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Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-39024
224,878 Shares
BEYOND.COM CORPORATION
Common Stock
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This prospectus relates to 224,878 outstanding shares of our common stock
that the selling stockholders named in this prospectus may offer from time to
time. These shares were issued to the selling stockholders in connection with an
equity transfer agreement dated April 7, 2000 whereby we transferred 80.01% of
our interest in ViaDownload L.L.C. We are filing the registration statement of
which this prospectus is a part to satisfy our contractual obligations under
this agreement relating to these shares. The registration of these shares does
not necessarily mean that any of the selling stockholders will offer or sell
their shares.
We are not offering or selling any shares of our common stock pursuant to
this prospectus. We will not receive any of the proceeds from the sale by the
selling stockholders of the shares of common stock. We will bear the expenses of
the offering of the common stock, except that the selling stockholders will pay
any applicable underwriting fees, discounts or commissions and transfer taxes,
as well as the fees and disbursements of his or her counsel and experts.
Our common stock is listed for trading on the Nasdaq Stock Market's
National Market under the symbol "BYND". On August 28, 2000, the last reported
sales price for our common stock on the Nasdaq Stock Market's National Market
was $0.9375.
INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 3.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is August 28, 2000
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TABLE OF CONTENTS
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RISK FACTORS................................................................ 3
BEYOND.COM CORPORATION...................................................... 15
USE OF PROCEEDS............................................................. 16
DIVIDEND POLICY............................................................. 16
SELLING STOCKHOLDERS........................................................ 16
DESCRIPTION OF CAPITAL STOCK................................................ 16
PLAN OF DISTRIBUTION........................................................ 22
LEGAL MATTERS............................................................... 22
EXPERTS..................................................................... 23
WHERE YOU CAN FIND MORE INFORMATION......................................... 23
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................. 23
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. INFORMATION CONTAINED IN BEYOND.COM'S WEB SITE
DOES NOT CONSTITUTE PART OF THIS DOCUMENT. THIS DOCUMENT MAY BE USED ONLY WHERE
IT IS LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY
BE ACCURATE ON THE DATE OF THIS DOCUMENT.
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RISK FACTORS
You should carefully consider the risks described below before making a
decision to purchase shares of our common stock. If any of the following risks
actually occur, our business, financial condition or results of future
operations could be materially adversely affected. In such case, the trading
price of our common stock could decline, and you may lose all or part of your
investment. This prospectus contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of many factors,
including the risks faced by us described below and elsewhere in this
prospectus.
POTENTIAL DELISTING OF OUR COMMON STOCK BY NASDAQ
Our common stock trades on the Nasdaq National Market which has alternative
compliance requirements for continued listing of common stock. The requirements
affecting us include (i) a minimum closing bid price of at least $5.00 per
share, or (ii) net tangible assets of at least $4,000,000. At June 14, 2000, our
common stock had traded below $5.00 for more than 20 consecutive trading days.
Similarly, at June 14, 2000, our net tangible assets were less than $4,000,000.
On June 14, 2000, we received a letter from Nasdaq indicating that unless the
minimum bid price for our common stock returned to at least $5.00 per share for
at least 10 consecutive trading days prior to September 12, 2000, our shares
will be delisted from the Nasdaq National Market on September 14, 2000. Thus, if
we cannot meet the preceding test, or if we cannot raise our net tangible assets
to at least $4,000,000 by September 12, 2000, our shares could be delisted from
Nasdaq National Market on September 14, 2000, if we do not file an appeal.
Shares may also be delisted from the Nasdaq National Market if the minimum
closing bid price per share is less than $1.00 for a period of 30 consecutive
business days. As of the close of business on August 25, 2000, our common stock
has closed at a minimum bid price per share of less than $1.00 for eleven
consecutive business days. The result of delisting from the Nasdaq National
Market could be a reduction in the liquidity of any investment in our common
stock, the existing notes, or the exchange notes. Delisting could also reduce
the ability of holders of our common stock to purchase or sell shares as quickly
and as inexpensively as they have done historically. This lack of liquidity also
makes it more difficult for us to raise capital in the future.
IF WE DO NOT SECURE ADDITIONAL CAPITAL TO FUND OUR BUSINESS WE WILL BE UNABLE TO
CONTINUE OUR OPERATIONS
We require substantial working capital to fund our business in the near and
longer term. We expect operating losses and negative cash flow to continue for
the foreseeable future. We will have to raise additional funds to finance our
operations and to make interest payments to holders of our existing notes and
exchange notes. We may elect to seek additional funds at any time. The actual
amount and timing of our longer-term future capital requirements may differ
materially from our estimates. In particular, our estimates may be inaccurate as
a result of changes and fluctuations in our revenues, operating costs and
development expenses.
Our revenues and costs depend upon factors that we cannot control. These
factors include changes in technology and regulations, increased competition and
factors such as Web integrity, seasonality, and performance by third parties in
connection with our operations. Because of these factors, our actual revenues
and costs are uncertain and may vary considerably. These variations may
significantly affect our future need for capital. We may be unable to raise
financing sufficient for our needs, either on suitable terms or at all. If this
should occur, we will be unable to continue operating.
OUR LIMITED EXPERIENCE MAKES IT DIFFICULT TO ASSESS WHETHER WE CAN SUCCESSFULLY
IMPLEMENT OUR NEW BUSINESS MODEL
Historically, our business has focused primarily on the online resale of
commercial off-the-shelf computer software to consumers, small businesses and
large enterprises. We recently refocused our business from a consumer oriented
business model to an e-commerce services provider model that we refer to as our
eStore Group. We must launch and operate our eStore business model successfully
and generate adequate revenue and gross margin to replace an expected decrease
in revenue we may incur in the consumer market as we scale
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back on our consumer marketing efforts. We have limited experience in operating
our eStore business and cannot give any assurances that we will be able to
successfully build this business.
IF WE DO NOT OBTAIN SUBSTANTIAL AMOUNTS OF CAPITAL FOR DEBT SERVICE, WE MAY NOT
BE ABLE TO REPAY THE EXISTING NOTES AND THE EXCHANGE NOTES IN 2003
By selling the existing notes in November and December 1998, we incurred
$63,250,000 principal amount of indebtedness. Unless we are able to successfully
secure additional financing, we will not have sufficient cash to fund scheduled
payments of principal and interest on our existing notes. Likewise, we will
likely require substantial amounts of cash to fund scheduled payments of the
principal and interest on the exchange notes. We will not be able to meet these
cash requirements out of cash flow from operations. We also may be unable to
obtain alternative financing. A lack of adequate financing may adversely affect
our ability to:
- respond to changing business and economic conditions;
- make future acquisitions;
- absorb negative operating results; or
- fund capital expenditures or increased working capital requirements.
We could attempt to refinance our outstanding existing or exchange notes if
our cash flow from operations is insufficient to repay them at maturity.
However, a refinancing might not be available on terms acceptable to us, or at
all. If we fail to make necessary payments on the existing or exchange notes, we
will be in default under the terms of the existing or exchange notes, as
applicable, and may also be in default under agreements controlling our other
indebtedness, if any. Any default by us under the existing or exchange notes or
on other indebtedness would adversely affect our financial condition and
operations.
IF WE DO NOT SUCCESSFULLY EXECUTE OUR NEW ESTORE BUSINESS STRATEGY, OUR BUSINESS
WILL SUFFER
We must successfully execute our new eStore strategy. This entails adding
significant new eStore clients in the software and computer peripherals markets
while adding additional high margin services that are valued by our customers.
In addition, we must successfully maintain the Beyond.com brand. We cannot be
certain that we can accomplish these objectives or that our business strategy
will be successful.
IF WE DECIDE TO DISCONTINUE OUR ONLINE STORE, OUR BUSINESS MAY SUFFER
As part of the implementation of our new strategy to focus on our eStore
Group, we may decide that it is in our best interests to discontinue the
operation of our online store. We cannot predict with any certainty if our focus
on our eStore Group and the discontinuance of our online store will be
profitable. If our financial projections regarding the discontinuance of our
online store are not attained, our business may suffer.
WE DEPEND ON THE CONTINUED SERVICE OF KEY PERSONNEL WHOSE EXPERTISE WOULD BE
DIFFICULT TO REPLACE AND WE MAY BE UNABLE TO RETAIN QUALIFIED PERSONNEL IN THE
FUTURE
Our future success depends on the continued service and performance of our
senior management and other key personnel, particularly William S. McKiernan,
Chairman of our Board of Directors and Ronald S. Smith, our Chief Executive
Officer, subject to approval of his visa application. We have recently
experienced the loss of some senior executive officers and anticipate we may
lose more members of our management team in the near future. John Barratt and
Bonnie Charboneau-Fowler have accepted positions with us and our board of
directors has approved their respective appointments as Senior Vice President
and Chief Operating Officer and Vice President, Business Operations. However,
Mr. Barratt and Ms. Charboneau-Fowler are not U.S. citizens and their employment
with us is subject to the approval of their visa applications to the U.S.
