As filed with the Securities and Exchange Commission on March 2,
2000
Registration No. 333-
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SUPPLIERMARKET.COM, INC.
(Exact name of registrant as specified in its
charter)
| Delaware
(State or other Jurisdiction
of Incorporation or Organization)
|
|
7389
(Primary Standard Industrial
Classification Code Number)
|
|
04-3473646
(I.R.S. Employer Identification No.)
|
|
10 Mall Road
Burlington, Massachusetts 01803
(781) 273-6700
(Address, including zip code, and telephone
number,
including area code, of Registrant’s principal executive
offices)
Jonathan Burgstone, Chief Executive Officer
Asif Satchu, Chairman and President
SupplierMarket.com, Inc.
10 Mall Road
Burlington, Massachusetts, 01803
(781) 273-6700
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
| Keith F.
Higgins, Esq.
David B. Walek, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
(617) 951-7000
(617) 951-7050 (fax)
|
|
William J.
Whelan, III, Esq.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
(212) 474-1000
(212) 474-3700 (fax)
|
|
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date
of this Registration Statement.
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,
check the following box. ¨
If this
Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, 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, 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(d) under the
Securities Act, 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
Title of each
class of securities
to be registered |
|
Proposed maximum
aggregate offering price (1)(2) |
|
Amount of
registration fee |
|
| Common Stock, $.001 par
value per share |
|
$100,000,000
|
|
$26,400
|
(1)
|
Includes shares of common
stock issuable upon exercise of the underwriters’ over-allotment
option.
|
(2)
|
Estimated solely for the
purpose of calculating the amount of the registration fee in accordance
with Rule 457(o) of the Securities Act of 1933.
|
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 which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a)
of the Securities Act of 1933 or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said
section 8(a), may determine.
SUBJECT TO COMPLETION, DATED
,
2000
Shares
Common Stock
Prior to this
offering there has been no public market for our common stock. The initial
public offering price of our common stock is expected to be between $
and $
per share. We have applied to list our common
stock on The Nasdaq Stock Market’s National Market under the symbol
“SMKT”.
The
underwriters have an option to purchase a maximum of
additional shares of our common stock to
cover over-allotments of shares.
Investing in
our common stock involves risks. See “Risk Factors” on page
7.
| |
|
Price to
Public
|
|
Underwriting
Discounts and
Commissions
|
|
Proceeds to
SupplierMarket.com
|
| Per Share |
|
$
|
|
$
|
|
$
|
| Total |
|
$
|
|
$
|
|
$
|
Delivery of the
shares of common stock will be made on or about
, 2000.
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.
Credit Suisse First Boston
The date of this prospectus is
, 2000.
The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
[Inside front cover graphic and textual description to be filed
by amendment.]
TABLE OF CONTENTS
|
You
should rely only on the information contained in this document or to which
we have referred you. We have not authorized anyone to provide you with
different information. This document may only be used where it is legal to
sell these securities. The information in this document may only be
accurate on the date of this document.
Dealer Prospectus Delivery Obligation
Until
,
2000 (25 days after the commencement of this offering), all dealers that
effect transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition
to the dealer’s obligation to deliver a prospectus when acting as an
underwriter and for unsold allotments or subscriptions.
This
summary highlights information contained elsewhere in this prospectus. You
should read the entire prospectus carefully before investing in our common
stock.
SupplierMarket.com
SupplierMarket.com is a leading business-to-business Internet-based
marketplace serving the large and fragmented market for direct materials.
Direct materials are used in the manufacture of finished goods and include
a wide variety of components and materials, from bolts, nuts and fasteners
to rubber and glass products to corrugated packaging to injection and
blow-molded plastic components. The direct materials market includes
numerous industrial segments, and we estimate that the annual market for
direct materials in the United States is approximately $2 trillion. As of
February 25, 2000, we had registered approximately 2,500 buyers and 8,000
suppliers. Our marketplace enables participants to efficiently and cost
effectively buy and sell direct materials in an open, neutral exchange that
requires no up-front fees, no software installation and no consulting
services.
