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PROSPECTUS
Under Rule 424(b)(3)
Relating to Registration Statement 333-33352
WEBB INTERACTIVE SERVICES, INC.
This is a public offering of a maximum of 2,042,769 shares of common
stock of Webb Interactive Services, Inc. The shares include up to (i) 1,562,500
shares which are reserved for issuance upon conversion of our Series B
Convertible Preferred Stock and (ii) 480,269 shares issuable upon exercise of
transferable stock purchase warrants.
The selling shareholders are offering all of the shares to be sold. We
will not receive any of the proceeds from the offer and sale of the shares,
however, 480,269 of the shares offered by the selling shareholders are issuable
upon the exercise of outstanding stock purchase warrants at exercise prices of
$20.20 and $18.51 per share. If these warrants were exercised in full, we would
receive aggregate gross proceeds of $9,470,717.
The Nasdaq SmallCap Market lists our common stock under the symbol
WEBB.
Investing in our common stock involves risks. You should not purchase
our common stock unless you can afford to lose your entire investment. See "Risk
Factors" beginning on page 3 of this prospectus.
Because the selling shareholders will offer and sell the shares at
various times, we have not included in this prospectus information about the
price to the public of the shares or the proceeds to the selling shareholders.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or passed on the
adequacy of the disclosures in this prospectus. Any representation to the
contrary is a criminal offense.
In addition to the shares being offered under this prospectus, up to
312,500 shares of our common stock are being offered under another registration
statement on behalf of Castle Creek Technology Partners LLC, one of the selling
shareholders.
The date of this prospectus is April 4, 2000
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WEBB INTERACTIVE SERVICES, INC.
Webb Interactive Services, Inc. ("Webb") provides innovative advanced
online commerce and communication solutions for small businesses, with a
particular emphasis on local commerce interaction. Our AccelX(TM) product line
of XML-based commerce and buyer-seller interaction services provide businesses
with powerful web site development and communication tools to attract customers,
generate leads, increase buyer-seller interaction and strengthen customer
relationship management. The AccelX services are divided into two categories:
Customer Relationship Management (CRM) services and Marketplace Services.
We license our services on a private-label basis to high-volume
distribution partners such as yellow page directory publishers, newspapers, city
guides, vertical market portals and other aggregators of local businesses. Our
products are designed to be delivered on an application service provider (ASP)
business model whereby we host the software on our servers and deliver and
manage the service on behalf of our distribution partners. Generally, these
services are provided on a revenue-share basis providing us with recurring
revenues as our distribution partners sell these services to their small
business customers. This distribution model is designed to provide us with a
growing base of businesses using one or more of our services who are ideal
customers for additional AccelX services.
Prior to the third quarter of 1997, our focus generally was on three
markets: general web site development, maintenance and hosting; rural or small
market Internet service providers (ISPs); and healthcare information services
and continuing medical education. Each of these activities involved, to varying
degrees, the building of online communities and the development of tools and
services to allow for the building of strategic and customized web sites. As an
outgrowth of these activities, since mid 1997, our business has evolved to the
development of online communities. Most recently, we have combined our
community-building and communications expertise with acquired expertise in local
commerce, to develop applications for small businesses.
The combining of community communications and e-commerce for the unique
needs of small businesses and local commerce interaction represents Webb's
primary business focus. We also provide e-banking services for financial
institutions and local commerce interaction and have recently initiated an
effort to commercialize the Jabber.org instant messaging technology.
Our strategy is to grow our local commerce business by:
o Delivering first-to-market execution and expert technical solutions that
capitalize on our expertise in commerce, community building and
communication;
o Securing additional distribution partnerships to rapidly expand the
deployment of our services;
o Expanding our value-added services to enhance buyer-seller interaction; and
o Developing strategic alliances in order to more rapidly gain market share.
AccelX services utilize instant messaging to enhance the interactive
communications between buyers and sellers. In 1999, we became the initial
sponsor of the open-source XML-based instant messaging software development
initiative known as Jabber.org. as we believed it provided the best instant
messaging platform for our application services. We believe that instant
messaging will evolve from its primary use today by personal computer users for
instant chat communications to provide a foundation for an entire new class of
programs, with applications such as voice over the Internet, mobile
communications, enterprise communications and collaboration, real-time online
auctioning, and customer relationship management. For this reason, we have
formed a subsidiary, Jabber, Inc., in order to commercialize this business
opportunity separately from our local commerce business.
We were incorporated under the laws of the State of Colorado on March
22, 1994. Our executive offices are located at 1800 Glenarm Place, Suite 700,
Denver, Colorado 80202, telephone number (303) 296-9200.
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RISK FACTORS
Our limited operating history could affect our business. We were
founded in March 1994 and commenced sales in February 1995. Accordingly, we have
a limited operating history upon which you may evaluate us. Our business is
subject to the risks, expenses and difficulties frequently encountered by
companies with a limited operating history including:
o Limited ability to respond to competitive developments;
o Exaggerated effect of unfavorable changes in general economic and
market conditions;
o Ability to attract qualified personnel; and
o Ability to develop and introduce new product and service
offerings.
There is no assurance we will be successful in addressing these risks. If we are
unable to successfully address these risks our business could be significantly
affected.
We have accumulated losses since inception and we anticipate that we
will continue to accumulate losses for the foreseeable future. We have incurred
net losses since inception totaling approximately $42.6 million through December
31, 1999. In addition, we expect to incur additional substantial operating and
net losses in 2000 and for one or more years thereafter. We expect to incur
these additional losses because:
o We currently intend to increase our capital expenditures and
operating expenses to expand the functionality and performance of
our products and services; and
o We recorded goodwill and other intangible assets totaling
approximately $24 million in connection with the acquisitions of
three businesses which will be amortized over their estimated
useful lives of approximately three years.
The accumulated deficit at December 31, 1999, included approximately
$17.6 million of non-cash expenses related to the issuance of preferred stock
and warrants in financing transactions, stock and stock options issued for
services, warrants issued to four customers and interest expense on the 10%
convertible note payable. We will be required to record significant additional
non-cash charges of approximately $12.5 million in the first quarter of 2000 in
connection with the issuance of the series B preferred stock and warrants to the
selling shareholders. The current competitive business environment may result in
our issuance of similar securities in future financing transactions or to other
companies as an inducement for them to enter into a business relationship with
us. While these transactions represent non-cash charges, they will increase our
expenses and net loss and our net loss available to common shareholders.