Immigration and Naturalization Service or similar governmental requirements in
order to be permitted to work in the U.S. Mr. Smith, our President and Chief
Executive Officer, is also not a U.S. citizen. His visa application has been
approved by the U.S. Immigration and Naturalization Service but from time to
time
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Mr. Smith may be subject to similar governmental requirements in order to
continue working in the U.S. If our key employees are denied permission to work
in the U.S., our business may suffer. Competition for qualified management
personnel is intense, particularly in the Silicon Valley area, and we may be
unable to successfully attract, assimilate, or retain sufficiently qualified
personnel in the future.
WE ANTICIPATE SIGNIFICANT OPERATING LOSSES AND NEGATIVE CASH FLOW WHICH MAY
CAUSE US TO GO OUT OF BUSINESS
We expect significant operating losses and negative cash flow to continue
for the foreseeable future. Because we have planned expenses and relatively low
gross margins, our ability to become profitable depends on our ability to
generate and sustain higher net revenues. If we do achieve profitability, we
cannot be certain that we can sustain or increase profitability on a quarterly
or annual basis in the future.
We base our current and future expense levels, which are largely fixed, on
our operating plans and estimates of future revenues. We find sales and
operating results difficult to forecast, because they generally depend on the
volume and timing of the orders we receive. As a result, we may be unable to
adjust our spending in a timely manner to compensate for any unexpected revenue
shortfall. A shortfall in revenues will significantly harm our business and
operating results. In view of the rapidly evolving nature of our business,
proposed and possible future acquisitions, we have difficulty forecasting our
revenues. Therefore, we believe that period-to-period comparisons of our
financial results are not necessarily meaningful and you should not rely upon
them as an indication of our future performance. If we cannot achieve and
sustain operating profitability or positive cash flow from operations, we may be
unable to meet our debt service obligations or working capital requirements,
which would adversely affect our business and may cause us to go out of
business.
WE HAVE INCURRED NET LOSSES SINCE INCEPTION AND EXPECT TO INCUR NET LOSSES FOR
THE FORESEEABLE FUTURE
Because we have refocused our business model to an e-commerce services
provider model from a consumer oriented business model, our prior operating
history does not provide meaningful information upon which you may evaluate our
business and prospects. We incurred net losses of approximately $229.5 million
from inception of our business in 1994 through June 30, 2000. As of June 30,
2000, we had an accumulated deficit of approximately $233.2 million. We expect
to continue to incur significant net operating losses for the foreseeable
future.
INTELLECTUAL PROPERTY CLAIMS AGAINST US CAN BE COSTLY AND RESULT IN THE LOSS OF
SIGNIFICANT RIGHTS
Other parties may assert infringement or unfair competition claims against
us. In the past, other parties have sent us notice of claims of infringement of
proprietary rights, and we expect to receive other notices in the future. We
cannot predict whether others will assert claims of infringement against us, or
whether any past or future assertions or prosecutions will adversely affect our
business. If we are forced to defend against any such claims, whether they are
with or without merit or are determined in our favor, then we may face wasted
time, costly litigation, diversion of technical and management personnel, or
product shipment delays. As a result of such a dispute, we may have to develop
non-infringing technology or enter into royalty or licensing agreements. Such
royalty or licensing agreements, if required, may be unavailable on terms
acceptable to us, or at all. If there is a successful claim of product
infringement against us and we are unable to develop non-infringing technology
or license the infringed or similar technology on a timely basis, it could
adversely affect our business.
WE ARE SUBJECT TO A PENDING LEGAL PROCEEDING
On July 7, 2000, Softmat, LLC filed a complaint against us in the United
States District Court, Central District of California, alleging that our
merchandising systems for computer software infringes a patent held by Softmat.
The complaint seeks monetary damages, treble damages, injunctive relief and
attorney's fees for willful infringement. We have yet to formally respond to
Softmat's complaint. We have consulted outside counsel and we intend to defend
Softmat's lawsuit vigorously. However, the litigation is in the preliminary
stage, and we cannot predict its outcome with any certainty. The litigation
process is inherently uncertain.
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Patent litigation is particularly complex and can extend for a protracted time,
which can substantially increase the cost of such litigation. This litigation
has also diverted and is expected to continue to divert the efforts and
attention of some of our key management and technical personnel. Thus,
regardless of the eventual outcome, our defense of this litigation may be costly
and time consuming. Should the outcome of the litigation be adverse to us, we
could be required to pay significant monetary damages and could be enjoined from
selling those of our products that infringe Softmat's patent unless we are able
to negotiate a license from Softmat. In the event we obtain a license from
Softmat, we would likely be required to make royalty payments with respect to
sales of our products covered by the license. Any such payments would increase
our cost of revenues and reduce our gross profit. If we are required to pay
significant monetary damages, are enjoined from selling any of our products or
are required to make substantial royalty payments pursuant to any such license
agreement, our business would be significantly harmed.
WE MAY NOT BE ABLE TO COMPETE WITH MORE ESTABLISHED OR MORE SPECIALIZED
COMPANIES
Increased competition may cause us to reduce pricing or increase service
and marketing expenses that could reduce operating margins and funds available
to improve our technology, promote our business and continue operations. We
cannot assure that we can compete successfully against current and future
competitors. Failure to compete successfully against our current and future
competitors could materially hurt our business. We face competition primarily on
two fronts: e-commerce service vendors of various types and government resellers
and systems integrators.
E-commerce Service Vendors
The e-commerce business-to-business outsourcing marketplace for building
and managing Web stores is new, rapidly evolving and intensely competitive. We
expect competition to intensify in the future as current and new competitors
potentially launch new e-commerce services that offer a variety of outsourcing
options to businesses. eStore competitors include, but are not limited to,
Digital River, ReleaseNow, NetSales and ShopNow. These companies provide similar
solutions to our eStore Group offering. Like us, they target the software and
hardware industry and similar customers ranging from small to large businesses.
Other competitors include Escalate, BuyNow and Sykes Enterprises. Escalate and
BuyNow are still new to the market but could pose a competitive threat once
established. Sykes Enterprises has a solid clientele in the software and
hardware industry and could be a competitive threat if they become an end-to-end
or full-service provider.
Competitive pressures created by any one of these current or future
competitors, or by our competitors collectively, could negatively impact our
business.
We believe that the principal competitive factors in our market are:
- skill in building and managing Web stores that offer a wide array of
services, including advertising, merchandising, marketing campaigns,
banner campaigns, market research and strategic planning. Marketing
services include direct emails with personalized messages, e-packaging
solutions that allow customers to rent, demo and download software,
update services that inform clients of new upgrades to their software,
and e-business centers that target business-to-business clients;
- expertise in Web user interface design;
- proprietary technology and operational experience in digital download;
- rapid website building time;
- operational and service performance excellence in the areas of customer
support and site uptime;
- offering additional services, including anti-fraud services;
- providing a one-stop solution through partnerships with companies that
allow these companies to outsource some of their services and alleviate
internal resources; and
- expertise in integrating with a client's infrastructure.
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Competitors such as Digital River have longer operating histories and
larger customer bases than we do. In addition, some of our current or potential
competitors have greater financial, marketing and other resources than we do.
In addition, as more businesses turn to e-commerce outsourcers to market
and sell their products online, well established and well financed entities may:
- acquire online competitors;
- invest in online competitors; or
- form joint ventures with online competitors.
Certain of our actual or potential competitors, such as Digital River,
ReleaseNow, NetSales, ShopNow and BuyNow, may be able to:
- secure key partnerships with vendors that allow them to outsource their
services at a better price than we can;
- secure key partnerships that enable them greater access to potential
customers;
- devote greater resources to marketing and promotional campaigns;
- adopt more aggressive pricing or services models to build market share;
or
- devote substantially more resources to grow and improve their e-commerce
outsourcing offerings than we can.
Government Resellers and Systems Integrators
In the government services marketplace, our competitors including, but not
limited to, SoftwareSpectrum, GTSI, ASAP, CDW-G, SoftMart, GMR, MA Federal,
SHI.com, and CorporateSoftware & Technology have greater experience in selling
software to the large enterprise market than we do. Further, they have more
sophisticated infrastructure and larger sales teams than we do.