The U.S.
market for direct materials is highly fragmented and inefficient. Based on
industry reports, we believe that over 250,000 suppliers currently serve
this market, with over 90% of these companies generating less than $10
million in annual revenue. This high degree of fragmentation, combined with
the lack of a centralized marketplace, makes it difficult for buyers and
suppliers to find qualified trading partners, resulting in high search
costs and limited competition. Additionally, the traditional request for
quote, or RFQ, process through which buyers solicit bids from suppliers, is
inefficient and time-consuming, involving multiple and repetitive
steps.
The
SupplierMarket.com solution provides a secure Internet-based marketplace
that aggregates buyers and suppliers, matches them with multiple qualified
trading partners and promotes a competitive pricing environment. Our
solution eliminates many of the inefficiencies in the traditional direct
materials purchasing process, thus providing benefits for both buyers and
suppliers. It benefits buyers by reducing the cost of direct materials,
providing access to an increased base of new and qualified suppliers,
shortening cycle times for purchasing and employing a standardized data
format. Suppliers benefit through increased access to new business
opportunities, reduced sales and marketing costs, shortened sales cycle
times and the opportunity to be evaluated and rewarded based on expertise
and efficiency.
There
are several key differences between our marketplace and alternatives
offered by other business-to-business e-commerce companies. First, any
registered buyer or supplier of direct materials can immediately access our
entirely Internet-based marketplace with a standard browser connection;
there is no required installation of software. Second, use of our
marketplace is completely free to the buyer, and a supplier is only
required to pay us a transaction fee when it has been selected by a buyer
as a result of a competitive bidding event to fulfill the RFQ. Third, our
technology-based solution does not require the use of consultants for
implementation or ongoing support.
We have
developed several key proprietary technologies that underlie the advanced
functionality of our scalable Internet-based marketplace. First, our RFQ
Builder enables buyers to create and submit RFQs quickly in a standardized
format. Second, our SmartMatch technology automatically matches buyers and
suppliers with qualified trading partners. Finally, our bidding technology
creates a competitive pricing environment.
We have
conducted bidding events in various industrial segments for direct
materials such as extruded plastic film and sheet, injection and
blow-molded plastic components, metal stampings, bolts, nuts and fasteners,
machine tooling, molded rubber and wire and cord products.
A few
of the buyers and suppliers that have participated in our marketplace
include:
| |
Ÿ Affordable
Interiors
Ÿ Becker Group
Ÿ Century Plastics
Ÿ Dunlap Industries
Ÿ J.L. French
|
|
Ÿ Masco
Ÿ Pentair
Ÿ Shamrock Industrial Fasteners
Ÿ Simmons Company
Ÿ U.S. Filter
|
|
SupplierMarket.com, Inc. was formed in February 1999, and we began
offering commercial access to our marketplace in October 1999. Our
headquarters is located at 10 Mall Road, Burlington, Massachusetts 01803
and our telephone number is (781) 273-6700. Our website address is
www.suppliermarket.com. The information on our website is not incorporated
as a part of this prospectus.
“SupplierMarket.com”, “RFQ Builder”, “SMC”,
“SmartMatch”, “People buy parts. People sell parts. This is
where they meet.” and “Buying and selling just doesn’t get
any easier than this.” are service marks of SupplierMarket.com. All
other trademarks or service marks appearing in this prospectus are
trademarks or service marks of the respective companies that use
them.
The Offering
Shares of common stock
offered by
SupplierMarket.com |
|
shares |
|
|
Total shares of common
stock to be outstanding
after the offering |
|
shares |
|
|
| Use of
proceeds |
|
For working capital, other general
corporate purposes
and potential acquisitions. |
|
|
| Proposed Nasdaq
National Market symbol |
|
SMKT |
The
number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of December 31, 1999.
This number does not include the following:
Ÿ
|
2,453,808
shares of common stock issuable upon the exercise of stock options and
warrants outstanding as of December 31, 1999 and 2,873,116 additional
shares of common stock reserved for issuance under our stock plans;
and
|
Ÿ
|
2,181,416
shares of common stock reserved for issuance under our strategic
warrant plan and issuable upon exercise of warrants issuable under
that plan.
|
Except as otherwise indicated, all information in this prospectus
assumes:
Ÿ
|
a one-for-two
reverse stock split of the common stock effected on February 29,
2000;
|
Ÿ
|
the
conversion of each outstanding share of our Series A preferred stock
into two shares of common stock and the conversion of each outstanding
share of our Series B preferred stock into one half of one share of
common stock, both of which will occur simultaneously with the closing
of this offering;
|
Ÿ
|
the filing of
an amended and restated certificate of incorporation effective upon
the closing of this offering; and
|
Ÿ
|
no exercise
of the underwriters’ over-allotment option.
|
Summary Financial Information
The
following tables summarize the financial information for our business.
