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As filed with the Securities and Exchange Commission on January 31, 2000
Registration No. 333-_______
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM S-8
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
________________
Chemdex Corporation
(Exact name of Registrant as specified in its charter)
Delaware 77-0465496
(State of incorporation) (I.R.S. Employer Identification No.)
1500 Plymouth Street
Mountain View, CA 94043
(Address of principal executive offices)
_______________________
Chemdex Corporation
1998 Stock Option Plan
(Full title of the Plan)
_______________________
James G. Stewart
Chief Financial Officer
Chemdex Corporation
1500 Plymouth Street
Mountain View, CA 94043
(650) 567-8900
(Name, address and telephone number, including area code, of agent for service)
_______________________
Copy to:
Jeffrey Y. Suto
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
(650) 854-4488
Page 1 of 34 Pages
Exhibit Index on Page 34
(Calculation of Registration Fee on following page)
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CALCULATION OF REGISTRATION FEE
Proposed
Maximum Proposed
Maximum Amount Offering Maximum Amount of
to be Price Per Aggregate Registration
Title of Securities to be Registered Registered(1) Share Offering Price Fee
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1998 Stock Option Plan
<S> <C> <C> <C> <C>
Common Stock,
$.0002 par value..................... 605,230 $99.25 (2) $60,069,077.50 $15,858.24
Total: 605,230 $60,069,077.50 $15,858.24
</TABLE>
_______________________
(1) This Registration Statement shall also cover any additional shares of
Common Stock which are issued or become issuable under any of the Plans
being registered pursuant to this Registration Statement by reason of any
stock dividend, stock split, recapitalization or any other similar
transaction effected without the receipt of consideration which results in
an increase in the number of the Registrant's outstanding shares of Common
Stock.
(2) Estimated in accordance with Rule 457(c) under the Securities Act solely
for the purpose of calculating the registration fee. The computation with
respect to the securities offered is based upon the average high and low
sale prices of the Common Stock as reported on the Nasdaq National Market
on January 25, 2000.
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CHEMDEX CORPORATION
FORM S-3 REGISTRATION STATEMENT
CROSS REFERENCE SHEET REQUIRED BY ITEM 501 OF REGULATION S-K FOR THE RESALE
PROSPECTUS CONSTITUTING PART I HEREIN
<TABLE>
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<S> <C>
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Item Number and Description in Part I of S-3 Caption in Prospectus
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1. Forepart of the Registration Statement and Outside Outside Front Cover Page
Front Cover Page of Prospectus
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2. Inside Front and Outside Back Cover Pages of Available Information; Incorporation of Certain
Prospectus Documents by Reference; Table of Contents
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3. Summary Information "The Company"
Risk Factors Risk Factors
Ratio of Earnings to Fixed Charges Not Applicable
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4. Use of Proceeds Use of Proceeds
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5. Determination of Offering Price Not Applicable
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6. Dilution Not Applicable
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7. Selling Security Holders Selling Stockholders
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8. Plan of Distribution Plan of Distribution; Outside Front Cover Page
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9. Description of Securities to be Registered Not Applicable
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10. Interests of Named Experts and Counsel Legal Matters
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11. Material Changes Not Applicable
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12. Incorporation of Certain Information by Reference Where You Can Find More Information
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13. Disclosure of Commission Position on Indemnification of Officers and Directors
Indemnification for Securities Act Liabilities
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</TABLE>
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PART I
PROSPECTUS
605,230 Shares
CHEMDEX CORPORATION
Common Stock
This Prospectus relates to the possible resale by certain Selling
Stockholders (as defined below and as listed on page 26 of this Prospectus) from
time-to-time of 605,230 shares of the Common Stock, par value $.0002 per share
(the "Shares"), of Chemdex Corporation, a Delaware corporation (the "Company"),
issued upon the exercise of certain stock options. The Shares are listed on the
Nasdaq National Market under the symbol CMDX.
The holders of Shares that may be resold pursuant to this Prospectus are
collectively referred to herein as the "Selling Stockholders." All Shares
covered by this Prospectus are subject to certain restrictions which lapse over
a prescribed period of time. No Shares may be resold, and the Company will take
actions to prevent such resale, until such time as all restrictions have lapsed
with respect to the Shares being resold. See "Plan of Distribution."
If resold, the Shares would be offered for the respective accounts of the
Selling Stockholders. Any or all of the Selling Stockholders may be deemed to be
affiliates of the Company at the time such shares are offered or sold by them.
See "Selling Stockholders." The Company anticipates that if any of the Selling
Stockholders chooses to resell any of the Shares pursuant to this Prospectus,
such sales will be transacted by the Selling Stockholders in ordinary market
transactions, in sales pursuant to Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act"), or otherwise. The Selling Stockholders might be
deemed to be "underwriters" within the meaning of the Securities Act, in which
event any discounts, concessions, or commissions received by them, which are not
expected to exceed those customary in the types of transactions involved, or any
profit on resales of the Shares by them, may be deemed to be underwriting
commissions or discounts under the Securities Act. The Company will receive none
of the proceeds from any sales of Shares by the Selling Stockholders.
__________
Prospective investors should review and consider carefully the discussion under
"Risk Factors," beginning on page 9.
___________
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this Prospectus. You should
not rely on any unauthorized information. This Prospectus does not offer to sell
or buy any shares in any jurisdiction in which it is unlawful. The information
in this Prospectus is current as of the date on the cover. The Company will bear
the costs of registering the Shares under the Securities Act.
______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Date of this Prospectus is January 31, 2000
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WHERE YOU CAN FIND MORE INFORMATION
This Prospectus is part of a registration statement on Form S-8 that we
filed with the Securities and Exchange Commission. Certain information in the
registration statement has been omitted from this Prospectus in accordance with
the rules of the SEC. We file proxy statements and annual, quarterly and
special reports and other information with the SEC. You can inspect and copy
the registration statement as well as the reports, proxy statements and other
information we have filed with the SEC at the public reference room maintained
by the SEC at 450 Fifth Street, N.W., Washington, D.C., and at the SEC Regional
Offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New York, New
York 10048. You can call the SEC at 1-800-732-0330 for further information
about the public reference rooms. We are also required to file electronic
versions of these documents with the SEC, which may be accessed from the SEC's
World Wide Web site at http://www.sec.gov. Reports, proxy and information
statements and other information concerning Chemdex Corporation may be inspected
at The Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" certain of our publicly-
filed documents into this Prospectus, which means that information included in
those documents is considered part of this Prospectus. Information that we file
with the SEC after the effective date of this Prospectus will automatically
update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"), until the Selling Stockholders have sold all the shares.
The following documents filed with the SEC are incorporated by reference in
this Prospectus:
1. Our Prospectus filed on July 28, 1999 pursuant to Rule 424(b) of the
Securities Act, which contains audited financial statements for the
latest fiscal year;
2. All other reports we have filed with the SEC pursuant to Section 13(a)
or 15(d) of the Exchange Act since July 28, 1999, including our
quarterly report on Form 10-Q for the quarter ended September 30, 1999
(as filed on November 12, 1999) and a current report on Form 8-K dated
December 10, 1999 (as filed on January 4, 2000);
3. The description of our Common Stock contained in a Form 8-A filed with
the SEC under the Exchange Act on July 23, 1999, including any
amendment or report filed for the purpose of updating such
description;
4. All documents we subsequently file with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, which documents are
deemed to be incorporated by reference in, and to be a part of, this
registration statement from the date of filing (except that no
document shall be deemed to be incorporated by reference if filed
after the filing of a post-effective amendment which deregisters
securities then remaining unsold); and
5. The Company's Current Report on Form 8-K filed with the SEC on January
25,000.
We will furnish without charge to you, on written or oral request, a copy
of any or all of the documents incorporated by reference. You should direct any
requests for documents to Geraldine Moore, 1500 Plymouth Street, Mountain View,
California, 94043, telephone: (650) 567-8900.
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This Prospectus contains forward-looking statements that relate to future events
or to our future financial performance. These statements are only predictions.
Actual events or performance results may differ significantly from those
anticipated in the forward-looking statements.
THE COMPANY
Chemdex's Business
Overview
Chemdex is a leading provider of e-commerce solutions to the highly
fragmented life sciences industry. We enable life sciences enterprises,
researchers and suppliers to efficiently buy and sell research products through
the Chemdex Marketplace, a secure, Internet-based purchasing solution. The
Chemdex Marketplace utilizes an advanced search engine and software to allow
users to easily identify, locate and purchase life sciences research products.
We believe the Chemdex Marketplace and purchasing solution provide significant
benefits to enterprises, researchers and suppliers.
Industry Background
Growth of Business-to-Business Commerce on the Internet
The Internet has emerged as the fastest growing communications medium in
history and is dramatically changing how businesses and individuals communicate
and share information. International Data Corporation estimates that the number
of Internet users will grow from 97 million at the end of 1998 to 320 million by
2002, though Chemdex may not benefit from this growth. The Internet has created
new opportunities for conducting commerce, such as business-to-consumer and
person-to-person e-commerce. Recently, the widespread adoption of intranets and
the acceptance of the Internet as a business communications platform has created
a foundation for business-to-business e-commerce that offers the potential for
organizations to streamline complex processes, lower costs and improve
productivity. Internet-based business-to-business e-commerce is poised for rapid
growth and is expected to represent a significantly larger opportunity than
business-to-consumer or person-to-person e-commerce. According to Forrester
Research, business-to-business e-commerce is expected to grow from $43 billion
in 1998 to $1.3 trillion in 2003, accounting for more than 90% of the dollar
value of e-commerce in the United States by 2003, though Chemdex may not benefit
from this growth.
