<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) MAY 15, 2000
JUPITER COMMUNICATIONS, INC.
(Exact name of registrant as specified in charter)
DELAWARE 000-27537 11-3497726
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
627 BROADWAY, NEW YORK, NEW YORK 10012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 780-6060
NOT APPLICABLE
(Former name or former address, if changed since last report.)
<PAGE> 2
This Current Report on Form 8-K/A amends the Current Report on Form 8-K
filed on March 30, 2000.
Item 2 ACQUISITION OR DISPOSITION OF ASSETS
(a) On March 16, 2000, Jupiter Communications, Inc. ("Jupiter")
completed its acquisition of Internet Research Group, a California corporation
("IRG"), pursuant to an Agreement and Plan of Merger and Reorganization, dated
as of February 28, 2000, among Jupiter, IRG Acquisition Corp., a wholly-owned
subsidiary of Jupiter ("Merger Sub"), IRG and the shareholders of IRG listed on
Schedule I thereto (the "IRG Shareholders"). The acquisition was accomplished
through the merger of Merger Sub with and into IRG (the "Merger"). The Merger
was effected through the conversion and exchange of each share of common stock
of IRG outstanding immediately prior to the consummation of the Merger into
.092766387 of a share of Jupiter's common stock. The amount of such
consideration was determined based upon arm's-length negotiations between
Jupiter and IRG. A copy of the Merger Agreement and the Press Release were
previously filed with the Securities and Exchange Commission and are
incorporated herein by reference to Exhibit 2.1 and 99.1, respectively, to the
Company's Current Report on Form 8-K, filed with the Securities and Exchange
Commission on March 30, 2000.
(b) On April 14, 2000, Jupiter Communications, Inc. ("Jupiter")
completed its acquisition of Net Market Makers, a California corporation
("NMM"), pursuant to a Stock Purchase Agreement, dated as of February 28, 2000
(the "Stock Purchase Agreement"), among Jupiter, NMM and the shareholders of NMM
listed on Schedule I thereto (the "NMM Shareholders"). The acquisition was
accomplished through the purchase from the NMM Shareholders of all the issued
and outstanding shares of capital stock of NMM (the "NMM Shares") for
consideration consisting of an aggregate of approximately $20.5 million in cash
and 274,680 shares of common stock of Jupiter. The amount of such consideration
was determined based upon arm's-length negotiations between Jupiter and the NMM
Shareholders. Jupiter used a portion of the proceeds received from its initial
public offering to acquire the NMM Shares. A copy of the Stock Purchase
Agreement was previously filed with the Securities and Exchange Commission and
is incorporated herein by reference to Exhibit 2.2 to the Company's Current
Report on Form 8-K, filed with the Securities and Exchange Commission on March
30, 2000.
Item 7 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
The following appear as Exhibit 99.2 to this Current Report on Form
8-K/A and are incorporated into this document by reference:
(i) Balance sheets of Internet Research Group as of December 31, 1998
and December 31, 1999, and the related statements of operations, stockholders'
equity and cash flows for the years then ended.
The following appear as Exhibit 99.3 to this Current Report on Form
8-K/A and are incorporated into this document by reference:
2
<PAGE> 3
(ii) Balance sheet of Net Market Makers as of December 31, 1999, and
the related statement of operations, shareholders' equity and cash flows for the
year then ended.
(b) Pro Forma Financial Information.
The following appear as Exhibit 99.4 to this Current Report on Form
8-K/A and are incorporated into this document by reference:
(i) Unaudited condensed consolidated pro forma balance sheet
as of December 31, 1999; and
(ii) the related unaudited condensed consolidated pro forma statement
of operations for the year ended December 31, 1999.
(c) Exhibits. The following documents are filed as exhibits to this
report:
<TABLE>
<CAPTION>
<S> <C>
2.1* Agreement and Plan of Merger and Reorganization,
dated as of February 28, 2000, among Jupiter
Communications, Inc., IRG Acquisition Corp.,
Internet Research Group and the shareholders of
Internet Research Group listed on Schedule I
thereto.
2.2* Stock Purchase Agreement, dated as of February 28,
2000, among Jupiter Communications, Inc., Net Market
Makers, Inc. and the shareholders of Net Market
Makers, Inc. listed on Schedule I thereto.
23.1 Consents of Independent Accountants.
99.1* Press Release dated February 29, 2000.
99.2 Balance sheets of Internet Research Group as of
December 31, 1998 and December 31, 1999, and the
related statements of operations, stockholders'
equity and cash flows for the years then ended.
99.3 Balance sheet of Net Market Makers as of December
31, 1999, and the related statement of operations,
shareholders' equity and cash flows for the year
then ended.
99.4 Unaudited condensed consolidated pro forma financial
information as of and for the year ended December
31, 1999.
</TABLE>
_________________
*Previously Filed.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Jupiter Communications, Inc.
Date: May 15, 2000 /s/ Jean Robinson
----------------------------
Jean Robinson
Chief Financial Officer
4
<PAGE> 5
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
<S> <C>
2.1* Agreement and Plan of Merger and Reorganization, dated as
of February 28, 2000, among Jupiter Communications, Inc.,
IRG Acquisition Corp., Internet Research Group and the
shareholders of Internet Research Group listed on Schedule
I thereto.
2.2* Stock Purchase Agreement, dated as of February 28, 2000,
among Jupiter Communications, Inc., Net Market Makers, Inc.
and the shareholders of Net Market Makers, Inc. listed on
Schedule I thereto.
23.1 Consents of Independent Accountants.
99.1* Press Release dated February 29, 2000.
99.2 Balance sheets of Internet Research Group as of December
31, 1998 and December 31, 1999 and the related statements
of operations, stockholders' equity and cash flows for the
years then ended.
99.3 Balance sheet of Net Market Makers as of December 31, 1999,
and the related statement of operations, shareholders'
equity and cash flows for the year then ended.
99.4 Unaudited condensed consolidated pro forma financial
information as of, and for the year ended December 31,
1999.
