-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WWSPNJZdWEjHlYMEHeMDrjZQ6KU+Gw4b2fS+JfAzCt9WlAmM6xthJsIDqLLyNHsQ NQqFpxFoKbUj6sBALz4Prg== 0000895345-99-000514.txt : 19991021 0000895345-99-000514.hdr.sgml : 19991021 ACCESSION NUMBER: 0000895345-99-000514 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990201 ITEM INFORMATION: FILED AS OF DATE: 19991020 FILER: COMPANY DATA: COMPANY CONFORMED NAME: THEGLOBE COM INC CENTRAL INDEX KEY: 0001066684 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING [7310] IRS NUMBER: 141781422 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-25053 FILM NUMBER: 99730988 BUSINESS ADDRESS: STREET 1: 31 WEST 21ST STREET CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2128860800 MAIL ADDRESS: STREET 1: 31 WEST 21ST STREET CITY: NEW YORK STATE: NY ZIP: 10010 8-K/A 1 ============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------------------- FORM 8-K/A AMENDMENT TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ----------------------------------- FEBRUARY 1, 1999 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) THEGLOBE.COM, INC. (Exact name of registrant as specified in its charter) DELAWARE 0-25053 14-1781422 (State or other (Commission File Number) (I.R.S. Employer jurisdiction of Identification incorporation or Number) organization) 120 BROADWAY NEW YORK, NEW YORK 10271 (Address of principal executive offices) (212) 894-3600 (Registrant's telephone number, including area code) ============================================================================== The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of the Current Report on Form 8-K, originally filed by the registrant with the Securities and Exchange Commission on February 15, 1999, and amended by the Current Report on Form 8-K/A, filed by the registrant with the Securities and Exchange Commission on April 1, 1999, as set forth in the pages attached hereto: ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements of Business Acquired and theglobe.com, inc. Pro Forma Condensed Consolidated Financial Information TABLE OF CONTENTS PAGE ---- factorymall.com, inc. Financial Statements Independent Auditors' Report F-1 Balance Sheets at December 31, 1998 and 1997 F-2 Statements of Operations for the years ended December 31, 1998 and 1997 and the period from April 25, 1996 (inception) to December 31, 1996 F-3 Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1998 and 1997 and the period from April 25, 1996 (inception) to December 31, 1996 F-4 Statements of Cash Flows for the years ended December 31, 1998 and 1997 and the period from April 25, 1996 (inception) to December 31, 1996 F-5 Notes to Financial Statements F-6 theglobe.com, inc. Pro Forma Condensed Consolidated Financial Information F-12 Unaudited Pro Forma Condensed Consolidated Balance Sheet at December 31, 1998 F-14 Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 1998 F-15 Notes to the Unaudited Pro Forma Condensed Consolidated Financial Information F-16 INDEPENDENT AUDITORS' REPORT The Board of Directors factorymall.com, inc.: We have audited the accompanying balance sheets of factorymall.com, inc. as of December 31, 1998 and 1997, and the related statements of operations, stockholders' equity (deficit), and cash flows for the years ended December 31, 1998 and 1997 and the period from April 25, 1996 (inception) to December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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 factorymall.com, inc. as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the years ended December 31, 1998 and 1997 and the period from April 25, 1996 (inception) to December 31, 1996, in conformity with generally accepted accounting principles. /s/ KPMG LLP Seattle, Washington March 5, 1999
FACTORYMALL.COM, INC. (dba azazz!) Balance Sheets December 31, 1998 and 1997 ASSETS 1998 1997 ------------- ------------- Current assets: Cash $ 258,438 $ 42,286 Inventory 34,113 6,608 Prepaid expenses and other current assets 6,913 38,136 ------------- ----------- Total current assets 299,464 87,030 Computer equipment, furniture and office equipment, net 270,365 43,634 ------------- ----------- Total assets $ 569,829 $ 130,664 ============= =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 299,210 $ 46,219 Accrued expenses 128,938 9,858 Current portion of capital lease obligations 22,258 17,917 Current portion of notes payable to related parties 64,767 -- ------------- ----------- Total current liabilities 515,173 73,994 Capital lease obligations, net of current portion 16,502 20,533 Notes payable to related parties, net of current portion 103,271 -- ------------- ----------- Total liabilities 634,946 94,527 ------------- ----------- Stockholders' equity (deficit): Preferred stock, no par value. Authorized 5,000,000 shares; no shares issued and outstanding -- -- Common stock, no par value. Authorized 25,000,000 shares; issued and outstanding 11,315,671 shares in 1998 and 9,950,000 shares in 1997 1,494,551 546,000 Additional paid-in capital 562,825 -- Deferred stock compensation (292,163) -- Accumulated deficit (1,830,330) (509,863) ------------- ----------- Total stockholders' equity (deficit) (65,117) 36,137 ------------- ----------- Total liabilities and stockholders' equity (deficit) $ 569,829 $ 130,664 ============= =========== See accompanying notes to financial statements.
