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Filed Pursuant to Rule 424(b)(5)
Registration No. 333-91553
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY 3, 2000)
[LOGO OF EGGHEAD.COM]
Shares of Common Stock
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Egghead.com, Inc. is offering 702,947 shares of common stock pursuant to a
common stock purchase agreement with Acqua Wellington North American Equities
Fund, Ltd. This prospectus supplement relates to the first settlement date of
the first draw down under the purchase agreement. The common stock is being
purchased at an average price of $10.67 per share, which price is based on the
recent trading prices of the common stock on the Nasdaq National Market and
reflects a 5.60% discount. See "Plan of Distribution" beginning on page S-11 of
this prospectus supplement.
The common stock is quoted on the Nasdaq National Market under the symbol
"EGGS." On March 2, 2000, the closing sale price of the common stock was $9.44
per share.
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This investment involves a high degree of risk. See "Risk Factors" beginning
on page S-3 of this prospectus supplement.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The date of this prospectus supplement is March 2, 2000.
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TABLE OF CONTENTS
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About This Prospectus...................................................... S-2
Special Note Regarding Forward-Looking Information......................... S-2
The Offering............................................................... S-3
Risk Factors............................................................... S-3
Use of Proceeds............................................................ S-11
Dilution................................................................... S-11
Plan of Distribution....................................................... S-11
Where You Can Find More Information........................................ S-13
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ABOUT THIS PROSPECTUS SUPPLEMENT
Unless the context otherwise requires, the terms "we," "our," "us," "the
company" and "Egghead" refer to Egghead.com, Inc., a Delaware corporation,
formerly known as Onsale, Inc. The term "Old Egghead" refers to Egghead.com,
Inc., a Washington corporation that was acquired by Onsale, Inc. Egghead, the
Egghead logo and Onsale are our registered trademarks. Other trademarks and
trade names appearing in this prospectus supplement are the property of their
holders.
This prospectus supplement is part of a registration statement that we filed
with the Securities and Exchange Commission utilizing a "shelf" registration
process. Under this shelf process, we may sell up to 5,000,000 shares of common
stock in one or more offerings. This prospectus supplement provides specific
information about the offering of 702,947 shares under the shelf registration
statement, and updates information provided in the prospectus dated February 3,
2000. You should read both this prospectus supplement and the prospectus
carefully.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This document and the documents incorporated in this document by reference
contain forward-looking statements within the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 with respect to our financial
condition, results of operations and business. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates" and similar
expressions identify forward-looking statements. These forward-looking
statements speak only as of the date of this prospectus supplement, are not
guarantees of future performance and are subject to certain risks and
uncertainties that could cause actual results to differ materially from the
results contemplated by the forward-looking statements. The sections entitled
"Risk Factors" that appear in this prospectus supplement and in our annual
report on Form 10-K for the year ended December 31, 1998 describe some, but not
all, of the factors that could cause these differences.
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THE OFFERING
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Common stock offered by Egghead............... 702,947 shares
Common stock to be outstanding after the 37,978,071 shares*
offering.....................................
Use of proceeds............................... For general corporate purposes.
See "Use of Proceeds."
Nasdaq National Market Symbol................. EGGS
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* Based on shares outstanding as of February 29, 2000. Excludes 5,947,492
shares subject to options and purchase rights outstanding as of that date.
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
consider the risks described below and the other information in this prospectus
supplement carefully. The risks described below are not the only ones we face.
Additional risks that we are aware of or that we currently believe are
immaterial may become important factors that affect our business. If any of the
following risks occur, or if others occur, our business, operating results and
financial condition could be seriously harmed. The trading price of our common
stock could decline due to any of these risks, and you may lose all or part of
your investment.
The expected benefits of our merger with Old Egghead might not be realized.
The potential benefits that we expect to achieve as a result of our merger
with Old Egghead may be more difficult to achieve than expected, or may not be
achievable at all. For example:
. We may be unable to derive or maintain an amount of revenue per visitor
to our web sites that is similar to the amount we derived from visitors
to our web site before the merger;
. Our efforts to build a single, widely-recognized online brand may be
more expensive than anticipated, or may be of limited utility in product
areas outside of computer-related products;
. Anticipated cost reductions may not be achieved, or may be offset by
unanticipated cost increases;
. Economies of scale may not be acheived--in particular, our purchasing
power leverage with vendors may not increase as a result of the merger;
. Our customer base may overlap with the customer base of Old Egghead more
than anticipated, resulting in a smaller-than-expected customer base for
the combined company; and
. Visitor traffic on our web sites may not be as high as we anticipate due
to several factors, including consolidation of operations, customer
overlap and brand consolidation, and may not increase in the future.
The integration of our two companies may be difficult.
Although our merger with Old Egghead was consummated in November 1999, the
process of integrating the two companies into a single company is an ongoing
process. Merging our two companies involves technological, operational and
personnel-related risks. The integration process will be complex, time-
consuming and expensive, and will disrupt our business if not completed in a
timely and efficient manner. We will utilize common information and
communication systems, facilities, operating procedures, financial controls and
human resources practices. We may encounter difficulties, costs and delays
involved in integrating these operations, including:
. Combining operational systems, such as product fulfillment and customer
service, may be more difficult than we anticipate;
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. We may lose key employees that we do not anticipate losing, and the
attention of our management team may be diverted from other ongoing
business concerns more than we anticipate; and
. Our business cultures may be more difficult to integrate than we
anticipate.
We expect to incur net losses for the foreseeable future.
