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Amazon Com Inc – ‘8-K’ for 4/26/99

As of: Wednesday, 5/12/99 · For: 4/26/99 · Accession #: 891020-99-805 · File #: 0-22513

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/12/99  Amazon Com Inc                    8-K:5       4/26/99    3:110K                                   Bowne - Seattle/FA

Current Report — Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                        48    230K 
 2: EX-23.1     Consent of Pricewaterhousecoopers LLP                  1      6K 
 3: EX-23.2     Consent of Pricewaterhousecoopers LLP                  1      6K

8-K — Current Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Accounting for Stock-Based Compensation Comprehensive Income E-Niche Incorporated Exchange.com Other Events
1	1st Page - Filing Submission
2	Item 5. Other Events
"	Exchange.com
12	Comprehensive Income
22	E-Niche Incorporated
26	Accounting for Stock-Based Compensation

8-K 1st Page of 48 TOC ↑Top Previous Next ↓Bottom Just 1st
 
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934

APRIL 26, 1999

DATE OF REPORT
 (DATE OF EARLIEST EVENT REPORTED)

AMAZON.COM, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

    DELAWARE                   000-22513                  91-1646860
----------------------------  ------------------------     -------------------  
(State or Other Jurisdiction   (Commission File No.)          (IRS Employer     
    of Incorporation)                                      Identification No.)

 1516 SECOND AVENUE, SEATTLE, WASHINGTON 98101

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

(206) 622-2335

(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

8-K 2nd Page of 48 TOC 1st Previous Next ↓Bottom Just 2nd
ITEM 5. OTHER EVENTS                                                            

PENDING TRANSACTIONS                                                            

ALEXA INTERNET                                                                  

On April 24, 1999, Amazon.com, Inc., a Delaware corporation ("Amazon.com"), AI  
Acquisitions, Inc., a Washington corporation and wholly owned subsidiary of     
Amazon.com, Alexa Internet, a California corporation ("Alexa"), and Brewster    
Kahle, the President and Chief Executive Officer of Alexa, entered into a       
definitive Agreement and Plan of Merger (the "Alexa Merger Agreement"). Pursuant
to the Alexa Merger Agreement, and subject to the terms and conditions thereof, 
Amazon.com will acquire all of the capital stock and assume all outstanding     
options of Alexa (the "Alexa Merger"). The Alexa Merger will be accounted for   
under the purchase method of accounting.                                        

Amazon.com will issue shares of its common stock, par value $.01 per share      
("Amazon.com Common Stock"), totaling approximately $250 million.               

EXCHANGE.COM                                                                    

On April 24, 1999, Amazon.com, Amazon.com Auctions, Inc., a Delaware corporation
and wholly owned subsidiary of Amazon.com, e-Niche Incorporated, a Delaware     
corporation ("e-Niche Incorporated" or "Exchange.com"), and all of the          
stockholders of Exchange.com, entered into a definitive Agreement and Plan of   
Merger (the "Exchange.com Merger Agreement"). Pursuant to the Exchange.com      
Merger Agreement, and subject to the terms and conditions thereof, Amazon.com   
will acquire all of the capital stock and assume all outstanding options of     
Exchange.com (the "Exchange.com Merger"). The Exchange.com Merger will be       
accounted for under the purchase method of accounting.                          

Amazon.com will issue shares of Amazon.com Common Stock and pay approximately $4
million of cash, with an aggregate value of approximately $200 million, assuming
that all conditions have been met and assuming that $50 million of contingent   
consideration is paid to by stockholders and certain option holders as a result 
of the continued employment of certain employees.                               

The Alexa Merger and Exchange.com Merger are subject to various conditions. It  
is anticipated that the Alexa Merger and Exchange.com Merger will be consummated
in the second quarter of 1999.                                                  

FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS              

(a)     Financial Statements of Businesses To Be Acquired       

Alexa Audited Financial Statements:   

             (i)     Report of PricewaterhouseCoopers LLP, dated
April 23, 1999        

              (ii)    Alexa Internet (A Development Stage Company)
                         Balance Sheets as of December 31, 1998 and 1997

              (iii)   Alexa Internet (A Development Stage Company)
                      Statements of Operations for the years ended
                           December 31, 1998 and 1997 and for the cumulative
                      period from February 14, 1996 (inception) to
December 31, 1998     

              (iv)    Alexa Internet (A Development Stage Company)
                             Statement of Stockholders' Equity (Deficit) for the
                      period from February 14, 1996 (inception) to
December 31, 1998     

              (v)     Alexa Internet (A Development Stage Company)
                      Statements of Cash Flows for the years ended
                           December 31, 1998 and 1997 and for the cumulative
                      period from February 14, 1996 (inception) to
December 31, 1998     

                    (vi)    Alexa Internet (A Development Stage Company) Notes
 to Financial Statements

            e-Niche Incorporated Audited Financial Statements:

                    (i)     Report of PricewaterhouseCoopers LLP, dated May 3,
1999                  

           (ii)    e-Niche Incorporated (a development stage
                           enterprise) Balance Sheet as of December 31, 1998
and 1997              

           (iii)   e-Niche Incorporated (a development stage
                          enterprise) Statement of Operations for the year
                      ended December 31, 1998, for the period from
                             inception (July 29, 1997) through December 31, 1997
                           and for the period from inception (July 29, 1997)
   through December 31, 1998

           (iv)    e-Niche Incorporated (a development stage
                           enterprise) Statement of Changes in Stockholders'
                        Equity (Deficit) for the period from inception
                   (July 29, 1997) through December 31, 1998

           (v)     e-Niche Incorporated (a development stage
                          enterprise) Statement of Cash Flows for the year
                      ended December 31, 1998, for the period from
                             inception (July 29, 1997) through December 31, 1997
                           and for the period from inception (July 29, 1997)
   through December 31, 1998

           (vi)    e-Niche Incorporated (a development stage
                   enterprise) Notes to Financial Statements

8-K 3rd Page of 48 TOC 1st Previous Next ↓Bottom Just 3rd
             Alexa Internet Condensed Financial Statements
(unaudited):                    

                    (i)     Alexa Internet (A Development Stage Company)
                             Condensed Balance Sheets as of March 31, 1999
                 (unaudited) and December 31, 1998

                    (ii)    Alexa Internet (A Development Stage Company)
                                Condensed Statements of Operations for the three
                           month periods ended March 31, 1999 and 1998
                              (unaudited) and for the cumulative period from
                               February 14, 1996 (inception) to March 31, 1999
(unaudited)     

                    (iii)   Alexa Internet (A Development Stage Company)
                                Condensed Statements of Cash Flows for the three
                           month periods ended March 31, 1999 and 1998
                              (unaudited) and for the cumulative period from
                               February 14, 1996 (inception) to March 31, 1999
(unaudited)     

                    (iv)    Alexa Internet (A Development Stage Company)
                       Notes to Condensed Financial Statements

                     e-Niche Incorporated Condensed Consolidated Financial
Statements (unaudited):         

                 (i)     e-Niche Incorporated (a development stage
                                enterprise) Condensed Consolidated Balance Sheet
                             as of March 31, 1999 (unaudited) and December
31, 1998        

                 (ii)    e-Niche Incorporated (a development stage
                               enterprise) Condensed Consolidated Statement of
                            Operations for the three month periods ended
                               March 31, 1999 and 1998 (unaudited) and for the
                             period from inception (July 29, 1997) through
          March 31, 1999 (unaudited)

                 (iii)   e-Niche Incorporated (a development stage
                               enterprise) Condensed Consolidated Statement of
                            Cash Flows for the three month periods ended
                               March 31, 1999 and 1998 (unaudited) and for the
                             period from inception (July 29, 1997) through
          March 31, 1999 (unaudited)

                 (iv)    e-Niche Incorporated (a development stage
                           enterprise) Notes to Condensed Consolidated
                Financial Statements (unaudited)

(b)     Pro Forma Financial Information                         

                   Pro Forma Combined Condensed Consolidated Financial
Statements (unaudited):         

                 (i)     Pro Forma Combined Condensed Consolidated
                              Balance Sheet as of March 31, 1999 (unaudited)

                 (ii)    Pro Forma Combined Condensed Consolidated
                           Statement of Operations for the three month
                       period ended March 31, 1999 (unaudited)

                 (iii)   Pro Forma Combined Condensed Consolidated
                          Statement of Operations for the year ended
             December 31, 1998 (unaudited)

             (iv)    Notes to Pro Forma Combined Condensed
                             Consolidated Financial Statements (unaudited)

(c)     Exhibits                                                

              23.1    Consent of PricewaterhouseCoopers LLP,
       Independent Accountants

              23.2    Consent of PricewaterhouseCoopers LLP,
       Independent Accountants

8-K 4th Page of 48 TOC 1st Previous Next ↓Bottom Just 4th

 REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of                                   
Alexa Internet                                                                  

In our opinion, the accompanying balance sheets and the related statements of   
operations, of stockholders' equity (deficit) and of cash flows present fairly, 
in all material respects, the financial position of Alexa Internet (a           
development stage company) as of December 31, 1998 and 1997, and the results of 
its operations and its cash flows for the years then ended, and for the         
cumulative period from February 14, 1996 (inception) to December 31, 1998, in   
conformity with generally accepted accounting principles. These financial       
statements are the responsibility of the Company's management; our              
responsibility is to express an opinion on these financial statements based on  
our audits. We conducted our audits of these financial statements in accordance 
with generally accepted auditing standards 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 the opinion expressed 
above.                                                                          

PricewaterhouseCoopers LLP                                                      
San Francisco, California                                                       
April 23, 1999                                                                  

8-K 5th Page of 48 TOC 1st Previous Next ↓Bottom Just 5th

ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
BALANCE SHEETS                                                                  
DECEMBER 31, 1998 AND 1997                                                      
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                        1998          1997     
                                                                     -----------   ----------- 
                                                                                               
Assets                                                                                         
Current assets:                                                                                
  Cash and cash equivalents                                          $   147,392   $   620,160 
  Marketable securities                                                3,841,059     2,598,867 
  Accounts receivable                                                    164,267            -- 
  Other assets                                                           171,920        28,301 
                                                                     -----------   ----------- 

         Total current assets                                          4,324,638     3,247,328 

Property and equipment, net                                              771,542       701,273 
Other assets                                                              15,608        27,827 
                                                                     -----------   ----------- 

         Total assets                                                $ 5,111,788   $ 3,976,428 
                                                                     ===========   =========== 

Liabilities and Stockholders' Equity                                                           
Current liabilities:                                                                           
  Accounts payable                                                   $   238,102   $    80,796 
  Accrued liabilities                                                    264,111       137,432 
  Deferred revenue                                                        54,632            -- 
  Notes payable, current portion                                         309,461       200,000 
                                                                     -----------   ----------- 

         Total current liabilities                                       866,306       418,228 

Notes payable, less current portion                                      255,069       300,000 
                                                                     -----------   ----------- 

         Total liabilities                                             1,121,375       718,228 
                                                                     -----------   ----------- 

Commitments (Note 6)                                                                           

Stockholders' equity:                                                                          
  Convertible preferred stock, no par value:  10,524,792 shares                                
    authorized;  Series A, 10,524,792 shares                                                   
    designated in 1998 and 1997; 10,524,792 and 5,277,396              9,880,527     4,828,072 
    shares issued and outstanding in 1998 and 1997, respectively;                              
    liquidation preference $10,028,548                                                         
  Common stock, no par value; 50,000,000 shares authorized;                                    
    16,175,086 and 16,037,794 shares issued and outstanding in 1998    2,018,723     1,484,154 
    and 1997, respectively                                                                     
  Treasury stock                                                            (308)         (421)
  Preferred stock warrants                                                    --        52,474 
  Deferred stock compensation                                           (502,602)      (76,041)
  Deficit accumulated during development stage                        (7,531,389)   (3,074,045)
  Accumulated other comprehensive income                                 125,462        44,007 
                                                                     -----------   ----------- 

         Total stockholders' equity                                    3,990,413     3,258,200 
                                                                     -----------   ----------- 

                    Total liabilities and stockholders' equity       $ 5,111,788   $ 3,976,428 
                                                                     ===========   =========== 

The accompanying notes are an integral part of these financial statements.

8-K 6th Page of 48 TOC 1st Previous Next ↓Bottom Just 6th

ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
STATEMENTS OF OPERATIONS                                                        
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 AND FOR THE CUMULATIVE PERIOD    
FROM FEBRUARY 14, 1996 (INCEPTION) TO DECEMBER 31, 1998                         
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                            Period from  
                                                                            February 14  
                                                                                1996     
                                                                           (inception) to
                                                                             December 31,
                                                   1998         1997            1998     
                                               -----------   -----------     ----------- 
                                                                                         
Revenue                                        $   372,159   $        --     $   372,159 
                                               -----------   -----------     ----------- 
Operating expenses:                                                                      
  Cost of revenue                                    4,761            --           4,761 
  Research and development                       1,311,227     1,003,233       2,615,787 
  Sales and marketing                            2,215,658       983,158       3,219,860 
  General and administration                     1,023,720       495,488       1,667,393 
  Depreciation and amortization                    383,389       186,819         588,978 
                                               -----------   -----------     ----------- 

    Total operating expenses                     4,938,755     2,668,698       8,096,779 
                                               -----------   -----------     ----------- 

Operating loss                                  (4,566,596)   (2,668,698)     (7,724,620)

Interest income, net                               110,852        78,073         188,931 
Other income (expense), net                         (1,600)        6,700           4,300 
                                               -----------   -----------     ----------- 

    Net loss                                    (4,457,344)   (2,583,925)     (7,531,389)

Other comprehensive income:                                                              
  Change in unrealized gain on available-for-                                            
    sale marketable securities                      81,455        44,007         125,462 
                                               -----------   -----------     ----------- 

      Comprehensive loss                       $(4,375,889)  $(2,539,918)    $(7,405,927)
                                               ===========   ===========     =========== 

The accompanying notes are an integral part of these financial statements.

