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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the year ended December 31, 2000
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission file number 0-78271
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IMAGEX.COM, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1727170
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10210 NE Points Dr., Suite 200 98033
Kirkland, WA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (425) 576-6500
Securities registered pursuant to Section 12(b) of the act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.01 Par Value
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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 aggregate market value of the voting stock held by non-affiliates of
the registrant at February 27, 2001 was $54,952,541 (based on the closing sale
price of $2.06 per share on the Nasdaq National Market on such date.)
The number of shares outstanding of the registrant's common stock of
February 27, 2001 was 26,643,656.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for the 2001 Annual Meeting of
Shareholders to be held on May 8, 2001 are incorporated by reference into Part
III of this Form 10-K.
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Table of Contents
Page
----
Part I:
Item 1. Business................................................. 3
Risk Factors Affecting ImageX.com's Operating Results.... 11
Item 2. Properties............................................... 16
Item 3. Legal Proceedings........................................ 16
Item 4. Submission of Matters to a Vote of Security Holders...... 16
Part II:
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters...................................... 17
Item 6. Selected Financial Data.................................. 18
Item 7. Management's Discussion and Analysis of Operations....... 20
Item 7A. Quantitative and Qualitative Disclosures................. 28
Item 8. Financial Statements..................................... F-1
Item 9. Change in and Disagreements with Accountants on
Accounting and Financial Disclosure...................... II-1
Part III:
Item 10. Directors and Executive Officers of the Registrant....... II-1
Item 11. Executive Compensation................................... II-1
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................... II-1
Item 13. Certain Relationships and Related Transactions........... II-1
Part IV:
Item 14. Exhibits, Financial Statement Schedules.................. II-1
The Company's Annual Meeting of Shareholders is scheduled for 8:00 a.m.
(local time) on May 8, 2001 at the Bellevue Club, 11200 SE 6th Street, Bellevue,
WA, 98004. Matters to be voted on will be included in the Company's proxy
statement to be filed with the Securities and Exchange Commission and
distributed to Shareholders prior to the Annual Meeting.
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PART I
Item 1-Business
This annual report on Form 10-K contains forward-looking statements. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as may,
will, should, expect, plan, intend, anticipate, believe, estimate, predict,
potential or continue, the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially. In evaluating these statements, you should specifically
consider various factors, including the risks outlined in the "Risk Factors
Affecting ImageX.com's Operating Results" below. These factors may cause our
actual results to differ materially from any forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of the forward-looking
statements. We are under no duty to update any of the forward-looking statements
after the date of this annual report to conform such statements to actual
results or to changes in our expectations.
Overview
ImageX.com is the technology market leader in Web-enabled design and
printing services, dedicated to streamlining the workflow process from design,
production, delivery and management of branded communication materials.
ImageX.com's branded service areas provide an Internet-based end-to-end solution
to produce printed business communication materials for a variety of customers,
focused primarily on Fortune 1000 corporations.
ImageX.com's nationwide services include the following:
o Corporate Online Printing Center, a customized, secure Web site for larger
corporate customers containing an online catalog of their repeat-ordered
printed business materials;
o Extensis Products Group graphic design software including Portfolio media
asset manager, Suitcase font manager, and Preflight Online, a Web-based
digital file-checking software;
o Creativepro.com, a Web portal offering industry news, reviews, and
e-stores for graphic design professionals; and
o Small Business Printing Center, an outsourced small office/home office
print procurement service.
General Development of Business
ImageX.com, Inc. was incorporated on August 21, 1995 and is headquartered
in Kirkland, Washington. In 1999, we completed our initial public offering,
followed by a second public offering in early 2000. During 2000, we acquired
creativepro.com, an Oregon software company best known for its Extensis software
product line used by creative design professionals to create, edit, assemble and
manage digital content for print and electronic publishing. Also during 2000,
the Company acquired Howard Press, a New Jersey based, full-service printing
company providing Fortune 1000 companies with a broad range of printing,
publishing and warehousing and fulfillment services. During the 1999 fiscal
year, we acquired two companies, an Oregon-based printer, and a California-based
print broker; and merged with an Oregon based technology company.
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Since the introduction of the Corporate Online Printing Center technology
in 1997, our customer and revenue base has grown rapidly. Our online customers
include XO Communications, Blue Shield of California, SFX Entertainment, Getty
Images, IKON Office Solutions, CIBC World Markets, Network Commerce, MCSI,
General Motors, and CB Richard Ellis.
As of December 31, 2000, we had 817 employees and offices in 23
metropolitan markets across the United States.
ImageX.com Products and Services and Segment Information
The Company identifies operating segments based on product line
information, customer base and economic characteristics. As such, ImageX.com has
two major segments: Printing and Related Technology Services and Software
Products and Services. Printing and Related Technology Services segment includes
an aggregation of operations that provide internet-based e-procurement solutions
for printed business materials to corporate customers. Software Products and
Services segment includes development and sales of graphic design and print file
preparation software applications for corporate customers and individuals. The
financial results of these segments are included in the notes to the financial
statements.
Printing and Related Technology Services:
Our end-to-end Web-based solutions include several services that address
specific customer needs in the print industry workflow. These services
streamline and can reduce the cost of the print management procurement,
manufacturing and fulfillment processes.
The ImageX.com Corporate Online Printing Center is an enterprise-wide
e-procurement solution that enables companies to order, manage and distribute
branded communications materials through their own customized, secure Web site
that contains a digital catalog of their custom-printed business materials. Each
user can modify, proof, procure and manage their printed business materials from
any Windows-based, Internet-enabled personal computer.
Our Corporate Online Printing Center solution helps customers reduce print
procurement costs, streamline processes and control their brands more
effectively resulting in rapid delivery of consistent, high-quality printed
business materials. Specifically, our Corporate Online Printing Center offers
our customers the following key features:
o Expediency-Shortens the time required for customers to order printed
business materials from as much as weeks to as little as minutes,
eliminating the need to send markups and proofs to and from the
printer.
o Accuracy-Enables our customers to directly access their corporate
information online through a screen rendering that is designed to be
color-consistent and dimensionally accurate. Customers can order
their products from their own digital online catalog that includes
employee data, company graphics and logos, delivery information,
reporting requirements and prototypes of the customer's printed
business materials. We believe our system reduces errors associated
with data reentry, typesetting and the use of outdated document
versions.
o Single Source-Eliminates any need for customers to engage several
different printers to supply their printing needs. Individual
printers are typically constrained to a limited range of products
that can be supported by their equipment. Through our network of
commercial
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printing vendors and three owned facilities, we are able to provide
a wide range of printed business materials from one source. All
printed materials are shipped to the customer in an ImageX.com
branded carton. The ImageX.com solution is technology-neutral and
geography-neutral, aggregating a broad set of printing needs from
our customers.
o Security and Control-Enables customers to monitor print orders
through a password protected, secure Web site. Authorized customer
employees can individually access a wide variety of printed business
materials within the centralized parameters and rules established by
the customer organization. This is designed to bring a uniform look
to a customer's printed business materials and helps to maintain
consistency of the customer's corporate identity.
o Convenience-Allows customers to modify and order their printed
business materials, at any time, on any day, without any degradation
of services; provides online order status reports; and enables
central order management which allows customers to queue their
orders and release them in batches.
o Scalability-Scales to a large number of new employees and new
products, providing the ability to handle increasing order volume
without compromising system integrity and performance.
o Streamlined Manufacturing-Eliminates the typesetting process and
certain pre-press manufacturing steps by providing our commercial
printing vendors with print-ready files that are routed directly to
their print manufacturing equipment.
We own three printing facilities, one in Oregon and two in New Jersey that
supplement our network of commercial printing vendors. In addition to printing
items ordered through the Corporate Online Printing Center, each of our owned
printing facilities produce custom printed materials ordered through traditional
means.
Small Business Printing Center provides quick and easy access via the
Internet to a wide range of personalized printed materials at competitive
prices. This service enables users to quickly customize and order business
materials from standard templates, enabling customized smaller-quantity print
orders ideal for small office/home office businesses.
Software Products and Services:
Extensis Products Group develops and supports software and Internet-based
services for design and marketing professionals. From design through output,
Extensis products and services make the process of creating, editing and
managing branded communication materials for print and electronic publishing
more productive and efficient. Extensis' award-winning products include
Suitcase, the font management solution that helps users find the right font
quickly; Portfolio, the digital asset management solution that allows users to
efficiently organize and access digital media files; and Preflight Online, the
Web-based service that allows users to check files for potential printing and
prepress errors before submitting them for output.
Creativepro.com is a Web portal launched in 1999 that provides online
information, products and e-Services that address the core needs of creative
professionals within the print and Web publishing communities. As a one-stop
resource, creativepro.com delivers a wide range of industry-specific features,
including news, opinions and reviews, e-store, and job classifieds. These are
all designed to make the process of creating, editing, assembling and managing
digital content for print and electronic publishing
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more productive and efficient. Aligned with ImageX.com's services,
Creativepro.com's Web presence has unprecedented reach to the millions of users
and influencers in the print and creative production process.
Business Strategy
Our objective is to be the market leader in Web-enabled design and
printing services, dedicated to streamlining the workflow process from the
design, production, delivery and management of branded communication materials.
The following are the key components of our strategy:
o Exploit First Mover Advantage as the Leading End-To-End Printing
Solution-We believe that, as the first company providing an
integrated Internet solution for procurement of printed business
materials for corporate customers, we have the opportunity to
establish ourselves as the leading commercial printing brand on the
Internet.
o Focus on Quality of Customers-We believe that, by targeting and
winning larger corporate customers, such as those companies on the
Fortune 1000, we can achieve higher revenue growth as these
companies tend to have larger print budgets and they can see the
positive impact of our solution throughout their organization on a
greater scale.
o Increase Revenues From Existing Customers-We believe that
substantial opportunity exists for us to grow by selling additional
products and services to our existing customers. Existing customers
have the advantage of understanding our value proposition, so
further selling to different divisions of a company or increasing
the number of products we produce for a company presents an
opportunity to increase revenues.
o Enhance Product and Technology Leadership-We intend to continue our
leadership position by pursuing technology initiatives designed to
enhance our product and service offerings, such as our integration
with B2B procurement systems like Ariba and Commerce One. We
consistently research and reassess customer needs and preferences
and future trends when developing new products and technologies to
achieve customer satisfaction.
o Extend Market Reach Through Strategic Alliances-We intend to
leverage and extend our technology alliances into marketing
alliances and build a structured partner program for marketing and
referrals. We believe these alliances will generate more leads and
revenues.
Customers and Markets
Printed business materials, which include promotional marketing materials
and general office products, are employed throughout business organizations
today. Based on data provided by CAP Ventures, sales in the U.S. printing
industry totaled $306 billion in 2000. Of that amount, $61 billion was derived
from the commercial print industry, including sales of printed business
materials for corporate and small office/home office print buyers.
Our target customers for the Corporate Online Printing Center are Fortune
1000 companies in major markets nationwide. At December 31, 2000, we had 331
online customers through our direct sales efforts and through conversion of
acquired customers. Of the 331 corporate online customers, 32 are Fortune 1000
companies. In addition to online customers, we also serve customers acquired
through acquisition who order printed business materials from us through
traditional means. Our goal is to convert as many such target customers as
possible to our online system. Fine Arts Graphics, Image Press and Howard Press,
companies acquired by us during the last two years, sold printed business
materials to an aggregate of over 850 customers as of the end of 2000.
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Extensis Products Group markets and sells its products to design and
marketing professionals and those involved with brand management. Preflight
Online is sold and marketed to printers, prepress houses, service bureaus,
newspapers and publishers. Portfolio is sold and marketed to professional
photographers, stock photography agencies, magazines and other publications and
corporations that manufacture and sell products. Creativepro.com serves the
needs of creative professionals and those in the print and web publishing
industry.
Sales and marketing
Organization
We sell the ImageX.com Corporate Online Printing Center services through
our direct sales force. As of December 31, 2000, our sales and marketing team
consisted of 54 employees. We have a Director of Sales and 42 sales
representatives covering 23 sales regions throughout the United States. We
continue to expand our direct sales force into additional major markets across
the country in order to expand our customer base.
Promotion
We market the Corporate Online Printing Center solution primarily to
senior purchasing and marketing executives of our customers. Our solution allows
employees and purchasing departments to quickly process their orders for general
office materials, such as business cards, stationery and labels, and to allow
marketing departments to more efficiently provide promotional marketing
materials, such as brochures and sell sheets, to their sales organizations,
channel partners and customers.
Multiple integrated marketing tools are used to generate leads, and,
ultimately, gain new customers:
o Print Media/Public Relations-Print media/public relations build
awareness of our solution in major markets and draw target customers
to our Web site. ImageX.com uses advertising and public relations
agencies to integrate all marketing programs and ensure efficient
and effective spending.
o Trade Shows/Event Speakerships/E-commerce Summits-Key e-commerce and
industry events reach a broader market and facilitate market
education and lead generation. They also accelerate the sales cycle
time from lead-to-closure.
Extensis software is distributed by a comprehensive network of global
resellers in over 35 countries. In North America, products are sold through a
combination of direct corporate and online sales as well as through distributors
including Ingram Micro and TechData. Extensis products are available from
catalog resellers including MicroWarehouse, PC Connection, Creative Computers,
CDW and Multiple Zones. Online resellers include buy.com and outpost.com. In
Europe and Australasia, distributors include Computers Unlimited in the UK,
Apacabar in France, Softline, MacLand and Prisma Opengate in Germany, Pica in
Australia, and Marubeni and SoftwareTOO in Japan. Creativepro.com sells
advertising space on its website to those wishing to reach the creative
community.
Technology
The technology behind the ImageX.com Corporate Online Printing Center
solution is based on an integrated view of the entire print procurement and
manufacturing process. Our corporate print procurement solution combines both
the print manufacturing process and the customer procurement process into one
coherent system, and drives the entire ordering and manufacturing processes. The
solution was designed as a scalable manufacturing system to process thousands of
printing orders daily. ImageX.com hosts substantially
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all elements of the system for all customers and print vendors. Customers use
standard Internet browsers to access the system.
The ImageX.com corporate print procurement solution runs on a distributed
Oracle database that holds and manages all ordering rules, content information
and process data. The system utilizes Microsoft's Internet Information Server,
Transaction Server and Message Queue Server. Finally Adobe PDF technology is
used for online proofing of materials prior to ordering. Every component of the
ImageX.com corporate print procurement solution architecture was chosen with
scalability as a primary consideration. By using scalable technologies from
Oracle, Microsoft and Adobe, the ImageX.com solution is able to leverage
innovations and capabilities from those vendors on an incremental basis, without
impacting other elements of the system or its fundamental architecture.
Extensis Products Group produces software based on both the MacOS and
Windows operating systems. Extensis' products are available in both stand-alone
and server-based versions. Preflight Online is an internet delivered
preflighting technology that utilizes an ASP delivery model.
Operations
The Corporate Online Printing Center leverages a network of approximately
40 commercial printing vendors and three facilities that we own. Our network of
commercial printing vendors includes printers located across the United States,
all of whom can ship nationwide. A substantial majority of our vendors are
small, regional operators. With this network of vendors and the facilities that
we own, we are able to deliver printed business materials nationwide and
globally. We believe that the Corporate Online Printing Center offers improved
corporate utilization within our vendor network, direct cost and overhead cost
reduction and improved vendor management.
The Small Business Printing Center is completely outsourced with the Web
site, customer service, and manufacturing all performed by a third-party
provider. We receive a portion of the revenue generated through this
arrangement.
Product Development
Our future success will depend on our ability to maintain and develop
competitive technologies, to continue to enhance our current services, and to
develop and introduce new services in a timely and cost-effective manner that
meets evolving customer needs, new competitive service offerings, emerging
industry standards and rapidly changing technology. We have a dedicated product
development organization that creates new features and functionality for our
existing services, as well as the software that supports new services. Our
Corporate Online Printing Center technology is currently running on its eighth
version. The product development team has expertise in database systems, network
technology, digital print imaging systems, Internet protocols and security,
distributed computing and computer-integrated manufacturing. At December 31,
2000, we had 74 employees engaged in product development. Product development
expenses were $10.8 million for the year ended December 31, 2000, $3.8 million
in 1999, and $2.8 million in 1998. We expect to continue making substantial
expenditures on product development in the future.
Intellectual Property
We rely on intellectual property laws in the United States and other
jurisdictions to protect our proprietary rights. We have filed trademark
applications for the ImageX.com name in the U.S., Canada and other key foreign
countries. We currently have 83 U.S. patent applications pending on our
technology relating to our Corporate Online Printing Center, PrintBid.com and
Extensis Products Group technology. We own copyrights in the computer software
and online materials that we have developed, and we currently hold
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limited licenses to use software in which third parties own copyrights,
including software for database management and electronic pre-press.
Competition
The market for printed business materials is very competitive. We compete
primarily with local and regional commercial printers, which are either
independent or owned by print industry consolidators, and with print brokers or
other Internet-based print providers. The U.S. commercial printing industry is
highly fragmented, with over 30,000 local and regional commercial printers
operating nationwide in 2000. These printers compete aggressively for business
printing orders in the markets they serve.
