<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1999
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------------------
ABOUT.COM, INC.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
DELAWARE 7379 13-4034015
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
--------------------------
220 EAST 42ND STREET, 24(TH) FLOOR
NEW YORK, NEW YORK 10017
(212) 849-2000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
------------------------------
MR. SCOTT P. KURNIT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ABOUT.COM, INC.
220 EAST 42ND STREET, 24(TH) FLOOR
NEW YORK, NEW YORK 10017
(212) 849-2000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
------------------------------
Copies to:
<TABLE>
<S> <C>
ALEXANDER D. LYNCH, ESQ. MARK L. JOHNSON, ESQ.
ALAN N. SHAPIRO, ESQ. JOHN D. HANCOCK, ESQ.
BROBECK, PHLEGER & HARRISON LLP FOLEY, HOAG & ELIOT LLP
1633 BROADWAY, 47(TH) FLOOR ONE POST OFFICE SQUARE
NEW YORK, NEW YORK 10019 BOSTON, MASSACHUSETTS 02109
(212) 581-1600 (617) 832-1000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /__________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /__________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /__________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) OFFERING PRICE(2) REGISTRATION FEE(2)
<S> <C> <C> <C>
Common Stock, par value $.001 per share 4,025,000 $226,406,250 $62,941
</TABLE>
(1) Includes shares that the Underwriters have the option to purchase from the
Registrant and certain selling stockholders solely to cover over-allotments,
if any.
(2) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as amended,
based on the high and low sale prices of the Common Stock on the Nasdaq
National Market on September 30, 1999.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY US FEDERAL SECURITIES LAWS TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE>
SUBJECT TO COMPLETION -- OCTOBER 6, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS
, 1999
[LOGO]
3,500,000 SHARES OF COMMON STOCK
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ABOUT.COM, INC.:
THE OFFERING:
<S> <C>
- - We operate ABOUT.COM, a network of
- - We are offering 3,000,000 of the
shares more than 650 highly-targeted
topic-and existing stockholders are
offering specific web sites.500,000
of the shares.
- - About.com, Inc.
- - The underwriters have an option to
220 E. 42nd Street, 24th
Floorpurchase an additional 525,000
shares New York, New York 10017from
us and existing stockholders to
(212) 849-2000cover over-allotments.
- - There is an existing trading market
for
<CAPTION>
SYMBOL & MARKET: these shares. The
reported last sale price on October
4, 1999 was $59.875
<S> <C>
- - BOUT/Nasdaq National Market
</TABLE>
per share.
- - We plan to use the proceeds from
this offering for general corporate
purposes. We will not receive any
proceeds from the shares sold by
existing stockholders.
- - Closing: , 1999
Per Share Total
Public offering price: $ $
Underwriting fees:
Proceeds to About.com:
Proceeds to selling stockholders:
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
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Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE
BEAR, STEARNS & CO. INC.
ROBERTSON STEPHENS
VOLPE BROWN WHELAN & COMPANY
E*OFFERING
DLJDIRECT Inc.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 4
Forward-Looking Statements; Market
Data................................ 12
Use of Proceeds....................... 13
Price Range of Common Stock........... 13
Dividend Policy....................... 13
Capitalization........................ 14
Dilution.............................. 15
Selected Consolidated Financial
Data................................ 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
<CAPTION>
PAGE
<S> <C>
Business.............................. 27
Management............................ 41
Related-Party Transactions............ 51
Principal and Selling Stockholders.... 55
Description of Capital Stock.......... 57
Underwriting.......................... 60
Legal Matters......................... 62
Experts............................... 62
Where You Can Find Additional
Information......................... 62
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, ESPECIALLY THE RISKS OF
INVESTING IN OUR COMMON STOCK DISCUSSED UNDER "RISK FACTORS," BEFORE INVESTING
IN OUR COMMON STOCK. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS
PROSPECTUS ASSUMES THAT THE UNDERWRITERS DO NOT EXERCISE THEIR OVER-ALLOTMENT
OPTION.
ABOUT.COM, INC.
OUR BUSINESS
We operate ABOUT.COM, a network of more than 650 highly-targeted,
topic-specific web sites. Our network is differentiated by the high quality and
depth of content we provide to users through the efforts of knowledgeable human
guides who manage the sites, the volume of sites in our network and the
consistency of site structure and design across the network. The sites provide
high-quality original articles, moderated forums and chat rooms, newsletters,
easy access to related sites, tools, and functionality within the ABOUT.COM
network and extensive hand-picked links to web sites outside of ABOUT.COM. We
pre-screen, train and monitor our guides to ensure quality and consistency
across our network.
Our network has been the fastest growing property among the top 25 Internet
properties ranked by Media Metrix since we launched the About.com brand in May
1999. According to Media Metrix, approximately 8.9 million unique users visited
ABOUT.COM in August 1999, making ABOUT.COM the number one
news/information/entertainment Internet property in terms of audience reach and
the fifteenth largest Internet property overall.
We believe that the design of our network provides an attractive advertising
and electronic commerce platform for reaching highly concentrated groups of
users. Because our network is organized into sections and channels of related
sites, we provide advertisers and electronic commerce marketers the ability to
access specific audiences through our highly targeted sites or use our sections,
channels or network to reach broader audiences.
OUR GROWTH STRATEGY
Our objective is to enhance our position as the leading Internet network of
topic-specific web sites. The key elements of our strategy include:
- Enhancing channels
- Increasing traffic
- Continuing to build brand awareness
- Maximizing revenues from highly-targeted advertising
CORPORATE INFORMATION
We were incorporated in New York in June 1996 as General Internet Inc. We
reincorporated in Delaware in December 1998 as MiningCo.com, Inc. and changed
our corporate name to About.com, Inc. in May 1999. Our principal executive
offices are located at 220 East 42nd Street, 24th Floor, New York, New York
10017. Our telephone number at that location is (212) 849-2000 and our e-mail
address is [email protected]. INFORMATION CONTAINED ON OUR WEB SITE DOES NOT
CONSTITUTE PART OF THIS PROSPECTUS.
1
<PAGE>
THE OFFERING
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<S> <C>
Common stock offered:
By About.com................................... 3,000,000 shares
By the selling stockholders.................... 500,000 shares
Total...................................... 3,500,000 shares
Common stock to be
outstanding after this offering.................. 15,288,418 shares
Use of proceeds.................................... We intend to use our net proceeds of
this offering for general corporate
purposes. See "Use of Proceeds."
Nasdaq National Market symbol...................... BOUT
</TABLE>
ADDITIONAL SHARES MAY BE ISSUED AFTER THIS OFFERING UPON THE EXERCISE OF OPTIONS
AND WARRANTS.
The number of shares of common stock to be outstanding after this offering
is based on shares outstanding as of September 30, 1999. You should be aware
that we are permitted, and in some cases obligated, to issue shares of common
stock in addition to the common stock to be outstanding after this offering. If
and when we issue these shares, the percentage of common stock you own may be
diluted. The following is a summary of the additional shares of common stock
that we have reserved for issuance as of September 30, 1999:
- 2,810,123 shares issuable upon the exercise of options outstanding at a
weighted average exercise price of $18.22 per share, of which 865,058 were
exercisable, and 431,042 shares available for future option grants;
- 125,000 shares available for issuance to our employees who elect to buy
stock in the future under our employee stock purchase plan; and
- 65,860 shares issuable upon the exercise of warrants outstanding at a
weighted average exercise price of $9.80 per share.
About.com, MiningCo., The Mining Company, GuideSite and our logo are our
trademarks. Each other trademark, trade name or service mark appearing in this
prospectus belongs to its holder.
2
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table summarizes our consolidated statements of operations
data. This table does not present all of our consolidated financial information.
You should read this information together with our consolidated financial
statements and the notes to those statements beginning on page F-1 of this
prospectus, the information under "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 27, 1996
(INCEPTION) YEAR ENDED SIX MONTHS ENDED
THROUGH DECEMBER 31, JUNE 30,
DECEMBER 31, --------------------- ---------------------
1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues.................................................. $ -- $ 391 $ 3,722 $ 548 $ 6,074
Cost of revenues.......................................... 91 1,931 4,189 1,286 5,246
Non-cash compensation..................................... -- -- 27 20 3,621
------------- --------- ---------- --------- ----------
Gross profit (loss)....................................... (91) (1,540) (494) (758) (2,793)
Operating expenses:
Sales and marketing..................................... 241 1,761 7,890 1,377 23,784
General and administrative.............................. 1,101 1,994 2,944 1,103 3,273
Product development..................................... 948 3,046 3,113 1,184 2,934
Non-cash compensation................................... -- -- 451 231 616
Amortization of goodwill................................ -- -- -- -- 33
------------- --------- ---------- --------- ----------
Total operating expenses.................................. 2,290 6,801 14,398 3,895 30,640
------------- --------- ---------- --------- ----------
Loss from operations...................................... (2,381) (8,341) (14,892) (4,653) (33,433)
Other income (expense), net............................... (57) (299) (686) (571) 818
------------- --------- ---------- --------- ----------
Net loss.................................................. (2,438) (8,640) (15,578) (5,224) (32,615)
Cumulative dividends and accretion of convertible
preferred stock to liquidation value.................... -- -- (1,230) -- (659)
------------- --------- ---------- --------- ----------
Net loss attributable to common stockholders.............. $ (2,438) $ (8,640) $ (16,808) $ (5,224) $ (33,274)
------------- --------- ---------- --------- ----------
------------- --------- ---------- --------- ----------
Basic and diluted net loss per common share............... $ (1.20) $ (4.94) $ (9.71) $ (3.08) $ (4.38)
------------- --------- ---------- --------- ----------
------------- --------- ---------- --------- ----------
Weighted average shares outstanding used in basic and
diluted net loss per common share calculation........... 2,035 1,749 1,732 1,698 7,589
------------- --------- ---------- --------- ----------
------------- --------- ---------- --------- ----------
</TABLE>
The following table summarizes our consolidated balance sheets data. The as
adjusted column reflects our sale of 3,000,000 shares of common stock in this
offering, the net proceeds from which are estimated to be approximately $168.9
million after deducting estimated underwriting fees and estimated offering
expenses payable by us. Please see "Capitalization."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
--------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
CONSOLIDATED BALANCE SHEETS DATA:
Cash and cash equivalents........................................................... $ 61,506 $ 230,423
Working capital..................................................................... 52,911 221,828
Total assets........................................................................ 74,969 243,886
Notes payable, excluding current portion............................................ 667 667
Total stockholders' equity.......................................................... 62,454 231,371
</TABLE>
3
<PAGE>
RISK FACTORS
ANY INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD CONSIDER CAREFULLY THE FOLLOWING INFORMATION ABOUT THESE RISKS, TOGETHER
WITH THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE YOU DECIDE TO
BUY OUR COMMON STOCK. IF ANY OF THE EVENTS DESCRIBED IN THE FOLLOWING RISK
FACTORS ACTUALLY OCCURS, OUR BUSINESS, RESULTS OF OPERATIONS OR FINANCIAL
CONDITION WOULD LIKELY SUFFER. IN THIS CASE, THE MARKET PRICE OF OUR COMMON
STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF THE MONEY YOU PAID TO BUY
OUR COMMON STOCK.
BECAUSE WE HAVE ONLY BEEN IN BUSINESS FOR A SHORT PERIOD OF TIME, THERE IS
LIMITED INFORMATION UPON WHICH YOU CAN EVALUATE OUR BUSINESS.
We were incorporated in June 1996 and launched our network in April 1997.
Accordingly, you can only evaluate our business based on our limited operating
history. As a young company, we face risks and uncertainties relating to our
ability to successfully implement our business plan. If we are unsuccessful in
addressing these risks and uncertainties, our business, results of operations
and financial condition will be materially adversely affected.
WE HAVE LOST MONEY EVERY QUARTER AND EVERY YEAR, AND WE EXPECT TO LOSE MONEY IN
THE FUTURE.
IF OUR REVENUES DO NOT INCREASE SUBSTANTIALLY, WE MAY NEVER BECOME
PROFITABLE. We have not generated enough revenues to exceed the substantial
amounts we have spent to create, launch and enhance ABOUT.COM and to grow our
business. Even if we do achieve profitability, we may not sustain or increase
profitability on a quarterly or annual basis in the future.
A PORTION OF OUR HISTORICAL REVENUES HAVE BEEN DERIVED FROM BARTER
AGREEMENTS. Approximately 10% of our revenues in 1998 and approximately 7% of
our revenues in the first six months of 1999 were derived from agreements where
we traded advertisements on ABOUT.COM in exchange for advertisements on other
web sites without receiving any cash payments. We expect that these barter
revenues will continue to account for up to 10% of our total annual revenues in
the future.
OUR COSTS OF REVENUES COMBINED WITH OUR OPERATING EXPENSES HAVE EXCEEDED OUR
REVENUES FOR ALL QUARTERS. We have historically funded our operations by selling
our stock and not by generating income from our business. At June 30, 1999, our
accumulated deficit was $59.3 million. We expect to continue to lose money for
the foreseeable future because we plan to continue to incur significant
expenses.
FLUCTUATIONS IN OUR OPERATING RESULTS MAY NEGATIVELY IMPACT OUR STOCK PRICE.
Our quarterly operating results may fluctuate significantly in the future
due to a variety of factors that could affect our revenues or our expenses in
any particular quarter. It is possible that in some future periods our results
of operations may be below the expectations of public market analysts and
investors. In this event, the price of our common stock is likely to fall.
You should not rely on our results of operations during any particular
quarter as an indication of our results for a full year or any other quarter.
Factors that may affect our quarterly results include:
- the demand for advertising on ABOUT.COM;
- the number of Internet users on, and the frequency of their use of,
ABOUT.COM, since our advertising revenues are typically based on user
traffic;
- our ability to attract and retain advertisers and electronic commerce
partners;
- fees we may pay for distribution or content or other costs we may incur as
we expand our operations;
4
<PAGE>
- our ability to meet the minimum number of advertisements that we are
required to deliver to users by many of our advertising contracts, since
our failure to do this would result in our deferring recognition of the
related revenues and would reduce our available advertising inventory in
subsequent periods;
- changes in rates paid for advertising on ABOUT.COM; and
- the timing and amount of our costs related to advertising sales and
marketing efforts.
Our operating expenses are based in part on our expectations of our future
revenues and are relatively fixed in the short term. Given our limited operating
history and our difficulties in accurately estimating the user traffic
historically experienced on our website, user traffic on our website is
difficult to forecast accurately. Consequently, since revenues from Internet
advertising will make up a significant amount of our revenues for the
foreseeable future, our revenues are difficult to forecast accurately. In
particular, we intend to continue to expend significant amounts to build and
enhance brand awareness of ABOUT.COM. We may be unable to adjust spending
quickly enough to offset any unexpected revenue shortfall. If we have a
shortfall in revenues in relation to our expenses, or if our expenses precede
increased revenues, then our results of operations and financial condition would
be materially adversely affected.
WE WILL ONLY BE ABLE TO EXECUTE OUR BUSINESS PLAN IF INTERNET USAGE GROWS.
Our business would be adversely affected if Internet usage does not grow.
Internet usage may be inhibited for any of the following reasons:
- the Internet infrastructure may not be able to support the demands placed
on it, and its performance and reliability may decline as usage grows;
- security and authentication concerns with respect to the transmission over
the Internet of confidential information, such as credit card numbers, and
attempts by unauthorized computer users, so-called hackers, to penetrate
online security systems; and
- privacy concerns, including those related to the ability of web sites to
gather user information without the user's knowledge or consent.
WE WILL ONLY BE ABLE TO EXECUTE OUR BUSINESS PLAN IF INTERNET ADVERTISING
INCREASES.
OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION WOULD BE
MATERIALLY ADVERSELY AFFECTED IF THE INTERNET ADVERTISING MARKET DEVELOPS MORE
SLOWLY THAN WE EXPECT OR IF WE ARE UNSUCCESSFUL IN INCREASING OUR ADVERTISING
REVENUES. Revenues from Internet advertising will make up a significant amount
of our revenues for the foreseeable future. Since the Internet advertising
market is new and rapidly evolving, we cannot yet gauge its effectiveness as
compared to traditional advertising media.
THE ADOPTION OF INTERNET ADVERTISING, PARTICULARLY BY THOSE ENTITIES THAT
HAVE HISTORICALLY RELIED UPON TRADITIONAL MEDIA FOR ADVERTISING, REQUIRES THE
ACCEPTANCE OF A NEW WAY OF CONDUCTING BUSINESS, EXCHANGING INFORMATION AND
ADVERTISING PRODUCTS AND SERVICES. Advertisers that have traditionally relied
upon other advertising media may be reluctant to advertise on the Internet.
These businesses may find Internet advertising to be less effective than
traditional advertising media for promoting their products and services. Many
potential advertising and electronic commerce partners have little or no
experience using the Internet for advertising purposes. Consequently, they may
allocate only limited portions of their advertising budgets to Internet
advertising.
ADVERTISERS AND ELECTRONIC COMMERCE MARKETERS MAY NOT ADVERTISE ON ABOUT.COM
OR MAY PAY LESS FOR ADVERTISING ON ABOUT.COM IF THEY DO NOT BELIEVE THAT THEY
CAN RELIABLY MEASURE THE EFFECTIVENESS OF INTERNET ADVERTISING OR THE
DEMOGRAPHICS OF THE USER VIEWING THEIR ADVERTISEMENTS. We use both internal
measurements and measurements provided to us by third parties. If these third
parties are unable to
5
<PAGE>
continue to provide these services, we would have to perform them ourselves or
obtain them from another provider. This could cause us to incur additional costs
or cause interruptions in our business while we are replacing these services. In
addition, we are implementing additional systems designed to record demographic
data on our customers. If we do not implement these systems successfully, we may
not be able to accurately evaluate the demographic characteristics of our
customers. Moreover, "filter" software programs that limit or prevent
advertising from being delivered to an Internet user's computer are available.
Widespread adoption of this software could adversely affect the commercial
viability of Internet advertising.
TO THE EXTENT THAT MINIMUM GUARANTEED IMPRESSION LEVELS ARE NOT MET OVER THE
CONTRACT PERIOD, WE DEFER RECOGNITION OF THE CORRESPONDING PRO RATA PORTION OF
THE REVENUES RELATED TO SUCH UNFULFILLED OBLIGATION UNTIL THE GUARANTEED
IMPRESSION LEVELS ARE ACHIEVED. Advertising based on impressions, or the number
of times an advertisement is delivered to users, represents substantially all of
our current revenues. To the extent that minimum impression levels are not
achieved for any reason, we may be required to provide additional impressions
after the contract term, which would reduce our advertising inventory.
OUR REVENUES COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO ADAPT TO OTHER
INTERNET ADVERTISING PRICING MODELS IF THEY ARE ADOPTED. It is difficult to
predict which, if any, pricing models for Internet advertising will emerge as
industry standards. This makes it difficult to project our future advertising
rates and revenues.
WE MAY NOT BE ABLE TO ADAPT AS INTERNET TECHNOLOGIES AND CUSTOMER DEMANDS
CONTINUE TO EVOLVE.
To be successful, we must adapt to rapidly changing Internet technologies by
continually enhancing ABOUT.COM and introducing new services to address our
users' changing demands. We could incur substantial costs if we need to modify
our services or infrastructure in order to adapt to changes affecting providers
of Internet services. Our business, results of operations and financial
condition could be materially adversely affected if we incurred significant
costs to adapt, or cannot adapt, to these changes.
THE DEVELOPMENT OF OUR BRAND IS ESSENTIAL TO OUR FUTURE SUCCESS.
If our brand marketing efforts are unsuccessful, our business, financial
condition and results of operations would be materially adversely affected. In
order to build our brand awareness, we must succeed in our brand marketing
efforts, provide high-quality services and increase user traffic on ABOUT.COM.
These efforts have required, and will continue to require, significant expenses.
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY.
Competition could result in less user traffic to ABOUT.COM, price reductions
for our advertising inventory, reduced margins or loss of market share, any of
which would have a material adverse effect on our business, results of
operations and financial condition. We face intense competition for users and
for advertisers. We expect this competition to increase because there are no
substantial barriers to entry in our market. Competition may also increase as a
result of industry consolidation. We may not be able to compete successfully.
We compete for users and advertisers with the following:
- Internet "portal" companies, including Excite, Lycos and Yahoo!;
- Internet retrieval and directories companies, including AskJeeves and
LookSmart;
- online content web sites, including C--net, ESPN.com and ZDNet.com;
- online community web sites, including iVillage;
6
<PAGE>
- online personal homepage services, including GeoCities and theglobe.com;
- publishers and distributors of television, radio and print, including CBS,
Disney, NBC and Time Warner;
- general purpose consumer online services, including America Online and
Microsoft Network; and
- web sites maintained by Internet service providers, including AT&T
Worldnet, Earthlink and MindSpring.
Our ability to compete depends on many factors, many of which are outside of
our control. These factors include the quality of content provided by us and by
our competitors, the ease of use of services developed either by us or by our
competitors, the timing and market acceptance of new and enhanced services
developed either by us or by our competitors, and sales and marketing efforts by
us and our competitors.
We believe that many of our existing competitors, as well as potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. This may allow them to devote greater resources than we
can to the development and promotion of their services. These competitors may
also engage in more extensive research and development, adopt more aggressive
pricing policies and make more attractive offers to existing and potential
employees, guides, distribution partners and advertisers. Our competitors may
develop services that are equal or superior to ABOUT.COM or that achieve greater
market acceptance than ABOUT.COM. In addition, current and potential competitors
have established or may establish cooperative relationships among themselves or
with third parties to increase the ability of their services to address the
needs of advertisers and electronic commerce marketers. As a result, it is
possible that new competitors may emerge and rapidly acquire significant market
share.
WE DEPEND ON RELATIONSHIPS WITH THIRD PARTIES.
Our business, results of operations and financial condition could be
materially adversely affected if we do not establish and maintain distribution
relationships on commercially reasonable terms or if any of our distribution
relationships do not result in increased user traffic on ABOUT.COM. A portion of
the users who come to ABOUT.COM come from third-party web sites with which we
have non-exclusive, short-term distribution relationships. Since these web sites
may not attract significant numbers of users themselves, ABOUT.COM may not
receive a significant number of additional users from these relationships.
Moreover, we may have to pay significant fees to establish additional
relationships or maintain existing relationships in the future.
We have entered into, and may continue to enter into, agreements with
advertisers or other third-party web sites that require us to exclusively
feature these parties for certain aspects of ABOUT.COM. These exclusivity
agreements may limit our ability to enter into other advertising or sponsorship
agreements or other strategic relationships. Many companies we may pursue for
strategic relationships also offer competing services. As a result, these
competitors may be reluctant to enter into strategic relationships with us.
WE MAY NOT EFFECTIVELY MANAGE OUR GROWTH.
In order to execute our business plan, we must grow significantly. This
growth will place a significant strain on our personnel, management systems and
resources. If we do not manage growth effectively, our business, results of
operations and financial condition would be materially adversely affected. We
expect that the number of our employees, including management-level employees,
will continue to increase for the foreseeable future. In addition, we expect
that the number of guides will continue to increase as new topic-specific sites
are established. We must continue to improve our
7
<PAGE>
operational and financial systems and managerial controls and procedures, and we
will need to continue to expand, train and manage our workforce. We must also
maintain close coordination among our technical, accounting, finance, marketing,
sales and editorial organizations.
REGULATORY AND LEGAL UNCERTAINTIES COULD HARM OUR BUSINESS.
Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could decrease the demand for our network,
increase our cost of doing business or otherwise have a material adverse effect
on our business, results of operations and financial condition. There are, and
will be, an increasing number of laws and regulations pertaining to the
Internet. These laws or regulations may relate to liability for information
retrieved from or transmitted over the Internet, online content regulation, user
privacy, taxation and the quality of products and services. Moreover, the
applicability to the Internet of existing laws governing intellectual property
ownership and infringement, copyright, trademark, trade secret, obscenity,
libel, employment, personal privacy and other issues is uncertain and
developing. Please see "Business--Government Regulation and Legal
Uncertainties."
WE MAY BE LIABLE FOR THE CONTENT WE MAKE AVAILABLE ON THE INTERNET.
We make content available on ABOUT.COM and on the web sites of our
advertisers and distribution and syndication partners. The availability of this
content could result in claims against us based on a variety of theories,
including defamation, obscenity, negligence, copyright or trademark
infringement. Other claims may be brought based on the nature, publication and
distribution of our content or based on errors or false or misleading
information provided on ABOUT.COM, including information deemed to constitute
professional advice such as legal, medical, financial or investment advice. We
could also be exposed to liability for third-party content accessed through
ABOUT.COM'S links to other websites or posted by users in chat rooms or bulletin
boards offered on our topic-specific sites. Our financial condition could be
materially adversely affected if we were found liable for information that we
make available. Implementing measures to reduce our exposure to this liability
may require us to spend substantial resources and limit the attractiveness of
our services to customers. Please see "Business-- Government Regulations and
Legal Uncertainties."
IF WE ARE UNABLE TO SUCCESSFULLY INTEGRATE FUTURE ACQUISITIONS INTO OUR
OPERATION, THERE COULD BE AN ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF
OPERATIONS.
We may acquire complementary businesses, products and technologies in the
future. Some of the risks attendant to these acquisitions are:
- difficulties and expenses of integrating the operations and personnel of
acquired companies into our operations while preserving the goodwill of
the acquired entity;
- the additional financial resources that may be needed to fund the
operations of acquired companies;
- the potential disruption of our business;
- our management's ability to maximize our financial and strategic position
by incorporating acquired technology or businesses;
- the difficulty of maintaining uniform standards, controls, procedures and
policies;
- the potential loss of key employees of acquired companies;
- the impairment of relationships with employees and customers as a result
of changes in management; and
- increasing competition with other entities for desirable acquisition
targets.
8
<PAGE>
Any of the above risks could prevent us from realizing significant benefits
from our acquisitions. In addition, the issuance of our common stock in
acquisitions will dilute our stockholder interests, while the use of cash will
deplete our cash reserves. Finally, if we are unable to account for our
acquisitions under the "pooling of interests" method of accounting, we may incur
significant, one-time write-offs and amortization charges. These write-offs and
charges could decrease our future earnings or increase our future losses.
WE WOULD BE UNABLE TO PROVIDE CONTENT WITHOUT THE EFFORTS OF OUR NETWORK OF
GUIDES.
Our business, results of operations and financial condition would be
materially adversely affected if our guides fail to provide us with adequate
content or if we fail to successfully replace former guides on a timely basis.
We are substantially dependent on our network of guides for providing in-depth,
high-quality, up-to-date content that covers thousands of subjects. Our guides
may not continue to provide us with a sufficient amount of high-quality content
covering a broad enough range of subjects. Furthermore, any number of guides may
discontinue their relationship with us. In addition, since the guides are
independent contractors, we have less control over the content production
process than if the guides were our employees.
WE COULD INCUR SIGNIFICANT WITHHOLDING TAXES AND EMPLOYEE BENEFITS EXPENSES IF
THE GUIDES WERE DEEMED TO BE OUR EMPLOYEES RATHER THAN INDEPENDENT
CONTRACTORS.
One or more jurisdictions or taxing authorities, including the Internal
Revenue Service, may seek to treat the guides as our employees rather than
independent contractors. As a result, they may seek to impose taxes, interest or
penalties on us. In addition, employees are generally entitled to healthcare and
other benefits that are typically unavailable to independent contractors. Since
we believe that the guides are independent contractors, we would vigorously
oppose any claim to the contrary. However, our efforts to do so might not be
successful. We are not able to estimate accurately the quantitative effect that
these taxes or employee benefit costs would have on us if the guides were deemed
to be employees. Our business, results of operations and financial condition
would be materially adversely affected if these claims are made and we do not
prevail or if we are required to treat the guides as employees for tax or
employee benefit purposes or otherwise. Please see "Business--Government
Regulation and Legal Uncertainties."
WE DEPEND ON OUR KEY EXECUTIVES AND WILL NEED ADDITIONAL PERSONNEL TO GROW OUR
BUSINESS.
Our future success depends, in part, on the continued service of our key
management personnel, particularly Mr. Scott P. Kurnit, our President and Chief
Executive Officer, and Mr. William C. Day, our Chief Operating Officer. Although
we are the beneficiary of a key person life insurance policy on Mr. Kurnit's
life, the loss of his services, or the services of other key employees, would
have a material adverse effect on our business, results of operations and
financial condition. Our future success also depends on our ability to attract,
retain and motivate highly skilled employees, including advertising sales
personnel. Competition for employees in our industry is intense. We may be
unable to attract, assimilate or retain other highly qualified employees in the
future. We have from time to time in the past experienced, and we expect to
continue to experience in the future, difficulty in hiring and retaining highly
skilled employees with appropriate qualifications.
THE PERFORMANCE OF ABOUT.COM IS CRITICAL TO OUR BUSINESS AND TO OUR REPUTATION.
Any system failure, including network, software or hardware failure, that
causes an interruption in our network or a decrease in responsiveness of
ABOUT.COM could result in reduced user traffic on ABOUT.COM and reduced revenue.
ABOUT.COM has in the past experienced slower response times and interruptions in
service for a variety of reasons. ABOUT.COM could also be affected by computer
viruses, electronic break-ins or other similar disruptions. Our insurance
policies have low coverage limits and
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<PAGE>
therefore our insurance may not adequately compensate us for any losses that may
occur due to any interruptions to our network.
In January 1998, we entered into an Internet-hosting agreement with Global
Center, Inc. to maintain all of our production servers at Global Center's
Manhattan Data Center. This agreement was extended in January 1999 and is
terminable by either party upon 90 days' notice. Our operations depend on Global
Center's ability to protect its and our systems against damage from fire, power
loss, water damage, telecommunications failures, vandalism and other malicious
acts, and similar unexpected adverse events. Any disruption in the Internet
access provided by Global Center could have a material adverse effect on our
business, results of operations and financial condition.
Our users and our guides depend on Internet service providers, online
service providers and other web site operators for access to ABOUT.COM. Each of
these providers has experienced significant outages in the past, and could
experience outages, delays and other difficulties due to system failures
unrelated to our systems.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY AND WE MAY BE LIABLE FOR
INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Third parties may infringe or misappropriate our patents, trademarks or
other intellectual property, which could have a material adverse effect on our
business, results of operations or financial condition. While we enter into
confidentiality agreements with our material employees, guides, consultants and
strategic partners, and generally control access to and distribution of our
proprietary information, the steps we have taken to protect our intellectual
property may not prevent misappropriation. In addition, we do not know whether
we will be able to defend our proprietary rights since the validity,
enforceability and scope of protection of proprietary rights in Internet-related
industries is uncertain and still evolving.
Third parties may assert infringement claims against us. From time to time
in the ordinary course of business we have been, and we expect to continue to
be, subject to claims of alleged infringement of the trademarks and other
intellectual property rights of third parties. These claims and any resultant
litigation, should it occur, could subject us to significant liability for
damages. In addition, even if we prevail, litigation could be time-consuming and
expensive to defend, and could result in the diversion of our time and
attention. Any claims from third parties may also result in limitations on our
ability to use the intellectual property subject to these claims unless we are
able to enter into agreements with the third parties making these claims.
SEASONAL FACTORS MAY AFFECT OUR QUARTERLY OPERATING RESULTS.
Seasonality of user traffic on ABOUT.COM and our advertising revenues may
cause our total revenues to fluctuate. User traffic on web sites has typically
declined during the summer and year-end vacation and holiday periods. We believe
that advertising sales in traditional media, such as television and radio,
generally are lower in the first and third calendar quarters of each year.
Similar seasonal or other patterns may develop in our business.
WE WOULD LOSE REVENUES AND INCUR SIGNIFICANT COSTS IF OUR SYSTEMS OR MATERIAL
THIRD-PARTY SYSTEMS ARE NOT YEAR 2000 COMPLIANT.
The failure of our internal systems, or any material third-party systems, to
be Year 2000 compliant would have a material adverse effect on our business,
results of operations and financial condition. Although we have received
compliance information from our material third-party vendors, we have not
received compliance information from all of our third-party vendors. It is also
possible that our third-party vendors were mistaken in certifying that their
systems are Year 2000 compliant. As a result, we cannot be sure that our
internal system, as a whole, is Year 2000 compliant. In addition, there can be
10
<PAGE>
no assurance that governmental agencies, utility companies, Internet access
companies, third-party service providers and others outside of our control will
be Year 2000 compliant. The failure by those entities to be Year 2000 compliant
could result in a systemic failure beyond our control, as a prolonged Internet,
telecommunications or electrical failure, which could also prevent us from
delivering ABOUT.COM, decrease the use of the Internet or prevent customers from
accessing ABOUT.COM, any of which could have a material adverse effect on our
business, results of operations and financial condition. Based on the results of
our Year 2000 assessment, we have determined that it is not necessary to develop
a Year 2000 contingency plan. Please see "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Impact of the Year 2000."
WE CANNOT PREDICT OUR FUTURE CAPITAL NEEDS AND WE MAY NOT BE ABLE TO SECURE
ADDITIONAL FINANCING.
We may need to raise additional funds in the future in order to fund more
aggressive brand promotion or more rapid expansion, to develop new or enhanced
services, to respond to competitive pressures or to make acquisitions. Any
required additional financing may not be available on terms favorable to us, or
at all. If adequate funds are not available on acceptable terms, we may be
unable to fund our expansion, successfully promote our brand, or take advantage
of acquisition opportunities, develop or enhance services, respond to
competitive pressures or take advantage of acquisition opportunities, any of
which could have a material adverse effect on our business, results of
operations and financial condition. If additional funds are raised by our
issuing equity securities, stockholders may experience dilution of their
ownership interest and the newly issued securities may have rights superior to
those of the common stock. If additional funds are raised by our issuing debt,
we may be subject to limitations on our operations, including limitations on the
payment of dividends. We currently anticipate that our net proceeds from this
offering, together with currently available funds, will be sufficient to meet
our anticipated needs through at least 2000. Please see "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
FUTURE SALES OF COMMON STOCK BY OUR EXISTING STOCKHOLDERS COULD ADVERSELY AFFECT
OUR STOCK PRICE.
Sales of a substantial number of shares of our common stock in the public
market could cause the market price of our common stock to decline and could
impair our ability to raise additional capital through the sale of equity
securities.
As of September 30, 1999, we had approximately 12,288,418 shares of common
stock outstanding, of which approximately shares were freely transferable
without restriction or registration under the Securities Act. After this
offering, 3,500,000 additional shares will be freely transferable, or
approximately 4,025,000 shares if the underwriters exercise their over-allotment
option in full. The remaining shares of common stock held by existing
stockholders as of September 30, 1999 are "restricted securities" as that term
is defined in Rule 144 under the Securities Act. Approximately shares of
our common stock are subject to "lock-up" agreements that generally prohibit the
sale or other transfer of the shares for 90 days from the date of this
prospectus without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation, the lead manager of this offering. From time to time,
these shares will become eligible for sale, subject in most cases to the volume,
holding period and other limitations of Rule 144 and Rule 701. After this
offering, approximately restricted securities held by non-affiliates will
be eligible for sale from time to time under Rule 144(k) without volume and
manner of sale restrictions. In addition, we have filed a registration statement
on Form S-8 with the Securities and Exchange Commission covering 3,349,885
shares of common stock reserved for issuance under our stock plans as of
September 30, 1999. Sales of a large number of of any of these shares could have
an adverse effect on the market price for our common stock.
11
<PAGE>
AFTER THIS OFFERING, OUR OFFICERS AND DIRECTORS MAY STILL CONTROL US.
Our executive officers and directors will, in the aggregate, beneficially
own approximately % of the common stock following this offering. These
stockholders may be able to exercise control over all matters requiring approval
by our stockholders, including the election of directors and approval of
significant corporate transactions. This concentration of ownership may also
have the effect of delaying or preventing a change in control of us, which could
have a material adverse effect on our stock price. Please see "Principal and
Selling Stockholders."
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE.
The market price of our common stock has fluctuated in the past and is
likely to continue to be highly volatile and could be subject to wide
fluctuations. In addition, the Nasdaq National Market, where most publicly held
Internet companies are traded, has experienced extreme price and volume
fluctuations. These fluctuations often have been unrelated or disproportionate
to the operating performance of these companies. These broad market and industry
factors may materially adversely affect the market price of our common stock,
regardless of our actual operating performance. In the past, following periods
of volatility in the market price of a company's securities, securities class
action litigation often has been instituted against that company. Litigation
like this, if instituted, could result in substantial costs and a diversion of
management's attention and resources.
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
The public offering price per share will significantly exceed the net
tangible book value per share. Accordingly, investors purchasing shares in this
offering will suffer immediate and substantial dilution of their investment.
Please see "Dilution."
FORWARD-LOOKING STATEMENTS; MARKET DATA
Many statements made in this prospectus under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere are
forward-looking statements that are not based on historical facts. Because these
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from those
expressed or implied by these forward-looking statements, including those
discussed under "Risk Factors."
