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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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MESSAGEMEDIA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7389 33-0612860
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE) IDENTIFICATION NUMBER)
OF INCORPORATION OR
ORGANIZATION)
4104 SORRENTO VALLEY BOULEVARD, SUITE 200
SAN DIEGO, CALIFORNIA 92121
(619) 410-3700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICES)
----------------
BERT C. KLEIN
VICE PRESIDENT OF FINANCE AND ADMINISTRATION
AND CHIEF FINANCIAL OFFICER
MESSAGEMEDIA, INC.
4104 SORRENTO VALLEY BOULEVARD, SUITE 200
SAN DIEGO, CALIFORNIA 92121
(619) 410-3700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
D. BRADLEY PECK, ESQ.
MICAELA H. MARTIN, ESQ.
PATRICK R. O'NEIL, ESQ.
COOLEY GODWARD LLP
4365 EXECUTIVE DRIVE, SUITE 1100
SAN DIEGO, CA 92121
(619) 550-6000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common stock, $.001 par value.... 7,063,015 $7.5625 $53,414,051 $14,850
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</TABLE>
(1) The registration fee for the remaining 754,775 shares registered hereunder
has been previously paid by the Registrant pursuant to the Registrant's
earlier registration statement on Form S-3 (File No. 333-42855) as amended.
(2) Estimated in accordance with Rule 457(c) of the Securities Act of 1933, as
amended (the "Securities Act") solely for the purpose of computing the
amount of the registration fee based on the average of the high and low
prices of the Registrant's Common Stock as reported on the Nasdaq National
Market on January 19, 1999.
Pursuant to Rule 429 under the Securities Act, the Prospectus which forms a part
of this Registration Statement shall also relate to 754,775 of the 4,923,520
shares of the Registrant's Common Stock registered for resale pursuant to the
Company's earlier registration statement on Form S-3 (File No. 333-42855) and
all amendments thereto.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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SUBJECT TO COMPLETION, DATED JANUARY 21, 1999
PROSPECTUS
7,063,015 SHARES
MESSAGEMEDIA, INC.
COMMON STOCK
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The Selling Securityholders identified in this Prospectus are selling
7,063,015 shares of our common stock. These shares may be offered from time to
time by the Selling Securityholders through public or private transactions, on
or off the Nasdaq National Market, at prevailing market prices or at privately
negotiated prices. The Selling Securityholders 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 is currently traded on the Nasdaq National Market under
the symbol "MAIL." On January 19, 1999, the last reported sales price of a share
of MessageMedia common stock on the Nasdaq National Market was $7.25 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 3 OF THIS PROSPECTUS.
------------------
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 __________, 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 Washington, D.C., New York, New York and
Chicago, Illinois. 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 are also
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 (the "Exchange Act"):
1. Annual Report on Form 10-K for the fiscal year ended December
31, 1997, as amended;
2. Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998; and
3. Current Reports on Form 8-K filed with the SEC on January 29,
1998, April 29, 1998, May 1, 1998, June 26, 1998 (as amended on
November 3, 1998), August 25, 1998, November 30, 1998, and
December 23, 1998.
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:
MessageMedia, Inc.
4104 Sorrento Valley Boulevard, Suite 200
San Diego, California 92121
Attn: Investor Relations
(619) 410-3700
http://www.messagemedia.com
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THE COMPANY
MessageMedia, Inc. develops and provides e-mail outsourcing services and
products that enable continuous, intelligent communications between businesses
and their customers and prospects. We cost-effectively integrate customer
service, sales and marketing functions in transactional e-mail messages that
seamlessly link a business to its constituents using textual, graphical,
animated and interactive elements.
Our services and products include embedded secure payment systems,
e-mail subscription management services, complete e-mail list management and
delivery service, easy and dependable addition of e-mail editions to any print
publication and delivery of information to large groups of people on a periodic
basis using Internet e-mail. These services and products are enhanced by our
ability to handle, log and route all return e-mail including new transactions,
incorrect addresses, customer responses and customer service requests. Our
current customers include more than 60 leading companies, such as E*TRADE,
Standard & Poor's, USA Today, Intuit and CMP Media. Many of these customers
consider MessageMedia a strategic partner for developing services that provide
important competitive advantages.
On December 9, 1998, we acquired Email Publishing Inc. ("EPub"), a
provider of message delivery and e-mail subscription management services. On
December 11, 1998, we acquired Distributed Bits, L.L.C. ("Distributed Bits"), a
provider of innovative inbound e-mail management products and solutions. We
believe the acquisitions will help to position MessageMedia as the leading
provider of electronic messaging solutions.
On January 11, 1999, we announced our intent to relocate our executive
offices to Boulder, Colorado. We believe the relocation will be completed in May
1999. We also announced changes in our management, specifically, Dennis Cagan
accepted the position of interim Chief Executive Officer and current president
Keith Kendrick will depart from MessageMedia on January 31, 1999.
Our executive offices are currently located at 4104 Sorrento Valley
Blvd., Suite 200, San Diego, California 92121 and our telephone number is (619)
410-3700. We maintain a website at http://www.messagemedia.com.
MessageMedia, Interactive Messaging Platform, First Virtual, VirtualTAG,
VirtualPIN and our logo are trademarks or service marks of MessageMedia. All
other brand names or trademarks appearing in this Prospectus are the property of
their respective holders.
