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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number: 333-76331
INTERNET.COM CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 06-1542480
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
23 OLD KINGS HIGHWAY SOUTH
DARIEN, CONNECTICUT 06820
(Address of principal executive offices) (Zip Code)
(203) 662-2800
(Registrant's telephone number, including area code)
SECURITIES REGISTERED UNDER SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE ACT: COMMON STOCK $.01 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of voting common stock held by non-affiliates of
the registrant as of March 26, 2001, based upon the last sale price of such
common stock on that date as reported by the Nasdaq National Market was
$101,332,308.
The number of shares of the outstanding registrant's Common Stock as of March
26, 2001, was 25,333,077.
Information required by Part III of this Form 10-K, to the extent not set
forth herein, is incorporated by reference from the registrant's definitive
proxy statement for its 2001 annual meeting of stockholders, which will be filed
pursuant to Regulation 14A under the Securities Exchange Act of 1934 within 120
days after the end of the fiscal year to which this Form 10-K relates.
INTERNET.COM CORPORATION
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PAGE
----
Part I
Item 1. Business 3
Item 2. Properties 24
Item 3. Legal Proceedings 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 25
Item 6. Selected Financial Data 26
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations 27
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 34
Item 8. Financial Statements and Supplementary Data 35
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure 63
Part III
Item 10. Directors and Executive Officers of the Registrant 64
Item 11. Executive Compensation 64
Item 12. Security Ownership of Certain Beneficial Owners and Management 64
Item 13. Certain Relationships and Related Transactions 64
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 65
Signatures 68
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: Statements in this Form 10-K which are not historical facts are
"forward-looking statements" that are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve risks and uncertainties which could cause
actual results to differ materially from those described in the forward-looking
statements. The potential risks and uncertainties address a variety of subjects
including, for example: the competitive environment in which internet.com
competes; the unpredictability of internet.com's future revenues (including
those resulting from online advertising on internet.com's Web sites and related
Internet media properties), expenses, cash flows and stock price; internet.com's
investments in international and venture investments; any material change in
internet.com's intellectual property rights; and continued growth and acceptance
of the Internet. For a more detailed discussion of such risks and uncertainties,
refer to internet.com's reports filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933 and the Securities Exchange
Act of 1934. The forward-looking statements included herein are made as of the
date of this Form 10-K, and internet.com assumes no obligation to update the
forward-looking statements after the date hereof.
2
PART I
ITEM 1. BUSINESS
INTRODUCTION
internet.com owns and operates a network of 170 Web sites and related
Internet media properties, (as of March 15, 2001), focused solely on the
Internet industry and information technology ("IT"). In addition to our 170 Web
sites, our network includes 350 e-mail newsletters, which are periodical
publications delivered by electronic mail; over 400 online discussion forums,
which are electronic message centers where members of specific interest groups
review messages left by others and leave their own messages; and over 150
moderated e-mail discussion lists, which are similar to online discussion
forums, except that members' messages are transmitted and received by e-mail
broadcast. Our network is organized into 16 subject areas, or vertical content
channels. internet.com also produces over 20 offline seminars on Internet and
IT-specific topics that are aligned with our network of Web sites and e-mail
newsletters. These vertical content channels serve our Internet users, which
include Internet industry and information technology professionals, Web
developers and experienced Internet users. We provide our audience, or community
of Internet users, with the following resources:
o real-time Internet industry and IT news o archives of definitive industry publications
o tutorials, training and skills development o discussion forums
o Internet and IT market research o software downloads
o buyer's guides and products reviews o expert advice
We also provide advertisers and vendors with a means through which they can
reach our community of Internet industry and information technology
professionals, many of whom either make or influence Internet and IT purchasing
decisions. We have had over 2,000 advertisers on our network.
We have rapidly built a network of Internet media properties through
internal development and acquisitions. We have experience identifying,
evaluating, acquiring and integrating Internet media properties that are
complementary to our content offerings and services. From July 1995 through
March 15, 2001, we made 74 acquisitions of Internet media properties, consisting
of 100 Web sites, 105 e-mail newsletters, 125 online discussion forums and 162
moderated e-mail discussion lists. Our size and recent growth are illustrated by
the following statistics for the months of January 2000 and 2001:
JANUARY JANUARY
2000 2001
----------- -----------
Web site page views 112,000,000 250,000,000
Unique Web site visitors 2,200,000 3,200,000
E-mail newsletters distributed 21,000,000 35,800,000
E-mail newsletter subscribers 2,300,000 5,600,000
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Our objective is to maintain and strengthen our position as a provider of
business information focused on the Internet industry and information
technology. We intend to achieve this objective by continuing to execute the
following strategies:
o increase our proprietary content offerings and services;
o grow through targeted acquisitions;
o enhance worldwide brand recognition;
o expand revenue opportunities; and
o increase our international presence.
Prior to the acquisition of Mecklermedia Corporation by Penton Media, Inc.
in November 1998, we operated since December 1994 as one of three divisions that
comprised Mecklermedia. Our predecessor Web sites, mecklerweb.com and
iworld.com, were also dedicated to covering the Internet industry and
information technology. In connection with this acquisition, Penton Media
determined that Mecklermedia's Internet business was not consistent with its
planned strategic direction. To address this issue, Alan M. Meckler,
Mecklermedia's Chairman and Chief Executive Officer, purchased an 80.1% interest
in internet.com LLC, a business formed by Penton Media to hold the Internet
business acquired from Mecklermedia. As of March 15, 2001, Mr. Meckler
beneficially owned approximately 51.8% of our outstanding common stock.
internet.com Corporation was incorporated on April 5, 1999 in the State of
Delaware. internet.com LLC was merged with and into internet.com Corporation
upon consummation of our initial public offering in June 1999. Our principal
executive offices are located at 23 Old Kings Highway South, Darien, Connecticut
06820 and our telephone number is (203) 662-2800.
INDUSTRY BACKGROUND
The Internet has emerged as a global distribution network for real-time
news and information, an environment for online communities and a market
place in which commerce is conducted. International Data Corporation
estimates that the number of Internet users will grow from 500 million in
2001 to 1.0 billion in 2005. International Data Corporation expects U.S.
spending on Web Hardware and Software to increase from $260 billion in 2000 to
$1.3 trillion in 2004. In addition, Forrester Research estimates that spending
on B2B recruitment and E-mail will increase from $3.0 billion in 2000 to
$19.3 billion in 2005. To best exploit the growth of the Internet and
information technology, businesses must stay abreast of Internet-related
technologies and products as well as develop and maintain the skills
necessary to utilize these technologies and products. A broader set of
executive management and business professionals are increasingly
participating in Internet and information technology implementation decisions
with information technology professionals. As a result, Internet and
IT-related topics need to be addressed from a variety of business and
technology perspectives to effectively communicate the value of deploying and
integrating Internet and information technologies.
The increasing use of the Internet is dramatically affecting the operating
methods of profit and not-for-profit businesses and other organizations. These
businesses and organizations are dedicating an increasing amount of personnel
and financial resources to integrating and effectively using the Internet and IT
to expand and enhance their operations. As a result, these businesses and
organizations have a rapidly growing need for personnel with specialized skills
and knowledge in technologies that can effectively build and manage their
Internet and information technology infrastructures.
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THE INTERNET.COM SOLUTION
We provide our community of Internet users with a wide variety of content
offerings and services to aid them in their daily work and purchasing decisions.
Our solution addresses the needs of three constituencies - Internet users,
advertisers and vendors.
BENEFITS FOR OUR COMMUNITY OF INTERNET USERS
CONTENT. Our network of Web sites, e-mail newsletters, online discussion
forums and moderated e-mail discussion lists provides Internet and IT news and
information, which is updated on a daily basis. This Internet and IT news and
information helps our community of Internet users to enhance their job
performance by providing them with up-to-date information and resources about
the Internet industry and information technology. Our network consists of
proprietary content as well as services for the Internet industry and
information technology, including:
o news;
o analysis;
o tutorials, training and skills development;
o market information about emerging products and technologies;
o buyers' guides and product reviews;
o Internet and IT market research; and
o expert advice.
Unlike traditional media, our network provides our community of Internet
users with real-time Internet and IT news and information. These users can
easily search our network by using a host of search and navigation tools.
COMMUNITY. Our network of Web sites, e-mail newsletters, online discussion
forums and moderated e-mail discussion lists provides our community of Internet
users the ability to discuss and solve technical problems and share information
by contributing materials and communicating with each other. Users submit and
share software code and development tools that are then published and archived
on our network. We believe that creating a sense of community through these
services fosters loyalty and affinity among our community of Internet users and
increases the amount of time they spend using our services. These services
include:
o ONLINE DISCUSSION FORUMS. We offer over 400 online discussion forums,
categorized by vertical content areas for the Internet industry and
information technology, that enable users to share information and
resources in order to help each other solve technical problems. We
archive these online discussion forums, creating an online knowledge
repository for future reference.
o MODERATED E-MAIL DISCUSSION LISTS. We offer over 150 moderated e-mail
discussion lists which have over 134,000 subscribers. These lists, which
are moderated by skilled internet.com personnel, are categorized by
subject or vertical content areas for the Internet industry and
information technology and enable subscribers to conveniently share
information and resources and solve technical problems.
o QUESTION AND ANSWER SERVICES. We offer question and answer services that
enable users to submit technical questions related to the Internet
industry and information technology as well as our content offerings and
services. Answers from skilled internet.com personnel are published
online in searchable formats.
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o TECHNICAL JOB LISTINGS. Through JOBS.INTERNET.COM and in conjunction
with a commerce agreement with Dice.com, part of EarthWeb Inc., we
provide our community of Internet users with access to Internet industry
and information technology job openings. These job openings can be
searched by job type, salary range and geographic location.
COMMERCE. Our network of Web sites, e-mail newsletters, online discussion
forums and moderated e-mail discussion lists provides our community of Internet
users the ability to evaluate, compare and purchase Internet and IT-related
products and services provided by e-commerce vendors. We receive either fixed
fees for advertising, bounties for new customers or revenue sharing of 10% to
50% of the sales made by the e-commerce vendors as a result of links from our
network, or in some cases combinations of advertising, bounties and revenue
sharing. Through LINUXCENTRAL.COM we sell hardware, software and other products
geared for the Linux and Open Source community. Through our CAREERS CHANNEL, we
offer paid job listings that can be searched by job type, salary range and
geographic location. These commerce offerings provide our users with access to
the following goods and services, among others:
o online and instructor lead training;
o software and hardware;
o technical books and training materials;
o Internet and IT research reports;
o employment classifieds;
o opt-in e-mail list brokerage;
o online press release distribution;
o Web site hosting services;
o Web site security services; and
o business to business product and services exchange.
BENEFITS FOR ADVERTISERS AND VENDORS
We provide advertisers and vendors with targeted channels to reach our highly
focused community of Internet users, 87% of whom either make or influence
purchasing decisions, according to a survey we commissioned from Insight Express
LLC. We believe that our Internet users represent a large and targeted online
community of Internet industry and information technology professionals, Web
developers and experienced Internet users. We believe our advertisers and
vendors can enhance the effectiveness of their advertising by customizing
advertisements and placing them on targeted channels and pages on our network.
We also provide vendors with a much needed distribution channel and the ability
to focus their marketing efforts cost effectively.
6
Our Web sites, e-mail newsletters, online discussion forums and
moderated e-mail discussion lists attract a focused community of business and
professional Internet users, as compared to more broadly focused Web sites.
According to a survey we commissioned from Insight Express LLC, which was
conducted from October 2000 through December 2000, some key demographics of
our community of Internet users include:
o 87% are involved in purchasing Internet and information technology
products and services for their companies and organizations, including
hardware, software, networking and Internet access;
o 79% purchased products online within the past six months;
o 54% have Internet technology or information technology job titles;
another 28% are in corporate management;
o the average annual household income of the group exceeds $71,000;
o 65% are in the desirable 25-44 age group; and
o 60% have at least one college degree.
OUR BUSINESS STRATEGY
Our objective is to maintain and strengthen our position as a provider of
business information focused solely on the Internet industries. We intend to
achieve this objective by continuing to execute the following key strategies:
INCREASE OUR PROPRIETARY CONTENT OFFERINGS AND SERVICES. We will strengthen
our existing content offerings and services by continuing to improve our
proprietary content available for our community of Internet users. Our editorial
team, comprised of over 150 employees and over 100 freelance ontributors as of
February 28, 2001, creates proprietary content for our network on a daily basis.
We will continue to identify emerging topics of interest and then create and
aggregate content for those topics through internal development and acquisitions
of additional Web sites, e-mail newsletters, online discussion forums and
moderated e-mail discussion lists.
GROW THROUGH TARGETED ACQUISITIONS. From July 1995 through March 15, 2001, we
made 74 acquisitions, which included 100 Web sites, 105 e-mail newsletters, 125
online discussion forums and 162 moderated e-mail discussion lists. We expect to
continue to pursue strategic acquisitions to strengthen our content offerings
and services. We may also acquire Internet media properties to obtain valuable
brands, expertise or access to new users, advertisers and vendors. We believe
that by acquiring Internet media properties, we can integrate them into our
network and improve their traffic and revenue results. In addition, we believe
that acquiring Web sites, e-mail newsletters, online discussion forums and
moderated e-mail discussion lists generally has increased the overall traffic on
our existing network. We intend to use our experience gained from our numerous
acquisitions in order to identify, evaluate, acquire and integrate Web sites and
other media properties which are complementary to our network.
ENHANCE WORLDWIDE BRAND RECOGNITION. We will continue to expand the
combination of online and offline advertising and promotional campaigns to
enhance the recognition of internet.com and our other brands. We intend to
continue to promote the internet.com brand as a leading source of online
content focused on the Internet industry. In addition, we will continue to
promote our branded Internet services, such as SEARCHENGINEWATCH, WEB
DEVELOPER and CLICKZ, The ELECTRONIC COMMERCE GUIDE, under the internet.com
network through online and offline advertising and other promotional
activities. We also provide access to limited versions of our editorial
content to others at no charge to promote our brands and generate traffic.
Our marketing and branding campaigns are designed to increase overall brand
awareness. This increased brand awareness will help drive additional traffic
to our network and create additional advertising impressions, which in turn
will create additional advertising, e-commerce and other revenue
opportunities. As a result, this growth in user traffic should make our
network more valuable to
7
advertisers and vendors. Our marketing and branding campaigns will reinforce to
users, advertisers and vendors that the internet.com brand represents technical
competence, comprehensiveness, timeliness and objectivity.
EXPAND REVENUE OPPORTUNITIES. For the year ended December 31, 2000, a
majority of our revenues were derived from advertising. We are continuing to
develop additional revenue sources, including e-commerce agreements and
offerings; permission based opt-in e-mail list rentals; seminars and Internet
breakfast forums; paid subscription services; postal list rentals; content
and brand licensing; online press release distribution services; and venture
fund management fees. See "Revenue Opportunities."
INCREASE OUR INTERNATIONAL PRESENCE. The Internet is also rapidly growing
internationally and we intend to utilize our experience to continue to develop
and acquire Web sites, e-mail newsletters, online discussion forums and
moderated e-mail discussion lists with an international focus in order to expand
our global presence. We have launched internet.com country and regional Web
sites for Arabia, Asia, Australia, China, France, Germany, India, Israel, Japan,
Korea, Singapore, South Africa, Sweden, Turkey and the United Kingdom. These
regional editions are produced by our employees and freelance contributors in
the geographic areas they serve and provide daily Internet news from the country
or region in either English or the primary language. We are seeking
opportunities in other countries and regions to produce additional non-English
language editions. We intend to continue to develop and acquire English and
non-English language Internet media properties to increase our global presence.
REVENUE OPPORTUNITIES
ADVERTISING. For the year ended December 31, 2000, a majority of our
revenues were generated from advertising on our Web sites and online discussion
forums. With the growth in subscribers to our e-mail newsletters and moderated
e-mail discussion lists, these media properties are also expected to contribute
to increased advertising revenues in the future.
E-COMMERCE AGREEMENTS AND OFFERINGS. We have entered into a number of
e-commerce agreements, which generally include either a fixed fee for
advertising, a bounty for new customer accounts or revenue sharing of 10% to 50%
of the sales made by the e-commerce vendor as a result of links from our
network, or in some cases combinations of advertising, bounties and revenue
sharing. E-commerce agreements typically are a minimum of three months in
duration. As of December 31, 2000, our 10 longest term vendors relationships
were:
CareerBuilder, Inc. Insight Express, Inc.
Commission Junction, Inc. NewMediary, Inc.
Cyveillance, Inc. Qwest Communications, Inc.
Digital River, Inc. Real Networks, Inc.
Domain Bank, Inc. ScreamingMedia.com, Inc.
We also provide our user community with various e-commerce offerings.
Through ALLNETRESEARCH.COM, we sell paid research reports offered by over 90
third party publishers. Through LINUXCENTRAL.COM, we sell hardware, software and
other products geared for the Linux and Open Source community. Through our
CAREERS CHANNEL, we offer paid job listings that can be searched by job type,
salary range and geographic location.
PERMISSION BASED OPT-IN E-MAIL LIST RENTALS. Through a third-party agent, we
currently offer for rental our permission based opt-in e-mail list names
relating to over 250 Internet and IT-specific topics. Members of our community
of Internet users volunteer, or "opt in," to be included on these lists to
receive e-mail product offerings and information relevant to their Internet
interests. Subscribers to these permission based opt-in e-mail lists receive
e-mail announcements of special offers relating to each topic subscribed. We
generate revenues on a per use basis for the rental of our list names.
8
SEMINARS AND INTERNET BREAKFAST FORUMS. We offer offline seminars focused on
Internet and IT-specific topics that are of interest to our community of
Internet users. We are able to efficiently promote these seminars through our
network. We generate revenues from attendee registrations, as well as from
advertiser and vendor sponsorships. In addition, internet.com offers Internet
breakfast forums on a monthly basis in cities in which it has news bureaus in
the United States, as well as overseas where internet.com has international
editions. We generate revenues from the sale of sponsorships and table top
exhibitions.
PAID SUBSCRIPTION SERVICES. Paid subscription services relate to customer
subscriptions to our paid e-mail newsletters and services, SearchEngineWatch,
certain sections of WALLSTREETRESEARCHNET, UNCLAIMEDDOMAIN, DOMAINBOOK.COM,
ASPNEWS.COM AND ALERTIPO.COM, which are sold through our network and through
affiliate relationships. Revenue from subscriptions is recognized ratably
over the subscription period. Deferred revenues relate to the portion of
collected subscription fees which has not yet been recognized as revenue.
LICENSING AGREEMENTS. We license our editorial content and brands to third
parties for fixed fees and royalties based on the licensee's revenues generated
by the licensed content. We also provide access to limited versions of our
editorial content to others at no charge, to promote our brands and generate
traffic.
We license selected portions of our editorial content to print publishers.
We license one-time rights to reprint individual articles, online or in print,
to third parties through licensing of reprints and copyright permission
requests. We licensed our ISDEX, The Internet Stock Index, to the Kansas City
Board of Trade for futures and futures options contracts which trade on this
exchange. We also licensed our ISDEX to Investec Guinness Flight Global Asset
Management Limited for use in connection with a mutual fund.