8-K 7th Page of 48 TOC 1st Previous Next ↓Bottom Just 7th
ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)                                     
FOR THE PERIOD FROM FEBRUARY 14, 1996 (INCEPTION) TO DECEMBER 31, 1998          
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                          Convertible                                                               
                                        Preferred Stock             Common Stock                 Treasury Stock     
                                     ---------------------       ---------------------       --------------------   
                                     Shares         Amount       Shares         Amount       Shares        Amount   
                                     ------         ------       ------         ------       ------        ------   
                                                                                                                    
Balance, February 14,                                                                                               
  1996 (inception)                        --     $        --           --     $        --        --     $        -- 
Issuance of common stock                                                                                            
  ($0.0004 per share) for                                                                                           
  cash in February 1996                   --              --    2,500,000           1,000        --              -- 
Net loss                                  --              --           --              --        --              -- 
                                  ----------     -----------   ----------     -----------   -------     ----------- 
Balance, December 31, 1996                --              --    2,500,000           1,000        --              -- 
Conversion of notes payable                                                                                         
  to common stock in April                                                                                          
  1997                                    --              --    8,750,000       1,299,000        --              -- 
Issuance of employee stock                                                                                          
  options at below fair                                                                                             
  value during 1997                       --              --           --         154,911        --              -- 
Exercise of stock options                                                                                           
  in April 1997                           --              --    4,110,710           2,611        --              -- 
Amortization of deferred                                                                                            
  compensation related to                                                                                           
  employee stock options                                                                                            
  during 1997                             --              --           --              --        --              -- 
Issuance of preferred stock                                                                                         
  ($0.94285 per share) and                                                                                          
  warrant to purchase                                                                                               
  additional preferred stock                                                                                        
  ($0.01 per warrant share)                                                                                         
  for cash less issuance                                                                                            
  costs of $85,131 in May 1997     5,247,396       4,862,395           --              --        --              -- 
Issuance of common stock                                                                                            
  ($0.095 per share) for services                                                                                   
  rendered in connection with                                                                                       
  the issuance of preferred                                                                                         
  stock in May 1997                       --         (64,323)     677,084          64,323        --              -- 
Issuance of preferred stock                                                                                         
  ($1.00 per share) for services                                                                                    
  rendered in July 1997               30,000          30,000           --              --        --              -- 
Repurchase of exercised but                                                                                         
  nonvested stock and related                                                                                       
  write-off of deferred                                                                                             
  compensation during 1997                --              --           --         (37,691)  420,764            (421)
Change in unrealized gain on                                                                                        
  available-for-sale                                                                                                
  marketable securities                   --              --           --              --        --              -- 
Net loss                                  --              --           --              --        --              -- 
                                  ----------     -----------   ----------     -----------   -------     ----------- 
Balance, December 31, 1997         5,277,396     $ 4,828,072   16,037,794     $ 1,484,154   420,764     $      (421)
                                  ==========     ===========   ==========     ===========   =======     =========== 
                                                        [Enlarge/Download Table]

                                                                              Deficit                     
                                                               Accumulated   Accumulated        Total     
                                    Preferred                     Other        During       Stockholders' 
                                      Stock       Deferred    Comprehensive  Development       Equity     
                                     Warrants   Compensation      Income        Stage         (Deficit)   
                                     --------   ------------      ------        -----         ---------   
                                                                                                          
                                   ---------    -----------    -----------    -----------     ----------- 
Balance, February 14,                                                                                     
  1996 (inception)                 $      --   $        --     $       --     $        --     $       --  
Issuance of common stock                                                                                  
  ($0.00-4 per share) for                                                                                 
  cash in February 1996                   --            --             --              --           1,000 
Net loss                                  --            --             --        (490,120)       (490,120)
                                  ----------   -----------     ----------     -----------    ------------ 
Balance, December 31, 1996                --            --             --        (490,120)       (489,120)
Conversion of notes payable                                                                               
  to common stock in April                                                                                
  1997                                    --            --             --              --       1,299,000 
Issuance of employee stock                                                                                
  options at below fair                                                                                   
  value during 1997                       --      (154,911)            --              --             --  
Exercise of stock options                                                                                 
  in April 1997                           --            --             --              --           2,611 
Amortization of deferred                                                                                  
  compensation related to                                                                                 
  employee stock options                                                                                  
  during 1997                             --         41,179             --              --         41,179 
Issuance of preferred stock                                                                               
  ($0.94285 per share) and                                                                                
  warrant to purchase                                                                                     
  additional preferred stock                                                                              
  ($0.01 per warrant share)                                                                               
  for cash less issuance                                                                                  
  costs of $85,131 in May 1997        52,474            --             --              --       4,914,869 
Issuance of common stock                                                                                  
  ($0.095 per share) for services                                                                         
  rendered in connection with                                                                             
  the issuance of preferred                                                                               
  stock in May 1997                       --            --             --              --             --  
Issuance of preferred stock                                                                               
  ($1.00 per share) for services                                                                          
  rendered in July 1997                   --            --             --              --         30,000  
Repurchase of exercised but                                                                               
  nonvested stock and related                                                                             
  write-off of deferred                                                                                   
  compensation during 1997                --        37,691            --              --           (421)  
Change in unrealized gain on                                                                              
  available-for-sale                                                                                      
  marketable securities                   --            --         44,007              --         44,007  
Net loss                                  --            --             --      (2,583,925)    (2,583,925) 
                                  ----------   -----------     ----------     -----------    -----------  
Balance, December 31, 1997        $   52,474   $   (76,041)    $   44,007     $(3,074,045)   $ 3,258,200  
                                  ==========   ===========     ==========     ===========    ============ 

The accompanying notes are an integral part of these financial statements.

8-K 8th Page of 48 TOC 1st Previous Next ↓Bottom Just 8th
ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)                                     
FOR THE PERIOD FROM FEBRUARY 14, 1996 (INCEPTION) TO DECEMBER 31, 1998          
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                     Convertible                                                    
                                   Preferred Stock            Common Stock          Treasury Stock  
                               -----------------------  ------------------------   -----------------
                                Shares        Amount      Shares        Amount      Shares    Amount
                               ---------    ----------  ----------    ----------   --------  -------
                                                                                                    
Balances, December 31, 1997                                                                         
   (from previous page)        5,277,396    $4,828,072  16,037,794    $1,484,154    420,764   $(421)
Exercise of preferred stock           --            --          --            --         --      -- 
   warrant ($0.94285 per                                                                            
    share)                     5,247,396     5,052,455          --            --         --      -- 
Issuance of employee                                                                                
   stock options at below                                                                           
   fair value during 1998             --            --          --       530,613         --      -- 
Exercise of common stock                                                                            
   options by employees               --            --     137,292        12,132         --      -- 
Repurchase of exercised                                                                             
   but nonvested stock                                                                              
   and related writeoff                                                                             
   of deferred  compensation                                                                        
   during 1998                        --            --          --        (8,176)   112,500    (112)
Issuance of treasury                                                                                
   stock on exercise of                                                                             
   options                            --            --          --            --   (225,000)    225 
Amortization of deferred                                                                            
   compensation related to                                                                          
   employee stock options             --            --          --            --         --      -- 
Change in unrealized gain                                                                           
   on available-for-sale                                                                            
   marketable securities              --            --          --            --         --      -- 
Net loss                              --            --          --            --         --      -- 
                              ----------    ----------  ----------    ----------    -------   ----- 
Balances, December 31, 1998   10,524,792    $9,880,527  16,175,086    $2,018,723    308,264   $(308)
                              ==========    ==========  ==========    ==========    =======   ===== 

                                                        [Enlarge/Download Table]

                                                                         Deficit                  
                                                         Accumulated   Accumulated       Total    
                              Preferred                    Other        During       Stockholders'
                                Stock       Deferred    Comprehensive  Development       Equity   
                               Warrants   Compensation      Income        Stage         (Deficit) 
                              ----------  ------------  -------------  -----------    ------------
                                                                                                  
Balances, December 31, 1997                                                                       
   (from previous page)       $  52,474    $ (76,041)      $ 44,007    $(3,074,045)    $3,258,200 
Exercise of preferred stock                                                                       
   warrant ($0.94285 per                                                                          
    share)                      (52,474)          --             --             --      4,999,981 
Issuance of employee                                                                              
   stock options at below                                                                         
   fair value during 1998            --     (530,613)            --             --             -- 
Exercise of common stock                                                                          
   options by employees              --           --             --             --         12,132 
Repurchase of exercised                                                                           
   but nonvested stock                                                                            
   and related writeoff                                                                           
   of deferred  compensation                                                                      
   during 1998                       --        8,176             --             --           (112)
Issuance of treasury                                                                              
   stock on exercise of                                                                           
   options                           --           --             --             --            225 
Amortization of deferred                                                                          
   compensation related to                                                                        
employee stock options               --       95,876             --             --         95,876 
Change in unrealized gain                                                                         
   on available-for-sale                                                                          
   marketable securities             --           --         81,455             --         81,455 
Net loss                             --           --             --     (4,457,344)    (4,457,344)
                               --------    ---------       --------    -----------     ---------- 
Balances, December 31, 1998    $     --    $(502,602)      $125,462    $(7,531,389)    $3,990,413 
                               ========    =========       ========    ===========     ========== 

The accompanying notes are an integral part of these financial statements.

8-K 9th Page of 48 TOC 1st Previous Next ↓Bottom Just 9th

ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
STATEMENTS OF CASH FLOWS                                                        
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 AND FOR THE CUMULATIVE PERIOD    
FROM FEBRUARY 14, 1996 (INCEPTION) TO DECEMBER 31, 1998                         
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                                  PERIOD FROM   
                                                                               FEBRUARY 14, 1996
                                                                                 (INCEPTION) TO 
                                                                                  DECEMBER 31,  
                                                      1998          1997              1998      
                                                   -----------   -----------   -----------------
                                                                                                
Cash flows from operations:                                                                     
  Net loss                                         $(4,457,344)  $(2,583,925)     $ (7,531,389) 
  Adjustments to reconcile net loss to net cash                                                 
    used in operating activities:                                                               
  Depreciation and amortization                        383,389       186,819           585,782  
  Amortization of deferred stock compensation           95,876        41,179           137,055  
  Gain on sale of marketable securities               (127,939)      (68,532)         (196,471) 
  Expenses paid through issuance of preferred                                                   
    stock                                                   --        30,000            30,000  
  Changes in operating assets and liabilities:                                                  
    Accounts receivable                               (164,267)           --          (164,267) 
    Other assets                                      (131,400)      (45,828)         (187,528) 
    Accounts payable                                   157,306        70,856           238,103  
    Accrued liabilities                                126,679       115,056           264,111  
    Deferred revenue                                    54,632            --            54,632  
                                                   -----------   -----------      ------------  
        Net cash used in operating activities       (4,063,068)   (2,254,375)       (6,769,972) 
                                                   -----------   -----------      ------------  
Cash flows from investing activities:                                                           
  Payments for property and equipment                 (453,433)     (787,330)       (1,357,099) 
  Purchase of short-term investments                (5,712,798)   (5,486,328)      (11,199,126) 
  Cash receipts on maturities of securities          4,680,000     3,000,000         7,680,000  
                                                   -----------   -----------      ------------  
        Net cash used in investment activities      (1,486,231)   (3,273,658)       (4,876,225) 
                                                   -----------   -----------      ------------  
Cash flows from financing activities:                                                           
  Proceeds from issuance of common stock                12,132         2,611            15,743  
  Proceeds from issuance of preferred stock, net            --     4,862,395         4,862,395  
  Proceeds from issuance of warrants                        --        52,474            52,474  
  Proceeds from exercise of warrant                                                             
    for preferred stock                              4,999,981            --         4,999,981  
  Proceeds from notes payable                          273,651       500,000           773,651  
  Payments for notes payable                          (209,121)           --          (209,121) 
  Proceeds from convertible notes payable                   --       688,654         1,298,999  
  Purchase of treasury stock                              (112)         (421)             (533) 
                                                   -----------   -----------      ------------  
        Net cash provided by financing activities    5,076,531     6,105,713        11,793,589  
                                                   -----------   -----------      ------------  
Net increase (decrease) in cash                       (472,768)      577,680           147,392  
Cash and cash equivalents - beginning of period        620,160        42,480                --  
                                                   -----------   -----------      ------------  
Cash and cash equivalents - end of period          $   147,392   $   620,160      $    147,392  
                                                   ===========   ===========      ============  

Supplemental disclosure of cash flow information (Note 13)                      

The accompanying notes are an integral part of these financial statements.

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ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
NOTES TO FINANCIAL STATEMENTS                                                   
--------------------------------------------------------------------------------

1. ORGANIZATION                                                                 

    Alexa Internet (the Company), incorporated in California in April 1996 under
   the name of the Internet Archive (subsequently changed to Alexa Internet in
    May 1996), creates Internet navigation services. The Company's activities to
date have consisted of product development, raising capital, acquiring  
equipment, and marketing its product. The Company has not generated     
  significant revenues to date and is considered a development stage company
at December 31, 1998.                                                   

As discussed in Note 14, the Board of Directors approved the sale of the
Company to Amazon.com on April 23, 1999.                                

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                   

USE OF ESTIMATES                                                

    The preparation of financial statements in conformity with generally
        accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities
      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.                                                      

FACTORS THAT COULD AFFECT FUTURE RESULTS                        

       The Internet industry is highly competitive. The success of the Company
   in the Internet navigation business is dependent upon the Company's
      ability to raise capital, complete development of its products, and to
generate significant customer usage and advertising revenues.   

REVENUE RECOGNITION                                             

    The Company's revenues are derived primarily from the sale of banner
        advertisements placed on the Alexa toolbar. To date, the duration of the
        Company's banner advertising commitments has ranged from one week to six
   months. Banner advertising revenues are recognized ratably over the
period in which the advertisement is displayed, provided that no
      significant Company obligations remain and collection of the resulting
      receivable is probable. Such revenue is recognized when the service is
provided.                                                       

     Revenues from barter transactions are recognized during the period in
  which the advertisements are displayed on the Alexa toolbar, and a
   corresponding amount is charged to operations as applicable for the
    value of the goods or services received by the Company in the barter
      transaction. Barter transactions are recorded at the fair value of the
  goods and services provided or received, whichever is more readily
        determinable in the circumstances. For the year ended December 31, 1998,
revenues from barter transactions have accounted for            

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ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
NOTES TO FINANCIAL STATEMENTS                                                   
--------------------------------------------------------------------------------

 approximately 27% of revenues. These were no revenues from barter
transactions prior to 1998.                                     

      No one customer accounted for 10% or more of revenues during the years
       ended December 31, 1998 and 1997, and during the cumulative period from
February 14, 1996 (inception) to December 31, 1998.             

