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Filed pursuant to Rule 424(b)(3)
Registration Statement No. 333-89967
PROSPECTUS
4,095,124 SHARES
MESSAGEMEDIA, INC.
COMMON STOCK
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The selling security holders identified in this prospectus are selling
4,095,124 shares of our common stock. These shares may be offered from time to
time by the selling security holders through public or private transactions, on
or off The Nasdaq National Market, at prevailing market prices or at privately
negotiated prices. The selling security holders will receive all of the proceeds
from the sale of the shares and will pay all underwriting discounts and selling
commissions, if any, applicable to the sale of the shares. We will pay the
expenses of registration of the sale of the shares.
Our common stock currently is traded on The Nasdaq National Market under the
symbol "MESG." On October 26, 1999, the last reported sale price of a share of
our common stock on The Nasdaq National Market was $13 per share.
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INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is November 15, 1999.
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THIS PROSPECTUS IS PART OF A REGISTRATION STATEMENT WE FILED WITH THE SEC.
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR PROVIDED IN
THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES 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 OF THE DOCUMENT.
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 the documents we file at the
SEC's public reference room in Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and the SEC's regional offices located at Seven
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can request
copies of these documents by writing to the SEC and paying a fee for the copying
cost. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings also are available to the public at no
cost from the SEC's website at http://www.sec.gov.
The SEC allows us to "incorporate by reference" information that 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 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 and Exchange Act of 1934:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1998;
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
3. Quarterly Report on Form 10-Q for the quarter ended June 30, 1999;
4. Current Reports on Form 8-K filed with the SEC on December 23, 1998 (as
amended on February 19, 1999), April 5, 1999 and August 24, 1999 (as
amended on September 23, 1999 and October 1, 1999);
5. The description of our common stock set forth in our Registration
Statement on Form 8-A, dated November 19, 1996; and
6. Definitive Proxy Statement dated April 28, 1999 for the 1999 annual
meeting of stockholders held on May 28,1999.
On December 16, 1998 we changed our name from First Virtual Holdings
Incorporated to MessageMedia, Inc. All filings made with the SEC prior to
December 23, 1998 may be located using either "First Virtual Holding
Incorporated" or "First Virtual Holdings Incorporated" as our company name.
You may request a copy of these filings at no cost by writing or calling us,
or you may view a copy by visiting our website, each at the following address
(information contained in our website does not constitute a part of this
prospectus):
MessageMedia, Inc.
6060 Spine Road
Boulder, Colorado 80301
Attn: Investor Relations
(303) 440-7550
http://www.messagemedia.com
MessageMedia, Revnet and our logo are among the trademarks or service marks
owned by us, and First Virtual(R) is among the registered marks owned by us.
This prospectus also makes reference to trademarks of other companies which are
the property of their respective owners.
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THE COMPANY
We are a leading provider of an integrated, comprehensive set of
permission-based e-messaging solutions. E-messaging is our term to describe our
suite of services that utilizes the medium of e-mail to develop and foster
permission-based relationships with our customers. Our e-messaging solutions,
available either on an outsourced-subscription basis or as in-house packaged
software, enable businesses to use e-messaging as a strategic tool to increase
sales, improve customer communication and develop long-term customer loyalty.
Specifically, our suite of services and products, including Internet-based
marketing, customer care, survey and information distribution solutions, allows
businesses to establish and enhance two-way customer dialogue across multiple
functions within the business enterprise, from marketing to sales to customer
service. By leveraging the cost-effective reach, flexibility and widespread
acceptance of e-mail, our solutions enable businesses to create, deliver and
continually refine targeted, permission-based e-messaging campaigns. Our expert
staff of client service professionals assists our clients in building their
businesses through the strategic implementation and use of our suite of service
applications.
The dramatic growth of the Internet and the proliferation of e-mail have
changed the way businesses and customers communicate. Online businesses are
increasingly in need of strategic business applications that foster customer
loyalty and provide personalized, one-to-one communication. Permission-based, or
"opt-in," e-mail is emerging as a highly reliable, cost-effective and timely way
for businesses to create a personal, two-way dialogue with their customers.
Because creating strong and effective e-messaging programs requires a broad
range of technology and industry expertise, we believe that businesses
increasingly are seeking an outsourced solution for their e-messaging
applications. Forrester Research predicts that outsourced e-mail messages will
grow from three billion in 1998 to 250 billion in 2002.
Through our professional staff of client service representatives, we deliver
e-messaging services specifically tailored to each client's business objectives.
After a contract is signed with a client, we appoint an account management team
to act as the client's primary point of contact for all relationship and
campaign management issues. We provide end-to-end e-messaging mailing and
campaign management solutions, including creating a detailed specification of
customer needs, developing the web interfaces, customizing the database,
implementing project plans and campaign roll-out and conducting post-mailing
analysis. Our proprietary technology allows us to track and review current and
past e-messaging campaigns, providing valuable information that allows us to
tailor and fine-tune our clients' e-messaging campaigns to optimize
effectiveness. Our services provide clients with the following benefits:
o a comprehensive set of e-messaging solutions designed to increase
sales, improve customer communication and develop long-term customer
loyalty;
o permission-based e-messaging that facilitates an immediate two-way
dialogue with customers;
o tools to track, review and refine e-messaging campaigns by leveraging
our expertise and proprietary technology;
o rapidly deployable, cost-effective outsourced solutions which eliminate
the need to invest in the technology, hardware and human resources
necessary to implement and manage a comprehensive set of e-messaging
services; and
o a readily scalable solution that manages large volumes of simple or
complex customer communications and easily integrates more advanced
e-messaging applications.
Our clients cover a broad range of industry segments, including
Internet/e-commerce, publishing, computer hardware/software and financial
services. We currently provide e-messaging services to over 200 clients,
including America Online, Inc., Apple Computer, Inc., CMP Group, Inc., E*Trade
Securities, Inc., Microsoft Corporation and PeopleSoft, Inc., and have sold our
e-messaging products to over 4,000 customers.
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OUR STRATEGY
The key elements of our growth strategy include:
o expand our customer base and increase sales to current customers;
o broaden our industry-leading service offerings;
o extend our brand and position MessageMedia as the industry standard in
permission-based e-messaging;
o pursue strategic acquisitions; and
o develop an international presence.
HISTORY AND STRATEGIC RELATIONSHIPS
In June 1998, we were recapitalized by SOFTBANK Corp. and its affiliates, a
leading investor in the Internet sector. We intend to leverage our strategic
relationship with SOFTBANK through introductions to companies within the
SOFTBANK family of investments and capitalize on the expertise and advice of its
partners with respect to building e-businesses. In August 1998, we made a
strategic decision to focus exclusively on e-messaging and related services, and
to phase out our Internet payment system offerings. In furtherance of this
strategic shift, in December 1998 we acquired two e-messaging companies, E-mail
Publishing, Inc., or Epub, and Distributed Bits, LLC, or Dbits, and changed our
name from First Virtual Holdings Incorporated to Message Media, Inc. In March
1999, Pequot Capital Management, Inc. and affiliates bought approximately 2.4
million shares of our common stock, from which we derived net proceeds of
approximately $10 million, and in August 1999 we acquired two additional
e-messaging companies, Revnet Systems and Decisive Technology, to further
broaden our suite of e-messaging solutions and our customer base.
