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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 9, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INTRAWARE, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 68-0389976
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
2000 POWELL STREET, SUITE 140
EMERYVILLE, CA 94608
(925) 253-4500
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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JOHN MOSS
2000 POWELL STREET, SUITE 140
EMERYVILLE, CA 94608
(925) 253-4500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
JOHN DONAHUE, ESQ.
ADAM R. DOLINKO, ESQ.
MICHAEL A. WALKER, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650) 493-9300
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this registration statement becomes effective.
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
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) SECURITY(2) PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.0001 par value per share
shares.................................... 1,414,020 shares $10,340,621.25 $10,340,621.25 $2,729.92
</TABLE>
(1) Shares of Common Stock that may be offered pursuant to this registration
statement consist of shares that may be issuable upon conversion of, or as
dividends on Series A, B and C Preferred Stock and shares that may be issued
upon the exercise of warrants. For purposes of estimating the number of
shares of Common Stock to be included in this registration statement, we
included (i) 671,226 shares, representing 120% of the number of shares of
Common Stock issuable upon conversion in full of Series A Preferred Stock
(excluding accrued and unpaid dividends) at the conversion price of $14.91
per share as of September 6, 2000 plus, (ii) 57,797 shares, representing
120% of the number of shares of Common Stock issuable upon conversion in
full of the Series B Preferred Stock (excluding accrued and unpaid
dividends) at the conversion price of $8.5125 as of September 6, 2000, plus
(iii) 33,641 shares, representing 120% of the number of shares of Common
Stock issuable upon conversion in full of the Series C Preferred Stock
(excluding accrued and unpaid dividends) at the conversion price of $14.625
as of September 6, 2000, plus (iv) 234,984 shares representing 120% of the
number of shares of common stock issuable in lieu of cash dividends payable
on the Preferred Stock, assuming a dividend conversion price of $7.3125 and
assuming all the shares of Preferred Stock were held until maturity, plus
(v) 416,362 shares of common stock, representing 120% of the number of
shares issuable upon exercise of warrants issued to the purchasers of the
preferred stock, plus (vi) shares that may be issuable as the result of a
stock split, stock dividend or similar transaction as provided by Rule 416
of the Securities Act.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 based on a per
share price of $7.3125, the average of the high and low reported sales
prices of the Registrant's common stock on the Nasdaq National Market on
November 6, 2000.
------------------------------
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 WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 9, 2000
INTRAWARE, INC.
1,414,020 Shares
Common Stock
------------------
This prospectus relates to 1,414,020 shares of our common stock which may be
sold from time to time by the selling securityholders identified in this
prospectus. The shares offered by this prospectus are issuable upon conversion
of, or as dividends on, our Series A, B, and C Preferred Stock or upon exercise
of warrants held by the selling security holders. As of November 1, 2000 the
shares of Series A, B and C Preferred Stock were convertible into an aggregate
of 635,553 shares of common stock, excluding accrued and unpaid dividends, and
the warrants were exercisable for 346,968 shares of common stock.
While we may receive proceeds upon the exercise of the warrants, we will not
receive any proceeds from the sale of the shares offered by this prospectus.
Our common stock is quoted on the Nasdaq National Market under the symbol
"ITRA". On November 6, 2000, the last reported sale price for our common stock
on the Nasdaq National Market was $7.3125 per share.
Investment in the securities involves risks. See "Risk Factors" beginning on
page 2 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 NOVEMBER 9, 2000.
<PAGE>
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. The selling
securityholders will not make an offer of the shares of our common stock in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of those documents.
TABLE OF CONTENTS
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THE COMPANY................................................. 1
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS............ 1
RISK FACTORS................................................ 2
USE OF PROCEEDS............................................. 11
DESCRIPTION OF CAPITAL STOCK................................ 11
SELLING SECURITYHOLDERS..................................... 16
PLAN OF DISTRIBUTION........................................ 18
LEGAL MATTERS............................................... 20
EXPERTS..................................................... 20
WHERE YOU CAN FIND MORE INFORMATION......................... 20
</TABLE>
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THE COMPANY
We are a leading provider of information technology management solutions.
Our services allow information technology professionals to manage the business
software life cycle from their web browsers--starting with research and
evaluation, through purchase, training, and deployment, to updates and asset
management. We provide objective technical research; in-depth software analysis;
an extensive selection of software, training, and resources; and a comprehensive
software delivery, deployment, update, and asset management system.
Intraware, Inc. was incorporated in Delaware on August 14, 1996.
Our corporate offices are located at 2000 Powell Street, Suite 140,
Emeryville, California 94608. Our telephone number at that location is
(925) 253-4500.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
In addition to the other information contained in this prospectus, investors
should carefully consider the risk factors disclosed in this prospectus,
including those beginning on page 1, in evaluating an investment in the common
stock issuable upon conversion of and as common stock dividends on the
Series A, Series B and Series C preferred shares and exercise of the related
warrants. This prospectus and the documents incorporated herein by reference
include "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. All statements other than
statements of historical fact are "forward-looking statements" for purposes of
these provisions, including any projections of earnings, revenues or other
financial items, any statements of the plans and objectives of management for
future operations, any statements concerning proposed new products or services,
any statements regarding future economic conditions or performance, and any
statement of assumptions underlying any of the foregoing. In some cases,
forward-looking statements can be identified by the use of terminology such as
"may", "will", "expects", "plans", "anticipates", "estimates", "potential", or
"continue" or the negative thereof or other comparable terminology. Although
Intraware believes that the expectations reflected in the forward-looking
statements contained herein and in such incorporated documents are reasonable,
there can be no assurance that such expectations or any of the forward-looking
statements will prove to be correct, and actual results could differ materially
from those projected or assumed in the forward-looking statements. Intraware's
future financial condition and results of operations, as well as any
forward-looking statements, are subject to inherent risks and uncertainties,
including but not limited to the risk factors set forth below and for the
reasons described elsewhere in this prospectus. All forward-looking statements
and reasons why results may differ included in this prospectus are made as of
the date hereof, and Intraware assumes no obligation to update any such
forward-looking statement or reason why actual results might differ.
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING A
DECISION TO INVEST IN INTRAWARE. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE
NOT THE ONLY ONES FACING INTRAWARE. ADDITIONAL RISKS AND UNCERTAINTIES NOT
PRESENTLY KNOWN TO US OR THAT WE DO NOT CURRENTLY BELIEVE ARE IMPORTANT TO AN
INVESTOR MAY ALSO HARM OUR BUSINESS OPERATIONS. IF ANY OF THE EVENTS,
CONTINGENCIES, CIRCUMSTANCES OR CONDITIONS DESCRIBED IN THE FOLLOWING RISKS
ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR OUR RESULTS OF OPERATIONS
COULD BE SERIOUSLY HARMED. IF THAT OCCURS, THE TRADING PRICE OF INTRAWARE COMMON
STOCK COULD DECLINE, AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT.
WE HAVE NEGATIVE CASH FLOW AND MAY NOT HAVE SUFFICIENT CASH TO EFFECTIVELY
MANAGE OUR WORKING CAPITAL REQUIREMENTS AND FUND OUR OPERATIONS FOR THE PERIOD
REQUIRED TO ACHIEVE PROFITABILITY.
We have limited cash and credit available, and may be unable to raise
additional financing or establish additional lines of credit. As of August 31,
2000, we had approximately $22.2 million of cash and cash equivalents and
$7.0 million in short-term marketable securities, before our repayment of
$7.9 million to our preferred stockholders in September 2000. As of August 31,
2000, our available credit under existing lines of credit was $1.7 million.