ONLINE PRESS RELEASE DISTRIBUTION SERVICES. Through INTERNETNEWSBUREAU.COM,
we provide paid e-mail based press release distribution services. These press
releases are e-mailed to over 5,000 registered journalists.
VENTURE FUND MANAGEMENT FEES. We are the portfolio manager of internet.com
Venture Fund I LLC, a $5.0 million venture fund formed in March 1999,
internet.com Venture Fund II LLC, a $15.0 million venture fund formed in
September 1999, and internet.com Venture Partners III LLC, a $75.0 million
venture fund formed in January 2000, all of which invest in early-stage
content-based Internet properties that are not competitive with internet.com. We
earn management fees for the day-to-day operation and general management of the
funds. We are also entitled to 20% of the realized gains on investments made by
these funds. We invested $700,000 in the initial fund and $1.7 million in the
second fund, which are now fully invested. We committed $10.4 million in the
third fund, of which $3.1 million has been invested as of December 31, 2000. The
remaining $4.3 million in the initial fund, $13.5 million in the second fund and
$64.6 million in the third fund were invested or committed by third party
investors.
CONTENT OFFERINGS AND SERVICES
We offer a broad range of content offerings and services to serve the needs
of our community of Internet users for content, community and commerce, as well
as the needs of advertisers and vendors in targeting our community of Internet
users. Our network is organized into the following 16 vertical content
categories, or channels:
o INTERNETNEWS CHANNEL - Provides real-time coverage of Internet industry
and information technology news events from around the world. Our staff
of over 25 analysts and journalists file approximately 50 original items
daily in the following vertical Internet news categories: business,
finance, Internet service provider, or ISP, Web developer, E-commerce,
Internet advertising and
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Internet stocks. We enhance our original coverage of Internet industry
and IT news events through agreements with Reuters NewMedia Inc. and USA
TODAY to carry selected Internet news items.
o INTERNET TECHNOLOGY CHANNEL - Provides access to Internet news,
analyses, tutorials, reviews and resource guides to help our users
integrate evolving Internet technologies. Internet media properties in
the Internet Technology Channel cover many topics, including corporate
intranet implementation, Web servers and Internet and information
technology products.
o WEB DEVELOPER CHANNEL - Provides our users who are responsible for
building and maintaining Web sites with communication services and the
latest information and trends for Web site development. We provide
tutorials, applets and script downloads and online resource directories
to Web developers. In addition, we provide community-building resources
through online discussion forums, frequently asked questions and
moderated e-mail discussion lists.
o ECOMMERCE/MARKETING CHANNEL - Provides Internet marketers and e-commerce
professionals with information resources, market research and sales and
marketing techniques. This channel includes tutorials for gaining better
placement in search engines, summaries of the latest Internet market
research and information about Internet advertising and promotion.
o INTERNET RESOURCES CHANNEL - Provides access to an online dictionary of
Internet and information technology terms, subscription services to our
e-mail newsletters, information about Internet and IT industry events
and other Internet resources.
o ASP RESOURCES CHANNEL. - Provides news, analysis, commentary and
community interaction to help Application Service Providers ("ASP")
professionals do their jobs and buy products and services more
efficiently.
o ISP RESOURCES CHANNEL - Provides information for professionals in the
Internet Service Provider ("ISP") and Competitive Local Exchange Carrier
("CLEC") industries, including ISP-Planet, CLEC-Planet and ISP-Lists, a
collection of 47 e-mail discussion lists used by more than 59,000
professionals in the ISP industry to communicate with their colleagues.
o INTERNET INVESTING CHANNEL - Provides stock and financial news,
information and analysis about Internet companies. This channel includes
the Internet Stock Report, which includes daily analysis of Internet
stocks; ISDEX, The Internet Stock Index, a proprietary index of 50
publicly traded Internet stocks; InternetStockList, a directory of
publicly traded Internet companies; and IPO Watch, a directory of
Internet companies which have filed to go public.
o INTERNATIONAL CHANNEL - Provides Internet news and information for
specific countries or regions, including Arabia, Asia, Australia, China,
France, Germany, India, Israel, Japan, Korea, Singapore, South Africa,
Sweden, Turkey and the United Kingdom.
o DOWNLOAD CHANNEL - Helps experienced Internet users evaluate and
retrieve freeware and shareware software in a variety of categories,
including business, developer, utilities, multimedia and games.
o LINUX/OPEN SOURCE CHANNEL - Provides news, tutorials, information
resources and e-commerce services for technology professionals
implementing and maintaining Linux and/or open source technologies.
o INTERNET LISTS CHANNEL - A collection of Web-based directories that
allow users to find and evaluate ISPs, ASPs, Web design firms, trade
shows and online casinos.
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o WINDOWS INTERNET TECHNOLOGY CHANNEL - Provides news, tutorials, and
information resources for technology professionals implementing and
maintaining Internet and intranet applications using Microsoft
Corporation technologies, including Active Server Pages and Back Office.
o WIRELESS INTERNET CHANNEL - Provides comprehensive coverage of the
market serving the mobile community of Personal Digital Assistant
("PDA") and mobile phone users.
o EARTHWEB CHANNEL - Provides a comprehensive set of solutions to a broad
range of IT and Internet professionals including all job titles from
CTOs to programmers.
o CAREERS CHANNEL - Provides access to Internet and IT job listings posted
by thousands of employers across the country.
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INTERNET.COM WEB SITES AND RELATED INTERNET MEDIA PROPERTIES
In addition to our 170 Web sites, the Internet media properties presented on
these channels include 350 e-mail newsletters, over 400 online discussion forums
and over 150 moderated e-mail discussion lists. Our network of Internet media
properties consists of the following:
E-MAIL ONLINE E-MAIL
INTERNET WEB NEWS- DISCUSSION DISCUSSION
MEDIA PROPERTY DESCRIPTION SITE LETTER FORUMS LISTS
- -------------------------------------- ----------------------------------------- ------- -------- ------------ ------------
INTERNETNEWS CHANNEL
atnewyork Provides news and analysis for the o o o
www.atnewyork.com New York City Internet industry and
information technology
boston.internet.com Provides news and analysis for the o
www.boston.internet.com Boston Internet industry and
information technology
chicago.internet.com Provides news and analysis for the o o
www.chicago.internet.com Chicago Internet industry and
information technology
dc.internet.com Provides news and analysis for the o
www.dc.internet.com Washington, DC Internet industry
and information technology
internetnews radio Daily audio Internet news broadcast o
www.internetnewsradio.com
internetnews Real-time, global coverage of o o
www.internetnews.com Internet industry and information
technology news and analysis
reported by our staff covering
business, finance, ISP, Web
development, e-commerce,
advertising, stocks and
international news
la.internet.com Provides news and analysis for the o o
www.la.internet.com Los Angeles Internet industry and
information technology
NewsLinx Provides continuous updates of o o
www.newslinx.com Internet news headlines with links
to the related articles from
leading news Web sites
seattle.internet.com Provides news and analysis for the o o
www.seattle.internet.com Seattle Internet industry and
information technology
siliconvalley.internet.com Provides news and analysis for the o o
www.siliconvalley.internet.com Silicon Valley Internet industry
and information technology
INTERNET TECHNOLOGY CHANNEL
BotSpot Directory of information and o o o
www.botspot.com resources about automated Internet
data retrieval
BrowserWatch News and information for technical o o o
www.browserwatch.com professionals about Web browsers
DBASupport.com News and information about new o o o
www.dbasupport.com hardware and networking devices
Hardware Central Comprehensive hardware information o o o
www.hardwarecentral.com including advice on optimization
and troubleshooting
InternetProductWatch Searchable directory of commercial o o
www.internetproductwatch.com Internet product listings
Internet Technology Forums Discussion forums about Internet o
forums.internet.com technology topics
Intranet Design Magazine Tutorials and product reviews for o o o o
www.intranetdesignmagazine.com intranet managers
ServerWatch Reviews of Web server hardware and o o o o
www.serverwatch.com software
SolarisGuide Information resource for Sun o o
www.solarisguide.com Solaris administrators and software
developers
SQLCourse Online tutorial teaching the basics o
www.sqlcourse.com of Structured Query Language, a
method of retrieving information
from databases
SQLCourse2 Online tutorial teaching the basics o
www.sqlcourse2.com of Structured Query Language, a
method of retrieving information
from databases
SQLWire News site for SQL professionals, o o o
www.sqlwire.com featuring links to news stories
about Structured Query Language and
related topics
12
E-MAIL ONLINE E-MAIL
INTERNET WEB NEWS- DISCUSSION DISCUSSION
MEDIA PROPERTY DESCRIPTION SITE LETTER FORUMS LISTS
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INTERNET TECHNOLOGY CHANNEL (CONTINUED)
Webopedia Dictionary and search engine o o
www.webopedia.com containing more than 8,800 Internet
and technology definitions and
terms
WebServer Compare Directory of Web servers listing o
www.webservercompare.com technical specifications
WEB DEVELOPER CHANNEL
ExtremeFlash.com Information resource for flash o
www.extremeflash.com multimedia technology
FlashKit Information resource for flash o o o o
www.flashkit.com multimedia technology
FlashPlanet Information resource for flash o
www.flashplanet.com multimedia technology
Gif.com One stop shop for GIF and JPEG o o
www.gif.com graphics
JavaBoutique Collection of over 360 Java applets o o o o
www.javaboutique.com available for download
Javascript.com Portal site that facilitates access o o
www.javascript.com to internet.com Javascript services
The JavascriptSource Collection of over 300 Javascripts o o o
www.javascriptsource.com available for download
Jobs.webdeveloper.com Find or post a Web developer job o
www.jobs.webdeveloper.com
ScriptSearch Links to more than 5,000 C++, PERL, o o o
www.scriptsearch.com VBScript and other programs online
StreamingMediaWorld Tutorials and information resources o o o o
www.streamingmediaworld.com for streaming media developers
WebDeveloper News, reviews and tutorials for Web o o o o
www.webdeveloper.com developers
Web Developer Forums Discussion forums about Web o
forums.internet.com development topics
Web Developer's Journal Tutorials and information resources o o o o
www.webdevelopersjournal.com for Web site development, site
design, HTML, Web graphics and
audio
Web Developer's Virtual Library Tutorials and technical information o o o o
www.wdvl.com for Web developers
WebReference Tutorials, technical information o o o o
www.webreference.com and reviews for Web developers
XML.101 Tutorials and information resource O o
www.xml101.com for learning XML (Extensible Markup
Language)
ECOMMERCE/MARKETING CHANNEL
Ad Resource Collection of Internet advertising o
www.adresource.com resources for Internet marketers
AllNetResearch Directory of Internet Cindustry and o o o
www.allnetresearch.com information technology research
reports available for online
purchase
ChannelSeven.com The information source for Internet o o o
www.channelseven.com marketing and advertising
ClickZ Network Cutting edge commentary on Internet o o o
www.clickz.com marketing and advertising from
industry leaders as well as case
studies and unique insight
CyberAtlas Searchable repository of o o o
www.cyberatlas.com Internet-related research abstracts
Domainbook One of the largest catalogs of o
www.domainbook.com domain names for sale on the
Internet
DomainNotes The ultimate domain name resource o o o
www.domainnotes.com with domain news, articles, and
discussion
Ecommerce News Your source for E-commerce news, o
www.internetnews.com views, and how-to's
eCRM Guide The definitive source for Customer Relationship o o
www.ecrmguide.com Management (CRM) technology
13
E-MAIL ONLINE E-MAIL
INTERNET WEB NEWS- DISCUSSION DISCUSSION
MEDIA PROPERTY DESCRIPTION SITE LETTER FORUMS LISTS
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ECOMMERCE MARKETING CHANNEL (CONTINUED)
Electronic Commerce Guide News, tutorials, reviews and o o o o
www.ecommerce-guide.com opinions for e-commerce
professionals
Internet Advertising Report Highlights top Internet marketing o o
www.internetnews.com and advertising news and events
Internet Day Daily tutorial for Internet o o
www.internetday.com marketers and professionals
Internet PR Guide InternetPRGuide offers public o
www.internetprguide.com relations tips and strategy for
Internet professionals on PR topics
such as press release writing,
distribution and trade shows
New Media New Media follows what's next on the o o
www.newmedia.com Net - the latest trends and
technologies for Internet architects
Refer-It Directory of Web site affiliate, o o
www.refer-it.com referral and revenue sharing
programs
SearchEngineWatch How-to site for Internet marketers o o
www.searchenginewatch.com and users about search engine
operations
TurboAds.com The ultimate resource for rich o o
www.turboads.com media advertising
Unclaimed Domains The ultimate domain names alert o o
www.unclaimeddomains.com service online
Wireless Ad Watch Provides users with in-depth wireless o o
www.wirelessadwatch.com marketing data, news, company profiles
and insight
AllNet Training Provides courses and events focused on o o
www.allnettraining.com the needs of IT, Communications, Internet
and Development professionals
INTERNET RESOURCES CHANNEL
ConsoleWire.com The online resource for o o o o
www.consolewire.com Next-Generation Internet-Enabled
consoles
CoolCentral Recommendations for useful and o
www.coolcentral.com entertaining Web sites
The Counter Online tools to enable Webmasters o o o
www.thecounter.com to analyze their traffic
Events.internet.com Information about internet.com's o
events.internet.com seminars and breakfast forums
focused on the Internet industry
and IT
The Guestbook Online application that mpermits o
www.theguestbook.co Webmasters to add a "guest sign in"
feature to Web sites
Internet Breakfast Forums An excellent opportunity for o
www.breakfastforums.com professionals to enhance their
knowledge of the Internet industry
and IT as well as to network with
some leading industry figures
Internet Forums Directory of online discussion o
forums.internet.com forums about a variety of Internet
topics
Internet News Bureau Press release distribution services o
www.newsbureau.com for businesses and journalists
Internet Seminars Internet and IT seminars o
www.seminars.internet.com for industry professionals
InternetShopper Directory of shopping Web sites o o
www.internetshopper.com listed by category, daily listings
of free and discounted items
available online and an Internet
shopping agent
My Desktop Information site for experienced o o o o
www.mydesktop.com Internet users
SharkyExtreme Resource for the latest hardware o o o o
www.sharkyextreme.com and software technology on the Web
Virtual Dr Technical support for Internet and o o o o
www.virtualdr.com personal computer users
ASP RESOURCES CHANNEL
Application Planet A resource center for users of o o
www.applicationplanet.com Web-based business services
ASPIsland E-mail newsletters, discussion o o o o
www.aspisland.com forums and job resources
ASP News Global news and analysis o
www.internetnews.com forPApplication Service Providers
("ASP")
ASPnews.com E-mail newsletters and online o o
www.aspnews.com publication serving the ASP
industry and community
The List: ASP's The definitive ASP buyer's guide o
asp.thelist.com
ThinPlanet.com News and information resource for o o o
www.thinplanet.com professionals involved with "thin
client" computing
14
E-MAIL ONLINE E-MAIL
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MEDIA PROPERTY DESCRIPTION SITE LETTER FORUMS LISTS
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ISP RESOURCE CHANNEL
CLEC-Planet News and information about o o
www.clec-planet.com Competitive Local Exchange Carriers
("CLEC's") for the Internet Service
Provider ("ISP") industry
ISP Glossary Your source for the most up-to-date o
isp.webopedia.com terms, definitions, and acronyms
for and about internet service
providers
ISP-Lists E-mail discussion lists and Web o o o
www.isp-lists.com sites serving ISP industry
professionals
ISP News Real-time, global coverageSof ISP o
www.internetnews.com industry news
ISP-Planet News and information for the ISP o o
www.isp-planet.com industry
INTERNET INVESTING CHANNEL
After Hours Trading News, resources and quotes for the o o
www.internetinvesting.com 24 hour investor
Alert-IPO An automated notification system o o
www.alert-ipo.com for Initial Public Offerings with
the most comprehensive database on
the Web
Internet Investing The latest news, analysis and data o
www.internetinvesting.com for investors from internet.com's
global network of investing sites
Internet Stock Forums Discussion forums about Internet o
forums.internet.com stocks and investing
Internet Fund Index Directory of Internet mutual funds, o
www.internetfundindex.com sortable by size, performance or
name
Internet Stock Report Strategic and financial analysis of o o o
www.internetstockreport.com the Internet industry, including
stocks, M&A, forecasts, and trends
InternetStockList Directory of publicly traded o
www.internetstocklist.com Internet companies, including
related news, information and
analysis
InternetVCLinx News and information covering o o
www.internetvclinx.com leading venture capitalists, their
funds and their deal flow related
to the Internet industry
InternetVCWatch Database of Internet venture o o o
www.internetvcwatch.com capital firms, deals and companies
that have received venture funding
IPOWatch Directory of Internet o o
www.internetnews.com companies that have filed to go
public, including related news,
information and analysis
ISDEX, The Internet Stock Index Proprietary index of 50 publicly o o
www.isdex.com traded Internet stocks
Mutual Funds Central Provides timely intelligence for o
www.mutualfundscentral.com fund investors
Silicon Alley Stocks News and information about New York o o
www.siliconalleystoc.com City Internet industry public
companies
Wall Street Research Net Information and resources for o o
www.wsrn.com investors on the Web
INTERNATIONAL CHANNEL
Arabia Daily Internet and IT news and o
arabia.internet.com information about the Middle East
Asia Daily Internet and IT news and o o
asia.internet.com information about Asia
Australia Daily Internet and IT news and o o
australia.internet.com information about Australia
China Daily Internet and IT news and o o
china.internet.com information about China
France Daily Internet and IT news and o o
france.internet.com information about France
Germany Daily Internet and IT news and o o
germany.internet.com information about Germany
15
E-MAIL ONLINE E-MAIL
INTERNET WEB NEWS- DISCUSSION DISCUSSION
MEDIA PROPERTY DESCRIPTION SITE LETTER FORUMS LISTS
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INTERNATIONAL CHANNEL (CONTINUED)
India Daily Internet and IT news and o o
india.internet.com information about India
Israel Daily Internet and IT news and o o
israel.internet.com information about Israel
Japan Daily Internet and IT news and o o
japan.internet.com information about Japan
Korea Daily Internet and IT news and o o
korea.internet.com information about Korea
Singapore Daily Internet and IT news and o o
singapore.internet.com information about Singapore
South Africa Daily Internet and IT news and o o
southafrica.internet.com information about South Africa
Sweden Daily Internet and IT news and o o
sweden.internet.com information about Sweden
Turkey Daily Internet and IT news and o o
turkey.internet.com information about Turkey
United Kingdom Daily Internet and IT news and o o
uk.internet.com information about the United
Kingdom
DOWNLOAD CHANNEL
CWSApps Reviews and downloads for Microsoft o o o
www.cwsapps.com Windows based Internet software
Jumbo! Software Web site with over 300,000 o o o
www.jumbo.com programs available for download.
