As filed with the Securities and Exchange Commission on September 18, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
NET PERCEPTIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 41-1844584
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR IDENTIFICATION
ORGANIZATION) NUMBER)
7700 FRANCE AVENUE SOUTH
EDINA, MINNESOTA 55435
(952) 842-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
STEVEN J. SNYDER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
NET PERCEPTIONS, INC.
7700 FRANCE AVENUE SOUTH
EDINA, MINNESOTA 55435
(952) 842-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
Copies to:
JOHN T. ROBERTS
VICE PRESIDENT AND GENERAL COUNSEL
NET PERCEPTIONS, INC.
7700 FRANCE AVENUE SOUTH
EDINA, MINNESOTA 55435
(952) 842-5000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after this registration statement becomes effective.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check
the following box. [_]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act of 1933, please
check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM
CLASS AMOUNT OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO TO BE PRICE OFFERING REGISTRATION
BE REGISTERED REGISTERED PER SHARE (1) PRICE (1) FEE
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COMMON STOCK,
$0.0001 PAR 1,845,519 $13.53 $24,969,872 $6,592.00
VALUE PER
SHARE....
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(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(c) of the Securities Act of
1933, and based upon the average high and low prices on September 12,
2000, as reported on the Nasdaq National Market.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
===============================================================================
THE INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE
AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY
THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED SEPTEMBER 18, 2000
PRELIMINARY PROSPECTUS
1,845,519 Shares
NET PERCEPTIONS, INC.
Common Stock
This prospectus relates to the public offering, which is not being
underwritten, of up to 1,845,519 shares of our common stock which are held
by or on behalf of some of our current stockholders named in this
prospectus or their respective pledgees, donees, transferees or other
successors in interest that receive these shares as a gift, partnership
distribution or other non-sale related transfer. These stockholders
received these shares in a private transaction in which we acquired all of
the outstanding shares of Knowledge Discovery One, Inc. ("KD One").
The prices at which such stockholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale of the
shares.
Our common stock is quoted on the Nasdaq National Market under the symbol
"NETP." The last reported sale price of our common stock on the Nasdaq
National Market on September 15, 2000 was $13.38 per share.
Our principal executive offices are located at 7700 France Avenue South,
Edina, Minnesota 55435. Our telephone number at that location is (952)
842-5000.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 3 AND THE SECTIONS ENTITLED "RISK FACTORS" IN THE OTHER
DOCUMENTS WE FILE WITH THE SECURITIES AND EXCHANGE COMMISSION THAT ARE
INCORPORATED BY REFERENCE IN THIS PROSPECTUS FOR CERTAIN RISKS AND
UNCERTAINTIES THAT YOU SHOULD CONSIDER.
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 _______, 2000.
TABLE OF CONTENTS
RISK FACTORS.................................................................3
FORWARD-LOOKING STATEMENTS..................................................15
WHERE YOU CAN FIND MORE INFORMATION.........................................16
USE OF PROCEEDS.............................................................17
PLAN OF DISTRIBUTION........................................................17
SELLING STOCKHOLDERS........................................................20
LEGAL MATTERS...............................................................23
EXPERTS.....................................................................23
This prospectus is part of a registration statement that Net Perceptions
filed with the Securities and Exchange Commission using a "shelf"
registration process. You should rely only on the information contained or
incorporated by reference in this prospectus and the registration
statement. We have not authorized any other person to provide you with
different information. If anyone provides you with different or
inconsistent information you should not rely on it. We are not, and neither
the selling stockholders nor any other person are, making an offer to sell
these securities in any jurisdiction where the offer or sale is not
permitted. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the securities
covered by this prospectus. You should assume that the information
appearing in this prospectus is accurate as of the date on the front cover
of this prospectus only. Our business, financial condition, results of
operations and prospects may have changed since that date.
RISK FACTORS
An investment in shares of our common stock involves a high degree of
risk. You should consider carefully the following information about these
risks, together with the other information contained in and incorporated by
reference in this prospectus, before you decide to buy our common stock. If
any of the following risks actually occur, our business, results of
operations and financial condition would likely suffer. In these
circumstances, the market price of our common stock could decline, and you
may lose all or part of the money you paid to buy our common stock.
RISKS ASSOCIATED WITH OUR BUSINESS
WE ARE AN EARLY-STAGE COMPANY AND WE EXPECT TO ENCOUNTER RISKS AND
DIFFICULTIES FREQUENTLY ENCOUNTERED BY EARLY-STAGE COMPANIES IN NEW AND
RAPIDLY EVOLVING MARKETS.
We were founded in July 1996. We began shipping products in the first
quarter of 1997. The market for our products is unproven and our limited
operating history makes an evaluation of our future prospects very
difficult. We will encounter risks and difficulties frequently encountered
by early-stage companies in new and rapidly evolving markets. We may not
successfully address any of these risks. If we do not successfully address
these risks, we may not achieve profitability and we could suffer increased
operating losses.
OUR QUARTERLY OPERATING RESULTS ARE VOLATILE AND DIFFICULT TO PREDICT. IF
WE FAIL TO MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS,
THE MARKET PRICE OF OUR COMMON STOCK MAY DECREASE SIGNIFICANTLY.
Our quarterly operating results have varied in the past and may vary
significantly in the future. Because our operating results are volatile and
difficult to predict, we believe that period-to-period comparisons of our
results of operations are not a good indication of our future performance.
It is likely that in some future quarter or quarters our operating results
will be below the expectations of public market analysts and investors. In
this event, the market price of our common stock may decrease
significantly.
We cannot predict our future quarterly revenues with any degree of
certainty for a variety of reasons, including because:
o we operate with a limited order backlog, and revenues in any quarter
are substantially dependent on orders booked and shipped in that
quarter;
o the market in which we compete is relatively new and rapidly evolving
and has many new entrants;
o we expect that, for the foreseeable future, revenues will come from
licenses to a small number of customers, so delays or cancellations of
orders by a few customers can significantly impact revenues within a
quarter;
o our sales cycle varies substantially from customer to customer; and
o the timing of large orders can significantly affect revenues within a
quarter.
o Historically, we have recognized a substantial portion of our revenues
in the last month of a quarter, with these revenues frequently
concentrated in the last two weeks of the quarter. Accordingly, we
cannot predict our financial results for any quarter until very late
in the quarter. A delay in an anticipated sale or revenue recognition
near the end of a quarter can seriously harm our operating results for
that quarter.
Our expense levels are relatively fixed in the short term and are
based, in part, on our expectations as to our future revenues. As a result,
any delay in generating or recognizing revenues could cause significant
variations in our operating results from quarter to quarter and could
result in increased operating losses.
WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR LOSSES IN THE FUTURE.
We had net losses of $4.7 million in 1997, $5.0 million in 1998,
$12.0 million in 1999 and $19.3 million (including $11.4 million of
amortization of intangibles related to the acquisition of KD One) for the
six months ended June 30, 2000. As of June 30, 2000, we had an accumulated
deficit of $42.1 million. We have not had a profitable quarter and do not
expect to have a profitable quarter in 2000 or 2001. We expect that our
losses will continue to increase in 2000. We expect to continue to incur
significant sales and marketing, research and development and general and
administrative expenses. As a result of the KD One acquisition, we will
continue to have substantial expenses associated with the amortization of
goodwill and other intangible assets. We will need to generate significant
additional revenues to achieve profitability. We may never achieve
profitability. Although our revenues have grown in recent quarters, we do
not believe that we can sustain these growth rates, or that these growth
rates are indicative of future revenue growth rates.
A DECLINE IN THE PRICE OF, DEMAND FOR, OR MARKET ACCEPTANCE OF NET
PERCEPTIONS FOR E-COMMERCE WOULD SERIOUSLY HARM OUR BUSINESS.