There can be no assurance that we will be able to achieve the revenue and gross
margin objectives necessary to achieve profitability without either obtaining
additional financing or reducing our expenses or expense growth. Any substantial
reduction in our expenses or expense growth could impair our future revenue
growth by cutting product development, sales, marketing and/or support
resources. Any such impairment of revenue growth could slow or prevent our
transition to profitability and have a material adverse effect on our business.
WE HAVE A HISTORY OF LOSSES, WE EXPECT FUTURE LOSSES AND WE MAY NOT EVER BECOME
PROFITABLE.
We have not achieved profitability, expect to incur net losses in the
foreseeable future and may not ever become profitable in the future. We incurred
net losses of $28.0 million for the year ended February 29, 2000, $15.0 million
for the year ended February, 28, 1999, $6.0 million for the year ended
February 28, 1998 and $1.5 million for the period from August 14, 1996 through
February 28, 1997. In addition, we incurred net losses of $11.6 million and
$23.4 million for the three months and six months ended August 31, 2000,
respectively. As of August 31, 2000, we had an accumulated deficit of
approximately $72.8 million. Net losses have increased for each of our quarters
since inception and we cannot assure you this trend will not continue. We expect
to continue to increase our sales and marketing, product development and
administrative expenses. As a result we will need to generate significant
additional revenues to achieve and maintain profitability.
We were founded in August 1996, and are an early stage company. We have a
limited operating history that makes it difficult to forecast our future
operating results. Although our revenues have grown in most of our recent
quarters, we cannot be certain that such growth will continue or that we will
achieve sufficient revenues for profitability. If we do achieve profitability in
any period, we cannot be certain of continued or increased profitability on a
quarterly or annual basis.
WE ARE SUBSTANTIALLY DEPENDENT ON THE SUN/NETSCAPE ALLIANCE AND THE TERMINATION
OF THIS RELATIONSHIP WOULD HAVE A SUBSTANTIAL, IMMEDIATE ADVERSE EFFECT ON OUR
BUSINESS.
For the three months ended August 31, 2000, we generated approximately 84.3%
of our software product revenues from the sale of the Sun/Netscape Alliance's
iPlanet software, and approximately 37.7% of our online service revenues from
the outsourcing of INTRAWARE DELIVERY services to the Sun/Netscape Alliance. As
a result, transactions with the Sun/Netscape Alliance and the sale of iPlanet
products accounted for approximately 67.5% of our total net revenues in the
three months ended August 31, 2000. Our agreement for resale of iPlanet products
will expire on December 31, 2000, and we cannot assure you that the term of that
agreement will be extended or that a replacement
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agreement will be executed. If the existing agreement for resale of iPlanet
products were not extended or replaced, or the Sun/Netscape Alliance otherwise
limited or discontinued selling its software through us, our business would be
materially adversely affected.
We provide online software update and license management services to
Sun/Netscape Alliance customers through our INTRAWARE DELIVERY service under an
agreement that expires on June 30, 2001. We cannot assure you that this
agreement will be extended. Substantially all of our INTRAWARE DELIVERY revenues
to date have been generated through this Sun contract, and our failure to extend
this contract at the end of its current term could have a material adverse
effect on our INTRAWARE DELIVERY revenues and on our business as a whole.
If Sun and/or Netscape chose to offer its own electronic software delivery,
tracking, maintenance or other services, which it is permitted to do under the
current agreements, it would have a substantial and immediate adverse effect on
our business, results of operations and financial condition.
THE LOSS OF ONE OR MORE OF OUR KEY CUSTOMERS COULD ADVERSELY AFFECT OUR
REVENUES.
We believe that a substantial amount of revenue from software product sales
in any given future period may come from a relatively small number of customers.
If one or more major customers were to substantially cut back software purchases
or stop using our products or services, our operating results could be
materially adversely affected. We do not have long-term contractual
relationships with most of these customers because they purchase software on a
transaction by transaction basis. As a result, we cannot assure you that any of
our customers who purchase software through us will purchase from us in future
periods.
OUR QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS BECAUSE
OF MANY FACTORS AND ANY OF THESE COULD ADVERSELY AFFECT OUR STOCK PRICE.
We believe that quarter-to-quarter comparisons of our operating results are
not a good indication of our future performance. It is likely that in some
future quarter our operating results will be below the expectations of public
market analysts and investors and as a result, the price of our common stock
will fall. Our operating results have varied widely in the past, and we expect
that they will continue to vary significantly from quarter to quarter due to a
number of risk factors, including:
- demand for our online services and technology and the products of our
software vendors;
- the timing of sales of our online services and technology and the products
of our software vendors;
- aggressive cost management in the sales, marketing, product development
and support areas;
- loss of strategic relationships with major software vendors;
- the mix of our proprietary online services vs. software products sold;
- delays in introducing our online services or our vendors' software
products according to planned release schedules;
- our ability to retain existing customers and attract new customers;
- changes in our pricing policies or the pricing policies of our software
vendors;
- changes in the growth rate of Internet usage and acceptance by customers
of electronic software delivery for large software purchases, particularly
for international customers;
- technical difficulties, system failures or Internet downtime;
- the mix of domestic and international sales;
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- certain government regulations;
- our ability to upgrade and develop our information technology systems and
infrastructure;
- costs related to acquisitions of technology or businesses; and
- general economic conditions as well as those specific to the Internet and
related industries.
While we have recently experienced increasing gross margins on revenues
derived from software product sales, there can be no assurance that such
increases will continue. Also, as we have shifted a larger proportion of our
sales and marketing resources toward our more recently introduced online
services, such as INTRAWARE DEPLOYMENT, INTRAWARE E-LEARNING and INTRAWARE ASSET
MANAGEMENT, we have experienced and may continue to experience one or more
quarters of reduced software product sales. Any shortfall in our revenues would
directly adversely affect our operating income or loss, and these fluctuations
could affect the market price of our common stock.
We plan to significantly increase our operating expenses to expand our sales
and marketing operations, broaden our customer support capabilities, and fund
greater levels of product development. Our operating expenses, which include
sales and marketing, product development and general and administrative
expenses, are based on our expectations of future revenues and are relatively
fixed in the short term. If revenues fall below our expectations and we are not
able to quickly reduce our spending in response, our operating results would be
adversely affected.
OUR NEWLY INTRODUCED ONLINE SERVICES AND TECHNOLOGY MAY NOT BE ABLE TO GENERATE
ANTICIPATED REVENUES.
We have only recently started selling a number of online services such as
INTRAWARE DEPLOYMENT, INTRAWARE VOLUME LICENSING, INTRAWARE E-LEARNING and
INTRAWARE ASSET MANAGEMENT. We cannot assure you that these online services will
result in additional customers and customer loyalty, significant additional
revenues or improved operating margins in future periods. Additionally, we
cannot assure you that software vendors will continue to find it strategically
or economically justifiable for us to deliver the INTRAWARE DELIVERY service to
their customers.
We had no significant online services revenues until the quarter ended
November 30, 1998, and for the three months ended August 31, 2000, revenues from
online services and technology totaled only $6.5 million, which constituted
19.9% of our total revenues for that period. These online services are not only
important to improving our operating results but also to continuing to attract
and retain both our software vendor and corporate information technology
professional customers, and in differentiating our online service offerings from
those of our competitors.
OUR INDUSTRY IS HIGHLY COMPETITIVE AND WE CANNOT ASSURE YOU THAT WE WILL BE ABLE
TO EFFECTIVELY COMPETE.