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.
Investment in MessageMedia shares involves a high degree of risk. You
should consider the following discussion of risks as well as other information
in this Prospectus before purchasing any MessageMedia shares.
OUR HISTORY OF OPERATING LOSSES AND ANTICIPATED FUTURE LOSSES
We have incurred net operating losses in each quarter since our
inception in March 1994. To date, we have not generated significant revenues and
we cannot guarantee that our revenues will increase in the future. In addition,
we are currently making and plan to continue to make significant investments in
our systems, sales, marketing, research, development and engineering and
administrative infrastructure in the near future. As a result of these
expenditures, we expect to continue to incur significant operating losses for
the foreseeable future. For these and other reasons, we cannot assure you that
we will ever operate profitably.
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OUR LIMITED OPERATING HISTORY
We began operations in March 1994. To date, we have generated
substantially all of our revenues from the following:
o The receipt of registration fees from consumers and merchants;
o Transaction processing fees;
o Merchandising fees;
o Sales of our VirtualTAGs, an interactive banner; and
o Consulting fees.
Since discontinuing the Internet Payment System operations in August
1998, we have dedicated all of our resources to developing and implementing our
Interactive Messaging Platform and related services and technologies.
Our future financial performance will depend significantly on the
successful introduction and customer acceptance of the Interactive Messaging
Platform and other new and enhanced products and services. It is very difficult
to predict what the demand will be for our Interactive Messaging Platform
because it is a relatively new type of product. Furthermore, we believe that our
prior experience in developing and operating the Internet Payment System does
not offer a meaningful basis to assess the future prospects of our Interactive
Messaging Platform and related products and services. Accordingly, we cannot
assure you that a significant market for the Interactive Messaging Platform or
for any of our other technologies or services will develop.
UNCERTAINTY RELATING TO INTEGRATING EMAIL PUBLISHING INC. AND DISTRIBUTED BITS,
L.L.C.
On December 9, 1998, we acquired EPub through a merger in which EPub
merged with and into our wholly-owned subsidiary. On December 11, 1998, we
acquired Distributed Bits in a similar transaction. As a result, companies that
had previously operated independently must now work together. The integration
will require significant effort from our personnel and the personnel of EPub and
Distributed Bits who are now MessageMedia employees. In addition to the
integration risks that we describe below, we cannot assure you that we will be
able to profitably consolidate such businesses.
INTEGRATION OF POTENTIAL ACQUISITIONS
As part of our business strategy, we may focus on acquiring, or making
significant investments in, complementary companies, products and technologies.
The following risks are common to the integration of two companies, and may be
associated with recent or future acquisitions:
o The difficulty of incorporating new operations, technology and
personnel into one company;
o The potential disruption of our ongoing business;
o The additional expense associated with amortization of acquired
intangible assets;
o The maintenance of uniform standards, controls, procedures and
policies; and
o The impairment of relationships with employees and customers.
We cannot assure you that we will successfully overcome these risks or
any other problems that we encounter in connection with any future acquisitions.
OUR NEED FOR ADDITIONAL CAPITAL
In the near future, we will need to raise additional funds through the
public or private sale of our equity or debt securities or from other sources
for the following purposes:
o To fund our operations;
o To develop new or enhanced services;
o To respond to competitive pressures;
o To acquire complementary businesses or technologies; and
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o To remain in compliance with requirements of the Nasdaq National
Market for continued listing.
We cannot assure you that additional funds will be available when we
need them, or that if funds are available, they will include terms favorable to
MessageMedia or our stockholders. If we are not able to obtain sufficient funds
or if adequate funds are not available on terms acceptable to us, we may not be
able to develop or enhance our products and services. A lack of sufficient funds
could also prevent us from taking advantage of important opportunities or being
able to respond to competitive pressures. Any of these results could have a
material adverse effect on our business, financial condition and results of
operations.
Our need to raise additional funds could also directly and adversely
affect your investment in MessageMedia in another way. When a company raises
funds by issuing shares of stock, the percentage ownership of the existing
stockholders of that company is reduced or diluted. If we raise funds in the
future by issuing additional shares of stock, you may experience significant
dilution. Additionally, certain types of equity securities that we may issue in
the future could have rights, preferences or privileges senior to your rights as
a holder of our common stock.
OUR ABILITY TO ATTRACT AND RETAIN PERSONNEL
Our success greatly depends on the continued service of our key senior
management personnel. None of the persons currently in such positions are bound
by an employment agreement. The loss of any member of our senior management team
could have a material adverse effect on our future operating results. On January
11, 1999, our current president Keith S. Kendrick announced that he would leave
MessageMedia at the end of January 1999. Our future success will depend in large
part upon our ability to attract, retain and motivate highly skilled employees,
in particular in the role of President or Chief Executive Officer as well as
other senior management positions. We face significant competition for
individuals with the skills and experience required to perform in such roles. We
cannot assure you that we will be able to attract or retain such individuals, or
that the departure of such individuals from MessageMedia will not cause a
disruption in our operations.