We currently derive a substantial portion of our revenues from our
Net Perceptions for E-commerce product. We anticipate that Net Perceptions
for E-commerce will continue to account for a substantial portion of our
revenues for the foreseeable future. Consequently, a decline in the price
of or demand for Net Perceptions for E-commerce, or its failure to achieve
broad market acceptance, would result in decreased revenues and increased
operating losses.
WE FACE INTENSE COMPETITION AND, IF WE ARE UNABLE TO COMPETE SUCCESSFULLY,
WE MAY BE UNABLE TO INCREASE OUR PRODUCT SALES AND MARKET SHARE.
The market for our products is intensely competitive, evolving and
subject to rapid technological change. We expect the intensity of
competition to increase in the future. Competitors vary in size and in the
scope and breadth of the products and services offered.
In the marketing of Net Perceptions for E-commerce, we primarily
encounter competition from Andromedia (a division of Macromedia),
Broadbase, E.piphany and Personify. Microsoft has acquired FireFly Network,
a company with collaborative filtering technology and, as a result, we
expect that we may encounter competition from Microsoft in the future.
Other e-commerce platform providers such as Art Technology, Broadvision and
IBM can be expected to make portions of our capability standard within
their offerings.
In the marketing of Net Perceptions for Marketing Campaigns, we
primarily encounter competition from Xchange, Inc., Annuncio Software,
Prime Response and Rubric, which was acquired by Broadbase. We expect that
if we are successful in our strategy to leverage our technology into new
vertical markets, we will encounter many additional, market-specific
competitors. For example, RightPoint Software, acquired by E.piphany, is an
established firm serving call centers that we have encountered in the
marketing of Net Perceptions for Call Centers. In addition, because there
are relatively low barriers to entry in the software market, we expect
additional competition from other established and emerging companies as the
Internet software market continues to develop and expand.
In the marketing of Net Perceptions for Knowledge Management, we
primarily encounter competition from Orbital Software, Autonomy and Tacit
Knowledge Systems.
In the marketing of our Knowledge Refinery and Retail Discovery Suite
products acquired in the KD One acquisition, we primarily encounter
competition from Brio, Seagate, Comshare, IBM and SAS. Our recently
introduced Net Perceptions Intelligence for E-Commerce product competes
with Accrue, E.piphany, Personify, Net Genesis and Web Trends. Our Net
Perceptions Intelligence for Advertising solution has, to our knowledge,
few if any direct competitors.
In addition, we offer certain of our products on a hosted, or
Application Service Provider (ASP), basis. Charges for ASP services vary
for different service offerings, but generally include an initial set-up
fee and a recurring monthly charge based on usage. We expect increasing
competition from other network-based providers such as Cogit, Coremetrics
and TriVida, which was acquired by Be Free.
We believe that the principal competitive factors affecting our
market include core technology, product features, product quality and
performance, customer service and price. Although we believe that our
products currently compete favorably with respect to such factors, our
market is relatively new and is rapidly evolving. We may not be able to
maintain our competitive position against current and potential
competitors, especially those with significantly greater financial,
marketing, service, support, technical and other resources.
Many of our competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
significantly greater name recognition and a larger installed base of
customers than we have. In addition, many of our competitors have
well-established relationships with current and potential customers of
ours, have extensive knowledge of our industry and are capable of offering
a single-vendor solution. As a result, our competitors may be able to
respond more quickly to new or emerging technologies and changes in
customer requirements, or to devote greater resources to the development,
promotion and sale of their products than we can. In addition, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the
ability of their products to address customer needs. Also, relationships
with large systems integrators such as Andersen Consulting,
PricewaterhouseCoopers and others are an important factor in successfully
achieving widespread deployment of these solutions. Many of our competitors
have such relationships in place today, and this may hinder our ability to
gain equivalent access to systems integration resources. Accordingly, it is
possible that new competitors or alliances among competitors may emerge and
rapidly acquire significant market share. We also expect that competition
will increase as a result of software industry consolidations. Increased
competition is likely to result in price reductions, reduced gross margins
and loss of market share. We may not be able to compete successfully
against current and future competitors.
THERE ARE NUMEROUS RISKS AND UNCERTAINTIES ASSOCIATED WITH OUR ACQUISITION
OF KD ONE THAT MAY AFFECT THE PRICE OF OUR COMMON STOCK.
If the costs associated with the acquisition of KD One ultimately
exceed the benefits realized, we may experience increased losses and the
market price of our common stock may decline.
We cannot account for the acquisition of KD One as a pooling of
interests. A significant portion of the purchase price for the acquisition
will be allocated to goodwill and other intangible assets, which will be
amortized by us over their estimated useful lives. As a result, we will
record non-cash charges against our future operating results, which will
adversely affect our reported financial results. We have recorded
approximately $118.8 million in goodwill and other intangible assets in
connection with the acquisition. We recorded related amortization expense
on these intangibles of $7.6 million in the second quarter of 2000 and
anticipate recording total amortization expense of $26.5 million in 2000,
$30.4 million in 2001, $30.4 million in 2002, $28.0 million in 2003 and
$3.5 million in the first quarter of 2004. The unamortized intangible asset
balances are subject to quarterly realizability analysis under FAS 121
which could accelerate these amortization amounts. If the benefits of the
KD One acquisition do not ultimately exceed the associated costs, we could
continue to incur increased losses, or be required to write down some or
all of the unamortized goodwill and other intangible assets.
In addition, the market price of our common stock may decline as a
result of the acquisition if the continued integration of Net Perceptions
and KD One is unsuccessful, if we do not achieve the perceived benefits of
the acquisition as rapidly as, or to the extent anticipated by, financial
or industry analysts, or if the effect of the acquisition on our financial
results is not consistent with the expectations of financial or industry
analysts.
If we do not continue to integrate KD One's operations and personnel
in a timely manner or effectively manage the combined company, the benefits
of the acquisition may not be achieved and key personnel and customers may
be lost.
Achieving the benefits of our acquisition of KD One depends on the
timely, efficient and successful execution of a number of events, including
the continued integration of the operations and personnel of the two
companies. The successful execution of these events involves considerable
risk and ultimately may not be successful.
In addition, current and prospective KD One employees may experience
uncertainty about their future roles with us while our strategies with
regard to KD One are being implemented, and since the completion of the KD
One acquisition, a number of KD One employees, including certain senior
managers, have ceased employment with us. This uncertainty may continue and
may result in a loss of employees or may adversely affect KD One's ability
to attract and retain key management, sales, marketing and technical
personnel.
If we do not successfully integrate KD One's technology, many of the
potential benefits of the acquisition may not be realized.
We intend to continue to integrate KD One's technology into our own
products in addition to offering KD One's products separately. We may not
be able to fully integrate KD One's technology. In order to fully realize
the potential benefits of the acquisition, we must make KD One's
technology, products and services operate together with our technology,
products and services. We may be required to spend additional time or money
on integration that would otherwise be spent on developing our products and
services or other matters. If we do not integrate our technology
effectively or if management and technical staff spend too much time on
integration issues, we could experience increased operating expenses and
the costs of the acquisition could exceed the benefits.
If we fail to successfully cross-market our products and KD One's
products, or to develop new products, we may be unable to increase or
maintain our customer base or revenues.
We have offered, and will continue to offer, our respective products
and services to each other's customers. If these cross-marketing efforts
are not successful, we will be unable to fully realize the potential
benefits of the KD One acquisition. We are developing, and intend to
continue to develop, new products and services that combine the knowledge
and resources of both businesses. We cannot assure you that these
integrated products or services will be successful. As a result, we may not
be able to increase or maintain our customer base. To date, the companies
have not thoroughly investigated the obstacles, including technological,
market-driven or other obstacles, to developing and marketing these new
products and services in a timely and efficient way. We may not be able to
overcome these obstacles in developing new products and services.
OUR PRODUCTS HAVE A LENGTHY SALES CYCLE. AS A RESULT, IT IS DIFFICULT TO
PREDICT THE QUARTER IN WHICH A SALE MAY OCCUR.