For website competition, we expect challenges from current online
resellers, such as, Amazon.com, Buy.com, CompUSA, Cyberian Outpost, and Egghead,
which may have longer operating histories, larger customer bases and greater
financial, marketing and other resources than we do. In addition, new
technologies and expansion of existing technologies, such as price comparison
programs that select specific titles from a variety of websites, may direct
customers to online software resellers that compete with us and may increase our
competition.
OUR FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED IF WE ARE UNABLE TO SECURE AND
MAINTAIN FUTURE CONTRACTS WITH U.S. GOVERNMENT AGENCIES
We have several contracts with U.S. Government agencies, which accounted
for approximately 14% of our net revenues in 1999 and 20% of our net revenues in
the six months ended June 30, 2000. Each of these contracts is subject to annual
review and renewal by the government, and may be terminated at any time. Each
government contract, option and extension is only valid if the government
appropriates enough funds for expenditure on such contracts, options or
extensions. Accordingly, we might fail to derive any revenue from sales of
software to the U.S. Government in any given future period. If the U.S.
Government fails to renew or terminates any of these contracts it would
adversely affect our business and results of operations.
IF THERE IS A REDUCTION IN PERFORMANCE, DISRUPTION IN INTERNET ACCESS OR
DISCONTINUATION OF SERVICES PROVIDED TO US BY CYBERSOURCE, OUR BUSINESS WILL BE
ADVERSELY AFFECTED
We use a database management system to index, retrieve and manipulate
product information, content, product catalogs, orders, transactions, and
customer information, and perform rapid searching, sorting, viewing and
distribution of a large volume of content. The data warehouse allows us to
access detailed transaction and customer interaction data and perform
proprietary market analysis. Our data warehouse incorporates
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commercially available hardware and software combined with our proprietary
software in an internally developed configuration. This data warehouse provides
a unified platform for our store engine and back office systems. Any reduction
in performance, disruption in Internet access or discontinuation of services
provided to us by CyberSource could materially adversely affect our business. We
cannot assure you that we will:
- accommodate increases in network traffic in the future;
- accurately project the rate or timing of such increases;
- upgrade our systems and infrastructure to accommodate future traffic
levels on our online sites;
- effectively upgrade and expand our transaction processing systems;
- successfully integrate any newly developed or purchased modules with our
existing systems;
- successfully use new technologies; or
- successfully adapt our online sites, proprietary technology and
transaction processing systems to meet customer requirements or emerging
industry standards.
WE CONTINUE TO EVALUATE THE CARRYING AMOUNT OF OUR LONG-LIVED ASSETS, INCLUDING
GOODWILL, WHICH COULD RESULT IN DOWNWARD ADJUSTMENTS OF THE VALUE OF THOSE
ASSETS ON OUR BALANCE SHEET
We review our long-lived assets, including goodwill and other intangible
assets, for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. We believe that the
carrying value of our goodwill and intangible assets do not require adjustment
at this time. If future events or changes in circumstances occur that indicate
that the carrying value of these assets may not be recoverable, we may make
downward adjustments to the carrying value of these assets on our balance sheet
in the future.
WE MAY NOT ACCURATELY FORECAST OUR SALES AND REVENUES DUE TO A VARIETY OF
FACTORS, WHICH WILL CAUSE QUARTERLY FLUCTUATIONS IN OUR OPERATING RESULTS AND
MAY RESULT IN VOLATILITY IN OUR STOCK PRICE
Our revenues and operating results may fluctuate significantly from quarter
to quarter due to a number of factors, not all of which are in our control.
These factors include:
- our ability to attract and retain new customers and maintain customer
satisfaction;
- new websites, services and products introduced by us or by our
competitors;
- price competition;
- decreases in the level of growth, use of or consumer acceptance of the
Internet and online services for the purchase of consumer products;
- the termination of contracts with major purchasers, particularly U.S.
Government agencies;
- technical difficulties or system downtime affecting the Internet or
online services, generally, and eStore websites for customers or the
operation of our website;
- the failure of Internet bandwidth to increase significantly over time
and/or an increase in the cost to consumers of obtaining or using
Internet bandwidth;
- the amount and timing of operating costs and capital expenditures
relating to the expansion of our business, operations and infrastructure;
- government regulations related to use of the Internet for commerce or
sales and distribution of software; and
- general economic conditions and economic conditions specific to the
Internet, online commerce and the software industry.
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OUR RESULTS FROM OPERATIONS ARE SUBJECT TO SEASONAL FLUCTUATIONS
Seasonal fluctuations in the software industry, Internet and commercial
online service usage, and traditional retail, government and corporate seasonal
spending patterns and advertising expenditures may affect our business. In
particular, Internet and online service usage and its rate of growth may decline
in the summer. These seasonal patterns may cause quarterly fluctuations in our
operating results and could adversely and materially affect our financial
performance. Our gross margins are likely to fluctuate over time. A number of
factors may impact our gross margins, including:
- the mix of revenues between our eStores Group, Government Systems Group
and our website;
- the mix of transaction versus reseller revenue in our eStore business;
- the mix of revenues from sales of shrink-wrap products and products
delivered through digital download;
- the mix of revenues from sales of software products and computer
peripheral products (such as joysticks, personal organizers and related
products);
- the amount of advertising or promotional revenues we receive; and
- our ability to rapidly grow value added services for our eStore business.
IF NETWORK BANDWIDTH DOES NOT INCREASE TO KEEP PACE WITH THE INCREASE IN SIZE OF
NEW SOFTWARE PRODUCTS, OUR ABILITY TO DELIVER SOFTWARE PRODUCTS VIA DIGITAL
DOWNLOAD MAY BE LIMITED
We believe that the size of new software products will continue to increase
and that they will be suitable for digital download only if network bandwidth
increases significantly. This trend may limit our ability to distribute such
software products via digital download and may limit our ability to realize the
higher gross margins associated with digital download software product sales for
our eStore customers. Any change in one or more of these factors could adversely
and materially affect our gross margins and operating results in future periods.
Due to the foregoing factors, we believe that quarter-to-quarter
comparisons of our operating results are not a good indicator of our future
performance. It is likely that in some future quarter our operating results may
fall below the expectations of securities analysts and investors. In this event,
the trading price of our common stock may fall significantly.
OUR FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED IF WE ARE UNABLE TO MAINTAIN
OUR CURRENT RELATIONSHIPS WITH SOFTWARE DEVELOPERS AND DISTRIBUTORS
Our eStore Group and Government Systems Group are entirely dependent upon
the software developers and distributors that supply us with software and
computer products for resale, and the availability of these software and
computer products is unpredictable. In 1999 and 1998, sales of software provided
by Microsoft and by a major software distributor accounted for a substantial
portion of our revenues. As is common in the industry, we have no long term or
exclusive arrangements with any software developers or distributors that
guarantee the availability of software for resale. For example, our agreement
with Microsoft automatically renews for successive one-year periods but is
terminable for any reason by 30 days written notice prior to the expiration of
the given term. If this relationship terminates then the publishers or
distributors that currently supply us with software might cease to continue to
supply us, and we might be unable to establish new relationships with other
software developers and distributors.
Our eStore Group and Government Systems Group also rely on software
distributors to ship shrink-wrap software to customers that do not use digital
download. We have limited control over the shipping procedures of our
distributors and shipments by these distributors have in the past been, and may
in the future be, subject to delays. Although most software we sell carries a
warranty from its publisher, publishers or distributors occasionally fail to
reimburse us for returns from customers. Furthermore, our contract with
Microsoft allows Microsoft to review and approve our creditworthiness. If
Microsoft determines that we are not creditworthy or
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not in compliance with payment or reporting terms, it may require us to post
security acceptable to them which could negatively impact our financial
condition.
OUR COMMON STOCK PRICE IS VOLATILE
The market price for our common stock is volatile and has fluctuated
significantly to date. The trading price of our common stock is likely to
continue to be highly volatile and subject to wide fluctuations in response to
factors including the following:
- actual or anticipated variations in our quarterly operating results;
- announcements of technological innovations, new sales formats or new
products or services by us or our competitors;
- changes in financial estimates by securities analysts;
- conditions or trends in the Internet and online commerce industries;
- changes in the economic performance and/or market valuations of other
Internet, online service or retail companies;
- announcements by us of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;
- additions or departures of key personnel; and
- sales of common stock.
In addition, the securities market has experienced extreme price and volume
fluctuations, and the market prices of the securities of Internet-related and
technology companies have been especially volatile. These broad market and
industry factors may adversely affect the market price of our common stock,
regardless of our actual operating performance. In the past, following periods
of volatility in the market price of stock, many companies have been the object
of securities class action litigation. If we were to be sued in a securities
class action, it could result in substantial costs and a diversion of
management's attention and resources.