You should read this information along with “Selected Financial Data
”, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our financial statements
and related notes. Net loss per share data includes accretion of
offering costs incurred in connection with our preferred stock issuances
in 1999. Unaudited pro forma loss per share data reflect the conversion
of all preferred stock outstanding as of December 31, 1999 into common
stock as if the shares had converted immediately upon issuance, even
though the effect of the conversion is antidilutive. Unaudited pro forma
loss per share data does not reflect potential shares of common stock
issuable upon exercise of outstanding options and warrants because the
effect would be antidilutive. Pro forma as adjusted balance sheet data
reflect:
Ÿ
|
the
conversion of all preferred stock outstanding into common stock
including shares of preferred stock issued after December 31, 1999;
and
|
Ÿ
|
the issuance
of
shares in this offering at an assumed
initial public offering price of $
per share and after deducting underwriting discounts and
commissions and estimated offering expenses.
|
| |
|
Period From
Inception
(February 12, 1999)
Through
December 31, 1999
|
| Statement of
Operations Data: |
| Revenue |
|
$
51,541 |
|
| Operating
expenses: |
|
Costs of revenue |
|
107,605 |
|
|
Sales and
marketing |
|
2,397,405 |
|
|
Research and
development |
|
515,993 |
|
|
General and
administrative |
|
636,171 |
|
|
Stock-based
compensation |
|
2,731,515 |
|
| |
|
|
|
|
Total operating
expenses |
|
6,388,689 |
|
| |
|
|
|
| Operating
loss |
|
(6,337,148 |
) |
| Interest
income |
|
280,109 |
|
| |
|
|
|
| Net loss |
|
$ (6,057,039 |
) |
| |
|
|
|
| Net loss per share,
basic and diluted |
|
$
(2.66 |
) |
| Weighted average
common shares outstanding, basic and diluted |
|
2,344,874 |
|
| Unaudited pro forma
net loss per share, basic and diluted |
|
$
(0.58 |
) |
| Unaudited pro forma
weighted average common shares outstanding, basic and
diluted |
|
10,446,037 |
|
| |
|
December 31,
1999
|
| |
|
Actual
|
|
Pro Forma
As Adjusted
|
| Balance Sheet
Data: |
| Cash and cash
equivalents |
|
$36,761,018 |
|
|
$
|
| Working
capital |
|
35,784,958 |
|
|
|
| Total
assets |
|
39,141,083 |
|
|
|
| Redeemable convertible
preferred stock |
|
40,830,504 |
|
|
|
| Total stockholders
’ (deficit) equity |
|
(3,491,503 |
) |
|
|
This offering involves a high degree of risk. You should
carefully consider the following risk factors, in addition to the other
information in this prospectus, before making a decision to invest in
shares of our common stock. Any of these risk factors could materially
adversely affect our business, financial condition and results of
operations. If this occurs, the trading price of our common stock could
decline, and you may lose all or part of your
investment.
We only began operating our marketplace in the fourth quarter
of 1999. Our limited operating history makes it difficult for you to
evaluate our past performance and future prospects.
We
were founded in February 1999 and only began operating our
Internet-based marketplace in October 1999. Our extremely limited
operating history makes it difficult to evaluate our business and
prospects. We will encounter risks, costs and difficulties frequently
encountered by companies in an early stage of development in new and
rapidly evolving markets. Many of these risks are unknown, but include
those associated with managing our growth and the uncertainty about the
widespread acceptance of the Internet as a means of purchasing and
selling direct materials. Our failure to identify and successfully
address these risks would harm our business.
We have not achieved profitability to date and anticipate
continued losses, and we may be unable to achieve profitability, which
could cause the market price of our common stock to
decline.
We
have never been profitable, and, if we become profitable, we may be
unable to sustain profitability. We have incurred substantial losses
since we were founded, and we expect to continue to incur net losses on
both a quarterly and annual basis for at least the foreseeable future.