Traditional commercial printers often have long-standing relationships
with customers. We face challenges in convincing businesses to consider
alternatives to their traditional printer. Commercial printers compete primarily
on product pricing, product and service quality and, to a lesser extent, on
innovation in printing technologies and techniques. To attract new customers and
retain our existing customers, we must compete effectively in each of these
areas.
We also face direct competition from printing services brokers who offer
customers a relatively wide variety of products and services and are able to
obtain favorable pricing for their customers by soliciting bids from a variety
of printers. Like local and regional printers, printing services brokers often
have long-standing customer relationships.
We also face competition from other Internet-based companies that offer
business printing services, as well as from others that may develop such
services in the future. Potential developers of competing electronic commerce
services may include consumer printing services providers, office service
providers, equipment manufacturers and financial printers and publishers.
Extensis Products Group faces direct competition from other software
developers and providers of internet-based services.
Our Executive Officers
The name, age and position, as of March 8, 2001, of each of our executive
officers is as follows:
Name Age Position
- ---- --- --------
Richard P. Begert............ 44 President, Chief Executive Officer and
Director
Eric J. Bean................. 42 Vice President, Products and Technology
Robin L. Krueger............. 50 Chief Financial Officer, Treasurer and
Assistant Secretary
Gary Madson.................. 48 Vice President of Operations
Dana F. Manciagli............ 40 Vice President, Sales and Marketing
Mariam J. Naini.............. 37 Vice President, General Counsel and
Secretary
F. Joseph Verschueren........ 49 Chairman of the Board
Richard P. Begert (age 44) has been President, Chief Executive Officer and
director of ImageX.com since November 1998. From 1993 to 1998, Mr. Begert was
Regional President of AT&T Wireless Services (and its predecessor, McCaw
Cellular Communications, Inc.), a telecommunications company. From 1986 to 1993,
Mr. Begert held various other positions at McCaw Cellular. Mr. Begert received
his B.A. in business administration from the University of Washington.
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Eric J. Bean (age 42) has been Vice President, Products and Technology of
ImageX.com since July 1998. From June 1991 to July 1998, Mr. Bean held several
positions, including Director of Product Management and Business Line Manager,
with Adobe Systems Inc., a software company (and Aldus Corporation, which was
acquired by Adobe Systems in 1994). Mr. Bean received his B.S. in mathematics
from Pacific Lutheran University, his M.B.A. from the University of Washington,
and his master's degree in software engineering from Seattle University.
Robin L. Krueger (age 50) has been Chief Financial Officer since July 1999
and Treasurer and Assistant Secretary since December 1999. From 1994 to July
1999, Ms. Krueger was Vice President of Finance and Treasurer of Alaska
Airlines, Inc., a commercial airline. From 1987 to 1994, Ms. Krueger served as
Alaska Airlines' Assistant Vice President and Treasurer and from 1984 to 1987 as
Assistant Treasurer. Ms. Krueger received her B.B.A. from the University of
Washington and her M.B.A. from the George Washington University.
Gary Madson (age 48) has been Vice President of Operations since September
2000. Madson comes to ImageX.com from Zomax, Inc., an outsourcing service
provider to the software industry where he worked on the Microsoft account
holding the position of Global Microsoft Business Manager. He was responsible
for the outsourced CD replication, packaging, printing, fulfillment and
call-center operations supporting Microsoft's software business worldwide.
Madson took an in-house function from Microsoft and transitioned it into a
profitable outsourced solution. Prior to working at Zomax, Madson was the
general manager of KAO Infosystems, where he instituted world-class quality
programs such as ISO 9000 certification and a sophisticated call-center
excellence program. Before his experience at KAO Infosystems, Madson was the
vice president of operations for Royal Seafoods Inc., a seafood processing
business where he was responsible for manufacturing, warehousing, distribution,
engineering, product development and quality control. Madson holds a B.S. in
biological oceanography from the University of Washington.
Dana F. Manciagli (age 40) has been Vice President, Sales and Marketing of
ImageX.com since May 1998. From August 1996 to May 1998, Ms. Manciagli was Vice
President of Worldwide Marketing of the Kodak Professional Division of Eastman
Kodak Company, a photographic equipment and supply company. From June 1991 to
July 1996, she was Director of Marketing for Europe and Asia of Sea-Land
Service, Inc., a subsidiary of CSX Corporation, a transportation company, in
Hong Kong. Ms. Manciagli received her B.A. in political science from the
University of California, Santa Barbara and her master's degree in international
management from the American Graduate School of International Management.
Mariam J. Naini (age 37) has been Vice President, General Counsel and
Secretary of ImageX.com since November 1999 and Secretary since December 1999.
From April 1999 to October 1999, Ms. Naini was an Associate General Counsel at
Amazon.com, Inc. From April 1998 to March 1999, she was an Of Counsel with Irell
& Manella LLP's Los Angeles, California office. From July 1994 to March 1998,
Ms. Naini was a Senior Associate with Morgan, Lewis & Bockius LLP's Washington,
D.C. office, and from December 1988 to June 1994, she was an associate with
Howrey & Simon LLP's Washington, D.C. office. Ms. Naini received her B.A. degree
with honors, in three years, from Wellesley College and a Juris Doctorate degree
in 1988 from Georgetown University Law Center.
F. Joseph Verschueren (age 49) was a Co-Founder of ImageX.com, has been a
director of ImageX.com since its inception in 1995 and has served as Chairman of
the Board since August 1997. In addition, he served as President from September
1996 to November 1998 and Chief Executive Officer from August 1997 to November
1998. Mr. Verschueren served as Chief Executive Officer of Parallel
Communications Inc., an advertising agency, from 1992 to 1996 and as Chairman of
the Board of Parallel Communications until July 1999. Mr. Verschueren received
his B.A. in English and a B.A. in philosophy from Gonzaga University.
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Employees
As of December 31, 2000, we had 817 employees. We also employ a limited
number of independent contractors and temporary employees on a periodic basis.
None of our employees are represented by a labor union, and we consider our
labor relations to be good. We believe our success depends to a significant
extent on our ability to attract, motivate and retain highly skilled management
and employees. To this end, we focus on incentive programs such as employee
stock options, competitive compensation and benefits for our employees.
Annual Meeting
The Company's Annual Meeting of Shareholders is scheduled for 8:00 a.m.
(local time) on May 8, 2001 at the Bellevue Club, 11200 SE 6th Street, Bellevue,
WA, 98004. Matters to be voted on will be included in the Company's proxy
statement to be filed with the Securities and Exchange Commission and
distributed to Shareholders prior to the Annual Meeting.
RISK FACTORS AFFECTING IMAGEX.COM'S OPERATING RESULTS
You should carefully consider the risks described below and the other
information in this report. While we have attempted to identify all risks that
are material to our business, additional risks that we have not yet identified
or that we currently think are immaterial may also impair our business
operations. The trading price of our common stock could decline due to any of
these risks. In assessing these risks, you should also refer to the other
information in this report, including the consolidated financial statements and
related notes.
We Have A Limited Operating History And Are Subject To The Risks Of New
Enterprises. We began operations in 1996 and commercially introduced our
Internet-enabled printing services in October 1997. Our limited operating
history and the uncertain and emerging nature of the market in which we compete
make it difficult to assess our prospects or predict our future operating
results. Therefore, you should not consider our recent revenue growth as an
indication of our future rate of revenue growth, if any. Our prospects are
subject to the risks and uncertainties frequently encountered in the
establishment of a new business enterprise, particularly in the new and rapidly
evolving markets for Internet products and services.
We Have A History Of Losses And Expect Losses Will Continue. We have never
been profitable, and we anticipate that we will continue to incur net losses in
future periods. To become profitable, we must significantly increase our
revenues by obtaining new customers and generating additional revenues from
existing customers, control our expenses and improve our gross margins. As of
December 31, 2000, we had an accumulated deficit of $81.3 million. Although we
have experienced revenue growth in recent periods, our revenues may not continue
at their current level or increase in the future. We may continue to incur
operating losses for some time.
If we are unable to continue to increase our revenues and operating
margins, our operating losses may continue to increase in future periods.
Increased competition or other changes in printing industry economics may also
adversely affect our ability to eventually become profitable.
Our Quarterly Results Are Difficult To Predict And Are Likely To
Fluctuate, Which May Have An Impact On Our Stock Price. Our quarterly revenues,
expenses and operating results have varied significantly in the past and are
likely to vary significantly from quarter to quarter in the future. Our
operating results may fall below market analysts' expectations in some future
quarters, which could lead to a significant decline in
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the market price of our stock. In addition to the risk factors described
elsewhere, quarterly fluctuations may also result from:
o our ability to obtain new customers and upgrade acquired customers
to the ImageX.com online system;
o changes in our operating expenses and capital expenditure
requirements;
o our ability to retain our existing customers and increase sales to
them;
o changes in the mix of printing and software services we sell;
o the timing of customer orders;
o impairment of long-lived assets;
o increased competition; and
o general or industry-specific economic conditions.
Based on all these factors, we believe that our quarterly revenues,
expenses and operating results will be difficult to predict. Moreover, because
of our short operating history and our acquisitions, period-to-period
comparisons of our operating results are not necessarily meaningful. As a
result, you should not rely on such comparisons as indications of our future
performance.
To Obtain New Customers, We Must Overcome Long Standing Customer
Relationships And Long Sales Cycles. Many of the potential customers that we
pursue through our direct sales process have long-standing business
relationships and personal ties with their existing printers, which they are
reluctant to disrupt. Customers are also often reluctant to change their
existing ordering and production processes to take advantage of our Internet-
based printing services. To successfully sell our products, we generally must
educate our potential customers on the use and benefits of our system, which can
require significant time and resources. Consequently, we must incur substantial
expenses in acquiring new customers and converting them to the ImageX.com online
system. The period between initial contact and the purchase of our products
through our online system is often long and subject to delays associated with
the lengthy approval and competitive evaluation processes that typically
accompany a customer's decision to change its outsourcing relationships. For
typical customers, the sales cycle takes between two to twelve weeks, but for
large customers, the sales cycle may require more than one year.
A substantial majority of our revenue is derived from customers that we
have obtained through acquisitions of print providers. A majority of this
revenue is currently generated through traditional offline orders rather than
through our online procurement system. In order for our business to be
successful, we must increase the percentage of our revenue from online ordering
while increasing our revenue in absolute terms. There can be no assurance that
we will be able to convert acquired customers fast enough to accomplish this.
Furthermore, we have historically made acquisitions using our common stock as a
major portion of the consideration. With the recent closing prices of our common
stock, it becomes impractical to use it for such acquisitions. And with the
current state of capital markets, we are cognizant of our need to conserve cash.
These factors together make it more difficult for us to obtain additional
customers through acquisitions.
We May Be Unable To Meet Our Future Capital Requirements And Execute On
Our Business Strategy. Because we are not currently generating sufficient cash
to fund operations, we may need to raise additional capital in the future, in
order to fund our operations and pursue our growth strategy. We believe
12
our existing cash and cash equivalents will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures for at least
the next 12 months. However, our future capital requirements will depend on many
factors that are difficult to predict, including our rate of revenue growth, our
operating losses, the cost of obtaining new customers and technical
capabilities, and the cost of upgrading and maintaining our network
infrastructure and other systems. As a result, we cannot predict with certainty
the timing or amount of our future capital needs. If our capital requirements
vary materially from those currently planned, we may require additional
financing sooner than anticipated. We have no commitments for additional
financing, and we may experience difficulty in obtaining additional funding on
favorable terms, if at all. Any difficulty in obtaining additional financial
resources could force us to curtail our operations or prevent us from pursuing
our growth strategy.
We May Need To Raise Additional Capital In The Future, Which Can Cause
Dilution. Any future funding may dilute the ownership of our shareholders.
Shareholders could experience additional dilution if we issue shares of our
stock to pay for acquisitions of other businesses or assets. In addition, our
board of directors has broad discretion to determine the rights and preferences
of securities issued to investors or shareholders of acquired businesses in the
future. If we issue securities with senior or superior rights and powers,
existing shareholders may be adversely affected.
Increases In Paper Prices And Shortages In Paper Supply Could Adversely
Affect Our Gross Margins And Operating Results. The cost of paper is a principal
factor in the pricing we receive from our network of commercial printing vendors
and our own pricing through our three production facilities. We are generally
able to pass increases in the cost of paper on to customers, while decreases in
paper costs generally result in lower prices to customers. If we are unable to
pass future paper cost increases on to our customers, or if our customers reduce
their order volume, our profit margins and cash flows could be adversely
affected.
In recent years, increases or decreases in demand for paper have led to
corresponding pricing changes. In periods of high demand, certain paper grades
have been in short supply, including grades we and our commercial printing
vendors use. Any loss of the sources for paper supply or any disruption in our
suppliers' businesses or their failure to meet our product needs on a timely
basis could cause, at a minimum, temporary shortages in needed materials, which
could have a material adverse effect on our operating results, sales, profit
margins and cash flows.
We May Be Exposed To Environmental Liabilities And May Face Increased
Costs Of Compliance With Environmental Laws And Regulations. The printing
business generates substantial quantities of inks, solvents and other waste
products requiring disposal. The printing facilities that we operate are subject
to federal and state environmental laws and regulations concerning emissions
into the air, discharges into waterways and the generation, handling and
disposal of waste materials. We believe our facilities are in substantial
compliance with these laws and regulations at this time. However, changes to
these laws and regulations could increase the cost of our doing business or
otherwise have a material adverse effect on our business, financial condition
and operating results. In addition, although we maintain commercial property
insurance at all our facilities, this insurance may not be adequate to cover any
claims against us for environmental liabilities.
If Businesses Do Not Accept The Internet As A Means Of Procuring Printed
Business Materials, Our Business May Not Be Able To Grow Sufficiently. For us to
succeed, the Internet must continue to be adopted as an important means of
buying and selling products and services. Even if the Internet is widely adopted
for business procurement, it may not achieve broad market acceptance for
printing services procurement.
We have expended, and will continue to expend, significant resources
educating potential customers about our services, capabilities and benefits. We
may not be successful in achieving market acceptance of the
13
ImageX.com system or in achieving significant market share before competitors
offer products, applications or services with features similar or superior to
our current or proposed offerings.
If We Are Unable To Compete Successfully Against Traditional Printing
Companies Or Other Businesses Offering Internet-Based Printing Services, Our
Business May Not Succeed. The market for printed business materials is intensely
competitive. We compete primarily with local and regional printers, which are
either independent or owned by print industry consolidators. The U.S. commercial
printing industry is highly fragmented, with over 30,000 local and regional
commercial printers operating nationwide in 2000. These local and regional
printers typically have significant excess production capacity. Therefore, they
compete aggressively for business printing orders in the markets they serve.
Traditional commercial printers often have long-standing relationships
with customers. We face substantial challenges in convincing businesses to
consider alternatives to their traditional printers. In addition, printers
typically have extensive local sales forces that regularly canvass and solicit
businesses in the areas they serve. Commercial printers compete primarily on
product pricing, product and service quality and, to a lesser extent, on
innovation in printing technologies and techniques. To attract new customers and
retain our existing customers, we must compete effectively in each of these
areas.
We also face substantial competition from printing services
brokers-companies that contract with businesses to select and procure printing
services from a variety of printers. Brokers are able to offer customers a
relatively wide variety of products and services, and are often able to obtain
favorable pricing for their customers by soliciting bids from a variety of
printers. Like local and regional printers, printing services brokers often have
long-standing customer relationships and extensive local direct sales forces.
We also face direct competition from other companies that market
integrated Internet-based business printing services similar to ours. Potential
developers of competing electronic commerce services may include:
o consumer printing services providers, including Internet-based
providers;
o office services providers;
o equipment manufacturers; and
o financial printers and publishers.
Many of our current and potential future competitors have substantially
greater financial, marketing and other resources than we do. As a result, they
may be able to market their products, services and branding more aggressively
than we are able to, and may be able to significantly undercut our pricing for
extended periods of time. They may also be able to respond more quickly and
effectively to emerging new technologies and to changes in customer requirements
and preferences.
Difficulties With Third-Party Services And Technologies Could Disrupt Our
Business And Undermine Our Reputation. Our success in attracting and retaining
customers and convincing them to increase their reliance on our Internet-based
printing services depends on our ability to offer customers reliable, secure and
continuous service. This in turn requires us to ensure continuous and error-free
operation of our systems and network infrastructure. We rely on third parties to
provide key components of our networks and systems. For instance, we rely on a
third-party Internet services provider for the high-speed connections that link
our Web servers and office systems to the Internet. We also rely on third-party
communications services providers to provide secure connections to relay
customer order information to our network of commercial printing vendors.
14
As the volume of data traffic on our network and other systems increases,
we must continuously upgrade and enhance our technical infrastructure to
accommodate the increased demands placed on our systems. If we fail to rapidly
scale up the speed and data capacity of our systems, our customers may
experience a deterioration of response times from our systems or periodic
systems failures. Such difficulties would reduce customer loyalty and use of our
services.
Possible Electronic Commerce Security Breaches And Systems Failures Could
Harm Our Business. We rely on encryption and authentication technology to effect
secure transmission of confidential information. It is possible that advances in
computer capabilities, new discoveries in the field of cryptography, or other
events or developments will result in a compromise or breach of the codes used
by us to protect customer transaction data. If any such compromise of our
security were to occur, it could have a material adverse effect on our
reputation and on our ability to conduct business. It also could expose us to a
risk of loss or litigation and possible liability. It is possible that our
security measures will not prevent security breaches.
