As filed with the Securities and Exchange Commission on February 11, 2000
Registration No.: 333-95205
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
TO THE FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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NETGATEWAY, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of organization)
87-0591719
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(I.R.S. Employer Identification No.)
300 Oceangate, 5TH Floor
Long Beach, California 90802
Phone: 582-308-0010
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(Address of Principal Executive Offices) (Zip Code)
NETGATEWAY, INC.
1998 STOCK COMPENSATION PROGRAM; 1998 STOCK OPTION PLAN FOR
SENIOR EXECUTIVES; 1999 STOCK OPTION PLAN FOR
NON-EXECUTIVES; EXECUTIVE OFFICER COMMON STOCK GRANTS;
DIRECTOR WARRANTS AND CONSULTANT WARRANTS
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(Full title of the plan)
Craig S. Gatarz, Esq.
General Counsel
300 Oceangate, 5TH Floor
Long Beach, California 90802
Phone: 582-308-0010
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(Name, address and telephone number of agent for service)
Copy to:
C. Thomas Hopkins, Esq.
Nida & Maloney, LLP
800 Anacapa Street
Santa Barbara, California 93101
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EXPLANATORY NOTE
The Prospectus filed as part of this Registration Statement has been
prepared in accordance with the requirements of Form S-3 and may be used for
reofferings and resales of registered shares of common stock which have been
issued upon the exercise of options which have been granted under the
Netgateway, Inc.'s 1998 Stock Compensation Program; 1998 Stock Option Plan For
Senior Executives; 1999 Stock Option Plan For Non-Executives and individual
common stock grants or warrants issued to directors, officers, employees and
consultants of Netgateway.
<PAGE>
PROSPECTUS
NETGATEWAY, INC.
9,877,002 SHARES OF COMMON STOCK
issued pursuant to the
NETGATEWAY, INC.
1998 STOCK COMPENSATION PROGRAM; 1998 STOCK OPTION PLAN FOR
SENIOR EXECUTIVES; 1999 STOCK OPTION PLAN FOR
NON-EXECUTIVES; EXECUTIVE OFFICER COMMON STOCK GRANTS;
DIRECTORS WARRANTS AND CONSULTANT WARRANTS
This prospectus relates to the reoffer and resale of a total of 9,877,002
shares of our common stock, $.001 par value, which has been acquired under our
Netgateway, Inc. 1998 Stock Compensation Program; 1998 Stock Option Plan For
Senior Executives; 1999 Stock Option Plan For Non-Executives; Executive Officer
Common Stock Grants and individual common stock or warrants granted to certain
of our directors, officers, employees or consultants. The shares of common stock
acquired under the plans or individually may be offered from time to time by the
selling stockholders named or described in this prospectus. The shares may be
offered through brokers and dealers to be selected by the selling stockholders,
and through public or private transactions, on or off the Nasdaq National Market
System, pursuant to this registration statement or pursuant to Rule 144, in
negotiated transactions, at fixed prices, at market prices prevailing at the
time of sale, at prices related to prevailing market prices or at negotiated
prices. We will receive none of the proceeds from the sale of the shares by the
selling stockholders. We have agreed to bear certain expenses, including the
fees and costs of preparing, filing and keeping effective this registration
statement (other than selling commissions and fees and expenses of counsel and
other advisors to the selling stockholders) in connection with the registration
of the shares.
Through November 17, 1999, our common stock traded on the OTC Bulletin
Board under the symbol "NGWY." Commencing on November 18, 1999, our common stock
has been quoted on the Nasdaq National Market under the symbol "NGWY."
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Investing in our common stock involves risks. See "Risk Factors" beginning
on page 3.
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The selling stockholders and any broker-dealers, agents or underwriters
that participate with the selling stockholders in the distribution of the shares
may be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act of 1933, and any commissions received by them and any profit on
the resale of the shares purchased by them may be deemed underwriting
commissions or discounts under the Securities Act.
Neither the Securities and Exchange Commission nor any State Securities
Commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is February 11, 2000.
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TABLE OF CONTENTS
Page
Available Information....................................... 2
Information Incorporated by Reference....................... 2
Risk Factors................................................ 3
Use of Proceeds............................................. 16
The Selling Stockholders.................................... 16
Plan of Distribution........................................ 18
Legal Matters............................................... 18
Experts..................................................... 18
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934. In accordance with the Exchange Act, we file all required reports,
proxy statements and other information with the Securities and Exchange
Commission. Reports, proxy statements and other information filed by us may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; and
copies of such material may be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549, at prescribed rates. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. In addition, the Commission maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, "http://www.sec.gov".
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by us with the Commission are incorporated by
reference in this prospectus:
(1) The Company's Prospectus filed pursuant to Rule 424(b)(4) on
November 19, 1999 (File No. 333-79751); and
(2) The description of the common stock contained in the Company's
Registration Statement on Form 8-A filed November 4, 1999 (File
No. 000-27941).
The above-listed documents are on file with the Commission and are
incorporated in this prospectus by reference and made a part hereof. All
documents we subsequently file pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act, prior to the termination of the offering of the common stock
under this prospectus shall be deemed to be incorporated by reference into this
registration statement. Any statement contained in this prospectus, any
prospectus supplement or in a document incorporated by reference shall be deemed
modified or superseded to the extent that a statement contained in any
prospectus supplement or in any other subsequently filed document which also is
or is deemed to be incorporated by reference herein or therein, modifies or
supersedes that statement. Any statement so modified or superseded shall not be
deemed to constitute a part hereof, except as so modified or superseded. We will
cause to be furnished without charge to each person to whom this prospectus is
delivered, upon the written or oral request of such person, a complete copy of
the above referenced documents or other documents filed under the Exchange Act
(except for exhibits, unless they are specifically incorporated by reference
into those documents). Requests should be addressed to: Netgateway, Inc., 300
Oceangate, 5th Floor, Long Beach, California 90802, phone number (582) 308-0010,
Attention: Craig S. Gatarz, Esq.
2
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RISK FACTORS
This prospectus contains forward-looking statements and information
relating to Netgateway. We intend to identify forward-looking statements in this
prospectus by using words such as "believes," "intends," "expects," "may,"
"will," "should," "plan," "projected," "contemplates," "anticipates,"
"estimates," "predicts," "potential," "continue," or similar terminology. These
statements are based on our beliefs as well as assumptions we made using
information currently available to us. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise. Because these statements reflect our
current views concerning future events, these statements involve risks,
uncertainties, and assumptions. Actual future results may differ significantly
from the results discussed in the forward-looking statements. Some, but not all,
of the factors that may cause such a difference include those which we discuss
in this Risk Factors section of this prospectus.