FACTORYMALL.COM, INC. (dba azazz!) Statements of Operations Years ended December 31, 1998 and 1997 and the period from April 25, 1996 (inception) to December 31, 1996 1998 1997 1996 ------------- ------------- ------------- Net sales $ 473,563 $ 70,656 $ -- Cost of sales 349,563 53,314 -- ------------- ------------- ------------- Gross profit 124,000 17,342 -- Sales and marketing expense 333,415 94,997 -- Research and development expense 223,957 82,852 8,500 General and administrative expense 673,530 211,062 131,462 ------------- ------------- ------------- Loss from operations (1,106,902) (371,569) (139,962) ------------- ------------- ------------- Other income (expense): Interest expense (213,573) -- -- Other income, net 8 1,668 -- ------------- ------------- ------------- Total other income (expense) (213,565) 1,668 -- ------------- ------------- ------------- Net loss $(1,320,467) $ (369,901) $ (139,962) ============= ============= ============= See accompanying notes to financial statements.
FACTORYMALL.COM, INC. (dba azazz!) Statements of Stockholders' Equity (Deficit) Years ended December 31, 1998 and 1997 and the period from April 25, 1996 (inception) to December 31, 1996 Total Common stock Additional Deferred stockholders' ------------------------- paid-in stock Accumulated equity Shares Amount capital compensation deficit (deficit) ------------ ----------- ----------- ------------ ----------- ------------ Balances at April 25, 1996 (inception) -- $ -- -- -- -- -- Issuance of common stock 9,000,000 100,000 -- -- -- 100,000 Net loss -- -- -- -- (139,962) (139,962) ------------ ----------- ----------- ------------ ----------- ------------ Balances at December 31, 1996 9,000,000 100,000 -- -- (139,962) (39,962) Issuance of common stock 927,000 400,000 -- -- -- 400,000 Conversion of note payable 23,000 46,000 -- -- -- 46,000 Net loss -- -- -- -- (369,901) (369,901) ------------ ----------- ----------- ------------ ----------- ------------ Balances at December 31, 1997 9,950,000 546,000 -- -- (509,863) 36,137 Issuance of common stock 705,671 529,251 -- -- -- 529,251 Issuance of warrants in connection with convertible debt -- -- 190,000 -- -- 190,000 Conversion of notes payable to common stock 416,000 312,000 -- -- -- 312,000 Exercise of warrants 200,000 100,000 -- -- -- 100,000 Exercise of stock options 44,000 7,300 -- -- -- 7,300 Deferred stock compensation -- -- 372,825 (372,825) -- -- Amortization of deferred stock compensation -- -- -- 80,662 -- 80,662 Net loss -- -- -- -- (1,320,467) (1,320,467) ------------ ----------- ----------- ------------ ----------- ------------ Balances at December 31, 1998 11,315,671 $ 1,494,551 562,825 (292,163) (1,830,330) (65,117) ============ =========== =========== ============ =========== ============ See accompanying notes to financial statements.