This prospectus includes market data about us and the Internet industry.
These data come from information published by Media Metrix, Inc., a media
research firm specializing in market and technology measurement on the Internet,
and International Data Corporation, also known as IDC, and Forrester Research,
both of which are providers of market and strategic information for the
information technology industry. These market data include projections that are
based on a number of assumptions. The assumptions include that:
- no catastrophic failure of the Internet will occur;
- the number of people online and the total number of hours spent online
will increase significantly over the next five years;
- the value of online advertising dollars spent per online user hour will
increase;
- the download speed of content will increase dramatically; and
- Internet security and privacy concerns will be adequately addressed.
This type of data is inherently imprecise and investors should not place
undue reliance on these data. If any one or more of the foregoing assumptions
turns out to be incorrect, actual results may differ from the projections based
on these assumptions. The failure of these markets to grow at these projected
rates may have a material adverse effect on our business, results of operations
and financial condition, as well as the market price of our common stock.
12
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds we will receive from the sale of the
3,000,000 shares of common stock offered by us, after deducting estimated
underwriting fees and estimated offering expenses payable by us, will be
approximately $168.9 million (up to $198.6 million if the underwriters'
over-allotment option is exercised in full), at an assumed offering price of
$59.875 per share. We will not receive any proceeds from the sale of shares by
existing stockholders.
We intend to use the net proceeds of this offering to execute our business
plan and for general corporate purposes. As part of this plan, we intend to
enhance the value of our brand, to expand our advertising sales efforts and to
further develop our network. We may also explore acquisitions or minority
investments.
While we may also use a portion of our proceeds for acquisitions of
businesses, technologies and product offerings or minority investments in
businesses, we have no present commitments or agreements relating to any
acquisitions or investments. The amounts we actually spend for any of the
foregoing purposes may vary significantly and will depend on a number of
factors, including our future revenue, cash generated by operations, if any, and
other factors described under "Risk Factors." Accordingly, management will have
significant flexibility in applying our net proceeds. Pending any such use, as
described above, we intend to invest the net proceeds in interest-bearing
investment grade instruments. See "Risk Factors--If we are unable to
successfully integrate future acquisitions into our operations, there could be
an adverse effect on our business and results of operations."
PRICE RANGE OF COMMON STOCK
Since May 20, 1999, our common stock has been traded on the Nasdaq National
Market under the symbol "BOUT." From March 24, 1999 until May 19, 1999, our
common stock was traded on the Nasdaq National Market under the symbol "MINE."
The following table sets forth, for the periods indicated, the high and low
sales prices per share for our common stock as reported by the Nasdaq National
Market:
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
--------------------
HIGH LOW
<S> <C> <C>
YEAR ENDING DECEMBER 31, 1999:
First Quarter (from March 24, 1999)........................................................ $ 891/2 $ 467/16
Second Quarter............................................................................. 100 23
Third Quarter.............................................................................. 583/4 191/2
Fourth Quarter (through October 4, 1999)................................................... 601/2 535/8
</TABLE>
On October 4, 1999, the reported last sale price for our common stock on the
Nasdaq National Market was $59.875 per share. As of October 4, 1999, there were
approximately 117 holders of record of our common stock.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our capital stock since
inception and do not expect to pay any cash dividends for the foreseeable
future. We currently intend to retain future earnings, if any, to finance the
expansion of our business.
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<PAGE>
CAPITALIZATION
The following table sets forth, as of June 30, 1999, our cash position and
capitalization:
- on an actual basis; and
- on an as adjusted basis to give effect to our sale of 3,000,000 shares
in this offering at an assumed offering price of $59.875 per share,
after deducting estimated underwriting fees and estimated offering
expenses payable by us.
This information should be read together with our consolidated financial
statements and the notes relating to those statements appearing elsewhere in
this prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-----------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
<CAPTION>
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Cash and cash equivalents....................................................... $ 61,506 $ 230,423
---------- -----------
---------- -----------
Notes payable, excluding current portion........................................ $ 667 $ 667
Obligations under capital leases, excluding current installments................ 59 59
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares
issued and outstanding, actual or as adjusted............................... -- --
Common stock, $0.001 par value, 50,000,000 shares authorized; 12,144,155
shares issued and outstanding, actual; and 15,144,155 shares issued and
outstanding, as adjusted.................................................... 12 15
Additional paid-in capital...................................................... 125,102 294,016
Deferred compensation........................................................... (3,389) (3,389)
Accumulated deficit............................................................. (59,271) (59,271)
---------- -----------
Total stockholders' equity.................................................... 62,454 231,371
---------- -----------
Total capitalization........................................................ $ 63,180 $ 232,097
---------- -----------
---------- -----------
</TABLE>
We expect that there will be approximately 15,288,418 shares of common stock
outstanding after this offering. This number includes, in addition to the
adjustments described above, 144,263 shares issued upon option exercises that
occurred between July 1, 1999 and September 30, 1999. See "Prospectus
Summary--Additional shares may be issued after this offering upon the exercise
of options and warrants."
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<PAGE>
DILUTION
Our net tangible book value as of June 30, 1999 was $59,536,400, or $4.90
per share. Our net tangible book value per share is equal to the amount of our
total assets less intangible assets and less total liabilities, divided by the
number of shares of common stock outstanding as of June 30, 1999.
Assuming that we sell the 3,000,000 shares offered by us at a public
offering price of $59.88 per share, after deducting estimated underwriting fees
and estimated offering expenses payable by us, our net tangible book value as of
June 30, 1999 would have been $228,450,000, or $15.09 per share. This represents
an immediate increase in net tangible book value of $10.19 per share to existing
stockholders and an immediate dilution in net tangible book value of $44.79 per
share to investors purchasing shares in this offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share................................ $ 59.88
Net tangible book value per share as of June 30, 1999................ $ 4.90
Increase in net tangible book value per share attributable to new
investors.......................................................... 10.19
---------
Net tangible book value per share after this offering.................. 15.09
---------
Dilution per share to investors purchasing shares in this offering..... $ 44.79
---------
---------
</TABLE>
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read together
with the consolidated financial statements and the notes to those statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. These statements of
operations data for the period from June 27, 1996 (inception) through December
31, 1996 and for the years ended December 31, 1997 and 1998, and the balance
sheet data at December 31, 1997 and 1998 are derived from our audited
consolidated financial statements included elsewhere in this prospectus. The
balance sheets data as of December 31, 1996 have been derived from our audited
consolidated financial statements not included in this prospectus. Historical
results are not necessarily indicative of the results to be expected in the
future.
The selected consolidated financial data as of June 30, 1999 and for each of
the six months ended June 30, 1998 and 1999 are derived from our unaudited
interim consolidated financial statements included elsewhere in this prospectus.
The unaudited consolidated financial statements have been prepared on
substantially the same basis as the audited financial statements and include all
adjustments, consisting only of normal recurring adjustments, that we consider
necessary for a fair presentation of our financial position and results of
operations for those periods. Operating results for the six months ended June
30, 1999 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1999.
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 27, 1996
(INCEPTION) YEAR ENDED SIX MONTHS ENDED JUNE
TO DECEMBER 31, 30,
DECEMBER 31, ---------------------- ----------------------
1996 1997 1998 1998 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues............................................... $ -- $ 391 $ 3,722 $ 548 $ 6,074
Cost of revenues....................................... 91 1,931 4,189 1,286 5,246
Non-cash compensation.................................. -- -- 27 20 3,621
------------- ---------- ---------- ---------- ----------
Gross profit (loss).................................... (91) (1,540) (494) (758) (2,793)
Operating expenses:
Sales and marketing.................................. 241 1,761 7,890 1,377 23,784
General and administrative........................... 1,101 1,994 2,944 1,103 3,273
Product development.................................. 948 3,046 3,113 1,184 2,934
Non-cash compensation................................ -- -- 451 231 616
Amortization of goodwill............................. -- -- -- -- 33
------------- ---------- ---------- ---------- ----------
Total operating expenses............................... 2,290 6,801 14,398 3,895 30,640
------------- ---------- ---------- ---------- ----------
Loss from operations................................... (2,381) (8,341) (14,892) (4,653) (33,433)
Other income (expense), net............................ (57) (299) (686) (571) 818
------------- ---------- ---------- ---------- ----------
Net loss............................................... (2,438) (8,640) (15,578) (5,224) (32,615)
Cumulative dividends and accretion of convertible
preferred stock to liquidation value................. -- -- (1,230) -- (659)
------------- ---------- ---------- ---------- ----------
Net loss attributable to common stockholders........... $ (2,438) $ (8,640) $ (16,808) $ (5,224) $ (33,274)
------------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ----------
Basic and diluted net loss per common share............ $ (1.20) $ (4.94) $ (9.71) $ (3.08) $ (4.38)
------------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ----------
Weighted average shares outstanding used in basic and
diluted net loss per common share calculation........ 2,035 1,749 1,732 1,698 7,589
------------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ----------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------- AS OF
1996 1997 1998 JUNE 30, 1999
<S> <C> <C> <C> <C>
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEETS DATA:
Cash and cash equivalents....................................... $ 1,647 $ 303 $ 10,644 $ 61,506
Working capital (deficit)....................................... 1,195 (3,098) 4,231 52,911
Total assets.................................................... 2,039 1,357 15,658 74,969
Convertible notes payable....................................... -- 4,851 -- --
Notes payable, excluding current portion........................ 3,972 3,630 621 667
Convertible preferred stock..................................... -- -- 32,072 --
Total stockholders' (deficit) equity............................ (2,425) (10,944) (24,662) 62,454
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ TOGETHER WITH OUR CONSOLIDATED FINANCIAL STATEMENTS
AND THE NOTES TO THOSE STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. PLEASE SEE "RISK FACTORS" AND "FORWARD-LOOKING STATEMENTS; MARKET
DATA."
OVERVIEW
For the period from our incorporation on June 27, 1996 through April 1997,
our operating activities related primarily to the initial development of
ABOUT.COM, recruitment of employees and guides, and the establishment of our
organizational and technical infrastructure. Since the launch of our network in
April 1997, revenues and operating expenses have increased as we enhanced our
network of guides, expanded our editorial and operating staff, improved
ABOUT.COM's functions and features and promoted ABOUT.COM to increase brand
awareness. As part of our marketing efforts, we have conducted online campaigns
and, beginning in June 1998, an offline campaign consisting of a national trade
magazine print campaign, and outdoor and radio advertisements in selected
cities. In the second quarter of 1999, we conducted a significant offline
campaign consisting of a national print and television advertising campaign in
connection with the launch of the About.com brand.
To date, we have derived substantially all of our revenues from the sale of
advertisements on ABOUT.COM. We expect to derive our revenues principally from
the sale of advertising on ABOUT.COM for the foreseeable future. We currently
offer advertisers numerous sizes and types of advertising placements, including
banner advertisements, button advertisements and text links. We also offer
sponsorship programs and other promotional opportunities to build brand
awareness and drive user traffic to an advertiser's web site. To date, sales of
advertisements on ABOUT.COM have been generated primarily by our internal
advertising sales organization.
Advertisers on ABOUT.COM enter into agreements of typically between two
months and two years in duration. Pursuant to these agreements, we generally
guarantee a minimum number of impressions, or the number of times that an
advertisement is delivered to users of ABOUT.COM, to be delivered over a
specified period of time at a fixed rate. Revenues from advertising sales are
recognized ratably in the period in which the advertisement is displayed,
provided that we have no significant remaining obligations, at the lesser of the
ratio of impressions delivered over total guaranteed impressions or the straight
line basis over the term of the contract, and collection of the resulting
receivable is probable. Payments received from advertisers prior to displaying
their advertisements on ABOUT.COM are recorded as deferred revenues and are
recognized as revenues ratably as the advertisements are displayed. To the
extent these minimum guaranteed impression levels are not met ratably over the
contract period, we defer recognition of the corresponding pro rata portion of
the revenues related to such unfulfilled obligation until the guaranteed
impression levels are achieved. When there is no guarantee that we deliver a
minimum number of impressions over a specified period, we recognize revenue in
the period in which the impressions are delivered.
Some agreements with advertisers entitle us to a share of revenues generated
by sales of merchandise and services over a particular threshold resulting from
direct links from ABOUT.COM. Through June 30, 1999, we had not recognized any
material revenues from these revenue sharing agreements. Any revenues we derive
from these revenue sharing agreements will be recognized upon notification from
our advertisers of sales attributable to ABOUT.COM.
Our agreements with our channel partners are typically at least 12 months in
duration and generally require our partners to make payments to us for
development, placement and advertising payments. We recognize any development
fees as the services are provided. We recognize any placement fees ratably over
the term of the agreement.
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Approximately 10% of our revenues during the year ended December 31, 1998
and approximately 7% of our revenues for the six month period ended June 30,
1999 were generated by agreements where we traded advertisements on ABOUT.COM in
exchange for advertisements on third-party web sites without receiving any cash
payment. The corresponding expenses from these barter arrangements, which equal
the amount of the barter revenues from these arrangements, are included as a
component of cost of revenues. We anticipate that barter revenues will continue
to account for up to 10% of our total annual revenues.
Guide compensation is generally included as a component of cost of revenues.
We currently compensate guides at an amount equal to the greater of a monthly
minimum guarantee or a percentage of net advertising revenues generated in the
ABOUT.COM network. This revenue is distributed among the guides based on the
user traffic on their respective topic-specific sites as a percentage of traffic
for the whole network. Guides are also currently entitled to share a percentage
of net transaction revenues and net syndication revenues.
In connection with our initial public offering, we granted fully vested,
non-qualified stock options to purchase 199,500 shares of common stock to a
substantial majority of our guides. The exercise price per share of these
options was $25.00 and the options have two-year terms. Since the guides are
independent contractors, we recorded non-cash compensation expense of
approximately $3.6 million during the quarter ended March 31, 1999, representing
the fair market value of the options at the date of grant. This amount is
presented in a separate line item above the gross profit (loss) line.
Through June 30, 1999, we had recorded deferred compensation expense of
approximately $4.5 million in connection with the grant of stock options to
employees and directors, representing the difference between the deemed value of
the common stock at the date of grant for accounting purposes and the exercise
price of the related options. We amortize this non-cash expense over the vesting
period, typically four years, of the applicable options. Amortization of
deferred compensation expense was $478,000 for the year ended December 31, 1998
and $625,000 for the six months ended June 30, 1999, of which $9,000 is related
to deferred compensation expense for the grant of options to operations
personnel and has been included in the non-cash compensation expense line item
appearing above the gross profit (loss) line. We currently expect to amortize
the following amounts of deferred compensation expense annually: 1999--$1.1
million; 2000--$1.0 million; 2001--$1.0 million; and 2002-- $0.9 million.
In June 1999, we acquired VantageNet, Inc. In connection with this
acquisition, we recorded goodwill and purchased intangibles of $2.5 million. We
are amortizing the goodwill and purchased intangibles related to this
acquisition over the expected period of benefit of 3 years.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
REVENUES. Revenues consist primarily of advertising revenues on ABOUT.COM.
For the six months ended June 30, 1999, revenues increased to $6.1 million,
which included $452,000 of barter revenues, from $548,000, which included
$49,000 of barter revenues, for the six months ended June 30, 1998. This
period-to-period growth was primarily attributable to an increase in (1) the
number of advertisers and the average commitment per advertiser, (2) user
traffic on ABOUT.COM and (3) the number of our sales people. We anticipate that
revenues from advertising will continue to account for substantially all of our
revenues for the foreseeable future.
COST OF REVENUES. Since the launch of ABOUT.COM in April 1997, cost of
revenues has consisted primarily of guide compensation, third-party Internet
advertising sales organization fees, salaries of operating personnel, site
hosting and depreciation costs, barter advertising expenses and other product
costs. Cost of revenues increased to $5.2 million for the six months ended June
30, 1999 from
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$1.3 million for the six months ended June 30, 1998. The increase in cost of
revenues was due to an increase in site hosting costs to support the increase in
web site traffic, as well as an increase in depreciation and staff costs
required to support the expansion of ABOUT.COM.
NON-CASH COMPENSATION EXPENSE. For the six months ended June 30, 1999 and
1998, non-cash compensation expense increased to $3.6 million from $20,000.
Non-cash compensation expense included amortization of deferred compensation
relating to the grant of options to operations personnel in the amounts of
$9,000 for the six months ended June 30, 1999 and $20,000 for the six months
ended June 30, 1998. Non-cash compensation expense for the six months ended June
30, 1999 also included a charge in the amount of $3.6 million relating to our
grant of stock options to the guides upon the closing of our initial public
offering.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
online and offline advertising costs, salaries and commissions of internal sales
and marketing personnel, public relations costs, payments to third-party
Internet companies to drive user traffic to ABOUT.COM and other marketing
related expenses. For the six months ended June 30, 1999 and 1998, sales and
marketing expenses increased to $23.8 million from $1.4 million. This
period-to-period increase was primarily attributable to the non-recurring
expenditures related to the launch of the About.com brand in the second quarter
as well as an increase in our general sales and marketing expenses.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and related costs for general corporate functions,
including finance, accounting, facilities and professional services. For the six
months ended June 30, 1999 and 1998, general and administrative expenses
increased to $3.3 million from $1.1 million. The increase in general and
administrative expenses was primarily attributable to increased salaries and
related expenses associated with hiring additional personnel, facility-related
expenses, and costs relating to our operation as a public company. We expect
that we will incur additional general and administrative expenses as we hire
additional personnel and incur additional costs related to the growth of our
business and our operation as a public company, including directors' and
officers' liability insurance, investor relations programs and professional
services fees.
PRODUCT DEVELOPMENT. Product development expenses include personnel and
consulting costs associated with the design, development and testing of
ABOUT.COM and our systems and editorial personnel costs. We expense our product
development costs as incurred. For the six months ended June 30, 1999 and 1998,
product development expenses increased to $2.9 million from $1.2 million. This
period-to-period increase was primarily attributable to increased staffing
levels to support our growth and development. We believe that timely deployment
of new and enhanced features and technology are critical to attaining our
strategic objectives. Accordingly, we intend to continue recruiting and hiring
experienced product development personnel and to make additional investments in
product development.
NON-CASH COMPENSATION EXPENSE. For the six months ended June 30, 1999 and
1998, amortization of deferred compensation expense relating to the grant of
options to non-operations personnel amounted to $616,000 and $231,000,
respectively.
GOODWILL. Goodwill amortization related to the acquisition of VantageNet
amounted to $33,000 for the six months ended June 30, 1999.
OTHER INCOME (EXPENSE), NET. Other income (expense), net includes interest
expense related to our debt and capital lease obligations, net of interest
income from our cash and cash equivalents. For the six months ended June 30,
1999 and 1998, other income (expense), net increased to $818,000 from
$(571,000). The increase in other income was primarily attributable to the
interest income generated by the increase in cash and cash equivalents from our
initial public offering.
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CUMULATIVE DIVIDENDS AND ACCRETION OF CONVERTIBLE PREFERRED
STOCK. Cumulative dividends and accretion on our convertible preferred stock
amounted to $659,000 during the six months ended June 30, 1999. Each share of
convertible preferred stock was entitled to a cumulative dividend at a rate of
$0.135 per share per annum for the Series A convertible preferred stock, $0.162
per share per annum for the Series B convertible preferred stock and $0.176 per
share per annum for the Series C convertible preferred stock. Upon the closing
of our initial public offering, 3,346,715 shares of Series A convertible
preferred stock, 6,597,596 shares of Series B convertible preferred stock and
7,301,811 shares of Series C convertible preferred stock, representing all of
our outstanding shares of convertible preferred stock, automatically converted
into 6,139,640 shares of common stock.
PERIOD FROM JUNE 27, 1996 (INCEPTION) TO DECEMBER 31, 1996 COMPARED TO YEAR
ENDED DECEMBER 31, 1997, COMPARED TO YEAR ENDED DECEMBER 31, 1998
REVENUES. We launched our web service in April 1997. Revenues were $0 for
the period from June 27, 1996 (inception) to December 31, 1996, $391,000 for the
year ended December 31, 1997, which included $73,000 of barter revenues, and
$3.7 million for the year ended December 31, 1998, which included $366,000 of
barter revenues. This growth was primarily attributable to an increase in (1)
the number of advertisers and the average commitment per advertiser, (2) user
traffic on ABOUT.COM and (3) the number of our sales people. During the year
ended December 31, 1998, we derived 12%, or $450,000, of our revenues from an
advertising arrangement with Citibank, which ended on December 31, 1998.
COST OF REVENUES. In 1996, our first year of operation, cost of revenues
consisted of guide compensation, site hosting and depreciation costs incurred in
connection with developing our service. Cost of revenues was $91,000 for the
period from June 27, 1996 (inception) to December 31, 1996, $1.9 million for the
year ended December 31, 1997 and $4.2 million for the year ended December 31,
1998. This period-to-period growth in cost of revenues was primarily
attributable to an increase in the fees paid to guides, which increased by $1.1
million from 1996 to 1997 and an additional $1.0 million from 1997 to 1998, and
in site hosting and operations costs, which increased by $492,000 from 1996 to
1997 and an additional $570,000 from 1997 to 1998, which was due to growth in
user traffic on ABOUT.COM. Commencing in June 1998, we engaged a third-party
Internet advertising sales representative organization to supplement our
internal advertising sales force in selling our advertising inventory in
exchange for a service fee. Fees paid to the third-party Internet advertising
sales organization accounted for an increase of $233,000 in cost of revenues
from 1997 to 1998.
NON-CASH COMPENSATION EXPENSE. There were no non-cash compensation expenses
for the period from June 27, 1996 (inception) to December 31, 1996 or for the
year ended December 31, 1997. For the year ended December 31, 1998, amortization
of deferred compensation expense relating to stock options granted to operations
personnel was $27,000.
SALES AND MARKETING. Sales and marketing expenses were $241,000 for the
period from June 27, 1996 (inception) to December 31, 1996, $1.8 million for the
year ended December 31, 1997, and $7.9 million for the year ended December 31,
1998. In 1996, we did not dedicate meaningful funds to sales and marketing as
ABOUT.COM was not launched until April 1997. The increase in sales and marketing
expenses from 1996 to 1997 was primarily attributable to the initiation of our
online advertising and other promotional expenditures, which increased by
$916,000, as well as increased sales and marketing personnel and related
expenses, which increased by $512,000. The increase in sales and marketing
expenses from 1997 to 1998 was primarily attributable to the initiation of our
offline marketing and the expansion of online advertising efforts, which
accounted for an increase of $4.9 million, of which $817,000 was expense related
to third-party Internet companies to drive user traffic to ABOUT.COM, as well as
increased sales and marketing personnel and related expenses, which increased by
$329,000.
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GENERAL AND ADMINISTRATIVE. General and administrative expenses were $1.1
million for the period from June 27, 1996 (inception) to December 31, 1996, $2.0
million for the year ended December 31, 1997, and $2.9 million for the year
ended December 31, 1998. The increase in general and administrative expenses was
primarily attributable to increased salaries and related expenses associated
with hiring additional personnel and facility-related expenses. The absolute
dollar increase in general and administrative expenses was primarily
attributable to increased salaries and related expenses associated with hiring
additional personnel, which increased by $694,000 from 1996 to 1997 and by
$622,000 from 1997 to 1998, and facility-related expenses, which increased by
$588,000 from 1996 to 1997 and by $622,000 from 1997 to 1998, to support the
growth in our operations.
PRODUCT DEVELOPMENT. Product development expenses were $948,000 for the
period from June 27, 1996 (inception) to December 31, 1996, $3.0 million for the
year ended December 31, 1997, and $3.1 million for the year ended December 31,
1998. We launched our site in April 1997. The increase in absolute dollars in
product development expenses from 1996 to 1997 was primarily attributable to
increased staffing levels required to design, develop and test modifications and
improvements to ABOUT.COM. Product development expenses remained relatively
constant from 1997 to 1998 due to nonrecurring consulting fees associated with
the pre-launch development of ABOUT.COM incurred during the first six months of
1997, offset by an increase in staffing levels in 1998 and 1999 to support the
growth and development of ABOUT.COM.
NON-CASH COMPENSATION EXPENSE. During 1998, amortization of deferred
compensation relating to stock options granted to non-operations personnel
amounted to $451,000.
OTHER INCOME (EXPENSE), NET. Other income (expense), net was $(57,000) for
the period from June 27, 1996 (inception) to December 31, 1996, $(299,000) for
the year ended December 31, 1997 and $(686,000) for the year ended December 31,
1998. The change was primarily attributable to interest accrued on outstanding
debt obligations and amortization of debt discount. During 1997, we provided
consulting services to Citibank for an aggregate amount of $450,000. Pursuant to
our agreement with Citibank, we agreed to provide strategic assistance in
creating, supporting and managing customized web sites around which communities
on specific areas of interest for the financial institution's customers would be
created. The term of the agreement was from June 20, 1997 through December 15,
1997. Fees generated by these services, net of expenses, were recorded as other
income, net, of which $350,000 was recorded for the year ended December 31,
1997. We did not provide consulting services during 1998 and do not anticipate
providing consulting services in the future.
CUMULATIVE DIVIDENDS AND ACCRETION OF CONVERTIBLE PREFERRED
STOCK. Cumulative dividends and accretion on our convertible preferred stock
amounted to $1.2 million in 1998.
QUARTERLY RESULTS OF OPERATIONS DATA
The following tables set forth unaudited quarterly statement of operations
data for each of the six quarters ended June 30, 1999. In the opinion of
management, these data have been prepared substantially on the same basis as the
audited financial statements appearing elsewhere in this prospectus, and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of such data. The quarterly data should be read together
with the consolidated financial statements and the notes to those statements
appearing elsewhere in this prospectus. The
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results of operations for any quarter are not necessarily indicative of the
results of operations for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1998 1998 1998 1998 1999
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues.............................................. $ 152 $ 396 $ 1,030 $ 2,144 $ 2,367
Cost of revenues...................................... 545 741 1,229 1,674 2,323
Non-cash compensation................................. 18 2 3 4 3,616
----------- ----------- ------------- ------------ -----------
Gross profit (loss)............................... (411) (347) (202) 466 (3,572)
Operating expenses:
Sales and marketing................................. 318 1,059 2,332 4,181 5,438
General and administrative.......................... 470 633 794 1,047 1,403
Product development................................. 548 636 864 1,065 1,153
Non-cash compensation............................... 200 31 94 126 374
Amortization of goodwill............................ -- -- -- -- --
----------- ----------- ------------- ------------ -----------
Total operating expenses.......................... 1,536 2,359 4,084 6,419 8,368
----------- ----------- ------------- ------------ -----------
Loss from operations.................................. (1,947) (2,706) (4,286) (5,953) (11,940)
Other income (expense), net........................... (478) (93) (70) (45) 18
----------- ----------- ------------- ------------ -----------
Net loss.............................................. $ (2,425) $ (2,799) $ (4,356) $ (5,998) $ (11,922)
----------- ----------- ------------- ------------ -----------
----------- ----------- ------------- ------------ -----------
<CAPTION>
<S> <C>
JUNE 30,
1999
<S> <C>
Revenues.............................................. $ 3,707
Cost of revenues...................................... 2,923
Non-cash compensation................................. 5
---------
Gross profit (loss)............................... 779
Operating expenses:
Sales and marketing................................. 18,346
General and administrative.......................... 1,870
Product development................................. 1,781
Non-cash compensation............................... 242
Amortization of goodwill............................ 33
---------
Total operating expenses.......................... 22,272
---------
Loss from operations.................................. (21,493)
Other income (expense), net........................... 800
---------
Net loss.............................................. $ (20,693)
---------
---------
</TABLE>
We have a limited operating history upon which to evaluate our business and
to predict revenues and plan operating expenses. In order to be successful, we
must attract more user traffic to ABOUT.COM and generate significant advertising
revenues. We expect our quarterly operating results to vary significantly in the
future due to a variety of factors, many of which are outside our control. Since
we expect to be substantially dependent on revenues from advertising for the
foreseeable future, our quarterly revenues are likely to be particularly
affected by user traffic levels on ABOUT.COM. We launched our service in April
1997 with a significant online marketing campaign. As a result, we spent
significant amounts on marketing in the second quarter of 1997 to help support
this launch. During the second half of 1997, our general and administrative
expenses declined due to reductions in compensation of our officers. Following
the completion of a private equity financing in April 1998, we used a portion of
the proceeds to begin our offline marketing campaign. During the second quarter
of 1999, we significantly increased our spending on marketing in connection with
the launch of our About.com brand. Please see "Risk Factors--Our quarterly
operating results may fluctuate."
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through the
private placement of equity securities, the incurrence of indebtedness and the
sale of common stock in our initial public offering. In March 1999, we received
net proceeds of approximately $81.0 million from our initial public offering and
a concurrent private placement of shares of our common stock.
To date, we have experienced negative cash flows from operating activities.
Net cash used in operating activities was $6.0 million for the year ended
December 31, 1997 and $9.8 million for the year ended December 31, 1998. Net
cash used in operating activities was $4.3 million for the six months ended June
30, 1998 and $25.5 million for the six months ended June 30, 1999. Net cash used
in operating activities for these periods was primarily attributable to our net
losses during these periods, adjusted for certain non-cash items, and a higher
level of accounts receivable resulting from an increase in our revenues, which
was partially offset by increases in accounts payable and accrued expenses.
Net cash used in investing activities was $148,000 for the year ended
December 31, 1997 and $2.9 million for the year ended December 31, 1998. Net
cash used in investing activities was $243,000 for the six months ended June 30,
1998 and $5.9 million for the six months ended June 30, 1999. Prior to 1999, all
net cash used in investing activities related to capital expenditures, primarily
for the acquisition of equipment. For the six months ended June 30, 1999, net
cash used in investing activities consisted primarily of $4.8 million of capital
expenditures, primarily for the acquisition of equipment,
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$587,000 related to the acquisition of VantageNet and $488,000 related to the
purchase of certain intangible assets.
Net cash provided by financing activities was $4.8 million for the year
ended December 31, 1997 and $23.1 million for the year ended December 31, 1998.
Net cash provided by financing activities was $8.8 million for the six months
ended June 30, 1998 and $82.3 million for the six months ended June 30, 1999.
Net cash provided by financing activities in 1997 was primarily attributable to
net proceeds received by us from the issuance of loans payable. Net cash
provided by financing activities in 1998 was primarily attributable to net
proceeds from the issuances of loans payable and preferred stock and the
exercise of warrants by investors in December 1998, and, to a lesser extent,
borrowings under a secured credit facility related to equipment financing. At
December 31, 1998, there was no additional
availability under this credit facility and the balance outstanding was
$438,000, of which $154,000 is due in 1999, $157,000 in 2000 and $126,500 in
2001. In January and February 1999, we entered into a lease line of credit for
$781,000 to finance capital equipment, of which $232,000 is due in 1999,
$269,000 in 2000, $273,000 in 2001 and $7,000 in 2002. Net cash provided by
financing activities for the six months ended June 30, 1999 consisted primarily
of approximately $81.0 million in net proceeds received by us in connection with
the closing of our initial public offering and concurrent placement in March
1999 and $619,000 of proceeds, net of repayments, from our secured credit
facility. Net cash provided by financing activities for the six months ended
June 30, 1998 consisted primarily of $8.7 million of net proceeds received by us
from the issuance of loans payable and preferred stock and, to a lesser extent,
proceeds from a secured credit facility related to equipment financing.
As of June 30, 1999, we had $61.5 million of cash and cash equivalents. Our
principal capital commitments consisted of obligations outstanding under capital
and operating leases and a secured credit facility. We have spent approximately
$8.3 million on capital expenditures since inception, excluding capital lease
agreements. Although we have no material commitments for capital expenditures,
we anticipate that we will substantially increase our capital expenditures and
lease commitments consistent with our anticipated growth in operations,
infrastructure and personnel. We currently anticipate that we will continue to
experience significant growth in our operating expenses for the foreseeable
future and that our operating expenses will be a material use of our cash
resources.
Our ability to generate significant revenues is uncertain. We have incurred
substantial costs to create, launch and enhance ABOUT.COM and to grow our
business. We incurred net losses of $2.4 million for the period from June 27,
1996 (inception) to December 31, 1996, $8.6 million for the year ended December
31, 1997, $15.6 million for the year ended December 31, 1998, $5.2 million for
the six months ended June 30, 1998 and $32.6 million for the six months ended
June 30, 1999. At June 30, 1999, we had an accumulated deficit of $59.3 million.
We expect losses from operations and negative cash flow to continue for the
foreseeable future as a result of our expansion plans and our continuing
significant increases in operating expenses in the next several years. Although
we have experienced revenue growth in recent periods, our revenues may not
remain at their current level or increase in the future. If our revenues do not
increase substantially, we may not achieve profitability. Even if we achieve
profitability, we may not sustain or increase profitability on a quarterly or
annual basis in the future.
We currently anticipate that the net proceeds of this offering, together
with available funds, will be sufficient to meet our anticipated needs at least
through 2000. We may need to raise additional funds in the future in order to
fund more aggressive brand promotion or more rapid expansion, to develop new or
enhanced services, to respond to competitive pressures or to make acquisitions.
Any required additional financing may not be available on terms favorable to us,
or at all. If adequate funds are not available or not available on acceptable
terms, we may be unable to fund our expansion, successfully promote our brand,
develop or enhance our network, respond to competitive pressures or take
advantage of acquisition opportunities, which could have a material adverse
effect on our business, results of operations and financial condition. If we
raise additional funds by issuing equity securities, stockholders
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may experience dilution of their ownership interest and those securities may
have rights superior to those of the holders of the common stock. If we raise
additional funds by issuing debt, we may be subject to certain limitations on
our operations, including limitations on the payment of dividends.
IMPACT OF THE YEAR 2000
Many currently installed computer systems and software products are coded to
accept or recognize only two-digit entries in the date code field. These systems
may recognize a date using "00" as the year 1900 rather than the year 2000. As a
result, computer systems and/or software used by many companies and governmental
agencies may need to be upgraded to comply with Year 2000 requirements or risk
system failure or miscalculations causing disruptions of normal business
activities.
We are exposed to the risk that the systems on which we depend to conduct
our operations are not Year 2000 compliant.
STATE OF READINESS. We have completed the process of determining the Year
2000 readiness of our information technology systems, which include the hardware
and software necessary to provide and deliver ABOUT.COM and our non-information
technology systems, including telephone systems and other office equipment used
internally. Our assessment plan consisted of the following steps:
- evaluating our date dependent code, software and hardware and evaluating
external dependencies;
- quality assurance testing of our internally-developed proprietary software
and systems incorporated in ABOUT.COM;
- contacting third-party vendors and licensors of material hardware,
software and services; and
- contacting vendors of material non-information technology systems used by
us.
To date, our assessment has determined the following:
- Internally developed software and systems have been checked for date
dependent code, and all material files and systems are Year 2000 compliant.
- We have been informed by vendors of material hardware and software
components of our information technology systems that the products we use
are currently Year 2000 compliant.
- Our hosting service, GlobalCenter, has certified that its systems are Year
2000 compliant.
- Commercial software upon which we are dependent is either Year 2000
compliant or will be timely upgraded to be compliant in the normal course
of business through upgrades or installation of software patches.
- Substantially all hardware used in our network operations and all of the
hardware used in our office operations has been certified as Year 2000
compliant by our vendors.
- Our telephone system, fax machines and mail systems have been certified as
Year 2000 compliant.
- Our landlords and third-party advertising sales representative and
servicing organizations have not yet provided us with information regarding
their Year 2000 compliance.
COSTS. We anticipate that no additional costs will be incurred for our year
2000 compliance efforts.
RISKS. Although we have received compliance information from our material
third-party vendors, we have not received compliance information from all of our
third-party vendors. In addition, it is possible that our third-party vendors
were untruthful or mistaken in certifying that their systems and
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products are Year 2000 compliant. Being required to fix or replace material
third-party software, hardware or services on a timely basis could result in
lost revenues, increased operating costs, damage to our reputation, system
failures and other business interruptions, any of which could have a material
adverse effect on our business, results of operations and financial condition.
In addition, governmental agencies, utility companies, Internet access
companies, third-party service providers and others outside our control may not
be Year 2000 compliant. The failure by those entities to be Year 2000 compliant
could result in a systemic failure beyond our control, such as a prolonged
Internet, telecommunications or electrical failure, which could also prevent us
from delivering ABOUT.COM, decrease the use of the Internet or prevent users
from accessing ABOUT.COM, any of which would have a material adverse effect on
our business, results of operations and financial condition.
CONTINGENCY PLAN. Based on the results of the Year 2000 assessment, we have
determined that it is not necessary to develop a contingency plan to address the
worst-case scenario that might occur if technologies we are dependent upon
actually are not Year 2000 compliant.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use," which provides guidance for determining
whether computer software is internal-use software and accounting for the
proceeds of computer software originally developed or obtained for internal use
and then subsequently sold to the public. Statement of Position 98-1 also
provides guidance on capitalization of the costs incurred for computer software
developed or obtained for internal use. We adopted Statement of Position 98-1 in
1999 and there has not been any material effect on the financial statements.
