<PAGE>
================================================================================
UNITED STATES 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): July 24, 2000
L90, Inc.
(Exact name of registrant as specified in its charter)
Delaware 000-28893 95-4761069
--------------------------------------- ---------------- --------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
2020 Santa Monica Blvd., Ste. 400
Santa Monica, California 90404
----------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 315-1199
Not Applicable
----------------------------------------------------------------
(Former name or former address, if changed since last report)
This Report consists of 15 pages.
================================================================================
<PAGE>
Item 2. Acquisition or Disposition of Assets.
Acquisition of webMillion.com, Inc.
-----------------------------------
On July 28, 2000, the Registrant filed a Current Report on Form 8-K, dated
July 24, 2000 to announce the acquisition of webMillion.com, Inc., an Idaho
Corporation. This amendment to Registrant's Current Report on Form 8-K is being
filed to include the Financial Statements and Pro Forma Financial Information
required by Item 7 of Form 8-K.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
See page F-1 of this Report
(b) Pro Forma Financial Information
See page F-9 of this Report
SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 5, 2000 L90, Inc.
a Delaware corporation
By: /s/ John C. Bohan
-------------------
President
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of
webMillion.com, Inc.:
We have audited the accompanying balance sheets of WEBMILLION.COM, INC. as of
March 31, 2000 and December 31, 1999, and the related statements of operations,
shareholder's equity and cash flows for the three month period ended March 31,
2000 and the period from May 25, 1999 (inception) to December 31, 1999. 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 auditing standards generally accepted
in the United States. 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 webMillion.com, Inc. as of
March 31, 2000 and December 31, 1999, and the related statements of operations,
shareholder's equity and cash flows for the three month period ended March 31,
2000 and the period from May 25, 1999 (inception) to December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Orange County, California
July 25, 2000
F-1
<PAGE>
WEBMILLION.COM, INC.
Balance Sheets
March 31, 2000 and December 31, 1999
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------------- ----------------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 329,400 $ 34,478
Accounts receivable, (net of allowances of $0 and $18,269 at
December 31, 1999 and March 31, 2000, respectively) 164,412 24,760
Prepaid expenses and other assets 8,584 15,000
------------------- ----------------------
Total current assets 502,396 74,238
------------------- ----------------------
Property and equipment:
Computer equipment 67,772 -
Hardware 60,705 6,900
Furniture and equipment 1,023 -
------------------- ----------------------
129,500 6,900
Less-Accumulated depreciation and amortization 8,308 700
------------------- ----------------------
Property and equipment, net 121,192 6,200
Other long-term assets 3,400 -
------------------- ----------------------
Total assets $ 626,988 $ 80,438
=================== ======================
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Credit card liabilities $ 1,065 $ 2,341
Subscription agreement liabilities - 75,000
Other current liabilities 247,952 39,185
------------------- ----------------------
Total current liabilities 249,017 116,526
------------------- ----------------------
Total liabilities 249,017 116,526
------------------- ----------------------
Shareholder's Equity:
Common stock, no par value:
Authorized--10,000,000 shares; issued and outstanding --
1,174,069 and 834,000 shares in 2000 and 1999, respectively - -
Additional paid-in capital 1,321,542 194,280
Retained deficit (943,571) (230,368)
------------------- ----------------------
Total shareholder's equity 377,971 (36,088)
------------------- ----------------------
Total liabilities and shareholder's equity $ 626,988 $ 80,438
=================== ======================
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
WEBMILLION.COM, INC.
Statements of Operations
For the Three Months Ended March 31, 2000 and the Period Ended December 31, 1999
<TABLE>
<CAPTION>
Period from
Three Months May 25, 1999
Ended (Inception) to
March 31, December 31,
2000 1999
-------------------- ------------------------
<S> <C> <C>
Revenue:
Commission-based revenue $ 175,012 $ 25,317
-------------------- ------------------------
Total revenue 175,012 25,317
-------------------- ------------------------
Operating expenses:
Cost of service fee and other revenue 259,495 13,223
Sales and marketing 558,385 61,319
Research and development 11,309 828
General and administrative 61,939 183,215
-------------------- ------------------------
Total operating expenses 891,128 258,585
-------------------- ------------------------
Operating loss (716,116) (233,268)
Interest income, net 2,913 2,900
-------------------- ------------------------
Net loss $ (713,203) $ (230,368)
==================== ========================
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
WEBMILLION.COM, INC.