FACTORYMALL.COM, INC. (dba azazz!) Statements of Cash Flows Years ended December 31, 1998 and 1997 and the period from April 25, 1996 (inception) to December 31, 1996 1998 1997 1996 ------------ ------------ ----------- Cash flows from operating activities: Net loss $ (1,320,467) $ (369,901) $ (139,962) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 45,476 15,459 3,808 Stock compensation expense 80,662 -- -- Accrued interest expense converted into common stock 190,000 -- -- Change in certain assets and liabilities: Inventory (27,505) (4,628) (1,980) Prepaid expenses and other current assets 31,223 (28,799) (9,337) Accounts payable 252,991 34,462 11,757 Accrued expenses 131,080 9,858 -- ------------ ------------ ----------- Net cash used in operating activities (616,540) (343,549) (135,714) ------------ ------------ ----------- Cash used in investing activities - purchase of computer equipment, furniture and office equipment (235,570) (2,627) (7,642) ------------ ------------ ----------- Cash flows from financing activities: Proceeds from issuance of notes payable 151,790 -- 46,000 Proceeds from issuance of convertible notes payable 300,000 -- -- Repayment of capital lease obligations (20,079) (11,538) (2,644) Proceeds from exercise of warrants 100,000 -- -- Proceeds from exercise of stock options 7,300 -- -- Proceeds from issuance of common stock 529,251 400,000 100,000 ------------ ------------ ----------- Net cash provided by financing activities 1,068,262 388,462 143,356 ------------ ------------ ----------- Net increase in cash 216,152 42,286 -- Cash at beginning of period 42,286 -- -- ------------ ------------ ----------- Cash at end of period $ 258,438 $ 42,286 $ -- ============ ============ =========== Supplemental schedule of cash flow information - cash paid during the period for interest $ 4,219 $ 3,108 $ 337 ============ ============ =========== Supplemental schedule of noncash investing and financing activities: Computer equipment acquired through capital lease obligations $ 20,389 $ 17,606 $ 35,026 Notes payable and accrued interest converted to common stock 312,000 46,000 -- ============ ============ =========== See accompanying notes to financial statements.
FACTORYMALL.COM, INC. (dba azazz!) Notes to Financial Statements December 31, 1998, 1997 and 1996 (1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) DESCRIPTION OF BUSINESS factorymall.com, inc. (Company) (d/b/a azazz!) is a retailer on the Internet. The Company was incorporated in the State of Washington on April 25, 1996. Through its Internet web site (www.azazz.com), the Company allows customers to purchase various consumer goods. Inherent in the Company's business are various risks and uncertainties, including its limited operating history and the limited history of commerce on the Internet. Future revenues from the Company's services are dependent on the continued growth and acceptance of the Internet and use of the Internet for various commercial transactions. (b) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (c) INVENTORIES Inventories consist of finished goods which are valued at the lower of cost or market (net realizable value) on a first-in, first-out basis. (d) COMPUTER EQUIPMENT, FURNITURE AND OFFICE EQUIPMENT Computer equipment, furniture and office equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Computer equipment is depreciated over an estimated useful life of three years. Furniture and office equipment is depreciated over an estimated useful life of five years. (e) REVENUE RECOGNITION The Company recognizes revenue from product sales, net of any discounts, when the products are shipped to customers. Outbound shipping and handling charges are included in net sales. The Company provides an allowance for sales returns, which has been insignificant, based on historical experience. (f) ADVERTISING COSTS The cost of advertising is expensed as incurred. In 1998 and 1997, the Company incurred advertising expense of $93,066 and $17,739, respectively, which is included in sales and marketing expense. The Company incurred no advertising costs in 1996. (g) INCOME TAXES The Company is an S corporation for Federal income tax purposes. Consequently, taxable income or loss of the Company is attributed to the Company's stockholders and no provision for income taxes has been reflected in the accompanying financial statements. Pro forma income tax information has not been provided. Had the Company been taxed as a C corporation, any income tax benefit as a result of the losses incurred by the Company would have been fully offset by the establishment of a valuation allowance for deferred tax assets. (h) STOCK-BASED COMPENSATION The Company accounts for its stock option plans for employees in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense related to employee stock options is recorded only if, on the date of grant, the fair value of the underlying stock exceeds