If we are unable to raise additional working capital funds, we may not
be able to sustain our operations. We believe that our present cash and cash
equivalents, working capital and commitments for additional equity investments
will be adequate to sustain our current level of operations through 2001. There
is no assurance that we will be able to raise additional funds in amounts
required or upon acceptable terms. In addition, we may discover that we have
underestimated our working capital needs, and we may need to obtain additional
funds to sustain our operations through fiscal 2001. If we cannot raise
additional funds when needed, we may be required to curtail or scale back our
operations. These actions could have a material adverse effect on our business,
financial condition or results of operations.
We may never become or remain profitable. Our ability to become
profitable depends on the ability of our products and services to generate
revenues. The success of our revenue model will depend upon many factors
including:
o The success of our distribution partners in marketing their
products and services; and
o The extent to which consumers and businesses use our services and
conduct e-commerce transactions and advertising utilizing our
services.
Because of the new and evolving nature of the Internet, we cannot
predict whether our revenue model will prove to be viable, whether demand for
our products and services will materialize at the prices we expect to be
charged, or whether current or future pricing levels will be sustainable.
Additionally, our customer contracts may result in significant development
revenue in one quarter, which will not recur in the next quarter for that
customer.
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As a result, it is likely that components of our revenue will be volatile, which
may cause our stock price to be volatile as well.
Our business depends on the growth of the Internet. Our business plan
assumes that the Internet will develop into a significant source of
communication and communication interactivity. However, the Internet market is
new and rapidly evolving and there is no assurance that the Internet will
develop in this manner. If the Internet does not develop in this manner, our
business, operating results and financial condition would be materially
adversely affected. Numerous factors could prevent or inhibit the development of
the Internet in this manner, including:
o The failure of the Internet's infrastructure to support Internet
usage or electronic commerce;
o The failure of businesses developing and promoting Internet
commerce to adequately secure the confidential information, such
as credit card numbers, needed to carry out Internet commerce;
and
o Regulation of Internet activity.
Use of many of our products and services will be dependent on
distribution partners. Because we have elected to partner with other companies
for the distribution of many of our products and services, many users of our
products and services are expected to utilize our services through our
distribution partners. As a result, our distribution partners, and not us, will
substantially control the customer relationship with these users. If the
business of the companies with whom we partner is adversely affected in any
manner, our business, operating results and financial condition could be
materially adversely affected.
We may be unable to develop desirable products. Our products are
subject to rapid obsolescence and our future success will depend upon our
ability to develop new products and services that meet changing customer and
marketplace requirements. There is no assurance that we will be able to
successfully:
o Identify new product and service opportunities; or
o Develop and introduce new products and services to market in a
timely manner.
If we are unable to accomplish these items, our business, operating
results and financial condition could be materially adversely affected.
Our products and services may not be successful. Even if we are able to
successfully identify, develop, and introduce new products and services there is
no assurance that a market for these products and services will materialize to
the size and extent that we anticipate. If a market does not materialize as we
anticipate, our business, operating results, and financial condition could be
materially adversely affected. The following factors could affect the success of
our products and services:
o The failure of our business plan to accurately predict the rate
at which the market for Internet products and services will grow;
o The failure of our business plan to accurately predict the types
of products and services the future Internet marketplace will
demand;
o Our limited experience in marketing our products and services;
o The failure of our business plan to accurately predict our future
participation in the Internet marketplace;
o The failure of our business plan to accurately predict the
estimated sales cycle, price and acceptance of our products and
services;
o The development by others of products and services that renders
our products and services noncompetitive or obsolete; or
o Our failure to keep pace with the rapidly changing technology,
evolving industry standards and frequent new product and service
introductions that characterize the Internet marketplace.
The intense competition that is prevalent in the Internet market could
have a material adverse effect on our business. Our current and prospective
competitors include many companies whose financial, technical, marketing and
other resources are substantially greater than ours. There is no assurance that
we will have the financial resources, technical expertise or marketing, sales
and support capabilities to compete successfully. The
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presence of these competitors in the Internet marketplace could have a material
adverse effect on our business, operating results or financial condition by
causing us to:
o Reduce the average selling price of our products and services; or
o Increase our spending on marketing, sales and product
development.
There is no assurance that we would be able to offset the effects of
any such price reductions or increases in spending through an increase in the
number of our customers, higher sales from premium services, cost reductions or
otherwise. Further, our financial condition may put us at a competitive
disadvantage relative to our competitors. If we fail to, or cannot, meet
competitive challenges, our business, operating results and financial condition
could be materially adversely affected.
A limited number of our customers generate a significant portion of our
revenues. We had four customers representing 67% of revenues for the year ended
December 31, 1999, and four customers representing 71% of revenues for the year
ended December 31, 1998. There is no assurance that we will be able to attract
or retain major customers. The loss of, or reduction in demand for products or
services from major customers could have a material adverse effect on our
business, operating results, cashflow and financial condition.
The sales cycle for our products and services is lengthy and
unpredictable. While our sales cycle varies from customer to customer, it
typically has ranged from one to six months. Our pursuit of sales leads
typically involves an analysis of our prospective customer's needs, preparation
of a written proposal, one or more presentations and contract negotiations. We
often provide significant education to prospective customers regarding the use
and benefits of our Internet technologies and services. Our sales cycle may also
be affected by a prospective customer's budgetary constraints and internal
acceptance reviews, over which we have little or no control. In order to quickly
respond to, or anticipate, customer requirements, we may begin development work
prior to having a signed contract, which exposes us to the risk that the
development work will not be recovered from revenue from that customer.
We may be unable to adjust our spending to account for potential
fluctuations in our quarterly results. As a result of our limited operating
history, we do not have historical financial data for a sufficient number of
periods on which to base planned operating expenses. Therefore, our expense
levels are based in part on our expectations as to future sales and to a large
extent are fixed. We typically operate with little backlog and the sales cycles
for our products and services may vary significantly. As a result, our quarterly
sales and operating results generally depend on the volume and timing of and the
ability to close customer contracts within the quarter, which are difficult to
forecast. We may be unable to adjust spending in a timely manner to compensate
for any unexpected sales shortfalls. If we were unable to so adjust, any
significant shortfall of demand for our products and services in relation to our
expectations would have an immediate adverse effect on our business, operating
results and financial condition. Further, we currently intend to increase our
capital expenditures and operating expenses to fund product development and
increase sales and marketing efforts. To the extent that such expenses precede
or are not subsequently followed by increased sales, our business, operating
results and financial condition will be materially adversely affected.
We may be unable to retain our key executives and research and
development personnel. Our future success also depends in part on our ability to
identify, hire and retain additional personnel, including key product
development, sales, marketing, financial and executive personnel. Competition
for such personnel is intense and there is no assurance that we can identify or
hire additional qualified personnel.
