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FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-45106
PROSPECTUS
199,046 Shares of Common Stock
CROSSWALK.COM, INC.
Some of our stockholders from time to time are using this prospectus to
sell common stock. The selling shareholders are offering all of the shares
to be sold. We will not receive any of the proceeds from the offer and sale
of the shares, but we have agreed to bear the expenses of registration of the
shares by this prospectus.
Nasdaq National Market System symbol:
AMEN
On October 3, 2000, the last sale price of our common stock as reported
on the Nasdaq National Market was $1.562.
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Investing in our common stock involves risks. You should not purchase
our common stock unless you can afford to lose your entire investment. See
"Risk Factors" beginning on page 3 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or passed on the
adequacy of the disclosures in this prospectus. Any representation to the
contrary is a criminal offense.
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October 3, 2000
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TABLE OF CONTENTS
Page
About Crosswalk.com, Inc...............................................1
Recent Developments....................................................2
Risk Factors...........................................................2
Special Note Regarding Forward-Looking Statements.....................14
Use Of Proceeds.......................................................14
Selling Shareholders..................................................14
Plan Of Distribution..................................................16
Where You Can Find More Information...................................17
Legal Matters.........................................................18
Experts...............................................................18
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ABOUT CROSSWALK.COM, INC.
Crosswalk.com, Inc. is primarily known as the creator of
crosswalk.com(TM), an interactive Web site, which provides information and
resources that we believe generally appeals to the Christian and family
friendly community. We focus on "the intersection of faith and life",
covering a growing spectrum of everyday life within a Christian context. Our
strategy is to make crosswalk.com a community portal with deep content and
broad information for Christians, not just Christian information, drawing
many from the broad Christian community offline to an online experience where
faith and life meet every day. We intend to continue enhancing
crosswalk.com in order to become the preferred online resource for Christians
in search of information, interaction and involvement opportunities that help
them apply a Christian world view across the breadth of their life and
interests.
Crosswalk.com features channels including Music, Money, News & Culture,
Homeschooling, Sports, Movies, Spiritual Life, Women, Men, Careers and
LiveIt. Key services include: INVESTigator--the nation's leading
values-based investment database; the Goshen Directory, the largest directory
of Christian sites on the Web; over two dozen email newsletters; Religion
Today and BibleStudyTools.com. Content and site resources are developed and
offered both by Crosswalk.com and by ministries, secular retailers, and
publishers.
Crosswalk.com also includes Wike Associates (d/b/a Media Management)
which we acquired on August 13, 1999. Media Management, which includes the
Web site GOSHEN.net, is now a wholly owned subsidiary. GOSHEN.net, which has
been fully integrated into crosswalk.com, provides, among other things, an
extensive searchable directory that can be used to discover such Internet
services as Web sites providing information about youth group resources,
denominational publications, Christian support groups, listings of various
Christian radio shows, and even the personal pages of Christian individuals
and families. This directory, which contains approximately 20,000 listed,
categorized and cross-referenced Web sites, is a resource for finding
services and products on the Web that will be of interest to Christians.
Media Management also has an advertising "card pack" business which
distributes advertising materials to 250,000 churches, pastors and leading
laymen through six annual mailings. The average card pack contains between 90
to 120 advertisements, for which each advertiser pays approximately $2,400.
In September 1999, we entered into a one-year Network Title Sponsorship
Agreement with The Christian Network, Inc., which includes "Praise on Pax"
and "Worship on Pax." Under this agreement, we are entitled to a national
title sponsorship on "Praise on Pax" telecasts and a national corporate
sponsorship on "Worship on Pax" telecasts. We also receive advertising and
promotional rights. The total cost for these sponsorship and advertising
rights is $1,025,000, payable by us quarterly in cash or, at our option, in
shares of our common stock having a fair market value equal to the required
payment. We are also obligated to issue additional shares of our common
stock for each new member generated for our Web site as a result of these
sponsorship and advertising arrangements, based on a valuation of $1.00 for
each member generated. This prospectus has been prepared to cover resales by
the selling shareholders of shares of our common stock that we have and may
issue to the selling shareholders under the sponsorship agreement.
Crosswalk.com, Inc. was incorporated under the laws of the State of
Delaware in January 1997 as DIDAX INC. We changed our name to Crosswalk.com,
Inc. in May 1999. Our executive offices are located at 4100 Lafayette Center
Drive, Suite 110 and our telephone number is (703) 968-4808. Our Web site is
located at www.crosswalk.com. Information available on our Web site is not
part of this prospectus.
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RECENT DEVELOPMENTS
On September 29, 2000 we closed on a $2 million strategic private
placement in equity capital from affiliates of GroupHarbor.com, a developer
of web-based tools for the Christian community. The $2 million financing,
consists of 80,000 shares of three-year Series A Preferred Stock, convertible
into 862,069 shares of common stock. This is equivalent to $2.32 per common
share, representing a 42.8% premium over the average closing price of
Crosswalk's common stock for the five trading days preceding the September
29, 2000 close date. The Series A Preferred Stock will also accrue a 6%
dividend per annum. There were no agency fees, no commissions paid, and no
warrants issued in connection with the offering. One of the principals of
GroupHarbor.com will be appointed to the Board of Directors of
Crosswalk.com.
Pursuant to the offering, GroupHarbor.com will have the opportunity to
jointly participate in Crosswalk.com's ongoing development of Christian Group
Fellowship Tools (or "Christian e-groups"). Further details on this product
and this arrangement will be the subject of a release later in 2000.
RISK FACTORS
You should carefully consider the risks described below before making
an investment decision. The risks and uncertainties described below are not
the only ones we face. Additional risks and uncertainties not presently known
to us or that may be immaterial at this point may also impair our business
operations. If any of the following risks actually occur, our business,
condition (financial or otherwise), prospects or results of operations could
be materially adversely affected. In such case, the fair market value of our
securities could decline, and you may lose all or part of your investment.