The dynamics of business-to-business e-commerce relationships differ
significantly from those of other e-commerce relationships. Business-to-
business e-commerce solutions frequently automate or otherwise impact workflows
or processes that are fundamental to a business's operations by replacing
various paper-based transactions with electronic communications. In addition,
business-to-business e-commerce solutions must often be integrated with an
enterprise's existing information systems, a process that can be complex, time-
consuming and expensive. Finally, personnel throughout the enterprise must be
trained to use the solution. Consequently, selection and implementation of a
business-to-business e-commerce solution represents a significant commitment by
the enterprise, and the costs of switching solutions are high. In addition,
because business transactions are typically recurring and non-discretionary, the
average order size and lifetime value of a business-to-business e-commerce
customer is generally greater than that of a business-to-consumer e-commerce
customer.
Business-to-business e-commerce solutions that offer improved efficiency
through the automation of business processes and workflows are being targeted
toward a variety of industries. These solutions are likely to be most readily
accepted by industries characterized by a large number of buyers and sellers, a
high degree of fragmentation among buyers, sellers or both, significant
dependence on information exchange, large transaction volume and user acceptance
of the Internet.
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The Life Sciences Research Products Market
The life sciences research products market is large and growing, with a
myriad customers and suppliers. According to the Laboratory Products
Association, the North American life sciences research products market was
estimated to be approximately $9.4 billion in 1998. Outside of North America,
the life sciences research products market is concentrated in Europe and Japan.
The growth in the life sciences research products market is driven by increasing
research and development expenditures by pharmaceutical and biotechnology
companies, as well as an increase in the level of research funding available for
grant by the National Institutes of Health, similar international government
agencies and private foundations. Research and development budgets have been
increasing as new discovery tools, such as genomics, combinatorial chemistry and
high-throughput screening, are developed and utilized. These new technologies
allow researchers to experiment with thousands of chemical compounds
simultaneously, which requires extensive use of reagents and other life sciences
research products.
The life sciences research products market is highly fragmented. There are
over 5,000 suppliers offering more than one million products, many of which are
highly specialized. Life sciences research products include reagents, chemical
compounds, specialty chemicals, consumables, research instruments and other
equipment. The primary purchasers and users of life sciences research products
are research scientists working in pharmaceutical and biotechnology companies,
and academic and research institutions.
Limitations of Traditional Purchasing Methods for Life Sciences Research
Products
Traditional purchasing methods in the life sciences industry are
inefficient, costly and time-consuming for both the researcher and the
enterprise. Product orders are traditionally handled through an internal, paper-
based purchasing process that requires manual preparation of a purchase order,
written approval by the researcher's purchasing manager and manual order
tracking, billing and reporting across multiple departments within the
enterprise. Researchers, or their purchasing agents, place orders by telephone,
fax or e-mail and typically must place orders with multiple suppliers to obtain
all products related to a single research experiment. Additionally, the paper-
based orders are costly for purchasers and suppliers to track and bill, and the
decentralized order process does not facilitate data collection, which is
required to take full advantage of volume discounts or other economies of scale.
In addition, given the specialized and complex nature of life sciences research
products, the researchers have specific and unique knowledge regarding product
selection. Therefore, it is difficult to integrate these purchases with the
enterprise's purchasing policies and business rules.
The fragmentation of the life sciences supplier base also creates
inefficiencies for researchers. Since the researcher is often searching for a
specific product to meet the parameters of a research experiment, the current
paper-based purchasing process is complex, cumbersome and time-consuming. For
example, a life sciences researcher studying intracellular communications
related to cancer cells may need to purchase select antibodies for use in a
research experiment. There are numerous suppliers of antibodies, and product
specificity, reactivity, purity and other characteristics vary among suppliers.
Researchers may spend several hours examining multiple paper product catalogs
and other information from different suppliers to identify the most appropriate
product.
Traditional purchasing methods also present a number of challenges to
suppliers trying to reach life sciences researchers with product information.
Due to the high cost of printing and distributing paper catalogs, suppliers
cannot cost-effectively manage frequent updates and distribution of time-
sensitive information. In addition, individual researchers frequently move from
enterprise to enterprise, making it difficult for suppliers to maintain contact
with them. While some suppliers have developed Internet websites to communicate
with individual researchers, few have invested the significant time and money
required to establish an effective e-commerce channel with their customer base.
Most suppliers, often very small in size, have limited resources available to
support the growing challenge of marketing and selling to the fragmented,
worldwide life sciences research products market.
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Opportunity for Business-to-Business E-commerce Solution
Recognizing the limitations of traditional purchasing methods, several
large pharmaceutical and biotechnology companies have developed automated
purchasing systems. These systems attempt to streamline the purchasing process
and leverage purchasing volumes, but often have limitations. These solutions may
only offer access to the products of a limited number of suppliers and may not
be scalable. In addition, enterprises incur significant costs developing
internal solutions, integrating them with other enterprise systems and
maintaining their compliance with the enterprise's business rules and purchasing
policies.
Despite efforts by these enterprises, the fragmentation and complexities of
the life sciences industry and the current paper-based purchasing process create
the need for a business-to-business e-commerce solution that seamlessly links
suppliers and purchasers of research products. To effectively address the needs
of the life sciences enterprise, a solution must be cost-effective, easily
implemented and maintained, enable the enterprise to enforce its particular
purchasing policies and business rules, enable the collection of data to
maximize volume purchase discounts and interface to multiple suppliers. To
effectively address the needs of the researcher, a solution must be easy to use
and provide comprehensive product selection, in-depth product information,
specialized search capabilities and an efficient order and order-tracking
mechanism. To effectively address the needs of customers and suppliers, it is
important that the solution offer a neutral and fair marketplace with full
catalog descriptions of products and retail product pricing information. Such
information must also be fairly and accurately presented to researchers. In
addition, the solution should offer suppliers an opportunity for incremental
sales, the ability to offer customer-specific pricing and an opportunity to
leverage any existing electronic catalogs that may have been implemented by the
supplier.
The Chemdex Solution
Chemdex is a leading provider of e-commerce solutions to the life sciences
research products market. The Chemdex Marketplace is a secure, Internet-based
purchasing solution that enables life sciences enterprises, researchers and
suppliers to efficiently buy and sell life sciences research products. The
Chemdex Marketplace utilizes a database of approximately 750,000 life sciences
research products, advanced search engines and transaction software that enable
users to easily identify, locate and purchase the products they need. We also
provide applications that enable our customers and suppliers to interface with
the Chemdex Marketplace to automate their transactions. In addition to the
Chemdex Marketplace, we provide professional and implementation services to
enable our customers to take full advantage of the capabilities of the Chemdex
Marketplace.
Benefits to the Enterprise
Chemdex's purchasing solution enables enterprises to integrate their
business rules and processes, and negotiated supplier pricing with the Chemdex
Marketplace. We also provide enterprises the option of tailoring our solution to
meet their needs. Our purchasing solution requires minimal investment of time
and capital by our enterprise customers to install, maintain and use. Our
solution automates, consolidates and monitors the approval and invoicing process
as well as the order placement and delivery information for the enterprise. In
addition to reducing the cost of purchasing, our solution allows our enterprise
customers to enforce their particular business rules and aggregate purchases to
obtain volume discounts and other economies of scale. The Chemdex Marketplace
resides entirely on our servers, is accessible by standard browsers and requires
minimal software installation or integration at the customer site.
Benefits to the Researcher
Researchers, research assistants and other users within enterprises benefit
from the Chemdex Marketplace because it offers them convenient and easy one-
stop shopping. A researcher can use our advanced search engine to identify and
locate products from a broad product database and can use our automated ordering
and approval process to purchase products. For example, our solution allows a
researcher to personalize a list of product favorites to facilitate product
selection and recurring orders. The Chemdex Marketplace offers other advantages
over the traditional paper catalog alternative, including the online ability to
compare various products from a single or
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multiple suppliers and track the progress of an order. These features result in
significant time savings for the researcher.
Benefits to the Supplier
We offer suppliers a cost-effective opportunity to reach more customers and
sell more products by establishing or enhancing their Internet presence and
providing links to existing online or electronic catalogs. The Chemdex
Marketplace also offers suppliers the capability to implement customer-specific
pricing, update product information and introduce new products without being
limited by specific catalog publication cycles. In many cases, the Chemdex
Marketplace will appeal to suppliers as being less costly than traditional
distribution or representation arrangements because, among other factors, our
purchasing discounts may be less than those of traditional distributors. We plan
to provide tools to our suppliers that enable the online update and modification
of their product databases hosted on our servers, or to integrate the Chemdex
Marketplace directly with their systems. The Chemdex Marketplace is neutral in
that its search capability identifies products that meet the researchers' search
criteria, and provides an unbiased comparison of product characteristics and
pricing to allow the researcher to make a reasoned choice based upon the
information provided by suppliers.
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RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks and uncertainties described below and the other information in this
Prospectus before deciding whether to invest in shares of our common stock. If
any of the following risks actually occur, our business, results of operations
and financial condition could be materially adversely affected. This could
cause the trading price of our common stock to decline, and you might lose part
or all of your investment.
Factors Affecting our Business Condition
In addition to the other information included in this document, the
following factors should be considered in evaluating our business and future
prospects:
Our limited operating history makes it difficult for you to evaluate our
business and our prospects
We were founded in September 1997 and have a limited operating history.