The market for selling software products and related online services is
highly competitive. We expect competition to intensify as current competitors
expand their product offerings and new competitors enter the market. We have
recently experienced, and expect to continue to experience, price competition on
our software sales, particularly on large sales transactions. We cannot assure
you that we will be able to compete successfully against current or future
competitors, or that competitive pressures faced by us will not adversely affect
our business and results of operations.
Our current competitors include a number of companies offering one or more
solutions for the researching, evaluation, purchase, deployment, maintenance and
management of, and training on, business software. Because there are relatively
low barriers to entry in the software and Internet services markets, we expect
additional competition from other established and emerging companies.
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Increased competition is likely to result in price reductions, reduced gross
margins and loss of market share, any of which could have a significant adverse
effect on our business and results of operations.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources, better name recognition, and a larger installed base of customers
than we do. Many of our competitors may also have well-established relationships
with our existing and prospective customers.
Our current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase the
ability of their products to address customer needs and compete with our
products. We also expect that the competition will increase as a result of
software industry consolidations. As a result, we may not be able to effectively
compete for customers.
WE ARE DEPENDENT ON MARKET ACCEPTANCE OF ELECTRONIC SOFTWARE DELIVERY, AND IF IT
DOES NOT ACHIEVE WIDESPREAD ACCEPTANCE, OUR BUSINESS WILL BE ADVERSELY AFFECTED.
Our success will depend in large part on acceptance by information
technology professionals of electronic software delivery as a method of buying
business software. If electronic software delivery does not achieve widespread
market acceptance, our business will be adversely affected. Electronic software
delivery is a relatively new method of selling software products and the growth
and market acceptance of electronic software delivery is highly uncertain and
subject to a number of risk factors. These factors include:
- the potential for state and local authorities to levy taxes on Internet
transactions;
- the availability of sufficient network bandwidth to enable purchasers to
rapidly download software;
- the number of software packages that are available for purchase through
electronic software delivery as compared to those available through
traditional delivery methods;
- the level of customer confidence in the process of downloading software;
and
- the relative ease of such a process and concerns about transaction
security.
Even if electronic software delivery achieves widespread acceptance, we
cannot be sure that we will overcome the substantial technical challenges
associated with electronically delivering software reliably and consistently on
a long-term basis. Furthermore, the proliferation of software viruses poses a
risk to market acceptance of electronic software delivery. Any well-publicized
transmission of a computer virus by us or another company using electronic
software delivery could deter information technology professionals from
utilizing electronic software delivery technology and our business could be
adversely affected.
CONTINUED ADOPTION OF THE INTERNET AS A METHOD OF CONDUCTING BUSINESS IS
NECESSARY FOR OUR FUTURE GROWTH.
The widespread acceptance and adoption of the Internet by traditional
businesses for conducting business and exchanging information is likely only in
the event that the Internet provides these businesses with greater efficiencies
and improvements. The failure of the Internet to continue to develop as a
commercial or business medium would adversely affect our business.
FAILURE TO EXPAND INTERNET INFRASTRUCTURE COULD LIMIT OUR FUTURE GROWTH.
The recent growth in Internet traffic has caused frequent periods of
decreased performance, and if Internet usage continues to grow rapidly, its
infrastructure may not be able to support these demands and its performance and
reliability may decline. If outages or delays on the Internet occur frequently
or
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increase in frequency, overall web usage including usage of our web site in
particular could grow more slowly or decline. Our ability to increase the speed
and scope of our services to customers is ultimately limited by and dependent
upon the speed and reliability of both the Internet and our customers' internal
networks. Consequently, the emergence and growth of the market for our services
is dependent on improvements being made to the entire Internet as well as to our
individual customers' networking infrastructures to alleviate overloading and
congestion.
INCREASED SECURITY RISKS OF ONLINE COMMERCE MAY DETER FUTURE USE OF OUR
SERVICES.
Concerns over the security of transactions conducted on the Internet and the
privacy of users may also inhibit the growth of the Internet and other online
services generally, and online commerce in particular. Our failure to prevent
security breaches could significantly harm our business and results of
operations. We cannot be certain that advances in computer capabilities, new
discoveries in the field of cryptography, or other developments will not result
in a compromise or breach of the algorithms we use to protect our customers'
transaction data or our software vendors' products. Anyone who is able to
circumvent our security measures could misappropriate proprietary information or
cause interruptions in our operations. We may be required to incur significant
costs to protect against security breaches or to alleviate problems caused by
breaches. Any well-publicized compromise of security could deter people from
using the web to conduct transactions that involve transmitting confidential
information or downloading sensitive materials.
WE HAVE EXPERIENCED SIGNIFICANT GROWTH IN OUR BUSINESS IN RECENT PERIODS AND OUR
ABILITY TO MANAGE THIS GROWTH WILL AFFECT OUR BUSINESS.
Our ability to successfully offer products and services and implement our
business plan in a rapidly evolving market requires an effective planning and
management process. We have increased, and plan to continue to increase, the
scope of our operations. These expansion efforts could be expensive and put a
strain on management, and if we do not manage growth properly, it could
adversely affect our business. Our headcount has grown and will continue to grow
substantially. In particular, we will need to expand our technology
infrastructure, which will include making certain key employee hires in product
development. These hires historically have been difficult and we can not assure
you that we will be able to successfully attract and retain a sufficient number
of qualified personnel.
WE NEED TO EXPAND OUR MANAGEMENT SYSTEMS AND CONTROLS IN ORDER TO SUPPORT OUR
ANTICIPATED GROWTH.
Our growth has placed, and our anticipated future growth will continue to
place, a significant strain on our management systems and controls. We cannot
assure you that we will be able to adequately expand our technology resources to
support our anticipated growth. We expect that we will need to continue to
improve our financial and managerial controls and reporting systems and
procedures. Furthermore, we expect that we will be required to manage multiple
relationships with various software vendors, customers and other third parties.
WE MAY NOT BE ABLE TO FUND THE HIRING AND RETENTION OF SALES, MARKETING AND
SUPPORT PERSONNEL THAT WE NEED TO SUCCEED.
If we lack the funds to hire and retain sufficient numbers of sales,
marketing and support personnel, our business and results of operations would be
adversely affected. Competition for qualified sales and marketing and support
personnel is intense, and we might not be able to hire and retain sufficient
numbers of qualified sales and marketing and support personnel. We need to
substantially expand our sales operations and marketing efforts, both
domestically and internationally, in order to increase market awareness and
sales of the products and services we offer. These products and services require
a sophisticated sales effort targeted at several people within the information
technology departments of our prospective customers. If we are unable to fund
the hiring and retention of a
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sufficient number of qualified sales and marketing personnel, our business and
growth prospects will be materially adversely affected.
We currently have a small customer service and support organization and will
need to increase our staff to support new customers and the expanding needs of
existing customers. Hiring customer service and support personnel is very
competitive in our industry due to the limited number of people available with
the necessary technical skills and understanding of the Internet. Because of our
financial constraints and the limited availability of such personnel, we cannot
assure you that we will be able to hire and retain sufficient numbers of
qualified customer service and support personnel.
OUR EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS
AND THESE OFFICERS AND KEY PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE.
Our future success depends upon the continued service of our executive
officers and other key technology, sales, marketing and support personnel and
most of our officers or key employees are not bound by an employment agreement
for any specific term. If we lost the services of one or more of our key
employees, or if one or more of our executive officers or employees decided to
join a competitor or otherwise compete directly or indirectly with us, this
could have a significant adverse effect on our business. In particular, the
services of Peter Jackson, Chief Executive Officer, Paul Martinelli, Chief
Technology Officer, Mark Long, Executive Vice President of Strategic
Development, Don Freed, Executive Vice President and Chief Financial Officer,
and Frost Prioleau, Executive Vice President for Products and Services, would be
difficult to replace.