We had a net loss of approximately $6.1 million for the period since
inception through December 31, 1999. We expect to continue to make
significant expenditures for our infrastructure, sales and marketing,
research and development and general and administrative functions. As a
result, we will need to generate significant revenues to achieve
profitability. We cannot assure you that our revenues will grow in the
future or that we will achieve profitability. If revenues grow more
slowly than we anticipate, or if operating expenses exceed our
expectations, we will not be a profitable business.
Our Internet-based marketplace business model is new and the
demand for our service may decrease if it is not
successful.
To
date we have conducted only a limited number of bidding events. We earn
transaction fees from successfully completed bidding events. We depend
on our ability to grow our buyer and supplier base and expand into new
markets and industrial segments as the primary source of bidding events
in our marketplace. Our ability to generate revenue or profits is
unproven. If the assumptions underlying our business model are not valid
or we are unable to implement our business plan, our business may not
succeed. For the period since inception through December 31, 1999, all
of our revenues were generated from transaction fees paid by suppliers
using our marketplace. We may not be able to increase our revenue, and
if we fail to do so, our business will fail.
If we fail to attract and retain a large number of buyers and
suppliers, we may not be able to grow our revenue.
The
effectiveness of our Internet-based marketplace and the revenue we
derive from business conducted there depend on our ability to attract
and retain a large number of buyers and suppliers. If we do not add and
retain a substantial number of buyers and suppliers, our business could
be severely harmed.
Buyers may be unwilling to register or conduct significant
business in our marketplace. In order to accept our method of direct
materials purchasing, buyers must adopt new purchasing practices
different from their
traditional practices. Traditionally, buyers have frequently directed
business to suppliers based on factors other than price or quality,
including personal relationships. Our marketplace and method of
purchasing may be disruptive to long-standing relationships between a
buyer and its incumbent suppliers.
Suppliers may also be unwilling to register or conduct significant
business in our marketplace. Our marketplace is based on an open bidding
process that allows buyers to compare the business practices,
capabilities and prices of multiple prospective suppliers more
effectively. This heightened scrutiny and increased competition may
discourage some suppliers from participating in our marketplace.
Suppliers choosing not to participate may discourage other suppliers or
buyers from participating as well.
Buyers may not use our marketplace or may discontinue using
our marketplace if we are unable to deliver significant savings. As a
result, buyers may not post sufficient numbers of RFQs on our
marketplace.
Factors beyond our control may limit our ability to deliver
savings to registered buyers. For example, a buyer’s incumbent
suppliers may refuse to bid on an on-line RFQ. In addition, the direct
materials specified by some RFQs may be too unusual or may otherwise be
supplied by too few companies to allow for a competitive bidding event
and the attendant potential savings. Similarly, some industrial segments
may be characterized by rigid price structures that allow for little or
no variation in price among different suppliers. Despite the fact that
competition may be possible on the basis of quality and other factors,
it may not be possible to deliver strict price savings in those
segments. If our marketplace increases the efficiency of any particular
industrial segment, the future likelihood of significant savings to
buyers in that segment may decrease. If we are unable to deliver
significant savings in particular segments or the magnitude of savings
in particular segments decreases, we may have difficulty attracting
buyers in those segments, or attracting willing participants in other
segments, either of which may limit the number of RFQs posted on our
marketplace.
Suppliers may not use our marketplace or may discontinue using
our marketplace if we are unable to deliver new business opportunities.
As a result, our revenue growth could be limited.
Our
marketplace depends on the participation of large numbers of willing
suppliers in bidding events to generate efficient outcomes for buyers.
Because suppliers may in some cases be discouraged from using our
marketplace due to the increased competition it seeks to promote, we
depend on our ability to provide new business opportunities to suppliers
as the primary means of attracting suppliers to our marketplace. Factors
beyond our control may limit our ability to provide these new
opportunities in sufficient numbers. For example, buyers may continue to
select from among a small group of incumbent suppliers to fill their
RFQs despite the existence of competitive bids submitted by other
suppliers. If we are unable to provide new business opportunities in
sufficient number to suppliers, our current suppliers may reduce or
discontinue their use of the marketplace and we may have difficulty
attracting new suppliers, either of which will harm our
business.
We have depended and expect to depend on a small group of
buyers for the purchasing transactions they conduct on our marketplace;
a substantial reduction in their level of activity could harm our
business and slow our growth.