RISKS ASSOCIATED WITH NEW MANAGEMENT TEAM
Virtually all of our executive officers, including our Chief Financial
Officer, Vice President of Product Management, and Vice President of
Engineering, have joined our company within the past several months. Our future
success will depend in large part upon the ability of our executive officers and
other members of our management to operate effectively, both individually and as
a group. Due to the fact that many of our executive officers are new to our
company and have never worked together, and that we do not yet have a full
management team in place, we cannot assure you that our management will be able
to function effectively individually or as a team. Failure to do so could have a
material adverse effect on our business, financial condition and results of
operations.
RISKS ASSOCIATED WITH OUR RELOCATION
On January 11, 1999, we announced our plan to relocate and consolidate
our offices in our Boulder, Colorado location. The consolidation will require
the relocation of 22 of our employees currently residing in San Diego,
California and is subject to risks commonly encountered in making such a
relocation, including, among others, loss of personnel who choose not to
relocate, the difficulty associated with assimilating the personnel and
operations from two locations, the potential disruption of our business and the
impairment of our reputation and relationships with employees and clients. We
cannot assure you that we will overcome these risks and continue to operate our
business effectively.
Our relocation in Colorado also presents risks with respect to the
services we provide to our customers. Currently we maintain technical platforms
in each of San Diego and Boulder. The platforms contain software which we use to
provide e-mail delivery services for our customers. When we consolidate our
offices in Colorado, the technical platform in San Diego will be discontinued
and the software and services provided under the San Diego platform will be
integrated into the Colorado platform, which utilizes software acquired in the
EPub acquisition. We will also integrate software obtained in our acquisition of
DBits. We cannot assure you that we will be successful in our integration of the
software acquired from EPub with the San Diego platform, in our attempt
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to retrain our employees to manage the integrated platform, in the transition of
our customers to the new platform, or in our integration of the DBits software.
UNCERTAINTY OF OUR NASDAQ NATIONAL MARKET LISTING
Our common stock is currently listed on the Nasdaq National Market.
Nasdaq has certain requirements that a company must meet to remain listed on the
Nasdaq National Market. If we continue to experience losses from our operations
or if we are unable to raise additional funds, we may not be able to maintain
the standards for continued quotation on the Nasdaq National Market. If our
common stock is removed from the Nasdaq National Market, any trading in our
common stock might then be conducted on the Nasdaq SmallCap Market, which is a
significantly less active market than the Nasdaq National Market. As a result,
you could find it more difficult to dispose of your MessageMedia common stock.
Furthermore, Nasdaq recently adopted new rules which make continued
listing of companies on either of the Nasdaq National Market or the Nasdaq
SmallCap Market more difficult. If MessageMedia common stock were removed from
the Nasdaq National Market and did not qualify for listing on the Nasdaq
SmallCap Market or was subsequently delisted from the Nasdaq SmallCap Market,
MessageMedia common stock could be subject to what are known as the "penny
stock" rules. The "penny stock" rules place additional requirements on
broker-dealers who sell or make a market in such securities. Consequently, if we
fail to qualify for listing on, or if we were removed from, the Nasdaq SmallCap
Market, the ability or willingness of broker-dealers to sell or make a market in
MessageMedia common stock could decline. As a result, your ability to resell
your MessageMedia shares could be adversely affected. In addition, if the market
price of MessageMedia common stock falls below $5.00 per share, as it has in the
past, we could become subject to some of the "penny stock" rules even if our
common stock were still quoted on the Nasdaq SmallCap Market. Furthermore, if we
were deemed to be an issuer of "penny stock," we could lose the protection given
to "forward-looking statements" by Section 27A of the Securities Act and Section
21E of the Exchange Act.
ANTICIPATED FLUCTUATIONS IN OUR OPERATING RESULTS
We expect that our future operating results may fluctuate significantly.
These fluctuations will 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 Interactive Messaging Platform;
o Difficulties in the development or deployment of products or
services, including interactive messaging;
o Market acceptance of Internet commerce, products and services in
general; o Fluctuating market demand for our products and
services;
o The degree of acceptance of the Internet as an advertising and
merchandising medium;
o The timing and effectiveness of collaborative marketing efforts
initiated by our strategic partners;
o The timing of the introduction of new products and services
offered by us;
o The timing of the release of enhancements to our products and
services;
o Product introductions and service offerings by our competitors;
o The mix of the products and services provided by us;
o The timing and rate at which we increase our expenses to support
projected growth;
o The cost of compliance with applicable government regulations;
o Competitive conditions in our marketplace; and
o General economic conditions.
The fees that we charge for messaging and consulting services may change
as we introduce the Interactive Messaging Platform and assess our marketing
strategy and competitive position. 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 be
materially and adversely affected.
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RISKS RELATED TO OUR PRODUCT TRANSITION
As we discuss above, we have recently decided to change our business
strategy to focus on our Interactive Messaging Platform and related products and
services. Our Interactive Messaging Platform is a family of products and
services that relate to e-mail. Our Interactive Messaging Platform addresses all
aspects of using e-mail in a business-to-customer environment. For example, it
enables businesses to customize e-mail messages that they send to customers and
allows businesses to process customer responses. Once a customer's response is
received, our Interactive Messaging Platform enables businesses to charge the
customer's credit card in a secure manner.
Because we just recently finished completing the development of our
Interactive Messaging Platform and because we have only implemented it on a
limited basis, we cannot assure you that the Interactive Messaging Platform will
be successful. We recently released the first phase of the Interactive Messaging
Platform into the marketplace. To date, we have not received any significant
customer commitments to license, use or implement the Interactive Messaging
Platform.