We are one of the first companies to market real time personalization
and precision marketing solutions. As a result, we must use significant
resources to educate potential customers on the use and benefits of our
products. In addition, we believe that the purchase of our products is
relatively discretionary and involves a significant commitment of capital
and other resources by a customer. As a result, it usually takes our sales
organization several months to finalize a sale. This makes it difficult to
predict the quarter in which a sale may occur.
OUR PRODUCTS HAVE A LENGTHY IMPLEMENTATION CYCLE. IN ADDITION, ONLY A
LIMITED NUMBER OF OUR CUSTOMERS HAVE A DEPLOYED AND OPERATING APPLICATION
THAT UTILIZES OUR PRODUCTS. AS A RESULT, WE CANNOT BE CERTAIN THAT OUR
PRODUCTS WILL PERFORM AND BE RECEIVED AS WE EXPECT.
The implementation, including application design and deployment, of
our products requires a commitment of resources by our customers. The time
required for implementation of our products has varied depending on the
customer's application of the product. Additionally, implementation of Net
Perceptions for E-commerce often does not begin until a customer otherwise
undertakes to update its website.
We have currently licensed one or more of our products to more than
200 customers. However, only a limited number of these customers have fully
deployed an operating application that utilizes our products. Because most
of our customers have not yet fully implemented and deployed our products,
we cannot be certain that our products will:
o perform as designed;
o deliver the desired level of economic benefit to our customers;
o meet the other expectations and needs of our customers;
o achieve any significant degree of market acceptance; or
o perform to the level necessary to generate repeat customers and
customer references.
If implementation services performed by us constitute a significant
part of a product sales transaction, we recognize a substantial portion of
our revenues from the sales transaction upon the delivery of the
implementation services. As a result, delays in service delivery could
cause significant reduction in our license revenues and operating results
for any particular period.
WE HAVE SEVERAL NEW PRODUCTS WHICH MAY NOT ACHIEVE MARKET ACCEPTANCE.
We have announced during the last twelve months the commercial launch
of the following new products:
o Net Perceptions for Marketing Campaigns, which is a solution designed
to manage and personalize outbound promotional electronic mail
campaigns;
o Net Perceptions for Knowledge Management, which applies our real time
personalization capabilities to corporate intranets;
o Net Perceptions Recommendation Engine, which allows original equipment
manufacturers to add our real time personalization capabilities to
their existing applications;
o Intelligence for Advertising, which uses sophisticated analytical
techniques to help retailers maximize the return they receive from
newspaper circular advertising;
o Intelligence for E-commerce, which allows on-line retailers to make
better marketing and merchandising decisions; and
o The Net Perceptions Personalization Network, which we sometimes refer
to as the Network, which is an Application Services Provider, or
"ASP", delivered business intelligence and personalized marketing
service. The Network currently offers four channels: the Intelligence
Channel, the Web Recommendation Channel, the Customer Acquisition
Channel and the E-Mail Channel.
These new products have not received any degree of market acceptance.
There are significant risks inherent in product introductions such as
these. These products may not address some or all of the needs of customers
and may contain undetected errors or failures. A lack of necessary features
or errors or failures in the products will likely result in loss or delay
of market acceptance. We expect that our future financial performance will
depend significantly on the successful sales, implementation and market
acceptance of these new products which may not occur on a timely basis or
at all.
Our new products are subject to significant technical risks. We may
fail to introduce or deploy new products on a timely basis, or at all. In
the past, we have experienced some delays in the commencement of commercial
shipments of our new releases and new products. These delays caused
customer frustrations and delay or loss of product revenues. Some of our
competitors currently offer products with features and functionality
similar to those of some of our new products. In the past, we have also
experienced delays in purchases of our products by customers anticipating
our launch of new releases or new products. We could experience increased
expenses or lost revenues if customers defer material orders in
anticipation of new releases or new product introductions.
The software products we offer are complex and may contain undetected
errors or failures when first introduced, or as new versions are released.
We have in the past discovered software errors in our new releases and new
products after their introduction. We experienced delays in release and
lost revenues during the period required to correct these errors. We may
discover errors in new releases or new products after the commencement of
commercial shipments, despite testing by our personnel and our current and
potential customers. This may result in loss of or delay in market
acceptance of our products, which could seriously impair our ability to
achieve profitability.
IF WE FAIL TO GENERATE REPEAT OR EXPANDED BUSINESS FROM OUR CURRENT AND
FUTURE CUSTOMERS, WE MAY BE UNABLE TO BUILD A CRITICAL MASS OF CUSTOMERS
NECESSARY TO ACHIEVE INCREASED SALES AND MARKET SHARE.
Our success is dependent on the continued growth of our customer base
and the retention of our customers. We currently depend on a limited number
of key, high-profile customers. Our ability to attract new customers will
depend on a variety of factors, including the accuracy, scalability,
reliability and cost-effectiveness of our products and services and our
ability to effectively market such products and services. In the past, we
have lost potential customers to competitors for various reasons, including
lower prices and other incentives not matched by us. Many of our current
customers initially purchase a limited license for our products and
services for evaluation. If such evaluation is successful, the customer may
purchase a license to expand the use of our products in its organization or
license additional products and services. If we fail to generate repeat and
expanded business from our current and future customers, we may be unable
to build a critical mass of customers necessary to achieve increased sales
and market share.
IF WE FAIL TO SUBSTANTIALLY EXPAND OUR DIRECT SALES OPERATIONS, WE MAY BE
UNABLE TO INCREASE MARKET AWARENESS AND SALES OF OUR PRODUCTS AND SERVICES.
Our products and services require a sophisticated sales effort
targeted at the senior management of our prospective customers. As of June
30, 2000, our direct sales organization consisted of 81 employees. We plan
to hire additional direct sales personnel. Competition for qualified sales
personnel is intense, and we might not be able to hire the kind and number
of sales personnel we are targeting. New hires will require extensive
training and typically take several months to achieve productivity. We
cannot be certain that our recent hires will be as productive as necessary.
If we are unable to hire additional skilled sales personnel as needed, we
may not be able to capture increased market share for our products and
services.
IF WE CANNOT EXPAND OUR INDIRECT SALES CHANNEL, WE MAY BE UNABLE TO
INCREASE OUR CUSTOMER BASE AND ACHIEVE PROFITABILITY.
We intend to increase the proportion of our customers licensed
through our indirect channel, which includes resellers, systems integrators
and original equipment manufacturers. Our agreements with resellers are
generally not exclusive and in many cases may be terminated by either party
without cause. Many of these resellers do not have minimum purchase or
resale requirements. In addition, many of these resellers carry product
lines that are competitive with our product lines. These resellers may not
give a high priority to the marketing of our products or may not continue
to carry our products. They may give a higher priority to other products,
including the products of competitors. We may not retain any of our current
resellers or successfully recruit additional resellers. Events or
occurrences of this nature could seriously impair our ability to increase
our sales and market share. In addition, any sales through resellers will
have lower gross margins than direct sales.
We intend to increase sales through original equipment manufacturers.
We are currently investing, and intend to continue to invest, resources to
develop this sales channel. These investments could seriously harm our
operating margins. We depend on our original equipment manufacturers'
abilities to develop product enhancements or new products on a timely and
cost-effective basis that will meet changing customer needs and respond to
emerging industry standards and other technological changes. Our original
equipment manufacturers may not effectively meet these challenges. These
original equipment manufacturers:
o are not within our control;
o may incorporate into their products the technologies of other
companies in addition to or in place of our technologies; and
o are not obligated, in some instances, to purchase our products.
Our original equipment manufacturers may not continue to carry our
products. In addition, any sales through original equipment manufacturers
will have lower gross margins than direct sales. Our inability to recruit,
or our loss of, important original equipment manufacturers could seriously
impair our ability to increase our customer base and achieve profitability.
We have established a sales force dedicated to the development of the
indirect sales channel for our products. As of June 30, our indirect sales
organization consisted of six employees. We plan to hire additional
indirect sales personnel. Competition for qualified sales personnel is
intense, and we might not be able to retain our existing personnel or hire
and retain the kind and number of sales personnel we are targeting. New
hires will require extensive training and typically take several months to
achieve productivity. We cannot be certain that our recent hires will be as
productive as necessary.