Based on restated historical financial statements, we incurred net losses in
1997 and 1998. As of December 31, 1999, we had a combined net accumulated
deficit of approximately $269 million. We expect to experience substantial
quarterly net losses for the foreseeable future, due primarily to the following
factors:
. competitive pricing pressures, which we expect to continue to negatively
affect gross margins;
. we expect to spend significant amounts on operating expenses, in
particular marketing expenses; and
. we expect spend a substantial amount on our infrastructure.
We may seek additional financing and may not be able to secure it.
We expect to raise additional funds within the next 12 months. Additional
financing may not be available on terms favorable to us, or may not be
available to us at all. For instance, we may sell shares of our common stock
from time to time pursuant to our common stock purchase agreement with Acqua
Wellington. If we sell shares under that agreement, or if we otherwise raise
additional funds by issuing equity securities, you may experience significant
dilution of your ownership interest. Additionally, we could issue securities
that have rights senior to the rights of common stockholders.
Due to competitive pressures and our efforts to expand and maintain market
share, our profit margins may remain low for the foreseeable future.
Some of our competitors sell products that are commonly available from major
distributors at or near their purchase price. This may cause us to reduce our
selling prices on the same or similar goods, which would reduce profit margins.
We plan to make aggressive efforts to expand and maintain our market share,
and our profit margins may continue to be negatively affected as a result. We
may attempt to expand our market share for auctioned goods by increasing the
quantity of products available for bid at any one time, which tends to decrease
revenues per unit. We may also use promotional pricing and enhanced customer
service to increase our market share for current version sales. One of the
effects of these strategies may be low margins, and we may not be successful in
increasing or maintaining our market share in either or both lines of business.
Even if we are successful in increasing our market share, continued competition
and customer expectations may make it difficult to improve profit margins in
the future. Accordingly, our profits and stock price may be harmed.
Our operating results may fluctuate significantly and may be difficult to
predict.
The operating results of Onsale and Old Egghead prior to the merger
fluctuated, and we expect our operating results to fluctuate in the future, due
to a number of factors, many of which are outside our control. These factors
include:
. pricing competition;
. the availability and pricing of merchandise from vendors;
. our ability to manage our inventory mix and the mix of products offered
for auction, and take other actions required to maintain customer
satisfaction;
. the degree to which our sales of new, current-version merchandise at
attractive prices reduces sales of similar products on our auction site;
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. seasonal fluctuations in buying patterns of new and reconditioned
merchandise and in the availability of reconditioned merchandise;
. the level of traffic at our web site, and our ability to attract new
customers and to retain existing customers;
. the announcement or introduction of new types of merchandise, service
offerings or customer services by us or our competitors;
. the timing, cost and availability of web advertising;
. the amount and timing of costs relating to expansion of our operations;
. interruptions to or increases in the costs associated with the normal
flow of our business operations, including the occurrence of technical
or communications failures or stoppages by common carriers such as
United Parcel Service; and
. governmental regulation and taxation policies.
Due to these factors, factors discussed elsewhere in this document, or
unforeseen factors, in some future quarter our operating results may not meet
the expectations of securities analysts and investors, in which event the
trading price of our common stock may decline.
If we are unable to manage our growth, our business could be harmed.
We expect to continue to expand our operations, and in order to manage our
growth, we face many challenges, including:
. maintaining and improving existing operational, financial and inventory
systems, procedures and controls and implementing new systems,
procedures and controls;
. integrating new key managerial and technical employees into our existing
management team;
. training, motivating and managing our employee base;
. managing relationships with third parties;
. managing risks associated with accounts receivable expansion and
collection; and
. meeting our growing needs for working capital.
We operate in an extremely competitive market and we could lose revenue and
customers to our competitors.
Existing competitors. The electronic commerce market, particularly over the
Internet, is new, rapidly evolving and competitive, and we expect competition
to intensify in the future. We compete with many other companies which either
offer the same types of merchandise or provide the same or a similar type of
sales format to customers. Some current competitors include:
. Companies with online commerce sites such as Amazon.com, Inc.,
Beyond.com Corporation, Buy.com Inc., Cyberian Outpost, Inc. and Dell
Computer Corporation; and
. Companies offering certain types of Internet auctions, such as uBid,
Inc., Internet Shopping Network, Inc. (the FirstAuction site) and Micro
Warehouse, Inc.
This is not an exhaustive list of current competitors, and you should refer to
the annual reports of Onsale and Old Egghead previously filed with the
Securities and Exchange Commission for a list of additional competitors.
New competitors. It is not difficult to enter the online commerce market,
and current and new competitors can launch new online commerce web sites at
relatively low cost. Competition in online commerce will likely increase as
retailers, suppliers, manufacturers and direct marketers who have not
traditionally sold
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computer products and consumer goods directly to consumers through the Internet
enter this market segment. Increased competition may result in price
reductions, fewer customer orders, reduced gross margins, increased marketing
costs or loss of market share, or any combination of these problems.
New competitors may emerge and rapidly acquire market share in several ways,
including through mergers or by alliances among competitors and vendors. For
example, Dell Computer Corporation and Amazon.com, Inc. have agreed to provide
links from their web sites to new web pages that advertise their respective
products. Through such alliances, competitors may also obtain exclusive or
semi-exclusive sources of merchandise. In addition, manufacturers may elect to
liquidate their products directly over the Internet. Companies that primarily
conduct online person-to-person auctions, such as eBay Inc., may develop into
direct competitors in the future.
We may not be successful in competing against competitors. Many of these
competitors have greater financial, marketing, customer support, technical and
other resources than we do. As a result, they may be able to secure merchandise
from suppliers on more favorable terms than us, and they may be able to respond
more quickly to changes in customer preference or to devote greater resources
to the development, promotion and sale of their merchandise than we can. If
competition increases and our branding efforts are not successful, we may not
be able to command higher margins on the products we sell, or we may lose
revenue and customers to our competitors.