If we fail to successfully introduce and market the Interactive
Messaging Platform, or if our revenues from the Interactive Messaging Platform
do not cover the costs of our operations, then our business, financial condition
and results of operation will be materially and adversely affected.
UNCERTAIN ACCEPTANCE OF OUR INTERACTIVE MESSAGING SERVICES
Market demand for new product and service types such as interactive
messaging is inherently uncertain. The Interactive Messaging Platform is very
different from the traditional methods of marketing and information exchange
used by our target customers, who have typically relied on advertising and
direct mail to attract new customers and maintain customer relationships. We
believe that the Interactive Messaging Platform will prove to be an efficient
and cost-effective marketing and relationship-management tool for a broad
variety of customers. However, we cannot assure you that prospective customers
will be able to implement the Interactive Messaging Platform without substantial
additional cost or that it will be cost efficient when compared to traditional
methods of marketing and information exchange. If the Interactive Messaging
Platform fails to meet customers' demands, the use of our interactive messaging
services may decline over time. If this were to happen, our business, financial
condition and results of operations would be materially and adversely affected.
OUR DEPENDENCE ON DISTRIBUTION RELATIONSHIPS AND COLLATERAL SYSTEMS
We place a strong emphasis on developing and maintaining relationships
with entities in a position to distribute our product. For example, we focus on
developing relationships with financial institutions, catalog companies, direct
marketers and travel services (including airlines, rental car agencies and hotel
operators). These relationships enable us to promote our products and services
to the entities' merchant customers. Although we have developed relationships
with a number of such entities in an effort to further this goal, we do not have
any exclusive relationships with these entities. To date, our revenues have not
noticeably increased as a result of these relationships. We cannot assure you
that we will be able to maintain existing relationships, develop new
relationships or that any such relationship will prove to be effective in
creating demand for the Interactive Messaging Platform. We also cannot assure
you that our existing or potential marketing partners, some of whom have
significantly greater financial and marketing resources than do we, will not
change their business strategies or discontinue their relationships with us.
We depend heavily on several third-party providers of Internet and
related telecommunication services in operating our Interactive Messaging
Platform. We cannot assure you that these companies will 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. We would have to reengineer our computer systems and
telecommunications infrastructure to accommodate a new service provider. This
process would be both expensive and time-consuming. Any interruption by our
service providers would also be likely to disrupt the operation of the
Interactive Messaging Platform, causing a loss of revenues and potential loss of
customers. Such losses could have a material adverse effect on our business,
financial condition and results of operations.
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OUR RELIANCE ON SIGNIFICANT CUSTOMERS
A significant portion of our revenues attributable to EPub's business
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 for
this portion of our business. 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
EPub. Consequently, if we fail to develop relationships with significant new
customers, our business, financial condition and results of operations will be
materially and adversely affected.
UNDEVELOPED AND RAPIDLY CHANGING MARKETS FOR OUR PRODUCTS
The markets for our products and services are at a very early stage of
development and are rapidly changing. An increasing number of entities and
individuals continue to enter the market in which we compete. These 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. Demand for and
market acceptance of recently introduced products and services is both uncertain
and risky. The degree to which the Interactive 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 interactive messaging will also 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 will also
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. Accordingly, we cannot
assure you that sufficient demand for our products and services will develop to
sustain our business.
COMPETITION
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 interactive messaging
services and interactive Internet communications in the near future.
Our principal competitors in the interactive messaging services arena
include providers of e-mail based services such as Axciom, Cyber Data Systems,
Digital Impact, eGain, Email Channel, InfoBeat, Matchlogic, Mustang, Postmaster
Direct, PostX, ReplyNet and RevNet. We also compete with Narrative Communication
in the interactive advertising arena and with BroadVision, Intellipost and
E-Care Group for one-to-one marketing. Additionally, we compete with traditional
advertising, merchandising and direct marketing companies that use more
conventional means of delivering information and marketing messages to
consumers.
We may experience additional competition from Internet service
providers, advertising and direct marketing agencies and other large established
businesses that enter the market for interactive messaging services. Companies
such as America Online, Microsoft, IBM, Integrion, AT&T, Hewlett-Packard,
Netscape Communications, Harte-Hanks Data Technology, ADVO, The Interpublic
Group of Companies and Foote, Cone and Belding, which possess large, existing
customer bases, substantial financial resources and established distribution
channels, could develop, market or resell a number of messaging services. Such
potential competitors may also choose to enter the market for messaging services
by acquiring one of our existing competitors or by forming strategic alliances
with such competitors. Either of these occurrences could harm our ability to
compete effectively.
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.
Such 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 such 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
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assure 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.
RISKS OF TECHNOLOGICAL CHANGE AND EVOLVING INDUSTRY STANDARDS
Our products and services are designed around current technical
standards, and our revenues depend 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. We cannot assure you that the standards on which
our products and services are or will be based will be accepted by the industry.
Nor can we assure you that products, services or technologies developed by
others will not render our products and services noncompetitive or obsolete. If
we are unable to respond to changing market conditions, technological
developments, emerging industry standards or changing customer requirements, our
business, financial condition and results of operations could be materially and
adversely affected.