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RISK FACTORS
Except for the historical information contained or incorporated by reference
herein, this prospectus (and the information incorporated herein by reference)
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those discussed here or incorporated
by reference. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in the following section, as
well as those discussed elsewhere in this prospectus and in any other documents
incorporated herein by reference.
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones we face. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially and adversely
affected. In that case, the trading price of our common stock could decline, and
you may lose all or part of your investment.
WE HAVE A HISTORY OF OPERATING LOSSES AND FUTURE LOSSES ARE LIKELY.
We have incurred net losses applicable to common shares of approximately
$45.0 million from our inception in March 1994 through December 31, 1998,
approximately $14.0 million for the year ended December 31, 1998 and
approximately $26.9 million for the nine month period ended September 30, 1999.
As of September 30, 1999, our accumulated deficit was approximately $70.6
million. We have not achieved profitability and expect to continue to incur
operating losses at least into 2001. We intend to continue to invest heavily in
acquisitions, infrastructure development and marketing. Accordingly, we expect
to continue to incur significant operating and capital expenditures and, as a
result, we will need to generate significant revenue to achieve and maintain
profitability. Although our revenue has grown in recent quarters, we cannot
assure you that we will achieve sufficient revenue for profitability. Even if we
do achieve profitability, we cannot assure you that we can sustain or increase
profitability on a quarterly or annual basis in the future. If revenue grows
slower than we anticipate, or if operating expenses exceed our expectations or
cannot be adjusted accordingly, our business, results of operations and
financial condition will be materially and adversely affected.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY AND RECENTLY HAVE CHANGED OUR BUSINESS MODEL.
We were incorporated in March 1994 for the purpose of developing an Internet
payment system. In 1998 we changed our business model to focus exclusively on
providing e-messaging solutions and acquired two e-messaging companies, Epub and
Dbits. In August 1999, we acquired two additional e-messaging companies, Revnet
Systems and Decisive Technology. An investor in our common stock must consider
the risks and difficulties frequently encountered by early stage companies in
new and rapidly evolving markets, including the Internet e-messaging market.
These risks include our:
o ability to sustain historical revenue growth rates;
o need to manage our expanding operations;
o need to successfully integrate our recent and any future acquisitions;
o competition;
o ability to attract, retain and motivate qualified personnel;
o ability to maintain our current, and develop new, strategic
relationships;
o ability to anticipate and adapt to the changing Internet market; and
o ability to attract and retain a large number of customers from a
variety of industries.
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We also depend on the growing use of the Internet for marketing,
advertising, commerce and communication. We cannot assure you that our business
strategy will be successful or that we will successfully address these risks.
OUR MARKETS ARE RELATIVELY NEW AND UNPROVEN AND OUR SUCCESS DEPENDS ON MARKET
ACCEPTANCE AND THE EFFECTIVENESS OF OUR E-MESSAGING SERVICES.
Demand and market acceptance for Internet e-messaging solutions is
uncertain. Our future success is highly dependent on an increase in the use of
the Internet as a marketing, advertising and communications medium. The adoption
of Internet e-messaging, particularly by those entities that historically have
relied upon traditional media for marketing and advertising, requires the
acceptance of a new way of conducting business, exchanging information and
marketing products and services. Many of our current or potential e-messaging
customers have little or no experience using the Internet for marketing and
advertising purposes and they have allocated only a limited portion of their
budgets to Internet e-messaging. Moreover, our customers may find Internet
e-messaging to be less effective for promoting their products and services
relative to traditional marketing and advertising media. If our e-messaging
platform fails to meet customers' demands, the use of our e-messaging services
may decline over time and our business would suffer.
WE ADOPTED OUR CURRENT BUSINESS MODEL IN THE FOURTH QUARTER OF 1998 AND ITS
PROFIT POTENTIAL IS UNCERTAIN.
The profit potential for our business model, which is to generate revenue
solely by providing Internet e-messaging solutions to our customers, is
unproven. To be successful, both Internet marketing and our future and current
service offerings, including information distribution, e-mail marketing,
e-customer care, e-commerce messaging and e-surveys, will need to achieve broad
market acceptance. Our ability to generate significant revenue will depend, in
part, on our ability to contract with a sufficient number of customers. The
intense competition among Internet e-messaging companies has led to the creation
of a number of pricing alternatives for Internet e-messaging solutions. These
alternatives make it difficult for us to project future levels of revenue and
applicable gross profit that can be sustained by us or the Internet e-messaging
industry in general.
WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE EPUB, DBITS, REVNET SYSTEMS AND
DECISIVE TECHNOLOGY OR FUTURE ACQUISITIONS.
We acquired Epub and Dbits in December 1998 and Revnet Systems and Decisive
Technology in August 1999. As a result, companies that previously had operated
independently and with distinct business models must now work together. The
integration will require significant effort from our personnel and the personnel
of the acquired companies who are now our employees. We may not be able to
profitably consolidate these businesses.
The following risks are common to the integration of different companies,
and may be associated with recent or future acquisitions, including our recent
acquisitions of Revnet Systems and Decisive Technology:
o the difficulty of incorporating new operations, technology and
personnel into one company;
o the potential effects on operating results from increases in goodwill
amortization, acquired in-process technology, stock compensation
expense and increased compensation expense resulting from newly hired
employees;
o the diversion of management attention from other aspects of our
business;
o the potential disruption of our ongoing business;
o the potential reduction of the value of our e-messaging solutions or
reputation if an acquired company turns out to be a poor performer;
o the maintenance of uniform standards, controls, procedures and
policies;
o the potential of disputes with the sellers of one or more acquired
entities;
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o the possible failure to retain key acquired personnel;
o the assumption of most or all of the liabilities of the acquired
companies, some of which may be hidden, significant or not reflected in
the final acquisition price; and
o the impairment of relationships with employees and customers.
As part of our business strategy, we intend to focus on acquiring, or making
significant investments in, additional companies, products and technologies that
complement our business. The successful implementation of this strategy depends
on our ability to identify suitable acquisition candidates, acquire those
companies on acceptable terms and integrate their operations successfully with
our business. If we make additional acquisitions, we could have difficulty in
assimilating the acquired products, services or technologies into our
operations. These difficulties could disrupt our ongoing business, distract our
management and employees, increase our expenses and adversely affect our results
of operations. Furthermore, we may incur debt or issue equity securities to pay
for any future acquisitions. The issuance of equity securities could be dilutive
to our existing stockholders.
OUR FAILURE TO ENHANCE OUR EXISTING PRODUCTS AND INTRODUCE NEW PRODUCTS ON A
TIMELY BASIS COULD CAUSE OUR REVENUE TO FALL.
We continually are developing significant enhancements for our e-messaging
services and products. Any delay or difficulty associated with the introduction
of these enhancements could significantly harm our business, results of
operations and financial condition. We also may not be able to develop the
underlying core technologies necessary to create new products or enhancements,
or to license those products from third parties.
