SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-23337
SPORTSLINE USA, INC.
(Exact name of Registrant as specified in its charter)
Delaware 65-0470894
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6340 N.W. 5th Way 33309
Fort Lauderdale, Florida (Zip Code)
(Address of principal executive offices)
(954) 351-2120
(Registrant's telephone number, including area code)
None
(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, and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Number of shares of common stock outstanding as of September 30, 1999:
23,590,885
Page 1 of 16 Pages
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Part I. Financial Information
Item 1. Financial Statements (unaudited)
a) Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998..................3
b) Consolidated Statements of Operations
For the three and nine months ended September 30, 1999 and 1998........................4
c) Consolidated Statements of Changes in Shareholders' Equity
For the nine months ended September 30, 1999...........................................5
d) Consolidated Statements of Cash Flows
For the nine months ended September 30, 1999 and 1998..................................6
e) Notes to Consolidated Financial Statements..................................................7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........10
Part II. Other Information
Item 1. Legal Proceedings..............................................................................15
Item 2. Change in Securities...........................................................................15
Item 3. Defaults Upon Senior Securities................................................................15
Item 4. Submission of Matters to a Vote of Security Holders............................................15
Item 5. Other Information..............................................................................16
Item 6. Exhibits and Reports on Form 8-K...............................................................16
</TABLE>
2
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<TABLE>
<CAPTION>
SPORTSLINE USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share data)
(UNAUDITED)
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ......................................... $ 64,509 $ 31,684
Marketable securities ............................................. 33,868 27,391
Accounts receivable ............................................... 8,866 5,051
Deferred advertising and content costs ........................... 21,538 5,413
Prepaid expenses and other current assets ......................... 11,655 5,181
--------- ---------
Total current assets .......................................... 140,436 74,720
RESTRICTED CASH EQUIVALENTS .......................................... 12,989 13,038
NONCURRENT MARKETABLE SECURITIES ..................................... 66,918 26,167
LICENSING RIGHTS ..................................................... 5,950 --
NONCURRENT DEFERRED ADVERTISING -AOL ................................. 7,667 13,417
NONCURRENT DEFERRED ADVERTISING AND CONTENT - CBS .................... 33,038 --
PROPERTY AND EQUIPMENT, net .......................................... 7,718 5,367
GOODWILL ............................................................. 11,185 1,931
OTHER ASSETS ......................................................... 11,454 3,015
--------- ---------
$ 297,355 $ 137,655
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .................................................. $ 1,059 $ 2,545
Accrued liabilities ............................................... 8,890 5,334
Current portion of capital lease obligations ...................... 275 265
Deferred revenue .................................................. 2,691 2,067
--------- ---------
Total current liabilities .................................... 12,915 10,211
CAPITAL LEASE OBLIGATIONS, net of current portion .................... -- 207
ACCRUED AOL OBLIGATION ............................................... 8,274 8,274
CONVERTIBLE SUBORDINATED NOTES ....................................... 90,000 --
--------- ---------
Total liabilities ............................................ 111,189 18,692
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 3)
MINORITY INTEREST .................................................... 7,720 --
SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none
issued and outstanding as of September 30, 1999 and
December 31, 1998 ............................................... -- --
Common stock, $0.01 par value, 200,000,000 shares authorized,
23,590,885 and 20,300,785 issued and outstanding as of
September 30,1999 and December 31, 1998, respectively ........ 236 203
Additional paid-in capital ........................................ 218,016 211,061
Accumulated deficit ............................................... (109,806) (92,301)
--------- ---------
Total shareholders' equity .................................... 178,446 118,963
--------- ---------
$ 297,355 $ 137,655
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
3
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<TABLE>
<CAPTION>
SPORTSLINE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except share and per share data)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE ................................................. $ 15,155 $ 7,431 $ 39,236 $ 21,233
COST OF REVENUE ......................................... 8,331 4,081 20,498 12,465
------------ ------------ ------------ ------------
GROSS MARGIN ............................................ 6,824 3,350 18,738 8,768
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Product development ................................... 459 305 1,221 1,018
Sales and marketing ................................... 10,557 4,777 25,595 13,771
General and administrative ............................ 5,928 3,460 13,946 9,599
Depreciation and amortization ......................... 7,631 3,977 20,190 11,652
Other non-recurring charge for settlement of litigation -- 1,100 -- 1,100
------------ ------------ ------------ ------------
Total operating expenses .................... 24,575 13,619 60,952 37,140
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS .................................... (17,751) (10,269) (42,214) (28,372)
INTEREST EXPENSE ........................................ (1,631) (28) (3,895) (82)
INTEREST AND OTHER INCOME, net .......................... 2,662 1,476 6,880 3,122
------------ ------------ ------------ ------------
LOSS BEFORE EXTRAORDINARY GAIN .......................... (16,720) (8,821) (39,229) (25,332)
EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT (Note 3) . 21,809 -- 21,809 --
------------ ------------ ------------ ------------
NET INCOME (LOSS) ....................................... $ 5,089 $ (8,821) $ (17,420) $ (25,332)
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE - BASIC AND
DILUTED:
Loss per share before extraordinary gain ........... $ (0.72) $ (0.46) $ (1.74) $ (1.42)
Extraordinary gain (Note 3) 0.94 -- 0.97 --
------------ ------------ ------------ ------------
Net income (loss) per share - basic and diluted .... $ 0.22 $ (0.46) $ (0.77) $ (1.42)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING -
BASIC AND DILUTED ..................................... 23,262,812 19,062,532 22,585,447 17,801,064
============ ============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
4
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<TABLE>
<CAPTION>
SPORTSLINE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(amounts in thousands except share data)
