Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
______________________
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Fiscal Year Ended July 31, 1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From________________ to ________________
Commission File 000-22846
CMGI, Inc.
(Exact name of registrant as specified in its charter)
Delaware 04-2921333
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
100 Brickstone Square 01810
Andover, Massachusetts
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (978) 684-3600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
Common Stock, $0.01 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. [ ]
The approximate aggregate market value of Common Stock held by non-affiliates of
the Registrant was $7,391,519,644 as of October 22, 1999.
On October 22, 1999, the Registrant had outstanding 116,835,477 shares of
voting Common Stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement (the "Definitive Proxy Statement") to
be filed with the Securities and Exchange Commission relative to the Company's
1999 Annual Meeting of Stockholders are incorporated by reference into Part III
of this Report. Portions of Item 5 and Items 6, 7 and 8 are incorporated by
reference to the Company's 1999 Annual Report to Stockholders.
TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT
FISCAL YEAR ENDED JULY 31, 1999
CMGI, INC.
PART I
Item Page
----
1. Business...................................................................................... 2
2. Properties.................................................................................... 16
3. Legal Proceedings............................................................................. 16
4. Submission of Matters to Vote of Security Holders............................................. 16
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters......................... 17
6. Selected Consolidated Financial Data.......................................................... 17
7. Management's Discussion and Analysis of Financial Condition and Results of Operations......... 18
7A. Quantitative and Qualitative Disclosures About Market Risk.................................... 18
8. Financial Statements and Supplementary Data................................................... 18
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......... 18
PART III
10. Directors and Executive Officers of the Registrant............................................ 19
11. Executive Compensation........................................................................ 19
12. Security Ownership of Certain Beneficial Owners and Management................................ 19
13. Certain Relationships and Related Transactions................................................ 19
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................. 20
This Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "expects" and similar expressions are
intended to identify forward-looking statements. The important factors discussed
under the caption "Factors That May Affect Future Results" in the Company's 1999
Annual Report to Stockholders and incorporated herein by reference, among
others, could cause actual results to differ materially from those indicated by
forward-looking statements made herein and presented elsewhere by management.
Such forward-looking statements represent management's current expectations and
are inherently uncertain. Investors are warned that actual results may differ
from management's expectations.
1
-
PART I
ITEM 1. - BUSINESS
General CMGI, Inc. and its consolidated subsidiaries, ("CMGI" or "the
Company") develop and operate Internet and fulfillment services companies. CMGI
is a Delaware corporation. The Company previously operated under the name CMG
Information Services, Inc. and was incorporated in 1986.
CMGI's Internet strategy includes the internal development and operation of
majority-owned subsidiaries as well as taking strategic positions in other
Internet companies that have demonstrated synergies with CMGI's core businesses.
The Company's strategy also envisions and promotes opportunities for synergistic
business relationships among the Internet companies within its portfolio. At
July 31, 1999, CMGI's majority owned Internet subsidiaries included Activerse
Inc. (Activerse), Adsmart Corporation (Adsmart), Blaxxun Interactive, Inc.
(Blaxxun), CMGI Solutions, Inc. (CMGI Solutions), Engage Technologies, Inc.
(Engage), iCAST Corporation (iCAST), Magnitude Network, Inc. (Magnitude
Network), MyWay.com (formerly Planet Direct Corporation), Nascent Technologies,
Inc. (Nascent), NaviNet, Inc. (NaviNet), NaviSite, Inc. (NaviSite), Netwright,
LLC (Netwright) and ZineZone Corporation (ZineZone). Activerse provides open
standard Internet messaging technologies; Adsmart is an online advertising
network, providing a comprehensive set of services to advertisers and Web
publishers; Blaxxun develops and markets software for internet multimedia
communication; CMGI Solutions and Netwright are technology consulting units;
Engage, which completed its IPO during fiscal year 1999, is a provider of
profile-based Internet marketing solutions; iCAST was formed to provide both
original and syndicated video and audio content and provide an interactive
entertainment environment; Magnitude Network provides radio stations with
integration of radio and the Internet; MyWay.com provides a Web portal that can
be personalized to an individual user's locality, interests, and preferences,
and customized for distribution affiliates; Nascent is a developer of value-
added, carrier-class software that enables service providers to rapidly launch
new services on the World Wide Web; NaviNet, an Internet Access Provider, offers
a high-availability national network service for ISPs that want to expand their
coverage, capacity, and capabilities through outsourcing; NaviSite, which
commenced its IPO during October 1999, specializes in e-business outsourcing
solutions, including high-end Web hosting and Internet application hosting,
monitoring, and management; ZineZone is a network for people who are avid
embracers and early adopters of new forms of entertainment, leisure and
technology.
The Company maintains investments in three venture funds: CMG@Ventures I,
LLC (CMG@Ventures I), CMG@Ventures II, LLC (CMG@Ventures II) and CMG@Ventures
III, LLC (CMG@Ventures III). The Company owns 100% of the capital and is
entitled to 77.5% to 80% of the net capital gains of these three funds.
The Company provides fulfillment services through three wholly-owned
subsidiaries, SalesLink Corporation (SalesLink), InSolutions Incorporated
(InSolutions), and On-Demand Solutions, Inc. (On-Demand Solutions). SalesLink's
services are also provided through its subsidiary, Pacific Direct Marketing
Corporation (Pacific Link). The Company's fulfillment services offerings include
product and literature fulfillment, supply chain management, telemarketing, and
outsourced e-business program management. In May 1999, CMGI completed the sale
of its subsidiary, CMG Direct Corporation (CMG Direct) to Marketing Services
Group, Inc. (MSGI). At the time, CMG Direct comprised the Company's lists and
database services segment.
Subsequent to July 31, 1999, CMGI completed the acquisitions of AltaVista
Company (AltaVista) and Signatures Network, Inc. (Signatures Network) and
announced definitive agreements to acquire AdForce, Inc. (AdForce), AdKnowledge
Inc. (AdKnowledge), and Flycast Communications Corporation (Flycast). These
acquisitions are subject to customary conditions, including regulatory approval
and target company shareholder approval. AltaVista is an online media and
commerce network that integrates Internet technology and services to deliver
fast, relevant results for both individuals and Web-based businesses; Signatures
Network is a music and celebrity licensing and event merchandising company;
AdForce is a provider of centralized online advertising services; AdKnowledge,
which will become a wholly-owned subsidiary of Engage, is a provider of complete
Web marketing management services focused entirely on the needs of on line
marketers and agencies; Flycast is a provider of Web-based direct response
advertising solutions to advertisers.
The Company has adopted a strategy of seeking opportunities to realize
gains through the selective sale of investments or having separate subsidiaries
or affiliates sell minority interests to outside investors. The Company believes
that this strategy provides the ability to increase shareholder value as well as
provide capital to support the growth in the Company's subsidiaries and
investments. The Company expects to continue to develop and refine the products
and services of its businesses, with the goal of increasing revenue as new
products are commercially introduced, and to continue to pursue the acquisition
of or the investment in, additional Internet and fulfillment services companies.
2
-
Products and Services
Products and services of the Company's majority-owned subsidiaries as of
July 31, 1999 include the following:
Internet Segment
- ----------------
Activerse
Activerse is a provider of software solutions that facilitate real-time
communication and collaboration for business professionals in intra- or inter-
organizational teams. Activerse's products address the complex dynamics of Web
communication by providing instant access to Internet-connected communities,
workgroups, social groups and individuals.
The DING! suite of products from Activerse utilizes open Internet standards
including Java and HTML, and allows independent Web sites and Intranets to
manage their own DING! communities. Activerse's products enable both consumer
and corporate audiences to enhance online communities through the convenience of
instant messaging.
Adsmart Corporation
Adsmart, one of the largest online advertising networks, provides a
comprehensive set of services to advertisers and Web publishers. Adsmart's
buying services combined with the media properties in the Adsmart network
simplify the process for advertisers to plan and buy Internet advertising and
build unique sponsorship and co-branding relationships. With Adsmart's
assistance, advertisers can associate their brands with quality content and
build relationships with online audiences on branded sites and in key audience
channels. For Web publishers, Adsmart provides technology and services for
planning, promoting, managing, serving and tracking interactive marketing
campaigns in exchange for a percentage of the overall media buy. To
competitively provide these services, Adsmart leverages its expertise in
traditional and new media sales, brand advertising, direct marketing, and Web
site operations.
The Adsmart Network is now comprised of over 300 Web sites totaling over
2.0 billion monthly impressions. While Adsmart focuses on site specific
representation by adding premium sites to its growing network, Adsmart also
offers key divisions and targeted categories that match the way people buy
media, making the process easier for advertisers.
Adsmart's top branded Web sites such as Fast Company, U.S. News Online, and
World Wrestling Federation are represented in key divisions that include Women,
Sports, Business/Finance, Technology, Travel, Automotive, Young Adults, and its
Hispanic division, NetFuerza. These divisions represent many of the best brands
across the Web, giving advertisers a broad, highly popular set of Web sites to
choose from. Adsmart also offers more than twenty additional targeted audience
groups (TAG) which allow advertisers to make even more specific, focused media
buys. These categories include: 12-24 male, adventure sports enthusiasts,
affluent consumer, children, college, early adapters, e-commerce, entertainment,
health/fitness, home owners/home buyers, investor information, men, moms, music
enthusiasts, pets, photo interest, prospective auto buyers, seasonal/events,
seniors, SOHO, teen, and travel interest.
In addition, all of the sites in the Adsmart network are represented in
Adsmart's Media Plus Division. This division gives advertisers the demographics
of a broad, general Internet audience for their online media buy. While
advertisers benefit from those categories that directly meet their buying
demands, they will still be able to make site specific media purchases, taking
advantage of the premium brand names in the Adsmart Network and sponsorship
campaigns, such as interactive games, microsites, contests and key events,
developed by the Adsmart sales team. By structuring the network in this fashion,
Adsmart is leveraging the benefits of a site specific model while aggregating
its brands into leading advertiser-specified targets.
Blaxxun Interactive, Inc.
Blaxxun develops and markets software for internet multimedia
communication, including the Blaxxun Community Platform and professional and
consumer products for expert collaboration, e-commerce and community operation.
Blaxxun designs and delivers customer solutions on the Blaxxun Community
Platform. In addition, Blaxxun owns and operates selected online communities,
based on its technology.
