U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER: 000-25525
ABOUT.COM, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or other jurisdiction of 13-4034015
incorporation or (I.R.S. Employer
organization) Identification Number)
220 EAST 42ND STREET, 24TH FLOOR
NEW YORK, NEW YORK 10017
(Address of Principal Executive Officer and Zip Code)
(212) 849-2000
(Registrant's Telephone Number, Including Area Code)
Check whether the registrant: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12
months (or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No |_|
As of August 13, 1999, there were 12,151,735 shares of the registrant's
common stock outstanding.
<PAGE>
ABOUT.COM, INC.
FORM 10-Q
INDEX
Page
Number
------
PART I FINANCIAL INFORMATION
ITEM 1: Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of June 30, 1999
(unaudited) and December 31, 1998........................... 3
Unaudited Condensed Consolidated Statements of Operations
for the three and six months ended June 30, 1999 and 1998 .. 4
Unaudited Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1999 and 1998............. 5
Notes to Unaudited Condensed Consolidated Interim Financial
Statements.................................................. 6
ITEM 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 14
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk.. 31
PART II OTHER INFORMATION
ITEM 1: Legal Proceedings........................................... 31
ITEM 2: Changes in Securities and Use of Proceeds................... 31
ITEM 3: Defaults Upon Senior Securities............................. 32
ITEM 4: Submission of Matters to a Vote of Security Holders......... 32
ITEM 5: Other Information........................................... 32
ITEM 6: Exhibits and Reports on Form 8-K............................ 32
ITEM 7: Signatures.................................................. 32
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: Condensed Consolidated Financial Statements:
About.com, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 61,506,300 $ 10,644,300
Accounts receivable, net 3,036,600 917,300
Prepaid assets 121,700 100,000
------------- -------------
Total current assets 64,664,600 11,661,600
------------- -------------
Property and equipment, net 7,066,700 3,302,000
Goodwill, net 2,442,200 --
Deferred offering costs -- 568,700
Other assets, net 795,200 125,400
------------- -------------
Total assets $ 74,968,700 $ 15,657,700
============= =============
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses $ 9,348,800 $ 6,413,200
Accrued compensation 722,900 181,700
Guide fees payable 606,800 462,400
Deferred revenue 160,200 --
ESPP deductions withheld 322,700 --
Current portion of notes payable 385,600 154,000
Current installments of obligations under capital leases 206,800 219,000
------------- -------------
Total current liabilities 11,753,800 7,430,300
------------- -------------
Notes payable, excluding current portion 666,900 620,600
Deferred rent 34,700 47,700
Obligations under capital leases, excluding current installments 59,300 149,400
Redeemable convertible preferred stock -- 32,071,700
Stockholders' equity (deficit):
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,
12,144,155 and 2,202,558 shares isssued and outstanding at
June 30, 1999 and December 31, 1998, respectively 12,100 2,200
Additional paid-in capital 125,102,100 3,231,000
Deferred compensation (3,389,300) (1,238,900)
Accumulated deficit (59,270,900) (26,656,300)
------------- -------------
Total stockholders' equity (deficit) 62,454,000 (24,662,000)
------------- -------------
Commitments and contingencies -- --
Total liabilities and stockholders' equity (deficit) $ 74,968,700 $ 15,657,700
============= =============
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.
3
<PAGE>
About.com, Inc.
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
------------------------------- -------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 3,706,600 $ 396,000 $ 6,074,000 $ 548,000
Cost of revenues 2,922,800 742,000 5,245,600 1,287,000
Non-cash compensation 4,700 2,000 3,621,300 20,000
------------ ------------ ------------ ------------
Gross profit (loss) 779,100 (348,000) (2,792,900) (759,000)
------------ ------------ ------------ ------------
Operating expenses:
Sales and marketing 18,346,200 1,059,000 23,783,800 1,377,000
General and administrative 1,870,000 633,000 3,273,600 1,103,000
Product development 1,780,500 635,000 2,933,700 1,183,000
Amortization of goodwill 33,700 -- 33,700 --
Non-cash compensation 241,600 31,000 615,600 231,000
------------ ------------ ------------ ------------
Total operating expenses 22,272,000 2,358,000 30,640,400 3,894,000
------------ ------------ ------------ ------------
Loss from operations (21,492,900) (2,706,000) (33,433,300) (4,653,000)
------------ ------------ ------------ ------------
Other income (expense), net 800,200 (93,000) 818,700 (571,000)
------------ ------------ ------------ ------------
Net loss (20,692,700) (2,799,000) (32,614,600) (5,224,000)
------------ ------------ ------------ ------------
Cummulative dividends and accretion -- -- (659,600) --
------------ ------------ ------------ ------------
Net loss attributable to common stockholders $(20,692,700) $ (2,799,000) $(33,274,200) $ (5,224,000)
============ ============ ============ ============
Net loss per common share $ (1.71) $ (1.65) $ (4.38) $ (3.08)
============ ============ ============ ============
Weighted average shares outstanding 12,083,097 1,700,481 7,589,028 1,698,188
============ ============ ============ ============
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.
4
<PAGE>
About.com, Inc.
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------------
1999 1998
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net Loss $(32,614,700) $ (5,224,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 1,137,100 197,400
Amortization of debt discount and issuance costs -- 236,400
Non-cash compensation expense 4,237,000 251,000
Deferred interest on debt -- 333,300
Other (13,200) 1,000
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable, net (2,119,300) (151,200)
Other assets (216,100) (11,800)
Accounts payable and accrued expenses 2,935,700 80,400
Accrued compensation 541,200 15,000
Guide fees payable 144,400 76,200
Deferred revenue 160,200 (70,000)
ESPP deductions withheld 322,700 --
------------ ------------
Net cash used in operating activities (25,485,000) (4,266,300)
------------ ------------
Cash flows used in investing activities:
VantageNet acquisition, net (586,600) --
Purchase of intangible assets (487,600) --
Capital expenditures (4,845,900) (243,300)
------------ ------------
Net cash used in investing activities (5,920,100) (243,300)
------------ ------------
Cash flows from financing activities:
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 issuance of loans payable -- 1,800,000
Proceeds from issuance of common stock in connection with
the exercise of options 132,300 4,200
Proceeds from secured credit facility 781,300 268,700
Principal payments under secured credit facility (161,900) (25,900)
Principal payments under capital leases (102,300) (86,700)
Deferred offering/financing costs 568,700 (34,800)
------------ ------------
Net cash provided by financing activities 82,267,100 8,780,000
------------ ------------
Net increase in cash and cash equivalents 50,862,000 4,270,400
Cash and cash equivalents at beginning of period 10,644,300 303,200
------------ ------------
Cash and cash equivalents at end of period $ 61,506,300 $ 4,573,600
============ ============
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.
5
<PAGE>
ABOUT.COM, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(1) Organization and Business
About.com, Inc. ("About.com") 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 comprised
of a network of niche vertical sites for users and marketers. The Company
conducts its business within one industry segment.
The Company's unaudited interim financial statements as of June 30, 1999
and for the three and six month periods 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). All significant intercompany
balances and transactions have been eliminated in consolidation.
(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, 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 and placement agent fees of $6.0
million and offering costs of $1.7 million were approximately $81.0 million.
6
<PAGE>
ABOUT.COM, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Continued)
(b) Unaudited Interim Financial Information
The accompanying interim unaudited condensed consolidated balance sheets
and statements of operations and cash flows reflect all normal recurring
adjustments that are, in the opinion of management, necessary for a fair
presentation of the financial position of About.com at June 30, 1999, and the
results of operations and cash flows for the interim periods ended June 30, 1999
and 1998. The results of operations for any interim period are not necessarily
indicative of About.com's results of operations for any other future interim
period or for a full fiscal year.
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 Securities and Exchange
Commission's rules and regulations. It is suggested that these unaudited interim
condensed financial statements be read in conjunction with About.com's audited
financial statements and notes thereto for the year ended December 31, 1998 as
included in About.com's Registration Statement on Form S-1 filed with the
Securities and Exchange Commission in March 1999.
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.
7
<PAGE>
ABOUT.COM, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Continued)
(e) 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 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, 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. About.com's agreements with its electronic commerce partners are
typically longer in length, and in certain cases, 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 recognized minimal revenue 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 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.
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
$215,200 and $35,800 for the three months ended June 30, 1999 and 1998,
respectively, and $452,000 and $49,200 for the six months ended June 30, 1999
and 1998, respectively.
8
<PAGE>
ABOUT.COM, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Continued)
At June 30, 1999, accounts receivable included approximately $1,420,900 of
unbilled receivables, $712,000 of which have been subsequently billed. Such
unbilled receivables represent the recognized sales value of short term
advertising contracts that were earned but not billable to customers at June 30,
1999. 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.
(f) 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 (loss) 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
three and six month periods ended June 30, 1998 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.
Diluted net loss per common share for the periods ended June 30, 1999 and
1998, does not include the effect of options to purchase 2,821,811 and 935,243
shares of common stock and 65,860 and 729,376 warrants to purchase common stock,
respectively.
(g) 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.
9
<PAGE>
ABOUT.COM, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Continued)
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 does not expect the adoption
of SOP 98-1 to have a material effect on its capitalization policy.
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. In June 1999, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133", which amends the
effective date of FASB 133 to all fiscal quarters of all 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) Property and Equipment
Property and equipment consists of the following:
June 30, 1999 December 31, 1998
------------- -----------------
(Unaudited)
Equipment and computer hardware, including
assets under capital leases of $664,700 $ 8,661,400 $ 4,062,200
Leasehold improvements 200,300 32,400
Furniture and fixtures 106,600 17,800
----------- -----------
8,968300 4,112,400
Less accumulated depreciation and
amortization, including
assets under capital leases of $329,100,
and $239,900, respectively (1,901,600) (810,400)
----------- -----------
Total $ 7,066,700 $ 3,302,000
=========== ===========
10
<PAGE>
ABOUT.COM, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Continued)
(4) Concentration of Credit Risk
Financial instruments which subject About.com to concentrations of credit
risk consist primarily of cash and cash equivalents, short term investments and
accounts receivable. About.com maintains cash and cash equivalents with various
domestic financial institutions. About.com performs periodic evaluations of the
relative credit standing of these institutions. From time to time, About.com's
cash balances with any one 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 and establishes an allowance for doubtful
accounts based upon factors surrounding the credit risk of customers, historical
trends and other information. To date, such losses have been within management's
expectations.
For the six months ended June 30, 1999 and 1998, there were zero and one
customer, respectively, that accounted for more than 10% of revenue generated by
About.com and no customer accounted for more than 10% of gross receivables for
the periods then ended.
(5) Non-cash Compensation
In March 1999, About.com recorded a non-cash charge of $3.6 million for
guide compensation. About.com has granted fully vested, non-qualified stock
options to purchase 199,500 shares of common stock at an exercise price of
$25.00 per share to a 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 three months ended March
31, 1999 with an offsetting increase in additional paid in capital.
(6) Lease Line of Credit
During the first quarter of 1999, About.com entered into a lease line of
credit for $781,300 to finance capital equipment. Payments due are $232,200 in
1999, $268,000 in 2000, $273,300 in 2001 and $7,000 in 2002. The effective rate
of the credit facility is 16%.
