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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to ____________
Commission file number: 333-76331
INTERNET.COM CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 06-1542480
- -------------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
23 OLD KINGS HIGHWAY SOUTH
DARIEN, CONNECTICUT 06820
- -------------------------------------- ---------------------------------
(Address of principal executive offices) (Zip Code)
(203) 662-2800
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes [X] No [ ]
The number of outstanding shares the Registrant's common stock, par value $.01
per share, as of April 10, 2000 was 25,088,020.
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INTERNET.COM CORPORATION
------------------------
INDEX
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PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 1999 and March 31, 2000 3
Consolidated Statements of Operations - For the Three Months Ended
March 31, 1999 and 2000 4
Consolidated Statement of Changes in Stockholders' Equity - For the Three
Months Ended March 31, 2000 5
Consolidated Statements of Cash Flows - For the Three Months Ended
March 31, 1999 and 2000 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II. Other Information 15
Signatures 16
EXHIBIT 27. Financial Data Schedule
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PART I. FINANCIAL INFORMATION Item 1. Financial Statements
INTERNET.COM CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND MARCH 31, 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
DECEMBER 31, MARCH 31,
1999 2000
----------- -----------
(UNAUDITED)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 17,943 $100,803
Accounts receivable, net of allowances of $712 and $1,402, respectively 5,568 7,873
Prepaid expenses and other 347 732
---------------- ------------------
Total current assets 23,858 109,408
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $688 and $1,069, respectively 3,221 4,248
INTANGIBLE ASSETS, net of accumulated amortization
of $10,428 and $14,761, respectively 39,086 47,416
INVESTMENTS IN INTERNET.COM VENTURE FUNDS AND OTHER 1,855 2,349
OTHER ASSETS 370 570
---------------- ------------------
Total assets $ 68,390 $163,991
================ ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,635 $ 1,033
Accrued payroll and related expenses 1,441 1,436
Accrued expenses and other 2,096 2,744
Accrued Web site acquisition payments 6,462 7,645
Deferred revenues 403 718
---------------- ------------------
Total current liabilities 12,037 13,576
ACCRUED WEB SITE ACQUISITION PAYMENTS 338 279
--------------- ------------------
Total liabilities 12,375 13,855
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 4,000,000 shares authorized,
no shares issued and outstanding - -
Common stock, $.01 par value, 75,000,000 shares authorized,
23,334,520 and 25,086,520 shares issued and outstanding at
December 31, 1999 and March 31, 2000, respectively 233 251
Additional paid-in capital 70,917 169,268
Accumulated deficit (15,135) (19,383)
---------------- ------------------
Total stockholders' equity 56,015 150,136
---------------- ------------------
Total liabilities and stockholders' equity $ 68,390 $163,991
================ ==================
</TABLE>
See notes to consolidated financial statements.
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INTERNET.COM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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THREE MONTHS ENDED
MARCH 31,
--------------------------------------
1999(1) 2000
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REVENUES $ 1,612 $ 9,645
COST OF REVENUES 1,117 4,225
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GROSS PROFIT 495 5,420
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OPERATING EXPENSES:
Advertising, promotion and selling 928 4,032
General and administrative 773 1,921
Depreciation 82 381
Amortization 1,938 4,333
---------------- ------------------
TOTAL OPERATING EXPENSES 3,721 10,667
---------------- ------------------
OPERATING LOSS (3,226) (5,247)
MINORITY INTEREST - 46
EQUITY INCOME (LOSS) - (91)
INTEREST INCOME (EXPENSE), NET (32) 1,089
---------------- ------------------
LOSS BEFORE INCOME TAXES (3,258) (4,203)
PROVISION FOR INCOME TAXES - 45
---------------- ------------------
NET LOSS $ (3,258) $ (4,248)
================ ==================
BASIC AND DILUTED NET LOSS PER SHARE $ (0.20) $ (0.17)
================ ==================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 16,343 24,489
================ ==================
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(1) Represents the financial data of predecessor business
See notes to consolidated financial statements.