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. We cannot assure you that, despite
testing that our clients and we conduct, we will locate errors if they occur.
Nor can we assure you that we will not experience development delays. Either of
these occurrences could have a material adverse effect on our business,
financial condition and results of operations.
OUR RISK OF CAPACITY CONSTRAINTS
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. We cannot assure
you, however, that our products and services will be able to meet the growing
demand as the number of 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, financial condition and results of operations could
be materially and adversely affected.
OUR DEPENDENCE ON INCREASED USAGE AND STABILITY OF THE INTERNET
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 the
Interactive 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 is also
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
9.
<PAGE> 12
broad audience at moderate costs, the viability of Internet commerce and 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. It also needs to be expanded to provide a
substantial amount of public education to increase confidence in the integrity
and security of Internet commerce. If the Internet infrastructure is not
adequately expanded or managed, or if our products and services do not achieve
sufficient market acceptance, then our business, financial condition and results
of operations will be materially and adversely affected.
OUR RISK OF SYSTEMS FAILURES, SECURITY RISKS, AND LACK OF SUFFICIENT INSURANCE
Risk of System Failures
The success of our services also depends on our ability to protect our
computer equipment and the information stored in our data centers against loss
or damage. We must protect against system overloads, fire, power loss,
telecommunications failures, unauthorized intrusion, infection by computer
viruses and similar events. Our data centers and servers are currently located
in San Diego, California. We cannot assure you that a system failure would not
materially and adversely affect our ability to provide our products and
services.
Security Risks
We currently retain highly confidential customer information in a secure
database server that we believe is isolated from the Internet. 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, e-mail addresses
and comprehensive transaction histories. If attempts to effect unauthorized
transactions were to become widespread, we would be forced to devote substantial
resources to counteracting such attempts. These efforts could result in a
compromise of the system or the interruption of our ability to provide our
products and services. Attempts to effect unauthorized transactions could result
in adverse publicity for us and have a material adverse effect on our business,
financial condition and results of operations. It is also 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, we cannot
guarantee that such provisions will be enforceable or will be effective in
limiting our exposure to damage claims.
Lack of Sufficient Insurance
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 revenues, 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 coverage on
reasonable terms or at all in the future.
UNCERTAINTIES RELATING TO OUR INTELLECTUAL PROPERTY RIGHTS
We rely on a combination of the following to protect our proprietary
rights:
o Trade secret laws;
o Copyright laws;
o Trademark laws;
o Nondisclosure agreements; and
10.
<PAGE> 13
o Other contractual provisions and technical measures.
We cannot guarantee that these protections will adequately safeguard the
proprietary software underlying our products and services. Nor can we guarantee
that our agreements with employees, consultants and others who participate in
the development of our software will not be breached, that we will have adequate
remedies for any breach, or that our trade secrets will not become known. It is
possible that competitors could develop functionally equivalent interactive
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 obtain and use products or technology that we
consider proprietary. Third parties could also attempt to develop similar
technology independently. In addition, not all countries have effective
protection of intellectual property rights. We cannot guarantee that our means
of protecting our proprietary rights will be adequate or that our competitors
will not independently develop similar technology.
We believe that Internet commerce technology providers may become
increasingly subject to infringement claims as both the volume of Internet
commerce and the number of products and service providers that support Internet
commerce increase. On October 19, 1998, InfoBeat, Inc. filed a complaint against
EPub in the Federal District Court for the District of Colorado, alleging
infringement of a patent held by InfoBeat. The complaint seeks injunctive relief
and unspecified damages. Although we believe that the complaint is without
merit, this litigation could result in significant expense to us and could
divert management's time and resources from other matters. In the event of an
adverse ruling in such litigation, we may be required to pay substantial
damages, discontinue certain services, pay significant royalties to InfoBeat or
devote significant resources to developing alternative technologies. We cannot
guarantee that additional infringement claims will not be filed against us 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.
We may also initiate claims or litigation against third parties for
infringement of our proprietary rights or to establish the validity of our
proprietary rights. In particular, on October 29, 1998, we filed a complaint in
the Federal District Court in San Diego, California against InfoBeat. Our
complaint alleges infringement of a patent held by us and seeks injunctive
relief and unspecified damages. Patent litigation 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 for infringing technology. If we then fail to
develop or license a substitute technology, our business, financial condition
and results of operations could be materially and adversely affected.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
There are currently few laws or regulations that directly apply to
activities on the Internet. We believe that we are not currently subject to
direct regulation by any government agency in the United States, other than
regulations that are generally applicable to all businesses. 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, 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, results of operations, financial condition and
prospects.
YEAR 2000 COMPLIANCE
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 approximately one year, computer
systems and/or software used by many companies may need to be upgraded to comply
with "Year 2000" requirements. Although we believe
11.
<PAGE> 14
that our Interactive Messaging Platform is Year 2000 compliant, we cannot assure
you that coding errors or other defects will not be discovered in the future and
we have not yet undertaken a systematic effort to identify any Year 2000
compliance problems in the various components of the Interactive Messaging
Platform. We believe that compliance testing will require approximately 200-300
man-hours, and intend to complete the testing in 1999. To date, we have
incurred minimal expenses related to Year 2000 compliance, however, we expect
to incur $150,000 to $250,000 of expenses in 1999 related to Year 2000
compliance.