If we cannot continue to build strong brand loyalty, our business will be
harmed.
We believe that development and awareness of the Egghead.com brand is
critical to our success in attracting customers. Furthermore, we believe that
brand loyalty will become increasingly important as low barriers to entry
encourage the proliferation of web sites. If we are unsuccessful in continuing
to build strong brand loyalty, our business will be harmed.
In order to attract and retain consumers and advertisers, and to promote and
maintain the Egghead.com brand in response to competitive pressures, we intend
to increase our online and offline marketing and advertising. We believe that
advertising rates generally, and the cost of online advertising campaigns in
particular, could increase substantially in the future. Despite our efforts,
consumers or advertisers may not perceive our web site or the Egghead.com brand
as superior to the web sites or brands of our competitors.
We have a limited operating history as an online commerce company, which makes
our business difficult to evaluate.
We have a limited operating history as an online commerce company. We were
incorporated in 1994 and did not generate any revenues until July 1995. Old
Egghead was incorporated in 1984 but changed its business model from a chain of
retail stores to an online commerce web site beginning in February 1998. Our
prospects will therefore be subject to the risks, expenses and uncertainties
frequently encountered by young companies that operate in the new and rapidly
evolving markets for Internet products and services. These risks include:
. evolving and unpredictable business models;
. intense competition;
. our need and ability to manage growth; and
. the rapid evolution of technology in electronic commerce.
Our business may face increased government regulation.
Auctioneering and other laws. Several states have laws that regulate
auctions and auction companies within their jurisdiction. Some states may
interpret their statutes to apply to our transactions with consumers in such
states. The burdens of complying with auctioneering laws could materially
increase our cost of doing
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business. Similarly, states may construe their existing laws governing issues
such as property ownership, sales tax, libel and personal privacy to apply to
Internet companies servicing consumers within their boundaries. Resolution of
whether or how these laws will be applied is uncertain and may take years to
resolve.
Consumer protection laws. We could be subject to regulation under consumer
protection laws in various states. Several states, including California and
Washington, have laws regulating the disclosure of pricing information by
wholesalers and comparable businesses. In the future, governments of
California, Washington and other states could require additional disclosure in
order to comply with other regulations.
Tax laws. The tax treatment of the Internet and electronic commerce is
currently unsettled. A number of proposals have been made at the federal, state
and local level and by certain foreign governments that could impose taxes on
the sale of goods and services and certain other Internet activities. Our
business may be harmed by the passage of laws in the future imposing taxes or
other burdensome regulations on online commerce.
New Internet laws. Due to the increasing popularity and use of the Internet,
it is possible that a number of laws and regulations may be adopted with
respect to the Internet generally, covering issues such as user privacy,
pricing and characteristics and quality of products and services. Similarly,
the growth and development of the market for Internet commerce may prompt calls
for more stringent consumer protection laws that may impose additional burdens
on those companies conducting business over the Internet. The adoption of any
additional laws or regulations may decrease the growth of commerce over the
Internet, increase our cost of doing business or otherwise harm our business.
We may have to qualify to do business in other jurisdictions. Because our
service is available over the Internet in multiple states and foreign
countries, and we sell to consumers resident in such states and foreign
countries, such jurisdictions may claim that we are required to qualify to do
business as a foreign corporation in each of these states and foreign
countries. If we fail to qualify as a foreign corporation in a jurisdiction
where we are required to do so, we could be subject to taxes and penalties.
We face risks associated with purchasing and carrying our own inventory.
We purchase inventory from vendors. Risks of carrying inventory include:
. potential declines in the market value of the goods that we purchase;
. difficulties managing customer returns and credits associated with
merchandise to be returned to vendors;
. shrinkage resulting from theft, loss or inaccurate inventory recording;
and
. unpredictable sale prices due to the nature of our auction process.
If we manage our inventory poorly, we may be forced to sell our inventory at a
discount or loss.
We rely on merchandise vendors for supply, shipping and quality of products.
Supply. We rely on vendors to supply us with merchandise. For the year ended
December 31, 1999, purchases from Tech Data and Ingram Micro Inc., distributors
of computers and related products, accounted for approximately 38% and 14%,
respectively, of our aggregate merchandise purchases. We have no long-term
contracts or arrangements with our vendors that guarantee the availability of
merchandise. We may not be able to obtain sufficient quality and quantities of
merchandise at competitive prices. Also, the quality of service provided by
such parties may fall below the standard needed to enable us to conduct our
business effectively. We cannot assure you that our current vendors will
continue to supply merchandise or that we will be able to establish new vendor
relationships that will ensure that merchandise will be available.
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Customer service--shipping and quality of products (returns). We rely on
some of our vendors to ship merchandise directly to customers. Consequently, we
have limited control over the goods shipped by these vendors, and shipments of
goods may be subject to delays and shipment errors. In addition, we may accept
returns from customers for which we will not receive reimbursements from
manufacturers or vendors. If the quality of service provided by such vendors
falls below a satisfactory standard or if our level of returns exceeds
expectations, this could harm our business.
We rely on other third parties in conducting our operations.
In conducting our operations, we depend on several other third parties,
including the following:
. Fulfillment. Third parties fulfill a significant portion of our sales.