WE HAVE A LIMITED OPERATING HISTORY AND ARE SUBJECT TO THE RISKS ENCOUNTERED
BY DEVELOPING COMPANIES
Although we were founded in 1993, we did not start generating revenue
until 1996. Accordingly, we have a limited operating history and little
operating and financial data upon which you may evaluate us. Accordingly,
our business is subject to the risks, expenses and difficulties frequently
encountered by companies with a limited operating history including:
- Limited ability to respond to competitive developments;
- Rapid technological changes and increased competition could
adversely affect market acceptance of our services;
- Exaggerated effect of unfavorable changes in general economic and
market conditions;
- Ability to develop or fully utilize relationships with strategic
partners;
- Ability to identify, attract, retain and motivate qualified
personnel;
- Ability to develop and extend the Crosswalk brand; and
- Ability to develop and introduce new product and service
offerings.
There is no assurance we will be successful in addressing these risks.
If we are unable to successfully address these risks, our business could be
significantly affected.
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WE HAVE A HISTORY OF LOSSES, EXPECT FUTURE LOSSES AND CANNOT ASSURE YOU THAT
WE WILL ACHIEVE PROFITABILITY
We have accumulated losses since our inception and we anticipate that
we will continue to accumulate losses for the foreseeable future. We have
incurred net losses since inception totaling $28,247,522 through June 30,
2000. In addition, we expect to incur additional substantial operating and
net losses in 2000 and perhaps thereafter. We expect to incur these
additional losses because we plan to continue increasing our capital
expenditures and operating expenses to expand the functionality and
performance of our products and services and to increase our sales and
marketing efforts. Although our revenues have increased in recent quarters,
we cannot assure you that such growth will be maintained or increased in the
future and you should not rely on our recent revenue growth as indicative of
our future results of operations. We cannot predict with accuracy our future
results of operations and believe that any period-to-period comparisons of
our results are not meaningful.
THE EXPECTED FLUCTUATIONS OF OUR QUARTERLY RESULTS COULD CAUSE OUR STOCK
PRICE TO FLUCTUATE OR DECLINE.
We expect to experience significant fluctuations in future quarterly
operating results that may be caused by multiple factors, many of which are
not within our control, including the following:
- the level of usage of the Internet;
- the demand for Internet advertising and our products and services;
- the level of user traffic on our online services;
- the number, timing and significance of new service announcements
by us and our competitors;
- the acceptance of our marketing initiatives;
- our ability to develop, market and introduce new and enhanced
versions of our services on a timely basis;
- the level of product and price competition;
- pricing changes for Internet-based advertising;
- changes in our operating expenses, service mix, or sales incentive
strategy; and
- changes in general economic factors or conditions specific to the
Internet industry.
Our operating expense levels are based, in significant part, on
management's expectations of future quarterly revenue. If actual revenue
levels on a quarterly basis are below management's expectations, both gross
margins and results of operations are likely to be adversely affected because
a relatively small amount of our costs and expenses varies with revenue in
the short term. As a result, if our revenues are lower than we expect, our
quarterly operating results may not meet the expectations of public market
analysts or investors, which could cause the market price of our common stock
to decline.
COMPETITION IN OUR INDUSTRY COULD REDUCE OR ELIMINATE THE DEMAND FOR OUR
SERVICES.
We face intense competition in the markets our products and services.
We generate revenue from the sale of advertising space on our Web site; the
online retailing of select homeschooling products and services (including
commissions and referral fees from co-marketing relationships and affinity
marketing programs); and, to the provision of Internet services. For our
retails sales commissions and fees, we compete with traditional buying
services, stores and other Web sites where the products and services we
feature may be available. To sell advertising space on our Web site, we
compete with all other mediums of advertising such as print and direct mail,
radio and television, as well as the hundreds of thousands of Web sites.
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For example, the largest providers of online navigation, information,
entertainment, business and community services, such as Yahoo!, Lycos,
AltaVista, Microsoft, Netscape and America Online, provide Internet products
and services that target a wide range of audiences and communities which may
also appeal to our Christian and family-friendly audience. Likewise, we face
competition from companies providing similar services to other vertical
markets or targeted audiences that overlap with the interests of our
audience. There are also several other companies, including nonprofit
organizations, which are attempting or may attempt to aggregate Christian or
family-friendly content on the Internet. These competitors include
Christianity Online, a community portal maintained by publisher Christianity
Today, Inc., Christianity.com, a privately held provider of Christian content
and Internet-enabling solutions for individuals and Christian organizations.
iBelieve.com, a privately held Internet retailer of Christian related goods
and services; OnePlace.com, and ICRN which was acquired by Salem
Communications; Gospel Communications Network, a Web site operated by a
division of Gospel Films; Lightsource Online, a Web site operated by KMA
Gaylord Entertainment; and Christian Answers.Net, a Web site operated by Eden
Communications.
Many of these competitors have longer operating histories, greater name
recognition and significantly greater financial and other resources than
Crosswalk. Moreover, there are no substantial barriers to entry in our
markets, and we expect this competition to continue to intensify, especially
as we expand our own product and service offerings. For instance, the
presence of these competitors in the Internet marketplace could cause us to
increase our spending on marketing, sales and product development.
There can be no assurance that we will ever be positioned to compete
successfully with our current or future competitors nor can there be any
assurance that the competitive pressures we face will not result in increased
marketing costs, decreased Internet traffic or loss of market share or
otherwise will not materially adversely affect our business, results of
operations and financial condition.
WE COMPETE IN A MARKET SUBJECT TO RAPID TECHNOLOGICAL CHANGES AND MUST
CONTINUE TO ENHANCE OUR PRODUCTS AND SERVICES TO COMPETE EFFECTIVELY.