An investment in our common stock is highly speculative, involves a high
degree of risk and should be made only by investors who can afford a complete
loss. You should carefully consider the following risk factors, together with
the other information in this prospectus, before you decide to buy our common
stock.
RISKS SPECIFIC TO NETGATEWAY
We have had a deficit in stockholder's equity; We anticipate future losses
We have incurred substantial losses since our inception and we anticipate
continuing to incur substantial losses for the foreseeable future. As of June
30, 1999 and September 30, 1999, we had a working capital (deficit) of
$(1,545,420) and $(3,042,769), respectively, and shareholders' equity (deficit)
of $545,291 and $(867,106) at June 30, 1999 and September 30, 1999,
respectively. Additional information about these financial results are contained
in our financial statements and the related notes. We generated revenues of
$143,426 for the year ended June 30, 1999 and $212,733 during the three months
ended September 30, 1999. For the year ended June 30, 1999 and the three months
ended September 30, 1999, we incurred net losses of $(10,487,016) and
$(3,832,055), respectively. We may never achieve profitability. In addition,
during the year ended June 30, 1999 and the three months ended September 30,
1999, we recorded negative cash flows from operations of $(4,552,912) and
$(2,156,738), respectively. To succeed, we must leverage our existing
relationships and develop new relationships to substantially increase our
revenue derived from more comprehensive electronic commerce services. We have
expended and will continue to expend significant resources to build our internal
systems, to grow our infrastructure, to add additional participating companies
and employees, and to establish access to the Internet Commerce Center platform
for participating companies, directly and as resellers. These development
expenses must be incurred well in advance of the recognition of revenue. Under
generally accepted accounting principles during our fiscal year ended June 30,
1999 and the three months ended September 30, 1999, we recognized revenue only
upon completion of a customer transaction through the ICC. This required the
realization of expenses in advance of associated related revenue. Our
performance will depend in large part upon our ability to estimate accurately
these resource requirements and the revenues generated by customers engaging in
the transactions through the ICC. To date, the volume of our transactions has
been limited, and, accordingly, the revenue recognized has been minimal. We
intend to continue to invest heavily in acquisitions, infrastructure,
development, and marketing. As result, we may not be able to achieve or sustain
profitability.
Our auditors have qualified their report on our financial statements with
respect to our ability to continue as a going concern
The report of KPMG LLP, our independent auditors, with respect to our
financial statements and the related notes, indicate that, at the date of their
report, we were a development stage company, had generated minimal revenues
since inception, and were continuing to incur losses. Accordingly, our auditors
qualified their report to indicate that these matters raise substantial doubt,
at that date, about our ability to continue as a going concern. Our financial
statements do not include any adjustments that might result from this
uncertainty.
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Because we have been in business for a short period of time, there is limited
information upon which investors can evaluate our business
We began our operations in March 1998 and are currently a development
stage company. Consequently, we have a very limited operating history upon which
investors may base an evaluation of our business and determine our prospects for
achieving our intended business objectives. Although we have recently entered
into agreements with electronic commerce resellers providing us with access to
more than eight million potential clients, we are currently providing electronic
commerce transaction processing services to only approximately 1,600 clients. We
are prone to all of the risks inherent to the establishment of any new business
venture, including unforeseen changes in our business plan. For example, in June
1998, we changed our business plan to the development of technology to enable
businesses and other organizations to engage in electronic commerce, whereas our
prior efforts focused on the licensing and distribution of software support
materials for the governmental and educational markets. Investors should
consider the likelihood of our future success to be highly speculative in light
of our limited operating history, as well as the limited resources, problems,
expenses, risks, and complications frequently encountered by similarly situated
companies in the early stages of development, particularly companies in new and
rapidly evolving markets, such as electronic commerce. To address these risks,
we must, among other things,
o maintain and increase our client base,
o implement and successfully execute our business and marketing
strategy,
o continue to develop and upgrade our technology and transaction
processing systems,
o continually update and improve our service offerings and
features,
o provide superior customer service,
o respond to industry and competitive developments, and
o attract, retain, and motivate qualified personnel.
We may not be successful in addressing these risks. If we are unable to do
so, our business prospects, financial condition, and results of operations would
be adversely affected.
Fluctuations in our operating results may affect our stock price
As a result of our limited operating history and the emerging nature of the
markets in which we compete, we believe that our operating results may fluctuate
substantially/significantly. Because of this, quarter-to-quarter comparisons of
our results of operations may not be meaningful. If, in some future quarter,
whether as a result of such a fluctuation or otherwise, our results of
operations fall below the expectations of securities analysts and investors, the
trading price of our common stock would likely be negatively affected. You
should not rely on our results of any interim period as an indication of our
future performance. Additionally, our quarterly results of operations may
fluctuate significantly in the future as a result of a variety of factors, many
of which are outside our control. Factors that may cause our quarterly results
to fluctuate include, among others:
o our ability to retain existing clients and electronic commerce
resellers, to attract new clients and electronic commerce
resellers at a steady rate, and to maintain client satisfaction;
o our ability to motivate our existing clients, and the ability of
certain of our clients to motivate their customers, to begin to
conduct certain portions of their business on the Internet;
o the ability of our resellers to resell our StoresOnline services;
o the announcement or introduction of new services and products by
us and our competitors;
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o price competition or higher prices in the industry;
o pricing of hardware and software required for the transaction of
electronic commerce;
o the level of use of the Internet and online services and the rate
of market acceptance of the Internet and other online services
for transacting commerce;
o our ability to upgrade and develop our systems and infrastructure
in a timely and effective manner;
o our ability to attract, train, and retain skilled management,
strategic, technical, and creative professionals;
o technical difficulties, system downtime, or Internet brownouts;
o the amount and timing of operating costs and capital expenditures
relating to the expansion of our business, operations, and
infrastructure;
o unanticipated technical, legal, and regulatory difficulties with
respect to use of the Internet; and
o general economic conditions and economic conditions specific to
Internet technology usage and electronic commerce.
Our marketing strategy has not been tested and may not result in success
We have conducted some of our marketing efforts directly and have relied
substantially upon the marketing efforts of the electronic commerce resellers
with which we have contracts or strategic relationships. All of our marketing
efforts, including our marketing through these resellers, have been largely
untested in the marketplace, and may not result in sales of our products and
services. To penetrate our target market, we will have to exert significant
efforts to create awareness of, and demand for, our products and services. With
respect to our marketing efforts conducted directly, we intend to continue to do
the following:
o advertise on the Internet;
o advertise on television in selected markets;
o direct mail;
o conduct targeted e-mail campaigns;
o advertise in technology, financial, and business publications
having wide readership; and
o expand our sales staff.