OUR SUCCESS IS SUBJECT TO RISKS ASSOCIATED WITH DEPENDENCE ON THE INTERNET AND
INTERNET INFRASTRUCTURE
DEVELOPMENT
Our success will depend in large part on continued growth in, and the use
of, the Internet. There are critical issues concerning the commercial use of the
Internet, which remain unresolved. The issues concerning the commercial use of
the Internet, which we expect will affect the development of the market for our
services include:
- security;
- reliability;
- cost;
- ease of access;
- quality of service; and
- necessary increases in bandwidth availability.
The adoption of the Internet for information retrieval and exchange,
commerce and communications, particularly by those enterprises that have
historically relied upon traditional means of commerce and communications,
generally will require that these enterprises accept a new medium for conducting
business and exchanging information. These entities likely will accept this new
medium only if the Internet provides them with greater efficiency and an
improved area of commerce and communication.
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Demand and market acceptance of the Internet are subject to a high level of
uncertainty and are dependent on a number of factors, including the growth in
consumer access to and acceptance of new interactive technologies, the
development of technologies that facilitate interactive communication between
organizations and targeted audiences and increases in user bandwidth. If the
Internet fails to develop or develops more slowly than we expect as a commercial
or business medium, it will adversely affect our business.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH ONLINE COMMERCE SECURITY AND CREDIT CARD
FRAUD
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. To securely
transmit confidential information, such as customer credit card numbers, we rely
on encryption and authentication technology that we license from third parties.
To the extent that our activities or those of third party contractors
involve the storage and transmission of proprietary information (such as credit
card numbers), security breaches could damage our reputation and expose us to a
risk of loss or litigation and possible liability. Our business may be adversely
affected if our security measures do not prevent security breaches, and we
cannot assure that we can prevent all security breaches. In addition, we have
suffered losses as a result of orders placed with fraudulent credit card data
even though the associated financial institution approved payment of the orders.
Under current credit card practices, a merchant is liable for fraudulent credit
card transactions where, as is the case with the transactions we process, that
merchant does not obtain a cardholder's signature. Fraudulent use of credit card
data in the future could adversely affect our business.
OUR SUCCESS IS SUBJECT TO RISKS ASSOCIATED WITH DIGITAL DOWNLOAD
Our success will depend in part on our customers accepting digital download
as a method of buying software. We typically derive higher gross margins from
software sales to consumers via digital download than we do on shrink-wrap
software sales. Digital download is a relatively new method of selling software
products and its growth and market acceptance is highly uncertain and subject to
a number of factors, including:
- the availability of sufficient network bandwidth to enable purchasers to
rapidly download software;
- the impact of time-based Internet access fees;
- the number of software titles that are available for purchase through
digital download as compared to those available through traditional
methods;
- the level of consumer comfort with the process of downloading software;
and
- the relative ease of this process and transaction security concerns.
We believe there is a maximum size of a software product that most
consumers are willing to purchase via digital download. We also believe that the
size of new software products will continue to increase and that these software
products will be unsuitable for digital download without significant increases
in network bandwidth. It will adversely affect our business if digital download
fails to achieve widespread market acceptance. Even if digital download achieves
widespread acceptance, we might not overcome the substantial existing and future
technical challenges associated with electronically delivering software reliably
and consistently on a long-term basis. Our business environment is characterized
by rapid technological change, frequent new product enhancements and uncertain
product life cycles. If we are unable to enhance our digital download technology
in a timely and cost-effective manner, we may lose customers to our competitors.
This would also adversely affect our business.
WE ARE SUBJECT TO CAPACITY CONSTRAINT RISKS, RELIANCE ON INTERNALLY DEVELOPED
SYSTEMS AND SYSTEM DEVELOPMENT RISKS
Our revenues depend in part, on the number of customers who use our website
to purchase software. Accordingly, our website, transaction processing systems
and network infrastructure performance, reliability and availability are
critical to our operating results. These factors are also critical to our
reputation and our
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<PAGE> 12
ability to attract and retain customers and maintain adequate customer service
levels. The volume of goods we sell and the attractiveness of our product and
service offerings will decrease if there are any systems interruptions that
affect the availability of our website or our ability to fulfill orders. We have
experienced periodic systems interruptions, which we believe may continue to
occur. We may be unsuccessful in these efforts or we may be unable to accurately
project the rate or timing of increases in the use of our website. We may also
fail to timely expand and upgrade our systems and infrastructure to accommodate
these increases. In addition, we cannot predict whether additional network
capacity will be available from third party suppliers as we need it. Also, our
network or our suppliers' network might be unable to timely achieve or maintain
a sufficiently high capacity of data transmission to timely process orders or
effectively conduct digital download, especially if our website traffic
increases. Our failure to achieve or maintain high capacity data transmission
could significantly reduce consumer demand for our services.
WE HAVE OVERLAPPING MANAGEMENT WITH CYBERSOURCE WHICH MAY LEAD TO POTENTIAL
CONFLICTS OF INTERESTS
In connection with the spin off of our Internet commerce services business
to CyberSource in December 1997, we entered into agreements with CyberSource to
define the ongoing relationship between the two companies. At the time these
agreements were negotiated, all of our directors were also directors of
CyberSource and other members of our management team joined CyberSource as
executive officers. As a result, these and subsequent agreements may not be
deemed the result of arm's length negotiations. Further, although we and
CyberSource are engaged in different businesses, the two companies currently
have no policies to govern the pursuit or allocation of corporate opportunities
between CyberSource and us in the event they arise. Our business could be
adversely affected if the overlapping board members of the two companies pursue
CyberSource's interests over ours either in the course of intercompany
transactions or where the same corporate opportunities are available to both
companies.
OUR SYSTEMS ARE LOCATED IN A SINGLE FACILITY WHICH SUBJECTS US TO THE RISK OF
SYSTEM FAILURE
Our success, in particular our ability to successfully receive and fulfill
orders and provide high quality customer service, largely depends on the
efficient and uninterrupted operation of our computer and communications
systems. Substantially all of our development and management systems are in a
single facility we lease in Santa Clara, California.
Our systems and operations are vulnerable to damage or interruption from
fire, flood, power loss, telecommunications failure, break-ins, earthquake and
similar events. We have no formal disaster recovery plan and carry insufficient
business interruption insurance to compensate us for losses that may occur.
Furthermore, our security mechanisms or those of our suppliers may not prevent
security breaches or service breakdowns. Despite our implementation of security
measures, our servers may be vulnerable to computer viruses, physical or
electronic break-ins and similar disruptions. These events could cause
interruptions or delays in our business, loss of data or render us unable to
accept and fulfill customer orders.
IF WE ARE UNABLE TO RESPOND TO RAPID TECHNOLOGICAL CHANGE IN A TIMELY MANNER, WE
MAY LOSE CUSTOMERS TO OUR COMPETITORS
To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our online store. The Internet and
the online commerce industry are characterized by rapid technological change,
changes in user and customer requirements and preferences and frequent new
product and service introductions. If competitors introduce products and
services embodying new technologies or if new industry standards and practices
emerge, then our existing Website, proprietary technology and systems may become
obsolete. Our future success will depend on our ability to do the following:
- both license and internally develop leading technologies useful in our
business;
- enhance our existing services;
- develop new services and technology that address the increasingly
sophisticated and varied needs of our prospective customers; and
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<PAGE> 13
- respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
To develop our website, our eStore websites and other proprietary
technology entails significant technical and business risks. We may use new
technologies ineffectively, or we may fail to adapt our website, proprietary
technology and transaction processing systems to customer requirements or
emerging industry standards. If we face material delays in introducing new
services, products and enhancements then our customers may forego the use of our
services and use those of our competitors.
IN ORDER TO ENSURE THE QUALITY OF OUR BRAND, WE MUST SUCCESSFULLY PROTECT OUR
PROPRIETARY RIGHTS
We regard our copyrights, service marks, trademarks, trade dress, trade
secrets and similar intellectual property as critical to our success. To protect
our proprietary rights, we rely on trademark and copyright law, trade secret
protection and confidentiality and/or license agreements with our employees,
customers, partners and others. We pursue the registration of our trademarks and
service marks in the U.S., and have applied for the registration of our
trademarks and service marks. We applied for Federal registration of the service
marks "BEYOND.COM" on July 10, 1998, and "BEYOND DOT COM" on July 14, 1998,
although we cannot be certain that federal registration of these service marks
or any other service mark will issue. In addition, effective trademark, service
mark, copyright and trade secret protection may be unavailable in every country
in which our products and services are available online.