The market in which we compete is characterized by rapidly changing
technology, evolving industry standards, frequent new service and product
announcements, introductions and enhancements and changing customer demands.
For example, to the extent that higher bandwidth Internet access becomes more
available, we may be required to make significant changes to the design and
content of our products and services. In addition, the ever changing nature
of the Internet and the continual increase in the number of companies from a
multitude of industries offering Internet-based products and services
indicate that our future success will depend in significant part on our
ability to adapt to rapidly changing technologies, the ability to adapt our
services and products to evolving industry standards, and to continually
improve the performance, features and reliability of our services and
products in response to both evolving demands of the marketplace and
competitive service and product offerings.
For example, we must continue to enhance and improve the content,
features and functionality of our Web site. There is no assurance that we
will be able to successfully identify new product and service opportunities
or successfully design, develop, test and introduce new services and products
in a timely manner. Furthermore, even if we are able to successfully
identify, develop and introduce new products and service, there is no
assurance that a market for these products and services will materialize to
the size and extent that we anticipate. If a market does not materialize as
we anticipate, our business, operating results, and financial condition could
be materially adversely affected. The following factors could affect the
success of our products and services:
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- The failure of our business plan to accurately predict the rate at
which the market for Internet products and services will grow;
- The failure of our business plan to accurately predict the types
of products and services the future Internet marketplace will
demand;
- Our limited experience in marketing our products and services;
- The failure of our business plan to accurately predict our future
participation in the Internet marketplace;
- The failure of our business plan to accurately predict the
estimated sales cycle, price, and acceptance of our products and
services;
- The development by others of products and services that render our
products and services noncompetitive or obsolete; and
- Our failure to keep pace with the rapidly changing technology,
evolving industry standards, and frequent new product and service
introductions that characterize the Internet marketplace.
OUR REVENUE MODEL DEPENDS ON THE ADOPTION AND EFFECTIVENESS OF THE INTERNET
AS AN ADVERTISING MEDIUM AND OUR ABILITY TO ATTRACT AND EXPAND OUR USER AND
ADVERTISER BASE
We currently derive and expect to continue deriving a significant
portion of our revenues from advertisements and sponsorships on our Web
site. Accordingly, our future success is highly dependent on the acceptance
and growth of the Internet as an advertising medium and our ability to
attract and expand our user and advertiser base. Our ability to sustain and
increase our current level of advertising revenues depends, in part, on our
ability to hire, retain, manage, train and motivate our internal sales
force. If a significant portion of our sales force leaves, we may not be
able to compete effectively for or retain current and potential advertisers.
In addition, for the adoption of the Internet as an advertising
mechanism to increase, particularly to those companies that have historically
relied upon other forms of media, companies must be convinced that
advertising or promoting their products or services on the Internet is more
effective than other forms of media. Most of our current and potential
advertising customers, however, do not have a long history of using the
Internet as an advertising medium and continue to allocate only a limited
portion of their advertising budgets to Internet advertising. Moreover,
because the Internet advertising market is new and rapidly evolving, there
are no widely accepted standards or measurements for gauging its
effectiveness. As a result, our advertisers may challenge or refuse to
accept our internal or third-party measurements of advertisement delivery,
and such measurements may contain errors. If advertisers determine that
banner advertisements, or other forms of Internet advertising, are not an
effective advertising medium, then we may not be able to increase or sustain
our current advertising revenues. Likewise, since companies advertising on
the Internet typically prefer to advertise on high-traffic sites, our ability
to increase our advertising revenue will depend in large part on our ability
to attract more users to our Web site.
The intense competition we face in the sale of advertising has resulted
and will continue to result in a wide range of rates quoted by different
vendors for a variety of products and services. This, combined with a
limitation on the type and content of advertising acceptable to management
for use on crosswalk.com, makes it very difficult to project our future
levels of Internet advertising revenue.
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WE MUST CONTINUE TO DEVELOP AND INCREASE AWARENESS OF A "BRAND IDENTITY" IN
ORDER TO ATTRACT AND EXPAND OUR USER AND ADVERTISER BASE.
With the growing number of Internet sites and low barriers to entry in
our industry, we believe that developing and maintaining the "crosswalk.com"
brand is critically important to our future success in attracting and
expanding our audience and advertiser base. Promotion and enhancement of our
brand will depend in large part on our ability to continue product
high-quality products and services to the users of our Web site. We may also
find it necessary to substantially increase our expenditures for creating and
maintaining a distinct brand loyalty among Internet users. In addition, if
there is a breach (or alleged breach) of our security or the privacy of our
users, or if any third party undertakes illegal or harmful activity that
affects our services or users, we could suffer substantial adverse publicity
which may harm our brand reputation. Therefore, if we (1) cannot provide
high quality online products and services, (2) introduce new online products
and services that are not favorably received by users, (3) fail to adequately
promote and maintain our brands, (4) incur excessive expenses in attempting
to enhance our brand images or promote our products and services, or (5) are
subject to unfavorable publicity due to breaches of our security systems, our
business, results of operations and financial condition could be materially
effected.
WE MAY NOT BE ABLE TO SECURE FUNDING IN THE FUTURE TO OPERATE OUR BUSINESS
We require substantial working capital to fund our business. We have
had significant operating losses and negative cash flow from operations since
inception and expect this to continue for the foreseeable future. Although
with the recent cash infusion as described in the Recent Development section
herein, we believe that our present cash and cash equivalents, and working
capital will be adequate to sustain our current level of operations for the
forseeable future, we may need to raise additional funds to expand our
marketing initiatives and to accelerate the growth of the business. We may
also need to raise additional funds sooner in order to fund more rapid
expansion, to develop new or enhanced services or products, to respond to
competitive pressures or to acquire complementary products, businesses or
technologies. In addition, we may discover that we have underestimated our
working capital needs, and we may need to obtain additional funds to sustain
our operations. If additional funds are raised through the issuance of
equity or convertible debt securities, the percentage ownership of the our
shareholders will be reduced and such securities may have rights, preferences
or privileges senior to those of our existing shareholders. There can be no
assurance that additional financing will be available on favorable terms, or
at all. If adequate funds are not available or are not available on
acceptable terms, we may not be able to fund growth, take advantage of
acquisition opportunities, develop or enhance services or products or respond
to competitive pressures. Such inability could have a material adverse
effect on our business, results of operations and financial condition.