IF WE ARE UNSUCCESSFUL IN IMPROVING AND INCREASING THE SIZE OF OUR
PROFESSIONAL SERVICES ORGANIZATION, WE MAY LOSE CURRENT CUSTOMERS OR BE
UNABLE TO ATTRACT NEW CUSTOMERS.
Customers that license our software typically engage our professional
services organization to assist with support, training, consulting and
implementation. We believe that growth in our product sales depends on our
ability to provide our customers with these services and to educate
resellers on how to use our products. From time to time, we receive
customer complaints about the timeliness and accuracy of our customer
support. We plan to add more customer support personnel in order to address
current customer support needs. As of June 30, 2000, our professional
services and customer support organization consisted of 72 employees. There
are a limited number of people who have the skills needed to provide the
services that our customers demand. Competition for qualified service
personnel is intense. We cannot be certain that we can attract or retain a
sufficient number of the highly-qualified service personnel that our
business needs.
WE DEPEND ON INTERNATIONAL SALES AND, THEREFORE, OUR BUSINESS IS
SUSCEPTIBLE TO NUMEROUS RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS.
Licenses and services sold to customers outside of the United States
accounted for approximately 13% of our total revenues in 1998, 16% in 1999
and 26% for the six months ended June 30, 2000. We expect international
revenues to account for a significant percentage of total revenues in the
future, and we believe that we must continue to expand our international
sales and marketing activities in order to be successful. To successfully
expand international sales we must:
o expand our international operations;
o hire international personnel; and
o recruit additional international resellers and systems integrators.
This will require significant management attention and financial
resources and could seriously harm our operating margins. We have very
limited experience in marketing, selling, distributing and supporting our
products and services internationally.
International operations are generally subject to a number of other
risks as well, including:
o expenses associated with customizing products and services for foreign
countries;
o protectionist laws and business practices that favor local
competition;
o conflicting and changing governmental laws and regulations;
o longer sales cycles;
o difficulties in collecting accounts receivable;
o foreign currency exchange rate fluctuations; and
o political and economic instability.
During the third quarter of 1999, we established operations in the
United Kingdom. Also during the third quarter of 1999, we established
operations in Japan through a joint venture that created Net Perceptions
Japan. In the first half of 2000 we established operations in Singapore,
Hong Kong and Germany. As of June 30, 2000, we had 24 employees located in
Europe and three employees located in Asia (not including the employees of
the joint venture in Japan). All other employees were located in North
America.
The acceptance and use of the Internet in international markets is in
an earlier stage of development than in the United States, particularly the
use of the Internet as a method for conducting commerce. If the Internet or
electronic commerce fail to gain sufficient acceptance in international
markets or we fail to further expand our international operations in a
timely manner, we may be unable to generate sufficient revenues to cover
our expenses related to international operations. In addition, we may fail
to maintain or increase international market demand for our products.
IF OUR INTELLECTUAL PROPERTY IS NOT PROTECTED ADEQUATELY, WE MAY LOSE OUR
COMPETITIVE ADVANTAGE IN THE MARKET.
We are a technology company. Our success depends in large part on
protecting our intellectual property, which is our most important asset. We
rely upon a combination of trademark, copyright, patent and trade secret
laws to protect our rights in our technology. We license our software and
require our customers to enter into license agreements, which impose
restrictions on our customers' ability to utilize the software. In
addition, we seek to avoid disclosure of our trade secrets, including but
not limited to requiring those persons with access to our proprietary
information to execute confidentiality agreements with us and restricting
access to the source code for our software.
We have nineteen pending United States patent applications. We also
have license rights to two issued United States patents and one allowed
United States patent application from the University of Minnesota. We have
five pending foreign patent applications, but we have no issued foreign
patents. It is possible that no patents will issue from the currently
pending patent applications. It is also possible that our current patents
and potential future patents may be invalid or unenforceable. It is also
possible that any patent issued to us may not provide us with any
competitive advantages. Moreover, we may not develop future proprietary
products or technologies that are patentable, and the patents of others may
seriously limit our ability to conduct our business. In this regard, we
have not performed any comprehensive analysis of patents of others that may
limit our ability to conduct our business.
Our efforts to protect our proprietary rights may not succeed.
Copyright and trade secret laws afford only limited protection for our
proprietary rights in our software, documentation and other written
materials. Unauthorized parties may be able to copy aspects of our products
or to obtain and use information that we regard as confidential and
proprietary. Policing unauthorized use of our products is difficult, and
while we are unable to determine the extent to which piracy of our software
products exists, software piracy can be expected to be a persistent
problem. In addition, the laws of some foreign countries do not protect our
proprietary rights to as great an extent as the laws of the United States.
Our means of protecting our proprietary rights may not be adequate and our
competitors may independently develop similar technology, duplicate our
products or design around patents issued to us or our other intellectual
property. We may not be able to detect infringement or enforce our patent
or other rights and, as a result, our competitive position in the market
may suffer.
THIRD-PARTY INFRINGEMENT CLAIMS AGAINST US OR OUR TECHNOLOGY SUPPLIERS
COULD RESULT IN DELAYS IN PRODUCT DEVELOPMENT, THE LOSS OF CUSTOMERS, OR
COSTLY AND TIME-CONSUMING LITIGATION.
There has been a substantial amount of litigation in the software
industry regarding intellectual property rights. We have from time to time
received claims that we are infringing third parties' intellectual property
rights. It is possible that in the future third parties may claim that our
current or potential future products infringe their intellectual property
rights. We expect that software companies such as Net Perceptions will
increasingly be subject to infringement claims as the number of products
and competitors in our industry segment grows and the functionality of
products in different industry segments overlaps. Any such claims, with or
without merit, could be time-consuming, result in costly litigation, cause
product shipment delays or require us to enter into royalty or licensing
agreements in order to secure continued access to required technology.
Royalty or licensing agreements, if required, may not be available on terms
acceptable to us or at all. Claims of intellectual property infringement
may also require us to pay significant damages or subject us to an
injunction against the use of our products. Any successful claim of
intellectual property infringement against us could have an immediate and
significant impact on our ability to carry on our business and market our
products.
In addition, in all of our paid software license agreements, we
generally indemnify our customers against losses attributable to
intellectual property infringement by our software. Should a third party
bring a suit against a customer alleging that the customer's use of our
software infringes its intellectual property rights, we could incur
substantial costs in defending and resolving the suit.
IF WE ARE UNABLE TO CONTINUE TO UTILIZE TECHNOLOGY LICENSED FROM THIRD
PARTIES, WE MAY BE UNABLE TO CONDUCT OUR BUSINESS.
We license technology from various third parties for integration into
our products. Licenses to such third-party technology may not continue to
be available to us on commercially reasonable terms. We may not be able to
renew existing agreements or to license or develop alternative technology.
If we cannot maintain license rights to key third-party software, develop
similar technology or license similar technology from another source on a
timely or commercially feasible basis, we may be unable to market our
current products or develop new products in a timely manner.
IF WE ENGAGE IN FUTURE ACQUISITIONS, WE WILL INCUR A VARIETY OF COSTS AND
MAY NEVER REALIZE THE ANTICIPATED BENEFITS OF THE ACQUISITION.
If appropriate opportunities become available, we may attempt to
acquire businesses, products or technologies that we believe are a
strategic fit with our business. We currently have no commitments or
agreements for any acquisitions. If we do undertake any transaction of this
sort, the process of integrating an acquired business, product or
technology may result in unforeseen operating difficulties and expenditures
and may absorb significant management attention that would otherwise be
available for ongoing development of our business. Moreover, we may fail to
realize the anticipated benefits of any acquisition. Future acquisitions
could dilute existing stockholders' ownership interest in us and could
cause us to incur debt, expose us to future liabilities and result in
amortization expenses related to goodwill and other intangible assets.