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INTERNET.COM CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
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COMMON STOCK ADDITIONAL TOTAL
------------------------------ PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
------------- ------------- --------------- ----------------- -----------------
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BALANCE AT
DECEMBER 31, 1999 23,334,520 $ 233 $ 70,917 $ (15,135) $ 56,015
Proceeds from public offering 1,750,000 18 98,323 - 98,341
Exercise of stock options 2,000 - 28 - 28
Net loss - - - (4,248) (4,248)
------------- ------------- --------------- ----------------- -----------------
BALANCE AT
MARCH 31, 2000 25,086,520 $ 251 $ 169,268 $ (19,383) $ 150,136
============= ============= =============== ================= =================
</TABLE>
See notes to consolidated financial statements.
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INTERNET.COM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000
(UNAUDITED)
(IN THOUSANDS)
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THREE MONTHS ENDED
MARCH 31,
----------------------------------
1999(1) 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,258) $ (4,248)
Adjustments to reconcile net cash used in operating activities-
Depreciation and amortization 2,020 4,714
Provision for losses on accounts receivable 67 690
Minority interest - (46)
Equity (income) loss - 91
Changes in assets and liabilities -
Accounts receivable (7) (2,868)
Prepaid expenses and other (219) (585)
Accounts payable and accrued expenses 1,014 234
Deferred revenues 310 263
--------------- --------------
Net cash used in operating activities (73) (1,755)
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (370) (1,394)
Acquisitions of Web sites, related Internet media properties and other (1,085) (11,775)
Investment in internet.com venture funds and other - (585)
--------------- --------------
Net cash used in investing activities (1,455) (13,754)
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net - 98,341
Proceeds from exercise of stock options - 28
Contributions from Mecklermedia Corporation 1,670 -
Borrowings under line of credit 1,465 -
Payments for line of credit (1,500) -
--------------- --------------
Net cash provided by financing activities 1,635 98,369
--------------- --------------
Net increase in cash and cash equivalents 107 82,860
Cash and cash equivalents, beginning of year 129 17,943
--------------- --------------
Cash and cash equivalents, end of period $ 236 $ 100,803
=============== ==============
Supplemental disclosures of cash flow:
Cash paid for interest $ 32 $ -
=============== ==============
Cash paid for income taxes $ - $ 47
=============== ==============
</TABLE>
(1) Represents the financial data of predecessor business
See notes to consolidated financial statements.
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INTERNET.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. THE COMPANY
internet.com owns and operates a leading network of integrated
business-to-business Web sites and related Internet media properties focused
solely on the Internet industry. As of March 31, 2000, this network of Internet
media properties consisted of 107 Web sites, 132 e-mail newsletters, 117 online
discussion forums and 78 moderated e-mail discussion lists. The network is
organized into 12 vertical content channels to serve Internet users, which
include Internet industry and Internet technology professionals, Web developers
and experienced Internet users.
Since all of internet.com's products and services relate to providing
Internet-related information to Internet industry and Internet technology
professionals, Web developers and experienced Internet users, internet.com's
success is dependent on the continued growth of the Internet.
On June 25, 1999, internet.com completed an initial public offering
("IPO") of 3,400,000 shares of common stock at $14.00 per share. Net proceeds to
internet.com aggregated approximately $42.9 million.
On February 1, 2000, internet.com completed a follow-on offering of
3,750,000 shares of common stock priced at $60.00 per share, of which 1,750,000
shares were sold by internet.com and 2,000,000 shares were sold by Penton Media,
Inc. Net proceeds received by internet.com from the follow-on offering were
approximately $98.3 million. internet.com did not receive any of the proceeds
from the sale of shares by Penton Media, Inc.