WE NEED TO ATTRACT AND RETAIN QUALIFIED PERSONNEL AND MAY NOT BE ABLE TO DO SO.
Our success depends on the continued service of our key senior management
personnel, in particular, A. Laurence Jones, our Chief Executive Officer. The
loss of any member of our senior management team could have a material adverse
effect on our future operating results. Our future success also depends on our
continuing ability to attract, retain and motivate highly skilled employees. We
face significant competition for individuals with the skills and experience
required to perform in required roles and may not be able to attract or retain
such individuals in the future. Our management team is new and may not be able
to function effectively.
OUR MANAGEMENT TEAM HAS WORKED TOGETHER ONLY FOR A SHORT PERIOD OF TIME AND MAY
NOT WORK WELL TOGETHER.
Virtually all of our executive officers, including our Chief Executive
Officer, Chief Financial Officer, Vice President of Sales and Marketing and Vice
President of Corporate Development, have joined our company in 1999. Due to the
fact that many of our executive officers are new to our company and never have
worked together, our management may not be able to function effectively,
individually or as a team.
WE ANTICIPATE FLUCTUATIONS IN OUR FUTURE OPERATING RESULTS.
We expect that our future operating results will fluctuate significantly.
These fluctuations may be due to a number of factors, many of which are beyond
our control. Some of the factors that may cause fluctuations include the
following:
o Market response to our e-messaging services;
o Difficulties in the development or deployment of new e-messaging
products or services;
o The timing and rate at which we increase our expenses to support
projected growth;
o Fluctuating market demand for our products and services;
o The degree of acceptance of the Internet as a medium for communicating
with customers;
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o Product introductions and service offerings by our competitors;
o The mix of the products and services provided by us; and
o The cost of compliance with applicable government regulations,
including anti-SPAM, also known as unsolicited commercial e-mail,
legislation.
Our revenue for the foreseeable future will remain dependent on e-messaging
activity, the fees that we charge for our services and license fees for software
products. These future revenues are difficult to forecast. In addition, we plan
to significantly increase our operating expenses to increase our sales and
marketing operations, to upgrade and enhance our e-messaging solutions and to
market and support our solutions. We may be unable to adjust spending quickly
enough to offset any unexpected revenue shortfall. If we have a shortfall in
revenue in relation to our expenses, or if our expenses precede increased
revenue, then our business, results of operations and financial condition would
be materially and adversely affected. This would likely affect the market price
of our common stock in a manner which may be unrelated to our long-term
operating performance.
We believe that marketing and advertising sales in traditional media, such
as television and radio, generally are lower in the first calendar quarter of
each year. Seasonal or cyclical patterns may develop in our industry if our
market makes the transition from an emerging to a more developed medium. Our
revenue may also be affected by seasonal and cyclical patterns in Internet
e-messaging spending if they emerge.
We believe that period-to-period comparisons of our operating results are
not meaningful and should not be relied upon as an indication of our future
performance. Due to the factors we have listed above and other factors, it is
likely that our future operating results will at times not meet the expectations
of market analysts or investors. If our operating results fail to meet
expectations, the price of our common stock could fall.
WE NEED TO EFFECTIVELY MANAGE OUR GROWTH.
An effective planning and management process is required to successfully
implement our business plan in the rapidly evolving market for Internet
e-messaging. We continue to increase the scope of our operations, and we have
grown our workforce substantially. As of January 1, 1995, we had 5 employees
and, as of October 22, 1999, we had 244 employees. In addition, we plan to
continue to expand our sales and marketing and service offerings. This growth
has placed, and our anticipated future growth in our operations will continue to
place, a significant strain on our management systems and resources. We expect
that we will need to continue to improve our financial and managerial controls
and reporting systems and procedures, and will need to continue to expand, train
and manage our workforce. Our future performance also may depend on the
effective integration of acquired businesses. Such integration, even if
successful, may require a significant period of time and expense, and may place
a significant strain on our resources. We recently relocated a computer
processing center from San Diego, California to a facility in Colorado. Our
business, results of operations and financial condition will be materially and
adversely affected if we are unable to effectively manage our expanding
operations or the relocation of our computer processing center.
WE DEPEND ON THIRD-PARTY PROVIDERS OVER WHOM WE HAVE NO CONTROL TO OPERATE OUR
MESSAGING PLATFORM.
We depend heavily on several third-party providers of Internet and related
telecommunication services, including hosting and co-location companies, in
operating our e-messaging platform. These companies may not continue to provide
services to us without disruptions in service, at the current cost, or at all.
Although we believe that we could obtain these services from other sources if
need be, the costs associated with any transition to a new service provider
would be substantial, requiring us to reengineer our computer systems and
telecommunications infrastructure to accommodate a new service provider. This
process would be both expensive and time-consuming.
In addition, failure of our Internet and related telecommunications
providers to provide the data communications capacity in the time frame required
by us could cause interruptions in the services we provide. Despite precautions
taken by us, unanticipated problems affecting our computer and
telecommunications systems in the future could cause interruptions in the
delivery of our e-messaging services, causing a loss of revenue and potential
loss of customers.
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WE RELY ON A FEW CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR REVENUE.
A significant portion of our revenues are generated by a limited number of
customers. We expect that we will continue to depend on large contracts with a
small number of significant customers. This situation can cause our revenue and
earnings to fluctuate between quarters based on the timing of contracts. None of
our customers has any obligation to purchase additional products or services
from us. Consequently, if we fail to develop relationships with significant new
customers, our business and financial condition will suffer.
COMPETITION IN OUR INDUSTRY IS INTENSE.
We believe none of our competitors offer the full range of solutions
provided by us. However, the market for our products and services is intensely
competitive. There are no substantial barriers to entry into our business, and
we expect that established and new entities will enter the market for
e-messaging services and interactive Internet communications in the near future.
Our principal competitors in the e-messaging services arena include 24x7,
Inc., Axciom, Inc., Cyber Data Systems, Inc., DoubleClick, Inc., eGain
Communications Corporation, EmailChannel, Inc., Exactis.com, Inc., Experian,
Inc., Kana Communications, Inc., MarketHome, Inc., MatchLogic, Inc., Mustang
Software, Inc., NetCreations, Inc., PostX Corporation and ReplyNet, Inc. We also
compete with BroadVision, Inc., Digital Impact, E-Care Group and Mypoints.com,
Inc. for one-to-one marketing.
We may experience additional competition from Internet service providers, or
ISPs, and other large established businesses that enter the market for
e-messaging services. Companies such as ADVO Inc., America Online, Inc., AT&T,
IBM Corporation, Harte-Hanks, Inc., Hewlett-Packard Company, Integrion Financial
Network LLC, The Interpublic Group of Companies, Inc., Microsoft Corporation,
Netscape Communications and Foote Cone & Belding, some of whom are current
clients of ours, which possess large, existing customer bases, substantial
financial resources and established distribution channels, could develop, market
or resell a number of messaging services.
The Internet, in general, and our e-messaging solutions, in particular, also
must compete for a share of advertisers' total advertising budgets with
traditional advertising media such as television, radio, cable and print.