(UNAUDITED)
Common Stock Additional Accumulated
Shares Amount Paid-in Capital Deficit Total
------ ------ --------------- ------- -----
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1998 ....................... 20,300,785 $ 203 $ 211,061 $ (92,301) $ 118,963
Noncash issuance of common stock
and warrants pursuant to CBS agreement ........ 1,611,925 17 59,671 -- 59,688
Net proceeds from exercise of warrants .......... 243,800 2 1,395 -- 1,397
Issuance of common stock from exercise
of employee options ........................... 227,756 2 1,118 -- 1,120
Net loss ........................................ -- -- -- (10,128) (10,128)
---------------------------------------------------------------
Balances at March 31, 1999 .......................... 22,384,266 $ 224 $ 273,245 $ (102,429) $ 171,040
Equity transactions of subsidiary .............. -- -- 2,275 -- 2,275
Issuance of common stock pursuant to ........... 195,850 2 426 (85) 343
acquisition of business
Issuance of common stock pursuant to the ........ 54,228 -- 809 -- 809
employee stock purchase plan
Noncash issuance of warrants pursuant to PGA Tour -- -- 3,238 -- 3,238
agreement
Net proceeds from exercise of warrants ........ 24,500 -- 246 -- 246
Issuance of common stock from exercise
of employee options .......................... 89,384 1 382 -- 383
Net loss ........................................ -- -- -- (12,381) (12,381)
---------------------------------------------------------------
Balances at June 30, 1999 ........................... 22,748,228 $ 227 $ 280,621 $ (114,895) $ 165,953
Equity transactions of subsidiary .............. -- -- 2,661 -- 2,661
Noncash issuances of common stock pursuant to ... 124,320 2 2,802 -- 2,804
acquisition of businesses
Net proceeds from exercise of warrants .......... 611,884 6 1,670 -- 1,676
Issuance of common stock from exercise .......... 106,453 1 262 -- 263
of employee options
Net income ...................................... -- -- -- 5,089 5,089
---------------------------------------------------------------
Balances at September 30, 1999 ...................... 23,590,885 $ 236 $ 288,016 $ (109,806) $ 178,446
===============================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
5
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<CAPTION>
SPORTSLINE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(UNAUDITED)
Nine Months Ended
September 30,
-------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................................................ $ (17,420) $ (25,332)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ....................................................... 20,190 11,652
Other noncash expenses .............................................................. 214 180
Extraordinary gain on extinguishment of debt .................................... (21,809) --
Changes in operating assets and liabilities:
Accounts receivable ............................................................. (3,881) (2,559)
Prepaid expenses and other current assets ....................................... (3,427) 116
Accounts payable ................................................................ (1,943) (813)
Accrued liabilities ............................................................. 4,220 3,693
Deferred revenue ................................................................ 624 245
--------- ---------
Net cash used in operating activities ............................................ (23,232) (12,818)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities, net ................................................. (47,228) (8,164)
Purchases of property and equipment ..................................................... (5,051) (2,498)
Purchase of licensing rights ............................................................ (8,500) --
Purchase of service mark ................................................................ -- (100)
Acquisition of businesses ............................................................... (4,287) (374)
Net decrease (increase) in restricted cash ............................................. 49 (54)
--------- ---------
Net cash used in investing activities ............................................ (65,017) (11,190)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock of subsidiary ................................ 7,500 --
Net proceeds from issuance of common stock and exercise of common
stock warrants and options ........................................................... 5,894 87,854
Proceeds from issuance of convertible subordinated notes, net of costs .................. 145,445 --
Repurchase of convertible subordinated notes ............................................ (37,568) --
Repayment of capital lease obligations and long term borrowings ......................... (197) (1,093)
--------- ---------
Net cash provided by financing activities ........................................ 121,074 86,761
--------- ---------
Net increase in cash and cash equivalents ................................................... 32,825 62,753
CASH AND CASH EQUIVALENTS, beginning of period .............................................. 31,684 32,482
--------- ---------
CASH AND CASH EQUIVALENTS, end of period .................................................... $ 64,509 $ 95,235
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Non cash issuance of common stock and common stock warrants to CBS ..................... $ 59,688 $ 11,897
========= =========
Non cash issuance of common stock, warrants and options pursuant to consulting agreements $ -- $ 1,064
========= =========
Non cash issuance of common stock pursuant to purchase of service mark .................. $ -- $ 279
========= =========
Non cash issuance of common stock warrants pursuant to PGA Tour agreement .............. $ 3,238 $ --
========= =========
Non cash issuance of common stock of subsidiary ........................................ $ 4,936 $ --
========= =========
Non cash issuance of common stock pursuant to acquisition of businesses ................. $ 3,147 $ 1,650
========= =========
Equipment acquired under capital leases ................................................. $ -- $ 104
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest .................................................................. $ 2,376 $ 82
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
6
<PAGE>
SPORTSLINE USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) NATURE OF OPERATIONS:
SportsLine USA, Inc. ("SportsLine USA") is at the leading edge of media
companies, providing Internet sports content, community and e-commerce on a
global basis. SportsLine USA's content includes more than 400,000 pages of
multimedia sports information, entertainment and merchandise. SportsLine USA was
founded in 1994 and its flagship Internet sports service (www.sportsline.com )
was renamed CBS SportsLine in March of 1997 as part of an exclusive promotional
and content agreement with CBS Corporation ("CBS"). SportsLine USA produces the
official league Web sites for Major League Baseball, the PGA Tour and NFL Europe
League, and serves as the primary sports content provider for America Online,
Netscape and Excite. The board of directors has proposed an amendment to the
Company's Certificate of Incorporation to change the name of the Company from
SportsLine USA, Inc. to SportsLine.com, Inc. This proposal will be submitted for
vote to the shareholders on November 19, 1999.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying consolidated financial statements include the accounts
of SportsLine USA, Inc. and its subsidiaries (the "Company").
