Wednesday May 26, 4:05 pm Eastern Time
Company Press Release
Fatbrain.com Announces Record Financial Results for
the First Quarter
Online Revenues Increase More Than 2.5 Times and Company Experiences Strong Growth in
Online Customers and Corporate Partners
SUNNYVALE, Calif.--(BUSINESS WIRE)--May 26, 1999-- Fatbrain.com, Inc. (Nasdaq:FATB - news), the Internet's
most comprehensive professional bookstore, today announced financial results for its first quarter of fiscal 2000, ended April
30, 1999.
The Company announced record online sales of $4.5 million for the quarter, an increase of more than 2.5 times online sales of
$1.8 million for the prior year period. Total Company sales (which also include sales generated by physical retail stores, trade
shows and book fairs) for the quarter were $6.1 million, a 40 percent increase over total sales of $4.4 million for the same
period last year.
The Company reported a first quarter net loss of $5.2 million compared to a net loss of $1.7 million in the prior year period.
Net loss per share for the first quarter of fiscal 2000 was $0.46 compared to pro forma net loss per share of $0.25 for the
same period last year. Per share calculations for the current quarter are based on weighted average shares outstanding at April
30, 1999 of approximately 11,225,000. Pro forma per share calculations for the quarter ended April 30, 1998 are based on
pro forma weighted average shares outstanding of approximately 6,749,000, which assumes conversion of all outstanding
shares of preferred stock immediately upon issuance.
During the quarter, the Company added more than 25,000 customers, raising the total number of customers to just over
103,000. Fatbrain.com customers represent a wide range of purchasers, from individuals to enterprise-wide purchasing
managers. Online customer accounts continued to grow at a robust rate and increased 32.2 percent in the past quarter. Repeat
customer orders represented more than 55 percent of orders placed during the first quarter.
''Significant increases in the amount of traffic to our site indicate that the consumer response to our new name and our new
branding campaign has been excellent'' stated Chris MacAskill, president and chief executive officer. ''Our commitment to
serving the online business-to-business market and the expansion of our offerings to include additional professional categories
has also been favorably received. The addition of several key online accounts and partnerships during the quarter demonstrates
that more and more corporations are realizing the significant time and cost benefits derived from adopting Fatbrain.com's
custom e-commerce solutions.''
Operating Highlights
Branding Campaign Drives New Customers and Revenues
On March 29, 1999 the Company changed its name to Fatbrain.com from Computer Literacy, Inc. The Company also
launched a coordinated branding and advertising campaign, including full-page ad spreads in targeted industry publications
including PC Week, InfoWorld, and major newspapers. The name change and branding campaign spurred a significant growth
in new online customers and dramatically increased traffic to the site, allowing the Company to begin to capture revenues from a
new source -- sponsorship and advertising. Of the 25,000 new customers added during the quarter, more than half were
acquired after the name change was announced. The name change was designed to support Fatbrain.com's new brand identity
that extends beyond the Company's traditional market of technical experts to include professionals in other industries including
financial services, engineering, science and mathematics. The Company also launched a new Business Store, as well as a
Science and Math Store, which will offer an extensive selection of new titles on the Fatbrain.com Web site in the coming
quarter.
New Partners for FindITnow Program
Fatbrain.com added 68 new corporate accounts in the first quarter, representing a potential audience in excess of 600,000
individuals. Significant new partners for the Company's FindITnow intranet bookstore program added during the quarter include
Nortel Networks (NYSE: NT - news), Bank of America (NYSE: BAC - news) and Philips (NYSE: PHR - news).
Fatbrain.com's FindITnow intranet bookstore program allows businesses to provide customized professional bookstores on
their corporate networks. These co-branded stores provide employees with a quick, easy way to find and order books and
resources specific to their individual needs. FindITnow bookstores integrate with existing business processes to give
organizations control over procurement.
Strong Growth in Business to Business Partnerships
Fatbrain.com leveraged its expertise in deploying business-to-business e-commerce solutions to win additional corporate
accounts and strategic partnerships in the first quarter including:
-- Fatbrain.com's selection as the preferred custom online bookstore
for two Microsoft (Nasdaq: MSFT - news) communities, the Windows NT
Server Web site and Microsoft's relaunched developer resource
site, MSDN Online. The co-branded sites offer an expert selection
of technical and business books, training materials and
documentation plus special discounts for the more than 2.3
million information technology professionals who subscribe to
Microsoft's Windows NT user update services and to more than one
million Microsoft developers worldwide.