Consequently, we compete with advertising and direct marketing agencies. To the
extent that e-messaging is perceived to be a limited or ineffective advertising
medium, companies may be reluctant to devote a significant portion of their
advertising budget to our e-messaging solutions, which could limit the growth of
e-messaging and negatively effect our business.
We also expect that competition may increase as a result of industry
consolidation. Potential competitors may choose to enter the market for
e-messaging services by acquiring one or more of our existing competitors or by
forming strategic alliances with such competitors. In addition, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products or services to address the needs of our potential e-messaging
customers. Accordingly, it is possible that new competitors or alliances may
emerge and rapidly acquire significant market share. Increased competition is
likely to result in price reductions, reduced gross margins and loss of market
share, any of which would have a material adverse effect on our business,
results of operations and financial condition. We also may experience
competition from internal information systems and development groups of our
current and prospective clients that have better access to senior management.
Many of our current and potential competitors have longer operating
histories, greater name recognition, larger customer bases, more diversified
lines of products and services and significantly greater resources than we do.
These competitors may be able to undertake more extensive marketing campaigns,
adopt more aggressive pricing policies and make more attractive offers to
potential customers. In addition, many of our current or potential competitors
have broad distribution channels that may be used to bundle competing products
or services directly to end-users or purchasers. If these competitors bundle
competing products or services for their customers, the demand for our products
and services could substantially decline. As a result of the above factors, we
cannot assure
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you that we will compete effectively with current or future competitors or that
competitive pressures will not have a material adverse effect on our business,
financial condition and results of operations.
THE MARKETS FOR OUR PRODUCTS ARE UNDEVELOPED AND RAPIDLY CHANGING, WHICH MAKES
AN INVESTMENT IN OUR COMPANY RISKY.
The Internet and Internet e-messaging markets are characterized by rapidly
changing technologies, evolving industry standards, frequent new product and
service introductions, changing customer demands and increasing numbers of
service providers. Our products and services are designed around current
technical standards and our revenue depends on continued industry acceptance of
these standards. While we intend to provide compatibility with the most popular
industry standards, widespread adoption of a proprietary or closed standard
could prevent us from doing so. The standards on which our products and services
are or will be based may not be accepted by the industry.
New market entrants have introduced or are developing products and services
for use on the Internet and the World Wide Web that compete with our products.
The products, services or technologies developed by others may render our
products and services noncompetitive or obsolete. Accordingly, our future
success will depend on our ability to adapt to rapidly changing technologies and
to enhance existing solutions and develop and introduce a variety of new
solutions to address new industry standards and our customers' changing demands.
We may experience difficulties that could delay or prevent the successful
design, development, introduction or marketing of our solutions. In addition,
our new solutions or enhancements must meet the requirements of our current and
prospective customers and must achieve significant market acceptance. Material
delays in introducing new solutions and enhancements may cause customers to
forego purchases of our solutions and purchase those of our competitors.
The degree to which our e-messaging platform is accepted and used in the
marketplace will depend on continued growth in the use of e-mail as a primary
means of communications by businesses and consumers. An increase in the use of
e-messaging also will depend on market acceptance of e-mail as a method for
targeted marketing of products and services. Our ability to successfully
differentiate our services from random mass e-mailing products and services
which have encountered substantial resistance from consumers also will be
important. Businesses that already have invested substantial resources in
traditional or other methods of conducting business may be reluctant to adopt
new commercial methods or strategies that may limit or compete with their
existing businesses. Individuals with established patterns of purchasing goods
and services may be reluctant to alter those patterns.
WE FACE RISKS OF DEFECTS AND DEVELOPMENT DELAYS IN OUR PRODUCTS AND SERVICES.
Products and services based on sophisticated software and computing systems
often encounter development delays. Our underlying software may contain hidden
errors and failures when introduced or when usage increases. It is possible that
we may experience delays in the development of the software and computing
systems underlying our services. Despite testing that our clients and we
conduct, we may not locate errors if they occur. Also, we may experience
development delays. These occurrences could harm our reputation and revenue
growth.
IF CURRENT GROWTH RATES CONTINUE, THE CAPACITY OF OUR SOFTWARE OR HARDWARE COULD
BE STRAINED, LEADING TO SLOWER RESPONSE TIMES OR SYSTEM FAILURES.
If the volume of messages that our systems process significantly increases,
the capacity of our software or hardware could be strained. This could lead to
slower response time or system failures. We have made and intend to continue to
make substantial investments to increase our server capacity by adding new
servers and upgrading our software as necessary. However, our products and
services may not be able to meet the growing demand as the number of World Wide
Web and Internet users increases. We also depend, as do our customers, on Web
browsers, e-mail clients and Internet and online service providers for access to
our services. Some users of our services have experienced difficulties due to
system failures unrelated to our system, products or services. If we cannot
effectively address these capacity constraints, our business and financial
condition could be materially and adversely affected.
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THE SUCCESS OF OUR E-MESSAGING PLATFORM DEPENDS ON INCREASED USAGE AND THE
STABILITY OF THE INTERNET.
Our success will depend, in large part, upon the maintenance of the Internet
infrastructure, such as a reliable network backbone with the necessary speed,
data capacity and security, and timely development of enabling products such as
high speed modems, for providing reliable Internet access and services and
improved content. We cannot assure you that the Internet infrastructure will
continue to effectively support the demands placed on it as the Internet
continues to experience increased numbers of users, frequency of use or
increased bandwidth requirements of users. Even if the necessary infrastructure
or technologies are developed, we may have to spend a considerable amount of
time and money to adapt our solutions accordingly. Furthermore, the Internet has
experienced a variety of outages and other delays due to damage to portions of
its infrastructure. Any future outages or delays could impact the Internet sites
of customers using our solutions.
We believe that the future of the Internet as a center for commerce will
depend in significant part on the following factors:
o Continued rapid growth in the number of households and commercial,
educational and government institutions with access to the Internet;
o The level of usage by individuals;
o The number and quality of products and services designed for use on the
Internet; and
o Expansion of the Internet infrastructure.
The degree to which e-mail will become a common method of communication
depends on the extent that users increasingly prefer e-mail over traditional
means of communication. The growth of e-mail also depends on widespread access
to reliable and affordable e-mail services by individuals, businesses and other
organizations. Because usage of the Internet as a medium for on-line exchange of
information, advertising, merchandising and entertainment is a recent
phenomenon, it is difficult to predict whether the number of users drawn to the
Internet will continue to increase and whether any significant market for our
e-messaging platform, or any substantial commercial use of the Internet, will
develop. We cannot assure you that Internet usage patterns, and reliance on
e-mail communication in particular, will continue to grow and will not decline
as the newness of this method of communication wears off. It also is uncertain
whether the cost of Internet access will decrease. If either the Internet or
e-mail communication fails to achieve increased acceptance and does not become
accessible to a broad audience at moderate costs, the market for our products
and services will be jeopardized. The success of our business also depends on a
significant expansion of the Internet infrastructure to provide adequate
Internet access and proper management of Internet traffic.
ANY SYSTEM FAILURE MAY HARM OUR BUSINESS OR REPUTATION.
