<PAGE>
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 30, 1999
iVillage Inc.
-----------------------------------------------------------------
(Exact name of Registrant as Specified in Charter)
Delaware 000-25469 13-3845162
-------------------------- ----------------------- --------------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
organization)
212 Fifth Avenue, New York, New York 10010
- -------------------------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 604-0963
170 Fifth Avenue, New York, New York 10010
------------------------------------------------------------
(Former Name or Former Address if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
------------------------------------
The purpose of this Amendment is to amend Item 7 to provide
certain financial information with respect to the Merger (as defined below),
which information was impracticable to provide at the time the Registrant filed
the Current Report on Form 8-K dated July 14, 1999.
On June 30, 1999, iVillage Inc. ("iVillage" or "the Company")
acquired Online Psychological Services, Inc., a Delaware corporation
("OnlinePsych"), and Code Stone Technologies, Inc., a Delaware corporation
("Code Stone"). OnlinePsych was acquired pursuant to an Agreement and Plan of
Reorganization, dated as of June 30, 1999, by and among iVillage, OnlinePsych
Acquisition Corporation, OnlinePsych and the stockholders of OnlinePsych (the
"OnlinePsych Merger Agreement"). Code Stone was acquired pursuant to an
Agreement and Plan of Reorganization, dated as of June 30, 1999, by and among
iVillage, Code Stone Acquisition Corporation, Code Stone and the sole
stockholder of Code Stone (the "Code Stone Merger Agreement" and collectively
with the OnlinePsych Merger Agreement, the "Merger Agreements").
Pursuant to the Merger Agreements, OnlinePsych and Code Stone
were merged into separate wholly-owned subsidiaries of iVillage, with
OnlinePsych and Code Stone as the surviving corporations, respectively (the
"Merger"). As a result of the Merger, each of OnlinePsych and Code Stone became
a wholly-owned subsidiary of iVillage.
The aggregate purchase price paid in connection with the
Merger consisted of $1.5 million cash and approximately 577,000 shares of
iVillage common stock valued at approximately $30 million under the purchase
method of accounting. The Merger is intended to qualify as a tax-free
reorganization.
OnlinePsych operates a Web site focusing on mental health
issues while Code Stone provides much of the interactive technology utilized on
OnlinePsych's Web site. iVillage intends to continue to use the assets acquired
to conduct these businesses.
The description of the Merger Agreements contained herein,
which are each filed as an exhibit to this Form 8-K, does not purport to be
complete and is qualified in its entirety by the provisions of the Merger
Agreements.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
(a) Online Psychological Services, Inc. Financial Statements for
the Two Years ended December 31, 1998
<PAGE>
ONLINE PSYCHOLOGICAL SERVICES, INC.
-------
FINANCIAL STATEMENTS
for the years ended December 31, 1998
and December 31, 1997
AND
REPORT THEREON
--------
<PAGE>
Report of Independent Accountants
---------------------------------
To the Board of Directors and Stockholders of
Online Psychological Services, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' deficit and cash flows present fairly, in all material
respects, the financial position of Online Psychological Services, Inc. (the
"Company"), at December 31, 1998 and 1997, and the results of its operations and
its cash flows for the years then ended 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 audits. We conducted our audits 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 audits provide a
reasonable basis for the opinion expressed above.
McLean, Virginia /s/ PricewaterhouseCoopers LLP
July 16, 1999
1
<PAGE>
ONLINE PSYCHOLOGICAL SERVICES, INC.
BALANCE SHEETS
-------
<TABLE>
<CAPTION>
December 31,
------------ March 31,
1998 1997 1999
---- ---- ----
(unaudited)
ASSETS
<S> <C> <C> <C>
Current assets:
Cash $ 8,603 $ 22,643 $ 13,093
Accounts receivable 29,574 19,204 44,439
Due from stockholders 6,771 - 6,771
----- ------ -----
Total current assets 44,948 41,847 64,303
------ ------ ------
Equipment 22,797 19,622 22,797
Less: accumulated depreciation (8,475) (4,703) (9,536)
------ ------ ------
14,322 14,919 13,261
------ ------ ------
Total assets $ 59,270 $ 56,766 $ 77,564
=========== =========== =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 28,088 $ 8,820 $ 30,930
Deferred compensation 130,000 130,000 130,000
Line of credit 17,066 15,098 15,569
Deferred revenue 7,667 2,165 7,912
Stockholder loan 12,260 - 8,001
------- ------- -------
Total current liabilities 195,081 156,083 192,412
------- ------- -------
Commitments (Note 5)
Stockholders' deficit:
Common stock, no par value, 1,500 shares
authorized, issued and outstanding 244,598 13,323 245,170
Accumulated deficit (380,409) (112,640) (360,018)
-------- -------- --------
Total stockholders' deficit (135,811) (99,317) (114,848)
-------- ------- --------
Total liabilities and stockholders' deficit $ 59,270 $ 56,766 $ 77,564
=========== =========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
ONLINE PSYCHOLOGICAL SERVICES, INC.