the exercise price. The Company follows the disclosure-only requirements of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, which allows entities to continue to apply the provisions of APB Opinion No. 25 for transactions with employees and provide pro forma disclosures of operating results as if the fair value based method of accounting in SFAS No. 123 had been applied to employee stock option grants. (i) IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of their carrying amount or fair value less costs to sell. (j) FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts for the Company's cash, accounts payable, notes payable and capital lease obligations approximate fair value. (2) COMPUTER EQUIPMENT, FURNITURE AND OFFICE EQUIPMENT Computer equipment, furniture and office equipment consist of the following at December 31: 1998 1997 ------------ -------------- Computer equipment $ 309,269 $ 57,651 Furniture and office equipment 25,839 5,250 ------------ -------------- 335,108 62,901 Less accumulated depreciation 64,743 19,267 ------------ -------------- Net computer equipment, furniture and office equipment $ 270,365 $ 43,634 ============ ============== (3) COMMITMENTS (a) OPERATING LEASES The Company leases its offices under an operating lease agreement expiring in February 1999. Minimum lease payments required in 1999 under this lease total $4,000. The Company also rents warehouse space under a month-to-month arrangement. Rent expense totaled $27,056, $24,000 and $5,772 for the years ended December 31, 1998 and 1997 and the period from April 25, 1996 (inception) to December 31, 1996, respectively. (b) CAPITAL LEASES The Company leases computer equipment under capital leases. Future minimum lease payments under capital leases are as follows: 1999 $ 25,678 2000 12,994 2001 4,821 ------------- 43,493 Less amounts representing interest at 9.3% to 14.0% 4,733 ------------- 38,760 Less current portion 22,258 ============= $ 16,502 ============= (c) PORTAL COMMITMENTS The Company has agreements with certain Internet portal companies to purchase advertising on their Internet web sites in 1999. Total commitments under these contracts are approximately $85,000. (4) NOTES PAYABLE TO RELATED PARTIES Notes payable to related parties include the following: Note payable to stockholder, payable monthly in installments of $4,896, including interest at 12%, secured by computer equipment $ 147,449 Note payable to officer, payable monthly in installments of $969, including interest at 12%, secured by computer equipment 20,589 ------------- 168,038 Less current portion 64,767 ------------- $ 103,271 ============= Subsequent to December 31, 1998, the notes were repaid as part of the sale of the Company. (5) STOCKHOLDERS' EQUITY (a) CONVERTIBLE NOTES PAYABLE In March 1998, the Company issued $300,000 of convertible notes payable. The notes carried an annual interest rate of 12% and matured in July 1998. In addition, the Company issued the noteholders warrants to purchase 600,000 shares of common stock at $0.50 per share. The fair value of the warrants was $190,000 which was determined using a Black-Scholes pricing model with the following assumptions--fair market value of the underlying stock of $0.50 per share, expected life of five years, expected volatility of 70%, and a risk-free interest rate of 5.6%. The value of the warrants was recorded as a discount on the convertible notes payable and amortized to interest expense in 1998. In 1998, 200,000 warrants were exercised. At December 31, 1998, 400,000 warrants remained outstanding. In July 1998, the noteholders elected to convert the notes payable to common stock. The total principal and accrued interest of $312,000 outstanding was converted into 416,000 shares of common stock at $0.75 per share. In 1996, the Company issued a $46,000 convertible note payable. This note was converted into 92,000 shares of common stock in 1997 at $0.50 per share. (b) STOCK OPTION PLAN In 1998, the Company adopted a stock option plan (the Plan) that provides for the issuance of incentive and nonqualified stock options to officers, directors, employees, and consultants to acquire 1,500,000 shares of the Company's common stock. The Board of Directors determines the terms and conditions of options granted under the Plan, including the exercise price and vesting schedule. The exercise price for qualified incentive stock options shall not be less than the fair market value of the underlying stock at the date of grant, and have terms no longer than ten years from the date of grant. Options granted generally vest over periods ranging from 18 months to four years. Under APB 25, compensation expense is measured as the excess of the fair value of the underlying stock over the exercise price on the date of grant. Had stock compensation expense for the Company's stock option plan been determined based on the fair value methodology under SFAS 