Executives and research and development personnel who leave us may
compete against us in the future. We generally enter into written nondisclosure
and nonsolicitation agreements with our officers and employees which restrict
the use and disclosure of proprietary information and the solicitation of
customers for the purpose of selling competing products or services. However, we
generally do not require our employees to enter into non-competition agreements.
Thus, if any of these officers or key employees left, they could compete with
us, so long as they did not solicit our customers. Any such competition could
have a material adverse effect on our business.
We may be unable to manage our expected growth. If we are able to
implement our growth strategy, we will experience significant growth in the
number of our employees, the scope of our operating and financial systems and
the geographic area of our operations. There is no assurance that we will be
able to implement in whole or in
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part our growth strategy or that our management or other resources will be able
to successfully manage any future growth in our business. Any failure to do so
could have a material adverse effect on our operating results and financial
condition.
We may be unable to protect our intellectual property rights.
Intellectual property rights are important to our success and our competitive
position. There is no assurance that the steps we take to protect our
intellectual property rights will be adequate to prevent the imitation or
unauthorized use of our intellectual property rights. Policing unauthorized use
of proprietary systems and products is difficult and, while we are unable to
determine the extent to which piracy of our software exists, we expect software
piracy to be a persistent problem. In addition, the laws of some foreign
countries do not protect software to the same extent as do the laws of the
United States. Even if the steps we take to protect our proprietary rights prove
to be adequate, our competitors may develop services or technologies that are
both non-infringing and substantially equivalent or superior to our services or
technologies.
Computer viruses and similar disruptive problems could have a material
adverse effect on our business. Our software and equipment may be vulnerable to
computer viruses or similar disruptive problems caused by our customers or other
Internet users. Our business, financial condition or operating results could be
materially adversely affected by:
o Losses caused by the presence of a computer virus that causes us
or third parties with whom we do business to interrupt, delay or
cease service to our customers;
o Losses caused by the misappropriation of secured or confidential
information by a third party who, in spite of our security
measures, obtains illegal access to this information;
o Costs associated with efforts to protect against and remedy
security breaches; or
o Lost potential revenue caused by the refusal of consumers to use
our products and services due to concerns about the security of
transactions and commerce that they conduct on the Internet.
Future government regulation could materially adversely affect our
business. There are currently few laws or regulations directly applicable to
access to, communications on, or commerce on the Internet. Therefore, we are not
currently subject to direct regulation of our business operations by any
government agency, other than regulations applicable to businesses generally.
Due to the increasing popularity and use of the Internet, however, federal,
state, local, and foreign governmental organizations are currently considering a
number of legislative and regulatory proposals related to the Internet. The
adoption of any of these laws or regulations may decrease the growth in the use
of the Internet, which could, in turn:
o Decrease the demand for our products and services;
o Increase our cost of doing business; or
o Otherwise have a material adverse effect on our business, results
of operations and financial condition.
Moreover, the applicability to the Internet of existing laws governing
issues such as property ownership, copyright, trademark, trade secret,
obscenity, libel and personal privacy is uncertain and developing. Our business,
results of operations and financial condition could be materially adversely
affected by the application or interpretation of these existing laws to the
Internet.
Our articles of incorporation and bylaws may discourage lawsuits and
other claims against our directors. Our articles of incorporation provide, to
the fullest extent permitted by Colorado law, that our directors shall have no
personal liability for breaches of their fiduciary duties to us. In addition,
our bylaws provide for mandatory indemnification of directors and officers to
the fullest extent permitted by Colorado law. These provisions may reduce the
likelihood of derivative litigation against directors and may discourage
shareholders from bringing a lawsuit against directors for a breach of their
duty.
The price of our common stock has been highly volatile due to factors
that will continue to affect the price of our stock. Our common stock closed as
high as $67.75 per share and as low as $7.44 per share between January 1, 1999
and March 17, 2000. Historically, the over-the-counter markets for securities
such as our common stock have experienced extreme price and volume fluctuations.
Some of the factors leading to this volatility include:
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o Price and volume fluctuations in the stock market at large that
do not relate to our operating performance;
o Fluctuations in our quarterly revenue and operating results;
o Announcements of product releases by us or our competitors;
o Announcements of acquisitions and/or partnerships by us or our
competitors; and
o Increases in outstanding shares of common stock upon exercise or
conversion of derivative securities.
These factors may continue to affect the price of our common stock in
the future.
We have issued numerous options, warrants, and convertible securities
to acquire our common stock that could have a dilutive effect on our
shareholders. As of March 17, 2000, we had issued warrants and options to
acquire 4,116,824 shares of our common stock, exercisable at prices ranging from
$1.63 to $58.25 per share, with a weighted average exercise price of
approximately $14.07 per share. In addition to these warrants and options, we
have reserved 1,875,000 shares of common stock for issuance upon conversion of
our 10% convertible note and series B convertible preferred stock. During the
terms of these derivative securities, the holders will have the opportunity to
profit from either an increase or, in the case of the preferred stock and note,
decrease in the market price of our common stock with resulting dilution to the
holders of shares who purchased shares for a price higher than the respective
exercise or conversion price. In addition, the increase in the outstanding
shares of our common stock as a result of the exercise or conversion of these
derivative securities could result in a significant decrease in the percentage
ownership of our common stock by the purchasers of our common stock.
The potentially significant number of shares issuable upon conversion
of our 10% convertible note and series B convertible preferred stock could make
it difficult to obtain additional financing. Due to the significant number of
shares of our common stock which could result from a conversion of our 10%
convertible note and series B convertible preferred stock, new investors may
either decline to make an investment in Webb due to the potential negative
effect this additional dilution could have on their investment or require that
their investment be on terms at least as favorable as the terms of the 10%
convertible note or series B convertible preferred stock. If we are required to
provide similar terms to obtain required financing in the future, the potential
adverse effect of these existing financings could be perpetuated and
significantly increased.
Future sales of our common stock in the public market could adversely
affect the price of our common stock. Sales of substantial amounts of common
stock in the public market that is not currently freely tradable, or even the
potential for such sales, could have an adverse affect on the market price for
shares of our common stock and could impair the ability of purchasers of our
common stock to recoup their investment or make a profit. As of March 17, 2000,
these shares consist of:
o Approximately 310,000 shares owned by our executive officers and
directors of our outstanding common stock ("Affiliate Shares");
o Up to 1,875,000 shares issuable upon conversion of the 10%
convertible note and series B preferred stock; and
o Approximately 4,116,824 shares issuable to warrant and option
holders.