To
date, we have depended substantially on a small group of buyers,
comprising portfolio companies affiliated with some of our principal
stockholders and directors, for the RFQs they have posted on our
marketplace. All revenue earned in 1999 resulted from RFQs posted on our
marketplace by one portfolio company. This year through February 25, a
substantial majority of our revenues resulted from RFQs posted by
portfolio company buyers. We expect to continue to depend on these
portfolio companies as buyers, particularly if other buyers are slow to
adopt or to conduct significant business on our marketplace. If any of
these buyers discontinue use of our marketplace, or reduce the aggregate
dollar value of RFQs they post, our business could be severely
harmed.
We
have recently depended and expect to depend substantially on several
strategic buyers who have the ability to place a large amount of RFQs on
our marketplace. We intend to issue strategic warrants to purchase
our common stock to these strategic buyers that will vest depending upon
the total dollar amount of RFQs they post that result in signed purchase
orders. This year through February 25, these strategic buyers have
posted RFQs constituting a significant percentage of the dollar value of
all RFQs posted. We have obtained no commitments from these strategic
buyers or any other buyers to post RFQs or conduct any other activities
on our marketplace. Our strategy to expand our marketplace and grow our
business depends on the continued and increasing use of our marketplace
by these buyers. The loss or partial loss of one or more of these buyers
could be harmful to our business and could force us to curtail our
growth plans.
We face intense competition in the business-to-business
e-commerce market, and we cannot assure you that we will be able to
compete successfully. As a result, we may not be able to attract buyers
and suppliers.
The
business-to-business e-commerce market in which we operate is new,
rapidly evolving and intensely competitive. As one of a number of
companies providing services or products to this market, and with
minimal barriers to entry by potential competitors, we face the risk
that existing and potential buyers and suppliers in our marketplace may
seek our competitors’ services and products. We also face the risk
that large individual buyers or suppliers or groups of companies in one
or more related industrial segments may develop in-house or specialized
on-line marketplaces. For example, on February 25, 2000, the three major
automotive manufacturers announced their joint intention to establish an
on-line consolidated exchange for buyers and suppliers in the automotive
industry. Our revenue growth could be limited if buyers or suppliers
seek our competitors’ services or products or establish their own
marketplaces.
Our
marketplace is one of many alternative approaches to purchasing that
buyers and suppliers are considering. Many of our current and potential
competitors are larger and more established and have significantly
greater resources than we do. As a result, some of our current or
potential competitors may be able to commit more resources to marketing
and promotional campaigns, adopt more aggressive pricing policies and
devote more resources to technology development. In order to respond to
changes within this competitive environment, we may from time to time
make pricing, service, marketing or other strategic decisions that could
adversely affect our operating results. In addition, competitors may now
provide or later introduce products or services that appear to be the
same as ours, despite actual differences. In such an environment, we
face the risk that buyers and suppliers will confuse our marketplace
with the services of our competitors or choose the services of a
competitor with greater resources. We also face the risk that buyers and
suppliers may attain poor results with other products or services and
lose interest in trying ours. We may not be able to retain current
marketplace participants or secure new ones in light of these
issues.
For a
more detailed discussion of the competition we face, see “Business
—Competition.”
Our revenue growth will slow if we do not develop and maintain
strategic relationships.
We
have established and plan to continue to establish strategic
relationships with sales and marketing partners, significant buyers and
other organizations. We depend or expect to depend on these
relationships to grow our buyer and supplier base and the volume of
transactions conducted in our marketplace. We will also depend on these
relationships to generate sufficient opportunities to implement our
strategies of expanding into new markets and of providing additional
services and products. These relationships may not yield any new buyers
or suppliers or generate increased revenues. We have obtained no
commitments of any kind from any buyers to submit RFQs for bid or to
conduct any other activities in our marketplace. Additionally, we may
not be able to enter into new relationships or renew existing
relationships. We may not be able to recover our costs and expenses
associated with these efforts, which could harm our
business.
Most
of our current strategic relationships, including all of those with
significant buyers, are based on non-binding letters of intent. Although
we plan to consummate definitive agreements, we cannot assure you that
we will be able to do so within the relatively short expiration periods
provided for in these letters of intent.