We have licensed in the past, and expect to license in the future, certain
of our proprietary rights, such as trademarks or copyrighted material, to third
parties. While we attempt to ensure that these licensees maintain the quality of
our brand, the licensees could take actions that materially harm the value of
our proprietary rights or reputation. Furthermore, the steps we take to protect
our proprietary rights may be inadequate or third parties might infringe or
misappropriate our trade secrets, copyrights, trademarks, trade dress and
similar proprietary rights. In addition, others could independently develop
substantially equivalent intellectual property. We may have to litigate in the
future to enforce our intellectual property rights, to protect our trade secrets
or to determine the validity and scope of the proprietary rights of others. Such
litigation could result in substantial costs and the diversion of our management
and technical resources which could harm our business.
WE MAY BECOME SUBJECT TO ADDITIONAL GOVERNMENT REGULATION WHICH MAY AFFECT THE
MANNER IN WHICH WE
CONDUCT OUR BUSINESS
Laws and regulations directly applicable to communications or commerce over
the Internet are becoming more prevalent. A recent session of the U.S. Congress
resulted in Internet laws regarding children's privacy, copyrights, taxation and
the transmission of sexually explicit material. The European Union recently
enacted its own privacy regulations. The law of the Internet, however, remains
largely unsettled, even in areas where there has been some legislative action.
It may take years to determine whether and how existing laws such as those
governing intellectual property, privacy, libel, contracts and taxation apply to
the Internet. In addition, the growth and development of the market for online
commerce may prompt calls for more stringent consumer protection laws, both in
the U.S. and abroad that may impose additional burdens on companies conducting
business online. The adoption or modification of laws or regulations relating to
the Internet could adversely affect our business.
WE MAY FACE CLAIMS BASED ON OUR INTERNET CONTENT FOR WHICH WE ARE NOT COMPLETELY
COVERED BY INSURANCE
We believe that our future success will depend in part upon our ability to
deliver original and compelling descriptive content about the software products
we sell, or our customers sell, on the Internet. As a publisher of online
content, we face potential liability for defamation, negligence, copyright,
patent or trademark infringement, or other claims based on the nature and
content of materials that we publish or distribute. In the past, plaintiffs have
brought such claims and sometimes successfully litigated them against online
services. In addition, in the event that we implement a greater level of
interconnectivity on our website, we will not and cannot practically screen all
of the content our users generate or access, which could expose us to liability
with respect to such content. Although we carry general liability insurance, our
insurance may not cover claims of
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<PAGE> 14
these types or may be inadequate to indemnify us for all liability that may be
imposed on us. If we face liability, particularly liability that is not covered
by our insurance or is in excess of our insurance coverage, then our reputation
and our business may suffer.
WE MAY BE SUBJECT TO SALES AND OTHER TAXES WHICH WOULD RESULT IN A DECLINE IN
OUR PROFITS
We do not currently collect sales or other similar taxes for physical
shipments of goods into states other than California, Massachusetts, Virginia
and the District of Columbia. We do not currently collect sales or other similar
taxes for digital download of goods into states other than the District of
Columbia. However, one or more local, state or foreign jurisdictions may seek to
impose sales tax collection obligations on us and other out of state companies
which engage in online commerce. In addition, any new operations in states
outside California and the District of Columbia, could subject our shipments
into such states to state sales taxes under current or future laws. If one or
more states or any foreign country successfully asserts that we should collect
sales or other taxes on the sale of our merchandise, it could adversely affect
our business.
MANAGEMENT AND CERTAIN STOCKHOLDERS CAN EXERCISE SIGNIFICANT INFLUENCE OVER US
WHICH MAY NOT BE IN THE BEST INTEREST OF OTHER STOCKHOLDERS
As of June 30, 2000, William S. McKiernan, the Chairman of our Board of
Directors, and his respective affiliates beneficially own in the aggregate
approximately 20.2% of our outstanding common stock. Therefore, if William S.
McKiernan and his respective affiliates act together, they will be able to
exercise significant influence over all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. Such concentration of ownership may also have the effect of
delaying, preventing or deterring a change in our control which could adversely
affect the market price of our common stock.
OUR SUCCESS IS SUBJECT TO RISKS ASSOCIATED WITH GLOBAL EXPANSION
Although we sell software to customers outside the U.S., we have no
facility overseas for electronic fulfillment or physical distribution except
with regard to our 19.9% investment in SoftGallery. We also have no website
content localized for foreign markets. Therefore, we may be unable to expand our
global presence effectively. In addition, international operations are subject
to inherent risks, including:
- regulatory requirements;
- export restrictions;
- tariffs and other trade barriers;
- difficulties in protecting intellectual property rights;
- longer payment cycles;
- problems in collecting accounts receivable;
- political instability; and
- fluctuations in currency exchange rates.
In addition, the United States imposes export restrictions on certain
software because of its encryption technology and we may face liability if we
violate these restrictions.
THE INTRODUCTION OF THE EURO CURRENCY CREATES A SIGNIFICANT AMOUNT OF
UNCERTAINTY
In January 1999, the new "Euro" currency was introduced in certain European
countries that are part of the European Monetary Union ("EMU"). During 2002, all
EMU countries are expected to completely replace their national currencies with
the Euro. A significant amount of uncertainty exists as to the effect the Euro
will have on the marketplace generally and, additionally, all of the final rules
and regulations have not yet been defined and finalized by the European
Commission with regard to the Euro currency. We list the prices
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<PAGE> 15
for our products, accounts, and invoices for sales and collect payments in U.S.
dollars, even for sales outside the U.S. We currently utilize third-party vendor
equipment and software products that may or may not be EMU compliant. Although
we are currently taking steps to address the impact, if any, of EMU compliance
for such third-party products, the failure of any critical component to operate
properly during and after the Euro conversion process may have an adverse effect
on our business or results of operations or require us to incur expenses to
remedy such problems.
OUR CHARTER DOCUMENTS AND OTHER AGREEMENTS CONTAIN PROVISIONS WHICH MAY
ADVERSELY AFFECT A POTENTIAL TAKEOVER
Provisions of our Amended and Restated Certificate of Incorporation,
Bylaws, option agreements and Delaware law could make it more difficult for a
third party to acquire us, even if doing so would be beneficial to our
stockholders. See "Description of Capital Stock".
BEYOND.COM CORPORATION
We are an e-commerce services provider that builds and manages websites for
businesses and sells software and computer related products to the government,
corporate and consumer markets. Additionally, Beyond.com operates its own online
store, (http://www.beyond.com/), where customers can find an extensive selection
of software and computer related products and services.
We were incorporated in California in 1994 as CyberSource Corporation and
changed our name to software.net Corporation in April 1998. In June 1998, we
were reincorporated in Delaware as software.net Corporation. In December, 1998,
we changed our name from software.net Corporation to Beyond.com Corporation.
References in this prospectus to "Beyond.com", "we", "our" and "us" refer to
Beyond.com Corporation, a Delaware corporation and its predecessor, software.net
Corporation, both the California and the Delaware corporation. Our principal
executive offices are located at 3200 Patrick Henry Drive, Santa Clara,
California 95054 and our telephone number is (408) 855-3000. We have applied for
federal registration of the service marks "BEYOND.COM" and "BEYOND DOT COM."
Each trademark, trade name or service mark of any other company appearing in
this prospectus belongs to its holder.
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<PAGE> 16
USE OF PROCEEDS
We will not receive any of the proceeds from the sale by the selling
stockholders of shares of our common stock. We have agreed to bear certain
expenses relating to the registration of the shares of common stock registered
pursuant to the registration statement of which this prospectus is a part.
DIVIDEND POLICY
We have never declared or paid any cash dividends. We currently expect to
retain future earnings, if any, to finance the growth and development of our
business.
SELLING STOCKHOLDERS
The following table provides the name of the selling stockholders and the
number of shares of common stock owned by the selling stockholders as of May 31,
2000. Since the selling stockholders may each sell all, some or none of their
respective shares, we cannot estimate the aggregate number and percentage of
shares of common stock that the selling stockholders will offer pursuant to this
prospectus or that the selling stockholders will own upon completion of an
offering to which this prospectus relates.
<TABLE>
<CAPTION>
SHARES
SHARES BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO THIS OWNED AFTER
OFFERING THIS OFFERING
------------------- SHARES BEING -----------------
NAME AND ADDRESS NUMBER PERCENT SOLD NUMBER PERCENT
---------------- ------- ------- ------------ ------ -------
<S> <C> <C> <C> <C> <C>
Gerard Fournier................... 215,883 * 215,883 -- *
Jean Francois Mammet.............. 8,995 * 8,995 -- *
</TABLE>
* Less than 1%
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
We are authorized to issue up to 70,000,000 shares of common stock and
15,000,000 shares of preferred stock. The following description of our capital
stock is not complete and is qualified in its entirety by our certificate of
incorporation and bylaws, both of which are included as exhibits to the
registration statement of which this prospectus forms a part, and by applicable
Delaware laws.