11
<PAGE>
ABOUT.COM, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Continued)
(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 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.
Acquired Effective Acquisition Net Tangible Intangibles/
Company Date Costs Assets Goodwill
- --------------------------------------------------------------------------------
VantageNet June 14, 1999 $51,000 $24,000 $2,476,000
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 three
and six month periods ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------------------------------------------------
1999 1998 1999 1998
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Total revenues $3,720,000 $406,000 $6,132,000 $560,000
Net loss attributable to
common stockholders ($20,865,000) ($ 2,995,000) ($33,627,000) ($5,625,000)
Net loss per common share ($1.72) ($1.70) ($4.40) ($3.19)
Weighted average shares used
in net loss per common
share calculation (1) 12,137,722 1,766,031 7,649,116 1,763,738
</TABLE>
12
<PAGE>
ABOUT.COM, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(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.
(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 three
and six month periods ended June 30, 1999 and 1998, 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.
(8) Supplemental Cash Flow Information
The amount of cash paid for interest was $80,110 and $31,849 for the six
months ended June 30, 1999 and 1998, respectively.
In March 1999, About.com converted all outstanding shares of convertible
preferred stock into 6,139,640 shares of common stock and $341,300 of unsecured
promissory notes payable was forgiven.
13
<PAGE>
ABOUT.COM, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF ABOUT.COM CONTAINS FORWARD-LOOKING STATEMENTS RELATING TO FUTURE
EVENTS AND THE FUTURE PERFORMANCE OF ABOUT.COM WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT OF 1993, AS AMENDED, AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. STOCKHOLDERS ARE CAUTIONED THAT SUCH
STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. ABOUT.COM'S ACTUAL RESULTS AND
TIMING OF CERTAIN EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING, BUT NOT
LIMITED TO, THOSE SET FORTH UNDER "RISK FACTORS THAT MAY AFFECT FUTURE RESULTS"
AND ELSEWHERE IN THIS REPORT AND IN ABOUT.COM'S OTHER PUBLIC FILINGS MADE WITH
THE SECURITIES AND EXCHANGE COMMISSION.
OVERVIEW
About.com is an Internet news, information and entertainment service
comprised of a network of niche vertical sites for users and marketers. This
network includes over 650 highly targeted environments, each of which focuses on
a specific topic and is overseen by a knowledgeable human guide. Each vertical
niche provides a comprehensive consumer experience including leading Internet
link directories, original content and community features. Through these
GuideSites(TM), the guides create and maintain Internet directories that include
approximately 400,000 pre-screened links to other web sites, which are
summarized by the guides, enabling users to quickly find relevant Internet
content. The GuideSite network also provides original high-quality content,
consisting primarily of text, that is created regularly by the guides on
thousands of subjects. Additionally, since our GuideSites focus on specific
topics, users with like interests can form communities by communicating with
each other directly or through the guides. We believe that our service offers an
enjoyable and efficient Internet experience for users across a broad range of
topics, creating highly targeted marketing opportunities for advertisers and for
businesses that market their products and services over the Internet. According
to Media Metrix, over 7.2 million unique users visited About.com in June 1999,
making About.com the second largest news/information/entertainment Internet
property in terms of audience reach and the 20th largest Internet property
overall in that month.
To date, substantially all of About.com's revenues have been derived from
the sale of advertisements on About.com. These sales have been made both to
companies that advertise their products and services over the Internet and to
electronic commerce marketers. About.com expects to derive its revenue
principally from the sale of advertising on About.com for the foreseeable
future. About.com currently offers advertisers and electronic commerce partners
numerous sizes and types of advertising placement, including banner
advertisements, button advertisements, text links and sponsorship programs.
About.com also offers other promotional opportunities to build brand awareness
and drive user traffic to an advertiser's or electronic commerce partner's web
site. To date, sales of advertisements on About.com have been generated
primarily by About.com's internal advertising sales organization and, to a
lesser extent, by third-party advertising sales representatives.
14
<PAGE>
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 revenues and are recognized as revenues ratably as the
advertisements are displayed. Pursuant to its agreements with advertisers,
About.com generally guarantees a minimum number of impressions, or times that an
advertisement is delivered to users of About.com, to be delivered over a
specified period of time for a fixed fee. To the extent these 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 related to
such unfulfilled obligation until the guaranteed impression levels are achieved.
When there is no guarantee of a minimum number of impressions, About.com
recognizes revenue in the period in which the advertisement is displayed.
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 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. For the three and six month periods ended
June 30, 1999, production and development fee revenue totaled $120,000.
For the three and six month periods ended June 30, 1999 and 1998,
approximately 6% and 10% and 7% and 10%, respectively, of About.com's revenues
were generated by agreements where About.com 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.
Advertisers on About.com typically enter into short-term agreements,
typically one to three months in duration. About.com's agreements with its
electronic commerce partners are typically longer in duration, ranging from six
months to two years and, in particular cases, these agreements entitle About.com
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, About.com had not recognized any material revenues from these revenue
sharing agreements. Any revenues About.com derives 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.
Guide compensation, including any compensation that has resulted or may in
the future result from the grant of stock options to the guides, is included as
a component of cost of revenues. Guides are currently compensated at an amount
equal to the greater of a monthly minimum guarantee or a percentage of net
advertising revenues generated by the entire GuideSite network, which is
distributed among the guides based on the user traffic on their respective
GuideSites. Guides are also currently entitled to share a percentage of net
transaction revenues and net syndication revenues. About.com has granted fully
vested, non-qualified stock options to purchase 199,500 shares of common stock
to a substantial majority of its guides. The exercise price per share of these
options is $25.00 and the options have two year terms. Since the guides are
independent contractors, About.com 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.
15
<PAGE>
To date, About.com has 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. This expense is amortized over the vesting period,
typically four years, of the applicable options. About.com currently expects 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. Amortization of deferred compensation expense was $478,000 for the year
ended December 31, 1998 and $601,000 for the six months ended June 30, 1999, of
which the $10,000 related to deferred compensation expense for the grant of
options to operations personnel has been included in cost of revenues.
In May 1999, the Company changed its corporate name to About.com and
launched a national marketing campaign focused on establishing its brand in the
marketplace. As a result, sales and marketing expenses grew to $18.3 million in
the three months ended June 30, 1999 from $1.1 million in the three months ended
June 30, 1998.
In June 1999, About.com acquired VantageNet, an Internet marketing company
which utilizes electronic surveys and/or polling tools for cash and common
stock.
Results of Operations
Revenues
Revenues consist primarily of advertising revenues on About.com. Revenues
increased to $3.7 million for the three months ended June 30, 1999 from $396,000
for the three months ended June 30 1998. For the six months ended June 30, 1999
and 1998, revenue increased to $6.1 million from $548,000. This period-to-period
growth was primarily attributable to an increase in (1) the number of
advertisers and the average commitment per advertiser, (2) our web site traffic
and (3) the number of our sales people. About.com anticipates that revenues from
advertising will continue to account for substantially all of About.com's
revenues for the foreseeable future, and that barter revenues will remain
relatively constant as a percentage of About.com's total revenues.
Cost of Revenues
Cost of revenues increased to $2.9 million for the three months ended June
30, 1999 from $744,000 for the three months ended June 30, 1998. For the six
months ended June 30, 1999 and 1998, cost of revenues increased to $8.9 million
from $1.3 million. Cost of revenues consists primarily of guide compensation,
third party advertising sales organization fees, salaries of operations
personnel, site hosting and depreciation costs and barter advertising expenses.
The absolute dollar 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 equipment costs, depreciation and staff costs required to support
the expansion of our site and services. In addition, cost of revenues includes
the non-cash compensation expense relating to About.com's granting stock options
to the guides at the closing of the initial public offering to purchase 199,500
shares of common stock. This non-cash compensation charge, which was included as
a component of cost of revenues in the first quarter of 1999, was based on the
value of the options granted to the guides and amounted to $3.6 million.
16
<PAGE>
Operating Expenses
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, payment to third-party Internet companies to
drive user traffic to About.com and other marketing related expenses. Sales and
marketing expenses were $18.3 million for the three months ended June 30, 1999
and $1.1 million for the three months ended June 30, 1998. For the six months
ended June 30, 1999 and 1998, sales and marketing expenses increased to $23.8
million from $1.4 million. These period-to-period increases were primarily
attributable to the launch of our national branding and marketing campaigns. The
increase was also attributable to the expansion of About.com's online
advertising efforts as well as increased sales and marketing personnel and
related expenses. About.com expects that sales and marketing expenses will
continue to be significant for the foreseeable future as About.com continues to
incur expenditures for marketing, promotion and branding, expands its internal
advertising sales force and hires additional marketing personnel.
General and Administrative
General and administrative expenses consist primarily of salaries
and related costs for general corporate functions, including finance,
accounting, facilities and legal expenses, and fees for professional services.
General and administrative expenses were $1.9 million for the three months ended
June 30, 1999 and $633,000 for the three months ended June 30, 1998. For the six
months ended June 30, 1999 and 1998, general and administrative expenses
increased to $3.3 million from $1.1 million. This period-to-period increase was
primarily attributable to increased salaries and related expenses associated
with hiring additional personnel, facility-related expenses and costs relating
to About.com's operation as a public company. About.com expects that it will
incur additional general and administrative expenses as it hires additional
personnel and incurs additional costs related to the growth of its business and
its operation as a public company, including directors' and officers' liability
insurance, investor relations programs and professional service fees.
Accordingly, About.com anticipates that general and administrative expenses will
continue to increase in absolute dollars in future periods.
Product Development
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 expenses its product
development costs as incurred. Product development expenses were $1.8 million
for the three months ended June 30, 1999 and $635,000 for the three months ended
June 30, 1998. 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 the growth and development of About.com. About.com believes
that timely deployment of new and enhanced features and technology are critical
to attaining its strategic objectives. Accordingly, About.com intends to
continue recruiting and hiring experienced product development personnel and to
make additional investments in product development. About.com expects that
product development expenditures will increase in absolute dollars in future
periods.
17
<PAGE>
Non-cash Compensation Expense
During 1998 and the first quarter of 1999, About.com recorded
deferred compensation expense of $4.5 million in the aggregate for the
difference between the exercise price and the deemed fair value of stock options
granted by About.com to employees, consisting of operational and non-operational
personnel, and directors. This amount is being amortized over the vesting
periods of the individual stock options, which are typically four years. For the
six months ended June 30, 1999, amortization of these non-cash charges for
non-operational personnel amounted to $616,000. During the six months ended June
30, 1999, amortization of these non-cash charges for operational personnel was
$9,000; which amount is included as a component of cost of revenues.
Other Income (Expense), Net
Other income (expense), net includes interest expense related to
About.com's debt and capital lease obligations, net of interest income from
About.com's cash and cash equivalents. Other income (expense), net was $800,000
for the three months ended June 30, 1999 and $(93,000) for the three months
ended June 30, 1998. For the six months ended June 30, 1999 and 1998, other
income (expense), net increased to $819,000 from $(571,000). The increase in
other income was primarily attributable to the interest income generated by the
increase in cash related to About.com's IPO.