Offers users a wide variety of free
software for download from
applications categories such as
business, communications, desktop
enhancements and productivity
INTERNET LISTS CHANNEL
InternetCasinoList Directory of more than 400online o
www.internetcasinolist.com casinos
Internet E-Mail List Directory of free e-mail service providers o o
www.internetmaillist.com
Internet Radio List A comprehensive global directory of over o o
www.internetradiolist.com 1,700 Internet radio stations and links to
live broadcasts on the Web
InternetTradeShowList Directory of trade shows and o o
www.internettradeshowlist.com seminars for the Internet industry
and information technology
The List: ASP's The definitive ASP buyer's guide o
asp.thelist.com
The List: ISP's Buyer's guide containing terms of o
www.thelist.com service for more than 9,600
Internet Service Providers
worldwide
The List: Web Hosts Buyer's guide for hosting prices o
webhosts.thelist.com and services
WebDesignList Directory of more than 2,500 Web o o
designlist.internet.com design firms
WINDOWS INTERNET TECHNOLOGY CHANNEL
15 seconds Tutorials, discussion lists and o o o o
www.15seconds.com newsletters for Microsoft Active
Server Pages developers
4GuysFromRolla Tutorials and information resources o o o o
www.4guysfromrolla.com for Web site developers using
Microsoft Active Server Pages
technology
ASPWatch.com The premier destination for news and o o o
www.aspwatch.com information on building Internet solutions
using Microsoft Active Server Pages
technology
ASPWire News site featuring links to press o o o o
www.aspwire.com reports about Microsoft's Active
Server Pages Web site development
technology
ASP101 Provides coverage of all aspects of o o
www.asp101.com using Microsoft Active Server Pages
technology
BHS.com Microsoft system administrator o o o o
www.bhs.com support site that offers software
downloads, FAQs, help wanted
listings and online discussion
forums
Swynk News and information for system o o o o
www.swynk.com administrators
16
E-MAIL ONLINE E-MAIL
INTERNET WEB NEWS- DISCUSSION DISCUSSION
MEDIA PROPERTY DESCRIPTION SITE LETTER FORUMS LISTS
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WINDOWS INTERNET TECHNOLOGY CHANNEL (CONTINUTUED)
VBWire News site featuring links to press o o o o
www.vbwire.com reports about Microsoft's Visual
Basic programming language
Windrivers Resource for Windows o o
www.windrivers.com support/drivers
WinPlanet Microsoft Windows software news, o o o o
www.winplanet.com tutorials, opinions, reviews and
tips
LINUX/OPEN SOURCE CHANNEL
All Linux Devices Daily source of embedded Linux o o o
www.alllinuxdevices.com information
Apache Today Site serves the community of Apache o o
www.apachetoday.com open source software users
BSDCentral Commercial supplier of Internet and o o
www.bsdcentral.com networking software based on the
Berkeley version of UNIX
BSDToday Daily source for BSD news and o o
www.bsdtoday.com information
Enterprise Linux Today Designed for those interested in o o
www.eltoday.com Linux in the enterprise role
JustLinux Portal site that facilitates access o o o o
www.justlinux.com to Linux information resources
LinuxCentral Linux software, book and o o
www.linuxcentral.com accessories e-commerce site
LinuxNewbie The ultimate resource for those who o o o
www.linuxnewbie.org are beginners to Linux/Open Source
LinuxPlanet Linux news and tutorials for system o o o
www.linuxplanet.com administrators
LinuxProgramming Tutorials, discussion lists and o
www.linuxprogramming.com information resources for Linux
programmers
LinuxStart Portal site that facilitates access o o o o
www.linuxstart.com to Linux information resources
LinuxToday News and community site for Linux o o o
www.linuxtoday.com professionals
PHP Builder Tutorials, message boards and o o o o
www.phpbuilder.com information resources for PHP
(Personnel Home Page Tools)
developers
WIRELESS INTERNET CHANNEL
AllNetDevices News and reviews of devices that o o o
www.allnetdevices.com perform specialized Internet and
intranet tasks
CEWire News site featuring links to press o o o
www.cewire.com reports about Microsoft's Windows
CE operating system
M-commercetimes Provides real-time news and o o
www.mcommercetimes.com information about mobile commerce
and the wireless industry
Palm Boulevard The complete independent Palm Pilot o o o o
www.palmblvd.com information resource
PDA Street The Internet's largest PDA o o o o
www.pdastreet.com information center for PDA
software, Windows CE shareware and
more
Psion Place The complete independent psion o o o o
www.psionplace.com resource center
Thinkmobile The portal for the mobile community o o
www.thinkmobile.com
Visor Village The complete independent Visor o o o o
www.visorvillage.com information resource center
Windows CE City The resource center for Windows CE o o o o
www.wincecity.com shareware, freeware, reviews and
more
17
E-MAIL ONLINE E-MAIL
INTERNET WEB NEWS- DISCUSSION DISCUSSION
MEDIA PROPERTY DESCRIPTION SITE LETTER FORUMS LISTS
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EARTHWEB CHANNEL
CIN The CIO Information Network focuses o o o o
www.cin.earthweb.com on the needs of senior IT
executives and provides an
exclusive Internet-based community
dedicated to the free exchange of
ideas
CodeGuru Dedicated to Visual C++/MFC, VB and o o o o
www.codeguru.com C+ programmers by providing the
most up-to-date technical
information and code snippets on
the Internet
CrossNodes The networking and communications o o
www.crossnodes.com portal providing information vital
to the maintenance and growth of
enterprise networks
Datamation The IT management portal providing o o
www.datamation.com management tools to help build
stable and scalable IT systems and
the teams that support them
Developer.com The software development portal o o
www.developer.com providing a comprehensive resource
for building enterprise-level
applications using the newest
technologies
EarthWeb Network of IT-related sites o o
www.earthweb.com providing a comprehensive set of
solutions to a broad range of IT
and Internet professionals
ERP Hub ERP portal providing information on o o
www.erphub.com applications, software and
implementation strategies, as well
as system performance, reliability
and infrastructure
Gamelan Java portal providing information o o
www.gamelan.com on Java 2, consumer & embedded
technologies, APIs, the Java
community process as well as
alternative Java techniques
HTML Goodies Site dedicated to every aspect of o o o o
www.htmlgoodies.com building a Web site from basic HTML
to fully-functioning PERL CGI
scripts
Intranet Journal Provides IT managers information on o o
www.intranetjournal.com intranet strategy, database &
software tools, as well as intranet
management and security
JARS Java review and resource site o o
www.jars.com offering a powerful and feature
rich Java search engine
Javascripts The largest Javascripts repository o o
www.javascripts.com online, containing thousands of
free downloadable Javascripts
OpenSourceIT An Open Source development portal o o
www.opensourceit.com featuring topical information on
languages, servers, applications
and Open Source Java
Practically Networked News and information about new o o o o
www.practicallynetworked.com hardware and networking devices
SysOpt Site dedicated to power users and o o o o
www.sysopt.com IT professionals providing product
information, how-to-guides and a
variety of technology articles
CAREERS CHANNEL
15secondsjobs The leading job source for Active o
jobs.internet.com/15seconds Server Pages (ASP) developers
Atlantajobs For the Internet job seeker who o
jobs.internet.com/atlanta wants to find or post a job in the
Southeast in the Internet,
technical and computer-related
fields. Post your resume and reach
thousands of tech-savvy employers
BHSjobs A comprehensive Windows NT and o
jobs.internet.com/bhs Windows 2000 job site
Bostonjobs For the Internet job seeker who o
jobs.internet.com/boston wants to find or post a job in the
Boston area in the Internet,
technical and computer-related
fields. Post your resume and reach
thousands of tech-savvy employers
Chicagojobs For the Internet job seeker who o
jobs.internet.com/chicago wants to find or post a job in the
Greater Chicago area in the
Internet, technical and
computer-related fields. Post your
resume and reach thousands of tech
savvy employers
18
E-MAIL ONLINE E-MAIL
INTERNET WEB NEWS- DISCUSSION DISCUSSION
MEDIA PROPERTY DESCRIPTION SITE LETTER FORUMS LISTS
- -------------------------------------- ----------------------------------------- ------- -------- ------------ ------------
CAREERS CHANNEL (CONTINUED)
DCjobs For the Internet job seeker who o
jobs.internet.com/dc wants to find or post an IT job in
the Metro DC area. DCjobs.internet.com
has the two most important assets for
an IT employment site a huge, motivated
audience and high-quality company
postings
Internet Career Resources For the Internet job seeker or o o
www.internetcareerresources.com established dotcommer who wants
information on how to find, apply
for, get and succeed at a dotcom
job
jobs.internet.com Provides users with searchable o
jobs.internet.com access to Internet industry and
information technology job openings
LAjobs For the Internet job seeker who o
jobs.internet.com/la wants to find or post a job in the
Greater Los Angeles area in the
Internet, technical and
computer-related fields. Post your
resume and reach thousands of
tech-savvy employers
Linuxjobs Linux Jobs has two of the most o
jobs.internet.com/linux important assets for an employment
site-- a huge motivated audience
and high-quality company postings.
Free of charge for job seekers,
reach tens of thousands of
tech-savvy readers
Seattlejobs For the Internet job seeker who o
jobs.internet.com/seattle wants to find or post a job in the
Greater Seattle area in the
Internet, technical and
computer-related fields. Post your
resume and reach thousands of
tech-savvy employers
SiliconAlleyjobs For the Internet job seeker who wants to o
jobs.internet.com/siliconalley find or post a job in New York City's
Silicon Alley area in the Internet,
technical and computer-related fields.
Post your resume and reach thousands of
tech-savvy employers
SiliconValleyjobs SiliconValleyJobs.internet.com has o
jobs.internet.com/siliconvalley the two most important assets for an
employment site - a huge, motivated audience
and high-quality company postings. Research
career opportunities, read company profies
and join in discussion forums
Swynkjobs A comprehensive system o
jobs.internet.com/swynk administrator's job search site.
Post or list a resume
WebDeveloperjobs For the Internet job seeker who o
jobs.internet.com/webdeveloper wants to find or post a job in the
Web developer community. Post your
resume and reach thousands of
tech-savvy employers.
Webopediajobs For the Internet job seeker who o
jobs.internet.com/webopedia wants to find or post a job in the
Internet, technical and
computer-related fields. Post your
resume and reach thousands of
tech-savvy employers
19
EDITORIAL
We maintain editorial offices in Darien, Connecticut; New York, New York;
South San Francisco and San Jose, California; Cambridge and North Andover,
Massachusetts; Ann Arbor, Michigan; and Lexington, Kentucky. In addition,
editorial personnel work from home offices throughout the United States and in
Hong Kong. Freelance contributors and analysts are also located both
domestically and in 18 countries worldwide.
Our editorial team, comprised of approximately 150 employees and over 100
freelance contributors as of February 28, 2001, creates considerable proprietary
content each month.
MARKETING AND SALES
MARKETING. We employ a combination of online and offline advertising and
promotional campaigns to promote our content offerings and services to our
community of Internet users, advertisers and vendors. User advertising includes
cross-promotion on our network, advertising in trade publications and at trade
shows and promotional links from Web sites that attract demographically similar
audiences. We believe that this strategy maintains the high quality and unique
focus of our community of Internet users. We have participated in various
Internet industry events, including Internet World, ISPCON and AdTech trade
shows. We have also used print advertising, which has appeared in BOARDWATCH,
BRILL'S CONTENT REVOLUTION, INTERNET WEEK, INTERNET WORLD, INSIDE MAGAZINE,
SILICON ALLEY REPORTER, TELE.COM, and UPSIDE, among other publications.
Our marketing efforts are directed largely at acquiring advertising clients
and commerce agreements. We principally use offline and online advertising,
direct mail and event sponsorships for customer acquisition. ADVERTISING AGE,
ADWEEK, B2B MAGAZINE, MARKETING COMPUTERS, ONLINE ADVERTISING DISCUSSION LIST
and SRDS, are among the venues used to deliver our promotional messages. In
addition, we have a strategic agreement with Penton Media, a significant
investor in internet.com, which provides for an exchange of services to be
provided by each party. This agreement expires on November 23, 2003.
Services provided by Penton Media to us under this agreement include the
following:
o one full-page advertisement at no charge in each issue of INTERNET
WORLD magazine and BOARDWATCH magazine;
o exhibit and sales office space at no charge for each U.S. Internet
World and ISPCON trade show; and
o prominent listing as a sponsor in all promotional materials and for
appropriate conference tracks, as well as prominent hanging media
banners for Internet World and ISPCON trade shows.
We provide a minimum of 2.3 million advertising impressions each month on
our network to Penton Media.
ADVERTISING SALES. We believe that we have been able to obtain revenue from
advertising on our Web sites and online discussion forums because we enable
clients to efficiently and effectively reach targeted segments of the Internet
community. Based on a survey we commissioned which was conducted from October
2000 through December 2000, 87% of our community of Internet users report that
they either make or influence purchasing decisions. We believe that targeting
this influential audience allows us to sell advertising space at rates that are
higher than the average rates charged by online services aimed at more general
audiences.
20
We also offer advertisers the opportunity to advertise on our e-mail
newsletters and moderated e-mail discussion lists. In January 2001, we
distributed 35.8 million copies of our e-mail newsletters to approximately 5.6
million subscribers. We also distributed 34.8 million messages to more than
134,000 moderated e-mail discussion list subscribers.
Our sales force is organized by geographic regions as follows: East,
Northeast, Southeast, Rocky Mountain, Midwest, Texas, Northwest, West, Southern
California, Canada, Europe, Asia, Australia and Israel.
Over 2,000 advertisers have placed advertisements on our network. For the
year ended December 31, 2000, our top 20 advertisers together accounted for 17%
of our revenues. Based on revenues, the following were our 20 largest
advertisers during the year ended December 31, 2000:
Ameritrade Holding Corporation Intel Corporation
BulkRegister.com Corporation Interliant, Inc.
Compaq Computer Corporation International Business Machines Corporation
cPulse LLC Microsoft Corporation
Dell Computer Corporation Oracle Corporation
EarthLink, Inc. RightNow Technologies, Inc.
Edgix Corporation SmartAge Corporation
Engage, Inc. Sprint Corporation
EWork Exchange, Inc. Sun Microsystems, Inc.
Guru, Inc. WebTrends Corporation
E-COMMERCE SALES, LICENSING AND BUSINESS DEVELOPMENT. We offer e-commerce,
licensing and other business development arrangements to maximize the potential
of our proprietary content and community of Internet users. We identify
potential e-commerce vendors, licensees and other potential business development
opportunities and generally enter into contracts of three to 12 months'
duration. E-commerce agreements generally include an advance against revenue
with revenue sharing of 10% to 50% of the sales made by the e-commerce vendor as
a result of links from our network.
Licensing arrangements allow third parties to reproduce our editorial
content and brands either for print or online use. We are typically paid per-use
in the case of book and print rights, including reprints of articles published
on our network, and monthly in cases where our editorial content is published in
electronic form.
COMPETITION
We believe we compete on the basis of our brand recognition and our
proprietary content offerings and services focused solely on the Internet
industry and information technology. We believe that we are differentiated
relative to our competitors due to our vertical focus of providing content,
community and commerce to Internet industry and information technology
professionals, Web developers and experienced Internet users.
The market for Internet-based services is relatively new, intensely
competitive and rapidly changing. Since the advent of commercial services on the
Internet, the number of online services competing for users' attention and
spending has proliferated. We expect that competition will continue to
intensify. We compete with other companies, which direct a portion of their
overall Web content at the Internet professional community, such as CNET, Inc.
and CMP Media Inc. We also compete for circulation and advertising impressions
with general interest portal and destination Web sites as well as traditional
media.
Many of our current and potential competitors have longer operating
histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources than we have. These competitors
may be able to respond more quickly to new or emerging technologies and changes
in customer requirements and to devote greater resources to the development,
promotion and sale
21
of their products and services than we can. The number of companies competing
for the attention and spending of our community of Internet users has increased
and we expect it to continue to increase.
TECHNOLOGY AND OPERATIONS
We have developed an expandable operations infrastructure using open
standard hardware and software systems. We make our Web sites, e-mail
newsletters, online discussion forums and moderated e-mail discussion lists
available using multiple Sun Microsystems, Inc. and Wintel-based servers that
run on Sun Solaris, Microsoft NT, Windows 2000 and Linux operating systems. We
license software from the following parties, among others: Web and e-mail
servers from Netscape Communications Corporation; Web and database servers from
Microsoft Corporation; database servers from Oracle Corporation, Informix
Corporation and Microsoft Corporation; an advertising management system from
DoubleClick Inc.; a content management system from Vignette Corporation; a
streaming media server from RealNetworks, Inc.; a spidering, content indexing,
personalization and categorization system from Autonomy, Inc.; discussion forums
from Web Crossing Inc., and firewalls from Network Associates Inc.
We maintain redundant server capacity in a data center operated by Qwest
Communications, Inc. In the event that production servers fail, we can restore
service quickly using spare servers. We have redundant Internet circuits
diversely routed within Qwest's network and with redundant network equipment
configured for automatic failover. All of our servers are powered by
uninterruptible power supplies, and the data center is on multiple power grids.
In addition, Qwest maintains a diesel-powered generator and fuel supply in the
event of extended outages. All of our production systems are copied each night
to backup tapes that are stored at an off-site storage facility. We maintain a
quality assurance process to constantly monitor our servers, processes and
network connectivity. We have implemented these redundancies and backup systems
in order to minimize the risk associated with damage from fire, power loss,
telecommunications failure, break-ins, computer viruses and other events beyond
our control.
INTELLECTUAL PROPERTY
We regard our content, logos, brands, domain names and software as
proprietary and attempt to protect them by relying on trademark, copyright,
trade secret and other laws and restrictions. We currently have no patents or
patents pending and do not anticipate that patents will become a significant
part of our intellectual property in the foreseeable future. We pursue the
registration of our trademarks and service marks in the United States and
internationally, and have applied for registration in the United States and
numerous other countries for a number of our trademarks and service marks. We
also pursue copyright registration of our content in the United States. We might
not be able to obtain effective trademark, copyright and trade secret protection
in every country in which we distribute our services or make them available
through the Internet, and it is difficult for us to police unauthorized use of
our proprietary information. We seek protection of our content, logos, brands
and software relating to our Web sites, e-mail newsletters, online discussion
forums and moderated e-mail discussion lists.
We have applied for registration of our trademarks and service marks in the
United States and in over 75 other countries. We have encountered obstacles to
registration of some marks in several of these countries.
Legal standards relating to the validity, enforceability and scope of
protection of proprietary rights in Internet-related businesses are uncertain
and still evolving. As a result, we cannot assure the future viability or value
of our proprietary rights. We might not have taken adequate steps to prevent the
misappropriation or infringement of our intellectual property. Any such
infringement or misappropriation, should it occur, might harm our business,
results of operations and financial condition. In addition, we may have to file
lawsuits in the future to perfect or enforce our intellectual property rights,
to protect our trade secrets or to determine the validity and scope of the
proprietary rights of others. These lawsuits could result in substantial costs
and divert our resources and the attention of our management. As a result, our
business, results of operations and financial condition would suffer.