OUR ABILITY TO INCREASE OUR CUSTOMER BASE AND OUR SALES DEPENDS ON THE
CONTINUING CONTRIBUTION OF OUR KEY PERSONNEL AND OUR ABILITY TO ATTRACT,
ASSIMILATE AND RETAIN OTHER HIGHLY QUALIFIED PERSONNEL.
Our future success depends on the continued service of our senior
management, product development and sales personnel. The loss of the
services of one or more of our key personnel could seriously harm our
ability to increase our customer base and sales. As of June 30, 2000, we
had 369 employees. We do not carry any significant key person life
insurance policies.
Our future success also depends on our continuing ability to attract,
hire, train and retain a substantial number of highly skilled managerial,
technical, sales, marketing and customer support personnel. Competition for
skilled personnel is intense, and we may fail to retain our key employees,
or attract, assimilate or retain other highly qualified personnel in the
future. If so, we may be unable to service our current customers, attract
new customers and increase our sales.
The market price of our common stock has been volatile and has
fluctuated significantly in the past. To the extent this volatility and
fluctuation continues, equity-based compensation policies and plans, which
have historically been significant in our attracting, hiring and retaining
highly skilled personnel, may not be as effective as in the past.
IN ORDER TO MANAGE OUR GROWTH AND EXPANSION, WE WILL NEED TO IMPROVE AND
IMPLEMENT NEW SYSTEMS, PROCEDURES AND CONTROLS.
We have recently experienced a period of significant expansion of our
operations that has placed a significant strain upon our management systems
and resources. In addition, we have recently hired a significant number of
employees and plan to further increase our total headcount. Our headcount
has increased from 14 at December 31, 1996 to 213 at December 31, 1999 to
369 at June 30, 2000. We may not be able to manage our growing operations
effectively, and, as a result, we may have difficulty in retaining current,
or attracting additional, employees.
We have expanded, and plan to continue to expand, the geographic
scope of our customer base and operations. This expansion has resulted and
further expansion, if any, will continue to result in, substantial demands
on our management resources. Our ability to compete effectively and to
manage future expansion of our operations, if any, will require us to
continue to improve our financial and management controls, reporting
systems and procedures on a timely basis, and expand, train and manage our
employee work force.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL THAT MAY NOT BE AVAILABLE ON
REASONABLE TERMS, OR AT ALL.
We believe we have sufficient cash and investments to meet our
working capital and capital expenditure needs for at least the next 12
months. After that, we may need to raise additional funds and we cannot be
certain that we will be able to obtain additional financing on favorable
terms, or at all. If we raise additional funds through the issuance of
equity or convertible debt, the percentage ownership of our stockholders
will be reduced, and these newly issued securities may have rights,
preferences or privileges senior to those of our existing stockholders,
including investors purchasing shares in this offering. If we cannot raise
funds as needed on acceptable terms, we may not be able to develop or
enhance our products, take advantage of future opportunities or respond to
competitive pressures or unanticipated requirements.
FUTURE SALES OF OUR COMMON STOCK COULD DEPRESS ITS MARKET PRICE.
If our stockholders sell substantial amounts of our common stock,
or there is a belief that such sales could occur, the market price of our
common stock could fall. These factors could also make it more difficult
for us to raise funds through future offerings of common stock. As of
August 31, 2000, we had outstanding 26,734,375 shares of common stock and
options to acquire an aggregate of 3,189,719 shares of common stock, of
which 2,059,369 were vested and exercisable. Substantially all of our
outstanding shares, including shares covered by this prospectus, are freely
tradeable and all shares acquired upon exercise of options will be freely
tradeable. Those shares which are not freely tradeable may be resold
publicly at any time, subject to the volume and other restrictions of Rule
144 under the Securities Act. If large numbers of these shares are sold
over a short period of time, the price of our common stock could be
adversely affected.
THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE, WHICH COULD RESULT IN
SUBSTANTIAL LOSSES FOR INDIVIDUAL STOCKHOLDERS.
The market price for our common stock has been and is likely to
continue to be highly volatile and subject to wide fluctuations in response
to factors including the following, some of which are beyond our control:
o actual or anticipated variations in our quarterly operating results;
o announcements of new technological innovations, increased cost of
operations or new products or services by us or our competitors;
o changes in financial estimates by securities analysts;
o conditions or trends in the Internet industry;
o changes in the economic performance and/or market valuations of other
Internet companies;
o volatility in the stock markets, particularly with respect to Internet
stocks, and decreases in the availability of capital for
Internet-related businesses;
o announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
o additions or departures of key personnel;
o sales of additional shares of common stock; and
o potential litigation.
From April 23, 1999 (the first day of public trading of our common
stock), through September 15, 2000, the high and low sales prices for our
common stock fluctuated between $66.50 and $9.75. On September 15, 2000,
the last reported sale price of our common stock on the Nasdaq National
Market was $13.38. In the past, securities class action litigation has
often been brought against a company following periods of volatility in the
market price of its securities. We may in the future be the target of
similar litigation. Securities litigation could result in substantial costs
and divert management's attention and resources.
WE ARE SUBJECT TO POTENTIAL PRODUCT LIABILITY CLAIMS THAT COULD RESULT IN
COSTLY AND TIME-CONSUMING LITIGATION.
Because our customers use our products for important applications
such as electronic commerce, errors or defects in, or other performance
problems with, our products could result in financial or other damages to
our customers. Our customers could seek damages for losses from us.
Although our license agreements typically contain provisions designed to
limit our exposure to product liability claims, existing or future laws or
unfavorable judicial decisions could negate these limitation of liability
provisions. Any product liability claim brought against us, even if
unsuccessful, would likely be time-consuming and costly, and potential
liabilities could exceed our available insurance coverage.
OUR CURRENT REVENUE RECOGNITION PRACTICES MAY NEED TO CHANGE, WHICH COULD
SERIOUSLY HARM OUR BUSINESS.
The American Institute of Certified Public Accountants issued
Statement of Position 97-2, "Software Revenue Recognition," in October 1997
and amended it by Statements of Position 98-4 and 98-9. However, full
implementation guidelines for these standards have not yet been issued and
there may be additional pronouncements issued in the future. Our current
revenue accounting practices may need to change and such changes could
seriously harm our future revenues and earnings.
PROVISIONS OF OUR CORPORATE CHARTER DOCUMENTS COULD DELAY OR PREVENT A
CHANGE OF CONTROL.
Various provisions of our certificate of incorporation and bylaws
could have the effect of delaying or preventing a change in control and
make it more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders. These provisions, if used by our
management, could negatively affect our stock price.
RISKS ASSOCIATED WITH THE INTERNET INDUSTRY
OUR BUSINESS COULD BE SERIOUSLY IMPACTED BY PRIVACY AND SECURITY CONCERNS.
Typically, our customers capture user preference and profile
information each time a user interacts with the application utilizing our
products or volunteers information in response to survey questions. Privacy
concerns may cause users to resist providing the personal data necessary to
support this profiling capability. Our customers generally have implemented
security measures to protect customer data from unauthorized disclosure or
interception by third parties. However, the security measures may not be
effective against all potential security threats. If a breach of customer
data security were to be publicized, our products may be perceived as less
desirable, and our future sales negatively impacted. More importantly, even
the perception of privacy and security concerns, whether or not valid, may
indirectly inhibit market acceptance of our products. In addition,
legislative or regulatory requirements may heighten such concerns if users
must be notified that the data captured after these interactions may be
used by marketing entities to direct product promotion and advertising to
that user. During the last twelve months, over 200 pieces of legislation
have been proposed at the federal and state level that address some aspect
of the Internet, including a number of bills that specifically address
Internet privacy matters. Such proposed legislation indicates that some
federal and state legislators believe that certain aspects of the Internet
and e-commerce, including data privacy, are appropriate matters for
regulation and review. Various other countries and political entities, such
as the European Economic Community, have adopted legislation or regulatory
requirements addressing issues, such as data privacy, that may directly
impact some of our customers. If user privacy concerns are not adequately
addressed or if restrictive legislation is adopted in the United States,
our business could be seriously harmed and we could experience increased
operating losses.