The performance of our computer and telecommunications equipment is
critical to our reputation and to our ability to achieve market acceptance of
our services. Any system failure, including any network, software or hardware
failure, that causes interruption or an increase in response time of our online
services could decrease usage of our services. Frequent systems failures could
reduce the attractiveness of our services to our customers. An increase in the
volume of printing orders could strain the capacity of our hardware, which could
lead to slower response time or systems failures. Our operations also depend in
part on our ability to protect our operating systems against physical damage
from fire, earthquakes, power loss, telecommunications failures, computer
viruses, hacker attacks, physical break-ins and similar events.
Potential Imposition Of Governmental Regulation On Electronic Commerce And
Legal Uncertainties Could Limit Our Growth. The adoption of new laws or the
adaptation of existing laws to the Internet may decrease the growth in the use
of the Internet, which could in turn decrease the demand for our services,
increase our cost of doing business or otherwise have a material adverse effect
on our business, financial condition and operating results. Few laws or
regulations currently directly apply to access to commerce on the Internet.
Federal, state, local and foreign governments are considering a number of
legislative and regulatory proposals relating to Internet commerce. As a result,
a number of laws or regulations may be adopted regarding Internet user privacy,
taxation, pricing, quality of products and services, and intellectual property
ownership. How existing laws will be applied to the Internet in areas such as
property ownership, copyright, trademark, trade secret, obscenity and defamation
is uncertain.
Possible Infringement Of Intellectual Property Rights Could Harm Our
Business. Legal standards relating to the protection of intellectual property
rights in Internet-related industries are uncertain and still evolving. As a
result, the future viability or value of our intellectual property rights, as
well as those of other companies in the Internet industry, is unknown. We
currently have no issued patents. We have 83 U.S. patent applications pending,
but we cannot be certain that any patent will ultimately be issued.
We cannot be certain that the steps we have taken to protect our
intellectual property rights will be adequate or that third parties will not
infringe or misappropriate our proprietary rights, nor can we be sure that
competitors will not independently develop technologies that are substantially
equivalent or superior to the proprietary technologies employed in our Web-based
services. In addition, we cannot be certain that our business activities will
not infringe on the proprietary rights of others or that other parties will not
assert infringement claims against us. Any claim of infringement of proprietary
rights of others, even if ultimately decided in our favor, could result in
substantial costs and diversion of resources. If a claim is asserted that we
infringed the intellectual property of a third party, we may be required to seek
licenses to such third-party technology. We cannot be sure that licenses to
third-party technology will be available to us at a reasonable
15
cost, if at all. If we were unable to obtain such a license on reasonable terms,
we could be forced to cease using the third-party technology. See more
discussion related to intellectual property rights under item 3 of Part I,
"Legal Proceedings", of this document.
Our Articles Of Incorporation And Bylaws And Washington Law Contain
Provisions That Could Discourage A Takeover. Certain provisions of our articles
of incorporation, our bylaws and Washington law could make it more difficult for
a third party to obtain control of ImageX.com, even if doing so might be
beneficial to our shareholders.
Item 2-Properties
We are headquartered in Kirkland, Washington, where we lease approximately
44,000 square feet of executive office space, pursuant to a lease that expires
on December 31, 2004. We also lease a total of approximately 92,000 square-feet
for administrative facilities in Tualatin, Oregon, San Leandro, California and
Union, New Jersey and Roselle, New Jersey. We have a total of approximately
232,000 square-feet for the production facility for the printing and related
technology segment in Tualatin, Oregon, Union, New Jersey and Linden, New
Jersey. Through an acquisition in 2000, we added an approximately 22,000
square-foot administrative office facility in Portland, Oregon, where our
software segment operates. During 2000, we relocated our headquarter to Kirkland
from Bellevue, Washington and we plan to sublease our 23,000 square-foot office
space in Bellevue, which leases expire in February 2002 and May of 2004.
Item 3-Legal Proceedings
On June 22, 2000, Markzware, a privately held California corporation,
served a complaint on creativepro.com, Inc. alleging a single count of patent
infringement. The complaint seeks actual, statutory and injunctive relief.
Although creativepro.com, Inc. disputes each and every allegation of wrongdoing
in this complaint and is aggressively defending itself in this action, there can
be no assurance that it will prevail in this lawsuit. Additionally, from time to
time, ImageX.com and its affiliate companies are subject to other legal
proceedings and claims in the ordinary course of business. The Company currently
is not aware of any such legal proceedings or claims that it believes will have,
individually or in the aggregate, a material adverse effect on its business,
prospects, financial condition and operating results.
Item 4-Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of 2000.
16
Part II
Item 5-Market for Registrant's Common Equity and Related Shareholder Matters
Our common stock has been quoted on the Nasdaq National Market under the
symbol "IMGX" since August 26, 1999, the date of our initial public offering.
Prior to that time, there was no public market for our stock.
The following table sets forth, for the periods indicated, the high and
low sales prices per share of our common stock as reported on the Nasdaq
National Market.
1999 Fiscal Year High Low
- ---------------- ---- ---
Third Quarter (since Aug.26, 1999).................... $23.00 $10.25
Fourth Quarter........................................ $45.00 $7.75
2000 Fiscal Year
- ----------------
First Quarter ........................................ $40.00 $17.13
Second Quarter ....................................... $16.11 $5.27
Third Quarter ........................................ $8.38 $3.91
Fourth Quarter........................................ $4.13 $0.97
On February 27, 2001, the Company had 360 shareholders of record. The last
reported sale price per share on February 27, 2001, was $2.06.
We have never paid dividends on our common stock. We currently intend to
retain any future earnings to fund the development and growth of our business.
Therefore, we do not currently anticipate declaring or paying cash dividends in
the foreseeable future.
Recent Sales of Unregistered Securities
Between June 30, 2000 and December 31, 2000, we issued 21,190 shares of
common stock at prices ranging from $1.03 to $5.94 to Mac Publishing Company as
consideration for advertising services rendered.
On August 18, 2000, we issued 1,000 shares of common stock at price of $5
per share to Ms. Lori Segale as consideration for consulting services rendered.
The sales and issuances of these securities were exempt from registration
under the Securities Act, pursuant to Section 4(2) of the Securities Act, on the
basis that the transactions did not involve a public offering.
17
Item 6-Selected Financial Data
You should read the following selected financial data in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and related notes of
ImageX.com. Historical results are not necessarily indicative of future results.
SELECTED FINANCIAL DATA
(In thousands, except share and per share data)
Year Ended December 31,
-----------------------
1996 1997 1998(2) 1999(3) 2000(4)
---- ---- ------ ------ ------
STATEMENT OF OPERATIONS DATA:
Revenues ......................................... $ 79 $ 87 $ 968 $ 11,499 $ 50,731
Cost of sales .................................... 99 100 998 8,541 33,963
----------------------------------------------------------------------------
Gross profit (loss) .............................. (20) (13) (30) 2,958 16,768
----------------------------------------------------------------------------
Operating expenses:
Sales and marketing .......................... -- 1,018 2,207 6,765 24,942
Product development .......................... 300 1,316 2,750 3,770 10,828
General and administrative ................... 146 1,285 3,549 11,002 25,470
Amortization of unearned compensation ........ -- -- 380 2,284 1,681
Amortization of goodwill and other
intangibles .............................. -- -- -- 213 3,964
In-process research and development .......... -- -- -- -- 1,062
----------------------------------------------------------------------------
Total operating expenses ............... 446 3,619 8,886 24,034 67,947
----------------------------------------------------------------------------
Loss from operations ............................. (466) (3,632) (8,916) (21,076) (51,179)
Other income (expense), net ...................... 3 62 (48) 241 3,724
----------------------------------------------------------------------------
Net profit (loss) ................................ (463) (3,570) (8,964) (20,835) (47,455)
Preferred stock accretion ........................ -- -- (221) (84) --
----------------------------------------------------------------------------
Net profit (loss) used in calculating net
loss per share ............................... $ (463) $ (3,570) $ (9,185) $ (20,919) $ (47,455)
----------------------------------------------------------------------------
Basic and diluted net loss per share(1) .......... $ (13.60) $ (14.14) $ (12.25) $ (3.07) $ (2.02)
----------------------------------------------------------------------------
Shares used in computation of basic and diluted
net loss per share(1) ............................ 34,042 252,425 749,987 6,805,098 23,534,359
----------------------------------------------------------------------------
18
December 31,
------------
1997 1998(2) 1999(3) 2000(4)
---- ------ ------ ------
BALANCE SHEET DATA:
Cash and cash equivalents ........................ $ 186 $ 967 $ 18,257 $ 40,420
Working capital (deficit) ........................ (616) (293) 18,053 47,386
Total assets ..................................... 938 2,469 35,668 136,306
Long-term obligations, net of current portion .... 300 454 -- 8,800
Mandatorily redeemable convertible preferred stock 3,459 11,350 -- --
Accumulated deficit .............................. (4,033) (12,997) (33,832) (81,287)
Total shareholders' equity (deficit) ............. (3,642) (10,887) 30,774 117,106
- -----------
(1) See Note 1 to ImageX.com Financial Statements for an explanation of the
method used in computing basic and diluted net loss per share.
(2) During December 1999, ImageX.com acquired PrintBid.com. The acquisition
was accounted for under the pooling-of-interest method and all
consolidated financial statements of ImageX.com have been restated to
include the results and balances of PrintBid.com for all periods
presented.
(3) The 1999 results include the operations of Fine Art Graphics and Image
Press, which ImageX.com acquired in April 1999 and September 1999
respectively. See Note 14 to ImageX.com's financial statements.
(4) The 2000 results include the operations of creativepro.com and Howard
Press, which ImageX.com acquired in June 2000. See Note 14 to ImageX.com's
financial statements.
19
Item 7-Management's Discussion and Analysis of Financial Condition and Results
of Operations
When you read this section of our Form 10-K, it is important that you also
read the financial statements and related notes included elsewhere in this
report. This section of this report contains forward-looking statements that
involve risks and uncertainties, such as statements of our plans, objectives,
expectations and intentions. We use words such as "anticipate," "believe,"
"expect," "future" and "intend" and similar expressions to identify
forward-looking statements. Our actual results could differ materially from
those anticipated in these forward-looking statements for many reasons,
including the factors described below and in the section entitled, "Risk Factors
Affecting ImageX.com's Operating Results." You should not place undue reliance
on these forward-looking statements, which apply only as of the date of this
report. We do not assume any obligation to revise forward looking statements.
Overview
ImageX.com is an Internet-based business-to-business e-commerce company in
the U.S. commercial printing industry. We derive substantially all our revenues
from the e-procurement and sale of printed business materials and software
products and services which include graphic design and print file preparation
software applications.
Revenue
For orders we receive through our Corporate Online Printing Center, we
charge customers for the printed products they order in accordance with
customer-specific pricing arrangements negotiated with each account. Orders are
fulfilled through our network of approximately 40 vendors and three
company-owned facilities and shipped directly to customers under the ImageX.com
brand. In addition, service revenues related to the Corporate Online Printing
Center are generated from creation of Web sites and annual maintenance fee for
the sites. To date, we have derived the majority of our revenues from our
Corporate Online Printing Center and from customers we obtained through
acquisitions.
In 2000, our revenue was supplemented by software product sales. We sell
software products to distributors and resellers and to some distributors that
will reproduce, localize, and package our products. We generally provide a
sixty-day right of return policy for consumer software sales. A provision is
recorded for estimated product returns.
Orders placed through our Small Business Printing Center are fulfilled by
an outsourced supplier. We receive a percentage of the purchase price paid by
customers for each order placed through the Small Business Printing Center. As
of December 31, 2000, the Small Business Printing Center had not generated
significant revenues.
As an element of our sales and marketing strategy, we enter into strategic
alliances with various parties. In certain of these arrangements we have agreed
to share revenue or pay transaction fees on revenue derived from the
relationship, and in one case to pay a fixed monthly fee regardless of revenue
generated. These relationships have not generated any significant revenues to
date.
In our Corporate Online Printing Center and Small Business Printing Center
and through our wholly owned subsidiaries, Image Press, Fine Arts Graphics, and
Howard Press, we recognize product revenues when the order is shipped to the
customer and we have fulfilled all of our contractual obligations. For sale of
Extensis graphic design software, we recognize revenue when pervasive evidence
of a contract exists, the software has been delivered, the fee is fixed or
determinable and collectibility is probable. Distributors and resellers
generally have a sixty-day right of return. A provision is recorded for
estimated product returns.
20
In the commercial printing industry, prices tend to move in correlation
with paper prices. We generally have been able to pass fluctuations in paper
pricing through to our customers, although this cannot be assured in the future.
We also offer volume discounts to customers, which we expect will continue.
Our customers include a wide variety of businesses, from Fortune 1000
companies to small office operations. A substantial portion of our revenue has
been derived from customers that have come to ImageX.com by means of our
acquisitions in 1999 and 2000. Our goal in such acquisitions was to convert
acquired customers to our online print procurement system. Although we intend to
encourage, and generally expect, that a majority of the historical revenue of
acquired companies will migrate to our online procurement system, such
conversions require significant time and effort, and we expect that customers
who elect to convert to online procurement will continue to order printing from
us through traditional means while they transition to e-procurement. Revenue
generated through traditional means could continue to account for a significant
percentage of our total revenue.
Gross Profit
For products sold through our Corporate Online Printing Center that are
produced by our network of vendors, gross profit is calculated as the selling
price of a specific product (including freight) less the price our vendor
charges us and freight costs. For products sold through our Corporate Online
Printing Center that we produce in our own facilities, gross profit is
calculated as the selling price of the product (including freight), less
manufacturing costs, freight costs and certain allocated overhead. For software
products, gross profit is the selling price less manufacturing costs and
royalties.
Operating Expenses
Our business incurs operating expenses in three broad expense categories:
sales and marketing, product development and general and administrative.
Historically, as is typical of early-stage technology companies, expenses of all
three categories increased significantly due to acquisitions, our expansion of
sales force, and our focus on building the ImageX.com online printing system and
an infrastructure suitable for future growth. In the future, we intend to focus
on increasing our revenue base and scalability by acquiring new customers,
converting customers we acquired to our online system, increasing revenue from
existing customers, and improving operation efficiency. Our future success will
depend on our ability to achieve these objectives. As a result, we expect that
expenses of all categories will decline over time as a percentage of sales.
Amortization of Unearned Compensation, Goodwill and Other Intangibles
Amortization consists of the amortization of unearned compensation,
goodwill and other intangible assets. The amortization of unearned compensation
is a result of recording the difference between the fair value of our common
stock at the date of grant and the exercise or purchase price of such
securities, as applicable. The unearned compensation is amortized over the
remaining vesting period of the applicable stock or options. The amortization of
goodwill and other intangible assets is a result of the acquisitions of Fine
Arts Graphics and Image Press in 1999 and creativepro.com and Howard Press in
2000. The amortization of goodwill and other intangible assets is over periods
ranging from 3 to 10 years.
21
Results of Operations
The following table sets forth, for the periods indicated, certain
statement of operations data expressed as a percentage of revenues. Historical
periods have been restated to reflect our acquisition of PrintBid.com in
December 1999, which was accounted for using the pooling-of-interest method.
SELECTED STATEMENT OF OPERATIONS DATA
Year Ended December 31,
-----------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Revenues ..................................................... 100% 100% 100% 100% 100%
Cost of sales ................................................ 126 115 103 74 67
--------------------------------------------------
Gross margin ................................................. (26) (15) (3) 26 33
--------------------------------------------------
Operating expenses:
Sales and marketing ...................................... -- 1,167 228 59 49
Product development ...................................... 382 1,509 284 33 22
General and administrative ............................... 186 1,474 367 96 50
Amortization of unearned compensation, goodwill, and other
intangibles ........................................... -- -- 39 22 11
In-process research and development ...................... -- -- -- -- 2
--------------------------------------------------
Total operating expenses ........................... 568 4,150 918 210 134
--------------------------------------------------
Loss from operations ......................................... (594) (4,165) (921) (184) (101)
Other income (expense), net .................................. 4 71 (5) 2 7
--------------------------------------------------
Net loss ..................................................... (590)% (4,094)% (926)% (182)% (94)%
--------------------------------------------------
We have incurred significant net losses since our inception. As of
December 31, 2000, we had accumulated a deficit of $81.3 million. Our limited
operating history and the uncertain and emerging nature of our market make it
difficult to assess our prospects or predict our future results of operations.
Therefore, you should not consider our recent revenue growth as an indication of
our future rate of revenue growth, if any. Our prospects are subject to the
risks and uncertainties frequently encountered in establishing a new business
enterprise, particularly in the new and rapidly evolving markets for online
products and services. Because of our short operating history, period-to-period
comparisons of our results of operations are not necessarily meaningful. As a
result, you should not rely on such comparisons as indications of our future
performance.
Years Ended December 31, 1999 and 2000
Revenues
Revenues were $11.5 million and $50.7 million for the years ended December
31, 1999 and 2000, respectively, representing an increase of $39.2 million, or
341%, over the prior year. This increase was primarily due to the acquisition of
creativepro.com and Howard Press customers in 2000 and to an increased number of
customers using our online system, from approximately 195 customers at December
31, 1999 to approximately 331 customers at December 31, 2000. The increase in
the number of customers contributes to both increased product and service
revenues.