STATEMENTS OF OPERATIONS
-------
<TABLE>
<CAPTION>
For the years ended For the three months
December 31, ended March 31,
------------------- --------------------
1998 1997 1999 1998
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenue:
License revenue $ 112,772 $ 235,652 $ 33,440 $ 31,046
Advertising revenue 56,964 17,310 35,070 4,670
Subscription and merchandising revenue 50,893 - 15,097 5,768
------- ------- ------ ------
Total revenue 220,629 252,962 83,607 41,484
------- ------- ------ ------
Operating expenses:
Production, content and product costs 65,812 33,456 9,359 14,040
Salary expense 387,861 181,392 38,396 43,541
Sales and marketing 4,208 5,809 6,477 5,111
General and administrative 23,874 35,118 7,783 6,990
Depreciation 3,772 3,507 1,061 903
------- ------- ------ ------
Total operating expenses 485,527 259,282 63,076 70,585
------- ------- ------ ------
Income (loss) from operations (264,898) (6,320) 20,531 (29,101)
Interest expense, net 2,871 2,623 140 263
----- ----- --- ---
Net income (loss) $ (267,769) $ (8,943) $ 20,391 $ (29,364)
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ONLINE PSYCHOLOGICAL SERVICES, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
-------
<TABLE>
<CAPTION>
Common Stock
------------ Accumulated
Shares Amount Deficit Total
------ ------ ------- -----
<S> <C> <C> <C> <C>
Balance, December 31, 1996 1,500 $ 7,055 $(103,697) $ (96,642)
Transfer of common stock from stockholder - 4,540 - 4,540
Imputed rent expense contribution - 1,728 - 1,728
Net loss - - (8,943) (8,943)
----- ------ -------- -------
Balance, December 31, 1997 1,500 $13,323 $(112,640) $ (99,317)
Transfer of common stock from stockholder - 229,118 - 229,118
Imputed rent expense contribution - 1,728 - 1,728
Imputed interest on stockholder loan - 429 - 429
Net loss - - (267,769) (267,769)
----- ------ -------- -------
Balance, December 31, 1998 1,500 $244,598 $(380,409) $(135,811)
Imputed rent expense contribution (unaudited) - 432 - 432
Imputed interest on stockholder loan (unaudited) - 140 - 140
Net income (unaudited) - - 20,391 20,391
----- ------ -------- -------
Balance, March 31, 1999 (unaudited) 1,500 $245,170 $(360,018) $(114,848)
===== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
ONLINE PSYCHOLOGICAL SERVICES, INC.
STATEMENTS OF CASH FLOWS
-------
<TABLE>
<CAPTION>
For the years ended For the three months
December 31, ended March 31,
------------------- --------------------
1998 1997 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(267,769) $ (8,943) $ 20,391 $(29,364)
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities:
Depreciation 3,772 3,507 1,061 903
Compensation expense satisfied by issuance of common stock 229,118 4,540 - -
Imputed interest 429 - 140 263
Imputed rent 1,728 1,728 432 432
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable (10,370) 2,506 (14,865) (2,441)
Increase (decrease) in accounts payable and accrued expenses 19,268 6,142 2,842 (1,276)
Increase in deferred compensation - 10,000 - -
Increase in deferred revenue 5,502 1,884 245 5,838
------- ----- ------- ------
Net cash (used in) provided by operating activities (18,322) 21,364 10,246 (25,645)
------- ------ ------- ------
Cash flows from investing activities:
Equipment purchases (3,175) (6,830) - -
Due from stockholders (6,771) - - (347)
------- ----- ------- ------
Net cash used in investing activities (9,946) (6,830) - (347)
------- ----- ------- ------
Cash flows from financing activities:
Proceeds from stockholder loan 24,430 20,426 - 15,026
Payments on stockholder loan (12,170) (25,026) (4,259) -
Net borrowings on line of credit 1,968 2,644 (1,497) 3,174
------- ----- ------- ------
Net cash provided by (used in) investing activities 14,228 (1,956) (5,756) 18,200
------- ----- ------- ------
Net (decrease) increase in cash (14,040) 12,578 4,490 (7,792)
Cash, beginning of period 22,643 10,065 8,603 22,643
------- ------ ------- ------
Cash, end of period $ 8,603 $ 22,643 $ 13,093 $ 14,851
========= ======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 2,435 $ 2,567 $ - $ -
========= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
ONLINE PSYCHOLOGICAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
----------
1. Business and Organization
Online Psychological Services, Inc., (the "Company") is an interactive
media company specializing in the online development of content related to
mental health issues. The Company was incorporated in the state of Delaware
on January 29, 1996 to develop programming material for distribution
through online service providers and the internet and is involved in the
sale of products through Internet commerce.