COMPUTER SYSTEMS AND SOFTWARE ARE CRITICAL TO OUR OPERATION AND ANY
SIGNIFICANT DISRUPTION WOULD ADVERSELY AFFECT OUR BUSINESS
A key element of our strategy is to generate a high volume of traffic
on our Web site. Accordingly, the performance of our services and products
is critical to our reputation, our ability to attract customers to
crosswalk.com and market acceptance of these services and products. Any
system failure, including network, software or hardware failure, that causes
interruptions in the availability or increased response time of our services
would reduce traffic to crosswalk.com and, if sustained or repeated, would
reduce the attractiveness of our services to advertisers and other future
potential customers or Internet users. An increase in the volume of traffic
conducted through our services and products could strain the capacity of our
software or hardware, which could lead to slower response time or system
failures. In addition, as the number of Web sites and Internet users
increases, there can be no assurance that our services and products will be
able to compete with firms who may have greater financial resources than we
do. We are also dependent upon Web browsers and Internet and online
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service providers for access to our services and consumers may experience
difficulties due to system failures unrelated to our own internal systems,
services and products. To the extent that the capacity constraints described
above are not effectively addressed by management, such constraints would have a
material adverse effect on our business, results of operations and financial
condition.
We are also vulnerable to damage from fire, floods, earthquakes, power
loss, telecommunications failures, break-ins and similar events. Although we
carry property insurance, our coverage may not be adequate to compensate for
all losses that may occur. Despite the implementation of network security
measures, our servers are also vulnerable to computer viruses, physical or
electronic break-ins and similar disruptive problems. Computer viruses,
break-ins or other problems caused by third parties could lead to
interruptions, delays or cessations in service to users of our services and
products. The occurrence of any of these risks could have a material adverse
effect on our business, results of operations and financial condition.
WE INTEND TO PURSUE STRATEGIC ACQUISITIONS AND OUR BUSINESS COULD BE
MATERIALLY ADVERSELY AFFECTED IF WE FAIL TO CONSUMMATE SUCH TRANSACTIONS OR
ADEQUATELY INTEGRATE ACQUIRED BUSINESSES.
Our current strategy is to broaden the number, scope and content of
crosswalk.com through the acquisition of existing sites and businesses
specializing in Internet-related technologies and content, as well as through
internally developed Internet sites and services. As part of this strategy,
we acquired gofishnet.com, Inc., an Internet retailer of Christian music and
videos, and Wike Associates (d/b/a Media Management, Inc.), whose Web site
GOSHEN.net is now our wholly owned subsidiary. Any similar future
investments would entail a number of risks, including the following:
- diversion of resources and management's attention;
- the inability to generate anticipated revenues;
- expenses, delays and difficulties integrating the acquired company
into our existing organization;
- the amortization of the acquired company's intangible assets;
- the potential loss of key employees of the acquired companies;
- the impairment of relationships with third parties; and
- potential additional expenses.
There can be no assurance that management would be successful in
overcoming these risks or any other problems encountered in connection with
such acquisitions or new investments.
WE RELY ON A NUMBER OF STRATEGIC RELATIONSHIPS WITH THIRD PARTIES TO SUPPLY
THE TECHNOLOGY TO OPERATE OUR BUSINESS.
We currently license several technologies from third parties. There
can be no assurance that these third party technology licenses will be
available on commercially reasonable terms, if at all. Our inability to
obtain any of these technology licenses could result in delays or reductions
in the introduction of new services or product shipments or could materially
and adversely affect the performance of our services until equivalent
technology could be identified, licensed and integrated. Any such delays or
reductions in
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the introduction of services or product shipments or adverse impact on service
quality could materially adversely affect our business, results of operations
and financial condition.
We have entered into certain material agreements with numerous
businesses, which provide us necessary services and products. The following
table provides information pertinent to these relationships:
<TABLE>
<CAPTION>
Name Service Provided Term Consideration
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<S> <C> <C> <C>
Exodus Communications Hosting 14 Month contract Company pays monthly fixed rate
to March 2001
Genuity Hosting Month to month Company pays monthly fixed rate
ichat Chat Technology Annual Renewal Company paysannual license fee
Microsoft Site Server3 Retail Application One Time Charge Company paid one time fee
Cybercash Internet secure Month to month Company pays fee per transaction
transaction capability
Real Media Ad server software Perpetual license Company paid one time license fee
Accrue Internet Statistical Perpetual license Company paid one time license fee
Reporting Software
Vignette Internet Publishing Annual Renewal Company paid one time license fee
Software and annual renewal license fee
N2H2 Filtering Software Month to month Company paid one time license fee
and pays monthly usage fees
Oracle Database Management Annual Renewal Company pays one time license fee
Software and annual maintenance fee
Akamai Streaming Media Annual Renewal Company pays fees for services
Services rendered
</TABLE>
If these arrangements and activities with such companies were lessened,
curtailed, or otherwise modified, we may not be able to replace or supplement
such services alone or with other companies. If these companies were to
cease to jointly provide their services, our business, results of operations,
and financial condition could be materially and adversely affected.