The continuing and uninterrupted performance of our computer systems and our
customers' computer systems is critical to our ability to provide outsourced
services. Sustained or repeated system failures would reduce the attractiveness
of our solutions to our customers and could harm our business reputation. Slower
response time or system failures may also result from straining the capacity of
our deployed software or hardware due to an increase in the volume of e-messages
delivered through our servers. To the extent that we do not effectively address
any capacity constraints or system failures, our business, results of operations
and financial condition would be materially and adversely affected.
Our operations are dependent on our ability to protect our computer systems
against damage from fire, power loss, water damage, telecommunications failures,
vandalism, infection by computer viruses, other malicious acts and similar
unexpected adverse events. In addition, interruptions in our solutions could
result from the failure of our Internet and related telecommunications providers
to provide the necessary data communications capacity in the time frame we
require. Despite precautions we have taken, unanticipated problems affecting our
systems have from time to time in the past caused, and in the future could
cause, interruptions in the delivery of our solutions. Most of our back-end
systems for disaster recovery presently are redundant and we expect all of our
back-end systems to be
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<PAGE> 12
fully redundant by February 1, 2000. Our business, results of operations and
financial condition could be materially and adversely affected by any damage or
failure that interrupts or delays our operations.
WE FACE SECURITY RISKS AND POTENTIAL LIABILITY ASSOCIATED WITH MISAPPROPRIATION
OF CONFIDENTIAL INFORMATION.
We currently retain highly confidential customer information in a secure
database server. We cannot assure you, however, that we will be able to prevent
unauthorized individuals from gaining access to this database server. Any
unauthorized access to our servers could result in the theft of confidential
customer information such as e-mail addresses. It also is possible that one of
our employees could attempt to misuse confidential customer information,
exposing us to liability. We use disclaimers and limitation of warranty
provisions in our client agreements in an attempt to limit our liability to
clients, including liability arising out of systems failure. However, such
provisions may not be enforceable or effective in limiting our exposure to
damage claims.
OUR INSURANCE COVERAGE MAY NOT BE ADEQUATE TO COMPENSATE US FOR ALL POTENTIAL
LOSSES.
Although we carry insurance, which we believe to be adequate, the coverage
it provides may not be adequate to compensate us for all losses that may occur.
We are in the process of taking precautions to protect both our company and our
customers from events that could interrupt delivery of our products and services
or that could result in a loss of transaction or customer data. However, these
measures will not eliminate a significant risk to our operations from a natural
disaster or systems failure. We cannot guarantee that these measures would
protect the company from an organized effort to inundate our servers with
massive quantities of e-mail or other Internet message traffic which could
overload our systems and result in a significant interruption of service. Our
business interruption insurance would not fully compensate us for lost revenue,
income, additional costs or increased costs that we would experience during the
occurrence of any disruption of our computer systems. We cannot guarantee that
we will be able to obtain sufficient insurance coverage on reasonable terms or
at all in the future.
OUR MEANS OF PROTECTING OUR PROPRIETARY RIGHTS MAY BE INADEQUATE AND OUR
COMPETITORS MAY DEVELOP SIMILAR TECHNOLOGY.
We rely on a combination of trade secret, copyright and trademark laws,
nondisclosure agreements, and other contractual provisions and technical
measures to protect our proprietary rights. We believe that, due to the rapid
pace of technological innovation for Internet products, our ability to establish
and maintain a position of technology leadership in the industry depends more on
the skills of our development personnel than upon the legal protections afforded
our existing technology. Trade secret, copyright and trademark protections may
not be adequate to safeguard the proprietary software underlying our products
and services. We may not have adequate remedies for any breach and our trade
secrets may otherwise become known. Moreover, notwithstanding our efforts to
protect our intellectual property, competitors may be able to develop
functionally equivalent e-messaging technologies without infringing any of our
intellectual property rights. Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy or otherwise obtain and use
products or technology that we consider proprietary, and third parties may
attempt to develop similar technology independently. In addition, effective
protection of intellectual property rights may be unavailable or limited in
certain countries. Accordingly, our means of protecting our proprietary rights
may not be adequate and our competitors may independently develop similar
technology.
We generally enter into confidentiality or license agreements with our
employees, consultants and corporate partners, and generally control access to
and distribution of our technologies, documentation and other proprietary
information. Despite our efforts to protect our proprietary rights from
unauthorized use or disclosure, parties may attempt to disclose, obtain or use
our solutions or technologies. We cannot assure you that the steps we have taken
will prevent misappropriation of our solutions or technologies, particularly in
foreign countries where laws or law enforcement practices may not protect our
proprietary rights as fully as in the United States.
We have licensed, and we may license in the future, elements of our
trademarks, trade dress and similar proprietary rights to third parties. While
we attempt to ensure that the quality of our brand is maintained by these
business partners, such partners may take actions that could materially and
adversely affect the value of our proprietary rights or our reputation. In
addition, we currently license certain software and communication systems
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<PAGE> 13
from third parties. Our failure to maintain these licenses, or to find
replacements for such technology in a timely and cost-effective manner, could
have a material adverse effect on our business, results of operations and
financial condition.
WE HAVE IN THE PAST AND MAY IN THE FUTURE BECOME INVOLVED IN PATENT INFRINGEMENT
CLAIMS WHICH RESULT IN A SIGNIFICANT DRAIN ON OUR RESOURCES AND PREVENT OUR
MANAGEMENT TEAM FROM FOCUSING ON MORE PROFITABLE TASKS.
As the volume of Internet commerce increases, and the number of products and
service providers that support Internet commerce increases, we believe that
Internet commerce technology providers may become increasingly subject to
infringement claims. We have been subject to claims of alleged infringement of
intellectual property rights in the past, and may become involved in additional
claims in the future. Any such claims, with or without merit, could be time
consuming, result in costly litigation, disrupt or delay the enhancement or
shipment of our products and services or require us to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may not
be available on terms acceptable or favorable to us, which could have a material
adverse effect on our business, financial condition and results of operations.
In addition, we may initiate claims or litigation against third parties for
infringement of our proprietary rights or to establish the validity of our
proprietary rights. Litigation to determine the validity of any claims could
result in significant expense to us and divert the efforts of our technical and
management personnel from productive tasks, whether or not such litigation is
determined in our favor. In addition, patent litigation such as the Exactis.com,
Inc. lawsuit often gives rise to counterclaims by the defendants, which could
include challenges to the validity of patents held by us. In the event of an
adverse ruling in any such litigation, we may be required to pay substantial
damages, discontinue the use and sale of infringing products, expend significant
resources to develop non-infringing technology or obtain licenses to infringing
technology. Our failure to develop or license a substitute technology could have
a material adverse effect on our business.
IN THE FUTURE, WE MAY BE SUBJECT TO INCREASED GOVERNMENT REGULATION.
Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent. We believe that we are not
currently subject to direct regulation by any government agency in the United
States, other than regulations that generally are applicable to all businesses
and newly enacted laws prohibiting spam and laws intended to protect minors. A
number of legislative and regulatory proposals are under consideration by
federal and state lawmakers and regulatory bodies and may be adopted with
respect to the Internet. Some of the issues that such laws or regulations may
cover include user privacy, obscenity, fraud, pricing and characteristics and
quality of products and services. The adoption of any such laws or regulations
may decrease the growth of the Internet, which could in turn decrease the
projected demand for our products and services or increase our cost of doing
business. Moreover, the applicability to the Internet of existing U.S. and
international laws governing issues such as property ownership, copyright, trade
secret, libel, taxation and personal privacy is uncertain and developing. Any
new legislation or regulation, or application or interpretation of existing
laws, could have a material adverse effect on our business.