If we fail to continue to develop and improve our financial
and managerial controls and reporting systems and procedures, and if we
do not effectively expand, train and manage our workforce, our business
will suffer dramatically and we may not be able to implement our
business plan.
Successful implementation of our business plan requires effective
management processes. We have recently experienced a period of
significant expansion of our operations. Our growth has placed, and our
anticipated future growth in our operations will continue to place, a
significant strain on our management systems and resources. Our ability
to compete effectively and to manage future expansion of our operations
will require us to continue to develop and improve our financial and
management controls, reporting systems and procedures on a timely basis,
and to continue to expand, train and manage our workforce. We continue
to increase the scope of our operations domestically and plan to expand
internationally. We have grown our workforce substantially from 13
employees in July 1999 to 103 as of March 1, 2000, and we plan to
continue to add to our sales and marketing, customer support, product
development and other administrative personnel. Our failure to manage
our growth effectively could cause our revenues to decline and our
operating expenses to increase at a higher than expected
rate.
We may have difficulty collecting transaction fees from all
suppliers for our services, and we may incur legal expenses to pursue
collection of receivables from some suppliers.
Under
the terms and conditions of our marketplace, a transaction fee is due
and payable to us at the conclusion of a successful bidding event, after
we notify the supplier that the buyer has accepted its bid. We charge
the supplier a transaction fee based on a percentage of the final dollar
value of its successful bid. Suppliers may be unwilling to pay us for
our services under the terms of our invoice, or at all, prior to
executing a purchase order with the buyer. We cannot assure you that we
will be successful in collecting all of our receivables, and we may
incur legal expenses to pursue collection.
If we fail to continuously improve our technology and enhance
our marketplace and related services, we may lose buyers and suppliers,
thus limiting our revenue growth.
Our
future success will depend on our ability to enhance the technological
capabilities of our Internet-based marketplace, and to continue to
develop and introduce new services that keep pace with competitive
introductions and technological developments, satisfy diverse and
evolving requirements of buyers and suppliers and otherwise achieve
market acceptance. Our success will depend, in part, on the availability
of, and our ability to obtain on commercially reasonable terms, licenses
to technologies used in the development and maintenance of our
marketplace. Any failure by us to anticipate or respond adequately to
changes in technology and user preferences, or any significant delays in
our development or licensing efforts, could make our services
unmarketable or obsolete. In particular, we believe that our future
success will depend, in part, upon market acceptance of the latest
version of our Internet-based marketplace, which has only recently been
released. We may not be successful in developing and marketing quickly
and effectively future versions or upgrades of our technology or in
offering new services that respond to technological advances or new
market requirements. As a result, our revenue may decline.
Our success is dependent on our key personnel, including
software engineers and sales and marketing professionals, whom we may
not be able to retain or hire in sufficient numbers to meet our
needs.
We
believe that our success will depend on the continued employment of our
senior management team and key sales and technical personnel. If one or
more members of our senior management team were unable or unwilling to
continue in their present positions, we would have great difficulty
finding or may be unable to find suitable replacements, and our
operating costs could increase. Most of our senior management do not
have employment agreements, and we do not have “key person”
life insurance policies on any members of our senior management. In
addition, if any of these key employees joins a competitor or forms a
competing company, some of our buyers and suppliers might choose to use
the services of that competitor or new company instead of our
own.
We
plan to hire additional members of senior management and we plan to
expand our employee base to manage our anticipated growth. Competition
for personnel in our industry, particularly for senior management
personnel and employees with technical and sales expertise, is intense.
The success of our business is dependent upon hiring and retaining
suitable personnel. To maintain our position as a provider of an
Internet-based business-to-business e-commerce solutions, we must make
sure our employees maintain their technical expertise and business
skills. We cannot assure you that we will be able to attract a
sufficient number of qualified employees or that we will successfully
train and manage the employees that we hire. In addition, the employees
that we hire, including key technical personnel, may leave us to join a
competitor or to start a new business which may compete with
us.
Our senior management team has limited tenure with us and has
limited experience working together, and our founders have limited
management experience, which may make it difficult to conduct and grow
our business.