22
Our business activities may infringe upon the proprietary rights of others,
and other parties might assert infringement claims against us. From time to
time, we have been, and expect to continue to be, subject to claims in the
ordinary course of our business including claims of alleged infringement of the
trademarks, service marks and other intellectual property rights of third
parties. If similar claims are made against us in the future, those claims and
any resultant litigation might subject us to liability for damages, result in
invalidation of our proprietary rights and, even if not meritorious, could be
time consuming and expensive to defend and could result in the diversion of our
resources and the attention of our management. As a result, our business,
results of operations and financial condition would suffer.
We generally obtain our content and some of our technology from our
employees or pursuant to work-for-hire arrangements. We also license technology
and content from third parties. In such license arrangements, we generally
obtain representations as to origin and ownership of such content and technology
and the licensors have generally agreed to defend, indemnify and hold us
harmless from any third party claims that such technology or content violates
the rights of another. We cannot be sure that these third party technology and
content protections will be effective or sufficient or that we will be able to
maintain such content or technology on commercially reasonable terms. As a
result, our business, results of operations and financial condition would
suffer.
We have licensed in the past, and expect to license in the future,
proprietary rights, such as trademarks or copyrighted material, to third
parties. While we attempt to ensure that the quality of our brands and content
are maintained by such licensees, we cannot be sure that such licensees will not
take actions that might decrease the value of our brands, proprietary rights or
reputation, which would harm our business, prospects, financial condition and
results of operations.
DOMAIN NAMES
We own the Internet domain name "internet.com," as well as numerous other
domain names both in the United States and internationally. Domain names
generally are regulated by Internet regulatory bodies. The regulation of domain
names in the United States and in foreign countries is subject to change.
Regulatory bodies could establish additional top-level domains, appoint
additional domain name registrars or modify the requirements for holding domain
names. As a result, we might not acquire or maintain the "internet.com" or
comparable domain name in all the countries in which we conduct business.
The relationship between regulations governing domain names and laws
protecting trademarks and similar proprietary rights is unclear and still
evolving. Therefore, we might be unable to prevent third parties from acquiring
domain names that infringe or otherwise decrease the value of our trademarks and
other proprietary rights.
EMPLOYEES
The following table sets forth a breakdown of our employees as of February
28, 2001:
NUMBER OF
EMPLOYEES
-----------
Editorial 153
Marketing and sales 154
Technology and operations 80
Administration 59
----
Total 446
====
We have never had a work stoppage and no personnel are represented under
collective bargaining agreements. We consider our relations with our personnel
to be good.
23
ITEM 2. PROPERTIES
- ------------------
We lease approximately 25,000 square feet of office space in two facilities
in Darien, Connecticut that house our principal administrative, editorial,
sales, marketing, and information technology operations. In addition, we lease
approximately 11,000 square feet of office space in New York, New York, that is
used by editorial, sales, marketing and information technology personnel, and
approximately 7,000 square feet of office space in San Francisco, California
that is used primarily by sales personnel. We also have domestic operating
leases in: Cambridge, Massachusetts; North Andover, Massachusetts; Washington,
D.C.; Tysons Corner, Virginia; Lexington, Kentucky; Ann Arbor and Clinton
Township, Michigan; Los Angeles and San Jose, California; and Seattle,
Washington. These locations range in size from 800 to 3,100 square feet and
expire between June 2001 and September 2004. In addition, we have international
operating leases in Australia, China, Hong Kong and England.
We believe that the general condition of our leased real estate is good and
that our facilities are suitable for the purposes for which they are being used.
We believe that our current facilties will be adequate to meet our needs for the
foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
Messrs. Alan M. Meckler and Christopher S. Cardell, who are stockholders,
executive officers and directors of internet.com, were stockholders, executive
officers and directors of Mecklermedia Corporation prior to its acquisition by
Penton Media in November 1998. In addition, Messrs. Gilbert F. Bach and Michael
J. Davies, who are directors of internet.com, were directors of Mecklermedia
Corporation prior to its acquisition by Penton Media. A complaint seeking class
action status was filed in Delaware Chancery Court on June 16, 1999 by a former
stockholder of Mecklermedia Corporation alleging that Messrs. Meckler, Cardell,
Bach and Davies, as well as the other directors of Mecklermedia Corporation,
breached their fiduciary duties of care, candor and loyalty in connection with
the approval of the sale of Mecklermedia Corporation to Penton Media at the
price paid by Penton Media and the related sale of 80.1% of the Internet
business of Mecklermedia Corporation to Mr. Meckler at the price paid by Mr.
Meckler. Among other things, this plaintiff has alleged that the price paid by
Penton Media for the purchase of Mecklermedia Corporation, and the price paid by
Mr. Meckler for an 80.1% stake in the Internet business of Mecklermedia
Corporation, were inadequate. This former stockholder of Mecklermedia
Corporation has asserted claims for unspecified damages. The plaintiff also
named internet.com Corporation as a defendant seeking that a constructive trust
be established consisting of any benefits derived by the defendants in respect
of the allegations set forth in the complaint. On August 20, 1999, all of the
defendants, including internet.com and Messrs. Meckler, Cardell, Bach and
Davies, served an answer to the complaint generally denying the allegations
therein, denying that the directors of Mecklermedia Corporation breached any
fiduciary duties, and asserting certain affirmative defenses. All of the
defendants intend to vigorously defend themselves.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
None
24
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- -----------------------------------------------------------------------------
The common stock of internet.com began trading publicly on the Nasdaq Stock
Market on June 25, 1999, under the symbol "INTM". Prior to that date, there was
no public market for our common stock. The following table sets forth for the
periods indicated the high and low sale prices of our common stock.
HIGH LOW
---- ---
YEAR ENDING DECEMBER 31, 1999
Second Quarter (commencing June 25, 1999) $16.344 $11.000
Third Quarter $26.875 $9.188
Fourth Quarter $72.250 $13.750
YEAR ENDING DECEMBER 31, 2000
First Quarter $68.125 $36.000
Second Quarter $40.000 $12.250
Third Quarter $32.875 $17.875
Fourth Quarter $24.500 $5.000
YEAR ENDING DECEMBER 31, 2001
First Quarter (Through March 15, 2001) $10.000 $5.000
As of March 15, 2001, there were 6,425 holders of record of our common
stock.
DIVIDEND POLICY
We have never declared or paid a cash dividend and do not anticipate doing
so in the foreseeable future. We expect to retain earnings to finance the
expansion and development of our business.
RECENT SALES OF UNREGISTERED SECURITIES
On September 8, 2000, we issued an aggregate of 211,382 shares of
internet.com common stock, with an aggregate market value at such time of
approximately $5.8 million, as partial consideration for the acquisition by
internet.com of substantially all of the assets of ClickZ, Inc., a Massachusetts
corporation ("ClickZ"). All of the shares of internet.com common stock issued in
this transaction were issued to ClickZ in a non-public offering pursuant to an
exemption from the registration requirements of the Securities Act of 1933, as
amended (the "1933 Act"), under Section 4(2) of the 1933 Act. This sale was made
without general solicitation or advertising. ClickZ and its principal
stockholders represented to us that ClickZ was a sophisticated investor, that it
had been given the opportunity to obtain from us all information that it
requested to evaluate the investment and that the shares were being acquired for
investment purposes only.
25
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------
The following selected financial data should be read in conjunction with the
financial statements of internet.com, the accompanying notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
selected financial data of the iWorld division of Mecklermedia for the years
ended September 1996, 1997 and 1998, and for the period from October 1, 1998
through November 23, 1998, are derived from financial statements of the iWorld
division of Mecklermedia. The selected financial data for the period from
inception (November 24, 1998) through December 31, 1998 and for the years ended
December 31, 1999 and 2000, as well as the balance sheet data as of December 31,
1999 and 2000, are derived from the financial statements of internet.com. These
financial statements have been audited by Arthur Andersen LLP, independent
public accountants. See "Index to Financial Statements."
The financial information of the iWorld division of Mecklermedia included
herein is not necessarily indicative of the results of operations, financial
position and cash flows of internet.com had it been a stand-alone entity at such
times. It is also not necessarily indicative of the results of operations,
financial position and cash flows of internet.com in the future. The share
information reflects the conversion of internet.com from a limited liability
company into a corporation as if such conversion had occurred at the beginning
of each period indicated.
INCEPTION
FISCAL YEAR ENDED OCT. 1, 1998 (NOV. 24, 1998) FISCAL YEAR FISCAL YEAR
---------------------------------- THROUGH THROUGH ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, NOV. 23, DEC. 31, DEC. 31, DEC. 31,
1996(1) 1997(1) 1998(1) 1998(1) 1998(2) 1999(2) 2000(2)
---------- ---------- ---------- ------------ -------------- ----------- -----------
STATEMENT OF OPERATIONS DATA:
Revenues $ 498 $ 1,479 $ 3,544 $ 778 $ 772 $ 16,085 $ 52,083
Cost of revenues 536 1,171 2,171 456 403 8,366 22,991
---------- ---------- ---------- ------------ -------------- ----------- -----------
Gross profit (38) 308 1,373 322 369 7,719 29,092
Operating expenses:
Advertising, promotion and selling 285 881 1,406 441 239 7,545 18,254
General and administrative 727 751 1,349 195 449 4,434 10,172
Depreciation 85 326 429 67 15 673 2,099
Amortization 109 505 920 86 632 9,796 24,854
Non-cash compensation charge -- -- -- -- -- 7,975 --
---------- ---------- ---------- ------------ -------------- ----------- -----------
Total operating expenses 1,206 2,463 4,104 789 1,335 30,423 55,379
---------- ---------- ---------- ------------ -------------- ----------- -----------
Operating loss (1,244) (2,155) (2,731) (467) (966) (22,704) (26,287)
Minority interest -- -- -- -- -- -- 399
Equity loss from international and
venture fund investments, net -- -- -- -- -- -- (1,482)
Loss on investments, net -- -- -- -- -- -- (216)
Interest income (expense), net -- -- -- -- (8) 688 4,814
---------- ---------- ---------- ------------ -------------- ----------- -----------
Loss before income taxes (1,244) (2,155) (2,731) (467) (974) (22,016) (22,772)
Provision for income taxes -- -- -- -- -- -- 205
---------- ---------- ---------- ------------ -------------- ----------- -----------
Net loss $ (1,244) $ (2,155) $ (2,731) $ (467) $ (974) $(22,016 $(22,977)
========== ========== ========== ============ ============== =========== ===========
Basic and diluted net loss per share $ (.06) $ (1.08) $ (0.92)
============== =========== ===========
Common shares used to compute basic
and diluted net loss per share 16,216 20,335 25,014
============== =========== ===========
AS OF
----------------------
DEC. 31, DEC. 31,
1999 (2) 2000 (2)
---------- -----------
BALANCE SHEET DATA:
Cash and cash equivalents $17,943 $ 59,979
Working capital 11,821 52,314
Total assets 68,390 162,172
Total equity 56,015 137,483
(1) Represents the financial data of the iWorld division of Mecklermedia
Corporation.
(2) Represents the financial data of internet.com.
26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- -----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
OVERVIEW
We own and operate a network of Web sites, e-mail newsletters, online
discussion forums and moderated e-mail discussion lists focused solely on the
Internet industry and information technology ("IT"). Our network consists of 16
subject areas, or vertical content channels, that contain 170 Web sites, 350
e-mail newsletters, over 400 online discussion forums and over 150 moderated
e-mail discussion lists focused solely on the Internet industry and IT. During
the month of January 2001, we delivered over 250 million page views to 3.2
million unique visitors and 35.8 million copies of our e-mail newsletters to
approximately 5.6 million subscribers, and 34.8 million postings were generated
by 134,000 subscribers to our moderated e-mail discussion lists.
We were formed in November 1998 following the acquisition of Mecklermedia by
Penton Media. As part of the acquisition, Penton Media agreed to contribute all
the assets of Mecklermedia's Internet media business division, iWorld, to a
newly formed limited liability company, internet.com LLC. As part of this
acquisition agreement, we reserved 4% of our total membership units for
discretionary grants to our employees. The grants were completed in March 1999.
As these membership units vested upon the completion of our initial public
offering, we recorded an $8.0 million compensation charge concurrent with the
completion of our initial public offering in June 1999. Prior to the acquisition
of Mecklermedia by Penton Media, iWorld operated as one of three business lines
which comprised Mecklermedia. Our predecessor Web sites, MecklerWeb and
iWorld.com, were also dedicated to covering Internet and IT developments.
We generate revenues from the following sources:
o Advertising on our Web sites, e-mail newsletters, online discussion
forums and moderated e-mail discussion lists;
o e-commerce agreements and offerings;
o permission based opt-in e-mail list rentals; seminars and Internet
breakfast forums;
o paid subscription services;
o licensing of our editorial content and brands; online press
release distribution services; and
o venture fund management fees.
We barter a portion of the unsold advertising impressions generated by our
network for advertising and promotion in media properties owned by Penton Media,
Inc. and other third parties. In addition, internet.com barters portions of
unsold advertising impressions for equity interests in certain of our venture
funds' portfolio companies. We did not record the effects of this barter in our
financial statements for the period from inception (November 24, 1998) to
December 31, 1998 and for the year ended December 31, 1999. Beginning in January
2000, in accordance with Emerging Issues Task Force Issue No. 99-17, "Accounting
for Advertising Barter Transactions," we have prospectively recorded revenues
and expenses from barter transactions at their estimated fair values. Revenues
related to barter transactions were approximately $4.1 million for year ended
December 31, 2000. Expenses related to barter transactions were approximately
$2.1 million for the year ended December 31, 2000.
For the years ended December 31, 1999 and 2000, a majority of our revenues
were derived from advertising. We recognize advertising revenue ratably in the
period the advertising is displayed, provided that no significant company
27
obligations remain outstanding and collection of the resulting receivable is
probable. Such obligations typically include guarantees of a minimum number
of advertising impressions, or times an advertisement is displayed. We use a
direct sales force to sell advertising to companies and advertising agencies.
Our e-commerce agreements and offerings generally include advertising on our
Web sites, bounties for new customers or revenue sharing for sales made by the
e-commerce vendors as a result of links from our network, or in some cases
combinations of advertising, bounties and revenue sharing. We recognize the
advertising component of these agreements ratably in the period the advertising
is displayed, provided that no significant company obligations remain and
collection of the remaining receivable is probable. Generally, bounties and
revenue sharing agreements require a monthly minimum fee from internet.com's
customers. Revenues from these agreements are recognized in the month they are
earned.
Through a third-party agent, we currently offer for rental our permission
based opt-in e-mail list names relating to over 250 Internet-specific topics.
Members of our community of Internet users volunteer, or "opt-in", to be
included on these lists to receive e-mail product offerings and information
relevant to their Internet interests. Subscribers to these permission based
opt-in e-mail lists receive e-mail announcements of special offers relating to
each topic subscribed. We generate revenues on a per use basis for the rental of
our list names. Revenue from permission based opt-in list rentals is recognized
at the time of use by the renter.
Our seminars generate revenues from attendee registrations, as well as from
advertiser and vendor sponsorships. Proceeds from the sale of attendee
registrations and advertiser and vendor sponsorships are deferred and recognized
as revenue at the time the seminars are held. In addition, internet.com offers
Internet breakfast forums on a monthly basis in cities in which it has news
bureaus in the United States, as well as overseas where internet.com has
international editions. Proceeds from the sale of sponsorships and table top
exhibits are deferred and recognized at the time the breakfast forums are held.
Paid subscription services relate to customer subscriptions to our paid
e-mail newsletters and services, SearchEngineWatch, certain sections of
WallStreetResearchNet, UnclaimedDomain, DomainBook.com, ASPNews.com and
AlertIPO.com, which are sold through our network and through affiliate
relationships. Revenue from subscriptions is recognized ratably over the
subscription period. Deferred revenues relate to the portion of collected
subscription fees which has not yet been recognized as revenue.
Our licensing agreements vary in structure, with internet.com generating
fixed fees, royalties or both for access to our editorial content and brands. We
generally license our editorial content and brands to offline and online media
companies. Revenues are recognized ratably over the period of the licensing
agreements.
Online press release distribution revenues are generated through
INTERNETNEWSBUREAU.COM. We distribute e-mail based press releases to over 5,000
registered journalists. Revenue from this service is recorded on a per use basis
and recognized at the time of distribution.
Venture fund management fees relate to management fees earned for the
day-to-day operation and general management of internet.com Venture Fund I LLC,
internet.com Venture Fund II LLC and internet.com Venture Partners III LLC.
Management fees are recognized ratably over the period in which services are
rendered. In addition, internet.com is entitled to 20% of the realized gains
earned from portfolio investments, which are recognized at the time of
distribution from the venture capital funds.
From July 1995 through March 15, 2001, we made 74 acquisitions of Internet
media properties, consisting of 100 Web sites, 105 e-mail newsletters, 125
online discussion forums and 162 moderated e-mail discussion lists. We expect to
continue to pursue strategic acquisitions to strengthen our content offerings
and services. All of internet.com's acquisitions have been accounted for as
purchases.
28
Consequently, as of December 31, 2000, we had $109.3 million of goodwill, which
is being amortized over three years.
We have sustained losses on a quarterly and annual basis in the past. We
expect to incur operating losses for the foreseeable future and because costs
are largely fixed in the short term, we expect to be vulnerable to significant
fluctuations in operating losses if actual revenues fall below anticipated
levels. Furthermore, given the rapidly evolving nature of our business, our
operating results are difficult to forecast and period-to-period comparison of
our operating results will not be meaningful and should not be relied upon as
any indication of future performance. Due to these and other factors, many of
which are outside our control, quarterly operating results may fluctuate
significantly in the future.
RESULTS OF OPERATIONS
Costs have been allocated to the iWorld division of Mecklermedia based on
our management's estimate of the costs attributable to its operations. Such
allocations are not necessarily indicative of the costs that would have been
incurred if the iWorld division of Mecklermedia had been a stand-alone entity.
The following table sets forth certain statement of operations data as a
percentage of revenues for the periods indicated:
PERCENTAGE OF REVENUES
--------------------------------------------------
FISCAL YEAR OCT. 1 NOV. 24 YEAR YEAR
ENDED THROUGH THROUGH ENDED ENDED
SEPT. 30, NOV. 23, DEC. 31, DEC. 31, DEC. 31,
1998(1) 1998(1) 1998(2) 1999(2) 2000(2)
---------- ------- ------- ------- -------
STATEMENT OF OPERATIONS DATA:
Revenues 100% 100% 100% 100% 100%
Cost of revenues 61 59 52 52 44
---------- ------- ------- ------- -------
Gross profit 39 41 48 48 56
---------- ------- ------- ------- -------
Operating expenses:
Advertising, promotion and selling 40 57 31 47 35
General and administrative 38 25 58 28 20
Depreciation 12 8 2 4 4
Amortization 26 11 82 61 48
Non-cash compensation charge -- -- -- 50 --
---------- ------- ------- ------- -------
Total operating expenses 116 101 173 190 107
---------- ------- ------- ------- -------
Operating loss (77) (60) (125) (142) (51)
---------- ------- ------- ------- -------
Minority interest -- -- -- -- 1
Equity loss from international and venture
fund investments, net -- -- -- -- (3)
Loss on investments, net -- -- -- -- --
---------- ------- ------- ------- -------
Interest income (expense), net -- -- (1) 4 9
---------- ------- ------- ------- -------
Loss before income taxes (77) (60) (126) (138) (44)
Provision for income taxes -- -- -- -- --
---------- ------- ------- ------- -------
Net loss (77)% (60)% (126)% (138)% (44)%
========== ======= ======= ======= =======
- ------------------
(1) Represents the financial data of the iWorld division of Mecklermedia
Corporation.