Cumulative Dividends and Accretion of Convertible Preferred Stock
Cumulative dividends on About.com's convertible preferred stock and
accretion of costs associated with the convertible preferred stock issuance
amounted to $659,600 and $0 for the six months ended June 30, 1999 and 1998. Up
to the date of the IPO, each share of convertible preferred stock was entitled
to a cumulative dividend at a rate of $0.135, $0.162 and $0.176 per share per
annum for the Series A, B and C convertible preferred stock, respectively. Upon
the close of the IPO, 3,346,715, 6,597,596 and 7,301,811 shares of Series A, B
and C convertible preferred stock, respectively, converted into an aggregate of
6,139,640 shares of common stock.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, About.com has financed its operations primarily
through the private placement of equity securities, the incurrence of
indebtedness and more recently, from its initial public offering and concurrent
placement. In March 1999, About.com received net proceeds of approximately $81.0
million from its initial public offering and concurrent private placement of
shares of About.com's common stock.
Net cash used in operating activities was $25.5 million for the six
months ended June 30, 1999 and $4.3 million for the six months ended June 30,
1998. Net cash used in operating activities for these periods was primarily
attributable to About.com's net losses during these periods, adjusted for
certain non-cash items, and a higher level of accounts receivable resulting from
an increase in About.com's revenues, which was offset by increases in accounts
payable, accrued expenses and deferred revenues.
18
<PAGE>
Net cash used in investing activities was $5.9 million for the six
months ended June 30, 1999 and $243,300 for the six months ended June 30, 1998.
For the six months ended June 30, 1999, net cash used in investing activities
related to $4.8 million of capital expenditures, primarily for the acquisition
of equipment, $587,000 related to the acquisition of VantageNet and $488,000
related to the purchase of certain intangible assets. For the six months ended
June 30, 1998, all net cash used in investing activities related to capital
expenditures.
Net cash provided by financing activities was $82.3 million for the
six months ended June 30, 1999 and $8.8 million for the six months ended June
30, 1998. 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 About.com in connection with the closing of its initial public
offering and concurrent placement in March 1999 and $781,000 of proceeds from a
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 About.com 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, About.com had $61.5 million of cash and cash
equivalents. About.com's principal commitments consist of obligations
outstanding under capital and operating leases and notes payable. Although
About.com has no material commitments for capital expenditures, management
anticipates that it will experience a substantial increase in its capital
expenditures and lease commitments consistent with its anticipated growth in
operations, infrastructure and personnel. About.com currently anticipates that
it will continue to experience significant growth in its operating expenses for
the foreseeable future and that its operating expenses will be a material use of
About.com's cash resources. About.com believes that the existing cash and cash
equivalents and short-term investments will be sufficient to meet its
anticipated cash needs for working capital and capital expenditures for at least
the next 12 months.
About.com's ability to generate significant revenues is uncertain.
About.com has incurred substantial costs to create, launch and enhance About.com
and to grow its business. At June 30, 1999, About.com had an accumulated deficit
of $59.3 million. About.com expects losses from operations and negative cash
flow to continue for the foreseeable future as a result of its expansion plans
and its expectation that its operating expenses, particularly sales and
marketing expenses, will increase significantly in the next several years.
Although About.com has experienced revenue growth in recent periods, About.com's
revenues may not remain at their current level or increase in the future. If
About.com's revenues do not increase substantially, About.com may not achieve
profitability, which would have a material adverse effect on About.com's
business, results of operations and financial condition. Even if About.com
achieves profitability, it may not sustain or increase profitability on a
quarterly or annual basis in the future.
19
<PAGE>
YEAR 2000 COMPLIANCE
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.
About.com is exposed to the risk that the systems on which it
depends to conduct its operations are not Year 2000 compliant.
State of Readiness. About.com has completed the process of
determining the Year 2000 readiness of its information technology systems, which
includes the hardware and software necessary to provide and deliver About.com
and its non-information technology systems, including telephone systems and
other office equipment used internally. About.com's assessment plan consisted of
the following steps:
o evaluating About.com's date dependent code, software and
hardware and evaluating external dependencies
o quality assurance testing of About.com's internally-developed
proprietary software and systems incorporated in About.com
o contacting third-party vendors and licensors of material
hardware, software and services that are related to the
delivery of About.com
o contacting vendors of material non-information technology
systems used by About.com
To date, About.com's assessment has determined the following:
o Internally developed software and systems have been checked
for date dependent code, and all material files and systems
are Year 2000 compliant.
o About.com has been informed by vendors of material hardware
and software components of its information technology systems
that the products used by About.com are currently Year 2000
compliant.
o About.com's hosting service, Frontier Global Center, has
certified that its systems are Year 2000 compliant.
o Commercial software upon which About.com is dependent is
either Year 2000 compliant or will be upgraded to be compliant
in the normal course of business through upgrades or
installation of software patches.
o Substantially all hardware used in About.com's network
operations and all of the hardware used in its office
operations has been certified as Year 2000 compliant by its
vendors.
20
<PAGE>
o About.com's telephone system, fax machines and mail systems
have been certified as Year 2000 compliant.
o About.com's landlords and third-party advertising sales
representative and servicing organizations have not yet
provided About.com with information regarding their Year 2000
compliance.
Costs. About.com anticipates that no additional costs will be
incurred for its Year 2000 compliance efforts.
Risks. Although About.com has received compliance information from
its material third-party vendors, it has not received compliance information
from all of its third-party vendors. In addition, it is possible that
About.com's third-party vendors were mistaken in certifying that their systems
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 and other business interruptions, any of which could
have a material adverse effect on About.com's business, results of operations
and financial condition.
In addition, there can be no assurance that governmental agencies,
utility companies, Internet access companies, third-party service providers and
others outside About.com's control will be Year 2000 compliant. The failure by
those entities to be Year 2000 compliant could result in a systemic failure
beyond the control of About.com, such as a prolonged Internet,
telecommunications or electrical failure, which could also prevent About.com
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
About.com's business, results of operations and financial condition.
Contingency Plan. Based on the results of the Year 2000 assessment,
About.com has not developed a contingency plan to address the worst-case
scenario that might occur if technologies it is dependent upon actually are not
Year 2000 compliant.
21
<PAGE>
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS RELATING TO FUTURE EVENTS
AND THE FUTURE PERFORMANCE OF ABOUT.COM WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1993, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED. STOCKHOLDERS ARE CAUTIONED THAT SUCH STATEMENTS INVOLVE
RISKS AND UNCERTAINTIES. ABOUT.COM'S ACTUAL RESULTS AND TIMING OF CERTAIN EVENTS
COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE
SET FORTH BELOW AND ELSEWHERE IN THIS REPORT AND IN ABOUT.COM'S OTHER PUBLIC
FILINGS MADE WITH THE SECURITIES AND EXCHANGE COMMISSION.
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 service 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. In 1998, approximately 10% of our revenues 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 approximately 10% of our
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.
22
<PAGE>
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:
o the demand for advertising on About.com;
o the number of users on, and the frequency of their use of, About.com since
our advertising revenues are typically based on user traffic;
o our ability to attract and retain advertisers and electronic commerce
partners;
o our ability to meet the minimum numbers 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;
o changes in rates paid for advertising on About.com;
o the timing and amount of our costs related to advertising sales and
marketing efforts; and
o fees we may pay for distribution or content or other costs we may incur as
we expand our operations.
Our operating expenses are based 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 and page views on our
website are 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 expend significant amounts to expand our internal
advertising sales force and to build 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.
Seasonal factors may affect our quarterly operating results.
Seasonality of our 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.
23
<PAGE>
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:
o the Internet infrastructure may not be able to support the demands placed
on it, and its performance and reliability may decline as usage grows;
o 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
o 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 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 users. If we do not implement these
systems successfully, we may not be able to accurately evaluate the demographic
characteristics of our users. 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.
24
<PAGE>
To the extent that 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. Advertising based on impressions,
or the number of times an advertisement is delivered to users, comprises
virtually 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
the industry standard. 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
customers' 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.
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 service,
increase our cost of doing business or otherwise have a material adverse effect
on our business, results of operations and financial condition. There is, 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.
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 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 the
GuideSites. 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 service to users.
25
<PAGE>
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 must increase our internal advertising sales force to support our growth.
Our business, results of operations and financial condition will be
materially adversely affected if we do not develop and maintain an effective
internal advertising sales force. On June 30, 1999, our internal advertising
sales force had 28 members. We need to continue to increase our internal
advertising sales force in the near future to support our growth. Our ability to
increase our sales force involves a number of risks and uncertainties,
including:
o the competition we face in hiring and retaining advertising sales
personnel;
o our ability to integrate, train and motivate additional advertising
sales and advertising sales support personnel;
o our ability to manage a multi-location advertising sales
organization; and
o the length of time it takes new advertising sales personnel to
become productive.
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 and electronic commerce marketers. 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, advertisers and electronic commerce marketers with
the following:
o Internet retrieval companies, search engines and other Internet
"portal" companies (such as Excite, Lycos and Yahoo!);
o online content web sites (such as C-net, ESPN.com and ZDNet.com);
o online community web sites (such as iVillage);
o online personal homepage services (such as GeoCities and
theglobe.com);
o publishers and distributors of television, radio and print (such as
CBS, Disney, NBC and Time Warner);
26
<PAGE>
o general purpose consumer online services (such as America Online and
Microsoft Network); and
o web sites maintained by Internet service providers (such as 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.
Based on our review of publicly available documents, 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 and electronic commerce partners. 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 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.
27
<PAGE>
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 have not estimated the minimum 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.
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.
In the future, we may also enter into agreements with advertisers,
electronic commerce marketers or other third-party web sites that require us to
exclusively feature these parties in certain sections or on certain pages 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. Some of our key employees
have recently been hired. These individuals do not have significant experience
working with us or our management team. In addition, we expect that the number
of guides will continue to increase as new GuideSites are established. We must
continue to improve our 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.
28
<PAGE>
We depend on our key personnel.
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. 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 service 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 therefore our insurance may not adequately
compensate us for any losses that may occur due to any interruptions in our
service.
In January 1998, we entered into an Internet-hosting agreement with
Frontier Global Center ("Frontier") to maintain all of our production servers at
Frontier's Manhattan Data Center until February 1, 2000. Our operations depend
on Frontier'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 Frontier 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 rights and we may be
liable for infringing the intellectual property rights of others.
Third parties may infringe or misappropriate our patents, trademarks or
other proprietary rights, 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 proprietary
rights 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.
29
<PAGE>
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.
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, take advantage of
acquisition opportunities, develop or enhance services or respond to competitive
pressures, 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.
Future sales of common stock by our existing stockholders could adversely affect
our stock price.
The market price of our common stock could decline as a result of sales by
our existing stockholders of shares of common stock in the market, or the
perception that these sales could occur. These sales also might make it more
difficult for us to sell equity securities in the future at a time and at a
price that we deem appropriate.
Our officers and directors may still control us.