Blaxxun uses open standards as a key element necessary for the rapid
adoption of Internet technology. Virtual Reality Modeling Language, or VRML, a
counterpart to HTML, enables the construction of virtual worlds. Like HTML,
VRML is an open
3
-
standard architecture that specifies formats and protocols for all aspects of
virtual worlds, including 3-D geometry, sound, video, interactive behavior and
avatars. Blaxxun's products, which include the Blaxxun Community Server,
Community Client software and Developer packages, are VRML-compliant.
The Blaxxun Community Server, a high-performance, multi-user server, allows
companies to incorporate interaction into their Web sites, creating user
communities for business, education and entertainment. Key features include
member and place management, avatar and bot support, shared objects and various
types of chat.
In addition, the Blaxxun Community Clients and several Community Developer
software packages allow integration of community technology with existing
servers and databases. As a Community Client, users are able to access servers
and interact with other users in the virtual 3-D environment. Community
Developer software allows users to create their own customized 3-D virtual
worlds.
The Blaxxun Software Development Kits provide application developers with a
set of development tools to customize the Community Platform to specific needs.
Uses of Blaxxun's products range from online trade shows to shopping malls,
customer support to entertainment, and product promotion to corporate meetings.
Blaxxun generates revenue primarily by selling its software products, but also
offers complete solutions to its customers.
Engage Technologies, Inc.
Engage offers a range of products and services that enable Web publishers,
advertisers and merchants to target the delivery of advertisements, content and
e-commerce offerings to their audiences and to measure their effectiveness.
Engage has generated most of its revenue to date through sales of its
advertising management software and outsourced services, as well as its services
for measuring and analyzing Web site traffic. In July 1999, Engage introduced
the availability of its Engage Knowledge data service with customers. Engage
Knowledge provides real-time access to Engage's database of more than 35 million
anonymous profiles of Web users for more effective targeting of online
advertising, promotions and content.
In October 1999, Engage introduced Engage AudienceNet, a Web-wide profile
driven advertising and marketing network that uses Engage's anonymous, behavior
based profiles to deliver substantial benefits to media buyers, Web sites and ad
networks.
An Engage profile is an anonymous collection of information about an
individual Web user's consumer interests, demographic characteristics and
geographic location. These profiles are developed through a combination of a
user's browsing behavior on participating Engage-enabled sites on the Internet
and information the user has voluntarily declared at those sites.
Based on its proprietary technology, Engage has built a database using data
drawn from multiple, diverse Web sites. When a user visits a Web site of any
customer subscribing to the Engage Knowledge data service, Engage matches that
visitor with his or her profile in the profile database. The Web site can then
use that profile to target offerings to the visitor based on his or her
particular preferences, demographic characteristics and geographic location.
Engage's profiling technology can create local and global user profiles.
Local profiles, which are created and maintained by Engage's customers, contain
data derived from the customer's own Web site and typically map preferences
based on particular interest categories designed by the customer and demographic
characteristics. Global profiles, which are compiled from data contributed to
the centralized Engage Knowledge database from the Web sites of all
participating Engage customers, are provided to customers on a subscription
basis and provide a broader and more detailed description of users' interests.
These global profiles do not contain personally identifiable information of
individual users, such as name, home or e-mail address, IP address or domain
name.
Each Engage global profile contains a series of numerical scores reflecting
each Web user's inferred preference level in hundreds of standard categories and
subcategories as well as demographic and geographic information. Categories can
be further customized to meet the needs of a specific customer or market. Engage
software uses sophisticated proprietary algorithms and methodologies to
continuously update and refine these global profiles based on a visitor's
browsing behavior across multiple Web sites, including pages selected by the
user, the duration of the user's visits and the responses of the user to
specific advertisements and promotions.
Engage profiles are designed to work with other Engage applications, third-
party software or customers' internally developed solutions, allowing customers
flexibility as the uses of profiling and related applications develop and
evolve.
4
-
The Company began to offer its ad management systems and services in April
1998 upon acquiring Accipter, Inc. Engage Accipiter products and services are
designed to manage and deliver advertising and direct marketing promotions on
individual Web sites. In April 1999, the Company also acquired Internet
Profiles Corporation (I/PRO), and began to offer products and services that
provide Web site traffic measurement and analysis and verification of site
traffic and advertising results. I/PRO operates as a wholly owned subsidiary of
Engage.
iCAST Corporation
iCAST's objective is to build and launch a next generation Internet
entertainment company. Among other goals, iCAST will seek to offer users a
highly interactive environment complete with a down-loadable desktop
entertainment application, syndicated and original audio and video content,
self-publishing tools, community features such as chat, instant messaging, news
feeds and the ability to connect with entertainers. The iCAST Website is
currently in production, with its launch targeted before the end of calendar
1999.
Magnitude Network, Inc.
Magnitude Network services clients looking for web distribution and
development solutions and has built a network of over 220 radio stations that
use their products and services. Magnitude Network provides radio stations with
a turnkey solution that allows stations to focus on their core radio competency.
Magnitude Network's products and services include:
. Web strategy consultation
. Customizable e-commerce merchandising and store-fronts as well as
management backend fulfillment.
. Web site design and development
. Streaming media servicing
. Advertising sales, serving and creation, nationally and locally.
. Content integration
. Rich Media ads
. Now Playing - links live streams to a dynamic information archive
. E-mail based direct marketing data base services
. Content distribution and advertising on over 220 US radio stations web
sites
MyWay.com
MyWay.com provides a Web portal that can be highly personalized to an
individual user's locality, interests and preferences, and deeply customized for
distribution affiliates. Internet users reach MyWay.com at either the MyWay.com
URL or through an Internet Service Provider (ISP), affinity group, or corporate
affiliate in the MyWay.com syndication network. MyWay.com believes that the
resulting network-wide viewership aggregated around channels of highly
desirable, focused content appeals to commerce partners and advertising
sponsors.
The advanced customization technology developed by MyWay.com allows rapid
deployment of custom portal solutions. Each affiliate in the syndication network
distributes and promotes its own branded version of the service customized for
their audience's special interest. The custom branded portal and content
objects from MyWay.com are designed to enhance affiliates' brand equity and
extend their customer/member relationship online. The MyWay.com syndication
network provides content, e-commerce and advertising partners with targeted
audience reach.
MyWay.com's core product is a highly customizable Web service providing
mainstream consumers and business users with the means to organize, communicate
and find information in a logical and intuitive manner. Personalized content
and community features include continually updated news headlines, real-time
stock quotes, sports and entertainment information and localized content for
more than 380 U.S. cities.
Through numerous partnerships with name-brand content providers, MyWay.com
aggregates over 40,000 content pages. The service's highly flexible technology
platform allows each page to display a distribution affiliate's brand, deliver
individualized content according to the user's affinity or special interest, and
respond to the user's selections, preferences and perspective.
5
-
MyWay.com also distributes customizable content objects that can be
easily integrated into any Web site. The objects enhance a Web site with such
features as news, weather, photos, financial planning, reminders, classifieds
and travel planning. Each object links to corresponding content on the
affiliate's branded version of MyWay.com.
Nascent Technologies, Inc.
Nascent Technologies is a provider of scalable software applications that
enable Internet access to electronic mail messaging and directories through
standard browser-enabled devices including desktop and laptop computers,
wireless handsets and PDA devices. Nascent's Mailspinner products provide
customers the ability to host custom branded Internet messaging services for
their subscribers without having to load electronic mail messaging software on
subscribers' computer devices.
Mailspinner provides access to email through ordinary Web Browsers. In
addition to allowing users to read their mail, Mailspinner provides the ability
to compose, save and transfer messages as well as check mail from a variety of
sources. Other functionality includes personal preferences such as signature
files and an address book.
Mailspinner PCS provides access to email through wireless communication
devices. Mailspinner PCS uses a custom Web Browser to leverage Nascent
Technologies server-engine technology to bring email to wireless handsets.
Nascent Technologies also provides custom engineering services to support
and extend the Mailspinner products. These professional services range from
changing the "look-and-feel" of the Mailspinner interface to custom software
engineering to ensure that Mailspinner works with a customer's unique software
implementation.
NaviNet, Inc.
NaviNet provides high-performance private label Internet access solutions
that are designed to enable organizations to expand their customer reach without
significant investment in infrastructure and technology.
NaviNet has built a proprietary network architecture, the NaviNet
Technology Platform, that the Company believes provides cost, quality and
performance advantages over existing dial-up access solutions. The NaviNet
Technology Platform aggregates multiple local calling areas into MegaPOPs,
deploys advanced switch bypass technology to eliminate busy signals due to voice
switch congestion, and employs private transit Internet connectivity to bypass
congested public peering points on the Internet. NaviNet's services include
Internet connectivity, network management, user authentication and customer
support based on full 24x7 service and support from its Network Management
Center (NMC). The NMC provides second level support for service requests and
emergencies using an automated trouble ticket tracking and escalation system.
GeoDial, NaviNet's flagship product, provides ISPs with Internet access at
highly competitive price metrics, allowing customers to move into new markets
while lowering their cost per subscriber. In addition, GeoDial includes Service
Level Agreements (SLA's) and its online management tools supply network activity
and subscriber usage information and are an important customer resource. As of
July 31, 1999, network coverage reached over 40% of the U.S. online population
and is targeted to reach more than 80% by year's end.
NaviSite, Inc.
NaviSite is an Internet application service provider offering Web site and
application hosting and management services. NaviSite's Internet application
service offerings allow businesses to outsource the deployment, configuration,
hosting, management and support of their Web sites and Internet applications in
a cost-effective and rapid manner.
NaviSite's focus on enhanced management services, beyond basic co-location
services, allows NaviSite to meet the expanding needs of businesses as their Web
sites and Internet applications become more complex. NaviSite also provides
customers with access to NaviSite's state-of-the-art data centers and the
benefit of their direct private transit Internet connections to major Internet
backbone providers. NaviSite only uses direct private transit Internet
connections, which differentiates their network infrastructure from that of most
of their competitors. These connections increase reliability and download
speeds. The scalability of NaviSite's infrastructure and cost-effectiveness of
their solutions allow NaviSite to offer a comprehensive suite of services to
meet the current and future hosting and management needs of their customers.