Statements of Shareholder's Equity
For the Three Months Ended March 31, 2000 and the Period Ended December 31, 1999
<TABLE>
<CAPTION>
Number of Common
Common Stock Retained
Stock Paid-in Earnings
Shares Capital (Deficit) Total
------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Contributed capital from founders on June 11, 1999 - $ 21,480 $ - $ 21,480
Issuance of founder's common stock on August 11, 1999 780,000 - - -
Issuance of common stock on August 11, 1999 43,200 138,240 - 138,240
Issuance of common stock on November 1, 1999 10,800 34,560 - 34,560
Net loss - - (230,368) (230,368)
------------- --------------- --------------- -------------
BALANCE at December 31, 1999 834,000 194,280 (230,368) (36,088)
Issuance of common stock on January 4, 2000 109,376 350,003 - 350,003
Issuance of common stock on January 5, 2000 4,688 15,002 - 15,002
Issuance of common stock on January 7, 2000 23,438 75,002 - 75,002
Issuance of common stock on January 10, 2000 7,813 25,002 - 25,002
Issuance of common stock on January 11, 2000 23,439 75,005 - 75,005
Issuance of common stock on January 20, 2000 39,063 125,002 - 125,002
Issuance of common stock on January 24, 2000 15,626 50,003 - 50,003
Issuance of common stock on January 26, 2000 15,626 50,003 - 50,003
Issuance of common stock on January 29, 2000 62,500 200,000 - 200,000
Issuance of common stock on February 2, 2000 38,500 123,200 - 123,200
Issuance of warrrants on February 17, 2000 - 37,781 - 37,781
Issuance of warrrant on February 18, 2000 - 1,259 - 1,259
Net loss - - (713,203) (713,203)
------------- --------------- --------------- -------------
BALANCE at March 31, 2000 1,174,069 $ 1,321,542 $ (943,571) $ 377,971
============= =============== =============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
WEBMILLION.COM, INC.
Statements of Cashflows
For the Three Months Ended March 31, 2000 and the Period Ended December 31, 1999
<TABLE>
<CAPTION>
Periods from
Three Months May 25, 1999
Ended (Inception) to
March 31, December 31,
2000 1999
-------------------- --------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (713,203) $ (230,368)
Adjustments to reconcile net loss to cash used in
operating activities-
Depreciation and amortization
7,608 700
Non-cash stock issuance for compensation expense
162,241 172,800
Changes in assets and liabilities:
Accounts receivable
(139,652) (24,760)
Prepaid expenses and other assets
6,416 (15,000)
Other long-term assets
(3,400) -
Credit card liabilities
(1,276) 2,341
Subscription agreement liability
- 75,000
Other current liabilities
208,768 39,185
-------------------- --------------------
Net cash provided by (used in)
operating activities
(472,498) 19,898
-------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (122,600) (6,900)
-------------------- --------------------
Net cash used in investing activities (122,600) (6,900)
-------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Initial contributed capital from founders - 21,480
Proceeds from issuance of common stock 890,020 -
-------------------- --------------------
Net cash provided by financing activities 890,020 21,480
-------------------- --------------------
Net increase in cash 294,922 34,478
Cash, beginning of period 34,478 -
-------------------- --------------------
Cash, end of period $ 329,400 $ 34,478
==================== ====================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 86 $ 100
==================== ====================
SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Issuance of common stock $ 75,000 $ -
==================== ====================
</TABLE>
\
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
WEBMILLION.COM, INC.
Notes to Financial Statements
March 31, 2000
1. Description of the Business
---------------------------
webMillion.com, (the "Company") is an Internet-based platform for direct
marketing programs. As the first free, multimillion-dollar Internet
lottery, the Company provides Internet consumers a free, online venue to
play lottery-style and themed games for cash prizes, including a three
million dollar grand prize. A unique referral-based reward model drives
membership and site loyalty, providing a compelling location for
advertisers to develop a brand, convey a consistent message and reach a
worldwide audience through a variety of direct avenues.
The Company was founded in February 1999 with minimal start-up activity,
incorporated in Idaho electing C-Corporation status on May 25, 1999
(inception), and launched its Web presence in August 1999.