The Company and its stockholders entered into a definitive agreement with
iVillage Inc. ("iVillage") pursuant to which the Company was acquired by
iVillage effective June 30, 1999 (the "Acquisition"). All outstanding
shares of the Company were exchanged for cash and stock. These financial
statements and footnotes are those of the Company prior to the Acquisition
and do not reflect any purchase accounting adjustments or other
transactions related to the Acquisition (see Note 6).
The Company has a limited operating history and its prospects are subject
to the risks, expenses and uncertainties frequently encountered by
companies in the new and rapidly evolving markets for Internet products and
services. These risks include the failure to develop and extend the
Company's online service brands, the rejection of the Company's services by
Web consumers, vendors or advertisers, and the inability of the Company to
maintain and increase the levels of traffic on its online services. In the
event the Company does not successfully implement its business plan,
certain assets may not be recoverable.
2. Summary of Significant Accounting Policies
Cash
-----
The Company considers all highly liquid investments with an original
maturity of three months or less at the time of purchase to be cash and
cash equivalents. The Company has no cash equivalents at December 31, 1998
or 1997.
Equipment
---------
Equipment, which consists of office computers and peripherals, is stated at
cost. The cost of additions and improvements are capitalized, while
maintenance and repairs are charged to expense when incurred. Depreciation
is computed using the straight-line method based on the estimated useful
life of three years. Upon retirement or sale, the
Continued
6
<PAGE>
ONLINE PSYCHOLOGICAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
----------
carrying amount of assets disposed of and related accumulated depreciation
are removed from the accounts and any resulting gain or loss is reflected
in the related period of operations. Long-lived assets held and utilized by
the Company are reviewed for impairment whenever changes in circumstances
indicate the carrying value of such assets may not be recoverable.
Income Taxes
------------
The Company has elected to be treated as an S Corporation for federal and
state income tax purposes and accordingly, any liabilities for income taxes
are the direct responsibility of the stockholders.
Stock Based Compensation
------------------------
The Company accounts for stock based compensation in accordance with the
provisions of Accounting Principals Board Opinion ("APB") No. 25,
Accounting for Stock Issued to Employees, and complies with the disclosure
provisions of Statement of Financial Accounting Standards (SFAS") No. 123,
Accounting for Stock-Based Compensation, for non employee compensation.
Under SFAS No. 123, compensation cost for an award of equity instruments to
an employee shall be recognized over the period(s) in which the related
employee services were rendered and if the award is for past services, the
related compensation cost shall be recognized in the period in which the
equity instrument is granted.
Revenue Recognition
-------------------
The Company's revenues are derived principally from licenses for the use,
marketing and distribution of its web site content; the sale of banner
advertisements; subscriptions and merchandise sales. Revenue from
traffic-based license fees is recognized upon notification from the third
party of web site traffic related to the Company's content. Revenue from
fixed license fees is recognized ratably over the term of the contracts.
Advertising revenue is recognized based on the placement of advertisements
by a third party placement agent. Such revenue is recognized once the
advertisement has been placed and as reported by the third-party placement
agent. The Company recognizes the net revenue received with respect to such
content licenses and advertising activities. Subscription revenue is
recognized ratably over the term of the contracts, which generally range
from one month to a year. Revenue generated from merchandise sales, net of
any discounts, is generally recognized upon shipment. Cash received in
advance of revenues earned for subscription and advertising contracts is
recorded as deferred revenue.
Continued
7
<PAGE>
ONLINE PSYCHOLOGICAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
----------
Fair Value
----------
The carrying amounts of cash, accounts receivable, accounts payable and
amounts included in other current assets and current liabilities that meet
the definition of a financial instrument, approximate fair value because of
the short-term nature of these amounts.
Concentration of Credit Risk
----------------------------
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of trade accounts
receivable. Receivables are not collateralized and accordingly, the Company
performs ongoing credit evaluations of its customers to reduce the risk of
loss.