(2) Represents the financial data of internet.com.
YEARS ENDED DECEMBER 31, 1999 AND 2000
REVENUES. Revenues were $16.1 million for the year ended December 31, 1999
and $52.1 million for the year ended December 31, 2000, representing an increase
of 224%. The majority of our revenues relate to advertising on our network of
Web sites e-mail newsletters, online discussion forums and moderated e-mail
discussion lists. While we anticipate that advertising revenues will continue
to represent a substantial majority of our revenues for the foreseeable
future, we believe that revenues from e-commerce agreements and offerings,
permission based opt-in e-mail list rentals, seminars and Internet breakfast
forums, paid subscription services, licensing, online press release
distribution services and venture fund management fees will continue to
expand and diversify our future revenue streams.
29
COST OF REVENUES. Cost of revenues primarily consists of expenses associated
with editorial, communications infrastructure and Web site hosting. Cost of
revenues was $8.4 million for the year ended December 31, 1999 and $23.0 million
for the year ended December 31, 2000, representing an increase of 175%. This
change was primarily due to the increased hiring of editorial, technology and
operations personnel and expenses for freelance contributors. The increase was
offset by capitalization of certain costs under the Emerging Issues Task Force
Issue No. 00-2, "Accounting for Web Site Development Costs" ("EITF 00-2"), of
$742,000 for the year ended December 31, 2000. As a percentage of revenues, cost
of revenues was 52% for the year ended December 31, 1999 and 44% for the year
ended December 31, 2000. We anticipate that our cost of revenues will continue
to increase in absolute dollars as we continue to strengthen our existing
content offerings and services. We anticipate hiring additional editorial,
technology and operations personnel, as well as freelance contributors, as we
acquire additional Web sites and related media properties.
ADVERTISING, PROMOTION AND SELLING. Advertising, promotion and selling
expenses primarily consist of costs related to sales and marketing staff, sales
commissions and promotion costs. Advertising, promotion and selling expenses
were $7.5 million for the year ended December 31, 1999 and $18.3 million for the
year ended December 31, 2000, representing an increase of 142%. This change was
primarily due to increased hiring of advertising sales personnel and the
recording of barter advertising. As a percentage of revenues, advertising,
promotion and selling expenses were 47% for the year ended December 31, 1999 and
35% for the year ended December 31, 2000.
GENERAL AND ADMINISTRATIVE. General and administrative expenses primarily
consist of salaries, professional fees, facilities costs and provisions for
losses on accounts receivable. General and administrative expenses were $4.4
million for the year ended December 31, 1999 and $10.2 million for the year
ended December 31, 2000, representing a 129% increase. This change was primarily
due to the hiring of additional personnel and increased provisions for losses on
accounts receivable. As a percentage of revenues, general and administrative
expenses were 28% for the year ended December 31, 1999 and 20% for the year
ended December 31, 2000. We expect that our general and administrative expenses
will continue to increase in absolute dollars, but these expenses are expected
to decrease as a percentage of revenues.
DEPRECIATION AND AMORTIZATION. Depreciation of property and equipment was
$673,000 for the year ended December 31, 1999 and $2.1 million for the year
ended December 31, 2000, representing a 212% increase. As a percentage of
revenues, depreciation of property and equipment was 4% for both the year ended
December 31, 1999 and 2000. Amortization of intangibles was $9.8 million for the
year ended December 31, 1999 and $24.9 million for the year ended December 31,
2000, representing a 154% increase. This increase was primarily due to the
amortization of acquired Web sites and related Internet media properties. As a
percentage of revenues, amortization of intangibles was 61% for the year ended
December 31, 1999 and 48% for the year ended December 31, 2000. We anticipate
that depreciation and amortization will continue to increase as we acquire
additional Web sites and related media properties. We also anticipate that our
capital expenditures will increase as needed to support growth in operations,
infrastructure and personnel.
NON-CASH COMPENSATION CHARGE. In March 1999, internet.com LLC granted 4% of
its total membership units at the time to certain of its employees. As these
membership units vested upon the completion of our initial public offering in
June 1999, internet.com recorded an $8.0 million compensation charge concurrent
with the completion of our initial public offering on June 25, 1999.
MINORITY INTEREST. Minority interest represents the minority
stockholders' proportionate share of losses of internet.com's majority-owned
consolidated international subsidiaries.
EQUITY LOSS FROM INTERNATIONAL AND VENTURE FUND INVESTMENTS, NET. Equity
losses represent internet.com's net equity interests in the investments in
international joint ventures and the internet.com venture funds. Equity losses
from international joint ventures were $318,000 for the year ended December 31,
2000. Equity losses from the internet.com venture funds were approximately $1.1
million for the year ended December 31, 2000.
30
LOSS ON INVESTMENTS, NET. During the year ended December 31, 2000,
internet.com determined that the declines in value from internet.com's
accounting basis for certain of our investments in internet.com venture fund
portfolio companies was other than temporary. internet.com recognized losses
totaling $216,000 related to investment impairment, net of a gain on the
distribution of GOTO.com common stock received from internet.com Venture Fund I,
LLC.
INTEREST INCOME (EXPENSE), NET. Interest income, net of interest expense,
was $688,000 for the year ended December 31, 1999 and $4.8 million for the year
ended December 31, 2000.
PROVISION FOR INCOME TAXES. internet.com recorded a provision for income
taxes of $205,000 for the year ended December 31, 2000 related to foreign income
tax liabilities.
PERIOD FROM NOVEMBER 24, 1998 THROUGH DECEMBER 31, 1998
REVENUES. Revenues were $772,000 for the period from November 24, 1998
through December 31, 1998.
COST OF REVENUES. Cost of revenues was $403,000 for the period from November
24, 1998 through December 31, 1998. As a percentage of revenues, cost of
revenues was 52% for the period from November 24, 1998 through December 31,
1998.
ADVERTISING, PROMOTION AND SELLING. Advertising, promotion and selling
expenses were $239,000 for the period from November 24, 1998 through December
31, 1998. As a percentage of revenues, advertising, promotion and selling
expenses were 31% for the period from November 24, 1998 through December 31,
1998.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$449,000 for the period from November 24, 1998, through December 31, 1998. As a
percentage of revenues, general and administrative expenses were 58% for the
period from November 24, 1998 through December 31, 1998.
DEPRECIATION AND AMORTIZATION. Depreciation of property and equipment was
$15,000 for the period from November 24, 1998 through December 31, 1998. As a
percentage of revenues, depreciation of property and equipment was 2% for the
period from November 24, 1998 through December 31, 1998. Amortization of
intangibles was $632,000 for period from November 24, 1998 through December 31,
1998. As a percentage of revenues, amortization of intangibles was 82% for the
period from November 24, 1998 through December 31, 1998.
INTEREST INCOME (EXPENSE), NET. Interest expense, net of interest income,
related to borrowings under our line of credit was $8,000 for the period from
November 24, 1998 through December 31, 1998.
PERIOD FROM OCTOBER 1, 1998 THROUGH NOVEMBER 23, 1998
REVENUES. Revenues were $778,000 for the period from October 1, 1998
through November 23, 1998.
COST OF REVENUES. Cost of revenues was $456,000 for the period from October
1, 1998 through November 23, 1998. As a percentage of revenues, cost of revenues
was 59% for the period from October 1, 1998 through November 23, 1998.
ADVERTISING, PROMOTION AND SELLING. Advertising, promotion and selling
expenses were $441,000 for the period from October 1, 1998 through November 23,
1998. As a percentage of revenues, advertising, promotion and selling expenses
were 57% for the period from October 1, 1998 through November 23, 1998.
31
GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$195,000 for the period from October 1, 1998 through November 23, 1998. As a
percentage of revenues, general and administrative expenses were 25% for the
period from October 1, 1998 through November 23, 1998.
DEPRECIATION AND AMORTIZATION. Depreciation of property and equipment was
$67,000 for the period from October 1, 1998 through November 23, 1998. As a
percentage of revenues, depreciation of property and equipment was 8% for the
period from October 1, 1998 through November 23, 1998. Amortization of
intangibles was $86,000 for the period from October 1, 1998 through November 23,
1998. As a percentage of revenues, amortization of intangibles was 11% for the
period from October 1, 1998 through November 23, 1998.
FISCAL YEAR ENDED SEPTEMBER 30, 1998
REVENUES. Revenues were approximately $3.5 million for the year ended
September 30, 1998. Revenues were earned from banner advertising from a
growing number of advertisers as well revenue from e-commerce and licensing
agreements.
COST OF REVENUES. Cost of revenues was approximately $2.2 million for the
year ended September 30, 1998. Cost of revenues related to payroll costs for
editorial, technology and operations personnel to support the current and
anticipated future growth of our network. As a percentage of revenues, cost
of revenues was 61% for the year ended September 30, 1998.
ADVERTISING, PROMOTION AND SELLING. Advertising, promotion and selling
expenses were approximately $1.4 million for the year ended September 30, 1998.
These costs were primarily due to the hiring of additional advertising sales
personnel and related sales commissions. As a percentage of revenues,
advertising, promotion and selling expenses were 40% for the year ended
September 30, 1998.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were
approximately $1.3 million for the year ended September 30, 1998. These expenses
were due primarily to increases in payroll for administrative personnel and
professional fees to support the growth of our busienss and an increase in bad
debt expense. As a percentage of revenues, general and administrative expenses
were 38% for the year ended September 30, 1998.
DEPRECIATION AND AMORTIZATION. Depreciation of property and equipment was
$429,000 for the year ended September 30, 1998. As a percentage of revenues,
depreciation expense was 12% for the year ended September 30, 1998. Amortization
of intangible assets was $920,000 for the year ended September 30, 1998.
Amortization of intangible assets was $920,000 for the year ended September 30,
1998. As a percentage of revenues, amortization expense was 26% for the year
ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded operations primarily with cash from our
initial and follow-on public offerings, borrowings under a line of credit and
the capital contributions of members of internet.com LLC. On June 25, 1999, we
completed our initial public offering of 3,400,000 shares of our common stock at
$14.00 per share. Net proceeds to internet.com aggregated approximately $43.0
million (net of underwriters' commission and offering expenses of $4.7 million).
On June 30, 1999, internet.com paid the outstanding balance under its line of
credit of approximately $5.0 million and terminated the line of credit. On
February 1, 2000, we completed our follow-on public offering of 3,750,000
shares of common stock priced at $60.00 per share, of which 1,750,000 shares
were sold by internet.com and 2,000,000 shares were sold by Penton Media,
Inc. Net proceeds received by internet.com from the follow-on offering were
approximately $98.3 million. internet.com did not receive any of the proceeds
from the sale of shares by Penton Media, Inc.
As of December 31, 2000, internet.com had total current assets of $73.9
million and total current liabilities of $21.6 million, or working capital of
$52.3 million.
32
Net cash used in operating activities was approximately $1.8 million for the
year ended September 30, 1998, $1.4 million for the period from October 1, 1998
through November 23, 1998, $612,000 from November 24, 1998 through December 31,
1998 and $3.5 million for the year ended December 31, 1999 and net cash provided
by operating activities was $553,000 for the year ended December 31, 2000. Net
cash used in operating activities was primarily a result of our net losses
adjusted for a non-cash compensation charge, depreciation and amortization, and
increases in accounts receivable and prepaid expenses, offset by an increase in
accounts payable, accrued expenses and deferred revenues. Net cash provided by
operating activities for the year ended December 31, 2000 was a result of a
decrease in our net losses adjusted for depreciation and amortization, losses
from investments and increases in accounts payable offset by minority interest
income and increases in accounts receivable.
Net cash used in investing activities was approximately $5.0 million for the
year ended September 30, 1998, $2.5 million for the period from October 1, 1998
through November 23, 1998, $1.1 million from November 24, 1998 through December
31, 1998, $25.0 million for the year ended December 31, 1999 and $57.2 million
for the year ended December 31, 2000. Net cash used in investing activities was
primarily a result of acquisitions of Web sites and related Internet media
properties and capital expenditures.
Net cash provided by financing activities was approximately $6.8 million for
the year ended September 30, 1998, $3.9 million for the period from October 1,
1998 through November 23, 1998, $1.9 million from November 24, 1998 through
December 31, 1998, $46.3 million for the year ended December 31, 1999 and $98.7
million for the year ended December 31, 2000. Net cash provided by financing
activities was a result of our initial public offering, borrowings under our
line of credit, a private placement of equity securities, contributions from
Mecklermedia, net proceeds from our follow-on public offering and from the
exercise of stock options.
Capital expenditures were $546,000 for the period from November 24, 1998
through December 31, 1998, $2.5 million for the year ended December 31, 1999 and
$3.7 million for the year ended December 31, 2000. We also anticipate that our
capital expenditures will increase as needed to support growth in operations,
infrastructure and personnel.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"),
"Accounting for Derivative Instruments and Hedging Activities", subsequently
amended by SFAS No. 138, which is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. SFAS No. 133 requires that all
derivative financial instruments, such as interest rate swap contracts and
foreign exchange contracts, be recognized in the financial statements and
measured at fair value regardless of the purpose or intent for holding them.
Changes in the fair value of derivative financial instruments are either
recognized periodically in income or stockholders' equity, depending on
whether the derivative is being used to hedge changes in fair value or cash
flows. internet.com does not invest in any derivative based financial
instruments, therefore, the adoption of SFAS 133 will not have a material
effect on internet.com's financial statements.
In December 1999, the Securities and Exchange Commission ("SEC") staff
released Staff Accounting Bulletin No. 101, Revenue Recognition ("SAB No.
101") to provide guidance on the recognition, presentation, and disclosure of
revenue in financial statements. However, SAB No. 101 does not change
existing literature on revenue recognition. Accordingly, it will not have a
material effect on internet.com's financial statements.
In January 2000, the Emerging Issues Task Force reached a consensus on Issue
No. 99-17, "Accounting for Advertising Barter Transactions," to be effective for
transactions entered into after January 20, 2000. The consensus states that
advertising barter transactions should be accounted for at fair value and the
fair value recognized disclosed in the financial statements, if there is
verifiable objective evidence provided by sufficient cash transactions received
by the seller of the advertising or similar advertising. Accordingly,
internet.com began to record the financial statement effects of barter
transactions at their estimated fair value, prospectively, beginning in January
2000.
33
As of July 1, 2000, internet.com adopted Emerging Issues Task Force Issue
00-2, "Accounting for Web Site Development Costs." As a result, internet.com is
now capitalizing costs incurred for the development of internal Web sites, which
had previously been expensed as a component of cost of revenues. internet.com
continues to expense all costs incurred that relate to the planning and
post-implementation phases of development. These charges are included in cost of
revenues in the accompanying statements of operations. Amounts capitalized are
included in intangible assets in the accompanying balance sheets and the related
amortization is included in amortization expense in the accompanying statements
of operations. These capitalized costs are being amortized over three years.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
- -------------------------------------------------------------------
We have no derivative financial instruments or derivative commodity
instruments. We have invested our net proceeds from our follow-on public
offering on February 1, 2000 in short-term, interest-bearing, investment grade
securities. Our transactions are generally conducted, and our accounts are
denominated, in United States dollars. Accordingly, we are not exposed to
significant foreign currency risk.
34
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ----------------------------------------------------
INTERNET.COM CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Public Accountants 36
Consolidated Balance Sheets as of December 31, 1999 and 2000 37
Consolidated Statements of Operations for the Period from Inception (November 24,
1998) through December 31, 1998 and for the Years Ended December 31, 1999
and 2000 38
Consolidated Statements of Changes in Stockholders' Equity for the Period from
Inception (November 24, 1998) through December 31, 1998 and for the Years
Ended December 31, 1999 and 2000 39
Consolidated Statements of Cash Flows for the Period from Inception
(November 24, 1998) through December 31, 1998 and for the Years Ended
December 31, 1999 and 2000 40
Notes to Consolidated Financial Statements 41
IWORLD DIVISION OF MECKLERMEDIA CORPORATION
(PREDECESSOR BUSINESS)
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Public Accountants 53
Balance Sheet as of September 30, 1998 54
Statements of Operations for the Years ended September 30, 1998 and for the Period
from October 1, 1998 through November 23, 1998 55
Statements of Changes in Division Equity for the Years ended September 30, 1998
and for the Period from October 1, 1998 through November 23, 1998 56
Statements of Cash Flows for the Years ended September 30, 1998 and for the
Period from October 1, 1998 through November 23, 1998 57
Notes to Financial Statements 58
35
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of internet.com Corporation:
We have audited the accompanying consolidated balance sheets of internet.com
Corporation (a Delaware Corporation) and subsidiaries as of December 31, 1999
and 2000, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the period from inception (November 24,
1998) through December 31, 1998 and for the years ended December 31, 1999 and
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of internet.com Corporation and
subsidiaries as of December 31, 1999 and 2000, and the results of its operations
and its cash flows for the period from inception (November 24, 1998) through
December 31, 1999 and for the years ended December 31, 1999 and 2000, in
conformity with accounting principles generally accepted in the United States.
As discussed in Note 3 to the consolidated financial statements, in 2000,
the Company changed its accounting for web site development costs and for barter
transactions in accordance with the Emerging Issues Task Force Issue No. 00-2
and Issue No. 99-17, respectively.
ARTHUR ANDERSEN LLP
Stamford, Connecticut
February 7, 2001
36
INTERNET.COM CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
DECEMBER 31, DECEMBER 31,
1999 2000
ASSETS ----------- -----------
Current assets:
Cash and cash equivalents $ 17,943 $ 59,979
Accounts receivable, net of allowances of $712 and $2,359, respectively 5,568 12,004
Prepaid expenses and other 347 1,964
--------- ---------
Total current assets 23,858 73,947
Property and equipment, net 3,221 4,837
Intangible assets, net 39,086 76,587
Investments in internet.com venture funds and other 1,855 6,018
Other assets 370 783
--------- ---------
Total assets $ 68,390 $ 162,172
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,635 $ 2,163
Accrued payroll and related expenses 1,441 2,407
Accrued expenses and other 2,096 3,888
Accrued Web site acquisition payments 6,462 10,988
Deferred revenues 403 2,187
--------- ---------
Total current liabilities 12,037 21,633
Accrued Web site acquisition payments 338 1,236
Deferred revenues -- 1,820
--------- ---------
Total liabilities 12,375 24,689
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, $.01 par value, 4,000,000 shares authorized, no
shares issued and outstanding -- --
Common stock, $.01 par value, 75,000,000 shares authorized,
23,334,520 and 25,323,357 shares issued and outstanding at
December 31, 1999 and 2000, respectively 233 253
Additional paid-in capital 70,917 175,363
Accumulated deficit (15,135) (38,112)
Accumulated other comprehensive loss -- (21)
--------- ---------
Total stockholders' equity 56,015 137,483
--------- ---------
Total liabilities and stockholders' equity $ 68,390 $ 162,172
========= =========
See notes to consolidated financial statements.