OUR ACQUISITIONS COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS, DILUTE
STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATING RESULTS.
We currently intend to make additional investments in complementary
companies, services and technologies. These acquisitions and investments could
disrupt our ongoing business, distract our management and employees and increase
our expenses. If we acquire another company, we could face difficulties in
assimilating that company's personnel and operations. In addition, the key
personnel of the acquired company may decide not to work for us. Acquisitions of
additional services or technologies also involve risks of incompatibility and
the need for integration into our existing services and marketing, sales and
support efforts. We may be required to spend additional time or money on
integration which would otherwise be spent on developing our business and
services. If we do not integrate our technology effectively or if management and
technical staff spend too much time on integration issues, it could harm our
business, financial condition and operating results. Also, if we finance the
acquisitions by incurring debt or issuing equity securities, this could dilute
our existing stockholders. Any amortization of goodwill or other assets, or
other charges resulting from the costs of such acquisitions, could adversely
affect our operating results.
WE FACE RISKS OF CLAIMS FROM THIRD PARTIES FOR INTELLECTUAL PROPERTY
INFRINGEMENT THAT COULD ADVERSELY AFFECT OUR BUSINESS.
Our services operate in part by making software products and other content
available to our customers. This creates the potential for claims to be made
against us, either directly or through contractual indemnification provisions
with vendors. Any claims could result in costly litigation and be time-consuming
to defend, divert management's attention and resources, cause delays in
releasing new or upgrading existing services or require us to enter into royalty
or licensing agreements. These claims could be made for defamation, negligence,
patent, copyright or trademark infringement, personal injury, invasion of
privacy or other legal theories based on the nature, content or copying of these
materials.
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Litigation regarding intellectual property rights is common in the Internet
and software industries. We expect that Internet technologies and software
products and services may be increasingly subject to third-party infringement
claims as the number of competitors in our industry segment grows and the
functionality of products in different industry segments overlaps. There can be
no assurance that our services do not infringe on the intellectual property
rights of third parties.
In addition, we may be involved in litigation involving the software of
third party vendors that we electronically distribute. Royalty or licensing
agreements, if required, may not be available on acceptable terms, if at all. A
successful claim of infringement against us and our failure or inability to
license the infringed or similar technology could adversely affect our business.
Although we carry general liability insurance, our insurance may not cover all
potential claims or may not be adequate to protect us from all liability that
may be imposed.
We take steps to verify that our INTRAWARE DEPLOYMENT customers that
download third-party software from our web site are entitled to deploy and use
that software. However, there can be no assurance that this verification
procedure will help us defend against claims by, or protect us against liability
to, the owners of copyrights in that third-party software.
Our success and ability to compete are substantially dependent upon our
internally developed technology, which we protect through a combination of
patent, copyright, trade secret and trademark law. We are aware that certain
other companies are using or may have plans to use the name "Intraware" as a
company name or as a trademark or service mark. While we have received no notice
of any claims of trademark infringement from any of those companies, we cannot
assure you that certain of these companies may not claim superior rights to
"Intraware" or to other marks we use. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy or otherwise obtain
and use our services or technology and we cannot be certain that the steps we
have taken will prevent misappropriation of our technology.
WE MAY BE REQUIRED TO REDEEM OR PAY SUBSTANTIAL PENALTIES TO THE HOLDERS OF THE
SERIES A, B AND C PREFERRED STOCK AND RELATED WARRANTS IF SPECIFIC EVENTS OCCUR.
Under our agreements with the holders of the Series A, B and C preferred
stock and the related warrants, we are required to redeem or pay substantial
penalties to these holders under specific circumstances, including, among
others:
- nonpayment of dividends on the Series A, B and C preferred shares in a
timely manner;
- failure to deliver shares of our common stock upon conversion of the
Series A, B and C preferred shares or upon exercise of the related
warrants after a proper conversion or exercise;
- nonpayment of the redemption price of the Series A, B and C preferred
shares if we elect to redeem these shares at maturity;
- failure to comply with financial covenants regarding cash balances and
cash burn rates;
- failure to have this registration statement effective by January 10, 2001,
or after being declared effective, the unavailability of this registration
statement to cover the resale of the shares of common stock issuable upon
conversion of the Series A, B and C preferred shares and exercise of the
related warrants (without regard to any limitations on conversions or
exercises);
- suspension or delisting from trading on the Nasdaq National Market;
- a change of control; or
- a material breach of our agreements with the selling securityholders.
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POTENTIAL YEAR 2000 PROBLEMS WITH OUR INTERNAL OPERATING SYSTEMS OR THE SOFTWARE
PRODUCTS THAT WE RESELL COULD ADVERSELY AFFECT OUR BUSINESS.
Although to date we have not experienced any material problems attributable
to the year 2000 problem with respect to our software products and internal
systems, it is possible that software we distribute could contain undetected
errors or defects associated with year 2000 date functions that may result in
material costs or liabilities to us in the future. Moreover, the software we
distribute interacts directly and indirectly with a large number of third-party
hardware and software systems, each of which may contain or introduce undetected
errors or defects. We are unable to predict to what extent our business may be
affected if the software we distribute or the systems that operate in
conjunction with that software experience a material year 2000 related failure.
Any year 2000 defect in the software we distribute, or the software and hardware
systems with which it operates, as well as any year 2000 errors caused by older
non-current products that were not upgraded by our customers, could expose us to
litigation that could require us to incur significant costs in defending the
litigation or expose us to the risk of significant damages. The risks of this
litigation may be particularly acute due to the mission-critical applications
for which many of the products we distribute are used.
OUR MARKET MAY UNDERGO RAPID TECHNOLOGICAL CHANGE AND OUR FUTURE SUCCESS WILL
DEPEND ON OUR ABILITY TO MEET THE CHANGING NEEDS OF OUR INDUSTRY.
Our market is characterized by rapidly changing technology, evolving
industry standards and frequent new product announcements. To be successful, we
must adapt to our rapidly changing market by continually improving the
performance, features and reliability of our services. We could incur
substantial costs to modify our services or infrastructure in order to adapt to
these changes. Our business could be adversely affected if we incur significant
costs without adequate results, or find ourselves unable to adapt rapidly to
these changes.
A DISASTER COULD SEVERELY DAMAGE OUR OPERATIONS.
We do not have a complete disaster recovery plan in effect and do not have
fully redundant systems for our service at an alternate site. A disaster could
severely damage our business and results of operations because our service could
be interrupted for an indeterminate length of time. Our operations depend upon
our ability to maintain and protect our computer systems, all of which are
located at our facility in Orinda, California and at an offsite location managed
by a third party in Santa Clara, California. Orinda and Santa Clara exist on or
near known earthquake fault zones. Although the outside facility, which hosts
our primary web and database servers, is designed to be fault tolerant, the
system is vulnerable to damage from fire, floods, earthquakes, power loss,
telecommunications failures, and similar events. Although we maintain insurance
against fires, floods, earthquakes and general business interruptions, there can
be no assurance that the amount of coverage will be adequate in any particular
case.
CHANGES IN THE LAWS AND OTHER GOVERNMENT REGULATIONS MAY ADVERSELY AFFECT OUR
BUSINESS.
If State and local tax laws are changed to impose sales tax on sales of
electronically delivered software our business will be materially and adversely
affected.
More generally, the law governing Internet transactions remains largely
unsettled, even in areas where there has been some legislative action. The
adoption or modification of laws or regulations relating to the Internet could
adversely affect our business by increasing our costs and administrative
burdens. It may take years to determine whether and how existing laws such as
those governing intellectual property, privacy, libel and taxation apply to the
Internet.