      Deferred revenues is primarily comprised of payments received pursuant
to banner advertising contracts in advance of delivery of the   
advertisements.                                                 

SOFTWARE DEVELOPMENT COSTS                                      

      Statement of Financial Accounting Standards No. 86, Accounting for the
     Costs of Computer Software to be Sold, Leased, or Otherwise Marketed,
requires that software development costs be capitalized once the
       technological feasibility of the software product has been established.
        As of December 31, 1998 all software development costs have been charged
     to research and development expense in the period incurred, since the
        deployment date occurred immediately following technological feasibility
of the products.                                                

RESEARCH AND DEVELOPMENT COSTS                                  

       Costs related to other research and development activities are expensed
when incurred.                                                  

INCOME TAXES                                                    

     The Company accounts for income taxes in accordance with Statement of
   Financial Accounting Standards No. 109, which requires an asset and
   liability approach to financial accounting and reporting for income
      taxes. Accordingly, deferred tax assets and liabilities arise from the
  differences between the tax basis of an asset or liability and its
   reported amount in the financial statements, and net operating loss
      carryforwards. Deferred tax amounts are determined using the tax rates
        expected to be in effect when the taxes will actually be paid or refunds
received, as provided under currently enacted tax law. Valuation
       allowances are established when necessary to reduce deferred tax assets
       to the amount expected to be realized. Income tax expense or benefit is
        the tax payable or refundable, respectively, for the period plus the net
change in deferred tax amounts during the period.               

STOCK-BASED COMPENSATION                                        

       The Company accounts for stock-based employee compensation arrangements
        in accordance with the provisions of Accounting Principles Board ("APB")
      Opinion No. 25, Accounting for Stock Issued to Employees, and complies
   with the disclosure provisions of Statement of Financial Accounting
    Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation.
     Under APB No. 25, compensation expense is based on the difference, if
      any, on the date of the grant, between the fair value of the Company's
    stock and the exercise price of the option. The Company accounts for
equity instruments issued to nonemployees in accordance with the
  provisions of SFAS No. 123 and Emerging Issues Task Force ("EITF")
96-18.                                                          

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ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
NOTES TO FINANCIAL STATEMENTS                                                   
--------------------------------------------------------------------------------

COMPREHENSIVE INCOME                                            

The Company adopted the provisions of SFAS No. 130, Reporting   
   Comprehensive Income. This statement requires companies to classify
    items of other comprehensive income by their nature in the financial
     statements and display the accumulated balance of other comprehensive
       income separately from retained earnings and additional paid-in capital
        in the equity section of a statement of financial position. Accordingly,
the Company has reported unrealized gains on available-for-sale 
marketable securities in comprehensive loss.                    

CASH EQUIVALENTS                                                

All cash and cash equivalents are held in checking, money market
      accounts or short-term investments with original maturities of 90 days
       or less. Cash equivalents are recorded at cost, which approximates fair
       value. As of December 31, 1998, the balance exceeded existing Federally
insured limits.                                                 

MARKETABLE SECURITIES                                           

The Company's marketable securities are categorized as          
       available-for-sale securities, as defined by the Statement of Financial
        Accounting Standards No. 115, Accounting for Certain Investments in Debt
        and Equity Securities. Unrealized holding gains and losses are reflected
     as a net amount in a separate component of stockholders' equity until
      realized. For the purpose of computing realized gains and losses, cost
is identified on a specific identification basis.               

PROPERTY AND EQUIPMENT                                          

Property and equipment are recorded at cost. Depreciation and   
       amortization are computed on the straight-line basis over the estimated
useful lives of the assets, as follows:                         

                                                                [Download Table]
                                                                
Computer and network equipment and software              3 years
Furniture and office equipment                           5 years

      Leasehold improvements are amortized on a straight-line basis over the
 life of the lease, or the useful life of the assets; whichever is
shorter.                                                        

       Maintenance and repairs are charged to expense as incurred. When assets
      are sold or retired, the cost and related accumulated depreciation are
       removed from the accounts and any resulting gain or loss is included in
operations.                                                     

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS                       

     In March 1998, the American Institute of Certified Public Accountants
       ("AICPA") issued Statement of Position ("SOP") 98-1, Accounting for the
      Cost of Computer Software Developed or Obtained for Internal Use ("SOP
98-1"). SOP 98-1 is effective for financial statements for years
  beginning after December 15, 1998. SOP 98-1 provides guidance over
       accounting for computer software developed or obtained for internal use
        including the requirement to capitalize specified costs and amortization
        of such costs. The Company does not expect the adoption of this standard
 to have a material impact on its results of operations, financial
position or cash flows.                                         

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ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
NOTES TO FINANCIAL STATEMENTS                                                   
--------------------------------------------------------------------------------

   In April 1998, the AICPA issued SOP 98-5, Reporting on the Costs of
  Start-up Activities ("SOP 98-5"). SOP 98-5, which is effective for
        fiscal years beginning after December 15, 1998, provides guidance on the
financial reporting of start-up costs and organization costs. It
  requires costs of start-up activities and organization costs to be
    expensed as incurred. As the Company has historically expensed these
   costs, the adoption of SOP 98-5 is not expected to have significant
      impact on its results of operations, financial position or cash flows.

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
      Instruments and Hedging Activities ("SFAS No. 133"), 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. SFAS No. 133 is
       effective for all fiscal quarters for fiscal years beginning after June
15, 1999. The Company is assessing the potential impact of this 
        pronouncement on its financial statements; however, the Company does not
  expect any significant impact since it currently does not have any
derivative instruments and does not anticipate acquiring any.   

3. MARKETABLE SECURITIES                                                        

  All outstanding securities classified as available for sale mature in less
than one year. The following is a summary of marketable securities at   
December 31, 1998 and 1997:                                             

                                                                [Download Table]

                                             UNREALIZED          FAIR    
                              COST          HOLDING GAINS        VALUE   
                           ----------       -------------     -----------
                                                                         
Government Bonds                                                         
  1998                     $3,715,597          $125,462       $3,841,059 
  1997                     $2,554,860          $ 44,007       $2,598,867 

4. PROPERTY AND EQUIPMENT                                                       

Property and equipment consists of:                                     

                                                                [Download Table]

                                                        1998            1997    
                                                    -----------       --------- 
                                                                                
Computer and network equipment and software         $ 1,255,699       $ 840,774 
Furniture and office equipment                           74,160          53,150 
Leasehold improvements                                   27,240           9,742 
                                                    -----------       --------- 
  Total assets                                        1,357,099         903,666 
Less accumulated depreciation and amortization         (585,557)       (202,393)
                                                    -----------       --------- 
                                                    $   771,542       $ 701,273 
                                                    ===========       ========= 

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ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
NOTES TO FINANCIAL STATEMENTS                                                   
--------------------------------------------------------------------------------

5. NOTES PAYABLE                                                                

The Company entered into a line of credit agreement with a bank which   
provides for borrowings up to $500,000 to purchase capital equipment.   
Borrowings bear interest at the bank's prime rate plus 1% and are       
collateralized by all assets of the Company, including intellectual     
 property. As of December 31, 1998, the Company has $564,530 notes payable
 outstanding under this agreement bearing interest at 9.5%. Borrowings are
repayable in monthly installments of principal plus accrued interest.   
According to the terms of the agreement, the Company is required to meet
   certain financial covenants including minimum net worth and working capital
   levels. In conjunction with the line of credit, the Company issued warrants
 to purchase 18,817 shares of the Company's preferred stock at an exercise
    price of $0.93 per share (see Note 7). No value was assigned to the warrants
as the fair value was determined to be insignificant.                   

  Scheduled repayments of notes payable principal subsequent to December 31,
1998 are as follows:                                                    

                                                                [Download Table]

YEAR ENDING DECEMBER 31,                                               
------------------------                                               
                                                                       
         1999                                                 $309,461 
         2000                                                  200,000 
         2001                                                   55,069 
                                                              -------- 
                                                               564,530 
         Less current portion                                 (309,461)
                                                              -------- 
                                                              $255,069 
                                                              ======== 

6. COMMITMENTS                                                                  

LEASE OBLIGATIONS                                               

    The Company has entered into two separate cancelable operating lease
     agreements for office space. The contracts provide for adjustments or
     escalations based upon changes in consumer price indices or operating
    expenses. Either party may terminate the agreements providing thirty
days written notice.                                            

       Rent expense under operating lease agreements was $139,191, $44,388 and
        $194,676 for the year ended December 31, 1998, December 31, 1997 and for
   the period from February 14, 1996 (inception) to December 31, 1998,
respectively.                                                   

7. STOCKHOLDERS' EQUITY                                                         

COMMON STOCK                                                    

        The Company is authorized to issue 50,000,000 shares of common stock. At
   December 31, 1998, 16,175,086 shares of common stock are issued and
outstanding.                                                    

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ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
NOTES TO FINANCIAL STATEMENTS                                                   
--------------------------------------------------------------------------------

CONVERTIBLE PREFERRED STOCK                                     

      As of December 31, 1998, the Company is authorized to issue 10,524,792
  shares of convertible preferred stock, all of which are designated
   Series A Convertible Preferred Stock (Series A preferred stock). At
    December 31, 1998, 10,542,792 shares of Series A preferred stock are
issued and outstanding.                                         

DIVIDENDS                                                       

The holders of Series A preferred stock are entitled to receive 
     dividends in preference to any dividend on common stock, at an annual
      rate equal to $0.0572 per share, when and if declared by the Company's
     Board of Directors. Such dividends are noncumulative and no dividends
have been declared or paid to date.                             

LIQUIDATION PREFERENCE                                          

  In the event of any liquidation, dissolution, or winding up of the
 Company, either voluntary or involuntary, the holders of Series A
        preferred stock are entitled to receive, in preference to the holders of
common stock, an amount equal to $0.95285 per share of Series A 
   preferred stock ($10,028,548 in total) plus all declared but unpaid
  dividends, if any. Once such liquidation preference has been paid,
      holders of Series A preferred stock are entitled to receive assets and
    funds of the Company in proportion to the number of shares of common
stock as if converted pursuant to the following paragraph.      

CONVERSION RIGHTS                                               

  Each share of Series A preferred stock shall be convertible at the
   option of the holder, at any time, into shares of common stock. The
  number of shares of common stock into which each share of Series A
preferred stock may be converted shall be determined by dividing
$0.95285 by the conversion price in effect on the date the stock
       certificate is surrendered for conversion. The initial conversion price
        per share shall be $0.95285. Series A preferred stock will automatically
       convert into common stock, at the then applicable rate, (i) at the time
        the consent of at least a majority of the outstanding Series A preferred
  stock to such conversion is obtained, or (ii) upon the sale of the
      Company's securities pursuant to a firm commitment underwritten public
      offering with a public offering price of not less than $4.00 per share
 and with aggregate gross proceeds to the Company of not less than
$12,000,000.                                                    

      The Series A preferred stock also carries provisions which protect the
holders of such securities from dilution caused by capital      
reorganization, stock splits, or other such capital changes.    

VOTING RIGHTS                                                   

   The holders of Series A preferred stock are entitled to vote on all
      matters and are entitled to the number of votes equal to the number of
        shares of common stock into which the preferred stock could be converted
       pursuant to the conversion rights. Except as otherwise required by law,
    the holders of the Series A preferred stock shall have voting rights
equal to those of the common stockholders.                      

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ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
NOTES TO FINANCIAL STATEMENTS                                                   
--------------------------------------------------------------------------------

        The holders of Series A preferred stock have the right to elect at least
      one member of the Board of Directors and additional members determined
        by multiplying the number of directors authorized to serve by a fraction
     calculated from the number of convertible shares divided by the total
common shares on a fully converted basis.                       

PREFERRED STOCK WARRANTS ISSUED TO NON-EMPLOYEES                

      In 1997, the Company issued a warrant to a creditor to purchase 18,817
    shares of Series A preferred stock at an exercise price of $0.93 per
  share. The warrant expires in June 2004 and remains outstanding at
December 31, 1998.                                              

8. EMPLOYEE STOCK OPTION PLAN                                                   

  In 1997, the Company established an employee stock option plan. Under this
   plan, the Company may grant options for 5,000,000 shares of common stock to
   its employees, directors, and consultants either as incentive stock options
   or nonstatutory options. The exercise price of each option is determined by
    the Board of Directors and an option's maximum term is 10 years. Options are
  exercisable upon grant. However, upon exercise, shares of common stock are
issued under a restriction agreement and generally vest over a four-year
period. Upon termination of employment, the Company has the right to    
  repurchase unvested shares at the original exercise price. At December 31,
  1998, 675,000 shares of common stock issued upon exercise of stock options
during 1997 and 1998 remain restricted.                                 

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ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
NOTES TO FINANCIAL STATEMENTS                                                   
--------------------------------------------------------------------------------

The following table summarizes activity under the Company's stock option
plan for the years ended December 31, 1997 and 1998:                    

                                                        [Enlarge/Download Table]

                                                 OPTIONS OUTSTANDING AND EXERCISABLE        
                                          --------------------------------------------------
                                                                                    WEIGHTED
                               SHARES                                               AVERAGE 
                             AVAILABLE      NUMBER         PRICE       AGGREGATE    EXERCISE
                             FOR GRANT    OF SHARES       PER SHARE      PRICE        PRICE 
                             ----------   ----------     ----------    ---------    --------
                                                                                            
Balance, December 31, 1996           --           --     $       --    $     --      $    --

  Options authorized          2,500,000           --             --          --           --
  Options granted            (2,291,462)   2,291,462     .001 - .09      62,879       0.0274
  Options exercised                  --   (1,610,710)         0.001      (1,611)       0.001
  Cancelled and repurchased                                                                 
    exercised options           435,764           --             --          --           --
                             ----------   ----------     ----------    --------      -------
Balance, December 31, 1997      644,302      680,752          0.090      61,268        0.090

  Options authorized          2,500,000           --             --          --           --
  Options granted              (566,000)     566,000          0.090      50,940        0.090
  Options exercised                  --     (137,292)         0.090     (12,132)       0.090
  Options cancelled             329,708     (329,708)         0.090     (29,674)       0.090
  Cancelled and repurchased                                                                 
    exercised options           112,500           --             --          --           --
  Adjustment to authorized                                                                  
    shares                     (338,542)          --             --          --           --
                             ----------   ----------     ----------    --------      -------
Balance December 31, 1998     2,681,968      779,752     $    0.090    $ 70,402      $ 0.090
                             ==========   ==========     ==========    ========      =======

   At December 31, 1998, employee options to purchase 779,752 shares of common
stock are outstanding and exercisable at $.09 per share, with a weighted
average remaining contractual life of 9.22 years. A total of 2,681,968  
common shares remain available for issuance.                            