WE MAY ENCOUNTER DIFFICULTIES MANAGING OUR GROWTH THAT COULD ADVERSELY AFFECT
OUR RESULTS OF OPERATIONS.
A key part of our strategy is to grow, which may strain our managerial,
operational and financial resources. The rapid execution necessary for us to
be established as a leader in the developmental market for Internet-based
sales of Christian related products, sponsorship and advertising requires an
effective planning and management process. Our development has placed, and is
expected to continue to place, a significant strain on managerial, technical,
sales and marketing and administrative personnel as well as our financial
resources. To manage our growth, we must implement operational and financial
systems and train and manage our employee base. There can be no assurance
that we will be able to successfully implement such systems on a timely
basis, if at all. Further, we will be required to manage multiple
relationships with consumers, strategic partners and other third parties.
There can be no assurance that
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our systems, procedures or controls will be adequate to support our future
operations. Our future operating results will also depend on our ability to
expand our sales and marketing organizations, implement and manage new services
to penetrate broader markets and further develop and expand our organization. If
we are unable to manage growth effectively, our business, results of operations
and financial condition will be materially adversely affected. There can be no
assurance that we will be able to effectively manage such change.
OUR SUCCESS IS TIED TO THE CONTINUED GROWTH AND USE OF THE INTERNET AND THE
ADEQUACY OF THE INTERNET INFRASTRUCTURE.
Our success is dependent in large part upon the continued growth in the
use of the Internet. The number of users and advertisers on the Internet may
not increase and commerce over the Internet may not become more accepted and
widespread for a number of reasons, including:
- inconsistent quality of service;
- actual or perceived lack of security of information;
- lack of access and ease of use;
- the failure of the Internet's infrastructure to support Internet
usage or electronic commerce;
- the failure of businesses developing and promoting Internet
commerce;
- regulation of the Internet; and
- lack of availability of cost-effective, high speed service or
communications equipment.
Published reports also indicate that as the Internet has grown, users
increasingly experience delays, transmission errors and other problems with
their use. The use of the Internet may not grow if there are delays in the
development or adoption of modifications by third parties to the current
configuration of the Internet to support the increased levels of activity.
If none of the foregoing changes occurs, or if the Internet does not become a
viable commercial medium, our business, results of operation, an financial
conditions could be materially adversely affected. Moreover, even if those
changes occur, we may need to spend substantial resources to adapt our
services to any new technologies relating to the Internet.
WE MUST RETAIN KEY PERSONNEL TO SUCCESSFULLY MANAGE OUR BUSINESS.
We believe our most important asset is our people. Our performance is
substantially dependent on the performance of our senior management,
including William Parker, our Chief Executive Officer and President, and
other key members of management. Although the Company has employment
agreements, which include non-compete provisions, with its senior management,
these agreements may be terminated upon thirty days' written notice. An
illustration of this concern was the recent announcement of the resignation
of our Chief Operating Officer. While we have no plans to fill this position
and the impact of this is unknown, if there is further senior management
departure, the result could be a material adverse effect on our business,
results of operations and financial condition due to the loss of knowledge
regarding the development, opportunities and challenges of our business. Our
future success will also depend on our continuing ability to attract and
retain additional qualified marketing, sales and technical personnel. There
is currently a shortage of qualified personnel with the skills we require,
and this
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shortage is likely to continue. If we are unable to attract, motivate and retain
qualified personnel, there could be a material adverse effect on our business,
results of operations and financial condition.
OUR CLASSIFICATION AS A "RELIGIOUS CORPORATION" MAY LIMIT OUR ABILITY TO
ATTRACT AND RETAIN PERSONNEL AND COULD SUBJECT US TO LEGAL LIABILITY.
Our bylaws provide that we are a "religious corporation." In general
our policy is to include (1) among our officers and directors,
unconditionally, and (2) among our employees where a bona-fide occupational
qualification exists, only persons who, upon request, subscribe to our
Christian statement of faith. We believe that this is necessary to best
identify with and service our selected Christian market niche and to generate
our Internet product which is heavily content laden. We believe that our use
of these religious criteria in our employment practices does not violate
federal law relating to equal employment opportunities because we qualify as
an exempt religious corporation for purposes of federal employment law.
Federal employment law has been subject to limited judicial and regulatory
interpretation on the question of what type of religious corporation would be
exempt from the reach of the law. Federal employment law is enforced, in
part, by a federal regulatory agency that is vested with broad discretion in
interpreting its meaning. Our policies and procedures with respect to hiring
have not been examined by federal or state authorities. For these reasons,
there can be no assurance that a review of our hiring practices or the
operation of our business will not result in determinations that materially
adversely affect our business, results of operations and financial condition
or our ability to attain our objectives.
WE ARE SUBJECT TO U.S. AND FOREIGN GOVERNMENT REGULATION OF THE INTERNET THAT
COULD IMPACT OUR BUSINESS.
We are subject to existing federal, state and local laws and
regulations that are applicable to businesses generally on such issues as
advertising, sweepstakes, promotions, quality of products and services, and
intellectual property ownership and infringement. In addition, although we
are not currently subject to direct regulation by any government agency,
there are currently a few laws and regulations directly applicable to access
to or commerce on the Internet. The United States federal government, as
well as various state and local governments, have recently passed legislation
that regulates various aspects of the Internet relating to issues such as
user privacy, online content, copyright infringement, taxation, access
charges, liability for third-party activities, and jurisdictions. For
example, the federal government recently enacted a law imposing a three-year
moratorium on new taxes on Internet-based transactions. This moratorium
relates to new taxes on Internet access fees and state taxes on e-commerce.
We have not been able to determine how we will be affected by this
moratorium, but to the extent that it provides a material benefit, its
expiration could have a material adverse effect on our financial condition
and results of operations.