The Company has a license agreement with an Internet service provider,
which generated revenue approximating 52% and 93% of total revenue for the
years ended December 31, 1998 and 1997, respectively. Primarily all the
Company's receivables at December 31, 1998 and 1997 are from
well-established companies. Substantially all subscribers pay for services
with major credit cards for which the Company receives timely remittances
from the credit card carriers. The Company has not experienced any losses
in connection with the collectibility of its accounts receivable, and
accordingly, has made no provision for doubtful accounts in its financial
statements.
Use of Estimates
----------------
The financial statements are prepared on the accrual basis of accounting in
conformity with generally accepted accounting principles. 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 reported
period. The most significant estimate relates to the valuation of the
Company's stock performed by an independent appraiser. Actual results could
differ from those estimates.
Continued
8
<PAGE>
ONLINE PSYCHOLOGICAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
----------
Recent Pronouncements
---------------------
Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information ("SFAS 131") replaces the
industry segment approach under previously issued pronouncements with the
management approach. The management approach designates the internal
organization that is used by management for allocating resources and
assessing performance as the source of the Company's reportable segments.
SFAS 131 also requires disclosures about products and services, geographic
areas and major customers. Currently, the Company has only one reportable
segment; the adoption of SFAS 131 is not expected to significantly impact
financial statement disclosure of the Company.
In March 1998, the American Institute of Certified Public Accountants
issues Statement of Position 98-1 (SOP 98-1) entitled "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." SOP
98-1 requires that both internal and external costs incurred to develop
internal-use software during the application development stage be
capitalized and amortized over the estimated useful life of the software.
SOP 98-1 is effective for fiscal years beginning after December 15, 1998
and is not expected to have a material effect on the Company's financial
statements.
Interim Financial Information (unaudited)
-----------------------------------------
Interim financial information for the three months ended March 31, 1999 and
1998 included herein is unaudited. However, the Company believes the
interim information includes all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the results for
interim periods. The results of operations for the three months ended March
31, 1999 are not necessarily indicative of the results to be expected for
the year ending December 31, 1999.
3. Revolving Line of Credit Agreement
Amounts outstanding under a revolving line of credit were $17,066 and
$15,098 at December 31, 1998 and 1997, respectively. The Company may borrow
up to $20,000 under this line of credit, which will expire October 26,
1999. Advances on the credit line are payable upon demand and bear interest
at prime plus 6.9%. The line of credit is guaranteed by the Company's Chief
Executive Officer and stockholder. Interest expense for the years ending
December 31, 1998 and 1997, was $2,442 and $2,623, respectively. There are
no fees on the unused line.
Continued
9
<PAGE>
ONLINE PSYCHOLOGICAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
----------
4. Stockholders' Equity
During 1997, the Company's founder and Chief Executive Officer
transferred 30 shares of his holdings in the Company's Common Stock to
an employee at the estimated fair value of the shares, as determined
based upon an independent valuation, in consideration for services
rendered to the Company by the employee. In connection with the
issuance of the 30 shares of Common Stock, the Company recorded
compensation expense of $4,540 for the year ended December 31, 1997.
During 1998, the Company's founder and Chief Executive Officer
transferred 757 shares of his holdings in the Company's Common Stock to
two employees of the Company. This transfer was recorded by the Company
at the estimated fair value of the shares, as determined based upon an
independent valuation, in consideration for services rendered to the
Company by the employees. In connection with the transfer of the 757
shares of Common Stock, the Company recorded compensation expense of
$229,118 for the year ended December 31, 1998. At December 31, 1998, in
connection with this transaction, $6,771 is due from the stockholders
as reimbursement for related payroll taxes paid by the Company on their
behalf. Such amount was repaid by the stockholders subsequent to
December 31, 1998.
5. Related Party Transactions
The Company leases web server space from a company that is wholly-owned
by one of its stockholders. This lease expires March 31, 2000. Lease
expense was $32,363 and $22,215 for the years ended December 31, 1998
and 1997, respectively.
The Chief Executive Officer and stockholder provides corporate office
space to the Company for which he is not reimbursed. Rental expense was
imputed, based on the fair market value of the occupied property.
Rental expense for the years ended December 31, 1998 and 1997 was
$1,728 and $1,728, respectively.