OUR STOCK PRICE HAS BEEN VOLATILE IN THE PAST AND MAY BE VOLATILE IN THE FUTURE,
REGARDLESS OF OUR ACTUAL OPERATING PERFORMANCE.
The stock market in general, and Internet companies in particular, including
our company, have experienced extreme price and volume fluctuations that often
have been unrelated or disproportionate to operating performance. The trading
prices of many Internet companies' stocks are at or near historical highs and
these trading prices and price to earnings multiples are substantially above
historical levels. These trading prices and multiples may not be sustained.
Broad market and industry factors may reduce our stock price, regardless of our
actual operating performance. In addition, the trading price of our common stock
could fluctuate in response to factors such as:
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<PAGE> 14
o quarterly fluctuations in our revenue and financial results both in
absolute terms and relative to analyst and investor expectations;
o changes in recommendations of securities analysts;
o announcements of technological innovations or new services or products;
o publicity regarding actual or potential results with respect to
technologies, services or products under development;
o disputes or other developments concerning proprietary rights, including
copyright and litigation matters; and
o other events or factors, many of which are beyond our control.
In the past, companies that have experienced volatility in the market price
of their stock have been the object of securities class action litigation. If we
were the object of securities class action litigation, it could result in
substantial costs and a diversion of management's attention and resources.
POTENTIAL YEAR 2000 PROBLEMS WITH OUR INTERNAL OPERATING SYSTEMS COULD HARM OUR
BUSINESS.
Many computer systems and software products are coded to accept only
two-digit entries in date code fields. Beginning in the year 2000, these date
code fields will need to accept four-digit entries to distinguish 21st century
dates from 20th century dates. As a result, in less than three months, computer
systems and/or software used by many companies may need to be upgraded to comply
with "year 2000" requirements. Since we just recently developed the software for
our e-messaging platform and are adding new enhancements and functionality
regularly, we believe that our e-messaging platform is year 2000 compliant.
Coding errors or other defects may be discovered in the future as more testing
is completed or new functionality added.
We rely on a number of software and communications systems provided by third
parties to operate our e-messaging platform. Any of these could contain coding
which is not year 2000 compliant. These systems include server software used to
operate the network servers, software controlling routers, switches and other
components of the data network, disk management software used to control the
data disk arrays, firewall, security, monitoring and back-up software used by
us, as well as desktop PC applications software. In each case, we employ widely
available software applications from leading third party vendors, and expect
that such vendors will provide any required upgrades or modifications in a
timely fashion. However, if any third party software or communication systems
suppliers fail to provide year 2000 compliant versions of the software or system
components we rely upon, our operations, including our e-messaging platform,
could be disrupted. We have contacted and monitor each of our key suppliers to
validate their efforts to ensure that their software products and communication
systems are year 2000 compliant and will continue to do so throughout the course
of this process.
Year 2000 compliance problems also could undermine the general
infrastructure necessary to support our operations. For instance, we depend on
third-party ISPs to provide connections to the Internet and to customer
information systems. Any interruption of service from ISPs could result in a
temporary interruption of our e-messaging and other services. We have attempted
to address this risk by obtaining the same service capacity from multiple ISPs.
In addition, we rely on two third-party data centers to house some servers and
communications systems. Any interruption in the security, access, monitoring or
power systems at the third-party data centers could result in an interruption of
services. Moreover, it is difficult to predict what effects year 2000 compliance
problems will have on the integrity and stability of the Internet. If businesses
and consumers are not able to reliably access the Internet, or if the ISPs on
which we rely fail to provide us with uninterrupted service, our reputation
could be harmed and the demand for our services could decline, resulting in an
adverse impact to our business, financial condition and results of operations.
With respect to any particular customer, our ability to provide services to
that customer could be adversely affected if that customer fails to ensure that
its software systems are year 2000 compliant. Disruptions in the
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<PAGE> 15
information systems of significant customers could temporarily prevent such
customers from accessing or using the messaging platform, which could materially
affect our operating results. Our e-messaging platform is designed to interface
with customer databases and communications systems to retrieve relevant
information from customers' electronic commerce systems or customer databases
and to allow customers to independently control certain features of the service,
including the content of transmitted messages. We cannot assess or control the
degree of year 2000 compliance in our customers' information systems. To address
the risk of disruptions in customer information systems, we designed our
e-messaging platform to include redundant manual control features which can be
used by such customers. Nevertheless, certain customers may elect to discontinue
use of the e-messaging services until their internal information technology
problems have been alleviated, which would adversely affect our business,
financial condition and results of operations. The spending patterns of current
or potential customers may be affected by year 2000 issues as companies expend
significant resources to correct or update their systems for year 2000
compliance. Because of these expenditures, our customers may have less money
available to pay for services, which could have a material adverse affect on our
business, financial condition and results of operations.
SUBSTANTIAL SALES OF OUR COMMON STOCK BY OUR LARGE STOCKHOLDERS COULD CAUSE OUR
STOCK PRICE TO FALL.
We have a limited number of stockholders that hold a large portion of our
common stock. To the extent our large stockholders sell substantial amounts of
our common stock in the public market, the market price of our common stock
could fall.
PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT OR DELAY A
CHANGE IN CONTROL OF OUR COMPANY AND MAY REDUCE THE MARKET PRICE OF OUR COMMON
STOCK.
Provisions in our charter documents may delay, defer or prevent a change in
control of our company that a stockholder may consider favorable, may discourage
bids for our common stock at a premium over the market price of our common stock
and may adversely affect the market price of our common stock and the voting and
other rights of the holders of our common stock. These provisions include:
o authorizing the issuance of preferred stock without stockholder
approval;
o providing for a classified board of directors with staggered,
three-year terms;
o prohibiting cumulative voting in the election of directors;
o requiring super-majority voting to effect certain amendments to our
certificate of incorporation and bylaws;
o limiting the persons who may call special meetings of stockholders; and
o prohibiting stockholder actions by written consent.
Other provisions of Delaware law also may discourage, delay or prevent
someone from acquiring or merging with us.
OUR OFFICERS AND DIRECTORS AND THEIR AFFILIATES EXERCISE SIGNIFICANT CONTROL
OVER OUR COMPANY.
Our directors and executive officers, and certain of their affiliates,
individually and as a group, effectively control us and direct our affairs and
business, including any determination with respect to the acquisition or
disposition of assets by us, future issuances of common stock or other
securities by us, declaration of dividends on our common stock and the election
of directors. This concentration of ownership also may have the effect of
delaying, deferring or preventing a change in control of our company.
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLY
UNCERTAIN.