With respect to our marketing efforts conducted through resellers, we have
commenced and intend to continue to do the following:
o create a group within our sales staff trained to assist resellers
in marketing our products and services to their customers,
members, employees, and relationships;
o create branded promotional brochures and other marketing
materials to inform resellers and their constituencies as to our
products and services, and
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o advertise in trade publications in strategic industries.
Our failure to further develop our marketing capabilities and successfully
market our products and services could adversely affect us.
If we are unable to upgrade our infrastructure, we may be unable to process an
increased volume of transactions
A key element of our strategy is to provide on a cost-effective basis the
means by which our clients can generate a high volume of electronic commerce
transactions through the use of our hardware and software infrastructure. If the
volume of transactions through our infrastructure substantially increases, we
will have to expand and further upgrade our technology, transaction processing
systems, and hardware and software infrastructure to accommodate these increases
or our systems may suffer from
o unanticipated system disruptions,
o slower response times,
o degradation in levels of customer service,
o impaired quality and speed of transaction processing, and
o delays in reporting accurate financial information.
We may be unable to effectively upgrade and expand our hardware and
software infrastructure or to integrate smoothly any newly developed or
purchased software with our existing systems.
We rely on internally developed systems which are inefficient, which may put us
at a competitive disadvantage
We use an internally developed system for a portion of our transaction
processing software, as well as the software required to interconnect our
clients' systems with our own. As we developed these systems primarily to
support the rapid growth of transaction submission volume and customer service
and less on traditional accounting, control, and reporting, these systems are
inefficient and require a significant amount of manual effort to prepare
information for financial and accounting reporting. This type of manual effort
is time-consuming and costly and may place us at a competitive disadvantage when
compared to competitors with more efficient systems. We intend to upgrade and
expand our transaction processing systems and to integrate newly-developed and
purchased software with our existing systems in order to improve the efficiency
of our reporting methods and support increased transaction volume. However, we
are unable to predict whether these upgrades will improve our competitive
position.
If we change our revenue recognition principles, our results of operations for
prior periods may change
We currently recognize revenues using the completed contract method. We
intend to consider using the percentage of completion method to recognize
revenues when we meet the criteria necessary to use that method. Under the
completed contract method, revenue is recognized upon completion or substantial
completion of the contract. Under the percentage of completion method, revenue
is recognized on a pro rata basis as work progresses on the contract, and
percentage of completion is determined on the basis of cost incurred to total
estimated costs. Under the percentage of completion method, in the period in
which one determines that a loss will result from a performance of a contract,
the entire amount of the estimated loss is recognized. In the event that we make
this change, we will be required to restate comparative prior periods. We cannot
guarantee that any amendments to our financial statements as a result of this
change will not be material.
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Our management owns a substantial portion of our common stock, investors may
have difficulty obtaining the necessary stockholder vote for corporate
actions contrary to the wishes of management
At February 10, 2000, our current directors and executive officers together
beneficially own approximately 4,677,302 shares or approximately 27% of the
outstanding shares of our common stock. As a result of their stock ownership:
o our current officers and directors have the ability to
substantially influence the outcome of all matters on which
stockholders are entitled to vote, including the elections of our
directors and the approval of significant corporate transactions;
and
o investors may have difficulty obtaining the necessary stockholder
vote required for corporate actions contrary to the wishes of
management.
Our management team is relatively new; Many of our employees have recently
joined us and must be integrated into our operations
From our inception on March 4, 1998 to June 30, 1998, during the year ended
June 30, 1999, during the three months ended September 30, 1999 and during the
three months ended December 31, 1999, we expanded from seven to 16 employees,
from 16 to 68 employees, from 68 to 101 employees and from 101 to 125 employees,
respectively. Some of our officers have no prior senior management experience in
public companies and have only recently joined us. Our new employees include a
number of key managerial, technical, financial, marketing, and operations
personnel who have not yet been fully integrated into our operations, and we
expect to add additional key personnel in the near future. Our failure to fully
integrate our new employees into our operations would adversely affect us.
We have limited human resources; We need to attract and retain highly skilled
personnel; We may be unable to effectively manage our growth with our
limited resources
We expect that the expansion of our business will place a significant
strain on our limited managerial, operational, and financial resources. We will
be required to expand our operational and financial systems significantly and to
expand, train, and manage our work force in order to manage the expansion of our
operations. Our future success will depend in large part on our ability to
attract, train, and retain additional highly skilled executive level management,
creative, technical, and sales personnel. Competition is intense for these types
of personnel from other technology companies and more established organizations,
many of which have significantly larger operations and greater financial,
marketing, human, and other resources than we have. We may not be successful in
attracting and retaining qualified personnel on a timely basis, on competitive
terms, or at all. If we are not successful in attracting and retaining these
personnel, we will be adversely affected.
We depend upon our senior management and their loss or unavailability could put
us at a competitive disadvantage
Our success depends largely on the skills of certain key management and
technical personnel. The loss or unavailability of any of these individuals for
any significant period of time could adversely affect us. We have obtained, own,
and are the sole beneficiary of, key-person life insurance in the amount of
$1,000,000 on the life of Keith D. Freadhoff, our Chairman of the Board of
Directors. We may not be able to replace this key individual in the event his
services become unavailable.
As our chairman of the board of directors has pledged his stock, we may
experience a change of control
Keith D. Freadhoff, our Chairman of the Board of Directors, has pledged
825,000 shares of our common stock held by him as security for his personal
financial obligations, which, at the date of this prospectus, are approximately
$1,100,000. These financial obligations are due on demand. If Mr. Freadhoff
defaults on these obligations, Mr. Freadhoff may lose ownership of these shares,
including the right to vote these shares, which could result in a change of
control of Netgateway and could adversely affect us.
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We may be unable to protect our intellectual property rights and we may be
liable for infringing the intellectual property rights of others
Our ability to compete effectively will depend on our ability to maintain
the proprietary nature of our services and technologies, including our
proprietary software and the proprietary software of others with which we have
entered into software licensing agreements. Although we have one patent
application pending, we hold no patents and rely on a combination of trade
secrets and copyright laws, nondisclosure, and other contractual agreements and
technical measures to protect our rights in our technological know-how and
proprietary services. We depend upon confidentiality agreements with our
officers, directors, employees, consultants, and subcontractors to maintain the
proprietary nature of our technology. These measures may not afford us
sufficient or complete protection, and others may independently develop know-how
and services similar to ours, otherwise avoid our confidentiality agreements, or
produce patents and copyrights that would adversely affect us. We believe that
our services are not subject to any infringement actions based upon the patents
or copyrights of any third parties; however, our know-how and technology may in
the future be found to infringe upon the rights of others. Others may assert
infringement claims against us, and if we should be found to infringe upon their
patents or copyrights, or otherwise impermissibly utilize their intellectual
property, our ability to continue to use our technology could be materially
restricted or prohibited. If this event occurs, we may be required to obtain
licenses from the holders of this intellectual property, enter into royalty
agreements, or redesign our products and services so as not to utilize this
intellectual property, each of which may prove to be uneconomical or otherwise
impossible. Licenses or royalty agreements required in order for us to use this
technology may not be available on terms acceptable to us, or at all. These
claims could result in litigation, which could adversely affect us.
