estimated on the date of grant
using the minimum value method with the following assumptions: risk-free
rate--4.26%; expected option life--5 years; expected forfeitures rate--none;
expected dividend yield--none.
The Company uses the intrinsic value method of accounting for stock-based
compensation for employees prescribed by APB No. 25, and, accordingly, adopted
the disclosure-only provisions of SFAS
10
<PAGE>
LIQUIDMARKET, INC.
(A COMPANY IN THE DEVELOPMENTAL STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. STOCK OPTIONS (ALL INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1999 IS
UNAUDITED): (CONTINUED)
No. 123. Had the Company applied the provisions set forth in SFAS No. 123, the
Company's net loss would not be materially different from the amount presented
for the period June 12, 1998 (Date of Inception) through December 31, 1998.
In connection with the stock option grants noted above, the Company
recognized unearned compensation of $185,294 which is being amortized over the
vesting period of the related options generally one to four years. The Company
recorded amortization of deferred compensation expense of $593,356 during the
six months ended June 30, 1999 relating to the stock options granted, of which
approximately $568,750 related to the options granted to the Board member noted
above (see Note 8).
8. SUBSEQUENT EVENT (UNAUDITED)
In July 1999, the Company entered into an agreement and plan of merger to
sell all the Company's outstanding preferred and common shares.
11
<PAGE>
XOOM.COM, INC.
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial
information for Xoom.com, Inc. gives effect to the merger of LiquidMarket,
Inc. into Xoom.com, Inc. The merger of LiquidMarket into Xoom.com is based on
a preliminary allocation of the total purchase cost. The historical financial
information has been derived from the respective historical financial
statements of Xoom.com and LiquidMarket and should be read in conjunction
with those financial statements in Exhibit 99.1 of this Form 8-K/A.
The unaudited pro forma condensed combined balance sheet assumes the
LiquidMarket merger took place as of June 30, 1999 and allocates the total
purchase cost of the fair values of assets and liabilities of LiquidMarket
based on a preliminary valuation.
The unaudited pro forma condensed combined statements of operations
combine historical statements of operations for Xoom.com and LiquidMarket for
the year ended December 31, 1998, and for the six months ended June 30, 1999,
and give effect to the merger, including the amortization of goodwill and
other intangible assets, as if they had occurred on January 1, 1998, and
January 1, 1999, respectively.
The total estimated purchase consideration of the LiquidMarket merger has
been allocated on a preliminary basis to assets and liabilities based on
management's estimates of their fair value with the excess consideration over
the net assets acquired allocated to goodwill. This allocation is subject to
change pending a final analysis of the total purchase consideration and the
fair value of the assets acquired and liabilities assumed. The impact of
these changes could be material. The following items could affect the final
purchase price allocation at the date the transaction is consummated: (A)
LiquidMarket balance sheet (B) the stock option activity of LiquidMarket; and
(C) the finalization of the integration plan.
The unaudited pro forma condensed combined information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the transactions had
been consummated at the dates indicated, nor is it necessarily indicative of
future operating results or financial position of the combined companies.
<PAGE>
XOOM.COM, INC.
UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
---------------------------------------------------------------------
PRO FORMA
BUSINESS
LIQUIDMARKET, COMBINATION
XOOM.COM INC. COMBINED ADJUSTMENTS PRO FORMA
----------- --------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 57,418 $ 599 $ 58,017 $ -- $ 58,017
Short-term investments...................... 107,995 -- 107,995 -- 107,995
Accounts receivable, net.................... 3,025 -- 3,025 -- 3,025
Inventories................................. 793 -- 793 -- 793
Other current assets........................ 2,450 6 2,456 -- 2,456
----------- ------- ----------- ------------- -----------
Total current assets.......................... 171,681 605 172,286 -- 172,286
Fixed assets, net........................... 4,499 328 4,827 -- 4,827
Goodwill, net............................... 51,123 -- 51,123 20,997(2) 72,120
Intangible assets, net...................... 10,230 -- 10,230 17,021(2) 27,251
Investments................................. 53,615 -- 53,615 -- 53,615
Other assets................................ 1,316 -- 1,316 -- 1,316
----------- ------- ----------- ------------- -----------
Total assets.................................. $ 292,464 $ 933 $ 293,397 $ 38,018 $ 331,415
----------- ------- ----------- ------------- -----------
----------- ------- ----------- ------------- -----------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:..........................