Any service interruptions experienced by these distribution centers as a
result of labor problems or otherwise could disrupt or prevent
fulfillment of customer orders;
. Operating software. Our internally-developed auction software depends on
operating systems, database and server software that have been
developed, produced by and licensed from third parties;
. Payment processing. We rely on one or two processors of credit card
transactions. If computer systems failures or other problems were to
prevent them from processing our credit card transactions, we would
experience delays and business disruptions; and
. Shipping. We use one or two primary delivery services to ship our
products. Our business would suffer if labor problems or other causes
prevented these or any other major carriers from delivering our products
for significant time periods.
We may not be able to maintain satisfactory relationships with any of the above
parties on acceptable commercial terms, and the quality of services that they
provide may not remain at the levels needed to enable us to conduct our
business effectively.
Our online commerce systems are vulnerable to interruption.
Customer access to our web site will directly affect the volume of orders
and thus affect our revenues. System interruptions may make our web site
unavailable or prevent us from fulfilling orders efficiently, reducing the
volume of goods we sell and the attractiveness of our products and services. We
may need to add hardware and software and further develop and upgrade our
existing technology, transaction-processing systems and network infrastructure
to accommodate increased traffic on our web site and increased sales volume. We
maintain substantially all of our computer and communications hardware at two
facilities, in Menlo Park, California and Vancouver, Washington. Our systems
and operations could be damaged or interrupted by fire, flood, power loss,
telecommunications failure, network break-ins, earthquake and similar events.
Our backup systems and disaster recovery plan may not be adequate, and we may
not have sufficient business interruption insurance to compensate us for losses
from a major interruption. Computer viruses, physical or electronic break-ins,
deliberate attempts by third parties to exceed the capacity of our systems and
similar disruptions could cause system interruptions, delays and loss of
critical data, and could prevent us from providing services and accepting and
fulfilling customer orders.
We depend on continued improvements in the Internet infrastructure and in our
own systems.
Growth of the Internet generally. Our success depends in large part on the
development of the Internet infrastructure and related enabling technologies,
performance improvements and security measures for providing reliable Internet
access and services. The Internet could suffer from performance problems or
outages due to continued growth in Internet users and their bandwidth
requirements, which could lead to decreased usage or growth in usage of our web
site. Also, our ability to increase the speed with which we provide services to
consumers and to increase the scope of such services is limited by and
dependent upon the speed
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and reliability of the Internet. Consequently, the emergence and growth of the
market for our services is dependent on future improvements to the entire
Internet.
Growth of our own systems in particular. Our revenues depend upon the number
of visitors who use our web site and the volume of orders we fulfill through
our web sites. We use an internally developed system for our web site and
several aspects of transaction processing, including billing, shipping and
tracking. We may be required to add additional hardware and software and
further develop and upgrade our existing technology, transaction-processing
systems and network infrastructure to accommodate increased traffic on our web
site and increased sales volume through our transaction-processing systems. Any
failure to do so may cause unanticipated systems disruptions, slower response
times, degradation in levels of customer service, impaired quality and speed of
order fulfillment or delays in reporting accurate financial information.
We depend on key employees.
Our future performance depends upon contributions from members of our senior
management and other key personnel. Most of our key personnel do not have long-
term employment agreements, and we do not maintain any key person life
insurance. Competition for attracting and retaining personnel in our industry
is intense, especially in the San Francisco Bay area where our headquarters and
one of our operating sites are located, and we may fail to attract and retain
the personnel we will need to succeed in the future. It is difficult for us to
attract new employees by offering stock options due to the volatility of our
stock price. If one or more of our key personnel leaves us or joins a
competitor, our business could be harmed.
We may be unable to protect our intellectual property.
Generally, our performance and ability to compete are dependent to an
important degree on our ability to protect and enforce our intellectual
property rights, which include the following:
. our proprietary technology;
. our registered U.S. trademarks and our other trademarks and service
marks; and
. our domain names, each of which relates to our brand.
We rely on a combination of patent, trademark, copyright and trade secret
laws, regulations governing domain names, confidentiality agreements and
technical measures to establish and protect our proprietary rights. We may not
be able to protect our proprietary rights, and our inability or failure to do
so could result in lost or forgone licensing revenues, dilution of the
Egghead.com brand and other loss of competitive and commercial advantages that
we hold. Additionally, we may choose to litigate to protect our intellectual
property rights, which could result in a significant cost of resources and
money to us. We may not be successful in any litigation that we undertake.
We could face litigation risks.
Intellectual property rights. Our business activities may infringe upon the
proprietary rights of others, and we have in the past received, and may in the
future receive, notices from third parties claiming infringement by our
software or other aspects of our business. Any of these claims, with or without
merit, could result in significant litigation costs and diversion of resources
and management attention, and could require us to enter into royalty and
licensing agreements (which may not be available on terms acceptable to us or
at all). Successful litigation could result in invalidation of our proprietary
rights or significant liability for damages, which could harm our business.
Products liability and consumer protection. Our sale of products through our
web sites could subject us to product liability claims or consumer protection
regulation, and states and other jurisdictions other than California and
Washington may interpret their products liability or consumer protection laws
to apply to
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Internet commerce providers such as us that enter into transactions with their
residents. While we carry liability insurance, this may not be adequate to
compensate for substantial claims, and these claims could have a harmful effect
on our business.
Liability for information transmitted over our online services. The law
relating to the liability of online services companies for information carried
on or disseminated through our services is currently unsettled. Claims could be
made against us under both United States and foreign law for defamation, libel,
invasion of privacy, negligence, copyright or trademark infringement, or other
theories based on the nature and content of the materials disseminated through
our services. Several private lawsuits seeking to impose such liability on
other online services companies are currently pending. In addition, legislation
has been proposed that imposes liability for or prohibits the transmission over
the Internet of certain types of information. The potential imposition of
liability on online services companies for information carried on or
disseminated through their services could require us to alter our service
offerings.