We may be held liable for online content provided by third parties
We may face potential liability for defamation, negligence, copyright,
patent, or trademark infringement and other claims based on the nature and
content of the materials that appear on storefronts and Web pages that utilize
our services. Claims of this type have been brought, and sometimes successfully
pursued, against online services. Although we carry general liability insurance,
our insurance may not cover all claims or may not be adequate to indemnify us
for any liability that may be imposed. Any imposition of liability, particularly
liability that is not covered by insurance or is in excess of our insurance
coverage, could adversely affect us.
We cannot predict our future capital needs and we may not be able to secure
additional financing
Because we cannot predict our future capital needs or be assured of
securing additional financing when it may be needed, our financial resources may
not be sufficient to satisfy our capital requirements for the next 18 months. In
addition, we may need to raise significant additional funds in order to support
our growth, develop new or enhanced services and products, respond to
competitive pressures, acquire or invest in complementary or competitive
businesses or technologies, or take advantage of unanticipated opportunities. If
our financial resources are insufficient and, in any case, after this 18-month
period, we will require additional financing in order to meet our plans for
expansion. We cannot be sure that this additional financing, if needed, will be
available on acceptable terms or at all. Furthermore, any additional debt
financing, if available, may involve restrictive covenants, which may limit our
operating flexibility with respect to business matters. If additional funds are
raised through the issuance of equity securities, the percentage ownership of
our existing stockholders will be reduced, our stockholders may experience
additional dilution in net book value per share, and those equity securities may
have rights, preferences, or privileges senior to those of our existing
stockholders. If adequate funds are not available on acceptable terms, we may be
unable to develop or enhance our services and products, take advantage of future
opportunities, repay debt obligations as they become due, or respond to
competitive pressures, any of which would have a material adverse effect on our
business, prospects, financial condition, and results of operations.
Because we will not pay cash dividends, investors may have to sell their shares
in order to realize their investment
We have not paid any cash dividends on our common stock and do not intend
to pay cash dividends in the foreseeable future. We intend to retain future
earnings, if any, for reinvestment in the development and expansion of our
business. Any credit agreements into which we may enter with institutional
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lenders may restrict our ability to pay dividends. Whether we pay cash dividends
in the future will be at the discretion of our board of directors and will be
dependent upon our financial condition, results of operations, capital
requirements, and any other factors that the board of directors decides are
relevant. As a result, investors may have to sell their shares of common stock
to realize their investment.
Because we depend upon a single site for our computer and communications
systems, we are more vulnerable to the effects of natural disasters,
computer viruses, and similar disruptions
Our ability to successfully process transactions and provide
high-quality customer service largely depends on the efficient and uninterrupted
operation of our computer and communications hardware and software systems. Our
proprietary and licensed software resides solely on our servers, all of which,
as well as all of our communications hardware, are located in a monitored server
facility in Irvine, California. Our systems and operations are in a secured
facility with hospital-grade electrical power, redundant telecommunications
connections to the Internet backbone, uninterruptible power supplies, and
generator back-up power facilities. In addition, we maintain redundant systems
for backup and disaster recovery. Despite these safeguards, we remain vulnerable
to damage or interruption from fire, flood, power loss, telecommunications
failure, break-ins, earthquake, and similar events. In addition, we do not, and
may not in the future, carry sufficient business interruption insurance to
compensate us for losses that may occur. Despite our implementation of Internet
security measures, our servers are vulnerable to computer viruses, physical or
electronic break-ins, and similar disruptions, which could lead to
interruptions, delays, loss of data, or the inability to process client
transactions. The occurrence of any of these events could adversely affect us.
Users may confuse other companies' domain names with our own
We have registered with the InterNIC registration service the Internet
domain names:
<TABLE>
<S> <C> <C>
netgateway.net Clevelandstores.com cablenetmall.com
netgateway.org, Clevelande-mall.com citdmall.com
storesonlinemall.com Clevelandemall.com northshorestores.com
federalbuyersmall.com Cleveland-emall.com otimall.com
solint.net E-Cart.com showcasestores.com
frontiervisionmall.com cablecommerce.net cconnections.com
opentrade.net mikesofamerica.com openemail.net
communicationsgroup.com golfmate.com dgenesis.com
afisteaks.com eknowledge.net citdmall.com
northshorestores.com quickgrill.com getitnashville.com
wirelessonemall.com storesonline.com shoptwincities.com
</TABLE>
We have registered with InterNIC.com the Internet domain names:
o millenniumemall.com; and
o millenniumemall.net.
However, there are other substantially similar domain names which are
registered by companies which may compete with us, which may cause potential
users and advertisers to confuse our domain name with other similar domain
names. In addition, new domains may be added in the future, allowing
combinations and similar domain names that may be confusingly similar to our
own. If that confusion occurs,
o we may inadvertently lose business to a competitor,
o we may have to adjust our advertising rates and service fees
accordingly, or
o some users of our services may have negative experiences
with other companies on their Web sites that those users
erroneously associate with us.
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Some provisions of our certificate of incorporation and by-laws may deter
takeover attempts, which may limit the opportunity of our stockholders to
sell their shares at a premium to the then market price
Some of the provisions of our certificate of incorporation and our by-laws
could make it more difficult for a third party to acquire us, even if doing so
might be beneficial to our stockholders by providing them with the opportunity
to sell their shares at a premium to the then market price. Our by-laws contain
provisions that regulate the introduction of business at annual meetings of our
stockholders by other than the board of directors. These provisions may have the
effect of rendering more difficult, delaying, discouraging, preventing, or
rendering more costly an acquisition of Netgateway or a change in control of
Netgateway. In addition, our certificate of incorporation authorizes the board
of directors to issue up to 4,000,000 shares of preferred stock, which may be
issued in one or more series, the terms of which may be determined at the time
of issuance by the board of directors, without further action by stockholders,
and may include voting rights, including the right to vote as a series on
particular matters, preferences as to dividends and liquidation, conversion, and
redemption rights, and sinking fund provisions. No shares of preferred stock are
currently outstanding, and we have no present plans for the issuance of any
preferred stock. However, the issuance of any preferred stock could adversely
affect the rights of holders of our common stock, and, therefore, could reduce
its value. In addition, specific rights granted to future holders of preferred
stock could be used to restrict our ability to merge with, or sell our assets
to, a third party. The ability of the board of directors to issue preferred
stock could have the effect of rendering more difficult, delaying, discouraging,
preventing, or rendering more costly an acquisition of us or a change in our
control, thereby preserving our control by the current stockholders.