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, covering issues such as libel, pricing, user privacy and
characteristics and quality of products and services. In addition, the
European Union has recently enacted privacy and copyright directives that
could impose additional burdens and costs on our operations as we expand
internationally. Due to the global nature of the Internet, it is possible
that the governments of other nations might attempt to regulate its
transmissions, and we may unintentionally violate such laws and be prosecuted
for such violations. The adoption of any additional laws or regulations may
decrease the growth of the Internet, which could in turn decrease the demand
for our services and products and increase our cost of doing business or
otherwise have an adverse effect on our business, results of operations and
financial condition. Moreover, the applicability to the Internet of existing
laws in various jurisdictions governing issues such as property ownership,
libel and personal
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privacy is uncertain. Any such new legislation or regulation could have a
material adverse effect on our business, results of operations and financial
condition.
WE MAY BE SUBJECT TO LIABILITY FOR OUR ONLINE SERVICES.
Our online products and services allow our users to exchange
information, generate and download content, and conduct business. The
liability issues for providers of these types of online services for the
actions of their users is unsettled. There is a potential that claims could
be made against us for defamation, negligence, personal injury, infringement
of intellectual property rights, or other theories based on the content of
the information available from our Web site. Similar types of claims have
been brought, and sometimes successfully asserted, against other online
service providers or through content and materials that may have been posted
by users in our bulletin boards, classifieds or chat room services.
WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR PROPRIETARY TECHNOLOGY.
We regard our technology as proprietary and attempt to protect it with
copyrights, trademarks, trade secret laws, restrictions on disclosure and
transferring title and other methods. We also generally enter into
confidentiality or license agreements with our consultants and business
partners, and generally control access to and distribution of documentation
and other proprietary information. Despite these precautions, it may be
possible for a third party to copy or otherwise obtain and use our products
or technology without authorization, or to develop similar technology
independently. Policing unauthorized use of our technology is also
difficult. There can be no assurance that the steps taken by management will
prevent misappropriation or infringement of our technology. In addition,
litigation may be necessary in the future to enforce our intellectual
property rights, to protect our trade secrets or to determine the validity
and scope of the proprietary rights of others. Such litigation could result
in substantial costs and diversion of resources and could have a material
adverse effect on our business, results of operations and financial condition.
WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS OF THIRD
PARTIES.
We cannot assure you that third parties will not claim that our
products or services infringe upon their intellectual property rights. We
have not conducted a search to determine whether any of our services or
technologies may be infringing upon the rights of any third parties.
However, a number of Internet companies are actively developing search,
indexing, e-commerce and other Web-related technologies. We expect that many
of these companies will take steps to protect these technologies, including
obtaining patent protection. In addition, we are aware that a number of
patents have been issued in the areas of e-commerce, online direct marketing,
common Web graphics formats and Web-based information indexing and retrieval.
Third parties may assert claims against us alleging that we infringe their
intellectual property rights. We may incur substantial expenses in defending
ourselves against such claims regardless of their merit. If we determine
that licensing any third party's proprietary rights is appropriate, we cannot
guarantee that we will be able to obtain a license on reasonable terms. As a
result of these developments, we could incur substantial costs that could
have a material adverse effect on our business, results of operation or
financial condition.
WE MAY BE LIABLE IF THIRD PARTIES MISAPPROPRIATE OUR USER'S PERSONAL
INFORMATION.
If third parties were able to penetrate our network security and
misappropriate our users' personal information, we could be subject to
liability. For instance, if a third party misappropriates credit card
information of one of our users, we could be liable for unauthorized
purchases with the information or
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<PAGE> 14
other similar fraud claims. In addition, such misappropriation could result in
liability for other misuses of personal information, such as unauthorized
marketing purpose.
OUR STOCK PRICE HAS HISTORICALLY BEEN VOLATILE AND COULD AFFECT YOUR ABILITY
TO RESELL SHARES AT ATTRACTIVE PRICES.
The price of our common stock has been highly volatile due to factors
that will continue to affect the price of our stock. Our common stock traded
as high as $10.50 per share and as low as $1.00 between October 3, 1999 and
October 3, 2000. This volatility may continue. Some of the factors that
could lead to this type of volatility include:
- Price and volume fluctuations in the stock market at large that do not
relate to our operating performance;
- Fluctuations in our quarterly revenue and operating results;
- Structure of future capitalization, if any;
- Announcements of product releases by us or our competitors;
- Failure to meet or exceed estimates by securities analysts;
- Any loss of key management;
- Announcements of acquisitions and/or partnerships by us or our
competitors;
- General economic conditions and general market volatility of
Internet-related stocks; and
- Increases in outstanding shares of common stock, including upon exercise
or conversion of derivative securities.
These factors may continue to affect the price of our common stock
in the future.
WE CANNOT PREDICT THE EFFECT THAT THE EXERCISE OF EXISTING OPTIONS WILL HAVE
ON OUR STOCK.
As of June 30, 2000, there were 7,708,744 shares of common stock outstanding
and 2,287,581 shares of common stock issuable upon the exercise of
outstanding warrants and options. We are unable to predict the effect that
any subsequent sales of securities by our existing shareholders, under Rule
144 or otherwise, may have on the then-prevailing market price of our common
stock, although such sales could have depressive effect on such market
price. Nevertheless, the possibility that substantial amounts of common
stock may be sold in the public market may adversely affect prevailing market
prices of the common stock and could impair our ability to raise capital
through the sale of its equity securities.
OUR STOCKHOLDERS' ABILITY TO RECOVER MONETARY DAMAGES FROM OUR OFFICERS AND
DIRECTORS IS LIMITED.