We expect our stock price to be volatile.
The market price of the shares of our common stock has been and we expect it
to continue to be, subject to wide fluctuations in response to several factors,
such as:
. actual or anticipated variations in our results of operations;
. announcements of technological innovations;
. new sales formats, services or product introductions by us or our
competitors;
. developments with respect to patents, copyrights or proprietary rights;
. changes in financial estimates by securities analysts; and
. conditions and trends in the Internet and electronic commerce
industries.
The stock markets generally, and the Nasdaq National Market in particular,
have experienced extreme price and volume fluctuations that have particularly
affected the market prices of equity securities of many technology companies
and that often have been unrelated or disproportionate to the operating
performance of such companies. These market fluctuations, as well as general
economic, political and market conditions such as recessions, interest rates or
international currency fluctuations, may adversely affect the market price of
our common stock. In the past, stockholders have instituted securities class
action litigation against several companies following periods of volatility in
the market price of their securities. Such litigation, if instituted against
us, could result in diversion of our management's attention and resources and
substantial financial costs.
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USE OF PROCEEDS
We estimate that the net proceeds that we will receive from the sale of the
702,947 shares of common stock offered with this prospectus supplement and the
accompanying prospectus will be approximately $7.4 million, after deducting the
estimated offering expenses payable by us. We intend to use the net proceeds as
stated in the accompanying prospectus.
DILUTION
The net tangible book value of the common stock as of December 31, 1999 was
$53.4 million, or $1.44 per share. Net tangible book value per share represents
the amount of our total tangible assets less total liabilities, divided by the
37,192,507 shares of common stock outstanding as of December 31, 1999. After
giving effect to the sale of the common stock offered with this prospectus at
an average price of $10.67 per share, after deducting estimated offering
expenses, the net tangible book value at December 31, 1999 would have been
$60.8 million, or $1.60 per share. This represents an increase in net tangible
book value per share of $0.16 to existing stockholders and an immediate
dilution of $9.07 per share to Acqua Wellington.
The above discussion assumes no exercise of any stock options outstanding as
of December 31, 1999. As of December 31, 1999, there were options outstanding
to purchase a total of 5,478,512 shares of our common stock with a weighted
average exercise price of $17.34 per share. Upon exercise of these options,
there will be further dilution to Acqua Wellington.
PLAN OF DISTRIBUTION
We entered into a common stock purchase agreement with Acqua Wellington on
February 17, 2000 under which we may sell up to an aggregate of $100 million of
our common stock. From time to time during the nine months following the date
of the purchase agreement, we may, at our sole discretion, present Acqua
Wellington with draw down requests to sell up to $30 million worth of the
common stock per draw down, or less depending on the minimum price at which we
elect to sell the common stock during the draw down period. The common stock
will be sold at the volume weighted average trading price of the common stock
on the Nasdaq National Market each day during the draw down period, less a
discount of 4.25% to 5.60% depending on the minimum price at which we elect to
sell the common stock during the draw down period. The purchase agreement
provides that the minimum price at which we will sell the common stock is $9.44
per share, unless a lower minimum is mutually agreed to by both parties. We may
present Acqua Wellington with up to seven draw down notices during the term of
the purchase agreement. Each draw down period includes two settlements.
Under the purchase agreement, Acqua Wellington has an option to purchase up
to an additional $10 million worth of our common stock during the first draw
down period, at the volume weighted average trading price of the common stock
on the Nasdaq National Market on the day of each exercise of the option, less a
discount of 5.60%.
Restrictions on Obtaining Financing from Alternative Sources. The purchase
agreement restricts us from entering into any agreement with a third party for
the principal purpose of securing debt or equity financing for Egghead without
the consent of Acqua Wellington, subject to the following exceptions:
. we may enter into any loan, credit or lease facility with a bank or
financing institution;
. we may establish employee stock option plans and enter into related
agreements, and we may issue shares of common stock in connection with
our existing employee stock option plans and agreements;
. we may issue equity securities and finance the acquisition of other
companies, equipment, technologies or lines of business;
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. we may issue debt or equity securities to specified persons, or to any
person or entity specifically identified by our board of directors as a
strategic partner of Egghead; and
. we may issue debt or equity securities to one or more companies whose
principal business is not the investment in the securities of other
entities.
Should Acqua Wellington consent to us entering into another debt or equity
financing agreement, Acqua Wellington will have the option, to be exercised
within 10 days, to participate in the other financing on the same terms of that
financing.
If the volume average trading price of the common stock is less than $10.00
per share for five or more consecutive trading days, we may notify Acqua
Wellington that we wish to secure additional financing. If we and Acqua
Wellington cannot agree to terms on additional financing, we may secure
additional debt or equity financing from a third party.
Status as Underwriter. Acqua Wellington is an "underwriter" within the
meaning of the Securities Act in connection with its sale of the shares
acquired under the purchase agreement with us. Broker-dealers or other persons
acting on behalf of Acqua Wellington or each other that participate in the
distribution of the shares may also be deemed to be underwriters. Any
commissions or profits they receive on the resale of the shares may be deemed
to be underwriting discounts and commissions under the Securities Act.
Termination. We may terminate this agreement upon a change of control of
Egghead, or a continuing breach of the agreement by Acqua Wellington. Acqua
Wellington may terminate this agreement upon a material adverse change to
Egghead, a change in ownership such that current officers and directors of
Egghead beneficially own less than 2% of the common stock that they own as of
the date of the purchase agreement, or if we issue convertible debentures or
enter into an alternative financing without Acqua Wellington's consent.