123, the Company's 1998 net loss would have increased to the following pro forma amount: Net loss: As reported $ (1,320,407) Pro forma (1,327,492) The weighted average fair value of options granted in 1998 was $0.36. The fair value for these options was estimated at the date of grant using the minimum value method which takes into account (1) the fair value of the underlying stock at the grant date, (2) the exercise price, (3) an expected life of five years, (4) no dividends, and (5) a risk-free interest rate of 5.4%. Compensation expense recognized in providing pro forma disclosures may not be representative of the effects on net income or loss for future years. A summary of stock option activity under the Plan is as follows: OUTSTANDING OPTIONS ---------------------------- SHARES WEIGHTED AVAILABLE NUMBER AVERAGE FOR GRANT OF SHARES EXERCISE PRICE ------------- ------------- ------------- Balances at December 31, 1997 -- -- $ -- Plan adoption 1,500,000 -- -- Options granted (1,500,000) 1,500,000 0.50 Options exercised -- (44,000) 0.16 ------------- ------------- ------------- Balances at December 31, 1998 -- 1,456,000 $ 0.51 ============= ============= ============= The Company issued additional options to acquire 183,900 shares of the Company's common stock during 1998. Subsequent to year-end, the Board of Directors approved the issuance of these options and amended the Plan to provide for the issuance of incentive and nonqualified stock options to acquire an additional 500,000 shares of the Company's common stock. The following table summarizes information about stock options outstanding under the Plan at December 31, 1998:
OUTSTANDING OPTIONS ------------------------ OPTIONS EXERCISABLE WEIGHTED ------------------------ AVERAGE WEIGHTED WEIGHTED REMAINING AVERAGE AVERAGE EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE ----------- ----------- ----------- ----------- ----------- ----------- $ 0.50 1,371,000 4.5 years $ 0.50 223,250 $ 0.50 0.75 85,000 4.7 years 0.75 2,313 0.75 ----------- ----------- ----------- ----------- ----------- 1,456,000 4.6 years 0.51 225,563 0.50 =========== =========== =========== =========== ===========
(7) SUBSEQUENT EVENT In February 1999, the Company entered into an agreement to merge the Company with Nirvana Acquisition Corporation (a wholly-owned subsidiary of theglobe.com). All issued and outstanding options to purchase common stock of the Company vested fully on the acquisition date and were converted into options to purchase common stock of theglobe.com at a specified conversion rate. As a result of the acquisition, certain employees received a percentage of the sale proceeds, as provided for under the terms of their employment contracts. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (b) Pro forma Condensed Consolidated Financial Information All information contained in Item 7(b) does not give effect to a 2 for 1 stock split effected by theglobe.com on May 14, 1999. In February 1999, theglobe.com, inc. ("theglobe" or "the Company") acquired factorymall.com, inc. ("factorymall"), for approximately $22.8 million including acquisition costs. The acquisition will be accounted for as a purchase business combination. The consideration payable by theglobe in connection with the acquisition of factorymall consists of: o Subject to the exercise of dissenter's rights, the issuance by theglobe of approximately 307,000 newly issued shares of common stock, par value $.001 per share, of theglobe ("theglobe Common Stock"), valued at $17.4 million, to the factorymall shareholders, with cash to be paid in lieu of the issuance of fractional shares. o The assumption by theglobe of options to purchase shares of factorymall's common stock, without par value ("factorymall Common Stock"), which were exchanged for options to purchase approximately 41,017 shares of theglobe Common Stock. The options were valued at $1.7 million. Such options have an aggregate exercise price of approximately $928,950. o The assumption by theglobe of warrants to purchase shares of factorymall Common Stock which were exchanged for warrants to purchase approximately 9,405 shares of theglobe Common Stock. The warrants were valued at $403,000. Such warrants have an aggregate exercise price of approximately $200,000. o The retention of certain bonus obligations of factorymall triggered in connection with the acquisition of factorymall which will result in the issuance by theglobe of approximately 36,864 shares of theglobe Common Stock and the payment by theglobe of approximately $451,000 in cash. The shares issued in connection with the assumption of certain bonus obligations were valued at $2.0 million. In addition, the Company incurred $800,000 of acquisition costs. The consideration payable by theglobe was determined as a result of negotiation between theglobe and factorymall. The number of shares of theglobe Common Stock to be issued to the factorymall