Prior to investing in our common stock, you should consider the risks and
difficulties that we face as an early stage company in a new and rapidly
evolving market. Some of these specific risks and difficulties include:
o we may be unable to significantly increase and maintain customer
adoption and use of our Internet-based purchasing solution;
o we depend substantially on a purchasing solution that has been present
in the market for a limited time and may not be successful;
o we may be unable to develop and enhance the Chemdex brand;
o we may be unable to maintain existing or establish new relationships
with suppliers of life sciences research products;
o we depend substantially on revenues from product sales and we may be
unable to significantly increase revenues from product sales or
generate revenues from other sources;
o we may be unable to adapt to rapidly changing technologies and
developing markets;
o we may be unable to effectively manage our rapidly expanding
operations and the increasing use of our services;
o we may be unable to attract, retain and motivate qualified personnel,
particularly people who understand specialized life sciences research
products or the life sciences industry in general;
o we may be unable to compete in a highly competitive market dominated
by larger, more established companies with substantial financial
resources and significant customer relationships; and
o we may be unable to comply with applicable laws and regulations to
economically compete in a highly competitive market.
In 1998, we generated revenues of $29,000 and in the nine months ended
September 30, 1999 we generated revenues of $11.6 million. Due to our limited
operating history, we believe that period-to-period comparisons of our revenues
and results of operation are not meaningful. As a result, you should not rely on
our revenues or results of operations for any prior period as an indication of
future performance or prospects.
We have a history of losses and anticipate continued losses for the foreseeable
future
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We have had substantial losses since our inception. We currently expect our
losses to increase in the future and we cannot assure you that we will ever
achieve or sustain profitability. As of September 30, 1999, we had an
accumulated deficit of approximately $42.2 million. The extent of these losses
will be contingent, in part, on the amount of growth in our revenue. The extent
of these losses will also be contingent, in part, on the amount of growth in our
operating expenses, which we plan to increase. If our revenues fail to grow at
anticipated rates or our operating expenses increase without a commensurate
increase in our revenues, or we fail to adjust operating expense levels
accordingly, the imbalance between revenues and operating expenses will
negatively affect our business, revenues, results of operations and financial
condition.
To date we have derived our revenues primarily from product sales. In order
to increase our revenues, we must, among other things:
o attract new enterprise customers and retain existing enterprise
customers;
o encourage researchers employed by our enterprise customers to adopt
our Internet-based purchasing solution and to use it frequently;
o increase our product offering by adding and maintaining supplier
relationships; and
o develop new sources of revenues beyond our existing revenue sources.
If we are unable to accomplish one or more of these objectives, our
revenues may not grow as we anticipate, if at all, and our business, revenues,
financial condition and results of operations will be negatively affected. We
may not be able to build on our current sources of revenues by adding additional
products or services. Even if we do add additional products or services, there
are economic, legal, regulatory and other risks associated with adding these new
revenue sources. For example, we may post advertisements on our web site to
generate advertising revenue. However, our supplier relationships may be harmed
if our suppliers associate advertisements posted on our web site with a bias in
our offering of life sciences research products.
Our business model is not proven and may not be successful
Our business-to-business e-commerce model is based on the development of
the Chemdex Marketplace for the purchase and sale of life sciences research
products. This business model is new and not proven and depends upon our ability
to, among other things:
o sell our purchasing solution to pharmaceutical and biotechnology
companies and academic and research institutions;
o achieve high rates of adoption by researchers within enterprise
customers;
o maintain our current suppliers and enter into agreements with
additional suppliers;
o generate significant revenues from the use of our Internet-based
purchasing solution; and
o obtain higher transaction volumes and increase productivity.
We cannot be certain that our business model will be successful or that we
can achieve or sustain revenue growth or generate any profits. The success of
this business model will require, among other things, that we develop and market
solutions with broad market acceptance by our customers, suppliers, users and
strategic partners. We cannot be certain that business-to-business commerce on
the Internet generally, or our purchasing solution, services and brand in
particular, will achieve broad market acceptance. For example, purchasers may
continue purchasing products through their existing methods and may not adopt an
Internet-based purchasing solution because of their comfort with existing
purchasing habits and direct supplier relationships, the costs and resources
required to switch
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purchasing methods, the need for products not offered through the Chemdex
Marketplace, security and privacy concerns, or general reticence about
technology or the Internet.
Our gross margins are low and we will have to increase productivity in our
business to be profitable
Our gross margin for the nine months ended September 30, 1999 was
approximately 4.9%. Our gross margins are determined by price arrangements with
our suppliers, and thus we are vulnerable to any changes in those pricing
arrangements. Any decrease would have a significant negative impact on our
financial results. Our gross margins on sales of life sciences research products
are small relative to the margins earned by traditional distributors of life
sciences research products. If we do not increase these discounts,
substantially increase our revenues, and scale our business in a manner that
generates increased productivity, including further automation of our purchasing
solution, we may never achieve profitability. Distributors, in general, operate
with low margins. This is especially true in the life sciences research products
market.
In addition, due to our low gross margins, unexpected costs or expenses we
incur would substantially affect our ability to achieve or maintain operating
profits. For example, we generally bear the risks of the loss of products upon
shipment by our suppliers to our customers, of product returns and refunds to
our customers, and of non-collection of accounts receivable. Although we
maintain insurance for claims for damages to our customers or others caused by
our products we do not have insurance coverage for the costs of products lost
during shipment, product returns or uncollectable accounts receivable.
We are subject to government regulation that exposes us to potential liability
and negative publicity
We currently rely upon our suppliers to meet all packaging, distribution,
labeling, hazard and health information notices to purchasers, record keeping
and licensing requirements applicable to our business during the entire
transaction. Our reliance on suppliers' regulatory due diligence assessment of
purchasers and the compliance by suppliers and purchasers with applicable
governmental regulations may not be sufficient if we are held to need our own
licenses. For example, if we are held to be seller or a distributor of regulated
products because we did take legal title, we may have inadvertently violated
some governmental regulations by not having the appropriate license or permit
and may be subject to potentially severe civil or criminal penalties and fines
for each offense. We are aware that some of our prior sales may have been made
in the absence of us having the requisite local, state, or federal license or
permit. We may be subject to potentially severe civil and criminal penalties and
fines for each of these sales, which could have a material adverse impact on our
business, revenues, results of operations and financial condition. In addition
to these prior sales, we are unable to verify that our suppliers have in the
past complied, or will in the future comply, with the applicable governmental
regulatory requirements, or that their actions are adequate or sufficient to
satisfy all governmental or other legal requirements that may be applicable to
our sales. We could be fined or exposed to civil or criminal liability,
including monetary fines and injunctions, and we could receive potential
negative publicity, if the applicable governmental regulatory requirements have
not been, or are not being, fully met by our suppliers or by us directly.
Negative publicity, fines and liabilities could also occur if an unqualified
person, or even a qualified customer, lacks the appropriate license or permits
to sell, use or ship, or improperly receives a dangerous or unlicensed product
through the Chemdex Marketplace. We do not maintain any reserve for potential
liabilities resulting from government regulation. It is also possible that a
number of laws and regulations may be adopted or interpreted in the United
States and abroad with particular applicability to the Internet.
We rely on a limited number of enterprise customers, and any loss of an
enterprise customer could have a negative effect on us
We expect that for the foreseeable future we will generate a significant
portion of our revenues from a limited number of enterprise customers. Further,
our enterprise customers are not obligated to use our purchasing solution
exclusively or for any minimum number of transactions or dollar amounts. We
currently do not offer all of the life science research products required by our
customers, and we expect that our customers will continue to use multiple
sources to meet their needs. In addition, our contracts with our customers are
for limited terms and our customers may discontinue use of our Chemdex
Marketplace at any time upon short notice and without penalty. If
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we lose any of our enterprise customers, or if we are unable to add new
enterprise customers, our revenues will not increase as expected, we will lose
access to the researchers employed by these enterprises, we could lose a number
of our product suppliers, and our brand name and customer and supplier
perceptions of our purchasing solution would be harmed.
We will be very dependent on our strategic relationship with VWR for the
foreseeable future
We recently entered into a strategic relationship agreement with VWR
Scientific Products Corporation to jointly market VWR laboratory products using
the Chemdex Marketplace. The agreement gives us the right to offer approximately
350,000 VWR-distributed products to our customers through the Chemdex
Marketplace. VWR and Chemdex are also jointly developing an Internet purchasing
solution for VWR's existing and future customers that will provide access to
three categories of products:
o products distributed by VWR (VWR core products),
o products distributed by Chemdex (Chemdex core products), and
o products that are not distributed by either VWR or Chemdex but are
purchased from third parties (third party products).
The extent to which our operations are integrated with VWR and the
potential financial impact on us of this strategic relationship makes us very
dependent on VWR for the foreseeable future. We may experience technical or
logistical difficulties in integrating VWR's suppliers, products and services
with the Chemdex Marketplace. If we are unable to do so in a timely manner, our
business, revenues, financial condition and results of operations could be
negatively affected. In addition, our agreement with VWR is nonexclusive except
as to the purchase of third party products by VWR and some other provisions and
has a limited term. We cannot be certain that VWR will not enter into a similar
relationship with one of our competitors, or that VWR will renew our agreement
at the end of its term.
We receive no fee for orders for VWR core products through the Chemdex
Marketplace from VWR's 40 largest customers and we receive a minimal fee for all
other orders for VWR core products forwarded to VWR. Under the terms of the
agreement, VWR provides some support services for purchasing third party
products in exchange for a fee which approximates VWR's costs incurred.
Since we receive minimal gross margins for sales of third party products,
our gross profit margins on these sales are lower than our margins on sales of
Chemdex core products. To the extent sales of VWR core products or third party
products increase relative to, or displace our sales of Chemdex core products,
our revenues and gross margins will likely decline, which would make it more
difficult for us to achieve profitability.