COMMON STOCK
As of July 31, 2000, there were 38,137,210 shares of common stock
outstanding held of record by approximately 408 stockholders. Subject to
preferences that may be applicable to any outstanding shares of preferred stock,
our board of directors may declare a dividend out of funds legally available and
the holders of common stock are entitled to receive ratably any such dividends.
In the event of our liquidation, dissolution or winding up, holders of our
common stock are entitled to share ratably in all of our assets remaining after
we pay our liabilities and liquidation preferences of any outstanding shares of
preferred stock. Holders of our common stock have no preemptive rights or other
subscription rights to convert their shares into any other securities. There are
no redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock and the shares of common stock to be issued
upon conversion of our 7 1/4% Convertible Subordinated Notes will be fully paid
and nonassessable.
PREFERRED STOCK
Our board of directors has the authority, without further action by our
stockholders, to issue up to 15,000,000 shares of preferred stock in one or more
series and to fix the privileges and rights of each series. These privileges and
rights may be greater than those of the common stock. Our board of directors,
without further stockholder approval, can issue preferred stock with voting,
conversion or other rights that could adversely affect the voting power and
other rights of the holders of common stock. This type of "blank check preferred
stock" makes it possible for us to issue preferred stock quickly with terms
calculated to delay or prevent a change in our control or make removal of our
management more difficult. Additionally, if we issue this preferred stock, then
the market price of
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<PAGE> 17
common stock may decrease, and voting and other rights may decrease. We
currently have no plans to issue any of this preferred stock.
WARRANTS
Concurrent with the purchase of 238,949 shares of our common stock at a
price per share equal to our initial public offering price (less underwriters'
discounts) by America Online in June 1998, we issued to America Online a
non-forfeitable warrant for 358,423 shares of common stock at a per share
exercise price of $8.37, which vests in increments of 1/36 per month commencing
March 1, 1998.
CONVERTIBLE NOTES
On August 8, 2000, we commenced our offer to exchange our 7 1/4%
Convertible Subordinated Notes due December 1, 2003 into our 10 7/8% Convertible
Subordinated Notes due December 1, 2003. The exchange offer expires on September
6, 2000, 5:00 p.m., Eastern Daylight Time, unless we extend the offer. Our
10 7/8% Convertible Subordinated Notes:
o are general unsecured obligations;
o mature on December 1, 2003;
o bear interest at a rate of 10 7/8% per year commencing on their issue
date;
o are convertible, at any time prior to the close of business on
December 1, 2003, into shares of our common stock at the conversion
price of $2.875 per share, subject to certain adjustments;
o may be redeemed at our option on or after December 6, 2001, in whole
or, from time to time, in part, upon not less than 30 nor more than 60
days notice by mail at the following prices (expressed as a percentage
of principal amount) during the periods set forth below:
<TABLE>
<S> <C>
December 6, 2001 through November 30, 2002.................... 106.215%
December 1, 2002, through December 1, 2003.................... 103.100%
</TABLE>
o rank behind all existing and future senior indebtedness of ours and
any of our subsidiaries in right of payment;
o were issued in denominations of $1,000 principal amount and integral
multiples thereof; and
o were issued only in fully registered book entry form, without coupons,
and are represented by one or more permanent global 10 7/8%
Convertible Subordinated Note.
o Interest will be in cash or, at our option, in common stock at rate of
10 7/8% per year, payable on June 1 and December 1 of each year. If we
elect to pay interest in common stock, the shares of common stock will
be valued at 90% of the average of the closing prices for the five
trading days immediately preceding the second trading day prior to the
interest payment date.
Upon the occurrence of certain events which constitute a "change of
control" (as defined in the 10 7/8% Convertible Subordinated Note), we may, at
the election of a holder of our 10 7/8% Convertible Subordinated Notes, be
required to purchase all or any part of such holder's notes.
LaSalle Bank National Association has agreed to serve as the Trustee under
the Indenture. LaSalle Bank National Association will be permitted to deal with
us and any of our affiliates with the same rights as if it were not Trustee;
provided, however, that under the Trust Indenture Act, if LaSalle Bank National
Association acquires any conflicting interest (as defined in the Trust Indenture
Act) and there exists a default with respect to our 10 7/8% Convertible
Subordinated Notes, it must eliminate such conflict or resign.
We, together with LaSalle Bank National Association, may amend or
supplement the terms of our 10 7/8% Convertible Subordinated Notes with the
written consent of the holders of at least a majority in principal amount of the
then outstanding notes. However, we may not, without the consent of the holder
of each 10 7/8% Convertible Subordinated Note affected thereby, amend the notes
to alter the rights of such holders in a materially adverse manner.
The occurrence of any of the following events would constitute a default
(such events are referred to as "Events of Default") under our Indenture with
LaSalle Bank National Association and our 10 7/8% Convertible Subordinated
Notes:
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<PAGE> 18
o our failure to pay any interest on our 10 7/8% Convertible
Subordinated Notes for 30 days after the same is due or our failure to
pay any principal of or premium, if any, on our 10 7/8% Convertible
Subordinated Notes when due;
o our failure to comply with any of our other agreements contained in
our 10 7/8% Convertible Subordinated Notes or our Indenture with
LaSalle Bank National Association for 60 days after receipt of notice
of such failure from LaSalle Bank National Association or the holders
of not less than 25% in aggregate principal amount of our 10 7/8%
Convertible Subordinated Notes then outstanding;
o our default under any bond, debenture, note or other evidence of
indebtedness for money borrowed or that of any subsidiary of ours
having an aggregate outstanding principal amount in excess of $10
million, which default shall have resulted in such indebtedness being
accelerated, without such indebtedness being discharged, or such
acceleration having been rescinded or annulled, within ten days from
the date of such acceleration; and
o certain events of bankruptcy, insolvency or reorganization with
respect to us or any subsidiary of ours.
If an event of default (other than an Event of Default resulting from
bankruptcy, insolvency or reorganization with respect to us or any subsidiary of
ours) occurs and is continuing, LaSalle Bank National Association may, by notice
to us, declare all unpaid principal of and accrued interest to the date of
acceleration on our 10 7/8% Convertible Subordinated Notes then outstanding to
be due and payable immediately. Also, in such event, the holders of at least 25%
in principal amount of our 10 7/8% Convertible Subordinated Notes then
outstanding may, by notice to us and LaSalle Bank National Association, declare
all unpaid principal of and accrued interest to the date of acceleration on our
10 7/8% Convertible Subordinated Notes then outstanding to be due and payable
immediately. If an Event of Default resulting from certain events of bankruptcy,
insolvency or reorganization with respect to us or subsidiary of ours occurs,
all unpaid principal of and accrued interest on our 10 7/8% Convertible
Subordinated Notes then outstanding shall become and be immediately due and
payable without any declaration or other act on the part of LaSalle Bank
National Association or any holder.
Our Indenture with LaSalle Bank National Association provides that the
holders of a majority in principal amount of our outstanding 10 7/8% Convertible
Subordinated Notes may on behalf of all holders waive any existing default or
Event of Default and its consequences except a default or Event of Default in
the payment of principal of or accrued interest on our 10 7/8% Convertible
Subordinated Notes or any default in respect of any provision of the Indenture
that cannot be modified or amended without the consent of the holder of each
10 7/8% Convertible Subordinated Note affected.
LaSalle Bank National Association shall, within 90 days after the
occurrence of any default known to it, give to the holders of our 10 7/8%
Convertible Subordinated Notes notice of such default; provided that, except in
the case of a default in the payment of principal of or interest on any of our
10 7/8% Convertible Subordinated Notes, LaSalle Bank National Association may
withhold such notice if it in good faith determines that the withholding of such
notice is in the interests of such holders.
No holder of our 10 7/8% Convertible Subordinated Notes may pursue any
remedy under our Indenture with LaSalle Bank National Association or our 10 7/8%
Convertible Subordinated Notes against us (except actions for payment of overdue
principal or interest or for the conversion of our 10 7/8% Convertible
Subordinated Notes), unless:
o the holder gives to LaSalle Bank National Association written notice
of a continuing Event of Default;
o the holders of at least 25% in principal amount of our outstanding
10 7/8% Convertible Subordinated Notes make a written request to
LaSalle Bank National Association to pursue the remedy;
o such holder or holders offer satisfactory indemnity to LaSalle Bank
National Association against any loss, liability or expense;
o LaSalle Bank National Association does not comply with the request
within 60 days after receipt of the request and the offer of
indemnity; and
o LaSalle Bank National Association shall not have received during such
60 day period a contrary direction from the holders of at least a
majority in principal amount of our outstanding 10 7/8% Convertible
Subordinated Notes.