37
INTERNET.COM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 24, 1998) THROUGH
DECEMBER 31, 1998 AND FOR THE YEARS ENDED DECEMBER 31, 1999 AND 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INCEPTION
(NOVEMBER 24,
1998) YEAR YEAR
THROUGH ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER
1998(1) 1999(2) 31, 2000
------------- ------------- ------------
Revenues $ 772 $ 16,085 $ 52,083
Cost of revenues 403 8,366 22,991
-------- -------- --------
Gross profit 369 7,719 29,092
-------- -------- --------
Operating expenses:
Advertising, promotion and selling 239 7,545 18,254
General and administrative 449 4,434 10,172
Depreciation 15 673 2,099
Amortization 632 9,796 24,854
Non-cash compensation charge -- 7,975 --
-------- -------- --------
Total operating expenses 1,335 30,423 55,379
-------- -------- --------
Operating loss (966) (22,704) (26,287)
Minority interest -- -- 399
Equity loss from international and venture fund
investments, net -- -- (1,482)
Loss on investments, net -- -- (216)
Interest income (expense), net (8) 688 4,814
-------- -------- --------
Loss before income taxes (974) (22,016) (22,772)
Provision for income taxes -- -- 205
-------- -------- --------
Net loss $ (974) $(22,016) $(22,977)
======== ======== ========
Basic and diluted loss per share $ (0.06) $ (1.08) $ (0.92)
======== ======== ========
Weighted average number of common shares 16,216 20,335 25,014
======== ======== ========
(1) Represents the financial statements of the predecessor business.
(2) Represents the combined financial data of predecessor business and
internet.com.
See notes to consolidated financial statements.
38
INTERNET.COM CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (NOVEMBER 24, 1998) THROUGH
DECEMBER 31, 1998 AND FOR THE YEARS ENDED DECEMBER 31, 1999 AND 2000
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL TOTAL
-------------------------- PAID-IN ACCUMULATED COMPREHENSIVE STOCKHOLDER COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT LOSS EQUITY LOSS
------------ ------------ ------------ ------------ ------------- ------------ --------------
Balance at inception
(November 24, 1998) 16,215,891 $ 162 $ 22,665 $ -- $ -- $ 22,827 $ --
Net loss -- -- -- (974) -- (974) (974)
------------ ------------ ------------ ------------ ------------- ------------ ------------
Balance at
December 31, 1998 16,215,891 162 22,665 (974) -- 21,853 (974)
============
Proceeds from private
placement 908,475 9 2,232 -- -- 2,241 --
Issuance of management
shares 725,000 7 7,968 -- -- 7,975 --
Conversion of internet.com
LLC to internet.com
Corporation -- -- (974) 974 -- -- --
Exercise of warrant 2,075,634 21 2,979 -- -- 3,000 --
Proceeds from initial public --
offering 3,400,000 34 42,795 -- -- 42,829
Exercise of stock options 9,520 -- 133 -- -- 133 --
Net loss -- -- (6,881) (15,135) -- (22,016) (22,016)
------------ ------------ ------------ ------------ ------------- ------------ ------------
Balance at
December 31, 1999 23,334,520 233 70,917 (15,135) -- 56,015 (22,016)
============
Proceeds from public offering 1,750,000 18 98,312 -- -- 98,330 --
Exercise of stock options 27,455 -- 363 -- -- 363 --
Issuance of stock for
acquisition 211,382 2 5,771 -- -- 5,773 --
Foreign currency translation
adjustment -- -- -- -- (21) (21) (21)
Net loss -- -- -- (22,977) -- (22,977) (22,977)
------------ ------------ ------------ ------------ ------------- ------------ ------------
Balance at
December 31, 2000 25,323,357 $ 253 $ 175,363 $ (38,112) $ (21) $ 137,483 $ (22,998)
============ ============ ============ ============ ============= ============ ============
NOTE:
Immediately prior to the closing of its initial public offering,
internet.com LLC converted its business form to a corporation. This
reorganization was effected by merging internet.com LLC into a newly-formed
Delaware corporation called internet.com Corporation. Each member of
internet.com LLC received shares of internet.com Corporation common stock in
exchange for their membership units at a rate of 16,215.891 shares per
membership unit. All share and per share data have been retroactively adjusted
to reflect the reorganization. The net losses for the year ended December 31,
1999 have been charged to additional paid-in capital to the extent the loss
related to the period prior to the initial public offering.
See notes to consolidated financial statements.
39
INTERNET.COM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 24, 1998) THROUGH DECEMBER 31,
1998 AND FOR THE YEARS ENDED DECEMBER 31, 1999 AND 2000
(IN THOUSANDS)
INCEPTION
(NOVEMBER
24, 1998)
THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998(1) 1999(2) 2000
------------ ------------ ------------
Cash flows from operating activities:
Net loss $ (974) $(22,016) $(22,977)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 647 10,469 26,953
Provision for losses on accounts receivable 42 670 2,776
Minority interests -- -- (399)
Equity loss from international and venture -- -- 1,482
fund investments, net
Loss on investments, net -- -- 216
Non-cash compensation charge -- 7,975 --
Changes in current assets and liabilities:
Accounts receivable, net (595) (4,193) (9,085)
Prepaid expenses and other (23) (467) (2,030)
Accounts payable and accrued expenses 217 3,866 3,495
Deferred revenues 74 232 122
-------- -------- --------
Net cash (used in) provided by operating
activities (612) (3,464) 553
-------- -------- --------
Cash flows from investing activities:
Additions to property and equipment (546) (2,514) (3,701)
Acquisitions of Web sites, related Internet
media properties and other (599) (20,670) (47,654)
Investments in internet.com venture funds and other -- (1,855) (5,861)
-------- -------- --------
Net cash used in investing activities (1,145) (25,039) (57,216)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock, net -- 45,070 98,330
Proceeds from exercise of warrant -- 3,000 --
Proceeds from exercise of stock options -- 133 363
Borrowings under line of credit 1,886 4,670 --
Payments for line of credit -- (6,556) --
-------- -------- --------
Net cash provided by financing activities 1,886 46,317 98,693
-------- -------- --------
Effect of exchange rates on cash -- -- 6
-------- -------- --------
Net change in cash and cash equivalents 129 17,814 42,036
Cash and cash equivalents, beginning of period -- 129 17,943
-------- -------- --------
Cash and cash equivalents, end of period $ 129 $ 17,943 $ 59,979
======== ======== ========
Supplemental disclosures of cash flow:
Cash paid for interest $ 8 $ 92 $ --
======== ======== ========
Cash paid for income taxes $ -- $ -- $ 25
======== ======== ========
(1) Represents the financial statements of the predecessor business.
(2) Represents the combined financial data of predecessor business and
internet.com.
See notes to consolidated financial statements.
40
INTERNET.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 24, 1998) THROUGH
DECEMBER 31, 1998 AND FOR THE YEARS ENDED DECEMBER 31, 1999 AND 2000
1. THE COMPANY
internet.com owns and operates a leading network of integrated
business-to-business Web sites and related Internet media properties focused
solely on the Internet industry and information technology. As of December 31,
2000, this network of Internet media properties consisted of 164 Web sites, 277
e-mail newsletters, 539 online discussion forums and 113 moderated e-mail
discussion lists. The network is organized into 15 vertical content channels to
serve Internet users, which include Internet industry and information technology
professionals, Web developers and experienced Internet users.
Since all of internet.com's products and services relate to providing
Internet-related information to Internet industry and information technology
professionals, Web developers and experienced Internet users, its success is
dependent on the continued growth of the Internet and information technology.
On June 25, 1999, internet.com completed an initial public offering ("IPO")
of 3,400,000 shares of common stock at $14.00 per share. Net proceeds to
internet.com aggregated approximately $42.9 million.
Immediately prior to the closing of its initial public offering,
internet.com LLC converted its business form to a corporation. This
reorganization was effected by merging internet.com LLC into a newly-formed
Delaware corporation called internet.com Corporation.
For presentation purposes the financial statements have been restated as if
internet.com had always been a corporation.
On February 1, 2000, internet.com completed a follow-on offering of
3,750,000 shares of common stock priced at $60.00 per share, of which 1,750,000
shares were sold by internet.com and 2,000,000 shares were sold by Penton Media,
Inc. Net proceeds received by internet.com from the follow-on offering were
approximately $98.3 million. internet.com did not receive any of the proceeds
from the sale of shares by Penton Media, Inc.
2. HISTORY
internet.com LLC was formed as part of the acquisition of Mecklermedia
Corporation by Internet World Media, a wholly-owned subsidiary of Penton Media
(a publicly-owned corporation). During the negotiation of this acquisition,
Penton Media indicated that it did not wish to retain all of iWorld Corporation,
Mecklermedia's Internet business, because it believed that the Internet business
was inconsistent with its strategic direction. However, Penton Media indicated
that it wanted Internet World Media to maintain a minority interest in the
Internet business due to its belief that the Internet business had the potential
to become profitable in the future. As a result, Alan M. Meckler, Mecklermedia's
Chairman and Chief Executive Officer, agreed to purchase an 80.1% interest in
the Internet business from Internet World Media for a total of $18.0 million in
cash and a warrant valued at $284,000 immediately following the acquisition of
Mecklermedia by Internet World Media which imputed a purchase price of $22.8
million. On November 24, 1998, Mecklermedia was acquired by Internet World Media
in an all-cash tender offer. Following its purchase of Mecklermedia, Internet
World Media caused iWorld Corporation to be merged into internet.com LLC, a
newly-formed Delaware limited liability company. Internet World Media then sold
80.1% of its membership interest in internet.com to Alan M. Meckler
41
(including four trusts for the benefit of his children) for a total of $18.0
million in cash and a warrant. Internet World Media retained a 19.9% interest in
internet.com LLC and a warrant to acquire up to an additional 128 membership
units in internet.com LLC (representing 2,075,634 shares of our common stock)
for up to $3.0 million. For accounting purposes, the warrant was valued at
$284,000 which reflected the present value of the strike price using a risk free
rate of return over a three year term, as compared to the cash price per share
paid to Penton Media. This warrant was exercised by Penton Media on June 24,
1999.
Immediately prior to the closing of the IPO, internet.com LLC converted its
business form to a corporation. This reorganization was effected by merging
internet.com LLC into a newly-formed Delaware corporation called internet.com
Corporation. Each member of internet.com LLC received shares of internet.com
Corporation common stock in exchange for their membership units at a rate of
16,215.891 shares per membership unit. All share and per share data have been
retroactively adjusted to reflect the reorganization.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of internet.com, its majority-owned and wholly-owned subsidiaries.
All significant intercompany balances and transactions have been eliminated in
consolidation.
REVENUE RECOGNITION. internet.com generates its revenues from eight primary
sources: the sale of advertising on its Web sites, e-mail newsletters, online
discussion forums and moderated e-mail discussion lists; e-commerce agreements
and offerings; permission based opt-in e-mail list rentals; seminars and
Internet breakfast forums; subscriptions to paid e-mail newsletters; licensing
of editorial content and brands; online press release distribution services and
venture fund management fees.
ADVERTISING REVENUES. Advertising revenue is recognized ratably in the
period the advertising is displayed, provided that no significant company
obligations remain and collection of the resulting receivable is probable.
Company obligations typically include guarantees of a minimum number of
advertising impressions, or times that an advertisement is viewed by users
of internet.com's Web sites and related Internet media properties.
E-COMMERCE REVENUES. Our e-commerce agreements and offerings generally
include advertising on our Web sites, bounties for new customers or
revenue sharing for sales made by the e-commerce vendors as a result of
links from our network, or in some cases combinations of advertising,
bounties and revenue sharing. We recognize the advertising component of
these agreements ratably in the period the advertising is displayed,
provided that no significant company obligations remain and collection of
the remaining receivable is probable. Generally, bounties and revenue
sharing agreements require a monthly minimum fee from internet.com's
customers. Revenues from these agreements are recognized in the month they
are earned.
PERMISSION BASED OPT-IN E-MAIL LIST RENTAL REVENUES. Permission based
opt-in e-mail list revenue relates to customer subscriptions to our opt-in
e-mail lists through a third party agent. Revenue is recorded on a per use
basis for the rental of our list names. Revenue from permission based
opt-in list rentals is recognized at the time of the use by the renter.
SEMINARS AND INTERNET BREAKFAST FORUMS. Seminar revenue relates to
registration fees received from attendees at our offline seminars, as well
as advertisers and vendor sponsorships. Revenue for seminars is recognized
in the period in which the seminar is held. Deferred revenues relate to
the portion of collected seminar registration fees and advertiser and
vendor sponsorships that have been collected prior to the commencement of
the seminars. In addition, internet.com offers Internet breakfast forums
on a monthly basis in cities in which it has news bureaus in the United
States, as well as overseas where internet.com has international editions.
42
Proceeds from the sale of sponsorships and table top exhibitions are
deferred and recognized at the time the breakfast forums are held.
PAID SUBSCRIPTION REVENUES. Subscription revenue relates to customer
subscriptions to our paid e-mail newsletters and services,
SearchEngineWatch certain, sections of WallStreetResearchNet,
UnclaimedDomains, DomainBook.com, ASPNews.com and AlertIPO.com which are
sold through our network and affiliate relationships. Revenue from
subscriptions is recognized ratably over the subscription period. Deferred
revenues relate to the portion of collected subscription fees which have
not yet been recognized as revenue.
LICENSING REVENUES. The licensing agreements vary, with internet.com
generating fixed fees and royalties for monthly access to editorial
content and brands produced by internet.com. Such amounts are recognized
as revenue in the month earned.
ONLINE PRESS RELEASE DISTRIBUTION SERVICES. Online press release
distribution revenues are generated through INTERNETNEWSBUREAU.COM. We
distribute e-mail based press releases to over 5,000 registered
journalists. Revenue from this service is recorded on a per use basis and
recognized at the time of distribution.
VENTURE FUND MANAGEMENT FEES. Venture fund management fees relate to
management fees earned for the day-to-day operation and general management
of internet.com Venture Fund I LLC, internet.com Venture Fund II LLC and
internet.com Venture Partners III LLC. Management fees are recognized
ratably over the period the services are rendered. In addition,
internet.com is entitled to 20% of the realized gains from the portfolio
investments, which are recognized at the time of distribution from the
venture funds.
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK. Financial instruments that potentially subject
internet.com to a significant concentration of credit risk consist primarily of
cash and accounts receivable. internet.com deposits the majority of its cash
with a single financial institution. Most of internet.com's accounts receivable
as of December 31, 1999 and 2000 are from Internet-related businesses.
For the period from inception (November 24, 1998) through December 31, 1998,
and for the years ended December 31, 1999 and 2000, one customer accounted for
25%, 10% and 3% of revenues, respectively.
CASH AND CASH EQUIVALENTS. internet.com considers all highly liquid
investments purchased with original maturities of three months or less to be
cash equivalents. At December 31, 1999 and 2000, internet.com had no investments
with maturities greater than three months.
FINANCIAL INSTRUMENTS. The recorded amounts of financial instruments such as
cash and cash equivalents, accounts receivable and accounts payable and debt
approximate their fair values due to their short maturities.
PROPERTY AND EQUIPMENT. Depreciation of computer equipment and software is
provided for by the straight-line method over estimated useful lives ranging
from three to five years. Depreciation of furniture, fixtures and equipment is
provided for by the straight-line method over estimated useful lives ranging
from five to ten years. Leasehold improvements are amortized over the shorter of
their useful lives or the lease term.
Maintenance and repair expenditures are charged to appropriate expense
accounts in the period incurred; replacements, renewals and betterments are
capitalized. Upon the sale or other disposition of property, the cost and
accumulated depreciation of such properties are eliminated from the accounts
and the gains or losses thereon are reflected in operations.
INTANGIBLE ASSETS. Intangible assets, primarily consisting of goodwill, are
being amortized using the straight-line method over three years.
43
IMPAIRMENT OF LONG-LIVED ASSETS. Long-lived assets and certain identifiable
intangibles are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss is recognized when the sum of undiscounted
expected future cash flows is less than the carrying amount of such assets. The
measurement for such impairment loss is based on the fair value of the assets.
internet.com believes no such impairment exists as of December 31, 2000.
INVESTMENTS IN INTERNET.COM VENTURE FUNDS. Although internet.com has less
than a 20% interest in the internet.com venture funds, the investments are
accounted for on the equity basis of accounting as internet.com has significant
influence as the managing member of the funds. These investments are reviewed
whenever events or changes in circumstances indicate that the carrying amount of
these investments may not be recoverable.
ACCRUED WEB SITE ACQUISITION PAYMENTS. Accrued Web site acquisition payments
consist of future amounts payable under purchase agreements for Web sites and
related Internet media properties.
ADVERTISING EXPENSE. internet.com expenses advertising costs as incurred.
Advertising expense was $44,000, $670,000 and $1.7 million for the period from
inception (November 24, 1998) through December 31, 1998 and for the years ended
December 31, 1999 and 2000, respectively.
INCOME TAXES. internet.com accounts for income taxes using the asset and
liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred income tax assets and liabilities of changes in tax rates is
recognized in income in the period that includes the enactment date. Valuation
allowances have been established when necessary to reduce deferred tax assets to
the amount expected to be realized.
STOCK BASED COMPENSATION. internet.com grants to certain employees stock
options with an exercise price equal to the fair value of the shares at the date
of grant. internet.com accounts for stock option grants in accordance with APB
Opinion 25, "Accounting for Stock Issued to Employees," and, accordingly,
recognizes no compensation expense for such grants.
In October 1995, Statement of Financial Accounting Standard "SFAS" No. 123,
"Accounting for Stock-Based Compensation", was issued. As permitted under the
provisions of SFAS No. 123, internet.com has not changed its method of
accounting for stock-based compensation; however, SFAS No. 123 requires
additional footnote disclosures relating to the effect of using a fair value
based method of accounting for stock-based compensation cost.
RECENT ACCOUNTING PRONOUNCEMENTS. In June 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging
Activities", subsequently amended by SFAS No. 138, which is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. SFAS No. 133
requires that all derivative financial instruments, such as interest rate
swap contracts and foreign exchange contracts, be recognized in the financial
statements and measured at fair value regardless of the purpose or intent for
holding them. Changes in the fair value of derivative financial instruments
are either recognized periodically in income or stockholders' equity,
depending on whether the derivative is being used to hedge changes in fair
value or cash flows. internet.com does not invest in any derivative based
financial instruments, therefore, the adoption of SFAS 133 will not have a
material effect on internet.com's financial statements.
44
In December 1999, the Securities and Exchange Commission ("SEC") staff
released Staff Accounting Bulletin No. 101, Revenue Recognition ("SAB No.
101") to provide guidance on the recognition, presentation, and disclosure of
revenue in financial statements. However, SAB No. 101 does not change
existing literature on revenue recognition. Accordingly, it will not have a
material effect on internet.com's financial statements.