6
-
NaviSite's suite of service offerings includes:
. Web site and Internet application hosting, which includes access to
NaviSite's state-of-the-art data centers, bandwidth and basic back-up,
storage and monitoring services;
. Enhanced server management, which includes custom reporting, hardware
options, load balancing and mirroring, system security, advanced back- up
options, remote management and the services of NaviSite's business solution
managers;
. Specialized application management, which includes management of e-
commerce and other sophisticated applications and their underlying
services, including ad-serving, streaming, databases and transaction
processing; and
. Application rentals and related consulting and other professional services.
ZineZone Corporation
Launched in March 1999, ZineZone is a lifestyle Web site targeting
adventurers and trendsetters who readily embrace new forms of leisure and
entertainment. The site offers original multi-media content, powerful
personalization capabilities, unique editorial content and personal publishing
tools. ZineZone maintains its specialized content by searching the Web with a
powerful search and retrieval filtering technology. The site delivers daily
updated content based on user interests and features interviews with
'Trailblazers', which are defined as outstanding innovators whose risk taking
and determination have enabled them to redefine their field and themselves.
Users can interact with 'Trailblazers' and one another through email chats and
discussion groups. ZineZone has an archive of over 1000 'Zines' or Web guides,
which are organized digests of Web content, automatically filtered and updated
on a 24-hour basis.
CMG@Ventures Funds
The Company's first Internet venture fund, CMG@Ventures I, LLC
(CMG@Ventures I) was formed in February, 1996. CMGI completed its $35 million
commitment to this fund during fiscal year 1997. The Company owns 100% of the
capital and is entitled to approximately 77.5% of the net capital gains of
CMG@Ventures I. The Company's second Internet venture fund, CMG@Ventures II, LLC
(CMG@Ventures II), was formed during fiscal year 1997. The Company owns 100% of
the capital and is entitled to 80% of the net capital gains of CMG@Ventures II.
In fiscal year 1999, CMGI announced the formation of the @Ventures III
venture capital fund (The Fund). The Fund secured capital commitments from
outside investors and CMGI, to be invested in emerging Internet service and
technology companies. 78.1% of amounts committed to The Fund are provided
through two newly formed entities, @Ventures III L.P. and @Ventures Foreign Fund
III, L.P. CMGI does not have a direct ownership interest in either of these
entities, but CMGI is entitled to 2% of the net capital gains realized by both
entities. Management of these entities is the responsibility of @Ventures
Partners III, LLC. The Company has committed to contribute up to $56 million to
its newly formed limited liability company affiliate, CMG@Ventures III, LLC,
equal to 19.9% of total amounts committed to The Fund, of which approximately
$20 million has been funded as of July 31, 1999. CMG@Ventures III, LLC will take
strategic positions side by side with @Ventures III L.P. CMGI owns 100% of the
capital and is entitled to 80% of the net capital gains realized by CMG@Ventures
III, LLC. @Ventures Partners III, LLC is entitled to the remaining 20% of the
net capital gains realized by CMG@Ventures III, LLC. The remaining 2% committed
to The Fund is provided by a fourth entity, @Ventures Investors, LLC, in which
CMGI has no ownership. CMG@Ventures III, LLC is currently proposing an expansion
fund to @Ventures III to provide follow-on financing to existing @Ventures III
investee companies, pursuant to which CMGI's commitment could increase by up to
$38 million. The Company anticipates synergies between these strategic positions
and CMGI's core businesses, including speeding technological innovation and
access to markets.
7
-
At July 31, 1999, the CMG@Ventures funds held investments in the following
companies for which the funds have made no distributions:
- -----------------------------------------------------------------------------------------------------------------------------------
Ownership
Percentage of Initial
Outstanding Investment
Company Name Description of Business Shares Date
------------ ----------------------- ------ ----
- -----------------------------------------------------------------------------------------------------------------------------------
Ancestry.com, Inc. A provider of community, content and commerce resources for
families via the Internet. 8% Dec. 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Asimba, Inc. A content rich, personalized, online community for the
competitive and recreational sports market. 4% Oct. 1998
- -----------------------------------------------------------------------------------------------------------------------------------
AuctionWatch.com, Inc. An online destination that aggregates auction-related
(formerly Omnibot) information, posts daily editorial content, and provides
value-added services to new and experienced buyers and sellers
in the auction process. 1% July 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Aureate Media Corporation Provides software publishers with ad-supported distribution
channels, services, and technology. 6% July 1999
- -----------------------------------------------------------------------------------------------------------------------------------
BizBuyer.com, Inc. An online business-to-business marketplace where small to
mid-size businesses can put their product and service needs out
for bid and receive quotes from thousands of qualified vendors. 8% June 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Blaxxun Interactive, Inc. Provides products and solutions for multimedia communication on
the Internet and intranet 54% Aug. 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Carparts.com Provides consumers with a search capability to locate and order
online certain auto parts. 5% Mar. 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Chemdex Corporation A provider of electronic commerce solutions for the life
science industry, uniting buyers and suppliers in a single Web
marketplace. 9% Sept. 1997
- -----------------------------------------------------------------------------------------------------------------------------------
Critical Path, Inc. Supplies email and messaging solutions to corporations,
Internet Service Providers, Web hosting companies and Web 4% Apr. 1998
portals.
- -----------------------------------------------------------------------------------------------------------------------------------
eCircles Corporation Provides a free service that allows for friends and family to
share information and coordinate events on the World Wide Web. 8% Mar. 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Exp.com, Inc. (formerly Provides an electronic marketplace for interactive advice
Advoco.com) servicing a wide range of categories. 5% Apr. 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Furniture.com, Inc. An e-commerce provider of a broad selection of furniture and
home furnishing accessories. 4% Dec. 1998
- -----------------------------------------------------------------------------------------------------------------------------------
HotLinks Network, Inc. Operates a service that allows users to create personal Web
directories. 9% Dec. 1998
- -----------------------------------------------------------------------------------------------------------------------------------
INPHO.com, Inc. / Provides methods by which the public can access public
HomePriceCheck.com information. 15% July 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Intelligent/Digital, Inc. Offers "market-making" technologies and services that
facilitate real-time interaction and live trade between the
buying and selling communities in business-to-business 6% June 1999
marketplaces.
- -----------------------------------------------------------------------------------------------------------------------------------
KOZ, Inc. Helps media companies, such as newspapers and broadcasters,
strengthen their ties to their local communities by providing
value-added programs and services that simplify community
building on the World Wide Web. 8% May 1997
- -----------------------------------------------------------------------------------------------------------------------------------
MotherNature.com An online retail store and information source for natural and
healthy living products. 13% May 1998
- -----------------------------------------------------------------------------------------------------------------------------------
NameTree, Inc. Builds enhanced DNS systems for the Internet. 6% July 1999
- -----------------------------------------------------------------------------------------------------------------------------------
NextMonet.com, Inc. An e-commerce site for purchasers of art, in the form of an
on-line art gallery. 11% Jan. 1999
- -----------------------------------------------------------------------------------------------------------------------------------
8
-
- -----------------------------------------------------------------------------------------------------------------------------------
Ownership
Percentage of Initial
Outstanding Investment
Company Name Description of Business Shares Date
------------ ----------------------- ------ ----
- -----------------------------------------------------------------------------------------------------------------------------------
NextPlanetOver.com Combines e-commerce with original editorial content in order to
create a Web-based shopping experience for the entertainment
hobbyist. 5% May 1999
- -----------------------------------------------------------------------------------------------------------------------------------
OneCore Financial Network, Inc. Offers an integrated set of Web-based financial applications
targeted at small businesses. 6% Feb. 1999
- -----------------------------------------------------------------------------------------------------------------------------------
ONEList.com, Inc. Provides free e-mail communities via the Internet, allowing
users to search for or subscribe to communities on different
topics or create their own community. 6% Dec. 1998
- -----------------------------------------------------------------------------------------------------------------------------------
PlanetOutdoors.com, Inc. An e-commerce distributor of outdoor recreation and adventure
travel products. 6% July 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Productopia, Inc. Provides product advice for consumers looking for information
and recommendations on what to buy and where they can find it. 7% May 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Promedix.com, Inc. A business-to-business Web site, called the Specialty Medical
Product Exchange, that streamlines the buying and selling of
specialty medical products. 7% Dec. 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Raging Bull, Inc. A free financial Web site that provides investors with
financial discussion and commentary along with free real-time
stock quotes. 12% Sept. 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Silknet Software, Inc. Provides customer driven centric eBusiness software that helps
companies build their e-businesses. 18% Oct. 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Speech Machines plc An operator of Internet-based speech-to-text services. 19% Sept. 1997
- -----------------------------------------------------------------------------------------------------------------------------------
Thingworld.com, LLC (formerly Enables entertainment, music, sports, and consumer brand
Parable, LLC) companies to creatively manage and distribute their properties
online. 36% Aug. 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Vicinity Corporation A provider of e-retail technologies and services that connect
shoppers in the online world with sellers in the real world. 32% Feb. 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Virtual Ink Corporation A newly launched company focused on the development of Digital
Meeting Assistant (TM) (DMA) technologies. 8% Oct. 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Visto Corporation Provides Web-based personal information services. 9% June 1998
WebCT, Inc. (formerly Provides a Web-based platform for teaching and learning in the
Universal Learning higher education marketplace.
Technology) 30% July 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Vstore.com Provides an on-line retail hub that allows users to create a
custom on-line store for at no cost. 1% July 1999
- -----------------------------------------------------------------------------------------------------------------------------------
CMG@Ventures I also held 6.6 million shares of Lycos common stock at July 31,
1999, of which 2.9 million had been allocated to outside profit members, and 1.5
million shares may be required to be sold to Lycos pursuant to employee stock
option exercises at prices ranging from $0.0025 to $2.40. CMG@Ventures II also
held 2.4 million shares of Hollywood Entertainment Corporation (Hollywood
Entertainment) common stock, of which approximately 2.0 million shares were
attributable to CMGI. CMG@Ventures II received the Hollywood Entertainment
shares during fiscal 1999 in exchange for its investment in Reel.com, Inc.
Chemdex, Critical Path, Hollywood Entertainment, Lycos and Silknet shares are
publicly traded on the Nasdaq National Market under the symbols CMDX, CPTH,
HLYW, LCOS and SILK, respectively.