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared from the books and records of internet.com in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. It is suggested that these unaudited
consolidated financial statements be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 1999 included in
internet.com's Form 10-K for the fiscal year ended December 31, 1999. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the results for the interim periods presented have been
reflected in such consolidated financial statements.
The consolidated financial statements include the accounts of internet.com
and its majority-owned and wholly-owned subsidiaries. All significant
intercompany transactions have been eliminated.
Certain amounts have been reclassified in the prior year statements to
conform to the current year presentation.
internet.com does not believe any recently issued accounting standards
will have a material impact on its financial condition or results of operations.
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3. COMPUTATION OF NET LOSS PER SHARE
Basic net loss per share is computed using the weighted average number of
common shares outstanding during the period. Dilutive net 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 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.
Computations of basic and diluted net loss per share for the three months
ended March 31, 1999 and 2000 are as follows:
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THREE MONTHS ENDED
MARCH 31,
-------------------------------------
1999 2000
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Numerator: Net loss $ (3,258) $ (4,248)
Denominator: Weighted average shares outstanding 16,343 24,489
---------------- -----------------
Basic and diluted net loss per share $ (0.20) $ (0.17)
================ =================
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4. ACQUISITIONS OF ASSETS
For the three months ended March 31, 1999 and 2000, internet.com made one
and 14 acquisitions of Web sites and related Internet media properties for a
total of $200,000 and $7.7 million, respectively. These acquisitions were
accounted for as purchases. Twelve of the acquisitions made during the three
months ended March 31, 2000 provide for contingent payments to be made after the
acquisition date based upon the achievement of certain objectives. The acquired
Web sites and related Internet media properties had minimal tangible assets or
liabilities. Therefore, a substantial majority of the purchase price has been
recorded as intangible assets on a preliminary basis and is being amortized over
an estimated useful life of three years. The purchase accounting for these
acquisitions will be finalized at a later date not to exceed one year from the
purchase date of each acquisition.
The unaudited pro forma information below presents results of operations
as if the acquisitions occurred as of January 1, 1999 and 2000, respectively,
for the three months ended March 31, 1999 and 2000, respectively. The unaudited
pro forma information is not necessarily indicative of the results of operations
of the combined companies had these events occurred at the beginning of the
periods presented nor is it indicative of future results.
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THREE MONTHS ENDED
MARCH 31,
-------------------------------------
1999 2000
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Revenues $ 2,081 $ 10,116
================ =================
Net loss $ 3,868 $ 4,690
================ =================
Basic and diluted net loss per share $ (0.24) $ (0.19)
================ =================
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5. SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES
internet.com barters portions of unsold advertising impressions for equity
interests in certain of its venture funds' portfolio companies. internet.com
recorded $360,000 in both revenue and investments in internet.com venture funds
and other during the three months ended March 31, 2000 related to the barter of
unsold advertising impressions for equity.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements and the accompanying notes which appear elsewhere in this filing.
This filing contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that involve risks and
uncertainties. These statements relate to our future plans, objectives, beliefs,
expectations and intentions. These statements may be identified by the use of
words such as "expects," "anticipates," "believes," "intends," "plans" and
similar expressions. Our actual results could differ materially from those
discussed in these statements. Factors which could cause our actual results to
differ from those contained in the forward-looking statements are discussed
below and in our reports filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934.
The forward-looking statements included herein are made as of the date of this
Form 10-Q, and we are under no obligation to update the forward-looking
statements after the date hereof.
OVERVIEW
We own and operate a leading network of integrated business-to-business
vertical content Web sites, e-mail newsletters, online discussion forums and
moderated e-mail discussion lists focused solely on the Internet industry. As of
March 31, 2000, our network consisted of 12 integrated business-to-business
vertical content channels containing 107 Web sites, 132 e-mail newsletters, 117
online discussion forums and 78 moderated e-mail discussion lists focused solely
on the Internet industry. During the month of March 2000, we delivered
approximately 130 million page views to over 2.2 million unique visitors and 24
million copies of our e-mail newsletters to 2.6 million subscribers, and 33.9
million postings were generated by 104,000 subscribers to our moderated e-mail
discussion lists.