During 1998 and 1997, in the form of a note, the Company received cash
advances of $24,430 and $20,426, respectively, from its Chief Executive
Officer and stockholder for
Continued
10
<PAGE>
ONLINE PSYCHOLOGICAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
----------
purposes of funding operations. The note is non-interest bearing for which
interest is imputed at 7% per annum, and is payable upon demand. At
December 31, 1998 and 1997, the Company's obligation under this note was
$12,260 and $0, respectively, and interest of $429 and $0, was charged to
expense during the years then ended.
6. Subsequent Event
Effective June 30, 1999, in accordance with the terms of a definitive
agreement (the "Acquisition Agreement"), the Company was acquired by
iVillage Inc. ("iVillage") for $24.8 million. All outstanding shares of
the Company were exchanged for $1.5 million in cash and a number of shares
of iVillage common stock equal to $23.3 million, as defined by the
Acquisition Agreement. Concurrent with the acquisition, the Company's tax
status will change from an S-Corporation to a C-Corporation.
In connection with the closing, the current stockholders of the Company
entered into a Release Agreement with iVillage waiving the payment of
$130,000 of deferred compensation and $8,001 representing a stockholder
loan.
No effect has been given to these financial statements for adjustments that
have or will take place as a result of the iVillage purchase of the
Company.
11
<PAGE>
(b) iVillage Inc. Unaudited Pro Forma Condensed Consolidated
Financial Information
IVILLAGE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
The pro forma financial information gives effect to the following
transactions.
ACQUISITION OF MINORITY INTEREST OF iBABY, INC.
On February 10, 1999, iVillage Inc. entered into an agreement to purchase
all of the outstanding shares of iBaby, Inc. held by the minority stockholders
in exchange for approximately $11.0 million. The purchase price is comprised of
$8 million in cash and common stock having an aggregate value of $3.0 million.
iVillage paid $1.5 million on February 12, 1999, with the remaining $6.5 million
being payable within two business days of the closing of iVillage's initial
public offering of common stock ("IPO") and receipt by iVillage, of at least
$6.5 million of IPO proceeds. The number of shares to be issued were dependent
upon the IPO price per share, less underwriters' discount.
The acquisition of the minority interest of iBaby has been accounted for as
a purchase. As iVillage has held a majority interest and control of iBaby since
April 1998, the results of operations have already been reflected in iVillage's
consolidated financial statements.
ACQUISITION OF ASTROLOGY.NET
On February 18, 1999, the Company acquired all of the outstanding stock of
KnowledgeWeb, Inc. d/b/a/ Astrology.Net ("Astrology.Net"), an Internet content
provider, in exchange for 802,125 shares of iVillage's common stock and $1
million in cash. The Astrology.Net Agreement also provides for employment,
non-compete and stock option agreements for the founding stockholders of
Astrology.Net.
The terms of the agreement are such that 326,331 of the shares of common
stock were issued up-front and the remaining 475,794 will be placed into escrow
to be released to the stockholders of Astrology.Net within a period of five
years. The release from escrow will be accelerated dependent on Astrology.Net
meeting revenue targets. In the event there is no acceleration of the release of
these shares by the end of the five-year term, all remaining shares in escrow
will be released to Astrology.Net's stockholders. In addition, all outstanding
options to purchase Astrology.Net common stock were converted into non-qualified
options to purchase an aggregate of 31,208 shares of iVillage common stock.
In addition to the shares issued, the Company has issued the founding
stockholders of Astrology.Net who will continue as employees of Astrology.Net
options to purchase 150,000 shares of iVillage common stock at an exercise price
equal to the IPO price. These options vest over a period of seven years, with
accelerated vesting dependent on Astrology.Net meeting certain revenue targets,
however, they are contingent on continued employment with iVillage.
The acquisition has been accounted for as a purchase with an estimated
purchase price of approximately $21.0 million, based on a value of the Company's
common stock of $24.00 a share and an estimate for the value of the
Astrology.Net options assumed by iVillage. The difference between the purchase
price and the fair value of the acquired net assets of Astrology.Net has been
recorded as goodwill and amortized over the period of expected benefit.
NBC AGREEMENT
On March 9, 1999, the Company and National Broadcasting Company, Inc.
("NBC") entered into an agreement to amend, subject to closing conditions, the
November 11, 1998 advertising and promotion agreement with NBC which included,
among other things, the issuance of 4,889,030 shares of Series E Convertible
Preferred Stock.
12
<PAGE>
ONLINE PSYCH
On June 30, 1999, iVillage acquired Online Psychological Services, Inc. and
Code Stone Technologies, Inc. Online Psych operates a Web site focusing on
mental health issues, while Code Stone provides much of the interactive
technology used on Online Psych's Web site. The aggregate purchase price paid to
acquire Online Psych and Code Stone consisted of $1.5 million cash and
approximately 577,000 shares of iVillage common stock valued at approximately
$28.5 mill in under the purchase method of accounting. For purposes of the
following unaudited pro forma condensed consolidated financial statements,
Online Psych and Code Stone are collectively referred to as "Online Psych".