9
-
Fulfillment Services
- --------------------
SalesLink Corporation
- ---------------------
SalesLink, along with its subsidiary, Pacific Link, provides product and
literature fulfillment, inventory and data warehouse management, supply chain
management, closed-loop telemarketing, customized software solutions and value
added services for its clients' marketing or manufacturing programs, primarily
to high technology, biotechnology, financial services and health-care markets.
SalesLink's largest customer is Cisco Systems, Inc. (Cisco), which accounted for
67% and 64% of SalesLink's fiscal year 1999 and 1998 revenues, respectively.
Product and Literature Fulfillment. On behalf of its fulfillment clients,
SalesLink receives orders for promotional literature and products and "fulfills"
them by assembling and shipping the items requested. Product and literature
fulfillment services begin with the receipt of orders by SalesLink's inbound
telemarketing staff via phone or electronic transmission directly into
SalesLink's computers. Orders are then generated and presented to the production
floor where fulfillment packages are assembled and shipped to either the end-
user or to a broker or distributor.
Inventory and Data Warehouse Management. As adjunct services to
fulfillment, SalesLink provides product and literature inventory control and
warehousing, offering its customer support and management reports detailing
orders, shipments, billings, back orders and returns.
Supply Chain Management. SalesLink also offers supply-based management
programs. Also known as "turnkey," these programs are a form of outsourced
manufacturing, in which clients retain SalesLink to purchase components and
manufacture customer bills of materials into products that are either shipped to
customers, channels of distribution, or to the customer's factory for final
manufacturing. These outsourced manufacturing services primarily assist
companies in the areas of accessory kits, software, literature and promotional
products.
Telemarketing. SalesLink's telemarketing group offers comprehensive inbound
business-to-business telemarketing services to support its sales inquiry
management and order processing activities. Telemarketing services include lead
qualification, order processing fulfillment and marketing analysis. SalesLink
also offers outbound business telemarketing services that are tailored to an
individual client's needs. Outbound telemarketing programs can be used to update
a client's existing database, survey possible markets or pre-qualify sales
leads.
Customized Software Solutions. SalesLink's proprietary information
management system, SL FlagShip, allows customers to better understand their
sales and product ordering information. The information is used by customers to
evaluate inventory, market campaigns and distribution channel success. SL
FlagShip can help solve geomarketing, budget, sales, and media problems through
campaign analysis, market demographics, sales lead and territory management,
source code analysis, market research and surveys.
InSolutions, Inc.
InSolutions provides comprehensive supply chain management solutions for
clients in the high technology industry. InSolutions' services include:
. D-ROM, DVD and diskette replication
. Product packaging and assembly
. Fulfillment
. Print management
. Electronic order processing and software distribution
. Inventory management
. Online operations including remote access to inventory, work-in-progress,
order status and package tracking.
10
--
On-Demand Solutions, Inc.
On-Demand Solutions provides online operations logistics solutions,
offering outsourced program management that support all aspects of the "Web to
Warehouse to Customer" process, and markets support programs for the high-tech,
scholastic and sports industries. On-Demand Solutions' online operations provide
service and support in the following e-business value chain areas:
. Remote access to bills of material, "see through" inventory, work-in-
progress, order status and online package tracking.
. Online inventory supply and e-mail order confirmation
. Complete supply chain management and software manufacturing and/or assembly
services
. Real-time order processing and product fulfillment
. Secure online shopping and payment functionality
. Web site design, hosting and maintenance
. Marketing capabilities including campaign support, online
survey/registration data capture for customer profiling, marketing
collateral manufacturing & fulfillment to prospective clients and customer
contact strategies
List and Database Services
- --------------------------
In May 1999, the Company completed the sale of its subsidiary, CMG Direct
to MSGI. At the time, CMG Direct comprised the Company's entire lists and
database services segment. These services consisted principally of providing
mailing lists to those interested in marketing to students and others in the
educational field, as well as providing general customer database management and
list processing services. As a result of the sale, the net gain on the sale of
CMG Direct and the historical operations of the Company's lists and database
services segment have been reflected as income from discontinued operations in
the accompanying consolidated financial statements. The list and database
services segment ceased to exist upon the sale of CMG Direct.
AltaVisa Acquisition Subsequent to Year End
On August 18, 1999 CMGI completed the acquisition of an 81.5% equity stake
in AltaVista Company and its two wholly-owned subsidiaries: Zip2 Corporation and
Shopping.com (AltaVista) for consideration of approximately $2.4 billion.
AltaVista integrates proprietary Internet technology and services to deliver
relevant results for both individuals and Web-based businesses.
AltaVista Search is a free Internet service, offering advanced keyword and
multimedia search functionality and assisting Web users in finding relevant
information anywhere on the Internet. AltaVista Search is one of the fastest
Internet search service, that its index is among the most comprehensive and
current indices available, and that it produces highly relevant search results.
AltaVista refreshes its growing index every 28 days or less - one of the fastest
refresh rates for an index of its size. On June 28, 1999, AltaVista announced
enhanced multimedia search capabilities designed to provide users with fast and
easy access to multimedia content on the Web. AltaVista's Photo & Media Finder
links to more than 17 million distinct photos, video and audio clips.
In addition, AltaVista Search has been consistently recognized for its
superior search capabilities. AltaVista's commitment to delivering superior
search technologies provides a strong foundation on which to build additional
functionality to meet users' ever-growing needs. AltaVista continues to add
features and partners to AltaVista Search in areas such as natural language
question and answer (Ask AltaVista with Ask Jeeves), locating Web sites
(RealNames), translating languages (Babelfish with Systran), and searching
photographs and multimedia content (AltaVista Photo & Media Finder with Virage
and Corbis).
In addition to search, AltaVista offers users a comprehensive destination
for Internet navigation, directory services, personalized content and rich local
community information. On June 28, 1999, AltaVista introduced the MyAltaVista
personal homepage. This personal daily destination has many important features,
including integrated search, web directory, business directory, finance, sports,
weather, national news, local news, lottery results, maps and directions, movie
and TV listings, horoscopes, a community section, e-mail and calendaring. As a
result of its relationships with media partners and content providers, AltaVista
has a comprehensive platform that offers users a destination that includes
international and national content while providing a very rich and relevant
local community feel. For instance, a user can enter a preference for a movie
and the platform will identify local theaters and show times, offer movie
reviews, and will provide maps and directions to the theater. AltaVista
continues to improve its content channels. On June 28, 1999, AltaVista also
introduced a new finance channel, AltaVista Finance. AltaVista also announced
and later introduced the AltaVista microportal, a desktop application that
provides up-to-the-minute news, weather, sports and financial information, as
well as links to AltaVista Search technologies and other media and commerce
services.
11
--
AltaVista seeks to provide highly satisfying, easy to use, e-commerce
offerings to customers. AltaVista currently offers more than one million
products across multiple categories representing leading brand names.
AltaVista's subsidiary, Shopping.com, uses a robust, scalable e-commerce
platform on which AltaVista will seek to expand its e-commerce business.
AltaVista's goal is to make the shopping experience one that is quick, easy,
fun, interactive, dynamic and personalized. On May 5, 1999, Shopping.com
introduced the Internet's first 125% satisfaction guarantee. On June 28, 1999,
AltaVista introduced the Ultrastore retail concept. The Ultrastore seeks to use
AltaVista's e-commerce platform to provide superstore selection and value with
neighborhood store service and convenience. Shopping.com is also leveraging
AltaVista's search technology to enhance the shopping experience by increasing
the accuracy of the shopping search. For example, a user searching for
information by entering the key word "handheld computing devices" on AltaVista
Search would see a commerce offer for a related product in a sidebar on the
search results page. For merchants and advertisers, this allows for highly
dynamic, personally targeted selling opportunities.
Through its subsidiary, Zip2 Corporation (Zip2), AltaVista is building a
co-branded network with new media and commerce companies to meet Internet users'
needs for an experience that integrates content and community. In order to
enrich its local community offering, on June 28, 1999, AltaVista announced a
new, distinctive AltaVista Partner Network to deliver new community portal
services using the Zip2 community portal platform ("Homebase"). This Homebase
platform allows media companies to quickly capitalize on new information
services and content feeds in creating powerful local sites on the AltaVista
platform. Each site using the Homebase platform is co-branded with the partner
and AltaVista. All sites use a common AV Connections navigation bar that allows
users to access other important destinations from anywhere in the AltaVista
Network. This approach allows AltaVista to extend the scope and reach of its
Internet offering quickly. Media companies and merchants benefit from the
increased traffic and mutual sharing that the network offers. Users benefit from
the common look-and-feel, mutually beneficial exchange of information and
integration of features and functions. As of July 31, 1999, AltaVista was
continuing to enlist media companies with a goal of extending its network to
most major markets throughout the world.
On May 17, 1999, AltaVista announced the successful launch of AltaVista
Germany, found at http://www.altavista.de. AltaVista Germany users can perform
-----------------------
full-text searches across the millions of web documents existing in Germany.
AltaVista is currently expanding in numerous international locations.
On August 12, 1999, AltaVista announced a nationwide dial-up free Internet
connection service (FreeAccess) and registered more than 400,000 users within
seven weeks. The FreeAccess service is combined with the AltaVista microportal.
The FreeAccess service is supported through advertising that is displayed within
the microportal window, which takes up less than five percent of a user's
screen.
On October 25, 1999, AltaVista unveiled its next generation network, the
first significant re-launch of its entire platforms and services. The new
AltaVista Network comprises new media features, channels and content, new
commerce from AltaVista's Shopping.com e-commerce platform, more powerful search
capabilities and a contemporary and easy navigational interface for AltaVista
Search. Changes implemented on October 25, 1999, include the following:
--AltaVista Search introduced new and enhanced features of its industry-
leading search technologies. AltaVista has significantly increased the number of
Web pages it crawls and currently has a 400 million page index. Search results
are presented in a new format that is easier to read and to navigate. Several
new content providers have been added as well to provide well-respected and
popular directories, business search capabilities, and discussion and news
groups.
--AltaVista introduced its new media platform with AltaVista Live! This
site within the AltaVista domain is designed to provide day and night
programming for news, entertainment, finance, sports and an array of human-
interest areas, such as health, careers, real estate and many more. One of its
distinguishing features in this area is its emphasis on live programming,
providing information on an immediate basis.