In January 2000, the Emerging Issues Task Force reached a consensus on Issue
No. 99-17, "Accounting for Advertising Barter Transactions," to be effective for
transactions entered into after January 20, 2000. The consensus states that
advertising barter transactions should be accounted for at fair value and the
fair value recognized disclosed in the financial statements, if there is
verifiable objective evidence provided by sufficient cash transactions received
by the seller of the advertising or similar advertising. Accordingly,
internet.com began to record the financial statement effects of barter
transactions at their estimated fair value, prospectively, beginning in January
2000. Revenues related to barter transactions were approximately $4.1 million
for year ended December 31, 2000. Expenses related to barter transactions were
approximately $2.1 million for the year ended December 31, 2000.
As of July 1, 2000, internet.com adopted Emerging Issues Task Force Issue
00-2, "Accounting for Web Site Development Costs." As a result, internet.com is
now capitalizing costs incurred for the development of internal Web sites, which
had previously been expensed as a component of cost of revenues. internet.com
continues to expense all costs incurred that relate to the planning and
post-implementation phases of development. These charges are included in cost of
revenues in the accompanying statements of operations. Amounts capitalized are
included in intangible assets in the accompanying balance sheets and the related
amortization is included in amortization expense in the accompanying statements
of operations. These capitalized costs are being amortized over three years. As
of December 31, 2000, internet.com had capitalized $742,000 of Web site
development costs and recorded related amortization expense of $75,000 for the
year ended December 31, 2000.
4. COMPUTATION OF NET LOSS PER SHARE
Basic loss per share is computed using the weighted average number of common
shares outstanding during the period. Dilutive loss per share is computed using
the weighted average number of common and dilutive common equivalent shares
outstanding during the period. Common equivalent shares consist of the
incremental common shares issuable upon the exercise of stock options. Common
equivalent shares are excluded from the calculation if their effect is
anti-dilutive.
Computations of basic and diluted net loss per share for the period from
inception (November 24, 1998) through December 31, 1998 and for the years ended
December 31, 1999 and 2000, respectively are as follows (in thousands, except
per share amounts):
INCEPTION
(NOVEMBER 24,
1998)
THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 2000
------------ ------------ ------------
BASIC AND DILUTED NET LOSS PER SHARE
Numerator: Net loss $ (974) $(22,016) $(22,977)
Denominator: Weighted average shares outstanding 16,216 20,335 25,014
-------- -------- --------
Basic and diluted net loss per share $ (0.06) $ (1.08) $ (0.92)
======== ======== ========
45
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
Computer equipment and software $ 2,996 $ 6,051
Furniture, fixtures and equipment 654 1,109
Leasehold improvements 259 464
------- -------
3,909 7,624
Less: Accumulated depreciation (688) (2,787)
------- -------
Property and equipment, net $ 3,221 $ 4,837
======= =======
6. INTANGIBLE ASSETS
Intangible assets consisted of the following (in thousands):
DECEMBER 31, DECEMBER 31,
1999 2000
--------- ---------
Goodwill $ 48,752 $ 109,347
Trademarks 762 1,780
Web site development costs -- 742
--------- ---------
49,514 111,869
Less: Accumulated amortization (10,428) (35,282)
--------- ---------
Intangible assets, net $ 39,086 $ 76,587
========= =========
7. ACQUISITIONS
For the years ended December 31, 1999 and 2000, internet.com made 19 and 28
acquisitions of Web sites and related Internet media properties for a total of
$23.8 million and $40.3 million, respectively. These acquisitions were accounted
for as purchases. Thirteen and 15 of these acquisitions, for the years ended
December 31, 1999 and 2000, respectively, provide for contingent payments to be
made after the acquisition date based upon the achievement of certain
objectives. The acquired Web sites and related Internet media properties have
minimal tangible assets or liabilities. Therefore, the entire purchase price has
been recorded as an intangible asset.
On September 8, 2000 internet.com consummated the acquisition of all the
assets of ClickZ, Inc., a Massachusetts corporation ("ClickZ"), pursuant to an
asset purchase agreement, dated September 8, 2000, by and among internet.com and
the stockholders of ClickZ. The consideration paid in the acquisition of ClickZ
consisted of cash in the amount of $10 million and 211,382 restricted shares of
internet.com's common stock. Furthermore, an additional payment, based on future
performance measures will be made at the end of the earnout period consisting of
50% cash and 50% restricted shares of internet.com's common stock.
On December 22, 2000 internet.com agreed to acquire certain assets and to
assume certain liabilities of EarthWeb Inc., a Delaware corporation
("EarthWeb"), pursuant to an asset purchase agreement, dated December 22, 2000,
by and among internet.com and EarthWeb. The consideration paid in the
acquisition of EarthWeb consisted of $500,000 in cash plus the assumption of
certain de minimus liabilities of EarthWeb. In addition, internet.com agreed to
provide EarthWeb with advertising impressions on internet.com's network of Web
sites over a three-year period. internet.com valued this barter agreement at
$2.7 million which is included as a component of deferred revenue at December
31, 2000.
46
A substantial majority of the purchase price of all the acquisitions made
during the year ended December 31, 2000 has been recorded as intangible assets
on a preliminary basis and is being amortized over an estimated useful life of
three years. The purchase accounting for these acquisitions will be finalized at
a later date not to exceed one year from the purchase date of each acquisition.
The unaudited pro forma information below presents results of operations as
if all the acquisitions occurred at January 1, 1999. The unaudited pro forma
information is not necessarily indicative of the results of operations of the
combined companies had these events occurred at the beginning of the period
presented nor is it indicative of future results (in thousands, except per share
amounts):
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 2000
--------- --------
Revenues $ 28,801 $ 73,778
========= ========
Net loss $ (43,293) $(39,643)
========= ========
Basic and diluted loss per share $ (2.11) $ (1.58)
========= ========
8. INVESTMENTS IN INTERNET.COM VENTURE FUNDS AND OTHER
Investments in internet.com venture funds and other consisted of the
following (in thousands):
DECEMBER 31, DECEMBER 31,
1999 2000
------ ------
internet.com Venture Fund I LLC $ 700 $ 481
internet.com Venture Fund II LLC 1,155 998
internet.com Venture Partners III LLC -- 2,788
Investments in internet.com Venture Fund
portfolio companies -- 1,751
------ ------
Investments in internet.com venture funds
and other $1,855 $6,018
====== ======
internet.com Venture Fund I LLC ("Fund I"), internet.com Venture Fund II LLC
("Fund II") and internet.com Venture Partners III LLC ("Fund III") (or
collectively referred to as the "Funds") were organized on March 23, 1999,
September 7, 1999 and January 7, 2000, respectively, as Delaware limited
liability companies. I-Venture Management LLC, a wholly-owned subsidiary of
internet.com, is the managing member and acts as the Funds' investment manager
and makes all investment decisions on behalf of both Funds. internet.com is
responsible for the day-to-day operation of the Funds.
The Funds' investment objective is to maximize capital appreciation through
investments in Internet related companies that have a broad focus on content
outside the areas of e-business and Internet technology and are believed to have
high growth potential.
As of December 31, 1999, internet.com had a 14% and 10% investment in each
of Fund I and Fund II, respectively. As of December 31, 2000, internet.com had a
14%, 12% and 14% investment in each of Fund I, Fund II and Fund III,
respectively. Acting as the managing member of the Funds, internet.com has
significant influence over the operations of the funds, and accordingly,
internet.com accounts for these investments on the equity basis of accounting,
subject to review for impairment. As of December 31, 2000, internet.com was
fully invested in Fund I and Fund II and had approximately $7.3 million of
unpaid capital commitments to Fund III.
internet.com is entitled to approximately a 2% management fee for the
day-to-day management of the Funds, which amounted to $107,000 and $1.1 million
for the years ended December 31, 1999 and 2000, respectively. As of December
31, 1999 and 2000, amounts owed to internet.com for management fees were
$15,000 and $47,000, respectively.
47
internet.com has entered into barter advertising agreements with certain
portfolio companies of Fund I, Fund II and Fund III. In exchange for
advertising on internet.com's network of Web Sites, internet.com has received
equity interests in these portfolio companies. internet.com's equity interest
is less than 20%, accordingly internet.com accounts for these on the cost
basis of accounting. The cost has been determined based upon the value of the
equity interests received. These investments are reviewed for impairment by
the management of internet.com on a quarterly basis.
9. PREFERRED STOCK
On June 25, 1999, in conjunction with internet.com's IPO, internet.com
authorized the issuance of 4,000,000 shares of preferred stock, $.01 par value
(the "Preferred Stock").
The Board of Directors has the authority, without further vote or action by
the stockholders, to issue the undesignated shares of Preferred Stock in one or
more series and to fix all rights, qualifications, preferences, limitations and
restrictions of each series, including dividend rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and the number of shares
constituting any series or the designation of such series.
10. NON-CASH COMPENSATION CHARGE
In March 1999, internet.com LLC granted 4% of its total membership units at
the time to certain of its employees. As these membership units vested upon the
completion of the IPO, internet.com recorded an $8.0 million compensation charge
concurrent with the completion of the IPO on June 25, 1999.
11. INCOME TAXES
No benefit for federal and state income taxes is reported in the financial
statements for the period from inception (November 24, 1998) through December
31, 1998 as internet.com had elected to be taxed as a partnership prior to the
reorganization of internet.com LLC into a subchapter C-Corporation which took
effect immediately prior to the closing of the IPO. The federal and state income
tax effects of internet.com's results of operations were recorded by the members
in their respective income tax return for the period from inception (November
24, 1998) through the consummation of the IPO on June 25, 1999.
internet.com did not provide for any current or deferred United States
federal or state income taxes for any of the periods presented because it has
experienced operating losses since inception.
As of December 31, 1999 and 2000, internet.com had future federal and state
income tax benefits as follows (in thousands):
DECEMBER 31, DECEMBER 31,
1999 2000
-------- --------
Net operating losses $ 2,646 $ 2,070
Amortization of intangible assets 2,740 9,069
Depreciation of property and equipment (60) 110
Reserves recorded for financial reporting purposes 523 1,617
-------- --------
Total future federal and state income tax benefits 5,849 12,866
-------- --------
Less valuation allowance (5,849) (12,866)
-------- --------
Deferred income tax asset $ -- $ --
======== ========
48
internet.com has a valuation allowance as of December 31, 1999 and 2000,
which fully offsets its deferred income tax assets. Due to internet.com's brief
operating history and recent historical losses, there is no assurance that
internet.com will generate sufficient taxable income in the future to be able to
realize any or all of the deferred tax assets.
As of December 31, 2000, internet.com has approximately $4.1 million of net
operating losses for federal income tax purposes, which begin to expire in 2018.
internet.com also has $1.0 million of net operating loss carryforwards for state
income tax purposes, which begin to expire in 2003.
A reconciliation setting forth the difference between internet.com's
effective income tax rate and the U.S. Federal statutory income tax rate is as
follows (in thousands):
DECEMBER 31, DECEMBER 31,
1999 2000
------- -------
Federal statutory tax rate $(4,000) $(8,042)
State taxes (527) (936)
Losses without income tax benefits 4,071 7,237
Non-deductible expenses 426 1,667
Foreign income taxes -- 205
Other 30 74
------- -------
$ -- $ 205
======= =======
12. COMMITMENTS AND CONTINGENCIES
internet.com has entered into various operating leases for each of its
office facilities. Generally under the lease agreements, internet.com is
obligated to pay a proportionate share of all electricity, heating, ventilation
and air conditioning costs for these premises. Rent expense for leased
facilities was $7,000, $460,000 and $1.5 million for the period from inception
(November 24, 1998) through December 31, 1998 and the years ended December 31,
1999 and 2000, respectively.
Future annual minimum lease payments under all operating leases are as
follows (in thousands):
YEAR ENDING DECEMBER 31,
2001 $1,773
2002 1,625
2003 997
2004 689
2005 130
Thereafter 397
------
$5,611
======
internet.com has entered into employment agreements with two of its officers
with terms ranging from six months to one year.
A complaint seeking class action status was filed in Delaware Chancery Court
on June 16, 1999 by a former shareholder of Mecklermedia Corporation alleging
that certain officers and directors of Mecklermedia Corporation breached their
fiduciary duties in connection with the sale of Mecklermedia Corporation to
Penton Media. This former shareholder of Mecklermedia Corporation has asserted
claims for damages against the officers and directors and has also named
internet.com Corporation as a defendant seeking that a constructive trust be
established. All of the defendants deny such allegations and intend to
vigorously defend themselves.
49
internet.com is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position of internet.com.
13. EMPLOYEE BENEFIT PLAN
internet.com has a defined contribution plan which qualifies under Section
401(k) of the Internal Revenue Code for employees meeting certain service
requirements. The plan allows eligible employees to contribute up to 15% of
their compensation to the plan. At the discretion of the board of directors,
internet.com may also make contributions each year for the benefit of all
eligible employees under the plan. There were no discretionary contributions for
the period from inception (November 24, 1998) through December 31, 1998 and for
the years ended December 31, 1999 and 2000, respectively.
14. STOCK INCENTIVE PLAN
In April 1999, internet.com established a stock incentive plan under which
internet.com may issue qualified incentive or nonqualified stock options to
employees, including officers, consultants and directors up to an aggregate of
6,000,000 shares of common stock of which 592,350 options were granted
immediately prior to the IPO. The exercise price of the options granted under
the stock incentive plan will not be less than the fair market value of the
shares of internet.com's common stock on the date of grant. The plan will
terminate on April 15, 2009.
A summary of the status of internet.com's stock option plan as of December
31, 1999 and 2000, and changes during the years ending December 31, 1999 and
2000 are presented below:
DECEMBER 31, 1999 DECEMBER 31, 2000
------------------------ -------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE
---------- -------- ---------- --------
Outstanding at beginning of year -- $ -- 1,090,730 $ 17.21
Granted 1,157,100 $ 17.03 3,387,470 $ 13.58
Exercised (9,520) $ 14.00 (27,455) $ 13.30
Forfeited (56,850) $ 14.11 (224,804) $ 23.03
---------- -------- ----------
Outstanding at December 31, 1999 1,090,730 $ 17.21 4,225,941 $ 10.52
========== ==========
Options exercisable at end of year 31,980 $ 42.89 376,820 $ 12.86
========== ======== ========== ========
Weighted average fair value of
options granted during the year $ 13.46 $ 11.04
50
The following table summarizes information about stock options outstanding
at December 31, 2000:
OUTSTANDING EXERCISABLE
----------------------------------- --------------------
WEIGHTED-
AVERAGE
NUMBER OF REMAINING WEIGHTED- NUMBER OF WEIGHTED-
OPTIONS AT YEARS OF AVERAGE OPTIONS AT AVERAGE
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICES 2000 LIFE PRICE 2000 PRICE
------------ ------------ -------- -------- ---------
$5.625-$7.34 1,637,270 7.56 $ 6.38 25,000 $ 5.63
$12.03-$16.28 1,954,421 6.24 $13.94 294,251 $14.29
$18.75-$22.50 217,500 7.73 $20.02 14,312 $19.88
$30.91-$37.09 153,100 7.93 $31.77 4,795 $37.09
$40.69-$58.69 263,650 7.41 $46.72 38,462 $48.72
--------- -------
4,225,941 376,820
========= =======
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions used for
grants in 1999 and 2000: risk-free interest rates of 6.72% and 5.96%
respectively; expected lives of 3 years; expected dividend rate of zero; and
expected volatility of 138% and 150%, respectively.
internet.com applies Accounting Principles Board Opinion No. 25 in
accounting for its stock option plan. Accordingly, no compensation expense
has been recognized for its stock option plan.
The following table reflects pro forma net loss and loss per share had
internet.com elected to adopt the fair value approach of SFAS No. 123 (in
thousands, except per share amounts):
INCEPTION
(NOVEMBER 24,
1998)
THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 2000
--------------- ----------- ------------
Net loss
As reported $ (974) $ (22,016) $ (22,977)
======= ========== ==========
Pro forma $ (974) $ (24,635) $ (29,572)
======= ========== ==========
Basic and diluted loss per share
As reported $ (.06) $ (1.08) $ (0.92)
======= ========== ==========
Pro forma $ (.06) $ (1.21) $ (1.18)
======= ========== ==========
These pro forma amounts may not be representative of future disclosures
since the estimated fair value of stock options is amortized to expense over the
vesting period, and additional options may be granted in future years.
15. RELATED PARTY TRANSACTIONS
internet.com, Internet World Media, Inc. and Penton Media, Inc. entered
into a services agreement dated November 24, 1998, whereby internet.com
agreed to provide certain services to Internet World Media, Inc. and Penton
Media, Inc. in return for services to be provided to internet.com by Internet
World Media, Inc. and Penton Media, Inc. This services agreement expires
November 23, 2003.
51
On November 24, 1998, internet.com entered into a Trademark Co-License
Agreement with Internet World Media. internet.com provides Internet World Media
with a royalty-free license to use several of internet.com's trademarks in
Internet World Media's INTERNET WORLD, BOARDWATCH and DIRECTORY OF INTERNET
SERVICE PROVIDERS print publications, at Internet World Media's Internet World
and ISPCON trade shows and conferences and in promotional materials for those
print publications, trade shows and conferences.
On November 24, 1998, internet.com entered into a Copyright Co-License
Agreement with Internet World Media. internet.com provides Internet World Media
with a royalty-free license to use several of internet.com's copyrights and the
material protected by those copyrights in Internet World Media's INTERNET WORLD,
BOARDWATCH and DIRECTORY OF INTERNET SERVICE PROVIDERS print publications.
I-Venture Management LLC, a wholly owned subsidiary of internet.com serves
as the managing member of internet.com Venture Fund I LLC, internet.com Venture
Fund II LLC and internet.com Venture Partners III LLC. Certain directors and
officers of internet.com serve as directors and officers of I-Venture Management
LLC.
internet.com made a $180,000 non-interest bearing loan to one of its
stockholders in 1997, which is still outstanding and is included in other assets
as of December 31, 2000.
16. QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
QUARTERS ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---------- --------- ------------ -----------
2000
- ----
Revenues $ 9,645 $ 12,161 $ 14,717 $ 15,560
Gross profit $ 5,420 $ 6,662 $ 8,383 $ 8,627
Net loss $ (4,248) $ (4,431) $ (5,790) $ (8,508)
Basic and diluted
loss per share $ (0.17) $ (0.18) $ (0.23) $ (0.34)
MARCH 31(1) JUNE 30(2) SEPTEMBER 30 DECEMBER 31
----------- ---------- ------------ -----------
1999
- ----
Revenues $ 1,612 $ 2,872 $ 4,114 $ 7,487
Gross profit $ 495 $ 1,086 $ 2,079 $ 4,059
Net loss $ (3,258) $(11,598) $ (3,254) $ (3,906)
Basic and diluted
loss per share $ (0.20) $ (0.63) $ (0.14) $ (0.17)
(1) Represents financial data from the predecessor business.