RISKS SPECIFIC TO OUR INDUSTRY
Internet security poses risks to our entire business
The processing of electronic commerce transactions by means of our hardware
and software infrastructure involves the transmission and analysis of
confidential and proprietary information of the consumer, the merchant, or both,
as well as our own confidential and proprietary information. The compromise of
our security or misappropriation of proprietary information could have a
material adverse effect on our business, prospects, financial condition, and
results of operations. We rely on encryption and authentication technology
licensed from other companies to provide the security and authentication
necessary to effect secure Internet transmission of confidential information,
such as credit information and proprietary consumer information. Advances in
computer capabilities, new discoveries in the field of cryptography, or other
events or developments may result in a compromise or breach of the technology
used by us to protect client transaction data. Anyone who is able to circumvent
our security measures could misappropriate proprietary information or cause
interruptions in our operations, as well as the operations of the merchant. We
may be required to expend significant capital and other resources to protect
against security breaches or to minimize problems caused by security breaches.
Concerns over the security of the Internet and other electronic transactions and
the privacy of consumers and merchants may also inhibit the growth of the
Internet and other online services generally, especially as a means of
conducting commercial transactions. To the extent that our activities or the
activities of others involve the storage and transmission of proprietary
information, security breaches could damage our reputation and expose us to a
risk of loss or litigation and possible liability. Our security measures may not
prevent security breaches. Our failure to prevent these security breaches may
adversely affect us.
We will only be able to execute our business plan if electronic commerce
continues to grow
Our future revenues and any future profits are substantially dependent upon
the widespread acceptance and use of the Internet and other online services as
an effective medium of commerce by merchants and consumers. If use of the
Internet and other online services does not continue to grow or grows more
slowly than we expect, if the infrastructure for the Internet and other online
services does not effectively support the growth that may occur, or if the
Internet and other online services do not become a viable commercial
marketplace, we could be adversely affected. Rapid growth in the use of, and
interest in, the Internet, the Web, and online services is a recent phenomenon,
and may not continue on a lasting basis. In addition, customers may not adopt,
and continue to use, the Internet and other online services as a medium of
commerce. Demand and market acceptance for recently introduced services and
products over the Internet are subject to a high level of uncertainty, and few
services and products have generated profits. For us to be successful, consumers
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<PAGE>
of both retail and business to business services must be willing to accept and
use novel and cost efficient ways of conducting business and exchanging
information.
In addition, the public in general may not accept the Internet and other
online services as a viable commercial marketplace for a number of reasons,
including potentially inadequate development of the necessary network
infrastructure or delayed development of enabling technologies and performance
improvements. To the extent that the Internet and other online retail and
business to business services continue to experience significant growth in the
number of users, their frequency of use, or in their bandwidth requirements, the
infrastructure for the Internet and online services may be unable to support the
demands placed upon them. In addition, the Internet or other online services
could lose their viability due to delays in the development or adoption of new
standards and protocols required to handle increased levels of Internet
activity, or due to increased governmental regulation. Significant issues
concerning the commercial use of the Internet and online services technologies,
including security, reliability, cost, ease of use, and quality of service,
remain unresolved and may inhibit the growth of Internet business solutions that
utilize these technologies. Changes in, or insufficient availability of,
telecommunications services to support the Internet or other online services
also could result in slower response times and adversely affect usage of the
Internet and other online services generally and our product and services in
particular.
We may not be able to adapt as the Internet, electronic commerce, the
electronic commerce services industry, and customers demands continue to
evolve
Our failure to respond in a timely manner to changing market conditions or
client requirements would have an adverse effect on us. The Internet, the
electronic commerce, and the electronic commerce services industry are
characterized by:
o rapid technological change;
o changes in user and customer requirements and preferences;
o frequent new product and service introductions embodying new
technologies; and
o the emergence of new industry standards and practices that
could render proprietary technology and hardware and
software infrastructure obsolete.
Our success will depend, in part, on our ability to:
o enhance and improve the responsiveness and functionality of
our online transaction processing services;
o license or develop technologies useful in our business on a
timely basis;
o enhance our existing services;
o develop new services and technology that address the
increasingly sophisticated and varied needs of our
prospective or current customers; and
o respond to technological advances and emerging industry
standards and practices on a cost-effective and timely
basis.
We may not be able to compete effectively in our industry
While the market for electronic commerce services is relatively new, it is
already highly competitive and characterized by an increasing number of entrants
that have introduced or developed products and services similar to those offered
by us. We believe that competition will intensify and increase in the future.
Our target market is rapidly evolving and is subject to continuous technological
change. As a result, our competitors may be better positioned to address these
developments or may react more favorably to these changes, which could adversely
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<PAGE>
affect us. We compete on the basis of a number of factors, including the
attractiveness of the electronic commerce services offered, the breadth and
quality of these services, creative design and systems engineering expertise,
pricing, technological innovation, and understanding clients' strategies and
needs. A number of these factors are beyond our control. Existing or future
competitors may develop or offer electronic commerce services that provide
significant technological, creative, performance, price, or other advantages
over the services offered by us.
Our competitors can be divided into several groups:
o large systems integrators;
o Internet service providers and portals;
o large information technology consulting services providers;
o computer hardware and service vendors; and
o strategic consulting firms.
We also may compete with telecommunications companies. Although most of
these types of competitors to date have not offered a full range of Internet
professional services, many are currently offering these services or have
announced their intention to do so. These competitors at any time could elect to
focus additional resources in our target markets, which could materially
adversely affect our business, prospects, financial condition, and results of
operations. Many of our current and potential competitors have longer operating
histories, larger customer bases, longer relationships with clients, and
significantly greater financial, technical, marketing, and public relations
resources than we do. Competitors that have established relationships with large
companies, but have limited expertise in providing Internet solutions, may
nonetheless be able to successfully use their client relationships to enter our
target market or prevent our penetration into their client accounts. We believe
that our primary competitors currently include, Broadvision, Open Market,
Commerce One, Ariba, VerticalNet, Intel, Microsoft, AT&T, Intershop, MCI
Worldcom, Yahoo! Stores, ICAT, GE Information Services, IBM, and smaller
Internet services providers.