On July 24, 2000, the Company became a subsidiary of L90, Inc. an Internet-
based advertising solution for advertisers and Web publishers.
2. Summary of Significant Accounting Policies
------------------------------------------
Revenue Recognition
-------------------
Revenue is derived from ad sales earned under commission-based contracts.
The Company provides advertising space on their Web site, which is sold by
a third party.
Cash and Cash Equivalents
-------------------------
For purposes of the balance sheets and statements of cash flows, cash and
cash equivalents includes all cash instruments due on demand or with an
original maturity of 90 days or less.
Accounts Receivable
--------------------
The Company has receivables due from third party advertising companies
resulting from the sale of advertising space available on its Web site.
This third party advertiser is responsible for collections of amounts due.
The Company's credit exposure is limited to the net amount of cash to be
received by the Company from the sale of advertising by the third party
advertisers on its site. The Company has no control over the extension of
credit to its customers, who are primarily located in the United States, as
this is performed by the third party advertising company. The ability of
these customers to meet their obligations to the Company is dependent on
their economic health, as well as their industry and other factors. The
Company maintains an allowance for doubtful accounts, which represents
management's estimate of expected losses on specific accounts and inherent
losses on other as yet unidentified accounts included in accounts
receivable. The amounts the Company will ultimately realize could differ
materially in the near term from the amounts assumed in arriving at the
allowance for doubtful accounts reported in the financial statement.
Property and Equipment
----------------------
Property and equipment are recorded at cost and depreciated over the
estimated useful life of the asset, using the straight-line method of
depreciation. Property and equipment have estimated useful lives ranging
from three to five years.
F-6
<PAGE>
WEBMILLION.COM, INC.
Notes to Financial Statements
March 31, 2000
Equipment Under Capital Leases
------------------------------
Equipment under capital leases is recorded at the lower of the present
value of the minimum lease payments or the fair value of the leased
property at the inception of the lease. Amortization of leased property is
computed using the straight-line method over the term of the lease.
Income Taxes
------------
The Company provides for income taxes in accordance with the asset and
liability method. Deferred income taxes are provided for temporary
differences between financial statement and income tax basis of assets and
liabilities for which income tax expenses or benefits are expected to be
realized in future years.
Stock-Based Compensation
-------------------------
Compensation costs have been recognized in the Statement of Operations in
an amount equal to the difference between the fair value of the stock at
the date of grant and any cash proceeds received. Compensation costs were
calculated using a fair value of $3.20 per share (see Note 3). Compensation
expense has also been recognized for the granting of common stock warrants
to employees in an amount equal to the fair value of the options at the
date of grant.
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities at date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
3. Shareholder's Equity
--------------------
No Par Value Common Stock
-------------------------
On June 11, 1999 the founders of the Company contributed cash of $21,480 in
order to pay for start-up costs and purchase equipment.
On August 11, 1999, the Company issued a total of 780,000 shares to the two
founders of webMillion.com. During fiscal year 1999, additional 54,000
shares were issued to various employees as stock-based compensation (see
Note 2).
During the period from January 1, 2000 to March 31, 2000, the Company
issued 38,500 shares to various employees as stock-based compensation (see
Note 2). In addition, the Company issued 301,569 shares of common stock to
various investors at $3.20 per share, for net proceeds of $965,020.
Common Stock Warrants
---------------------
During February 2000, the Company issued warrants to two employees to
purchase a total of 30,000 and 1,000 shares, respectively of the Company's
common stock at an exercise price of $3.20 per share. The warrants expire
two years from the date of issuance. The fair value of each warrant at the
date of grant is estimated using the Black-Scholes option-pricing model
with the following weighted-average assumptions: Dividend yield of zero
percent; 65 percent expected volatility; risk-free rate of 6.12 percent;
and expected lives of 2 years. As the Company is privately held, expected
volatility does not impact the calculation. The calculated fair values of
the two warrants at the date of the grant are $37,781 and $1,259,
respectively and are reflected in the Statements of Shareholder's Equity.
F-7
<PAGE>
WEBMILLION.COM, INC.