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BUSINESS
OVERVIEW
We operate ABOUT.COM, a network of more than 650 highly-targeted,
topic-specific web sites. Our network is differentiated by the high quality and
depth of content we provide to users through the efforts of knowledgeable human
guides who manage the sites, the volume of sites in our network and the
consistency of site structure and design across the network. The sites provide
high-quality original articles, moderated forums and chat rooms, newsletters,
easy access to related sites, tools, and functionality within the ABOUT.COM
network and extensive hand-picked links to web sites outside of ABOUT.COM. We
pre-screen, train and monitor our guides to ensure quality and consistency
across our network.
Our network has been the fastest growing property among the top 25 Internet
properties ranked by Media Metrix since we launched the About.com brand in May
1999. According to Media Metrix, approximately 8.9 million unique users visited
ABOUT.COM in August 1999, making ABOUT.COM the number one
news/information/entertainment Internet property in terms of audience reach and
the fifteenth largest Internet property overall.
We believe that the design of our network provides an attractive advertising
and electronic commerce platform for reaching highly concentrated groups of
users. Because our network is organized into sections and channels of related
sites, we provide advertisers and electronic commerce marketers the ability to
access specific audiences through our highly targeted sites or use our sections,
channels or network to reach broader audiences.
INDUSTRY BACKGROUND
GROWTH OF INTERNET USAGE
The Internet is a significant global mass medium for conducting business,
collecting and exchanging information, communicating and entertaining.
International Data Corporation, or IDC, estimates that the number of Internet
users worldwide will grow from approximately 142.2 million at the end of 1998 to
approximately 502.4 million by the end of 2003, representing a compound annual
growth rate of 29%. As Internet usage continues to grow, advertisers and
electronic commerce marketers are increasingly using the web to locate
customers, advertise and facilitate transactions.
ADVERTISING. The Internet allows advertisers to more precisely target
desired audiences while tracking impression levels, user demographics and
advertisement effectiveness. According to Forrester Research, the total
worldwide dollar value of Internet advertising will increase from $3.3 billion
in 1999 to $24.1 billion in 2003.
ELECTRONIC COMMERCE. The Internet allows marketers to interact more
effectively with customers and to more easily obtain relevant data about buying
patterns, preferences and demands. According to IDC, the percentage of Internet
users buying goods and services on the Internet will increase from approximately
22% in 1998 to approximately 36% in 2003, and the total value of goods and
services purchased directly on the web will increase from approximately $27.0
billion in 1998 to approximately $842.7 billion in 2003.
LOCATING INFORMATION ON THE INTERNET
The proliferation of content is making it increasingly difficult and
time-consuming for users to navigate the Internet and to locate useful and
relevant information. According to IDC, the number of web pages will increase
from approximately 925 million at the end of 1998 to over 13 billion by the end
of 2003, representing a compound annual growth rate of 70%. A number of methods
and sources have emerged to enable Internet users to find information:
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INTERNET DIRECTORIES. Internet directories generally list web sites by
specific topics of interest and contain links to these sites. With the rapid
growth of content available on the Internet, these directories are becoming
increasingly difficult to build and update with a high level of quality. In
addition, the creators of these directories often have limited relevant
knowledge about the directories' particular topic areas.
INTERNET SEARCH ENGINES. Internet search engines capture, store and index
web site information in order to retrieve web site listings in response to a
user query. These software programs have a limited ability to determine the
quality or relevance of the web sites they retrieve. Further, as the nature of
the available content has become more difficult to classify, many companies
offering search engines are being forced to employ significant editorial staffs
to ensure that responses to queries are satisfactory. Search engines based on
natural language have the added difficulty of accurately determining sentence
syntax and nuances.
INTERNET PORTALS. Many traditional Internet directories and search engines
have added commodity tools and features, such as weather, news feeds, stock
portfolios and personal home pages, and a limited amount of non-proprietary
content from other media. These portals provide Internet users with basic
information and static links on a broad range of topics. Because most portals
have many similar tools and features and provide limited original content, there
is little differentiation among them.
TOPIC-SPECIFIC SITES. More in-depth content is generally found on sites
focused on particular topics where individuals knowledgeable about those topics
create the content. Because these sites tend to be widely dispersed, Internet
users may need to visit a number of other, unaffiliated sites in order to
satisfy their information needs.
USER-GENERATED CONTENT SITES. Many web sites provide a forum for users to
generate and contribute relevant content. However, the quality of this content
varies significantly and the content is frequently unmanaged and poorly
organized and presented. As a result, advertisers may be reluctant to entrust
their brands to sites that rely upon user-generated content.
OUR SOLUTION
We offer users a broad network of over 650 topic-specific sites in order to
help users locate information within and outside of our network. In doing so, we
create an environment in which advertisers can direct their messages to targeted
audiences ranging from all users of our network to the users of a specific site.
HIGH-QUALITY, TOPIC-SPECIFIC SITES. Each of our topic-specific sites is
overseen by a guide who is knowledgeable about the site's topic. Our experienced
editorial staff pre-screens, trains and oversees these guides in order to ensure
a quality user experience. As a result of this guide management process, our
sites incorporate high-quality original articles, information and relevant
hand-picked links to third-party web sites within and outside our network.
NETWORK BENEFITS. ABOUT.COM is designed to enable users to move rapidly and
efficiently throughout our networks and to find relevant information on a wide
range of topics. To facilitate user navigation, we group our web sites into
sections that are then incorporated into broad, topical channels. All of our
sites, sections and channels are designed and presented in a consistent manner
so that users moving through ABOUT.COM can easily find the information they are
seeking. By using standard templates and a patented guide-management
methodology, we can easily and cost-effectively add new sites to address new
topics of interest and to develop event-driven and seasonal web sites.
ATTRACTIVE ADVERTISING AND ELECTRONIC COMMERCE PLATFORM. We believe our
network offers a broad range of advertising and electronic commerce marketing
opportunities. By organizing related sites into channels and sections, we
provide advertisers and electronic commerce marketers with significant
flexibility to select the level of targeting that they want to achieve on
ABOUT.COM. Advertisers and
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electronic commerce marketers can access broad audiences by advertising across
our network or reach more targeted audiences by advertising in specific
channels, sections or web sites.
OUR STRATEGY
Our objective is to enhance our position as the leading Internet network of
topic-specific web sites. The key elements of our strategy include:
ENHANCING CHANNELS. We believe that many of our topic-specific sites have
the opportunity to become market leaders in their given categories. Towards this
end, we will continue to internally develop the content and services offered at
the channel, section and site levels. In selected categories, we may choose to
partner with companies having tools or content that will enable us to expand the
information available in these categories and establish market leadership for
ABOUT.COM.
INCREASING TRAFFIC. We intend to increase user traffic to ABOUT.COM by
expanding the features available on our network and increasing cross-promotion
among our topic-specific sites. We believe these efforts will promote user
loyalty, increase repeat usage and extend duration per visit. In addition, we
have recently established an affiliate marketing program in which third parties
can incorporate features and tools from ABOUT.COM that enable their users to
link into our network to utilize those tools and access our content. We intend
to supplement these efforts to increase traffic by continuing to form selected
distribution and syndication partnerships.
CONTINUING TO BUILD BRAND AWARENESS. We believe that enhancing our brand
awareness is critical to attracting and retaining Internet users and
advertisers. In May 1999, we conducted a significant marketing campaign in
connection with the launch of ABOUT.COM. We intend to continue to build our
brand awareness through offline and online marketing efforts.
MAXIMIZING REVENUES FROM HIGHLY-TARGETED ADVERTISING. As traffic to our
network has increased, we have begun to emphasize premium-priced advertising
that provides our advertisers with highly-targeted audiences at the site level.
We have increased the number of sites on which we have sold site-specific
advertising from seven in March 1999 to 77 in June 1999. We believe we have
significant opportunities to sell premium-rate, targeted advertising on
additional sites, as well as across combinations of sites, sections and
channels.
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CHANNEL STRUCTURE AND DEVELOPMENT
Our network currently consists of more than 650 topic-specific sites, each
of which focuses on a particular topic and is overseen by a knowledgeable and
paid guide. For ease of use and for enhanced advertising opportunities, we have
grouped our more than 650 topic-specific sites into the following 18 channels,
which in turn are divided into the indicated sections:
ARTS/LITERATURE
Books/Authors
Performing Arts
Visual Arts/Design
Writing/Publishing
BUSINESS/CAREERS
Business
Industries
Job Searching
Professions/
Occupations
COMPUTING/TECHNOLOGY
Business/Industry
Games
Hardware
Multimedia
OS
Programming
Software
EDUCATION
Adult/Continuing Ed
Arts
College/University
History
Languages
Literature
Philosophy/Religion
Primary/Secondary
Ed
Sciences--Life/Earth
Sciences--Physical/
Computer
Social Sciences
ENTERTAINMENT
Comedy
Movies
Music
Online
Radio
TV
FINANCE/INVESTING
Banking/Financial
Services
Bonds/Fixed Income
Day Trading
Economics
Electronic Commerce
Financial Planning
Frugal Living
Insurance Industry
Investing: Canada
Investing for
Beginners
Investment Clubs
Mutual Funds
Personal Credit: US
Real Estate: US
Retirement Planning
Stocks
GAMES
Electronic Games
Games--General
HEALTH/FITNESS
Alternative
Medicine
Disabilities
Diseases/Conditions
Fitness/Wellness
Medicine
Mental Health
Women's Health
HOBBIES
Arts/Crafts
Collecting
Pastimes
HOME/FAMILY
Beauty/Fashion
Cars/Motorcycles
Drinks/Beverages
Food/Cooking
Gardening
Home
Parenting/Family
Pets
Relationships
INTERNET/ONLINE
Business/Industry
Communication
Design
Programming
Security
Sites/Services
KIDS/TEENS
Arts
Computers/Internet
Kids/Teens
Connecting
Entertainment
Games
For Grownups
For Teens
Hobbies/Interests
Home
News/Current
Events
Homework
Sports/Fitness
LOCAL
Alaska/Hawaii
California US
Canada
Midatlantic US
Midwest US
Mountain States US
New England US
Pacific Northwest US
Southeast US
Southwest US
NEWS/MEDIA
Media
News/Weather
SHOPPING
Computer Brand
Reviews
Computer Peripherals
Contests and
Sweepstakes
Couponing and
Refunding
Electronic Commerce
Fashion
Focus on Mac
Hardware
Freebies
Frugal Living
Home Electronics
Online Shopping
Palmtops/PDAs
Personal Credit: US
SOCIETY/CULTURE
Beliefs/Folklore
Cultures--Africa/
Mideast
Cultures--Americas
Cultures--Asia/Pacific
Cultures--Europe
Government/Politics
Groups/Subcultures
Issues/Causes
Religion/Spirituality
Sexuality
SPORTS
Fishing/Hunting
Individual/Spectator
Motor Sports
Recreation
Sports-General
Team/Spectator
Water Sports
Winter Sports
TRAVEL
Africa/Asia/Australia
Canada
Europe
Latin America/
Caribbean
Lodging/
Transportation
Outdoors/Recreation
US--Midwest
US--Northeast
US--Pacific/Mountain
US--Southeast
US--Southwest
Vacations
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We will continue to enhance the content and services offered at the channel,
section and site levels. Towards this end, we have created a cross-discipline
team structure to focus on the needs of particular channels. In those areas
where we believe our internal offering can compete successfully on an
independent basis, the relevant channel teams will focus their energy on the
channel's further development. In other selected areas, we may choose to
strengthen our channel offering by combining the benefits of our network with
the tools or content of a third-party. These relationships can vary from
providing content for a particular area of a channel or section to sponsoring an
entire channel or section. They also enable us to increase the breadth of
content on our network without incurring significant development costs. These
third-party channel development agreements are typically at least 12 months in
duration and require our partners to make payments to us for development,
placement and advertising. To date, we have formed partnerships in the following
channels and sections:
- AboutShopping with ShopNow.com;
- AboutFinance with The Motley Fool;
- AboutComputing/Technology with CMP Media, Inc.;
- Auto Section with Cars.com; and
- Careers Section with HotJobs.com.
We have also entered into partnerships to enhance our service offerings
across several of our channels and sections. In the future, we may also expand
our channel and section offerings through the acquisition of complementary
businesses and technologies.
DISTRIBUTION AND SYNDICATION PARTNERSHIPS
We believe that our distribution and syndication partnerships drive traffic
to ABOUT.COM. Through these partnerships, we typically provide content to a
partner's web site, and users can then link to ABOUT.COM for the full feature or
additional information on that topic. The flexibility and breadth of our content
enables us to partner with a broad range of Internet companies, including the
following:
- Search engines and Internet directories such as AltaVista, Dogpile,
GoTo.com, Metacrawler, Netscape Communications' NetSearch and RealNames;
- Internet service providers such as BellSouth.net;
- Content web sites such as CNN.com and Weather.com; and
- Broadband cable-related sites such as AMC American Pop, American Movie
Classics, Bravo, Home Box Office, Independent Film Channel,
LifetimeTV.com, Romance Classics and Showtime.
These agreements typically require us to make payments that are either fixed
or are based on the amount of user traffic directed from the partner's site to
ABOUT.COM. In addition, through our recently established affiliate marketing
program, third-party web sites can populate their site with our features and
content, and Internet users are linked to ABOUT.COM for additional content.
These agreements will require us to make payments that are based on the amount
of user traffic directed from the affiliate's site to ABOUT.COM. Through our
syndication partnerships, we provide content to a partner's web site for a fee.
We intend to continue to pursue distribution and syndication partnerships with
leading Internet service providers and popular web sites in the future.
ADVERTISING AND ELECTRONIC COMMERCE
We believe our network provides a highly targeted platform for advertising
and electronic commerce over a broad range of consumer and business topics.
Sales of advertisements on ABOUT.COM
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are being generated primarily by our internal advertising sales organization.
Our internal advertising sales force maintains close relationships with
advertisers by consulting regularly with them on design and placement of their
Internet-based advertising, by providing them with advertising measurement
analysis and by providing a high level of customer support. As of August 31,
1999, we had an internal advertising sales organization consisting of 35
professionals located in New York, Los Angeles and San Francisco. We intend to
increase the size of our internal advertising sales organization.
Our advertisers typically enter into agreements with terms of between two
months and two years, under which they generally receive a guaranteed number of
impressions at a fixed rate. In some cases, these agreements entitle us to a
share of revenues generated by sales of merchandise or services over a
particular threshold resulting from direct links from ABOUT.COM. Advertisers
have significant flexibility in determining the placement of their
advertisements based on the level of targeting they want to achieve. We offer
numerous sizes and types of advertising placement, including banner
advertisements, button advertisements and text links. We also offer sponsorship
programs and other promotional opportunities to build brand awareness and to
drive traffic to the web sites of our advertisers.
The following is a list of some of the advertisers that have advertised on
ABOUT.COM during the first three quarters of 1999:
<TABLE>
<S> <C>
BBQ.com IBM
Bell Atlantic Insweb
BellSouth Lifeminders.com
Big Star Lowestfare.com
Entertainment Mail.com
BMG Music Mondera.com
Borders.com MotherNature.com
Buy.com Medscape
Cars.com The Motley Fool
Clorox Netscape
CMP Media Nicorette
Dow Jones Procter & Gamble
Drugstore.com RealNames
eFax Renaissance
GAP Cruises
General Motors ShopNow.com
Hewlett Packard Thomas Register
HotJobs.com Uproar
</TABLE>
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For several of our advertisers we have developed electronic commerce
promotions that integrate original content from ABOUT.COM with traditional
commercial advertising. We provide links to these integrated promotional sites
by prominently displaying the advertisement within ABOUT.COM. For example, we
have developed an online book store for Borders.com that integrates Borders'
book offerings with book reviews independently written by ABOUT.COM guides. As
part of this promotion, guides can make recommendations for books related to
their topic-specific sites that are linked to the Borders online book store. As
of August 31, 1999, over 550 guides had created annotated links to Borders book
store within their topic-specific sites. We believe these features create a more
relevant, engaging purchasing vehicle for users, while enhancing the value of
our network as an electronic commerce platform.
BRAND PROMOTION AND MARKETING
In May 1999, we changed our name from MiningCo.com to About.com. In support
of this initiative, we conducted a significant national print and television
campaign.
We believe that an aggressive brand promotion campaign will increase usage
of ABOUT.COM, as well as attract additional advertisers and electronic commerce
partners. We market our service through online advertising and have been
advertising in selected cities through traditional offline media, including
outdoor and radio advertisements and a national trade magazine campaign. We also
utilize public relations, trade shows and ongoing customer communications
programs. We intend to expand our marketing and brand promotion initiatives.
GUIDE MANAGEMENT
As of August 31, 1999, our 674 guides, 478 of whom had been guides for at
least one year, were located in over 40 states and 18 countries. Through the
topic-specific sites, these independent contractors create annotated Internet
directories and original content, and moderate personal interaction tools such
as bulletin boards and chat. As of August 31, 1999, the guides were directly
supported by a team of 50 of our employees, including 26 editors. Editors
regularly monitor each topic-specific site to assess the relevance and quality
of its features, the management of personal interaction tools and compliance
with our policies. Editors also provide weekly newsletters and host chats with
guides to better communicate topic-specific site tips, including news, ideas for
improving sites and marketing information.
APPLICATION AND TRAINING. We recruit our guides through various methods,
including searches of the Internet for topic-specific sites run by individuals,
user inquiries, referrals by existing guides and Internet-based classified job
listings. Guide applications are available on ABOUT.COM and are screened by a
team of editors who read and evaluate the applicant's sample feature article and
Internet directories, as well as assess the applicant's knowledge of his or her
topic. Once an application is accepted, the applicant becomes an associate guide
and is placed into a four-week preliminary training class. During this period,
the associate guide is taught how to construct and maintain one of our
topic-specific sites, how to administer a bulletin board and chat, and how to
create features and newsletters. At the same time, we review the associate
guide's feature articles and directories for quality of organization,
annotation, completeness, direct linking to relevant pages within web sites and
writing skills. If the associate guide meets our qualification criteria at the
end of this period, his or her web site becomes a live topic-specific site and
the associate guide becomes a guide.
Following successful completion of the training class, each guide is placed
in a comprehensive 12-week follow-on training and quality control process.
During this period, the editorial staff provides guides with feedback on the
strengths and weaknesses of their sites and makes recommendations for further
improvements of both quality and consistency. At the end of this 12-week period,
the quality of
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the guide's site is rated. This rating is regularly revisited by the editors and
is one of the factors that determines a guide's minimum compensation.
GUIDE CONTRACTS. Pursuant to the standard guide contract, we are granted an
exclusive perpetual license to use guide-developed ABOUT.COM content on the
Internet and on any other commercial online service, subject to the guide
sharing in any associated revenue. In addition, we also retain the right, on a
non-exclusive basis, to use the content in any offline media, subject to the
guide sharing in any associated revenue. The guides have agreed to share with us
any revenue derived from their use of this content in any offline media. The
standard guide contract is terminable by either party upon 15 days' prior
written notice.
GUIDE COMPENSATION. Guides are currently compensated based on the greater
of a monthly guarantee or a percentage of net advertising revenues generated by
the topic-specific sites on ABOUT.COM, which we distribute among the guides
based on the user traffic on each guide's respective topic-specific site. By
compensating guides based on the net advertising revenues of topic-specific
sites, the guides are provided incentives to help and encourage each other.
Guides are also currently entitled to share a percentage of net transaction
revenues and net syndication revenues. In addition, we may distribute a
discretionary bonus to guides based on outstanding content, exceptional
performance and longevity.
ONLINE GUIDE LOUNGE. We provide relevant information to the guides through
a password-protected web site and via bulletin boards, chat and newsletters. The
guide lounge includes a library of reference information for the guides,
including our policies, publishing regulations and other useful information. The
guide lounge also provides the guides with a platform for communicating with
each other.
OUR PROPRIETARY TEMPLATE
We have developed a proprietary template for the consistent presentation of
each topic-specific site's navigational features, content and personal
interaction tools. This template includes:
- a welcome page that promotes various aspects of a topic-specific site,
including the guide's latest featured article;
- the name, e-mail address and photograph of the guide managing the
topic-specific site;
- an Internet directory that provides annotated links to the guide's
selected third-party Internet content;
- an archive of the guide's original content features;
- a guide-created e-mail newsletter to allow the site's users to stay in
touch with developments on the site and the site's particular topic;
- a guide-moderated bulletin board where users can post questions, opinions
or information;
- a chat room for users that is used for regularly scheduled, guide-hosted
chat sessions and unscheduled open chat;
- an events calendar maintained by the guide that lists various activities
and events related to the site's specific topic; and
- a guide biography page that provides users with background information
regarding the guide.
Our editors regularly identify noteworthy content features within the
topic-specific sites and combine this content in a variety of formats for users.
This content is used to create daily features on
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pages within ABOUT.COM (e.g., "ABOUT.COM TODAY"), and to develop e-mail
newsletters. We believe that these features and newsletters are effective site
promotion and user retention tools.
OPERATING INFRASTRUCTURE
Our operating infrastructure is designed to provide timely and efficient
delivery of the network to customers. Each page on a topic-specific site is
generated and delivered by one of our web and applications servers. Our network
uses FreeBSD, Solaris and Microsoft Windows NT for operating systems, and Apache
and IIS for Internet web server software. Our internal programming efforts are
written using a broad spectrum of programming languages.
The administrative control center is our patented Internet-based site
management environment. This center enables our guides to remotely manage their
topic-specific sites at any time via a password-protected interface in order to
preview and upload content, view usage and feedback reports, and access
administrative tools for newsletters, chat, bulletin boards and events
calendars.
In January 1998, we entered into an Internet-hosting agreement with
GlobalCenter to maintain all of our production servers at GlobalCenter's
Manhattan Data Center. This agreement was extended in January 1999 and is
terminable by either party upon 90 days' notice. GlobalCenter provides
comprehensive facilities management services, including human and technical
monitoring of all production servers 24 hours per day, seven days per week.
GlobalCenter provides the means of connectivity for ABOUT.COM's servers to
end-users via the Internet through high capacity transmission wires. These
connections link to many different parts of the Internet via a combination of
public and private peering agreements. The facility has two independent power
supplies, which are battery-powered, as well as two independent diesel
generators designed to provide power to these systems within seconds of a power
outage. The diesel generators can supply the data center's power for nine days
before refueling is required. GlobalCenter does not guarantee that our Internet
access will be uninterrupted, error-free or secure. Our operations are dependent
on GlobalCenter's ability to protect both its and our systems against damage
from fire, power loss, water damage, telecommunications failures, vandalism and
other malicious acts, and similar unexpected adverse events. Any disruption in
the Internet access provided by GlobalCenter could have a material adverse
effect on our business, results of operations and financial condition.
ABOUT.COM must accommodate a high volume of traffic and has in the past and
may in the future experience slower response times and system downtime for a
variety of reasons. An increase in volume of users accessing ABOUT.COM could
lead to systems failures or slower response times and adversely affect
advertising revenues. Users may become dissatisfied by any system failure that
interrupts our ability to provide ABOUT.COM to them or results in slower
response time. ABOUT.COM could also be affected by computer viruses, electronic
break-ins or other similar disruptions. Our insurance policies have low coverage
limits and therefore insurance may not adequately compensate us for any losses
that may occur due to any failures in our system or interruptions in our
service. We are in the process of developing a comprehensive disaster recovery
plan to respond to system failures. Our business, results of operations and
financial condition could be materially adversely affected by any damage or
failure that interrupts or delays our operations.
All of our production data is copied to backup tapes each night and these
backup tapes are rotated to a third-party facility for off-site storage. We keep
all of our production servers behind packet-filtered routers and do not allow
any outside access to any administrative functions. Strict password management
and physical security measures are followed.
Our users and guides depend on Internet service providers, online service
providers and other web site operators for access to ABOUT.COM. Each of these
providers and operators has experienced significant outages in the past, and
could experience outages, delays and other difficulties due to system failures
unrelated to our systems. Moreover, the Internet infrastructure may not be able
to support
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continued growth in its use. Any of these problems could materially adversely
affect our business, results of operations and financial condition.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
GENERAL. There are an increasing number of laws and regulations pertaining
to the Internet. In addition, a number of legislative and regulatory proposals
are under consideration by federal, state, local and foreign governments and
agencies. Laws or regulations may be adopted with respect to the Internet
relating to liability for information retrieved from or transmitted over the
Internet, online content regulation, user privacy, taxation and quality of
products and services. Moreover, the applicability to the Internet of existing
laws governing issues such as intellectual property ownership and infringement,
copyright, trademark, trade secret, obscenity, libel, employment and personal
privacy is uncertain and developing. Any new legislation or regulation, or the
application or interpretation of existing laws, may decrease the growth in the
use of the Internet, which could in turn decrease the demand for our network,
increase our cost of doing business or otherwise have a material adverse effect
on our business, results of operations and financial condition.
LIABILITY FOR INFORMATION RETRIEVED FROM ABOUT.COM AND FROM THE
INTERNET. Content may be accessed on ABOUT.COM or on the web sites of our
distribution or syndication partners, and this content may be downloaded by
users and subsequently transmitted to others over the Internet. This could
result in claims against us based on a variety of theories, including
defamation, obscenity, negligence, copyright or trademark infringement or other
theories based on the nature, publication and distribution of this content.
These types of claims have been brought, sometimes successfully, against
providers of Internet services in the past. We could also be exposed to
liability with respect to third-party content that may be posted by users in
chat rooms or bulletin boards offered on the topic-specific sites. If any
information, including information deemed to constitute professional advice such
as legal, medical, financial or investment advice, provided on ABOUT.COM
contains errors or false or misleading information, third parties could make
claims against us for losses incurred in reliance on such information. ABOUT.COM
contains approximately 500,000 human-filtered annotated links to other web
sites. As a result, we may be subject to claims alleging that, by directly or
indirectly providing links to other web sites, we are is liable for copyright or
trademark infringement or the wrongful actions of third parties through their
respective web sites.
The Communications Decency Act of 1996, or CDA, was enacted to prohibit the
transmission over the Internet of indecent, obscene or offensive content. While
selected parts of the CDA have been deemed unconstitutional, provisions
protecting providers of Internet services from claims related to third-party
content remain effective. Under the CDA, a provider of Internet services will
generally not be treated as a publisher or speaker of any information available
on its service but provided by a third-party content provider unless the
provider of Internet services exerts editorial control over the content or
embraces the content as its own. The Digital Millennium Act of 1998 provides
additional safe harbor defenses for Internet service providers under similar
conditions and upon compliance with procedural requirements specified in the
act. Our activities may prevent us from being able to take advantage of these
safe harbor provisions. In particular, while we do not edit the guide-developed
content prior to its availability on ABOUT.COM and only monitor this content to
ensure compliance with our policies, we may be subject to claims that we are the
publisher of the content available on the topic-specific sites. In addition,
since we have exclusive online rights to all guide-developed content on
ABOUT.COM, we aggregate this content for use on ABOUT.COM and for syndication
and distribution to third-party web sites and electronic commerce partners. We
may be subject to claims that we are the publisher of this aggregated
guide-developed content and to the extent that we exercise editorial control
over the content available on any site within our network, we increase the risk
that we will be found to be the publisher or speaker of that content. While we
attempt to reduce our exposure to this potential liability
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through, among other things, provisions in guide agreements, user policies and
disclaimers, the enforceability and effectiveness of such measures are
uncertain.
Our general liability insurance may not cover all potential claims to which
we are exposed and may not be adequate to indemnify us for all liability that
may be imposed. Any imposition of liability that is not covered by insurance or
is in excess of insurance coverage could have a material adverse effect on our
business, results of operations and financial condition. Even if these claims do
not result in liability, we could incur significant costs in investigating and
defending against these claims. Potential liability for information disseminated
through ABOUT.COM could lead us to implement measures to reduce our exposure to
such liability, which may require the expenditure of substantial resources and
limit the attractiveness of our network to users.
STATUS OF THE GUIDES AS INDEPENDENT CONTRACTORS. We treat the guides as
independent contractors for tax and employee benefit purposes. One or more
jurisdictions may deem the guides to be our employees rather than independent
contractors and seek to impose taxes, interest and penalties on us. We could
have substantial tax and employee benefit liabilities if it were ultimately
determined that the guides are our employees. See "Risks Factors--We could incur
significant withholding taxes and employee benefits expenses if the guides were
deemed to be our employees rather than independent contractors."
ONLINE CONTENT REGULATIONS. Several federal, state and foreign statutes
prohibit the transmission of indecent, obscene or offensive content over the
Internet to particular groups of persons. Our network includes links to sites
with adult content. In addition, pending legislation seeks to ban Internet
gambling and federal and state officials have taken action against businesses
that operate Internet gambling activities. The enforcement of these statutes and
initiatives, and any future enforcement activities, statutes and initiatives,
may result in limitations on the type of content and advertisements available on
ABOUT.COM. Legislation regulating online content could dampen the growth in use
of the Internet generally and decrease the acceptance of the Internet as an
advertising and electronic commerce medium, which could have a material adverse
effect on our business, results of operations and financial condition.
PRIVACY CONCERNS. The Federal Trade Commission, or FTC, is considering
adopting regulations regarding the collection and use of personal identifying
information obtained from individuals when accessing web sites, with particular
emphasis on access by minors. These regulations may include requirements that
companies establish certain procedures to, among other things:
- give adequate notice to users regarding information collection and
disclosure practices;
- provide users with the ability to have personal identifying information
deleted from a company's database;
- provide users with access to their personal information and with the
ability to rectify inaccurate information;
- clearly identify affiliations or a lack thereof with third parties that
may collect information or sponsor activities on a company's web site; and
- obtain express parental consent prior to collecting and using personal
identifying information obtained from children under 13 years of age.
These regulations may also include enforcement and redress provisions. While
we are implementing programs designed to enhance the protection of the privacy
of our users, including children, these programs may not conform with any
regulations adopted by the FTC. Moreover, even in the absence of those
regulations, the FTC has begun investigations into the privacy practices of
companies that collect information on the Internet. One investigation resulted
in a consent decree
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pursuant to which an Internet company agreed to establish programs to implement
the principles noted above. We may become subject to a similar investigation, or
the FTC's regulatory and enforcement efforts may adversely affect our ability to
collect demographic and personal information from users, which could have an
adverse effect on our ability to provide highly targeted opportunities for
advertisers and electronic commerce marketers. Any of these developments would
have a material adverse effect on our business, results of operations and
financial condition.
It is also possible that cookies, or information keyed to a specific server,
file pathway or directory location that is stored on a user's hard drive,
possibly without the user's knowledge, which are used to track demographic
information and to target advertising, may become subject to laws limiting or
prohibiting their use. A number of Internet commentators, advocates and
governmental bodies in the United States and other countries have urged the
passage of laws limiting or abolishing the use of cookies. Limitations on or
elimination of our use of cookies could limit the effectiveness of our targeting
of advertisements, which could have a material adverse effect on our business,
results of operations and financial condition.
The European Union, or EU, has adopted a directive that imposes restrictions
on the collection and use of personal data. Under the directive, EU citizens are
guaranteed rights to access their data, rights to know where the data
originated, rights to have inaccurate data rectified, rights to recourse in the
event of unlawful processing and rights to withhold permission to use their data
for direct marketing. The directive could, among other things, affect U.S.
companies that collect information over the Internet from individuals in EU
member countries, and may impose restrictions that are more stringent than
current Internet privacy standard in the United States. In particular, companies
with offices located in EU countries will not be allowed to send personal
information to countries that do not maintain adequate standards of privacy. The
directive does not, however, define what standards of privacy are adequate. As a
result, the directive may adversely affect the activities of entities such as us
that engage in data collection from users in EU member countries.
DATA PROTECTION. Legislative proposals made by the federal government would
afford broader protection to owners of databases of information such as stock
quotes and sports scores. This protection already exists in the EU. If enacted,
this legislation could result in an increase in the price of services that
provide data to web sites and could create potential liability for unauthorized
use of these data. Either of these possibilities could have a material adverse
effect on our business, results of operations and financial condition.
INTERNET TAXATION. A number of legislative proposals have been made at the
federal, state and local level, and by certain foreign governments, that would
impose additional taxes on the sale of goods and services over the Internet and
certain states have taken measures to tax Internet-related activities. Although
Congress recently placed a three-year moratorium on state and local taxes on
Internet access or on discriminatory taxes on electronic commerce, existing
state or local laws were expressly excepted from this moratorium. Further, once
this moratorium is lifted, some type of federal and/or state taxes may be
imposed upon Internet commerce. This legislation, or other attempts at
regulating commerce over the Internet, may substantially impede the growth of
commerce on the Internet and, as a result, adversely affect our opportunity to
derive financial benefit from those activities.
REVENUE SHARING ARRANGEMENTS. We enter into agreements with advertisers
under which we may be entitled to receive a share of revenues generated from the
purchase of goods and services through direct links from ABOUT.COM. These
agreements may expose us to additional legal risks and uncertainties, including
potential liabilities to customers of those products and services by virtue of
our involvement in providing access to those products or services, even if we do
not provide those products or services ourselves. Any indemnification provided
to us in our agreements with these parties, if available, may not be adequate.
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DOMAIN NAMES. Domain names are Internet "addresses." The current system for
registering, allocating and managing domain names has been the subject of
litigation, including trademark litigation, and of proposed regulatory reform.
We have registered the domain name "ABOUT.COM." Although we are seeking to
register "ABOUT.COM" as a trademark in the United States, we may not
successfully obtain the registration and third parties may bring claims for
infringement against us for the use of this trademark. There can be no assurance
that our domain names will not lose their value, or that we will not have to
obtain entirely new domain names in addition to or in lieu of our current domain
names if reform efforts result in a restructuring in the current system.
JURISDICTIONS. Due to the global nature of the Internet, it is possible
that, although transmissions by us over the Internet originate primarily in New
York, the governments of other states and foreign countries might attempt to
regulate our transmissions or prosecute us for violations of their laws. These
laws may be modified, or new laws enacted, in the future. Any of the foregoing
developments could have a material adverse effect on our business, results of
operations and financial condition. In addition, as our network is available
over the Internet in multiple states and foreign countries, these jurisdictions
may claim that we are required to qualify to do business as a foreign
corporation in each of these states or foreign countries. We are qualified to do
business only in California, Georgia, Minnesota and New York, and failure by us
to qualify as a foreign corporation in a jurisdiction where we are required to
do so could subject us to taxes and penalties and could result in our inability
to enforce contracts in these jurisdictions. Any new legislation or regulation,
the application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the Internet and other online services could have a material
adverse effect on our business, results of operations and financial condition.
INTELLECTUAL PROPERTY
We seek to protect our proprietary rights, but our actions may be inadequate
to protect our patents, trademarks or other proprietary rights or to prevent
others from claiming violations of their proprietary rights. We have one United
States patent, four patent applications on file with the United States Patent
and Trademark Office and one international patent application. We enter into
confidentiality agreements with our material employees, guides, consultants and
strategic partners, and generally controls access to and distribution of our
proprietary information. Despite our efforts to protect our proprietary rights
from unauthorized use or disclosure, parties may attempt to disclose, obtain or
use our proprietary information. The steps we have taken may not prevent
misappropriation of its proprietary information. Third parties may infringe or
misappropriate our proprietary rights, which could have a material adverse
affect on our business, results of operations and financial condition. The
validity, enforceability and scope of protection of proprietary rights in
Internet-related industries is uncertain and still evolving.
Furthermore, third parties may assert infringement claims against us. From
time to time we have been, and we expect to continue to be, subject to claims in
the ordinary course of our business, including claims of alleged infringement of
the trademarks and other intellectual property rights of third parties by us or
our guides. These claims and any resultant litigation, should it occur, could
subject us to significant liability for damages and could result in the
invalidation of our proprietary rights. In addition, even if we prevail, any
litigation could be time-consuming and expensive to defend, and could result in
the diversion of management's time and attention, any of which could materially
adversely affect our business, results of operations and financial condition.
Any claims from third parties may also result in limitations on our ability to
use the trademarks and other intellectual property subject to those claims
unless we enter into agreements with the third parties responsible for those
claims, which may be unavailable on commercially reasonable terms.
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<PAGE>
COMPETITION
We compete for users, advertisers and electronic commerce marketers with a
wide range of companies including the following:
- Internet "portal" companies, including Excite, Lycos and Yahoo!;
- Internet search engines and directories, including AskJeeves and
LookSmart;
- online content web sites, including C/net, ESPN.com and ZDNet.com;
- online community web sites, including iVillage;
- online personal homepage services, including GeoCities and theglobe.com;
- publishers and distributors of television, radio and print, including CBS,
Disney, NBC and Time Warner;
- general purpose consumer online services, including America Online and
Microsoft Network; and
- web sites maintained by Internet service providers, including AT&T
WorldNet, EarthLink and MindSpring.