Our strategic relationship with VWR may lead to conflicts that could be
detrimental to us
Our strategic relationship with VWR may lead to conflicts that could be
detrimental to us. For example, we plan to provide the greatest number and
variety of products from the greatest number of suppliers possible; however, our
strategic relationship with VWR may deter other suppliers, particularly those
that compete directly with VWR products, from entering into agreements with us.
In addition, as noted above, our agreement with VWR is nonexclusive, and it is
possible that VWR could enter into similar relationships with one or more of our
competitors, or develop its own purchasing solution that would compete with
ours.
The Chief Executive Officer of VWR is a member of our Board of Directors, which
may lead to conflicts of interest that could be detrimental to us
Paul Nowak, the Chief Executive Officer of VWR, is a member of our board of
directors. This may lead to conflicts of interest, as VWR is one of the
laboratory supply industry's largest distributors and is a potential competitor
of ours. In addition, VWR has entered into and may in the future enter into
relationships with our
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competitors, other suppliers or our customers. Although we intend to have Mr.
Harris excuse himself from Board discussions that involve potential conflicts of
interest, we cannot be sure that this will minimize these conflicts of interests
or that Mr. Nowak's' position as a member of our Board of Directors will not
operate to our detriment.
If we cannot build a critical mass of suppliers and customers, we will not be
able to increase our product offering and draw more customers
Our business model depends in large part on our ability to build a critical
mass of products and suppliers. To attract and maintain suppliers, we must build
a critical mass of customers. However, customers must perceive value in our
purchasing solution which, in part, depends upon the breadth of our product
offerings from our suppliers. If we are unable to increase the number of
suppliers and draw more customers to the Chemdex Marketplace, we will not be
able to benefit from any network effect, where the value to each participant in
the Chemdex Marketplace increases with the addition of each new participant. As
a result, the overall value of the Chemdex Marketplace and our purchasing
solution would be harmed, which would negatively affect our business, revenues,
financial condition and results of operations.
The time it takes to sell and implement our solution is long, which could
negatively affect our revenue growth, if any, and make it difficult to predict
our revenues and results of operations
A key element of our strategy is to market our solution directly to life
sciences organizations, and to succeed we must satisfy the enterprise purchasing
departments, the information technology groups and the individual researchers
who are the users of our Internet-based purchasing solution. The time it takes
to sell and implement our solution is long and we devote significant sales,
marketing and management resources to the sales process without any assurance
that the customer will use the Chemdex Marketplace. We are generally required to
provide a significant level of education to our customers and potential
customers regarding the use and benefits of our Internet-based purchasing
solution. Furthermore, potential enterprise customers and a number of their
departments typically engage in extensive internal reviews and analyses before
making purchase decisions. The sale and implementation of our solution are
subject to delays due to our customers' internal budgeting and procedures for
approving capital expenditures and deploying new technologies within their
networks. These delays also could impair our ability to generate revenue.
Even if enterprise customers adopt our purchasing solution, we may not increase
our revenues if researchers within these enterprises do not use the Chemdex
Marketplace
Our revenues are primarily derived from purchases of life sciences research
products by researchers, research assistants and other users within our
enterprise customers. These persons may or may not use our Chemdex Marketplace
to purchase their research products. Even if we successfully maintain existing
enterprise customers and add new enterprise customers, we may not be able to
increase revenues if researchers within our enterprise customers do not adopt
and use the Chemdex Marketplace. Once an enterprise customer adopts our
Internet-based purchasing solution, it takes time for researchers and other
users within the enterprise to become aware of, learn to use and begin using our
Chemdex Marketplace. The long sales cycle and the time it takes for researchers
to begin using our Internet-based purchasing solution could negatively affect
our revenue growth, if any, and makes it difficult to predict our results of
operations. Also, our efforts to attract researchers to adopt and to increase
their use of our solution may not be successful, which would limit our ability
to generate revenues from these customers.
Reductions in the research and development budgets and government research
funding of our customers will negatively affect our revenues
Our purchasing solution is used by researchers and their assistants and
staff at pharmaceutical and biotechnology companies, and academic and research
institutions. Changes in the research and development budgets of these companies
and institutions and the timing of spending under these budgets can have a
significant effect on the demand for life sciences research products. These
budgets are based on a wide variety of factors including the resources available
to make these expenditures, the spending priorities among various types of
research, and the policies regarding these expenditures during recessionary
periods. Any decrease in life sciences
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research and development expenditures by these companies and institutions could
have a negative effect on our revenues.
A significant portion of our sales are expected to be to research
scientists and entities whose funding is dependent on grants from government
agencies such as the U.S. National Institutes of Health (NIH) and similar
domestic and international agencies. The funding associated with approved NIH
grants generally becomes available at particular times of the year, as
determined by the federal government, and may result in fluctuations in our
revenues and results of operations. Although NIH research funding has increased
during the past several years, grants have, in the past, been frozen for
extended periods or have otherwise become unavailable to various institutions,
sometimes without advance notice. Furthermore, recent government proposals
designed to reduce or eliminate budgetary deficits have included reduced
allocations to the NIH and other government agencies that fund research and
development activities. If government funding, especially NIH grants, were to
become unavailable to researchers for any extended period of time, or if overall
research funding were to decrease, there could be a negative effect on our
business, revenues, results of operations and financial condition.
The success of our business depends on maintaining and expanding our supplier
base
Our future success depends in large part upon our ability to offer and
deliver a broad and deep life sciences research product offering to our
customers. We rely on independent suppliers and manufacturers for products
offered through our Chemdex Marketplace. To increase the breadth of our product
offering, including related products that we do not currently offer such as
laboratory equipment and supplies, we must establish relationships with
additional suppliers. Some potential suppliers may view us as detrimental to
their business, since suppliers compete with one another and with us for sales
and customers. Our agreements with suppliers are typically for one-year terms
and we cannot assure you that these agreements will be renewed beyond the
initial term. In addition, these suppliers are not required to accept purchase
orders from us. If we fail to secure products from our suppliers or if a
significant number of suppliers do not renew their agreements with us, the
breadth and depth of products that we can offer users would be decreased. In
addition, there are significant costs, difficulties and risks associated with
adding new products in related markets, such as the difficulty of signing up new
suppliers, obtaining necessary permits, complying with governmental regulation,
pressures on margins, new competition and integration of these new products into
the Chemdex Marketplace. These events could result in decreased adoption and use
of our purchasing solution and decreased revenues, which could have a negative
effect on our business, results of operations and financial condition.
Our cost of revenues includes cost of goods payable to suppliers. We cannot
assure you that our suppliers will enter into or renew agreements with us on the
same or similar terms as those currently in effect or that the cost of goods
payable to our suppliers will remain the same. Less favorable terms will make it
difficult for us to achieve profitable operations. Any decreases in our already
low gross margins will have a significant negative effect on our results of
operations and financial condition.
Our supplier agreements are nonexclusive and many of our suppliers sell
their products directly to our customers. In addition, the growing reach and use
of the Internet has further intensified competition in this industry. Some
suppliers provide customers with direct access to products, and if suppliers,
including our current suppliers, provide products to enterprise customers and
their researchers at a cost lower than ours, our revenues, results of operations
and financial condition could be negatively affected.
If we cannot timely and accurately add supplier product data to our purchasing
solution database we may lose sales and customers, which would adversely affect
our revenues
Currently, we are responsible for loading supplier product information into
our database and categorizing the information for search purposes. This process
entails a number of risks, including dependence on our suppliers to provide us
in a timely manner with accurate, complete and current information about their
products, and to promptly update this information when it changes. We will not
derive revenue from these products until these data are loaded in our system.
The time period in which we estimate loading these supplier product data is a
forward-looking statement that is subject to risks and uncertainties and actual
results may differ materially from those
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described in these forward-looking statements. Timely loading of these products
in our database depends upon a number of factors, including the file formats of
the data provided to us by suppliers and our ability to further automate and
expand our operations to accurately load these data in our product database, any
of which could delay the actual loading of these products beyond the dates
estimated by us.
In addition, we are generally obligated under our supplier agreements to
load updated product data onto our database for access through the Chemdex
Marketplace within a specified period of time following their delivery from the
supplier. Our current supplier data backlog could make it difficult for us to
meet these data update obligations to our suppliers. While we intend to further
automate the loading and updating of supplier data on our system, we cannot
assure you that we will be able to do so in a timely manner, in part because
achieving the highest level of this automation is dependent upon our suppliers'
automating their delivery of product data to us. If our suppliers do not provide
us in a timely manner with accurate, complete and current information about the
products we offer, our database may be less useful to our customers and users
and may expose us to liability. Although we screen our suppliers' information
before we make it available to our customers and users, we cannot guarantee that
the product information available in our Chemdex Marketplace will always be
accurate, complete and current, or comply with governmental regulations. This
could expose us to liability or result in decreased adoption and use of our
Internet-based purchasing solution, which could reduce our revenues and
therefore have a negative effect on our results of operations and financial
condition.
If our suppliers do not provide timely and professional delivery of products to
our customers our business will be harmed
We also rely on our suppliers and manufacturers to deliver life sciences
research products to our customers in a professional, safe and timely manner. If
the products are not delivered to our customers in a professional, safe and
timely manner, then our service will not meet customer expectations and our
reputation and brand will be damaged. In addition, deliveries that are
nonconforming, late or are not accompanied by information required by applicable
law or regulations, could expose us to liability or result in decreased adoption
and use of our Internet-based purchasing solution, which could have a negative
effect on our business, results of operations and financial condition. Further
we, and not our suppliers, typically bear the responsibility for product refunds
and returns and the risk of non-collectibility of accounts receivable from our
customers.