</TABLE>
__________________
* Previously Filed.
5
<PAGE> 1
Exhibit 23.1
CONSENT OF KPMG LLP, INDEPENDENT AUDITORS
We consent to the use of our report dated March 16, 2000, with respect to the
financial statements of Internet Research Group, as of December 31, 1998 and
1999 and for the years then ended included in the Amendment to Current Report
(Form - 8K/A) of Jupiter Communications, Inc.
/S/ KPMG LLP
San Francisco, California
May 15, 2000
CONSENT OF KPMG LLP, INDEPENDENT AUDITORS
We consent to the use of our report dated March 27, 2000, with respect to the
financial statements of Net Market Makers, as of December 31 1999 and for the
year then ended included in the Amendment to Current Report (Form - 8K/A) of
Jupiter Communications, Inc.
/S/ KPMG LLP
San Francisco, California
May 15, 2000
<PAGE> 1
Exhibit 99.2
IRG
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report........................................................................ F-1
Balance Sheets as of December 31, 1998 and 1999 .................................................... F-2
Statements of Operations for the years ended December 31, 1998 and 1999 ............................ F-3
Statements of Stockholders' Equity for the years ended December 31, 1998 and 1999 .................. F-4
Statements of Cash Flows for the years ended December 31, 1998 and 1999 ............................ F-5
Notes to Financial Statements ...................................................................... F-6
</TABLE>
<PAGE> 2
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Internet Research Group:
We have audited the accompanying balance sheets of Internet Research Group (the
Company) as of December 31, 1998 and 1999, and the related statements of
operations, shareholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Internet Research Group as of
December 31, 1998 and 1999, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/S/ KPMG LLP
San Francisco, California
March 16, 2000
F-1
<PAGE> 3
INTERNET RESEARCH GROUP
Balance Sheets
December 31, 1998 and 1999
<TABLE>
<CAPTION>
ASSETS 1998 1999
-------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 46,116 -
Trade accounts receivable, less
allowance for doubtful accounts of
$0 and $119,721 in 1998 and 1999,
respectively 580,483 1,000,966
Employee receivable 1,100 1,100
-------- ---------
Total current assets 627,699 1,002,066
Property and equipment, net 29,268 85,700
Costs and estimated earnings in excess of
billings on contracts in progress 47,055 -
Security deposits 10,713 15,196
-------- ---------
Total assets $714,735 1,102,962
======== =========
LIABILITIES AND STOCKHOLDERS'S EQUITY
Current liabilities:
Cash overdraft $ - 8,253
Trade accounts payable 72,215 257,340
Accrued liabilities 76,012 317,274
Deferred revenue 294,149 281,948
Borrowings under line of credit - 100,000
Loan payable to stockholders 110,000 -
-------- ---------
Total current liabilities 552,376 964,815
-------- ---------
Commitments
Stockholders' equity:
Common stock, no par value; 10,000,000 shares
authorized; 5,000,000 and 6,250,000 shares
issued and outstanding in 1998 and 1999,
respectively 1,000 2,459,990
Deferred compensation expense - (1,494,672)
Retained earnings (accumulated deficit) 161,359 (827,171)
-------- ---------
Total stockholders' equity 162,359 138,147
-------- ---------
Total liabilities and stockholders' equity $714,735 1,102,962
======== =========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 4
INTERNET RESEARCH GROUP
Statements of Operations
Years ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
1998 1999
----------- ----------
<S> <C> <C>
Revenue:
Consulting and other services revenue $2,271,460 3,791,660
Other income 81,179 35,438
---------- ---------
Total revenue 2,352,639 3,827,098
Expenses:
Selling, general, and administrative (excluding stock
compensation expense of $0 and $963,068 in 1998
and 1999, respectively) 2,346,941 3,850,175
Stock compensation expense -- 963,068
---------- ---------
Operating income (loss) 5,698 (986,145)
Interest income 3,652 2,925
Interest expense (2,666) (4,510)
---------- ---------
Income (loss) before income taxes 6,684 (987,730)
Income tax expense 800 800
---------- ---------
Net income (loss) $ 5,884 (988,530)
========== =========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 5
INTERNET RESEARCH GROUP
Statements of Stockholders' Equity
December 31, 1999 and 1998
<TABLE>
<CAPTION>
Retained
Common stock Deferred earnings Total
------------------------ compensation (accumulated stockholders'
Shares Amount expense (deficit) equity
----------- ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Balances as of December 31, 1997 5,000,000 $ 1,000 -- 303,475 304,475
Distributions to stockholders -- -- -- (148,000) (148,000)
Net income -- -- -- 5,884 5,884
----------- ---------- ------------ ------------ -------------
Balances as of December 31, 1998 5,000,000 1,000 -- 161,359 162,359
Purchase of common stock by stockholders 1,250,000 32,500 -- -- 32,500
Contribution by stockholders -- 825,000 -- -- 825,000
Compensation expense for options -- 1,601,490 (1,601,490) -- --
Amortization of deferred compensation expense -- -- 106,818 -- 106,818
Net loss -- -- -- (988,530) (988,530)
----------- ---------- ------------ ------------ -------------
Balances as of December 31, 1999 6,250,000 $2,459,990 (1,494,672) (827,171) 138,147
=========== ========== ============ ============ =============
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 6
INTERNET RESEARCH GROUP
Statements of Cash Flows
Years ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,884 (988,530)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 17,370 17,956
Amortization of deferred compensation expense - 106,818
Issuance of common stock for services - 856,250
Changes in operating assets and liabilities:
Accounts receivable, net (235,325) (420,483)
Costs and estimated earnings in excess of
billings on contracts in progress (47,055) 47,055
Other assets 14,263 (4,483)
Trade accounts payable 53,123 185,125
Accrued liabilities 11,930 241,262
Deferred revenue 294,149 (12,201)
---------- ---------
Net cash provided by operating activities 114,339 28,769
---------- ---------
Cash flows used in investing activities - purchase of
property and equipment (39,211) (74,388)
---------- ---------
Cash flows from financing activities:
Distributions to shareholders (148,000) -
Purchase of common stock by new shareholders - 1,250
Proceeds from line of credit - 100,000
Proceeds from loans from shareholders 110,000 -
Repayment of loans from shareholders - (110,000)
---------- ---------
Net cash used in financing activities (38,000) (8,750)
---------- ---------
Net increase (decrease) in cash and cash equivalents 37,128 (54,369)
Cash and cash equivalents at beginning of year (8,253) 46,116
---------- ---------
Cash and cash equivalents at end of year $ 28,875 (8,253)
========== =========
Supplemental disclosures of cash flow information:
Cash paid during the year:
Interest $ 2,666 4,510
========== =========
Income taxes $ 800 800
========== =========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 7
INTERNET RESEARCH GROUP
Notes to Financial Statements
December 31, 1998 and 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(a) DESCRIPTION OF BUSINESS
Internet Research Group (the Company) is a research and consulting
firm that specializes in developing business, sales, and market
development strategies for Internet-related companies. The Company
helps high technology companies through a combination of extensive
interviews, market segmentation, and modeling. The research and
publishing division, founded in 1997, produces in-depth technology
and market analysis services and other information, communication,
and consulting services that define and characterize Internet
markets.