(2) Represents the combined financial data from the predecessor business
and internet.com
52
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of internet.com LLC:
We have audited the accompanying balance sheets of the iWorld Division of
Mecklermedia Corporation, as of September 30 1998, and the related statements of
operations, changes in division equity and cash flows for the year ended
September 30, 1998 and for the period October 1, 1998 through November 23, 1998.
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 in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the iWorld division of
Mecklermedia Corporation, as of September 30, 1998, and the results of its
operations and its cash flows for the year ended September 30, 1998, and for the
period October 1, 1998 through November 23, 1998, in conformity with generally
accepted accounting principles in the United States.
ARTHUR ANDERSEN LLP
Stamford, Connecticut
April 5, 1999
53
IWORLD DIVISION OF MECKLERMEDIA CORPORATION
(PREDECESSOR BUSINESS)
BALANCE SHEET
SEPTEMBER 30, 1998
(IN THOUSANDS)
ASSETS
Current assets:
Accounts receivable, net of allowances of $149 $1,002
Prepaid expenses and other 257
------
Total current assets 1,259
Property and equipment, net 1,336
Intangible assets, net 4,630
------
Total assets $7,225
======
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable $ 316
Accrued payroll and related expenses 625
Accrued expenses 32
------
Total current liabilities 973
Division equity 6,252
------
Total liabilities and division equity $7,225
======
See notes to financial statements.
54
IWORLD DIVISION OF MECKLERMEDIA CORPORATION
(PREDECESSOR BUSINESS)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998 AND
THE PERIOD FROM OCTOBER 1, 1998 THROUGH NOVEMBER 23, 1998
(IN THOUSANDS)
OCTOBER 1, 1998
YEAR ENDED THROUGH
SEPTEMBER 30, NOVEMBER 23,
1998 1998
------------- ---------------
Revenues $ 3,544 $ 778
Cost of revenues 2,171 456
------- -------
Gross profit 1,373 322
------- -------
Operating expenses:
Advertising, promotion and selling 1,406 441
General and administrative 1,349 195
Depreciation 429 67
Amortization 920 86
------- -------
Total operating expenses 4,104 789
------- -------
Net loss $(2,731) $ (467)
======= =======
See notes to financial statements.
55
IWORLD DIVISION OF MECKLERMEDIA CORPORATION
(PREDECESSOR BUSINESS)
STATEMENTS OF CHANGES IN DIVISION EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1998 AND FOR THE PERIOD
FROM OCTOBER 1, 1998 THROUGH NOVEMBER 23, 1998
(IN THOUSANDS)
Balance at September 30, 1997 $ 2,144
Contributions from Mecklermedia Corporation 6,839
Net loss (2,731)
-------
Balance at September 30, 1998 6,252
Contributions from Mecklermedia Corporation 3,877
Net loss (467)
-------
Balance at November 23, 1998 $ 9,662
=======
See notes to financial statements.
56
IWORLD DIVISION OF MECKLERMEDIA CORPORATION
(PREDECESSOR BUSINESS)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
AND FOR THE PERIOD FROM OCTOBER 1, 1998 THROUGH NOVEMBER 23, 1998
(IN THOUSANDS)
FOR THE YEAR OCTOBER 1, 1998
ENDED THROUGH
SEPTEMBER 30, NOVEMBER 23,
1998 1998
------------- --------------
Cash flows from operating activities:
Net loss $(2,731) $ (467)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 1,349 153
Changes in operating assets and liabilities:
Accounts receivable, net (570) (326)
Prepaid expenses and other (187) (28)
Accounts payable and accrued expenses 305 (725)
------- -------
Net cash used in operating activities (1,834) (1,393)
------- -------
Cash flows from investing activities:
Additions to property and equipment (934) (91)
Acquisitions of Web sites, related
Internet media properties and other (4,071) (2,393)
------- -------
Net cash used in investing activities (5,005) (2,484)
------- -------
Cash flows from financing activities:
Contributions from Mecklermedia Corporation 6,839 3,877
------- -------
Net cash provided by financing activities 6,839 3,877
------- -------
Net change in cash -- --
Cash at beginning of period -- --
------- -------
Cash at end of period $ -- $ --
======= =======
Supplemental disclosures of cash flow:
Cash paid for interest $ -- $ --
======= =======
Cash paid for income taxes $ -- $ --
======= =======
See notes to financial statements.
57
IWORLD DIVISION OF MECKLERMEDIA CORPORATION
(PREDECESSOR BUSINESS)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
AND FOR THE PERIOD FROM OCTOBER 1, 1998 THROUGH NOVEMBER 23, 1998
1. ORGANIZATION AND NATURE OF BUSINESS
The accompanying financial statements and related notes reflect the
carved-out historical results of operations and financial position of the iWorld
division of Mecklermedia Corporation ("iWorld"). The Statements of Operations
include all revenues and costs directly attributable to iWorld, including costs
for facilities, functions and services used by iWorld at shared sites and
allocations of costs for certain administrative functions and services performed
by centralized departments within Mecklermedia Corporation.
iWorld consisted of a network of Web sites and related Internet media
properties that delivered the latest news and resources for the Internet
industry, directories of Internet products and services, back issues of the
Mecklermedia Corporation's print publications, and information about
Mecklermedia Corporation's trade shows.
Costs were allocated to iWorld based on management's estimate of costs
attributable to the operation of the business. Such costs are not necessarily
indicative of the costs that would have been incurred if iWorld had been a
separate entity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION. iWorld bartered portions of the unsold advertising
impressions generated by its Web sites, e-mail newsletters, online discussion
forums and moderated e-mail discussion lists for advertising and promotion in
media properties owned by third parties. iWorld did not record any revenues for
such barter transactions.
iWorld generated its revenues from four primary sources: the sale of
advertising on its Web sites, e-mail newsletters, online discussion forums and
moderated e-mail discussion lists; e-commerce agreements; licensing of editorial
content, brands and software; and subscriptions to paid e-mail newsletters.
ADVERTISING REVENUES. Advertising revenue is recognized ratably in the
period the advertising is displayed, provided that no significant company
obligations remain and collection of the resulting receivable is probable.
Company obligations typically include guarantees of a minimum number of
advertising impressions, or times that an advertisement is viewed by users
iWorld's Web sites and related Internet media properties.
E-COMMERCE REVENUES. E-commerce agreements generally include a fixed
fee for advertising and/or revenue sharing for sales made by the
e-commerce vendors. The advertising component of these agreements is
recognized ratably in the period the advertising is displayed, provided
that no significant company obligations remain and collection of the
remaining receivable is probable.
LICENSING REVENUES. The licensing agreements vary, with iWorld
typically generating fixed fees and royalties for monthly access to
editorial content produced by iWorld. Such amounts are recognized as
revenue in the month earned.
58
PAID SUBSCRIPTION REVENUES. Subscription revenue relates to customer
subscriptions to our paid e-mail newsletters. Revenue from subscriptions
is recognized ratably over the subscription period. Deferred revenues
relate to the portion of collected subscription fees which have not yet
been recognized as revenue.
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK. Financial instruments that potentially subject
iWorld to a significant concentration of credit risk consist primarily of cash
and accounts receivable. iWorld deposits all its cash primarily with a single
financial institution. Most of iWorld's accounts receivable as of September 30,
1998 are from Internet-related businesses.
At September 30, 1998, three customers accounted for 28% of accounts
receivable. For the year ended September 30, 1998, one customer accounted for
17% of revenues. For the period from October 1, 1998 through November 23, 1998,
one customer accounted for 21% of revenues.
FINANCIAL INSTRUMENTS. The recorded amounts of financial instruments such as
cash and cash equivalents, accounts receivable and accounts payable approximate
their fair values due to their short maturities.
PROPERTY AND EQUIPMENT. Depreciation of computer equipment and software is
provided for by the straight-line method over estimated useful lives ranging
from three to five years. Depreciation of furniture, fixtures and equipment is
provided for by the straight-line method over estimated useful lives ranging
from five to ten years. Amortization of leasehold improvements is provided for
over the lesser of the term of the related lease or the estimated useful life of
the improvement.
Maintenance and repair expenditures are charged to appropriate expense
accounts in the period incurred; replacements, renewals and betterments are
capitalized. Upon the sale or other disposition of property, the cost and
accumulated depreciation of such properties are eliminated from the accounts and
the gains or losses thereon are reflected in operations.
INTANGIBLE ASSETS. Intangible assets, primarily consisting of goodwill,
resulting from acquisitions of Web sites and related Internet media properties
are being amortized using the straight-line method over periods ranging from
three to five years.
INCOME TAXES. The taxable losses of iWorld for the year ended September 30,
1998 and for the period October 1, 1998 through November 23, 1998 were included
in the Mecklermedia Corporation's consolidated income tax returns. For all
periods presented, deferred income taxes and related income tax expenses have
been recorded by applying the asset and liability approach to each component of
iWorld as if it were a separate taxpayer. Under this approach, deferred tax
assets and liabilities represent the expected future tax consequences of
carryforwards and temporary differences between the carrying amounts and the tax
bases of assets and liabilities.
ADVERTISING COSTS. iWorld expensed advertising costs as incurred.
Advertising expense was $320,000, and $167,000 for the year ended September 30,
1998, and for the period from October 1, 1998 through November 23, 1998,
respectively.
59
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
SEPTEMBER 30,
1998
-------------
Computer equipment $1,694
Furniture, fixtures and equipment 420
Leasehold improvements 134
------
2,248
Less: Accumulated depreciation (912)
------
Property and equipment, net $1,336
======
4. INTANGIBLE ASSETS
Intangible assets consisted of the following (in thousands):
SEPTEMBER 30,
1998
-------------
Goodwill $5,690
Trademarks 474
------
6,164
Less: Accumulated amortization (1,534)
------
Intangible assets, net $4,630
======
5. ACQUISITIONS
iWorld acquired nine and four Web sites and related Internet media
properties for $3.9 million and $2.4 million during the years ended September
30, 1998 and the period from October 1, 1998 through November 23, 1998,
respectively. These acquisitions were accounted for as purchases. Certain of
these acquisitions provide for contingent payments to be made one year after the
acquisition dates based upon the achievement of certain objectives. The acquired
Web sites and related Internet media properties had no tangible assets or
liabilities and therefore the entire purchase price has been recorded as
goodwill and is being amortized over its estimated useful life. The pro forma
results for the year ended September 30, 1998 and the period from October 1,
1998 through November 23, 1998, assuming these acquisitions had been made at the
beginning of the period, would not be materially different from reported
results.
6. INCOME TAXES
The operating results of iWorld were included in the consolidated tax
returns of Mecklermedia. The methodology for allocating income tax expense to
iWorld is set forth in Note 2. For all periods presented, valuation allowances
were recorded against income tax benefits generated from the losses from iWorld.
iWorld did not provide for any current or deferred United States federal,
state or foreign income tax provision or benefit for any of the periods
presented because it has experienced operating losses since inception.
60
At September 30, 1998 and November 23, 1998, iWorld had future federal and
state income tax benefits as follows (in thousands):
FOR THE YEAR OCTOBER 1,
ENDED 1998 THROUGH
SEPTEMBER 30, NOVEMBER 23,
1998 1998
------- -------
Net operating losses $ 2,388 $ 2,559
Amortization of intangible assets 314 307
Depreciation of property and equipment (58) (58)
Reserves recorded for financial
reporting purposes 38 99
------- -------
Total future federal and state
income tax benefits 2,682 2,907
Less valuation allowances (2,682) (2,907)
------- -------
Deferred income tax asset $ -- $ --
======= =======
At November 23, 1998, iWorld had available net operating loss carryforwards
for its federal income tax purposes of approximately $7.0 million which will
expire beginning in 2009.
A reconciliation setting forth the difference between the effective income
tax rate of iWorld and the U.S. Federal statutory tax rate is as follows (in
thousands):
FOR THE YEAR OCTOBER 1,
ENDED 1998 THROUGH
SEPTEMBER 30, NOVEMBER 23,
1998 1998
------------- ------------
Federal statutory tax rate $ 928 $ 159
State taxes 133 23
Losses without income tax benefits (1,064) (183)
Provision for non-deductible expenses 3 1
------- -------
$ -- $ --
------- -------
7. EMPLOYEE BENEFIT PLAN
iWorld participated in Mecklermedia's defined contribution plan which
qualified under Section 401(k) of the Internal Revenue Code for employees
meeting certain service requirements. The plan allowed eligible employees to
contribute up to 15% of their compensation to the plan. At the discretion of
Mecklermedia's board of directors, Mecklermedia was also able to make
contributions dependent on profits each year for the benefit of all eligible
employees under the plan. There were no discretionary contributions for any of
the periods presented.
8. RELATED PARTY TRANSACTIONS
The accompanying financial statements include costs for cash management,
accounting, legal and network operations that were provided to iWorld by
Mecklermedia, in addition to allocated costs for facility charges at shared
sites, including rent and equipment usage. Costs for cash management accounting,
legal and network operations have been allocated to iWorld based on internet.com
management's estimated percentage of the time spent by Mecklermedia employees on
iWorld to total department time. The costs for facility charges are based on the
percentage of usage by the iWorld
61
Division of Mecklermedia to the overall costs. Such allocations are not
necessarily indicative of the costs that would have been incurred if iWorld had
been a stand-alone entity.
Costs allocated to iWorld by Mecklermedia were approximately $1,185,000, and
$150,000 for the year ended September 30, 1998, and for the period from October
1, 1998 through November 23, 1998, respectively. For the year ended September
30, 1998, allocated costs of $100,000 and $1,085,000 were included in cost of
revenues and general and administrative expenses, respectively. All of the
allocated costs for the period from October 1, 1998 through November 23, 1998,
were included in general and administrative expenses. Management believes the
allocation methods used are reasonable.
Mecklermedia funded the working capital requirements of iWorld based upon a
centralized cash management system. Division Equity, included in the
accompanying financial statements, consists of funding for net losses, working
capital requirements and acquisitions. There is no liability to Mecklermedia for
these amounts. In addition, no interest has been charged on these transactions.
Division equity consisted of the following (in thousands):
OCTOBER 1, 1998
YEAR ENDED THROUGH
SEPTEMBER 30, NOVEMBER 23,
1998 1998
------------- --------------
Division equity at beginning of period $ 2,144 $ 6,252
Net losses (2,731) (467)
Working capital 1,834 1,393
Acquisitions 5,005 2,484
------- -------
Division equity at end of period $ 6,252 $ 9,662
======= =======
Average division equity during the period $ 4,198 $ 7,957
======= =======
62
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
63
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference to internet.com's Proxy Statement for its
Annual Meeting of Stockholders to be held in 2001.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to internet.com's Proxy Statement for its
Annual Meeting of Stockholders to be held in 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to internet.com's Proxy Statement for its
Annual Meeting of Stockholders to be held in 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to internet.com's Proxy Statement for its
Annual Meeting of Stockholders to be held in 2001.
64
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
INDEX TO EXHIBITS
(a)
(1) FINANCIAL STATEMENTS: See internet.com Corporation -- Index to
Consolidated Financial Statements and iWorld Division of Mecklermedia
Corporation (Predecessor Business) -- Index to Financial Statements at
Item 8 on page 34 of this report.
(2) FINANCIAL STATEMENT SCHEDULE: Schedule II -- Valuation and
Qualifying Accounts
(3) INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
2.01* Merger Agreement, dated June 24, 1999, between
internet.com LLC and the Registrant
3.01* Registrant's Amended and Restated Certificate of
Incorporation
3.02* Registrant's Bylaws
4.01* Specimen Stock Certificate for the Registrant's Common
Stock
4.02* Registration Rights Agreement, dated as of November 24,
1998, by and among internet.com LLC and Internet World
Media, Inc.
10.01* Form of Indemnification Agreement entered into between the
Registrant and each of its directors and executive officers
10.02* Services Agreement by and among Penton Media, Inc.,
Internet World Media, Inc. and internet.com LLC, dated as
of November 24, 1998
10.03* Trademark Co-License Agreement by and between Internet
World Media, Inc. and internet.com LLC, dated as of
November 24, 1998
10.04* Copyright Co-License Agreement by and between Internet
World Media, Inc. and internet.com LLC, dated as of
November 24, 1998
10.05*+ Registrant's 1999 Stock Incentive Plan
10.06*+ Employment Agreement between the Registrant and
Christopher S. Cardell, dated as of November 24, 1998
10.07*+ Employment Agreement between the Registrant and
Christopher J. Baudouin, dated as of November 24, 1998
10.08* Specimen Advertising Insertion Order
10.09** Asset Purchase Agreement, dated September 8, 2000, by and
among internet.com Corporation, ClicZ, Inc., Andrew R.
Bourland and Ann M. Handley
11*** Statement Regarding Computation of Per Share Earnings
(Loss) (included in notes to financial statements)
21*** Subsidiaries of the Registrant
23*** Consent of Arthur Andersen LLP
* Incorporated herein by reference to the Registrant's Registration
Statement on Form S-1 (File No. 333-76331).
65
** Incorporated herein by reference to the Registrant's Current Report on
Form 8-K filed on September 11, 2000.
*** Filed herewith.
+ Compensatory plans and arrangements for executives and others.
66
(b) Reports on Form 8-K
On September 11, 2000, internet.com filed a Form 8-K announcing its
acquisition of all the assets of ClickZ, Inc. a Massachusetts corporation
("ClickZ") pursuant to an asset purchase agreement, dated September 8, 2000 by
and among internet.com, ClickZ, Andrew R. Bourland and Ann M. Handley.
On December 26, 2000, internet.com filed a Form 8-K announcing its
acquisition of certain assets of EarthWeb Inc. a Delaware corporation
("EarthWeb") pursuant to an asset purchase agreement, dated December 22, 2000 by
and among internet.com and EarthWeb.
67
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
April 2, 2001
internet.com Corporation
By: /s/ Alan M. Meckler
-------------------------
Name: Alan M. Meckler
Title: Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Alan M. Meckler Chairman of the Board, Chief Executive
-------------------------------- Officer and Director (Principal
Alan M. Meckler Executive Officer)
/s/ Christopher S. Cardell President, Chief Operating Officer and
-------------------------------- Director
Christopher S. Cardell
/s/ Christopher J. Baudouin Chief Financial Officer (Principal
-------------------------------- Financial and Accounting Officer)
Christopher J. Baudouin
/s/ Gilbert F. Bach Director
--------------------------------
Gilbert F. Bach
/s/ Michael J. Davies Director
--------------------------------
Michael J. Davies
/s/ William A. Shutzer Director
--------------------------------
William A. Shutzer
68
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of internet.com Corporation:
We have audited in accordance with generally accepted auditing standards the
consolidated financial statements of internet.com Corporation included in this
Form 10-K and have issued our report thereon dated February 7, 2001. Our audit
was made for the purpose of forming an opinion on the basic financial statements
taken as a whole. Schedule II is the responsibility of the company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. Schedule
II has been subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Stamford, Connecticut
February 7, 2001
S-1
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
INTERNET.COM CORPORATION
(IN THOUSANDS)
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 2000
----------------- -----------------
Balance, beginning of period $ 42 $ 712
Additions charged to statement of operations 670 2,772
Deductions -- (1,125)
------- -------
Balance, end of period $ 712 $ 2,359
======= =======
S-2