Indemnification and Fees. We have agreed to indemnify Acqua Wellington
against specified liabilities, including liabilities arising under the
Securities Act and the Exchange Act. We agreed to pay all reasonable fees and
expenses related to the transactions contemplated by the purchase agreement. We
estimate those fees and expenses to be $120,000.
Shares Offered With This Prospectus
We initiated a draw down on February 18, 2000, under which we agreed to sell
the common stock at the volume weighted average exercise price during the draw
down period, less a discount of 5.60%, with a minimum price (before discount)
of $10.00 per share.
With this prospectus supplement and the accompanying prospectus, we are
offering 702,947 shares of the common stock to Acqua Wellington as the first
settlement of the first draw down, pursuant to the draw down notice issued by
us and pursuant to exercises of options by Acqua Wellington. The common stock
will be purchased by Acqua Wellington at an average price of $10.67 per share
(after giving effect to the 5.60% discount).
S-12
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the Commission's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-
0330 for further information on the Public Reference Room. Our public filings,
including reports, proxy and information statements, are also available on the
Commission's web site at http://www.sec.gov.
The Commission allows us to "incorporate by reference" information from
other documents that we file with them, which means that we can disclose
important information by referring to those documents. The information
incorporated by reference is considered to be part of this prospectus
supplement, and information that we file later with the Commission will
automatically update and supersede this information. We incorporate by
reference into this prospectus the documents listed below, and any future
filings we make with the Commission under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 prior to the termination of this offering:
. Onsale's annual report on Form 10-K for the year ended December 31,
1998, filed with the Commission on March 31, 1999;
. the description of our common stock contained in Onsale's registration
statement on Form 8-A (File No. 000-21945) filed under Section 12(g) of
the Exchange Act with the Commission on March 11, 1997, including any
amendment or report filed for the purpose of updating such description;
and
. all other reports filed under Section 13(a) or 15(d) of the Exchange Act
since December 31, 1998, including (1) our quarterly reports on Form 10-
Q for the quarters ended March 31, June 30 and September 30, 1999, and
(2) our current reports on Form 8-K filed with the Commission on July
23, 1999, November 5, 1999, November 22, 1999, December 1, 1999 (as
amended on January 31, 2000) and March 2, 2000.
S-13
<PAGE>
PROSPECTUS
[LOGO OF EGGHEAD.COM]
Common Stock
----------------
With this prospectus, we may offer up to 5,000,000 shares of our common
stock. We will provide specific terms for each offer and sale of the common
stock in supplements to this prospectus. You should read this prospectus and
the relevant prospectus supplement carefully before investing in our common
stock.
The common stock is quoted on the Nasdaq National Market under the symbol
"EGGS." On February 3, 2000, the closing sale price of the common stock was
$12.56 per share.
----------------
This investment involves a high degree of risk. See "Risk Factors" in the
relevant supplement to this prospectus.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The date of this prospectus is February 3, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
About This Prospectus.................................................... 1
Prospectus Summary....................................................... 3
Risk Factors............................................................. 4
Use of Proceeds.......................................................... 4
Dividend Policy.......................................................... 4
Plan of Distribution..................................................... 4
Legal Matters............................................................ 7
Experts.................................................................. 7
Where You Can Find More Information...................................... 7
Forward-Looking Statements............................................... 8
</TABLE>
ABOUT THIS PROSPECTUS
Unless the context otherwise requires, the terms "we," "our," "us," "the
company" and "Egghead" refer to Egghead.com, Inc., a Delaware corporation,
formerly known as Onsale, Inc. Egghead, the Egghead logo and Onsale are our
registered trademarks. Other trademarks and trade names appearing in this
prospectus are the property of their holders.
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf process, we may sell up to 5,000,000 shares of common stock in
one or more offerings. This prospectus provides you with a general description
of the common stock we may offer. Each time we sell common stock, we will
provide a prospectus supplement that will contain specific information about
the terms of that offering. The prospectus supplement also may add, update or
change information contained in this prospectus. You should read both this
prospectus and any prospectus supplement together with additional information
described under the heading "Where You Can Find More Information." We may only
use this prospectus to sell securities if it is accompanied by a prospectus
supplement.
The registration statement that contains this prospectus, including the
exhibits to the registration statement, contains additional information about
us and the securities offered under this prospectus. That registration
statement can be read at the Commission's web site or at the Commission's
offices mentioned under the heading "Where You Can Find More Information."
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<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all the information you
should consider before buying shares in this offering. You should read the
entire prospectus and prospectus supplement, particularly the section titled
"Risk Factors" in the prospectus supplement, carefully.
We are a leading Internet retailer of new and surplus computer products,
consumer electronics, sporting goods, and vacation packages. Through our
auction site, we offer bargains on excess and closeout goods and services. We
combine broad selection, low prices and excellent service to provide an
outstanding online shopping experience for businesses and consumers.
We incorporated in California in July 1994 and reincorporated in Delaware in
March 1997, in both instances under the name Onsale, Inc. We changed our name
to Egghead.com, Inc. on November 19, 1999. Our principal executive offices are
located at 1350 Willow Road, Menlo Park, California 94025. Our telephone number
is (650) 470-2400.
The Offering
The shares that may be offered under this prospectus will represent
approximately 12% of our outstanding shares of common stock as of November 19,
1999. These shares may be offered on a continuous basis under Rule 415 under
the Securities Act of 1933.
<TABLE>
<S> <C>
Common stock offered by Egghead ......... 5,000,000 shares
Common stock to be outstanding after the
offering................................ 42,214,458 shares*
For general corporate purposes.