(b) CONSULTING AND OTHER SERVICES REVENUE
Consulting and other services revenue consists of consulting
services, reports, and Website sponsorship revenues, as well as
reimbursement of certain expenses by customers.
Revenue for consulting services performed is recognized using the
percentage-of-completion method as the costs of performing the
work are incurred. Periodic reviews are made as work progresses
and a provision is made for any estimated unrecoverable amounts.
Anticipated losses on contracts in progress are provided in full
when known.
Report revenue is recognized upon shipment of final report to
customer. Website sponsorship revenue is recognized over the term
of the contract.
The asset "costs and estimated earnings in excess of billings on
contracts in progress" represents revenue recognized in advance of
billings. The liability "deferred revenue" represents billings in
excess of revenue recognized.
(c) CASH AND CASH EQUIVALENTS
Cash and cash equivalents of $46,116 as of December 31, 1998
consist of checking and money market accounts with a bank. The
Company considers all highly liquid debt instruments with
remaining maturities of three months or less when acquired to be
cash equivalents.
(d) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated
using the straight-line method over the estimated useful lives of
the assets of three to five years.
(e) INCOME TAXES
The Company has received S corporation status from the Internal
Revenue Service. Under the applicable statutory rules for Federal
tax purposes, income and loss of an S corporation flow through to
the shareholder of the corporation and are not taxed at the
corporate level. The state of California, however, assesses a
franchise tax equal to the greater of $800 or 1-1/2% of taxable
income for corporations electing S corporation status.
F-6 (Continued)
<PAGE> 8
INTERNET RESEARCH GROUP
Notes to Financial Statements
December 31, 1998 and 1999
(f) 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 disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(g) COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted the provisions of
the Financial Accounting Standards Board's (FASB) Statement of
Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income. SFAS No. 130 established standards for the
display of comprehensive income and its components in a full set
of financial statements. Comprehensive income includes all changes
in equity during a period except those resulting from the issuance
of shares of stock and distributions to shareholders. There were
no differences between net income and comprehensive income during
the years ended December 31, 1998 and 1999.
(h) STOCK-BASED COMPENSATION
SFAS No. 123, Accounting for Stock-Based Compensation, sets forth
accounting and reporting standards for stock-based employee
compensation. As permitted by SFAS No. 123, the Company accounts
for stock option grants using the intrinsic-value method in
accordance with Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related
interpretations. Deferred compensation expense associated with
stock-based compensation is being amortized on a straight-line
basis over the vesting period of the individual award.
(i) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
DISPOSED OF
The Company accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to
be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair
value of the assets. Assets to be disposed of are reported at the
lower of the carrying amount or fair value less costs to sell.
(2) RELATED PARTY TRANSACTIONS
LOANS PAYABLE TO SHAREHOLDERS
The Company had loans payable to shareholders totaling $110,000 as of
December 31, 1998. The loans were repaid in full on January 29, 1999.
There were no loans outstanding as of December 31, 1999. Interest expense
incurred on the loans was approximately $0 and $1,100 in 1998 and 1999,
respectively.
F-7 (Continued)
<PAGE> 9
INTERNET RESEARCH GROUP
Notes to Financial Statements
December 31, 1998 and 1999
(3) CONTRACTS IN PROGRESS
Information with respect to the billing status of consulting contracts in
progress as of December 31, 1998 and 1999, is as follows:
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
Costs incurred on contracts in progress $ 47,055 271,034
Estimated earnings -- 180,690
--------- ---------
47,055 451,724
Less billings to date 294,149 733,672
--------- ---------
$(247,094) (281,948)
========= =========
Included in the accompanying balance
sheets under the following captions:
Costs and estimated earnings in excess of
billings on contracts in progress $ 47,055 --
Deferred revenue (294,149) (281,948)
--------- ---------
$(247,094) (281,948)
========= =========
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1998 and 1999, consisted of the
following:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Office equipment $ 28,079 95,248
Furniture and fixtures 10,932 17,947
-------- --------
39,011 113,195
Less accumulated depreciation 9,743 27,495
-------- --------
Net property and equipment $ 29,268 85,700
======== ========
</TABLE>
(5) CREDIT FACILITIES
In 1999, the Company secured a line of credit in the amount of $250,000
bearing interest at prime plus 1.5% (10.0% as of December 31, 1999). As
of December 31, 1999, $100,000 was outstanding under the line of credit.
The line of credit is secured by assets of the Company. All amounts
outstanding under the line of credit are fully payable upon demand by
lender.