Unless the Affiliate Shares are further registered under the securities
laws, they may not be resold except in compliance with Rule 144 promulgated by
the SEC, or some other exemption from registration. Rule 144 does not prohibit
the sale of these shares but does place conditions on their resale which must be
complied with before they can be resold.
The common stock issuable upon conversion of our convertible note and
preferred stock may increase as the price of our common stock decreases, which
may adversely affect the price of our common stock. On March 17, 2000, we had
issued and outstanding $2,500,000 principal amount of a 10% convertible note and
12,500 shares of series B convertible preferred stock. The number of shares of
common stock that may ultimately be issued upon conversion of these securities
is presently indeterminable and could fluctuate significantly. Purchasers of
common stock could therefore experience substantial dilution upon conversion of
the convertible note and preferred stock. In addition, the significant downward
pressure on the market price of our common stock could develop as the holders
convert and sell material amounts of common stock which could encourage short
sales by the holders or others, placing further downward pressure on the market
price of our common stock.
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To illustrate the potential dilution that may occur upon conversion of
the convertible note and preferred stock, the following table sets forth the
number of shares of common stock that would be issued upon conversion of the
principal of the convertible note and the shares of preferred stock if the
market price for our common stock on the dates that the conversion prices of
these securities are subject to adjustment is $41.00, the closing sale price for
our common stock on March 17, 2000, and at assumed market prices of 75%, 50%,
25% and 10% of the market price on March 17, 2000, assuming that the conversion
price for the 10% note is adjusted after September 29, 2000. At March 17, 2000,
the lowest potential conversion price was $8.00 per share.
<TABLE>
<CAPTION>
Shares Issued Upon Conversion
------------------------------------------------
Market Price 10% Notes Series B Preferred Stock Total (Percentage
(Conversion Price) (Conversion Price) of Outstanding)
- --------------------------------- -------------------- -------------------------- ------------------
<S> <C> <C> <C>
$41.00 (actual price at 03/17/00) 248,262 ($10.07) 625,000 ($20.00) 873,262 (9.7%)
$30.75 (75% of 03/17/00 price) 248,262 ($10.07) 625,000 ($20.00) 873,262 (9.7%)
$20.50 (50% of 03/17/00 price) 248,262 ($10.07) 625,000 ($20.00) 873,262 (9.7%)
$10.25 (25% of 03/17/00 price) 248,262 ($10.07) 1,219,512 ($10.25) 1,467,774 (16.3%)
$ 4.10 (10% of 03/17/00 price) 312,500 ($ 8.00) 1,562,500 ($8.00) 1,875,000 (20.8%)
</TABLE>
Future sales of our common stock in the public market could limit our
ability to raise capital. Sales of substantial amounts of our common stock in
the public market pursuant to Rule 144, upon exercise or conversion of
derivative securities or otherwise, or even the potential for such sales, could
affect our ability to raise capital through the sale of equity securities.
Provisions in our articles of incorporation allow us to issue shares of
stock that could make a third party acquisition of us difficult. Our Articles of
Incorporation authorize our Board of Directors to issue up to 20,000,000 shares
of common stock and 5,000,000 shares of preferred stock in one or more series,
the terms of which may be determined at the time of issuance by the Board of
Directors, without further action by our shareholders. Preferred stock
authorized by the Board of Directors may include voting rights, preferences as
to dividends and liquidation, conversion and redemptive rights and sinking fund
provisions. If the Board of Directors authorizes the issuance of preferred stock
in the future, this authorization could affect the rights of the holders of
common stock, thereby reducing the value of the common stock, and could make it
more difficult for a third party to acquire us, even if a majority of the
holders of our common stock approved of an acquisition.
The issuance of our 10% convertible note payable and series B
convertible preferred stock required us to record non-cash expenses which will,
in turn, increase our net loss available to common shareholders. Based on
current accounting standards, we recorded a non-cash expense of approximately
$2.1 million as additional interest expense for the year ended December 31,
1999, as a result of the issuance of our 10% convertible note. We will record
additional non-cash expenses of approximately $643,000 during the three years
ending December 31, 2002 related to the issuance of the note and approximately
$12.5 million during the first quarter of 2000 in connection with the issuance
of the preferred stock.
We do not anticipate paying dividends on our common stock for the
foreseeable future. We have never paid dividends on our common stock and do not
intend to pay any dividends on our common stock in the foreseeable future. Any
decision by us to pay dividends on our common stock will depend upon our
profitability at the time, cash available therefor, and other factors. We
anticipate that we will devote profits, if any, to our future operations.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements made in this prospectus and the documents
incorporated by reference in this prospectus under the captions "Webb
Interactive Services, Inc." and "Risk Factors" and elsewhere in this prospectus
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are subject to the
safe harbor provisions of the reform act. Forward-looking statements may be
identified by the use of the terminology such as may, will, expect, anticipate,
intend, believe, estimate, should, or continue or the negatives of these terms
or other variations on these words or comparable terminology. To the
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extent that this prospectus contains forward-looking statements regarding the
financial condition, operating results, business prospects or any other aspect
of Webb, you should be aware that our actual financial condition, operating
results and business performance may differ materially from that projected or
estimated by us in the forward-looking statements. We have attempted to
identify, in context, some of the factors that we currently believe may cause
actual future experience and results to differ from their current expectations.
These differences may be caused by a variety of factors, including but not
limited to adverse economic conditions, intense competition, including entry of
new competitors, ability to obtain sufficient financing to support our
operations, progress in research and development activities, variations in costs
that are beyond our control, adverse federal, state and local government
regulation, unexpected costs, lower sales and net income, or higher net losses
than forecasted, price increases for equipment, inability to raise prices,
failure to obtain new customers, the possible fluctuation and volatility of our
operating results and financial condition, inability to carry out marketing and
sales plans, loss of key executives, and other specific risks that may be
alluded to in this prospectus.
USE OF PROCEEDS
The selling shareholders are offering all of the shares to be sold. We
will not receive any of the proceeds from the offer and sale of the shares,
however, 480,269 of the shares offered by the selling shareholders are issuable
upon the exercise of outstanding stock purchase warrants at exercise prices of
$20.20 and $18.51 per share. If these warrants were exercised in full, we would
receive gross proceeds of $9,470,717 in the aggregate.
SELLING SHAREHOLDERS
The common stock covered by this prospectus consists of shares issued
or issuable upon conversion of our series B convertible preferred stock and the
exercise of warrants to purchase 480,269 shares of our common stock. The selling
shareholders acquired all of their preferred stock and warrants for 343,750
shares in exchange for a cash investment of $12,500,000 given to us on February
18, 2000. The remaining warrant for 136,519 shares was issued on December 18,
1999, in consideration for the amendment to the terms of our 10% convertible
note.