Use of proceeds.......................... See "Use of Proceeds."
Nasdaq National Market Symbol............ EGGS (formerly ONSL)
</TABLE>
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* Based on shares outstanding as of January 31, 2000.
3
<PAGE>
RISK FACTORS
An investment in the common stock involves a high degree of risk. You
should carefully consider the information contained under the heading "Risk
Factors" in the applicable supplement to this prospectus before investing in
our common stock. Our business and results of operations could be seriously
harmed by any of the risks described in the applicable supplement to this
prospectus. The trading price of our common stock could decline due to any of
these risks, and you may lose all or part of your investment.
USE OF PROCEEDS
Unless otherwise indicated in the applicable supplement to this prospectus,
the net proceeds from the sale of common stock offered under this prospectus
will be added to our general funds and may be used:
. for working capital to fund operations, including increased operating
expenses as we continue to expand our marketing efforts, increase our
staffing, increase our software development efforts, and grow our
infrastructure; and
. for general corporate purposes.
Until we have used the net proceeds, we intend to invest the proceeds in
short-term marketable securities.
DIVIDEND POLICY
We have never paid any cash dividends on our common stock. We anticipate
that we will continue to retain any earnings for use in the operation of our
business and we do not currently intend to pay dividends.
PLAN OF DISTRIBUTION
We may sell common stock through underwriters, dealers or agents, directly
to one or more purchasers, or by means of both of these methods. We may
distribute common stock from time to time in one or more transactions at a
fixed price or prices (which may be changed from time to time), at market
prices prevailing at the time of sale, at prices related to these prevailing
market prices, or at negotiated prices.
Regardless of the method we use to sell our common stock, we will provide a
prospectus or prospectus supplement pursuant to Rule 424(b) under the
Securities Act of 1933 (the "Securities Act") that will disclose:
. the identity of any underwriters, dealers, agents or investors who
purchase common stock, as required;
. the number of shares sold, the public offering price and consideration
paid, and the proceeds we will receive from the sale;
. the amount of any compensation, discounts or commissions to be received
by underwriters, dealers or agents;
. the terms of any idemnification provisions, including indemnification
from liabilities under the federal securities laws; and
. any other material terms of the distribution of the common stock.
Use of Underwriters and Agents. Only underwriters named in a prospectus or
prospectus supplement, if any, are underwriters of the common stock offered
with that prospectus or prospectus supplement. If underwriters are used in the
sale, they will acquire the common stock for their own account and may resell
the common stock from time to time in one or more transactions at a fixed
public offering price or at varying prices determined at the time of sale. We
may offer the common stock to the public through underwriting syndicates
represented by managing underwriters or by underwriters
4
<PAGE>
without a syndicate. Subject to certain conditions, the underwriters will be
obligated to purchase all the common stock offered by the prospectus supplement
in which they are named, if any. Any public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may change from time to
time.
We may sell the common stock through agents we designate from time to time.
We will name any agent involved in the offering and sale of common stock and in
the prospectus supplement we will describe any commissions we will pay the
agent. Unless the prospectus supplement states otherwise, our agent will act on
a best-efforts basis for the period of appointment.
We may authorize agents or underwriters to solicit offers by certain types
of institutional investors to purchase the common stock from us pursuant to
delayed delivery contracts providing for payment and delivery on a specified
date in the future. We will list the public offering price for any such shares
and describe the conditions to these contracts and the commissions we must pay
for solicitation of these contracts in a prospectus supplement.
In connection with the sale of the common stock offered with this
prospectus, underwriters, dealers or agents may receive compensation from us or
from purchasers of the common stock for whom they may act as agents, in the
form of discounts, concessions or commissions. Agents and underwriters may
engage in transactions with us, or perform services for us, in the ordinary
course of business.
Sales Directly to Purchasers. We may enter into agreement directly with one
or more purchasers. Such agreements may provide for the sale of our common
stock at a fixed price, based on the market price of the common stock or
otherwise. Alternatively, such agreement may provide for the sale of common
stock over a period of time by means of draw downs at our election which the
purchaser would be obligated to accept under specified conditions. Under this
form of agreement, we may sell common stock at a per share purchase price which
is discounted from the market price. Such agreement may also provide for sales
of common stock based on combinations of or variations from these methods.
Deemed Underwriters. The underwriters, dealers, agents or purchasers that
participate in the distribution of the common stock may be deemed to be
underwriters under the Securities Act. Broker-dealers or other persons acting
on behalf of parties that participate in the distribution of the common stock
may also be deemed to be underwriters. Any discounts or commissions received by
them and any profit on the resale of the common stock received by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
Anyone deemed to be an underwriter under the Securities Act may be subject to
statutory liabilities, including Sections 11, 12 and 17 of the Securities Act
and Rule 10b-5 under the Securities Exchange Act of 1934 (the "Exchange Act").
Underwriters or purchasers that would be deemed underwriters under the
Securities Act, and their pledgees, donees, transferees and other subsequent
owners, may offer the common stock at various times in the over-the-counter
market or in privately negotiated transactions, at a fixed price or prices
(which may be changed from time to time), prevailing market prices at the time
of sale, at prices related to those prevailing market prices, or at negotiated
prices. These sales may be made according to one or more of the following
methods:
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
. block trades in which the broker or dealer so engaged will attempt to
sell the common stock as agent but may position and resell a portion of
the block as principal in order to facilitate the transaction;
. purchases by a broker or dealer as principal and resale by the broker or
dealer for its account as allowed under this prospectus, including
resale to another broker or dealer;
. exchange distributions under the rules of the exchange;
. negotiated transactions between sellers and purchasers without a broker-
dealer; and
. by writing options.