To attract customers and suppliers to our Chemdex Marketplace, we must not favor
one supplier over another
The life sciences research products market consists of a complex set of
relationships among manufacturers, suppliers, distributors and customers.
Adoption of our solution by suppliers and customers is dependent on their
perception that we provide a neutral, unbiased marketplace to purchase and sell
life sciences research products. To the extent that we are perceived by our
customers or suppliers as favoring one supplier over another, customers and
suppliers may lose confidence in the Chemdex Marketplace as a fair and neutral
marketplace and choose alternative solutions. Our relationship with VWR,
including the fact that VWR is a stockholder and is represented on our Board of
Directors, may compromise the perception that we provide a neutral and unbiased
marketplace for life sciences research products. Any bias, whether perceived or
actual, could have a negative impact on our ability to maintain or increase our
supplier base, which in turn may limit our ability to maintain or increase our
customer base. This would reduce revenues and therefore have a negative impact
on our business, results of operations and financial condition.
We face intense competition that could limit our ability to expand our base of
customers and users
The market for business-to-business e-commerce and Internet ordering and
purchasing is new and rapidly evolving, and competition is intense and is
expected to increase significantly in the future. We face competition from four
main areas: other companies with e-commerce offerings, traditional suppliers and
distributors of life sciences research products, life sciences companies that
have developed their own purchasing solutions and enterprise software companies
that offer, or may develop, alternative purchasing solutions. We may not be able
to compete successfully against our current or future competitors and
competition could have a material adverse effect on our business, results of
operations and financial condition. Our competitors and potential competitors
may
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develop superior Internet purchasing solutions that achieve greater market
acceptance than our solution. In addition, substantially all of our prospective
customers have established long-standing relationships with some of our
competitors or potential competitors, including most of our suppliers.
Accordingly, we cannot be certain that we will be able to expand our customer
list and user base, or retain our current customers or suppliers.
Our solution and services are new and face rapid technological changes and if we
do not respond appropriately, we may lose customers
The market for our solution is characterized by rapid technological
advances, evolving standards in the Internet and software markets, changes in
customer requirements and frequent new product and service introductions and
enhancements. As a result, our future success depends upon our ability to
enhance our current Internet-based purchasing solution and services, to develop
and introduce new solutions and services that will achieve market acceptance,
and where necessary to integrate our Internet-based purchasing solution with our
customers' enterprise resource planning systems. If we do not adequately respond
to the need to develop and introduce new solutions or services, or to integrate
with our customers' enterprise resource planning systems, then our business,
revenues, results of operations and financial condition will be negatively
affected. For example, we may lose market share and ultimately revenue as our
customers switch to our competitors' offerings if:
o we are unable to develop technology that is a success in the
marketplace;
o our technology does not integrate with our customers' systems; and
o our technology is surpassed by the superior technology of a
competitor.
Further, we may incur significant expense to integrate our purchasing
solution with our customers' enterprise resource planning systems and business
rules, and to maintain this integration as our customers' enterprise resource
planning systems evolve. Failure to provide this integration may delay or
altogether dissuade the market or a particular customer from adopting our
Internet-based purchasing solution, which could negatively affect our revenues
and therefore have a material adverse effect on our business, results of
operations and financial condition.
If we do not successfully develop and timely introduce new versions of our
purchasing solution in the next several months our business will be harmed
We are currently in the process of developing and integrating new
technology into our Internet-based purchasing solution as part of our planned
release of several enhanced versions of the Chemdex Marketplace over the next
few months. These new releases are planned to include significant enhancements
to the user interfaces, database management and search technology, and security
controls, and will allow us to offer VWR's products to our customers. The
planned timing of introduction of new releases of our purchasing solution is a
forward-looking statement that is subject to risks and uncertainties, and actual
timing may differ materially from that set forth in these forward-looking
statements as a result of a number of factors. Enhancing and introducing new
technology into our purchasing solution involves numerous technical challenges
and substantial personnel resources, and often takes many months to complete. We
cannot be certain that we will be successful at enhancing or integrating this
technology into our Internet-based purchasing solution on a timely basis, or in
accordance with our milestones or our product release objectives. In addition,
we cannot be certain that, once integrated, this technology or our Internet-
based purchasing solution will function as expected. If we are unable to enhance
and integrate this new technology into our purchasing solution on a timely
basis, we may lose customers or experience difficulty obtaining new customers,
which could adversely affect our business, revenues, financial condition and
results of operations. Major enhancements and new solutions and services often
require long development and testing periods.
In addition, our Internet-based purchasing solution is complex and, despite
vigorous testing and quality control procedures, may contain undetected errors
or "bugs" when first introduced or updated. Any inability to timely deliver a
quality solution and services could have a negative effect on our business,
revenues, financial condition and results of operations.
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We may not be able to determine or design the features and functionality that
our enterprise customers and researchers require or prefer
Our success depends upon our ability to accurately determine the features
and functionality that our enterprise and research customers require or prefer
in an e-commerce solution, and our ability to successfully design and implement
purchasing solutions that include these features and functionality. If we are
unable to determine or design in the features and functionality that enterprise
and research customers require or prefer in an e-commerce solution, our business
will be negatively affected. We have designed the Chemdex Marketplace based upon
internal development efforts and feedback from a relatively limited number of
enterprise and research customers. We cannot be certain, however, that the
features and functionality that we currently offer in the Chemdex Marketplace,
or those that we may offer in future releases of our solution, will satisfy the
requirements or preferences of our current or potential enterprise and research
customers.
We will need to manage our expanding business effectively in order to meet
customer and investor expectations
We have rapidly and significantly expanded our operations and expect to
continue to do so. This growth has placed, and is expected to continue to place,
a significant demand on our sales, marketing, managerial, operational, financial
and other resources. If we cannot manage our growth effectively, it is likely
that our revenues and results of operations will not meet customer and investor
expectations. As of September 30, 1999, we had grown to 175 employees. We expect
to hire a significant number of new employees to support our business.
Our current information systems, procedures and controls may not continue
to support our operations and may hinder our ability to exploit the market for
selling products to the life sciences industry. We are in the process of
implementing a new enterprise resource planning system that will replace our
existing accounting and management information systems and allow for future
scalability and enhancements. In addition, we anticipate requiring additional
space to accommodate our growth in the next six months. We could experience
interruptions to our business when we transition to the new enterprise resource
planning system and when we relocate to new facilities. Even after we implement
our new system and relocate to new facilities, our personnel, systems,
procedures, controls and facilities may be inadequate to support our future
operations.
We depend on our key personnel to manage our business effectively in a rapidly
changing market
Our performance is substantially dependent on the performance of our
executive officers and other key employees. We do not have any employment
agreements with our executive officers and key employees, although some of them
have severance arrangements. Our failure to successfully manage our personnel
requirements would have a negative effect on our business, revenues, financial
condition and results of operations. We have experienced difficulty from time to
time in hiring the personnel necessary to support the growth of our business,
and we may experience similar difficulty in hiring and retaining personnel in
the future. Six of our ten executive officers have only been employed by us
since January 1999 or later. Competition for senior management, experienced
sales and marketing personnel, software developers, qualified engineers and
other employees is intense, and we cannot be certain that we will be successful
in attracting and retaining our personnel. The loss of the services of any of
our executive officers or other key employees could have a negative effect on
our business. In particular, the loss of services of David Perry, our President
and Chief Executive Officer, and Pierre Samec, our Chief Information Officer,
would have a detrimental effect on our business. Mr. Perry is one of the co-
founders and is primarily responsible for our vision and future direction, and
Mr. Samec is responsible for all of our technology systems and software.
The unpredictability of our quarterly results may negatively affect the trading
price of our common stock
Our revenues and results of operations may fluctuate significantly in the
future as a result of a variety of factors, many of which are outside of our
control. As a result, you should not rely on period-to-period comparisons of
revenues and results of operations as an indication of our future performance.
Some of the factors that may affect our revenues and results of operations
include:
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o demand for and market acceptance of our Internet-based purchasing
solution and services;
o introduction of new and enhanced purchasing solutions and services by
us or our competitors;
o budgeting cycles of customers and users;
o loss of one or more of our key suppliers, customers or strategic
relationships;
o changes in our pricing policy or those of our competitors or
suppliers;
o amount and timing of capital expenditures and other costs relating to
the expansion of our operations;
o timing and number of new hires;
o ability to comply with applicable laws and regulations or obtain
necessary permits and licenses to sell or ship products to customers;
o technical difficulties with our web site or Internet-based purchasing
solution;
o level of activity and funding in the life sciences industry; and
o general economic conditions.
We may from time to time make pricing, service or marketing decisions or
enter into strategic business combinations that could have a negative effect on
our business, revenues, financial condition or results of operations for any
number of quarterly periods. For example, we intend to significantly expand our
development and engineering expenses to improve our Internet-based purchasing
solution. In addition, in order to accelerate the promotion of the Chemdex
brand, we intend to increase our marketing budget significantly. These increases
in expenses may negatively affect our results of operations for a number of
quarterly periods and we cannot assure that these measures will increase our
revenues.
Due to our relatively short operating history we have limited meaningful
historical financial data upon which to base our planned operating expenses.
Accordingly, our expense levels are based in part on our expectations as to
future revenues from new customers and are relatively fixed in the short term.
We cannot be certain that we will be able to accurately predict our revenues,
particularly in light of our limited operating history, the intense competition
in the life sciences industry, and the resulting uncertainty as to the success
of our business model. If we fail to accurately predict revenues in relation to
fixed expense levels and we are unable to adjust our operating expenses in a
timely manner in response to lower-than-expected revenues, our results of
operations and financial condition could be negatively affected.