The Company acquired International Golf Outlet, Inc. in June 1998 and
accounted for this transaction using the purchase method of accounting. The
purchase resulted in goodwill of $1,960,000. In August 1999 additional stock was
issued for revenue and other goals that were met which increased goodwill in the
amount of $249,000. Such goodwill is being amortized over an estimated life of
ten years.
The Company acquired Golf Club Trader, Inc. in May 1999. The purchase
was accounted for using the pooling-of-interests method of accounting; however,
given Golf Club Trader, Inc.'s immateriality, historical results of the Company
were not restated and the results of Golf Club Trader, Inc. are included herein
beginning April 1, 1999.
The Company acquired other businesses during the quarter ended
September 30, 1999, and accounted for these transactions using the purchase
method of accounting. The purchases resulted in goodwill of $4,928,000, and will
be amortized over an estimated life of ten years.
Sports.com Limited, formerly known as SportsLine Europe Limited, was
formed in May 1999. In June 1999, Sports.com Limited acquired the sports
division of Infosis Group. The Company accounted for this transaction using the
purchase method of accounting resulting in goodwill of $1,978,000. The
accompanying financial statements also include the purchase of Sportsweb, which
resulted in goodwill of $2,420,000. In connection with the initial
capitalization of Sports.com Limited and the acquisition of Sportsweb, a
liability of $7,720,000 has been recognized in the Company's balance sheet to
reflect the minority interest in Sports.com Limited.
In connection with the aforementioned purchases, the Company recognized
goodwill amortization expense of $218,000 and $50,000 for the three months ended
September 30, 1999 and 1998, respectively. Goodwill amortization expense was
$320,000 and $66,000 for the nine months ended September 30, 1999 and 1998,
respectively.
In the opinion of management, the unaudited consolidated interim
financial statements contain all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position of the
Company at September 30, 1999, and the results of operations and cash flows for
the three months and nine months ended September 30, 1999 and 1998. The
consolidated balance sheet at December 31, 1998 has been derived from the
audited financial statements as of that date.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission's rules and regulations.
These financial statements should be read in conjunction with the
Company's audited financial statements included in the Company's Annual Report
on Form 10-K, as filed with the Securities and Exchange Commission on March 15,
1999. The results of operations for the three and nine months ended September
30, 1999 are not necessarily indicative of the results to be expected for any
subsequent quarter or for the entire fiscal year ending December 31, 1999.
7
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SPORTSLINE USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(Continued)
Per Share Amounts
Net income (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 exercise of stock options and warrants (using the treasury stock
method). There were 8,120,472 and 4,258,371 options and warrants outstanding at
September 30, 1999 and 1998, respectively, that could potentially dilute
earnings per share in the future. These options and warrants were not included
in the computation of diluted earnings per share because such instruments would
have been antidilutive for all periods presented. The loss before extraordinary
item is the basis for the exclusion of options and warrants for the computation
of earnings per share.
Revenue by Type
Revenue by type for the three and the nine months ended September 30,
1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Advertising...................................... $7,797 $4,200 $20,082 $12,752
E-commerce....................................... 3,660 1,141 9,542 2,183
Membership and premium services.................. 1,338 1,301 3,997 3,413
Content licensing and other...................... 2,360 789 5,615 2,885
------------ ------------- ------------ ------------
$15,155 $7,431 $39,236 $21,233
============ ============= ============ ============
</TABLE>
Barter transactions, in which the Company received advertising or other
services or goods in exchange for content or advertising on its Web sites,
accounted for approximately 18% and 16% of total revenue for the three months
ended September 30, 1999 and 1998, respectively. Barter transactions accounted
for 19% and 17% of total revenue for the nine months ended September 30, 1999
and 1998, respectively.
Recent Accounting Pronouncements
In June 1997, SFAS No. 130, Reporting Comprehensive Income, was issued
which was adopted by the Company as of January 1, 1998. This statement
establishes standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. This statement
requires that an enterprise (a) classify items of other comprehensive income by
their nature in financial statements and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of statements of financial position.
Comprehensive loss is defined as the change in equity during the financial
reporting period of a business enterprise resulting from non-owner sources.
Comprehensive income (loss) equals the net income (loss) for all periods
presented.
In June 1998, the FASB issued SFAS No. 133, as amended by SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133, as
amended, establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133, as amended, requires that
changes in the derivative's fair value be recognize current in the statement of
operations unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the statement of operations, and requires that a
company formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting. SFAS No. 133, as amended, is
effective for fiscal years beginning after September 15, 2000. A company may
also implement the provision of SFAS No. 133, as amended, as of the beginning of
any fiscal quarter after issuance. SFAS No. 133, as amended, cannot be applied
retroactively, and must be applied to (a) derivative instruments and (b) certain
derivative instruments embedded in hybrid contracts that were issued, acquired,
or substantively modified after December 31, 1997. The Company has not yet
adopted SFAS No. 133, as amended, and presently does not have any derivative
instruments.
8
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SPORTSLINE USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(Continued)
Segment Reporting
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information. SFAS No. 131 establishes standards for
the way public business enterprises report information about operating segments
in annual financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
stockholders. SFAS No. 131 is effective for financial statements for periods
beginning after December 31, 1997.
