Fatbrain.com Online Revenue Increases 2.8 times to $8.2 Million; Total Revenues Hit $10 Million Mark; The Company Reports 42.6% Sequential Quarterly Growth in Online Sales

Business Wire, Nov 23, 1999

SANTA CLARA, Calif.--(BUSINESS WIRE)--Nov. 23, 1999--

Fatbrain.com(TM), Inc. (Nasdaq:FATB), the Internet's most comprehensive bookstore for professionals, today announced financial results for the third quarter and nine month period of fiscal 2000, ended October 31, 1999. The Company announced record online sales of $8.2 million for the quarter, an increase of more than 2.8 times online sales of $2.9 million for the prior year period. This represents sequential growth in online sales of 42.6 percent. Total Company sales (which also include sales generated by physical retail stores, trade shows and book fairs) for the quarter were $10.0 million, a 91 percent increase over total sales of $5.2 million for the same period last year.

The Company reported a third quarter net loss of $9.1 million compared to a net loss of $2.9 million in the prior year period, which is in line with analysts' expectations. Net loss per share for the third quarter of fiscal 2000 was $0.80 compared to pro forma net loss per share of $0.38 for the same period last year. Per share calculations for the current quarter are based on weighted average shares outstanding at October 31, 1999 of approximately 11,365,000. Pro forma per share calculations for the quarter ended October 31, 1998 are based on pro forma weighted average shares outstanding of approximately 7,650,000, which assumes conversion of all outstanding shares of preferred stock immediately upon issuance.

For the nine month period of fiscal 2000, online sales totaled $18.5 million, an increase of more than 2.5 times online sales of $7.2 million for the same period of fiscal 1999. Total sales for the nine months were $23.5 million, an increase of 63 percent from total sales of $14.4 million for the same nine month period of fiscal 1999. The Company reported a net loss of $20.3 million, or $1.79 per share, for the nine month period ended October 31, 1999. This compares to a net loss of $6.5 million, or a pro forma net loss per share of $0.90, for the same period of last year.

The Company added more than 50,000 new customers during the third quarter, and Fatbrain.com's customer base now totals over 188,000. Online customer accounts increased 36.2 percent sequentially, and repeat customer orders represented more than 58.2 percent of orders placed.

"The past quarter marked a pivotal point in our strategic evolution with the launch of eMatter, the Internet's first secure digital publishing platform, " stated Chris MacAskill, president and chief executive officer. "This innovative initiative attracted substantial investments from Vulcan Ventures and Highland Capital Partners and, notably, was Internet visionary Keith Benjamin's first investment in his venture debut at Highland. We are extremely pleased to be able to draw upon the support of these respected organizations as we focus on expanding our first mover advantage to address this tremendous market opportunity, which we estimate to be greater than $100 billion."

"We also continued to make significant advances in our business-to-business model, adding more than 1,100 new corporate accounts during the third quarter, improving the functionality and efficiency of the FINDitNOW program and expanding the accessibility of this program to customers of Ariba's business-to-business e-commerce solution. Additionally, we added several new customers to our growing list of print-on-demand partnerships and strengthened the management team of our print-on-demand business, now referred to as "Online Business Services" to channel the rapid growth we have been experiencing in this segment of our business," concluded Mr. MacAskill.

Operating Highlights

Vulcan Ventures and Highland Capital Partners Support New

E-Commerce Initiative

Fatbrain.com announced a recent $30 million round of financing which includes $20 million from Vulcan Ventures, the investment organization of Paul G. Allen, and $10 million from Highland Capital Partners. The funding will be used primarily to support its e-commerce initiatives, including eMatter, the Company's new digital publishing platform. Additionally, Diane Daggatt of Vulcan Ventures and Keith Benjamin of Highland Capital will take seats on Fatbrain.com's Board of Directors.

Fatbrain.com Makes History with eMatter Digital Publishing

On August 31, 1999 Fatbrain.com made history and rocked the traditional publishing paradigm by inventing secure digital publishing for the masses. eMatter is the first secure digital publishing solution that allows authors and publishers to sell their works online, earning royalties of at least 50 percent on every copy sold. eMatter provides a new global distribution channel for works of all kinds, including books and magazines and unique content such as short stories, speeches and essays. The eMatter initiative combines Fatbrain.com's new patent-pending digital rights technology with Fatbrain.com's established community of customers to provide a rich channel for the exchange of timely, valuable information between writers and readers everywhere.