--Shopping.com launched a new service to give the user a richer and more
comprehensive shopping experience. The service is based on extensive content and
product attributes, which will provide users with advanced features such as
comparison-shopping and feature specific product searching. The service will
also help educate the user on product categories, suggest related product
categories, and provide up-to-date product news.
12
--
Signatures Network Acquisition Subsequent to Year End
On September 27, 1999, CMGI completed the acquisition of a majority
position in Signatures Network for consideration of approximately $40 million
and the commitment to provide $100 million in operating capital.
Signatures Network is a worldwide entertainment merchandising and licensing
company representing some of today's most recognized artists, celebrities and
properties. Signatures Network creates licensing, merchandising and marketing
programs based on music, lifestyle/family, sports and fashion properties.
Signatures Network creates and sells high-quality merchandise and souvenirs
at concerts and events worldwide. In addition to traditional music concerts, key
merchandising events include arena attractions, sporting events and theatrical
tours.
Signatures Network also develops and distributes entertainment and
lifestyle-based products to a broad range of retailers worldwide. Signatures
Network creates product lines and merchandising programs such as themed in-store
boutiques and major promotions. Signatures Network core products are imprinted
and embroidered activewear, upscale apparel, gifts and collectibles. A range of
retail outlets, including department stores, mass merchandisers, record stores,
video stores, gift shops, art and museum shops, book stores and home shopping
channels offer the Signatures Network product lines. Their product lines are
also distributed over the Internet and through catalogs, inserts in
entertainment products and print advertising.
Business Strategy
With respect to the businesses of CMGI, the Company will seek to expand its
participation in the Internet and fulfillment services industries and increase
market share. Key elements of this strategy include:
Continue to enhance and expand the Company's products and services. The
Company has devoted significant resources to new subsidiaries and material
businesses which seek to capitalize in a coordinated manner on opportunities
surrounding the growth of the Internet and the interactive marketing industry.
The Company intends to continue to pursue the growth and development of its
technologies and services and continue to introduce its products commercially.
Additionally, the Company intends to continue to evaluate new opportunities to
further its investment in its Internet strategy and also to seek out
opportunities to increase shareholder value through the sale of selected
investments or technologies or having separate subsidiaries sell a minority
interest to outsiders.
Continue to pursue innovative advertising solutions. The Company is
actively seeking to develop innovative ways for advertisers to reach their
target audiences effectively through the Internet. The Company designs and
offers customized packages which include the ability to change advertisements
quickly and frequently, to conduct advertising test campaigns with rapid result
delivery and to track daily usage statistics. The Company has developed and will
continue developing software that provides the ability to target ads based on
demographics and usage patterns.
Actively seek growth in the Company's fulfillment services segment. CMGI
intends to continue to pursue the strategy of growing its fulfillment services
segment through gaining market share in its existing markets, through
acquisition and through developing new IT based products and services for its
client base. InSolutions, a turnkey provider with diskette and CD ROM
manufacturing capabilities; and On-Demand Solutions, a provider of fulfillment,
turnkey and Web-based catalogue and sports e-commerce services, have been
integrated with SalesLink's national supply chain management and fulfillment
operations, while creating an e-commerce fulfillment component that will seek to
broaden the Company's market potential in the fast-growing Internet fulfillment
industry.
Cross-sell products and services. The Company is involved in many aspects
of the Internet economy. The Company has experienced success in fostering the
cross-selling of products and services among the businesses in its portfolio,
and will continue to pursue such cross-selling.
Sales and Marketing
The Company markets its products and services through a marketing staff
using both telemarketing and direct sales. The Company maintains separate sales
and marketing staffs for each subsidiary, enabling the sales personnel to
develop strong customer relationships and expertise in their respective areas.
The Company has established direct sales forces experienced in each subsidiary's
business to address the new and evolving requirements of the Internet business
arena. The Company believes that an experienced sales staff is critical to
initiating and maintaining customer relationships. The Company advertises its
products and services through
13
--
space advertising, Internet banners, radio and television spots, trade shows and
Company sponsored user groups. In addition, in certain instances, the Company,
has complemented the activities of its direct sales force by retaining
advertising sales agencies, to serve as a sales representatives on a commission
basis.
The Company attends numerous trade shows in the Internet and high
technology markets, while further supplementing its sales efforts with space
advertising and product and services listings in appropriate directories. In
addition, the Company sponsors user group meetings for its customers, where new
products and services are highlighted.
Competition
CMGI's Internet investments compete in the electronic technology and
Internet service arenas. The market for Internet products and services is
rapidly evolving and highly competitive. Although the Company believes that the
diverse segments of the Internet market will provide opportunities for more than
one supplier of products and services similar to those of the Company, it is
possible that a single supplier may dominate one or more market segments. The
Company believes the principal competitive factors in this market are name
recognition, performance, ease of use, variety of value-added services,
functionality and features and quality of support. Competitors include a wide
variety of companies and organizations, including Internet software, content,
service and technology companies, telecommunication companies, cable companies
and equipment/technology suppliers. Some of the Company's existing competitors,
as well as a number of potential new competitors, have greater financial,
technical and marketing resources than the Company.
The Company may also be affected by competition from licensees of its
products and technology. There can be no assurance that the Company's
competitors will not develop Internet products and services that are superior to
those of the Company or that achieve greater market acceptance than the
Company's offerings. Moreover, a number of the Company's current advertising
customers, licensees and partners have also established relationships with
certain of the Company's competitors, and future advertising customers,
licensees and partners may establish similar relationships. The Company may also
compete with online services and other Web site operators as well as traditional
off-line media such as print and television for a share of advertisers' total
advertising budgets. There can be no assurance that the Company will be able to
compete successfully against its current or future competitors or that
competition will not have a material adverse effect on the Company's business,
results of operations and financial condition.
CMGI's fulfillment services segment companies have several prominent
competitors for the fulfillment and supply chain management components of its
businesses, and also compete with the internal fulfillment and manufacturing
operations of customers themselves. The companies in this segment also compete
on the basis of pricing, geographic proximity to their clients and the speed and
accuracy with which orders are processed.
Research and Development
The Company develops and markets a variety of Internet related products and
services. These industries are characterized by rapid technological development.
The Company believes that its future success will depend in large part on its
ability to continue to enhance its existing products and services and to develop
other products and services which complement existing ones. In order to respond
to rapidly changing competitive and technological conditions, the Company
expects to continue to incur significant research and development expenses
during the initial development phase of new products and services as well as on
an on-going basis.
During fiscal years 1999, 1998 and 1997, the Company expended $22,478,000,
$19,223,000 and $17,767,000, respectively, or 12.8%, 23.5% and 29.6%,
respectively, of net revenues, on research and development. In addition, during
fiscal years 1999, 1998 and 1997, the Company recognized $6,061,000, $10,325,000
and $1,312,000, respectively, of in-process research and development expenses in
connection with acquisitions of subsidiaries and investments in affiliates. See
further discussion of in-process research and development expenses in Item 7
below.
14
--
Intellectual Property and Proprietary Rights
The Company regards its software technologies and databases as proprietary.
The Company relies upon a combination of patent, trade secret, copyright and
trademark laws to protect its intellectual property. It has entered into
confidentiality agreements with its management and key employees with respect to
this software, and limits access to, and distribution of this, and other
proprietary information. However, the steps the Company takes to protect its
intellectual property may not be adequate to deter misappropriation of the
Company's proprietary information. In addition, the Company may be unable to
detect unauthorized uses of and take appropriate steps to enforce its
intellectual property rights.
Engage has filed for patents covering its profiling algorithm and its dual-
blind methodology for protecting end-user privacy. The profiling algorithm
patent application covers the process of identifying visitors uniquely at each
Web site while maintaining a central database of cross-referenceable identifiers
and allowing Web sites to access globally derived data only via their local
identifier. There can be no assurance that Engage's patent applications will be
granted. Even if they are granted, these patents may be successfully challenged
by others or invalidated.
The Engage Knowledge database contains detailed information about millions
of Web users. Engage believes it has rights to this database's entire content,
all records and all derived information from the database as a whole, all
updating routines and quality assurance processes and all underlying data
warehouse technology. However, there can be no assurance that any patent, trade
secret or other intellectual property protection will be available for such
information.
Although senior management believes that the Company's services and
products do not infringe on the intellectual property rights of others, the
Company is subject to the risk that such a claim may be asserted in the future.
Employees
As of July 31, 1999, the Company employed a total of 1,594 persons on a
full-time basis. None of the Company's employees are represented by a labor
union. The Company believes that its relations with its employees are good.
Segment Information
Segment information is set forth in Note 3 of the Notes to Consolidated
Financial Statements referred to in Item 8(a) below and incorporated herein by
reference.
Significant Customers
Significant customers information is set forth under the heading
"Diversification of Risk" in Note 2 of the Notes to Consolidated Financial
Statements referred to in Item 8(a) below and incorporated herein by reference.
15
--
ITEM 2. - PROPERTIES
The location and general character of the Company's principal properties by
industry segment as of October 29, 1999 are as follows:
Internet Segment
In its Internet segment, the Company leases approximately 580,000 square
feet of office, administrative, engineering, sales and marketing, operations and
data center space, principally in Massachusetts, California, New York, North
Carolina and the United Kingdom, under leases expiring from 1999 to 2011.
In addition, the Company leases approximately 174,000 square feet in
Andover, Massachusetts, under a lease which expires in 2009. This facility
consists of executive office space for the Company's corporate headquarters, as
well as administrative, engineering, sales and marketing, and operations space
for certain Internet segment subsidiaries.
Fulfillment Services Segment
In its Fulfillment Services segment, the Company leases approximately
695,000 square feet of office, storage, production and assembly, sales and
marketing, and operations space, principally in Massachusetts, California and
Illinois, under leases expiring from 2000 to 2013. Approximately 26,000 square
feet is sublet to a third party.
ITEM 3. - LEGAL PROCEEDINGS
The Company is not a party to any material litigation.