Section 145 of the General Corporation Law of the State of Delaware
contains provisions entitling our directors and officers to indemnification
from judgments, fines, amounts paid in settlement and reasonable expenses,
including attorney's fees, as a result of an action or proceeding in which
they may be involved by reason of being or having been a director or officer
of Crosswalk.com provided the officers or directors acted in good faith. Our
certificate of incorporation contains provisions indemnifying our officers
and directors to the fullest extent provided by Delaware law. As a result,
the rights of our
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<PAGE> 15
shareholders to recover monetary damages from directors of Crosswalk.com for
breaches of directors' fiduciary duties may be significantly limited.
WE HAVE NOT HISTORICALLY PAID DIVIDENDS AND DO NOT ANTICIPATE PAYING DIVIDENDS
IN THE NEAR FUTURE.
We have not paid any dividends on capital stock to date and do not
currently intend to pay dividends in the foreseeable future. The payment of
dividends, if any, will be contingent upon our revenue and earnings, if any,
our capital requirements and our general financial condition. The payment of
any dividends will be within the discretion of our Board of Directors. It is
the Board's current intention to retain all earnings, if any, for use in
business operations and, accordingly, we do not anticipate paying any cash
dividends in the foreseeable future.
WE ARE SUBJECT TO THE NASDAQ NATIONAL MARKET SYSTEM LISTING ELIGIBILITY AND
MAINTENANCE REQUIREMENTS AND OUR STOCK COULD BE AFFECTED IF WE FAIL TO
MAINTAIN THESE REQUIREMENTS.
Under the current rules relating to the continued listing of securities
on the Nasdaq National Market System, a company must maintain (a) at least
$4,000,000 in net tangible assets (b) public float of at least 750,000
shares, (c) market value of public float of at least $5,000,000, and (d) a
minimum bid price of $1.00 per share. If we are not able to maintain these
listing requirements, we may be downgraded to Nasdaq SmallCap status.
If we should continue to experience losses from operations, we may be
unable to maintain the standards for continued listing and our common stock
could be subject to delisting from the Nasdaq National Market System or
furthermore from the Nasdaq SmallCap Market. Trading, if any, in our common
stock would thereafter be conducted in the over-the-counter market on an
electronic bulletin board established for securities that do not meet the
Nasdaq SmallCap listing requirements or in what are commonly referred to as
the "pink sheets." As a result, an investor may find it more difficult to
dispose of, or to obtain accurate quotations as to the price of, our common
stock .
If our common stock were delisted from Nasdaq, and no other exclusion
from the definition of a "penny stock" under applicable SEC regulations were
available, our common stock may become subject to the penny stock rules that
impose additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited
investors (generally defined as investors with net worth in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together with
spouse). For transactions covered by these rules, the broker-dealer must
make a special suitability determination for the purchase and must have
received the purchaser's written consent to the transaction prior to sale.
Consequently, delisting from Nasdaq, if it were to occur, could materially
adversely affect the ability of broker-dealers to sell the securities. and
the liquidity and trading price of our common stock.
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<PAGE> 16
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements made in this prospectus and the documents
incorporated by reference in this prospectus under the captions "The Company"
and "Risk Factors" and elsewhere in this prospectus constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are subject to the safe
harbor provisions of the reform act. Forward-looking statements may be
identified by the use of terminology such as may, will, expect, anticipate,
intend, believe, estimate, should, or continue or the negatives of these
terms or other variations on these words or comparable terminology. To the
extent that this prospectus contains forward-looking statements regarding the
financial condition, operating results, business prospects or any other
aspect of our company, you should be aware that our actual financial
condition, operating results and business performance may differ materially
from that projected or estimated by us in the forward-looking statements. We
have attempted to identify, in context, some of the factors that we currently
believe may cause actual future experience and results to differ from their
current expectations. These differences may be caused by a variety of
factors, including but not limited to adverse economic conditions, intense
competition, including entry of new competitors, ability to obtain sufficient
financing to support our operations, progress in research and development
activities, variations in costs that are beyond our control, changes in
capital expenditure budgets for cable companies, adverse federal, state and
local government regulation, inadequate capital, unexpected costs, lower
sales and net income, or higher net losses than forecasted, price increases
for equipment, inability to raise prices, failure to obtain new customers,
the possible fluctuation and volatility of our operating results and
financial condition, inability to carry out marketing and sales plans, loss
of key executives, and other specific risks that may be alluded to in this
prospectus.
USE OF PROCEEDS
All of the shares covered by this prospectus are being offered by the
selling shareholders. Accordingly, we will not receive any of the proceeds
from the offer and sale of the shares.
SELLING SHAREHOLDERS
The common stock covered by this prospectus consists of shares issued
or issuable to the selling shareholders from time to time as payment for
title and corporate sponsorship, advertising rights for our Web site under a
Network Title Sponsorship Agreement with the selling shareholders (the
"Sponsorship Agreement").
The number of shares that may be actually sold by the selling
shareholders will be determined by such selling shareholders. Because the
selling shareholders may sell all, some or none of the shares of common stock
which they hold, and because the offering contemplated by this prospectus is
not currently being underwritten, no estimate can be given as to the number
of shares of common stock that will be held by the selling shareholders upon
termination of the offering.
The following table sets forth certain information regarding the
selling shareholders, including:
- The name of the selling shareholders,
- The beneficial ownership of common stock of the selling
shareholders as of September 21, 2000, and
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<PAGE> 17
- The maximum number of shares of common stock offered by the
selling shareholders.
The information as to beneficial ownership is based on data
furnished by the Company's transfer agent as of the prospectus date of
effectiveness. The shares of common stock included for resale under this
registration statement were based on the number of shares derived by dividing
the value of advertising services provided during the one year contract term,
expiring September 30, 2000, by the average closing sale price of our common
stock during each quarter through September 30, 2000.