We must deliver an officers' certificate to LaSalle Bank National
Association within 90 days after the end of each fiscal year as to the signers'
knowledge of our compliance with all conditions and covenants contained in our
Indenture with LaSalle Bank National
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<PAGE> 19
Association, and stating whether or not the signers know of any default or Event
of Default. If any such signer knows of such a default or Event of Default, the
officers' certificate shall describe the default or Event of Default and the
efforts to remedy the same.
The holders of a majority in principal amount of all our outstanding
10 7/8% Convertible Subordinated Notes will have the right to direct the time,
method and place of conducting any proceeding for exercising any remedy or power
available to LaSalle Bank National Association, provided that such direction
does not conflict with any law or the Indenture, is not unduly prejudicial to
the rights of another holder or LaSalle Bank National Association and does not
involve liability for LaSalle Bank National Association.
In November and December 1998, we issued $63.25 million aggregate principal
amount of 7 1/4% Convertible Subordinated Notes. Our 7 1/4% Convertible
Subordinated Notes:
o are general unsecured obligations;
o mature on December 1, 2003;
o bear interest at a rate of 7 1/4% per year commencing November 23,
1998;
o are convertible, at any time prior to the close of business on
December 1, 2003, into shares of our common stock at the conversion
price of $18.34 per share, subject to certain adjustments;
o may be redeemed at our option on or after December 6, 2001, in whole
or, from time to time, in part, upon not less than 30 nor more than 60
days notice by mail at the following prices (expressed as a percentage
of principal amount) during the periods set forth below:
<TABLE>
<S> <C>
December 6, 2001 through November 30, 2002.................... 101.813%
December 1, 2002, through December 1, 2003.................... 100.000%
</TABLE>
o rank behind all existing and future senior indebtedness of ours and
any of our subsidiaries in right of payment;
o were issued in denominations of $1,000 principal amount and integral
multiples thereof; and
o were issued only in fully registered book entry form, without coupons,
and are represented by a permanent global 7 1/4% Convertible
Subordinated Note.
Upon the occurrence of certain events which constitute a "change of
control" (as defined in the 7 1/4% Convertible Subordinated Note), we may, at
the election of a holder of our 7 1/4% Convertible Subordinated Notes, be
required to purchase all or any part of such holder's notes.
LaSalle Bank National Association has agreed to serve as the Trustee under
the Indenture. LaSalle Bank National Association will be permitted to deal with
us and any of our affiliates with the same rights as if it were not Trustee;
provided, however, that under the Trust Indenture Act, if LaSalle Bank National
Association acquires any conflicting interest (as defined in the Trust Indenture
Act) and there exists a default with respect to our 7 1/4% Convertible
Subordinated Notes, it must eliminate such conflict or resign.
We, together with LaSalle Bank National Association, may amend or
supplement the terms of our 7 1/4% Convertible Subordinated Notes with the
written consent of the holders of at least a majority in principal amount of the
then outstanding notes. However, we may not, without the consent of the holder
of each 7 1/4% Convertible Subordinated Note affected thereby, amend the notes
to alter the rights of such holders in a materially adverse manner.
The occurrence of any of the following events would constitute a default
(such events are referred to as "Events of Default") under our Indenture with
LaSalle Bank National Association and our 7 1/4% Convertible Subordinated Notes:
19
<PAGE> 20
o our failure to pay any interest on our 7 1/4% Convertible Subordinated
Notes for 30 days after the same is due or our failure to pay any
principal of or premium, if any, on our 7 1/4% Convertible
Subordinated Notes when due;
o our failure to comply with any of our other agreements contained in
our 7 1/4% Convertible Subordinated Notes or our Indenture with
LaSalle Bank National Association for 60 days after receipt of notice
of such failure from LaSalle Bank National Association or the holders
of not less than 25% in aggregate principal amount of our 7 1/4%
Convertible Subordinated Notes then outstanding;
o our default under any bond, debenture, note or other evidence of
indebtedness for money borrowed or that of any subsidiary of ours
having an aggregate outstanding principal amount in excess of $10
million, which default shall have resulted in such indebtedness being
accelerated, without such indebtedness being discharged, or such
acceleration having been rescinded or annulled, within ten days from
the date of such acceleration; and
o certain events of bankruptcy, insolvency or reorganization with
respect to us or any subsidiary of ours.
If an event of default (other than an Event of Default resulting from
bankruptcy, insolvency or reorganization with respect to us or any subsidiary of
ours) occurs and is continuing, LaSalle Bank National Association may, by notice
to us, declare all unpaid principal of and accrued interest to the date of
acceleration on our 7 1/4% Convertible Subordinated Notes then outstanding to be
due and payable immediately. Also, in such event, the holders of at least 25% in
principal amount of our 7 1/4% Convertible Subordinated Notes then outstanding
may, by notice to us and LaSalle Bank National Association, declare all unpaid
principal of and accrued interest to the date of acceleration on our 7 1/4%
Convertible Subordinated Notes then outstanding to be due and payable
immediately. If an Event of Default resulting from certain events of bankruptcy,
insolvency or reorganization with respect to us or subsidiary of ours occurs,
all unpaid principal of and accrued interest on our 7 1/4% Convertible
Subordinated Notes then outstanding shall become and be immediately due and
payable without any declaration or other act on the part of LaSalle Bank
National Association or any holder.
Our Indenture with LaSalle Bank National Association provides that the
holders of a majority in principal amount of our outstanding 7 1/4% Convertible
Subordinated Notes may on behalf of all holders waive any existing default or
Event of Default and its consequences except a default or Event of Default in
the payment of principal of or accrued interest on our 7 1/4% Convertible
Subordinated Notes or any default in respect of any provision of the Indenture
that cannot be modified or amended without the consent of the holder of each 7
1/4% Convertible Subordinated Note affected.
LaSalle Bank National Association shall, within 90 days after the
occurrence of any default known to it, give to the holders of our 7 1/4%
Convertible Subordinated Notes notice of such default; provided that, except in
the case of a default in the payment of principal of or interest on any of our 7
1/4% Convertible Subordinated Notes, LaSalle Bank National Association may
withhold such notice if it in good faith determines that the withholding of such
notice is in the interests of such holders.
No holder of our 7 1/4% Convertible Subordinated Notes may pursue any
remedy under our Indenture with LaSalle Bank National Association or our 7 1/4%
Convertible Subordinated Notes against us (except actions for payment of overdue
principal or interest or for the conversion of our 7 1/4% Convertible
Subordinated Notes), unless:
o the holder gives to LaSalle Bank National Association written notice
of a continuing Event of Default;
o the holders of at least 25% in principal amount of our outstanding 7
1/4% Convertible Subordinated Notes make a written request to LaSalle
Bank National Association to pursue the remedy;
o such holder or holders offer satisfactory indemnity to LaSalle Bank
National Association against any loss, liability or expense;
o LaSalle Bank National Association does not comply with the request
within 60 days after receipt of the request and the offer of
indemnity; and
o LaSalle Bank National Association shall not have received during such
60 day period a contrary direction from the holders of at least a
majority in principal amount of our outstanding 7 1/4% Convertible
Subordinated Notes.
We must deliver an officers' certificate to LaSalle Bank National
Association within 90 days after the end of each fiscal year as to the signers'
knowledge of our compliance with all conditions and covenants contained in our
Indenture with LaSalle Bank National
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Association, and stating whether or not the signers know of any default or Event
of Default. If any such signer knows of such a default or Event of Default, the
officers' certificate shall describe the default or Event of Default and the
efforts to remedy the same.
The holders of a majority in principal amount of all our outstanding 7 1/4%
Convertible Subordinated Notes will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy or power
available to LaSalle Bank National Association, provided that such direction
does not conflict with any law or the Indenture, is not unduly prejudicial to
the rights of another holder or LaSalle Bank National Association and does not
involve liability for LaSalle Bank National Association.
CERTAIN CHARTER AND BYLAW PROVISIONS
We are subject to the "business combination" statute of the Delaware
General Corporation Law. This statute prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner, such as the approval of a
majority of certain members of the board of directors. The term "business
combination" includes mergers and stock and asset sales. An "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years, did own) 15% or more of the corporation's voting stock. The
effect of this statute could, among other things, make it more difficult for a
third party to gain control of us, discourage bids for the common stock at a
premium or otherwise adversely affect the market price of the common stock.