Our executive officers and directors beneficially own, in the aggregate,
approximately 38% of the common stock. 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.
Our shares may experience extreme price and volume fluctuations.
The market for the stocks of Internet-related companies, including ours,
has experienced extreme price and volume fluctuations. The market price of our
common stock may continue to be volatile. In the past, securities class action
litigation has often been instituted against a company following periods of
volatility in the market price of About.com's securities. If instituted against
us, regardless of the outcome, litigation could result in substantial costs and
a diversion of our management's attention and resources and have a material
adverse effect on our business, results of operations and financial condition.
30
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Currency Rate Fluctuations. About.com's results of operations, financial
position and cash flows are not materially affected by changes in the relative
values of non-U.S. currencies to the U.S. dollar. About.com does not use
derivative financial instruments to limit its foreign currency risk exposure.
Market Risk. About.com's accounts receivables are subject, in the normal
course of business, to collection risks. About.com regularly assesses these
risks and has established policies and business practices to protect against the
adverse effects of collection risks. As a result, About.com does not anticipate
any material losses in this area.
Interest Rate Risk. About.com's investments are classified as cash and
cash equivalents with original maturities of three months or less. Therefore,
changes in the market's interest rates do not affect the value of the
investments as recorded by About.com.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Changes in Securities:
NONE
(b) Use of Proceeds
On March 29, 1999, About.com consummated the initial public offering of
3,450,000 shares of its common stock and a concurrent private placement of
107,527 shares of its common stock (collectively, the "Offering"). Net proceeds
to About.com from the Offering were approximately $81.0 million.
During the three months ended June 30, 1999, About.com used approximately
$23.5 million of the proceeds from the Offering for general corporate purposes,
equipment purchases, marketing expenditures related to the national marketing
and branding campaigns, the payment of debt obligations, and cash paid in
connection with the acquisition of VantageNet.
31
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
(a) The following exhibits are filed as part of this report:
2.1 Agreement and Plan of Reorganization, dated June 10, 1999, by
and between About.com, Inc., About.com Acquisition Corp.,
VantageNet, Inc., and certain stockholders of VantageNet, Inc.
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
1) On June 3, 1999, the Company filed a report on Form 8-K,
pursuant to Item 5 of such Form, announcing that it had
changed its name from MiningCo.com, Inc. to About.com, Inc.
effective May 17, 1999 and that on May 20, 1999, the Nasdaq
National Market ticker symbol for the registrant's common
stock was changed from "MINE" to "BOUT".
ITEM 7. SIGNATURES
Pursuant to the requirements of the Securities Exchange Act, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 16, 1999 ABOUT.COM, INC.
By: /s/ Todd B. Sloan
------------------------------------
Todd B. Sloan
Chief Financial Officer (Principal
Financial Officer)
32
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into as of June 10, 1999, by and among About.com, Inc., a Delaware
corporation ("About.com"), About.com Acquisition Corp., a Delaware corporation
and a wholly-owned subsidiary of About.com ("AAC"), VantageNet, Inc., a
Minnesota corporation ("VantageNet"), and Patrick M. Trepanier and Jacob D.
Gove, the sole stockholders of VantageNet (collectively, the "Stockholders").
RECITALS
WHEREAS, About.com, AAC, VantageNet and the Stockholders each have
determined to engage in the transactions contemplated hereby, pursuant to which
(i) AAC will merge with and into VantageNet and (ii) each issued and outstanding
share of capital stock of VantageNet shall be converted into cash and shares of
About.com capital stock in the manner herein described;
WHEREAS, the respective Boards of Directors of VantageNet, About.com
and AAC, and the Stockholders and About.com, as the sole stockholder of AAC,
have each approved this Agreement and the transactions contemplated hereby;
WHEREAS, following the Closing (as defined below), About.com wishes
to engage each of the Stockholders as an employee of About.com or AAC and each
of the Stockholders desires to be so employed; and
WHEREAS, the parties intend for the transactions contemplated by
this Agreement to qualify as a plan of reorganization in accordance with the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
THE MERGER
1.1 Surviving Corporation; Effective Time.
(a) At the Closing (as defined in Section 7.1) and subject to
the terms and conditions of this Agreement, AAC shall be merged with and into
VantageNet in accordance with the Delaware General Corporation Law (the "DGCL")
and the Minnesota Business Corporation Act ("MBCA"),whereupon the separate
existence of AAC shall cease, and VantageNet shall be the surviving corporation.
(b) Simultaneously with the Closing, VantageNet and AAC shall
file a certificate of merger (the "Certificate of Merger") in the office of the
Secretary of State of the State of Delaware in accordance with the DGCL and in
the office of the Secretary of State of the
<PAGE>
State of Minnesota. The Merger shall become effective at such time as the
Certificate of Merger is duly filed in both Delaware and Minnesota (the date of
such filings being hereinafter referred to as the "Effective Date" and the time
of such filings being hereinafter referred to as the "Effective Time"). It is
the intention of the parties that this Agreement shall constitute an agreement
of merger under the DGCL and the MBCA. From and after the Effective Time,
VantageNet shall possess all the rights, privileges, powers and franchises and
be subject to all of the restrictions, disabilities and duties of both
VantageNet and AAC, as provided under the DGCL and the MBCA.
1.2 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation and Bylaws of VantageNet following the Closing shall be the
Certificate of Incorporation and Bylaws of VantageNet as in effect immediately
prior to the Effective Time, until thereafter amended in accordance with
applicable law.
1.3 Directors and Officers. From and after the Effective Time,
except as set forth herein and until successors are duly elected or appointed
and qualified in accordance with applicable law, the directors and officers of
VantageNet immediately prior to the Effective Time shall remain directors and
officers of VantageNet.
1.4 Conversion of Shares. As of the Effective Time, by virtue of the
Merger, automatically and without any action on the part of any holder thereof:
(a) each issued and outstanding share of VantageNet common
stock, $0.01 par value per share (the "Shares"), shall
be converted into (i) 21.85 shares, or 65,550 shares in
the aggregate, of About.com's common stock, $0.001 par
value per share (the "About.com Common Stock") and (ii)
$183.33 per share, or $550,000 in the aggregate(the
"Cash Consideration");
(b) Fractional shares of About.com Common Stock will not be
issued in connection with the conversion of the Shares
into shares of About.com Common Stock and the About.com
Common Stock converted pursuant to subsection (a) above
shall be rounded up to the nearest whole number of
shares of About.com Common Stock.
1.5 Exchange of Certificates.
(a) At the Closing and subject to the terms of the Escrow
Agreement (as defined below), upon receipt of the certificates representing the
Shares, AAC shall deliver to each Stockholder in exchange therefor a certificate
for the number of shares of About.com Common Stock to which such holder is
entitled pursuant to Section 1.4 (subject to any Escrowed Amounts (as defined in
Section 1.6)). Certificates representing the shares of About.com Common Stock to
be issued pursuant to Section 1.4 shall include an appropriate Securities Act of
1933 legend (Rule 144 legend), providingthat the stock evidenced by the
certificates are restricted securities. In addition, at the Closing, AAC shall
deliver to each Stockholder the Cash Consideration to which such holder is
entitled pursuant to Section 1.4.
2
<PAGE>
(b) All About.com Common Stock delivered to the Stockholders
or the Escrow Agent (as defined below) in exchange for the Shares in accordance
with the terms hereof shall be deemed to have been delivered in full
satisfaction of all rights pertaining to such Shares. After the Effective Time,
there shall be no further registration of transfers on the stock transfer books
of VantageNet of certificates representing any VantageNet capital stock that
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing VantageNet capital stock are presented
for any reason, they shall be cancelled and exchanged as provided in this
Section 1.5.
1.6 Escrow. Contemporaneously with the execution of this Agreement,
About.com, AAC, VantageNet, the Stockholders and First Union National Bank (the
"Escrow Agent") shall enter into an Escrow Agreement substantially in the form
as attached hereto as Exhibit A (the "Escrow Agreement"). Pursuant to the terms
and conditions of the Escrow Agreement, upon the Closing About.com shall deliver
all of the shares of About.com Common Stock that the Stockholders are eligible
to receive pursuant to Section 1.4 (the "Escrowed Amounts") to the Escrow Agent
for deposit in the Escrow Account (as defined in the Escrow Agreement) for the
purpose of securing various obligations of VantageNet and the Stockholders set
forth in this Agreement and the Escrow Agreement. The Escrowed Amounts shall be
held by the Escrow Agent under the Escrow Agreement pursuant to the terms
thereof. The Escrowed Amounts shall be held as a trust fund and shall not be
subject to any lien, attachment, trustee process or any other judicial process
of any creditor of any party, and shall be held and disbursed solely for the
purposes and in accordance with the terms of the Escrow Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ABOUT.COM AND AAC
Each of About.com and AAC, jointly and severally, agrees with, and
represents and warrants to VantageNet and each of the Stockholders as follows:
2.1 Organization. Each of About.com and AAC is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware.
2.2 Power and Authority. Each of About.com and AAC has the requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of About.com and AAC, has been authorized by all necessary
corporate action of each of About.com and AAC and constitutes the legal, valid
and binding obligation of each of About.com and AAC, enforceable against
About.com and AAC in accordance with its terms, except as such enforceability
may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights generally
and by general equitable principles.
2.3 1933 Act Filings. About.com has furnished to VantageNet true and
complete copies of its prospectus filed with the United States Securities and
Exchange Commission on March 24, 1999 (the "Prospectus"). Each of the balance
sheets included in the Prospectus fairly presents the financial position of
About.com as of its date.
3
<PAGE>
2.4 No Conflict or Default. Each of About.com's and AAC's
consummation of the transactions contemplated hereby and the compliance with the
terms hereof by it do not, or as of the Closing will not, violate any provisions
of their respective Certificates of Incorporation or Bylaws, or conflict with or
result in a breach of any terms of, or constitute a default under any material
agreement, obligation or instrument to which either of them is a party or by
which either of them is bound.
2.5 Consents and Approvals. Except in connection with the filing of
the Certificate of Merger or any applicable federal or state securities filings,
no consent, approval, order, authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or local
governmental authority or any non-governmental third party on the part of
About.com or AAC is required in connection with the execution, delivery and
performance by About.com and AAC of this Agreement or the consummation of the
transactions contemplated hereby.
2.6 Brokers or Finders. Neither About.com nor AAC has incurred, or
will incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF VANTAGENET
AND THE STOCKHOLDERS
VantageNet and each of the Stockholders, jointly and severally,
represents and warrants to each of About.com and AAC that:
3.1 Organization and Corporate Authority. VantageNet is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Minnesota and has requisite corporate power and authority
to carry on its business in the places where such business is now conducted.
3.2 Power and Authority. VantageNet has all requisite corporate
power and authority to enter into this Agreement and all other documents
contemplated hereby (collectively, the "VantageNet Documents") and to consummate
the transactions contemplated hereby. The VantageNet Documents have been duly
executed and delivered by VantageNet, have been authorized by all necessary
corporate action of VantageNet and constitute legal, valid and binding
obligations of VantageNet, enforceable against VantageNet in accordance with
their respective terms, except as such enforceability may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and by general
equitable principles.