   The Company accounts for the plan in accordance with APB No. 25, Accounting
for Stock Issued to Employees, and related Interpretations. For certain 
   options granted in 1998 and 1997, the exercise price was less than the fair
   value of common stock on the grant date. In accordance with APB No. 25, for
the period ended December 31, 1998, the Company recorded compensation   
expense in relation to employee stock options totaling $95,876.         

The following information concerning the Company's stock option plan is 
provided in accordance with SFAS No. 123 Accounting for Stock-Based     
  Compensation. The fair value of each option grant is estimated on the date
   of grant using the minimum value method with the following weighted-average
assumptions used for grants in 1998: average risk-free interest rate of 
  5.48% and expected life of 5 years. Volatility and dividend yields are not
factors in the Company's minimum value                                  

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ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
NOTES TO FINANCIAL STATEMENTS                                                   
--------------------------------------------------------------------------------

   calculation. The weighted average fair value of options granted in 1998 and
1997 was $1.05 and $.07, respectively. Using the above method and       
    assumptions, had the Company accounted for compensation expense according to
SFAS No. 123, the pro forma net loss would be as follows:               

                                                                [Download Table]

                                            1998             1997   
                                         ----------       ----------
                                                                    
Net loss - as reported                   $4,439,345       $2,583,925
Net loss - proforma                      $4,439,971       $2,586,072

    These pro forma effects may not be representative of the effects on reported
net income for future years as options vest over several years and      
additional awards are generally made each year.                         

9.  401(k) PLAN                                                                 

  In June 1997, the Company established a 401(k) Plan (the 401(k) Plan). All
    employees of the Company are eligible to participate in the 401(k) Plan. The
Company may make discretionary contributions to the 401(k) Plan. No     
  contributions were made by the Company during the years ended December 31,
 1997 and 1998 and during the period from February 14, 1996 (inception) to
December 31, 1998.                                                      

10. INCOME TAXES                                                                

TAX PROVISION                                                   

   The Company recognizes no income tax provision due to net operating
      losses incurred since inception and a full valuation allowance against
deferred tax assets.                                            

      The Company's deferred tax assets as of December 31, 1998 and 1997 are
as follows:                                                     

                                                                [Download Table]

                                                 1998              1997    
                                             -----------       ----------- 
                                                                           
Capitalized start-up costs                   $   330,682       $   731,428 
Research & development credits                   216,020            62,955 
Net operating loss carryforward                2,020,317           177,919 
Other, including nondeductible accruals           37,152            43,547 
                                             -----------       ----------- 
  Gross deferred tax assets                    2,604,171         1,015,849 
Valuation allowance                           (2,604,171)       (1,015,849)
                                             -----------       ----------- 
      Net deferred tax asset                 $        --       $        -- 
                                             ===========       =========== 

      Due to uncertainty of realization, a full valuation allowance has been
   provided against deferred tax assets at December 31, 1998 and 1997.

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ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
NOTES TO FINANCIAL STATEMENTS                                                   
--------------------------------------------------------------------------------

      At December 31, 1998, the Company has net operating loss carryforwards
        of $5,387,183 and $3,236,269, respectively, for federal and state income
   tax purposes. These carryforwards begin to expire in years 2012 and
        2005, respectively. The Company's research and development credits begin
 to expire in 2002 for both federal and state income tax purposes.

   Due to changes in the Company's ownership during 1997 and 1998, the
   amount of loss available to offset future federal and state taxable
        income or tax may be limited by IRS Code Section 382. The amount of such
limitation, if any, has not been determined.                    

CONVERSION TO "C" CORPORATION STATUS                            

        On May 13, 1997, the Company issued Series A Convertible Preferred Stock
        to a corporate investor, which caused the Company's S corporation status
to terminate at that date. The Company elected under IRC Section
        1362(e)(2) to allocate the net income or loss for the entire fiscal year
on a pro rata basis between the period before the S corporation 
termination and the period following the termination.           

11. RELATED PARTY TRANSACTIONS                                                  

    In May and July 1996, the Company issued convertible notes payable to one of
 the Company's shareholders in the amounts of $400,000 and $600,000 and to
    one of the Company's directors in the amount of $300,000. Under the terms of
    these notes, the Company was allowed to borrow any sum up to the full amount
   of the notes. Interest accrued at 5.76%, 6.04%, and 6.04%, respectively, on
  the outstanding balances. The Company borrowed a total of $610,346 against
the convertible notes in 1996 and an additional $688,654 during 1997. In
   April 1997, the total balances outstanding on the notes were converted into
    8,750,000 shares of the Company's common stock, and all related interest was
forgiven by the holders of the notes.                                   

    In 1996, the Company issued an option to purchase 2,500,000 shares of common
  stock to one of the Company's founders at an exercise price of $0.0004 per
 share. This option was exercised and the 2,500,000 shares of common stock
issued are subject to a restriction agreement and vest over a four-year 
period. Upon termination of employment, the Company has the right to    
  repurchase unvested shares at the original exercise price. At December 31,
1998, 765,625 shares remain subject to repurchase.                      

12. NONMONETARY TRANSACTIONS                                                    

 The Company entered into an arrangement with two strategic partners under
  which access to each partner's unique Web content is included as a feature
 in the Alexa toolbar. The purpose of these arrangements is to enhance the
 content offered by the Company to users and the Company's partners obtain
   higher visibility for their Web content. These arrangements are nonmonetary
    in nature and no accounting recognition has been given to them as their fair
value was not determinable.                                             

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ALEXA INTERNET                                                                  
(A DEVELOPMENT STAGE COMPANY)                                                   
NOTES TO FINANCIAL STATEMENTS                                                   
--------------------------------------------------------------------------------

13. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                            

                                                        [Enlarge/Download Table]

                                                                          FEBRUARY 14, 
                                                                              1996     
                                             YEAR ENDED     YEAR ENDED   (INCEPTION) TO
                                             DECEMBER 31,  DECEMBER 31,   DECEMBER 31, 
                                                1998           1997           1998     
                                             ------------  ------------  --------------
                                                                                       
Cash payments for interest                    $ 32,258      $   19,325     $   51,583  
                                              ========      ==========     ==========  
Noncash investing and financing activities:                                            
   Conversion of notes payable to                                                      
     common stock                             $     --      $1,299,000     $1,299,000  
                                              ========      ==========     ==========  
   Change in unrealized gain on marketable                                             
     securities                               $ 81,455      $   44,007     $  125,455  
                                              ========      ==========     ==========  
   Common stock issued for services                                                    
     rendered in connection with the                                                   
     issuance of preferred stock              $     --      $   64,323     $   64,323  
                                              ========      ==========     ==========  
   Preferred stock issued for services        $     --      $   30,000     $   30,000  
                                              ========      ==========     ==========  

14. SUBSEQUENT EVENTS                                                           

  In February 1999, the Company purchased a certificate of deposit ("CD") in
    the amount of $60,000. The Company pledged the CD to a financial institution
as collateral against credit cards the financial institution issued to  
certain of the Company's employees.                                     

In March and April 1999, the Company entered into four non-cancelable   
   operating leases for computer and network equipment. The term of the leases
is two years and the lease payments totals $59,550.                     

  On April 23, 1999, the Board of Directors approved the sale of the Company
  to Amazon.com for approximately $250 million in Amazon.com stock. The sale
is subject to approval by the Company's stockholders.                   

8-K 21st Page of 48 TOC 1st Previous Next ↓Bottom Just 21st

 REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and                                                   
Stockholders of e-Niche Incorporated                                            

In our opinion, the accompanying balance sheet and the related statements of    
operations, of changes in stockholders' equity (deficit) and of cash flows      
present fairly, in all material respects, the financial position of e-Niche     
Incorporated (a development stage enterprise) at December 31, 1998 and 1997, and
the results of its operations and its cash flows for the year ended December 31 
1998, for the period from inception (July 29, 1997) through December 31, 1997   
and for the period from inception (July 29, 1997) through December 31, 1998, in 
conformity with generally accepted accounting principles. These financial       
statements are the responsibility of the Company's management; our              
responsibility is to express an opinion on these financial statements based on  
our audits. We conducted our audits of these statements in accordance with      
generally accepted auditing standards 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 the opinion expressed    
above.                                                                          

PricewaterhouseCoopers LLP                                                      
Boston, Massachusetts                                                           
May 3, 1999                                                                     

8-K 22nd Page of 48 TOC 1st Previous Next ↓Bottom Just 22nd

E-NICHE INCORPORATED                                                            
(A DEVELOPMENT STAGE ENTERPRISE)                                                
BALANCE SHEET                                                                   

                                                        [Enlarge/Download Table]

                                                                                      DECEMBER 31,           
                                                                                1998                 1997    
                                                                            -----------          ----------- 
                                                                                                             
ASSETS                                                                                                       
Current assets:                                                                                              
    Cash and cash equivalents                                               $ 1,605,616          $    16,001 
    Prepaid expenses and other current assets                                    56,136                   -- 
                                                                            -----------          ----------- 

             Total current assets                                             1,661,752               16,001 
                                                                            -----------          ----------- 

Fixed assets, net                                                               184,388                4,369 
Other assets                                                                     18,382                   -- 
                                                                            -----------          ----------- 

                                                                            $ 1,864,522          $    20,370 
                                                                            ===========          =========== 

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND                                                      
  STOCKHOLDERS' EQUITY (DEFICIT)                                                                             
Current liabilities:                                                                                         
    Current portion of long-term debt                                       $    25,000          $        -- 
    Accounts payable                                                             81,518                  949 
    Accrued professional services fees                                           30,000                   -- 
    Other accrued expenses                                                        8,401                   -- 
                                                                            -----------          ----------- 

             Total current liabilities                                          144,919                  949 
                                                                            -----------          ----------- 

Long-term debt                                                                  125,000                   -- 
                                                                            -----------          ----------- 

Series A redeemable convertible preferred stock, $0.01 par value;                                            
  2,000,000 shares authorized, issued and outstanding at December 31, 1998    1,973,561                   -- 
                                                                            -----------          ----------- 

Stockholders' equity (deficit):                                                                              
Series B convertible preferred stock, $0.01 par value; 1 share authorized,                                   
  issued and outstanding at December 31, 1998                                    18,681                   -- 
Common stock, $0.01 par value; 5,000,001 shares authorized;                                                  
  2,250,000 and 1,386,809 shares issued and outstanding at                                                   
  December 31, 1998 and 1997, respectively                                       22,500               13,868 
Additional paid-in capital                                                       39,119               36,132 
Deficit accumulated during the development stage                               (459,258)             (30,579)
                                                                            -----------          ----------- 

             Total stockholders' equity (deficit)                              (378,958)              19,421 
                                                                            -----------          ----------- 

Commitments (Note 9)                                                                                         

                                                                            $ 1,864,522          $    20,370 
                                                                            ===========          =========== 


The accompanying notes are an integral part of these financial statements.

8-K 23rd Page of 48 TOC 1st Previous Next ↓Bottom Just 23rd

E-NICHE INCORPORATED                                                            
(A DEVELOPMENT STAGE ENTERPRISE)                                              
STATEMENT OF OPERATIONS                                                         

                                                                [Download Table]

                                               PERIOD FROM    PERIOD FROM 
                                                INCEPTION      INCEPTION  
                                                (JULY 29,      (JULY 29,  
                                 YEAR ENDED   1997) THROUGH  1997) THROUGH
                                DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                    1998           1997           1998    
                                 ---------      ---------      ---------  
                                                                          

Costs and expenses:                                                       
    Research and development     $ 129,484      $   3,901      $ 133,385  
    Selling and marketing           57,396            471         57,867  
    General and administrative     241,363         25,648        267,011  
                                 ---------      ---------      ---------  

       Loss from operations       (428,243)       (30,020)      (458,263) 

Other expense                         (240)          (559)          (799) 
Interest expense, net                 (196)            --           (196) 
                                 ---------      ---------      ---------  

       Net loss                  $(428,679)     $ (30,579)     $(459,258) 
                                 =========      =========      =========  


The accompanying notes are an integral part of these financial statements.

8-K 24th Page of 48 TOC 1st Previous Next ↓Bottom Just 24th

E-NICHE INCORPORATED                                                            
(A DEVELOPMENT STAGE ENTERPRISE)                                                
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)                          
FOR THE PERIOD FROM INCEPTION (JULY 29, 1997) THROUGH DECEMBER 31, 1998         

                                                        [Enlarge/Download Table]

                                                                                                      DEFICIT                  
                                          SERIES B                                                   ACCUMULATED               
                                        CONVERTIBLE                                    ADDITIONAL    DURING THE                
                                      PREFERRED STOCK              COMMON STOCK          PAID-IN     DEVELOPMENT               
                                   SHARES        AMOUNT       SHARES       PAR VALUE     CAPITAL        STAGE        TOTAL     
                                -----------    -----------  -----------   -----------  -----------   -----------   ----------- 
                                                                                                                               
Capital contributed by founder           --    $        --           --   $        --   $    49,000  $        --    $    49,000

Issuance of restricted stock             --             --    1,386,809        13,868      (12,868)           --         1,000 

Net loss                                 --             --           --            --           --       (30,579)      (30,579)
                                -----------    -----------  -----------   -----------  -----------   -----------   ----------- 

Balance at December 31, 1997             --             --    1,386,809        13,868       36,132       (30,579)       19,421 

Issuance of restricted stock                                    500,000         5,000          300            --         5,300 

Return of capital                        --             --           --            --      (30,000)           --       (30,000)

Conversion of notes                                                                                                            
 payable to Series B                                                                                                           
  convertible preferred                                                                                                        
  stock and common stock                  1         18,681      363,191         3,632       32,687            --        55,000 

Net loss                                 --             --           --            --           --      (428,679)     (428,679)
                                -----------    -----------  -----------   -----------  -----------   -----------   ----------- 

Balance at December 31, 1998              1    $    18,681    2,250,000   $    22,500  $    39,119   $  (459,258)  $  (378,958)
                                ===========    ===========  ===========   ===========  ===========   ===========   =========== 


The accompanying notes are an integral part of these financial statements.