F-8 (Continued)
<PAGE> 10
INTERNET RESEARCH GROUP
Notes to Financial Statements
December 31, 1998 and 1999
(6) LEASE COMMITMENTS
The Company is obligated under noncancelable operating leases for office
space, that expire through 2001. Future minimum lease payments under
noncancelable operating leases as of December 31, 1999, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- --------------------
<S> <C>
2000 $ 141,000
2001 139,000
----------
$ 280,000
==========
</TABLE>
Rental expense for the operating leases was $ 123,000 and $125,000 for
1998 and 1999, respectively.
(7) 401(k) PLAN AND PROFIT SHARING PLAN
All eligible employees are covered by a defined contribution plan
pursuant to Section 401(k) of the Internal Revenue Code. The Company
contributes a matching contribution of 25% of the first 5% of employee
contributions. Matching contributions totaled $6,414 and $18,666 in 1998
and 1999, respectively.
The Company has a profit sharing plan covering all eligible employees.
Company contributions are made at the discretion of the Company. The
Company contributed $53,383 and $45,334 to the plan during the years
ended December 31, 1998 and 1999, respectively.
(8) COMMON STOCK AND STOCK OPTION PLAN
(a) STOCK OPTION PLAN
In 1999, the Company adopted a stock plan (the Plan) pursuant to
which the Company's Board of Directors may grant stock options and
stock purchase rights to officers and employees. The 1999 Plan
authorizes grants of options and rights to purchase up to
1,850,000 shares of authorized but unissued common stock.
All options vest ratably and become fully exercisable after four
years from the date of grant and expire after ten years.
As of December 31, 1999, options for 633,000 shares had been
granted under the Plan with an exercise price of $0.001. No
options have been exercised or forfeited.
As of December 31, 1999, there were 1,217,000 shares available for
grant under the Plan.
(b) STOCK GRANTS AND PURCHASES
In January 1999, 1,250,000 shares of common stock were purchased
by new shareholders for a total consideration of $1,250. The fair
value of these shares totaled $32,500. The difference between the
fair value and the consideration received was recorded as
compensation expense in 1999.
F-9 (Continued)
<PAGE> 11
INTERNET RESEARCH GROUP
Notes to Financial Statements
December 31, 1998 and 1999
In June 1999, 750,000 shares of common stock, valued at $825,000,
were given up by certain founding shareholders and reallocated to
certain newer shareholders. This reallocation was accounted for as
a contribution to capital by the founding shareholders and
compensation expense to the receiving shareholders.
(c) STOCK COMPENSATION
The Company uses the intrinsic-value method prescribed by APB
Opinion No. 25 in accounting for its stock-based compensation
arrangements for employees. Compensation cost has been recognized
for certain fixed stock options issuances and stock grants in 1999
in the accompanying financial statements because the fair value of
the underlying common stock equals or exceeds the exercise price
of the stock options or the amount paid for the stock at the date
of grant. No compensation cost has been recognized for stock
options granted at an exercise price equal to the fair market
value of the stock on the date of grant.
The Company has recorded deferred stock compensation expense of
$1,601,490 for the difference at the grant date between the
exercise price and the fair value of the common stock underlying
the stock options granted for the year ended December 31, 1999.
This deferred compensation expense is being amortized on a
straight-line basis over the vesting period of four years.
Amortization of deferred compensation of $106,818 was recognized
for the year ended December 31, 1999.
The per share fair value of stock options granted during 1999 was
$2.53, on the date of grant using the Black-Scholes option-pricing
model (excluding a volatility assumption) with the following
weighted-average assumptions: expected dividend yield of 0%,
risk-free interest rate of 6.33%, and an expected life of four
years.
Compensation expense associated with unrestricted stock grants of
$857,500 was expensed at the time the stock was granted. The per
share value of the stock granted during 1999 ranged from $0.03 to
$1.10.
Had compensation cost for the Company's stock-based compensation
plan been determined consistent with the fair value approach set
forth in SFAS No. 123, the compensation cost would be
substantially the same as the compensation cost determined under
the intrinsic-value method.
(d) STOCK SPLITS
Share information for all periods have been retroactively adjusted
to reflect a 10-for-1 split of common stock effective in November
1999.
F-10 (Continued)
<PAGE> 12
INTERNET RESEARCH GROUP
Notes to Financial Statements
December 31, 1998 and 1999
(9) BUSINESS AND CREDIT CONCENTRATION
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of trade accounts
receivable. The Company has not experienced significant credit losses in
the past.
No individual customer accounted for more than 10% in 1998 or 1999 of the
Company's total revenues. Three and two customers comprised 35% and 32%
of accounts receivable as of December 31, 1998 and 1999, respectively.
(10) SUBSEQUENT EVENT
On March 16, 2000, the Company was acquired by Jupiter Communications
(Jupiter). The shareholders in the Company received 581,044 shares of
Jupiter common stock and options to purchase 61,456 shares of Jupiter
common stock, in exchange for all common stock and stock options
outstanding. All options issued by the Company were fully vested upon the
acquisition.