Our products can use data captured with "cookies" to track
demographic information and user preferences. A "cookie" is a bit of
information keyed to a specific server, file pathway or directory location
that is stored on a computer user's hard drive, possibly without the user's
knowledge. Some countries have imposed laws limiting the use of cookies,
and a number of Internet commentators, advocates and governmental bodies in
the United States and other countries have proposed or urged passage of
laws limiting or abolishing the use of cookies. If laws of this type are
passed, our business could be adversely impaired and we could suffer
increased operating losses. In addition, Internet users can, if they
choose, configure their Web browsers to limit the collection of user data.
If many Internet users choose to limit the collection of user data in this
matter, or if major countries or regions adopt legislation or other
restrictions on the use of customer data, our software would be less useful
to our customers and market acceptance of our products could be adversely
impacted.
IF WE DO NOT RESPOND TO RAPID TECHNOLOGICAL CHANGES, OUR PRODUCTS COULD
BECOME OBSOLETE AND WE COULD LOSE OUR COMPETITIVE ADVANTAGE IN THE MARKET.
The life cycles of our products are difficult to predict because the
markets for our products are characterized by rapid technological change,
changing customer needs, frequent new software product introductions and
evolving industry standards.
The introduction of products embodying new technologies and the
emergence of new industry standards could render our existing products
obsolete and unmarketable. To be successful, we need to develop and
introduce new software products and enhancements to existing products on a
timely basis that:
o keep pace with technological developments and emerging industry
standards; and
o address the increasingly sophisticated needs of our customers.
In addition, we may:
o fail to develop and market new products and enhancements to existing
products that respond to technological changes or evolving industry
standards;
o experience difficulties that could delay or prevent the successful
development, introduction and marketing of these new products and
enhancements to existing products; and
o fail to develop new products and enhancements to existing products
that adequately meet the requirements of the marketplace or achieve
market acceptance.
If any of these events occur, we may be unable to compete
successfully in the market for our products and services, and as a result,
our business could fail.
THE GROWTH OF THE MARKET FOR OUR PRODUCTS AND SERVICES WOULD BE IMPAIRED IF
THE USE OF THE INTERNET AND ELECTRONIC COMMERCE DO NOT GROW AS ANTICIPATED,
AND THIRD PARTIES DO NOT CONTINUE TO DEVELOP AND IMPROVE THE INTERNET
INFRASTRUCTURE.
Our future revenues depend, in part, upon the increased acceptance
and use of the Internet and other on-line services as a medium of commerce.
Rapid growth in the use of the Internet, the Web and on-line services is a
recent phenomenon. Acceptance and use may not continue to develop at
historical rates and a sufficiently broad base of customers may not adopt
or continue to use the Internet and other on-line 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 proven services and products exist.
In addition, the Internet may not be accepted as a viable long-term
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 continues to experience significant expansion in
the number of users, frequency of use or bandwidth requirements, the
infrastructure for the Internet may be unable to support the demands placed
upon it. In addition, the Internet could lose its viability as a commercial
medium 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. Changes in, or insufficient
availability of, telecommunications services to support the Internet also
could result in slower response times and adversely affect usage of the
Internet generally.
The growth of the market for our products and services would be
impaired if:
o use of the Internet, the Web and other on-line services does not
continue to increase or increases more slowly than expected;
o the infrastructure for the Internet, the Web and other on-line
services does not effectively support expansion that may occur; or
o the Internet, the Web and other on-line services do not become a
viable commercial marketplace, which would inhibit the development of
electronic commerce and of the need for our Net Perceptions for
E-commerce product.
INCREASING GOVERNMENT REGULATION COULD LIMIT THE MARKET FOR OUR PRODUCTS
AND SERVICES, WHICH COULD SERIOUSLY IMPAIR THE GROWTH OF OUR BUSINESS OR
EXPOSE US TO UNANTICIPATED LIABILITIES.
As Internet commerce evolves, we expect that federal, state or
foreign governmental authorities will enact laws or adopt regulations
covering issues such as user privacy, pricing, content and quality of
products and services. If enacted, such laws, rules or regulations could
limit the market for our products and services. Although many of these
regulations may not apply to our business directly, we expect that laws
regulating the solicitation, collection or processing of personal/customer
information could indirectly affect our business.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference herein
contain forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from any
future results, performances or achievements expressed or implied by the
forward-looking statements. Forward-looking statements include, but are not
limited to, statements about:
o our limited operating history;
o our estimates for future revenue and profitability;
o the progress of and delays in our product development;
o the market for our products and services and the status of our sales
and marketing efforts;
o changes in our product pricing policies;
o the development of Internet markets;
o our estimates regarding our capital requirements and our needs for
additional financing; and
o our ability to integrate recently acquired businesses or technologies
and our strategy regarding future acquisitions.
In some cases, you can identify forward-looking statements by terms
such as "may," "will," "should," "could," "would," "expects," "plans,"
"anticipates," "believes," "estimates," "projects," "predicts," "potential"
and similar expressions intended to identify forward-looking statements.
These statements reflect our current views with respect to future events
and are based on assumptions and subject to risks and uncertainties. Given
these uncertainties, you should not place undue reliance on these
forward-looking statements. We discuss many of these risks in this
prospectus in greater detail under the heading "Risk Factors." Also, these
forward-looking statements represent our estimates and assumptions only as
of the date of this prospectus.
You should read this prospectus and the documents that we incorporate
by reference in this prospectus completely and with the understanding that
our actual future results may be materially different from what we expect.
We qualify all of our forward-looking statements by these cautionary
statements.
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 SEC at the SEC's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 for further information on the operation of the Public
Reference Room. Our SEC filings are also available to the public from our
web site at http://www.netperceptions.com or at the SEC's web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus, and later
information filed with the SEC will update and supersede this information.
We incorporate by reference the documents listed below and any future
filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 until this offering is completed.
(a) Annual Report on Form 10-K for the fiscal year ended December 31, 1999
filed with the SEC on March 30, 2000;
(b) Proxy Statement on Schedule 14A for the 2000 Annual Meeting of
Stockholders filed with the SEC on April 6, 2000;
(c) Quarterly Report on Form 10-Q for the quarter ended March 31, 2000
filed with the SEC on May 15, 2000;
(d) Quarterly Report on Form 10-Q for the quarter ended June 30, 2000
filed with the SEC on August 11, 2000;
(e) Current Report on Form 8-K filed with the SEC on February 22, 2000;
(f) Current Report on Form 8-K/A filed with the SEC on April 21, 2000; and
(g) The description of Common Stock contained in the registration
statement on Form 8-A (Registration No. 000-25781) filed April 15,
1999, including any amendments or reports filed for the purpose of
updating such descriptions.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Investor Relations
Net Perceptions, Inc.
7700 France Avenue South
Edina, Minnesota 55435
(952) 842-5000
USE OF PROCEEDS
We will not receive any of the net proceeds from the sale of the
shares of Net Perceptions common stock offered hereby, all of which
proceeds will be received by the selling stockholders.
PLAN OF DISTRIBUTION
We are registering all 1,845,519 shares on behalf of certain selling
stockholders. All of the shares included in this prospectus were issued by
us in connection with our acquisition of KD One. We acquired all of the
outstanding shares of KD One, and KD One is now our wholly-owned
subsidiary. We will receive no proceeds from this offering. The selling
stockholders named in the table below, or pledgees, donees, transferees or
other successors-in-interest selling shares received from a named selling
stockholder as a gift, partnership distribution or other non-sale related
transfer after the date of this prospectus (collectively, the "Selling
Stockholders"), may sell the shares from time to time. The Selling
Stockholders will act independently of us in making decisions with respect
to the timing, manner and size of each sale. The sales may be made on any
national securities exchange or quotation service on which our common stock
may be listed or quoted at the time of sale or in the over-the-counter
market or otherwise, at prices and at terms then prevailing, or at prices
related to the then current market price, or in negotiated transactions.