3.3 Capitalization. The authorized capital stock of VantageNet
consists of 1,000,000 shares of common stock, par value $.01 per share, of which
3,000 shares are presently issued and outstanding. All such shares of stock are
owned of record and beneficially by the Stockholders in the amounts set forth on
Schedule 3.3. All outstanding shares of VantageNet capital stock have been duly
authorized and validly issued and are fully paid and nonassessable. There have
been no additional shares of capital stock of VantageNet that have been issued
or that
4
<PAGE>
are presently outstanding and there are no subscriptions, options, warrants,
conversion rights, rights of exchange or other rights, plans, agreements or
commitments of any nature whatsoever (including, without limitation, conversion
or preemptive rights) providing for the purchase, issuance, transfer,
registration or sale of any shares of VantageNet's capital stock or any
securities convertible into or exchangeable for any shares of VantageNet capital
stock. All of the shares of capital stock issued by VantageNet have been issued
pursuant to valid exemptions from registration under all federal and state
securities laws and there are no outstanding obligations of VantageNet to
repurchase, redeem or otherwise acquire any of the shares of capital stock
issued by VantageNet.
3.4 Subsidiaries. VantageNet does not presently own, directly or
indirectly, any interest in any other corporation, association, joint venture or
other business entity.
3.5 Financial Records.. The internal books and records of VantageNet
from which the accounting records were derived do not contain any information
which is false or misleading.
3.6 Absence of Certain Changes. Except as set forth in Schedule 3.6
hereto, since May 6, 1999, there has not been:
(a) Any event that may reasonably have a material adverse
effect on the business, properties, results of operations, condition
(financial or otherwise) or prospects of VantageNet (each a "Material
Adverse Effect");
(b) Any increase in or modification of any bonus, pension,
insurance or other employee benefit plan, payment or arrangement
(including, without limitation, the granting of stock options, restricted
stock awards or stock appreciation rights) made to, for or with any of
VantageNet's directors or employees;
(c) Any declaration, setting aside or payment of dividends or
distributions in respect of the capital stock of VantageNet, or any
split-up or other recapitalization in respect of the capital stock of
VantageNet or any direct or indirect redemption, purchase or other
acquisition of any such capital stock of VantageNet or any agreement to do
any of the foregoing;
(d) Any issuance, transfer, sale or pledge by VantageNet of
any shares of its capital stock or other securities or of any commitment,
option, right or privilege under which VantageNet is or may become
obligated to issue any shares of its capital stock or other securities;
(e) Any alteration in any term of any outstanding securities
of VantageNet;
(f) Any change in the accounting methods, practices or
policies followed by VantageNet from those in effect during the past year;
(g) Any sale, assignment, or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets of
material value by VantageNet;
5
<PAGE>
(h) Any change in or amendment to the Certificate of
Incorporation or Bylaws of VantageNet; or
(i) Any agreement or commitment, whether written or oral, by
VantageNet to do any of the things described in this Section 3.6.
3.7 Liabilities. VantageNet does not have, and as of the Closing
Date (as defined below) will not have, any liabilities or obligations of any
kind that, in the aggregate, exceed Five Thousand Dollars ($5,000.00) (whether
absolute or contingent or accrued).
3.8 Litigation. No litigation, arbitration or other proceeding is
pending or, to the best knowledge of VantageNet or either of the Stockholders,
threatened by or against VantageNet, its properties or assets, the capital stock
of VantageNet or its officers, directors or stockholders before any court or any
government agency, and, to the best knowledge of VantageNet and the
Stockholders, no facts exist which might form the basis for any such litigation,
arbitration or proceeding. VantageNet is not the subject of any investigation
for violation of any laws, regulations or administrative orders applicable to
its business by any governmental authority or any other person. There is no
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against VantageNet or either of the Stockholders, their respective properties or
assets or the capital stock of VantageNet or which in any manner challenges or
seeks to prevent enjoin, alter or materially delay any of the transactions
contemplated hereby. There is no action, suit, proceeding or investigation by
VantageNet or the Stockholders currently pending or that is currently
contemplated.
3.9 No Conflict or Default. Neither the execution and delivery of
this Agreement or any of the documents to be delivered hereunder, nor compliance
with the terms and provisions hereof or thereof, will violate any statute,
regulation or ordinance of any governmental authority, or conflict with or
result in the breach of any term, condition or provision of (i) the Certificate
of Incorporation or Bylaws of VantageNet, or (ii) any agreement, deed, contract,
mortgage, indenture, writ, order, decree, legal obligation or instrument to
which either of the Stockholders is a party or by which any of them are or may
be bound, or (iii) of any agreement, deed, contract, mortgage, indenture, writ,
order, decree, legal obligation or instrument to which VantageNet is a party and
that is set forth on Schedule 3.9 hereto, or constitute a default (or an event
which, with the lapse of time or the giving of notice, or both, would constitute
a default) thereunder, or result in the creation or imposition of any lien,
charge, encumbrance or restriction of any nature whatsoever.
3.10 Consents and Approvals. Except for the contracts set forth on
Schedule 3.9 hereto and in connection with the filing of the Certificate of
Merger, no consent, approval, order, authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state or
local governmental authority or any non-governmental third party on the part of
VantageNet or either of the Stockholders is required in connection with the
execution, delivery and performance by VantageNet and the Stockholders of this
Agreement, the consummation of the transactions contemplated hereby or the
operation of VantageNet's business following the Closing Date.
6
<PAGE>
3.11 Taxes. VantageNet has (i) duly and timely filed or caused to be
filed all Federal, state and local tax returns, statements, reports and forms
required to be filed by VantageNet and will duly and timely file or cause to be
filed all such applicable tax returns, statements, reports and forms required to
be filed prior to the Effective Date which relate to VantageNet or with respect
to which VantageNet is liable or otherwise in any way subject, including,
without limitation, any income, property, sales, use, franchise, added value,
withholding, and social security taxes, and all such tax returns (including all
amendments thereto) (A) are complete, accurate and in accordance in all material
respects with all legal requirements applicable thereto and (B) as of the time
of filing, correctly reflected the facts regarding the income, business assets,
operations, activities, status or other matters of VantageNet required to be
shown thereon, (ii) paid, when due, all taxes shown to be due and payable on
such returns, or pursuant to any assessment or otherwise, and (iii) properly
accrued, charged or established adequate reserves on the Unaudited Financial
Statements for all taxes arising in respect of any fiscal year of VantageNet. No
tax liabilities, disallowances or assessments relating to the business, assets
or employees or independent contractors of VantageNet have been assessed as of
the date hereof, and, to the best knowledge of VantageNet and the Stockholders,
there is no basis for any such liabilities, disallowances or assessments.
VantageNet is not delinquent in the payment of any taxes which would result in
the imposition of any charge, lien, encumbrance or adverse claim of any kind
whatsoever on VantageNet, its properties or assets or the capital stock of
VantageNet. VantageNet has properly withheld and/or paid all withholding,
employment or other similar taxes and all unemployment compensation and similar
obligations required to be withheld or paid. The Stockholders will be
responsible for filing any tax return relating to the business of VantageNet
conducted prior to the Closing.
3.12 Intellectual Property Rights.
(a) Schedule 3.12 hereto sets forth a list of all patents,
trade names, trademarks, service marks, brandmarks,
copyrights trade secrets, software and other
intellectual property rights owned by, licensed or used
in the business of VantageNet, or which are registered
in the name of VantageNet, other than the Excluded
Inventions as such term is defined in the Stockholders'
respective employment agreements (collectively, the
"VantageNet Rights"). Except as set forth on Schedule
3.12, VantageNet is the sole owner of all right, title
and interest in the VantageNet Rights, free and clear of
all liens, encumbrances, licenses, claims, rights of use
and restrictions whatsoever.
(b) There are no outstanding options, licenses, sublicenses
or agreements of any kind relating to the VantageNet
Rights nor are there any options, licenses, sublicenses
or agreements of any kind with respect to the patents,
trademarks, trade names, copyrights, trade secrets,
rights, or other intellectual property or other
proprietary rights of any other person or entity which
relate to the business of VantageNet and there has been
no disposition, license, sublicense or disclosure of the
VantageNet Rights or any portion thereof, except
pursuant to that certain Employment Agreement between
VantageNet, Inc. and Patrick M. Trepanier, dated May 5,
1999, that certain Employment Agreement
7
<PAGE>
between VantageNet, Inc. and Jacob D. Gove dated May 5,
1999, and that certain Asset Purchase Agreement dated
May 5, 1999, and that certain Assignment Agreement
between Patrick Daggett and VantageNet, Inc., dated
February 7, 1999.
(c) Neither the VantageNet Rights nor anything used in
connection with the business of VantageNet, now or in
the past, infringes or infringed or will infringe upon
any rights or intellectual property of any other person,
firm, corporation or other entity and no one has
disputed (or has a basis to dispute) the right, title or
interest of VantageNet to the VantageNet Rights. Neither
VantageNet nor either of the Stockholders is aware of
any facts which would invalidate or render unenforceable
any of the VantageNet Rights. As of the date of this
Agreement, VantageNet has not received any notices of
infringement with respect to the VantageNet Rights and,
to the best knowledge of VantageNet and each of the
Stockholders, the VantageNet Rights are not being
infringed or violated by any other person or entity, nor
do they infringe any rights of others.
(d) VantageNet has taken reasonable security measures to
protect the secrecy, confidentiality and value of the
VantageNet Rights. Any employee or other person who,
either alone or in concert with others, developed,
invented, discovered, derived, programmed or designed
any of the VantageNet Rights or any part thereof, or who
has knowledge of or access to information relating to
it, has been put on notice that the VantageNet Rights is
proprietary to VantageNet and not to be divulged or
misused, has assigned all of his or her rights relating
to the VantageNet Rights to VantageNet and has executed
a proprietary information and assignment of inventions
agreement to such effect (all of which such agreements
have been delivered to About.com). No claim of ownership
or legal title or interest in or with respect to the
VantageNet Rights by or against any employee who had
access to the VantageNet Rights has been made or now
exists and neither VantageNet nor the Stockholders know
of any basis for any such claims. No third party has
access to the source code versions of any of the
VantageNet Rights or is otherwise in a position to
duplicate or make any unauthorized use of such source
code versions.
(e) VantageNet and the Stockholders are not aware that any
employees of VantageNet are obligated under any contract
or other agreement, or subject to any judgment, decree
or order of any court or administrative agency, that
would, after the date of Closing, interfere with the use
of such employee's best efforts to promote the interests
of VantageNet or that would reasonably be expected
8
<PAGE>
to conflict with VantageNet's business as proposed to be
conducted, including the unrestricted use of the
VantageNet Rights. Neither the execution nor delivery of
this Agreement, nor the carrying on of VantageNet's
business by the employees of VantageNet following the
Closing, will conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument
under which any of such employees is now obligated.