F-11 (Continued)
<PAGE> 1
Exhibit 99.3
NMM
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report........................................................................ F-1
Balance Sheet as of December 31, 1999 .............................................................. F-2
Statement of Operations for the year ended December 31, 1999........................................ F-3
Statement of Shareholders' Equity for the year ended December 31, 1999.............................. F-4
Statement of Cash Flows for the year ended December 31, 1999 ....................................... F-5
Notes to the Financial Statements................................................................... F-6
</TABLE>
<PAGE> 2
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Net Market Makers:
We have audited the accompanying balance sheet of Net Market Makers as of
December 31, 1999 and the related statements of operations, shareholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Net Market Makers as of
December 31, 1999 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ KPMG LLP
San Francisco, California
March 27, 2000
F-1
<PAGE> 3
NET MARKET MAKERS
Balance Sheet
December 31, 1999
<TABLE>
<S> <C>
Current assets:
Cash $ 463,418
Accounts receivable 92,070
Prepaid expenses 119,841
-----------
Total current assets 675,329
Property and equipment, net 40,266
Other assets 25,199
-----------
$ 740,794
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued payables and other liabilities $ 38,217
Accrued payroll 65,991
Accrued shareholder distributions 282,791
Deferred revenue 133,568
-----------
Total current liabilities 520,567
-----------
Total liabilities 520,567
-----------
Commitments and contingencies
Shareholders' equity:
Common stock, par value $.01 per share; 10,000,000 shares
authorized; 8,800,000 shares issued and outstanding 88,000
Additional paid-in capital 4,462,378
Deferred compensation (3,654,084)
Shareholder loans (120,656)
Accumulated deficit (555,411)
-----------
Total shareholders' equity 220,227
-----------
$ 740,794
===========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 4
NET MARKET MAKERS
Statement of Operations
Year ended December 31, 1999
<TABLE>
<S> <C>
Revenue:
Conference events $2,821,934
Other 145,622
----------
Total revenue 2,967,556
----------
General and administrative expenses:
Personnel 1,155,167
Conferences 658,459
Stock-based compensation 745,916
Consultants 269,281
Other 248,796
----------
Total general and administrative expenses 3,077,619
----------
Operating loss (110,063)
Other income:
Interest income 9,511
----------
Net loss before taxes (100,552)
Income tax expense 10,000
----------
Net loss $ (110,552)
==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 5
NET MARKET MAKERS
Statement of Shareholders' Equity
Year ended December 31, 1999
<TABLE>
<CAPTION>
Common stock Additional Shareholder Total
Partners' --------------- paid-in Deferred note Accumulated shareholders'
capital Shares Amount capital compensation receivable deficit equity
--------- ------ ------ ---------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial partners'
contribution $ 30,659 -- $ -- -- -- -- -- 30,659
Issuance of common stock
in exchange for
partnership capital
contribution (30,659) 7,100,000 71,000 (40,341) -- -- -- --
Common stock purchased in
exchange for note
receivable -- 1,700,000 17,000 4,502,719 (4,400,000) (119,719) -- --
Amortization of stock-
based compensation -- -- -- -- 745,916 -- -- 745,916
Interest on shareholder
loan -- -- -- -- -- (937) -- (937)
Net loss -- -- -- -- -- -- (110,552) (110,552)
Distributions to
shareholders -- -- -- -- -- -- (444,859) (444,859)
-------- --------- ------- ---------- ------------ ---------- ------------ ------------
Balance as of
December 31, 1999 $ -- 8,800,000 $88,000 4,462,378 (3,654,084) (120,656) (555,411) 220,227
======== ========= ======= ========== ============ ========== ============ ============
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 6
NET MARKET MAKERS
Statement of Cash Flows
Year ended December 31, 1999
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $(110,552)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation 1,038
Interest on shareholder note receivable (937)
Stock compensation expense 745,916
Changes in operating assets and liabilities:
Prepaid expenses (119,841)
Accounts receivable (92,070)
Accrued liabilities 38,217
Accrued payroll 65,991
Deferred revenue 133,568
---------
Net cash provided by operating activities 661,330
---------
Cash flows from investing activities:
Purchase of property and equipment (41,304)
Purchase of intangible assets (25,199)
---------
Net cash used in investing activities (66,503)
---------
Cash flows from financing activities:
Capital contribution 30,659
Profit distributions to shareholders (162,068)
---------
Net cash used in financing activities (131,409)
---------
Net increase in cash 463,418
Cash at beginning of period --
---------
Cash at end of period $ 463,418
=========
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ --
=========
Cash paid for interest $ --
=========
Supplemental schedule of noncash financing activities:
Accrued shareholder tax distribution $ 282,791
=========
Issuance of shareholder note in exchange for stock $ 119,719
=========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 7
NET MARKET MAKERS
Notes to Financial Statements
December 31, 1999
(1) SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(a) DESCRIPTION OF BUSINESS
Net Market Makers (the Company) provides information, analysis,
resources and connections to the people who build and grow net
markets, as well as to the broader community of others who facilitate
this growth. The Company holds informational conferences, provides
consulting services and a monthly newsletter and writes research
reports to keep its clients oriented toward the growth areas of
business-to-business e-commerce.
The Company began as a sole proprietorship with two founders in 1998.
In January 1999, the Company became a partnership, at which point
substantive operations of the Company began, and the Company was
incorporated in the State of California on October 1, 1999 as a
Subchapter S corporation. The Company issued common stock in exchange
for the net book value of the partnership on November 1, 1999.
(b) 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 disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(c) COMPREHENSIVE INCOME (LOSS)
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 130, Reporting Comprehensive Income, which establishes standards
for reporting and display of comprehensive income and its components.
During the period presented, the Company did not have any other
comprehensive income or loss items and, accordingly, comprehensive
loss is equivalent to net loss for the period presented.
(d) SEGMENTS OF AN ENTERPRISE AND CONCENTRATIONS OF MARKET, CREDIT AND
SUPPLIERS' RISK
In June 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 131, Disclosures About Segments of an Enterprise and Related
Information, which is effective for fiscal years beginning after
December 15, 1997. SFAS No. 131 establishes revised standards for the
reporting of financial and descriptive information about operating
segments in financial statements. The Company adopted this statement
effective January 1, 1999. The chief decision maker of the Company
makes decisions and reviews operating results on a combined basis for
all product lines and no other discrete financial information is
available. Accordingly, the Company has determined that it operates
only in one segment.
The Company relies heavily on revenues from user conferences. During
1999, the Company held two such conferences. Financial instruments,
which potentially subject the Company to concentrations of credit
risk, consist of accounts receivable, which are comprised primarily of
amounts due for newsletter subscriptions. The Company controls this
risk by monitoring the age and collection of its receivables.
(Continued)
F-6
<PAGE> 8
NET MARKET MAKERS
Notes to Financial Statements
December 31, 1999
(e) FAIR VALUE OF FINANCIAL INSTRUMENTS
Prepaid expenses, other assets, accrued liabilities and accrued
payroll are considered to have carrying amounts that approximate fair
value because of the short maturity of these financial instruments.