The Selling Stockholders may effect such transactions by selling the shares
to or through broker-dealers. The shares may be sold by one or more of, or
a combination of, the following:
o a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by such
broker-dealer for its account pursuant to this prospectus;
o an exchange distribution in accordance with the rules of such
exchange;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o in privately negotiated transactions.
To the extent required, this prospectus may be amended or
supplemented from time to time to describe a specific plan of distribution.
In effecting sales, broker-dealers engaged by the Selling Stockholders may
arrange for other broker-dealers to participate in the resales.
The Selling Stockholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise.
In such transactions, broker-dealers may engage in short sales of the
shares in the course of hedging the positions they assume with Selling
Stockholders. The Selling Stockholders also may sell shares short and
redeliver the shares to close out such short positions. The Selling
Stockholders may enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the
shares. The broker-dealer may then resell or otherwise transfer such shares
pursuant to this prospectus. The Selling Stockholders also may loan or
pledge the shares to a broker-dealer. The broker-dealer may sell the shares
so loaned, or, upon a default, the broker-dealer may sell the pledged
shares pursuant to this prospectus. The Selling Stockholders also may
transfer and donate the shares in other circumstances in which case the
transferees, donees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Stockholders.
Broker-dealers or agents may also receive compensation from the purchasers
of the shares for whom they act as agents or to whom they sell as
principals, or both. Compensation as to a particular broker-dealer might be
in excess of customary commissions and will be in amounts to be negotiated
in connection with the sale. Broker-dealers or agents and any other
participating broker-dealers or the Selling Stockholders may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act
in connection with sales of the shares. Accordingly, any such commission,
discount or concession received by them and any profit on the resale of the
shares purchased by them may be deemed to be underwriting discounts or
commissions under the Securities Act. Because Selling Stockholders may be
deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act of 1933, the Selling Stockholders will be subject to the
prospectus delivery requirements of the Securities Act. In addition, any
securities covered by this prospectus which qualify for sale pursuant to
Rule 144 promulgated under the Securities Act may be sold under Rule 144
rather than pursuant to this prospectus. We are not aware of any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of shares by the Selling Stockholders. We
are also not aware of any underwriter or coordinating broker acting in
connection with the proposed sale of shares by the Selling Stockholders.
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states
the shares may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the shares may not simultaneously
engage in market making activities with respect to our common stock for a
period of up to five business days prior to the commencement of such
distribution, subject to specified exceptions or exemptions. In addition,
and without limiting the foregoing, each Selling Stockholder will be
subject to applicable provisions of the Exchange Act and the associated
rules and regulations under the Exchange Act, including Regulation M, which
provisions may limit the timing of purchases and sales of shares of our
common stock by the Selling Stockholders. We will make copies of this
prospectus available to the Selling Stockholders and have informed them of
the need for delivery of copies of this prospectus to purchasers at or
prior to the time of any sale of the shares offered hereby.
In connection with a particular offering or sale of the shares, or
upon being notified by a Selling Stockholder that any material arrangement
has been entered into with a broker-dealer for the sale of shares through a
block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, if required, we will file
a supplement to this prospectus. Such supplement will disclose any
additional required information, including, to the extent applicable and so
required:
o the name of each such Selling Stockholder and of the participating
broker-dealer(s);
o the number of shares involved;
o the price at which such shares were sold;
o the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
o that such broker-dealer(s) did not conduct any investigation to verify
the information included or incorporated by reference in this
prospectus; and
o other facts material to the transaction.
We will bear all costs, expenses and fees in connection with the
registration of the shares. The Selling Stockholders will bear all
commissions and discounts, if any, attributable to the sales of the shares.
The Selling Stockholders are under no obligation to sell all or any
of the shares. The Selling Stockholders are not restricted as to the prices
at which they may sell their shares and sales of such shares at less than
the market price may depress the market price of our common stock.
Pursuant to the registration rights agreement between the former
stockholders of KD One and us, we agreed to indemnify the Selling
Stockholders and their respective controlling persons against liabilities
related to the registration statement of which this prospectus forms a
part, including liabilities under the Securities Act, and the Selling
Stockholders have agreed to indemnify us and our directors, officers and
controlling persons against liabilities relating to information given to us
in writing for use in connection with this registration, including
liabilities under the Securities Act. The Selling Stockholders may also
agree to indemnify any broker-dealer or agent that participates in
transactions involving sales of the shares against certain liabilities,
including liabilities under the Securities Act.
SELLING STOCKHOLDERS
The following table sets forth the number of shares owned by the
Selling Stockholders as of September 12, 2000. None of the Selling
Stockholders has had a material relationship with Net Perceptions or its
affiliates within the past three years other than as a result of the
ownership of the shares or other securities of Net Perceptions or its
affiliates or as a result of their employment with Net Perceptions as of
the date of the closing of the acquisition of KD One. No estimate can be
given as to the amount of shares that will be held by the Selling
Stockholders after completion of this offering because the Selling
Stockholders may offer all or some of the shares. The shares offered by
this prospectus may be offered from time to time by the Selling
Stockholders named below. A portion of the Selling Stockholders' shares are
held in escrow under an escrow agreement entered into in connection with
the acquisition of KD One, and are referred to below as the Escrow Shares.
The Escrow Shares may not be sold until they are released from escrow,
which will not occur until February 14, 2001, at the earliest.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
PERCENT OF SHARES ESCROW SHARES
NUMBER OF SHARES OUTSTANDING REGISTERED FOR REGISTERED FOR
SELLING STOCKHOLDERS OWNED SHARES(1) SALE HEREBY(2) SALE HEREBY(3)
-------------------- ----- --------- -------------- --------------
<S> <C> <C> <C> <C>
Chet Aitken 751 (4) * 751 (4) 126
Austin Ventures V Affiliates 18,582 * 18,582 2,205
Funds, L.P.
Austin Ventures V, L.P. 371,426 1.4 371,426 44,310
Jon Bayless 1,402 * 1,402 168
Nathan Beach 272 (4) * 272 (4) 42
Brian Benton 882 * 882 105
Ajay Bhargava 1,665 * 1,665 546
David Boles 4,107 (4) * 4,107 (4) 588
Joe Bulger
1,655 * 1,655 189
H. Berry Cash
10,175 * 10,175 1,218
Roger Castillo 415 * 415 42
Centerpoint Venture Partners 424,922 1.6 424,922 50,694
L.P.