8-K 25th Page of 48 TOC 1st Previous Next ↓Bottom Just 25th

E-NICHE INCORPORATED                                                            
(A DEVELOPMENT STAGE ENTERPRISE)                                                
STATEMENT OF CASH FLOWS                                                         
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                

                                                        [Enlarge/Download Table]

                                                                            PERIOD FROM    PERIOD FROM 
                                                                             INCEPTION      INCEPTION  
                                                                              (JULY 29,     (JULY 29,  
                                                              YEAR ENDED   1997) THROUGH  1997) THROUGH
                                                             DECEMBER 31,  DECEMBER 31,   DECEMBER 31, 
                                                                 1998           1997          1998     
                                                             -----------   -------------  -------------
                                                                                                       

CASH FLOWS FROM OPERATING ACTIVITIES:                                                                  
    Net loss                                                 $  (428,679)  $   (30,579)   $  (459,258) 
    Adjustments to reconcile net loss to net cash                                                      
      used for operating activities:                                                                   
      Depreciation                                                 9,383           485          9,868  
      Compensation expense associated with the issuance                                                
       of restricted stock                                         5,300            --          5,300  
      Changes in assets and liabilities:                                                               
        Prepaid expenses and other current assets                (56,136)           --        (56,136) 
        Accounts payable                                          80,569           949         81,518  
        Accrued professional services fees                        30,000                       30,000  
        Other accrued expenses                                     8,401            --          8,401  
                                                             -----------   -----------    -----------  

        Net cash used for operating activities                  (351,162)      (29,145)      (380,307) 
                                                             -----------   -----------    -----------  

CASH FLOWS FROM INVESTING ACTIVITIES:                                                                  
    Purchases of fixed assets                                   (189,402)       (4,854)      (194,256) 
    Increase in other assets                                     (18,382)           --        (18,382) 
                                                             -----------   -----------    -----------  

        Net cash used for investing activities                  (207,784)       (4,854)      (212,638) 
                                                             -----------   -----------    -----------  

CASH FLOWS FROM FINANCING ACTIVITIES:                                                                  
    Proceeds from issuance of notes payable to stockholder        80,000            --         80,000  
    Repayments of notes payable to stockholder                   (25,000)           --        (25,000) 
    Borrowing from line of credit                                150,000            --        150,000  
    Proceeds from Series A redeemable convertible preferred                                            
      stock, net of issuance costs                             1,973,561            --      1,973,561  
    Proceeds from issuance of common stock                            --         1,000          1,000  
    Capital contribution                                              --        49,000         49,000  
    Return of capital                                            (30,000)           --        (30,000) 
                                                             -----------   -----------    -----------  

        Net cash provided by financing activities              2,148,561        50,000      2,198,561  
                                                             -----------   -----------    -----------  

Net increase in cash and cash equivalents                      1,589,615        16,001      1,605,616  

Cash and cash equivalents, beginning of period                    16,001            --             --  
                                                             -----------   -----------    -----------  

Cash and cash equivalents, end of period                     $ 1,605,616   $    16,001    $ 1,605,616  
                                                             -----------   -----------    -----------  


SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:                       

In September 1998, the Company converted notes payable to a stockholder of      
$55,000 into 1 share of Series B convertible preferred stock and 363,191 shares 
of common stock.                                                                

The accompanying notes are an integral part of these financial statements.

8-K 26th Page of 48 TOC 1st Previous Next ↓Bottom Just 26th

E-NICHE INCORPORATED                                                            
(A DEVELOPMENT STAGE ENTERPRISE)                                                
NOTES TO FINANCIAL STATEMENTS                                                   

1.      NATURE OF THE BUSINESS                                                  

     e-Niche Incorporated (the "Company") was incorporated in the State of
       Delaware on July 29, 1997. The Company was formed to design and develop
      marketplaces on the Internet that bring together buyers and sellers of
 rare and hard-to-find items. Since its inception, the Company has
       devoted substantially all of its efforts to business planning, research
     and development, recruiting management and technical staff, acquiring
 operating assets and raising capital. Accordingly, the Company is
    considered to be in the development stage as defined in Statement of
Financial Accounting Standards ("SFAS") No. 7.                  

2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                              

USE OF ESTIMATES                                                

    The preparation of financial statements in conformity with generally
        accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities
      and the 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.                                                

CASH AND CASH EQUIVALENTS                                       

      All highly liquid investments with an initial maturity of three months
  or less are considered to be cash equivalents. The Company invests
excess cash primarily in money market funds of major financial  
   institutions. Accordingly, these investments are subject to minimal
credit and market risk. At December 31, 1998, the Company's cash
       equivalents are classified as available-for-sale and include $1,400,000
        in money market funds. These investments are stated at cost plus accrued
interest, which approximates fair market value.                 

FIXED ASSETS                                                    

Fixed assets are recorded at cost and depreciated using the     
  straight-line method over their estimated useful lives. Repair and
maintenance costs are expensed as incurred.                     

ACCOUNTING FOR STOCK-BASED COMPENSATION                         

  The Company accounts for stock-based awards to employees using the
   intrinsic value method as prescribed in Accounting Principles Board
       ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
      related interpretations and has adopted the provisions of Statement of
   Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," through disclosure only (Note 7).                

COMPREHENSIVE INCOME                                            

   The Company adopted SFAS No. 130, "Reporting Comprehensive Income,"
        effective January 1, 1998. This statement requires a full set of general
       purpose financial statements to be expanded to include the reporting of
"comprehensive income." Comprehensive income is comprised of two
      components, net income and other comprehensive income. During the year
     ended December 31, 1998 and the period from inception (July 29, 1997)
       through December 31, 1997, the Company had no items qualifying as other
      comprehensive income; accordingly, the adoption of SFAS No. 130 had no
impact on the Company's financial statements.                   

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E-NICHE INCORPORATED                                                            
(A DEVELOPMENT STAGE ENTERPRISE)                                                
NOTES TO FINANCIAL STATEMENTS                                                   

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS                       

      In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
 Instruments and Hedging Activities." The new standard 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.
 SFAS No. 133 is effective for all fiscal quarters of fiscal years
       beginning after June 15, 1999. The Company does not expect SFAS No. 133
 to have a material effect on its financial position or results of
operations.                                                     

        In February 1998, the Accounting Standards Executive Committee ("AcSEC")
       issued Statement of Position ("SoP") 98-1, "Accounting for the Costs of
   Computer Software Developed or Obtained for Internal Use." SoP 98-1
      establishes the accounting for costs of software products developed or
purchased for internal use, including when such costs should be 
    capitalized. SoP 98-1 will be effective for the Company beginning in
    fiscal 1999, and the Company does not expect adoption of this SoP to
have a material effect on its financial position or results of  
operations.                                                     

    In April 1998, the AcSEC issued SoP 98-5, "Reporting on the Costs of
      Start-Up Activities." Start-up activities are defined broadly as those
one-time activities related to the opening of a new facility,   
  introducing a new product or service, conducting business in a new
       territory, conducting business with a new class of customer, commencing
     some new operation or organizing a new entity. SoP 98-5 requires that
    the cost of start-up activities be expensed as incurred. SoP 98-5 is
        effective for the Company beginning in fiscal 1999, and the Company does
not expect adoption of this SoP to have a material effect on its
financial position or results of operations.                    

3.      FIXED ASSETS                                                            

Fixed assets consist of the following:                          

                                                                [Download Table]

                                        ESTIMATED                            
                                       USEFUL LIFE        DECEMBER 31,       
                                         (YEARS)      1998           1997    

                                                                             
Computer equipment and software             3      $  172,639      $       - 
Office equipment                            3          14,271              - 
Furniture and fixtures                      5           7,346          4,854 
                                                   -----------     --------- 

                                                      194,256          4,854 
Less - accumulated depreciation                        (9,868)          (485)
                                                   -----------     --------- 

                                                   $  184,388      $   4,369 
                                                   ===========     ==========


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E-NICHE INCORPORATED                                                            
(A DEVELOPMENT STAGE ENTERPRISE)                                                
NOTES TO FINANCIAL STATEMENTS                                                   

4.      LINE OF CREDIT                                                          

        In October 1998, the Company entered into an agreement with a bank under
which it may borrow up to $350,000 for working capital purposes 
   ("Working Capital Line") and $150,000 for purchases of fixed assets
  ("Equipment Line"). Outstanding borrowings under the agreement are
        collateralized by the Company's assets and bear interest at the lender's
        prime rate plus 1.0% for the Working Capital Line and the lender's prime
      rate plus 0.5% for the Equipment Line (8.75% and 8.25% at December 31,
   1998, respectively). The Working Capital Line expires on October 8,
      1999, at which time all outstanding interest and principal is due. The
     Equipment Line expires on July 8, 1999, at which time all outstanding
       interest and principal will convert to a thirty month term loan payable
   in thirty monthly installments of principal and interest. Under the
      terms of the agreement, the Company is required to comply with certain
      restrictive covenants, including the maintenance of a minimum tangible
     net worth of $250,000 and limitations on indebtedness, liens, mergers
and payments of dividends.                                      

      As of December 31, 1998, there are no outstanding borrowings under the
    Working Capital Line and future minimum principal payments under the
Equipment Line are as follows:                                  

                                                                [Download Table]

YEAR ENDING                   
DECEMBER 31,                  
                              

1999                 $  25,000
2000                    60,000
2001                    60,000
2002                     5,000
                     ---------

                     $ 150,000
                     =========

In April 1999, all outstanding borrowings and interest under the
Equipment Line were repaid in full.                             

5.      PREFERRED STOCK                                                         

        On September 4, 1998, the Company authorized and issued 2,000,000 shares
 of Series A redeemable convertible preferred stock (the "Series A
    stock") at a price of $1.00 per share and converted $55,000 of notes
       payable to a stockholder into 1 share of Series B convertible preferred
    stock (the "Series B stock") and 363,191 shares of common stock. The
Series A and Series B stock has the following characteristics.  

VOTING RIGHTS                                                   

      Holders of Series A stock are entitled to the number of votes equal to
  the number of shares of the Company's common stock into which such
     holder's shares are convertible at the record date for such vote. The
      holder of Series B stock is entitled to one vote on the affairs of the
Company.                                                        

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E-NICHE INCORPORATED                                                            
(A DEVELOPMENT STAGE ENTERPRISE)                                                
NOTES TO FINANCIAL STATEMENTS                                                   

DIVIDEND RIGHTS                                                 

   The holders of Series A stock are not entitled to receive dividends
  unless declared by the Company's Board of Directors. Any dividends
        declared must be distributed and paid in full to the holders of Series A
      stock prior to payments to common stockholders. The holder of Series B
       stock is not entitled to dividends. From the date of issuance of Series
     A stock through December 31, 1998, no dividends have been declared or
paid by the Company.                                            

LIQUIDATION PREFERENCES                                         

In the event of any liquidation, dissolution, winding up or     
reorganization (including certain mergers or asset sales) of the
  Company, the holders of Series A stock and Series B stock shall be
        entitled to receive an amount equal to $1.00 per share plus any declared
       but unpaid dividends and $75,000 per share, respectively. If the assets
 of the Company are insufficient to pay these amounts in full, the
        liquidation distribution shall be made ratably based upon these amounts.

  Any assets remaining following any liquidation distribution to the
        holders of Series A stock and Series B stock will be distributed ratably
among the common stockholders.                                  

CONVERSION RIGHTS                                               

        Each share of Series A stock is convertible at any time at the option of
the holder into one share of common stock, subject to certain   
        adjustments. Upon the closing of an initial public offering in which net
      proceeds equal or exceed $20,000,000 and in which the price per common
       share to the public is at least $5.00, all outstanding shares of Series
      A stock and Series B stock automatically convert into shares of common
      stock at the then effective conversion rate (one share of common stock
    for each share of Series A stock and each share of Series B stock at
    December 31, 1998). Series A stock shall also convert into shares of
       common stock at the then effective conversion rate upon the election of
more than 66 2/3% of the holders of Series A stock.             

    At December 31, 1998, 2,000,001 shares of the Company's common stock
     have been reserved for issuance upon conversion of Series A stock and
Series B stock.                                                 

REDEMPTION RIGHTS                                               

    At the request of the majority of the holders of Series A stock, the
     Company will redeem all outstanding shares of Series A stock in three
     equal annual installments beginning September 4, 2003 at a redemption
 price of $1.00 per share, plus any declared but unpaid dividends,
subject to certain anti-dilution adjustments.                   

6.      COMMON STOCK                                                            

 Each share of common stock entitles the holder to one vote on all
 matters submitted to a vote of the Company's stockholders. Common
 stockholders are entitled to receive dividends, if any, as may be
declared by the Board of Directors, subject to the preferential 
dividend rights of the holders of Series A stock.               

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E-NICHE INCORPORATED                                                            
(A DEVELOPMENT STAGE ENTERPRISE)                                                
NOTES TO FINANCIAL STATEMENTS                                                   

        In September 1998, the Company entered into a recapitalization agreement
    whereby the common stock was split at a ratio of 1,386.809 to 1. All
shares of common stock and options included in the accompanying 
    financial statements have been retroactively adjusted to reflect the
stock split for all periods presented.                          

RESTRICTED STOCK AGREEMENTS                                     

      The Company has entered into stock restriction agreements with certain
stockholders. The agreements provide that, in the event these   
      individuals are no longer employed by the Company, the Company has the
right to repurchase any or all unvested shares at their original
   issuance price. The repurchase option rights lapse at various dates
       through February 2003. At December 31, 1998, 1,443,002 shares of common
stock were subject to repurchase by the Company.                

       At December 31, 1998, the Company's outstanding common stock is subject
   to certain restrictions as to sale or transfer. The Company and its
       stockholders are entitled to a right of first refusal on shares offered
for sale at the then-current fair market value.                 

7.      STOCK OPTION PLAN                                                       

        In 1998, the Company adopted the 1998 Stock Plan (the "1998 Plan") which
   provides for the grant of incentive stock options and non-qualified
      stock options, stock awards and stock purchase rights for the purchase
  of up to 750,000 shares of the Company's common stock by officers,
 employees, consultants and directors of the Company. The Board of
       Directors is responsible for administration of the 1998 Plan. The Board
  determines the term of each option, the option exercise price, the
       number of shares for which each option is granted and the rate at which
     each option is exercisable. Incentive stock options may be granted to
       any officer or employee at an exercise price per share of not less than
       the fair value per common share on the date of the grant (not less than
 110% of fair value in the case of holders of more than 10% of the
        Company's voting stock) and with a term not to exceed ten years from the
       date of the grant (five years for grants to holders of more than 10% of
       the Company's voting stock). Non-qualified stock options may be granted
     to any officer, employee, consultant or director at an exercise price
per share of not less than the book value per share.            