Beginning in the three months ended September 30, 1999, the Company
began operating in two segments. The following information is disclosed, per
SFAS No. 131, based on the method management uses to organize financial
information for making operating decisions and assessing performance. The
Company currently has two major lines of businesses that share the same
infrastructure: United States and Europe.
A summary of the segment financial information is as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, 1999 September 30, 1999
------------------ ------------------
<S> <C> <C>
Total revenue:
United States $ 14,579 $ 38,660
Europe 576 576
--------- ---------
$ 15,155 $ 39,236
========= =========
Loss from operations:
United States $ (16,190) $ (40,478)
Europe (1,561) (1,736)
--------- ---------
$ (17,751) $ (42,214)
========= =========
Interest income(expense), net:
United States $ 945 $ 2,834
Europe 86 151
--------- ---------
$ 1,031 $ 2,985
========= =========
Net loss before extraordinary gain:
United States $ (15,245) $ (37,644)
Europe (1,475) (1,585)
--------- ---------
$ (16,720) $ (39,229)
========= =========
Total assets as of September 30, 1999:
United States $ 282,929
Europe 14,426
---------
$ 297,355
=========
</TABLE>
(3) COMMITMENTS AND CONTINGENCIES:
From time to time, the Company may be involved in litigation relating
to claims arising out of its operations in the normal course of business. The
Company is not currently a party to any other legal proceedings, the adverse
outcome of which, individually or in the aggregate, would have a material
adverse effect on the Company's consolidated financial position or results of
operations.
9
<PAGE>
SPORTSLINE USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) COMMITMENTS AND CONTINGENCIES:--(Continued)
Effective October 1, 1998, the Company and America Online, Inc. ("AOL")
entered into an agreement (the "AOL Agreement"), which has an initial term of
three years, subject to extension for up to two additional three-year terms at
the option of AOL under certain circumstances. Under the AOL Agreement, the
Company became the premier provider of special features and major event coverage
to the Sports Channel on the AOL service, as well as an anchor tenant in the
Sports Web Center on aol.com, AOL's Web site. Cbs.sportsline.com will also be
the premier national sports partner with a presence on all Digital City local
services, currently serving 50 cities, and an anchor tenant in the Sports
Channel on CompuServe. In addition, SportsLine WorldWide will be the premier
global provider of country-specific sports content to all of AOL's international
services, and the Company will be the premier provider of licensed sports
equipment and apparel as well as golf products within the Sports Channel on the
AOL service. The Company (i) paid AOL cash in the amount of $8 million, (ii)
issued AOL 550,000 shares of common stock and (iii) granted AOL warrants to
purchase an additional 900,000 shares of Common Stock at exercise prices ranging
from $20 to $40 per share, 450,000 of which are subject to vesting based on the
Company's achievement of specified revenue thresholds. Furthermore, the Company
has agreed to make a payment to AOL, provided, that AOL holds and does not sell
any of such shares for a period of two years, if AOL is not able to realize at
least $15 million from the sale of the 550,000 shares of common stock issued to
it, at the end of such two-year period (the "AOL Obligation"). The Company
accrued a liability of approximately $8,274,000 for the payment that may be
required based on the value of the Company's stock at inception of the AOL
agreement and placed in escrow cash and cash equivalents of approximately
$12,500,000 to be restricted as security for the AOL Obligation. On a pro forma
basis, as of September 30, 1999, had AOL sold the shares of the Company's common
stock issued under the AOL Agreement pursuant to the provisions of the stock
liability, the Company would have recorded a non-recurring gain of approximately
$8,274,000. The ultimate amount of any such accrued AOL Obligation will be
determined upon future sale of such shares by AOL. In addition, AOL will be
eligible to share in direct revenues attributable to AOL promotion of Company
offerings on AOL brands once certain thresholds specified in the agreement have
been met. Over the three-year agreement, the Company will receive a number of
guaranteed impressions on AOL's commercial online services and Web sites.
In March 1999, the Company completed an offering of $150 million
aggregate principal amount of 5% Convertible Subordinated Notes due 2006 (the
"Convertible Subordinated Notes"). The Convertible Subordinated Notes are
convertible, at the holders option, into the Company's common stock at an
initial conversion rate of 15.355 shares of common stock per $1000 principal
amount of Convertible Subordinated Notes (equivalent to a conversion price of
approximately $65.125 per share), subject to adjustment in certain events.
Interest on the Convertible Subordinated Notes is payable semiannually on April
1 and October 1 of each year, commencing October 1, 1999. The Convertible
Subordinated Notes are unsecured and are subordinated to all existing and future
Senior Indebtedness (as defined in the Convertible Subordinated Notes indenture)
of the Company. The Convertible Subordinated Notes may not be redeemed by the
Company prior to April 2, 2002. Thereafter, the Convertible Subordinated Notes
will be redeemable at the option of the Company, in whole or part, at the
redemption prices set forth in the Convertible Subordinated Notes indenture. As
of September 30, 1999, the Company had no material indebtedness outstanding that
would have constituted Senior Indebtedness. The Indenture will not limit the
amount of additional indebtedness, including Senior Indebtedness, which the
Company can create, incur, assume, or guarantee, nor will the Indenture limit
the amount of indebtedness which any subsidiary of the Company can create,
incur, assume or guarantee.