LAMAZE PUBLISHING
On July 13, 1999, iVillage entered into an agreement to acquire all of the
outstanding stock of Lamaze Publishing Company, Inc. ("Lamaze Publishing"), a
multimedia provider of education information to expectant and new mothers. The
total purchase price consisted of 1,748,791 shares of iVillage common stock,
subject to certain adjustments, and approximately $5 million to repay debt. The
difference between the purchase price of $101.3 million as calculated according
to generally accepted accounting principles and the fair value of the acquired
net assets of Lamaze Publishing will be recorded as goodwill and amortized over
the period of expected benefit which is estimated at ten years.
The accompanying unaudited pro forma condensed consolidated financial
statements illustrate the effect of all of the events discussed above as if they
had occurred on January 1, 1998 for the unaudited pro forma condensed
consolidated statements of operations. The unaudited pro forma condensed
consolidated balance sheet gives effect to the acquisition of Lamaze Publishing
as if it had occurred on June 30, 1999.
The unaudited pro forma condensed consolidated financial statements have
been included as required by the rules of the Securities and Exchange Commission
and are provided for comparative purposes only. The unaudited pro forma
condensed consolidated financial statements do not purport to be indicative of
the results of operations or financial position that would have been obtained if
the transactions had been effected on the date indicated or which may be
obtained in the future.
The accompanying unaudited pro forma condensed consolidated financial
statements should be read in connection with the audited and unaudited
historical financial statements of iVillage which have been filed with the
Securities and Exchange Commission.
13
<PAGE>
iVillage, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 1999
IN THOUSANDS
<TABLE>
<CAPTION>
iVillage Inc. Pro Forma
and Subsidiaries Lamaze Adjustments Pro Forma
---------------- ------ ----------- ---------
Assets:
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $ 85,279 $ 85 1(a) $ (4,720) $ 80,644
Accounts receivable, net 2,843 2,191 5,034
Prepaid expenses and other current assets 1,162 2,646 3,808
-------- ------- -------- ---------
Total current assets 89,284 4,922 (4,720) 89,486
Fixed assets, net 6,968 2,216 9,184
Other assets 189 189
Prepaid distribution costs - 65 65
Goodwill and intangible assets, net 61,631 402 1(b) 101,279 163,312
-------- ------- -------- ---------
Total assets $158,072 $7,605 $96,559 $ 262,236
======== ====== ======= =========
Liabilities and Stockholder's Equity:
Current liabilities:
Accounts payable and accrued expenses $ 10,398 $ 2,708 1(f) $ 350 $ 13,456
Capital leases payable 73 73
Deferred revenue 2,117 4,345 1(g) 6,462
Other current liabilities 192 2,552 1(c) (2,552) 192
-------- ------- -------- ---------
Total current liabilities 12,780 9,605 (2,202) 20,183
Long term debt and Shareholders' loans - 2,168 1(c) (2,168) -
-------- ------- -------- ---------
Total liabilities 12,780 11,773 (4,370) 20,183
-------- ------- -------- ---------
Commitments and Contingencies
Stockholder's equity:
Common stock 243 534 1(d) (534) 260
1(e) 17
Additional paid-in capital 302,430 1(e) 96,743 399,173
Accumulated deficit (134,549) (4,702) 1(d) 4,702 (134,549)
Stockholders' notes receivable (14,681) (14,681)
Unearned compensation and deferred advertising (8,151) - (8,151)
-------- ------- -------- ---------
Total stockholder's equity 145,292 (4,168) 100,929 242,052
-------- ------- -------- ---------
Total liabilities and stockholders' equity $ 158,072 $ 7,605 $ 96,559 $ 262,236
======== ====== ======= =========
</TABLE>
14
<PAGE>
iVillage Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Six months ended June 30, 1999
(in thousands)
<TABLE>
<CAPTION>
1/1/99- 1/1/99- 1/1/99- 1/1/99-
6/30/99 2/17/99 6/30/99 6/29/99
iVillage Inc. Online Pro Forma
and Subsidiaries Astrology.Net Lamaze Psych Adjustments Pro Forma
---------------- -------------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 14,572 $ 190 6,403 $ 171 $ 21,336
---------------- -------------- ---------- ----------- ----------- ---------
Cost of revenues 9,112 124 3,393 56 12,685
---------------- -------------- ---------- ----------- ----------- ---------
Gross margin 5,460 66 3,010 115 - 8,651
---------------- -------------- ---------- ----------- ----------- ---------