        No compensation cost has been recognized for employee stock options from
     inception (July 29, 1997) through December 31, 1998. Had compensation
   cost been determined based on the fair value at the grant dates for
       options granted in 1998 consistent with the provisions of SFAS No. 123,
      the Company's net loss for the year ended December 31, 1998 would have
        been approximately $430,000. Because options vest over several years and
     additional option grants are expected to be made in future years, the
       above pro forma results are not representative of the pro forma results
for future years.                                               

   For purposes of pro forma disclosure, the fair value of each option
grant was estimated on the date of grant using the Black-Scholes
       option-pricing model with the following assumptions for grants in 1998:
   no dividend yield; no volatility; risk-free interest rate of 5% and
expected lives of 5 years.                                      

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E-NICHE INCORPORATED                                                            
(A DEVELOPMENT STAGE ENTERPRISE)                                                
NOTES TO FINANCIAL STATEMENTS                                                   

A summary of the status of the Company's stock options as of    
      December 31, 1998, and changes during the year then ended is presented
below:                                                          

                                                                [Download Table]

                                                                    WEIGHTED-
                                                                    AVERAGE  
                                                                    EXERCISE 
                                                   SHARES            PRICE   
                                                                             
Granted                                            369,500           $ 0.10  

Outstanding at end of year                         369,500           $ 0.10  
                                                  ========                   

Options exercisable at end of year                      -                    

Weighted-average fair value of                                               
  options granted during the year                 $  0.03                    

Options available for future grant                380,500                    

The following table summarizes information about stock options  
outstanding at December 31, 1998:                               

                                                                [Download Table]

                                     WEIGHTED-                  
                                     AVERAGE                    
                                     REMAINING                  
                                    CONTRACTUAL                 
                                       LIFE            SHARES   
EXERCISE PRICE          SHARES        (YEARS)        EXERCISABLE
                                                                
    $0.10               369,500           9.92                - 

8.      INCOME TAXES                                                            

     During the period from July 29, 1997 (inception) through September 4,
      1998, the Company qualified under Section 1362 of the Internal Revenue
    Code as an S Corporation and was not required to pay income taxes. S
      Corporation stockholders are required to report their respective share
       of the Company's taxable income or loss on their individual tax returns
and are personally liable for any related tax. During 1998, the 
     Company's S Corporation status was terminated and it qualified as a C
      Corporation. The net loss incurred while the Company qualified as an S
   Corporation remains with its stockholders. The loss incurred by the
   Company as a C Corporation is to be carried forward by the Company.

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E-NICHE INCORPORATED                                                            
(A DEVELOPMENT STAGE ENTERPRISE)                                                
NOTES TO FINANCIAL STATEMENTS                                                   

  At December 31, 1998, net deferred tax assets are comprised of the
following:                                                      

                                                                [Download Table]
                                                       
Deferred tax assets:                                   

   Net operating loss carryforwards          $ 168,976 
   Other                                         2,884 
                                             --------- 

Gross deferred tax assets                      171,860 
Deferred tax liabilities                       (11,934)
                                             --------- 

Net deferred tax assets                        159,926 
Deferred tax asset valuation allowance        (159,926)
                                             --------- 

                                             $       - 
                                             ========= 

       Realization of net deferred tax assets is dependent upon the generation
        of future taxable income. The Company has provided a valuation allowance
    for the full amount of its deferred tax assets, since realization of
these future benefits is not sufficiently assured.              

     At December 31, 1998, the Company has federal and state net operating
       loss carryforwards of approximately $410,000 available to reduce future
taxable income which expire at various dates through 2018.      

      Under the provisions of the Internal Revenue Code, certain substantial
        changes in the Company's ownership may limit the amount of net operating
    loss carryforwards and research and development credit carryforwards
    which could be utilized annually to offset future taxable income and
taxes payable.                                                  

9.      COMMITMENTS                                                             

   The Company leases office space and off-site facilities for certain
   computer equipment under noncancelable operating leases. Total rent
  expense under these operating leases was approximately $17,600 and
$2,600 for the year ended December 31, 1998 and the period from 
  inception (July 29, 1997) through December 31, 1997, respectively.

  Future minimum lease payments at December 31, 1998 are as follows:

                                                                [Download Table]

YEAR ENDING DECEMBER 31,                              
                                                      
      1999                                     150,000
      2000                                     108,000
      2001                                     108,000
                                            ----------

                                            $  366,000
                                            ==========

8-K 33rd Page of 48 TOC 1st Previous Next ↓Bottom Just 33rd

E-NICHE INCORPORATED                                                            
(A DEVELOPMENT STAGE ENTERPRISE)                                                
NOTES TO FINANCIAL STATEMENTS                                                   

10.     SUBSEQUENT EVENTS                                                       

     On January 8, 1999, the Company issued convertible notes payable (the
    "Notes") to new and existing Company investors for total proceeds of
      $4,000,000. The Notes bore interest at 4.75% per annum and on February
        25, 1999, the Notes were canceled. In return for the cancellation of the
Notes, the Company issued 881,640 shares of Series C redeemable 
convertible preferred stock ("Series C stock").                 

       Additionally, on February 25, 1999, the Company issued 1,322,442 shares
   of Series C stock at a price of $4.54 per share to existing and new
       investors for cash proceeds of $6,000,000. Each share of Series C stock
is convertible into one share of common stock subject to certain
anti-dilution adjustments. The holders of Series C stock will   
    participate on an as-converted basis in any dividends paid on common
  stock and are entitled to one vote on all matters. The liquidation
        preference of Series C stock is equal to its issue price. At the request
  of the majority of the holders of Series C stock, the Company will
     redeem all outstanding shares of Series C stock in three equal annual
       installments beginning September 4, 2003 at a redemption price of $4.54
     per share, plus any declared but unpaid dividends, subject to certain
anti-dilution adjustments.                                      

      On January 11, 1999, the Company acquired all of the outstanding stock
    of Bibliofind, Inc. in an acquisition accounted for as a purchase in
    accordance with APB No. 16 "Business Combinations." The Company paid
       $4,000,000 in cash and issued $2,000,000 of promissory notes payable to
    the shareholders of Bibliofind. In March 1999, the Company repaid in
full the promissory notes payable issued in connection with the 
acquisition.                                                    

    On April 24, 1999, the Company entered into an Agreement and Plan of
    Merger (the "Merger Agreement") with Amazon.com, Inc. and Amazon.com
      Auctions (collectively referred to as Amazon.com) and the stockholders
        of the Company. Under the terms of the Merger Agreement, Amazon.com will
       acquire all of the outstanding shares of the Company's stock and assume
  all outstanding options in exchange for shares of Amazon.com, Inc.
    common stock. Additionally, on or about the first anniversary of the
      closing date of this transaction (the "Anniversary Date"), Amazon.com,
     Inc. will issue additional shares of Amazon.com, Inc. common stock to
  stockholders and pay cash to certain option holders of the Company
  subject to certain conditions, including the employment of certain
        employees of the Company at Amazon.com on the Anniversary Date. Prior to
    the closing of the merger, the Company's Series A and Series C stock
  will be converted to common stock at a 1-to-1 ratio. The holder of
    Series B stock will be paid $75,000 for cancellation of the Series B
stock.                                                          

8-K 34th Page of 48 TOC 1st Previous Next ↓Bottom Just 34th
ALEXA INTERNET
(A DEVELOPMENT STAGE COMPANY) 
CONDENSED BALANCE SHEETS
(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                            MARCH 31, 1999  DECEMBER 31, 1998
                                                            --------------  -----------------
                                                              (UNAUDITED)                    
                                                                                             
ASSETS                                                                                       
Current assets:                                                                              
       Cash and cash equivalents                                $   628           $   147    
       Marketable securities                                      1,839             3,841    
       Accounts receivable                                          352               164    
       Prepaid expenses and other                                    28               172    
                                                                -------           -------    
            Total current assets                                  2,847             4,324    

Property and equipment, net                                         790               772    
Other assets                                                       83                16      
                                                                -------           -------    
            Total assets                                        $ 3,720           $ 5,112    
                                                                =======           =======    
LIABILITIES AND STOCKHOLDERS' EQUITY                                                         
Current liabilities:                                                                         
       Accounts payable                                         $   162           $   238    
       Accrued advertising                                          107                --    
       Accrued liabilities                                          169               264    
       Deferred revenue                                              74                55    
       Note payable, current portion                                309               309    
                                                                -------           -------    
            Total current liabilities                               821               866    

Note payable, less current portion                                  178               255    
                                                                -------           -------    
            Total liabilities                                       999             1,121    
                                                                -------           -------    

Stockholders' equity:                                                                        
       Convertible preferred stock                                9,881             9,881    
       Common stock                                               7,761             2,019    
       Deferred compensation                                     (5,971)             (503)   
       Accumulated other comprehensive income                       100               125    
       Deficit accumulated during the development stage          (9,050)           (7,531)   
                                                                -------           -------    
            Total stockholders' equity                            2,721             3,991    
                                                                -------           -------    
                Total liabilities and stockholders' equity      $ 3,720           $ 5,112    
                                                                =======           =======    

See notes to condensed financial statements.

8-K 35th Page of 48 TOC 1st Previous Next ↓Bottom Just 35th

ALEXA INTERNET
(A DEVELOPMENT STAGE COMPANY) 
CONDENSED STATEMENT OF OPERATIONS 
(IN THOUSANDS)
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                                                                                    PERIOD FROM    
                                                                                     INCEPTION     
                                                                                (FEBRUARY 14, 1996)
                                        THREE MONTHS ENDED  THREE MONTHS ENDED        THROUGH      
                                          MARCH 31, 1999      MARCH 31, 1998       MARCH 31, 1999  
                                        ------------------  ------------------  -------------------
                                                                                                   
Revenue                                      $   382           $     2                $  754       
                                             -------           -------                ------       
Operating expenses:                                                                                
       Cost of revenue                            66                --                    71       
       Research and development                  384               313                 3,000       
       Sales and marketing                     1,013               465                 4,233       
       General and administrative                370               153                 2,037       
       Depreciation and amortization             122                79                   711       
                                             -------           -------                ------       
            Total operating expenses           1,955             1,010                10,052       

Operating loss                                (1,573)           (1,008)               (9,298)      

Interest income, net                              54                24                   243       
Other income (expense), net                       --                --                     4       
                                             -------           -------                ------       
            Net loss                          (1,519)             (984)               (9,051)      

Other comprehensive income:                                                                        
       Change in unrealized gain on                                                                
         available-for-sale marketable                                                             
         securities                              (25)               --                   100       
                                             -------           -------                ------       
           Comprehensive loss                $(1,544)          $  (984)              $(8,951)      
                                             =======           =======               =======       

See notes to condensed financial statements.

8-K 36th Page of 48 TOC 1st Previous Next ↓Bottom Just 36th
ALEXA INTERNET
(A DEVELOPMENT STAGE COMPANY) 
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                                                                                                              PERIOD FROM     
                                                                                                               INCEPTION      
                                                                                                           (FEBRUARY 14, 1996)
                                                                     THREE MONTHS      THREE MONTHS ENDED         THROUGH     
                                                                 ENDED MARCH 31, 1999     MARCH 31, 1998       MARCH 31, 1999 
                                                                 --------------------  ------------------  ------------------ 
                                                                                                                              
Cash flows from operations:                                                                                                   
      Net loss                                                         $ (1,519)             $   (984)            $ (9,051)   
      Adjustments to reconcile net loss to net cash                                                                           
           used in operating activities:                                                                                      
      Depreciation and amortization                                         396                    79                  982    
      Amortization of deferred stock compensation                            --                    --                  137    
      Gain on sale of marketable securities                                 (57)                  (30)                (253)   
      Expenses paid through issuance of preferred stock                      --                    --                   30    
      Changes in operating assets and liabilities:                                                                            
           Accounts receivable                                              (93)                   --                 (257)   
           Other current assets                                              48                   (66)                  48    
           Other assets                                                     (67)                   --                 (255)   
           Accounts payable                                                  --                    --                  238    
           Accrued liabilities                                              (45)                  124                  219    
           Deferred Revenue                                                  --                    --                   55    
                                                                       --------              --------             --------    
                 Net cash used in operating activities                   (1,337)                 (877)              (8,107)   
                                                                       --------              --------             --------    

Cash flows from investing activities:                                                                                         
      Payments for property and equipment                                  (140)                 (173)              (1,497)   
      Purchase of short-term investments                                     --                    --              (11,199)   
      Cash receipts on maturities of securities                           2,035                 1,000                9,715    
                                                                       --------              --------             --------    
                 Net cash provided by (used in) investing activities      1,895                   827               (2,981)   
                                                                       --------              --------             --------    

Cash flows from financing activities:                                                                                         
      Proceeds from issuance of common stock                                 --                    --                   16    
      Proceeds from issuance of preferred stock, net                         --                    --                4,862    
      Proceeds from issuance of warrants                                     --                    --                   52    
      Proceeds from exercise of warrant for preferred stock                  --                    --                5,000    
      Proceeds from notes payable                                            --                    --                  774    
      Proceeds from convertible notes payable                                --                    --                1,299    
      Purchase of treasury stock                                             --                    --                   (1)   
      Payments for term loan                                                (77)                  (50)                (286)   
                                                                       --------              --------             --------    
                 Net cash provided by (used in) financing activities        (77)                  (50)              11,716    
                                                                       --------              --------             --------    

Net increase (decrease) in cash and cash equivalents                        481                  (100)                 628    
Cash and cash equivalents - beginning of period                             147                   620                   --    
                                                                       --------              --------             --------    
Cash and cash equivalents - end of period                              $    628              $    520             $    628    
                                                                       --------              --------             --------    


See notes to condensed financial statements.

8-K 37th Page of 48 TOC 1st Previous Next ↓Bottom Just 37th
NOTES TO CONDENSED FINANCIAL STATEMENTS 
--------------------------------------------------------------------------------

BASIS OF PRESENTATION                                                           

The accompanying unaudited condensed financial statements have been prepared in 
accordance with generally accepted accounting principles for interim financial  
information and Article 10 of Regulation S-X. Accordingly, they do not include  
all of the information and notes required by generally accepted accounting      
principles for complete financial statements. In the opinion of management, all 
adjustments (consisting only of normal recurring accruals) considered necessary 
for a fair presentation have been included. Operating results for the three     
month period ended March 31, 1999 are not necessarily indicative of the results 
that may be expected for the year ending December 31, 1999. For further         
information, refer to the consolidated financial statements for the years ended 
December 31, 1998 and 1997 and for the cumulative period from February 14, 1996 
(inception) to December 31, 1998 and notes thereto included herein.             