In August 1999, the Company repurchased $60 million of its Convertible
Subordinated Notes for approximately $36.4 million, and as a result, the Company
recognized an extraordinary gain of $21.8 million, net of amortized debt
issuance costs. In October 1999, the Company completed an offer to purchase any
and all of its outstanding Convertible Subordinated Notes. Notes in an aggregate
principal amount of approximately $70 million were tendered and accepted for
payment pursuant to the offer. The aggregate cost to purchase the Notes tendered
pursuant to the offer was approximately $53 million and, as a result, the
Company will recognize an extraordinary gain of approximately $14 million, net
of expenses and unamortized debt issuance costs, in the quarter ending December
31, 1999. Convertible Subordinated Notes in an aggregate principal amount of
approximately $20 million remain outstanding.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements, which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements. Factors
that might cause or contribute to such differences include, among others,
competitive pressures, the growth rate of the Internet, constantly changing
technology and market acceptance of the Company's products and services.
Investors are also directed to consider the other risks and uncertainties
discussed in the Company's Securities and Exchange Commission filings, including
those discussed under the caption "Risk Factors That May Affect Future Results"
in the Company's Annual Report on Form 10-K for the year ended December 31,
1998. The Company undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements, which may be made to reflect
events or circumstances after the date
10
<PAGE>
hereof or to reflect the occurrence of unanticipated events. The following
discussion also should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto included elsewhere in this Report.
Recent Developments
In August 1999, the Company entered into a three-year promotional and
programming agreement with Westwood One, Inc., a radio network with over 5,000
radio stations worldwide, in exchange for $9 million of the Company's common
stock, issued subsequent to September 30, 1999 (450,000 shares). The Company and
Westwood One, Inc. will share all revenue generated from all programming
produced.
In August 1999, the Company repurchased $60 million of its Convertible
Subordinated Notes for approximately $36.4 million, and as a result, the Company
recognized an extraordinary gain of $21.8 million, net of amortized debt
issuance costs. In October 1999, the Company completed an offer to purchase any
and all of its outstanding Convertible Subordinated Notes. Notes in an aggregate
principal amount of approximately $70 million were tendered and accepted for
payment pursuant to the offer. The aggregate cost to purchase the Notes tendered
pursuant to the offer was approximately $53 million and, as a result, the
Company will recognize an extraordinary gain of approximately $14 million, net
of expenses and unamortized debt issuance costs, in the quarter ending December
31, 1999. Convertible Subordinated Notes in an aggregate principal amount of
approximately $20 million remain outstanding.
During the quarter ended September 30, 1999, the Company acquired two
additional businesses in exchange for an aggregate of $2,373,000 cash and
$2,555,000 of the Company's common stock (110,100 shares). In connection with
these purchases, goodwill was recorded in the amount of $4,928,000, which will
be amortized over ten years.
In September 1999, the Company and ZoneNetwork.com , publisher of
MountainZone.com, signed an exclusive three-year content and commerce agreement.
ZoneNetwork is producing co-branded, customized sites and stores for each of the
Company's worldwide properties. The Company received a 3% minority stake in
ZoneNetwork.com and a multi-million dollar fee in exchange for promotion of the
co-branded sites and stores.
Results of Operations
Revenue
Total revenue for the quarters ended September 30, 1999 and 1998 was
$15,155,000 and $7,431,000, respectively. Total revenue for the nine months
ended September 30, 1999 and 1998 was $39,236,000 and $21,233,000, respectively.
The increase in revenue was primarily due to increased advertising sales, as
well as increased revenue from the sale of merchandise (e-commerce), premium
service fees and content licensing.
Advertising revenue increased 86% to $7,797,000 for the three months
ended September 30, 1999 from $4,200,000 for the three months ended September
30, 1998. Advertising revenue increased 57% to $20,082,000 for the nine months
ended September 30, 1999 from $12,752,000 for the nine months ended September
30, 1998. The increase in revenue was primarily due to a higher number of
impressions sold and additional sponsors advertising on the Company's Web sites.
Additional revenue was also generated in connection with the Company's
advertising and sponsorship agreements with WebMD, MountainZone.com, and
CareerPath, and the Company's new agreements with PGATOUR.com and Major League
Baseball.
Membership and premium services revenue increased $37,000 for the three
months ended September 30, 1999 compared to the same period in 1998 and $584,000
for the nine months ended September 30, 1999 compared to the same period in
1998. In January 1999, the Company launched "SportsLine Rewards," a program
which offers bonus points to members for viewing pages and making purchases.
These points can be redeemed for discounts on merchandise, special events and
other premium items. While membership revenue decreased due to a restructuring
of the Company's membership program, premium service revenue increased due to
increased participation in the Company's fantasy sports contests as well as
increased participation in the Company's "Sports Careers" products.
E-commerce revenue for the three months ended September 30, 1999
increased 221% to $3,660,000 from $1,141,000 for the three months ended
September 30, 1998. E-commerce revenue for the nine months ended September 30,
1999 increased 337% to $9,542,000 from $2,183,000 for the nine months ended
September 30, 1998. The principal contributing factors to increased e-commerce
revenue were increased product assortment, a new order entry platform and better
product promotion through the Company's relationships with CBS and AOL. The
purchase of two e-commerce businesses in 1999 also contributed to increased
sales of merchandise in the third quarter.
Content licensing and other revenue increased $1,571,000 for the three
months ended September 30, 1999 compared to the same period in 1998, and
$2,730,000 for the nine months ended September 30, 1999 compared to the same
period in 1998. This was due primarily to increased revenue as a result of the
Company's agreement with AOL and new subsidiary in Europe.
11
<PAGE>
As of September 30, 1999, the Company had deferred revenue of
$2,691,000 relating to cash or receivables for which services had not yet been
provided.