(f) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated on a
straight-line basis over their estimated useful lives of three years
for computer equipment and software, and seven years for office
furniture and fixtures. Leasehold improvements are amortized on a
straight-line basis over the shorter of the lease term or their
estimated useful lives.
(g) IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with SFAS No. 121, Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of, the Company reviews, as
circumstances dictate, the carrying amount of its long-lived assets.
The purpose of these reviews is to determine whether the carrying
amounts are recoverable. Recoverability is determined by comparing the
projected undiscounted net cash flows of the long-lived assets against
their respective carrying amounts. The amount of impairment, if any,
is measured based on the excess of the carrying value over the fair
value of the asset. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell. The Company
estimates fair value based on the best information available, making
judgments and projections as considered necessary.
(h) REVENUE RECOGNITION
Revenue from conference events is recognized when the events have
taken place. Revenues from subscriptions are recognized over the
subscription period. Revenue from other consulting services is
recognized as services are performed.
(i) INCOME TAXES
The Company's shareholders have elected S corporation status for
federal income tax purpose. As a result, there is no provision for
federal income tax expense. State franchise tax is assessed at the
rate of 1.5% at the corporate level.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Office furniture and fixtures $ 8,626
Computer equipment 30,641
Software 2,037
---------------
41,304
Less accumulated depreciation and amortization (1,038)
===============
$ 40,266
===============
</TABLE>
(Continued)
F-7
<PAGE> 9
NET MARKET MAKERS
Notes to Financial Statements
December 31, 1999
Depreciation expense on property and equipment was approximately $1,000 for
the year ended December 31, 1999.
(3) SHAREHOLDERS' EQUITY
COMMON STOCK
The Company issued 7,100,000 shares of common stock on November 1, 1999, in
exchange for the capital contributions represented by the accounts of the
Net Market Makers Partnership of $30,659.
On November 8, 1999, the Company executed a common stock purchase
agreement, whereby an executive of the Company purchased 1,700,000 shares
of common stock for $0.07 per share. The common stock was issued in
exchange for a promissory note in the amount of $119,719 with an interest
rate of 5.42%. The stock vests at a rate of 212,500 shares per quarter
commencing with the quarter ending March 31, 2000. In the event of a change
in ownership of more than 50% of the Company, the lesser of an additional
850,000 shares or the remaining unvested portion, vests immediately (note
5). The stock purchased was valued at $2.56 per share, which was the
estimated market value of the Company's stock on that date, resulting in
compensation of $4,400,000 to be amortized over the vesting period
consistent with the method described in FASB Interpretation No. 28,
Accounting for Stock Appreciation Rights and Other Variable Stock Option or
Award Plans. For the year ended December 31, 1999, compensation expense of
$745,916 was recorded in the Company's statement of operations. The
principal and accrued interest on the note shall be payable as follows:
$59,860, plus interest, due on November 8, 2000, and $59,860, plus
interest, due on November 8, 2001.
(4) COMMITMENTS
The Company leases office space and equipment under noncancelable operating
leases expiring at various dates through 2002. The leases contain various
renewal options. Minimum lease payments under these noncancelable operating
leases are as follows as of December 31, 1999:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
2000 $ 33,239
2001 2,796
2002 and thereafter 2,796
-------------------
$ 38,831
===================
</TABLE>
Rent expense under noncancelable operating leases was $26,631 for the year
ended December 31, 1999.
(Continued)
F-8
<PAGE> 10
NET MARKET MAKERS
Notes to Financial Statements
December 31, 1999
(5) SUBSEQUENT EVENTS
(a) INCORPORATION STATUS
Subsequent to December 31, 1999, the Company terminated its S corporation
status.
(b) LETTER OF INTENT
Subsequent to December 31, 1999, the Company entered into a letter of
intent with Jupiter Communications, Inc. to have all its outstanding shares
of common stock acquired for approximately $20,000,000 in cash and
$5,000,000 in stock.
(c) SHAREHOLDER STOCK PURCHASE
Subsequent to December 31, 1999, the common stock purchase agreement
discussed in note 3 was amended. As such, 1,062,500 shares were contributed
back to the capital of the Company in exchange for immediate vesting of the
remaining 637,500 shares. In addition, the related promissory note for
$119,719 was canceled and replaced with a promissory note for $44,895.
F-9
<PAGE> 1
ACQUISITION OF INTERNET RESEARCH GROUP
On March 16, 2000, Jupiter Communications, Inc. ("Jupiter") completed its
acquisition of Internet Research Group, a California corporation ("IRG"),
pursuant to an Agreement and Plan of Merger and Reorganization, dated February
28, 2000, among Jupiter, IRG Acquisition Corp., a wholly-owned subsidiary of
Jupiter ("Merger Sub"), IRG and the shareholders of IRG. The acquisition was
accomplished through the merger of Merger Sub with and into IRG. The
consideration payable by Jupiter was determined as a result of negotiation
between Jupiter and IRG. The consideration paid consisted of 581,044 shares of
common stock of Jupiter. In addition, options to purchase approximately 676,000
shares of IRG common stock were exchanged for options to purchase 61,456 shares
of Jupiter common stock.
The total purchase price for this transaction was approximately $20.5 million.
The difference between the fair market value of IRG's net tangible assets and
the purchase price will be accounted for as goodwill and will be amortized over
ten years, the expected period of benefit.
ACQUISITION OF NET MARKET MAKERS
On April 14, 2000, Jupiter Communications Inc. ("Jupiter") completed its
acquisition of Net Market Makers, a California corporation ("NMM"), pursuant to
a Stock Purchase Agreement, dated February 28, 2000 (the "Stock Purchase
Agreement"), among Jupiter, NMM and the shareholders of NMM (the "NMM
Shareholders"). The acquisition was accomplished through the purchase from the
NMM Shareholders of all the issued and outstanding shares of capital stock of
NMM for consideration consisting of $20.5 million in cash and 274,680 shares of
common stock of Jupiter. The agreement calls for additional consideration of up
to $10.5 million in cash to be paid if certain revenue targets are met by NMM
during 2000 and 2001.