We rely on a number of software and communications systems provided by
third parties to operate our Interactive Messaging Platform. Any of these could
contain coding which is not Year 2000 compliant. These systems include server
software used to operate our network servers, software controlling routers,
switches and other components of our data network, disk management software used
to control our 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
suppliers fail to provide Year 2000 compliant versions of the software, our
operations, including the Interactive Messaging Platform, could be disrupted.
Year 2000 compliance problems could also undermine the general
infrastructure necessary to support our operations. For instance, we depend on
third-party Internet service providers (known as "ISPs") to provide connections
to the Internet and to our customers' information systems. Any interruption of
service from our ISPs could result in a temporary interruption of our
interactive 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 a third-party data center to house some of our servers and communications
systems. Any interruption in the security, access, monitoring or power systems
at the third-party data center could result in an interruption of our 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, the demand for our
services could decline, resulting in an adverse impact to our business,
financial condition and results of operations.
Our operations could also be adversely affected if our customers fail to
ensure that their software systems are Year 2000 compliant. The Interactive
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. Disruptions in the information
systems of significant customers could temporarily prevent such customers from
accessing or using the Interactive Messaging Platform, which could materially
affect our operating results. To address the risk of disruptions in customer
information systems, we have designed the Interactive Messaging Platform to
include redundant manual control features which can be used by such customers.
Nevertheless, certain customers may elect to discontinue use of our interactive
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
our services, which could have a material adverse affect on our business,
financial condition and results of operations.
12.
<PAGE> 15
SELLING SECURITYHOLDERS
We are registering for resale certain shares of MessageMedia common
stock, including shares of MessageMedia common stock issuable upon exercise of
certain warrants. The following table sets forth (i) the name of the Selling
Securityholders, (ii) the number and percent of shares of MessageMedia common
stock that the Selling Securityholders beneficially owned prior to the offering
for resale of any of the shares of MessageMedia common stock being registered
hereby, (iii) the number of shares of MessageMedia common stock that may be
offered for resale for the account of the Selling Securityholders pursuant to
this Prospectus (the "Resale Shares"), and (iv) the number and percent of shares
of MessageMedia common stock to be held by the Selling Securityholders after the
offering of the Resale Shares (assuming all of the Resale Shares are sold by the
Selling Securityholders). The term "Selling Securityholder" includes the
securityholders listed below.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING NUMBER OF AFTER OFFERING(2)
------------------------- SHARES BEING -------------------------
SELLING SECURITYHOLDERS(1) NUMBER PERCENT(3) OFFERED NUMBER PERCENT(3)
- --------------------------- ---------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Andrew C. Currie (4)................... 1,819,795 4.5% 1,819,795 0 --
Brian P. Makare (5).................... 992,616 2.5% 992,616 0 --
Bradley A. Feld (6).................... 11,568,391 28.7% 496,308 11,072,083 27.5%
SOFTVEN No. 2 Investment
Enterprise Partnership............. 879,488 2.2% 879,488 0 --
Dan Lynch.............................. 255,665 1.0% 255,665 0 --
John Strauss........................... 191,748 * 191,748 0 --
WHP Family Limited Partnership......... 63,916 * 63,916 0 --
Catalyst Infotech Development
Fund, L.P.......................... 597,227 1.5% 597,227 0 --
Grandhaven L.L.C....................... 49,765 * 49,765 0 --
Hexagon Investments L.L.C.............. 49,765 * 49,765 0 --
Labyrinth Enterprises L.L.C............ 49,765 * 49,765 0 --
Legacy Enterprises L.L.C............... 49,765 * 49,765 0 --
Athena West............................ 60,830 * 31,518 29,320 *
Business Plan Associates............... 23,455 * 23,455 0 --
Thomas Bartel.......................... 10,443 * 10,443 0 --
Alan Welty............................. 9,894 * 9,894 0 --
Intensity Channels, Inc................ 4,947 * 4,947 0 --
Dan Diehkoff........................... 6,596 * 6,596 0 --
Clifton Management & Trading........... 8,075(7) * 8,075(7) 0 --
Seth Antine............................ 25,500(7) * 25,500(7) 0 --
American Friends of Tifereth
Tiberias Institutions.............. 8,500(7) * 8,500(7) 0 --
Bodenheimer Foundation................. 4,250(7) * 4,250(7) 0 --
Congregation Ahavas Tzedakah
Vechesed........................... 47,600(7) * 47,600(7) 0 --
Friends of Kiryat Meor Chaim Inc....... 6,375(7) * 6,375(7) 0 --
The Jerusalem Fund Inc................. 4,250(7) * 4,250(7) 0 --
Irwin Katsof........................... 1,700(7) * 1,700(7) 0 --
Keren M Y C B Elias Foundation Inc..... 5,500(7) * 5,500(7) 0 --
</TABLE>
13.