ITEM 4. - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
On May 13, 1999 the Company held a Special Meeting of Stockholders. At the
meeting the following matters were approved:
1. An amendment to the Company's Restated Certificate of Incorporation to
provide for an increase in the number of authorized shares of Common
Stock, $0.01 par value per share, from 100,000,000 to 400,000,000 was
approved. 64,468,974 shares of Common Stock were voted for such
amendment, 1,120,376 shares of Common Stock were voted against such
amendment and 72,858 shares of Common Stock abstained from the vote.
1,000 shares of common stock were subject to non-votes.
2. An amendment to the Company's 1986 Stock Option Plan and 1995 Employee
Stock Option Purchase Plan to provide for an increase in the maximum
number of shares of the Company's Common Stock available under its two
plans combined from nine million shares to fourteen million shares was
approved. 31,700,584 shares of Common Stock were voted for such
amendment, 5,520,190 shares of Common Stock were voted against such
amendment and 244,268shares of Common Stock abstained from the vote.
24,677,996 shares of common stock were subject to non-votes.
16
--
PART II
ITEM 5. - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market information is set forth in Note 19 of the Notes to
Consolidated Financial Statements referred to in Item 8(a) below and
incorporated herein by reference.
(b) On October 22, 1999, there were 1,641 holders of record of common
stock.
(c) The Company has never declared or paid cash dividends on its common
stock. The Company currently intends to retain earnings, if any, to support its
growth strategy and does not anticipate paying cash dividends in the foreseeable
future. Payment of future dividends, if any, will be at the discretion of the
Company's Board of Directors after taking into account various factors,
including the Company's financial condition, operating results, current and
anticipated cash needs and plans for expansion.
(d) On April 7, 1999 the Company issued 360,532 shares of its common stock
to shareholders of I/PRO in consideration for the acquisition of all of the
issued and outstanding shares of capital stock of IPRO. The shares issued by
the Company are not registered under the Securities Act of 1933, as amended, and
carry restrictions on transfer or sale for a period of two years.
On May 19, 1999 the Company issued 45,906 shares of its common stock
to shareholders of Nascent Technologies, Inc. in consideration for the
acquisition of all of the issued and outstanding shares of capital stock of
Nascent Technologies, Inc. The shares issued by the Company are not registered
under the Securities Act of 1933, as amended, and carry restrictions on transfer
or sale for a period of two years.
On June 24, 1999 the Company issued 8,684 shares of its common stock
to shareholders of Digiband, Inc. in consideration for the acquisition of all of
the issued and outstanding shares of capital stock of Digiband, Inc. The shares
issued by the Company are not registered under the Securities Act of 1933, as
amended, and carry restrictions on transfer or sale for a period of two years.
On June 29, 1999, the Company issued and sold 375,000 shares of its
Series C Convertible Preferred Stock (the"Series C Preferred Stock") to funds
managed by four institutional investment managers. The Certificate of
Designation relating to the Series C Preferred Stock divides the 375,000 shares
into three separate tranches of 125,000 shares each to be designated as
"Tranche1," "Tranche 2," and "Tranche 3" (individually, a "Tranche" and
collectively, the "Tranches"). The three Tranches are convertible into common
stock at prices of $91.43, $75.15 and $75.32 per share, respectively. The
Company will pay a semiannual dividend on the Series C Preferred Stock of 2% per
annum, in arrears, on June 30 and December 30 of each year, at the Company's
option, in cash or through an adjustment to the liquidation preference of the
Series C Preferred Stock. Such adjustments, if any, will also increase the
number of shares into which the Series C Preferred Stock is convertible. The
conversion price calculated for each Tranche is also subject to adjustment for
certain actions taken by the Company. The Series C Preferred Stock may be
converted into Common Stock by the holders at any time and automatically
converts into Common Stock on June 30, 2002.
The shares issued in the above mentioned transactions were issued in
private placements in reliance upon the exemption provided by section 4 (2) of
the Securities Act of 1933.
ITEM 6. - SELECTED CONSOLIDATED FINANCIAL DATA
The information required by this Item is set forth under the caption
"Selected Consolidated Financial Data" appearing in the 1999 Annual Report to
Shareholders and is incorporated herein by reference and is filed herewith as
Exhibit 13.1.
17
--
ITEM 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is set forth under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing in the 1999 Annual Report to Shareholders, and is
incorporated herein by reference and is filed herewith as Exhibit 13.2.
ITEM 7A. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to equity price risks on the marketable portion of
its equity securities. The Company's available-for-sale securities at July 31,
1999 include equity positions in companies in the Internet industry sector,
including Yahoo! Inc., Lycos, Inc., Silknet Software, Inc., Chemdex Corporation
and Critical Path, Inc., many of which have experienced significant historical
volatility in their stock prices. The Company typically does not attempt to
reduce or eliminate its market exposure on these securities. A 20% adverse
change in equity prices, based on a sensitivity analysis of the Company's
available-for-sale securities portfolio as of July 31, 1999, would result in an
approximate $306.5 million decrease in the fair value of the Company's
available-for-sale securities.
The carrying values of financial instruments including cash and cash
equivalents, accounts receivable, accounts payable and notes payable,
approximate fair value because of the short maturity of these instruments. The
carrying value of long-term debt approximates its fair value, as estimated by
using discounted future cash flows based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.
The Company uses derivative financial instruments primarily to reduce
exposure to adverse fluctuations in interest rates on its borrowing
arrangements. The Company does not enter into derivative financial instruments
for trading purposes. As a matter of policy all derivative positions are used
to reduce risk by hedging underlying economic exposure. The derivatives the
Company uses are straightforward instruments with liquid markets. At July 31,
1999 the Company was primarily exposed to the London Interbank Offered Rate
(LIBOR) interest rate on its bank borrowing arrangements. Information about the
Company's borrowing arrangements including principal amounts and related
interest rates appears in Note 12 to the Consolidated Financial Statements filed
herewith as Exhibit 13.3.
The Company has historically had very low exposure to changes in foreign
currency exchange rates, and as such, has not used derivative financial
instruments to manage foreign currency fluctuation risk. As the Company expands
globally, the risk of foreign currency exchange rate fluctuation may
dramatically increase. Therefore, in the future, the Company may consider
utilizing derivative instruments to mitigate such risks.
ITEM 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) The following consolidated financial statements of the Company and
independent auditors' report required by this Item are set forth in the 1999
Annual Report to Shareholders and are incorporated herein by reference and are
filed herewith as Exhibit 13.3:
- Consolidated Balance Sheets as of July 31, 1999 and 1998
- Consolidated Statements of Operations for the three years ended July
31, 1999
- Consolidated Statements of Stockholders' Equity for the three years
ended July 31, 1999
- Consolidated Statements of Cash Flows for the three years ended July
31, 1999
- Notes to Consolidated Financial Statements- Independent Auditors'
Report
(b) Selected Quarterly Financial Data (unaudited) is set forth in Note 19
of the Notes to Consolidated Financial Statements referred to in Item 8 (a)
above and is incorporated herein by reference.
ITEM 9. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
18
--
PART III
ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to the portions of the Definitive Proxy Statement
entitled "Proposal 1--Election of Directors," "Additional Information," and
"Section 16(a) Beneficial Ownership Reporting Compliance."
ITEM 11. - EXECUTIVE COMPENSATION
Incorporated by reference to the portions of the Definitive Proxy Statement
entitled "Executive Compensation,"and "Additional Information -- Compensation of
Directors."
ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the portion of the Definitive Proxy Statement
entitled "Security Ownership by Management and Principal Stockholders."
ITEM 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the portion of the Definitive Proxy Statement
entitled "Certain Relationships and Related Transactions."
19
--
PART IV
ITEM 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) Financial Statements, Financial Statement Schedule, and Exhibits
1. Financial Statements. The financial statements as set forth under
Item 8 of this report on Form 10-K are incorporated herein by
reference.
- Consolidated Balance Sheets as of July 31, 1999 and 1998
- Consolidated Statements of Operations for the three years
ended July 31, 1999, 1998 and 1997
- Consolidated Statements of Stockholders' Equity for the
three years ended July 31, 1999, 1998 and 1997
- Consolidated Statements of Cash Flows for the three years
ended July 31, 1999, 1998 and 1997
- Notes to Consolidated Financial Statements
- Independent Auditors' Report
2. Financial Statement Schedule. Financial Statement Schedule II of
the Company and the corresponding Report of Independent Auditors
on Financial Statement Schedule are included in this Report.
All other financial statement schedules have been omitted since
they are either not required, not applicable, or the information
is otherwise included.
3. Exhibits. The Exhibits listed in the Exhibit Index immediately
preceding such Exhibits are filed as part of this Annual Report
on Form 10-K.
(B) Reports on Form 8-K
On July 14, 1999, the Company filed a Current Report on Form 8-K
dated June 29, 1999 to report under Item 5 (Other Events) the execution of
the Purchase and Contribution Agreement between the Company and its wholly-
owned subsidiary Zoom Newco, Inc. and Compaq Computer Corporation, Digital
Equipment Corporation and Alta Vista Company. No financial statements were
required to be filed with such report.
On July 7, 1999, the Company filed a Current Report on Form 8-K dated
June 29, 1999 to report under Item 5 (Other Events) the issuance and sale
of 375,000 shares of its newly designated Series C Convertible Preferred
Stock. No financial statements were required to be filed with such report.
On May 7, 1999, the Company filed a Current Report on Form 8-K dated
May 7, 1999 to report under Item 5 (Other Events) the issuance of a news
release related to the restatement of its results for the third and fourth
quarters of fiscal 1998 ended April 30, 1998 and July 31, 1998,
respectively, and for its first and second quarters of fiscal 1999 ended
October 31, 1998 and January 31, 1999, respectively. No financial
statements were required to be filed with such report.
20
--
EXHIBIT INDEX
Exhibit No. Title Method of Filing
- ----------- ----- ----------------
2.1 Purchase and Contribution Agreement, dated as of Incorporation by reference to Exhibit 2.1 to the
June 29, 1999, by and among CMGI, Inc., Compaq Current Report on Form 8-K filed on September 2, 1999.
Computer Corporation, Digital Equipment
Corporation, AltaVista Company and Zoom Newco Inc.
2.2 Amendment No. 1 to Purchase and Contribution Incorporation by reference to Exhibit 2.2 to the
Agreement, dated as of August 18, 1999, by and Current Report on Form 8-K filed on September 2, 1999.
among CMGI, Inc., Compaq Computer Corporation,
Digital Equipment Corporation, AltaVista Company
and Zoom Newco Inc.