We generate revenues from the following sources:
o advertising on our Web sites, e-mail newsletters, online discussion
forums and moderated e-mail discussion lists;
o e-commerce agreements and offerings;
o seminars;
o permission based opt-in e-mail list rentals;
o paid subscription services;
o licensing of our editorial content, brands and software;
o online press release distribution services; and
o venture fund management fees
We barter a portion of the unsold advertising impressions generated by our
network for advertising and promotion in media properties owned by Penton Media,
Inc. and other third parties. In addition, we barter portions of unsold
advertising impressions for equity interests in certain of our venture funds'
portfolio companies. We did not record the effects of this barter in our
financial statements for the three months ended March 31, 1999. Beginning in
January 2000, in accordance with Emerging Issues Task Force Issue No. 99-17,
"Accounting for Advertising Barter Transactions," we have prospectively recorded
revenues from barter transactions at their estimated fair values. Revenues and
expenses related to barter transactions were approximately $1.0 million and
$643,000, respectively, for the three months ended March 31, 2000.
For the three months ended March 31, 2000, approximately 74% of our
revenues were from the sale of advertising. We recognize advertising revenue
ratably in the period the advertising is displayed, provided that we have no
significant remaining obligations and collection of the resulting receivable is
probable. Such obligations typically include guarantees of a minimum number of
advertising impressions, or number of times
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an advertisement is displayed. We use a direct sales force to sell advertising
to companies and advertising agencies.
Our e-commerce agreements and offerings generally include advertising on
our Web sites, bounties for new customers or revenue sharing for sales made by
the e-commerce vendors as a result of links from our network, or in some cases
both advertising, bounties and revenue sharing. We recognize the advertising
component of these agreements ratably in the period the advertising is
displayed, provided that we have no significant remaining obligations and
collection of the remaining receivable is probable. We recognize the revenue
sharing component of these agreements as revenue in the period that the
underlying sales are made by the e-commerce vendor.
Our seminars generate revenues from attendee registrations, as well as
from advertiser and vendor sponsorships. Proceeds from the sale of attendee
registrations and advertiser and vendor sponsorships are deferred and recognized
as revenue at the time the seminars are held.
Through a third-party agent, we currently offer for rental our permission
based opt-in e-mail list names relating to over 80 Internet-specific topics.
Members of our community of Internet users volunteer, or "opt in," to be
included on these lists to receive e-mail product offerings and information
relevant to their Internet interests. Subscribers to these permission based
opt-in e-mail lists receive e-mail announcements of special offers relating to
each topic subscribed. We generate revenues on a per use basis for the rental of
our list names. Revenue from permission based opt-in list rentals is recognized
at the time of use by the renter.
Paid subscription services relate to customer subscriptions to our paid
e-mail newsletters, which are sold through our network and through affiliate
relationships. Revenue from subscriptions is recognized ratably over the
subscription period. Deferred revenues relate to the portion of collected
subscription fees which has not yet been recognized as revenue.
Our licensing agreements vary in structure, with internet.com generating
fixed fees, royalties or both for access to our editorial content, brands or
software. We generally license our editorial content, brands and software to
offline and online media companies.
Online press release distribution revenues are generated through
INTERNETNEWSBUREAU.COM, which we acquired in October 1999. We distribute e-mail
based press releases to over 4,500 registered journalists. We recognize revenues
for these services during the period in which the press releases are delivered.
Venture fund management fees relate to management fees earned for the
day-to-day operation and general management of internet.com Venture Fund I LLC
and internet.com Venture Fund II LLC. Management fees are recognized ratably
over the period the services are rendered. In addition, internet.com is entitled
to 20% of the realized gains earned from portfolio investments.