There has been no prior market for our common stock and we expect the price of
our common stock to be volatile
An active public market for our common stock may not develop or be
sustained. Although the initial public offering price was determined based on
several factors, the market price after the offering may vary from the initial
offering price.
The market price of the common stock may fluctuate significantly in
response to a number of factors, some which are beyond our control, including:
o quarterly variations in our operating results;
o changes in estimates of our financial performance by securities
analysts;
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o changes in market valuation of Internet commerce companies generally;
o announcements by us of significant contracts, acquisitions, strategic
partnerships, joint ventures or capital commitments;
o loss of a major customer, supplier or strategic partner, or failure to
complete a sale of our purchasing solution to a significant customer;
o additions or departures of any of our key personnel;
o future sales of our common stock; and
o stock market price and volume fluctuations, which are particularly
common among highly volatile securities of Internet companies.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources, which could have a negative effect on our business, results of
operations and financial condition.
Our business will suffer if the life sciences industry does not accept Internet
solutions
Business-to-business e-commerce is a new and emerging business practice
that remains largely untested in the marketplace. Growth in the demand for our
Internet-based purchasing solution and services depends on the adoption of e-
commerce and Internet solutions by life sciences industry participants, which
requires the acceptance of a new way of conducting business and purchasing
supplies. Our business could suffer dramatically if e-commerce and Internet
solutions are not accepted or not perceived to be effective.
The Internet may not prove to be a viable commercial marketplace for the
life sciences industry for a number of reasons, including:
o inadequate development of the necessary infrastructure for
Internet-based communications within life sciences organizations;
o security and confidentiality concerns of customers and suppliers;
o lack of development of complementary products, such as high-speed
modems and high-speed communication lines;
o implementation of competing purchasing solutions;
o lack of human contact that current, traditional suppliers provide; and
o governmental regulation.
The accelerated growth and increasing volume of Internet traffic may cause
performance problems that may slow adoption of our Internet-based purchasing
solution and the Chemdex Marketplace
The growth of Internet traffic to very high volumes of use over a
relatively short period of time has caused frequent periods of decreased
Internet performance, delays and, in some cases, system outages. This decreased
performance is caused by limitations inherent in the technology infrastructure
supporting the Internet and the internal networks of Internet users.
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If Internet usage continues to grow rapidly, the infrastructure of the
Internet and its users may be unable to support the demands of growing e-
commerce usage, and the Internet's performance and reliability may decline. If
our existing or potential enterprise and research customers experience frequent
outages or delays on the Internet, the adoption or use of our Internet-based, e-
commerce purchasing solution may grow more slowly than we expect or even
decline. Our ability to increase the speed and reliability of our Internet-based
purchasing solution is limited by and depends upon the reliability of both the
Internet and the internal networks of our existing and potential customers. As a
result, if improvements in the infrastructure supporting both the Internet and
the internal networks of our enterprise customers and their researchers are not
made in a timely fashion, we may have difficulty obtaining new customers, or
maintaining our existing customers, either of which could reduce our potential
revenues and have a negative impact on our business, results of operations and
financial condition.
Security and disruption problems with the Internet or transacting business over
the Internet may inhibit the growth of our Internet-based purchasing solution
The secure transmission of confidential information over the Internet is
essential to maintaining customer and supplier confidence in our Chemdex
Marketplace. Customers generally are concerned with security and privacy on the
Internet and any publicized security problems could inhibit the growth of the
Internet, and therefore our purchasing solution, as a means of conducting
transactions. Substantial security breaches on our system could significantly
harm our business. A party that is able to circumvent our security systems could
misappropriate proprietary information or cause interruptions in our operations.
We incur substantial expense to protect against and remedy security breaches and
their consequences. Despite the implementation of security measures, our
networks may be vulnerable to unauthorized and illegal access, computer viruses
and other disruptive problems. Eliminating computer viruses and alleviating
other security problems may require interruptions, delays or cessation of
service to users accessing our solution.
Internet service providers and on-line service providers have in the past
experienced, and may in the future experience, interruptions in service as a
result of the accidental or intentional actions of Internet users, current and
former employees or others. We may be required to expend significant capital or
other resources to protect against the threat of security breaches or to
alleviate problems caused by these breaches. Although we intend to continue to
implement industry-standard security measures, we cannot be certain that
measures implemented by us will not be circumvented in the future.
If we experience a security breach that results in the misappropriation of
proprietary information maintained in our systems or if we experience
interruptions in our service, our reputation and brand may be damaged and we may
be exposed to a risk of loss or litigation and possible liability. Damage to our
reputation and brand could cause us to lose suppliers and customers and
negatively affect our business, results of operations and financial condition.
Our insurance policies may not be adequate to reimburse us for losses caused by
security breaches or service disruption.
System failure may cause interruption of our services
The performance of our server and networking hardware and software
infrastructure is critical to our business and reputation and our ability to
process transactions, provide high quality customer service, and attract and
retain customers, suppliers, users and strategic partners. Currently our
infrastructure and systems are located at one site at Exodus Communications in
Sunnyvale, California. We anticipate adding a mirror site at a different,
distant location. Until then, we depend on our single-site infrastructure and
any disruption to this infrastructure resulting from a natural disaster or other
event could result in an interruption in our service, fewer transactions and, if
sustained or repeated, could impair our reputation and the attractiveness of our
services.
Our systems and operations are vulnerable to damage or interruption from
human error, natural disasters, power loss, telecommunications failures, break-
ins, sabotage, computer viruses, intentional acts of vandalism and similar
events. We do not have a formal disaster recovery plan or alternative provider
of hosting services. In addition, we do not carry sufficient business
interruption insurance to compensate us for losses that could occur. Any failure
on our part to expand our system or Internet infrastructure to keep up with the
demands of our
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customers and users, or any system failure that causes an interruption in
service or a decrease in responsiveness of our Internet-based purchasing
solution or web site, could result in fewer transactions and, if sustained or
repeated, could impair our reputation and the attractiveness of our brand name,
which would adversely affect our business, revenues, financial condition and
results of operations.
We face year 2000 risks associated with our own systems and those of our
customers, suppliers and the Internet
Significant uncertainty exists concerning the potential costs and effects
associated with any year 2000 compliance problems. Any year 2000 compliance
problems faced by us, our customers, suppliers and strategic partners could have
a negative effect on our business, revenues, and results of operations and
financial condition. In addition, our ability to operate is dependent upon
delivery of accurate, electronic information via the Internet. To the extent
year 2000 issues result in the long-term inoperability of the Internet, the
Chemdex Marketplace or the systems of VWR, our business, revenues, financial
condition and results of operations could be seriously harmed.
Although we believe that our internally developed applications and systems
are designed to be year 2000 compliant, we use third party equipment and
software that may not be year 2000 compliant. In addition, until some of the
billing and cash collection functions for spot buying services are transitioned
to Chemdex, we are dependent upon VWR's systems for receiving payment for
products purchased using the spot buying services. Failure of our applications
and services, VWR's billing and collection system, or third party equipment and
software that we use, to be year 2000 compliant could result in the Chemdex
Marketplace not being used for purchasing life sciences research products, the
termination of our customer agreements or in liability for damages, any of which
could have a material adverse effect on our business, results of operations and
financial condition. Many of our customers' systems with which the Chemdex
Marketplace integrates may not yet be year 2000 compliant. In addition, our
suppliers' systems may not be year 2000 compliant. Any negative effects on our
customers' or suppliers' systems as a result of the year 2000 problem, or
unknown, non-compliance of our own systems, could have a negative effect on our
business, results of operations and financial condition and we do not have a
formal contingency plan to address year 2000 issues. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000 Compliance."
We may require additional capital for our operations that could have a negative
effect on your investment
We currently anticipate that cash and cash equivalents at September 30,
1999, together with our existing borrowing arrangements and available funds will
be sufficient to meet our anticipated needs for working capital and capital
expenditures for at least the next 12 months. This is a forward-looking
statement that is subject to risks and uncertainties and actual results may
differ materially from those described in this forward-looking statement. We may
need to raise additional funds in the future in order to fund rapid expansion,
to pursue customer sales and implementation, to develop new or enhanced
solutions and services, to respond to competitive pressures or to acquire
complementary businesses, technologies or services.
If we raise additional funds through the issuance of equity or convertible
debt securities, the percentage ownership of our stockholders will be reduced,
stockholders may experience additional dilution and these securities may have
powers, preferences and rights that are senior to those of the rights of our
common stock. We cannot be certain that additional financing will be available
on terms favorable to us, if at all. If adequate funds are not available or not
available on acceptable terms, we may be unable to fund our expansion, promote
our brand identity, take advantage of unanticipated acquisition opportunities,
develop or enhance services or respond to competitive pressures. Any inability
to do so could have a negative effect on our business, revenues, financial
condition and results of operations.
Our planned international expansion may make it more difficult to manage our
business
We expect to enter the international market. To do so, we plan to establish
international operations, hire additional personnel and establish relationships
with additional suppliers and partners. This expansion will require significant
management attention and financial resources and could have a negative effect on
our business,
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<PAGE>
revenues, financial condition and results of operations. We cannot assure you
that we will be able to create or sustain international demand for our
Internet-based purchasing solution and services. In addition, our international
business may be subject to a variety of risks, including applicable government
regulation, difficulties in collecting international accounts receivable, longer
payment cycles, increased costs associated with maintaining international
marketing efforts, the introduction of non-tariff barriers and higher duty rates
and difficulties in enforcement of contractual obligations and intellectual
property rights. We cannot assure you that these factors will not have a
negative effect on any future international sales and, consequently, on our
business, results of operations and financial condition.