Operating expenses:
Product development and technology 3,038 - 3,038
Sales and marketing 23,206 29 1,327 8 24,570
General and administrative 7,872 64 1,461 92 9,489
Depreciation and amortization 7,519 9 435 2 3(a) 5,056 19,473
---------------- -------------- ---------- ----------- ---------
3(a) 871
3(a) 459
3(a) 5,122
-----------
Total operating expenses 41,635 102 3,223 102 11,508 56,570
---------------- -------------- ---------- ----------- ----------- ---------
Loss from operations (36,175) (36) (213) 13 (11,508) (47,919)
Interest income (expense), net 1,513 (3) (180) - 3(b) 180 1,510
---------------- -------------- ---------- ----------- ----------- ---------
Net loss $ (34,662) $ (39) $ (393) $ 13 $ (11,328) $(46,409)
================ ============== ========== =========== =========== =========
Preferred stock deemed dividend (23,612) - (23,612)
Net loss attributable to common stockholders $ (58,274) $ (39) $ (393) $ 13 $ (11,328) $(70,021)
================ ============== ========== =========== =========== =========
Basic and diluted net loss per share
attributable to common stockholders (2.77) (2.89)
577
214
Weighted average shares of common stock 29
outstanding used in computing basic 625
and diluted net loss per share 21,027 3(c) 1,749 24,221
================ ============== ========== =========== =========== =========
</TABLE>
15
<PAGE>
iVillage Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 1998
(in thousands)
<TABLE>
<CAPTION>
iVillage Inc. Online Pro Forma
and Subsidiaries Astrology.Net Lamaze Psych Adjustments Pro Forma
---------------- ------------- ------ ----- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 15,012 $ 848 $ 11,212 $ 221 $ - $ 27,293
---------------- ------------- ------ ----- ----------- ---------
Cost of revenues 12,403 204 5,488 155 $ 18,250
---------------- ------------- ------ ----- ----------- ---------
Gross margin 2,609 644 5,724 66 - 9,043
---------------- ------------- ------ ----- ----------- ---------
Operating expenses:
Product development and technology 2,118 - 2,118
Sales and marketing 28,523 127 2,666 4 - 31,320
General and administrative 10,612 537 2,812 323 - 14,284
Depreciation and amortization 5,683 91 830 4 2(a) 10,112 37,603
---------------- ------------- ------ ----- ----------- ---------
2(a) 3,670
2(a) 6,970
2(a) 10,243
Total operating expenses 46,936 755 6,308 331 30,995 85,325
---------------- ------------- ------ ----- ----------- ---------
Loss from operations (44,327) (111) (584) (265) (30,995) (76,282)
Interest income (expense), net 591 (299) (3)2(b) 299 588
Loss on sale of Web site (504) - (504)
Minority interest 587 - 2(c) (587) 0
---------------- ------------- ------ ----- ----------- ---------
Net loss $ (43,653) $ (111) $ (883) $ (268) $(31,283) $ (76,198)
================ ============= ====== ===== =========== =========
Basic and diluted net loss per
share attributable to common
stockholders (2.59) (3.51)
2(d) 577
2(d) 1,630
2(d) 125
Weighted average shares of common
stock outstanding used 2(d) 802
in computing basic and diluted
net loss per share 16,854 2(d) 1,749 21,737
================ ====== ===== =========== =========
</TABLE>
16
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
1. The pro forma adjustments to the unaudited pro forma condensed
consolidated balance sheet as of June 30, 1999 are as follows:
a) Adjustment to cash, for the cash portion of the acquisition price,
of approximately $4,720 for Lamaze Publishing.
b) Adjustment to goodwill and intangible assets to reflect the excess
of the purchase price over the fair value of net assets acquired of
Lamaze Publishing, calculated as follows:
<TABLE>
<CAPTION>
LAMAZE
--------
<S> <C>
Cash portion of purchase price........................................... $ 4,720
Value of stock and option portion of purchase price...................... 96,603
Acquisition costs........................................................ 350
--------
Purchase price........................................................... 101,673
Fair value of net assets to be acquired.................................. 552
--------
Goodwill................................................................. $101,121
--------
--------
</TABLE>
--------------------------
* The value of the common stock to be issued in connection with the
acquisition of Lamaze Publishing was estimated as $55.24, the
average value of the iVillage common stock surrounding the date the
terms of the acquisition were agreed to.