Additionally, in pursuing acquisition opportunities we may compete with
other companies with similar growth strategies, some of which may be larger and
have greater financial and other resources than we have. Competition for these
acquisition targets likely could also result in increased prices of acquisition
targets and a diminished pool of companies available for acquisition.
There are relatively low barriers to entry in our business. Although we
have one patent application pending at this time, we have no patented, and only
a limited amount of other proprietary, technology that would preclude or inhibit
competitors from entering the electronic commerce services market. Therefore, we
must rely on the skill of our personnel and the quality of our client service.
The costs to develop and provide electronic commerce services are relatively
low. Therefore, we expect that we will continually face additional competition
from new entrants into the market in the future, and we are subject to the risk
that our employees may leave us and may start competing businesses. The
emergence of these enterprises could adversely affect us.
Regulatory and legal uncertainties could harm our business
We are not currently subject to direct regulation by any government agency
other than laws or regulations applicable generally to electronic commerce. Any
new legislation or regulation, the application of laws and regulations from
jurisdictions whose laws do not currently apply to our business, or the
application of existing laws and regulations to the Internet and other online
services, could adversely affect us. Due to the increasing popularity and use of
the Internet and other online services, federal, state, and local governments
may adopt laws and regulations, or amend existing laws and regulations, with
respect to the Internet or other online services covering issues such as
taxation, user privacy, pricing, content, copyrights, distribution, and
characteristics and quality of products and services. In 1998, the United States
Congress established the Advisory Committee on Electronic Commerce which is
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<PAGE>
charged with investigating, and making recommendations to Congress regarding,
the taxation of sales by means of the Internet. Furthermore, the growth and
development of the market for electronic commerce may prompt calls for more
stringent consumer protection laws to impose additional burdens on companies
conducting business online. The adoption of any additional laws or regulations
upon the recommendation of this Advisory Committee or otherwise may decrease the
growth of the Internet or other online services, which could, in turn, decrease
the demand for our services and increase our cost of doing business, or
otherwise have a material adverse effect on us. Moreover, the relevant
governmental authorities have not resolved the applicability to the Internet and
other online services of existing laws in various jurisdictions governing issues
such as property ownership and personal privacy and it may take time to resolve
these issues definitively.
RISKS SPECIFIC TO THIS OFFERING
The market price of our securities may be volatile, and we must satisfy the
applicable requirements for our common stock to continue to trade on the
Nasdaq National Market
Our common stock is quoted on the Nasdaq National Market. From time to
time, the market price of our common stock may experience significant
volatility. Our quarterly results, failure to meet analysts expectations,
announcements by us or our competitors regarding acquisitions or dispositions,
loss of existing clients, new procedures or technology, changes in general
conditions in the economy, and general market conditions could cause the market
price of the common stock to fluctuate substantially. In addition, the stock
market has experienced significant price and volume fluctuations that have
particularly affected the trading prices of equity securities of many technology
companies. These price and volume fluctuations often have been unrelated to the
operating performance of the affected companies. In the past, following periods
of volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such a company. This type of
litigation, regardless of the outcome, could result in substantial costs and a
diversion of management's attention and resources, which could adversely affect
us.
Under the currently effective criteria for continued listing of securities
on the Nasdaq National Market, a company must maintain $50 million in market
value, a minimum bid price of $5.00, and a public float of at least $15 million.
If we cannot maintain the standards for continued listing, our common stock
could be subject to delisting from the Nasdaq National Market. Trading, if any,
in our common stock would then be conducted in either the Nasdaq SmallCap Market
or in the over-the-counter market on the OTC Bulletin Board established for
securities that do not meet the Nasdaq SmallCap Market listing requirements or
in what are commonly referred to as the "pink sheets." As a result, an investor
may find it more difficult to dispose of, or to obtain accurate quotations as to
the price of, our shares.
Significant additional dilution if outstanding options and warrants are
exercised
As of the date of this prospectus, we have outstanding stock options to
purchase approximately 2,665,060 shares of common stock and warrants and
convertible or exchangeable securities to purchase approximately 1,651,260
million shares of common stock, some of which have exercise prices significantly
below the current price of our common stock. To the extent those options or
warrants are exercised, there will be dilution. In addition, in the event that
any future financing should be in the form of, be convertible into, or
exchangeable for, equity securities, and upon the exercise of options and
warrants, investors may experience additional dilution.
Future sales of common stock by our existing stockholders could adversely affect
our stock price
The market price of our common stock could decline as a result of sales of
a large number of shares of our common stock in the market or the perception
that these sales could occur. These sales also might make it more difficult for
us to sell equity securities in the future at a time and at a price that we deem
appropriate. On the date of this prospectus, we will have outstanding 16,945,464
shares of common stock. Of these shares, an aggregate of 5,869,474 (which number
does not include any of the securities being registered pursuant to this
registration statement) are freely tradable. With respect to the securities
being registered under this registration statement, our directors, officers and
certain employees and former employees who hold together in excess of 3,500,000
shares, warrants or options and who individually hold more than 10,000 shares or
options have entered or will enter into lock-up agreements by which they have
agreed that they will not sell, directly or indirectly the shares held by them
of any of our common stock or any security or other instrument which by its
terms is convertible into, or exchangeable for, shares of our common stock,
without our prior written consent or in compliance with the terms of the lock-up
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<PAGE>
agreements. The lock-up agreements provide that any shares above 10,000 shares
held by any one individual will have a lock-up period of 90 days from the date
in which such shares are issued. Only one-third of the shares held by any one
individual can be sold in any given month during the lock-up period. This
lock-up will not apply to certain senior executives solely to the extent
necessary to enable those executives to meet income tax obligations for the 1999
tax year incurred directly as a result of the issuance of those securities by
us. We will endeavor to obtain lock-up agreements from other employees although
there can be no assurances that we will be successful in doing so.
USE OF PROCEEDS
Netgateway will not receive any of the proceeds from the sale of the shares
offered by this prospectus. All net proceeds from the sale by selling
stockholders of common stock offered in this prospectus will go to the selling
stockholders or their pledgees, donees, transferees, or other successors in
interest.
THE SELLING STOCKHOLDERS
The shares of our common stock to which this prospectus relates are being
registered for re-offers and resales by selling stockholders who have acquired
shares pursuant to the exercise of options granted under our 1998 Stock
Compensation Program; 1998 Stock Option Plan For Senior Executives and 1999
Stock Option Plan For Non-Executives and/or individual common stock or warrants
granted to employees or consultants of Netgateway. The selling stockholders
named below may resell all, a portion or none of the relevant shares at any
time. However, a stockholder who sells shares pursuant to this prospectus must
comply with Rule 144(e) under the Securities Act, which limits the number of
shares that may be sold by any stockholder during any three month period.