We may be exposed to product liability claims
We face potential liability for claims based on the type and adequacy of
the information and data that we obtain from suppliers and make available, and
the nature of the products that we sell and distribute utilizing the Internet,
including claims for breach of warranty, product liability, misrepresentation,
violation of governmental regulations and other commercial claims. In
particular, we bear the risk of liability for product loss, spill, or release,
and resulting damages to persons and property during delivery to the customer
and return by the customer to the supplier. We pass through the manufacturers'
warranties on the products we distribute. Further, we bear the risk of loss of
revenue from the product sale if a purchaser does not pay for a defective
product. Although we maintain general liability insurance, our insurance may not
cover some claims, penalties, or spills, is subject to policy limits and
exclusions, and may not be adequate to fully indemnify us or our employees for
any civil, governmental or criminal liability that may be imposed. Furthermore,
this insurance may not be available at commercially reasonable rates in the
future. Any liability not covered by our insurance or in excess of our insurance
coverage could have a negative effect on our business, results of operations and
financial condition. Our liability is potentially greater with respect to sales
to researchers and others that are not affiliated with an enterprise customer.
We also seek to obtain indemnification from our suppliers against some of
these claims. However, the scope of the indemnification is limited, a few of our
suppliers have not agreed to indemnify us and some suppliers may be unable or
unwilling to indemnify us in the future. In addition, we are not in a position
to monitor our suppliers' activities. Therefore, we are exposed to liability and
risk for these claims.
We depend on our intellectual property rights and are subject to the risk of
infringement
Our intellectual property is important to our business, and we seek to
protect our intellectual property through copyrights, trademarks, trade secrets,
confidentiality provisions in our customer, supplier and strategic relationship
agreements, nondisclosure agreements with third parties, and invention
assignment agreements with our employees and contractors. We cannot assure that
measures we take to protect our intellectual property will be successful or that
third parties will not develop alternative purchasing solutions that do not
infringe upon our intellectual property. In addition, we could be subject to
intellectual property infringement claims by others. Our failure to protect
against misappropriation of our intellectual property, or claims that we are
infringing the intellectual property of third parties could have a negative
effect on our business, revenues, financial condition and results of operations.
Regulation or taxation of the Internet or transacting business over the Internet
may inhibit the growth of our Internet-based purchasing solution
Due to the increasing popularity and use of the Internet and of e-commerce,
it is possible that a number of taxes, laws and regulations may be adopted in
the U.S. and abroad with particular applicability to the Internet and e-commerce
transactions. It is possible that governments will adopt taxes and enact
legislation that may be applicable to us in areas such as content, product
distribution, network security, encryption and the use of key escrow, data and
privacy protection, electronic authentication or "digital" signatures, illegal
and harmful content, access charges and re-transmission activities. Moreover,
the applicability to the Internet of existing laws governing issues such as
property ownership, content, taxation, defamation and personal privacy is
uncertain. Taxes, laws or regulations may limit the growth of the Internet,
dampen e-commerce and reduce the number of transactions, increase our cost of
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<PAGE>
doing business or increase our legal exposure. Any of these factors could have a
negative effect on our business, revenues, and results of operations and
financial condition.
Item 3. Qualitative and Quantitative Disclosure about Market Risk
Our sales from inception to date have been made to U.S. Customers and, as a
result, we have not had any exposure to factors such as changes in foreign
currency exchange rates or weak economic conditions in foreign markets.
However, in future periods, we expect to sell in foreign markets. As our sales
are made in U.S. dollars, a strengthening of the U.S. dollar could make our
products less competitive in foreign markets.
At September 30, 1999, our cash and cash equivalents consisted primarily of
money market funds and commercial paper held by large institutions in the U.S.
USE OF PROCEEDS
The proceeds from the sale of the Common Stock offered by this Prospectus
are solely for the account of the Selling Stockholders. We will not receive any
proceeds from the sale of these shares.
PLAN OF DISTRIBUTION
Certain of the Shares covered by this Prospectus are restricted and may not
be sold by the Selling Stockholders until these restrictions lapse. We have a
repurchase right with respect to these restricted shares, which right generally
lapses at a rate of 25% on the first anniversary of the date of grant of the
award of the Shares by the Company to the Selling Stockholders and as to 1/48th
of the shares each month after the first anniversary, provided that the holder
continues to provide services to the Company as an employee or consultant. The
registration statement registering the Shares for resale is being filed to
enable the Selling Stockholders, if they choose, to sell their Shares once such
restrictions have lapsed in the public market from time to time. All Shares
held by the Selling Stockholders have been included on the registration
statement and are covered by this Prospectus even though some portion of these
shares will continue to be restricted and subject to our repurchase right for
some time following the date of this Prospectus.
It is anticipated that Selling Stockholders who do choose to resell their
Shares may offer the Shares in the manner set forth on the cover page of this
Prospectus, from time-to-time, through broker-dealers or agents designated by
the Selling Stockholders. Any broker-dealer acquiring Shares from a Selling
Stockholder may sell the Shares either directly, in its normal market-making
activities, through or to other brokers on a principal or agency basis, or to
its customers. Any such sales may be at prices then prevailing on the Nasdaq
National Market or other applicable securities exchange, at prices related to
such prevailing market prices, at negotiated prices or a combination of such
pricing methods. The costs of any such sales will be borne by the Selling
Stockholders. The costs of registering the Shares under the Securities Act are
being borne by the Company.
In connection with any sales covered by this Prospectus, the Selling
Stockholders and any brokers participating in such sales may be deemed to be
underwriters within the meaning of the Securities Act. To the Company's
knowledge, no specific brokers or dealers have been designated by any Selling
Stockholder nor has any agreement been entered into regarding brokerage
commissions or for the exclusive sale of any securities which may be offered
pursuant to this Prospectus.
We have advised the Selling Stockholders that the anti-manipulation rules
under Regulation M of the Exchange Act may apply to sales of the Shares in the
market. We have also informed the Selling Stockholders of the possible need for
delivery of copies of this Prospectus to prospective purchasers. Selling
Stockholders may indemnify any broker-dealer that participates in transactions
involving the sale of the Shares against certain liabilities, including
liabilities arising under the Securities Act. Any commissions paid or discounts
or concessions allowed to any such broker-dealers, and, if any such broker-
dealers purchase shares as principal in a transaction, any
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<PAGE>
profits received on the resale of such shares, may be deemed to be underwriting
discounts and commissions under the Securities Act.
Shares being sold pursuant to this Prospectus must be sold by the Selling
Stockholders in compliance with Rule 144(e) of the Securities Act, which limits
the amount of securities that can be sold by any one person (and others whose
stock would be aggregated with the stock owned by such person) in any three-
month period to the greater of:
o 1% of the shares of our outstanding Common Stock as shown by our most
recently filed report or statement we have filed with the SEC; or
o the average weekly reported volume of trading in our Common Stock as
reported on Nasdaq during the four calendar weeks immediately
preceding the date of receipt of the order to execute the transaction
by the broker or the date of execution of the transaction directly
with a market maker.
In addition, any Shares covered by this Prospectus that qualify for sale
pursuant to Rule 144 may be sold under that Rule rather than pursuant to this
Prospectus.
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<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information as of January 4, 2000
with respect to the Selling Stockholders. The following table assumes that the
Selling Stockholders sell all of the shares offered by this Prospectus. We are
unable to determine the exact number of shares that actually will be sold.
The number and percentage of shares beneficially owned is based on
32,783,152 shares outstanding at January 4, 2000 determined in accordance with
Rule 13d-3 of the Exchange Act. The information is not necessarily indicative
of beneficial ownership for any other purpose. Under Rule 13d-3, beneficial
ownership includes any shares as to which an individual has sole or shared
voting power or investment power, and also includes shares which an individual
has the right to acquire within 60 days of January 4, 2000 through the exercise
of any stock option or other right. Unless otherwise indicated in the
footnotes, each person has sole voting and investment power (or shares such
powers with his or her spouse) with respect to the shares shown as beneficially
owned. Percentages shown are based upon all shares registered hereunder being
sold.
<TABLE>
<CAPTION>
Shares Beneficially Owned
Shares Beneficially Owned Prior Shares Offered by After
Selling Stockholder to the Offering this Prospectus the Offering
- ------------------ ------------------------------- ----------------- -------------------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Martin Cassidy 25,000 * 25,000 25,000 *
Kamal Dharmani 6,000 * 6,000 6,000 *
Jennifer Edsell 5,000 * 5,000 5,000 *
Justine Fenwick 69,000 * 15,000 15,000 *
Martha Greer 225,000 * 225,000 225,000 *
Gina Harris 3,350 * 3,350 3,350 *
George Langer 8,000 * 8,000 8,000 *
Dennis Reno 25,000 * 25,000 25,000 *
Christopher Snideman 10,000 * 10,000 10,000 *
Eric Stutzman 6,000 * 3,500 6,000 *
Raul Vazquez 11,000 * 11,000 11,000 *
Ben Villatore 14,000 * 14,000 14,000 *
Cindy Vindasius 40,000 * 15,000 40,000 *
David Weber 200,000 * 200,000 200,000 *
Trudy Bresner 7,250 * 7,250 7,250 *
Dennis Crow 25,695 * 6,250 25,695 *
Steve A. Draper 2,000 * 2,000 2,000 *
Kristine M. McLaughlin 1,000 * 1,000 1,000 *
Robin Reed 26,500 * 16,000 26,500 *
Sandy Smith 2,500 * 2,500 2,500 *
**Includes other Shares 4,380 * 4,380 4,380 *
Total: 605,230
</TABLE>
______________________________
* Less than 1%
** Certain nonaffiliates who are not listed above may use this Prospectus to
resell shares of Common Stock held by them provided the aggregate number of
shares which they may resell does not exceed 1,000 shares. The total number
of shares listed above includes shares that may be sold by such persons.