Joseph Dalton 37,819 * 37,819 7,497
Mark Davis 1,381 * 1,381 336
Paul Dehnert 29,660 * 29,660 4,725
John Dirvin 701 * 701 84
Ron Dovich 2,441 * 2,441 882
Estate of Joann Eisler 880 * 880 105
David Elliott 2,453 (4) * 2,453 (4) 294
Dietrich Erdmann 19,094 * 19,094 2,268
Peter Eppele 6,673 * 6,673 1,176
Wes Fox 1,834 * 1,834 420
Fran Frazer 9,249 (4) * 9,249 (4) 1,113
Kent Fuka ---- * ---- 168
Coyne Gibson 7,772 (4) * 7,772 (4) 1,869
Jeff Goke 3,991 (4) * 3,991 (4) 483
Greg Goralski 1,752 (4) * 1,752 (4) 210
Kay Hackmann 1,630 * 1,630 378
Karen Heath 6,726 (4) * 6,726 (4) 1,344
Barry Higgins 2,804 * 2,804 336
Roger Hughes 2,028 * 2,028 231
InterWest Investors VI, L.P. 11,072 * 11,072 1,323
InterWest Partners VI, L.P. 388,858 1.5 388,858 46,389
Lynn Keeling 3,424 * 3,424 588
Sue Keller -- * -- 42
Meredith Koester 276 * 276 84
Lee Kunkle 16,123 (4) * 16,123 (4) 1,932
Mary McCommon -- * -- 42
Mark McKnight 1,051 (4) * 1,051 (4) 126
Mary Mitchell 701 (4) * 701 (4) 84
Jean Nance 1,402 (4) * 1,402 (4) 168
John Overholt 18,226 * 18,226 2,184
Jackie Parker 701 (4) * 701 (4) 84
Phillips-Smith Specialty 39,927 * 39,927 8,337
Retail Group III
Phoenix Leasing Incorporated 2,394 * 2,394 294
Nick Revezzo 276 * 276 42
RHO Management Trust I 112,087 * 112,087 15,057
Terry Rock 1,731 * 1,731 294
Pam Saegert -- * -- 42
Larry Scroggins 141 * 141 16
L.J. Sevin 25,438 * 25,438 3,045
Larry Steury 4,831 (4) * 4,206 (4) 504
Roger Sunshine 1,314 * 1,314 378
John Thornton 1,402 * 1,402 168
Frank Triolo 4,012 (4) * 4,012 (4) 1,008
Chien Tung 623 * 623 63
Elaine Wetmore 30,497 (4) * 7,609 (4) 903
Larry Wikelius 12,472 (4) * 12,472 (4) 1,890
Linda Wozniak 1,051 * 1,051 126
Mark Zuzanek 3,907 (4) * 3,907 (4) 588
</TABLE>
--------------------
* Represents beneficial ownership of less than one percent.
(1) Based on the number of shares outstanding on August 31, 2000.
(2) Assumes the sale of all shares of Net Perceptions common stock offered
by the Selling Stockholders. This registration statement also shall
cover any additional shares of common stock which become issuable in
connection with the shares registered for sale hereby by reason of any
stock divided, stock split, recapitalization or other similar
transaction effected without the receipt of consideration which
results in an increase in the number of Net Perceptions' outstanding
shares of common stock.
(3) Escrow Shares may not be sold until they are released from escrow,
which will not occur until February 14, 2001, at the earliest.
(4) A portion of the shares held by this Selling Stockholder are subject
to repurchase by us. Under the terms of the stock purchase agreement
entered into by this Selling Stockholder in connection with the
exercise of employee stock options, shares subject to repurchase may
not be sold until our repurchase rights have lapsed.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
Net Perceptions by Skadden, Arps, Slate, Meagher & Flom LLP, Boston,
Massachusetts.
EXPERTS
The financial statements incorporated in this prospectus by reference
to the annual report on Form 10-K for the year ended December 31, 1999,
have been so incorporated in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Net Perceptions in
connection with the sale of common stock being registered. All amounts are
estimates except for the SEC registration fee.
SEC Registration Fee..........$6,592
Legal Fees and Expenses.......35,000
Accounting Fees and Expenses..10,000
Printing Fees..................5,000
Transfer Agent Fees............5,000
Miscellaneous............... 10,000
-------
Total................. $71,592
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation law authorizes a
court to award or a corporation's board of directors to grant
indemnification to directors and officers in terms sufficiently broad to
permit such indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the
Securities Act of 1933. Article VII of our Amended and Restated Bylaws
provides for mandatory indemnification of our directors and officers and
permissible indemnification of employees and other agents to the maximum
extent permitted by the Delaware General Corporation Law. Our Amended and
Restated Certificate of Incorporation provides that, pursuant to Delaware
law, a director shall not be liable for monetary damages for breach of the
directors' fiduciary duty as directors to us and our stockholders. This
provision in our Amended and Restated Certificate of Incorporation does not
eliminate the directors' fiduciary duty, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief
will remain available under Delaware law. In addition, each director will
continue to be subject to liability for breach of the director's duty of
loyalty to us for acts or omissions not in good faith or involving
intentional misconduct, for knowing violations of laws, for actions leading
to improper personal benefit to the director, and for payment of dividends
or approval of stock repurchases or redemptions that are unlawful under
Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws
or state or federal environmental laws.
We have entered into Indemnification Agreements with our officers and
directors which provide our officers and directors with further
indemnification to the maximum extent permitted by the Delaware General
Corporation Law. We also maintain liability insurance for our directors and
officers. Reference is also made to Section 1.10 of the Amended and
Restated Investor Rights Agreement contained in Exhibit 4.1 hereto and
Section 1.10 of the Registration Rights Agreement contained in Exhibit 4.2
hereto, each indemnifying certain of our stockholders, including
controlling stockholders, against certain liabilities.
ITEM 16. EXHIBITS
2.1** Agreement and Plan of Merger, dated as of January 15, 2000, as
amended February 3, 2000, by and among Net Perceptions, Inc.,
Kentucky Acquisition Corporation and Knowledge Discovery One, Inc.
4.1* Amended and Restated Investors' Rights Agreement, dated December 18,
1997, by and among Net Perceptions, Inc. and the investors and
founders named therein, as amended.
4.2** Registration Rights Agreement, dated as of February 14, 2000, by and
among Net Perceptions, Inc. and the stockholders named therein.
4.3* Specimen common stock certificate.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1).
24.1 Power of Attorney (included on the signature page of this
registration statement).
* Incorporated by reference to Net Perceptions' Registration Statement
on Form S-1 (Registration No. 333-71919).
** Incorporated by reference to Net Perceptions' Registration Statement
on Form S-1 (Registration No. 333-31230).
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(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.
(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.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 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
this registration statement 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.
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 Securities Act of 1933 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
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Edina, State of
Minnesota, on this 18th day of September, 2000.
NET PERCEPTIONS, INC.
By: /s/ Steven J. Snyder
---------------------------------------
Steven J. Snyder
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that the persons whose signatures
appear below constitute and appoint Steven J. Snyder, President and Chief
Executive Officer, and Thomas M. Donnelly, Senior Vice President of Finance
and Administration, Chief Financial Officer and Secretary, and each of them
individually, as their true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for them and in their names,
places and steads, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration
statement, and to sign any subsequent registration statement filed pursuant
to Rule 462(b) under the Securities Act of 1933, as amended, and any and
all amendments thereto, and to file the same, with all exhibits thereto,
and the other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as they might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or their
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed below by the following
persons on behalf of Net Perceptions, Inc. and in the capacities and on the
dates indicated:
<TABLE>
<S> <C> <C>
/s/ Steven J. Snyder President, Chief Executive September 18, 2000
---------------------- Officer and Director
Steven J. Snyder (Principal Executive Officer)
/s/ Thomas M. Donnelly Senior Vice President of September 18, 2000
----------------------- Finance and Administration,
Thomas M. Donnelly Chief Financial Officer and
Secretary (Principal
Financial and Accounting
Officer)
/s/ John T. Riedl Chief Scientist and Director September 18, 2000
------------------------
John T. Riedl
/s/ Douglas J. Burgum Director September 18, 2000
------------------------
Douglas J. Burgum
/s/ William Lansing Director September 18, 2000
------------------------
William Lansing
/s/ Ann L. Winblad Director September 18, 2000
------------------------
Ann L. Winblad
</TABLE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Exhibit Title
-------------- -------------
<S> <C>
2.1** Agreement and Plan of Merger, dated as of January 15, 2000,
as amended February 3, 2000, by and among Net Perceptions,
Inc., Kentucky Acquisition Corporation and Knowledge
Discovery One, Inc.
4.1* Amended and Restated Investors' Rights Agreement, dated
December 18, 1997, by and among Net Perceptions, Inc. and
the investors and founders named therein, as amended.
4.2** Registration Rights Agreement, dated as of February 14,
2000, by and among Net Perceptions, Inc. and the
stockholders named therein.
4.3* Specimen common stock certificate.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).
24.1 Power of attorney (included on the signature page of this
registration statement).
</TABLE>
* Incorporated by reference to Net Perceptions' Registration Statement
on Form S-1 (Registration No. 333-71919).
** Incorporated by reference to Net Perceptions' Registration Statement
on Form S-1 (Registration No. 333-31230).