We believe that our ability to compete depends on many factors, many of
which are outside of our control. These factors include the quality of content
provided by us and our competitors, the ease of use of services developed either
by us or our competitors, the timing and market acceptance of new and enhanced
services developed either by us or our competitors, and sales and marketing
efforts of us and our competitors.
We also compete with television, radio, cable and print (traditional
advertising media) for a share of advertisers' total advertising budgets. If
advertisers perceive the Internet or ABOUT.COM to be a limited or ineffective
advertising medium, advertisers may be reluctant to devote a significant portion
of their advertising budget to Internet advertising or to advertise on
ABOUT.COM.
Please see "Risk Factors--We may not be able to compete successfully" for a
more detailed description of the risks of competition.
EMPLOYEES AND GUIDES
As of August 31, 1999, we had 211 full-time employees, including 77 in
marketing and sales, 54 in content, editorial and guide support, 22 in finance
and administration and 58 in product development, operations and technical
support. As of August 31, 1999, we had 674 guides and an additional 81 guides in
training. None of the guides are employed by us, but rather they are engaged by
us as independent contractors. None of our employees are represented by a union.
We believe our relationship with our employees and the guides is good.
FACILITIES
We are headquartered at 220 East 42nd Street, New York, New York, where we
lease an aggregate of approximately 42,000 square feet of space covering three
floors. The leases on these floors expire between 2000 and 2003. We also entered
into a six-month lease for approximately 3,000 square feet of commercial space
in Westchester, New York. We currently anticipate that we will require
additional space as more personnel are hired and we are actively searching for
larger space in New York City.
We also lease a sales office located at 120 Montgomery Street, San
Francisco, California. The lease expires in July 2002 and is for approximately
3,515 square feet. In addition, we lease a product development office at 360
North Robert Street, St. Paul, Minnesota that expires in 2002 and covers
approximately 1,730 square feet.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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MANAGEMENT
The following table sets forth, as of August 31, 1999, the name, age and
position of each of our directors, executive officers and certain other key
employees.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Scott P. Kurnit(1)*..................... 45 Chairman of the Board of Directors, President and Chief Executive
Officer
William C. Day*......................... 35 Chief Operating Officer
Todd B. Sloan*.......................... 36 Chief Financial Officer
Mark J. Lieberman....................... 40 President--About.com Ventures
Jon Spaet............................... 43 President--Advertising Sales
Alan T. Wragg........................... 56 President--International
Eric W. Bingham......................... 40 Senior Vice President--Business Operations
Alan P. Blaustein....................... 30 Senior Vice President and General Counsel
John R. Caplan.......................... 30 Senior Vice President--Marketing
Elizabeth A. Maier...................... 47 Senior Vice President--Product Design and Development
Ron McCoy............................... 30 Senior Vice President--Technology and Operations
Linda Osborne........................... 39 Vice President--Guide Operations
Frank J. Biondi, Jr..................... 54 Director
Dixon R. Doll (1)....................... 56 Director
Ronald Unterman (1)(2).................. 53 Director
Marc M. Watson (1)(2)................... 54 Director
Kristopher A. Wood (2).................. 28 Director
</TABLE>
- ------------------------
* Denotes executive officer.
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
SCOTT P. KURNIT has served as our Chairman of the Board of Directors,
President and Chief Executive Officer since he founded About.com in June 1996.
From March 1995 to February 1996, Mr. Kurnit served as President and Chief
Executive Officer of MCI/News Corporation Internet Ventures with responsibility
for the Internet initiatives of the parent companies. From June 1993 to March
1995, Mr. Kurnit served as Executive Vice President of Prodigy Service Co., an
online services company. From March 1985 to June 1993, Mr. Kurnit was the
President for both Viewer's Choice and Showtime Event Television for Viacom Inc.
From June 1979 to March 1985, Mr. Kurnit was employed by Warner Communication in
various capacities, including Director of Programming for Qube and Vice
President of Programming and Advertising Sales for all of the company's cable
systems. Mr. Kurnit received his B.A. in Sociology and Communications from
Hampshire College.
WILLIAM C. DAY has served as our Chief Operating Officer since he co-founded
About.com in June 1996. From December 1998 until January 1999, Mr. Day also
served as About.com's Chief Financial Officer. From October 1995 to June 1996,
Mr. Day served as Vice President, Software Development for Prodigy Service Co.
From July 1994 to October 1995, Mr. Day served as Vice President, General
Manager for Content and Community for Prodigy, and from May 1993 to July 1994,
he served as Director, Internet Development for Prodigy. Mr. Day received his
B.S. in Mechanical Engineering from Yale University, and an M.B.A. from The
Wharton School of the University of Pennsylvania.
TODD B. SLOAN has served as our Chief Financial Officer since January 1999.
From August 1996 to October 1998, Mr. Sloan served as Executive Vice
President/Chief Operating Officer for SW Networks (a wholly owned subsidiary of
Sony Music since November 1997 and a wholly owned subsidiary of Sony Corporation
of America from February 1995 to October 1997). From February 1995 to October
1998,
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Mr. Sloan also served as Chief Financial Officer of SW Networks. From September
1985 to February 1995, Mr. Sloan served in various capacities, including Senior
Manager, for Ernst & Young. Mr. Sloan received his B.B.A. in Accounting and
Finance from the University of Wisconsin/Madison. Mr. Sloan is a C.P.A.
MARK S. LIEBERMAN has served as our President--About.com Ventures since
April 1999. From December 1996 to October 1998, Mr. Lieberman served as
Executive Vice President of Cahners Business Information, a division of Reed
Elsevier PLC. From January 1992 to December 1996, Mr. Lieberman was the
President of Abel Technologies, a capital and strategic advisory company founded
by Mr. Lieberman that focused on the convergence of technology, media and
telecommunications. From June 1989 to December 1991, Mr. Lieberman served in
various capacities in the Bush Administration. Mr. Lieberman received his degree
in mechanical engineering from Tufts University and a J.D. from the Benjamin
Cardozo School of Law.
JON SPAET has served as our President--Advertising Sales since July 1999.
From 1993 to July 1999, Mr. Spaet served as Vice President of Advertising Sales
for MSNBC, a joint venture of General Electric Company's NBC unit and Microsoft
Corporation. Mr. Spaet was responsible for establishing and building the ad
sales revenue for MSNBC Cable since its inception. Mr. Spaet received his B.S.
in Management and Marketing and an M.B.A. in Finance from New York University.
ALAN T. WRAGG has served as our President--International since July 1999.
From August 1996 to July 1999, Mr. Wragg served as our President--Advertising
Sales and E-Commerce. From September 1987 to August 1996, Mr. Wragg served as
the Publisher of TVSM, Inc. (now owned by News Corporation), a U.S. publisher of
cable television programming guides, including The Cable Guide, Total TV Weekly
and Total TV Online. Mr. Wragg also spent 14 years at Time Inc. as Advertising
Director at LIFE Monthly and as a sales executive at Sports Illustrated. Mr.
Wragg received his B.B.A. in Marketing from Cleveland State University, and an
M.B.A. from Adelphi University.
ERIC W. BINGHAM has served as our Senior Vice President--Business Operations
since July 1996. From June 1995 to June 1996, Mr. Bingham served as Director,
Business Development for News Corporation, an international media company. From
January 1990 to May 1995, Mr. Bingham served as Director, International
Operations for Home Box Office, a division of Time Warner Inc. Mr. Bingham
received his B.A. in History from Allegheny College, and an M.B.A. from Boston
University.
ALAN P. BLAUSTEIN has served as our Senior Vice President & General Counsel
since April 1999. From August 1995 to April 1999, Mr. Blaustein was an associate
with Brobeck, Phleger & Harrison LLP, a law firm specializing in emerging growth
technologies companies. From August 1994 to August 1995, Mr. Blaustein was an
associate with King & Spalding, a law firm. Mr. Blaustein received his B.S. in
Accounting from Binghamton University and a J.D. from New York University School
of Law.
JOHN R. CAPLAN has served as our Senior Vice President--Marketing since
November 1998. From October 1995 to November 1998, Mr. Caplan served as Director
of Marketing for Berenter Greenhouse & Webster, an advertising and marketing
agency specializing in consumer brands. From October 1994 to September 1995, he
served as President of Advertising & Diversity, Inc., a marketing strategy firm.
From September 1991 to October 1994, Mr. Caplan served as an Account Executive
for TDI Worldwide (now owned by CBS Corporation), an outdoor advertising
company. Mr. Caplan received his B.A. in English from the University of
Rochester.
ELIZABETH A. MAIER has served as our Senior Vice President--Product Design
and Development since July 1996. From November 1995 to July 1996, Ms. Maier
served as Prodigy Service Co.'s Senior Director, Product Design. From July 1995
to November 1995, Ms. Maier served as Prodigy's Manager, Custom Applications.
From October 1988 to July 1995, Ms. Maier held a variety of product design and
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management positions with Prodigy. Ms. Maier received her B.A. in Psychology
from Syracuse, and a Ph.D. in Cognitive Psychology from Michigan State
University.
RON MCCOY has served as our Senior Vice President--Technology and Operations
since April 1999. From 1993 to April 1999, Mr. McCoy served in various
capacities for Cox Enterprises, a multimedia company, most recently as the Chief
Technology Officer and Director of Operations for Cox Interactive Media.
LINDA OSBORNE has served as our Vice President--Content since August 1999.
From December 1997 to August 1999, Ms. Osborne served as the Programming
Director of ParentSoup.com, one of the communities of iVillage Inc. From June
1996 to August 1997, Ms. Osborne served as Executive Producer for West Side
Films/Interactive. From May 1992 to June 1996, Ms. Osborne was an Executive
Producer with CEL Educational Resources Inc. From February 1987 to May 1992, Ms.
Osborne wrote and produced a variety of programming as head of her own
independent production service. From September 1980 to February 1987, Ms.
Osborne served as Senior Writer/Producer for Broad Street Productions, Drexel
Burnham Lambert's video production unit. Ms. Osborne received her B.A. from New
York University in Broadcast Journalism.
FRANK J. BIONDI, JR. has served as a director of About.com since December
1998. Since January 1999, Mr. Biondi has served as Chairman and Chief Executive
Officer of Biondi Reiss Capital Management L.L.C., an investment management
organization. From April 1996 to November 1998, Mr. Biondi served as Chairman
and Chief Executive Officer of Universal Studios, Inc., an international
entertainment company. From July 1987 to January 1996, Mr. Biondi served as
President and Chief Executive Officer of Viacom Inc., an international
entertainment company. Mr. Biondi currently serves on the boards of directors of
Bank of New York Company, Inc., a bank holding company, and Vail Resorts, Inc.,
a mountain resort company. Mr. Biondi received his B.A. in Psychology from
Princeton University, and an M.B.A. from Harvard University.
DIXON R. DOLL has served as a director of About.com since August 1997. Since
June 1996, Mr. Doll has served as Managing General Partner of Doll Capital
Management, a venture capital investment firm. From September 1994 to June 1996,
Mr. Doll was an independent venture capitalist. From 1985 to September 1994, Mr.
Doll served as General Partner of Accel Partners, a venture capital investment
firm. Since 1973, Mr. Doll has held various senior management positions at DMW
Group LLC and predecessor entities, a network integration and professional
services firm, including Chairman of the Board of Directors and Chief Executive
Officer. Mr. Doll serves on the boards of directors of International
Manufacturing Services, Inc., a provider of advanced manufacturing services,
Network Equipment Technologies, Inc., a manufacturer of multi-service
communications products, Zamba Corp., a supplier of mobile data communication
software, and a number of private companies. Mr. Doll received a B.S. in
Electrical Engineering from Kansas State University, and an M.S.E. and Ph.D.
from the University of Michigan.
RONALD UNTERMAN has served as a director of About.com since January 1997.
Since December 1997, Mr. Unterman has served as Senior Vice President,
Technology Development of Envirogen, Inc., an environmental biotechnology
company. From August 1988 to December 1997, Mr. Unterman served as Vice
President of Envirogen, Inc. Mr. Unterman received his B.A. in Biology from
Haverford College, and a Ph.D. from Columbia University in Biochemistry.
MARC M. WATSON has served as a director of About.com since April 1998. In
1998, Mr. Watson co-founded C-Max Capital Corp., an investment firm focusing on
private technology and medical-related companies and currently serves as its
Managing Director. From October 1993 to October 1998, Mr. Watson was Chairman of
the Board of Sano Corporation, a drug delivery systems development company. Mr.
Watson currently serves on the board of directors of Equitrac Corporation, a
provider of computer system solutions. Mr. Watson received both his B.B.A. in
Accounting and his J.D. from the University of Miami.
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KRISTOPHER A. WOOD has served as a director of About.com since November
1998. Since September 1997, Mr. Wood has served as Managing Director of XL
Ventures, Inc., the parent company of XL Ventures LLC, which is the venture
capital investment subsidiary of Big Flower Holdings, Inc., an advertising,
marketing and information services company. Since September 1995, Mr. Wood has
also served as Director--Mergers & Acquisitions for Big Flower Holdings, Inc.
(and its predecessor, Big Flower Press Holdings, Inc.). From July 1993 to May
1995, Mr. Wood was a member of the Global Finance Group at BT Alex. Brown
Incorporated, an investment banking firm. Mr. Wood serves on the board of
directors of Webstakes.com, Inc. Mr. Wood received his B.S. in Economics from
The Wharton School of the University of Pennsylvania.
DIRECTORS' TERMS
All directors hold office until the next annual meeting of stockholders or
until their successors have been duly elected and qualified. Each of Messrs.
Doll, Unterman, Watson and Wood was originally elected to the board of directors
pursuant to an agreement that terminated upon the closing of our initial public
offering. Mr. Kurnit was originally elected to the board of directors pursuant
to a provision of his employment agreement, which provision terminated upon the
closing of our initial public offering.
BOARD COMMITTEES
The audit committee of the board of directors was established in May 1998
and reviews, acts on and reports to the board of directors with respect to
various auditing and accounting matters, including the recommendation of our
independent auditors, the scope of the annual audits, fees to be paid to the
independent auditors, the performance of our independent auditors and our
accounting practices. The members of the audit committee are Messrs. Unterman,
Watson and Wood.
The compensation committee of the board of directors was established in May
1998 and determines the salaries, benefits and stock option grants for our
employees, consultants, directors and other individuals compensated by us. The
compensation committee also administers our compensation plans. The members of
the compensation committee are Messrs. Doll, Kurnit, Unterman and Watson.
DIRECTOR COMPENSATION
Other than reimbursing directors for customary and reasonable expenses of
attending board of directors or committee meetings, we do not currently
compensate our directors.
Under our 1998 stock option plan, each individual who first becomes a
non-employee member of the board of directors will be granted an option to
purchase 20,000 shares of common stock on the date the individual joins the
board of directors, provided the individual has not previously been employed by
us or any parent or subsidiary corporation. In addition, on the date of each
annual stockholders' meeting after the initial public offering, each
non-employee member of the board of directors who is to continue to serve on the
board of directors will automatically be granted an option to purchase 5,000
shares of common stock, provided the individual has served as a non-employee
member of the board of directors for at least six months. Please see "--Amended
and Restated 1998 Stock Option/Stock Issuance Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our compensation committee currently consists of Messrs. Doll, Kurnit,
Unterman and Watson. Other than Mr. Kurnit, our President and Chief Executive
Officer, none of the members of the compensation committee is or has been an
officer or employee of ours. Prior to the formation of the compensation
committee in May 1998, the board of directors as a whole made decisions relating
to compensation of our executive officers. Mr. Kurnit has participated in all
discussions and decisions
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<PAGE>
concerning the compensation of our executive officers, except that he was
excluded from discussions by the board of directors regarding his own
compensation.
Mr. Doll is affiliated with Doll Technology Investment Fund, Doll Technology
Affiliates Fund, L.P. and Doll Technology Side Fund, L.P. Mr. Marc Watson is
affiliated with C-Max Capital Limited Partnership-I. These funds, together with
Mr. Kurnit, have in the past provided financing to us in consideration for the
issuance of our securities. Please see "Certain Transactions" for information
relating to these financing transactions.
In addition to Mr. Marc Watson, Mr. Kevin Watson is affiliated with C-Max
Capital Limited Partnership-I. We entered into an advisory agreement with Mr.
Kevin Watson effective April 20, 1998, pursuant to which Mr. Kevin Watson agreed
to provide consulting and advisory services to us. These services include
introducing us to members of the investment community and assisting us with
respect to financial and strategic matters. In consideration for his services
under this agreement, Mr. Kevin Watson was granted a warrant to purchase up to a
total of 21,360 shares of common stock at an exercise price of $5.06 per share.
This warrant is exercisable at any time until March 23, 2006.
EMPLOYMENT, SEVERANCE AND OTHER AGREEMENTS
We and Mr. Kurnit are parties to a letter agreement dated October 20, 1996,
as amended, governing his employment with us. In the event that Mr. Kurnit is
terminated by us without cause, Mr. Kurnit shall be entitled to be paid his base
salary for 12 months following his termination. In addition, if Mr. Kurnit is
involuntarily terminated within 12 months following a change of control, all of
his unvested stock options will immediately vest and become fully exercisable.
We and Mr. Sloan are parties to a letter agreement dated January 11, 1999
governing his employment with us. The agreement provides that Mr. Sloan will
receive a base salary of $165,000 per annum and options to purchase 62,300
shares of common stock at an exercise price of $4.21 per share. Mr. Sloan will
also be eligible to participate in an executive bonus pool if one is
established. In the event that Mr. Sloan is terminated without cause he shall be
entitled to be paid his base salary for three months following his termination.
In addition, if Mr. Sloan is involuntarily terminated within 12 months following
a change of control, all of his unvested stock options will immediately vest and
become fully exercisable.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to our Chief Executive Officer and our other executive officer whose annual
salary and bonus exceeded $100,000 in 1998 for services rendered in all
capacities to us during 1997 and 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------
AWARDS
ANNUAL COMPENSATION -----------------
---------------------- SHARES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
<S> <C> <C> <C> <C>
Scott P. Kurnit............................................... 1998 $ 170,750 $ 100,000 9,204
President, Chief Executive Officer and Chairman of the Board 1997 138,125 100,000 21,475
of Directors
William C. Day................................................ 1998 125,625 25,000 74,012
Chief Operating Officer 1997 109,687 -- 180,990
</TABLE>
In accordance with the rules of the SEC, annual compensation excludes other
compensation in the form of perquisites and other personal benefits because the
aggregate amount of these benefits
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<PAGE>
constituted less than the lesser of $50,000 or 10% of the total of annual salary
and bonuses for each of the named executive officers in 1997 and 1998.
OPTION GRANTS IN LAST YEAR
The following table sets forth information regarding options granted to the
named executive officers during the year ended December 31, 1998. Each option
represents the right to purchase one share of common stock and was granted under
our stock option plan. These options become exercisable at a rate of 25%
following one year from the date of grant with the remainder vesting ratably for
36 months thereafter. We have not granted any stock appreciation rights.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
--------------------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(3)
OPTIONS EMPLOYEES EXERCISE MARKET EXPIRATION --------------------------
NAME GRANTED IN 1998(1) PRICE PRICE(2) DATE 0% 5%
<S> <C> <C> <C> <C> <C> <C> <C>
Scott P. Kurnit............. 9,204 2.2% $ 0.56 $25.00 03/30/08 $ 224,946 $ 369,654
William C. Day.............. 6,372 1.5 0.51 25.00 03/30/08 156,050 256,233
67,640 16.3 1.01 25.00 07/02/08 1,622,684 2,686,144
<CAPTION>
NAME 10%
<S> <C>
Scott P. Kurnit............. $ 591,666
William C. Day.............. 409,933
4,317,702
</TABLE>
- ------------------------
(1) During the year ended December 31, 1998, we granted options to purchase a
total of 415,611 shares of common stock to employees.
(2) There was no public market for the common stock during 1998. For purposes of
this table, the initial public offering price of $25.00 per share has been
assumed to be the market price at the date of grant.
(3) Amounts in these columns represent hypothetical gains that could be achieved
for the respective options if exercised at the end of the option term. The
0%, 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the SEC and do not represent our estimate or
projection of our future common stock prices. Actual gains, if any, on stock
option exercises depend on our future performance and overall stock market
conditions. The amounts reflected in the table may be more or less than the
amounts actually achieved.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1998 AND YEAR-END
OPTION VALUES
The following table sets forth information concerning the value realized
upon exercise of options during 1998 and the number and value of unexercised
options held by each of the named executive officers at December 31, 1998. There
was no public trading market for our common stock as of December 31, 1998.
Accordingly, the values set forth below have been calculated on the basis of the
initial public offering price of $25.00 per share, less the applicable exercise
price per share, multiplied by the number of shares underlying the options.
<TABLE>
<CAPTION>
VALUE NUMBER OF SECURITIES
REALIZED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES (MARKET PRICE OPTIONS AT DECEMBER 31, IN-THE- MONEY OPTIONS AT
ACQUIRED AT EXERCISE 1998 DECEMBER 31, 1998
ON LESS EXERCISE -------------------------- ---------------------------
NAME EXERCISE PRICE)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Scott P. Kurnit................ -- -- 30,678 -- $ 749,464 $ --
William C. Day................. 1,780 $ 43,592 123,282 129,940(2) 3,019,176 3,148,411
</TABLE>
- ------------------------
(1) Solely for purposes of this calculation, the fair market value of our common
stock at the time of the exercise was deemed to be the initial public
offering price of $25.00 per share. The exercise price of the options was
$0.51 per share.
46
<PAGE>
(2) Options to purchase 62,300 shares of common stock accelerated and became
exercisable when our initial public offering closed. This resulted in an
increase in the value of Mr. Day's unexercised in-the-money exercisable
options of $1,525,727.
AMENDED AND RESTATED 1998 STOCK OPTION/STOCK ISSUANCE PLAN
Our amended and restated 1998 stock option/stock issuance plan serves as the
successor equity incentive program to our 1997 employee incentive stock option
plan. The 1998 stock option/stock issuance plan became effective on July 2, 1998
upon adoption by the board of directors and was approved by the stockholders on
the same day. On February 1, 1999 the board approved the amended and restated
1998 stock option/stock issuance plan, which was approved by the stockholders on
the same day. A total of 1,886,800 shares of common stock were initially
authorized for issuance under the stock option plan. This initial share reserve
was comprised of the shares that remained available for issuance under the old
stock option plan on the effective date of the new stock option plan, including
the shares subject to outstanding options under that plan plus an increase of
890,000 shares. On February 5, 1999, the board authorized, and the stockholders
approved, an increase of 1,338,085 shares. Outstanding options under the old
stock option plan were incorporated into the new stock option plan upon the date
of the approval of the new stock option plan, and no further option grants are
being made under the old stock option plan. The incorporated options will
continue to be governed by their existing terms, unless the plan administrator
elects to extend one or more features of the new stock option plan to those
options.
As of September 30, 1999 there were outstanding options to purchase a total
of 2,778,071 shares of common stock under the 1998 stock option plan, of which
options to purchase 833,006 shares were then exercisable. Since we have filed a
registration statement on Form S-8, any shares issued upon exercise of these
options will be immediately available for sale in the public market, subject to
the terms of any lock-up agreements entered into between these optionholders and
the underwriters.
Except as otherwise noted in the previous paragraph or below, the
outstanding options under the old stock option plan contain substantially the
same terms and conditions summarized below for the discretionary option grant
program in effect under the 1998 stock option plan. The 1998 stock option plan
is divided into three separate components:
- the discretionary option grant program under which eligible individuals in
our employ or service (including officers, non-employee members of the
board of directors, consultants and guides) may, at the discretion of the
plan administrator, be granted options to purchase shares of common stock
at an exercise price determined by the plan administrator;
- the stock issuance program under which those individuals may, in the plan
administrator's discretion, be issued shares of common stock directly,
through the purchase of those shares at a price determined by the plan
administrator or as a bonus tied to the performance of services; and
- the automatic option grant program under which option grants will
automatically be made at periodic intervals to eligible non-employee
members of the board of directors to purchase shares of common stock at an
exercise price equal to 100% of the fair market value of those shares on
the grant date.
In no event may any one participant in the 1998 stock option plan receive
option grants or direct stock issuances for more than 267,000 shares in the
aggregate per calendar year. Under the old stock option plan, only employees
were eligible to receive option grants and the exercise price could not be less
than the fair market value per share on the grant date.
The discretionary option grant program and the stock issuance program are
administered by the compensation committee of the board of directors. The
compensation committee as plan administrator
47
<PAGE>
has complete discretion to determine which eligible individuals are to receive
option grants or stock issuances, the time or times when option grants or stock
issuances are to be made, the number of shares subject to each grant or
issuance, the status of any granted option as either an incentive stock option
or a non-statutory stock option under the Federal tax laws, the vesting schedule
to be in effect for the option grant or stock issuance and the maximum term for
which any granted option is to remain outstanding. The administration of the
automatic option grant program is self-executing in accordance with the express
provisions of that program. Under the old stock option plan, only incentive
stock options were granted.
The exercise price for the shares of common stock subject to option grants
made under the 1998 stock option plan may be paid in cash or in shares of common
stock valued at fair market value on the exercise date. The option may also be
exercised through a same-day sale program without any cash outlay by the
optionee. In addition, the plan administrator may provide financial assistance
to one or more participants in the 1998 stock option plan in connection with
their acquisition of shares, by allowing those individuals to deliver a
full-recourse, interest-bearing promissory note in payment of the option
exercise price and any associated withholding taxes incurred in connection with
that acquisition.
In the event of an acquisition of us, whether by merger or asset sale or a
sale by the stockholders of more than 50% of the total voting power of us that
is recommended by the board of directors, each outstanding option under the
discretionary option grant program that is not to be assumed by the successor
corporation or otherwise continued will automatically accelerate in full, and
all repurchase rights relating to shares under the discretionary option grant
program and stock issuance program will immediately lapse, except to the extent
our repurchase rights with respect to those shares are to be assigned to the
successor corporation or otherwise continued in effect. Under the 1998 stock
option plan, the plan administrator has the authority at the time of grant to
provide that the shares subject to options granted under the discretionary
option grant program will automatically vest:
- upon an acquisition of us whether or not those options are assumed or
continued, or
- upon a hostile change in control of us effected through:
- a tender offer for more than 50% of our outstanding voting stock, or
- a proxy contest for the election of the board of directors, or
- if the individual is terminated involuntarily or resigns for good
reason within 12 months following an acquisition in which the
individual's options were assumed or otherwise continued in effect or
following a hostile change in control.
The vesting of outstanding shares under the stock issuance program may be
accelerated upon similar terms and conditions.
Stock appreciation rights are authorized for issuance under the
discretionary option grant program, which rights provide the holders with the
election to surrender their outstanding options for an appreciation distribution
from us equal to the excess of the fair market value of the vested shares of
common stock subject to the surrendered option over the aggregate exercise price
payable for those shares. This appreciation distribution may be made in cash or
in shares of common stock. There are currently no outstanding stock appreciation
rights.
The plan administrator has the authority to effect the cancellation of
outstanding options under the discretionary option grant program (including
options incorporated from the old stock option plan) in return for the grant of
new options for the same or different number of option shares with an exercise
price per share based upon the fair market value of the common stock on the new
grant date.
Under the automatic option grant program, non-employee board of directors
members will be entitled to receive option grants. Each automatic grant will
have an exercise price equal to the fair
48
<PAGE>
market value per share of common stock on the grant date and will have a maximum
term of 10 years, subject to earlier termination following the optionee's
cessation of board of directors service. Each automatic option will be
immediately exercisable; however, any shares purchased upon exercise of the
option will be subject to repurchase, at the option exercise price paid per
share, should the optionee's service as a non-employee member of the board of
directors cease prior to vesting in the shares. Each 20,000-share grant will
vest over a four-year period. Each annual 5,000-share grant will vest upon the
optionee's completion of one year of board of directors service measured from
the grant date. However, each outstanding option will immediately vest upon a
change in control of us or the death or disability of the optionee while serving
as a board of directors member. Please see "--Director Compensation."
The board of directors may amend or modify the 1998 stock option plan at any
time, subject to any required stockholder approval. The 1998 stock option plan
will terminate on the earliest of:
- July 1, 2008;
- the date on which all shares available for issuance under the 1998 stock
option plan have been issued as fully-vested shares; and
- the termination of all outstanding options in connection with particular
changes in control or ownership of us.
1999 NON-OFFICER STOCK OPTION/STOCK ISSUANCE PLAN
The 1999 non-officer stock option/stock issuance plan was adopted by our
board of directors on August 20, 1999 and became effective upon that date. A
total of 400,000 shares of our common stock have been authorized for issuance
under this plan. This plan has two separate programs:
- the discretionary option grant program, under which eligible individuals
may be granted options to purchase shares of our common stock at an
exercise price not less than the fair market value of those shares on the
grant date; and
- the stock issuance program, under which eligible individuals may be issued
shares of common stock which will vest upon the attainment of performance
milestones or upon the completion of a period of service or which are
fully vested at issuance as a bonus for past services.
The individuals eligible to participate in this plan include our employees
(other than officers) and any consultants we hire. This plan is administered by
the board or a committee appointed by our board. The committee will determine
which eligible individuals are to receive option grants or stock issuances under
this plan, the time or times when the grants or issuances are to be made, the
number of shares subject to each grant or issuance, the vesting schedule to be
in effect for the option grant or stock issuance and the maximum term for which
any granted option is to remain outstanding.
The exercise price for any options granted under this plan may be paid in
cash or in shares of our common stock valued at fair market value on the
exercise date. The option may also be exercised through a same-day sale program
without any cash outlay by the optionee.
This plan includes the following change in control provisions which may
result in the accelerated vesting of outstanding option grants and stock
issuances:
- In the event that we are acquired by merger, asset sale, or stock sale,
each outstanding option under the discretionary option grant program which
is not to be assumed by the successor corporation will immediately become
exercisable for all the option shares, and all outstanding unvested shares
will immediately vest, except to the extent our repurchase rights with
respect to those shares are to be assigned to the successor corporation or
the accelerated vesting is limited by the terms of the option grant.
49
<PAGE>
- The board will have complete discretion to grant one or more options which
will become exercisable immediately prior to the change of control for all
the option shares, whether or not those options are assumed in the
acquisition.
- The board may grant options such that the options will immediately vest if
the optionee's services with us or the acquiring entity are subsequently
terminated within a designated time period.
- The board may grant options and structure repurchase rights so that the
shares subject to those options or repurchase rights will immediately vest
in connection with a successful tender offer for more than fifty percent
of our outstanding voting stock or a change in the majority of our board
through one or more contested elections. Such accelerated vesting may
occur either at the time of such transaction or upon the subsequent
termination of the individual's service within a designated time period.
The board may amend or modify this plan at any time. The plan will terminate
no later than August 20, 2009.
1999 EMPLOYEE STOCK PURCHASE PLAN
Our employee stock purchase plan became effective on March 22, 1999. The
purchase plan is designed to allow eligible employees of us and participating
subsidiaries to purchase shares of common stock, at semi-annual intervals,
through their periodic payroll deductions. As of September 30, 1999, a total of
125,000 shares of common stock were reserved for issuance under the purchase
plan.
The purchase plan will be implemented in a series of successive purchase
periods, each with a duration of six months. Purchase periods will generally run
from the first business day in May to the last business day in October each year
and from the first business day in November to the last business day in April
the next year. However, the initial purchase period began on March 22, 1999 and
will end on October 31, 1999.
Employees who are scheduled to work more than 20 hours per week for more
than five calendar months per year on the start date of any purchase period are
eligible to enter the purchase plan on that start date.
Payroll deductions may not exceed 15% of the participant's cash earnings.
The accumulated payroll deductions of each participant will be applied to the
purchase of shares on the participant's behalf on each purchase date. The
purchase price per share will equal 85% of the lower of the fair market value of
the common stock on the start of the purchase period or the fair market value on
the purchase date. No participant may purchase more than 500 shares on any
purchase date.
In the event we are acquired by merger or asset sale, all outstanding
purchase rights will automatically be exercised immediately prior to the
effective date of the acquisition. The purchase price will be equal to 85% of
the lower of the fair market value per share of common stock on the start of the
purchase period in which that acquisition occurs or the fair market value per
share of common stock immediately prior to the acquisition.
The purchase plan will terminate on the earliest of:
- October 31, 2009;
- the date on which all shares available for issuance under the purchase
plan have been sold in accordance with the purchase plan; and
- the date on which all purchase rights are exercised in connection with an
acquisition of About.com by merger or asset sale
Subject to stockholder approval for certain amendments, the board of
directors may at any time alter, suspend or discontinue the purchase plan.
50
<PAGE>
RELATED-PARTY TRANSACTIONS
SERIES A FINANCING
Between March 1997 and January 1998, we issued convertible promissory notes
in an aggregate principal amount of $4,950,000 to a number of investors,
including the investors set forth in the table below. Pursuant to their terms,
the principal amount due on these notes was either automatically convertible
into shares of our capital stock upon the closing of our next equity financing
or due and payable on the earlier of the fifth anniversary of the delivery of
the notes or upon an event of default under the notes. These notes bore interest
at a variable rate equal to the prime rate published by a major financial
institution plus 2% per annum. On April 23, 1998, in consideration for the
cancellation of the principal amount of these notes and $70,000 in interest that
accrued on these notes prior to August 12, 1997, we issued to the noteholders a
total of 3,346,715 shares of Series A convertible preferred stock. The remaining
interest on these notes was evidenced by newly issued unsecured promissory notes
that, by their terms, were forgiven and cancelled upon the closing of our
initial public offering. Upon the closing of our initial public offering, the
outstanding shares of Series A convertible preferred stock converted into a
total of 1,191,433 shares of common stock.
At the time of the delivery of the convertible promissory notes, we issued
warrants to purchase a total of 309,748 shares of common stock to the investors.
Of these warrants, warrants to purchase 218,890 shares of common stock had an
exercise price of $0.03 per share and warrants to purchase 90,858 shares of
common stock had an exercise price of $4.21 per share. In December 1998, all of
the warrants to purchase common stock at an exercise price of $0.03 per share
were exercised and warrants to purchase a total of 66,753 shares of common stock
at an exercise price of $4.21 per share were exercised. The remaining warrant
for 24,105 shares was cancelled.
The following table lists the number of shares of Series A convertible
preferred stock that were purchased, and the warrants that were exercised in
December 1998, by executive officers, directors and their affiliated entities,
and by 5% stockholders:
<TABLE>
<CAPTION>
AMOUNT OF
PRINCIPAL AMOUNT OF
SURRENDERED IN INTEREST
CONSIDERATION SURRENDERED IN NUMBER OF $0.03 NUMBER OF $4.21
NUMBER OF SHARES OF SERIES A CONSIDERATION WARRANTS WARRANTS
OF SERIES A PREFERRED OF SERIES A TO PURCHASE COMMON TO PURCHASE COMMON
PURCHASER PREFERRED STOCK STOCK PREFERRED STOCK STOCK EXERCISED STOCK EXERCISED
<S> <C> <C> <C> <C> <C>
Crystal Internet Venture Fund,
L.P......................... 711,109 $ 1,066,664 -- 14,748 39,556
Doll Technology Affiliates
Fund, L.P................... 49,217 $ 73,826 -- 5,270 183
Doll Technology Investment
Fund........................ 836,542 $ 1,219,776 $ 35,036 89,563 3,099
Doll Technology Side Fund,
L.P......................... 32,044 $ 48,066 -- 3,431 119
Scott P. Kurnit............... 200,000 $ 300,000 -- 4,154 11,125
Open Text Corporation......... 433,333 $ 650,000 -- -- --
Zero Stage Capital V, L.P..... 917,803 $ 1,341,668 $ 35,036 98,263 3,400
</TABLE>
SERIES B FINANCING
Between November 1997 and February 1998, we issued convertible promissory
notes in an aggregate principal amount of $2,800,000 to a number of existing
investors, including Crystal Internet Venture Fund, L.P., Doll Technology
Affiliates Fund, L.P., Doll Technology Investment Fund, Doll Technology Side
Fund, L.P. and Zero Stage Capital V, L.P. Pursuant to their terms, the notes
were either automatically convertible into shares of our Series B convertible
preferred stock upon the closing of
51
<PAGE>
our next equity financing or due and payable on the earlier of the first
anniversary of the delivery of the notes, unless the payee extended the maturity
date, or upon an event of default under the notes. These notes bore interest at
a fixed rate equal to 10% per annum, although a few of these notes bore interest
at a variable rate equal to the prime rate published by a major financial
institution plus 2% per annum. In addition, at the time of the delivery of the
convertible promissory notes, we issued warrants to these investors to purchase
a total of 250,192 shares of common stock at an exercise price of $5.06 per
share. In December 1998, all of these warrants were exercised.