-25-
<PAGE>
While some or all of the Selling Stockholders listed above may be deemed to
be affiliates of the Company, neither the Company nor such Selling
Stockholders admit that the persons listed as Selling Stockholders are, in
fact, affiliates of the Company.
LEGAL MATTERS
The validity of the issuance of the common stock offered by this Prospectus
will be passed upon by Venture Law Group, A Professional Corporation, Menlo
Park, California. As of the date of this Registration Statement, employees of
Venture Law Group and an investment partnership affiliated with Venture Law
Group beneficially own an aggregate of 76,285 shares of the Registrant's Common
Stock.
Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers, as well as other
employees and individuals, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation--a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, bylaws, disinterested director vote, stockholder vote, agreement or
otherwise.
The Company's Restated Certificate of Incorporation limits the liability of
directors to the full extent permitted by Delaware law. Delaware law provides
that a corporation's certificate of incorporation may contain a provision
eliminating or limiting the personal liability of directors for monetary damages
for breach of their fiduciary duties as directors, except for liability (i) for
any breach of their duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) for unlawful payments of dividends or
unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL
or (iv) for any transaction from which the director derived an improper personal
benefit. The Company's Bylaws provide that the Company shall indemnify its
directors and officers and may indemnify its employees and agents to the fullest
extent permitted by law. The Company believes that indemnification under its
Bylaws covers at least negligence and gross negligence on the part of
indemnified parties.
The Company intends to enter into agreements which indemnify its directors
and executive officers. These agreements, among other things, indemnify the
Company's directors and officers for certain expenses (including attorneys'
fees), judgments, fines and settlement amounts incurred by such persons in any
action or proceeding, including any action by or in the right of the Company,
arising out of such person's services as a director or officer of the Company,
any subsidiary of the Company or any other company or enterprise to which the
person provides services at the request of the Company. The Company believes
that these provisions and agreements are necessary to attract and retain
qualified directors and officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding that might result in a claim for such indemnification.
-26-
<PAGE>
TABLE OF CONTENTS
WHERE YOU CAN FIND MORE INFORMATION...................................... 4
THE COMPANY.............................................................. 5
RISK FACTORS............................................................. 9
USE OF PROCEEDS.......................................................... 23
PLAN OF DISTRIBUTION..................................................... 23
SELLING STOCKHOLDERS..................................................... 25
LEGAL MATTERS............................................................ 26
INDEMNIFICATION OF DIRECTORS AND OFFICERS................................ 26
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<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
---------------------------------------
The following documents filed with the Securities and Exchange Commission
(the "Commission") are hereby incorporated by reference:
----------
(a) The Registrant's Prospectus filed on July 28, 1999 pursuant to Rule
424(b) of the Securities Act, which contains audited financial statements for
the Registrant's latest fiscal year for which such statements have been filed.
(b) All other reports we have filed with the SEC pursuant to Section 13(a)
or 15(d) of the Exchange Act since July 28, 1999, including our quarterly report
on Form 10-Q for the quarter ended September 30, 1999 (as filed on November 12,
1999) and a current report on Form 8-K dated January 25, 2000.
All documents we subsequently file with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act, which documents are deemed to be
incorporated by reference in, and to be a part of, this registration statement
from the date of filing (except that no document shall be deemed to be
incorporated by reference if filed after the filing of a post-effective
amendment which deregisters securities then remaining unsold).
(c) The description of our Common Stock contained in a Form 8-A filed with
the SEC under the Exchange Act on July 23, 1999, including any amendment or
report filed for the purpose of updating such description; and All documents
subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act, prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference in this Registration Statement and to be part hereof
from the date of filing such documents.
Item 4. Description of Securities. Not applicable.
-------------------------
Item 5. Interests of Named Experts and Counsel.
--------------------------------------
As of the date of this Registration Statement, employees of Venture Law
Group and an investment partnership affiliated with Venture Law Group
beneficially own an aggregate of 76,285 shares of the Registrant's Common Stock.
Item 6. Indemnification of Directors and Officers.
-----------------------------------------
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers, as well as other
employees and individuals, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation--a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, bylaws, disinterested director vote, stockholder vote, agreement or
otherwise.
The Company's Restated Certificate of Incorporation limits the liability of
directors to the full extent permitted by Delaware law. Delaware law provides
that a corporation's certificate of incorporation may contain a
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<PAGE>
provision eliminating or limiting the personal liability of directors for
monetary damages for breach of their fiduciary duties as directors, except for
liability (i) for any breach of their duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. The Company's Bylaws provide that the
Company shall indemnify its directors and officers and may indemnify its
employees and agents to the fullest extent permitted by law. The Company
believes that indemnification under its Bylaws covers at least negligence and
gross negligence on the part of indemnified parties.
The Company intends to enter into agreements which indemnify its directors
and executive officers. These agreements, among other things, indemnify the
Company's directors and officers for certain expenses (including attorneys'
fees), judgments, fines and settlement amounts incurred by such persons in any
action or proceeding, including any action by or in the right of the Company,
arising out of such person's services as a director or officer of the Company,
any subsidiary of the Company or any other company or enterprise to which the
person provides services at the request of the Company. The Company believes
that these provisions and agreements are necessary to attract and retain
qualified directors and officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding that might result in a claim for such indemnification.
Item 7. Exemption from Registration Claimed. Not applicable.
-----------------------------------------------------
Item 8. Exhibits.
--------
Exhibit
Number
------
5.1 Opinion of Venture Law Group, a Professional Corporation.
23.1 Consent of Venture Law Group, a Professional Corporation
(included in Exhibit 5.1).
23.2 Consent of Independent Auditors (see p.33 )
24.1 Powers of Attorney (see p.32).
Item 9. Undertakings.
-------------
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) that, for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration
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<PAGE>
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as the indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in a
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the question has already been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
[Signature Pages Follow]
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Chemdex Corporation, a corporation organized and existing under the laws of the
State of Delaware, certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Mountain View, State of California, on January
28, 2000.
Chemdex Corporation
By: /s/ James G. Stewart
------------------------------------
James G. Stewart
Chief Financial Officer
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<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David P. Perry and James G. Stewart,
jointly and severally, his or her attorneys-in-fact and agents, each with the
power of substitution and resubstitution, for him or her and in his or her name,
place or stead, in any and all capacities, to sign any amendments to this
Registration Statement on Form S-8, and to file such amendments, together with
exhibits and other documents in connection therewith, with the Securities and
Exchange Commission, granting to each attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as he or she might or could do in
person, and ratifying and confirming all that the attorney-in-facts and agents,
or his or her substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David P. Perry President Chief Executive Officer and January 28, 2000
- ---------------------------------- Director (Principal Executive Officer)
David P. Perry
/s/ James G. Stewart Chief Financial Officer and Assistant January 28, 2000
- ---------------------------------- Secretary (Principal Financial and
James G. Stewart Accounting Officer)
/s /Charles R. Burke Director January 28, 2000
- ----------------------------------
Charles R. Burke
/s/ Brook H. Byers Chairman of the Board January 28, 2000
- ----------------------------------
Brook H. Byers
/s/ Jonathan D. Callaghan Director January 28, 2000
- ----------------------------------
Jonathan D. Callaghan
/s/ Paul Nowak Director January 28, 2000
- ----------------------------------
Paul Nowak
/s/ John A. Pritzker Director January 28, 2000
- ----------------------------------
John A. Pritzker
/s/ Naomi O. Seligman Director January 28, 2000
- ----------------------------------
Naomi O. Seligman
/s/ L. John Wilkerson Director January 28, 2000
- ----------------------------------
L. John Wilkerson
</TABLE>
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<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 pertaining to the 1998 Stock Option Plan of Chemdex Corporation of
our report dated May 7, 1999 (except for note 9, as to which the date is July
23, 1999) with respect to the consolidated financial statements and schedule of
Chemdex Corporation included in its Registration Statement (Form S-1) and
related Prospectus as filed with the Securities and Exchange Commission on
July 26, 1999.
/s/ Ernst & Young LLP
San Jose, California
January 31, 2000
__________________________________
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INDEX TO EXHIBITS
Exhibit
Number
------
5.1 Opinion of Venture Law Group, a Professional Corporation
23.1 Consent of Venture Law Group, a Professional Corporation
(included in Exhibit 5.1).
23.2 Consent of Independent Auditors (see p.33).
24.1 Power of Attorney (see p.32)
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EXHIBIT 5.1
January 31, 2000
Chemdex Corporation
1500 Plymouth Street
Mountain View, CA 94043
Registration Statement on Form S-8
----------------------------------
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-8
(the "Registration Statement") executed by Chemdex Corporation (the "Company")
---------------------- -------
and to be filed with the Securities and Exchange Commission (the "Commission")
----------
in connection with the registration under the Securities Act of 1933, as
amended, of a total of 605,230 shares of Common Stock previously acquired under
the Company's 1998 Stock Plan by persons listed as Selling Stockholders in the
prospectus contained within the registration statement and certain unnamed non-
affiliates of the Company. As your counsel in connection with this transaction,
we have examined the proceedings taken and are familiar with the proceedings
proposed to be taken by you in connection with the sale and issuance of the
Shares.
It is our opinion that upon conclusion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states where required, the Shares when issued and sold under the
applicable provisions of the Plans in the manner described in the Registration
Statement will be legally and validly issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement and in any amendment thereto.
This opinion is solely for your benefit and may not be relied upon by any
other person without our prior written consent.
Very truly yours,
VENTURE LAW GROUP
A Professional Corporation
/s/