During the first quarter of 1999, the Company issued employee stock options at  
below fair value and recorded deferred stock compensation of approximately      
$5.7 million in connection with these grants.                                   

SUBSEQUENT EVENT                                                                

On April 24, 1999, Amazon.com, Inc. ("Amazon.com"), AI Acquisitions, Inc., a    
wholly owned subsidiary of Amazon.com, Alexa Internet ("Alexa"), and Brewster   
Kahle, the President and Chief Executive Officer of Alexa, entered into a       
definitive Agreement and Plan of Merger (the "Alexa Merger Agreement"). Pursuant
to the Alexa Merger Agreement, and subject to the terms and conditions thereof, 
Amazon.com will acquire all of the capital stock and assume all outstanding     
options of Alexa. The Alexa Merger will be accounted for under the purchase     
method of accounting.                                                           

Amazon.com will issue Amazon.com common stock, par value $.01 per share,        
totaling approximately $250 million.                                            

RECLASSIFICATION ADJUSTMENTS                                                    

Certain amounts for Alexa have been reclassified to conform to Amazon.com's     
financial statement presentation.                                               

8-K 38th Page of 48 TOC 1st Previous Next ↓Bottom Just 38th

E-NICHE INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                              MARCH 31,   DECEMBER 31,
                                                                 1999        1998     
                                                               -------      -------   
                                                             (UNAUDITED)              
                                                                                      
ASSETS                                                                                
Current assets:                                                                       
      Cash and cash equivalents                                $ 4,659      $ 1,606   
      Prepaid expenses and other current assets                     45           56   
                                                               -------      -------   
            Total current assets                                 4,704        1,662   

Fixed assets, net                                                  407          184   
Goodwill and other assets, net                                   5,732           18   
                                                               -------      -------   
            Total assets                                       $10,843      $ 1,864   
                                                               =======      =======   

LIABILITIES AND STOCKHOLDERS' DEFICIT                                                 
Current liabilities:                                                                  
      Current portion of long-term debt                        $   126      $    25   
      Accounts payable                                             185           82   
      Other accrued expenses                                        69           38   
                                                               -------      -------   
            Total current liabilities                              380          145   
                                                               -------      -------   
Long-term debt                                                     125          125   
                                                               -------      -------   
Redeemable convertible preferred stock                          11,936        1,974   
                                                               -------      -------   
Stockholders' deficit:                                                                
      Convertible preferred stock                                   19           18   
      Common stock                                                  23           22   
      Additional paid-in capital                                    39           39   
      Deficit accumulated during the development stage          (1,679)        (459)  
                                                               -------      -------   
            Total stockholders' deficit                         (1,598)        (380)  
                                                               -------      -------   
                Total liabilities and stockholders' deficit    $10,843      $ 1,864   
                                                               =======      =======   


See notes to condensed consolidated financial statements. 

8-K 39th Page of 48 TOC 1st Previous Next ↓Bottom Just 39th
E-NICHE INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                                                                           PERIOD FROM   
                                                                            INCEPTION    
                                          THREE MONTHS    THREE MONTHS   (JULY 29, 1997) 
                                             ENDED           ENDED           THROUGH     
                                         MARCH 31, 1999  MARCH 31, 1998   MARCH 31, 1999 
                                         --------------  --------------  ----------------
                                                                                         

Net sales                                   $   173             $  --        $   173     
Cost of sales                                     5                --              5     
                                            -------             -----        -------     
Gross profit                                    168                --            168     

Operating expenses:                                                                      
      Selling and marketing                     157                --            215     
      Research and development                  308                --            441     
      General and administrative                625                 1            892     
      Merger and acquisition related                                                     
        costs, including amortization                                                    
        of goodwill and other purchased                                                  
        intangibles                             262                --            262     
                                            -------              ----        -------     
           Total operating expenses           1,352                 1          1,810     

Loss from operations                         (1,184)               (1)        (1,642)    
Interest expense, net                           (36)               --            (37)    
                                            -------              ----        -------     
Net loss                                    $(1,220)             $ (1)       $(1,679)    
                                            =======              ====        =======     

See notes to condensed consolidated financial statements. 

8-K 40th Page of 48 TOC 1st Previous Next ↓Bottom Just 40th
\                              E-NICHE INCORPORATED                             
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(IN THOUSANDS)
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                                                           Period from  
                                                                                            Inception   
                                                                                         (July 29, 1997)
                                                 Three Months Ended  Three Months Ended        through  
                                                   March 31, 1999      March 31, 1998    March 31, 1999 
                                                   --------------      --------------    ---------------
                                                                                                        
Cash flows from operating activities:                                                                   
  Net loss                                            $  (1,219)          $     (1)          $  (1,679) 
  Adjustments to reconcile net loss to net cash                                                         
    provided (used) by operating activities:                                                            
  Depreciation and amortization                             297                 --                 307  
  Compensation expense exercised with the                                                               
      issuance of restricted stock                           --                 --                   5  
  Changes in assets and liabilities                                                                     
    Accounts receivable and prepaid expenses                 13                 --                 (43) 
    Accounts payable and accrued expenses                    93                 --                 215  
                                                     ------------        ------------      -------------
                                                           (816)                (1)             (1,195) 
                                                     ------------        ------------      -------------

Cash flows from investing activities:                                                                   
  Purchases of fixed assets                                (172)                --                (367) 
  Acquisition of Bibliofind, net of cash received        (5,996)                --              (5,996) 
  Increase in other assets                                  (26)                --                 (44) 
                                                     ------------        ------------      -------------
         Net cash used by investing activities           (6,194)                --              (6,407) 
                                                     ------------        ------------      -------------
Cash flows from financing activities:                                                                   
  Borrowings from line of credit                             --                 --                 150  
  Proceeds from notes payable, including notes to                                                       
    stockholders                                          6,000                 --               6,055  
  Repayment of notes payable, including notes to                                                        
    stockholders                                         (5,900)                --              (5,900) 
  Proceeds from issuance of preferred stock               9,962                 --              11,936  
  Other changes in capital, including issuance                                                          
    of common stock                                          --                 --                  20  
                                                     ------------        ------------      -------------
         Net cash provided by financing activities       10,062                 --              12,261  
                                                     ------------        ------------      -------------
Net increase (decrease) in cash and cash                                                                
  equivalents                                             3,052                 (1)              4,659  

Cash and cash equivalents at beginning of period          1,606                 16                  --  
                                                     ------------        ------------      -------------
Cash and cash equivalents at end of period           $    4,658          $      15         $     4,659  
                                                     ------------        ------------      -------------

See notes to condensed consolidated financial statements. 

8-K 41st Page of 48 TOC 1st Previous Next ↓Bottom Just 41st

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------- 

BASIS OF PRESENTATION                                                           

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and notes required by generally accepted         
accounting principles for complete financial statements. In the opinion of      
management, all adjustments (consisting only of normal recurring accruals)      
considered necessary for a fair presentation have been included. Operating      
results for the three month period ended March 31, 1999 are not necessarily     
indicative of the results that may be expected for the year ending December 31, 
1999. For further information, refer to the consolidated financial statements   
for the period from inception (July 29, 1997) through December 31, 1998 and     
notes thereto included herein.                                                  

SERIES C PREFERRED STOCK                                                        

On January 8, 1999, the Company issued convertible notes payable to new and     
existing Company investors for total proceeds of $4 million. On February 25,    
1999, the Notes were canceled. In return for the cancellation of the Notes, the 
Company issued 881,640 shares of Series C redeemable convertible preferred stock
("Series C stock"). Additionally, on February 25, 1999, the Company issued      
1,322,442 shares of Series C stock at a price of $4.54 per share to existing and
new investors for cash proceeds of $6 million.                                  

ACQUISITION OF BIBLIOFIND, INC.                                                 

On January 11, 1999, Exchange.com acquired all of the outstanding stock of      
Bibliofind, Inc. in an acquisition accounted for as a purchase in accordance    
with APB No. 16 "Business Combinations." Exchange.com paid $4 million in cash   
and issued $2 million of promissory notes payable to the shareholders of        
Bibliofind. Exchange.com recorded approximately $6 million in goodwill and will 
amortize this goodwill over approximately five years.  In March 1999,           
Exchange.com repaid in full the promissory notes payable issued in connection   
with the acquisition. Had Bibliofind's results of operations been included with 
Exchange.com's results of operations, Exchange.com's pro forma combined revenues
and combined net loss would have been $507,000 and $(1,463,000), respectively,  
for the year ended December 31, 1998. Pro forma combined revenues and combined  
net loss would not have been materially different than reported results for the 
period ended March 31, 1999.                                                    

SUBSEQUENT EVENT                                                                

On April 24, 1999, Amazon.com, Inc. ("Amazon.com"), Amazon.com Auctions, Inc., a
wholly owned subsidiary of Amazon.com, e-Niche Incorporated ("e-Niche           
Incorporated" or "Exchange.com"), and all of the stockholders of Exchange.com,  
entered into a definitive Agreement and Plan of Merger (the "Exchange.com Merger
Agreement"). Pursuant to the Exchange.com Merger Agreement, and subject to the  
terms and conditions thereof, Amazon.com will acquire all of the capital stock  
and assume all outstanding options of Exchange.com. The Exchange.com Merger will
be accounted for under the purchase method of accounting.                       

Amazon.com will issue shares of its common stock, par value $.01 per share, and 
pay approximately $4 million of cash, with an aggregate value of approximately  
$200 million, assuming that all conditions have been met and assuming that      
$50 million of contingent consideration is paid to stockholders and certain     
option holders subject to the continued employment of certain employees.        

RECLASSIFICATION ADJUSTMENTS                                                    

Certain amounts for Exchange.com have been reclassified to conform to           
Amazon.com's financial statement presentation.                                  

8-K 42nd Page of 48 TOC 1st Previous Next ↓Bottom Just 42nd
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS                     

The following unaudited pro forma combined condensed consolidated financial     
statements give effect to the Alexa Merger and the Exchange.com Merger. The     
Alexa Merger and the Exchange.com Merger will be accounted for under the        
purchase method of accounting in accordance with APB Opinion No. 16. Under the  
purchase method of accounting, the purchase price is allocated to the assets    
acquired and liabilities assumed based on their estimated fair values. The      
estimated fair values contained herein are preliminary in nature, and may not be
indicative of the final purchase price allocation, which will be based on an    
assessment of fair value to be performed by an independent appraiser. Any       
amounts that may be allocable to in process research and development would be   
recorded as one time charges that would reduce the goodwill reflected in the pro
forma combined condensed consolidated balance sheet and reduce the amount of    
amortization of goodwill reflected in the pro forma combined condensed          
consolidated statements of operations. Such preliminary estimates of the fair   
values of the assets and liabilities of Alexa and Exchange.com have been        
combined with the recorded values of the assets and liabilities of Amazon.com in
the unaudited pro forma combined condensed consolidated financial statements.   

The unaudited pro forma combined condensed consolidated balance sheet has been  
prepared to reflect the acquisitions as if they occurred on March 31, 1999. The 
unaudited pro forma combined condensed consolidated statements of operations    
reflect the combined results of operations of Amazon.com, Alexa and Exchange.com
for the year ended December 31, 1998 and the three months ended March 31, 1999  
as if the acquisitions occurred on January 1, 1998.                             

The unaudited pro forma combined condensed consolidated financial statements are
presented for illustrative purposes only and are not necessarily indicative of  
the combined condensed consolidated financial position or results of operations 
in future periods or the results that actually would have been realized had     
Amazon.com, Alexa and Exchange.com been a combined company during the specified 
periods. The unaudited pro forma combined condensed consolidated financial      
statements, including the notes thereto, are qualified in their entirety by     
reference to, and should be read in conjunction with, the historical            
consolidated financial statements of Amazon.com, included in its Annual Report  
on Form 10-K for the year ended December 31, 1998 and its Current Reports on    
Form 8-K filed August 27, 1998 and April 29, 1999.                              

PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET 
MARCH 31, 1999
(IN THOUSANDS)
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                                                                                        ALEXA     EXCHANGE.COM             
                                                                                       PROFORMA     PROFORMA       PROFORMA
                                                AMAZON.COM    ALEXA    EXCHANGE.COM  ADJUSTMENTS   ADJUSTMENTS     BALANCE 
                                              ------------  --------  -------------  -----------  ------------     --------
                                                                                                                           
ASSETS                                                                                                                     
Current assets:                                                                                                            
      Cash                                    $    5,248    $    628      $4,659      $     --      $ (1,075)d  $    9,460 
      Marketable securities                    1,437,717       1,839          --            --            --     1,439,556 
      Inventories                                 45,236          --          --            --            --        45,236 
      Prepaid expenses and other                  37,077         380          45            --         1,000 d      38,502 
                                              ----------    --------     -------      --------      --------    ---------- 
           Total current assets                1,525,278       2,847       4,704            --           (75)    1,532,754 

Fixed assets, net                                 60,600         790         407            --            --        61,797 
Goodwill and other, net                          187,194          83       5,732       248,230 c     124,291 f     565,530 
Deferred charges                                  39,912          --          --            --            --        39,912 
                                              ----------    --------     -------      --------      --------    ---------- 
           Total assets                       $1,812,984    $  3,720     $10,843      $248,230      $124,216    $2,199,993 
                                              ==========    ========     =======      ========      ========    ========== 

LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                       
Current liabilities:                                                                                                       
      Accounts payable                        $  133,018    $    162     $   185      $     --      $     --    $  133,365 
      Accrued advertising                         16,187         107          --            --            --        16,294 
      Other liabilities and accrued expenses      45,194         243          69         1,000 a       1,250 d      47,756 
      Current portion of long-term debt                                                                                    
        and capital lease obligation               7,186         309         126            --            --         7,621 
                                              ----------    --------     -------      --------      --------    ---------- 
           Total current liabilities             201,585         821         380         1,000         1,250       205,036 

Long-term debt and capital lease obligation    1,533,862         178         125            --            --     1,534,165 

Redeemable convertible preferred stock                --          --      11,936            --       (11,936)e             

Stockholders' equity:                                                                                                      
      Convertible preferred stock                     --       9,881          19        (9,881)b         (19)e          -- 
      Common stock                                 1,614       7,761          23        (7,761)b         (23)e             
                                                                                            12 a           7 d       1,633 
      Additional paid-in capital                 306,414          --          39       249,939 a     145,332 d     701,724 
      Deferred compensation and other             (2,374)     (5,971)                    5,971 b     (12,074)g     (14,448)
      Accumulated other comprehensive income      (4,390)         --          --            --            --        (4,390)
      Accumulated deficit and other                                                                                        
        stockholders' equity                    (223,727)     (8,950)     (1,679)        8,950 b       1,679 e    (223,727)
                                              ----------    --------     -------      --------      --------    ---------- 
           Total stockholders' equity             77,537       2,721      (1,598)      247,230       134,902       460,792 
                                              ----------    --------     -------      --------      --------    ---------- 
               Total liabilities and                                                                                       
                 stockholders' equity         $1,812,984    $  3,720     $10,843      $248,230      $124,216    $2,199,993 
                                              ==========    ========     =======      ========      ========    ========== 

See notes to pro forma combined condensed consolidated financial statements.