(f) VantageNet is Year 2000 Compliant. As used herein, Year
2000 Compliant means that each item of software used in
its business, and all other VantageNet Rights, is
designed effectively and without error to record, store,
process, calculate, verify and present calendar dates
falling on or after (and, if applicable, spans of time
including) January 1, 2000, and before December 31,
2049, and that each such item will calculate any
information (including information imported from, or
exported to, other programs or systems) dependent on or
relating to such dates in the same manner, and with the
same functionality, data integrity and performance, as
it records, stores, processes, calculates and presents
calendar dates on or before December 31, 1999, or
calculates any information dependent on or relating to
such dates.
3.13 Compliance with Law. VantageNet has complied and is in
compliance in all material respects with all applicable federal, state and local
laws, statutes, licensing requirements, rules and regulations, including those
that relate to environmental, employment, labor and matters.
3.14 Brokers or Finders. VantageNet has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
3.15 Employees. Other than the Stockholders, VantageNet has never
had any other employees.
3.16 Bank Accounts VantageNet has furnished to About.com a true and
complete list in Schedule 3.16 setting forth the names and addresses of all
banks, other institutions and state governmental departments at which VantageNet
has accounts, deposits or the like, and the names of all persons authorized to
draw on or give instructions with respect thereto or holding a power-of-attorney
on behalf of VantageNet. All cash held in such accounts is not subject to any
restriction or limitation as to withdrawal.
3.17 Title to Properties and Assets; Leases. Schedule 3.17 sets
forth the real and all material items of tangible personal property, including
fixed assets and equipment, owned or leased by VantageNet or used in the
operation of the business of VantageNet. VantageNet owns, or has a valid right
to use, its assets and property free and clear of all
9
<PAGE>
mortgages, liens, claims and encumberances. With respect to the property and
assets it leases or licenses, VantageNet is in compliance with such leases or
licenses in all material respects.
3.18 Accounts Receivable. Schedule 3.18 contains a summary of the
accounts receivable of VantageNet as of the date of this Agreement, together
with an accurate aging of such accounts receivable. The accounts receivable are
collectible at their full amounts.
3.19 Accounts Payable. Schedule 3.19 contains a summary of the
accounts payable of VantageNet as of the date of this Agreement, all of which
arose in the normal and ordinary course of the business of VantageNet.
3.20 Contracts. Schedule 3.20 contains a complete list of each
contract or agreement to which VantageNet is a party or which relates to the
operation of the business of VantageNet. Each of these contracts or agreements
is a legal, binding and enforceable obligation by or against VantageNet. To
VantageNet's and the Stockholder's knowledge, no party with whom VantageNet has
an agreement or contract is in default thereunder or has breached any term or
provision thereof which is material to the conduct of VantageNet's business.
VantageNet is not in material default in respect of any contract or agreement to
which it is a party.
3.21 Representations Complete. None of the representations and
warranties made by VantageNet herein, nor any statement made in any Exhibit or
certificate furnished pursuant to this Agreement, contains or will contain any
untrue statement of a material fact, or omit to state any material fact required
to be stated therein, or necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading.
ARTICLE 4
CERTAIN COVENANTS AND AGREEMENTS
4.1 Conduct of Business by VantageNet. During the period from the
date of this Agreement to the Closing Date, VantageNet shall conduct its
operations, and the Stockholders will ensure such conduct to be, only according
to its ordinary and usual course of business and will use its best efforts to
preserve intact its business organization, keep available the services of its
officers and employees and maintain satisfactory relationships with clients and
others having business relationships with VantageNet. During the period from the
date of this Agreement to the Closing Date, VantageNet shall confer on a regular
and frequent basis with one or more designated representatives of About.com to
report material operational matters and to report the general status of ongoing
operations. VantageNet shall immediately notify About.com of any emergency or
other change in the normal course of its business or in the operation of its
properties and of any complaints, investigations or hearings (or communications
indication that the same may be contemplated), adjudicatory proceedings, budget
meetings or submissions involving VantageNet and permit About.com's
representatives prompt access to all materials prepared in connection therewith.
Further:
(a) From the date hereof until the Closing, neither VantageNet
nor the Stockholders, without About.com's prior express written consent or
except as expressly permitted hereby:
10
<PAGE>
(i) incur any additional indebtedness relating to
VantageNet, or guarantee any indebtedness or obligation of any other
party;
(ii) issue, redeem or purchase any of VantageNet's
capital stock or securities convertible into VantageNet capital
stock or grant or issue any options, warrants or rights to subscribe
for VantageNet capital stock or securities convertible into
VantageNet capital stock or commit to do any of the foregoing;
(iii) enter into, amend or terminate any material
agreement or arrangement relating to VantageNet;
(iv) increase the compensation payable or to become
payable to any of VantageNet's officers, employees or agents,
including, without limitation, the payment or obligation to pay any
bonus, pension, retirement or insurance proceeds to such persons, or
adopt or amend any employee benefit plan or arrangement;
(v) enter into any employment contract or agreement with
any existing or prospective employee;
(vi) cancel, without full payment, any note, loan or
other obligation owing to VantageNet;
(vii) acquire or dispose of any properties or assets
used in the business of VantageNet;
(viii) create or suffer to be imposed any lien,
mortgage, security interest or other charge on or against
VantageNet's properties or assets;
(ix) engage in any other material activities or
transactions;
(x) make or adopt any change in the Certificate of
Incorporation or Bylaws of VantageNet as in force and effect on the
date hereof; or
(xi) take any action, or omit to take any action, within
their control, that would cause, and shall promptly notify About.com
in writing of any event or occurrence which cause any of the
representations and warranties set forth in Article 3 hereof to
become untrue, incomplete, or inaccurate in any material respect as
or prior to the Closing Date.
(b) From the date hereof until the Closing, or except as
expressly permitted hereby, VantageNet shall, unless otherwise expressly
consented to in writing by About.com:
(i) maintain VantageNet's existing insurance policies,
unless comparable insurance is substituted therefor, and shall not
take any action to terminate or modify those insurance policies;
11
<PAGE>
(ii) maintain VantageNet's books and records consistent
with past practices and policies and in accordance with generally
accepted accounting principles;
(iii) maintain in good working condition, ordinary wear
and tear excepted, and in compliance in all material respects with
all applicable laws and regulations, all fixed assets owned, leased
or operated, as the case may be, by VantageNet;
(iv) observe and perform, and remain in compliance with,
VantageNet's obligations in agreements and contracts the breach or
violation of which would have, individually or in the aggregate, a
Material Adverse Effect; and
(v) maintain compliance with the terms and conditions of
all VantageNet Rights and use its best efforts to maintain all such
VantageNet Rights in full force and effect.
(c) From the date hereof until the Closing, About.com shall be
authorized to serve advertisements across all of the VantageNet network.
With respect to any advertisements served by About.com on the VantageNet
network during this period, About.com agrees that VantageNet shall be
entitled to compensation equal to 20% of Net VantageNet Revenues. For
purposes of this Section 4.1(c), Net VantageNet Revenues shall be equal to
Gross VantageNet Realized Revenues minus all advertising and marketing
costs relating to the activities of VantageNet up to a maximum of 20% of
Gross VantageNet Realized Revenues. Gross VantageNet Realized Revenues
shall include all revenues actually received (on a cash basis) by
About.com from all advertisers whose advertisements are served on the
VantageNet network.
4.2 Necessary Consents. Prior to the Closing, each of the parties
hereto shall obtain such written consents and releases and take such other
actions as may be necessary or appropriate to allow the consummation of the
transactions contemplated hereby and to allow the continuation of VantageNet's
business by About.com and AAC after the Closing as conducted at the date hereof.
4.3 Access to Information. VantageNet and the Stockholders shall
give About.com and AAC and their respective accountants, legal counsel and other
representatives (collectively, the "Requesting Parties") full access, during
normal business hours throughout the period prior to the Closing, to all of the
properties, books, contracts, commitments and records relating to the business,
assets and liabilities of VantageNet, and shall furnish the Requesting Parties
during such period all such information concerning its affairs as the Requesting
Parties may reasonably request; provided, that any furnishing of such
information pursuant hereto or any investigation by a Requesting Party shall not
affect such Requesting Party's right to rely on the representations, warranties
and covenants made by VantageNet or the Stockholders in this Agreement. Pending
the Closing, each Requesting Party shall hold in confidence all information so
obtained and will use such information only for purposes related to the
transactions contemplated hereby. Each Requesting Party further agrees that,
pending the Closing, it will not
12
<PAGE>
disclose any such information to any third party except upon the prior written
consent of VantageNet and the Stockholders, or except as required by law or
except to its accountants, legal counsel or other representatives who have
agreed to maintain the confidentiality of such information. If the transactions
contemplated hereby are not consummated, the Requesting Party shall return all
data to VantageNet and the Stockholders and continue to honor the foregoing
confidentiality and non-disclosure covenants for a period of three (3) years.
Such obligation of confidentiality shall not extend to any information (i) which
is shown to be or to have been generally known to others engaged in the same
trade or business as VantageNet; (ii) previously known to the Requesting Party
prior to the start of discussions leading to the execution of this Agreement;
(iii) obtained by the Requesting Party in good faith from third parties who are
not obligated to maintain the information confidential; (iv) that is or shall be
public knowledge through no act or omission by the Requesting Party or any of
its directors, officers, employees, or representatives; or (v) that is required
to be disclosed pursuant to any law, rule or regulation or pursuant to any order
or decree of any appropriate court or governmental agency or pursuant to any
disclosure obligations set forth in the federal securities laws.
4.4 Other Negotiations. Prior to the Closing, or such earlier date
on which this Agreement is terminated in accordance with its terms, neither
VantageNet nor any of its officers, directors, employees, agents or
representatives will, directly or indirectly, initiate discussions or negotiate,
or authorize any person or entity to discuss or negotiate on behalf of such
party with any other party, or entertain or consider any inquiries or proposals
received from any other party, concerning the possible disposition of
VantageNet's business, assets or capital stock, in whole or in part. Neither
VantageNet nor any of its officers, directors, employees, agents or
representatives will furnish any information concerning VantageNet to any person
other than the other parties hereto for the purpose of, or with the intent of,
permitting such person or entity to evaluate a possible acquisition of
VantageNet's business, assets or capital stock, in whole or in part.
4.5 Certain Defaults; Litigation. VantageNet and the Stockholders
will give prompt notice to the other parties of:
(a) any notice of default received by such party subsequent to
the date of this Agreement and prior to the Closing under any instrument
or agreement to which such party or its assets is a party or by which it
is bound, which default could, if not remedied, result in a Material
Adverse Effect or which would render incorrect or misleading any
representation made herein, and
(b) any suit, action, proceeding or investigation instituted
or threatened against or affecting such party subsequent to the date of
this Agreement and prior to the Closing which, if adversely determined,
could result in a Material Adverse Effect or which would render incorrect
or misleading any representation made herein.
13
<PAGE>
ARTICLE 5
CONDITIONS PRECEDENT TO
OBLIGATIONS OF ABOUT.COM AND AAC
The obligations of About.com and AAC to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at or before the
Closing, of all the following conditions, unless expressly waived in writing by
About.com and AAC:
5.1 Representations and Warranties True; Schedules Delivered. The
representations and warranties set forth in Article III hereof shall have been
true and correct at and as of the Closing as though such representations and
warranties were made on and as of that date. The Schedules referred to herein
shall have been completed and provided to About.com and shall be in form and
substance satisfactory to About.com and its counsel.