Laws and regulations directly applicable to communications or commerce over
the Internet are becoming more prevalent. It appears that additional laws and
regulations regarding protection of
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privacy on the Internet will be adopted at the state and federal levels in the
United States. The European Union has enacted its own data protection and
privacy directive, which required all 15 European Union Member States to
implement laws relating to the processing and transmission of personal data by
October 24, 1998. We must comply with these new regulations in both Europe and
the United States, as well as any other regulations adopted by other countries
where we may do business. We must also comply with U.S. export controls on
software generally and encryption technology in particular. The growth and
development of the market for online commerce may prompt calls for more
stringent consumer protection laws, both in the United States and abroad.
Compliance with any newly adopted laws may prove difficult for us and may
negatively affect our business.
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USE OF PROCEEDS
We will not receive any proceeds from the sale by the selling
securityholders of common stock, although we may receive up to approximately
$4.4 million upon exercise of the warrants.
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 250,000,000 shares of common stock, $0.0001 par
value, and 10,000,000 shares of preferred stock, $0.0001 par value. The
following description of our capital stock does not purport to be complete and
is subject to and qualified in its entirety by our amended and restated
certificate of incorporation and amended and restated bylaws and by the
provisions of applicable Delaware law, particularly the certificate of
designations, preferences and rights relating to the Series A preferred,
Series B preferred and Series C preferred shares.
COMMON STOCK
As of November 1, 2000, there were 27,514,500 shares of common stock
outstanding, held of record by approximately 498 stockholders. In addition, as
of November 1, 2000, there were shares of common stock subject to
outstanding options and warrants exercisable for 346,968 shares of common stock.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, holders of common stock are
entitled to receive ratably such dividends as may be declared by the board of
directors out of funds legally available for that purpose. In the event of our
liquidation, dissolution or winding up, the holders of common stock are entitled
to share ratably in all assets remaining after payment of liabilities and the
liquidation preference of any outstanding preferred stock. The common stock has
no preemptive or conversion rights, other subscription rights, or redemption or
sinking fund provisions. All outstanding shares of common stock are fully paid
and non-assessable.
PREFERRED STOCK
GENERAL
On June 30, 2000, we issued 834 shares of Series A preferred stock, 833
shares of Series B preferred stock and 833 shares of Series C preferred stock to
certain institutional investors in return for $25,000,000. On the same date, we
also issued to those investors warrants to purchase a number of shares of our
common stock that was indeterminable at that date. In issuing the preferred
stock and the warrants, we relied on the exemption provided by Regulation D
promulgated number the Securities Act based on the limited number of investors
and on representations of such investors. Pursuant to the terms of the preferred
stock, we subsequently redeemed 792 shares of each of the Series B and Series C
preferred stock for a total of approximately $16.1 million. After that
redemption, the number of common shares issuable upon conversion of the
Series A, B and C Preferred Stock as of November 1, 2000 was 635,554 (excluding
accrued and unpaid dividends and without regard to any limitations on
conversions). The warrants are currently exercisable for 346,968 shares (without
regard to any limitations on exercises).
DIVIDENDS
The Series A, Series B and Series C preferred shares carry a dividend rate
of 9% per annum, payable on the first day of each calendar quarter beginning on
October 1, 2000 and quarterly thereafter or upon conversion or redemption. At
our option, dividends may be paid in cash or shares of common stock, subject to
satisfaction of the conditions described below. If we choose to pay dividends in
shares of our common stock, the number of shares to be issued in payment of a
dividend on the Series A,
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Series B and Series C preferred shares will be equal to the accrued dividends
divided by the dividend conversion price, which is equal to the average of the
closing bid price of our common stock on each of the ten consecutive trading
days preceding the dividend date.
We will not have the right to pay dividends in shares of our common stock if
a triggering event, as described below, has occurred and is continuing.
Triggering events include the following:
- the failure of this registration statement covering the resale of the
shares of common stock underlying the Series A, Series B and Series C
preferred shares and related warrants to be declared effective by the SEC
on or prior to January 10, 2001;
- if while this registration statement is required to be maintained
effective, the effectiveness of this registration statement lapses for any
reason, including, without limitation, the issuance of a stop order, or is
unavailable to a holder of the Series A, Series B and Series C preferred
shares for resale of all of the shares issuable upon conversion of the
preferred shares and exercise of the warrants, in accordance with the
terms of the related registration rights agreement and such lapse or
unavailability continues for a period of 5 consecutive trading days or for
more than an aggregate of 20 trading days in any 365-day period, except
for permitted grace periods;
- the suspension or delisting from trading of our common stock on the Nasdaq
National Market, the New York Stock Exchange or the American Stock
Exchange for a period of five consecutive trading days or for more than 10
trading days in any 365-day period;
- our notice to any holder of Series A, Series B and Series C preferred
shares of our intent not to comply with a request for conversion tendered
in accordance with the terms of the certificate of designations relating
to the Series A, Series B and Series C preferred shares;
- our failure to issue shares of common stock upon conversion prior to the
10th business day after the required date of delivery;
- our breach of all or any part of some covenants set forth in the
Securities Purchase Agreement;
- our breach of any representation, warranty, covenant or other term or
condition of the documents governing the issuance of the Series A,
Series B and Series C preferred shares and the related registration rights
agreement unless the breach would not have a material adverse effect or is
cured within 10 business days after it occurs.
MATURITY DATE
The Series A, Series B and Series C preferred shares mature on June 30,
2002, subject to extension in some circumstances, at which time the Series A,
Series B and Series C preferred shares must be redeemed or converted at our
option. If we elect to redeem any Series A, Series B and Series C preferred
shares outstanding on June 30, 2002, the amount required to be paid will be
equal to the liquidation preference of the Series A, Series B and Series C
preferred shares, which equals the price originally paid for such shares plus
accrued and unpaid dividends. If we elect to convert any Series A, Series B and
Series C preferred shares outstanding on June 30, 2002, we will be required to
issue shares in an amount determined as described below.
CONVERSION
In general, the selling securityholders will have the right to convert the
Series A, Series B and Series C preferred shares into shares of our common
stock, subject to a few limitations described below. The number of shares of
common stock to be issued upon conversion of a Series A, Series B and Series C
preferred share is determined by dividing the sum of $10,000 plus accrued and
unpaid dividends by the applicable conversion price as described below.
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The conversion prices for the three Series of preferred stock were set
during three 20-trading day pricing periods, which occurred between July 5 and
September 5, 2000. The transaction was structured so that, if at any time during
a pricing period the average closing bid price of our common stock fell below
$12.50 per share, that pricing period would terminate. Upon termination of a
pricing period, we would be required to redeem approximately 41.7 shares of the
preferred stock being priced during that period, and repay approximately
$420,000 to the preferred stockholders, for each trading day that the pricing
period had been shortened due to the early termination. The conversion price for
each respective Series of preferred stock may be adjusted downward, and the
number of shares of common stock into which that preferred stock is convertible
may increase proportionally, to the extent the average closing bid price of our
common stock during the 20 trading days before June 30, 2002 is lower than the
current conversion price for each respective Series of preferred stock, and in
certain other circumstances which are described more fully in the Form 8-K that
we filed with the SEC on July 3, 2000.
In accordance with the pricing structure noted above, we redeemed
substantially all of the Series B and Series C preferred stock and repaid in the
aggregate approximately $16.1 million to the preferred stockholders in two
stages on August 17, 2000 and September 5, 2000.