The table below sets forth, with respect to each selling stockholder or
group of selling stockholders and based upon the information available to us as
of February 10, 2000, the selling stockholders' relationship, if any, with us
within the past three years and the number of shares owned by those selling
stockholders that may be sold pursuant to this prospectus. In addition to the
shares of our common stock that are made available for resale pursuant to this
prospectus, various selling stockholders hold options to purchase additional
common stock from us. We cannot assure that any of the selling stockholders will
sell any or all of the shares of common stock to which this prospectus relates.
In the event that any selling stockholder sells all of the shares set forth
below without exercising more options for shares of our common stock or
otherwise acquiring shares of our common stock, that selling stockholder will no
longer hold shares of our common stock.
<TABLE>
Shares that may be Shares of Common
issued upon exercise Stock that may be sold
Selling Stockholder Relationship to Company of the options under this prospectus
- ------------------- ----------------------- ------------------ ---------------------
<S> <C> <C> <C>
Holders of shares of Common Senior executives of the
Stock of the Company issued Company and its
pursuant to the 1998 Stock subsidiaries and affiliates
Option Plan for Senior (including officers) 5,000,000 5,000,000
Executives
Holders of shares of Common Employees (including 2,000,000 2,000,000
Stock of the Company issued officers), consultants or
pursuant to the 1999 Stock directors of the Company
Option Plan for and its subsidiaries and
Non-Executives affiliates
Holder of shares of Common Employees, officers, 1,000,000 1,000,000
Stock of the Company issued directors and independent
pursuant to the 1998 Stock contractors of the Company
Compensation Program or its subsidiaries
</TABLE>
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<PAGE>
<TABLE>
Shares to be Beneficially Owned
Shares Beneficially Shares of Common upon completion of offering(1)(2)
Relationship Owned prior Stock offered under ---------------------------------
Selling Stockholder to Company to the offering this prospectus Number Percent
- ------------------ ---------------- --------------------- -------------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Keith D. Freadhoff Chairman of the 2,051,049 400,000 1,607,500 12%
Board of Directors
Donald M. Corliss President and Director 552,000 400,000 152,000 3.3%
David Bassett-Parkins Chief Operating Officer, 584,000 400,000 184,000 3.4%
Chief Financial Officer
and Director
Roy W. Camblin Chief Executive Officer 700,000 500,000 200,000 4.1%
and Director
Keith D. Freadhoff Chairman of the Board of 2,051,049 43,549 1,607,500 12%
Directors
R. Scott Beebe Director 797,951 43,651 754,300 4.7%
Ronald Spire Director 87,302 87,302 0 *
April Reitman Consultant 2,500(1) 2,500(1) 0 *
</TABLE>
- -----------
*Less than one percent
(1) Assumes that the warrant to acquire shares is exercisable within 60 days.
(2) Assumes that the outstanding warrant is exercised and all shares offered
hereby are sold, that no additional shares will be acquired and that no
shares other than those offered hereby will be sold.
PLAN OF DISTRIBUTION
The shares offered by this prospectus may be sold by the selling
stockholders from time to time, on the Nasdaq National Market System on terms to
be determined by the selling stockholders at the time of sale. The selling
stockholders may also make private sales directly or through a broker or
brokers. Alternatively, the selling stockholders may from time to time offer
shares to or through underwriters, dealers or agents, who may receive
consideration in the form of discounts and commissions. That compensation, which
may be in excess of ordinary brokerage commissions, may be paid by the selling
stockholders and/or the purchasers of the shares offered by this prospectus for
whom such underwriters, dealers or agents may act. The selling stockholders and
any dealers or agents that participate in the distribution of the shares offered
by this prospectus may be deemed to be "underwriters" as defined in the
Securities Act, and any profit on the sale of the shares offered by this
prospectus by them and any discounts, commissions or concessions received by
those dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act. The aggregate proceeds to the selling
stockholders from sales of the shares offered by the selling stockholders will
be the purchase price of the common stock less any broker's commissions.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the common stock offered by this prospectus may
not simultaneously engage in market making activities with respect to the common
stock for a period of one business day prior to the commencement of that
distribution. Without limiting this, the selling stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations under
the Exchange Act, which may limit the timing of purchases and sales of our
common stock by the selling stockholders.
In addition to the shares sold under this prospectus, a selling stockholder
may, at the same time, sell any shares of common stock, including the shares to
be offered through this prospectus, owned by him or her in compliance with all
of the requirements of Rule 144 under the Securities Act, regardless of whether
those shares are covered by this prospectus.
There is no assurance that any of the selling stockholders will sell any or
all of the common stock offered by this prospectus.
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We will pay all expenses in connection with this offering other than
commissions and discounts of underwriters, dealers or agents. All selling and
other expenses incurred by a selling stockholder will be borne by that selling
stockholder.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for us by
Nida & Maloney, LLP, Santa Barbara, California.
EXPERTS
The financial statements incorporated in this prospectus by reference from
our registration statement No. 333-79751 on Form S-1 filed June 1, 1999, as
amended, have been audited by KPMG LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so included in
reliance upon the report of that firm given upon their authority as experts in
accounting and auditing.
16
<PAGE>
PART I.
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing the information specified in Items 1 and 2 of Part
I of Form S-8 will be sent or given to plan participants as specified in Rule
428(b)(1) and, in accordance with the instructions to Part I, are not filed with
the Securities and Exchange Commission as part of this Registration Statement.
I-1
<PAGE>
PART II.
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 3. Incorporation of documents by reference.
The following documents heretofore filed by the Registrant with the
Securities and Exchange Commission (the "Commission") are by this reference
incorporated in and made a part of this Registration Statement:
(1) The Registrant's Prospectus filed pursuant to Rule 424(b)(4) on
November 19, 1999 (File No. 333-79751); and
(2) The description of the Common Stock contained in the Registrant's
Registration Statement on Form 8-A filed November 4, 1999 (File
No. 000-27941).
All documents subsequently filed by the Registrant pursuant to Section
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended,
prior to the filing of a post-effective amendment which indicates that all
securities offered hereunder have been sold or which deregisters all securities
then remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and the Prospectus that is part hereof from the date of
filing of such documents.
Item 4. Description of securities.
Not applicable.
Item 5. Interests of named experts and counsel.
The validity of the common stock has been passed upon for the Registrant by
Nida & Maloney, LLP, Santa Barbara, California. Nida & Maloney, LLP owns 15,000
shares of common stock of the Registrant.