From July 1995 through March 31, 2000, we made 56 acquisitions of Internet
media properties, consisting of 70 Web sites, 48 e-mail newsletters, 77 online
discussion forums and 63 moderated e-mail discussion lists. We expect to
continue to pursue strategic acquisitions to strengthen our content offerings
and services; although there can be no assurance that any further strategic
acquisitions will be consumated. All of our acquisitions have been accounted for
as purchases. Consequently, as of March 31, 2000 we had $46.6 million of
goodwill, net, which is being amortized over three years.
We have sustained losses on a quarterly and annual basis in the past. We
expect to incur significantly higher costs, particularly advertising, promotion
and selling expense, to grow our business. As a result, we expect to incur
significant operating losses for the foreseeable future and because costs are
largely fixed in the short term, we expect to be vulnerable to significant
fluctuations in operating losses if actual revenues fall below
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anticipated levels. Furthermore, given the rapidly evolving nature of our
business and our limited operating history, our operating results are difficult
to forecast and period-to-period comparison of our operating results will not be
meaningful and should not be relied upon as any indication of future
performance. Due to these and other factors, many of which are outside our
control, quarterly operating results may fluctuate significantly in the future.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 2000
REVENUES. Revenues were approximately $1.6 million for the three months
ended March 31, 1999 and approximately $9.6 million for the three months ended
March 31, 2000, representing an increase of 498%. Revenue relates to advertising
on our Web sites, e-mail newsletters, online discussion forums and moderated
e-mail discussion lists; e-commerce agreements and offerings; seminars;
permission based opt-in e-mail list rentals; paid subscription services;
licensing; online press release distribution services; and venture fund
management fees. While we anticipate that advertising revenues will continue to
represent a majority of our revenues for the foreseeable future, we believe that
revenues from e-commerce agreements and offerings, seminars, permission based
opt-in e-mail list rentals, paid subscription services, licensing, online press
release distribution services and venture fund management fees will expand and
diversify our future revenue streams.
COST OF REVENUES. Cost of revenues primarily consists of expenses
associated with editorial, communications infrastructure and Web site hosting.
Cost of revenues was approximately $1.1 million for the three months ended March
31, 1999 and approximately $4.2 million for the three months ended March 31,
2000, representing an increase of 278%. This change was primarily due to the
increased hiring of editorial, technology and operations personnel and expenses
for freelance contributors. As a percentage of revenues, cost of revenues was
69% for the three months ended March 31, 1999 and 44% for the three months ended
March 31, 2000. We anticipate that our cost of revenues will continue to
increase in absolute dollars as we continue to expand our existing content
offerings and services. However, we anticipate cost of revenues to decrease as a
percentage of revenues. We anticipate hiring additional editorial, technology
and operations personnel, as well as freelance contributors, as we acquire
additional Web sites, e-mail newsletters, online discussion forums and moderated
e-mail discussion lists and expand our proprietary content.
ADVERTISING, PROMOTION AND SELLING. Advertising, promotion and selling
expenses primarily consist of costs related to sales and marketing staff, sales
commissions and promotion costs. Advertising, promotion and selling expenses
were $928,000 for the three months ended March 31, 1999 and approximately $4.0
million for the three months ended March 31, 2000, representing a 334% increase.
This change was primarily due to increased hiring of advertising sales personnel
and the recording of barter advertising. As a percentage of revenues,
advertising, promotion and selling expenses were 58% for the three months ended
March 31, 1999 and 42% for the three months ended March 31, 2000. We anticipate
that our advertising, promotion and selling expenses will continue to increase
in absolute dollars, primarily due to our planned hiring of additional sales
personnel in an effort to increase our advertising sales as well as increased
expenses for the promotion of our content offerings and services to our
community of Internet users, advertisers and vendors.