At November 1, 2000, the conversion price of the Series A preferred stock
into common stock was $14.91 per share, which would allow that Series of
outstanding preferred stock to be converted into 559,355 shares of common stock
(excluding accrued and unpaid dividends and without any limitations on
conversions). The conversion price of the Series B preferred stock into common
stock was $8.5125 per share at November 1, 2000, which would allow the
outstanding shares of that series of preferred stock to be converted into 48,164
shares of common stock (excluding accrued and unpaid dividends and without
regard to any limitations on conversions).
As of November 1, 2000, the conversion price of the Series C preferred stock
into common stock was $14.625 per share, which would allow the outstanding
shares of that series of preferred stock to be converted into 28,034 shares of
common stock (excluding accrued and unpaid dividends and without regard to any
limitations on conversions).
No holder may convert or exercise, and we may not effect a conversion for, a
number of Series A, Series B and Series C preferred shares or related warrants
that would cause the holder and the holder's affiliates to have acquired,
through that conversion and during the prior 60 days, a number of shares of our
common stock that, when added to the number of shares of our common stock held
by them at the beginning of that 60-day period, would exceed 10% of our then
total outstanding common stock. Unconverted Series A, Series B and Series C
preferred shares and unexercised warrants held by that holder and the holder's
affiliates are not counted in making that determination.
REDEMPTION
If a triggering event as described above in our discussion of dividends
occurs, the holders of the Series A, Series B and Series C preferred shares will
have the right to require us to redeem all or a portion of any outstanding
Series A, Series B and Series C preferred shares for cash. The redemption price
in such a case is the greater of:
- 120% of the price paid for the Series A, Series B and Series C preferred
shares plus accrued dividends; or
- the product of the number of shares of common stock into which the
Series A, Series B and Series C preferred stock is convertible multiplied
by the closing sale price of our common stock on the day immediately
before the triggering event occurs.
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REDEMPTION OR CONVERSION UPON CHANGE OF CONTROL
Subject to our right described in the next paragraph to require conversion
upon a merger transaction, the holders of the Series A, Series B and Series C
preferred shares have the right to require that all or any of the outstanding
Series A, Series B and Series C preferred shares be redeemed upon a change of
control. The redemption price in such a case is the greater of:
- 125% of the price paid for the Series A, Series B and Series C preferred
shares plus accrued dividends; or
- the product of the number of shares of common stock into which the
Series A, Series B and Series C preferred stock is convertible immediately
prior to the public announcement of the change of control multiplied by
the closing sale price of our common stock on the day of delivery of the
change in control redemption notice by the holder.
At any time after the date we publicly announce a merger transaction, we
have the right to require conversion of all of the outstanding Series A,
Series B and Series C preferred stock if the following conditions, among others,
are met:
- we have timely delivered shares of common stock upon conversion of the
Series A, Series B and Series C preferred shares and exercise of the
related warrants;
- a registration statement relating to the Series A, Series B and Series C
preferred shares and warrants has been effective for at least 20 days
prior to the date we give notice of the required conversion covering the
resale of that number of shares required to be registered pursuant to our
registration rights agreement with the preferred stockholders;
- the common stock has been listed on the Nasdaq National Market or The New
York Stock Exchange, Inc. during the period from June 30, 2000 to the
conversion date and suspension or delisting is not threatened;
- from June 30, 2000 through the date of a conversion at our election, there
has not occurred a triggering event or an event that without being cured
would constitute a triggering event;
- we have not failed to make any payments due to the holders of the
Series A, Series B and Series C preferred shares later than 5 business
days after such payment was due;
- on each of the 10 days prior the notice of merger conversion the closing
bid price of the common stock is at least 180% of the conversion price in
effect;
- the acquiror entity is listed on the Nasdaq National Market or The New
York Stock Exchange, Inc. and has a market capitalization of its equity
securities which are being issued of at least $2 billion;
- a public disclosure of such a merger transaction shall be made no sooner
than January 26, 2000;
- on or after January 10, 2001 this registration statement covering the
resale of the shares of common stock underlying the Series A, Series B and
Series C preferred shares and the related warrants is effective; and
- we give notice of the required conversion at least 30 trading days prior
to the closing of the merger.
LIQUIDATION PREFERENCE
In the event of our liquidation, the holders of the Series A, Series B and
Series C preferred shares will be entitled to a liquidation preference before
any amounts are paid to the holders of our common stock. The liquidation
preference is equal to the amount originally paid for the Series A, Series B and
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Series C preferred shares, or $10,000 per share, plus accrued and unpaid
dividends on any outstanding Series A, Series B and Series C preferred shares.
VOTING RIGHTS
Other than as required by law, the holders of the Series A, Series B and
Series C preferred shares have no voting rights except that the consent of
holders of at least a majority of the outstanding Series A, Series B and
Series C preferred shares will be required to effect any change in either our
amended and restated certificate of incorporation or certificate of designations
that would change any of the rights of the Series A, Series B and Series C
preferred shares or to issue any other additional Series A, Series B and
Series C preferred shares.
WARRANTS
We issued warrants to purchase 346,968 shares of our common stock in
connection with the sale of the Series A, Series B and Series C preferred
shares. The exercise price of those warrants, as of November 1, 2000, is
$12.6825 per share, subject to anti-dilution adjustments.
REGISTRATION RIGHTS
The holders of the Series A, Series B and Series C preferred shares and
related warrants are entitled to have the shares of common stock underlying such
securities registered by us under the terms of an agreement between us and the
holders of the Series A, Series B and Series C preferred shares and related
warrants. Under the terms of such agreement, we are required to register at
least that number of shares of common stock equal to the product of 1.2 and the
number of shares of common stock issuable upon conversion of and in lieu of cash
dividends on the Series A, Series B and Series C preferred shares and exercise
of the related warrants. We are also required to maintain the effectiveness of
the registration statement covering such shares of common stock until the
earlier of:
- the date as of which the holders of the Series A, Series B and Series C
preferred shares and warrants may sell all of the shares of common stock
covered by such registration statement under Rule 144(k) of the Securities
Act, and
- the date on which the holders of the Series A, Series B and Series C
preferred shares and warrants have sold all of the shares of common stock
issued or issuable upon conversion of the Series A, Series B and Series C
preferred shares and exercise of the related warrants.
We will bear all registration expenses, other than discounts and brokerage
commissions, with respect to this registration statement.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Computershare
Investor Services, LLC of California, 601 South Figueroa, 49th Floor, Los
Angeles, CA 90017 and telephone number is (213) 362-4912.
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SELLING SECURITYHOLDERS
The shares of common stock being offered by the selling securityholders are
issuable (1) upon conversion of or as common stock dividends on the Series A,
Series B and Series C preferred shares or (2) upon exercise of the related
warrants. For additional information regarding the Series A, Series B and
Series C Convertible Preferred Shares, see "Description of Capital
Stock--Preferred Stock." We are registering the shares in order to permit the
selling securityholders to offer the shares of common stock for resale from time
to time. Except for the ownership of the Series A, Series B and Series C
preferred shares, and the warrants, the selling securityholders have not had any
material relationship with us within the past three years.
The table below lists the selling securityholders and other information
regarding the beneficial ownership of the common stock by each of the selling
securityholders. The second column lists, for each selling securityholder, the
number of shares of common stock held, plus the number of shares of common
stock, based on its ownership of Series A, Series B and Series C preferred
shares and related warrants, that would have been issuable to the selling
securityholders on November 1, 2000 assuming conversion of all Series A,
Series B and Series C preferred shares and the exercise of all warrants held by
such selling securityholders on that date, without regard to any limitations on
conversions or exercise. Because conversion of the Series A, Series B, and
Series C preferred shares is based on a formula that, at maturity or as a result
of antidilution adjustments, may depend on the market price of our common stock,
the numbers listed in the second column may fluctuate from time to time. The
third column lists the shares of common stock being offered by this prospectus
by each selling securityholder.