3.1 Restated Certificate of Incorporation of the Incorporation by reference to Exhibit 4.1 to the
Registrant. Registration Statement on Form S-3 (File No.
333-85047) filed on August 12, 1999.
3.2 Certificate of Designations, Preferences and Incorporation by reference to Exhibit 4.1 to the
Rights of Series D Preferred Stock of CMGI, Inc. Current Report on Form 8-K filed on September 2, 1999.
3.3 Restated By-Laws of the Registrant. Incorporation by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1 (File
No. 33-71518)(the "CMGI Registration Statement").
4.1 Specimen Stock Certificate representing Common Filed herewith.
Stock
4.2 Promissory Note, dated August 18, 1999, issued to Incorporation by reference to Exhibit 4.2 to the
Digital Equipment Corporation, in the principal Current Report on Form 8-K filed on September 2, 1999.
amount of $138,000,000.
4.3 Promissory Note, dated August 18, 1999, issued to Incorporation by reference to Exhibit 4.3 to the
Compaq Computer Corporation, in the principal Current Report on Form 8-K filed on September 2, 1999.
amount of $82,000,000.
10.1 Lease dated as of April 12, 1999 between Andover Filed herewith.
Mills Realty Limited Partnership and CMGI, Inc.
for premises located at 100 Brickstone Square,
Andover, Massachusetts.
10.2 Amendment No. 1 to Lease dated as of July 19, Filed herewith.
1999 between Andover Mills Realty Limited
Partnership and CMGI, Inc. for premises located
at 100 Brickstone Square, Andover, Massachusetts.
10.3 Lease dated as of September 13, 1999 between Filed herewith.
Arastradero Property and AltaVista Company for
premises located at 1070 Arastradero Road,
Palo Alto, California.
21
--
Exhibit No. Title Method of Filing
- ----------- ----- ----------------
10.4 Indenture of Lease dated as of August 16, 1999, Filed herewith.
between 622 Building Company LLC and ICast, Inc.
for premises located at 622 Third Avenue, New
York, New York.
10.5 Lease, dated January 6, 1998, between the Medford Incorporation by reference to Exhibit 10.2 to the
Nominee Trust and SalesLink Corporation for Quarterly Report on Form 10-Q filed on June 15, 1998.
premises located at 425 Medford Street, Boston,
Massachusetts.
10.6 Lease, dated September 1, 1998, between Cabot Filed herewith.
Industrial Properties, L.P. and SalesLink
Corporation for premises at 6112 West 73/rd/
Street, Bedford Park, Illinois.
10.7 Lease, dated June 30, 1995, between Windy Pacific Filed herewith.
Partners and Pacific Mailing Corporation for
premises located at Lot #2, Dumbarton Business
Center, Central Ave., Newark, California.
10.8 First Amendment to Lease Between Windy Pacific Filed herewith.
Partners and Pacific Mailing Corporation, dated
May 28, 1996 for premises located at Lot #2,
Dumbarton Business Center, Central Ave., Newark,
California.
10.9 Lease, dated July 30, 1995, between Windy Pacific Filed herewith.
Partners and Pacific Mailing Corporation for
premises located at Lot #3, Dumbarton Business
Center, Central Ave., Newark, California.
10.10 First Amendment to Lease Between Windy Pacific Filed herewith.
Partners and Pacific Mailing Corporation, dated
December 22, 1995 for premises located at Lot #3,
Dumbarton Business Center, Central Ave., Newark,
California.
10.11 Second Amendment to Lease Between Windy Pacific Filed herewith.
Partners and Pacific Mailing Corporation, dated
May 28, 1996 for premises located at Lot #3,
Dumbarton Business Center, Central Ave., Newark,
California.
10.12 Third Amendment to Lease Between Windy Pacific Filed herewith.
Partners and Pacific Mailing Corporation, dated
September 25, 1996 for premises located at Lot
#3, Dumbarton Business Center, Central Ave.,
Newark, California.
10.13 Lease, dated September 25, 1996, between Windy Filed herewith.
Pacific Partners and Pacific Direct Marketing
Corp. DBA Pacific Link for premises at Lot #4,
Dumbarton Business Center, Central Ave., Newark,
California.
22
Exhibit No. Title Method of Filing
- ----------- ----- ----------------
10.14 Capital & Counties plc and Engage Technologies Incorporation by reference to Exhibit 10.14 to
Limited underlease, dated April 27, 1999. Registration Statement on Form S-1 of Engage
Technologies, Inc. (File No. 333-78015) (the "Engage
Form S-1").
10.15 Anthony & Co. Office Lease between Milkson Incorporation by reference to Exhibit 10.15 to the
Associates, LLC and Accipiter, Inc., dated April Engage Form S-1.
9, 1997.
10.16 Amendment to Lease Agreement between Milkson Incorporation by reference to Exhibit 10.16 to the
Associates, LLC and Accipiter, Inc. dated Engage Form S-1.
November 5, 1997.
10.17 Lease dated as of March, 1997 by and between Incorporation by reference to Exhibit 10.5 to
William J. Callahan and William J. Callahan, Jr., Registration Statement on Form S-1 of NaviSite, Inc.
as trustees of Andover Park Realty Trust, and CMG (File No. 333-83501) (the "NaviSite Form S-1").
Information Services, Inc.
10.18 Lease dated as of May 14, 1999 by and between 400 Incorporation by reference to Exhibit 10.6 to the
River Limited Partnership and NaviSite, Inc. NaviSite Form S-1.
10.19 Lease made as of April 30, 1999 by and between Incorporation by reference to Exhibit 10.7 to the
CarrAmerica Realty Corporation and NaviSite, Inc. NaviSite Form S-1.
10.20* Employment Agreement, dated August 1, 1993, Incorporation by reference to Exhibit 10.10 to the
between the Registrant and David S. Wetherell. CMGI Registration Statement
10.21* Amendment No. 1 to the Employment Agreement, Incorporation by reference to Exhibit 10.18 to the
dated January 20, 1994, between the Registrant CMGI Registration Statement.
and David S. Wetherell.
10.22* 1995 Employee Stock Purchase Plan, as amended. Incorporation by reference to Appendix C to the
Registrant's Definitive Proxy Statement on Schedule
14A filed on April 16, 1999.
10.23* 1986 Stock Option Plan, as amended. Incorporation by reference to Appendix B to the
Registrant's Definitive Proxy Statement on Schedule
14A filed on April 16, 1999.
10.24* 1995 Stock Option Plan for Non-Employee Incorporation by reference to Exhibit 10.3 to the
Directors, as amended. Quarterly Report on Form 10-Q filed on December 15,
1997.
10.25* Amendment No. 2 to Employment Agreement, dated Incorporation by reference to Exhibit 10.2 to the
October 25, 1996, between the Registrant and Quarterly Report on Form 10-Q filed on December 13
David S. Wetherell. 1996.
10.26 CMG Stock Purchase Agreement, dated as of Incorporation by reference to Exhibit 99.1 to the
December 10, 1996 by and between the Registrant Current Report on Form 8-K filed on February 14, 1997.
and Microsoft Corporation.
23
Exhibit No. Title Method of Filing
- ----------- ----- ----------------
10.27* CMG @Ventures, Inc. Deferred Compensation Plan. Incorporation by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q filed on June 16, 1997.
10.28 Common Stock Purchase Agreement dated as of Incorporation by reference to Exhibit 99.1 to the
December 19, 1997 by and between CMG Information Current Report on Form 8-K filed December 29, 1997.
Services, Inc. and Intel Corporation.
10.29 Common Stock Purchase Agreement dated as of Incorporation by reference to Exhibit 99.1 to the
February 15, 1998 by and between CMG Information Current Report on Form 8-K filed March 19, 1998.
Services, Inc. and Sumitomo Corporation.
10.30 Registration Rights Agreement dated April 8, 1998. Incorporation by reference to Exhibit 2.6 to the
Current Report on Form 8-K filed on April 23, 1998.
10.31 Amended and Restated Revolving Credit and Term Incorporation by reference to Exhibit 10.57 to the
Loan Agreement, dated as of June 11, 1998, among Annual Report on Form 10-K filed on October 29, 1998.
SalesLink Corporation, InSolutions Incorporated,
Pacific Direct Marketing Corp., BankBoston, N.A.
and the other lending institutions set forth in
Schedule 1.
10.32 Amended and Restated Term Note, dated June 11, Incorporation by reference to Exhibit 10.58 to the
1998, between SalesLink Corporation and Annual Report on Form 10-K filed on October 29, 1998.
InSolutions Incorporated and Imperial Bank.
10.33 Amended and Restated Term Note, dated June 11, Incorporation by reference to Exhibit 10.59 to the
1998, between SalesLink Corporation and Annual Report on Form 10-K filed on October 29, 1998.
InSolutions Incorporated and BankBoston, N.A.
10.34 Fourth Amended and Restated Revolving Credit Incorporation by reference to Exhibit 10.60 to the
Note, dated June 11, 1998, between SalesLink Annual Report on Form 10-K filed on October 29, 1998.
Corporation and InSolutions Incorporated and
Imperial Bank.
10.35 Fourth Amended and Restated Revolving Credit Incorporation by reference to Exhibit 10.61 to the
Note, dated June 11, 1998, between SalesLink Annual Report on Form 10-K filed on October 29, 1998.
Corporation and InSolutions Incorporated and
BankBoston, N.A.
10.36 Amended and Restated Stock Pledge Agreement, Incorporation by reference to Exhibit 10.62 to the
dated June 11, 1998, between SalesLink Annual Report on Form 10-K filed on October 29, 1998.
Corporation and BankBoston, N.A.
10.37 Amended and Restated Guaranty, dated as of June Incorporation by reference to Exhibit 10.63 to the
11, 1998, by Pacific Direct Marketing Corp. in Annual Report on Form 10-K filed on October 29, 1998.
favor of BankBoston, N.A.
10.38 Amended and Restated Security Agreement, dated as Incorporation by reference to Exhibit 10.64 to the
of June 11, 1998, among SalesLink Corporation, Annual Report on Form 10-K filed on October 29, 1998.
InSolutions Incorporated and BankBoston, N.A.