The number of shares that actually may be sold by each selling
shareholder will be determined by such selling shareholder. Because the selling
shareholders may sell all, some or none of the shares of common stock which they
hold, and because the offering contemplated by this prospectus is not currently
being underwritten, no estimate can be given as to the number of shares of
common stock that will be held by the selling shareholders upon termination of
the offering.
The following table sets forth information as of March 17, 2000,
regarding the selling shareholders, including:
o The name of the selling shareholders;
o The beneficial ownership of common stock of the selling
shareholders; and
o The maximum number of shares of common stock offered by the
selling shareholders.
The information presented is based on data furnished to us by the
selling shareholders and assumes a conversion price for the preferred stock of
$20.00 per share. The actual number of shares of common stock issuable upon
conversion of the preferred stock is subject to adjustment and could be
materially more than the amounts set forth in the table below, depending on
factors which we cannot predict at this time, including, among other factors,
the future market price of the common stock.
Under the registration rights agreement, we are required to register
for resale by the selling shareholders 2,042,769 shares of our common stock.
This amount is based upon:
o The number of shares issuable upon conversion of the preferred
stock and exercise of the warrants; and
o The potential increase in the number of shares issuable with
respect to the preferred stock if the conversion price declines
due to a decline in the market price for our common stock.
9
<PAGE>
If the warrants were exercised in full and all of the preferred stock
was converted at the conversion price of $20.00 per share, only 1,105,269 shares
of common stock would be issued and available for resale under this prospectus.
However, we cannot determine the exact number of shares of common stock that we
will ultimately issue upon exercise of the warrants and conversion of the
preferred stock if anti-dilution adjustments occur with respect to the warrants
or the conversion price for the preferred stock changes from the initial
conversion price.
Pursuant to their terms, the preferred stock and warrants are
convertible or exercisable by any holder only to the extent that the number of
shares thereby issuable, together with the number of shares of common stock
owned by such holder, but not including unconverted or unexercisable shares of
preferred stock or warrants, would not exceed 4.99% of the then outstanding
shares of our common stock as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, unless such conversion is approved by the
majority of the holders of our common stock. Accordingly, the number of shares
of common stock set forth in the third and fourth columns in the table below for
the selling shareholders exceeds the number of shares of common stock that the
selling shareholders beneficially own in accordance with Section 13(d) as of
March 17, 2000. This 4.99% limit may not prevent any holder from converting all
of its preferred stock or exercising its warrants, because the holder can
convert preferred stock or exercise warrants into 4.99% of our outstanding
common stock, then sell all of that stock to permit it to engage in further
conversions or exercises. As a result, the 4.99% limit does not prevent selling
shareholders from selling more than 4.99% of our common stock.
<TABLE>
<CAPTION>
Shares of Common Stock
Owned Before Offering Plus
Shares Of Common Maximum Number of Shares Maximum Number of Shares of Common
Stock Owned Which Can Be Acquired Shares Offered Under Stock Owned
Selling Beneficially Before Over the Life of Securities This Registration Beneficially After
Shareholder Offering (%) Owned (%) Statement (%) Offering (%) (2)
- --------------------- --------------------- ----------------------------- ---------------------- -------------------
<S> <C> <C> <C> <C>
Castle Creek 472,444(4.99%) 1,402,144 (13.5%) 1,089,644 (10.8%) 248,262 (2.7%)(2)
Technology Partners
LLC (1)
Marshall Capital 472,444 (4.99%) 953,125 (9.6%) 953,125 (9.6%) None
Management, Inc. (3)
</TABLE>
(1) Castle Creek Technology Partners LLC, 77 West Wacker Drive, Suite 4040,
Chicago, Illinois 60601. Castle Creek Technology Partners LLC beneficially owns
472,444 shares, determined in accordance with Rule 13d-3, and disclaims
beneficial ownership of any shares other than these shares. Castle Creek
Technology Partners LLC acquired its securities in the ordinary course of its
business and at the time of its purchase of these securities, it had no
understandings, directly or indirectly with any person to distribute the
securities. As investment manager, pursuant to a management agreement with
Castle Creek Technology Partners LLC, Castle Creek Partners, LLC may be deemed
to beneficially own the securities held by Castle Creek Technology Partners LLC.
Castle Creek Partners, LLC disclaims such beneficial ownership. John Ziegelman
and Daniel Asher, as managing members of Castle Creek Partners, LLC, hold the
voting and dispositive powers over the securities owned by Castle Creek
Technology Partners LLC and may be deemed to be beneficial owners of the
securities. Messrs. Ziegelman and Asher disclaim such beneficial ownership.
(2) The shares of common stock beneficially owned after the offering consist of
shares issuable upon conversion of a 10% promissory note acquired in 1999 and
assumes a conversion rate of $10.07 per share, the current conversion rate for
the note.
(3) Marshall Capital Management, Inc., 11 Madison Avenue, 7th Floor, New York,
New York 10010. Marshall Capital Management, Inc beneficially owns 472,444
shares, determined in accordance with Rule 13d-3, and disclaims beneficial
ownership of any shares other than those shares. Marshall Capital Management,
Inc. acquired the securities in the ordinary course of business and at the time
of its purchase of these securities, it had no understanding, directly or
indirectly, with any person to distribute the securities. Marshall Capital
Management, Inc. is a wholly-owned subsidiary of Credit Suisse Group, a Swiss
financial services company whose shares are traded publicly on the Zurich Stock
Exchange.
10
<PAGE>
PLAN OF DISTRIBUTION
The sale of the shares offered by this prospectus may be made in the
Nasdaq SmallCap Market or other over-the-counter markets at prices and at terms
then prevailing or at prices related to the then current market price or in
negotiated transactions. These shares may be sold by one or more of the
following:
o A block trade in which the broker or dealer will attempt to sell
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction.
o Purchases by a broker or dealer as principal and resale by a
broker or dealer for its account using this prospectus.
o Ordinary brokerage transactions in which the broker does not
solicit purchasers and transactions in which the broker does
solicit purchasers.
o Transactions directly with a market maker.
o In privately negotiated transactions not involving a broker or
dealer.
Each sale may be made either at market prices prevailing at the time of
such sale, at negotiated prices, at fixed prices which may be changed, or at
prices related to prevailing market prices.
Brokers or dealers engaged by the selling shareholders to sell the
shares may arrange for other brokers or dealers to participate. Brokers or
dealers engaged to sell the shares will receive compensation in the form of
commissions or discounts in amounts to be negotiated immediately prior to each
sale. These brokers or dealers and any other participating brokers or dealers
may be deemed to be underwriters within the meaning of the Securities Act of
1933 in connection with these sales. We will receive no proceeds from any
resales of the shares offered by this prospectus, and we anticipate that the
brokers or dealers, if any, participating in the sales of the shares will
receive the usual and customary selling commissions. If the warrants are
exercised in full, we will receive $9,470,717 in the aggregate.