In accordance with the terms of the registration rights agreement with the
holders of the Series A, Series B and Series C preferred shares, this prospectus
covers the resale of at least that number of shares of common stock equal to the
product of 1.2 and the number of shares of common stock issuable upon exercise
of the warrants, payment of dividends on and conversion of the Series A,
Series B and Series C preferred shares, determined as if the Series A, Series B
and Series C preferred shares were converted in full as calculated as of the
date immediately following the last day of the Series C pricing period. Because
of the accrual of dividends and adjustments at maturity or upon dilutive
issuances, the number of shares that will actually be issued upon conversion of
the Series A, B and C may be more or less than the 1,414,020 shares being
offered by this prospectus. The fourth column assumes the sale of all of the
shares offered by each selling securityholder.
Under the certificate of designations for the Series A, Series B and
Series C preferred shares and under the terms of the warrants, no selling
securityholder may convert Series A, Series B and Series C preferred shares or
exercise the warrants, respectively, to the extent such conversion or exercise
would cause such selling securityholder, together with its affiliates, to have
acquired a number of shares of common stock during the 60-day period ending on
the date of conversion which, when added to the number of shares of common stock
held at the beginning of such 60-day period, would exceed 10% of our then
outstanding common stock, excluding for purposes of such determination shares of
common stock issuable upon conversion of the Series A, Series B and Series C
preferred shares which have not been converted and upon exercise of the related
warrants which have not been exercised. The number
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of shares in the second column does not reflect this limitation. The selling
securityholders may sell all, some or none of their shares in this offering. See
"Plan of Distribution."
<TABLE>
<CAPTION>
COMMON SHARES
BENEFICIALLY COMMON SHARES COMMON SHARES
OWNED PRIOR TO OFFERED BY THIS OWNED AFTER
NAME OF SELLING SECURITY HOLDER OFFERING PROSPECTUS OFFERING
------------------------------------------------- -------------- --------------- -------------
<S> <C> <C> <C>
Fisher Capital Ltd.(1)........................... 389,171 481,353 0
Wingate Capital Ltd.(1).......................... 183,762 226,997 0
HFTP Investment L.L.C.(2)........................ 197,144 282,463 0
Marshall Capital Management, Inc.(3)............. 295,326 423,207 0
</TABLE>
------------------------
(1) Citadel Limited Partnership is the trading manager of each of Fisher
Capital Ltd. and Wingate Capital Ltd. (collectively, the "Citadel Entities")
and consequently has voting control and investment discretion over
securities held by the Citadel Entities. Kenneth C. Griffin indirectly
controls Citadel Limited Partnership. The ownership information for each of
the Citadel Entities does not include ownership information for the other
Citadel Entities. Citadel Limited Partnership, Kenneth C. Griffin and each
of the Citadel Entities disclaim ownership of the shares held by the other
Citadel Entities.
(2) Promethean Asset Management, LLC, a New York limited liability company
("Promethean"), serves as investment manager to HFTP Investment L.L.C.
("HFTP") and may be deemed to share beneficial ownership of the shares
beneficially owned by HFTP by reason of shared power to vote and to dispose
of the shares beneficially owned by HFTP. Promethean disclaims beneficial
ownership of the shares beneficially owned by HFTP. Mr. James F. O'Brien,
Jr. indirectly controls Promethean. Mr. O'Brien disclaims beneficial
ownership of the shares beneficially owned by Promethean and HFTP.
(3) Marshall Capital Management, Inc. is an indirect, wholly owned subsidiary of
Credit Suisse First Boston Group, a Swiss financial services company whose
shares are publicly traded. The parent companies of Marshall Capital
Management, Inc. disclaim beneficial ownership of any securities owned by
Marshall Capital Management, Inc.
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PLAN OF DISTRIBUTION
We are registering the shares of common stock issuable upon conversion of,
or as common stock dividends on, the Series A, Series B and Series C preferred
stock and upon exercise of the related warrants to permit the resale of the
shares of common stock by the holders of the Series A, Series B and Series C
preferred stock and the related warrants from time to time after the date of
this prospectus. We will not receive any of the proceeds from the sale by the
selling securityholders of the shares of common stock, although we may receive
up to approximately $4.4 million upon exercise of the warrants. We will bear all
fees and expenses incident to our obligation to register the shares of common
stock.
The selling securityholders may sell all or a portion of the common stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the common stock
is sold through underwriters or broker-dealers, the selling securityholder will
be responsible for underwriting discounts or commissions or agent's commissions.
The common stock may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of the sale, at varying prices determined
at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,
(1) on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale,
(2) in the over-the-counter market,
(3) in transactions otherwise than on these exchanges or systems or in the
over-the-counter market,
(4) through the writing of options, whether such options are listed on an
options exchange or otherwise, or
(5) through the settlement of short sales.
If the selling securityholders effect such transactions by selling shares of
common stock to or through underwriters, broker-dealers or agents, such
underwriters, brokers-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling securityholders or
commissions from purchasers of the shares of common stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, brokers-dealers or agents may be in
excess of those customary in the types of transactions involved). In connection
with sales of the common stock or otherwise, the selling securityholders may
enter into hedging transactions with broker-dealers, which may in turn engage in
short sales of the common stock in the course of hedging in positions they
assume. The selling securityholders may also sell shares of common stock short
and deliver shares of common stock covered by this prospectus to close out short
positions, provided that the short sale is made after the registration statement
is declared effective and a copy of this prospectus is delivered in connection
with the short sale. The selling securityholder may also loan or pledge shares
of common stock to broker-dealers that in turn may sell such shares.
The selling securityholders may pledge or grant a security interest in some
or all of the shares of common stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of common stock from time to time pursuant to the
prospectus. The selling securityholders also may transfer and donate the shares
of common stock in other circumstances in which case the transferees, donees,
pledgees or other successors in interest will be the selling beneficial owners
for purposes of the prospectus.
The selling securityholders and any broker-dealer participating in the
distribution of the shares of common stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any
18
<PAGE>
commissions paid, or any discounts or concessions allowed to any such
broker-dealer may be deemed to be underwriting commissions or discounts under
the Securities Act. At the time a particular offering of the shares of common
stock is made, a prospectus supplement, if required, will be distributed which
will set forth the aggregate amount of shares of common stock being offered and
the terms of the offering, including the name or names of any broker-dealers or
agents, any discounts, commissions and other terms constituting compensation
from the selling securityholder and any discounts, commissions or concessions
allowed or reallowed or paid to broker-dealers.
Under the securities laws of some states, the shares of common stock may be
sold in such states only through registered or licensed brokers or dealers. In
addition, in some states the shares of common stock may not be sold unless such
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with.
There can be no assurance that any selling securityholder will sell any or
all of the shares of common stock registered pursuant to the shelf registration
statement, of which this prospectus forms a part.
The selling securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation,
Regulation M of the Exchange Act, which may limit the timing of purchases and
sales of any of the shares of common stock by the selling securityholders and
any other participating person. Regulation M may also restrict the ability of
any person engaged in the distribution of the shares of common stock to engage
in market-making activities with respect to the shares of common stock. All of
the foregoing may affect the marketability of the shares of common stock and the
ability of any person or entity to engage in market-making activities with
respect to the shares of common stock.