Barter transactions, in which the Company received advertising or other
services or goods in exchange for content or advertising on its Web sites,
accounted for approximately 18% and 16% of total revenue for the three months
ended September 30, 1999 and 1998, respectively. Barter transactions accounted
for 19% and 17% of total revenue for the nine months ended September 30, 1999
and 1998, respectively. In future periods, management intends to maximize cash
advertising and content licensing revenue, although the Company will continue to
enter into barter relationships when deemed appropriate.
Cost of Revenue
Cost of revenue for the three months ended September 30, 1999 and 1998
was $8,331,000 and $4,081,000, respectively. Cost of revenue for the nine months
ended September 30, 1999 and 1998 was $20,498,000 and $12,465,000 respectively.
The increase in cost of revenue was primarily the result of increased
merchandise costs due to higher merchandise sales and increased revenue sharing
under the Company's agreements with CBS, Major League Baseball and PGATOUR.com.
During 1999, the Company increased its editorial and operations staff to support
the production of sports-related information and programming on the Company's
Web sites and the content requirements under the AOL agreement as well as
official sites of Major League Baseball and PGATOUR.com. As a percentage of
revenue, cost of revenue remained at 55% for the three months ended September
30, 1999 and 1998. For the nine months ended September 30, 1999 and 1998 cost of
revenue decreased to 52% from 59%. If e-commerce revenue in the future increases
as a percentage of the Company's total revenue, management anticipates that
gross margins could decrease in future quarters. The Company's e-commerce
revenue generally produces a lower gross margin than other revenue categories.
In addition, the Company's gross margin was, and may continue to be, adversely
affected by start up expenses of its newly formed subsidiary, Sports.com
Limited.
Operating Expenses
Product Development. For the three months ended September 30, 1999 and
1998, product development costs were $459,000 and $305,000, respectively. For
the nine months ended September 30, 1999 and 1998, product development costs
were $1,221,000 and $1,018,000, respectively. The Company believes that
investments in product development are required to remain competitive.
Consequently, the Company intends to continue to invest resources in product
development. As a percentage of revenue, product development expense decreased
to 3% for the three months ended September 30, 1999 from 4% for the three months
ended September 30, 1998. For the nine months ended September 30, 1999 product
development expense decreased to 3% from 5% for the nine months ended September
30, 1998, respectively.
Sales and Marketing. For the three months ended September 30, 1999 and
1998, sales and marketing expense was $10,557,000 and $4,777,000, respectively.
Sales and marketing expense was $25,595,000 for the nine months ended September
30, 1999 compared to $13,771,000 for the nine months ended September 30, 1998.
The increase in sales and marketing expense was primarily the result of
increased advertising on other Web sites and an increase in the number of sales
and marketing personnel and related costs. Also, in February 1999, the Company
entered into a new agreement with Netscape, which resulted in additional
marketing expense. In addition, in August 1999, the Company started a national
outdoor advertising campaign that has contributed to increased marketing
expense. Barter transactions accounted for approximately 26% and 24% of sales
and marketing expense for the three months ended September 30, 1999 and 1998,
respectively, and 29% and 25% of sales and marketing expense for the nine months
ended September 30, 1999 and 1998, respectively. The increase in the
proportionate amount of barter expense was due primarily to the barter of
content licensing for advertising during 1999 as a result of the Company's
agreement with AOL. As a percentage of revenue, sales and marketing expense
increased to 70% for the three months ended September 30, 1999 from 64% for the
three months ended September 30, 1998. For the nine months ended September 30,
1999 and 1998, sales and marketing expense was 65% for both periods. During the
remainder of 1999, the Company plans to continue spending aggressively on a
number of marketing related initiatives, hiring of new employees, investments in
customer targeting and personalization tools and advertising for its Web sites.
The Company also plans to launch a marketing campaign in Europe during the
fourth quarter of 1999 to promote its Sports.com web sites.
General and Administrative. General and administrative expense for the
three months ended September 30, 1999 and 1998 was $5,928,000 and $3,460,000,
respectively. For the nine months ended September 30, 1999 general and
administrative expense was $13,946,000 compared to $9,599,000 for the nine
months ended September 30, 1998. The increase in general and administrative
expense in each period was primarily attributable to salary and related expenses
for additional personnel, increases in rent and occupancy expense, increases in
systems support and maintenance expense and start up expenses associated with
the Company's subsidiary, Sports.com Limited. The Company increased general and
administrative expense in order to develop and maintain the administrative
infrastructure necessary to support the growth of its business. As a percentage
of revenue, general and administrative expense decreased to 39% for the three
months ended September 30, 1999 from 47% for the three months ended September
30, 1998, and to 36% for the nine months ended September 30, 1999 from 45% for
the nine months ended September 30, 1998.
Depreciation and Amortization. Depreciation and amortization expense
was $7,631,000 and $3,977,000 for the three months
12
<PAGE>
ended September 30, 1999 and 1998, respectively. For the nine months ended
September 30, 1999 depreciation and amortization expense was $20,190,000
compared to $11,652,000 for the nine months ended September 30, 1998. The
increase in depreciation and amortization expense was primarily due to the
amortization of amounts related to the Company's agreements with AOL, CBS,
Westwood One, Inc. and PGATOUR.com and, to a lesser extent, to additional
property and equipment acquired during 1999 to continue expanding the Company's
technology infrastructure. The Company's agreement with CBS was amended in
February 1999, which resulted in the issuance of additional warrants to CBS, and
increased amortization expense in 1999. In future periods, the Company
anticipates total amortization expense to increase as a result of the shares and
warrants related to the new AOL, CBS, PGATOUR.com and Westwood One agreements.