In connection with their ownership or sale of the shares, the selling
shareholders may enter into hedging transactions. In connection with such
transactions, persons with whom they effect such transactions, including
broker-dealers, may engage in short sales of our own common stock in connection
with the transaction with selling shareholders. The selling shareholders may
also engage in short sales and short sales against the box, and in options,
swaps, derivatives and other transactions in our securities, and may sell and
deliver the shares covered by this prospectus in connection with such
transactions or in settlement of securities loans. These transactions may be
entered into with broker-dealers or other financial institutions that may resell
those shares. In addition, from time to time, a selling shareholder may pledge
its shares pursuant to the margin provisions of its customer agreements or
otherwise. Upon delivery of the shares or a default by a selling shareholder,
the broker-dealer or financial institution may offer and sell the pledged shares
from time to time.
An affiliate of Castle Creek Technology Partners LLC has a short
position in shares of our common stock. Castle Creek Technology Partners LLC has
confirmed to us that none of the shares covered by this registration statement
will be used to cover any portion of this short position. Castle Creek
Technology Partners LLC has also confirmed to us that neither it nor its
affiliate will take any action to cover any portion of this short position
during any period that Castle Creek Technology Partners LLC is deemed to be
engaged in a distribution of the shares pursuant to this registration statement.
To comply with the securities laws of some states, if applicable, the
shares will be sold in those states only through brokers or dealers. In
addition, in some states, the shares may not be sold in those states unless they
have been registered or qualified for sale in those states or an exemption from
registration or qualification is available and is complied with.
If necessary, the specific shares of our common stock to be sold, the
names of the selling shareholders, the respective purchase prices and public
offering prices, the names of any agent, dealer or underwriter, and any
applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying
11
<PAGE>
prospectus supplement or, if appropriate, a post-effective amendment to the
registration statement of which this prospectus is a part. We entered into a
registration rights agreement in connection with the private placement of the
series B convertible preferred stock and the warrants which required us to
register the underlying shares of our common stock under applicable federal and
state securities laws. The registration rights agreement provides for
cross-indemnification of the selling shareholders and us and each party's
respective directors, officers and controlling persons against liability in
connection with the offer and sale of the common stock, including liabilities
under the Securities Act of 1933 and to contribute to payments the parties may
be required to make in respect thereof. We have agreed to indemnify and hold
harmless the selling shareholders from liability under the Securities Act of
1933.
The rules and regulations in Regulation M under the Securities Exchange
Act of 1934, provide that during the period that any person is engaged in the
distribution, as so defined in Regulation M of our common stock, such person
generally may not purchase shares of our common stock. The selling shareholders
are subject to applicable provisions of the Securities Act of 1933 and
Securities Exchange Act of 1934 and the rules and regulations thereunder,
including, without limitation, Regulation M, which provisions may limit the
timing of purchases and sales of shares of the common stock by the selling
shareholders. The foregoing may affect the marketability of the common stock.
We will bear all expenses of the offering of the common stock, except
that the selling shareholders will pay any applicable underwriting commissions
and expenses, brokerage fees and transfer taxes, as well as the fees and
disbursements of counsel to and experts for the selling shareholders.
RECENT DEVELOPMENTS
In December 1999, the Securities and Exchange Commission Staff released
SAB No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101
provides interpretive guidance on the recognition, presentation and disclosure
of revenue in financial statements. SAB 101 must be applied to financial
statements no later than the first fiscal quarter of 2000. We are currently
reviewing SAB 101 to determine what impact, if any, adoption of this SAB will
have on our financial position or results of operations.
DESCRIPTION OF SECURITIES
General
Our articles of incorporation authorize our board of directors to issue
25,000,000 shares of capital stock, including 20,000,000 shares of common stock
and 5,000,000 shares of preferred stock, with rights, preferences and privileges
as are determined by our board of directors.
Common Stock
As of March 17, 2000, we had 8,995,371 shares of common stock
outstanding. All outstanding shares of our common stock are fully paid and
nonassessable and the shares of our common stock offered by this prospectus will
be, upon issuance, fully paid and nonassessable. The following is a summary of
the material rights and privileges of our common stock.
Voting. Holders of our common stock are entitled to cast one vote for
each share held at all shareholder meetings for all purposes, including the
election of directors. The holders of more than 50% of the voting power of our
common stock issued and outstanding and entitled to vote and present in person
or by proxy, together with any preferred stock issued and outstanding and
entitled to vote and present in person or by proxy, constitute a quorum at all
meetings of our shareholders. The vote of the holders of a majority of our
common stock present and entitled to vote at a meeting, together with any
preferred stock present and entitled to vote at a meeting, will decide any
question brought before the meeting, except when Colorado law, our articles of
incorporation, or our bylaws require a greater vote and except when Colorado law
requires a vote of any preferred stock issued and outstanding, voting as a
separate class, to approve a matter brought before the meeting. Holders of our
common stock do not have cumulative voting for the election of directors.
12
<PAGE>
Dividends. Holders of our common stock are entitled to dividends when,
as and if declared by the board of directors out of funds available for
distribution. The payment of any dividends may be limited or prohibited by loan
agreement provisions or priority dividends for preferred stock that may be
outstanding.
Preemptive Rights. The holders of our common stock have no preemptive
rights to subscribe for any additional shares of any class of our capital stock
or for any issue of bonds, notes or other securities convertible into any class
of our capital stock.
Liquidation. If we liquidate or dissolve, the holders of each
outstanding share of our common stock will be entitled to share equally in our
assets legally available for distribution to our shareholders after payment of
all liabilities and after distributions to holders of preferred stock legally
entitled to be paid distributions prior to the payment of distributions to
holders of our common stock.
Series B Convertible Preferred Stock
On February 18, 2000, 12,500 shares of our series B convertible
preferred stock and warrants to acquire 343,750 shares of our common stock were
issued to the selling shareholders for an aggregate cash investment of
$12,500,000. The preferred stock does not bear dividends and does not entitle
the holders to any voting rights except as required by Colorado law. The
following is a summary of the material terms of the series B convertible
preferred stock.