Accounts payable............................ $ 3,516 $ 114 $ 3,630 $ 300(1) $ 3,930
Accrued compensation and related expenses... 1,101 -- 1,101 -- 1,101
Other accrued liabilities................... 2,176 90 2,266 -- 2,266
Deferred revenue............................ 2,676 -- 2,676 -- 2,676
Notes payable............................... 1,103 -- 1,103 -- 1,103
Capital lease obligations................... 41 -- 41 -- 41
Contingency accrual......................... 1,000 -- 1,000 -- 1,000
----------- ------- ----------- ------------- -----------
Total current liabilities..................... 11,613 204 11,817 300 12,117
Deferred revenues, less current portion....... 2,500 -- 2,500 -- 2,500
Notes payable, less current portion........... 331 -- 331 -- 331
Capital lease obligations, less current
portion..................................... 98 -- 98 -- 98
Stockholders' equity:.........................
Preferred stock............................. -- 5 5 (5)(3) --
Common stock................................ 304,253 3,271 307,524 35,176(3) 342,700
Notes receivable from stockholders.......... (995) -- (995) -- (995)
Deferred compensation....................... (499) (185) (684) 185(3) (499)
Accumulated deficit......................... (24,837) (2,362) (27,199) 2,362(3) (24,837)
----------- ------- ----------- ------------- -----------
Total stockholders' equity.................... 277,922 729 278,651 37,718 316,369
----------- ------- ----------- ------------- -----------
Total liabilities and stockholders' equity.... $ 292,464 $ 933 $ 293,397 $ 38,018 $ 331,415
----------- ------- ----------- ------------- -----------
----------- ------- ----------- ------------- -----------
See accompanying notes.
</TABLE>
<PAGE>
XOOM.COM, INC.
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
XOOM.COM LIQUIDMARKET, INC. PRO FORMA
FOR THE FOR THE PERIOD FROM PRO FORMA FOR THE
YEAR ENDED JUNE 12, 1998 (DATE OF BUSINESS YEAR ENDED
DECEMBER 31, INCEPTION) THROUGH COMBINATION DECEMBER 31,
1998 DECEMBER 31, 1998 COMBINED ADJUSTMENTS 1998
------------ ----------------------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenue....................................... $ 8,318 $ -- $ 8,318 $ -- $ 8,318
Cost of net revenue............................... 3,584 -- 3,584 -- 3,584
-------- ----- ------- ------------ ------------
Gross margin...................................... 4,734 -- 4,734 -- 4,734
Operating expenses:
Operating and development....................... 3,841 268 4,109 -- 4,109
Sales and marketing............................. 2,834 192 3,026 -- 3,026
General and administrative...................... 3,366 211 3,577 -- 3,577
Purchased in-process research and development... 790 -- 790 -- 790
Amortization of deferred compensation........... 1,416 7 1,423 -- 1,423
Amortization of goodwill and other intangible
assets........................................ 1,843 -- 1,843 10,862 (A) 12,705
-------- ----- ------- ------------- --------
Total operating expenses.......................... 14,090 678 14,768 10,862 25,630
-------- ----- ------- ------------- --------
Loss income from operations....................... (9,356) (678) (10,034) (10,862) (20,896)
Other income (expense):
Interest income................................. 187 3 190 -- 190
Interest expense................................ (135) (1) (136) -- (136)
Interest expense related to warrant............. (1,494) -- (1,494) -- (1,494)
-------- ----- -------- ------------- ---------
Net loss.......................................... $(10,798) $(676) $(11,474) $(10,862) $(22,336)
--------- ----- -------- ------------- ---------
--------- ----- -------- ------------- ---------
(B) $ (2.54)
Basic and diluted net loss per share.............. ---------
---------
Shares used in per share calculation--basic and
diluted......................................... (B) 8,809
---------
---------
See accompanying notes.
</TABLE>
<PAGE>
XOOM.COM, INC.