The total purchase price for this transaction was approximately $29.3 million.
The difference between the fair market value of NMM's net tangible assets and
the purchase price will be accounted for as goodwill and will be amortized over
seven years, the expected period of benefit.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited Pro Forma Condensed Consolidated Statement of Operations (the "Pro
Forma Statements of Operations") for the year ended December 31, 1999 gives
effect to the acquisition of IRG and NMM (the "Acquisitions") as if they had
occurred on January 1, 1999. The Pro Forma Statement of Operations is based on
historical results of operations of Jupiter and the Acquisitions for the year
ended December 31, 1999. The unaudited Pro Forma Condensed Consolidated Balance
Sheet (the "Pro Forma Balance Sheet") gives effect to the Acquisitions as if the
acquisitions had occurred on December 31, 1999.
The Pro Forma Financial Information is intended for informational purposes only
and is not necessarily indicative of the future financial position or future
results of operations of the consolidated Company after the Acquisitions, or of
the financial position or results of operations of the consolidated Company that
would have actually occurred had the Acquisitions been affected on the date
indicated or which may be obtained in the future.
The Pro Forma Statement of Operations and Pro Forma Balance Sheet and
accompanying notes (the "Pro Forma Financial Information") should be read in
conjunction with and are qualified by the historical financial statements of the
Company and notes thereto.
F-1
<PAGE> 2
JUPITER COMMUNICATIONS, INC.
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
NET INCOME
JUPITER MARKET PORTFOLIO
COMMUNICATIONS MAKERS GROUP ADJUSTMENTS PRO FORMA
-------------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $57,222,154 $463,418 -- -- 57,685,572
Short-term investments 8,852,937 -- -- -- 8,852,937
Accounts receivable net 17,849,722 92,070 1,000,966 -- 18,942,758
Prepaid expenses and other current assets 3,156,851 119,841 1,100 -- 3,277,792
----------- -------- --------- ---------- -----------
Total current assets 87,081,664 675,329 1,002,066 -- $ 8,759,055
=========== ======== ========= ========== ===========
Property and equipment, net 5,131,095 40,266 85,700 -- 5,257,061
Goodwill and other intangible assets, net 4,526,071 -- -- 20,361,228(a) 53,988,162
29,100,863(b)
Other assets 440,744 25,199 15,196 -- 481,139
----------- -------- --------- ---------- -----------
Total assets $97,179,574 $740,794 1,102,962 49,462,091 148,485,421
=========== ======== ========= ========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 2,764,013 $ 38,217 265,693 -- 3,067,823
Accured expenses 1,178,619 -- 317,274 -- 1,495,893
Accrued compensation 2,515,680 348,782 -- -- 2,864,462
Borrowing under line of credit -- -- 100,000 -- 100,000
Deferred reference 25,594,018 133,568 281,948 -- 26,009,934
----------- -------- --------- ---------- -----------
Total current liabilities 32,052,330 520,567 964,815 -- 33,537,712
=========== ======== ========= ========== ===========
Deferred rent 129,716 -- -- -- 129,716
Convertible notes payable 3,500,000 -- -- -- 3,500,000
Common stock, 50.001 per value 100,000,000
shares authorized, 4,499,973 shares issued
and outstanding at December 31, 1999 14,500 88,000 2,459,990 (2,547,134)(a,b) 15,356
Other stockholders' equity 61,483,028 152,227 (2,327,843) 52,009,225 (a,b) 111,302,637
----------- -------- --------- ---------- -----------
Total stockholders' equity 61,497,528 220,227 138,147 49,462,091 111,317,995
=========== ======== ========= ========== ===========
Commitments and contingencies
----------- -------- --------- ---------- -----------
Total liabilities and
stockholders' equity/members' deficiency $97,179,574 $740,794 1,102,962 49,462,091 148,485,421
=========== ======== ========= ========== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
information.
F-2
<PAGE> 3
JUPITER COMMUNICATIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
[CAPTION]
<TABLE>
Internet
Jupiter Net Market Research
Communications Makers Group Adjustments Pro Forma
-------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Strategic Planning Services $23,133,867 $ -- $ 3,791,660 $ -- $26,925,527
Conferences 11,269,950 2,821,934 -- -- $14,091,884
Other 3,680,468 145,622 35,438 -- $3,861,528
Total revenues ----------- ----------- ----------- ----------- -----------
38,084,285 2,967,556 3,827,098 -- 44,878,939
Cost of services and fulfillment 16,897,660 1,602,116 3,086,623 -- 21,586,399
----------- ----------- ----------- ----------- -----------
Gross profit 21,186,625 1,365,440 740,475 -- 23,292,540
Other operating expenses:
Sales and marketing 11,383,673 -- -- -- 11,383,673
General and administrative expenses 10,100,267 728,549 734,596 -- 11,563,412
Depreciation and amortization 1,278,241 1,038 28,956 2,036,123 (a) 7,501,624
4,157,266 (b)
Non-cash compensation -- 745,916 963,068 1,708,984
----------- ----------- ----------- ----------- -----------
Total other operating expenses 22,762,181 1,475,503 1,726,620 6,193,389 32,157,693
Operating loss (1,575,556) (110,063) (986,145) (6,193,389) (8,865,153)
Interest income 743,484 9,511 2,925 -- 755,920
Interest expense -- -- (4,510) -- (4,510)
----------- ----------- ----------- ----------- -----------
Other income (expense) 743,484 9,511 (1,585) -- 751,410
Loss before income taxes (832,072) (100,552) (987,730) (6,193,389) (8,113,743)
Income tax benefit (expense) 202,000 (10,000) (800) -- 191,200
----------- ----------- ----------- ----------- -----------
Net loss $ (630,072) $ (110,552) $ (988,530) $(6,193,389) $(7,922,543)
=========== =========== =========== =========== ===========
Basic and diluted net loss per common share $ (0.05) $(0.64)
=========== ===========
581,044 (c)
Weighted average common shares outstanding 11,564,816 274,680 (d) 12,420,540
=========== =========== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
information.