24
Exhibit No. Title Method of Filing
- ----------- ----- ----------------
10.39 Amended and Restated Security Agreement, dated as Incorporation by reference to Exhibit 10.65 to the
of June 11, 1998, between Pacific Direct Annual Report on Form 10-K filed on October 29, 1998.
Marketing Corp. and BankBoston, N.A.
10.40 Amended and Restated Trademark Collateral Incorporation by reference to Exhibit 10.66 to the
Security and Pledge Agreement, dated as of June Annual Report on Form 10-K filed on October 29, 1998.
16, 1998, between SalesLink Corporation and
BankBoston, N.A.
10.41 Trademark Collateral Security and Pledge Incorporation by reference to Exhibit 10.67 to the
Agreement, dated as of June 11, 1998, between Annual Report on Form 10-K filed on October 29, 1998.
InSolutions Incorporated and BankBoston, N.A.
10.42 Registration Rights Agreement, dated June 16, Incorporation by reference to Exhibit 10.68 to the
1998, between the listed shareholders and CMG Annual Report on Form 10-K filed on October 29, 1998.
Information Services, Inc.
10.43* CMG @Ventures I, LLC Limited Liability Company Incorporated by reference to Exhibit 10.1 to the
Agreement, dated December 18, 1997. Quarterly Report on Form 10-Q filed on June 15, 1998.
10.44* CMG @Ventures II, LLC Operating Agreement, dated Incorporation by reference from Exhibit 10.69 to the
as of February 26, 1998. Annual Report on Form 10-K filed on October 29, 1998.
10.45* Summary of Management's Interests in the Filed herewith.
@Ventures III Venture Capital Funds.
10.46* Limited Liability Company Agreement of CMG Filed herewith.
@Ventures III, LLC, dated August 7, 1998.
10.47* Agreement of Limited Partnership of @Ventures Filed herewith.
III, L.P., dated August 7, 1998.
10.48* Amendment No. 1 to the Agreement of Limited Filed herewith.
Partnership of @Ventures III, L.P., dated
August 7, 1998.
10.49* Agreement of Limited Partnership of @Ventures Filed herewith.
Foreign Fund III, L.P., dated December 22, 1998.
10.50* Amendment No. 1 to the Agreement of Limited Filed herewith.
Partnership of @Ventures Foreign Fund III, L.P.,
dated December 22, 1998.
10.51 Securities Purchase Agreement, dated December 21, Incorporation by reference to Exhibit 99.1 to the
1998, by and among CMGI, Inc. and RGC Current Report on Form 8-K filed on January 7, 1999.
International Investors, LDC and RGC
Investments II, L.P.
25
Exhibit No. Title Method of Filing
- ----------- ----- ----------------
10.52 Registration Rights Agreement, dated December 21, Incorporation by reference to Exhibit 99.2 to the
1998, by and among CMGI, Inc. and RGC Current Report on Form 8-K filed on January 7, 1999.
International Investors, LDC and RGC Investments
II, L.P.
10.53 ISDA Master Swap Agreement (the "Swap Agreement") Incorporation by reference to Exhibit 10.1 to the
dated January 15, 1999, between BankBoston, N.A. Quarterly Report on Form 10-Q filed on March 17, 1999.
and CMGI, Inc.
10.54 Schedule to the Swap Agreement, dated January 15, Incorporation by reference to Exhibit 10.2 to the
1999. Quarterly Report on Form 10-Q filed on March 17, 1999.
10.55 Confirmation to the Swap Agreement, dated January Incorporation by reference to Exhibit 10.3 to the
15, 1999. Quarterly Report on Form 10-Q filed on March 17, 1999.
10.56 ISDA Credit Support Annex, dated January 15, Incorporation by reference to Exhibit 10.4 to the
1999, between BankBoston, N.A. and CMGI, Inc. Quarterly Report on Form 10-Q filed on March 17, 1999.
10.57 Agreement for the Assignment of Voting Rights, Incorporation by reference to Exhibit 10.5 to the
dated January 15, 1999, between CMGI, Inc. and Quarterly Report on Form 10-Q filed on March 17, 1999.
Long Lane Master Trust.
10.58 Long Lane Floating Rate Trust Certificate Incorporation by reference to Exhibit 10.6 to the
Purchase Agreement, dated January 15, 1999, Quarterly Report on Form 10-Q filed on March 17, 1999.
between CMGI, Inc. and Long Lane Master Trust.
10.59 Repurchase Agreement, dated January 15, 1999, Incorporation by reference to Exhibit 10.7 to the
between CMGI, Inc. and Long Lane Master Trust. Quarterly Report on Form 10-Q filed on March 17, 1999.
10.60 Unlimited Guaranty, dated as of October 30, 1998, Incorporation by reference to Exhibit 10.8 to the
by CMGI Information Services, Inc. in favor of Quarterly Report on Form 10-Q filed on March 17, 1999.
BankBoston, N.A.
10.61 First Amendment to Amended and Restated Revolving Incorporation by reference to Exhibit 10.1 to the
Credit and Term Loan Agreement, dated as of June Quarterly Report on Form 10-Q filed on June 14, 1999.
11, 1998, among SalesLink Corporation,
InSolutions Incorporated, Pacific Direct
Marketing Corp., BankBoston, N.A. and the other
lending institutions set forth in Schedule 1.
10.62 Second Amended and Restated Term Note, dated Incorporation by reference to Exhibit 10.2 to the
March 16, 1999 among Saleslink.com Corporation, Quarterly Report on Form 10-Q filed on June 14, 1999.
Insolutions Incorporated, On-Demand Solutions,
Inc. and BankBoston, N.A.
10.63 Second Amended and Restated Term Note, dated Incorporation by reference to Exhibit 10.3 to the
March 16, 1999 among Saleslink.com Corporation, Quarterly Report on Form 10-Q filed on June 14, 1999.
Insolutions Incorporated, On-Demand Solutions,
Inc. and Imperial Bank.
26
Exhibit No. Title Method of Filing
- ----------- ----- ----------------
10.64 Security Agreement, dated March 16, 1999 between Incorporation by reference to Exhibit 10.4 to the
On-Demand Solutions and BankBoston, N.A. Quarterly Report on Form 10-Q filed on June 14, 1999.
10.65 CMGI and Participating Subsidiaries Deferred Incorporation by reference to Exhibit 10.19 to the
Compensation Plan, effective as of December 1, Quarterly Report on Form 10-Q filed on March 17, 1999.
1998.
10.66 Form of Indemnification Agreement executed Incorporation by reference to Exhibit 10.01 to the
between the Company and each of the members of Annual Report on Form 10-K filed on October 29, 1998.
its Board of Directors (David S. Wetherell,
William H. Berkman, Craig D. Goldman, John A.
McMullen and Robert J. Ranalli) in June 1998.
10.67 Securities Purchase Agreement, dated as of June Incorporation by reference to Exhibit 99.1 to the
29, 1999, by and among the Company and the Current Report on Form 8-K filed on July 7, 1999.
Investors named therein.
10.68 Registration Rights Agreement, dated as of June Incorporation by reference to Exhibit 99.2 to the
29, 1999 by and among the Company and the Current Report on Form 8-K filed on July 7, 1999.
Investors named therein.
13.1 Selected Consolidated Financial Data Filed herewith.
13.2 Management's Discussion and Analysis of Financial Filed herewith.
Condition and Results of Operations
13.3 CMGI, Inc. and Subsidiaries Consolidated Filed herewith.
Financial Statements, Supplementary Data and
Independent Auditors' Report
21 Subsidiaries of the Registrant. Filed herewith.
23.1 Consent of Independent Auditors. Filed herewith.
27 Financial Data Schedule for fiscal year ended Filed herewith.
July 31, 1999.
* Management contracts and compensatory plans or arrangements.
27
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE
--------------------------------------------------------------
The Board of Directors and Stockholders
CMGI, Inc.:
Under the date of September 24, 1999, except for Note 20, which is as of
October 29, 1999, we reported on the consolidated balance sheets of CMGI, Inc.
and subsidiaries as of July 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended July 31, 1999, which are included in the
Form 10-K for the year ended July 31, 1999. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule of Valuation and Qualifying Accounts
in the Form 10-K. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
KPMG LLP
Boston, Massachusetts
September 24, 1999
28
CMGI, INC.
SCHEDULE II
Valuation and Qualifying Accounts
For the years ended July 31, 1999, 1998, 1997
Additions Deductions
---------------------------- -----------------------------------
Additions Deductions
Accounts Receivable, Charged to (Charged
Allowance for Balance at Costs and against (a) Balance at
Doubtful beginning of Expenses (Bad Accounts Deconsolidation/ end
Accounts period Acquisitions Debt Expense) Receivable) Dispositions of period
-------- ------ ------------ -------------- ---------- ------------ -----------
1997 $323,000 $395,000 $ 424,000 $186,000 $ 10,000 $ 946,000
1998 $946,000 $264,000 $ 448,000 $ 99,000 $659,000 $ 900,000
1999 $900,000 $484,000 $2,528,000 $878,000 $ - $3,034,000
(a) Amount of $659,000 in fiscal 1998 relates to the effect of deconsolidation
of Lycos, Inc. on November 1, 1997. Amount of $10,000 in fiscal 1997
relates to the disposition of the Company's subsidiary, NetCarta
Corporation in January 1997.
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CMGI, INC.
(Registrant)
Date: October 29, 1999 By /s/ David S. Wetherell
----------------------------------
David S. Wetherell, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been duly signed below by the following persons on behalf of the Registrant
and in the capacities and on the date set forth above.
Signature Title
- --------- -----
/s/ David S. Wetherell Chairman of the Board, President,
- ----------------------------------
David S. Wetherell Chief Executive Officer and
Director (Principal Executive Officer)
/s/ Andrew J. Hajducky III Chief Financial Officer and
- ----------------------------------
Andrew J. Hajducky III, CPA Treasurer (Principal Financial and
Accounting Officer)
/s/ William H. Berkman Director
- ----------------------------------
William H. Berkman
/s/ Craig D. Goldman Director
- ----------------------------------
Craig D. Goldman
/s/ Avram Miller Director
- ----------------------------------
Avram Miller
/s/ Robert J. Ranalli Director
- ----------------------------------
Robert J. Ranalli
/s/ William D. Strecker Director
- ----------------------------------
William D. Strecker
30