We will pay all expenses of the registration of the shares of common stock
pursuant to the registration rights agreement estimated to be $19,000.00 in
total, including, without limitation, Commission filing fees and expenses of
compliance with state securities or "blue sky" laws; provided, however, that the
selling securityholders will pay all underwriting discounts and selling
commissions, if any. In connection with sales made pursuant to this prospectus,
we will indemnify the selling securityholders against liabilities, including
some liabilities under the Securities Act, in accordance with the registration
rights agreement or the selling securityholders will be entitled to
contribution. We will be indemnified by the selling securityholders against
civil liabilities, including liabilities under the Securities Act that may arise
from any written information furnished to us by the selling securityholders for
use in this prospectus, in accordance with the related registration rights
agreement or we will be entitled to contribution.
Once sold under the shelf registration statement, of which this prospectus
forms a part, the shares of common stock will be freely tradable in the hands of
persons other than our affiliates.
19
<PAGE>
LEGAL MATTERS
The validity of the issuance of the shares of common stock being offered
hereby will be passed upon for us by Wilson Sonsini Goodrich & Rosati,
Professional Corporation.
EXPERTS
The financial statements of Intraware, Inc. as of February 29, 2000,
February 28, 1999, and for each of the years in the three-year period ended
February 29, 2000 incorporated in this Prospectus by reference to the Annual
Report on Form 10-K for the year ended February 29, 2000 of Intraware, Inc. have
been so incorporated in reliance upon the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Intraware is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In accordance with the
Exchange Act, Intraware files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by Intraware may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the Commission's
following Regional Offices': New York Regional Office, 7 World Trade Center, New
York, New York, 10048; and Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material also may be obtained at prescribed rates from the Public Reference
Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549-1004.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Intraware's common stock is listed on The Nasdaq Stock Market's
National Market System and such reports, proxy statements and other information
concerning Intraware may be inspected at the offices of The Nasdaq Stock Market,
1735 K Street, N.W., Washington, D.C. 20006-1506. The Commission maintains a web
site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and information we later file 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 and 15(d) of the Exchange Act until this
offering is complete:
- Our Annual Report on Form 10-K for the fiscal year ended February 29, 2000
as filed with the Commission on May 26, 2000 (File No. 000-25249);
- Our Quarterly Report on Form 10-Q for the fiscal quarter ended May 31,
2000 as filed with the Commission on July 17, 2000;
- Our Quarterly Report on Form 10-Q for the fiscal quarter ended August 31,
2000 as filed with the Commission on October 16, 2000;
- Our Current Report on Form 8-K as filed with the Commission on July 3,
2000;
- Our Current Report on Form 8-K as filed with the Commission on July 27,
2000;
- The description of our Common Stock which is contained in our Registration
Statement on Form 8-A filed with the Commission on January 8, 1999
pursuant to Section 12 of the Exchange Act, and any description of any of
our securities which is contained in any registration statement
20
<PAGE>
filed after the date hereof under Section 12 of the Exchange Act,
including any amendment or report filed for the purpose of updating any
such description.
You may also request a copy of these filings, at no cost by writing or
telephoning us at the following address:
Intraware, Inc.
General Counsel
2000 Powell Street, Suite 140
Emeryville, CA 94608
(925) 253-4500
21
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by Intraware
in connection with the sale of common stock being registered. All amounts are
estimates except the SEC registration fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
----------
<S> <C>
SEC registration fee........................................ $ 2,729.77
Legal fees and expenses..................................... 10,000.00
Accounting fees and expenses................................ 6,000.00
Miscellaneous fees and expenses............................. 270.23
Total..................................................... $19,000.00
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933. Article IX of our amended
and restated certificate of incorporation, as amended, and Article VI of our
amended and restated bylaws provide for indemnification of our directors,
officers, employees and other agents to the maximum extent permitted by Delaware
law. In addition, we have entered into indemnification agreements with our
officers and directors.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER
---------------------
<C> <S>
3.1* The Certificate of Incorporation of Intraware, Inc.
3.2** The Series A Certificate of Designations, Preferences and
Rights.
3.3** The Series B Certificate of Designations, Preferences and
Rights.
3.4** The Series C Certificate of Designations, Preferences and
Rights.
4.1** Form of Warrant issued in connection with the sale of Series
A, B and C Preferred Stock.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation regarding legality of the securities being
registered.
10.1** Securities Purchase Agreement dated as of June 29, 2000
among Intraware, Inc. and the buyers of the Series A, B and
C Preferred Stock.
10.2** Registration Rights Agreement dated as of June 29, 2000
among Intraware, Inc. and the buyers of the Series A, B and
C Preferred Stock.
23.1 Consent of PricewaterhouseCoopers, LLP.
23.2 Consent of Attorneys (see Exhibit 5.1).
</TABLE>
------------------------
* Incorporated by reference to Intraware's Registration Statement on Form S-1
(File No. 333-69261) declared effective on February 25, 1999.
** Incorporated by reference to exhibits filed with Registrant's Form 8-K as
filed with the Securities and Exchange Commission on July 3, 2000.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS
(a) We undertake:
(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.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective 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;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
(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.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company'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 this
registration statement shall be deemed to be a new registration statement
relating to the securities offered thereby, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
(c) 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 foregoing provisions, 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. If a claim for indemnification against
such liabilities (other than 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.
II-2
<PAGE>
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 Emeryville, State of California on November 9, 2000.
<TABLE>
<S> <C> <C>
INTRAWARE, INC.
By: /s/ JOHN J. MOSS
-----------------------------------------
John J. Moss
GENERAL COUNSEL AND SECRETARY
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
President, Chief Executive
/s/ PETER H. JACKSON Officer and Director
------------------------------------------- (Principal Executive November 9, 2000
Peter H. Jackson Officer)
/s/ DONALD M. FREED
------------------------------------------- Chief Financial Officer November 9, 2000
Donald M. Freed
/s/ LAURENCE M. BAER
------------------------------------------- Director November 9, 2000
Laurence M. Baer
/s/ JOHN V. BALEN
------------------------------------------- Director November 9, 2000
John V. Balen
/s/ MARY ANN BYRNES
------------------------------------------- Director November 9, 2000
Mary Ann Byrnes
/s/ CHARLES G. DAVIS, JR.
------------------------------------------- Director November 9, 2000
Charles G. Davis, Jr.
/s/ MARK B. HOFFMAN
------------------------------------------- Director November 9, 2000
Mark B. Hoffman
/s/ RONALD E. F. CODD
------------------------------------------- Director November 9, 2000
Ronald E. F. Codd
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ JOHN J. MOSS
--------------------------------------
John J. Moss
ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER
---------------------
<C> <S>
3.1* The Certificate of Incorporation of Intraware, Inc.
3.2** The Series A Certificate of Designations, Preferences and
Rights.
3.3** The Series B Certificate of Designations, Preferences and
Rights.
3.4** The Series C Certificate of Designations, Preferences and
Rights.
4.1** Form of Warrant issued in connection with the sale of Series
A, B and C Preferred Stock.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation regarding legality of the securities being
registered.
10.1** Securities Purchase Agreement dated as of June 29, 2000
among Intraware, Inc. and the buyers of the Series A, B and
C Preferred Stock.
10.2** Registration Rights Agreement dated as of June 29, 2000
among Intraware, Inc. and the buyers of the Series A, B and
C Preferred Stock.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Attorneys (see Exhibit 5.1).
</TABLE>
------------------------
* Incorporated by reference to Intraware's Registration Statement on Form S-1
(File No. 333-69261) declared effective on February 25, 1999.
** Incorporated by reference to exhibits filed with Registrant's Form 8-K as
filed with the Securities and Exchange Commission on July 3, 2000.