-- An exclusive partnership with mcafee.com, a wholly-owned
subsidiary of Network Associates, Inc. (Nasdaq: NETA - news), to deliver
customized reading recommendations to help McAfee Oil Change
Online users manage their PC components and upgrades. With the
integration of Fatbrain.com's e-commerce service, Oil Change
Online can now recommend books and resources geared to the user's
individual PC configuration. The companies' collaboration enables
mcafee.com to deliver Fatbrain.com's world-class selection of
books, training materials and documentation to all Oil Change
Online subscribers.
-- An exclusive partnership with Internet.com, the e-business and
Internet technology network. Through this e-commerce agreement,
Fatbrain.com provides Internet.com users instant, easy access to
Fatbrain.com's selection of resources. Comprised of more than 50
Web sites, Internet.com serves more than 1.7 million Internet
industry and Internet technology professionals, Web developers
and sophisticated Internet users each month. From contextual
links and book reviews throughout the Internet.com network,
Fatbrain.com provides the Internet.com community of users with
access to books and resources relating to its interests.
-- An exclusive strategic alliance with Deja.com, the leading
discussion destination on the Internet. This alliance enables
Deja.com to provide its consumers with customized personal
recommendations from Fatbrain.com's vast library of resources.
Fatbrain.com exclusively will deliver this bookstore feature to
consumers conducting forum searches on the Deja.com
Computer/Technology and Money channels.
-- An exclusive working relationship with Palm Computing, Inc., a
3Com company (Nasdaq: COMS - news), to deliver on-demand hard-copy
documentation via a custom online store serving the developer
community of the Palm Computing® platform. Fatbrain.com is
using its unique print-on-demand capabilities to provide an
active community of more than 15,000 developers a quick and easy
way to order documentation and reference tools to assist in the
development of third party applications for the Palm Computing
platform.
-- Partnerships with DigitalThink, The Database Domain, Scholars.com
and Wave Technologies -- four major Web-based training and
certification vendors. This allows Fatbrain.com to add
approximately 100 Web-delivered online training and certification
courses to its catalog of more than 2,500 computer-based and
video-based courses. Training courses offered through
Fatbrain.com range from beginning HTML to advanced JAVA, and
cover C++, LAN, Oracle, WAN, and others. Certification courses
cover A+, JAVA Certifications, Microsoft's MCSE and MCSD and
Oracle Certified Professional (OCP).
Procurement Alliances with Ariba and Trilogy
Fatbrain.com has forged strategic partnerships with procurement leaders Ariba and Trilogy to extend its FindITnow
business-to-business program and content offerings to all sizes of corporations that use procurement solutions to purchase
services and supplies over the Internet. These include Fortune 500, Global 2000 and broad market players.
Fatbrain.com worked with Ariba to deliver its FindITnow program to Global 2000 organizations using Ariba's buy-side solution
to purchase resources, goods and services over the Internet. Fatbrain.com provides content and sell-side support for Ariba
Supplier Link and Ariba.com, both of which connect buying organizations to suppliers worldwide. Through this partnership,
Fatbrain.com has gained a distribution channel to millions of corporate buyers worldwide using Ariba's solutions.
The Company also worked with Trilogy to develop a buy-side e-commerce solution that allows small and medium-size
businesses to purchase supplies over the Internet. The resultant Fatbrain.com Buying Chain product provides low cost buying
processes for companies using the Internet to buy books and other knowledge products and, in addition, serves as a portal to a
wide range of additional suppliers.
New Distribution Center
To better serve the needs of its growing customer base, on May 1, 1999, Fatbrain.com relocated its distribution center from
Fremont, California to Erlanger, Kentucky, immediately adjacent to Cincinnati, Ohio. The location of the new 40,000 square
foot automated facility allows customers to place orders later in the day and receive their shipment the following day. The
distribution center is strategically located in close proximity to major book publishers and the transportation hubs of major
freight companies. The long-term benefits to this move are significant. Being closer to both the publishers and major shipping
companies should reduce both inbound and out bound freight costs, reduce transit time from publishers and should also allow
the Company to take orders later in the day and still provide same day shipping.