shareholders, and cash to be paid in lieu of the issuance of fractional shares, was determined based on the exchange ratio of 0.023513329 of a share of theglobe Common Stock for each share of factorymall Common Stock. Funds payable in connection with the acquisition of factorymall will be provided from theglobe's cash on hand. The Company has allocated a portion of the purchase price to the net book value of the acquired assets and liabilities of factorymall as of the date of acquisition. The excess of the purchase price over the net book value of the acquired assets and liabilities of factorymall has been preliminarily allocated to goodwill and other intangible assets. Goodwill and other intangible assets will be amortized over a period of 3 years, the expected period of benefit. This allocation is preliminary and may be subject to change upon the evaluation of the fair value of the acquired assets and liabilities of factorymall at the date of acquisition as well as the potential identification of certain intangible assets. The unaudited Pro Forma Condensed Consolidated Statement of Operations (the "Pro Forma Statement of Operations") for the year ended December 31, 1998 gives effect to the acquisition of factorymall as if it had occurred on January 1, 1998. The Pro Forma Statement of Operations is based on historical results of operations of the Company and factorymall for the year ended December 31, 1998. The unaudited Pro Forma Condensed Consolidated Balance Sheet (the "Pro Forma Balance Sheet") gives effect to the acquisition of factorymall as if the acquisition had occurred on that date. The Pro Forma Statement of Operations and Pro Forma Balance Sheet and the accompanying notes (the "Pro Forma Financial Information") should be read in conjunction with and are qualified by the historical financial statements of the Company and notes thereto. The Pro Forma Financial Information is intended for informational purposes only and is not necessarily indicative of the future financial position or future results of operations of the consolidated company after the acquisition of factorymall, or of the financial position or results of operations of the consolidated company that would have actually occurred had the acquisition of factorymall been effected on January 1, 1998.
theglobe.com, inc. Unaudited Pro Forma Condensed Consolidated Balance Sheet December 31, 1998 ----------------------------------------- Pro Forma Pro Forma theglobe.com,inc. factorymall.com, inc. Adjustments As Adjusted ----------------- --------------------- ----------- ------------ ASSETS Cash and cash equivalents $29,250,572 $258,438 - $29,509,010 Short-term investments 898,546 - - 898,546 Accounts receivable, net 2,004,875 - - 2,004,875 Inventory - 34,113 - 34,113 Prepaids and other current assets 678,831 6,913 - 685,744 ----------- ------------- ----------- ----------- Total current assets 32,832,824 299,464 - 33,132,288 Property and equipment, net 3,562,559 270,365 3,832,924 Restricted investments 1,734,495 - - 1,734,495 Goodwill and intangible assets - - 22,841,666(a) 22,841,666 ----------- ------------- ----------- ----------- Total assets $38,129,878 $569,829 $22,841,666 $61,541,373 =========== ============= =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Accounts payable $ 2,614,445 $299,210 - $2,913,655 Accrued expenses 817,463 128,938 - 946,401 Accrued compensation 691,279 - - 691,279 Deferred revenue 673,616 - - 673,616 Current portion of notes payable to related party - 64,767 - 64,767 Current installments of obligations under capital leases 1,026,728 22,258 - 1,048,986 ----------- ------------- ----------- ----------- Total current liabilities 5,823,531 515,173 - 6,338,704 Notes payable to related party, net of current portion - 103,271 - 103,271 Obligations under capital leases, excluding current installments 2,005,724 16,502 - 2,022,226 ----------- ------------- ----------- ----------- Total liabilities 7,829,255 634,946 - 8,464,201 22,776,549(a) 22,776,549 Stockholders' equity (deficit) 30,300,623 (65,117) 65,117(a) 30,300,623 ----------- ------------- ----------- ----------- Total liabilities and stockholders' equity (deficit) $38,129,878 $569,829 $22,841,666 $61,541,373 =========== ============= =========== ===========