<PAGE> 16
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING NUMBER OF AFTER OFFERING(2)
------------------------- SHARES BEING -------------------------
SELLING SECURITYHOLDERS(1) NUMBER PERCENT(3) OFFERED NUMBER PERCENT(3)
- --------------------------- ---------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Ohr Somayach Tanenbaum
Educational ...................... 2,125(7) * 2,125(7) 0 --
Reuvain and Gail Lea Schepansky....... 2,125(7) * 2,125(7) 0 --
Shekel Hakodesh....................... 5,100(7) * 5,100(7) 0 --
Yeshiva of Telshe Alumni.............. 4,250(7) * 4,250(7) 0 --
Jerome Bloom.......................... 2,125(7) * 2,125(7) 0 --
Wolowitz Pension Fund................. 6,375(7) * 6,375(7) 0 --
Shor Yoshuv Building Fund............. 2,125(7) * 2,125(7) 0 --
Isaac Weiss........................... 4,250(7) * 4,250(7) 0 --
Huberfeld Bodner Family Foundation.... 340,000(7) 1.0% 340,000(7) 0 --
Millenco, L.P......................... 151,300(7) * 151,300(7) 0 --
Connie Lerner......................... 17,000(7) * 17,000(7) 0 --
Philip Huberfeld...................... 17,000(7) * 17,000(7) 0 --
Rita Folger........................... 17,000(7) * 17,000(7) 0 --
Harry Adler........................... 17,000(7) * 17,000(7) 0 --
Murray Huberfeld/David Bodner
Partnership....................... 55,250(7) * 55,250(7) 0 --
DBI, L.L.C............................ 478,844(8) 1.2% 478,844(8) 0 --
Derek Scruggs......................... 104,862(8) * 104,862(8) 0 --
Illinois Development Finance.......... 56,476(8) * 56,476(8) 0 --
Authority..........................
John Stafford......................... 21,611(8) * 21,611(8) 0 --
Anthony O. Brown...................... 21,938(8) * 21,938(8) 0 --
Marshall Toplansky.................... 12,463(8) * 12,463(8) 0 --
Scott Musser.......................... 3,806(8) * 3,806(8) 0 --
Silicon Valley Bank................... 25,564(9) * 25,564(9) 0 --
</TABLE>
- ---------------------
* less than 1%
(1) This table is based upon information supplied to us by the Selling
Securityholders.
(2) Assumes the sale of all of the Resale Shares.
(3) Applicable percentage of ownership is based on 40,322,890 shares of
MessageMedia common stock issued and outstanding on January 20, 1999,
adjusted as required by rules promulgated by the SEC.
(4) Mr. Currie is the Vice President of Product Development of MessageMedia.
(5) Mr. Makare is the Vice President of Engineering of MessageMedia.
(6) Mr. Feld is the Co-Chairman of the Board of MessageMedia. Includes
10,560,349 shares held of record by SOFTBANK Technology Ventures IV,
15,426 shares held of record by SOFTBANK Technology Advisors Fund and
496,308 shares held by Mr. Feld. Mr. Feld is the Managing Director of
SOFTBANK Technology Ventures IV and SOFTBANK Technology Advisors Fund
and disclaims beneficial ownership of the shares held by such entities
except to the extent of his pro rata partnership interest.
(7) Represents warrants exercisable for the same number of shares of
MessageMedia common stock at an exercise price of $1.00 per share.
(8) Includes for (i) DBI, L.L.C., warrants to purchase 171,016 shares of
MessageMedia common stock at an exercise price of $6.00 and 171,016
shares of MessageMedia common stock at $8.00; (ii) Derek Scruggs,
warrants to purchase 37,451 shares of MessageMedia common stock at an
exercise price of $6.00 and 37,451 shares of MessageMedia common stock
at $8.00; (iii) Illinois Development Finance Authority warrants to
purchase 20,170 shares of MessageMedia common stock at an exercise price
of $6.00 and 20,170 shares of
14.
<PAGE> 17
MessageMedia common stock at $8.00; (iv) John Stafford, warrants to
purchase 7,718 shares of MessageMedia common stock at an exercise price
of $6.00 and 7,718 shares of MessageMedia common stock at $8.00; (v)
Anthony O. Brown, warrants to purchase 7,835 shares of MessageMedia
common stock at an exercise price of $6.00 and 7,835 shares of
MessageMedia common stock at $8.00; (vi) Marshall Toplansky warrants to
purchase 4,451 shares of MessageMedia common stock at an exercise price
of $6.00 and 4,451 shares of MessageMedia common stock at $8.00; and
(vii) Scott Musser warrants to purchase 1,359 shares of MessageMedia
common stock at an exercise price of $6.00 and 1,359 shares of
MessageMedia common stock at $8.00.
(9) Represents a warrant exercisable for 25,564 shares of MessageMedia
common stock at an exercise price of $0.39 per share.
PLAN OF DISTRIBUTION
The Resale Shares may be sold from time to time by the Selling
Securityholders 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 Securityholders may offer their Resale Shares in
one or more of the following transactions:
o On any national securities exchange or quotation service on
which the MessageMedia 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 A combination of any of the above transactions.
The Selling Securityholders 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 Securityholders. The Selling Securityholders 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 Exchange Act, any
person engaged in the distribution of the Resale Shares may not simultaneously
engage in market making activities with respect to MessageMedia's 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
Securityholders 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
Exchange Act, which may limit the timing of purchases and sales of shares of
MessageMedia common stock by the Selling Securityholders or any such other
person.