8-K 43rd Page of 48 TOC 1st Previous Next ↓Bottom Just 43rd
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS 
THREE MONTHS ENDED MARCH 31, 1999 
 (IN THOUSANDS, EXCEPT PER SHARE DATA)
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                                                                                       ALEXA     EXCHANGE.COM             
                                                                                     PROFORMA      PROFORMA     PROFORMA  
                                               AMAZON.COM   ALEXA    EXCHANGE.COM   ADJUSTMENTS   ADJUSTMENTS    BALANCE  
                                             ------------   -----    -------------  -----------   ------------  --------- 
                                                                                                                          
Net sales                                    $ 293,643      $  382   $    173       $       --    $      --     $ 294,198 
Cost of sales                                  228,852          66          5               --           --       228,923 
                                             ---------      ------   --------       ----------    ---------     --------- 
Gross profit                                    64,791         316        168               --           --        65,275 

Operating expenses:                                                                                                       
      Marketing and sales                       60,744       1,013        157               --           --        61,914 
      Product development                       23,477         506        308               --           --        24,291 
      General and administrative                11,165         370        625               --           --        12,160 
      Merger and acquisition related costs,                                                                               
        including amortization                                                                                            
        of goodwill and other                                                                                             
          purchased intangibles                 25,309          --        262           20,686 c     10,831 f             
                                                                                                        906 g             
                                                                                                       (262)h      57,732 
                                             ---------      ------   --------       ----------    ---------     --------- 
           Total operating expenses            120,695       1,889      1,352           20,686       11,475       156,097 

Loss from operations                           (55,904)     (1,573)    (1,184)         (20,686)     (11,475)      (90,822)
Interest income                                 10,925          54         --               --           --        10,979 
Interest expense                               (16,688)         --        (36)              --           --       (16,724)
                                             ---------      ------   --------       ----------    ---------     --------- 
      Net interest expense                      (5,763)         54        (36)              --           --        (5,770)

Net loss                                     $ (61,667)    $(1,519)  $ (1,220)      $  (20,686)   $ (11,475)    $ (96,567)
                                             ==========     ======   ========       ==========    =========     ========= 
Basic and diluted loss per share             $   (0.39)                                                         $   (0.61)
                                             ==========                                                         ========= 

Shares used in computation of basic                                                                                       
      and diluted loss per share               156,897                                   1,176          661       158,734 
                                             ==========                             ==========    =========     ========= 

See notes to pro forma combined condensed consolidated financial statements.

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PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS 
YEAR ENDED DECEMBER 31, 1998
 (IN THOUSANDS, EXCEPT PER SHARE DATA)
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                                                                                     ALEXA      EXCHANGE.COM             
                                                                                    PROFORMA      PROFORMA      PROFORMA 
                                              AMAZON.COM    ALEXA    EXCHANGE.COM  ADJUSTMENTS   ADJUSTMENTS    BALANCE  
                                             -----------  ---------  ------------  -----------  ------------   --------- 
                                                                                                                         

Net sales                                    $ 609,996    $     372      $  --     $              $      --     $610,368 
Cost of sales                                  476,155            5         --                           --      476,160 
                                             ---------    ---------      -----     ---------      ---------    --------- 
Gross profit                                   133,841          367         --                           --      134,208 

Operating expenses:                                                                                                      
      Marketing and sales                      133,023        2,216         57                           --      135,296 
      Product development                       46,807        1,693        130                           --       48,630 
      General and administrative                15,799        1,024        241                           --       17,064 
      Merger and acquisition related costs,                                                                              
      including amortization                                                                                             
        of goodwill and other                                                                                            
          purchased intangibles                 50,172                                82,743 c       43,327 f            
                                                                                                      7,244 g            
                                                                                                      1,000 g    184,486 
                                             ---------    ---------      -----     ---------      ---------    --------- 
           Total operating expenses            245,801        4,933        428        82,743         51,571      385,476 

Loss from operations                          (111,960)      (4,566)      (428)      (82,743)       (51,571)    (251,268)
Interest income                                 14,053          111                                               14,164 
Interest expense                               (26,639)          (2)                                             (26,641)
                                             ---------    ---------      -----     ---------      ---------    --------- 
      Net interest expense                     (12,586)         109         --            --             --      (12,477)

Net loss                                     $(124,546)      (4,457)     $(428)      (82,743)     $ (51,571)   $(263,745)
                                             =========    =========      =====     =========      =========    ========= 
Basic and diluted loss per share             $   (0.84)                                                        $   (1.76)
                                             =========                                                         ========= 

Shares used in computation of basic                                                                                      
      and diluted loss per share               148,172                                 1,176            661      150,009 
                                             =========                             =========      =========    ========= 

See notes to pro forma combined condensed consolidated financial statements.

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 NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

BASIS OF PRESENTATION                                                           

The pro forma combined condensed consolidated financial statements reflect the  
issuance of Amazon.com common stock, par value $.01 per share ("Amazon.com      
Common Stock") and the issuance of Amazon.com replacement options for all       
outstanding shares of Alexa and Exchange.com. The Alexa Merger and Exchange.com 
Merger will be accounted for under the purchase method of accounting in         
accordance with APB Opinion No. 16.                                             

Subject to the satisfaction of all conditions precedent, the purchase price for 
Alexa is approximately $250 million and will be comprised of an estimated 1.176 
million shares of Amazon.com Common Stock and replacement options, including    
approximately $1 million of acquisition costs. The ultimate number of shares of 
Amazon.com Common Stock to be issued at closing will vary from this estimate    
based upon the fair value of Amazon.com Common Stock as defined in the Alexa    
Merger Agreement upon consummation of this transaction.                         

Substantially all of the approximate $250 million purchase price will be        
allocated to goodwill and other purchased intangibles. Preliminary estimates of 
the fair value of assets and liabilities of Alexa have been combined with the   
recorded values of the assets and liabilities of Amazon.com in the unaudited pro
forma combined condensed consolidated financial statements.                     

Subject to the satisfaction of all conditions precedent, the purchase price for 
Exchange.com is approximately $150 million and is comprised of an estimated 661 
thousand shares of Amazon.com Common Stock and replacement options, including   
approximately $1.25 million of acquisition costs. The ultimate number of shares 
of Amazon.com Common Stock to be issued at closing will vary from this estimate 
based upon the fair value of Amazon.com Common Stock as defined in the          
Exchange.com Merger Agreement upon consummation of this transaction.            

Substantially all of the approximate $150 million purchase price will be        
allocated to goodwill and other purchased intangibles. Preliminary estimates of 
the fair value of assets and liabilities of Exchange.com have been combined with
the recorded values of the assets and liabilities of Amazon.com in the unaudited
pro forma combined condensed consolidated financial statements.                 

On January 11, 1999, Exchange.com acquired all of the outstanding stock of      
BiblioFind, Inc. in an acquisition accounted for under the a purchase method of 
accounting in accordance with APB No. 16. Exchange.com paid $4 million in cash  
and issued $2 million of promissory notes payable to the shareholders of        
BiblioFind. Exchange.com recorded approximately $6 million of goodwill and      
intended to amortize the goodwill over approximately five years. In March 1999, 
Exchange.com repaid in full the promissory notes payable issued in connection   
with the acquisition. The Exchange.com portion of the Pro forma Combined        
Condensed Consolidated Statement of Operations for the year ended December 31,  
1998 does not reflect the results of operations of BiblioFind as if it had been 
acquired by Exchange.com on January 1, 1998, as required under APB No. 16. Had  
BiblioFind's results of operations been included with Exchange.com's results of 
operations, Exchange.com's pro forma combined revenues and combined net loss    
would have been $507,000 and $(1,463,000), respectively, for the year ended     
December 31, 1998. Pro forma combined revenues and combine net loss would not   
have been materially different than reported results for the period ended March 
31, 1999.                                                                       

PRO FORMA ADJUSTMENTS FOR ALEXA                                                 

(a)     To reflect the issuance of Amazon Common Stock and the  
                assumption of all outstanding options, having an aggregate value
         of approximately $250 million, including approximately $1
            million of transaction costs, to consummate the Alexa Merger
Agreement.                                      

  (b)     To eliminate the historical stockholders' equity of Alexa.

     (c)     To record the excess of the purchase price over the estimated
                fair value of assets and liabilities acquired in connection with
            the Alexa Merger Agreement and the related amortization. The
              purchase price allocation is based on management's preliminary
       estimates of the fair values of the tangible assets and
             intangible assets. The book value of tangible assets acquired
          and liabilities are assumed to approximate fair value. The
         estimated useful life of the goodwill and other purchased
 intangible assets averages approximately 3 years.

PRO FORMA ADJUSTMENTS FOR EXCHANGE.COM                                          

     (d)     To reflect the issuance of Amazon Common Stock, assumption of
               all outstanding options and payment of approximately $1 million
                of cash having an aggregate value of approximately $150 million,
           including approximately $1 million of transaction costs, to
consummate the Exchange.com Merger Agreement.   

  (e)     To eliminate the historical redeemable preferred stock and
stockholders' equity of Exchange.com.           

     (f)     To record the excess of the purchase price over the estimated
                fair value of assets and liabilities acquired in connection with
               the Exchange.com Merger Agreement and the related amortization.
      The purchase price allocation is based on management's
            preliminary estimates of the fair values of the net tangible
             assets and intangible assets and will be adjusted based on an
                independent assessment of fair value. The book value of tangible
               assets acquired and liabilities are assumed to approximate fair
          value. The estimated useful life of the goodwill and other
           purchased intangible assets averages approximately 3 years.

8-K 46th Page of 48 TOC 1st Previous Next ↓Bottom Just 46th
        (g)     To record deferred compensation associated with the acquisition.

(h)     To eliminate amortization of goodwill associated with   
Exchange.com's acquisition of BiblioFind, Inc.  

CONTINGENT CONSIDERATION                                                        

In addition to the approximate $150 million purchase price for all of     
the outstanding capital stock and assumption of all outstanding options of      
Exchange.com, approximately $47 million of Amazon.com Common Stock and          
approximately $3 million cash may be paid to stockholders and certain option    
holders of Exchange.com subject to the continued employment of certain employees
of Exchange.com at Amazon.com for a period of one year after closing. This      
contingent consideration has not been reflected in the pro forma combined       
condensed consolidated financial statements.                                    

PRO FORMA LOSS PER COMMON SHARE                                                 

Basic pro forma earnings per share is computed using the weighted average 
number of Amazon.com common shares outstanding during the period plus shares of 
Amazon.com Common Stock issued in connection with the Alexa Merger and the      
Exchange.com Merger, excluding Amazon.com Common Stock subject to repurchase.   
Diluted pro forma earnings per share is computed using the weighted average     
number of common and common equivalent shares outstanding during the period plus
shares of Amazon.com Common Stock and common equivalent shares assumed as part  
of the acquisition. Common equivalent shares consist of the incremental common  
shares issuable upon the exercise of stock options and warrants (using the      
treasury stock method). Common equivalent shares are excluded from the          
computation if their effect is antidilutive. Shares, options and warrants issued
in connection with the Exchange.com Merger Agreement are assumed outstanding at 
the beginning of the period.                                                    

CONFORMING AND RECLASSIFICATION ADJUSTMENTS                                     

There were no material adjustments required to conform the accounting     
policies of Amazon.com, Alexa and Exchange.com. Certain amounts for Exchange.com
have been reclassified to conform to Amazon.com's financial statement           
presentation. There have been no significant intercompany transactions.         

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the  
registrant has duly caused this amended report to be signed on its behalf by the
undersigned hereunto duly authorized.                                           

                  AMAZON.COM, INC.
              (Registrant)

Dated:  May 12, 1999                     By: /s/JOY D. COVEY                    
                                            ----------------------------------
                      Joy D. Covey
                                          Chief Financial Officer and Vice
                                  President of Finance and
                        Administration

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 EXHIBIT INDEX

                                                                [Download Table]

Exhibit Number  Description                                                   
--------------  -----------                                                   
                                                                              
     23.1       Consent of PricewaterhouseCoopers LLP, Independent Accountants

     23.2       Consent of PricewaterhouseCoopers LLP, Independent Accountants

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘8-K’ Filing	Date	First	Last	Other Filings

	9/4/03	29	33
	12/31/99	37	41	10-K, 10-K/A, ARS
	10/8/99	28
	7/8/99	28
	6/15/99	13	27	424B3
Filed on:	5/12/99	47
	5/3/99	2	21
	4/29/99	42		8-K
For Period End:	4/26/99	1		8-K, POS AM
	4/24/99	2	41
	4/23/99	2	20
	3/31/99	3	45	10-Q
	2/25/99	33	41
	1/11/99	33	45
	1/8/99	33	41
	12/31/98	2	45	10-K, ARS
	12/15/98	12	13
	9/4/98	28	31
	8/27/98	42		8-K
	3/31/98	3	40	10-Q
	1/1/98	26	45
	12/31/97	2	37	10-K405, ARS
	7/29/97	2	41
	5/13/97	19		S-1/A
	12/31/96	7	17
	2/14/96	2	37
				List all Filings

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Filing Submission 0000891020-99-000805 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Amazon Com Inc – ‘8-K’ for 4/26/99

As of: Wednesday, 5/12/99 · For: 4/26/99 · Accession #: 891020-99-805 · File #: 0-22513

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