Notes to Financial Statements
March 31, 2000
4. Commitments and Contingencies
-----------------------------
Litigation
----------
The Company may become subject to legal proceeding from time to time in the
normal course of business. The Company is not currently involved in any
litigation that management believes will have a material adverse effect on
the Company's financial position or results of operations.
Office and Equipment Lease
--------------------------
The Company began leasing its office building under a one-year operating
lease, which began on April 15, 2000 and expires on April 30, 2001. Under
these terms, the Company is required to pay $3,400 per month under the
current lease obligation.
The Company entered into a capital lease obligation with Dell Financial
Services for computer and Web site related costs. The Company pays $399 per
month under a noncancellable lease arrangement, which commenced January 21,
2000 under a lease term of 36 months.
As of March 31, 2000, the minimum rental commitments required under
existing noncancellable capital and operating leases are as follows:
<TABLE>
<CAPTION>
Capital Operating
Year Ending December 31: Leases Leases
------------------ -------------------
<S> <C> <C>
2000 $ 4,795 $ 27,204
2001 4,795 13,602
2002 4,795 -
2003 - -
2004 - -
------------------ -------------------
Total minimum lease payments $ 14,385 $ 40,806
Amounts representing interest (3,760)
------------------
Present value of net minimum lease payments $ 10,625
------------------
</TABLE>
5. Provision for Income Taxes
--------------------------
No provision for federal and state income taxes has been recorded, as the
Company has incurred net operating losses through March 31, 2000.
6. Subsequent Events
-----------------
On May 2, 2000, the Company entered into a note payable (the "Note") to an
investor with a principal amount $250,000, together with simple interest at
a rate equal to the lowest applicable federal rate. The principal and
accrued interest on the Note is due and payable on August 2, 2000.
On July 7, 2000, the shareholders and warrant holders of the Company
entered into an agreement to sell all of the issued and outstanding shares
of common stock and warrants for common stock of the Company in exchange
for an aggregate of 2,000,000 shares of common stock of L90, Inc. The
shares of common stock were issued and sold in reliance upon the exemption
provided for by Section 4 (2) of the Securities Act and Regulation D
promulgated thereunder. The transaction closed on July 24, 2000.
F-8
<PAGE>
L90, INC.
Unaudited Pro Forma Condensed Consolidated Financial Statements
For the Three Months Ended March 31, 2000 and the Period Ended December 31, 1999
The following unaudited pro forma consolidated condensed financial statements
have been prepared to give effect to the merger with webMillion.com using the
purchase method of accounting. Under the purchase method of accounting, the
acquiring enterprise for accounting purposes in a business combination effected
through the exchange of stock is presumptively the enterprise whose former
common shareholders either retain or receive the larger portion of the voting
rights in the consolidated enterprise. L90 has been deemed the acquiror for
accounting purposes and its assets and liabilities will be brought forward at
their historical net book values. A new basis will be established for
webMillion.com's assets and liabilities based upon the fair values thereof at
the time of the merger and may be revised for a period of up to one year from
the date of the merger. The purchase accounting adjustments made in connection
with the development of the unaudited pro forma condensed consolidated financial
information are preliminary and have been made solely for purposes of developing
such unaudited pro forma condensed consolidated financial information and will
be adjusted upon the final determination of the fair values.
The unaudited pro forma consolidated condensed balance sheet as of March 31,
2000, gives effect to the merger as if it had occurred on March 31, 2000, and
combines the historical balance sheet of L90 and the historical balance sheet of
webMillion.com as of such date.
The unaudited pro forma consolidated condensed statements of operations
combine the historical statements of operations of L90 and webMillion.com as if
the merger had occurred at the beginning of the earliest period presented. The
unaudited pro forma consolidated condensed statements of operations for the
three months ended March 31, 2000, and for the year ended December 31, 1999,
combine the historical statements of operations of L90 with the historical
statements of operations of webMillion.com for each of the respective periods.
Unaudited pro forma consolidated condensed financial information is presented
for illustrative purposes only and is not necessarily indicative of the
financial position or results of operations that would have actually been
reported had the merger occurred at the beginning of the periods presented, nor
is it necessarily indicative of future financial position or results of
operations. These unaudited pro forma consolidated condensed financial
statements are based upon the respective historical financial statements of L90
and webMillion.com and notes thereto. These unaudited pro forma combined
condensed financial statements do not incorporate, nor do they assume, any
benefits from cost savings or synergies of operations of the consolidated
company.