5.2 Covenants Performed. VantageNet and the Stockholders shall have
performed, satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement to be performed or complied with by
VantageNet or the Stockholders on or before the Closing.
5.3 [Reserved]
5.4 VantageNet Stockholders. The current stockholders of VantageNet
shall have executed a unanimous written action whereby such stockholders vote
their respective shares in favor of the approval of this Agreement and shall not
have withdrawn such consent.
5.5 [Reserved]
5.6 Employment Agreements. Each of the Stockholders shall have
executed and delivered an employment agreement to About.com in the form attached
hereto as Exhibit B (collectively, the "Employment Agreements").
5.7 No Violations; No Actions. Consummation of the transactions
contemplated hereby shall not violate any order, decree or judgment of any court
or governmental body having competent jurisdiction and no action or proceeding
shall have been instituted or threatened by any person, entity or governmental
agency which, in any such case, in the sole judgment of About.com, has a
reasonable probability of resulting in (i) the obtaining of material damages
from VantageNet; (ii) an order, judgment or decree restraining, prohibiting or
rendering unlawful the consummation of the transactions contemplated hereby; or
(iii) other relief in connection therewith.
5.8 No Material Adverse Effect. During the period from June 9, 1999
to the Closing Date, there shall not have been any material adverse change in
the condition (financial or otherwise), liabilities, business or prospects of
VantageNet.
5.9 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be in form and substance
reasonably satisfactory to About.com
14
<PAGE>
and its counsel, and About.com shall have received all such counterpart
originals or certified or other copies of such documents as it may reasonably
request.
5.10 Delivery of Documents. About.com shall have received all
documents and other items to be delivered by VantageNet under Section 7.2.
5.11 Illegality or Legal Constraint. No statute, rule, regulation,
executive order, decree, injunction or restraining order shall have been
enacted, promulgated or enforced (and not repealed, superseded or otherwise made
inapplicable) by any court or governmental authority which prohibits the
consummation of the transactions contemplated hereby (each party agreeing
promptly to use its reasonable best efforts to have any such order, decree or
injunction lifted). There shall be no pending legal action, suit or proceeding
regarding the transactions contemplated hereby.
5.12 Required Consents. All consents, approvals and waivers from
third parties necessary to the transactions as contemplated hereby and to the
continued validity and effectiveness of the VantageNet Rights shall have been
obtained.
5.13 [Reserved]
5.14 Resignation of Directors. The directors and officers of
VantageNet shall have submitted their resignations in writing to About.com which
shall be effective as of the Closing Date.
5.15 Assignment of VantageNet Rights. All VantageNet Rights shall
have been properly assigned, if necessary, to provide the benefit of such
VantageNet Rights to About.com.
ARTICLE 6
CONDITIONS PRECEDENT TO
OBLIGATIONS OF VANTAGENET AND THE STOCKHOLDERS
The obligations of VantageNet and the Stockholders to consummate the
transactions contemplated by this Agreement are subject to the satisfaction, at
or before the Closing, of all the following conditions, unless expressly waived
in writing by VantageNet and the Stockholders:
6.1 Representations True. All representations and warranties by
About.com and AAC in this Agreement shall be true on and as of the Closing as
though such representations and warranties were made on and as of that date.
6.2 Covenants Performed. Each of About.com and AAC shall have
performed, satisfied, and complied in all respects with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by About.com or AAC on or before the Closing.
6.3 Delivery of Documents. VantageNet shall have received all
documents and other items to be delivered by About.com and AAC under Section
7.3.
15
<PAGE>
6.4 Required Consents. All consents, approvals and waivers from
third parties and governmental authorities necessary to the transactions as
contemplated hereby shall have been obtained.
6.5 Employment Agreements. About.com shall have executed and
delivered the Employment Agreements.
ARTICLE 7
CLOSING
7.1 Time and Place. The closing of the Merger (the "Closing") shall
occur at the offices of Brobeck, Phleger & Harrison LLP, 1633 Broadway, 47th
Floor, New York, New York 10023 at 10:00 a.m. on the earliest practicable date
after the conditions of Articles 5 and 6 shall have been met or at such other
time and date to which the parties may agree in writing (the "Closing Date").
7.2 Deliveries by VantageNet and the Stockholders. At the Closing,
VantageNet and the Stockholders shall execute and deliver or cause to be
executed and delivered to About.com:
(a) Corporate Documents. The Certificate of Incorporation of
VantageNet, certified by the Secretary of State of Minnesota as of a
recent date, and the Bylaws of VantageNet, certified by the Secretary of
VantageNet as in effect as of the Closing Date;
(b) [Reserved]
(c) Certificate of Good Standing. VantageNet shall have
delivered to About.com a certificate from the Secretary of State or other
appropriate official of the State of Minnesota to the effect that each of
VantageNet is in good standing or subsisting in Minnesota and listing all
charter documents of VantageNet on file;
(d) Resolutions. A copy of the resolutions of the Board of
Directors of VantageNet certified by the Secretary of VantageNet as having
been duly and validly adopted and being in full force and effect,
authorizing execution and delivery of this Agreement and performance of
the transactions contemplated hereby by VantageNet;
(e) [Reserved]
(f) Certificates Representing Shares. The Stockholders shall
have provided About.com with the certificates representing the Shares;
(g) Books and Records. All of the minute books, stock ledgers
and similar corporate records of VantageNet;
(h) [Reserved]
16
<PAGE>
(i) Consent. Evidence that all consents, releases, approvals,
or authorizations of or notifications to any third parties (including
governmental agencies), if any, required to effect the Merger and to
consummate the transactions contemplated hereby have been obtained by
VantageNet;
(j) [Reserved]
(k) [Reserved]
(l) Escrow Agreement. The Escrow Agreement; and
(m) Other Documents. Such other documents and instruments as
About.com or its counsel shall deem reasonably necessary to consummate the
transactions contemplated hereby.
All documents delivered to About.com shall be in form and substance
reasonably satisfactory to About.com and its counsel.
7.3 Deliveries of About.com. At the Closing, About.com shall execute
and deliver or cause to be executed and delivered to VantageNet simultaneously
with delivery of the items referred to in Section 7.2 above:
(a) Resolutions. A copy of the resolutions of the Board of
Directors of each of About.com and AAC, certified by the Secretary thereof
as having been duly and validly adopted and being in full force and
effect, authorizing execution and delivery of this Agreement and
performance of the transactions contemplated hereby by About.com and AAC;
(b) Escrow Agreement. The Escrow Agreement; and
(c) About.com Common Stock and Cash Consideration. Subject to
the Escrow Agreement, About.com will deliver to the Stockholders the
About.com Common Stock and the Cash Consideration.
All documents delivered to VantageNet shall be in form and substance
reasonably satisfactory to VantageNet.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification by the Stockholders. The Stockholders shall
indemnify About.com and AAC and their respective directors, officers, employees,
agents or advisors, or any of their respective successors and assigns, in
respect of, and hold each of them harmless against, any and all demands, claims,
debts, actions, assessments, judgements, settlements, sanctions, obligations and
other liabilities (whether absolute, accrued, contingent, fixed or otherwise,
known or unknown, due or to become due or otherwise), monetary damages, fines,
fees, penalties, interest obligations, deficiencies, losses and expenses
(including, without limitation, amounts paid in settlement, interest, court
costs, costs of investigators, reasonable fees
17
<PAGE>
and expenses of attorneys, accountants, financial advisors and other experts,
and other expenses of litigation) ("Damages"), incurred or suffered by them:
(a) resulting from, relating to or constituting any
misrepresentation, breach of warranty or failure to perform any covenant
or agreement of VantageNet or the Stockholders contained, or referred to,
in this Agreement, the Escrow Agreement or in the certificates delivered
pursuant to Section 7.2 herein; or
(b) arising out of the conduct of VantageNet's business prior
to the Effective Date or resulting from or relating to any goods sold or
services rendered by VantageNet through the Effective Date, including
without limitation, customer claims and customer warranty claims in
respect of such pre-Effective Date goods and services ("Customer Claims"),
regardless of when asserted.
8.2 Indemnification by About.com and AAC. About.com and AAC, jointly
and severally, shall indemnify the Stockholders and hold each of them harmless
against, any and all Damages incurred or suffered by them arising out of the
conduct of VantageNet's business following the Effective Date or resulting from
or relating to any goods sold or services rendered by or through VantageNet
following the Effective Date, including without limitation, customer claims and
customer warranty claims in respect of such post-Effective Date goods and
services, regardless of when asserted.
8.3 Method of Asserting Claims.
(a) All claims for indemnification by any party entitled to
make such claim hereunder (or any of their affiliated parties (each an
"Indemnified Person")) pursuant to this Article 8 shall be made in accordance
with the provisions of this Section 8.3 and the Escrow Agreement.
(b) The Indemnified Person shall give prompt written
notification to the party obligated to provide such indemnification (the
"Indemnifying Person") of the commencement of any action, suit or proceeding
relating to a third party claim for which indemnification pursuant to this
Article 8 may be sought; provided, however, that no delay on the part of the
Indemnified Person in notifying the Indemnifying Person shall relieve the
Indemnifying Person from any liability or obligation under this Article 8 unless
such notification delay shall prejudice the Indemnifying Person. Within 30 days
after delivery of such notification, the Indemnifying Person may, upon written
notice thereof to the Indemnified Person, assume control of the defense of such
action, suit or proceeding with counsel reasonably satisfactory to the
Indemnified Person, provided (i) the Indemnifying Person acknowledges in writing
to the Indemnified Person that the Indemnifying Person shall indemnify the
Indemnified Person with respect to all elements of such action, suit or
proceeding and any damages, fines, costs or other liabilities that may be
assessed against the Indemnified Person in connection with such action, suit or
proceeding, and (ii) the third party seeks monetary damages only. If the
Indemnifying Person does not so assume control of such defense, the Indemnified
Person shall control such defense. The party not controlling such defense may
participate therein; provided, that if the Indemnifying Person assumes control
of such defense and the Indemnified Person is advised by counsel in writing that
the Indemnifying Person and the Indemnified Person may
18
<PAGE>
have conflicting interests or different defenses available with respect to such
action, suit or proceeding, the reasonable fees and expenses of counsel to the
parties shall be considered "Damages" for purposes of this Agreement. The party
controlling such defense shall keep the other party advised of the status of
such action, suit or proceeding and the defense thereof and shall consider in
good faith recommendations made by the other party with respect thereto. An
Indemnified Person shall not agree to any settlement of such action, suit or
proceeding without the prior written consent of the Indemnifying Person. The
Indemnifying Person shall not agree to any settlement or the entry of a judgment
in any action, suit or proceeding without the prior written consent of the
Indemnified Person, which shall not be unreasonably withheld (it being
understood that it is reasonable to withhold such consent if, among other
things, the settlement or the entry of a judgment (A) lacks a complete release
of the Indemnified Person for all liability with respect thereto or (B) imposes
any liability or obligation on the Indemnified Person).