We will make copies of this Prospectus available to the Selling
Securityholders and have informed the Selling Securityholders 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 Securityholders 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 $34,850.00.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of any of the
Resale Shares by the Selling Securityholders. All proceeds from the sale of the
Resale Shares will be for the accounts of the Selling Securityholders.
15.
<PAGE> 18
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Cooley Godward LLP, San Diego, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial statements
included in our Annual Report on Form 10-K, as amended, for the year ended
December 31, 1997, as set forth in their report, which is incorporated
in this prospectus by reference. Our financial statements are incorporated by
reference in reliance on their report, given on their authority as experts in
accounting and auditing.
16.
<PAGE> 19
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by the Registrant in
connection with the sale of the common stock being registered. All the amounts
shown are estimates except for the registration fee.
<TABLE>
<S> <C>
Registration Fee..................... $ 14,850
Legal fees and expenses.............. $ 10,000
Accounting fees and expenses......... $ 10,000
----------
Total...................... $ 34,850
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145(a) of the Delaware General Corporation Law (the "DGCL")
provides in relevant part that "[a] corporation may indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful." With
respect to derivative actions, Section 145(b) of the DGCL provides in relevant
part that "[a] corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor
. . . [by reason of his service in one of the capacities specified in the
preceding sentence] against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expense
which the Court of Chancery and such other court shall deem proper."
Article Ten of the Company's Certificate of Incorporation states that to
the fullest extent permitted by DGCL, no director of the Registrant shall be
personally liable to the Registrant or its stockholders for monetary damages for
breach of fiduciary duty as a director.
Article V of the Registrant's Bylaws provides that the Company may
indemnify each person who is or was a director of the Company to the full extent
permitted by the DGCL. Such Article also provides that the Registrant may, but
is not required to, indemnify its employees and agents (other than directors and
officers) to the extent and in the manner permitted by the DGCL.
The Registrant has entered into an indemnification agreement with each
of its directors and officers and intends to maintain insurance for the benefit
of its directors and officers insuring such persons against certain liabilities,
including liabilities under the securities laws.
II-1.
<PAGE> 20
ITEM 16. EXHIBITS
a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
*3.1 Registrant's Amended and Restated Certificate of
Incorporation.
*3.2 Registrant's Bylaws.
**3.3 Registrant's Certificate of Amendment of Amended and
Restated Certificate of Incorporation.
+5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP.
23.3 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1 Power of Attorney. Reference is made to page II-4.
</TABLE>
- ------------
* Filed as an exhibit to Registrant's Registration Statement on Form S-1
(No. 333-14573) and incorporated herein by reference.
** Filed as an exhibit to Registrant's Current Report Form 8-K, filed on
December 23, 1998, and incorporated herein by reference.
+ To be filed by amendment.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the provisions described in Item 15 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement;
(iii) to include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that clauses (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by
these clauses is contained in periodic reports filed by the Registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the registration
statement;
II-2.
<PAGE> 21
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3.
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on the 21st day of
January 1999.
MESSAGEMEDIA, INC.
By: /S/ Bert C. Klein
--------------------------------------
Bert C. Klein
Vice President of Finance and
Administration and Chief Financial
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Keith S. Kendrick, Bert C. Klein and
Lewis H. Silverberg as their true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign any or
all amendments (including post-effective amendments) to the Registration
Statement and to file the same, with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/S/ Keith S. Kendricku President January 21, 1999
- ---------------------------------
Keith S. Kendrick
/S/ Bert C. Klein Vice President of Finance and January 21, 1999
- ------------------------------------ Administration and Chief
Bert C. Klein Financial Officer
/S/ Lewis H. Silverberg Secretary January 21, 1999
- ---------------------------------
Lewis H. Silverberg
/S/ Bradley A. Feld Co-Chairman of the Board of January 21, 1999
- ------------------------------------ Directors
Bradley A. Feld
/S/ Ronald D. Fisher Co-Chairman of the Board of January 21, 1999
- --------------------------------- Directors
Ronald D. Fisher
/S/ Pamela H. Patsley Director January 21, 1999
- ---------------------------------
Pamela H. Patsley
/S/ Gary E. Rieschel Director January 21, 1999
- ---------------------------------
Gary E. Rieschel
/S/ Lee H. Stein Director January 21, 1999
- ---------------------------------
Lee H. Stein
</TABLE>
II-4.
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
*3.1 Registrant's Amended and Restated Certificate of Incorporation.
*3.2 Registrant's Bylaws.
**3.3 Registrant's Certificate of Amendment of Amended and Restated
Certificate of Incorporation.
+5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP.
23.3 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-4.
</TABLE>
- ------------
* Filed as an exhibit to Registrant's Registration Statement on Form S-1
(No. 333-14573) and incorporated herein by reference.
** Filed as an exhibit to Registrant's Current Report Form 8-K, filed on
December 23, 1998, and incorporated herein by reference.
+ To be filed by amendment.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of MessageMedia, Inc.
(formerly known as First Virtual Holdings Incorporated) for the registration of
7,063,015 shares of its common stock and to the incorporation by reference
therein of our report dated January 16, 1998 (except for the first paragraph of
Note 6 and Note 10, for which the date is March 20, 1998), with respect to the
financial statements included in its Annual Report (Form 10-K), as amended, for
the year ended December 31, 1997, filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
San Diego, California
January 21, 1999