F-9
<PAGE>
L90, INC.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 2000
March 31, 2000
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Proforma
------------------------------------------- ----------------
L90, Inc. webMillion.com, Inc. Adjustments Pro Forma
--------------------------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 103,692,627 $ 329,400 $ - $ 104,022,027
Accounts receivable, net 7,228,151 164,412 - 7,392,563
Notes receivable from officers 925,588 - 925,588
Prepaid expenses and other assets 854,391 8,584 - 862,975
---------------- ----------- ------------ ----------------
Total current assets 112,700,757 502,396 - 113,203,153
---------------- ----------- ------------ ----------------
Restricted Cash 1,868,632 - - 1,868,632
Property and equipment:
Equipment 7,456,026 67,772 (4,320) (B) 7,519,478
Furniture and fixtures 108,883 1,023 (60) (B) 109,846
Leasehold Improvements 38,012 - (3,928) (B) 38,012
Hardware - 60,705 - 56,777
---------------- ----------- ------------ ----------------
7,602,921 129,500 (8,308) 7,724,113
Less - Accumulated depreciation
and amortization (731,653) (8,308) 8,308 (731,653)
---------------- ----------- ------------ ----------------
Property and equipment, net 6,871,268 121,192 - 6,992,460
Other long-term assets - 3,400 - (B) 3,400
Goodwill - - 19,122,029 (C) 19,122,029
---------------- ----------- ------------ ----------------
Total assets $ 121,440,657 $ 626,988 $ 19,122,029 $ 141,189,674
================ =========== ============ ================
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts payable $ 7,974,960 $ 1,065 $ - $ 7,976,025
Accrued expenses 1,847,711 - - 1,847,711
Current portion of notes payable 347,967 - - 347,967
Current portion of long term capital
lease obligations 153,678 - - 153,678
Deferred revenues 190,600 - - 190,600
Other current liabilities - 247,952 - 247,952
---------------- ----------- ------------ ----------------
Total current liabilities 10,514,916 249,017 - 10,763,932
Note payable, net of current portion 1,005,320 - - 1,005,320
Long term capital lease obligation,
net of current portion 819,776 - - 819,776
---------------- ----------- ------------ ----------------
Total liabilities $ 12,340,012 $ 249,017 $ - $ 12,589,029
---------------- ----------- ------------ ----------------
Shareholder's Equity:
Common stock 21,961 - 2,000 (C) 23,961
Additional paid-in capital 123,043,880 1,321,542 18,176,458 (C) 142,541,880
Notes receivable for common stock (126,083) - - (126,083)
Retained deficit (13,839,113) (943,571) 943,571 (13,839,113)
---------------- ----------- ------------ ----------------
Total shareholder's equity 109,100,645 377,971 19,122,029 128,600,645
---------------- ----------- ------------ ----------------
Total liabilities and
shareholder's equity $ 121,440,657 $ 626,988 $ 19,122,029 $ 141,189,674
================ =========== ============ ================
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
F-10
<PAGE>
L90, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
March 31, 2000
For the Three Months Ended March 31, 2000
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
L90, Inc. webMillion.com, Inc. Adjustments Pro Forma
-------------- ---------------------- ------------- ---------------
Revenue
<S> <C> <C> <C> <C> <C>
Service fee-based revenue $ 8,053,803 - - 8,053,803
Commission-based revenue 529,667 175,012 - 704,679
-------------- ---------------------- ------------- ---------------
8,583,470 175,012 - 8,758,482
-------------- ---------------------- ------------- ---------------
Operating expenses:
Cost of service fee and other revenue 5,455,575 259,495 - 5,715,070
Sales and marketing 2,908,254 558,385 - 3,466,639
Research and development 2,181,052 11,309 - 2,192,361
General and administrative 4,014,425 61,939 - 4,076,364
Goodwill amortization - - 239,025 (D) 239,025
-------------- ---------------------- ------------- ---------------
Total operating expenses 14,559,306 891,128 239,025 15,689,459
-------------- ---------------------- ------------- ---------------
Operating loss (5,975,836) (716,116) (239,025) (6,930,977)
Interest income, net 977,798 2,913 - 980,711
-------------- ---------------------- ------------- ---------------
Loss before provision for income taxes (4,998,038) (713,203) (239,025) (5,950,266)
Provision for income taxes - - - -
-------------- ---------------------- ------------- ---------------