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY; INDEMNIFICATION
Our certificate of incorporation includes provisions that limit the
personal liability of our officers and directors for monetary damages for breach
of their fiduciary duties as directors, except for liability that cannot be
eliminated under the Delaware General Corporation Law. Our certificate of
incorporation provides that, to the fullest extent provided by the Delaware
General Corporation Law, our directors will not be personally liable for
monetary damages for breach of their fiduciary duty as directors. The Delaware
General Corporation Law does not permit a provision in a corporation's
certificate of incorporation that would eliminate such 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 that involve intentional misconduct or a
knowing violation of law, (iii) for any unlawful payment of a dividend or
unlawful stock repurchase or redemption, as provided in Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
While these provisions provide directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate such
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care. The provisions described above apply to an
officer of a corporation only if he or she is a director of such corporation and
is acting in his or her capacity as director, and do not apply to the officers
of the corporation who are not directors.
Our bylaws provide that, to the fullest extent permitted by the Delaware
General Corporation Law, we may indemnify our directors, officers and employees.
Our bylaws further provide that we may similarly indemnify our agents. In
addition, we anticipate that each director will enter into an indemnification
agreement pursuant to which we will indemnify such director to the fullest
extent permitted by the Delaware General Corporation Law. At present, there is
no pending litigation or proceeding involving any of our directors or officers
in which indemnification is required or permitted, and we are not aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification.
REGISTRATION RIGHTS
The holders of our 7 1/4% Convertible Subordinated Notes have the right to
have such notes and the 3,448,745 shares of our common stock issuable upon
conversion of such notes registered. On March 23, 1999 a shelf-registration
statement covering the resale of these notes and shares of common stock issuable
upon conversion of these notes, and which included an additional 247,531 shares
of our common stock which were issued in private transactions and 358,423 shares
of our common stock issuable upon exercise of an outstanding warrant was
declared effective. We may suspend the use of this shelf-registration statement
for limited periods under certain circumstances relating to pending corporate
developments, public filings with the Securities and Exchange Commission and
similar events. Subject to certain limitations, we have agreed to pay liquidated
damages to all holders of our 7 1/4% Convertible Subordinated Notes or common
stock into which our 7 1/4% Convertible Subordinated Notes may convert that have
requested to sell pursuant to the shelf registration statement if a stop order
suspending such registration statement or proceedings therefor have been
initiated under the Securities Act of 1933, or if the related prospectus is
unavailable for periods in excess of those set forth in the
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registration rights agreement. We have further agreed, if such unavailability
continues for an additional 30 day period, to pay liquidated damages to all such
holders, whether or not such holder has requested to sell pursuant to the
shelf-registration statement. Liquidated damages will accrue until such time as
there are no triggering events which have occurred and are continuing at a rate
equal to one half of one percent (0.50%) per annum of the principal amount of
our 7 1/4% Convertible Subordinated Notes and will be payable on the interest
payment dates for our 7 1/4% Convertible Subordinated Notes to the persons in
whose names the relevant securities were registered at the close of business on
the immediately preceding regular record dates for our 7 1/4% Convertible
Subordinated Notes.
With respect to each holder, our obligations to pay liquidated damages
remains in effect only so long as our 7 1/4% Convertible Subordinated Notes and
the common stock issuable upon the conversion of our 7 1/4% Convertible
Subordinated Notes held by such holder are "registrable securities" within the
meaning of the registration rights agreement. We will pay all expenses of this
registration statement and provide each holder that is selling hereunder copies
of this prospectus and take certain other actions as are required to permit,
subject to the foregoing, unrestricted resales of the applicable securities.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is EquiServe. The
transfer agent's address is 150 Royall Street, Canton, Massachusetts 02021 and
telephone number is (781) 575-2000.
PLAN OF DISTRIBUTION
The shares of common stock offered by this prospectus are being sold by the
selling stockholders. We will not receive any of the proceeds from the sale of
these shares.
The distribution of the shares of common stock by the selling stockholders
may be made from time to time by the selling stockholders directly or through
one or more brokers, agents, or dealers in one or more transactions (which may
involve crosses and block transactions) on The Nasdaq Stock Market's National
Market, the Pacific Exchange, Inc. or other exchanges on which our common stock
is listed, pursuant to and in accordance with the rules of those exchanges, in
the over-the-counter market, in negotiated transactions or otherwise, at prices
related to prevailing market prices or at negotiated prices. In the event that
one or more brokers, agents or dealers agree to sell the shares, they may do so
by purchasing shares as principals or by selling shares as agents for the
selling stockholder. Any brokers, agents or dealers who sell the shares may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933.
Any broker, agent or dealer may receive compensation from the selling
stockholders which may be deemed to be underwriting discounts or commissions and
may receive commissions from purchasers of the securities for whom it may act as
agent. If any such broker or dealer purchases the shares as principal it may
resell the shares from time to time to or through other brokers or dealers, and
the other brokers or dealers may receive compensation in the form of concessions
or commissions from the selling stockholders or purchaser of the shares for whom
they may act as agents.
We have advised the selling stockholders that it and any brokers, dealers
or agents who effect a sale of the shares are subject to the prospectus delivery
requirements of the Securities Act of 1933. We have advised the selling
stockholders that in the event of a "distribution" of its shares, the selling
stockholders and any broker, agent or dealer who participates in the
distribution may be subject to applicable provisions of the Securities Exchange
Act of 1934 and its rules and regulations, including Regulation M.
In connection with distributions of the shares, the selling stockholders
may enter into hedging transactions with broker-dealers, and the broker-dealers
may engage in short sales of our common stock in the course of hedging the
positions they assume with the selling stockholder. The selling stockholders
also may sell our common stock short and deliver the shares to close out short
positions. The selling stockholders also may enter into option or other
transactions with broker-dealers that involve the delivery of the shares to the
broker-dealers, who may then resell or otherwise transfer the shares. The
selling stockholders may transfer the shares to a donee and any donee would
become a selling stockholders under this prospectus.
We will bear all expenses of the offering of the shares, except that the
selling stockholders will pay any applicable underwriting fees, discounts or
commissions and transfer taxes, as well as the fees and disbursements of his
counsel and experts.
LEGAL MATTERS
Certain legal matters will be passed on for us by our counsel, Morrison &
Foerster LLP, Palo Alto, California. As of the date of this prospectus, Richard
Scudellari, a partner in that firm, owns 40,000 shares of our common stock.
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EXPERTS
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the year ended December 31, 1999, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our consolidated financial statements and schedule are incorporated
by reference in reliance upon Ernst & Young LLP's report, given upon their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file with the Securities and Exchange Commission at the
Securities and Exchange Commission's public reference rooms at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Securities and Exchange Commission's regional offices at Seven World Trade
Center, 13th Floor, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference rooms. The Securities and Exchange Commission also
maintains a web site that contains reports, proxy and information statements,
and other information regarding registrants that file electronically with the
Securities and Exchange Commission (http://www.sec.gov). In addition, our common
stock is listed on the Nasdaq National Market and similar information concerning
Beyond.com can be inspected and copied at the offices of the National
Association of Securities Dealers, Inc., 9513 Key West Avenue, Rockville,
Maryland 20850.
We have filed a registration statement of which this prospectus is a part
and related exhibits with the Securities and Exchange Commission under the
Securities Act of 1933. The registration statement contains additional
information about us. You may inspect the registration statement and exhibits
without charge at the office of the Securities and Exchange Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and you may obtain copies from the
Securities and Exchange Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with the Securities and Exchange Commission,
which means that we can disclose important information to you by referring to
those documents. The information incorporated by reference is an important part
of this prospectus. Any statement contained in a document which is incorporated
by reference in this prospectus is automatically updated and superseded if
information contained in this prospectus, or information that we later file with
the Securities and Exchange Commission, modifies or replaces this information.
We incorporate by reference the following documents we have filed with the
Securities and Exchange Commission:
o Annual Reports on Form 10-K and Form 10-K/A for the year ended
December 31, 1999;
o Quarterly Reports on Form 10-Q for the quarterly period ended June 30,
2000 and March 31, 2000;
o All documents filed by us with the Securities and Exchange Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 after the date of this prospectus and prior to
the termination of the offering.
To receive a free copy of any of the documents incorporated by reference in
this prospectus (other than exhibits, unless they are specifically incorporated
by reference in the documents), call or write Beyond.com Corporation, 3200
Patrick Henry Drive, Santa Clara, California 95054, attention Investor
Relations, (408) 855-3000.
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