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1999
--------------------------------------------------------------
PRO FORMA
BUSINESS
LIQUIDMARKET, COMBINATION
XOOM.COM INC. COMBINED ADJUSTMENTS PRO FORMA
--------- ----------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Net revenue.................................... $ 10,947 $ -- $ 10,947 $ -- $ 10,947
Cost of net revenue............................ 4,724 -- 4,724 -- 4,724
--------- -------- --------- -------------- ---------
Gross margin................................... 6,223 -- 6,223 -- 6,223
Operating expenses:
Operating and development.................... 2,700 420 3,120 -- 3,120
Sales and marketing.......................... 7,538 242 7,780 -- 7,780
General and administrative................... 3,666 442 4,108 -- 4,108
Purchased in-process research and
development................................ 2,603 -- 2,603 -- 2,603
Amortization of deferred compensation........ 405 593 998 -- 998
Amortization of goodwill and other intangible
assets..................................... 2,304 -- 2,304 5,431 (A) 7,735
--------- -------- --------- -------------- ---------
Total operating expenses....................... 19,216 1,697 20,913 5,431 26,344
--------- -------- --------- -------------- ---------
Loss from operations........................... (12,993) (1,697) (14,690) (5,431) (20,121)
Other income (expense):
Interest income.............................. 3,008 11 3,019 -- 3,019
Interest expense............................. (65) (1) (66) -- (66)
--------- -------- --------- -------------- ---------
Net loss....................................... $(10,050) $(1,687) $(11,737) $ (5,431) $(17,168)
--------- -------- -------- -------------- ---------
--------- -------- -------- -------------- ---------
Basic and diluted net loss per share............ (B) $ (1.06)
---------
---------
Shares used in per share calculation--basic and
diluted....................................... (B) 16,218
---------
---------
See accompanying notes.
</TABLE>
<PAGE>
XOOM.COM, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
The total estimated purchase cost of the LiquidMarket, Inc. merger has
been allocated on a preliminary basis to assets and liabilities based on
management's estimate of their fair values. The excess of the purchase
consideration over the fair value of the net assets acquired has been
allocated to goodwill. This allocation is subject to change pending the
completion of the final analysis of the fair value of the assets acquired and
liabilities assumed. The impact of these changes could be material. The
following items could affect the final purchase price allocation at the date
the transaction is consummated: (A) LiquidMarket, Inc. balance sheet (B) the
stock option activity of LiquidMarket, Inc.; and (C) the finalization of the
integration plan.
The adjustments to the unaudited pro forma condensed combined balance sheet
as of June 30, 1999, have been calculated as if the merger occurred on June 30,
1999 and are as follows:
(1) To reflect the acquisition of Liquid Market, Inc. for total estimated
purchase price of approximately $38,747,000. The purchase consideration
consists of the following:
- Issuance of 824,325 shares of Xoom.com's common stock to the shareholders
of LiquidMarket, Inc., with a fair value of $33,547,000. An additional
106,101 shares will be included in the purchase price if specific
performance objectives are met. The fair value per share of Xoom.com's
common stock issued in the Liquid Market, Inc. acquisition is based on
the average closing price of Xoom.com's common stock on August 3, 1999
(the day the merger was announced) and the three days prior and
subsequent to such date.
- Assumption of options related to the LiquidMarket, Inc. acquisition to
purchase 130,750 shares of Xoom.com's common stock with a fair value
of $4,900,000. The fair value of the options assumed is based
on the Black-Scholes model using the following assumptions:
- Fair market value of the underlying shares is based on the average
closing price of Xoom.com's common stock the day the merger was
announced and the three days prior and subsequent to such date
- Expected life of 3 years
- Expected volatility of 1.0
- Risk free interest rate of 5.75%
- Expected dividend rate of 0%
- Other related transaction and merger costs estimated to be $300,000 for
the aquisition of LiquidMarket, Inc.
(2) Recognition of the excess purchase consideration of $38,018,000 over the
fair value of the net assets acquired, has been recorded as goodwill and
other intangible assets as follows:
<TABLE>
<CAPTION>
LIQUIDMARKET,
INC.
------------------
<S> <C>
Developed technology...................................................... $ 16,700,000
Acquired workforce........................................................ 321,000
Goodwill.................................................................. 20,997,000
------------------
Total..................................................................... $ 38,018,000
------------------
------------------
</TABLE>
(3) To reflect the elimination of the historical stockholders' equity accounts
of LiquidMarket, Inc.
<PAGE>
XOOM.COM, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
The adjustments to the unaudited pro forma condensed combined statement of
operations for the year ended December 31, 1998 and the six months ended June
30, 1999, have been calculated assuming that the merger occurred as of January
1, 1998 and January 1, 1999, respectively and are as follows:
(A) To reflect the amortization of goodwill and other intangible assets
resulting from the LiquidMarket, Inc. acquisition. The goodwill and other
intangible assets are being amortized over a period of forty-eight months.
(B) Basic and diluted net loss per share reflects the issuance of 930,426
shares of Xoom.com's common stock related to the LiquidMarket, Inc.
acquisition as if the shares had been outstanding for the entire period.
The effect of stock options issued assumed in the merger have not been
included as their inclusion would be anti-dilutive. The shares issued to
the shareholders of LiquidMarket, Inc. include 106,101 shares held in
escrow which will be released upon the achievement of certain performance
obligations.