On April 23, 1998, in consideration for the cancellation of the principal
amount of $2,800,000 and $69,800 in accrued interest under the convertible
promissory notes, we issued to the noteholders a total of 1,594,380 shares of
Series B convertible preferred stock. Further, in consideration for the
cancellation of $1,700,000 in principal and $305,800 in accrued interest under
an obligation to Open Text Corporation, we issued to Open Text Corporation
1,114,327 shares of Series B convertible preferred stock. Moreover, additional
investors, including C-Max Capital Limited Partnership-I, purchased a total of
2,688,893 shares of Series B convertible preferred stock in consideration for
$4,840,007. In addition to the issuance of shares of Series B convertible
preferred stock, on April 23, 1998, we issued warrants to the additional
investors to purchase a total of 107,695 shares of common stock at an exercise
price of $7.02 per share. In December 1998, warrants to purchase a total of
103,801 shares of common stock were exercised. The remaining warrant was
cancelled.
In June 1998, we issued a total of 1,199,996 shares of Series B convertible
preferred stock to various investors in consideration for $2,160,000. These
investors included Crystal Internet Venture Fund, L.P., Doll Technology
Affiliates Fund, L.P., Doll Technology Investment Fund, Doll Technology Side
Fund, L.P. and XL Capital Corporation.
Upon the closing of our initial public offering, the outstanding shares of
Series B convertible preferred stock converted into a total of 2,348,752 shares
of common stock.
The following table lists the shares of Series B convertible preferred stock
purchased, and the warrants exercised in December 1998, by executive officers,
directors and their affiliated entities, and by 5% stockholders:
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
PRINCIPAL INTEREST
SURRENDERED IN SURRENDERED IN
CONSIDERATION CONSIDERATION NUMBER OF $5.06 NUMBER OF $7.02
NUMBER OF SHARES OF SERIES B OF SERIES B WARRANTS WARRANTS
OF SERIES B PREFERRED PREFERRED TO PURCHASE COMMON TO PURCHASE COMMON
PURCHASER PREFERRED STOCK STOCK STOCK STOCK EXERCISED STOCK EXERCISED
<S> <C> <C> <C> <C> <C>
C-Max Capital Limited
Partnership-I............... 2,222,222 -- -- -- 85,440
Crystal Internet Venture Fund,
L.P......................... 482,136 $ 600,000 $ 17,850 54,884 --
Doll Technology Affiliates
Fund, L.P................... 30,437 $ 40,219 $ 1,162 3,659 --
Doll Technology Investment
Fund........................ 517,339 $ 683,595 $ 19,752 62,192 --
Doll Technology Side Fund,
L.P......................... 19,817 $ 26,186 $ 757 2,383 --
Open Text Corporation......... 1,114,327 $ 1,700,000 $ 305,789 -- --
XL Ventures LLC............... 277,778 -- -- -- --
Zero Stage Capital V, L.P..... 428,771 $ 750,000 $ 21,788 68,234 --
</TABLE>
SERIES C FINANCING
On October 5, 1998, we issued convertible promissory notes in an aggregate
principal amount of $1,081,000 to a number of existing investors, including some
of the investors set forth in the table
52
<PAGE>
below. Pursuant to their terms, these notes were either automatically
convertible into shares of our Series C convertible preferred stock upon the
closing of our next equity financing or due and payable on the earlier of the
60th day following October 5, 1999 or an event of default under the notes. These
notes bore interest at a fixed rate equal to 8% per annum.
On November 13, 1998, in consideration for the cancellation of the principal
amount and $8,900 in accrued interest under the convertible promissory notes, we
issued to the noteholders a total of 558,917 shares of Series C convertible
preferred stock. Further, in consideration for the cancellation of $1,555,600 in
principal and $226,400 in accrued interest under an obligation to Open Text
Corporation, we issued to Open Text Corporation 913,856 shares of Series C
convertible preferred stock. This amount represented all of the remaining
principal and interest under this obligation. Moreover, additional third-party
investors, including some of the investors set forth in the table below,
purchased a total of 5,437,953 shares of Series C convertible preferred stock in
consideration for $10,604,000, at a price per share equal to $1.95. The terms of
the Series C convertible preferred stock were determined by arm's length
negotiation between us and XL Ventures LLC and Prospect Street NYC Discovery
Fund, L.P., third parties previously unaffiliated with us.
On December 4, 1998, we issued an aggregate of 391,085 shares of Series C
convertible preferred stock to existing stockholders in consideration for
$762,600.
Upon the closing of our initial public offering, the outstanding shares of
Series C convertible preferred stock converted into a total of 2,599,455 shares
of common stock.
The following table lists the number of shares of Series C convertible
preferred stock purchased by executive officers, directors and their affiliated
entities, and by 5% stockholders:
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
PRINCIPAL INTEREST
NUMBER OF SURRENDERED IN SURRENDERED IN
SHARES OF CONSIDERATION CONSIDERATION
SERIES C OF SERIES C OF SERIES C
PREFERRED PREFERRED PREFERRED
PURCHASERS STOCK STOCK STOCK
<S> <C> <C> <C>
C-Max Capital Limited Partnership-I........... 599,123 $ 400,000 $ 3,289
Crystal Internet Venture Fund, L.P............ 513,635 $ 193,000 $ 1,587
Doll Technology Affiliates Fund, L.P.......... 27,640 $ 5,000 $ 41
Doll Technology Investment Fund............... 469,792 $ 245,000 $ 2,014
Doll Technology Side Fund, L.P................ 17,996 $ 3,000 $ 25
Open Text Corporation......................... 913,856 $ 1,555,600 $ 226,400
Prospect Street NYC Discovery Fund, L.P....... 1,794,872 -- --
XL Ventures LLC............................... 1,794,872 -- --
Zero Stage Capital V, L.P..................... 121,503 $ 235,000 $ 1,932
Zero Stage Capital VI, L.P.................... 512,821 -- --
</TABLE>
OPEN TEXT CORPORATION
On October 17, 1996, we executed a promissory note payable to Open Text in
the original principal amount of $3,905,616. On August 27, 1997, this note was
amended to reduce the principal amount outstanding under this note to
$3,255,600. The remaining $650,000 in principal was evidenced by a newly issued
convertible subordinated promissory note that was subsequently cancelled on
April 23, 1998, in consideration for the issuance of 433,333 shares of Series A
convertible preferred stock. None of the outstanding interest was evidenced by
the newly issued convertible subordinated promissory note. On April 23, 1998,
the promissory note was amended to reduce the outstanding principal amount from
$3,255,600 to $1,555,600. This reduction of $1,700,000 in principal, as well as
$305,800 of interest, was
53
<PAGE>
simultaneously converted into 1,114,327 shares of Series B convertible preferred
stock. On November 13, 1998, we issued 913,856 shares of Series C convertible
preferred stock in cancellation of the remaining $1,555,600 in principal and
$226,400 in interest outstanding under the promissory note.
On August 27, 1997, in connection with the execution of the convertible
subordinated promissory note, we issued Open Text warrants to purchase 24,105
shares of common stock at an exercise price of $4.21 per share. These warrants
were cancelled in December 1998. In January 1998, we issued Open Text warrants
to purchase 2,670 shares of common stock at an exercise price of $4.21 per
share. In June and July of 1998, we issued Open Text warrants to purchase an
aggregate of 6,230 shares of common stock at an exercise price of $4.21 per
share. These warrants to purchase an aggregate of 8,900 shares of common stock
remain outstanding.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
On April 23, 1998, we and the purchasers of our Series A convertible
preferred stock and Series B convertible preferred stock entered into an
investors' rights agreement. On November 13, 1998, the investors' rights
agreement was amended and restated to include the purchasers of our Series C
convertible preferred stock. Under the terms of the amended and restated
investors' rights agreement, holders of our Series A convertible preferred
stock, Series B convertible preferred stock and Series C convertible preferred
stock were granted registration rights with respect to the registration under
the Securities Act of the shares of common stock issuable upon conversion of
their respective shares of our convertible preferred stock. Comcast has also
become a party to the amended and restated investors' rights agreement. As a
result, Comcast has received rights to have its shares of common stock
registered for resale under the Securities Act. Some or all of these
stockholders may elect to exercise their registration rights and include their
shares for resale in connection with this offering. Please see "Description of
Capital Stock--Registration Rights."
STOCK OPTIONS GRANTED TO EXECUTIVE OFFICERS
For information regarding the grant of stock options to executive officers
and directors, please see "Management--Director Compensation" and "--Executive
Compensation."
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of October 4, 1999, and as adjusted to reflect
the sale of the shares of common stock offered by this prospectus, by:
- each person, or group of affiliated persons, known by us to beneficially
own 5% or more of the common stock;
- each of our directors and named executive officers;
- each selling stockholder; and
- all of our directors and executive officers as a group.
In accordance with the SEC's rules, the following table gives effect to the
shares of common stock that could be issued upon the exercise of outstanding
options and warrants within 60 days of October 4, 1999. Unless otherwise
indicated in the footnotes to the table, the following individuals have sole
vesting and sole investment control with respect to the shares they beneficially
own. Unless otherwise indicated in the footnotes to the table, the address of
each of the individuals listed below is c/o About.com, Inc., 220 East 42nd
Street, 24th floor, New York, New York 10017.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED
OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING
------------------------- SHARES -----------------------
BENEFICIAL OWNER NUMBER PERCENT OFFERED PERCENT
NUMBER
<S> <C> <C> <C> <C> <C>
Scott P. Kurnit (1)....................................... 1,537,597 12.5% 80,000
Marc M. Watson (2)........................................ 1,109,640 9.0
C-Max Capital Limited Partnership-I (3)................... 1,089,840 8.9
Dixon R. Doll (4)......................................... 914,445 7.5
Open Text Corporation (5)................................. 885,201 7.2
Doll Funds (6)............................................ 882,195 7.2
Zero Stage Capital Entities (7)........................... 875,099 7.1
Kristopher A. Wood (8).................................... 738,864 6.0
XL Ventures LLC (9)....................................... 737,864 6.0
Crystal Internet Venture Fund, L.P. (10).................. 716,839 5.8
Prospect Street NYC Discovery Fund, L.P. (11)............. 638,975 5.2
William C. Day (12)....................................... 222,006 1.8 35,000
Frank J. Biondi, Jr. (13)................................. 18,800 *
Ronald Unterman........................................... 18,800 *
Other selling stockholders................................
All directors and executive officers as a group (8
persons) (14)........................................... 4,560,152 36.5
</TABLE>
- ------------------------
* Less than 1% of total.
(1) Includes 30,678 shares issuable upon the exercise of stock options. Does not
include 195,800 shares issuable upon the exercise of options that do not
vest within 60 days of October 4, 1999. Mr. Kurnit may sell additional
shares in the event the underwriters exercise their over-allotment option in
full.
(2) Includes 1,089,840 shares beneficially owned by C-Max Capital Limited
Partnership-I. Mr. Watson is a director of C-Max Capital Corporation, the
general partner of C-Max Capital Limited Partnership-I. Mr. Watson disclaims
beneficial ownership of the shares held by C-Max Capital Limited
Partnership-I except to the extent of his pecuniary interest therein.
(3) The address of C-Max Capital Limited Partnership-I is 2950 SW 27th Avenue,
Suite 110, Miami, Florida 33133.
55
<PAGE>
(4) Includes 32,250 shares held by the Dixon and Carol Doll Family Trust, of
which Mr. Doll is a beneficiary. Also includes:
- 804,082 shares beneficially owned by Doll Technology Investment Fund;
- 47,310 shares beneficially owned by Doll Technology Affiliates Fund, L.P.;
and
- 30,803 shares beneficially owned by Doll Technology Side Fund, L.P.
Mr. Doll is the managing member of Doll Technology Investment Management,
L.L.C., the general partner of each of these funds. Mr. Doll disclaims
beneficial ownership of the shares held by these funds except to the extent
of his pecuniary interest in each of them.
(5) Includes 8,900 shares issuable upon the exercise of warrants. The address of
Open Text Corporation is 185 Columbia Street West, Waterloo, Ontario, Canada
N2L 5Z5.
(6) Consists of:
- 804,082 shares held by Doll Technology Investment Fund;
- 47,310 shares held by Doll Technology Affiliates Fund, L.P.; and
- 30,803 shares held by Doll Technology Side Fund, L.P.
The address of each of the foregoing entities is 3000 Sand Hill Road,
Building 3, Suite 210, Menlo Park, California 94025.
(7) Consists of:
- 692,534 shares held by Zero Stage Capital V Limited Partnership; and
- 182,565 shares held by Zero Stage Capital VI Limited Partnership.
The address of each of the foregoing entities is 101 Main Street, 17th Floor,
Cambridge, Massachusetts 02142-1519.
(8) Includes 737,864 shares held by XL Ventures LLC. Mr. Wood is an employee of
its parent company, XL Ventures, Inc. Mr. Wood disclaims beneficial
ownership of these shares.
(9) The address of XL Ventures LLC is 1105 North Market Street, Suite 1300,
Wilmington, Delaware 19801.
(10) The address of Crystal Internet Venture Fund, L.P. is 1120 Chester Avenue,
Suite 310, Cleveland, Ohio 44114.
(11) The address of Prospect Street NYC Discovery Fund, L.P. is 10 East 40th
Street, 44th Floor, New York, New York 10016.
(12) Includes 131,218 shares issuable upon the exercise of options. Does not
include 178,964 shares issuable upon the exercise of options that do not
vest within 60 days of October 4, 1999.
(13) Includes 1,000 shares owned by Mr. Biondi's spouse. Includes 17,800 shares
issuable upon the exercise of options.
(14) Includes 179,696 shares issuable upon the exercise of stock options and
8,900 shares issuable upon the exercise of warrants.
56
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 50,000,000 shares of common stock,
par value $.001 per share, and 5,000,000 shares of preferred stock, par value
$.001 per share.
COMMON STOCK
As of September 30, 1999, there were 12,288,418 shares of common stock
outstanding and held of record by 117 stockholders.
Holders of common stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders. Holders of a majority of the shares
of common stock entitled to vote in any election of directors may elect all of
the directors standing for election. Holders of common stock are entitled to
receive dividends, if, as, and when declared by the board of directors out of
funds legally available for such purposes, subject to any dividend preferences
of any outstanding preferred stock. Upon our liquidation, dissolution or winding
up, the holders of common stock are entitled to share ratably in our assets
available for distribution, subject to the preferential rights of any
outstanding preferred stock. Holders of the common stock have no preemptive,
subscription, redemption or conversion rights. There are no shares of preferred
stock outstanding. The rights, preferences and privileges of holders of common
stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock that we may designate and
issue in the future.
PREFERRED STOCK
The board of directors has the authority, without further stockholder
approval, to issue from time to time up to an aggregate of 5,000,000 shares of
preferred stock in one or more series. The board of directors may fix or alter
the designations, preferences, rights and any qualifications, limitations or
restrictions of the shares of each of these series, including the dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of these series. We have no present
plans to issue any shares of preferred stock. Please see "--Anti-Takeover
Effects of Certain Provisions of Delaware Law and Our Certificate of
Incorporation and Bylaws."
OPTIONS
Options to purchase a total of 3,624,885 shares of common stock may be
granted under the stock option plans. As of September 30, 1999, there were
outstanding under the stock option plans options to purchase a total of
2,778,071 shares of common stock, of which options to purchase 833,006 shares
were then exercisable. In addition, as of September 30, 1999, there were
outstanding options to purchase a total of 32,052 shares of common stock which
were not granted under the stock option plans, all of which were then
exercisable. Since we have filed a registration statement on Form S-8, any
shares issued upon exercise of these options will be immediately available for
sale in the public market, subject to the terms of any lock-up agreements
entered into between these optionholders and the underwriters. Please see "Risk
Factors--Future sales of common stock by our existing stockholders could
adversely affect our stock price", "Management--Amended and Restated 1998 Stock
Option/ Stock Issuance Plan" and "--1999 Non-Officer Stock Option/Stock Issuance
Plan."
COMMON STOCK WARRANTS
As of September 30, 1999, there were outstanding warrants to purchase a
total of 65,860 shares of common stock at an average exercise price of $9.80 per
share. The warrants contain anti-dilution provisions providing for adjustments
of the exercise price and the number of shares of common stock underlying the
warrants upon the occurrence of any recapitalization, reclassification, stock
dividend, stock split, stock combination or similar transaction. The warrants
grant to their holders registration rights, described below, with respect to the
common stock issuable upon their exercise. Please see
57
<PAGE>
"Risk Factors--Future sales of common stock by our existing stockholders could
adversely affect our stock price."
REGISTRATION RIGHTS
Pursuant to the terms of the amended and restated investors' rights
agreement, some holders of shares of common stock are entitled to demand that we
register their shares for resale under the Securities Act. The holders of 50% or
more of the shares of common stock issued upon the conversion of each series of
convertible preferred stock are entitled to demand that we register their shares
under the Securities Act, subject to certain limitations. We are not required to
effect more than one demand registration for each group of holders. In addition,
these holders and Comcast are entitled to piggyback registration rights with
respect to the registration of shares of common stock under the Securities Act.
In the event that we propose to register any shares of common stock under the
Securities Act, including in connection with this offering, the holders of
shares having piggyback rights are entitled to receive notice of that
registration and are entitled to include their shares in the registration,
subject to limitations. Further, at any time after we become eligible to file a
registration statement on Form S-3, the holders of a portion of our shares of
common stock may require us to file on two occasions Form S-3 registration
statements under the Securities Act with respect to their shares of common
stock. These registration rights are subject to conditions and limitations,
among them the right of the underwriters of an offering to limit the number of
shares of common stock to be included in the registration. We are generally
required to bear all of the expenses of these registrations, except underwriting
discounts and selling commissions. Registration of any of the shares of common
stock held by security holders with registration rights would result in those
shares becoming freely tradable without restriction under the Securities Act.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE
OF INCORPORATION AND BYLAWS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, or DGCL. Section 203 of the DGCL generally prohibits a
publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the
interested stockholder attained that status with the approval of the board of
directors or unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, fifteen percent
(15%) or more of a corporation's voting stock. This statute could prohibit or
delay the accomplishment of mergers or other takeover or change in control
attempts and, accordingly, may discourage attempts to acquire us.
In addition, certain provisions of our certificate and bylaws may be deemed
to have an anti-takeover effect and may delay, defer or prevent a tender offer
or takeover attempt that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the market price
for the shares held by stockholders.
BOARD OF DIRECTORS VACANCIES. The certificate authorizes the board of
directors to fill vacant directorships or increase the size of the board of
directors. This may deter a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
vacancies created by that removal with its own nominees.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. The certificate
provides that stockholders may not take action by written consent, but only at
duly called annual or special meetings of stockholders. The certificate further
provides that special meetings of our stockholders may be called only by the
chairman of the board of directors or a majority of the board of directors.
58
<PAGE>
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for election
as directors at an annual meeting of stockholders, must deliver a written notice
to our principal executive offices within a prescribed time period. The bylaws
also specify requirements as to the form and content of a stockholder's notice.
These provisions may preclude stockholders from bringing matters before an
annual meeting of stockholders or from making nominations for directors at an
annual meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval, subject to limitations imposed by the Nasdaq National
Market. These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital,
acquisitions and employee benefit plans. The existence of authorized but
unissued and unreserved common stock and preferred stock could render more
difficult or discourage an attempt to obtain control of us by means of a proxy
contest, tender offer, merger or otherwise.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our certificate provides that, except to the extent prohibited by the DGCL,
our directors shall not be personally liable to us or our stockholders for
monetary damages for any breach of fiduciary duty as our directors. Under the
DGCL, the directors have a fiduciary duty to us that is not eliminated by this
provision of the certificate and, in appropriate circumstances, injunctions and
other nonmonetary relief will remain available. This provision also does not
affect the directors' responsibilities under any other laws, including the
Federal securities laws or state or Federal environmental laws.
Section 145 of the DGCL enables a corporation to indemnify its directors and
officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers. However, this provision does
not eliminate or limit the liability of a director:
- for any breach of the director's duty of loyalty to the corporation or its
stockholders,
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law,
- for payments of dividends or approval of stock repurchases or redemptions
that are prohibited by the DGCL or
- for any transaction from which the director derived an improper personal
benefit.
Our certificate provides that, except to the extent prohibited by DGCL, we
may fully indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that the person is or was, or has agreed to become, a director or officer or is
or was serving, or has agreed to serve, at our request as a director or officer
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, against expenses (including attorney's fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by that
person in connection with any threatened, pending or completed action, suit,
proceeding or appeal.
We believe that the provisions of its certificate and bylaws and these
agreements are necessary to attract and retain qualified directors and executive
officers. Our bylaws also permit us to secure insurance on behalf of any
officer, director, employee or other agent for any liability arising out of his
or her actions, regardless of whether the DGCL would permit indemnification. We
have obtained liability insurance for our officers and directors.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent for which indemnification will be required
or permitted under the certificate. We are not aware of any threatened
litigation or proceeding that may result in a claim for indemnification.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company, New York, New York.
59
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement,
dated , 1999, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, BancBoston Robertson
Stephens Inc., Bear, Stearns & Co. Inc., Volpe Brown Whelan & Company, LLC,
E*Offering and DLJDIRECT Inc., have severally agreed to purchase from us and the
selling stockholders the numbers of shares of common stock set forth opposite
their names below.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS: OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation..............................
BancBoston Robertson Stephens Inc................................................
Bear, Stearns & Co. Inc. ........................................................
Volpe Brown Whelan & Company, LLC................................................
DLJDIRECT Inc. ..................................................................
-----------
Total...................................................................... 3,500,000
-----------
-----------
</TABLE>
The underwriting agreement provides that the obligations of the underwriters
to purchase and accept delivery of the shares of common stock in this offering
require approval by their counsel of legal matters and other conditions. The
underwriters must purchase and accept delivery of all the shares of common stock
in the offering, other than those shares covered by the over-allotment option
described below, if they purchase any of the shares.
The underwriters initially propose to offer some of the shares of common
stock directly to the public at the public offering price on the cover page of
this prospectus and some of the shares to dealers, including the underwriters,
at the public offering price less a concession not in excess of $ per
share. The underwriters may allow, and these dealers may re-allow to other
dealers, a concession not in excess of $ per share. After the initial
offering of the common stock, the representatives of the underwriters may change
the public offering price and other selling terms at any time without notice.
The following table shows the underwriting fees to be paid to the
underwriters by us and the selling stockholders in this offering. These amounts
are shown assuming both no exercise and full exercise of the underwriters'
option to purchase additional shares of common stock.
<TABLE>
<CAPTION>
PAID BY
PAID BY ABOUT.COM SELLING STOCKHOLDERS
-------------------------- --------------------------
NO EXERCISE FULL EXERCISE NO EXERCISE FULL EXERCISE
<S> <C> <C> <C> <C>
Per Share.............................. $ $ $ $
Total..................................
</TABLE>
We will pay the offering expenses, estimated to be $700,000.
60
<PAGE>
We and the selling stockholders have granted to the underwriters an option,
exercisable for 30 days after the date of this prospectus, to purchase, from
time to time, in whole or in part, up to an aggregate of 525,000 additional
shares of common stock at the public offering price less underwriting fees. The
underwriters may exercise this option solely to cover over-allotments, if any,
made in connection with this offering. To the extent that the underwriters
exercise this option, each underwriter will become obligated, under conditions
specified in the underwriting agreement, to purchase its pro rata portion of the
additional shares based on that underwriter's percentage underwriting commitment
as indicated in the preceding table.
We and the selling stockholders have agreed to indemnify the underwriters
against civil liabilities specified in the underwriting agreement, including
liabilities under the Securities Act, or to contribute to payments that the
underwriters may be required to make because of these liabilities.
We, all of our executive officers and directors, and all of the selling
stockholders have agreed, for a period of 90 days after the date of the
prospectus without the prior written consent of Donaldson, Lufkin & Jenrette,
not to:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of common stock or any securities convertible into
or exercisable or exchangeable for common stock; or
- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock.
However, we may issue, and grant options to purchase, shares of common stock
under our option plans and our purchase plan. In addition, we may issue shares
of common stock in connection with any acquisition of another company if the
terms of that issuance provide that the common stock shall not be resold prior
to 90 days after the date of this prospectus without the prior written consent
of Donaldson, Lufkin & Jenrette.
In addition, during this 90-day period, we have also agreed not to file any
registration statement for, and each of the executive officers, directors and
selling stockholders has agreed not to make any demand for or exercise any right
for, the registration of any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock without the
prior written consent of Donaldson, Lufkin & Jenrette, except for a registration
statement to register for resale the 400,000 shares reserved for issuance under
our 1999 Non-Officer Stock Option/Stock Issuance Plan.
A copy of this prospectus in electronic format will be made available on the
Internet web sites hosted by E*OFFERING Corp. and E*TRADE Securities, Inc.
E*TRADE will accept conditional offers to purchase shares from all of its
customers that pass and complete an online eligibility profile. If the demand
for shares from the customers of E*TRADE exceeds the amount of shares allocated
to it, E*TRADE will use a random allocation methodology to distribute shares in
even lots of 100 shares per customer.
Other than in the United States, no action has been taken by us, the selling
stockholders or the underwriters that would permit a public offering of the
shares of common stock offered by this prospectus in any jurisdiction where
action for that purpose is required. The shares of common stock offered by this
prospectus may not be offered or sold, directly or indirectly, nor may this
prospectus or any other offering material or advertisements associated with the
offer and sale of any shares of common stock offered by this prospectus be
distributed or published in any jurisdiction, except under circumstances that
will result in compliance with the applicable rules and regulations of that
jurisdiction. You should inform yourself about and observe any restrictions
relating to the offering of the common stock and the distribution of this
prospectus. This prospectus does not constitute an offer to sell or solicitation
of an offer to buy any shares of common stock offered by this prospectus in any
jurisdiction in which an offer or a solicitation is unlawful.
61
<PAGE>
The underwriters and dealers may engage in passive market making
transactions in the common stock in accordance with Rule 103 of Regulation M
promulgated by the Securities and Exchange Commission. In general, a passive
market maker may not bid for or purchase shares of common stock at a price that
exceeds the highest independent bid. In addition, the net daily purchases made
by any passive market maker generally may not exceed 30% of its average daily
trading volume in the common stock during a specified two-month period, or 200
shares, whichever is greater. A passive maker must identify passive market
making bids as such on the Nasdaq electronic inter-dealer reporting system.
Passive market making may stabilize or maintain the market price of the common
stock above independent market levels. Underwriters and dealers are not required
to engage in passive market making and may end passive market making activities
at any time.
As a result of the offering, the underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the common stock.
Specifically, the underwriters may over-allot the offering, creating a syndicate
short position. The underwriters may bid for and purchase shares of common stock
in the open market to cover a syndicate short positions or to stabilize the
price of the common stock. In addition, the underwriting syndicate may reclaim
selling concessions from syndicate members if the syndicate repurchases
previously distributed common stock in syndicate covering transactions, in
stabilization transactions or in some other way or if Donaldson, Lufkin &
Jenrette receives a report that indicates clients of those syndicate members
have "flipped" shares of common stock. These activities may stabilize or
maintain the market price of the common stock above independent market levels.
The underwriters are not required to engage in these activities, and may end any
of these activities at any time.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus will
be passed upon for us by Brobeck, Phleger & Harrison LLP, New York, New York,
and for the underwriters by Foley, Hoag & Eliot LLP, Boston, Massachusetts.
EXPERTS
Our financial statements as of December 31, 1997 and 1998 and for the period
from June 27, 1996 (inception) to December 31, 1996 and the years ended December
31, 1997 and 1998 included in this prospectus and elsewhere in the registration
statement have been so included in reliance on the report of KPMG LLP,
independent certified public accountants, appearing elsewhere herein, upon the
authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 (including
exhibits, schedules and amendments) under the Securities Act with respect to the
shares of common stock to be sold in this offering. This prospectus does not
contain all the information set forth in the registration statement. For further
information with respect to us and the shares of common stock to be sold in this
offering, reference is made to the registration statement. Statements contained
in this prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. In each instance reference is
made to the copy of that contract, agreement or other document filed as an
exhibit to the registration statement.
You may read and copy all or any portion of the registration statement or
any other information we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our SEC filings, including the registration statement, are also available
to you on the SEC's web site (http://www.sec.gov).
62
<PAGE>
We are subject to the information and reporting requirements of the
Securities Exchange Act, and, in accordance with those requirements, files
periodic reports, proxy statements and other information with the SEC. These
reports, proxy and information statements and other information may also be
inspected at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington,
D.C. 20006.
We intend to furnish our stockholders with annual reports containing audited
financial statements and with quarterly reports for the first three quarters of
each year containing unaudited interim financial information.
63
<PAGE>
ABOUT.COM, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Independent Auditors' Report.............................................................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 and June 30, 1999 (unaudited)................ F-3
Consolidated Statements of Operations for the period from June 27, 1996 (inception) to December 31, 1996,
the years ended December 31, 1997 and 1998 and the six months ended June 30, 1998 (unaudited) and 1999
(unaudited)............................................................................................. F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the period from June 27, 1996 (inception) to
December 31, 1996, the years ended December 31, 1997 and 1998 and the six months ended June 30, 1999
(unaudited)............................................................................................. F-5
Consolidated Statements of Cash Flows for the period from June 27, 1996 (inception) to December 31, 1996,
the years ended December 31, 1997 and 1998 and the six months ended June 30, 1998 (unaudited) and 1999
(unaudited)............................................................................................. F-7
Notes to Consolidated Financial Statements................................................................ F-9
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
About.com, Inc.:
We have audited the accompanying balance sheets of About.com, Inc. as of
December 31, 1997 and 1998, and the related statements of operations,
stockholders' deficit and cash flows for the period from June 27, 1996
(inception) to December 31, 1996 and for the years ended December 31, 1997 and
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of About.com, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from June 27, 1996 (inception) to December 31, 1996 and for the
years ended December 31, 1997 and 1998 in conformity with generally accepted
accounting principles.