GENERAL AND ADMINISTRATIVE. General and administrative expenses primarily
consist of salaries, professional fees, facilities costs and provisions for
losses on accounts receivable. General and administrative expenses were $773,000
for the three months ended March 31, 1999 and approximately $1.9 million for the
three months ended March 31, 2000, representing a 149% increase. This change was
primarily due to the hiring of additional personnel and increased provisions for
losses on accounts receivable. As a percentage of revenues, general and
administrative expenses were 48% for the three months ended March 31, 1999 and
20% for the three months ended March 31, 2000. We expect that our general and
administrative expenses will continue to
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increase in absolute dollars, but these expenses are expected to decrease as a
percentage of revenues. We anticipate hiring additional general and
administrative personnel.
DEPRECIATION AND AMORTIZATION. Depreciation of property and equipment was
$82,000 for the three months ended March 31, 1999 and $381,000 for the three
months ended March 31, 2000, representing a 365% increase. As a percentage of
revenues, depreciation of property and equipment was 5% for the three months
ended March 31, 1999 and 4% for the three months ended March 31, 2000.
Amortization of intangibles was approximately $1.9 million for the three months
ended March 31, 1999 and approximately $4.3 million for the three months ended
March 31, 2000, representing a 124% increase. This increase was primarily due to
the amortization of acquired Web sites and related Internet media properties. As
a percentage of revenues, amortization of intangibles was 120% for the three
months ended March 31, 1999 and 45% for the three months ended March 31, 2000.
We anticipate that amortization will continue to increase as we acquire
additional Web sites, e-mail newsletters, online discussion forums, moderated
e-mail discussion lists and other online businesses. We also anticipate
increasing our capital expenditures to support the current and expected growth
of our business.
EQUITY INCOME (LOSS). Equity losses represent our proportionate share of
net losses in our investments in internet.com Venture Fund I LLC and
internet.com Venture Fund II LLC for the three months ended March 31, 2000.
INTEREST INCOME (EXPENSE), NET. Interest expense, net of interest income,
related to borrowings under a line of credit was $32,000 for the three months
ended March 31, 1999. Interest income was $1.1 million for the three months
ended March 31, 2000.
PROVISION FOR INCOME TAXES. internet.com recorded a provision for income
taxes of $45,000 for the three months ended March 31, 2000 related to foreign
tax liabilities which were recorded based upon estimated foreign tax rates.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded operations primarily with cash from
proceeds from our IPO and follow-on public equity offering, borrowings under a
line of credit and the capital contributions of members of internet.com LLC. On
June 25, 1999, we completed our IPO of 3,400,000 shares of our common stock at
$14.00 per share. Net proceeds to internet.com aggregated approximately $42.9
million. On June 30, 1999, we paid the outstanding balance under our line of
credit of approximately $5.0 million and terminated the line of credit. On
February 1, 2000, we completed our follow-on public offering of 3,750,000 shares
of common stock priced at $60.00 per share, of which 1,750,000 shares were sold
by internet.com and 2,000,000 shares were sold by Penton Media, Inc. Net
proceeds received by internet.com from the follow-on offering were approximately
$98.3 million. internet.com did not receive any of the proceeds from the sale of
shares by Penton Media, Inc.
As of March 31, 2000, internet.com had total current assets of $109.4
million and total current liabilities of $13.6 million, or working capital of
$95.8 million.
Net cash used in operating activities was $73,000 for the three months
ended March 31, 1999 and $1.8 million for the three months ended March 31, 2000.
Net cash used in operating activities was primarily a result of our net losses
adjusted for depreciation and amortization offset by increases in accounts
receivable.
Net cash used in investing activities was approximately $1.5 million for
the three months ended March 31, 1999 and $13.8 million for the three months
ended March 31, 2000. Net cash used in investing activities was primarily a
result of acquisitions of Web sites and related Internet media properties and
capital expenditures. Included in investing activities are securities received
as a result of certain barter transactions with third parties.