This prospectus contains certain forward-looking statements that involve
risks and uncertainties. We use words such as "anticipate", "believe", "expect",
"future", "intend", "plan" and similar expressions to identify forward-
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<PAGE> 16
looking statements. These statements only are predictions. Although we believe
that the expectations reflected in these forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this amendment. Our actual
results could differ materially from those anticipated in these forward-looking
statements for many reasons, including the risks faced by us and described on
the preceding pages and elsewhere herein.
We believe it is important to communicate our expectations to our investors.
However, there may be events in the future that we are not able to predict
accurately or over which we have no control. The risk factors listed above, as
well as any cautionary language in this prospectus, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. Before you
invest in our common stock, you should be aware that the occurrence of the
events described in these risk factors and elsewhere herein could have a
material adverse effect on our business, operating results, financial condition
and stock price.
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<PAGE> 17
SELLING SECURITY HOLDERS
We are registering for resale certain shares of our common stock. The
following table sets forth (i) the name of the selling security holders, (ii)
the number and percent of shares our common stock that the selling security
holders beneficially owned prior to the offering for resale of any of the shares
of our common stock being registered hereby, (iii) the number of shares of our
common stock that may be offered for resale for the account of the selling
security holders pursuant to this prospectus (the "resale shares") and (iv) the
number and percent of shares of our common stock to be held by the selling
security holders after the offering of the resale shares (assuming all of the
resale shares are sold by the selling security holders). The term "selling
security holder" includes the security holders listed below.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED PRIOR SHARES BENEFICIALLY OWNED
TO OFFERING (2) NUMBER OF AFTER OFFERING (2) (4)
---------------------------------- SHARES BEING -------------------------------
SELLING SECURITY HOLDERS (1) NUMBER PERCENT (3) OFFERED NUMBER PERCENT (3)
- ---------------------------- ----------------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
SOFTBANK America Inc. 10,819,678(5) 20.0 243,903 10,575,775(5) 19.5
300 Delaware Avenue
Suite 909
Wilmington, DE 19801
SOFTBANK Technology 10,616,268(6) 19.6 239,318 10,376,950(6) 19.2
Ventures IV, LP
200 West Evelyn Avenue
Suite 200
Mountain View, CA 94041
Pequot Private Equity Fund, LP 2,521,497(7) 4.7 432,984 2,088,513(7) 3.9
c/o Pequot Capital Management,
Inc.
500 Nyala Farm Road
Westport, CT 06880
Van Wagoner Capital 1,500,000 2.8 1,500,000 0 0
Management
345 California Street, Suite 2450
San Francisco, CA 94104
The Raptor Global Portfolio Ltd. 353,669 * 353,669 0 0
c/o Tudor Investment Corp.
40 Rowes Wharf, 2nd Floor
Boston, MA 02110
Pequot Offshore Private Equity 319,250(8) * 54,821 264,429(8) *
Fund, Inc.
c/o Pequot Capital Management,
Inc.
500 Nyala Farm Road
Westport, CT 06880
Permal Media & Communications 228,683 * 228,683 0 0
Fund, LP
c/o Essex Investment
Management Company
125 High Street
Boston, MA 02110
</TABLE>
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<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C> <C>
SOFTBANK Technology 203,410(9) * 4,585 198,825(9) *
Advisors Fund, LP
200 West Evelyn Avenue
Suite 200
Mountain View, CA 94041
Dimensional Partners, Ltd. 160,000 * 160,000 0 0
c/o JDS Capital Management,
Inc
780 Third Avenue, 45th Floor
New York, NY 10017
Kingdon Associates 133,000 * 133,000 0 0
152 West 57th Street, 50th Floor
New York City, NY 10019
Tudor BVI Futures, Ltd. 132,868 * 132,868 0 0
c/o Tudor Investment Corp.
40 Rowes Wharf, 2nd Floor
Boston, MA 02110
Essex High Technology Fund, LP 129,707 * 129,707 0 0
c/o Essex Investment
Management Company
125 High Street
Boston, MA 02110
Kingdon Partners 110,903 * 110,903 0 0
152 West 57th Street, 50th Floor
New York City, NY 10019
Admirals, L.P. 100,000 * 100,000 0 0
135 East 57th Street, 16th Floor
New York, NY 10022
Pogue Capital International Ltd. 100,000 * 100,000 0 0
NCSS New York Windows
55 Water Street
Mezzanine, 3rd Floor
New York, NY 10041
Essex High Technology 81,756 * 81,756 0 0
(Bermuda) Fund, LP
c/o Essex Investment
Management Company
125 High Street
Boston, MA 02110
Essex High Technology Fund II 47,659 * 47,659 0 0
Ltd
c/o Essex Investment
Management Company
125 High Street
Boston, MA 02110
</TABLE>
17
<PAGE> 19
<TABLE>
<S> <C> <C> <C> <C> <C>
Dimensional Partners, L.P. 40,000 * 40,000 0 0
c/o JDS Capital Management,
Inc
780 Third Avenue, 45th Floor
New York, NY 10017
Altar Rock Fund L.P. 1,268 * 1,268 0 0
c/o Tudor Investment Corp.
40 Rowes Wharf, 2nd Floor
Boston, MA 02110
TOTAL 27,599,616 4,095,124 23,504,492
</TABLE>
- --------------------------
* less than 1%
(1) Based upon information supplied to us by the selling security
holders.
(2) Based upon information supplied to us by the selling security
holders, upon public filings with the SEC and upon information
supplied to us by our transfer agent and registrar. Beneficial
ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. Shares of common stock subject to warrants or options
currently exercisable or exercisable within 60 days of October 26,
1999 are deemed outstanding for computing the percentage of the
person or entity holding such securities, but are not deemed
outstanding for computing the percentage of any other person or
entity. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table
above have sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by them.
(3) Applicable percentage of ownership is based on 54,140,186 of our
common stock issued and outstanding as of October 26, 1999,
adjusted as required by rules promulgated by the SEC.
(4) Assumes the sale of all of the resale shares.
(5) SOFTBANK America Inc. is a wholly-owned subsidiary of SOFTBANK
Holdings, Inc., which in turn is a wholly-owned subsidiary of
SOFTBANK Corp. Excludes 10,376,950 shares (assumes the sale of the
resale shares) held of record by SOFTBANK Technology Ventures IV
LP, an affiliate of SOFTBANK Corp., 879,488 shares held of record
by Softven No. 2 Investment Enterprise Partnership, an affiliate
of SOFTBANK Corp., 254,036 shares held by SOFTBANK Ventures, Inc.,
which is wholly-owned by SOFTBANK Corp., and 198,825 shares
(assumes the sale of the resale shares) held of record by SOFTBANK
Technology Advisors Fund LP, an affiliate of SOFTBANK Corp. Also
excludes 481,308 shares held of record by Mr. Feld and 7,500,
7,500 and 7,500 shares subject to options exercisable within 60
days of October 26, 1999 held by Messrs. Feld, Rieschel and
Fisher, respectively. SOFTBANK Corp. disclaims beneficial
ownership of the shares of our common stock held by its
affiliates. Does not include shares over which SOFTBANK Corp. and
SOFTBANK Technology Ventures IV LP share voting power with Mr. Lee
H. Stein, Mrs. June Stein, Paymentech Merchant Services, Inc. and
First USA Financial, Inc. pursuant to a Voting Agreement dated as
of June 2, 1998. See Statement on Schedule 13D filed on September
1, 1999 by SOFTBANK Corp. and its affiliates. Messrs. Feld,
Rieschel and Fisher are three of our directors who are deemed
affiliates of SOFTBANK Corp. and its affiliates, and they disclaim
beneficial ownership of the shares of our common stock held by
SOFTBANK Corp. and its affiliates.