/S/ KPMG LLP
New York, New York
January 20, 1999, except as to Note 2(q)
which is as of March 19, 1999
F-2
<PAGE>
ABOUT.COM, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1997 1998 1999
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 303,200 $10,644,300 $61,506,300
Accounts receivable, less allowance for doubtful accounts of $6,000, $146,000
and $103,700, respectively.................................................... 118,300 917,300 3,036,600
Prepaid assets.................................................................. -- 100,000 121,700
----------- ----------- -----------
Total current assets.......................................................... 421,500 11,661,600 64,664,600
Property and equipment, net....................................................... 748,400 3,302,000 7,066,700
Goodwill, net..................................................................... -- -- 2,442,200
Debt issuance costs, net of amortization of $24,500 in 1997....................... 97,800 -- --
Deferred offering costs........................................................... -- 568,700 --
Other assets, net................................................................. 89,400 125,400 795,200
----------- ----------- -----------
Total assets.................................................................. $ 1,357,100 $15,657,700 $74,968,700
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Trade accounts payable and accrued expenses..................................... $ 1,257,300 $ 6,413,200 $ 9,348,800
Accrued compensation............................................................ 414,700 181,700 722,900
Guide fees payable.............................................................. 157,300 462,400 606,800
Deferred revenue................................................................ 529,600 -- 160,200
ESPP deductions withheld........................................................ -- -- 322,700
Convertible loans payable....................................................... 1,010,200 -- --
Current portion of notes payable................................................ -- 154,000 385,600
Current installments of obligations under capital leases........................ 150,000 219,000 206,800
----------- ----------- -----------
Total current liabilities..................................................... 3,519,100 7,430,300 11,753,800
Convertible notes payable, net of unamortized debt discount of $38,700 in 1997.... 4,851,000 -- --
Notes payable, excluding current portion.......................................... 3,630,100 620,600 666,900
Obligations under capital leases, excluding current installments.................. 251,600 149,400 59,300
Deferred rent..................................................................... 49,600 47,700 34,700
Redeemable convertible preferred stock, $0.001 par value:
Series A--3,346,715 shares authorized, issued and outstanding at December 31,
1998; liquidation preference of $1.50 per share plus unpaid dividends of 9%
per annum ($5,325,700 in the aggregate at December 31, 1998)................. -- 5,259,700 --
Series B--6,597,596 shares authorized, issued and outstanding at December 31,
1998; liquidation preference of $1.80 per share plus unpaid dividends of 9%
per annum ($12,602,100 in the aggregate at December 31, 1998)................ -- 12,448,300 --
Series C--8,717,949 shares authorized, 7,301,811 shares issued and outstanding
at December 31, 1998; liquidation preference of $1.95 per share plus unpaid
dividends of 9% per annum ($14,403,100 in the aggregate at December 31,
1998)........................................................................ -- 14,363,700 --
Stockholders' (deficit) equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized, no shares issued
and outstanding............................................................... -- -- --
Common stock, $0.001 par value; 50,000,000 shares authorized, 1,475,339,
2,202,558 and 12,144,155 shares issued and outstanding, respectively.......... 1,500 2,200 12,100
Additional paid-in capital...................................................... 132,700 3,231,000 125,102,100
Deferred compensation........................................................... -- (1,238,900) (3,389,300)
Accumulated deficit............................................................. (11,078,500) (26,656,300) (59,270,900)
----------- ----------- -----------
Total stockholders' (deficit) equity.......................................... (10,944,300) (24,662,000) 62,454,000
----------- ----------- -----------
Commitments and contingencies
Total liabilities and stockholders' (deficit) equity........................ $ 1,357,100 $15,657,700 $74,968,700
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
ABOUT.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 27, 1996
(INCEPTION) SIX MONTHS ENDED
TO YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ----------------------------- -----------------------------
1996 1997 1998 1998 1999
------------- ------------- -------------- ------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................... $ -- $ 390,600 $ 3,721,600 $ 547,700 $ 6,074,000
Cost of revenues........................... 90,800 1,931,000 4,188,300 1,286,200 5,245,600
Non-cash compensation...................... -- -- 27,000 20,000 3,621,300
------------- ------------- -------------- ------------- --------------
Gross profit (loss).................. (90,800) (1,540,400) (493,700) (758,500) (2,792,900)
Operating expenses:
Sales and marketing...................... 240,900 1,761,100 7,889,700 1,377,000 23,783,800
General and administrative............... 1,100,900 1,993,800 2,943,900 1,103,500 3,273,600
Product development...................... 948,000 3,045,900 3,113,500 1,183,500 2,933,700
Non-cash compensation.................... -- -- 451,000 231,000 615,600
Amortization of goodwill................. -- -- -- -- 33,700
------------- ------------- -------------- ------------- --------------
Total operating expenses............... 2,289,800 6,800,800 14,398,100 3,895,000 30,640,400
------------- ------------- -------------- ------------- --------------
Loss from operations................. (2,380,600) (8,341,200) (14,891,800) (4,653,500) (33,433,300)
Other income (expense):
Other income, net........................ -- 349,800 -- -- --
Interest income.......................... 9,200 8,800 49,700 14,000 902,900
Interest expense......................... (66,700) (657,800) (735,700) (584,800) (84,200)
------------- ------------- -------------- ------------- --------------
Total other income (expense), net.... (57,500) (299,200) (686,000) (570,800) 818,700
------------- ------------- -------------- ------------- --------------
Net loss................................... (2,438,100) (8,640,400) (15,577,800) (5,224,300) (32,614,600)
Cumulative dividends and accretion of
convertible preferred stock to
liquidation value........................ -- -- (1,230,500) -- (659,600)
------------- ------------- -------------- ------------- --------------
Net loss attributable to common
stockholders....................... $ (2,438,100) $ (8,640,400) $ (16,808,300) $ (5,224,300) $ (33,274,200)
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
Basic and diluted net loss per common
share.................................... $ (1.20) $ (4.94) $ (9.71) $ (3.08) $ (4.38)
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
Weighted average shares outstanding used in
basic and diluted net loss per common
share calculation........................ 2,035,144 1,748,850 1,731,598 1,698,188 7,589,028
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ABOUT.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL STOCKHOLDERS'
----------------------- PAID-IN DEFERRED ACCUMULATED (DEFICIT)
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT EQUITY
------------ --------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock......... 1,816,255 $ 1,800 $ 11,500 $ -- $ -- $ 13,300
Net loss for the period from June
27, 1996 (inception) to
December 31, 1996.............. -- -- -- -- (2,438,100) (2,438,100)
------------ --------- -------------- ------------- -------------- --------------
Balance as of December 31,
1996........................... 1,816,255 1,800 11,500 -- (2,438,100) (2,424,800)
Cancellation of common stock..... (367,802) (300) 300 -- -- --
Issuance of warrants in
connection with debt
transactions................... -- -- 104,000 -- -- 104,000
Exercise of stock options........ 26,886 -- 13,600 -- -- 13,600
Issuance of stock options in lieu
of services.................... -- -- 3,300 -- -- 3,300
Net loss for the year ended
December 31, 1997.............. -- -- -- -- (8,640,400) (8,640,400)
------------ --------- -------------- ------------- -------------- --------------
Balance as of December 31,
1997........................... 1,475,339 1,500 132,700 -- (11,078,500) (10,944,300)
Issuance of warrants in
connection with debt
transactions................... -- -- 216,000 -- -- 216,000
Deferred compensation related to
stock options granted.......... -- -- 1,716,900 (1,716,900) -- --
Amortization of deferred
compensation................... -- -- -- 478,000 -- 478,000
Exercise of stock options........ 87,583 100 77,100 -- -- 77,200
Issuance of common stock in
connection with the exercise of
warrants....................... 639,636 600 2,255,800 -- -- 2,256,400
Issuance of stock options and
warrants in lieu of services
rendered....................... -- -- 63,000 -- -- 63,000
Cumulative dividends on
convertible preferred stock.... -- -- (1,196,800) -- -- (1,196,800)
Accretion of convertible
preferred stock to liquidation
value.......................... -- -- (33,700) -- -- (33,700)
Net loss for the year ended
December 31, 1998.............. -- -- -- -- (15,577,800) (15,577,800)
------------ --------- -------------- ------------- -------------- --------------
Balance as of December 31,
1998........................... 2,202,558 2,200 3,231,000 (1,238,900) (26,656,300) (24,662,000)
</TABLE>
F-5
<PAGE>
ABOUT.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY (CONTINUED)
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL STOCKHOLDERS'
----------------------- PAID-IN DEFERRED ACCUMULATED (DEFICIT)
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT EQUITY
------------ --------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative dividends on
convertible preferred stock.... -- -- (646,100) -- -- (646,100)
Accretion of convertible
preferred stock to liquidation
value.......................... -- -- (13,500) -- -- (13,500)
Issuance of common stock in
connection with private
placement...................... 107,527 100 2,499,900 -- -- 2,500,000
Conversion of preferred stock in
connection with About.com's
IPO............................ 6,139,640 6,100 32,725,200 -- -- 32,731,300
Forgiveness and cancellation of
interest on Series A Notes in
connection with About.com's
IPO............................ -- -- 341,300 -- -- 341,300
Issuance of common stock in
connection with About.com's
IPO, net of offering costs of
$7,700,100..................... 3,450,000 3,400 78,545,600 -- -- 78,549,000
Compensation expense in
connection with options granted
to guides...................... -- -- 3,612,000 -- -- 3,612,000
Issuance of common stock in
connection with VantageNet
acquisition.................... 65,550 100 1,899,200 -- -- 1,899,300
Exercise of stock options and
warrants....................... 178,880 200 132,100 -- -- 132,300
Deferred compensation............ -- -- 2,775,400 (2,775,400) -- --
Amortization of deferred
compensation................... -- -- -- 625,000 -- 625,000
Net loss for the six months ended
June 30, 1999.................. -- -- -- -- (32,614,600) (32,614,600)
------------ --------- -------------- ------------- -------------- --------------
Balance as of June 30, 1999
(unaudited).................... 12,144,155 $ 12,100 $ 125,102,100 $ (3,389,300) $ (59,270,900) $ 62,454,000
------------ --------- -------------- ------------- -------------- --------------
------------ --------- -------------- ------------- -------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ABOUT.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 27,
1996
(INCEPTION) YEAR ENDED SIX MONTHS ENDED
TO DECEMBER 31, JUNE 30,
DECEMBER 31, ----------------------- -----------------------
1996 1997 1998 1998 1999
------------ ---------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................ $(2,438,100) $(8,640,400) $(15,577,800) $(5,224,300) $(32,614,600)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization..................... 29,400 213,400 567,600 197,400 1,137,100
Amortization of debt discount and issuance
costs........................................... -- 89,800 236,400 236,400 --
Non-cash compensation expense..................... -- -- 478,000 251,000 4,237,000
Stock options and warrants issued in lieu of
services rendered............................... -- 3,300 63,000 -- --
Other............................................. 39,100 10,500 (1,900) 1,000 (13,200)
Deferred interest on debt......................... 66,100 558,300 401,700 333,300 --
Changes in operating assets and liabilities, net
of effect of acquisition:
Accounts receivable, net........................ (300) (118,000) (799,000) (151,200) (2,119,300)
Other assets.................................... (62,900) (26,500) (136,000) (11,800) (216,100)
Accounts payable and accrued expenses........... 301,600 955,700 5,155,900 80,400 2,935,700
Accrued compensation............................ 151,300 263,400 67,000 15,300 541,100
Guide fees payable.............................. -- 157,300 305,100 76,200 144,400
Deferred revenue................................ -- 529,600 (529,600) (70,000) 160,200
ESPP deductions withheld........................ -- -- -- -- 322,700
------------ ---------- ----------- ---------- -----------
Net cash used in operating activities......... (1,913,800) (6,003,600) (9,769,600) (4,266,300) (25,485,000)
------------ ---------- ----------- ---------- -----------
Cash flows from investing activities:
VantageNet acquisition, net......................... -- -- -- -- (586,600)
Purchase of intangible assets....................... -- -- -- -- (487,600)
Capital expenditures................................ (357,800) (148,000) (2,941,900) (243,300) (4,845,900)
------------ ---------- ----------- ---------- -----------
Net cash used in investing activities......... (357,800) (148,000) (2,941,900) (243,300) (5,920,100)
------------ ---------- ----------- ---------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock.............. 13,300 -- -- -- --
Proceeds from issuance of common stock in connection
with the exercise of warrants..................... -- -- 2,256,400 -- 18,000
Proceeds from issuance of common stock related to
initial public offering and concurrent placement,
net............................................... -- -- -- -- 81,049,000
Proceeds from issuance of redeemable preferred
stock............................................. -- -- -- 6,854,500 --
Proceeds from secured credit facility, net.......... -- -- 437,500 242,800 619,400
Proceeds from issuance of convertible preferred
stock, net of expenses of $184,900................ -- -- 18,181,700 -- --
Proceeds from issuance of loans payable............. 3,905,600 5,000,000 2,881,000 1,800,000 --
Principal payments under capital lease
obligations....................................... -- (83,800) (212,500) (86,700) (102,300)
Proceeds from exercise of common stock options...... -- 13,600 77,200 4,200 114,300
Deferred financing/offering costs................... -- (122,300) (568,700) (34,800) 568,700
------------ ---------- ----------- ---------- -----------
Net cash provided by financing activities..... 3,918,900 4,807,500 23,052,600 8,780,000 82,267,100
------------ ---------- ----------- ---------- -----------
Net increase (decrease) in cash and cash
equivalents............................... 1,647,300 (1,344,100) 10,341,100 4,270,400 50,862,000
Cash and cash equivalents at beginning of period...... -- 1,647,300 303,200 303,200 10,644,300
------------ ---------- ----------- ---------- -----------
Cash and cash equivalents at end of period............ $1,647,300 $ 303,200 $10,644,300 $4,573,600 $61,506,300
------------ ---------- ----------- ---------- -----------
------------ ---------- ----------- ---------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
ABOUT.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 27,
1996
(INCEPTION) YEAR ENDED SIX MONTHS ENDED
TO DECEMBER 31, JUNE 30,
DECEMBER 31, ----------------------- -----------------------
1996 1997 1998 1998 1999
------------ ---------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Supplemental disclosures of cash flow
information:
Interest paid................................ $ 600 $ 8,100 $ 94,165 $ 31,800 $ 80,100
------------ ---------- ----------- ---------- -----------
------------ ---------- ----------- ---------- -----------
Noncash transactions:
Equipment acquired under capital leases...... $ -- $ 485,400 $ 179,300 $ 179,300 $ --
------------ ---------- ----------- ---------- -----------
------------ ---------- ----------- ---------- -----------
Barter transactions.......................... $ -- $ 72,500 $ 365,700 $ 49,200 $ 452,100
------------ ---------- ----------- ---------- -----------
------------ ---------- ----------- ---------- -----------
Conversion of $4,950,000 of the convertible
notes payable-Series A notes together with
$70,000 of interest thereon into 3,346,715
shares of Series A preferred stock on April
23, 1998................................... $ -- $ -- $ 5,020,000 $5,020,000 $ --
------------ ---------- ----------- ---------- -----------
------------ ---------- ----------- ---------- -----------
Conversion of $1,700,000 of the 8.25% notes
payable together with $305,800 of interest
thereon into 1,114,327 shares of Series B
preferred stock on April 23, 1998.......... $ -- $ -- $ 2,005,800 $2,005,800 $ --
------------ ---------- ----------- ---------- -----------
------------ ---------- ----------- ---------- -----------
Conversion of $2,800,000 of the convertible
notes payable-Series B together with
$69,800 of interest thereon into 1,594,380
shares of Series B preferred stock on April
23, 1998................................... $ -- $ -- $ 2,869,800 $2,869,200 $ --
------------ ---------- ----------- ---------- -----------
------------ ---------- ----------- ---------- -----------
Conversion of $1,555,600 of the 8.25% notes
payable together with $226,400 of interest
thereon into 913,856 shares of Series C
preferred stock on November 13, 1998....... $ -- $ -- $ 1,782,000 $1,782,000 $ --
------------ ---------- ----------- ---------- -----------
------------ ---------- ----------- ---------- -----------
Conversion of $1,081,000 of the convertible
notes payable-Series C together with $8,900
of interest thereon into 558,917 shares of
Series C preferred stock on November 13,
1998....................................... $ -- $ -- $ 1,089,900 $ -- $ --
------------ ---------- ----------- ---------- -----------
------------ ---------- ----------- ---------- -----------
Conversion of Series A, B and C preferred
stock into 1,191,433, 2,348,752 and
2,599,455 shares of common stock on March
24, 1999................................... $ -- $ -- $ -- $ -- $32,731,300
------------ ---------- ----------- ---------- -----------
------------ ---------- ----------- ---------- -----------
Forgiveness and cancellation of interests on
March 24, 1999............................. $ -- $ -- $ -- $ -- $ 341,300
------------ ---------- ----------- ---------- -----------
------------ ---------- ----------- ---------- -----------
Issuance of common stock in connection with
the VantageNet acquisition................. $ -- $ -- $ -- $ -- $ 1,899,300
------------ ---------- ----------- ---------- -----------
------------ ---------- ----------- ---------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(1) ORGANIZATION AND BUSINESS
About.com, Inc. ("About.com" or the "Company") was incorporated in New York
on June 27, 1996 (inception) as General Internet Inc. and commenced operations
on that date. In December 1998, General Internet Inc. changed its corporate name
to MiningCo.com, Inc. and reincorporated in Delaware. In May 1999, MiningCo.com,
Inc. changed its corporate name to About.com, Inc. About.com's Internet service,
ABOUT.COM, is an Internet news, information and entertainment service.
About.com's primary revenue source is the sale of advertising.
About.com's business is characterized by rapid technological change, new
product and service development and evolving industry standards. Inherent in the
Company's business are various risks and uncertainties, including its limited
operating history, uncertain profitability, history of losses, anticipated
continuing losses, the dependence on the Internet and risks associated with
Internet advertising.
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(A) INITIAL PUBLIC OFFERING AND CONCURRENT PLACEMENT
On February 23, 1999, About.com and Comcast Interactive Investments, Inc.
("Comcast") entered into a common stock purchase agreement pursuant to which
About.com agreed to sell $2,500,000 of common stock to Comcast. These common
shares were purchased directly from About.com in a private placement transaction
at a price of 93% of the initial public offering price per share (or $23.25 per
share). The underwriters did not receive any discount or commission related to
this transaction. The closing of the concurrent placement was contingent upon
the closing of About.com's initial public offering. ("IPO").
On March 24, 1999, About.com completed its IPO which resulted in the
issuance of 3,450,000 shares of common stock at $25.00 per share (which included
450,000 shares in connection with the exercise of the underwriters'
over-allotment option) and the concurrent placement of 107,527 shares to Comcast
at $23.25 per share. In addition, upon the closing of the IPO, 3,346,715,
6,597,596 and 7,301,811 shares of Series A, B and C convertible preferred stock,
respectively, automatically converted into 6,139,640 shares of common stock and
$341,300 in unsecured promissory notes payable was forgiven. Net proceeds from
the offering and concurrent placement, after underwriting fees of $6.0 million
and offering costs of $1.7 million were approximately $81.0 million.
(B) UNAUDITED INTERIM CONSOLIDATED FINANCIAL INFORMATION
The interim consolidated financial statements of About.com as of June 30,
1999 and for the six months ended June 30, 1998 and 1999, included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the SEC's rules and regulations relating to
interim financial statements.
In the opinion of management, the accompanying unaudited interim
consolidated financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial position
as of June 30, 1999, and the results of operations and cash flows for the six
F-9
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
months ended June 30, 1998 and 1999. The results of operations for any interim
period are not necessarily indicative of About.com's results of operations for
any future interim period or for a full year.
About.com's financial statements as of and for the six months ended June 30,
1999 include the consolidated accounts of About.com and its wholly-owned
subsidiary, VantageNet, Inc. from June 14, 1999 (date of acquisition) (see note
7). All significant intercompany transactions and balances have been eliminated
in consolidation.
About.com has made certain reclassifications within its financial statements
to more accurately present the financial results of the Company. Accordingly,
certain prior period balances have been reclassified to conform to the current
period presentation.
(C) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(D) CASH AND CASH EQUIVALENTS
About.com considers all highly liquid securities with original maturities of
three months or less to be cash equivalents, which principally consist of money
market accounts.
(E) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is computed using the straight-line method over three
years, which is the estimated useful life of the related assets. Leasehold
improvements are amortized over their estimated useful lives, or the term of the
related lease, whichever is shorter. Equipment under capital leases is stated at
the present value of minimum lease payments and is amortized using the
straight-line method over the shorter of the lease term or the estimated useful
life of the assets.
(F) GOODWILL
Goodwill and other purchased intangible assets are stated net of accumulated
amortization of $33,700 at June 30, 1999. Goodwill and other purchased
intangible assets are being amortized on a straight-line basis over the expected
period of benefit of three years.
(G) OTHER ASSETS
Other assets include security deposits and costs incurred in connection with
the purchase of URL names. URL costs in the amount of $487,600 have been
capitalized and are being amortized over a 5-year period. As of June 30, 1999,
URL costs net of amortization amounted to $475,400.
F-10
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(H) DEBT ISSUANCE COSTS
Amortization of debt issuance costs is calculated on the straight-line
method over the life of the related debt instrument.
(I) DEFERRED OFFERING COSTS
Deferred offering costs at December 31, 1998 represented costs incurred in
connection with About.com's initial public offering. These costs were charged
against additional paid-in capital at the close of About.com's initial public
offering on March 24, 1999.
(J) IMPAIRMENT OF LONG-LIVED ASSETS
About.com reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to future net cash flows
expected to be generated by the assets. If the assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. To date, no
impairment has occurred.
(K) INCOME TAXES
About.com accounts for income taxes using the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in results of operations in
the period that includes the enactment date.
(L) REVENUE AND EXPENSE RECOGNITION
REVENUE RECOGNITION
To date, substantially all of About.com's revenues have been derived from
the sale of advertisements on ABOUT.COM. About.com offers numerous sizes and
types of advertising placement, including banner advertisements, button
advertisements, text links and sponsorship programs. Advertising revenues are
derived principally from short-term advertising contracts in which About.com
typically guarantees a minimum number of impressions to advertisers over a
specified period of time for a fixed fee. Revenues from advertising sales are
recognized ratably in the period in which the advertisement is displayed,
provided that no significant About.com obligations remain, at the lesser of the
ratio of impressions delivered over total guaranteed impressions or the
straight-line basis over the term of the contract, and collection of the
resulting receivable is probable. Payments received from advertisers prior to
displaying their advertisements on ABOUT.COM are recorded as deferred revenue
and
F-11
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
are recognized as revenue ratably as the advertisements are displayed. Pursuant
to its agreements with advertisers, About.com generally guarantees a minimum
number of impressions (times that an advertisement appears in pages viewed by
the users of ABOUT.COM) to be delivered over a specified period of time for a
fixed fee. To the extent minimum guaranteed impression levels are not met
ratably over the contract period, About.com defers recognition of the
corresponding pro-rata portion of the revenues relating to such unfulfilled
obligations until the guaranteed impression levels are achieved. When there is
no guarantee of a minimum number of impressions over a specified period of time,
About.com recognizes revenues in the period in which the advertisement is
displayed. About.com's short-term advertising agreements are generally
terminable by either party upon relatively short notice. In certain cases, these
agreements are longer in duration and entitle About.com to a share of revenues
generated by sales over a particular threshold resulting from direct links from
ABOUT.COM. To date, About.com has not recognized any revenues from these revenue
sharing agreements. About.com's revenue derived from these revenue sharing
agreements will be recognized by About.com upon notification from its
advertisers and electronic commerce partners of sales attributable to ABOUT.COM.
A portion of About.com's revenues are from barter advertisements (agreements
whereby About.com trades advertisements on ABOUT.COM in exchange for
advertisements on third-party web sites). Barter advertising revenues and
expenses are recorded at the fair market value of services provided or received,
whichever is more determinable in the circumstances. Revenue from barter
advertising transactions is recognized as income when advertisements are
delivered on ABOUT.COM. Barter expense is recognized when About.com's
advertisements are run on third-party web sites, which is typically in the same
period when barter revenue is recognized. Barter expense is included as a
component of cost of revenues. Barter advertising revenues and expenses were $0,
$72,500 and $365,700 for the period from June 27, 1996 (inception) through
December 31, 1996 and for the years ended December 31, 1997 and 1998,
respectively. Barter advertising revenues and expenses for the six months ended
June 30, 1998 and 1999 were $49,200 and $452,000, respectively.
A portion of About.com's revenues are from production and development fees.
Production and development fees represent HTML design services, graphic
services, engineering and database development and related services. About.com
charges clients for these services on either a fixed price or time and materials
basis. Revenue is recognized as these services are performed. These revenues
fluctuate based on the number of new programs initiated, types of services and
scope and complexity of each program. These revenues accounted for 2% of
revenues for the six months ended June 30, 1999.
At December 31, 1998 and June 30, 1999, accounts receivable included
approximately $417,300 and $1,420,900 of unbilled receivables of which
$1,301,600 has been subsequently billed. Such unbilled receivables represent the
recognized sales value of short-term advertising contracts that were earned but
not billable to customers. The terms of the related advertising contracts
typically require billing at the end of 30, 60 or 90 days from the signing of
the contract.
EXPENSE RECOGNITION--GUIDE COMPENSATION
About.com's guides are compensated at an amount equal to the greater of a
monthly minimum guarantee or a percentage of net advertising revenues generated
by the entire network, which is
F-12
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
distributed among the guides based on the user traffic on their respective
sites. Net advertising revenues has been defined as total advertising revenues
received less particular types of non-cash revenues, third-party advertising
sales representative organization fees and marketing expenses. Guides are
currently entitled to a percentage of net transaction revenues and net
syndication revenues. In addition, management may distribute a semi-annual
discretionary bonus to guides. Guide compensation is included as a component of
cost of revenues, except for the non-cash compensation portion which was
recorded in connection with the grant of stock options to the guides and
presented as a separate line item above the gross profit (loss) line.
EXPENSE RECOGNITION--DISTRIBUTION AND SYNDICATION PARTNERSHIPS
About.com has entered into distribution and syndication partnership
agreements that drive traffic to ABOUT.COM. Through these partnerships,
About.com provides content to a partner's web site, and users can link to
ABOUT.COM by clicking on the content. About.com has agreements to provide
content to some of the leading Internet service providers, content web sites,
search engines/Internet directories and broadband cable-related sites. These
short-term agreements typically require About.com to make payments, which are
expensed, that are either fixed or are based on the amount of user traffic
directed from the partner's site to ABOUT.COM. About.com's fixed fees are paid
on a monthly basis and contracts in which fees are paid in advance are deferred
and amortized over the contract term.
(M) PRODUCT DEVELOPMENT EXPENSES
Product development expenses include personnel and consulting costs
associated with the design, development and testing of ABOUT.COM and About.com's
systems and editorial personnel costs. About.com generally expenses its product
development expenses as incurred. Software development costs are required to be
capitalized when a product's technological feasibility has been established by
completion of a working model of the product. To date, completion of a working
model of About.com's service and general release have substantially coincided.
As a result, About.com has not capitalized any software development costs since
those costs have not been significant.
(N) ADVERTISING EXPENSES
About.com expenses the costs of advertising its service as incurred. These
costs amounted to $60,000, $510,900, $5,262,800, $950,000 and $18,958,000 for
the period from June 27, 1996 (inception) through December 31, 1996, the years
ended December 31, 1997 and 1998 and the six months ended June 30, 1998 and
1999, respectively, and are included in sales and marketing in About.com's
statements of operations.
(O) STOCK-BASED COMPENSATION
About.com accounts for its employee stock option plans in accordance with
the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations.
Compensation expense related to employee stock options is recorded only if, on
the date of grant, the fair value of the underlying stock exceeds the exercise
price. About.com
F-13
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
adopted the disclosure-only requirements of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," which
allows entities to continue to apply the provisions of APB Opinion No. 25 for
transactions with employees and provide pro forma net income and pro forma
earnings per share disclosures for employee stock as if the fair-value-based
method of accounting in SFAS No. 123 had been applied to these transactions.
About.com accounts for non-employee stock-based awards in which goods or
services are the consideration received for the equity instruments issued based
on the fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measured.
(P) BASIC AND DILUTED NET LOSS PER COMMON SHARE
About.com adopted SFAS No. 128, "Computation of Earnings Per Share," during
the year ended December 31, 1997. In accordance with SFAS No. 128 and the SEC
Staff Accounting Bulletin No. 98, basic earnings per share is computed using the
weighted average number of common and dilutive common equivalent shares
outstanding during the period. Common equivalent shares consist of the
incremental common shares issuable upon the conversion of the convertible
preferred stock (using the if-converted method) and shares issuable upon the
exercise of stock options and warrants (using the treasury stock method); common
equivalent shares are excluded from the calculation if their effect is
anti-dilutive. Pursuant to SEC Staff Accounting Bulletin No. 98, all options,
warrants or other potentially dilutive instruments issued for nominal
consideration, prior to the anticipated effective date of an initial public
offering (including the IPO), are required to be included in the calculation of
basic and diluted net loss per share, as if they were outstanding for all
periods presented. As a result, About.com has included 218,890 shares of common
stock in the calculation of basic and diluted net loss per common share for the
1996, 1997 and 1998 periods presented which relate to certain investor warrants
issued for nominal consideration, all of which were exercised in December 1998
when About.com exercised its right to call those warrants (see notes 9 and 11).
Diluted net loss per common share for the period from June 27, 1996
(inception) through December 31, 1996 and the years ended December 31, 1997 and
1998 does not include the effects of options to purchase 0, 818,638, and
1,178,436 shares of common stock, respectively, 0, 427,003, and 68,708 common
stock warrants, respectively, or 0, 0 and 6,139,640 shares of convertible
preferred stock on an "as if" converted basis, respectively, as the effect of
their inclusion is anti-dilutive during each period. Diluted net loss per share
for the six months ended June 30, 1998 and 1999 does not include the effect of
options to purchase 935,243 and 2,821,811 shares of common stock and 729,376 and
65,860 warrants to purchase common stock, respectively.
(Q) STOCK SPLIT
In August 1996, About.com authorized and implemented a 1-for-40,000 common
stock split. Accordingly, all share and per share information in the
accompanying financial statements has been retroactively restated to reflect the
effect of the stock split.
F-14
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
All common share and per share amounts in the accompanying financial
statements have been adjusted retroactively for a 1.00-for-2.809 reverse stock
split of About.com's common stock which was approved by the Board of Directors
and stockholders and effected on March 19, 1999.
(R) RECENT ACCOUNTING PRONOUNCEMENTS
As of January 1, 1998, About.com adopted the provisions of SFAS No. 130,
"Reporting Comprehensive Income", which establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose financial statements. The adoption of this standard has had no impact on
About.com's financial statements. Accordingly, About.com's comprehensive net
loss is equal to its net loss for all periods presented.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information", which establishes standards for the way
that a public enterprise reports information about operating segments in annual
financial statements, and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997. In the initial
year of application, comparative information for earlier years must be restated.
About.com has determined that it does not have any separately reportable
business segments.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"), which provides guidance
for determining whether computer software is internal-use software and on
accounting for the proceeds of computer software originally developed or
obtained for internal use and then subsequently sold to the public. It also
provides guidance on capitalization of the costs incurred for computer software
developed or obtained for internal use. About.com adopted SOP 98-1 in 1999 and
there has not been any material effect on the financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
standards for derivative instruments, including derivative instruments embedded
in other contracts, and for hedging activities. SFAS No. 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. This
statement is not expected to affect About.com as About.com currently does not
engage or plan to engage in derivative instruments or hedging activities.
(3) BUSINESS AND CREDIT CONCENTRATIONS
Financial instruments which subject About.com to concentrations of credit
risk consist primarily of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities. The carrying amounts of these
instruments approximate fair value. The carrying amount of About.com's capital
leases and other equipment financing obligations approximates the fair value of
these instruments based upon management's best estimate of interest rates which
are similar to the rates obtained in its January and February 1999 lease line of
credit (see note 13).
F-15
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(3) BUSINESS AND CREDIT CONCENTRATIONS (CONTINUED)
About.com maintains cash and cash equivalents with a domestic financial
institution. About.com performs periodic evaluations of the relative credit
standing of this institution. From time to time, About.com's cash balances with
this financial institution may exceed Federal Deposit Insurance Corporation
insurance limits.
About.com's customers are concentrated in the United States. About.com
performs ongoing credit evaluations, generally does not require collateral and
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of each customer, historical trends and other information; to
date, such amounts have been within management's expectations.
For the period from June 27, 1996 (inception) to December 31, 1996, there
were no customers that accounted for over 10% of total revenues generated by
About.com, or of gross accounts receivable at December 31, 1996.
For the year ended December 31, 1997, one customer accounted for
approximately 19% of total revenues generated by About.com. No customers
accounted for over 10% of gross accounts receivable at December 31, 1997. As of
December 31, 1997, About.com had receivables in excess of $10,000 from three
separate customers totaling approximately $43,000.
For the year ended December 31, 1998, one customer accounted for
approximately 12% of total revenues generated by About.com. This advertising
arrangement ended on December 31, 1998. For the year ended December 31, 1998, a
third-party Internet advertising sales representative organization accounted for
approximately 21% of About.com's total revenues and accounted for approximately
35% of gross accounts receivable at December 31, 1998, totaling approximately
$376,000.
For the six months ended June 30, 1998, there was one customer and a
third-party Internet advertising sales representative organization accounted for
approximately 14% and 15%, respectively, of revenue generated by About.com. For
the six months ended June 30, 1999, no customer accounted for more than 10% of
revenue or gross receivables for the period then ended.
In June 1997, About.com entered into a consulting agreement with a major
financial institution pursuant to which About.com agreed to provide consulting
assistance in connection with the development of a customized web site for an
aggregate amount of $450,000. Fees in connection with this agreement have been
recognized as performance occurred under the terms of the agreement, net of any
expenses, and have been recorded as other income for the year ended December 31,
1997. In connection with this agreement, About.com issued the financial
institution a warrant to purchase 35,600 shares of common stock at $14.05 per
share with an expiration date of December 31, 1999. The fair value of the
warrants, using the Black-Scholes model based upon the following assumptions:
risk-free interest rate of 6%; dividend yield of 0%; expected life of 2.5 years;
and volatility of 0%, was deemed insignificant on the date of grant.
F-16
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(4) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------- -------------
1997 1998 1999
----------- ------------ -------------
<S> <C> <C> <C>
(UNAUDITED)
Equipment and computer hardware, including
assets under capital leases of $485,400,
$664,700 and $664,700, respectively............... $ 949,100 $ 4,062,200 $ 8,661,400
Leasehold improvements.............................. 32,400 32,400 200,300
Furniture and fixtures.............................. 9,700 17,800 106,600
----------- ------------ -------------
991,200 4,112,400 8,968,300
Less accumulated depreciation and amortization,
including assets under capital leases of $64,500,
$239,900 and $329,100, respectively............... (242,800) (810,400) (1,901,600)
----------- ------------ -------------
Total............................................... $ 748,400 $ 3,302,000 $ 7,066,700
----------- ------------ -------------
----------- ------------ -------------
</TABLE>
(5) INCOME TAXES
No provision for US federal or state income taxes has been recorded for any
period as About.com has incurred operating losses since inception.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
About.com's deferred tax assets for federal and state income taxes are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1998
------------- --------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................. $ 4,887,000 $ 12,100,000
Allowance for doubtful accounts.............................. 1,000 67,000
Deferred compensation........................................ 191,000 84,000
Depreciation................................................. (14,000) (26,000)
Deferred rent................................................ 23,000 22,000
------------- --------------
5,088,000 12,247,000
------------- --------------
Less valuation allowance..................................... (5,088,000) (12,247,000)
------------- --------------
Deferred tax assets............................................ $ -- $ --
------------- --------------
------------- --------------
</TABLE>
Realization of deferred tax assets is dependent upon future earnings, if
any. About.com has recorded a full valuation allowance against its deferred tax
assets since management believes that it is
F-17
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(5) INCOME TAXES (CONTINUED)
not more likely than not that these assets will be realized. No income tax
benefit has been recorded for all periods presented because of the valuation
allowance.
During the period from June 27, 1996 (inception) to December 31, 1996 and
the years ended December 31, 1997 and 1998, the valuation allowance for the
deferred tax assets increased by $1,121,000, $3,967,000, and $7,159,000,
respectively.
As of December 31, 1997 and 1998, About.com had net operating loss
carryforwards for federal income tax purposes of approximately $10.6 million and
$26.3 million, respectively. There can be no assurance that About.com will
realize the benefit of the net operating loss carryforwards. The federal net
operating loss carryforwards are available to offset future taxable income and
expire at various dates beginning in fiscal year 2011 through 2013 if not
utilized.
Due to the "change in ownership" provisions of the Internal Revenue Code,
the availability of About.com's net operating loss and credit carryforwards may
be subject to an annual limitation against taxable income in future periods,
which could substantially limit the eventual utilization of these carryforwards.
(6) RELATED-PARTY TRANSACTIONS
At December 31, 1997, Mr. Scott P. Kurnit, About.com's President and Chief
Executive Officer and Chairman of the Board of Directors, elected to defer
compensation in the amount of $414,700, for accrued but unpaid salary and
bonuses. In January 1998, Mr. Kurnit converted $300,000 of that amount into a
convertible note payable (see note 9). During 1998, Mr. Kurnit elected to defer
an additional $67,000 of compensation, which at December 31, 1998 totaled
$181,700.
On April 20, 1998, About.com and a director of an investor in About.com
executed an advisory agreement, pursuant to which the individual agreed to
provide consulting and advisory services to About.com including, but not limited
to, introducing About.com to members of the investment community and assisting
About.com with respect to financial and strategic matters. In consideration for
his services under the advisory agreement, the individual was issued a warrant
to purchase up to an aggregate of 21,360 shares of About.com's common stock, at
an exercise price of $5.06 per share. The warrant is exercisable at any time
during the 10-year period commencing on the date of the closing of a qualified
initial public offering (which would include the IPO). The fair value of the
warrants, using the Black-Scholes model and the following assumptions: risk-free
interest rate of 6%, dividend yield of 0%, expected life of ten years, and
volatility of 0%, resulted in a compensation charge of $36,000 during 1998.
These warrants had not been exercised as of June 30, 1999.
(7) ACQUISITION
On June 14, 1999, About.com formed About.com Acquisition Corp. ("AAC"), a
Delaware corporation and a wholly-owned subsidiary of About.com. AAC was merged
with and into VantageNet, Inc., a Minnesota corporation ("VantageNet"), with
VantageNet as the surviving corporation. The merger was effected pursuant to the
Agreement and Plan of Reorganization, dated June 14, 1999, by and among
About.com, AAC, VantageNet and certain stockholders thereof. As a result of the
merger, VantageNet
F-18
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(7) ACQUISITION (CONTINUED)
became a wholly-owned subsidiary of About.com. VantageNet is an Internet
marketing company which utilizes electronic surveys and/or polling tools.
The consideration paid by About.com in connection with the merger consisted
of $550,000 in cash and 65,550 newly issued shares of common stock, par value
$0.001, of About.com. The total purchase price for this transaction was
approximately $2.5 million. The difference between the fair market value of
VantageNet's net tangible assets and the purchase price has been accounted for
as goodwill and other purchased intangible assets and is being amortized over
the expected period of benefit of three years.
<TABLE>
<CAPTION>
ACQUISITION NET TANGIBLE INTANGIBLES/
ACQUIRED COMPANY EFFECTIVE DATE COSTS ASSETS GOODWILL
- ------------------------------------------------------- --------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
VantageNet............................................. June 14, 1999 $ 51,000 $ 24,000 $ 2,476,000
</TABLE>
The following unaudited pro forma consolidated amounts give effect to the
acquisition as if it had occurred on January 1, 1998, by consolidating the
results of operations of VantageNet with the results of About.com for the year
ended December 31, 1998 and the six months ended June 30, 1998 and 1999.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------- -----------------------------
1998 1998 1999
-------------- ------------- --------------
<S> <C> <C> <C>
Total revenues.................................................... $ 3,772,000 $ 560,000 $ 6,132,000
Net loss attributable to common stockholders...................... $ (16,388,000) $ (5,625,000) $ (33,627,000)
Net loss per common share......................................... $ (9.12) $ (3.19) $ (4.40)
Weighted average shares used in net loss per common share
calculation (1)................................................. 1,797,148 1,763,738 7,649,116
</TABLE>
(1) The Company computes net loss per share in accordance with provisions of FAS
No. 128, "Earnings Per Share". Basic net loss per share is computed by
dividing the net loss for the period by the weighted average number of
common shares outstanding during the period. The weighted average common
shares used to compute pro forma basic net loss per share includes the
actual weighted average common shares outstanding for the historical year
ended Decemer 31, 1998 and the six month periods ended June 30, 1998 and
1999, respectively, plus the common shares issued in connection with the
acquisition of VantageNet from January 1, 1998. The common stock issued in
connection with the acquisition of VantageNet was 65,550 shares, which was
adjusted for the weighted average period such shares were considered to be
outstanding during 1999. In addition, diluted net loss per share is equal to
basic net loss per share as common stock issuable upon exercise of the
Company's employee stock options and upon exercise of outstanding warrants
are not included because they are antidilutive. In future periods, the
weighted average shares used to compute diluted earnings per share will
include the incremental shares of common stock relating to outstanding
options and warrants to the extent such incremental shares are dilutive.
F-19
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(7) ACQUISITION (CONTINUED)
The unaudited pro forma consolidated statements of operations are not
necessarily indicative of the operating results that would have been achieved
had the transactions been in effect as of the beginning of the periods presented
and should not be construed as being representative of future operating results.
(8) NOTES PAYABLE
8.25% NOTES PAYABLE
The following summarizes the 8.25% Notes Payable activity during 1997 and
1998:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST TOTAL
------------- ----------- -------------
<S> <C> <C> <C>
Balance at January 1, 1997......................... $ 3,905,600 $ 66,100 $ 3,971,700
Conversion into convertible note payable-- Series A
on August 27, 1997............................... (650,000) -- (650,000)
Accrued interest during 1997....................... -- 308,400 308,400
------------- ----------- -------------
Balance at December 31, 1997....................... 3,255,600 374,500 3,630,100
------------- ----------- -------------
Conversion into Series B preferred stock on April
23, 1998......................................... (1,700,000) (305,800) (2,005,800)
Accrued interest from January 1, 1998 through
November 13, 1998................................ -- 157,700 157,700
Conversion into Series C preferred stock on
November 13, 1998................................ (1,555,600) (226,400) (1,782,000)
------------- ----------- -------------
Balance at December 31, 1998....................... $ -- $ -- $ --
------------- ----------- -------------
------------- ----------- -------------
</TABLE>
On October 17, 1996, About.com executed a secured 8.25% Promissory Note
("8.25% Note") in the original principal amount of $3,905,600. On August 27,
1997, the 8.25% Note was amended to, among other things, reduce the principal
amount outstanding thereunder to $3,255,600, reflecting a reduction of $650,000
which was converted into a convertible note payable. In connection with the
execution of the convertible note payable (see note 9), About.com issued
warrants to purchase 24,105 shares of About.com's common stock at an exercise
price of $4.21 per share. The fair value of the warrants, using a Black-Scholes
model and the following assumptions: risk-free interest rate of 5.7%, dividend
yield of 0%, expected life of ten years and volatility of 0%, was deemed
insignificant on the date of grant.