22
The printing and related services segment revenues increased from $11.5 to
$41.9 million for the years ended December 31, 1999 and 2000, respectively,
representing an increase of $30.4 million or 264%. This increase is due to the
acquisition of Howard Press and the increased number customers described above.
The software products and services segment contributed $8.9 million to revenue
in 2000, resulting from the Creativepro acquisition.
Gross Profit
Gross profit was $3.0 million and $16.8 million for the years ended
December 31, 1999 and 2000, respectively, representing an increase of $13.8
million or 460%. The increase in gross profit was primarily due to our expanded
customer base and consequent increased sales volumes, increased product pricing
to our customers, change in product mix, and acquisitions.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of salaries and related
benefits for sales and marketing personnel, advertising expenses, marketing
expenses and travel expenses. Sales and marketing expenses were $6.8 million and
$24.9 million for the years ended December 31, 1999 and 2000, respectively,
representing an increase of $18.1 million, or 266%, over the prior year. The
increase in sales and marketing expenses resulted primarily from acquisitions
and expanding the number of our sales regions from 15 to 23 during 2000, hiring
new sales representatives and marketing personnel, promotion and public
relations expenses.
Product Development Expenses
Product development expenses consist primarily of salaries and benefits
for developers, product managers and quality assurance personnel. Product
development expenses were $3.8 million and $ 10.8 million for the years ended
December 31, 1999 and 2000, respectively, representing an increase of $7.0
million or 184%, over the prior year. The increase in product development
expenses was due to an acquisition in 2000, increased salary and benefit related
expenses from hiring new personnel and contractors.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and
benefits for executive, finance, administrative and information technology
personnel as well as outside professional services and facilities related
expenses. General and administrative expenses were $11.0 million and $25.5
million for the years ended December 31, 1999 and 2000, respectively,
representing an increase of $14.5 million, or 132%, over the prior year. The
increase in general and administrative expenses was primarily due to our hiring
additional executive, finance, administrative and information technology
personnel to support the growth of our business and acquisitions. In addition,
we have had higher expenses resulting from depreciation, professional fees and
office expenses.
Amortization
The amortization of unearned compensation was $2.3 million and $1.7
million for the years ended December 31, 1999 and 2000, respectively,
representing a decrease of $0.6 million, or 26%, over the prior year. This total
unearned compensation amount represents the difference between the fair value of
our common stock for accounting purposes at the date of grant and the exercise
or purchase price of such securities, as applicable. The unamortized portion of
this total unearned compensation amount is reflected as a reduction of
shareholders' equity and will be amortized over the remaining vesting period of
the applicable
23
stock or options. The unearned compensation is being amortized over the vesting
period of the individual options, generally four years, using an accelerated
method. We expect that the amortization of unearned compensation will decrease
in the future due to the accelerated amortization method being used.
The amortization of goodwill and other intangibles was $213,000 and $4.0
million for the years ended December 31, 1999 and 2000, respectively,
representing an increase of $3.8 million. The intangible assets being amortized
result primarily from acquisitions in 1999 and 2000. In the future, we
anticipate amortization of goodwill and other intangibles to increase compared
to 2000, which due to timing, included only approximately six months'
amortization of acquisitions closed during the year.
In Process Research and Development
Among the assets purchased in the acquisitions closed in June 2000 were
two software projects under development. Both of these products were between 85%
and 90% completed at the date of acquisition and had no alternative use if not
completed successfully. Both products are now complete and generated revenue in
the fourth quarter of 2000. These projects were valued using a discounted cash
flow analysis (19% discount rate) by independent appraisers. The $1,062,000 of
value derived from the analysis was expensed in the second quarter of 2000.
Other Income
Other income consists primarily of interest income. Other income was
$241,000 and $3.7 million for the years ended December 31, 1999 and 2000,
respectively, representing an increase of $3.5 million over the prior year. The
increase in other income primarily resulted from interest on the proceeds of our
initial public offering in August 1999 and follow-on offering in February 2000.
Income Taxes
No provision for federal income taxes has been recorded to date because we
incurred net operating losses from inception through December 31, 2000. As of
December 31, 2000, we had approximately $81.2 million of net operating loss
carryforwards for federal income tax purposes, expiring in 2011 through 2020.
These losses are available to offset future taxable income. Given our limited
operating history, losses incurred to date and the difficulty in accurately
forecasting our future results, we do not believe that the realization of the
related deferred income tax assets meets the criteria required by generally
accepted accounting principles and, accordingly, no deferred tax asset has been
recorded.
Net Loss
The net loss was $20.8 million and $47.5 million for the years ended
December 31, 1999 and 2000, respectively, representing an increase of $26.7
million, or 128%, over the prior year. The $26.7 million increase in net loss
for the year ended December 31, 2000 resulted from increases in all categories
of expenses-sales and marketing, product development, general and
administrative, and amortization; as we completed two acquisitions in 2000 and
had significant growth overall during the year ended December 31, 2000.
24
Years Ended December 31, 1998 and 1999
Revenues
Revenues were $968,000 and $11.5 million for the years ended December 31,
1998 and 1999, respectively, representing an increase of $10.5 million, or
1,088%, over the prior year. This increase was primarily due to the acquisition
of Fine Arts Graphics and Image Press customers in 1999 and to an increased
number of customers using our online system, from approximately 80 customers at
December 31, 1998 to approximately 200 customers at December 31, 1999. The
increase in the number of customers contributed to both increased product and
service revenues.
Gross Profit
Gross profits/(loss) were ($30,000) and $3.0 million for the years ended
December 31, 1998 and 1999, respectively, representing an increase of $3.0
million in 1999 over the prior year. The increase in gross profit was primarily
due to our expanded customer base and consequent increased sales volumes,
increased product pricing to our customers, and decreased costs due to
renegotiated supplier pricing with several of our key commercial print vendors.
Sales and Marketing Expenses
Sales and marketing expenses were $2.2 million and $6.8 million for the
years ended December 31, 1998 and 1999, respectively, representing an increase
of $4.6 million, or 209%. The increase in sales and marketing expenses resulted
primarily from hiring new sales representatives and marketing personnel, travel
expenses, and marketing expenses, including public relations, company Web site
maintenance, telemarketing expenses, and printed marketing materials.
Product Development Expenses
Product development expenses were $2.8 million and $3.8 million for the
years ended December 31, 1998 and 1999, respectively, representing an increase
of $1.0 million or 36%. The increase in product development expenses was due to
an increase in amortization resulting from the capitalization of certain
software development costs relating to our Corporate Online Printing Center,
increased salary and benefit related expenses from hiring new personnel and the
inclusion of product development expenses associated with PrintBid.com.
General and Administrative Expenses
General and administrative expenses were $3.5 million and $11.0 million
for the years ended December 31, 1998 and 1999, respectively, representing an
increase of $7.5 million, or 214%. The increase in general and administrative
expenses was primarily due to our hiring of additional executive, finance,
administrative and information technology personnel as well as outside
contractors to support the growth of our business. In addition, we had higher
expenses resulting from depreciation, software maintenance expenses, and
professional fees. Increases in general and administrative expenses were also a
result of the inclusion of PrintBid.com's expenses.
Amortization
The amortization of unearned compensation was $380,000 and $2.3 million
for the years ended December 31, 1998 and 1999, respectively, representing an
increase of $1.9 million, or 501%. This total
25
unearned compensation amount represented the difference between the fair value
of our common stock for accounting purposes at the date of grant and the
exercise or purchase price of such securities, as applicable. The unearned
compensation was amortized in accordance with Financial Accounting Standards
Board Interpretation No. 28 over the vesting period of the individual options,
generally four years.
The amortization of goodwill and other intangibles was $0 and $213,000 for
the years ended December 31, 1998 and 1999, respectively, representing an
increase of $213,000, or 100%. The goodwill and other intangibles arose as a
result of the acquisition of Fine Arts Graphics and Image Press.
Other Income (Expense), Net
The net other income/expense were an expense of $48,000 and income of
$241,000 for the years ended December 31, 1998 and 1999, respectively,
representing an increase of $289,000. The expense for the year ended December
31, 1998 was interest on debt outstanding. With the proceeds of our public
offering in August 1999, all existing debt was paid off and the remaining
proceeds were invested which resulted in a net interest income for the year
ended December 31, 1999.
Income Taxes
No provision for federal income taxes was recorded to date because we
incurred net operating losses from inception through December 31, 1999. As of
December 31, 1999, we had approximately $31.2 million of net operating loss
carryforwards for federal income tax purposes, expiring in 2011 through 2019.
These losses were available to offset future taxable income. Given our limited
operating history, losses incurred to date and the difficulty in accurately
forecasting our future results, we do not believe that the realization of the
related deferred income tax assets meets the criteria required by generally
accepted accounting principles and, accordingly, no deferred tax asset was
recorded.
Net Loss
The net loss was $9.0 million and $20.8 million for the years ended
December 31, 1998 and 1999, respectively, representing an increase of $11.8
million, or 132%, over the prior year. The $11.8 million increase in net loss
for the year ended December 31, 1999 was as a result of increased spending in
all categories-sales and marketing, product development, general and
administrative, and amortization; as we completed three acquisitions and had
significant growth overall during the year ended December 31, 1999.
Liquidity and Capital Resources
In February and March 2000 we completed our follow-on offering of common
stock and issued additional 4,695,595 shares at $23 per share. The net proceeds
from this offering were approximately $101.4 million, net of underwriting
discounts, commissions and other offering costs.
As of December 31, 2000, we had cash and cash equivalents of $40.4
million, representing an increase of $22.2 million from cash and cash
equivalents held as of December 31, 1999. Our working capital at December 31,
2000 was $47.4 million, compared to $18.1 million at December 31, 1999.
Net cash used in operating activities was $37.3 million and $17.3 million
for the years ended December 31, 2000 and 1999, respectively. The operating cash
outflows were primarily attributable to significant expenditures on product
development, sales and marketing, and general and administrative expenses, all
of which led to operating losses. The cash outflows resulting from operating
losses and increases in accounts receivable were partially offset by increases
in inventory.
26
Net cash used in investing activities was $44.1 million and $11.6 million
for the years ended December 31, 2000 and 1999, respectively, and consisted
primarily of acquisitions described elsewhere and capital expenditures,
including equipment and software.
Net cash provided by financing activities was $103.6 million for the year
ended December 31, 2000 and consisted primarily of $101.4 million in net
proceeds from the issuance of common stock in our follow-on offering. We also
received proceeds of $8.8 million from borrowing of long-term debt. Net cash
provided by financing activities was $46.2 million for the year ended December
31, 1999 and was primarily from the issuance of convertible preferred stock and
net proceeds from our initial public offering in August 1999.
We anticipate continued capital expenditures and lease commitments
consistent with anticipated growth in operations, infrastructure and personnel,
including growth associated with product and service offerings, geographic
expansion and integration of any newly acquired businesses. We may increase our
operating expenses which will consume a material amount of our cash resources;
however, we believe that our existing cash and cash equivalents together with
available credit facilities, will be sufficient to meet our anticipated cash
needs for working capital and capital expenditures for at least the next 12
months. However, our future capital requirements will depend on many factors
that are difficult to predict, including our rate of revenue growth, our
operating losses, the cost of obtaining new customers and technical
capabilities, and the cost of upgrading and maintaining our network
infrastructure and other systems.
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standard Board ("FASB") issued SFAS
No. 133, Accounting for Derivatives and Hedging Activities, which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The new standard is effective for the
Company beginning January 1, 2001. Because the Company has never used nor
currently intends to use derivatives, management does not anticipate that the
adoption of this new standard will have a significant effect on earnings or the
financial position of the Company.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition", which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC. SAB 101 outlines the basic criteria
that must be met to recognize revenue and provides guidance for disclosures
related to revenue recognition policies. SAB 101 became effective in fourth
quarter of 2000. The adoption of SAB 101 had no material effect on the financial
position or results of operations of the Company.
In March 2000, the FASB issued FASB Interpretation No. 44 ("FIN 44"),
"Accounting for Certain Transactions Involving Stock Compensation, an
Interpretation of APB Opinion No. 25". FIN 44 clarifies the application of
Opinion 25 for certain issues such as the definition of "employee", criteria for
determining noncompensatory plans, as well as accounting for modification to
fixed stock options and exchange of stock compensation awards in a business
combination. FIN 44 became effective on July 1, 2000. The adoption of FIN 44 had
no material effect on the financial position and results of operations of the
Company.
27
Impact of Inflation
Although the Company has not attempted to calculate the effect of
inflation, management does not believe inflation has had a material effect on
the Company's results of operations. In the future, increases in costs and
expenses, particularly raw materials and labor costs may have a significant
impact on the Company's operating results to the extent that such cost increases
cannot be passed along to the customers.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to financial market risks, including changes in interest
rates. We typically do not attempt to reduce or eliminate our market exposures
on our investment securities because the majority of our investments are
short-term. We do not have any derivative instruments.
The fair value of our investment portfolio or related income would not be
significantly impacted by either a 100 basis point increase or decrease in
interest rates due mainly to the short-term nature of the major portion of our
investment portfolio. Our $4 million term loan bears interest at LIBOR plus
2.5%. Our $4.8 million revolving credit line bears interest at LIBOR plus 2.5%
and prime plus 1%. Both are scheduled for repayments within five years. Related
expense would not be significantly impacted by either a 100 basis point increase
or decrease in interest rates.
All of the potential changes noted above are based on sensitivity analysis
performed on our balances as of December 31, 2000.
28
Item 8-Financial Statements
Financial statements of ImageX.com, Inc. are as follows
Page
----
Report of PricewaterhouseCoopers LLP, independent accountants ............ F-2
Consolidated Balance Sheets as of December 31, 2000 and 1999 ............. F-3
Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998 ..................................... F-4
Consolidated Statements of Comprehensive Income for the years
ended December 31, 2000, 1999 and 1998 ............................... F-4
Consolidated Statements of Shareholders' Equity (Deficit) for
the years ended December 31, 2000, 1999 and 1998 ..................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998 ..................................... F-6
Notes to Consolidated Financial Statements ............................... F-7
Unaudited Quarterly Information .......................................... F-30
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 2000, 1999 and 1998 ............................. S-1
F-1
Report of Independent Accountants
To the Board of Directors and Shareholders
ImageX.com, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of ImageX.com, Inc. and its subsidiaries (the "Company") at December
31, 2000 and 1999, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2000, in conformity
with accounting principles generally accepted in the United States of America.
In addition, in our opinion, the financial statement schedule listed in the
accompanying index presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Seattle, Washington
February 1, 2001
F-2
IMAGEX.COM, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
December 31, December 31,
2000 1999
---- ----
ASSETS
Current assets:
Cash and cash equivalents ............................................................. $ 40,420 $ 18,257
Accounts receivable (net of allowance for doubtful accounts and
returns of $1,403 and $126 at December 31, 2000 and 1999,
respectively) ...................................................................... 12,250 3,427
Inventories ........................................................................... 3,726 653
Prepaid expenses ...................................................................... 1,390 610
--------- ---------
Total current assets ............................................................... 57,786 22,947
Restricted cash ........................................................................... 2,412 1,625
Property and equipment, net ............................................................... 22,748 6,613
Goodwill (net of accumulated amortization of $2,589 and $145 at
December 31, 2000 and 1999, respectively) .......................................... 41,658 2,132
Other assets (net of accumulated amortization of $1,581 and $68 at
December 31, 2000 and 1999, respectively) .......................................... 11,702 2,351
--------- ---------
Total assets ....................................................................... $ 136,306 $ 35,668
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ...................................................................... $ 5,519 $ 3,500
Accrued liabilities ................................................................... 4,881 1,394
--------- ---------
Total current liabilities .......................................................... 10,400 4,894
Notes payable ............................................................................. 8,800
--------- ---------
Total liabilities .................................................................. 19,200 4,894
--------- ---------
Commitments and contingencies (Note 12)
Shareholders' equity:
Common stock, $0.01 par value; 70,000,000 shares authorized; 26,557,287
and 17,381,639 shares issued and outstanding at December 31, 2000 and
1999, respectively ................................................................. 265 174
Additional paid-in capital ............................................................ 199,092 67,118
Unearned compensation ................................................................. (837) (2,518)
Accumulated other comprehensive loss .................................................. (27)
Notes receivable from shareholders .................................................... (100) (168)
Accumulated deficit ................................................................... (81,287) (33,832)
--------- ---------
Total shareholders' equity ......................................................... 117,106 30,774
--------- ---------
Total liabilities and shareholders' equity ................................................ $ 136,306 $ 35,668
========= =========
The accompanying notes are an integral part of these financial statements.