These underwriters or purchasers may also sell the common stock under Rule 144,
instead of under this prospectus, if Rule 144 is available for those sales.
5
<PAGE>
Underwriters and purchasers that are deemed underwriters under the
Securities Act may engage in transactions that stabilize, maintain or otherwise
affect the price of the common stock, including the entry of stabilizing bids
or syndicate covering transactions or the imposition of penalty bids. Such
purchasers will be subject to the applicable provisions of the Securities Act
and Exchange Act and the rules and regulations thereunder, including Rule 10b-5
and Regulation M. Regulation M may restrict the ability of any person engaged
in the distribution of the common stock to engage in market-making activities
with respect to the common stock. In addition, the anti-manipulation rules
under the Exchange Act may apply to sales of the common stock in the market.
All of the foregoing may affect the marketability of the common stock and the
ability of any person to engage in market-making activities with respect to the
common stock.
Expenses Associated with Registration. We are paying substantially all of
the expenses of registering the common stock under the Securities Act and of
compliance with blue sky laws, including registration and filing fees, printing
and duplication expenses, administrative expenses and our legal and accounting
fees. We estimate these expenses to be approximately $120,000.
Indemnification and Contribution. We may provide agents, underwriters or
purchasers with indemnification against civil liabilities, including
liabilities under the Securities Act, or contribution with respect to payments
that the agents, underwriters or purchasers may make with respect to such
liabilities.
6
<PAGE>
LEGAL MATTERS
Fenwick & West LLP, Palo Alto, California will provide us with an opinion as
to the legality of the common stock that may be offered with this prospectus.
EXPERTS
The financial statements of Onsale, Inc. as of December 31, 1998 and 1997
and for each of the three years in the period ended December 31, 1998 and the
supplementary consolidated financial statements of Egghead.com, Inc. as of
December 31, 1998 and for the year then ended, incorporated in this document by
reference to the Annual Report on Form 10-K of Onsale, Inc. and the Current
Report on Form 8-K dated November 19, 1999, as amended on January 31, 2000 have
been so incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements and schedules incorporated by reference in this
prospectus and elsewhere in the registration statement to the extent and for
the periods indicated in their reports have been audited by Arthur Andersen
LLP, independent public accountants, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the Commission's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-
0330 for further information on the Public Reference Room. Our public filings,
including reports, proxy and information statements, are also available on the
Commission's web site at http://www.sec.gov.
The Commission allows us to "incorporate by reference" information from
other documents that we file with them, which means that we can disclose
important information by referring to those documents. The information
incorporated by reference is considered to be part of this prospectus, and
information that we file later with the Commission will automatically update
and supersede this information. We incorporate by reference into this
prospectus the documents listed below, and any future filings we make with the
Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 prior to the termination of this offering:
. Onsale's annual report on Form 10-K for the year ended December 31,
1998, filed with the Commission on March 31, 1999;
. the description of our common stock contained in Onsale's registration
statement on Form 8-A (File No. 000-21945) filed under Section 12(g) of
the Exchange Act with the Commission on March 11, 1997, including any
amendment or report filed for the purpose of updating such description;
and
. all other reports filed under Section 13(a) or 15(d) of the Exchange Act
since December 31, 1998, including (1) our quarterly reports on Form 10-
Q for the quarters ended March 31, June 30 and September 30, 1999, and
(2) our current reports on Form 8-K filed with the Commission on July
23, 1999, November 5, 1999, December 1, 1999 and January 31, 2000.
To the extent that any statement in this prospectus or a prospectus
supplement is inconsistent with any statement that is incorporated by reference
and that was made on or before the date of this prospectus or the applicable
prospectus supplement, the statement in this prospectus or the applicable
prospectus supplement shall control. The incorporated statement shall not be
deemed, except as modified or superceded, to constitute a part of this
prospectus, the applicable prospectus supplement or the registration statement.
Statements contained
7
<PAGE>
in this prospectus or the applicable prospectus supplement as to the contents
of any contract or other document are not necessarily complete and, in each
instance, we refer you to the copy of each contract or document filed as an
exhibit to the registration statement.
We will furnish without charge to each person to whom a copy of this
prospectus is delivered, upon written or oral request, a copy of the
information that has been incorporated into this prospectus by reference
(except exhibits, unless they are specifically incorporated into this
prospectus by reference). You should direct any requests for copies to:
Egghead.com, Inc.
1350 Willow Road
Menlo Park, California 94025
Attention: Investor Relations, (650) 470-2780.
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
This document and the documents incorporated in this document by reference
contain forward-looking statements within the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 with respect to our financial
condition, results of operations and business. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates" and similar
expressions identify forward-looking statements. These forward-looking
statements are not guarantees of future performance and are subject to certain
risks and uncertainties that could cause actual results to differ materially
from the results contemplated by the forward-looking statements. The sections
entitled "Risk Factors" that appear in our annual report on Form 10-K for the
year ended December 31, 1998 and in the prospectus supplement accompanying this
prospectus describe some, but not all, of the factors that could cause these
differences.
8
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[LOGO OF EGGHEAD.COM]
702,947 Shares of
Common Stock
----------------
PROSPECTUS SUPPLEMENT
March 2, 2000
----------------
You should rely only on the information contained in or specifically
incorporated by reference into this prospectus. We have not authorized anyone
to provide you with information different from that contained in this
prospectus. We are offering to sell, and seeking offers to buy, shares of
common stock only in the jurisdictions where offers and sales are permitted.
The information contained in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this prospectus or of
any sale of common stock.
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