Item 6. Indemnification of directors and officers.
Section 102(b)(7) of the Delaware General Corporation Law (the "Delaware
Law") permits a corporation to provide in its certificate of incorporation that
directors of the corporation shall not be personally liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's 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 payments of unlawful dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. The Registrant's Certificate of Incorporation
contains such a provision.
Section 145 of the Delaware Law 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 defense or settlement of such action, and the statute requires
court approval before there can be any indemnification where the person seeking
indemnification has been found liable to the corporation. Under Section 145, a
corporation shall indemnify an agent of the corporation for expenses actually
and reasonably incurred if and to the extent such person was successful on the
merits in a proceeding or in defense of any claim, issue or matter therein.
The Registrant is presently subject to Section 2115 of the California
Corporations Code (the "California Code"), according to which Section 317 of the
California Code applies to the indemnification of officers and directors of the
Registrant. Under Section 317 of the California Code, permissible
indemnification by a corporation of its officers and directors is substantially
the same as permissible indemnification under Section 145 of the Delaware Law,
except that (i) permissible indemnification does not cover actions the person
reasonably believed were not opposed to the best interests of the corporation,
as opposed to those the person believed were in fact in the best interests of
the corporation, (ii) the Delaware Law permits advancement of expenses to agents
other than officers and directors only upon approval of the board of directors,
<PAGE>
(iii) in a case of stockholder approval of indemnification, the California Code
requires certain minimum votes in favor of such indemnification and excludes the
vote of the potentially indemnified person, and (iv) the California Code only
permits independent counsel to approve indemnification if an independent quorum
of directors is not obtainable, while the Delaware Law permits the directors in
any circumstance to appoint counsel to undertake such determination.
The Registrant in its Certificate of Incorporation has provided for
indemnification of its officers, directors, employees and other agents
substantially identical to that permitted under the Delaware Law. Section 145 of
the Delaware Law and Section 317 of the California Code provide that they are
not exclusive of other indemnification that may be granted by a corporation's
charter, bylaws, disinterested director vote, stockholder vote, agreement or
otherwise. The limitation of liability contained in the Registrant's Certificate
of Incorporation and the indemnification provision included in the Registrant's
Certificate of Incorporation are consistent with Delaware Law Sections 102(b)(7)
and 145. The Registrant has also entered into separate indemnification
agreements with its directors and officers that could require the Registrant,
among other things, to indemnify them against certain liabilities that may arise
by reason of their status or service as directors and officers and to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, including liabilities that may arise under the
Securities Act of 1933. In addition, the Registrant has purchased directors and
officers insurance.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to such provisions, the Company has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is therefore unenforceable.
Item 7. Exemption from registration claimed.
The offer and sale of the restricted securities to be re-offered or re-sold
through this registration statement were exempt pursuant to Rule 701 under the
Securities Act. These restricted securities were issued pursuant to certain
written compensatory benefit plans (or written compensation contracts) and upon
the exercise of stock options or warrants issued to employees (including
officers) under those plans.
Item 8. Exhibits.
See Exhibit Index on page II-5.
Item 9. Undertakings.
(a) 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;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii)To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. 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 the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Long Beach, State of California, as of the 11th day
of February, 2000.
NETGATEWAY, INC.
By:/s/ Donald M. Corliss, Jr.
_____________________________
Donald M. Corliss, Jr.
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and as of the dates indicated below.
<TABLE>
<S> <C> <C>
Signature Title Date
/s/ Keith D. Freadhoff* Chairman of the Board of Directors February 11, 2000
- ------------------------------------
Keith D. Freadhoff
/s/ Roy W. Camblin III* Chief Executive Officer and Director February 11, 2000
- ------------------------------------ (Principal Executive Officer)
Roy W. Camblin III
/s/ Donald M. Corliss, Jr. President and Director February 11, 2000
- ------------------------------------
Donald M. Corliss, Jr.
/s/ David Bassett-Parkins* Chief Operating Officer, Chief Financial February 11, 2000
- ------------------------------------ Officer and Director
David Bassett-Parkins (Principal Financial and Accounting Officer)
/s/ Scott Beebe* Director February 11, 2000
- ------------------------------------
Scott Beebe
/s/ William Brock* Director February 11, 2000
- ------------------------------------
William Brock
/s/ Ronald Spire* Director February 11, 2000
- ------------------------------------
Ronald Spire
/s/ John Dillon* Director February 11, 2000
- ------------------------------------
John Dillon
*By: /s/ Donald M. Corliss
----------------------------
Donald M. Corliss, Attorney-in-Fact
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
Exhibit
Number Exhibit
- -------- -------------------------------------------------------------
<S> <C>
4.1 Netgateway, Inc. 1998 Stock Compensation Program[1]
4.2 Netgateway, Inc. 1998 Stock Option Plan for Senior Executives[2]
4.3 Netgateway, Inc. 1999 Stock Option Plan for Non-Executives+
4.4 Specimen of Common Stock Certificate[3]
4.5 Specimen of Common Stock Purchase Warrant+
4.6 Letter of Agreement re: Option Agreement Termination, dated
October 12, 1999, between Netgateway, Inc. and Keith D. Freadhoff+
4.7 Letter of Agreement re: Option Agreement Termination, dated
October 12, 1999, between Netgateway, Inc. and Donald M. Corliss, Jr.+
4.8 Letter of Agreement re: Option Agreement Termination, dated
October 12, 1999, between Netgateway, Inc. and David Bassett-Parkins+
4.9 Netgateway, Inc. Stock Grant Agreement, dated as of October 19, 1999,
between Netgateway, Inc. and Keith D. Freadhoff+
4.10 Netgateway, Inc. Stock Grant Agreement, dated as of October 19, 1999,
between Netgateway, Inc. and Donald M. Corliss, Jr.+
4.11 Netgateway, Inc. Stock Grant Agreement, dated as of October 19, 1999,
between Netgateway, Inc. and David Bassett-Parkins+
5.1 Opinion of Nida & Maloney, LLP+
23.1 Consent of KPMG LLP+
23.2 Consent of Nida & Maloney, LLP+
24.1 Power of Attorney+
- ---------------------------
</TABLE>
(1) Incorporated by reference to Exhibit 10.6 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-79751) filed with the
Securities and Exchange Commission on June 1, 1999.
(2) Incorporated by reference to Exhibit 10.7 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-79751) filed with the
Securities and Exchange Commission on June 1, 1999.
(3) Incorporated by reference to Exhibit 4.2 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-79751) filed with the
Securities and Exchange Commission on November 12, 1999.
+ Previously filed.
II-5