Net loss (4,998,038) (713,203) (239,025) (5,950,266)
============== ====================== ============= ===============
Cumulative dividends on participating
preferred stock (2,411) - - (2,411)
-------------- ---------------------- ------------- ---------------
Net loss attributable to common (5,000,449) (713,203) (239,025) (5,952,677)
stockholders
============== ====================== ============= ===============
Net loss per share:
Basic/Diluted $ (0.30) $ (0.32)
============== ===============
Weighted average number of common shares
outstanding:
Basic/Diluted 16,583,947 2,000,000 18,583,947
============== ====================== ===============
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
F-11
<PAGE>
L90, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------------------------------------------------------------
L90, Inc. webMillion.com, Inc. Adjustments Pro Forma
----------------- ---------------------- --------------- ---------------
Revenue
<S> <C> <C> <C> <C> <C>
Service fee-based revenue $ 7,282,892 - - 7,282,892
Commission-based revenue 1,917,907 25,317 - 1,943,224
----------------- ---------------------- --------------- ---------------
9,200,799 25,317 - 9,226,116
----------------- ---------------------- --------------- ---------------
Operating expenses:
Cost of service fee and other revenue 4,751,034 13,223 - 4,764,257
Sales and marketing 4,865,678 61,319 - 4,926,997
Research and development 2,581,070 828 - 2,581,898
General and administrative 4,520,895 183,215 - 4,704,110
Goodwill amortization - - 569,800 (D) 569,800
----------------- ---------------------- --------------- ---------------
Total operating expenses 16,718,677 258,585 569,800 17,547,062
----------------- ---------------------- --------------- ---------------
Operating loss (7,517,878) (233,268) (569,800) (8,320,946)
Interest income, net 30,397 2,900 - 33,297
----------------- ---------------------- --------------- ---------------
Loss before provision for income taxes (7,487,481) (230,368) (569,800) (8,287,649)
Provision for income taxes (800) - - (800)
----------------- ---------------------- --------------- ---------------
Net loss (7,488,281) (230,368) (569,800) (8,286,849)
================= ====================== =============== ===============
Cumulative dividends on participating
preferred stock (1,469,823) - - (1,469,823)
----------------- ---------------------- --------------- ---------------
Net loss attributable to common stockholders (8,958,104) (230,368) (569,800) (9,756,672)
================= ====================== =============== ===============
Net loss per share:
Basic/Diluted $ (1.34) $ (1.12)
================= ===============
Weighted average number of common shares
outstanding:
Basic/Diluted 6,675,361 2,000,000 8,675,361
================= ====================== ===============
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
F-12
<PAGE>
L90, INC.
Notes to Unaudited Pro Forma Financial Statements
For the Three Months Ended March 31, 2000 and the Period Ended December 31, 1999
The following adjustments were applied to the L90, Inc. historical financial
statements and those of webMillion.com, Inc. to arrive at the pro forma
financial information.
A. On July 24, 2000, L90, Inc. completed the merger with webMillion.com, a
platform for direct marketing programs. The transaction was structured as a
reverse triangular merger and will be accounted for through the purchase
method of accounting. As a result of the tax free purchase, webMillion now
is a wholly-owned subsidiary of the Registrant.
B. Reflects the preliminary purchase price allocation, consisting of 2.0
million shares of the Company's common stock valued at $19,500,000. The
amounts included in the pro forma balance sheet have been recorded at
management's estimate of their fair market value.
<TABLE>
<CAPTION>
<S> <C>
Goodwill $19,122,029
Cash 329,400
Accounts receivable 164,412
Property and equipment, net 121,192
Other assets 11,984
Current liabilities (249,017)
-----------
Total purchase price $ 19,500,000
=============
</TABLE>
C. Reflects the issuance of 2.0 million shares of common stock of the Company
in conjunction with the acquisition of webMillion.com, Inc. at the beginning
of the period presented.
D. Reflects the amortization of goodwill based on the preliminary purchase
price allocation (as noted in footnote (B) to the pro forma balance sheet)
using a 20 year amortization period.
F-13