F-3
<PAGE> 4
PRO FORMA ADJUSTMENTS AND ASSUMPTIONS
(a) On March 16, 2000, Jupiter Communications, Inc. ("Jupiter") acquired
Internet Research Group ("IRG") for $20.5 million including acquisition costs
pursuant to the terms of an Agreement and Plan of Merger dated March 16, 2000
(the "IRG Merger Agreement"), among Jupiter, IRG and the shareholders of IRG.
Pursuant to the terms of the IRG Merger Agreement, IRG merged with and into
Jupiter and became a wholly-owned subsidiary of Jupiter. The acquisition will be
accounted for as a purchase business combination. The consideration payable by
Jupiter in connection with the acquisition of IRG consisted of the following:
581,044 shares of Jupiter common stock valued at $18.4 million. In addition,
options to purchase approximately 676,000 shares of IRG common stock will be
exchanged for options to purchase 61,456 shares of Jupiter common stock. The
options were valued at approximately $2.0 million. Such options have an
aggregate exercise price of approximately $61. The Company also incurred
acquisition costs of approximately $100,000.
The following represents the allocation of the purchase price over the
historical net book values of the acquired assets and liabilities of IRG at
December 31, 1999, and is for illustrative pro forma purposes only. Actual fair
values will be based on financial information as of the acquisition date (March
16, 2000), which are not expected to be significantly different from the
historical net book values of the acquired assets and liabilities. Assuming the
transaction had occurred on December 31, 1999, the allocation would have been as
follows:
<TABLE>
<CAPTION>
IRG
<S> <C>
Assets acquired:
Accounts receivable $ 1,002,066
Property and equipment 85,700
Security deposits 15,196
Goodwill and intangibles 20,361,228
-----------
21,464,190
Liabilities assumed (964,815)
-----------
Purchase price $20,499,375
===========
</TABLE>
This allocation is preliminary and may be subject to change upon evaluation of
the fair value of IRG's acquired assets and liabilities as of the acquisition
date as well as the potential identification of certain intangible assets.
The Pro Forma adjustment reconciles the historical balance sheet of IRG at
December 31, 1999 to the allocated purchase price assuming the transaction had
occurred on December 31, 1999.
Goodwill and other intangible assets will be amortized over a period of 10
years, the expected period of benefit. The Pro Forma adjustment to the statement
of operations reflects twelve months of amortization expense for the year ended
December 31, 1999, assuming the transaction occurred on January 1, 1999. The
value of the goodwill and intangible assets as of December 31, 1999 would have
been approximately $20.4 million.
(b) On April 14, 2000, Jupiter Communications, Inc. ("Jupiter") acquired Net
Market Makers ("NMM") for $29.3 million including acquisition costs pursuant to
the terms of a Stock Purchase Agreement, dated February 28, 2000 (the "NMM
Merger Agreement"), among Jupiter, NMM and the shareholders of NMM. Pursuant to
the terms of the NMM Merger Agreement, NMM merged with and into Jupiter and
became a wholly-owned subsidiary of Jupiter. The acquisition will be accounted
for as a purchase business combination. The consideration payable by Jupiter in
connection with the acquisition of NMM consisted of the following: $20.5 million
in cash and 274,680 shares of Jupiter common stock valued at $8.7 million. The
Company also incurred acquisition costs of approximately $100,000.
The following represents the allocation of the purchase price over the
historical net book values of the acquired assets and liabilities of NMM at
December 31, 1999, and is for illustrative pro forma purposes only. Actual fair
values will be based on financial information as of the acquisition date (April
14, 2000), which are not expected to be significantly different from the
F-4
<PAGE> 5
historical net book values of the acquired assets and liabilities. Assuming the
transaction had occurred on December 31, 1999, the allocation would have been as
follows:
<TABLE>
<CAPTION>
NMM
<S> <C>
Assets acquired:
Cash $ 463,418
Accounts receivable 92,070
Prepaid expenses and other assets 145,040
Property and equipment 40,266
Goodwill and intangibles 29,100,863
-----------
29,841,657
Liabilities assumed (520,567)
-----------
Purchase price $29,321,090
===========
</TABLE>
This allocation is preliminary and may be subject to change upon evaluation of
the fair value of NMM's acquired assets and liabilities as of the acquisition
date as well as the potential identification of certain intangible assets.
The Pro Forma adjustment reconciles the historical balance sheet of NMM at
December 31, 1999 to the allocated purchase price assuming the transaction had
occurred on December 31, 1999.
Goodwill and other intangible assets will be amortized over a period of seven
years, the expected period of benefit. The Pro Forma adjustment to the statement
of operations reflects twelve months of amortization expense for the year ended
December 31, 1999, assuming the transaction occurred on January 1, 1999. The
value of the goodwill and intangible assets as of December 31, 1999 would have
been approximately $29.1 million.
(c) In connection with the acquisition of IRG, the Company issued 581,044 shares
of Jupiter common stock, par value $.001 per share, to the IRG shareholders. The
pro forma basic net loss per common share is computed by dividing the net loss
attributable to calculation of the weighted average number of shares
outstanding. The calculation of the weighted average number of shares
outstanding assumes that shares issued in connection with the acquisition were
outstanding for the entire period.
(d) In connection with the acquisition of NMM, the Company issued 274,680 shares
of Jupiter common stock, par value $.001 per share, to the NMM shareholders. The
pro forma basic net loss per common share is computed by dividing the net loss
attributable to calculation of the weighted average number of shares
outstanding. The calculation of the weighted average number of shares
outstanding assumes that shares issued in connection with the acquisition were
outstanding for the entire period.
F-5