Conversion. The preferred stock is convertible into common stock so
long as the conversion would not result in the holder being a beneficial owner
of more than 4.99% of our common stock and all such conversions do not exceed
1,764,537 shares of our common stock unless the issuance of the preferred stock
has been approved by our shareholders. The current conversion price is $20.00
per share. On the effective date of the registration statement of which this
prospectus is a part, the conversion price will be adjusted if the market price
for our common stock is less than $20.00, in which event, the conversion price
will be the then market price for our common stock. If the market price for our
common stock on the effective date is less than $26.00, the conversion price
will be subject to further adjustment on the later of 90 days following the
effective date of this registration statement or November 14, 2000. If the
market price for our common stock on this date is less than the then conversion
price, the conversion price will thereafter be the greater of the market price
for our common stock on this date or $8.00. The second adjustment date may be
delayed in the event that we fail to obtain shareholder approval of the issuance
of the preferred stock, we have not complied in any material respect with the
terms of the preferred stock or the agreement pursuant to which the preferred
stock was purchased, our common stock ceases to be quoted on the Nasdaq stock
market, there is a change in the ownership of Webb, the conversion would result
in a holder owning more than 4.99% of our outstanding shares of common stock or
we failed to keep the registration statement for the shares issuable upon
conversion of the preferred stock effective for any period following the
effective date.
The conversion price is also subject to anti-dilution protection in the
event of the issuance of our common stock at prices less than the conversion
price for the preferred stock or the then current price for our common stock and
for stock splits, stock dividends and other similar transactions.
The number of shares of common stock that may ultimately be issued upon
conversion is presently undeterminable and could fluctuate between a minimum of
625,000 shares if the market price of our common stock remains higher than
$20.00, the maximum conversion price, and a maximum of 1,562,500 shares, subject
to adjustment in the event of issuances of our common stock at prices lower than
the conversion price or market price of our common stock or pursuant to stock
splits, dividends or other similar events. Purchasers of common stock could
therefore experience substantial dilution upon conversion of the preferred
stock. To illustrate the potential dilution that may occur upon conversion of
the preferred stock, the following table sets forth the number of shares of
common stock that would be issued upon conversion of the preferred stock at
various conversion prices.
13
<PAGE>
<TABLE>
<CAPTION>
Conversion Shares Issued Upon Percentage of
Market Price Price Conversion Outstanding Shares
- ---------------------------------- ---------- ------------------ ------------------
<S> <C> <C> <C>
$41.00 (actual price at 03/17/00) $20.00 625,000 6.9%
$30.75 (75% of 03/17/00 price) $20.00 625,000 6.9%
$20.50 (50% of 03/17/00 price) $20.00 625,000 6.9%
$10.25 (25% of 03/17/00 price) $10.25 1,219,512 13.6%
$ 4.10 (10% of 03/17/00 price) $ 8.00 1,562,500 17.4%
</TABLE>
The variable conversion price formula of the preferred stock could
affect the common stock as follows:
o Reduction in Stock Price. If our common stock trades at a price less
than the maximum conversion price of $20.00 per share, then the
preferred stock may be convertible into shares of our common stock at a
variable rate based on future trading prices of the common stock and
events that may occur in the future. The number of shares of common
stock issuable upon conversion of the preferred stock will be inversely
proportional to the market price of the common stock at the dates upon
which the conversion price may be adjusted.
o Effect of Additional Shares in Market. Even though holders may not
convert shares of preferred stock into more than 4.99% of the
outstanding stock at any one time, holders may obtain and sell an
aggregate of substantially more than 4.99% of our outstanding stock by
converting and selling up to 4.99% of the outstanding shares in
multiple transactions. To the extent that holders of the preferred
stock convert and then sell their common stock, the common stock price
may decrease due to the additional shares in the market, possibly
allowing the holder to convert the preferred stock into greater amounts
of common stock, further depressing the stock price.
o Impact of Dilution. The additional shares issued upon conversion of the
preferred stock would dilute the percentage interest of each of our
existing common shareholders, and this dilution would increase as more
shares of common stock are issued due to the impact of the variable
conversion price. Each additional issuance of shares upon conversion
would increase the supply of shares in the market and, as a result, may
cause the market price of our common stock to decline. The effect of
this increased supply of common stock leading to a lower market price
may be magnified if there are sequential conversions of preferred
stock. Specifically, the selling shareholders could convert a portion
of their preferred stock prior to the dates that the conversion price
is to be adjusted and then sell the common stock issued upon
conversion, which likely would result in a drop in our stock price.
Then after the price adjustment date the selling shareholders could
convert their preferred stock at a lower conversion price because of
the decreased stock price, and be issued a greater number of shares of
common stock due to the lower conversion price. The increase in the
aggregate number of shares of common stock issued upon conversion of
the preferred stock above what it would otherwise be could place
significant downward pressure on our stock price. This downward
pressure on our stock price might encourage market participants to sell
our stock short, which would put further downward pressure on our stock
price.
Redemption. In the event that we do not have a sufficient number of
shares of our common stock available for the conversion of the preferred stock
for any reason, including our failure to obtain the approval of our shareholders
of the issuance of the preferred stock, fail in any material respect to comply
with the terms of the preferred stock or the purchase agreement pursuant to
which the preferred stock was sold or our common stock ceases to be quoted on
the Nasdaq Stock Market, the holders of the preferred stock have the right to
require us to redeem their shares of preferred stock. The redemption price would
be equal to the greater of $1,250 per share of preferred stock or the market
value of the preferred stock based on the then market value for our common
stock.
Right of First Refusal. For a period of one year following the issuance
of the preferred stock, the initial holders have the first right to purchase any
equity securities to be sold by us except for securities being sold pursuant to
our benefit plans, any firm-commitment underwritten public offering or the
issuance of our equity securities in connection with a strategic investment or a
merger or acquisition with an unaffiliated third party which is not effected for
the primary purpose of raising equity capital.
14
<PAGE>
Liquidation Preference. If we liquidate, dissolve or wind-up our
business, whether voluntary or otherwise, after we pay our debts and other
liabilities, the holders of the preferred stock will be entitled to receive from
our remaining net assets, before any distribution to the holders of our common
stock, the amount of $1,000 per share.
Registration Rights. Pursuant to the Securities Purchase Agreement
under which the preferred stock and warrants were issued, we were required to
file with the SEC a registration statement for the resale of the shares issuable
upon conversion of the preferred stock and the exercise of the warrants issued
in connection with the preferred stock and to use our best efforts to keep such
registration statement effective until all of the shares have been resold or can
be sold immediately without compliance with the registration requirements of the
Securities Act of 1933, pursuant to Rule 144 or otherwise.