Under the Company's agreement with CBS, the Company has issued shares
of common stock and warrants to purchase common stock in consideration of CBS's
advertising and promotional efforts and its license to the Company of the right
to use certain CBS logos and television-related sports content. The value of the
advertising and content has been recorded in the balance sheet as deferred
advertising and content costs and is amortized as depreciation and amortization
expense over each related contract year. Total amortization expense under the
CBS agreement was $10,525,000 for the nine months ended September 30, 1999 and
will be approximately $3.6 million for the remainder of 1999.
Under the Company's agreement with AOL, the Company issued shares of
common stock and warrants to purchase common stock and made a cash payment in
consideration of AOL's advertising and promotional efforts. The value of the
advertising has been recorded on the balance sheet as deferred advertising costs
and as amortized to depreciation and amortization expense over each related
contract year. Total amortization expense under the AOL agreement was $3,985,000
for the nine months ended September 30, 1999 and will be $1,328,000 for the
remainder of 1999.
Interest Expense. Interest expense was $1,631,000 for the three months
ended September 30, 1999 compared to $28,000 for the three months ended
September 30, 1998. For the nine months ended September 30, 1999 and 1998,
interest expense was $3,895,000 and $82,000, respectively. The increase in
interest expense was primarily due to accrued interest on the Convertible
Subordinated Notes, which were issued on March 24, 1999. Interest expense is
expected to decrease significantly in future periods as a result of the
Company's repurchase of approximately $130 million of the outstanding
Convertible Subordinated Notes.
Interest and Other Income, Net. Interest and other income, net for the
three months ended September 30, 1999 was $2,662,000 compared to $1,476,000 for
the three months ended September 30, 1998. For the nine months ended September
30, 1999 and 1998, interest and other income were $6,880,000 and $3,122,000,
respectively. The increase was primarily attributable to the higher average
balance of cash and cash equivalents and marketable securities resulting from
the Company's Convertible Subordinated Note offering in March 1999. Interest
income is expected to decrease in future periods as a result of the use of
approximately $90.5 million of cash to repurchase the Convertible Subordinated
Notes.
Extraordinary Gain. In the quarter ended September 30, 1999, the
Company repurchased $60,000,000 of its Convertible Subordinated Notes for
approximately $37,500,000, and as a result, the Company recognized an
extraordinary gain of $21,809,000, net of unamortized debt issuance costs.
Liquidity and Capital Resources
As of September 30, 1999, the Company's primary source of liquidity
consisted of $64,509,000 in cash and cash equivalents, an increase of
$32,825,000 from December 31, 1998. Short-term marketable securities at
September 30, 1999 totaled $33,868,000, a decrease of $6,477,000 from December
31, 1998. The Company invests its excess cash predominantly in instruments that
are highly liquid, of high investment grade, and such instruments generally have
maturities of less than one year with the intent to make such funds readily
available for operating and investment purposes. As of September 30, 1999, the
Company also had $66,918,000 of non-current marketable securities and increase
of $40,751,000 from December 31, 1998. Subsequent to September 30, 1999 the
Company used $53 million of cash to repurchase the Convertible Subordinated
Notes.
The Company has obtained revolving credit facilities that provide for
the lease financing of computers and other equipment purchases. Outstanding
amounts under the facilities bear interest at a current variable rate of
approximately 9%. As of September 30, 1999, the Company owed $275,000 under
these facilities.
As of September 30, 1999, current deferred advertising and content
costs totaled $21,538,000 and long-term deferred advertising and content costs
totaled $40,705,000. These deferred amounts represent costs related to the CBS
and AOL agreements. These amounts will be amortized as depreciation and
amortization expense over the terms of each agreement. Accrued liabilities
totaled $8,890,000 as of September 30, 1999, which represented an increase of
$3,556,000 from December 31, 1998 primarily due to increases in accruals for
advertising, revenue splits, health insurance and the employee stock purchase
plan.
Net cash used in operating activities was $23,232,000 and $12,818,000
for the nine months ended September 30, 1999 and 1998, respectively. The
principal uses of cash for all periods were to fund the Company's net losses
from operations partially offset by depreciation and amortization expense and
changes in working capital.
13
<PAGE>
Net cash used in investing activities was $65,017,000 and $11,190,000
for the nine months ended September 30, 1999 and 1998, respectively. The
principal uses of cash in investing activities were primarily for the purchase
of current and non-current marketable securities and purchases of licensing
rights, property and equipment and acquisitions of businesses.
Net cash provided by financing activities was $121,074,000 and
$86,761,000 for the nine months ended September 30, 1999 and 1998, respectively.
Financing activities during 1999 consisted principally of the issuance and
repurchase of a portion of the Convertible Subordinated Notes.
Although the Company has no material commitments for capital
expenditures, it anticipates purchasing approximately $4.0 to $5.0 million of
property and equipment during the remainder of 1999. The capital expenditures
will relate to infrastructure and system needs for the Company's European
expansion and anticipated growth in e-commerce as well as normal operating and
financial system improvements. Additionally, the Company intends to continue to
pursue acquisition of or investments in businesses, services and technologies
that are complementary to those of the Company.
The Company believes that its current cash and marketable securities
will be sufficient to fund its working capital and capital expenditure
requirements for at least the next 24 to 36 months. However, the Company expects
to continue to incur significant operating losses for at least the next 24 to 36
months. To the extent the Company requires additional funds to support its
operations or the expansion of its business, the Company may sell additional
equity, issue debt or convertible securities or obtain credit facilities through
financial institutions. There can be no assurance that additional financing, if
required, will be available to the Company in amounts or on terms acceptable to
the Company.