On April 23, 1998, the 8.25% Note was amended again to, among other things,
(i) reduce the principal amount outstanding thereunder to $1,555,600, reflecting
a reduction of $1,700,000 which was simultaneously converted into 944,444 shares
of Series B convertible preferred stock ("Series B Preferred") (see notes 9 and
10), (ii) reduce the interest amount outstanding thereunder by $305,800, which
was simultaneously converted into 169,883 shares of Series B Preferred, and
(iii) provide that the remaining principal and interest would automatically
convert into shares of About.com's Series C convertible preferred stock ("Series
C Preferred") upon the closing of the next financing conducted by About.com if
the next sale of equity to new investors on or prior to March 31, 1999 was at a
price per
F-20
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(8) NOTES PAYABLE (CONTINUED)
share less than $3.00 per share (on a pre-split basis), otherwise the note was
due and payable on March 31, 1999. On November 13, 1998, About.com issued
913,856 shares of About.com's Series C Preferred at $1.95 per preferred share in
consideration for the cancellation of the remaining $1,555,600 of principal and
$226,400 of interest outstanding under the 8.25% Note. Upon the closing of the
IPO, these 913,856 shares of About.com's Series C Preferred converted into
325,333 shares of common stock.
In January, June and July 1998, About.com issued to the holder of the 8.25%
Note warrants to purchase an additional 2,670, 2,111 and 4,119 shares of
About.com's common stock at an exercise price of $4.21 per share in
consideration for entering into a subordination agreement with another creditor
of About.com. The value attributed to the warrants, using a Black-Scholes
pricing model and the following assumptions: risk-free interest rate of 6.0%,
dividend yield of 0%, expected life of ten years and volatility of 0%, was
$18,000 in the aggregate, based upon the respective grant dates, which was
recorded as additional interest expense in 1998.
NOTES PAYABLE--CREDIT FACILITY
During January 1998, About.com entered into an asset backed credit facility
with Phoenix Leasing Incorporated ("Phoenix") which was funded as About.com
pledged fixed assets as security to Phoenix. During the year ended December 31,
1998, About.com received a total loan of $507,700 and pledged $507,700 of fixed
assets as security. The effective interest rate of the credit facility is 18%.
As of December 31, 1998, the balance outstanding was $437,500 of which $154,000
is due in 1999, $157,000 in 2000 and $126,500 in 2001. As of June 30, 1999, the
balance outstanding was $365,600 of which $143,600 is due within the next twelve
months.
F-21
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(9) CONVERTIBLE NOTES PAYABLE--SERIES A NOTES
The following summarizes the Convertible Notes Payable--Series A Notes
activity during 1997 and 1998:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST TOTAL
------------- ----------- -------------
<S> <C> <C> <C>
Balance at January 1, 1997......................... $ -- $ -- $ --
Issuance of notes between March 27, 1997 and
December 31, 1997................................ 4,000,000 -- 4,000,000
Conversion of $650,000 of the 8.25% notes payable
into a Series A convertible note on August 27,
1998............................................. 650,000 -- 650,000
Accrued interest during 1997....................... -- 239,700 239,700
------------- ----------- -------------
Balance at December 31, 1997....................... 4,650,000 239,700 4,889,700
------------- ----------- -------------
Conversion of $300,000 of Mr. Kurnit's deferred
compensation into Series A convertible note...... 300,000 -- 300,000
Interest accrued through April 23, 1998............ -- 154,800 154,800
Conversion into Series A preferred stock on April
23, 1998......................................... (4,950,000) (70,000) (5,020,000)
Conversion of remaining accrued interest into a
newly issued unsecured promissory note on April
23, 1998......................................... -- (324,500) (324,500)
------------- ----------- -------------
Balance at December 31, 1998....................... $ -- $ -- $ --
------------- ----------- -------------
------------- ----------- -------------
</TABLE>
Between March 27, 1997 and January 15, 1998, About.com issued several
secured subordinated notes, which converted into Series A Notes ("Series A
Notes"), for an aggregate principal amount of $4,950,000, which amount included
(i) the conversion of $650,000 from the 8.25% Notes and (ii) the conversion of
$300,000 of deferred compensation owed to Mr. Kurnit. These notes bore interest
at a variable rate equal to the prime rate plus two percent per annum. At
December 31, 1997, prime rate plus 2% was 10.5%. Pursuant to their terms, the
principal due on the Series A Notes were automatically convertible into shares
of About.com's common stock or convertible preferred stock upon the closing of
the next equity financing conducted by About.com. The conversion price for these
notes, as provided for in the original note agreement, was $1.50 per preferred
share.
In connection with the issuance of this debt, About.com issued warrants to
purchase 218,890 shares of About.com's common stock at an exercise price of
$0.03 per share and 90,858 shares of About.com's common shares at an exercise
price of $4.21 per share (which includes warrants to purchase 24,105 shares
relating to the conversion of $650,000 from the 8.25% Notes), all of which
expire ten years from their date of issuance; provided that, under certain
circumstances, About.com could cancel the warrants after providing the holders
thereof a reasonable period of time to exercise the warrants prior to their
cancellation. The value attributed to the warrants was $106,000 for warrants
issued with an exercise price of $0.03 and $31,000 for warrants issued with an
exercise price of $4.21 per share. These values were estimated, using a
Black-Scholes pricing model, based on the following assumptions: risk-free
F-22
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(9) CONVERTIBLE NOTES PAYABLE--SERIES A NOTES (CONTINUED)
interest rate of 6.0%, dividend yield of 0%, expected life of 10 years and
volatility of 0%. These amounts were recorded as an original issue debt discount
and amortized to interest expense over the life of the loans. In December 1998,
About.com exercised its right to call certain investor warrants which resulted
in the issuance of 218,890 shares of common stock at $0.03 per share and 66,753
shares of common stock at $4.21 per share for net cash proceeds of approximately
$287,600. The remaining 24,105 warrants with an exercise price of $4.21 per
share were cancelled.
On April 23, 1998, About.com issued an aggregate of 3,346,715 shares of
Series A Preferred, at a purchase price of $1.50 per preferred share, to holders
of the Series A Notes, in consideration for the cancellation of all principal
owed under the Series A Notes and $70,000 of interest accrued under the Series A
Notes prior to August 12, 1997. All remaining interest under the Series A Notes
up through April 23, 1998 was evidenced by newly issued unsecured promissory
notes of About.com which amounted to $337,100 as of December 31, 1998. The notes
bore interest at 6% and had no due date. In accordance with the terms of the
note upon the closing of a qualified initial public offering (including the
IPO), all amounts due under these unsecured promissory notes were automatically,
by its original terms, forgiven and canceled. Accordingly, such amount has been
recorded as a contribution to additional paid-in capital upon the closing of the
IPO.
The following summarizes the unsecured promissory notes activity during
1998:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST TOTAL
---------- --------- ----------
<S> <C> <C> <C>
Balance at January 1, 1998................................. $ -- $ -- $ --
Conversion of remaining accrued interest on Series A notes
into a newly issued unsecured promissory note on April
23, 1998................................................. 324,500 -- 324,500
Accrued interest during 1998............................... -- 12,600 12,600
---------- --------- ----------
Balance at December 31, 1998............................... 324,500 12,600 337,100
---------- --------- ----------
Accrued interest from January 1, 1999 through March 24,
1999..................................................... -- 4,200 4,200
Contribution to additional paid-in capital in connection
with the forgiveness and cancellation of interest on
March 24, 1999........................................... (324,500) (16,800) (341,300)
---------- --------- ----------
Balance at June 30, 1999................................... $ -- $ -- $ --
---------- --------- ----------
---------- --------- ----------
</TABLE>
F-23
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(10) CONVERTIBLE LOAN PAYABLE--SERIES B NOTES
The following summarizes the Convertible Loans Payable--Series B Notes
activity during 1997 and 1998:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST TOTAL
------------- ---------- -------------
<S> <C> <C> <C>
Balance at January 1, 1997.......................... $ -- $ -- $ --
Issuance of Series B notes on November 26, 1997..... 1,000,000 -- 1,000,000
Accrued interest during 1997........................ -- 10,200 10,200
------------- ---------- -------------
Balance at December 31, 1997........................ 1,000,000 10,200 1,010,200
------------- ---------- -------------
Issuance of Series B notes in February 1998......... 1,800,000 -- 1,800,000
Accrued interest through April 23, 1998............. -- 59,600 59,600
Conversion of the Series B notes and accrued
interest thereon into Series B preferred stock on
April 23, 1998.................................... (2,800,000) (69,800) (2,869,800)
------------- ---------- -------------
Balance at December 31, 1998........................ $ -- $ -- $ --
------------- ---------- -------------
------------- ---------- -------------
</TABLE>
Between November 1997 and February 1998, About.com issued several secured
subordinated notes ("Series B Notes") for an aggregate principal amount of
$2,800,000, of which $1,000,000 bore interest at a variable rate equal to the
prime rate plus two percent per annum and $1,800,000 bore interest at 10%
percent per annum and were due on demand. At December 31, 1997, prime rate plus
2% was 10.5%. Pursuant to their terms, the Series B Notes were automatically
convertible into shares of About.com's Series B Preferred upon the closing of
the next equity financing conducted by About.com. The conversion price for these
notes, as provided for in the original note agreement, was $1.80 per preferred
share.
In connection with the issuance of this debt, About.com issued warrants to
purchase 250,192 shares of About.com's common stock at an exercise price of
$5.06 per share, all of which expire ten years from their date of issuance;
provided that, under certain circumstances, About.com may cancel the warrants
after providing the holders thereof a reasonable period of time to exercise the
warrants prior to their cancellation. The fair value of the warrants, using the
Black-Scholes model and the following assumptions: risk-free interest rate of
6.0%, dividend yield of 0%, expected life of 10 years and volatility of 0%, was
$150,000 and recorded as additional interest expense. In December 1998,
About.com exercised its right to call certain investor warrants which resulted
in the issuance of 250,192 shares of common stock at $5.06 per share for net
cash proceeds of approximately $1,266,000.
On April 23, 1998, About.com issued 1,594,380 shares of Series B Preferred,
at a purchase price of $1.80 per share, to holders of the Series B Notes, in
consideration for the cancellation of all indebtedness of About.com under the
Series B Notes. Upon the closing of the IPO, these 1,594,380 shares of Series B
preferred converted into 567,601 shares of common stock.
F-24
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(11) CAPITALIZATION
AUTHORIZED SHARES
During 1996 and 1997, About.com amended and restated its certificate of
incorporation. As a result, at December 31, 1997, the total number of shares
which About.com was authorized to issue was 30,000,000; 26,500,000 of these
shares were common stock, each having a par value of $0.001; and 3,500,000
shares were preferred stock, each having a par value of $0.001. During each of
April 1998 and November 1998, About.com amended and restated its certificate of
incorporation. As a result, at December 31, 1998, the total number of shares
which About.com was authorized to issue was 53,662,260; 35,000,000 of these
shares were common stock, each having a par value of $0.001; and 18,662,260
shares were preferred stock, each having a par value of $0.001, of which
3,346,715, 6,597,596, and 8,717,949 have been designated as Series A Preferred,
Series B Preferred and Series C Preferred, respectively. Upon the closing of the
initial public offering, 3,346,715, 6,597,596 and 7,301,811 shares of Series A,
B and C convertible preferred stock, respectively, converted into 6,139,640
shares of common stock and About.com issued 3,557,527 shares of common stock in
connection with its initial public offering and concurrent placement. Upon the
closing of the initial public offering, About.com also amended and restated its
certificate of incorporation so that the Company is authorized to issue
50,000,000 shares of common stock and 5,000,000 shares of undesignated preferred
stock.
REDEEMABLE CONVERTIBLE PREFERRED STOCK
On April 23, 1998, About.com issued an aggregate of 3,346,715 shares of
Series A Preferred, at a purchase price of $1.50 per share, to holders of the
Series A Notes, in consideration for the cancellation of all principal owed
under the Series A Notes, amounting to $4,950,000, and $70,000 of interest
accrued under the Series A Notes prior to August 12, 1997. All remaining
interest under the Series A Notes up through April 23, 1998 was evidenced by
newly unsecured promissory notes of About.com which amounted to $337,100 as of
December 31, 1998. In March 1999, upon the closing of the initial public
offering, this amount together with interest accrued from January 1, 1999
through March 24, 1999 was forgiven and canceled and recorded as a contribution
to additional paid-in capital for an aggregate amount of $341,300.
On April 23, 1998 and in June 1998, About.com issued an aggregate of
6,597,596 shares of Series B Preferred, at a purchase price of $1.80 per share,
to (i) holders of the Series B Notes in consideration for the cancellation of
all indebtedness of About.com under the Series B Notes, amounting to $2,869,900,
(ii) the 8.25% Note holder, in consideration for the cancellation of $1,700,000
in principal and $305,800 in accrued interest, and (iii) $7,000,000 from other
investors. In March 1999, upon the closing of the initial public offering, the
6,597,596 shares of Series A Preferred were converted into 2,348,752 shares of
common stock.
In connection with the issuance of the Series B Preferred, About.com issued
warrants to purchase 107,695 shares of About.com's common stock at an exercise
price of $7.02 per share, all of which expire ten years from their date of
issuance; provided that, under certain circumstances, About.com may cancel the
warrants after providing the holders with a reasonable period of time to
exercise the warrants prior to their cancellation. In December 1998, About.com
exercised its right to call certain investor warrants which resulted in the
issuance of 103,801 shares of common stock at $7.02 per share for net cash
proceeds of approximately $702,800. The warrant for the remaining 3,894 shares
was cancelled.
F-25
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(11) CAPITALIZATION (CONTINUED)
On October 5, 1998, About.com delivered a number of convertible promissory
notes ("Series C Notes") in the aggregate principal amount of $1,081,000.
Pursuant to their terms, the Series C Notes were automatically convertible into
shares of About.com's Series C Convertible Preferred Stock ("Series C
Preferred"), at a conversion price equal to the lesser of $3.60 per share of
Series C Preferred or the purchase price per share of the Series C Preferred,
upon the closing of the next equity financing conducted by About.com. The
conversion price for the notes was $1.95 per preferred share which was the
highest price paid for the Company's preferred stock during such time period.
On November 13, 1998 and December 4, 1998, About.com issued an aggregate of
7,301,811 shares of Series C Preferred, at a purchase price of $1.95 per share,
to (i) holders of the Series C Notes in consideration for the cancellation of
all indebtedness of About.com under the Series C Notes, amounting to $1,089,900
(ii) the holders of the Series C Notes in consideration for the payment of
$2,322,000, (iii) the 8.25% Note holder, in consideration for the cancellation
of $1,782,000 in principal and accrued interest, and (iv) other investors in
consideration for the payment of $9,044,600, including $762,600 from existing
stockholders pursuant to participation rights granted to those stockholders. In
March 1999, upon the closing of the initial public offering, the 7,301,811
shares of Series C Preferred were converted into 2,599,455 shares of common
stock.
The following summarizes the Convertible Notes Payable--Series C Notes
activity during 1998:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST TOTAL
------------- --------- -------------
<S> <C> <C> <C>
Balance at January 1, 1997........................... $ -- $ -- $ --
Issuance of notes on October 5, 1998................. 1,081,000 -- 1,081,000
Accrued interest through November 13, 1998........... -- 8,900 8,900
Conversion into Series C preferred stock on November
13, 1998........................................... (1,081,000) (8,900) (1,089,900)
------------- --------- -------------
Balance at December 31, 1998......................... $ -- $ -- $ --
------------- --------- -------------
------------- --------- -------------
</TABLE>
Each share of Series A Preferred, Series B Preferred and Series C Preferred
was entitled to a cumulative dividend at the rate of $0.135, $0.162, and $0.176
per share per annum, respectively, payable in preference and priority to any
payment of any cash dividend on common stock, when and as declared by the Board
of Directors of About.com. Cumulative dividends on convertible preferred stock
amounted to $1,196,800 and $1,842,900 as of December 31, 1998 and March 24,
1999, respectively. Upon the closing of a qualified initial public offering
(including the IPO), all cumulative dividends were canceled. Each holder of
Series A Preferred, Series B Preferred and Series C Preferred shares were
entitled to the number of votes equal to the number of whole shares of common
stock into which the shares of preferred stock were convertible into on the date
of the vote.
Each share of Series A Preferred, Series B Preferred and Series C Preferred
was convertible into 0.356 shares of common stock, as adjusted for dilutive
issuances of stock and other securities. In March 1999, upon the closing of the
IPO, 3,346,715, 6,597,596 and 7,301,811 shares of Series A, B and C
F-26
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(11) CAPITALIZATION (CONTINUED)
convertible preferred stock, respectively, representing all of the outstanding
shares of convertible preferred stock, automatically converted into 6,139,640
shares of common stock.
<TABLE>
<CAPTION>
SERIES A SERIES B
---------------------------- -----------------------------
<S> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT
------------ -------------- ------------ ---------------
Balance at January 1, 1998.......................................... -- -- -- --
Conversion of the $4,950,000 of the convertible notes payable Series
A together with $70,000 of interest thereon into Series A preferred
stock on April 23, 1998............................................ 3,346,715 $ 5,020,000 -- --
Conversion of $1,700,000 of the 8.25% notes payable together with
$305,800 of interest thereon into Series B preferred stock on April
23, 1998........................................................... -- -- 1,114,327 $ 2,005,800
Conversion of $2,800,000 of the convertible notes payable--Series B
together with $69,800 of interest thereon into Series B preferred
stock on April 23, 1998............................................ -- -- 1,594,380 $ 2,869,800
Issuance of Series B preferred stock on April 23, 1998 in
consideration of cash proceeds of $7 million....................... -- -- 3,888,889 $ 7,000,000
Conversion of the remaining $1,555,600 of 8.25% notes payable
together with $226,400 of interest thereon into Series C preferred
stock on November 13, 1998......................................... -- -- -- --
Conversion of $1,081,000 of the convertible notes payable--Series C
together with $8,900 of interest thereon into Series C preferred
stock on November 13, 1998......................................... -- -- -- --
Issuance of Series C preferred on November 13, and December 4, 1998
in consideration of cash proceeds of $11.4 million................. -- -- -- --
------------ -------------- ------------ ---------------
Balance at December 31, 1998........................................ 3,346,715 $ 5,020,000 6,597,596 $ 11,875,600
------------ -------------- ------------ ---------------
Conversion of Series A, B, and C preferred stock into 1,191,433,
2,348,752, and 2,599,455 shares of common stock, respectively, upon
the closing of the IPO............................................. (3,346,715) $ (5,020,000) (6,597,596) $ (11,875,600)
------------ -------------- ------------ ---------------
Balance at June 30, 1999 (unaudited)................................ -- $ -- -- $ --
------------ -------------- ------------ ---------------
------------ -------------- ------------ ---------------
<CAPTION>
SERIES C
-----------------------------
<S> <C> <C>
SHARES AMOUNT
------------ ---------------
Balance at January 1, 1998.......................................... -- --
Conversion of the $4,950,000 of the convertible notes payable Series
A together with $70,000 of interest thereon into Series A preferred
stock on April 23, 1998............................................ -- --
Conversion of $1,700,000 of the 8.25% notes payable together with
$305,800 of interest thereon into Series B preferred stock on April
23, 1998........................................................... -- --
Conversion of $2,800,000 of the convertible notes payable--Series B
together with $69,800 of interest thereon into Series B preferred
stock on April 23, 1998............................................ -- --
Issuance of Series B preferred stock on April 23, 1998 in
consideration of cash proceeds of $7 million....................... -- --
Conversion of the remaining $1,555,600 of 8.25% notes payable
together with $226,400 of interest thereon into Series C preferred
stock on November 13, 1998......................................... 913,856 $ 1,782,000
Conversion of $1,081,000 of the convertible notes payable--Series C
together with $8,900 of interest thereon into Series C preferred
stock on November 13, 1998......................................... 558,917 $ 1,089,900
Issuance of Series C preferred on November 13, and December 4, 1998
in consideration of cash proceeds of $11.4 million................. 5,829,038 $ 11,366,600
------------ ---------------
Balance at December 31, 1998........................................ 7,301,811 $ 14,238,500
------------ ---------------
Conversion of Series A, B, and C preferred stock into 1,191,433,
2,348,752, and 2,599,455 shares of common stock, respectively, upon
the closing of the IPO............................................. (7,301,811) $ (14,238,500)
------------ ---------------
Balance at June 30, 1999 (unaudited)................................ -- $ --
------------ ---------------
------------ ---------------
</TABLE>
F-27
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(11) CAPITALIZATION (CONTINUED)
<TABLE>
<CAPTION>
# OF PRICE PER DIVIDEND TOTAL
SHARES SHARE RATE CONSIDERATION
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Series A.......................................................... 3,346,715 $ 1.50 $ 0.135 $ 5,020,000
Series B.......................................................... 6,597,596 $ 1.80 $ 0.162 $ 11,875,600
Series C.......................................................... 7,301,811 $ 1.95 $ 0.176 $ 14,238,500
<CAPTION>
CARRYING 1998
VALUE AT --------------------------
ISSUANCE(1) ACCRETION DIVIDENDS
-------------- ------------ ------------
<S> <C> <C> <C>
Series A.......................................................... $ 4,943,900 $ 10,100 $ 305,700
Series B.......................................................... $ 11,698,200 $ 23,600 $ 726,500
Series C.......................................................... $ 14,199,100 -- $ 164,600
------------ ------------
$ 33,700 $ 1,196,800
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
LIQUIDATION
BALANCE AT 1999 VALUE
DECEMBER 31, --------------------- BALANCE AT AT DECEMBER
1998 ACCRETION DIVIDENDS MARCH 24, 1999 31, 1998
-------------- --------- ---------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Series A............................................... $ 5,259,700 3,500 104,200 $ 5,367,400 $ 5,325,700
Series B............................................... $ 12,448,300 8,200 246,500 $ 12,703,000 $ 12,602,100
Series C............................................... $ 14,363,700 1,800 295,400 $ 14,660,900 $ 14,403,100
--------- ---------- ---------------
$ 13,500 $ 646,100 $ 32,731,300
--------- ---------- ---------------
--------- ---------- ---------------
<CAPTION>
LIQUIDATION
VALUE EQUIVALENT
AT MARCH 24, SHARES OF
1998 COMMON STOCK
---------------- --------------
<S> <C> <C>
Series A............................................... $ 5,429,900 1,191,433
Series B............................................... $ 12,848,600 2,348,752
Series C............................................... $ 14,698,500 2,599,455
--------------
6,139,640
--------------
--------------
</TABLE>
- ------------------------------
(1) Includes offering related costs of $76,100, $177,460 and $39,400 for Series
A, B and C, respectively
COMMON STOCK
During 1996, About.com issued shares of common stock to its founders and
original employees at approximately $0.03 per share. About.com's right to
repurchase these shares in certain circumstances was to lapse over a period of
three years. During 1997, About.com's Board of Directors approved a resolution
to cancel these shares in exchange for incentive stock options. Accordingly, on
March 20, 1997, About.com canceled 367,802 common shares and exchanged these
shares on a one-for-one basis for participation in the 1997 Employee Stock
Incentive Plan. These incentive stock options were granted with an exercise
price equal to their fair market value, or $0.51 per share, at the date of grant
as determined by an independent valuation.
F-28
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(11) CAPITALIZATION (CONTINUED)
WARRANTS
Warrant activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WARRANTS EXERCISE
GRANTED PRICE
---------- -----------
<S> <C> <C>
Outstanding at December 31, 1996....................................... -- $ --
Granted................................................................ 427,003 3.14
Exercised.............................................................. -- --
Canceled............................................................... -- --
---------- -----
Outstanding at December 31, 1997....................................... 427,003 3.14
Granted................................................................ 309,340 5.60
Exercised.............................................................. (639,636) 3.53
Canceled............................................................... (27,999) 4.60
---------- -----
Outstanding at December 31, 1998....................................... 68,708 9.66
---------- -----
Granted................................................................ -- --
Exercised.............................................................. (2,848) 6.32
Cancelled.............................................................. -- --
---------- -----
Outstanding at June 30, 1999 (unaudited)............................... 65,860 $ 9.80
---------- -----
---------- -----
</TABLE>
All warrants are exercisable and have expiration dates generally ten years
from the date of grant.
The weighted-average fair value of warrants granted during 1997 and 1998 was
$0.25 and $1.03, respectively, on the date of grant using a Black Scholes
pricing model with the following weighted-average assumptions for 1997 and 1998:
(i) risk-free interest rate-6.0% for both years; (ii) dividend yield-0.0% for
both years; and (iii) expected life-10 years for both years.
As of December 31, 1998, the following number of warrants to purchase common
stock remain outstanding: 8,900 shares at $4.21 per share; 21,360 shares at
$5.06 per share; 2,848 shares at $6.32 per share; and 35,600 shares at $14.05
per share.
As of June 30, 1999, the following number of warrants to purchase common
stock remain outstanding: 8,900 shares at $4.21; 21,300 shares at $5.06 per
share; and 35,600 at $14.05.
(12) STOCK OPTION PLAN
About.com's Board of Directors has authorized 996,800 shares at December 31,
1997 and 1,886,800 shares at December 31, 1998 of its common stock for issuance
pursuant to its 1998 Stock Option/Stock Issuance Plan (successor plan to
About.com's 1997 Employee Incentive Stock Option Plan). On February 5, 1999, the
Board of Directors and shareholders increased the authorized number of shares
authorized under the plan by 1,338,085 shares, effectively authorizing 3,224,885
in the aggregate. These options have ten year terms and have been issued at the
fair market value of About.com's common stock on the date of the applicable
grant (except for certain 1998 options issued with exercise prices less than the
deemed fair value at the date of grant). Incentive options granted to
stockholders who
F-29
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(12) STOCK OPTION PLAN (CONTINUED)
own more than 10% of the outstanding stock of About.com must be issued at 110%
of the fair market value of the stock on the date that the options are granted.
Stock option activity under the Plan during the periods indicated is as
follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS GRANTED EXERCISE PRICE
--------------- -----------------
<S> <C> <C>
Options outstanding at December 31, 1996................... --
Granted at $0.51........................................... 871,343 $ 0.51
Granted at $0.56(1)........................................ 21,475 0.56
Exercised.................................................. (26,886) 0.51
Canceled................................................... (97,081) 0.51
--------------- ------
Outstanding as of December 31, 1997........................ 768,851 0.51
--------------- ------
Granted at $0.51........................................... 146,759 0.51
Granted at $0.56(1)........................................ 9,204 0.56
Granted at $1.01........................................... 237,879 1.01
Granted at $2.81........................................... 10,110 2.81
Granted at $4.21........................................... 81,969 4.21
Exercised.................................................. (87,583) 0.90
Canceled................................................... (38,540) 0.64
--------------- ------
Outstanding as of December 31, 1998........................ 1,128,649 0.87
--------------- ------
Granted at $4.21........................................... 133,500 4.21
Granted at $23.00.......................................... 467,075 23.00
Granted at $25.00.......................................... 1,104,834 25.00
Granted at $47.50.......................................... 75,800 47.50
Granted at $51.50.......................................... 79,150 51.50
Exercised.................................................. (176,032) 0.65
Canceled................................................... (58,338) 16.98
--------------- ------
Outstanding as of June 30, 1999 (unaudited)................ 2,754,638 $ 16.87
--------------- ------
--------------- ------
Exercisable at December 31, 1997........................... 244,123 $ 0.51
---------------
---------------
Exercisable at December 31, 1998........................... 477,721 $ 0.55
---------------
---------------
Exercisable at June 30, 1999 (unaudited)................... 686,300 $ 0.63
---------------
---------------
Total options available as of December 31, 1997............ 201,063
---------------
---------------
Total options available as of December 31, 1998............ 643,682
---------------
---------------
Total options available as of June 30, 1999 (unaudited).... 162,358
---------------
---------------
</TABLE>
- ------------------------------
(1) Represents options granted to stockholder owning more than 10% of the
outstanding stock of About.com.
On August 20, 1999, the Board of Directors authorized 400,000 shares under
About.com's 1999 Non-Officer Stock Option/Stock Issuance Plan, effectively
authorizing 3,624,885 shares in the aggregate.
F-30
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(12) STOCK OPTION PLAN (CONTINUED)
The weighted-average remaining life of the 1,128,649 options outstanding at
December 31, 1998 is 8.75 years.
For the twelve months ended December 31, 1998, About.com recorded deferred
compensation expense of approximately $1,716,900, in connection with the grant
of certain options to employees and directors, representing the difference
between the deemed fair value of About.com's common stock at the date of grant
for accounting purposes and the exercise price of the related options. This
amount is presented as a reduction of stockholders equity (deficit) and
amortized over the vesting period, typically four years, of the applicable
options. About.com granted approximately 485,921 options at a weighted average
exercise price of $1.43 per share; all of which were granted at less than the
deemed fair value at the date of grant. About.com has amortized $478,000 of
deferred compensation for the year ended December 31, 1998 of which $27,000 has
been included in cost of revenues. About.com has amortized $278,100 of deferred
compensation for the six months ended June 30, 1999, which $9,400 has been
included in cost of revenue. About.com expects to amortize the following amounts
of deferred compensation annually: 1999--$423,900; 2000--$291,400;
2001--$291,400; and 2002--$232,200.
In September 1997, About.com recorded compensation expense of approximately
$3,300 in connection with options granted outside of the Plan to consultants to
purchase 49,787 shares of common stock at an exercise price of $0.51 per share.
The fair value of the options was determined using the Black-Scholes model and
the following assumptions: risk-free interest rate of 5.7%, dividend yield of
0%, expected life of 10 years and volatility of 0%. None of these options had
been exercised as of June 30, 1999.
About.com also recorded compensation expense of approximately $23,000 in
connection with options granted to consultants under the Plan in December 1998
to purchase 5,340 shares of common stock at an exercise price of $4.21 per
share. The fair value of the options was determined using the Black-Scholes
model and the following assumptions: risk-free interest rate of 6.0%, dividend
yield of 0%, and volatility of 0%. During the six months period ended June 30,
1999, 4,005 of these options have been exercised.
In March 1999, About.com recorded a non-cash charge of $3.6 million for
guide compensation. About.com has granted full vested, non-qualified stock
options to purchase 199,500 shares of common stock at an exercise price of
$25.00 per share to substantial majority of its guides. The options have a two
year term. Accordingly, such amount was recorded as a non-cash compensation
expense in About.com's statement of operations for the six months ended June 30,
1999 with an offsetting increase in additional paid-in capital. During the six
months ended June 30, 1999, 250 options were exercised.
F-31
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(12) STOCK OPTION PLAN (CONTINUED)
Had About.com determined compensation expense based on the fair value on the
grant date for its stock options issued to employees under SFAS No. 123,
About.com's net loss would have been adjusted to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------
1997 1998
------------- --------------
<S> <C> <C>
Net loss attributable to common stockholders--as reported...... $ (8,640,400) $ (16,808,300)
------------- --------------
------------- --------------
Net loss attributable to common stockholders--pro forma per
SFAS No. 123................................................. $ (8,675,900) $ (17,007,500)
------------- --------------
------------- --------------
Basic and diluted net loss per common share--as reported....... $ (4.94) $ (9.71)
------------- --------------
------------- --------------
Basic and diluted net loss per common share--pro forma per SFAS
No. 123...................................................... $ (4.96) $ (9.82)
------------- --------------
------------- --------------
</TABLE>
The per share weighted-average fair value of stock options granted during
1997 and 1998 was $0.09 and $3.87, respectively, on the date of grant using the
Black Scholes option pricing model with the following weighted-average
assumptions for 1997 and 1998: (i) risk-free interest rate--5.7% and 6%
respectively; (ii) dividend yield--0.0% for both years; and (iii) expected
life--3.4 and 4.4 years, respectively. As permitted under the provisions of SFAS
No. 123, and based on the historical lack of a public market for About.com's
options, no factor for volatility has been reflected in the option pricing
calculation.
The Company's Employee Stock Purchase Plan ("ESPP") was adopted by the Board
of Directors in February 1999. The ESPP will provide eligible employees of the
Company the opportunity to apply a portion of their compensation to the purchase
of shares of the Company at a 15% discount. The Company has reserved 125,000
authorized but unissued shares of common stock for issuance under the ESPP.
(13) COMMITMENTS AND CONTINGENCIES
(A) LEASES
About.com leases certain facilities in New York and White Plains
(Westchester County) and equipment under non-cancelable operating leases. These
leases generally provide for rental increases at specified intervals. In
addition, About.com is a lessee, under several capital lease agreements with
third parties for certain equipment. Total rent expense for the years ended
December 31, 1997 and December 31, 1998 was $320,900 and $320,600, respectively.
In March and September 1999, About.com entered into two lease agreements to
expand its office space in New York. These leases expire on April 30, 2003 and
August 31, 2000, respectively. The minimum lease payments under these leases
amount to approximately $2.7 million and have been included above as part of the
minimum lease payment schedule.
F-32
<PAGE>
ABOUT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(13) COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum lease payments under non-cancelable operating leases and
capital leases as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR LEASES LEASES
- -------------------------------------------------------------------- ---------- ------------
<S> <C> <C>
1999................................................................ $ 255,500 $ 746,700
2000................................................................ 143,800 937,700
2001................................................................ 18,400 614,200
2002................................................................ -- 638,800
2003................................................................ -- 216,600
---------- ------------
Total minimum lease payments.................................. 417,700 $ 3,154,000
------------
------------
Less amount representing interest (at rates ranging from 9.7% to
18.7%)............................................................ 49,300
----------
Present value of net minimum lease payments......................... 368,400
Less current installment of obligations under capital leases........ 219,000
----------
Obligations under capital leases, excluding current installments.... $ 149,400
----------
----------
</TABLE>
In January and February 1999, About.com entered into a lease line of credit
for $781,300 to finance capital equipment, of which $232,200 is due in 1999,
$268,800 in 2000, $273,300 in 2001, and $7,000 in 2002. The effective interest
rate of the credit facility was 16%. As of June 30, 1999, the balance
outstanding was $686,900, of which $242,000 is due within the next twelve
months.
(B) EMPLOYMENT AGREEMENTS
At December 31, 1998, About.com had employment agreements with two senior
employees which provide for severance benefits, among other items. In the event
these agreements are terminated, About.com may be liable for severance up to
$420,000 payable during the year following that termination.
During January 1999, About.com entered into employment arrangements with two
employees. The employment arrangements provide for minimum salary levels, and
incentive compensation and severance benefits, among other items. About.com
granted 133,500 options in the aggregate to the two employees. The exercise
price of the options is $4.21 per share. As a result, About.com recorded
deferred compensation expense in the first quarter of 1999 of $2,775,400
relating to the 133,500 options for the difference between the deemed fair value
of About.com's common stock (the initial public offering price of $25.00 per
share for accounting purposes) and the exercise price of that option at the date
of grant of $4.21 per share. This amount has been presented as a reduction of
stockholders' equity and is being amortized over the four-year vesting period of
the applicable options. About.com has amortized $346,900 of deferred
compensation for the six months ended June 30, 1999 and expects to amortize the
following amounts of deferred compensation annually: 1999--$693,800;
2000--$693,800; 2001--$693,800; and 2002--$694,000.
F-33
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
[LOGO]
3,500,000 SHARES OF COMMON STOCK
-------------------
PROSPECTUS
-------------------
DONALDSON, LUFKIN & JENRETTE
BEAR, STEARNS & CO. INC.
ROBERTSON STEPHENS
VOLPE BROWN WHELAN & COMPANY
E*OFFERING
DLJDIRECT INC.
- ------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of the company
have not changed since the date hereof.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than the
underwriting fees, payable by the registrant in connection with the sale of the
common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fees and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
------------
<S> <C>
SEC registration fee............................................................ $ 63,221
NASD filing fee................................................................. 26,490
Nasdaq National Market listing fee.............................................. 60,000
Legal fees and expenses......................................................... 200,000
Accounting fees and expenses.................................................... 150,000
Printing and engraving.......................................................... 150,000
Blue sky fees and expenses (including legal fees)............................... 5,000
Transfer agent fees............................................................. 10,000
Miscellaneous................................................................... 35,289
------------
Total..................................................................... $ 700,000
------------
------------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The registrant's Second Amended and Restated Certificate of Incorporation
(the "certificate") provides that, except to the extent prohibited by the
Delaware General Corporation Law, as amended (the "DGCL"), the registrant's
directors shall not be personally liable to the registrant or its stockholders
for monetary damages for any breach of fiduciary duty as directors of the
registrant. Under the DGCL, the directors have a fiduciary duty to the
registrant which is not eliminated by this provision of the certificate and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available. In addition, each director will
continue to be subject to liability under the DGCL for breach of the director's
duty of loyalty to the registrant, for acts or omissions which are found by a
court of competent jurisdiction to be not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are prohibited by the DGCL. This provision
also does not affect the directors' responsibilities under any other laws, such
as the Federal securities laws or state or Federal environmental laws. The
registrant has applied for liability insurance for its officers and directors.
Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) arising under Section 174 of the DGCL, or (iv)
for any transaction from which the director derived an improper personal
benefit. The DGCL provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under the corporation's bylaws, any agreement, a vote
of stockholders or otherwise. The certificate eliminates the personal liability
of directors to the fullest extent permitted by Section 102(b)(7) of the DGCL
and provides that the registrant may fully indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding
II-1
<PAGE>
(whether civil, criminal, administrative or investigative) by reason of the fact
that that person is or was a director or officer of the registrant, or is or was
serving at the request of the registrant as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with any threatened, pending or completed action, suit or proceeding.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the certificate. The registrant is not aware of any
threatened litigation or proceeding that may result in a claim for any
indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The registrant has sold and issued the following securities in the past
three years:
COMMON STOCK AND PREFERRED STOCK. On April 23, 1998, the registrant issued
an aggregate of 3,346,715 shares of Series A Convertible Preferred Stock (the
"Series A Preferred"), at a purchase price of $1.50 per share, to investors in
consideration for the cancellation of outstanding indebtedness. Upon the closing
of the initial public offering, all of the outstanding shares of Series A
Preferred converted into an aggregate of 1,191,433 shares of common stock.
In October 1996, the registrant issued a convertible subordinated promissory
note in the principal amount of $650,000 to Open Text Corporation.
Between March 1997 and January 1998, the registrant issued convertible
promissory notes in an aggregate principal amount of $4,950,000 to a number of
investors. These notes bore interest at a variable rate equal to the prime rate
published by a major financial institution plus 2% per annum.
Between November 1997 and February 1998, the registrant issued convertible
promissory notes in an aggregate principal amount of $2,800,000 to a number of
investors, of which $1,800,000 bore interest at a fixed rate equal to 10% per
annum, and $1,000,000 bore interest at a variable rate equal to the prime rate
published by a major financial insitution plus 2% per annum.
On April 23, 1998, the registrant issued an aggregate of 5,397,600 shares of
Series B Convertible Preferred Stock (the "Series B Preferred"), at a purchase
price of $1.80 per share, to investors in consideration for the cancellation of
outstanding indebtedness and the payment of additional cash. At a subsequent
closing in June 1998, the registrant issued an aggregate of 1,199,996 shares of
Series B Preferred to investors for $1,799,994. Upon the closing of the initial
public offering, all of the outstanding shares of Series B Preferred converted
into an aggregate of 2,348,752 shares of common stock.
In October 1998, the registrant issued convertible promissory notes in an
aggregate principal amount of $1,081,000 to a number of investors. These notes
bore interest at a fixed rate equal to 8% per annum.
On November 13, 1998, the registrant issued an aggregate of 6,910,726 shares
of Series C Convertible Preferred Stock (the "Series C Preferred"), at a
purchase price of $1.95 per share, to investors in consideration for the
cancellation of outstanding indebtedness and cash. At a subsequent closing in
December 1998, the registrant issued an aggregate of 391,085 shares of Series C
Preferred to certain investors for $1.95. Upon the closing of the initial public
offering, all of the outstanding shares of Series C Preferred converted into an
aggregate of 2,599,455 shares of common stock.
On March 24, 1999, the registrant sold a total of 107,527 shares of common
stock at a purchase price of $23.25 per share in a private placement to Comcast.
II-2
<PAGE>
On June 14, 1999, the registrant issued an aggregate of 65,550 shares of
common stock in exchange for all of the outstanding capital stock of VantageNet,
Inc.
WARRANTS. The registrant from time to time has granted warrants to
investors, consultants and other third parties in connection with business
transactions in reliance upon exemption from registration pursuant to Section
4(2) of the Securities Act of 1933, as amended. The following table sets forth
information regarding those grants:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICES
----------- --------------
<S> <C> <C>
June 27, 1996 (inception) to December 31, 1996.................. -- --
January 1, 1997 to December 31, 1997............................ 427,003 $0.03-$14.04
January 1, 1998 to December 31, 1998............................ 309,340 $0.03-$7.02
January 1, 1999 to September 30, 1999........................... -- --
</TABLE>
OPTIONS. The registrant from time to time has granted stock options to
employees and consultants in reliance upon exemption from registration pursuant
to either (i) Section 4(2) of the Securities Act of 1933, as amended, or (ii)
Rule 701 promulgated under the Securities Act of 1933, as amended. The following
table sets forth information regarding such grants:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICES
----------- ---------------
<S> <C> <C>
June 27, 1996 (inception) to December 31, 1996.............. -- --
January 1, 1997 to June 30, 1998............................ 1,098,568 $0.51-$0.56
July 1, 1998 to December 31, 1998........................... 329,958 $1.01-$4.21
January 1, 1999 to March 24, 1999........................... 1,056,227 $4.21-$25.00
</TABLE>
The above securities were offered and sold by the registrant in reliance
upon exemptions from registration pursuant to either (i) Section 4(2) of the
Securities Act of 1933, as amended, as transactions not involving any public
offering, or (ii) Rule 701 promulgated under the Securities Act of 1933, as
amended. No underwriters were involved in connection with the sales of
securities referred to in this Item 15.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Second Amended and Restated Certificate of Incorporation. (Incorporated by reference to Exhibit 3.3 of
the Registrant's Registration Statement on Form S-1 ("Registration Statement No. 333-69881")).
3.2 Amended and Restated Bylaws. (Incorporated by reference to Exhibit 3.5 of Registration Statement No.
333-69881).
4.1 Specimen Common Stock certificate. (Incorporated by reference to Exhibit 4.1 of Registration Statement
No. 333-69881).
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1 1997 Employee Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10.1 of Registration
Statement No. 333-69881).
10.2 Amended and Restated 1998 Stock Option/Stock Issuance Plan. (Incorporated by reference to Exhibit 10.9
of Registration Statement No. 333-69881).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.3 Second Amended and Restated Investors' Rights Agreement, dated as of March 25, 1999. (Incorporated by
reference to Exhibit 10.13 of Registration Statement No. 333-69881).
10.4 Sublease, dated as of November 1, 1996, by and between the Registrant and Minet, Inc., and Lease, dated
as of January 27, 1998, by and between Two Twenty East Limited Partnership and Minet, Inc.
(Incorporated by reference to Exhibit 10.4 of Registration Statement No. 333-69881).
10.5 Form of About.com, Inc. Guide Agreement. (Incorporated by reference to Exhibit 10.5 of Registration
Statement No. 333-69881).
10.6 Letter Agreement, dated as of October 20, 1996, by and between the Registrant and Mr. Scott P. Kurnit,
as amended. (Incorporated by reference to Exhibit 10.6 of Registration Statement No. 333-69881).
10.7 Agreement, dated as of January 27, 1998, and Extension of Agreement, dated as of January 29, 1999, by
and between the Registrant and GlobalCenter, Inc. (Incorporated by reference to Exhibit 10.7 of
Registration Statement No. 333-69881).
10.8 Letter Agreement, dated as of July 28, 1996, by and between the Registrant and Mr. Alan Wragg, as
amended. (Incorporated by reference to Exhibit 10.8 of Registration Statement No. 333-69881).
10.9 1999 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 10.10 of Registration
Statement No. 333-69881).
10.10 Letter Agreement, dated as of January 11, 1999, by and between the Registrant and Mr. Todd B. Sloan.
(Incorporated by reference to Exhibit 10.11 of Registration Statement No. 333-69881).
10.11 Letter Agreement, dated as of March 16, 1999, by and between the Registrant and Mr. Scott P. Kurnit.
(Incorporated by reference to Exhibit 10.14 of Registration Statement No. 333-69881).
10.12 1999 Non-Officer Stock Option/Stock Issuance Plan.
11.1 Statement re: Computation of Basic and Diluted Net Loss Per Share.
23.1 Consent of KPMG LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1 Powers of Attorney. (See Signature Page on Page II-6).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be supplied by amendment.
(b) Financial Statement Schedules.
Valuation and Qualifying Accounts--Allowance for Doubtful Accounts
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
this indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
those liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by that
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court
II-4
<PAGE>
of appropriate jurisdiction the question whether this indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of that issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424 (b)(1) or
(4), or 497(h) under the Securities Act of 1933, shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and this offering of these securities at
that time shall be deemed to be the initial BONA FIDE offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in The City of New York,
State of New York, on this 6th day of October, 1999.
<TABLE>
<S> <C> <C>
ABOUT.COM, INC.
By: /s/ SCOTT P. KURNIT
-----------------------------------------
Name: SCOTT P. KURNIT
Title: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and/or officers of About.com, Inc. (the
"Company"), hereby severally constitute and appoint Scott P. Kurnit, President
and Chief Executive Officer, and Todd B. Sloan, Chief Financial Officer, and
each of them individually, with full powers of substitution and resubstitution,
our true and lawful attorneys, with full powers to them and each of them to sign
for us, in our names and in the capacities indicated below, the Registration
Statement on Form S-1 filed with the Securities and Exchange Commission, and any
and all amendments to said Registration Statement (including post-effective
amendments), and any registration statement filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, in connection with the registration
under the Securities Act of 1933, as amended, of equity securities of the
Company, and to file or cause to be filed the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as each
of them might or could do in person, and hereby ratifying and confirming all
that said attorneys, and each of them, or their substitute or substitutes, shall
do or cause to be done by virtue of this Power of Attorney.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 6, 1999:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ ---------------------------
<C> <S>
President and Chief
/s/ SCOTT P. KURNIT Executive Officer, and
- ------------------------------ Chairman of the Board of
Scott P. Kurnit Directors (principal
executive officer)
/s/ TODD B. SLOAN Chief Financial Officer
- ------------------------------ (principal financial and
Todd B. Sloan accounting officer)
/s/ FRANK J. BIONDI, JR. Director
- ------------------------------
Frank J. Biondi, Jr.
/s/ DIXON R. DOLL Director
- ------------------------------
Dixon R. Doll
/s/ RONALD UNTERMAN Director
- ------------------------------
Ronald Unterman
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ ---------------------------
<C> <S>
/s/ MARC M. WATSON Director
- ------------------------------
Marc M. Watson
/s/ KRISTOPHER A. WOOD Director
- ------------------------------
Kristopher A. Wood
</TABLE>
II-7
<PAGE>
ABOUT.COM, INC.
VALUATION AND QUALIFYING ACCOUNTS--
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
PROVISION
BALANCE AT FOR BALANCE AT
BEGINNING DOUBTFUL END
OF PERIOD ACCOUNTS DEDUCTIONS OF PERIOD
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
For the period from June 27, 1996 (inception) to December 31,
1996:
Allowance for doubtful accounts.............................. $ 0 $ 0 $ 0 $ 0
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
For the year ended December 31, 1997:
Allowance for doubtful accounts.............................. $ 0 $ 6,000 $ 0 $ 6,000
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
For the year ended December 31, 1998:
Allowance for doubtful accounts.............................. $ 6,000 $ 140,000 $ 0 $ 146,000
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
For the six months ended December 31, 1999:
Allowance for doubtful accounts (unaudited).................. $ 146,000 $ 87,000 $ 129,300 $ 103,700
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
</TABLE>
S-1
<PAGE>
INDEX TO EXHIBITS
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Second Amended and Restated Certificate of Incorporation. (Incorporated by reference to Exhibit 3.3 of
the Registrant's Registration Statement on Form S-1 ("Registration Statement No. 333-69881")).
3.2 Amended and Restated Bylaws. (Incorporated by reference to Exhibit 3.5 of Registration Statement No.
333-69881).
4.1 Specimen Common Stock certificate. (Incorporated by reference to Exhibit 4.1 of Registration Statement
No. 333-69881).
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1 1997 Employee Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10.1 of Registration
Statement No. 333-69881).
10.2 Amended and Restated 1998 Stock Option/Stock Issuance Plan. (Incorporated by reference to Exhibit 10.9
of Registration Statement No. 333-69881).
10.3 Second Amended and Restated Investors' Rights Agreement, dated as of March 25, 1999. (Incorporated by
reference to Exhibit 10.13 of Registration Statement No. 333-69881).
10.4 Sublease, dated as of November 1, 1996, by and between the Registrant and Minet, Inc., and Lease, dated
as of January 27, 1998, by and between Two Twenty East Limited Partnership and Minet, Inc. (Incorporated
by reference to Exhibit 10.4 of Registration Statement No. 333-69881).
10.5 Form of About.com, Inc. Guide Agreement. (Incorporated by reference to Exhibit 10.5 of Registration
Statement No. 333-69881).
10.6 Letter Agreement, dated as of October 20, 1996, by and between the Registrant and Mr. Scott P. Kurnit,
as amended. (Incorporated by reference to Exhibit 10.6 of Registration Statement No. 333-69881).
10.7 Agreement, dated as of January 27, 1998, and Extension of Agreement, dated as of January 29, 1999, by
and between the Registrant and GlobalCenter, Inc. (Incorporated by reference to Exhibit 10.7 of
Registration Statement No. 333-69881).
10.8 Letter Agreement, dated as of July 28, 1996, by and between the Registrant and Mr. Alan Wragg, as
amended. (Incorporated by reference to Exhibit 10.8 of Registration Statement No. 333-69881).
10.9 1999 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 10.10 of Registration Statement
No. 333-69881).
10.10 Letter Agreement, dated as of January 11, 1999, by and between the Registrant and Mr. Todd B. Sloan.
(Incorporated by reference to Exhibit 10.11 of Registration Statement No. 333-69881).
10.11 Letter Agreement, dated as of March 16, 1999, by and between the Registrant and Mr. Scott P. Kurnit.
(Incorporated by reference to Exhibit 10.14 of Registration Statement No. 333-69881).
10.12 1999 Non-Officer Stock Option/Stock Issuance Plan.
11.1 Statement re: Computation of Basic and Diluted Net Loss Per Share.
23.1 Consent of KPMG LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1 Powers of Attorney. (See Signature Page on Page II-6).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be supplied by amendment.
(b) Financial Statement Schedules.
<PAGE>
ABOUT.COM, INC.
1999 NON-OFFICER STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1999 Non-Officer Stock Option/Stock Issuance Plan is
intended to promote the interests of About.com, Inc., a Delaware corporation, by
providing eligible persons with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two separate equity
programs:
(i) the Discretionary Option Grant Program
under which eligible persons may, at the discretion of the Plan
Administrator, be granted options to purchase shares of Common Stock,
and
(ii) the Stock Issuance Program under which
eligible persons may, at the discretion of the Plan Administrator, be
issued shares of Common Stock directly, either through the immediate
purchase of such shares or as a bonus for services rendered the
Corporation (or any Parent or Subsidiary).
B. The provisions of Articles One and Four shall apply to
all equity programs under the Plan and shall govern the interests of all persons
under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Board shall have the authority to administer the
Plan but may delegate such authority to a Committee.
B. The Plan Administrator shall have full power and
authority subject to the provisions of the Plan:
(i) to establish such rules as it may deem
appropriate for proper administration of the Plan, to make all factual
determinations, to construe and interpret the provisions of the Plan
and the awards thereunder and to resolve any and all ambiguities
thereunder;
<PAGE>
(ii) to determine, with respect to awards made
under the Plan, which eligible persons are to receive such awards, the
time or times when such awards are to be made, the number of shares to
be covered by each such award, the vesting schedule (if any) applicable
to the award and the maximum term for which the option is to remain
outstanding;
(iii) to amend, modify or cancel any
outstanding award with the consent of the holder or accelerate the
vesting of such award; and
(iv) to take such other discretionary actions
as permitted pursuant to the terms of the applicable program.
Decisions of each Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties.
C. Members of the Committee shall serve for such period of
time as the Board may determine and may be removed by the Board at any time. The
Board may also at any time terminate the functions of the Committee and reassume
all powers and authority previously delegated to such committee.
D. Service on the Committee shall constitute service as a
Board member, and members of the Committee shall accordingly be entitled to full
indemnification and reimbursement as Board members for their service on the
Committee. No member of the Committee shall be liable for any act or omission
made in good faith with respect to the Plan or any options or stock issuances
under the Plan.
IV. ELIGIBILITY
A. The persons eligible to participate in the Plan are as
follows:
(i) Employees (other than officers of the
Corporation), and
(ii) consultants and other independent
advisors who provide services to the Corporation (or any Parent or
Subsidiary).
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock reserved for issuance over the term of the Plan shall not exceed 400,000
shares.
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<PAGE>
B. Shares of Common Stock subject to outstanding options
shall be available for subsequent issuance under the Plan to the extent those
options expire, terminate or are cancelled for any reason prior to exercise in
full. Unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the original exercise or issue price paid per share, pursuant to
the Corporation's repurchase rights under the Plan shall be added back to the
number of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent options
or direct stock issuances under the Plan. However, should the exercise price of
an option under the Plan be paid with shares of Common Stock, then the number of
shares of Common Stock available for issuance under the Plan shall be reduced by
the gross number of shares for which the option is exercised or which vest under
the stock issuance, and not by the net number of shares of Common Stock issued
to the holder of such option or stock issuance.
C. If any change is made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan and (ii) the number and/or class of securities and the
exercise price per share in effect under each outstanding option under the Plan.
Such adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
3
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be a Non-Statutory Option and shall be
evidenced by one or more documents in the form approved by the Plan
Administrator; PROVIDED, however, that each such document shall comply with the
terms specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the
Plan Administrator at the time of the option grant.
2. The exercise price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section II
of Article Four and the documents evidencing the option, be payable:
(i) in cash,
(ii) check made payable to the Corporation
(iii) shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date, or
(iv) to the extent the option is exercised for
vested shares, through a special sale and remittance procedure pursuant
to which the Optionee shall concurrently provide irrevocable
instructions to (a) a Corporation-approved brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Corporation by reason
of such exercise and (b) the Corporation to deliver the certificates
for the purchased shares directly to such brokerage firm in order to
complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.
4
<PAGE>
C. CESSATION OF SERVICE.
1. The following provisions shall govern the exercise
of any options outstanding at the time of the Optionee's cessation of Service or
death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable
for such period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but
no such option shall be exercisable after the expiration of the option
term.
(ii) Any option exercisable in whole or in
part by the Optionee at the time of death may be subsequently exercised
by his or her Beneficiary.
(iii) During the applicable post-Service
exercise period, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of Service. Upon
the expiration of the applicable exercise period or (if earlier) upon
the expiration of the option term, the option shall terminate and cease
to be outstanding for any vested shares for which the option has not
been exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be outstanding
to the extent the option is not otherwise at that time exercisable for
vested shares.
(iv) Should the Optionee's Service be
terminated for Misconduct or should the Optionee engage in Misconduct
while his or her options are outstanding, then all such options shall
terminate immediately and cease to be outstanding.
2. The Plan Administrator shall have complete
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding:
(i) to extend the period of time for which
the option is to remain exercisable following the Optionee's cessation
of Service to such period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
(ii) to permit the option to be exercised,
during the applicable post-Service exercise period, for one or more
additional installments in which the Optionee would have vested had the
Optionee continued in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have
no stockholder rights with respect to the shares subject to the option until
such person shall have exercised the option, paid the exercise price and become
a holder of record of the purchased shares.
5
<PAGE>
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. An Option may, to
the extent permitted by the Plan Administrator, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for Optionee and/or one
or more such family members. The terms applicable to the assigned portion shall
be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Each option outstanding at the time of a Change in
Control but not otherwise fully-vested shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Change in
Control, become exercisable for all of the shares of Common Stock at the time
subject to that option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. However, an outstanding option shall not so
accelerate if and to the extent: (i) such option is, in connection with the
Change in Control, assumed or otherwise continued in full force and effect by
the successor corporation (or parent thereof) pursuant to the terms of the
Change in Control, (ii) such option is replaced with a cash incentive program of
the successor corporation which preserves the spread existing at the time of the
Change in Control on the shares of Common Stock for which the option is not
otherwise at that time exercisable for vested shares and provides for subsequent
payout in accordance with the same vesting schedule applicable to those option
shares or (iii) the acceleration of such option is subject to other limitations
imposed by the Plan Administrator at the time of the option grant.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Change in Control, except to
the extent: (i) those repurchase rights are assigned to the successor
corporation (or parent thereof) or otherwise continue in full force and effect
pursuant to the terms of the Change in Control or (ii) such accelerated vesting
is precluded by other limitations imposed by the Plan Administrator at the time
the repurchase right is issued.
C. Immediately following the consummation of the Change in
Control, all outstanding options shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation (or parent thereof) or
otherwise expressly continued in full force and effect pursuant to the terms of
the Change in Control.
6
<PAGE>
D. Each option which is assumed in connection with a Change
in Control shall be appropriately adjusted, immediately after such Change in
Control, to apply to the number and class of securities which would have been
issuable to the Optionee in consummation of such Change in Control had the
option been exercised immediately prior to such Change in Control. Appropriate
adjustments to reflect such Change in Control shall also be made to (i) the
exercise price payable per share under each outstanding option, PROVIDED the
aggregate exercise price payable for such securities shall remain the same and
(ii) the maximum number and/or class of securities available for issuance over
the remaining term of the Plan.
E. The Plan Administrator may at any time provide that one
or more options will automatically accelerate in connection with a Change in
Control, whether or not those options are assumed or otherwise continued in full
force and effect pursuant to the terms of the Change in Control. Any such option
shall accordingly become exercisable, immediately prior to the effective date of
such Change in Control, for all of the shares of Common Stock at the time
subject to that option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. In addition, the Plan Administrator may at
any time provide that one or more of the Corporation's repurchase rights shall
not be assignable in connection with such Change in Control and shall terminate
upon the consummation of such Change in Control.
F. The Plan Administrator may at any time provide that one
or more options will automatically accelerate upon an Involuntary Termination of
the Optionee's Service within a designated period (not to exceed eighteen (18)
months) following the effective date of any Change in Control in which those
options do not otherwise accelerate. Any options so accelerated shall remain
exercisable for fully-vested shares until the EARLIER of (i) the expiration of
the option term or (ii) the expiration of the one (1)-year period measured from
the effective date of the Involuntary Termination. In addition, the Plan
Administrator may at any time provide that one or more of the Corporation's
repurchase rights shall immediately terminate upon such Involuntary Termination.
G. The Plan Administrator may at any time provide that one
or more options will automatically accelerate in connection with a Hostile
Take-Over. Any such option shall become exercisable, immediately prior to the
effective date of such Hostile Take-Over, for all of the shares of Common Stock
at the time subject to that option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. In addition, the Plan
Administrator may at any time provide that one or more of the Corporation's
repurchase rights shall terminate automatically upon the consummation of such
Hostile Take-Over. Alternatively, the Plan Administrator may condition such
automatic acceleration and termination upon an Involuntary Termination of the
Optionee's Service within a designated period (not to exceed eighteen (18)
months) following the effective date of such Hostile Take-Over. Each option so
accelerated shall remain exercisable for fully-vested shares until the
expiration or sooner termination of the option term.
7
<PAGE>
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening options.
Shares of Common Stock may also be issued under the Stock Issuance Program
pursuant to share right awards which entitle the recipients to receive those
shares upon the attainment of designated performance goals or Service
requirements. Each such award shall be evidenced by one or more documents which
comply with the terms specified below.
A. PURCHASE PRICE.
1. The purchase price per share of Common Stock
subject to direct issuance shall be fixed by the Plan Administrator.
2. Subject to the provisions of Section II of Article
Four, Shares of Common Stock may be issued under the Stock Issuance Program for
any of the following items of consideration which the Plan Administrator may
deem appropriate in each individual instance:
(i) cash or check made payable to the
Corporation, or
(ii) past services rendered to the Corporation
(or any Parent or Subsidiary).
B. VESTING/ISSUANCE PROVISIONS.
1. The Plan Administrator may issue shares of Common
Stock which are fully and immediately vested upon issuance or which are to vest
in one or more installments over the Participant's period of Service or upon
attainment of specified performance objectives. Alternatively, the Plan
Administrator may issue share right awards which shall entitle the recipient to
receive a specified number of vested shares of Common Stock upon the attainment
of one or more performance goals or Service requirements established by the Plan
Administrator.
2. Any new, substituted or additional securities or
other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to his or her
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
8
<PAGE>
3. The Participant shall have full stockholder rights
with respect to the issued shares of Common Stock, whether or not the
Participant's interest in those shares is vested. Accordingly, the Participant
shall have the right to vote such shares and to receive any regular cash
dividends paid on such shares.
4. Should the Participant cease to remain in Service
while holding one or more unvested shares of Common Stock, or should the
performance objectives not be attained with respect to one or more such unvested
shares of Common Stock, then those shares shall be immediately surrendered to
the Corporation for cancellation, and the Participant shall have no further
stockholder rights with respect to those shares. To the extent the surrendered
shares were previously issued to the Participant for consideration paid in cash
or cash equivalent (including the Participant's purchase-money indebtedness),
the Corporation shall repay to the Participant the cash consideration paid for
the surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to the
surrendered shares.
5. The Plan Administrator may waive the surrender and
cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the cessation of the
Participant's Service or the non-attainment of the performance objectives
applicable to those shares. Such waiver shall result in the immediate vesting of
the Participant's interest in the shares of Common Stock as to which the waiver
applies. Such waiver may be effected at any time, whether before or after the
Participant's cessation of Service or the attainment or non-attainment of the
applicable performance objectives.
6. Outstanding share right awards shall automatically
terminate, and no shares of Common Stock shall actually be issued in
satisfaction of those awards, if the performance goals or Service requirements
established for such awards are not attained. The Plan Administrator, however,
shall have the authority to issue shares of Common Stock in satisfaction of one
or more outstanding share right awards as to which the designated performance
goals or Service requirements are not attained.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. All of the Corporation's outstanding repurchase rights
shall terminate automatically, and all the shares of Common Stock subject to
those terminated rights shall immediately vest in full, in the event of any
Change in Control, except to the extent (i) those repurchase rights are assigned
to the successor corporation (or parent thereof) or otherwise continue in full
force and effect pursuant to the terms of the Change in Control or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
9
<PAGE>
B. The Plan Administrator may at any time provide for the
automatic termination of one or more of those outstanding repurchase rights and
the immediate vesting of the shares of Common Stock subject to those terminated
rights upon (i) a Change in Control or Hostile Take-Over or (ii) an Involuntary
Termination of the Participant's Service within a designated period (not to
exceed eighteen (18) months) following the effective date of any Change in
Control or Hostile Take-Over in which those repurchase rights are assigned to
the successor corporation (or parent thereof) or otherwise continue in full
force and effect.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion,
be held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
10
<PAGE>
ARTICLE FOUR
MISCELLANEOUS
I. NO IMPAIRMENT OF AUTHORITY
Outstanding awards shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
II. FINANCING
The Plan Administrator may permit any Optionee or Participant
to pay the option exercise price under the Discretionary Option Grant Program or
the purchase price of shares issued under the Stock Issuance Program by
delivering a full-recourse, interest bearing promissory note payable in one or
more installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
III. TAX WITHHOLDING
The Corporation's obligation to deliver shares of Common
Stock upon the exercise of options or the issuance or vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.
IV. EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall terminate upon the EARLIEST of (i) August __,
2009, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Change in Control. Upon such plan
termination, all outstanding options and unvested stock issuances shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such grants or issuances.
V. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations with
respect to stock options or unvested stock issuances at the time outstanding
under the Plan unless the Optionee or the Participant consents to such amendment
or modification.
11
<PAGE>
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale
of shares of Common Stock under the Plan shall be used for general corporate
purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any
stock option under the Plan and the issuance of any shares of Common Stock (i)
upon the exercise of any granted option or (ii) under the Stock Issuance Program
shall be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the stock
options granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be
issued or delivered under the Plan unless and until there shall have been
compliance with all applicable requirements of Federal and state securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any stock exchange (or the Nasdaq National
Market, if applicable) on which Common Stock is then listed for trading.
VIII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
12
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BENEFICIARY shall mean, in the event the Plan
Administrator implements a beneficiary designation procedure, the person
designated by an Optionee or Participant, pursuant to such procedure, to succeed
to such person's rights under any outstanding awards held by him or her at the
time of death. In the absence of such designation or procedure, the Beneficiary
shall be the personal representative of the estate of the Optionee or
Participant or the person or persons to whom the award is transferred by will or
the laws of descent and distribution.
C. BOARD shall mean the Corporation's Board of Directors.
D. CHANGE IN CONTROL shall mean a change in ownership or
control of the Corporation effected through any of the following transactions:
(i) a merger, consolidation or reorganization
approved by the Corporation's stockholders, UNLESS securities
representing more than fifty percent (50%) of the total combined voting
power of the voting securities of the successor corporation are
immediately thereafter beneficially owned, directly or indirectly and
in substantially the same proportion, by the persons who beneficially
owned the Corporation's outstanding voting securities immediately prior
to such transaction,
(ii) any stockholder-approved transfer or
other disposition of all or substantially all of the Corporation's
assets, or
(iii) the acquisition, directly or indirectly
by any person or related group of persons (other than the Corporation
or a person that directly or indirectly controls, is controlled by, or
is under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which
the Board recommend such stockholders to accept.
E. CODE shall mean the Internal Revenue Code of 1986, as
amended.
F. COMMITTEE shall mean a committee of one (1) or more
Board members appointed by the Board to administer the Plan with respect to
eligible persons.
G. COMMON STOCK shall mean the Corporation's common stock.
H. CORPORATION shall mean About.com, Inc., a Delaware
corporation, and its successors.
I. DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under the Plan.
A-1
<PAGE>
J. EMPLOYEE shall mean an individual who is in the employ
of the Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.
K. EXERCISE DATE shall mean the date on which the
Corporation shall have received written notice of the option exercise.
L. FAIR MARKET VALUE per share of Common Stock on any
relevant date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded
on the Nasdaq National Market, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question, as such price is reported on the Nasdaq National Market or
any successor system. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed
on any Stock Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
M. HOSTILE TAKE-OVER shall mean:
(i) the acquisition, directly or indirectly,
by any person or related group of persons (other than the Corporation
or a person that directly or indirectly controls, is controlled by, or
is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board
over a period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (A) who were still in office at
the time the Board approved such election or nomination.
A-2
<PAGE>
N. INVOLUNTARY TERMINATION shall mean the termination of
the Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal
or discharge by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with Corporation or
Parent or Subsidiary employing the individual which materially reduces
his or her duties and responsibilities, (B) a reduction in his or her
level of compensation (including base salary, fringe benefits and
target bonus under any performance based bonus or incentive programs)
or (C) a relocation of such individual's place of employment by more
than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the individual's
consent. Notwithstanding the foregoing, an individual's resignation
following (i) a relocation shall not be considered an Involuntary
Termination if the relocation is part of a general relocation of a
significant portion of the operations of the Corporation (or Parent or
Subsidiary employing the individual) or of the department or division
in which such individual is employed to a location in the United States
and if expenses reasonably incurred by such individual in connection
with such relocation expenses are to be reimbursed by the Corporation
or any successor entity or (ii) a general reduction in the level of
base salary, target bonuses or fringe benefits payable to all or
substantially all of the employees of the Corporation (or Parent or
Subsidiary employing such individual) in connection with a cost
reduction program shall not constitute an Involuntary Termination.
O. MISCONDUCT shall mean the commission of any act of
fraud, embezzlement or dishonesty by the Optionee or Participant, any
unauthorized use or disclosure by such person of confidential information or
trade secrets of the Corporation (or any Parent or Subsidiary), or any
intentional wrongdoing by such person, whether by omission or commission, which
adversely affects the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. This shall not limit the grounds for the
dismissal or discharge of any person in the Service of the Corporation (or any
Parent or Subsidiary).
P. 1934 ACT shall mean the Securities Exchange Act of 1934,
as amended.
Q. NON-STATUTORY OPTION shall mean an option not intended
to satisfy the requirements of Code Section 422.
R. OPTIONEE shall mean any person to whom an option is
granted under the Discretionary Option Grant.
T. PARENT shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the Corporation,
provided each corporation in the unbroken chain (other than the Corporation)
owns, at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
A-3
<PAGE>
U. PARTICIPANT shall mean any person who is issued shares
of Common Stock under the Stock Issuance Program.
V. PERMANENT DISABILITYshall mean the inability of the
Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
W. PLAN shall mean the Corporation's 1999 Non-Officer Stock
Option/Stock Issuance Plan, as set forth in this document.
X. PLAN ADMINISTRATOR shall mean the particular entity,
whether the Committee or the Board, which is authorized to administer the Plan.
Y. PLAN EFFECTIVE DATE shall mean August __, 1999, the date
on which the Plan was adopted by the Board.
Z. SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.
AA. STOCK EXCHANGE shall mean either the American Stock
Exchange or the New York Stock Exchange.
BB. STOCK ISSUANCE PROGRAM shall mean the stock issuance
program in effect under the Plan.
CC. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
A-4
<PAGE>
Computation of net loss per common share EXHIBIT 11.1
<TABLE>
<CAPTION>
Period from
June 27, 1996
(inception) Six Months Ended
through Year Ended Year Ended June 30,
December 31, December 31, December 31, -------------------------
1996 1997 1998 1998 1999
-------------- ------------ ------------ ---- ----
<S> <C> <C> <C> <C> <C>
Basic:
Net loss............................... ($2,438,100) ($8,640,400) ($15,577,800) ($5,224,300) ($32,614,600)
Accretion of convertible preferred
stock to liquidation value........... 0 0 (1,230,500) 0 ($659,600)
------------ ------------ ------------- ----------- ------------
Net loss applicable to common
stockholders......................... ($2,438,100) ($8,640,400) ($16,808,300) ($5,224,300) ($33,274,200)
------------ ------------ ------------- ----------- ------------
------------ ------------ ------------- ----------- ------------
Weighted average shares of common
stock outstanding.................... 1,816,255 1,529,961 1,512,708 1,479,298 7,589,028
Add: Warrants issued for nominal
consideration 218,889 218,889 218,890 218,890 --
------------ ------------ ------------- ----------- ------------
Basic weighted average shares
outstanding.......................... 2,035,144 1,748,850 1,731,598 1,698,188 7,589,028
------------ ------------ ------------- ----------- ------------
------------ ------------ ------------- ----------- ------------
Basic net loss per common share........ ($1.20) ($4.94) ($9.71) ($3.08) ($4.38)
------------ ------------ ------------- ----------- ------------
------------ ------------ ------------- ----------- ------------
Diluted:
Net loss applicable to common
stockholders......................... ($2,438,100) ($8,640,400) ($16,808,300) ($5,224,300) ($33,274,200)
------------ ------------ ------------- ----------- ------------
------------ ------------ ------------- ----------- ------------
Basic weighted average shares
outstanding.......................... 2,035,144 1,748,850 1,731,598 1,698,188 7,589,028
Net effect of dilutive securities...... 0 0 0 0 0
------------ ------------ ------------- ----------- ------------
Diluted weighted average shares
outstanding.......................... 2,035,144 1,748,850 1,731,598 1,698,188 7,589,028
------------ ------------ ------------- ----------- ------------
------------ ------------ ------------- ----------- ------------
Diluted net loss per common share...... ($1.20) ($4.94) ($9.71) ($3.08) ($4.38)
------------ ------------ ------------- ----------- ------------
------------ ------------ ------------- ----------- ------------
</TABLE>
<PAGE>
EXHIBIT 23.1
ACCOUNTANTS' CONSENT AND REPORT ON SCHEDULE
The Board of Directors
About.com, Inc.
The audits referred to in our report dated January 20, 1999, except for note
2(q), which is as of March 19, 1999, included the related financial statement
schedule for the period from June 27, 1996 (inception) through December 31, 1996
and the years ended December 31, 1997 and 1998, included in the registration
statement. The financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
New York, New York
October 5, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1999 JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1999 DEC-31-1998 DEC-31-1997
<CASH> 61,506,300 10,644,300 303,200
<SECURITIES> 0 0 0
<RECEIVABLES> 3,140,300 1,063,300 124,300
<ALLOWANCES> 103,700 146,000 6,000
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 64,664,600 11,661,600 421,500
<PP&E> 8,968,300 4,112,400 991,200
<DEPRECIATION> 1,901,600 810,400 242,800
<TOTAL-ASSETS> 74,968,700 15,657,700 1,357,100
<CURRENT-LIABILITIES> 11,753,800 7,430,300 3,519,100
<BONDS> 726,200 770,000 3,881,700
0 32,071,700 0
0 0 0
<COMMON> 12,100 2,200 1,500
<OTHER-SE> 62,441,900 (24,664,200) (10,945,800)
<TOTAL-LIABILITY-AND-EQUITY> 74,968,700 15,657,700 1,357,100
<SALES> 0 0 0
<TOTAL-REVENUES> 6,074,000 3,721,600 390,600
<CGS> 0 0 0
<TOTAL-COSTS> 39,507,300 18,613,400 8,731,800
<OTHER-EXPENSES> 659,600 686,000 (299,200)
<LOSS-PROVISION> 103,700 146,000 6,000
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> (32,614,600) (15,577,800) (8,640,400)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (32,614,600) (15,577,800) (8,640,400)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (33,274,200) 16,808,300 (8,640,400)
<EPS-BASIC> (4.38) (9.71) (4.94)
<EPS-DILUTED> (4.38) (9.71) (4.94)
</TABLE>