(c) The Escrowed Amounts in Paragraph 5(c) of the Escrow
Agreement shall be used to satisfy all Damages of any and all parties pursuant
to the provisions of the Escrow Agreement.
8.4 Survival and Limitations.
(a) Except with respect to the representations and warranties
contained in Section 3.11, the representations and warranties of VantageNet and
the Stockholders set forth in Article 3 above and the indemnification
obligations set forth in this Article 8 with respect to such representations and
warranties of VantageNet and the Stockholders (i) shall survive the Effective
Date and the consummation of the transactions contemplated hereby and continue
for a period of twelve (12) months after the Effective Date and (ii) shall not
be affected by any examination made for or on behalf of About.com or AAC or the
knowledge of any of About.com's or AAC's officers, directors, stockholders,
employees or agents.
(b) The representations and warranties of VantageNet and the
Stockholders set forth in Section 3.11 shall survive the Effective Date and the
consummation of the transactions contemplated hereby and shall continue for
seven (7) years in full force and effect in accordance with their terms.
(c) The representations and warranties of About.com and AAC
set forth in Article 2 above shall survive the Effective Date and the
consummation of the transactions contemplated hereby and continue for a period
of twelve (12) months after the Effective Date.
(d) The date on which any particular representation, warranty
or indemnification obligation of any party hereto terminates shall be referred
to herein and in the Escrow Agreement as the "Termination Date". If a notice of
a claim is given in accordance with the notice provisions of this Agreement or
the Escrow Agreement before the Termination Date, then (notwithstanding the
occurrence of the Termination Date) the representation, warranty or
indemnification obligation applicable to such claim shall survive until, but
only for purposes of, the resolution of such claim.
19
<PAGE>
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Termination of Agreement. All parties hereto agree to fulfill
the requirements of Articles 5 and 6 as soon as practicable. If any precondition
to the completion of the transactions contemplated hereby as set forth in
Articles 5 and 6 is not fulfilled on or prior to June 19, 1999, which date may
be extended by mutual written agreement of the parties, this Agreement shall be
null and void and have no further effect and no party shall have any liability
to any other party as a result of such termination, except as to such matters as
are specified to survive the termination of this Agreement.
9.2 Further Assurances. At the request of any of the parties hereto,
and without further consideration, each party agrees to execute such documents
and instruments and to do such further acts as may be necessary or desirable to
effectuate the transactions contemplated hereby including, without limitation,
that the principals of VantageNet shall cooperate with About.com in the
preparation of any short-year tax returns required of VantageNet as a result of
the Transaction.
9.3 Each Party to Bear Own Costs. Each of the parties shall pay all
costs and expenses incurred or to be incurred by it in negotiating and preparing
this Agreement and in closing and carrying out the transactions contemplated by
this Agreement.
9.4 Headings. The subject headings of the Articles and Sections of
this Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.
9.5 Entire Agreement; Waivers. This Agreement and the Exhibits and
Schedules hereto constitute the entire agreement between the parties pertaining
to the contemporaneous agreements, representations, and understandings of the
parties. No supplement, modification, or amendment of this Agreement shall be
binding unless executed in writing by all parties. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.
9.6 Third Parties. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third person to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over against any party to this Agreement.
9.7 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and thereto and their respective heirs, executors,
administrators, successors and assigns.
20
<PAGE>
9.8 Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party to
whom notice is to be given, on the date of transmittal of services via telecopy
to the party to whom notice is to be given, or on the third day after mailing if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, and properly addressed as follows:
To About.com
or AAC at: About.com, Inc.
220 East 42nd Street, 24th Floor
New York, New York 10017
Attn: Alan P. Blaustein, Esq.
Senior Vice President and General Counsel
Telecopy No.: (212) 818-1379
With a copy to: Brobeck, Phleger & Harrison LLP
1633 Broadway, 47th Floor
New York, New York 10023
Attention: Eric Simonson, Esq.
Telecopy No.: (212) 586-7878
To VantageNet at: VantageNet, Inc.
709 Granite Drive
Eagan, Minnesota 55123
Attention: Patrick Trepanier
Telecopy No.: (651) 405-3019
Jacob D. Gove
3833 64th Street, E.
Inver Grove Heights, Minnesota 55076
Telecopy No.: (651) 457-9686
With a copy to: Hinshaw & Culbertson
3100 Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402 Attention: Mark
F. Palma, Esq.
Telecopy No.: (612) 334-8888
Any party may change its address for purposes of this paragraph by giving notice
of the new address to each of the other parties in the manner set forth above.
9.9 Attorneys' Fees. If any party to this Agreement shall bring any
action, suit, counterclaim or appeal for any relief against the other,
declaratory or otherwise, to enforce the terms hereof or to declare rights
hereunder (collectively, an "Action"), the Prevailing Party shall be entitled to
recover as part of any such Action its reasonable attorneys' fees and costs,
including any fees and costs incurred in bringing and prosecuting such Action
and/or enforcing
21
<PAGE>
any order, judgment, ruling or award granted as part of such Action. "Prevailing
Party" within the meaning of this Section 9.9 includes, without limitation, a
party who agrees to dismiss an Action upon the other party's payment of all or a
portion of the sums allegedly due or performance of the covenants allegedly
breached, or who obtains substantially the relief sought by it.
9.10 Governing Law. The terms of this Agreement shall be governed by
the laws of the State of New York, without regard to principles of choice or
conflicts of laws.
9.11 Dispute Resolution. In the event that a dispute shall ever
arise between the parties, the parties agree to act in good faith to attempt to
resolve such dispute. In consideration for the mutual promises of each party,
the parties agree that, in the event of any dispute, the parties shall meet
within 10 days of a written request by a party for such a meeting. The party
requesting the meeting shall set forth in detail the nature of the dispute.
Within the period outline above, the parties shall meet and attempt in good
faith to resolve the dispute. If, and only if, the dispute remains unresolved
through the foregoing process, the parties agree that all actions or proceedings
arising in connection with this Agreement shall be tried and litigated
exclusively in the State and Federal courts located in the Borough of Manhattan
in New York, New York. The aforementioned choice of venue is intended by the
parties to be mandatory and not permissive in nature, thereby precluding the
possibility of litigation between the parties with respect to or arising out of
this Agreement in any jurisdiction other than that specified in this Section
9.11. Each party hereby waives any right it may have to assert the doctrine of
forum non conveniens or similar doctrine or to object to venue with respect to
any proceeding brought in accordance with this paragraph, and stipulates that
the State and Federal courts located in the Borough of Manhattan in New York,
New York shall have in personam jurisdiction and venue over each of them for the
purposes of litigating any dispute, controversy or proceeding arising out of or
related to this Agreement. Each party hereby authorizes and accepts service of
process sufficient for personal jurisdiction in any action against it as
contemplated by this Section 9.11 by registered or certified mail, return
receipt requested, postage prepaid, to its address for the giving of notices as
set forth in this Agreement. Any final judgment rendered against a party in any
action or proceeding shall be conclusive as to the subject of such final
judgment and may be enforced in other jurisdictions in any manner provided by
law.
9.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
9.13 Severability. All provisions contained herein are severable and
in the event that any of them shall be held to be to any extent invalid or
otherwise unenforceable by any court of competent jurisdiction, such provision
shall be construed as if it were written so as to effectuate to the greatest
possible extent the parties' expressed intent; and in every case the remainder
of this Agreement shall not be affected thereby and shall remain valid and
enforceable, as if such affected provision were not contained herein.
9.14 Construction of Agreement; Knowledge. The words "include,"
"includes," and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." For purposes of this Agreement, and
except as provided in the
22
<PAGE>
following sentence, the term "knowledge," when used in reference to a
corporation means the actual knowledge of the executive officers of such
corporation after such officers shall have made inquiry that is customary and
appropriate under the circumstances to which reference is made, and when used in
reference to an individual means the actual knowledge of such individual after
the individual shall have made inquiry that is customary and appropriate under
the circumstances to which reference is made.
9.15 Publicity. The parties shall cooperate with each other in the
development and distribution of all news releases and other public disclosures
relating to the transactions contemplated hereby. Neither VantageNet nor the
Stockholders shall issue or make, or cause to have issued or made, any press
release or announcement concerning the transactions contemplated hereby without
the advance approval in writing of the form and substance thereof by About.com
and AAC.
9.16 Mutual Drafting. This Agreement is the joint product of the
parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of such parties, and shall not be
construed for or against any party hereto.
9.17 Specific Performance and Other Remedies. The parties hereto
each acknowledge that the rights of each party to consummate the transactions
contemplated hereby are special, unique and of extraordinary character, and
that, in the event that any party violates or fails or refuses to perform any
covenant or agreement made by it herein, the non-breaching party may be without
an adequate remedy at law. The parties each agree, therefore, that in the event
that either party violates or fails or refuses to perform any covenant or
agreement made by such party herein, the non-breaching party or parties may,
subject to the terms of this Agreement and in addition to any remedies at law
for damages or other relief, institute and prosecute an action in any court of
competent jurisdiction to enforce specific performance of such covenant or
agreement or seek any other equitable relief.
[remainder of page intentionally left blank]
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
and Plan of Reorganization as of the date first above written.
ABOUT.COM, INC.
By:/s/ Alan P. Blaustein
-----------------------------------------
Its: Senior VP and General Counsel
----------------------------------------
ABOUT.COM ACQUISITION CORP.
By:/s/ Alan P. Blaustein
-----------------------------------------
Its: Senior VP and General Counsel
----------------------------------------
VANTAGENET, INC.
By: /s/ Patrick M. Trepanier
-----------------------------------------
Its: President
----------------------------------------
PATRICK M. TREPANEIR
By: /s/ Patrick M. Trepanier
-----------------------------------------
JACOB E. GOVE
By:/s/ Jacob E. Gove
-----------------------------------------
24
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<CASH> 61,506,300 4,573,600
<SECURITIES> 0 0
<RECEIVABLES> 3,140,300 315,500
<ALLOWANCES> 103,700 46,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 64,664,600 4,843,100
<PP&E> 8,968,300 1,413,800
<DEPRECIATION> 1,901,600 440,200
<TOTAL-ASSETS> 74,968,700 5,917,900
<CURRENT-LIABILITIES> 11,753,800 2,408,300
<BONDS> 726,200 2,528,900
0 0
0 0
<COMMON> 12,100 1,500
<OTHER-SE> 62,441,900 (15,713,600)
<TOTAL-LIABILITY-AND-EQUITY> 74,968,700 5,917,900
<SALES> 0 0
<TOTAL-REVENUES> 6,074,000 548,000
<CGS> 0 0
<TOTAL-COSTS> 39,507,300 5,201,000
<OTHER-EXPENSES> 659,600 0
<LOSS-PROVISION> 103,700 46,000
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (32,614,600) (5,224,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (32,614,600) (5,224,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (33,274,200) (5,224,000)
<EPS-BASIC> (4.38) (3.08)
<EPS-DILUTED> (4.38) (3.08)
</TABLE>