(6) Excludes 10,575,775 shares (assumes the sale of the resale shares)
held of record by SOFTBANK America Inc., a wholly-owned subsidiary
of SOFTBANK Holdings, Inc., which in turn is a wholly-owned
subsidiary of SOFTBANK Corp., 879,488 shares held of record by
Softven No. 2 Investment Enterprise Partnership, an affiliate of
SOFTBANK Corp., 254,036 shares held by SOFTBANK Ventures, Inc.,
which is wholly-owned by SOFTBANK Corp., and 198,825 shares
(assumes the sale of the resale shares) held of record by SOFTBANK
Technology Advisors Fund LP, an affiliate of SOFTBANK Corp. Also
excludes 481,308 shares held of record by Mr. Feld and 7,500,
7,500 and 7,500 shares subject to options exercisable within 60
days of October 26, 1999 held by Messrs. Feld, Rieschel and
Fisher, respectively. SOFTBANK Corp. disclaims beneficial
ownership of the shares of our common stock held by its
affiliates. Does not include shares over which SOFTBANK Technology
Ventures IV LP and SOFTBANK Corp. share voting power with Mr. Lee
H. Stein, Mrs. June Stein, Paymentech Merchant Services, Inc. and
First USA Financial, Inc. pursuant to a Voting Agreement dated as
of June 2, 1998. See Statement on Schedule 13D filed on September
1, 1999 by SOFTBANK Corp. and its affiliates. Messrs. Feld,
Rieschel and Fisher are three of our directors who are deemed
affiliates of SOFTBANK Corp. and its
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<PAGE> 20
affiliates, and they disclaim beneficial ownership of the shares
of our common stock held by SOFTBANK Corp. and its affiliates.
(7) Excludes 264,429 shares held of record by Pequot Offshore Private
Equity Fund, Inc. See footnote 8 below. Gerald A. Poch, one of our
directors, is a principal in Pequot Capital Management, which is
an affiliate of Pequot Private Equity Fund, LP and Pequot Offshore
Private Equity Fund, Inc., and disclaims beneficial ownership of
the shares held by Pequot Private Equity Fund, LP and Pequot
Offshore Private Equity Fund, Inc.
(8) Excludes 2,521,497 shares held of record by Pequot Private Equity
Fund, LP. See footnote 7 above.
(9) Excludes 10,575,775 shares (assumes the sale of the resale shares)
held of record by SOFTBANK America Inc., a wholly-owned subsidiary
of SOFTBANK Holdings, Inc., which in turn is a wholly-owned
subsidiary of SOFTBANK Corp., 10,376,950 shares (assumes the sale
of the resale shares) held of record by SOFTBANK Technology
Ventures IV LP, an affiliate of SOFTBANK Corp., 879,488 shares
held of record by Softven No. 2 Investment Enterprise Partnership,
an affiliate of SOFTBANK Corp. and 254,036 shares held by SOFTBANK
Ventures, Inc., which is wholly-owned by SOFTBANK Corp. Also
excludes 481,308 shares held of record by Mr. Feld and 7,500,
7,500 and 7,500 shares subject to options exercisable within 60
days of October 26, 1999 held by Messrs. Feld, Rieschel and
Fisher, respectively. SOFTBANK Corp. disclaims beneficial
ownership of the shares of our common stock held by its
affiliates. Does not include shares over which SOFTBANK Corp. and
SOFTBANK Technology Ventures IV LP share voting power with Mr. Lee
H. Stein, Mrs. June Stein, Paymentech Merchant Services, Inc. and
First USA Financial, Inc. pursuant to a Voting Agreement dated as
of June 2, 1998. See Statement on Schedule 13D filed on September
1, 1999 by SOFTBANK Corp. and its affiliates. Messrs. Feld,
Rieschel and Fisher are three of our directors who are deemed
affiliates of SOFTBANK Corp. and its affiliates, and they disclaim
beneficial ownership of the shares of our common stock held by
SOFTBANK Corp. and its affiliates.
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PLAN OF DISTRIBUTION
The resale shares may be sold from time to time by the selling security
holders in one or more transactions at fixed prices, at market prices at the
time of sale, at varying prices determined at the time of sale or at negotiated
prices. The selling security holders may offer their resale shares in one or
more of the following transactions:
o on any national securities exchange or quotation service on which our
common stock may be listed or quoted at the time of sale, including The
Nasdaq National Market;
o in the over-the-counter market;
o in private transactions;
o through options;
o by pledge to secure debts or other obligations; or
o through a combination of any of the above transactions.
The selling security holders may effect such transactions by selling to or
through one or more broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the selling security holders. The selling security holders and any
broker-dealers that participate in the distribution may, under certain
circumstances, be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by such broker-dealers and any
profits realized on any resale of the resale shares by them might be deemed to
be underwriting discounts and commissions under the Securities Act.
Under applicable rules and regulations under the Securities Exchange Act,
any person engaged in the distribution of the resale shares may not
simultaneously engage in market making activities with respect to our common
stock for a period of two business days prior to the commencement of such
distribution. In addition and without limiting the foregoing, the selling
security holders and any other person participating in a distribution will be
subject to applicable provisions of the Securities Exchange Act and the rules
and regulations thereunder, including, without limitation, Regulation M under
the Securities Exchange Act, which may limit the timing of purchases and sales
of shares of our common stock by the selling security holders or any such other
person.
We will make copies of this prospectus available to the selling security
holders and have informed the selling security holders of the need for delivery
of a copy of this prospectus to each purchaser of the resale shares prior to or
at the time of any sale of the resale shares.
The selling security holders will pay all underwriting discounts,
commissions, transfer taxes and other expenses associated with the sale of the
resale shares by them. We will pay all costs and expenses associated with the
registration of the resale shares. We estimate that our expenses in connection
with this offering will be approximately $107,950.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of any of the resale
shares by the selling security holders. All proceeds from the sale of the resale
shares will be for the accounts of the selling security holders.
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby will be
passed upon for us by Cooley Godward LLP, Boulder, Colorado.
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EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the year ended December 31, 1998, as set forth in their report, which is
incorporated by reference and included in this prospectus and elsewhere in the
registration statement. Our financial statements and schedule are incorporated
by reference and our financial statements are included in reliance on Ernst &
Young LLP's report, given on their authority as experts in accounting and
auditing.
The audited financial statements of Revnet Systems, Inc. incorporated in
this prospectus by reference to our Form 8-K/A dated October 1, 1999 have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The audited financial statements of Decisive Technology Corporation
incorporated in this prospectus by reference to our Form 8-K/A dated October 1,
1999 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The audited financial statements of Email Publishing, Inc., incorporated in
this prospectus by reference to our Form 8-K/A dated February 19, 1999 have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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