Warrants Issued with Series B Convertible Preferred Stock
The selling shareholders also have been granted five year warrants to
purchase an aggregate of 343,750 shares of our common stock at an exercise price
of $20.20 per share. During the first three years of the warrants, the exercise
price is subject to adjustment at the end of each ninety-day period following
the issuance of the warrants. During this period, the exercise price at the end
of each ninety-day period shall be adjusted if the market price for our common
stock is less than the then exercise price for the warrants, and shall, in this
event, be the then market price for our common stock. The exercise price for the
warrants is also subject to anti-dilution protection in the event of the
issuance of our common stock at prices less than the exercise price for the
warrants and for stock splits, stock dividends and other similar transactions.
The warrants may be subject to early expiration after an underwritten public
offering or one year if the market price for our common stock exceeds $40.81.
10% Convertible Note
On August 25, 1999, we issued $5,000,000 principal amount of a 10%
convertible note. The terms of the notes were amended on December 18, 1999. On
February 18, 2000, one-half of the principal amount of the note was converted
into 248,262 shares of common stock at an exercise price of $10.07 per share.
The following is a summary of the material terms of the 10% convertible note.
Conversion Price. The convertible note is convertible into shares of
common stock at a conversion price of $10.07 per share. The conversion price
shall remain at $10.07 per share until September 30, 2000. The conversion price
after September 29, 2000 will continue to be $10.07 per share unless the market
price for our common stock at that time is less than $10.07. In this event, the
conversion price will be adjusted and will be the greater of the average of the
five lowest closing bid prices during the period from September 1, 2000 through
September 29, 2000 and $8.00.
The number of shares of common stock that may ultimately be issued upon
conversion is presently undeterminable and could fluctuate between a minimum of
248,262 shares if the market price of our common stock remains higher than
$10.07, the maximum conversion price, and a maximum of 312,500 shares, subject
to adjustment in the event of issuances of our common stock at prices lower than
the market price for our common stock at the time of issuance or pursuant to
stock splits, dividends or similar events. Purchasers of common stock could
therefore experience substantial dilution upon conversion of the convertible
note.
Redemption. We can prepay the promissory note at any time after August
25, 2000, if the closing bid price for our common stock for 20 consecutive
trading days is at least 200% of the conversion price then in effect. The
redemption price would equal 115% of the face amount of the convertible note,
plus accrued and unpaid interest.
Interest. The convertible note bears interest at the rate of 10% per
annum. If the market value of our common stock stays above $10.07, the issuance
of notes to pay interest would also result in an effective interest rate of more
than 10%. For example, if our market price was $41.00, the closing price on
March 17, 2000, the holder could exercise its right to have interest paid in
notes which would be immediately convertible into common stock with an economic
value approximately 307% more than if the interest had been paid in cash. This
would be an effective annualized interest rate of 40.7% for the quarter for
which the interest was being paid.
15
<PAGE>
Registration Rights. Pursuant to the securities purchase agreement
under which the convertible note and warrants were issued, we filed with the SEC
a registration statement which was declared effective on February 15, 2000, for
the resale of the shares issuable upon conversion of the note and the exercise
of the warrants issued in connection with the note and are required to use our
best efforts to keep such registration statement effective until all of the
shares have been resold or can be sold immediately without compliance with the
registration requirement of the Securities Act of 1933, pursuant to Rule 144 or
otherwise.
Warrants Issued with Convertible Note
The holder of the convertible note also was granted two five-year
warrants for 136,519 shares each, one exercisable at $11.44 per share and one
exercisable at $18.51 per share. The warrant exercisable at $11.44 per share has
been exercised. The exercise price for the remaining warrant is subject to
adjustment on September 29, 2000, if the market price for our common stock is
then less than the exercise price of the warrant. In this event, the exercise
price will be equal to the average closing bid prices for the period from
September 1, 2000 through September 29, 2000. The warrant is also subject to
anti-dilution protection in the event of the issuance of our common stock at
prices less than the exercise prices for the warrant or the then current price
for our common stock and for stock splits, stock dividends and other similar
transactions.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file with
the SEC at the SEC's public reference room located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's public reference rooms located at its
regional offices in New York, New York and Chicago, Illinois. Please call the
SEC at 1-800-SEC-0300 for further information on the operation of public
reference rooms. You can also obtain copies of this material from the SEC's
Internet web site located at http://www.sec.gov.
The SEC allows us to incorporate by reference the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, file no. 0-28462:
o Our annual report on Form 10-KSB for the year ended December 31,
1999.
o Our preliminary proxy statement of the 2000 annual meeting of
shareholders filed on March 17, 2000.
o The description of our common stock contained in our registration
statement on Form 8-A filed with the SEC on May 22, 1996.
o Our current report on Form 8-K filed January 5, 2000.
o Our current report on Form 8-K filed January 14, 2000.
o Our current report on Form 8-K filed February 25, 2000.
o Our current report on Form 8-K/A filed March 22, 2000.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address and telephone number:
Shareholder Services
Attn: Kim Boswood
Webb Interactive Services, Inc.
1800 Glenarm Place
Suite 700
Denver, Colorado 80202
(303) 296-9200
16
<PAGE>
This prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
The selling shareholders will not make an offer of these shares in any state
where the offer is not permitted. You should not assume that the information in
this prospectus is accurate as of any date other than the date on the front page
of this prospectus.
LEGAL MATTERS
Gray, Plant, Mooty, Mooty & Bennett, P.A., Minneapolis, Minnesota, has
issued an opinion about the legality of the shares registered by this
prospectus.
EXPERTS
The financial statements incorporated by reference in this prospectus
and elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference in reliance upon the authority of
said firm as experts in giving said reports.
INDEMNIFICATION
Our articles of incorporation provide that we shall indemnify, to the
full extent permitted by Colorado law, any of our directors, officers, employees
or agents who are made, or threatened to be made, a party to a proceeding by
reason of the fact that he or she is or was one of our directors, officers,
employees or agents against judgments, penalties, fines, settlements and
reasonable expenses incurred by the person in connection with the proceeding if
specified standards are met. Although indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to our directors, officers and
controlling persons under these provisions, we have been advised that, in the
opinion of the SEC, indemnification for liabilities arising under the Securities
Act of 1933 is against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
Our articles of incorporation also limit the liability of our directors
to the fullest extent permitted by the Colorado law. Specifically, our articles
of incorporation provide that our directors will not be personally liable for
monetary damages for breach of fiduciary duty as directors, except for:
o Any breach of the duty of loyalty to us or our shareholders;
o Acts or omissions not in good faith or that involved intentional
misconduct or a knowing violation of law;
o Dividends or other distributions of corporate assets that are in
contravention of specified statutory or contractual restrictions;
o Violations of specified laws; or
o Any transaction from which the director derives an improper
personal benefit.
17