theglobe.com, inc. Unaudited Pro Forma Condensed Consolidated Statement of Operations Year Ended December 31, 1998 ----------------------------------------- Pro Forma Pro Forma theglobe.com,inc. factorymall.com, inc. Adjustments As Adjusted ----------------- --------------------- ----------- ------------ Revenues $5,509,818 $473,563 - $5,983,381 Cost of revenues 2,238,871 349,563 - 2,588,434 ----------- ------------- ---------- Gross profit 3,270,947 124,000 3,394,947 Operating expenses: Sales and marketing 9,298,683 333,415 - 9,632,098 Product development 2,632,613 223,957 - 2,856,570 General and administrative 6,828,134 673,530 - 7,501,664 Non-recurring charge 1,370,250 - - 1,370,250 Amortization of intangible assets - - 7,613,889(a) 7,613,889 ----------- ------------- ----------- ---------- Loss from operations (16,858,733 (1,106,902) (7,613,889) (25,579,524) Other income (expense): Interest and dividend income 1,083,400 8 - 1,083,408 Interest and other expense (191,389) (213,573) - (404,962) ----------- ------------- ----------- ----------- Total other income (expense), net 892,011 (213,565) - (678,446) ----------- ------------- ----------- ----------- Loss before provision for income taxes (15,966,722) (1,320,467) (7,613,889) (24,901,078) ----------- ------------- ----------- ----------- Provision for income taxes 78,918 - 78,918 ----------- ------------- ----------- ----------- Net loss $(16,045,640) $(1,320,467) $(7,613,889) $(24,979,996) =========== ============= =========== =========== Basic and diluted net loss per share $(6.74) $(9.17)(b) =========== =========== Weighted average basic and diluted shares outstanding 2,381,140 343,864(b) 2,725,056(b) =========== ============= =========== ===========
theglobe.com, inc. NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (1) Pro Forma Adjustments and Assumptions (a) In February 1999, the Company acquired factorymall in a stock transaction for $22.8 million, including acquisition costs. The components of the purchase price were as follows: 307,000 shares of theglobe Common Stock, valued at $17.4 million, issued to the factorymall shareholders with cash paid in lieu of fractional shares, warrants to purchase approximately 9,405 shares of theglobe Common Stock valued at $403,000, options to purchase approximately 41,017 shares of theglobe Common Stock valued at $1.7 million, 36,864 shares of theglobe Common Stock, valued at $2.0 million, issued in connection with the assumption of certain factorymall bonus obligations triggered in connection with the acquisition of factorymall and $451,000 in cash. The Company also incurred acquisition costs amounting to $800,000. The following represents the allocation of the purchase price over the historical net book values of the acquired assets and liabilities of factorymall at December 31, 1998 and is for illustrative pro forma purposes only. Actual fair values will be based on financial information as of the acquisition date (February 1, 1999). Assuming the transaction had occurred on December 31, 1998, the allocation would have been as follows: Factorymall.com --------------------- Assets acquired; Cash $ 258,438 Inventory 34,113 Other assets 6,913 Computer equipment, office equipment and furniture 270,365 Goodwill and intangible assets 22,841,666 Liabilities assumed (634,946) ------------------- Purchase price $ 22,776,549 =================== This allocation is preliminary and may be subject to change upon evaluation of the fair value of factorymall's acquired assets and liabilities as of the acquisition date as well as the potential identification of certain intangible assets. The Pro Forma adjustment reconciles the historical balance sheet of factorymall at December 31, 1998 to the allocated purchase price assuming the transaction had occurred on December 31, 1998. Goodwill and other intangible assets will be amortized over a period of 3 years, the expected period of benefit. The Pro Forma adjustments to the statement of operations reflect twelve months of amortization expense for the year ended December 31, 1998, assuming the transaction occurred on January 1, 1998. The value of the intangible assets as of January 1, 1998 would have been approximately $22.8 million. (b) In connection with the acquisition of factorymall, the Company issued 343,864 shares of theglobe Common Stock, par value $.001 per share, to the factorymall shareholders and the assumption of certain bonus obligations triggered in connection with the acquisition. The pro forma basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. The calculation of the weighted average number of shares outstanding assumes that the shares issued in connection with the acquisition were outstanding for the entire period. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (c) Exhibits 23.1 Consent of KPMG LLP, independent auditors. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned hereunto duly authorized. Dated: October 20, 1999 theglobe.com,inc. By: /s/ Francis T. Joyce Name: Francis T. Joyce Title: Chief Financial Officer EX-23.1 2 Exhibit 23.1 CONSENT OF KPMG LLP, INDEPENDENT AUDITORS We consent to the use of our report dated March 5, 1999, with respect to the financial statements of factorymall.com, inc. as of December 31, 1998 and 1997 and for the period from inception (April 15, 1996) to December 31, 1996 and for each of the two years in the period ended December 31, 1998 included in the Amendment to Current Report (Form-8K/A) of theglobe.com, inc. /s/ KPMG LLP Seattle, Washington October 15, 1999 -----END PRIVACY-ENHANCED MESSAGE-----