About Fatbrain.com
Fatbrain.com is the Internet's most comprehensive professional bookstore. The Company offers a world-class selection of
books, training materials and documentation for experts in business and finance, technology and other industries. A leader in
business-to-business e-commerce, Fatbrain.com specializes in creating custom corporate intranet bookstores that work
seamlessly with existing infrastructure. Formerly ComputerLiteracy.com, the company first built a loyal following among
programmers and IT professionals for its unique specialty in resources for technology professionals. Fatbrain.com offers
discounts of up to 40 percent, and all in-stock orders placed by 4 PM PT ship the same business day. Visit Fatbrain.com on
the Web at fatbrain.com.
This announcement may contain forward-looking statements that involve risks and uncertainties including, among others,
Fatbrain.com's limited operating history, anticipated losses, the unpredictability of its future revenues, competition, risks
associated with system development and operation risks, management of potential growth, and risks of new business areas,
international expansion, business combinations, and strategic alliances. Actual results could differ materially from those
discussed. More information about factors that potentially could affect Fatbrain.com's financial results is included in the
Company's filings with the Securities and Exchange Commission, including its Registration Statement filed under its original
name, Computer Literacy, Inc., on Form SB-2 on November 19, 1998, as amended. All forward looking statements are based
on information available to the Company on the date hereof, and the Company assumes no obligation to update such
statements.
Fatbrain.com is a trademark of Fatbrain.com, Inc. All company and product names may be trademarks of the respective
companies with which they are associated.
Fatbrain.com, Inc.
Statements of Operations
(in thousands, except per share data)
Quarter Ended April 30,
1999 1998
-------- --------
(unaudited)
Revenues:
Online $ 4,491 $ 1,761
Retail and other 1,652 2,633
-------- --------
Total revenues 6,143 4,394
Cost of revenues:
Online 3,643 1,326
Retail and other 1,071 1,688
-------- --------
Total cost of revenues 4,714 3,014
-------- --------
Gross profit 1,429 1,380
Operating expenses:
Sales and marketing 4,670 1,986
Development and engineering 1,120 554
General and administrative 1,178 543
-------- --------
Total operating expenses 6,968 3,083
-------- --------
Loss from operations (5,539) (1,703)
Interest, net 329 32
======== ========
Net loss $ (5,210) $ (1,671)
======== ========
Pro forma basic and diluted
net loss per share (1) $ (0.46) $ (0.25)
======== ========
Shares used in calculating pro forma
basic and diluted net loss per share 11,225 6,749
======== ========
Basic and diluted net loss per share $ (0.46) $ (1.09)
======== ========
Shares used in calculating basic and
diluted net loss per share 11,225 1,527
======== ========
(1) Pro forma net loss per share assumes conversion of all
outstanding shares of preferred stock immediately upon issuance.
Fatbrain.com, Inc.
Balance Sheets
(in thousands, except per share data)
April 30, January 31,
1999 1999
--------- --------
(unaudited)
Assets
Current assets:
Cash and equivalents $ 6,922 $ 9,341
Short-term investments 1,033 5,344
Accounts receivable, net of allowance
of $210 and $161 1,368 1,268
Inventories 5,492 3,204
Prepaid expenses and other current assets 1,767 1,068
-------- --------
Total current assets 16,582 20,225
Property and equipment, net 3,383 2,097
Investments 14,108 14,181
Goodwill, net 2,700 2,751
Other assets 412 360
-------- --------
Total assets $ 37,185 $ 39,614
======== ========
Liabilities and Stockholders' equity
Current liabilities:
Accounts payable $ 4,205 $ 1,896
Accrued expenses 1,593 1,169
Current portion of capital lease obligations 18 18
-------- --------
Total current liabilities 5,816 3,083
Capital lease obligations 31 35
-------- --------
Total liabilities 5,847 3,118
Stockholders' equity:
Preferred stock, $0.001 par value,
5,000 authorized, none
issued and outstanding -- --
Common stock, $0.001 par value,
50,000 and 50,000 shares authorized,
11,252 and 11,172 shares issued and
outstanding at April 30, 1999
and January 31, 1999, respectively 11 11
Additional paid-in capital 50,326 50,270
Warrants 12 12
Unrealized loss on investments (51) (47)
Accumulated deficit (18,960) (13,750)
-------- --------
Total stockholders' equity 31,338 36,496
-------- --------
Total liabilities and
stockholders' equity $ 37,185 $ 39,614
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