Year 2000 Compliance
The Company utilizes a significant number of computer software programs
and operating systems across its entire organization, including applications
used in operating the Company's various Web sites, member services, e-commerce,
and various administrative and billing functions. To the extent that the
Company's software applications contain source codes that are unable to
appropriately interpret the upcoming calendar year 2000, some level of
modification, or even possible replacement of such applications may be
necessary.
The Company has added personnel and retained a consulting firm to help
assess the Company's Year 2000 compliance. The assessment is currently being
conducted in four phases, the first two of which have been completed. During
Phase One, the Company analyzed facilities, applications, network, distributed
computing, infrastructure, and data in order to determine the size, scope, and
complexity of the Company's exposure to Year 2000. During Phase Two, specific
strategies required to bring exposure areas into compliance were formulated.
Additionally, during Phase Two, the Company began interviewing hardware,
software, market feed, and firmware vendors for Year 2000 compliance plans. The
results of the first and second phases were used to develop a
compliance/renovation approach, budget, and project plan, which includes an
analysis of compliance strategies, cost parameters and timelines. Phase Three,
which is near completion, consists of the renovations of software and
applications, implementation of hardware patches, development of project
contingencies and completion of final testing. Phase Four will complete the
process with the development of a contingency plan for any hardware or software
failure. The Company expects to be substantially Year 2000 compliant by the end
of November 1999 with respect to its mission-critical computing infrastructure,
associated applications, and strategic vendors and suppliers.
The Company has incurred $550,000 in direct costs in the nine months
ended September 30, 1999 and expects to incur an additional $100,000 during the
remainder of 1999 to support its compliance initiatives. Although the Company
expects to be Year 2000 compliant on or before December 31, 1999, there can be
no assurances that the Company will not experience serious unanticipated
negative consequences and/or material costs caused by undetected errors or
defects in the technology used in its internal systems.
Seasonality
The Company expects that its revenue will be higher leading up to and
during major U.S. and European sports seasons and lower at other times of the
year, particularly during the summer months. In addition, the effect of such
seasonal fluctuations in revenue could be enhanced or offset by revenue
associated with major sports events, such as the Olympics and the World Cup
events, although such events do not occur every year. The Company believes that
advertising sales in traditional media, such as television, generally are lower
in the first and third calendar quarters of each year, and that advertising
expenditures fluctuate significantly with economic cycles. Depending on the
extent to which the Internet is accepted as an advertising medium, seasonality
and cyclicality in the level of Internet advertising expenditures could become
more pronounced. The foregoing factors could have a material adverse affect on
the Company's business, results of operations and financial condition.
14
<PAGE>
Recent Accounting Pronouncements
In June 1997, SFAS No. 130, Reporting Comprehensive Income, was issued
which was adopted by the Company as of January 1, 1998. This statement
establishes standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. This statement
requires that an enterprise (a) classify items of other comprehensive income by
their nature in financial statements and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of statements of financial position.
Comprehensive loss is defined as the change in equity during the financial
reporting period of a business enterprise resulting from non-owner sources.
Comprehensive income (loss) equals the net income (loss) for all periods
presented.
In June 1998, the FASB issued SFAS No. 133, as amended by SFAS No.
137, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133,
as amended, establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133, as amended, requires that
changes in the derivative's fair value be recognized currently in the statement
of operations unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the statement of operations, and
requires that a company formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting. SFAS No. 133, as
amended, is effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. SFAS No. 133, as amended, in hybrid contracts that were
issued, acquired, or substantively modified after December 31, 1997. The Company
has not yet adopted SFAS No. 133, as amended, and presently does not have any
derivative instruments.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently a party to any legal proceedings, the
adverse outcome of which, individually or in the aggregate, would have a
material adverse effect on the Company's financial position or results of
operations.
ITEM 2. CHANGE IN SECURITIES
(a) Sales of Unregistered Securities During the Three Months Ended
September 30, 1999
During the three months ended September 30, 1999, the Company issued
and sold the following securities without registration under the Securities Act:
The Company issued 282,960 shares of common stock to Kleiner Perkins
Caufield & Byers VII and 7,256 shares of common stock to KPCB Information
Sciences Zaibatsu Fund II pursuant to the cashless exercises of warrants in
accordance with their terms.
During the quarter ended September 30, 1999, as related to the
acquisitions of businesses the Company issued an aggregate of 124,320 shares of
common stock.
Upon exercise of warrants, the Company issued an aggregate of 321,918
shares of common stock for total cash of $1,676,250 including: (i) 200,000
shares of common stock to the Estate of Burk Zanft for cash consideration of
$1,000,000; (ii) 6,668 shares of common stock to International Management Group
for cash consideration of $50,000; (iii) 5,000 shares of common stock to the
Monica Seles for cash consideration of $25,000; (iv) 10,000 shares of common
stock to Richard Horrow for cash consideration of $50,000; and (iv) 20,000
shares of common stock to Eldrick T. Woods for cash consideration of $150,000;
(v) 80,000 shares of common stock to James Walsh for cash consideration of
$400,000; and (vi) 250 shares of common stock to Lee Kolligian for cash
consideration of $1,250.
No underwriter was involved in any of the above sales of securities.
All of the above securities were issued in reliance upon the exemption set forth
in Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act"), on the basis that they were issued under circumstances not involving a
public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
15
<PAGE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three month period ended September
30, 1999.
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.
Date: November 15, 1999 SPORTSLINE USA, INC.
(Registrant)
/s/ Michael Levy
----------------
Michael Levy
President and Chief Executive Officer
/s/ Kenneth W. Sanders
----------------------
Kenneth W. Sanders
Chief Financial Officer
16
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