F-3
IMAGEX.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year Ended
December 31,
------------
2000 1999 1998
---- ---- ----
Revenues:
Printing and related services ................................................. $ 41,861 $ 11,499 $ 968
Software products and services ................................................ 8,870
-------- -------- --------
Total revenues ...................................................... $ 50,731 $ 11,499 $ 968
Cost of sales:
Printing and related services ................................................. 32,690 8,541 998
Software products and services ................................................ 1,273
-------- -------- --------
Total cost of sales ................................................. 33,963 8,541 998
-------- -------- --------
Gross profit (loss) ................................................. 16,768 2,958 (30)
-------- -------- --------
Operating expenses:
General and administrative (excluding amortization of
unearned compensation of $1,351, $1,938, and $380) ...................... 25,470 11,002 3,549
Sales and marketing ......................................................... 24,942 6,765 2,207
Product development (excluding amortization of unearned
compensation of $330, $346, and $0) ...................................... 10,828 3,770 2,750
Amortization of unearned compensation, goodwill and
other intangibles ....................................................... 5,645 2,497 380
In-process research and development ......................................... 1,062
-------- -------- --------
Total operating expenses ........................................... 67,947 24,034 8,886
-------- -------- --------
Loss from operations ............................................... (51,179) (21,076) (8,916)
Interest income (expenses), net ................................................. 3,724 241 (48)
-------- -------- --------
Net loss ........................................................... $(47,455) $(20,835) $ (8,964)
======== ======== ========
Basic and diluted net loss per share (Note 1) ................................... $ (2.02) $ (3.07) $ (12.25)
======== ======== ========
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net loss ........................................................................ $(47,455) $(20,835) $ (8,964)
Other comprehensive income (loss):
Foreign currency translation .......................................... (27)
-------- -------- --------
Comprehensive income (loss) ..................................................... $(47,482) $(20,835) $ (8,964)
======== ======== ========
The accompanying notes are an integral part of these financial statements.
F-4
IMAGEX.COM, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
Preferred
Series A Common Stock Additional
--------- ------------ Paid-In Unearned
Shares Amount Shares Amount Capital Compensation
------ ------ ------ ------ ------- ------------
Balances, January 1, 1998 1,500,000 $ 15 1,200,000 $ 12 $ 392
Issuance of common stock for notes receivable................... 500,000 5 195
Repurchase of common stock...................................... (100,000) (1) (1)
Issuance of stock options to consultants ....................... 169
Issuance of common stock upon exercise of stock options......... 8,520 2
Issuance of common stock to PrintBid shareholders............... 473,454 5 319 $ (6)
Issuance of common stock warrants related to
convertible debt ............................................. 1,073
Unearned compensation, net...................................... 2,335 (1,955)
Accretion of mandatorily redeemable convertible
preferred stock .............................................. (221)
Net loss........................................................
------------------------------------------------------------------
Balances, December 31, 1998..................................... 1,500,000 15 2,081,974 21 4,263 (1,961)
------------------------------------------------------------------
Redemption of common stock...................................... (42,000) (1) (7)
Purchase of treasury stock...................................... (38,212) (1) (1)
Issuance of stock options and warrants to consultants........... 188
Issuance of common stock upon exercise of stock options......... 164,775 2 62
Issuance of common stock for acquisitions....................... 110,144 2 673
Warrants issued in conjunction with preferred stock............. 909
Accretion of mandatorily redeemable preferred stock............. (84)
Net proceeds from initial public offering (net of offering
costs of $3,119)............................................ 3,450,000 35 20,996
Collection of notes receivable..................................
Conversion of preferred stock to common stock upon initial
public Offering............................................. (1,500,000) (15) 11,351,132 113 35,799
Issuance of common stock upon exercise of warrants.............. 170,290 2 217
Unearned compensation, net...................................... 3,180 (557)
Issuance of common stock to PrintBid shareholders............... 133,536 1 1,070
Compensation related to common stock, subject to repurchase,
issued to advisors.......................................... 295
Write-off of unamortized discount on convertible debt........... (442)
Net loss........................................................
------------------------------------------------------------------
Balances, December 31, 1999..................................... 17,381,639 174 67,118 (2,518)
------------------------------------------------------------------
Net proceeds from follow-on offering (net of offering costs
of $6,588).................................................. 4,695,595 47 101,351
Issuance of common stock upon exercise of stock options......... 353,893 3 166
Issuance of common stock upon exercise of warrants.............. 195,273 1 571
Issuance of common stock pursuant to Employee Stock Purchase
Plan........................................................ 154,159 2 885
Issuance of common stock and options for acquisitions........... 3,753,818 38 28,911
Issuance of common stock for operating expenses................. 22,910 90
Amortization of unearned compensation........................... 1,681
Collection of notes receivable..................................
Foreign currency translation....................................
Net loss........................................................
------------------------------------------------------------------
Balances, December 31, 2000..................................... -- $ -- 26,557,287 $265 $199,092 $ (837)
==================================================================
Notes Accumulated
Receivable Other
From Comprehensive Accumulated
Shareholders Income (loss) Deficit Total
------------ ------------- ------- -----
Balances, January 1, 1998 $ (28) $ (4,033) $ (3,642)
Issuance of common stock for notes receivable................... (200)
Repurchase of common stock...................................... (2)
Issuance of stock options to consultants ....................... 169
Issuance of common stock upon exercise of stock options......... 2
Issuance of common stock to PrintBid shareholders............... 318
Issuance of common stock warrants related to
convertible debt ............................................. 1,073
Unearned compensation, net...................................... 380
Accretion of mandatorily redeemable convertible
preferred stock .............................................. (221)
Net loss........................................................ (8,964) (8,964)
-----------------------------------------------------
Balances, December 31, 1998..................................... (228) (12,997) (10,887)
-----------------------------------------------------
Redemption of common stock...................................... 8
Purchase of treasury stock...................................... (2)
Issuance of stock options and warrants to consultants........... 188
Issuance of common stock upon exercise of stock options......... (15) 49
Issuance of common stock for acquisitions....................... 675
Warrants issued in conjunction with preferred stock............. 909
Accretion of mandatorily redeemable preferred stock............. (84)
Net proceeds from initial public offering (net of offering
costs of $3,119)............................................ 21,031
Collection of notes receivable.................................. 67 67
Conversion of preferred stock to common stock upon initial
public Offering............................................. 35,897
Issuance of common stock upon exercise of warrants.............. 219
Unearned compensation, net...................................... 2,623
Issuance of common stock to PrintBid shareholders............... 1,071
Compensation related to common stock, subject to repurchase,
issued to advisors.......................................... 295
Write-off of unamortized discount on convertible debt........... (442)
Net loss........................................................ (20,835) (20,835)
-----------------------------------------------------
Balances, December 31, 1999..................................... (168) (33,832) 30,774
-----------------------------------------------------
Net proceeds from follow-on offering (net of offering costs
of $6,588).................................................. 101,398
Issuance of common stock upon exercise of stock options......... 169
Issuance of common stock upon exercise of warrants.............. 572
Issuance of common stock pursuant to Employee Stock Purchase
Plan........................................................ 887
Issuance of common stock and options for acquisitions........... 28,949
Issuance of common stock for operating expenses................. 90
Amortization of unearned compensation........................... 1,681
Collection of notes receivable.................................. 68 68
Foreign currency translation.................................... $ (27) (27)
Net loss........................................................ (47,455) (47,455)
-----------------------------------------------------
Balances, December 31, 2000.............................. $ (100) $ (27) $ (81,287) $117,106
=====================================================
The accompanying notes are an integral part of these financial statements.
F-5
IMAGEX.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Year Ended
December 31,
------------
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net loss ........................................................................ ($ 47,455) $ (20,835) $ (8,964)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ................................................ 9,415 1,947 423
Amortization of unearned compensation ........................................ 1,681 2,284 380
Interest expense for warrants issued in connection with bridge financing ..... 115 30
Amortization of discount on convertible debentures ........................... 2
Write-off of unamortized discount on convertible debt ........................ (442)
Services exchanged for common stock, options and warrants .................... 90 1339 482
Write-off of acquired in process research and development .................... 1,062
Provision for doubtful accounts .............................................. 218 111 15
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable .......................................................... (3,925) (2,340) (231)
Inventories .................................................................. 1,898 (624)
Prepaid expenses ............................................................. (234) (528) (33)
Other assets ................................................................. (152) (558) (6)
Accounts payable and accrued liabilities ..................................... 69 2,226 480
--------- --------- ---------
Net cash used in operating activities ........................................ (37,333) (17,305) (7,422)
--------- --------- ---------
Cash flows from investing activities:
Purchases of property and equipment .......................................... (16,635) (2,476) (870)
Proceeds from sale of property and equipment ................................. 20
Deposits of restricted cash .................................................. (787) (1,600) (25)
Acquisitions, net ............................................................ (26,718) (7,498)
--------- --------- ---------
Net cash used in investing activities ........................................ (44,120) (11,574) (895)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes payable ...................................... 4,000 2,932 601
Principal payments on notes payable .......................................... (8,251) (2,071) (285)
Proceeds from borrowings on line of credit ................................... 4,800 96
Repayment on line of credit .................................................. (796)
Proceeds from issuance of Preferred stock (net of offering costs of $1,063
and $118 for 1999 and 1998, respectively) ............................. 24,740 8,678
Repurchase of common stock ................................................... 1,628 (2) (2)
Proceeds from issuance of common stock ....................................... 268 10
Proceeds from issuance of common stock related to public
offering (net of offering costs of $6,558 and $3,119 for 2000
and 1999, respectively) ............................................... 101,398 21,031
Proceeds from repayment on notes receivable from shareholders ................ 68 67
--------- --------- ---------
Net cash provided by financing activities .................................... 103,643 46,169 9,098
--------- --------- ---------
Effect of exchange rate changes on cash ...................................... (27)
Net increase in cash and cash equivalents .................................... 22,163 17,290 781
Cash and cash equivalents at beginning of period ............................. 18,257 967 186
--------- --------- ---------
Cash and cash equivalents at end of period ................................... $ 40,420 $ 18,257 $ 967
========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-6
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
THE COMPANY
ImageX.com, Inc. ("the Company") was incorporated on August 21, 1995 and
is headquartered in Kirkland, Washington. The Company provides Internet-based
business-to-business e-procurement services for printed business materials and
designs and markets graphic-design software. The Company's e-procurement
solution includes the following services:
o Corporate Online Printing Center, a customized, secure Web site for
larger corporate customers containing an online catalog of their
repeat-ordered printed business materials;
o Extensis graphic design software including Portfolio media asset
manager, Suitcase font manager, and first ever Web-based digital
file-checking software, Preflight Online;
o Creativepro.com, a web portal offering industry news, reviews,
e-stores for graphic design professionals; and
o Small Business Printing Center, an outsourced small office/home
office print procurement service.
As described in Note 14, on December 9, 1999, the Company merged with
PrintBid.com, Inc. in a transaction accounted for as a pooling of interests.
These consolidated financial statements give retroactive effect to the merger of
the Company with PrintBid.com, Inc.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries after elimination of all significant
intercompany accounts and transactions.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
RESTRICTED CASH
Restricted cash consists of certificates of deposit which collateralize
letters of credit as required by the Company's office lease and marketing
agreements.
INVENTORIES
Inventories consist of raw materials and supplies, work-in-process and
finished goods, which are stated at the lower of cost or market. Cost is
determined using a method which approximates the first-in, first-out method.
Work-in-process includes direct labor, materials and allocated overhead.
F-7
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided on
the straight-line method for financial statement purposes. Estimated useful
lives of the assets are as follows:
Assets Years
------ -----
Computer software............................. 1 - 4
Computer hardware............................. 3 - 5
Office furniture and equipment................ 5 - 10
Machinery and equipment....................... 7 - 12
Leasehold improvements........................ Life of lease or useful lives,
whichever is shorter, ranging
from 3 to 5
Expenditures for additions and improvements are capitalized; expenditures
for maintenance and repairs are expensed as incurred. When assets are retired or
otherwise disposed of, the cost of the assets and related accumulated
depreciation are eliminated from the accounts and any resulting gain or loss is
reflected in the results of operations.
COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE
Costs of computer software developed or obtained for internal use are
capitalized while in the application development stage and are expensed while in
the preliminary stage and the post-implementation stage. Capitalized
internal-developed software is depreciated using the straight-line method over
one to four years. These capitalized costs are included in property and
equipment in the accompanying consolidated balance sheet.
GOODWILL
Goodwill represents the excess of the cost of purchased subsidiaries over
the estimated fair value of the net assets acquired as of the date of
acquisition and is being amortized using the straight line method over 10 years.
During 2000 and 1999, the Company recognized the related amortization expense of
approximately $2,451 and $145, respectively.
OTHER ASSETS
Other assets consist primarily of customer list, trained workforce, and
purchased technology resulting from acquisitions in 2000 and 1999. They are
being amortized using the straight-line methods over their estimated useful
lives, which range from 3 to 8 years. During 2000 and 1999, the Company
recognized related amortization expense of approximately $571 and $50 for
customer list, $470 and $18 for trained workforce, and $360 and $0 for purchased
technology.
F-8
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
VALUATION OF LONG-LIVED ASSETS
The Company periodically evaluates the carrying value of long-lived assets
to be held and used, including, but not limited to, property and equipment,
goodwill and other assets, when events and circumstances warrant such a review.
The carrying value of a long-lived asset is considered impaired when the
anticipated undiscounted cash flow from such asset is separately identifiable
and is less than its carrying value. In that event, a loss is recognized based
on the amount by which the carrying value exceeds the fair value of the
long-lived asset. No impairment has been recorded as of December 31, 2000.
STOCK-BASED COMPENSATION
The Company follows SFAS No. 123, "Accounting for Stock-Based
Compensation" which establishes financial accounting and reporting standards for
stock-based employee compensation plans and for the issuance of equity
instruments to acquire goods and services from nonemployees.
The Company has elected to apply the disclosure only provision of SFAS No.
123 for employee stock-based compensation plans. Accordingly, the Company
accounts for stock-based compensation to employees using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. Compensation expense
for stock options is measured as the excess, if any, of the fair value of the
Company's common stock at the date of grant over the exercise price. The Company
records the fair value of equity instruments issued to nonemployees in
accordance with the provisions of SFAS No. 123.
REVENUE RECOGNITION
The Company's range of printing products includes business cards, general
office products, and marketing/promotional materials. In the Corporate Online
Printing Center and through its wholly owned subsidiaries, Image Press, Fine
Arts Graphics, and Howard Press, the Company generally recognizes printing
revenues when the order is shipped to the customer and when the Company has
fulfilled all of its contractual obligations.
The Company also sells software products to distributors, resellers, and
customers. The revenue for these sales is recognized when persuasive evidence of
a contract exists, software has been delivered, the fee is fixed or determinable
and collectibility is probable. Distributors and resellers generally have a
sixty-day right of return. A provision is recorded for estimated product
returns.
PRODUCT DEVELOPMENT COSTS
Product development costs represent research and development expenditures,
which are charged to operating expenses as incurred.
ADVERTISING
The Company expenses advertising costs as incurred. Advertising expenses
for the years ended December 31, 2000, 1999 and 1998 were approximately $6,183,
$1,249, and $192, respectively.
F-9
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
COMPREHENSIVE INCOME (LOSS)
SFAS No. 130 requires the disclosure of comprehensive income and its
components in a full-set of general purpose financial statements. Comprehensive
income (loss) includes all changes in equity that result from transactions and
other economic events during the period other than transactions with
stockholders. Comprehensive income (loss) for the Company at December 31, 2000
includes accumulated foreign currency translation adjustments of ($27) resulting
from the translation of the balance sheet for a European subsidiary.
NET LOSS PER SHARE
In accordance with SFAS No. 128, basic net loss per share has been
computed using the weighted-average number of shares of common stock outstanding
during the period.
A reconciliation of shares used in the calculation of basic and diluted
net loss per share follows:
Year Ended
December 31,
-------------------------
2000 1999 1998
---- ---- ----
Net loss .......................................................... $ (47,455) $ (20,835) $ (8,964)
Accretion of mandatorily redeemable convertible preferred stock ...
-- (84) (221)
------------ ------------ ------------
Net loss for common stock ......................................... $ (47,455) $ (20,919) $ (9,185)
============ ============ ============
Weighted average shares of common stock outstanding (shares
used in computing basic net loss per share .................... 23,534,359 6,805,098 749,987
============ ============ ============
Basic and diluted net loss per share .............................. $ (2.02) $ (3.07) $ (12.25)
============ ============ ============
Basic loss per share excludes the effect of restricted stock subject to
repurchase from the weighted average shares of common stock outstanding. The
weighted average shares of restricted stock subject to repurchase totaled
399,019, 307,558, and 690,041 shares as of December 31, 2000, 1999, and 1998,
respectively.
Dilutive securities include options, warrants, preferred stock as if
converted and restricted stock subject to repurchase. Potentially dilutive
securities totaling 4,562,925, 3,603,796, and 8,192,063 shares for the years
ended December 31, 2000, 1999 and 1998, respectively, were excluded from
historical basic and diluted loss per share because of their antidilutive
effect.
INCOME TAXES
The Company follows the liability method of accounting for income taxes
pursuant to Statement of Financial Accounting Standards No. 109 (SFAS No. 109),
"Accounting for Income Taxes." Under SFAS No.
F-10
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
109, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities, and on tax
loss and credit carryforwards. They are measured using the enacted tax laws and
rates applicable to the periods in which the differences are expected to
reverse. The Company provides for a valuation allowance, if necessary, to reduce
deferred tax assets to their estimated realizable value.