<TABLE>
<CAPTION>
Selling Shareholder Shares of Common Stock Shares of Common Stock
------------------- Beneficially Owned Prior to Included Under this Registration
Offering Statement
---------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Christian Network, Inc. 131,071 (1.7%) 131,071 (1.7%)
28059 U.S. Highway 19, North
Suite 300
Clearwater, Florida 33761
David Sams 46,416 (0.6%) 46,416 (0.6%)
400 Beverly Drive
Suite 420
Beverly Hills, California 90212
</TABLE>
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<PAGE> 18
PLAN OF DISTRIBUTION
The sale of the shares offered by this prospectus may be made in the
Nasdaq National Market or other over-the-counter markets at prices and at
terms then prevailing or at prices related to the then current market price
or in negotiated transactions. These shares may be sold by one or more of
the following:
- A block trade in which the broker or dealer will attempt to sell shares
as agent but may position and resell a portion of the block as principal
to facilitate the transaction.
- Purchases by a broker or dealer as principal and resale by a broker or
dealer for its account using this prospectus.
- Ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
- In privately negotiated transactions not involving a broker or dealer.
In effecting sales, brokers or dealers engaged to sell the shares may
arrange for other brokers or dealers to participate. Brokers or dealers
engaged to sell the shares will receive compensation in the form of
commissions or discounts in amounts to be negotiated immediately prior to
each sale. These brokers or dealers and any other participating brokers or
dealers may be deemed to be underwriters within the meaning of the Securities
Act of 1933 in connection with these sales. We will receive no proceeds from
any resales of the shares offered by this prospectus, and we anticipate that
the brokers or dealers, if any, participating in the sales of the shares will
receive the usual and customary selling commissions.
To comply with the securities laws of some states, if applicable, the
shares will be sold in these states only through brokers or dealers. In
addition, in some states, the shares may not be sold in those states unless
they have been registered or qualified for sale in these states or an
exemption from registration or qualification is available and is complied
with.
Each sale may be made either at market prices prevailing at the time of
such sale, at negotiated prices, at fixed prices, which may be changed, or at
prices related to prevailing market prices.
If necessary, the specific shares of our common stock to be sold, the
names of the selling shareholders, the respective purchase prices and public
offering prices, the names of any agent, dealer or underwriter, and any
applicable commissions or discounts with respect to a particular offer will
be set forth in an accompanying prospectus supplement or, if appropriate, a
post- effective amendment to the registration statement of which this
prospectus is a part. We are required to register under applicable federal
and state securities laws, shares of our common stock issued to the selling
shareholders under the Sponsorship Agreement.
Under applicable rules and regulations under Regulation M under the
Securities Exchange Act of 1934, any person engaged in the distribution of
the common stock may not simultaneously engage in market making activities,
subject to certain exceptions, with respect to the common stock for a
specified period set forth in Regulation M prior to the commencement of such
distribution and until its completion. In addition and without limiting the
foregoing, the selling shareholder will be subject to the applicable
provisions of the Securities Act of 1933 and Securities Exchange Act of 1934
and the rules and regulations thereunder, including, without limitation,
Regulation M, which provisions may limit the timing of purchases and sales of
shares of the common stock by the selling shareholder. The foregoing may
affect the marketability of the common stock.
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<PAGE> 19
We will bear all expenses of the offering of the common stock, except
that the selling shareholders will pay any applicable underwriting
commissions and expenses, brokerage fees and transfer taxes, as well as the
fees and disbursements of counsel to and experts for the selling
shareholders.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC periodic reporting filing number is
0-22847. You may read and copy any document we file with the SEC at the
SEC's public reference room located at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the SEC's public reference rooms located at it's regional
offices in New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0300 for further information on the operation of public reference
rooms. You can also obtain copies of this material from the SEC's Internet
web site located at http://www.sec.gov.
The SEC allows us to incorporate by reference the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference
is considered to be a part of this prospectus, and information that we file
later with the SEC will automatically update and supersede this information.
We incorporate by reference the documents listed below and any future filings
we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
- The description of our common stock, par value $.01 per share, contained
in our registration statement on Form SB-2, declared effective by the SEC
on September 24, 1997, and Post-Effective Amendment No. 2 to that Form
SB-2 declared effective by the SEC on May 4, 1999.
- Our annual report on Form 10-K for the year ended December 31, 1999.
- Our quarterly report on Form 10-Q for the quarter ended March 31, 2000.
- Our quarterly report on Form 10-Q for the quarter ended June 30, 2000.
- Our Definitive Proxy Statement on Schedule 14A as filed with the SEC on
March 30, 2000.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address and telephone number:
Crosswalk.com, inc.
4100 Lafayette Drive, Suite 110
Chantilly, VA 20151
(703) 968-4808
Attn: Shareholder Services
This prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information or representations provided in
this prospectus. We have authorized no one to provide you with different
information. The selling shareholders will not make an offer of these shares
in any state where the offer is not permitted. You should not assume that the
information in this prospectus is accurate as of any date other than the date
on the front page of this prospectus.
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<PAGE> 20
LEGAL MATTERS
Morrison & Foerster LLP, Washington D.C., has passed on the validity of
the issuance of the shares registered by this prospectus.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K
for the year ended December 31, 1999, as set forth in their report, which is
incorporated by reference in this registration statement. Our financial
statements and schedule are incorporated by reference in reliance on Ernst &
Young's report given on their authority as experts in accounting and auditing.
Hoffman, Fitzgerald & Snyder PC, (formerly Hoffman, Morrison & Fitzgerald
PC), independent auditors, have audited our consolidated financial statements
as of December 31, 1998 and for the years ended December 31, 1998 and 1997
included in our Annual Report on Form 10-K for the year ended December 31,
1999, as set forth in their report, which is incorporated by reference in this
registration statement. Our financial statements are incorporated by reference
in reliance on Hoffman, Fitzgerald & Snyder PC's report, given on their
authority as experts in accounting and auditing.
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