The allocation of the purchase price to the assets and liabilities
acquired are preliminary. Final allocations will be based on
appraisal and other analyses of fair values. The final allocation
may differ from the amounts reflected above.
c) Adjustment to remove the short-term and long-term notes payable of
Lamaze Publishing that are to be paid off by iVillage on the date
of acquisition.
d) Adjustment to reflect the elimination of all of the stockholders'
equity balances of Lamaze Publishing.
e) Adjustment to reflect the issuance of 1,748,791 shares of iVillage
common stock for the acquisition of Lamaze Publishing.
f) Adjustment to record the estimated acquisition expenses incurred by
iVillage of approximately $350.
2. The pro forma adjustments to the unaudited pro forma condensed
consolidated statement of operations for the year ended December 31, 1998 are as
follows:
a) Adjustment to depreciation and amortization of goodwill of $10,112,
$3,670, $6,970 and $10,243 resulting from the acquisitions of
Lamaze Publishing, iBaby, Astrology.Net and Online Psych,
respectively, over the expected period of benefit (three years for
iBaby, Astrology.Net and Online Psych and ten years for Lamaze
Publishing).
b) Adjustment to remove Lamaze Publishing interest expense of $299,
assuming all notes were paid off by iVillage on January 1, 1998.
c) Adjustment to minority interest of $587 to add back the net loss
previously attributed to the minority stockholders of iBaby.
d) Adjustment to weighted average shares of common stock outstanding
used in computing basic and diluted net loss per share to reflect
the issuance of approximately 802,000, 125,500, 1,750,000 and
577,000 shares of common stock, in connection with the
acquisitions of Astrology.Net,
17
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
iBaby, Lamaze Publishing and Online Psych, respectively, and the
1,629,676 shares issued to NBC in connection with the advertising
and promotion agreement as of January 1, 1998.
3. The pro forma adjustments to the unaudited pro forma condensed
consolidated statement of operations for the six months ended June 30, 1999 are
as follows:
a) Adjustment to reflect the amortization of goodwill of $5,056, $459,
$871 and $5,122 resulting from the acquisitions of Lamaze
Publishing, iBaby, Astrology.Net and Online Psych, respectively,
over the expected period of benefit (three years for iBaby,
Astrology.Net and Online Psych and ten years for Lamaze
Publishing).
b) Adjustment to remove Lamaze Publishing interest expense of $180,
assuming all notes were paid off by iVillage on January 1, 1998.
c) Adjustment to reflect weighted average shares of common stock
outstanding used and computing basic and diluted net loss per
share. This adjustment reflects the issuance of approximately
802,000, 125,500, 1,750,000 and 577,000 shares of common stock, in
connection with the acquisitions of Astrology.Net, iBaby, Lamaze
Publishing and Online Psych, respectively, and the issuance of
1,629,676 shares to NBC in connection with the NBC agreement.
18
<PAGE>
(c) Exhibits
--------
2.1 Agreement and Plan of Reorganization, dated as of June
30, 1999, by and among iVillage Inc., OnlinePsych
Acquisition Corporation, Online Psychological Services,
Inc. and the stockholders of Online Psychological
Services, Inc. (incorporated by reference to Current
Report on Form 8-K filed on July 14, 1999).
2.2 Agreement and Plan of Reorganization, dated as of June
30, 1999, by and among iVillage Inc., Code Stone
Acquisition Corporation, Code Stone Technologies, Inc.
and the sole stockholder of Code Stone Technologies,
Inc. (incorporated by reference to Current Report on
Form 8-K filed on July 14, 1999).
19
<PAGE>
SIGNATURE
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.
iVillage Inc.
(Registrant)
Date: September 27, 1999 By: /s/ Steven A. Elkes
------------------------------
Steven A. Elkes
Senior Vice President
<PAGE>
EXHIBIT INDEX
Exhibits
- --------
2.1 Agreement and Plan of Reorganization, dated
as of June 30, 1999, by and among iVillage
Inc., OnlinePsych Acquisition Corporation,
Online Psychological Services, Inc. and the
stockholders of Online Psychological
Services, Inc. (incorporated by reference to
Current Report on Form 8-K filed on July 14,
1999).
2.2 Agreement and Plan of Reorganization, dated
as of June 30, 1999, by and among iVillage
Inc., Code Stone Acquisition Corporation,
Code Stone Technologies, Inc. and the sole
stockholder of Code Stone Technologies, Inc.
(incorporated by reference to Current Report
on Form 8-K filed on July 14, 1999).