CONCENTRATIONS OF CREDIT RISK
The Company reviews the credit histories of potential customers prior to
extending credit and maintains allowances for potential credit losses. For the
year ended December 31, 1998 and 2000, no single customer accounted for more
than 10% of the Company's revenues and there were no significant accounts
receivable from a single customer. For the year ended December 31, 1999, one
customer accounted for 13% of revenues. The Company maintains its cash and cash
equivalents in bank accounts in amounts, which, at times, may exceed federally
insured limits. The Company has not experienced any losses in such accounts.
FAIR VALUE OF FINANCIAL INSTRUMENTS
For certain financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities, recorded amounts
approximate fair value due to the relatively short maturity period.
The carrying amount of notes payable and the line of credit approximate
their market value because they have interest rates that vary with market
interest rates.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to 1998 and 1999 consolidated
financial statements to conform with 2000 consolidated financial statement
presentation.
LIQUIDITY
The Company has never been profitable and it is anticipated that the
Company will continue to incur net losses in future periods. To become
profitable, the Company must significantly increase revenues by obtaining new
customers and generating additional revenues from existing customers, control
expenses and improve gross margins. As of December 31, 2000, the Company had an
accumulated deficit of $81,287. Although the Company has experienced revenue
growth in recent periods, revenues may not continue at their current level, or
increase in the future.
F-11
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
The Company anticipates continued capital expenditures and lease
commitments consistent with anticipated growth in operations, infrastructure and
personnel, including growth associated with product and service offerings,
geographic expansion and integration of any new acquired businesses. We may
increase our operating expenses which will consume a material amount of our cash
resources; however, we believe that our existing cash and cash equivalents
together with available credit facilities, will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures for at least
the next 12 months. However, our future capital requirements will depend on many
factors that are difficult to predict, including our rate of revenue growth, our
operating losses, the cost of obtaining new customers and technical
capabilities, and the cost of upgrading and maintaining our network
infrastructure and other systems.
As the Company continues the development of its business, it will use
currently available funds and seek additional sources of financing, if
necessary. If unsuccessful in obtaining the necessary funding, the Company will
continue expansion of its operations on a reduced scale based on available
capital resources.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standard Board ("FASB") issued SFAS
No. 133, Accounting for Derivatives and Hedging Activities, which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The new standard is effective for the
Company beginning January 1, 2001. Because the Company has never used nor
currently intends to use derivatives, management does not anticipate that the
adoption of this new standard will have a significant effect on earnings or the
financial position of the Company.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition", which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC. SAB 101 outlines the basic criteria
that must be met to recognize revenue and provides guidance for disclosures
related to revenue recognition policies. SAB 101 became effective and was
implemented for the year ended December 31, 2000. The adoption of SAB 101 had no
material effect on the financial position or results of operations of the
Company.
In March 2000, the FASB issued FASB Interpretation No. 44 ("FIN 44"),
"Accounting for Certain Transactions Involving Stock Compensation, an
Interpretation of APB Opinion No. 25". FIN 44 clarifies the application of
Opinion 25 for certain issues such as the definition of "employee", criteria for
determining noncompensatory plans, as well as accounting for modification to
fixed stock options and exchange of stock compensation awards in a business
combination. FIN 44 became effective on July 1, 2000. The adoption of FIN 44 had
no material effect on the financial position and results of operations of the
Company.
F-12
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2. INVENTORIES:
Inventories consisted of the following at December 31, 2000 and 1999:
December 31,
------------
2000 1999
---- ----
Raw materials and supplies ................. $1,429 $ 225
Work-in-process ............................ 687 176
Finished goods ............................. 1,610 252
------ ------
$3,726 $ 653
====== ======
3. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at December 31, 2000 and
1999:
December 31,
------------
2000 1999
---- ----
Computer hardware ................................ $ 9,171 $ 3,683
Computer software ................................ 9,419 2,413
Production machinery and equipment ............... 5,342 2,076
Office furniture and equipment ................... 1,949 733
Leasehold improvements ........................... 3,532 185
-------- --------
29,413 9,090
Less accumulated depreciation and amortization ... (6,665) (2,477)
-------- --------
Property and equipment, net ...................... $ 22,748 $ 6,613
======== ========
Depreciation and amortization expense for the years ended December 31,
2000, 1999 and 1998 was $5,451, $1,743, and $424 respectively.
4. OTHER ASSETS:
Other assets consisted of the following at December 31, 2000 and 1999:
December 31,
------------
2000 1999
---- ----
Trained workforce ........................ $ 5,746 $ 212
Customer list ............................ 3,812 1,600
Purchased technology ..................... 2,060 --
Other .................................... 1,665 607
-------- --------
13,283 2,419
Less accumulated amortization ............ (1,581) (68)
-------- --------
Other assets, net ........................ $ 11,702 $ 2,351
======== ========
F-13
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
4. OTHER ASSETS: (Continued)
Other assets are being amortized using the straight-line methods over
their estimated useful lives, which range from 3 to 8 years. During 2000 and
1999, the Company recognized the related amortization expense of approximately
$1,513 and $68 for other assets.
5. ACCRUED LIABILITIES:
Accrued liabilities consisted of the following at December 31, 2000 and
1999:
December 31,
------------
2000 1999
---- ----
Accrued payroll and related benefits ........... $2,852 $ 713
Sales and excise taxes payable ................. 279 216
Other .......................................... 1,750 465
------ ------
$4,881 $1,394
====== ======
6. NOTES PAYABLE AND LINE OF CREDIT:
Notes payable and line of credit balance consisted of the following at
December 31, 2000:
Term loan payable to bank, interest at LIBOR (6.31% at
December 31, 2000) plus 2.5% ..................................... $4,000
Revolving credit line balance payable to bank, $2.4 million
balance accrues interest at LIBOR (6.31% at December 31,
2000) plus 2.5%, and $2.4 million balance accrues interest
at prime (9.5% at December 31, 2000) plus 1% ..................... $4,800
------
$8,800
======
F-14
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
6. NOTES PAYABLE AND LINE OF CREDIT: (Continued)
On August 1, 2000, Howard Press, a wholly owned subsidiary of the Company,
entered into a loan agreement with a bank for a $6 million revolving credit line
and a $4 million term loan collateralized by substantially all of the assets of
Howard Press. The revolving credit line and the term loan accrue interest at
prime rate plus margin of 0% to 1% or at LIBOR plus margin of 1.5% to 2.5%. The
margins are based on the Debt to Earnings Before Interest, Tax, Depreciation,
and Amortization (EBITDA) ratio of Howard Press. The revolving credit line is a
two-year facility due on July 31, 2002 with an annual extension each year if
approved by the bank. The principle of the term loan is payable monthly in
installments of $66,667 beginning August 1, 2002 and for three years thereafter,
and the remaining balance is due on August 1, 2005. Principle payments required
on the notes payable and line of credit during the next five years are as
follows:
Year Ending December 31,
------------------------
2001............................... $ --
2002............................... 5,133
2003............................... 800
2004............................... 800
2005............................... 2,067
--------------
$ 8,800
==============
The loan agreement includes various restrictive covenants, which among
other things, require Howard Press to maintain certain financial ratios and net
worth amounts.
Interest expense for the years ended December 31, 2000, 1999, and 1998 was
$257, $160, and $59, respectively.
7. FEDERAL INCOME TAXES:
At December 31, 2000, the Company had net operating loss carryforwards of
approximately $81,247, which will expire beginning in 2011 through 2020.
Utilization of net operating loss carryforwards may be subject to certain
limitations under Section 382 of the Internal Revenue Code.
The following is a reconciliation of the income tax benefit based on the
statutory Federal rate:
Years Ended
December 31,
------------
2000 1999 1998
---- ---- ----
Federal income tax benefit at statutory rate .. (34)% (34)% (34)%
Change in valuation allowance ................. 24 32 34
Amortization of deferred compensation ......... 3 2 --
Amortization of goodwill ...................... 7 -- --
----------------------------------
-- -- --
==================================
F-15
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
7. FEDERAL INCOME TAXES: (Continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial accounting
purposes and the amounts used for income tax purposes and for tax loss
carryforwards. The Company has recorded a valuation allowance against its net
deferred tax assets due to the uncertainty surrounding the ultimate realization
of such assets. Management evaluates, on a quarterly basis, the recoverability
of the net deferred tax assets and the amount of the valuation allowance. At
such time as it is determined that it is more likely than not that the net
deferred tax assets are realizable, the valuation allowance will be reduced.
The effect of temporary differences and carryforwards that give rise to
deferred tax assets and liabilities are as follows:
December 31,
------------
2000 1999 1998
---- ---- ----
Deferred income tax assets:
Net operating loss carryforwards .. $ 27,624 $ 10,622 $ 4,030
Credit carryforwards .............. 308 -- --
Accrued compensation and benefits . 280 152 82
Stock based compensation .......... 276 -- --
Provision for doubtful accounts ... 211 77 5
Depreciation ...................... -- 177 123
Other ............................. 18 14 15
--------------------------------------
Total ......................... 28,717 11,042 4,255
--------------------------------------
Deferred income tax liabilities:
Depreciation ...................... (1,596) -- --
--------------------------------------
Total ......................... (1,596) -- --
--------------------------------------
Net deferred tax assets ........... 27,121 11,042 4,255
Valuation allowance ............... (27,121) (11,042) (4,255)
--------------------------------------
$ -- $ -- $ --
======================================
8. RELATED PARTY TRANSACTIONS:
The original founders of the Company, one of whom is an officer and a
director of the Company, are the owners of 100% of the outstanding capital stock
of Parallel Communications, Inc. ("Parallel"), which served as the Company's
advertising agency pursuant to an Advertising Agency Service Agreement, dated
August 26, 1997. In 1999 and 1998, the Company paid Parallel approximately $957
and $521 respectively, for services performed on behalf of the Company. In
August 1999, Parallel was sold to an unrelated party.
In August 1999, PrintBid issued Series A convertible notes totaling $50
with 12,500 detachable warrants to a shareholder in exchange for online
advertising. PrintBid also issued Series A convertible notes totaling $48 with
12,000 detachable warrants to two shareholders during May and August 1999 in
F-16
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
8. RELATED PARTY TRANSACTIONS: (Continued)
exchange for cash. These notes, totaling $146 plus accrued interest, were due
two years after issuance, unless converted to stock in accordance with the
Series A subordinated convertible note agreement. The convertible notes
converted to equity securities upon the acquisition of PrintBid.
9. EMPLOYEE BENEFITS:
DEFINED CONTRIBUTION PLAN
The Company has a 401(k) Retirement Plan (the "Plan") which covers
substantially all eligible employees. The Plan is a defined contribution profit
sharing plan in which all eligible participants may elect to have a percentage
of their compensation contributed to the Plan, subject to certain guidelines
issued by the Internal Revenue Service. The Company can contribute to the Plan
at the discretion of the Board of Directors. There were no contributions made by
the Company during 1998, 1999 or 2000.
EMPLOYEE STOCK PURCHASE PLAN
In August 1999, the Company adopted the 1999 Employee Stock Purchase Plan
for all eligible employees. A total of 250,000 shares of common stock are
authorized to issue under the plan plus automatic annual increases to be added
on the first day of the Company's fiscal year beginning on January 1, 2001,
equal to the least of (1) 100,000 shares, (2) 0.5% of the average common shares
outstanding as used to calculate fully diluted earnings per share as reported in
the Company's financial statements for the preceding year and (3) a lesser
amount as determined by the Board of Directors. Under the plan, shares of the
company's common stock may be purchased at six-month intervals at 85% of the
lower of the fair market value on the purchase date or the offering price.
Employees may purchase shares having a value not exceeding $25 or 15% of their
gross compensation during an offering period. During 2000, employees purchased
154,159 shares at an average price of $5.75 per share.
STOCK OPTION PLAN
The Company has adopted a stock incentive compensation plan (the "Plan"),
which provides for the issuance of stock awards and nonqualified and incentive
stock options for officers, directors, employees, and consultants. As of
December 31, 1999, the Company had reserved a total of 2,800,000 shares of
common stock for issuance pursuant to the Plan. In May 2000, the Company's
shareholders voted at the Annual Meeting of Shareholders to increase the total
number of shares reserved under the Plan to 4,500,000 shares, plus an automatic
annual increase beginning on January 1, 2001 that equals to (1) 5% of the
adjusted average number of common shares outstanding as used to calculate fully
diluted earnings per share as reported in the Company's financial statements for
the preceding year or (2) a lesser amount determined by the Board of Directors.
The plan was also amended so that no more than an aggregate of 2,000,000 shares
may be subject to options that qualify as incentive stock options in a single
fiscal year; provided, however, that if fewer than 2,000,000 such shares are
issued in any previous year, any remaining shares shall be added to the
aggregate number of shares available for issuance pursuant to this plan. During
2000, the Company also assumed the stock option plan and the outstanding options
of an acquired company. No additional options will be granted under the assumed
plan. Options granted by the Company will generally expire 10 years from the
date of grant. Under the Plan, the Plan administrator will fix the conditions
for the exercise of the options. Generally, options vest over four years.
F-17
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
9. EMPLOYEE BENEFITS: (Continued)
Compensation expense of $1,681, $2,284, and $380 has been recorded for
stock options during the years ended December 31, 2000, 1999 and 1998,
respectively, because the exercise prices of the stock options granted were less
than the fair value of the related shares at the time of grant. The fair value
per share used to calculate unearned compensation was determined by the
Company's Board of Directors prior to initial public offering based on a number
of factors, including, among other things, appraisals by an outside valuation
firm and by reference to the preferred stock values reduced by a nominal
discount factor.
Option activity for the years ended December 31, 1998, 1999 and 2000 is as
follows:
Weighted Average
Shares Exercise Price
------ --------------
Options outstanding, January 1, 1998 .............. 309,750 $ 0.20
Granted ........................................... 1,043,300 0.42
Exercised ......................................... (508,520) 0.40
Canceled .......................................... (194,175) 0.24
---------- ------
Options outstanding, December 31, 1998 ............ 650,355 0.38
Granted ........................................... 1,189,796 7.51
Exercised ......................................... (164,775) 0.39
Canceled .......................................... (49,625) 1.41
---------- ------
Options outstanding, December 31, 1999 ............ 1,625,751 5.57
Granted ........................................... 1,752,225 8.80
Options assumed in acquisition .................... 764,876 9.97
Exercised ......................................... (353,893) 0.48
Canceled .......................................... (677,021) 11.58
---------- ------
Options outstanding, December 31, 2000 ............ 3,111,938 $ 7.75
----------
Options exercisable at December 31, 2000 .......... 821,739
----------
Stock awards and options available for grant at
December 31, 2000 .............................. 1,118,572
----------
F-18
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
9. EMPLOYEE BENEFITS: (Continued)
The following table summarizes information about options outstanding at
December 31, 2000:
Options Outstanding Options Exercisable
- ----------------------------------------------------------------------------- ----------------------------------
Weighted
Average
Remaining
Contractual Weighted Weighted
Range of Number Life Average Number Average
Exercise Prices of Shares (in Years) Exercise Price of Shares Exercise Price
- --------------- --------- ---------------- -------------- --------- --------------
$0.04-$0.65 352,257 7.33 $0.30 167,848 $0.30
$0.66-$3.03 338,502 9.13 $2.38 48,147 $0.93
$3.60-$6.00 504,972 8.77 $5.17 133,574 $5.47
$6.09-$7.00 240,075 8.68 $6.85 69,530 $7.00
$7.25-$7.25 405,700 9.37 $7.25 30,000 $7.25
$7.56-$7.56 402,350 9.54 $7.56 0 $0.00
$7.99-$10.19 114,547 8.61 $9.79 35,886 $9.39
$10.65-$10.65 349,096 7.95 $10.65 201,014 $10.65
$11.71-$25.94 384,539 6.74 $19.34 135,328 $16.23
$33.75-$33.75 19,900 9.04 $33.75 412 $33.75
- ---------------- ----------- ----------
$0.04-$33.75 3,111,938 8.47 $7.75 821,739 $7.57
================ =========== ==========
The weighted average fair values and weighted average exercise prices per
share at the date of grant for options granted were as follows:
Year Ended
December 31,
------------
2000 1999
---- ----
Weighted average fair value of options granted with exercise price less than
the fair value of the stock on the date of grant ............................. $ -- $7.30
===== =====
Weighted average fair value of options granted with exercise price equal to
the fair value of the stock on the date of grant ............................. $8.04 $7.08
===== =====
Weighted average exercise price of options granted with exercise price less
than the fair value of the stock on the date of grant ........................ $ -- $0.24
===== =====
Weighted average exercise price of options granted with exercise price equal
to the fair value of the stock on the date of grant .......................... $8.80 $9.86
===== =====
F-19
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
9. EMPLOYEE BENEFITS: (Continued)
PRO FORMA NET INCOME AND EARNINGS PER SHARE
Pro forma information regarding net loss as required by SFAS No. 123 has
been determined as if the Company had accounted for its employee stock options
and employee stock purchase plans using the Black-Scholes option-pricing model
with the following weighted-average assumptions:
Employee Stock
--------------
Employee Stock Option Plan Purchase Plan
-------------------------- -------------
2000 1999 1998 2000
---- ---- ---- ----
4.60% to
Risk free interest rate............... 6.18% 5.58% 5.65% 5.21% to 6.34%
5 to 10 5 to
Expected lives........................ 6 years years 10 years 6 months
Expected dividends.................... $0 $0 $0 $0
Volatility............................ 134% 88% -- 100% to 152%
The following table presents net loss and per share amounts as if the
Company accounted for compensation expense related to stock options under the
fair value method prescribed by SFAS No. 123:
Year Ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
Net loss-as reported ............. $(47,455) $(20,835) $ (8,964)
======== ======== =========
Net loss-pro forma ............... $(51,886) $(22,046) $ (9,031)
======== ======== =========
Loss per share-as reported ....... $ (2.02) $ (3.07) $ (12.25)
======== ======== =========
Loss per share-pro forma ......... $ (2.20) $ (3.25) $ (12.34)
======== ======== =========
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period.
10. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
During 1996, the Company issued 3,500,000 shares of Series B Preferred
Stock, $0.01 par value. During 1998, the Company issued 4,000,000 shares of
Series C Preferred Stock, $0.01 par value and 1,385,493 shares of Series D
Preferred Stock, $0.01 par value. During January 1999, the Company issued
additional 401,257 shares of Series D preferred stock for $803. During April
1999, the Company issued 11,904,761 shares of Series E preferred stock for
$25,000. Of the 11,904,761 shares issued, 579,745 shares
F-20
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
10. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK: (Continued)
were issued as a result of the conversion of the convertible subordinated
promissory notes issued to investors in January 1999 aggregating $1,197 plus
accrued interest of $20. All holders of Preferred Stock were entitled to vote on
all matters on an "as if converted" basis. The holders of Preferred Stock shall
be entitled to receive dividends prior and in preference to any declaration or
payment of any dividend on the Series A Preferred Stock and common stock of the
Company.
Each share of Preferred Stock is convertible at the option of the holder
or automatically upon either (a) sale of the Company's common stock in a public
offering in which the offering price of the common stock is not less than $10.00
per share and the gross proceeds are at least $15,000, as described in the
Company's Restated Articles of Incorporation or (b) upon the election by a
majority of the holders of Preferred Stock to convert their shares of Preferred
Stock into common stock. The conversion price is subject to weighted average
anti-dilution protection and proportional adjustments in the event of stock
splits and similar events. The Preferred Stock, other than Series A Preferred
Stock, is redeemable, at the option of the holders of more than 50% of the
outstanding shares thereof, beginning on or after April 2004. The redemption
price for each share of Preferred Stock shall be the original issue price plus
all accrued and unpaid dividends, adjusted for stock splits. Upon liquidation or
dissolution, holders of Preferred Stock will receive preference over holders of
Series A Preferred Stock and common stock. The redemption value of the
mandatorily redeemable convertible Preferred Stock was accreted over the period
from issuance to the earliest redemption date using the effective interest
method.
In August 1998, the Company issued warrants to two of its investors to
purchase 40,000 shares of Series C Preferred Stock in connection with bridge
financing arrangements. The Company executed convertible subordinated promissory
notes aggregating $600 which, with accrued interest, were converted into 302,993
shares of Series D Preferred Stock upon closing of the sale of Series D
Preferred Stock in October 1998. These warrants are exercisable at $1.50 per
share through August 28, 2005. The warrants were ascribed a value of $30. All
warrants were exercised during 1999.
In connection with the issuance of Series D Preferred Stock, the Company
issued warrants to its investors to purchase 69,542 shares of Series D Preferred
Stock. These warrants are exercisable at $3.98 per share and are exercisable
through October 1, 2005. The warrants were ascribed a value of $117. During
1999, 15,090 warrants were exercised.
In connection with the issuance of Series E preferred stock, the Company
issued warrants to its investors to purchase 42,768 shares of Series E preferred
stock. These warrants are exercisable at $4.20 per warrant and are exercisable
through April 8, 2004. The warrants were ascribed a value of $130.
At December 31, 2000, the following warrants to purchase mandatorily
redeemable convertible preferred stock were outstanding:
Price Per Share,
Subject to
Number of Shares Adjustment Expiration Date
---------------- ---------- ---------------
Series D Preferred Stock.................. 54,452 $3.98 October 1, 2005
Series E Preferred Stock.................. 42,768 $4.20 April 8, 2004
F-21
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
11. SHAREHOLDERS' EQUITY:
COMMON STOCK
As of December 31, 2000, the Company is authorized to issue 70,000,000
shares of voting common stock, $0.01 par value. At its discretion, the Board of
Directors may declare dividends on shares of common stock. Upon liquidation,
holders of common stock will be paid only after the Preferred Stock preferences
have been satisfied.
Pursuant to the Company's stock incentive compensation plan (see Note 9),
the Company issued 150,000 shares of common stock (100,000 shares were to a
director of the Company) at a purchase price of $0.20 per share for an aggregate
purchase price of $30, which was satisfied by notes receivable totaling $30. One
note in the amount of $10 bears interest at 5.70% and is due in February 2001.
The other note in the amount of $20 bears interest at the rate of 7.00% and was
paid off in April 2000. The 150,000 shares are subject to repurchase by the
Company for $0.20 per share, as follows:
1. 50,000 shares will be subject to repurchase through February
2001, with the number of shares being subject to repurchase reduced by
1,000 each month following the original issuance of the shares.
2. 100,000 shares were subject to repurchase through April 2000, and
none were repurchased.
In November 1998, the Company issued 500,000 shares of common stock to an
officer of the Company at a purchase price of $0.40 per share pursuant to a
promissory note in the amount of $200. The note bears interest at 7% and is due
in January 2003. These shares are subject to repurchase by the Company for $0.40
per share through January 15, 2003, with the shares being subject to repurchase
reduced by 120,000 shares after November 15, 1999, and reduced by 10,000 shares
each month following November 15, 1999. At December 31, 2000, the notes
receivable from shareholders totaled $100 and are included in shareholders'
equity on the accompanying balance sheet.
In June of 1998, upon formation of PrintBid, the founders of PrintBid
received 302,650 of PrintBid's shares, which subsequently converted to the
Company's shares, in exchange for certain technology and know-how. Of the shares
issued, 151,325 were subject to repurchase for up to three years. These shares
have been recorded at fair value on the date of issuance and the amount
associated with the shares subject to repurchase has been deferred and is being
amortized over the restriction period.
In June of 1998, 75,662 of PrintBid's restricted shares, which
subsequently converted to the Company's restricted shares, were issued to
outside advisors of PrintBid. The Company may repurchase these shares at par
value (.01) if the advisory relationship is terminated during the restriction
period. Compensation costs associated with these shares based on the fair value
at the date of grant are being recognized as expense over the restriction
period.
On June 16, 1999, the Board of Directors approved a one-for-two reverse
stock split of the Company's common stock. The reverse stock split became
effective on August 18, 1999. All references in the consolidated financial
statements and all related notes thereto referring to shares, share prices, per
share amounts and other share information have been retroactively adjusted for
the reverse stock split.
F-22
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
11. SHAREHOLDERS' EQUITY: (Continued)
During 1996, the Company issued 150,000 shares of common stock of $0.20
per share in exchange for a note receivable of $30. In January 1999, the Company
redeemed 42,000 shares of common stock in exchange for cancellation of the
outstanding remaining principal amount of the note receivable.
On August 26, 1999, the Company issued 3,000,000 shares of its common
stock at an initial public offering price of $7.00 per share. Additional 450,000
shares were issued upon the exercise of the underwriters' overallotment option.
The net proceeds to the Company from the offering, net of offering costs of
approximately $3,119 were approximately $21,031. Concurrent with the initial
public offering, each outstanding share of the Company's convertible preferred
stock was automatically converted into common stock.
On February 11, 2000, the Company issued 4,695,595 shares of its common
stock at an offering price of $23.00 per share. This includes 695,595 shares of
common stock issued upon exercise of the underwriters' overallotment option. The
net proceeds to the Company from the offering, net of offering costs of
approximately $6,588 was approximately $101,398.
SERIES A PREFERRED STOCK
As of December 31, 2000, the Company is authorized to issue 30,000,000
shares of preferred stock. The holders of Series A Preferred Stock shall be
entitled to receive dividends prior and in preference to any declaration or
payment of any dividend on the common stock of the Company. Each share of Series
A Preferred Stock was convertible at the option of the holder or automatically
upon sale of the Company's common stock in a public offering in which the
offering price of the common stock is not less than $5 per share and the gross
proceeds are at least $15,000, as described in the Company's Restated Articles
of Incorporation. The conversion price was subject to weighted average
anti-dilution protection and proportional adjustments in the event of stock
splits and similar events. All Series A Preferred Stock previously issued
converted to common stock upon the Company's initial public offering in 1999.
WARRANTS
During 1998 in connection with the sale of Series C Preferred Stock, the
Company sold warrants to purchase 1,180,000 shares of common stock for
consideration of $24 to investors. Of the warrants issued, 890,000 warrants are
exercisable at $3.00 per share. The remaining 290,000 warrants are exercisable
at $7.50 per share. The warrants are exercisable through January 8, 2005. A
certain number of warrants are subject to repurchase by the Company, as defined
in the warrant agreements. The period in which the Company is entitled to
repurchase the warrants is January 1, 2001 through March 31, 2001. The
repurchase price is $0.02 per warrant. The warrants were ascribed a value of
$1,038. One of the investors has entered into an agreement with the Company to
perform certain management services for the Company.
F-23
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
11. SHAREHOLDERS' EQUITY: (Continued)
At December 31, 2000, the following warrants to purchase common stock were
outstanding:
Price Per Share,
Subject to
Number of Shares Adjustment Expiration Date
- ---------------- ---------- ---------------
6,134................... $1.34 none
21,500................... $6.00 April 21, 2004
48,165................... $4.20 April 21, 2004
568,900................... $3.00 January 8, 2005
290,000................... $7.50 January 8, 2005
75,000................... $4.00 April 13, 2006
51,301................... $4.36 May 3, 2008-October 9, 2009
- -----------
1,061,000
12. COMMITMENTS AND CONTINGENCIES:
COMMITMENTS
The Company leases its facilities and certain equipment under
noncancelable operating leases which expire between January 1, 2001 and December
31, 2004. The Company pays taxes, insurance, normal maintenance and certain
other operating expenses. At December 31, 2000 the approximate future rental
payments due under these leases for the remainder of the lease terms were as
follows:
Year Ending December 31,
- ------------------------
2001 .................................................. $3,747
2002 .................................................. 2,119
2003 .................................................. 1,404
2004 .................................................. 1,277
------
$8,547
======
Certain leases include escalation clauses based on inflation. Total rent
expense incurred under operating leases for the years ended December 31, 2000,
1999 and 1998 was approximately $3,364, $793, and $333 respectively.
CONTINGENCIES
From time to time, the Company is subject to legal proceedings and claims
in the ordinary course of business. The Company currently is not aware of any
such legal proceedings or claims that it believes will have, individually or in
the aggregate, a material adverse effect on its business, prospects, financial
condition or operating results.
F-24
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
13. CASH FLOW INFORMATION:
Disclosure of cash flow information is summarized below for the years
ended December 31, 2000, 1999 and 1998:
Year Ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
Cash paid during the year for interest.................................................. $257 $160 $59
Non-cash financing activities:
Unearned compensation................................................................... 2,841 2,335
Issuance of common stock for note receivable............................................ 200
Value ascribed to common stock warrants issued in conjunction 1,038
with sale of Series C Preferred Stock...............................................
Value ascribed to Series C Preferred Stock warrants issued in connection with bridge 30
financing...........................................................................
Value ascribed to Series D Preferred Stock warrants issued in conjunction with sale of 117
Series D Preferred Stock............................................................
Value ascribed to Series E Preferred Stock warrants issued in conjunction with sale of 130
Series E Preferred Stock............................................................
Accretion on Series C Preferred Stock................................................... 64 213
Accretion on Series D Preferred Stock................................................... 8 9
Accretion on Series E Preferred Stock................................................... 12
Acquisitions (see Note 14):
Fair value of assets acquired, net...................................................... 65,342 6,384
Issuance of common stock................................................................ 28,949 675
Conversion of Series A, B, C, D and E Preferred Stock to
common stock in connection with the initial public offering......................... 35,897
Issuance of common stock warrant related to convertible debt............................ 35
Convertible debt issued in exchange for services to be performed........................ 25
Issuance of common stock................................................................ 7
Reclassification of preferred stock warrants from temporary 147
equity..............................................................................
Conversion of debt to equity securities................................................. 1,069
14. MERGERS AND ACQUISITIONS:
MERGERS:
On December 9, 1999, the Company merged with PrintBid.com, Inc.
("PrintBid" or "PrintBid.com"), a privately owned Oregon corporation. PrintBid
is an Internet-based provider of commercial printing services. The acquisition
was accounted for using the pooling-of-interest method. The Company issued
568,778 shares of common stock to the shareholders of PrintBid in conjunction
with this transaction.
F-25
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
14. MERGERS AND ACQUISITIONS: (Continued)
The following presents the separate results, in each of the periods
presented since the inception of PrintBid in 1998, of the Company and PrintBid
(in thousands):
The Company PrintBid Total
----------- -------- -----
For the year ended December 31, 1998
Revenues ............................ $ 968 $ -- $ 968
======== ======== ========
Net loss ............................ $ (8,600) $ (364) $ (8,964)
======== ======== ========
For the year ended December 31, 1999
Revenues ............................ $ 11,493 $ 6 $ 11,499
======== ======== ========
Net loss ............................ $(17,503) $ (3,332) $(20,835)
======== ======== ========
ACQUISITIONS:
On April 13, 1999, the Company acquired substantially all of the assets of
Fine Arts Engravers Company, Inc. ("Fine Arts Graphics" or "Fine Arts"), a
privately owned Oregon corporation. Fine Arts is in the printing business. The
acquisition was accounted for using the purchase method. The aggregate purchase
price of $5,000 consists of $375 of common stock for 93,750 shares issued to the
seller and $4,625 of cash payment.
On September 21, 1999, the Company acquired all of the common stock of
Image Press, Inc. ("Image Press"), a privately owned California corporation.
Image Press is a broker of printed paper products. The acquisition was accounted
for using the purchase method. The aggregate purchase price of $3,120 consists
of $300 of common stock for 16,394 shares issued to the seller and $2,820 of
cash payment. In September 2000, the Company made a contingent payment of $780
increasing the purchase price to $3,900.
On June 21, 2000, the Company completed the acquisition of
creativepro.com, Inc., an Oregon corporation. Creativepro.com develops and
markets Extensis software products. The acquisition was recorded using the
purchase method of accounting under APB Opinion No. 16. The Company issued
3,541,195 shares of stock and $14,551 in cash resulting in an aggregate purchase
price of $45,429, including transaction costs of $3,033.
On June 27, 2000, the Company completed the acquisition of certain assets
and liabilities of Howard Press Limited Partnership, a Delaware limited
partnership. Howard Press is a full-service printing company. The acquisition
was recorded using the purchase method of accounting under APB Opinion No. 16.
The Company issued 212,623 shares of stock and $12,813 in cash resulting in an
aggregate purchase price of $19,133, including transaction costs of $213. The
sellers of Howard Press are entitled to additional purchase price amounts in
stock and cash if certain milestones are met. If at the end of the first year
following the acquisition, Earnings Before Interest, Taxes, Depreciation, and
Amortization (EBITDA) exceed $2,500, an addition $1,000 of purchase price will
be paid. The sellers are also entitled to an amount of 2.5% of converted online
revenues, that is, certain revenues earned on sales from existing customers of
Howard Press generated by ImageX.com using its online printing center. The total
of these two cash incentives will not exceed $1,000. In addition, for the two
years following the
F-26
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
14. MERGERS AND ACQUISITIONS: (Continued)
acquisition, the sellers are entitled to 5% of the same converted online
revenues to be paid in stock quarterly. The Company has not made any such
payment in stock during 2000.
In accordance with the provisions of APB No. 16, all identifiable assets
and liabilities were assigned a portion of the cost of the acquisitions based on
their respective fair values. The estimated values of identifiable intangibles
such as assembled and trained work force, customer relationships, web portal,
existing technology and in-process research and development were determined by
independent valuations. The excess of the purchase price over the fair market
value of the assets acquired has been allocated to goodwill and will be
amortized over 10 years using the straight line method. Intangible assets are
amortized on a straight-line basis over their estimated useful lives, ranging
from 3 to 10 years. Goodwill and identifiable intangible assets are included in
"Goodwill" and "other assets" in the accompanying consolidated balance sheets.
The allocation of purchase price for the acquisitions is as follows:
Year ended
December 31,
------------
2000 1999
---- ----
Identified intangibles ..................... $10,320 $ 1,812
In-process research and development ........ 1,062 --
Goodwill ................................... 42,002 2,270
Tangible assets acquired, net .............. 11,958 4,038
------- -------
Total purchase price ............... $65,342 $ 8,120
======= =======
Among the assets purchased in the acquisitions closed in June 2000 were
two in-process research and development software projects valued at $798 and
$264. Both of these products were between 85% and 90% completed at the date of
acquisition and had no alternative use if not completed successfully. Both
products are now complete and generated revenue in the fourth quarter of 2000.
These projects were valued using a discounted cash flow analysis (19% discount
rate) by an independent appraiser. The $1,062 of value derived from the analysis
was expensed as in-process research and development in the second quarter of
2000.