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Net cash provided by financing activities was approximately $1.6 million
for the three months ended March 31, 1999 and $98.4 million for the three months
ended March 31, 2000. Net cash provided by financing activities was primarily a
result of contributions from Mecklermedia during the three months ended March
31, 1999 and from net proceeds from our follow-on public offering for the three
months ended March 31, 2000.
Capital expenditures were $370,000 for the three months ended March 31,
1999 and approximately $1.4 million for the three months ended March 31, 2000.
We anticipate that we will increase our capital expenditures consistent with our
anticipated growth in operations, infrastructure and personnel.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS No.
133") subsequently amended by SFAS No. 137, to be effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. SFAS No. 133 requires
that all derivative financial instruments, such as interest rate swap contracts
and foreign exchange contracts, be recognized in the financial statements and
measured at fair value regardless of the purpose or intent for holding them.
Changes in the fair value of derivative financial instruments are either
recognized periodically in income or stockholders' equity, depending on whether
the derivative is being used to hedge changes in fair value or cash flows. The
adoption of SFAS No. 133 is not expected to have a material effect on our
financial statements.
In March 2000, the Emerging Issues Task Force reached a consensus on Issue
No. 00-2, "Accounting for Web Site Development Costs," ("EITF Issue No. 00-2")
to be applicable to all Web site development costs incurred for the quarter
beginning after June 30, 2000. The consensus states that for specific Web site
development costs, the accounting for such costs should be based generally on a
model consistent with AICPA Statement of Position 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use," ("SOP
98-1"). Accordingly, certain Web site development costs which are presently
being expensed as incurred, will be capitalized and amortized. The adoption of
EITF Issue No. 00-2 is not expected to have a material effect on our financial
statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
We have no derivative financial instruments or derivative commodity
instruments in our cash and cash equivalents. We have invested our net proceeds
from our public offerings in short-term, interest-bearing, investment grade
securities. Our transactions are generally conducted, and our accounts are
generally denominated, in United States dollars. Accordingly, we are not exposed
to significant foreign currency risk.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
For a description of material pending legal proceedings affecting
the Registrant, see Item 3. Legal Proceedings contained in the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999.
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following is a list of exhibits filed as part of this Report
on Form 10-Q. Where so indicated by footnote, exhibits which were
previously filed are incorporated by reference. For exhibits
incorporated by reference, the location of the exhibit in the
previous filing is indicated parenthetically except for in those
situations where the exhibit number was the same as set forth
below.
Exhibit
Number Description
------------- ---------------------------------------------------
11 Statement Regarding Computation of Per Share
Earnings (Loss) (included in notes to consolidated
financial statements)
27 Financial Data Scheduled
(b) Reports on Form 8-K
None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: April 25, 2000 internet.com Corporation
/s/Christopher S. Cardell
-----------------------------------------------
Christopher S. Cardell
Director, President and Chief Operating Officer
/s/Christopher J. Baudouin
-----------------------------------------------
Christopher J. Baudouin
Chief Financial Officer
16
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from internet.com
Corporation's unaudited consolidated financial statements as of and for the
period ended March 31, 2000 and is qualfied in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 100,803
<SECURITIES> 0
<RECEIVABLES> 9,275
<ALLOWANCES> (1,402)
<INVENTORY> 0
<CURRENT-ASSETS> 109,408
<PP&E> 5,317
<DEPRECIATION> (1,069)
<TOTAL-ASSETS> 163,991
<CURRENT-LIABILITIES> 13,576
<BONDS> 0
0
0
<COMMON> 251
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 163,991
<SALES> 0
<TOTAL-REVENUES> 9,645
<CGS> 4,225
<TOTAL-COSTS> 4,225
<OTHER-EXPENSES> 10,712
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,089
<INCOME-PRETAX> (4,203)
<INCOME-TAX> 45
<INCOME-CONTINUING> (4,248)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,248)
<EPS-BASIC> (.17)
<EPS-DILUTED> (.17)
</TABLE>