The following summarizes the unaudited pro forma results of operations, on
a combined basis, as if the Company's acquisition of Fine Arts, Image Press,
creativepro.com and Howard Press occurred as of the beginning of each of the
periods presented. The pro forma information gives effect to certain
adjustments, including amortization of identified intangibles and goodwill. The
pro forma adjustments exclude the effect of the nonrecurring charge of $1,062
for purchased in-process research and development.
Year Ended Year Ended
December 31, 2000 December 31, 1999
----------------- -----------------
(Unaudited) (Unaudited)
Revenues ......................................... $ 71,822 $ 69,400
========= =========
Pro forma net loss ............................... $ (52,291) $ (26,765)
========= =========
Pro forma basic and diluted net loss per share ... $ (2.07) $ (2.53)
========= =========
F-27
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
14. MERGERS AND ACQUISITIONS: (Continued)
This unaudited pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the results of future
operations or results that would have been achieved if the Company had made
these acquisitions at the beginning of the specified periods.
15. SEGMENT INFORMATION:
The Company has two major segments: Printing and Related Technology
Services and Software Products and Services. Printing and Related Technology
Services segment includes an aggregation of operations that provide
internet-based e-procurement solutions for printed business materials to
corporate customers. Software Products and Services segment includes development
and sales of graphic design and print file preparation software applications for
corporate customers and individuals.
Segment information is presented in accordance with SFAS 131, Disclosures
about Segments of an Enterprise and Related Information. This standard is based
on a management approach, which requires segmentation based upon the Company's
internal organization and disclosure of revenue and income based upon internal
accounting methods. The measure of profit or loss used for each reportable
segment is net income or loss. Corporate costs and interest expense are included
in the Printing and Related Technology Services segment. There is no
inter-segment revenue on transactions between reportable segments.
Information on reportable segments and reconciliation to consolidated
financial information is as follows:
Printing and Related Software Products
Year ended December 31, Technology Services and Services Consolidated
-------------------- ------------ ------------
2000
Revenues .......................... $41,861 $8,870 $50,731
Depreciation and amortization ..... 10,774 322 11,096
In-process research and
development -- 1,062 1,062
Interest income, net .............. 3,724 -- 3,724
Net loss .......................... (41,076) (6,379) (47,455)
Total assets ...................... 91,556 44,750 136,306
-------------------------------------------------
1999
Revenues .......................... $11,499 -- $11,499
Depreciation and amortization ..... 4,231 -- 4,231
In-process research and
development -- -- --
Interest income, net .............. 241 -- 241
Net loss .......................... (20,835) -- (20,835)
Total assets ...................... 35,668 -- 35,668
-------------------------------------------------
F-28
IMAGEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
15. SEGMENT INFORMATION: (Continued)
Printing and Related Software Products
Year ended December 31, Technology Services and Services Consolidated
-------------------- ------------ ------------
1998
Revenues................................ $968 -- $968
Depreciation and amortization........... 803 -- 803
In-process research and
development........................... -- -- --
Interest expense, net................... (48) -- (48)
Net loss................................ (8,964) -- (8,964)
Total assets............................ 2,469 -- 2,469
-------------------------------------------------
F-29
UNAUDITED QUARTERLY INFORMATION (in thousands, except per share data)
Quarter Ended
------------------------------------------------------------------------------------
Mar. 31 Jun. 30 Sep. 30 Dec. 31 Year
2000
Revenue ............................ $ 5,569 $ 7,134 $ 18,481 $ 19,547 $ 50,731
Gross profit ....................... 1,378 2,375 6,329 6,687 16,768
Net loss ........................... (9,540) (10,769) (14,338) (12,808) (47,455)
Basic and diluted net loss per share (0.49) (0.48) (0.55) (0.49) (2.02)
------------------------------------------------------------------------------------
1999 (1)
Revenue ............................ $ 485 $ 2,841 $ 3,320 $ 4,853 $ 11,499
Gross profit ....................... 110 704 846 1,298 2,958
Net loss ........................... (2,455) (3,470) (6,746) (8,164) (20,835)
Basic and diluted net loss per share (2.40) (2.77) (0.84) (0.49) (3.07)
------------------------------------------------------------------------------------
(1) During December 1999, ImageX.com acquired PrintBid.com. The acquisition
was accounted for under the pooling-of-interest method and all unaudited
quarterly information above of ImageX.com has been restated to include the
results of PrintBid.com.
F-30
Item 9-Change in and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
Part III
Item 10-Directors and Executive Officers of the Registrant
Information regarding our executive officers is included in Part I hereof
under the caption, "Our Executive Officers." The information required by this
Item concerning our directors and nominees for directors is incorporated herein
by reference to our Proxy Statement for our 2001 Annual Meeting of Shareholders,
to be held on May 8, 2001. The proxy statement will be filed within 120 days of
December 31, 2000.
Item 11-Executive Compensation
The information required by this Item is incorporated herein by reference
to our Proxy Statement for our 2001 Annual Meeting of Shareholders to be held on
May 8, 2001. The proxy statement will be filed within 120 days of December 31,
2000.
Item 12-Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated herein by reference
to our Proxy Statement for our 2001 Annual Meeting of Shareholders to be held on
May 8, 2001. The proxy statement will be filed within 120 days of December 31,
2000.
Item 13-Certain Relationships and Related Transactions
The information required by this Item is incorporated herein by reference
to our Proxy Statement for our 2001 Annual Meeting of Shareholders to be held on
May 8, 2001. The proxy statement will be filed within 120 days of December 31,
2000.
Part IV
Item 14-Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as part of this report are as follows:
1. Consolidated Financial Statements.
See Index to Consolidated Financial Statements included at Item 8 of
this report.
II-1
2. Financial Statement Schedules.
Schedule II Valuation and Qualifying Accounts
All other schedules have been omitted because the required
information is included in the consolidated financial statements or
the notes thereto, or is not applicable or required.
3. Exhibits
NUMBER DESCRIPTION
- ------ -----------
3.1 Amended and Restated Articles of Incorporation of the registrant, as
further amended by Articles of Amendment.(1)
3.2 Amended and Restated Bylaws of the registrant.(1)
10.1 Amended and Restated Investor Rights Agreement, dated as of April 8,
1999, by and among the registrant and certain of the registrant's
shareholders named therein.(1)
10.2 Stock Vesting Agreement, dated as of December 20, 1996, by and
between the registrant and F. Joseph Verschueren.(1)
10.3 Stock Vesting Agreement, dated as of December 20, 1996, by and
between the registrant and Cory E. Klatt.(1)
10.4 Stock Vesting Agreement, dated as of December 20, 1996, by and
between the registrant and Elwood D. Howse, Jr.(1)
10.5 Stock Subscription and Repurchase Agreement, dated as of August 7,
1997, by and between the registrant and Elwood D. Howse, Jr.(1)
10.6 Stock Vesting and Pledge Agreement, dated as of November 16, 1998,
by and between the registrant and Richard P. Begert.(1)
10.7 Offer of Employment, dated as of November 12, 1998, from the
registrant to Richard P. Begert.(1)
10.8 Lease Agreement, dated as of January 31, 1997, by and between the
registrant and Bellevue Associates, L.P.(1)
10.9 Lease Agreement, dated as of May 15, 1998, by and between the
registrant and Spieker Properties, L.P.(1)
10.10 Lease Agreement, dated as of October 19, 1998, by and between the
registrant and Spieker Properties, L.P.(1)
10.11 Lease Agreement, dated as of April 22, 1999, by and between the
registrant and Spieker Properties, L.P.(1)
10.12 Lease Agreement, dated as of November 4, 1999, by and between the
Registrant and The Plaza at Yarrow Bay, LLC.(4)
10.13 Lease Assignment and Assumption, dated as of April 13, 1999, by and
between the Keystone Acquisition Corporation, a wholly owned
subsidiary of the registrant, and Fine Arts Graphics Company,
Inc.(1)
10.14 Lease Assignment and Assumption, dated as of April 13, 1999, by and
between Keystone Acquisition Corporation, a wholly owned subsidiary
of the registrant, and Fine Arts Graphics Company, Inc.(1)
10.15 Amended and Restated 1996 Stock Incentive Compensation Plan.(1)
10.16 1999 Employee Stock Purchase Plan.(1)
10.17 1999 Stock Option Grant Program for Nonemployee Directors.(1)
10.18 Form of Indemnification Agreement.(1)
10.19 Asset Purchase and Sale Agreement, dated as of February 23, 1999, by
and among the registrant, Keystone Acquisition Corp., Fine Arts
Engravers Company, Inc. and Nicholas J.
II-2
Stanley.(1)
10.20 Stock Purchase Agreement dated September 21, 1999, among ImageX.com,
Inc., Stanley F. and Marina Lynne Poitras, individually and as
Trustees of the Poitras Family Trust dated November 22, 1993, Glen
R. and Anne Douglas, as community property.(2)
10.21 Agreement and Plan of Merger dated November 17, 1999 among
ImageX.com, Inc., Orcas Acquisition Corp. and PrintBid.com, Inc.(3)
10.22 First Amendment to Agreement and Plan of Merger dated November 30,
1999, among ImageX.com, Inc., Orcas Acquisition Corp. and
PrintBid.com, Inc.(3)
10.23 Amended and Restated Agreement and Plan of Merger dated May 20, 2000
among ImageX.com, Inc., Columbia Acquisition Corp., and
creativepro.com, Inc., and Shareholder Representative.(5)
10.24 Asset Purchase Agreement dated June 15, 2000 among ImageX.com, Inc.,
Meadowlands Acquisition Corp., Howard Press Limited Partnership and
the partners thereof, individually.(6)
21.1 Subsidiaries of the registrant.*
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants. *
- -----------
* Filed herewith.
(1) Incorporated by Reference herein to the Registration Statement on Form S-1
and all amendments thereto filed with the Securities and Exchange
Commission on May 12, 1999. (File No. 333-78271).
(2) Incorporated by Reference herein to the Current Report on Form 8-K and all
amendments thereto filed with the Securities and Exchange Commission on
September 30, 1999. (File No. 000-26837).
(3) Incorporated by Reference herein to the Current Report on Form 8-K and all
amendments thereto filed with the Securities and Exchange Commission on
December 22, 1999. (File No. 000-26837).
(4) Incorporated by Reference herein to the Registration Statement on Form S-1
and all amendments thereto filed with the Securities and Exchange
Commission on January 13, 2000 (File No. 333-94639).
(5) Incorporated by Reference herein to the Current Report on Form 8-K and all
amendments thereto filed with the Securities and Exchange Commission on
July 5, 2000. (File No. 000-26837).
(6) Incorporated by Reference herein to the Current Report on Form 8-K and all
amendments thereto filed with the Securities and Exchange Commission on
July 12, 2000. (File No. 000-26837).
(b) Reports on Form 8-K
None.
(c) Exhibits
See Item 14 (a) above.
(d) Financial Statements and Schedules
See Item 14 (a) above.
II-3
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf of the undersigned, thereunto duly authorized.
IMAGEX.COM, INC.
By:
/s/ Richard P. Begert
-------------------------------------
Richard P. Begert
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this Report
has been signed by the following persons in the capacities indicated below on
the 9th day of March, 2001.
/s/ Richard P. Begert President and Chief Executive Officer
- ------------------------------- (Principal Executive Officer)
Richard P. Begert
/s/ Robin L. Krueger Chief Financial Officer, Treasurer and
- ------------------------------- Assistant Secretary (Principal Financial
Robin L. Krueger and Accounting Officer)
/s/ F. Joseph Verschueren Chairman of the Board
- -------------------------------
F. Joseph Verschueren
/s/ Garrett P. Gruener Director
- -------------------------------
Garrett P. Gruener
/s/ Elwood D. Howse, Jr. Director
- -------------------------------
Elwood D. Howse, Jr.
/s/ Wayne M. Perry Director
- -------------------------------
Wayne M. Perry
/s/ Richard R. Sonstelie Director
- -------------------------------
Richard R. Sonstelie
/s/ Bernee D. L. Strom Director
- -------------------------------
Bernee D. L. Strom
II-4
IMAGEX.COM, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions
-------------------------------
Balance at Amounts Balances of Amounts Balance at
beginning charged to companies written end of
Description of year income acquired off year
- ------------------------------------------------------------------------------------------------------------------------------------
Allowance for doubtful accounts and returns
Year ended December 31, 2000.......................... $126 $327 $1,059 $109 $1,403
Year ended December 31, 1999.......................... 15 88 32 9 126
Year ended December 31, 1998.......................... -- 15 -- -- 15
S-1
INDEX TO EXHIBITS
NUMBER DESCRIPTION
- ------ -----------
3.1 Amended and Restated Articles of Incorporation of the registrant, as
further amended by Articles of Amendment.(1)
3.2 Amended and Restated Bylaws of the registrant.(1)
10.1 Amended and Restated Investor Rights Agreement, dated as of April 8,
1999, by and among the registrant and certain of the registrant's
shareholders named therein.(1)
10.2 Stock Vesting Agreement, dated as of December 20, 1996, by and
between the registrant and F. Joseph Verschueren.(1)
10.3 Stock Vesting Agreement, dated as of December 20, 1996, by and
between the registrant and Cory E. Klatt.(1)
10.4 Stock Vesting Agreement, dated as of December 20, 1996, by and
between the registrant and Elwood D. Howse, Jr.(1)
10.5 Stock Subscription and Repurchase Agreement, dated as of August 7,
1997, by and between the registrant and Elwood D. Howse, Jr.(1)
10.6 Stock Vesting and Pledge Agreement, dated as of November 16, 1998,
by and between the registrant and Richard P. Begert.(1)
10.7 Offer of Employment, dated as of November 12, 1998, from the
registrant to Richard P. Begert.(1)
10.8 Lease Agreement, dated as of January 31, 1997, by and between the
registrant and Bellevue Associates, L.P.(1)
10.9 Lease Agreement, dated as of May 15, 1998, by and between the
registrant and Spieker Properties, L.P.(1)
10.10 Lease Agreement, dated as of October 19, 1998, by and between the
registrant and Spieker Properties, L.P.(1)
10.11 Lease Agreement, dated as of April 22, 1999, by and between the
registrant and Spieker Properties, L.P.(1)
10.12 Lease Agreement, dated as of November 4, 1999, by and between the
Registrant and The Plaza at Yarrow Bay, LLC.(4)
10.13 Lease Assignment and Assumption, dated as of April 13, 1999, by and
between the Keystone Acquisition Corporation, a wholly owned
subsidiary of the registrant, and Fine Arts Graphics Company,
Inc.(1)
10.14 Lease Assignment and Assumption, dated as of April 13, 1999, by and
between Keystone Acquisition Corporation, a wholly owned subsidiary
of the registrant, and Fine Arts Graphics Company, Inc.(1)
10.15 Amended and Restated 1996 Stock Incentive Compensation Plan.(1)
10.16 1999 Employee Stock Purchase Plan.(1)
10.17 1999 Stock Option Grant Program for Nonemployee Directors.(1)
10.18 Form of Indemnification Agreement.(1)
10.19 Asset Purchase and Sale Agreement, dated as of February 23, 1999, by
and among the registrant, Keystone Acquisition Corp., Fine Arts
Engravers Company, Inc. and Nicholas J. Stanley.(1)
10.20 Stock Purchase Agreement dated September 21, 1999, among ImageX.com,
Inc., Stanley F. and Marina Lynne Poitras, individually and as
Trustees of the Poitras Family Trust dated November 22, 1993, Glen
R. and Anne Douglas, as community property.(2)
10.21 Agreement and Plan of Merger dated November 17, 1999 among
ImageX.com, Inc., Orcas Acquisition Corp. and PrintBid.com, Inc.(3)
10.22 First Amendment to Agreement and Plan of Merger dated November 30,
1999, among ImageX.com,
1
Inc., Orcas Acquisition Corp. and PrintBid.com, Inc.(3)
10.23 Amended and Restated Agreement and Plan of Merger dated May 20, 2000
among ImageX.com, Inc., Columbia Acquisition Corp., and
creativepro.com, Inc., and Shareholder Representative.(5)
10.24 Asset Purchase Agreement dated June 15, 2000 among ImageX.com, Inc.,
Meadowlands Acquisition Corp., Howard Press Limited Partnership and
the partners thereof, individually.(6)
21.1 Subsidiaries of the registrant.*
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.*
- -----------
* Filed herewith.
(1) Incorporated by Reference herein to the Registration Statement on Form S-1
and all amendments thereto filed with the Securities and Exchange
Commission on May 12, 1999. (File No. 333-78271).
(2) Incorporated by Reference herein to the Current Report on Form 8-K and all
amendments thereto filed with the Securities and Exchange Commission on
September 30, 1999. (File No. 000-26837).
(3) Incorporated by Reference herein to the Current Report on Form 8-K and all
amendments thereto filed with the Securities and Exchange Commission on
December 22, 1999. (File No. 000-26837).
(4) Incorporated by Reference herein to the Registration Statement on Form S-1
and all amendments thereto filed with the Securities and Exchange
Commission on January 13, 2000 (File No. 333-94639).
(5) Incorporated by Reference herein to the Current Report on Form 8-K and all
amendments thereto filed with the Securities and Exchange Commission on
July 5, 2000. (File No. 000-26837).
(6) Incorporated by Reference herein to the Current Report on Form 8-K and all
amendments thereto filed with the Securities and Exchange Commission on
July 12, 2000. (File No. 000-26837).
2