Our
chief operating officer, chief financial officer, vice president of
corporate development and vice president of human resources joined us
this year. Most of our senior management team has been in place no
longer than six months, since shortly before we first began operating
our Internet-based marketplace. As a result, there has been little or no
opportunity to evaluate the effectiveness of our senior management team
as a combined unit or their ability to execute our business plan. Our
chief executive officer and our president, the founders of our company,
have not previously managed a large business and have no experience
managing a public company. The failure of our founders and senior
management to function effectively as a team or to execute our business
plan, or to design and refine our business plan and provide necessary
leadership, may inhibit our ability to operate our marketplace, maintain
a cohesive culture, compete effectively and grow our
business.
If we are unable to maintain our reputation and expand
recognition of the SupplierMarket.com brand, we may have difficulty
attracting new business and retaining current buyers and suppliers and
employees, and our business may suffer.
We
believe that establishing and maintaining a good reputation and name
recognition are critical for attracting and retaining buyers and
suppliers and employees. We also believe that the importance of
reputation and name recognition is increasing and will continue to
increase due to the growing number of entrants into the
business-to-business e-commerce market. If our reputation is damaged or
if potential buyers and suppliers are not familiar with us or the
services we provide, we may be unable to attract new, or retain
existing, buyers and suppliers and employees. Promotion and enhancement
of our name will depend largely on our success in continuing to provide
effective services. If buyers and suppliers do not perceive our services
to be effective or of high quality, our brand name and reputation will
suffer. In addition, if the services we provide have defects, we could
suffer adverse publicity as well as economic liability.
We may need to acquire new businesses, products and
technologies that complement or augment our existing Internet-based
marketplace and related technologies in order to remain competitive in
our market.
In
order to remain competitive, we may find it necessary to acquire
additional businesses, products or technologies. If we identify an
appropriate acquisition candidate, we may not be able to negotiate the
terms of the acquisition successfully, finance the acquisition or
integrate the acquired business, products or technologies into our
existing business and operations. The inability to integrate any newly
acquired entities or technologies effectively could harm our operating
results, business and growth. Members of our senior management may be
required to devote considerable amounts of their time to this
integration process, which will decrease the time they will have to
service current buyers and suppliers, attract new suppliers and develop
new products and services. Integrating any newly acquired businesses or
technologies may be expensive and time consuming. At present, we have no
commitments or agreements and are not currently engaged in discussions
for any material
acquisitions or investments. If we consummate one or more significant
acquisitions in which the consideration consists of stock or other
securities, your equity could be significantly diluted. If we were to
proceed with one or more significant acquisitions in which the
consideration included cash, we could be required to use a substantial
portion of our available cash, including proceeds of this offering, to
consummate any acquisition. Acquisition financing may not be available
on favorable terms, or at all. In addition, we may be required to
amortize significant amounts of goodwill and other intangible assets in
connection with future acquisitions, which would seriously harm our net
income. We may not be able to operate any acquired businesses profitably
or otherwise implement our business strategy successfully. Unsuccessful
acquisitions could harm our operating results, business and
growth.
In order to grow our business, we may need to raise additional
capital in the future, which would dilute your ownership in us. We may
be unable to raise additional capital, which may inhibit our ability to
develop or enhance our services, take advantage of business
opportunities or respond to competitive pressures.
In
the future, we may need to raise additional funds through public or
private debt or equity financing to take advantage of expansion or
acquisition opportunities, develop new services, compete effectively in
the market or fund operating losses. For the period from inception to
December 31, 1999, we used $2.3 million of cash for operating activities
and we expect to use cash for operating activities for the foreseeable
future. Any additional capital raised through the sale of equity or
equity-related securities would dilute your ownership percentage in us.
These securities could also have rights, preferences or privileges
senior to those of your common stock. We currently have no bank credit
facility under which we can borrow short-term funds. We may not be able
to obtain additional financing through securities issuances or
commercial lending sources when needed or on terms favorable to us or
our stockholders. If additional financing is not available on favorable
terms or at all, this may inhibit our ability to develop or enhance our
services, take advantage of business opportunities or respond to
competitive pressures.
As we expand our marketplace services to international buyers
and additional international suppliers, our business will be exposed to
the numerous risks associated with international
operations.
We
intend to offer our marketplace services to international buyers and
additional international suppliers. To date, we have limited experience
adapting our Internet-based marketplace for international buyers and
suppliers. International operations are subject to many risks,
including:
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political,
regulatory and economic instability;
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reduced
protection for intellectual property rights in some
countries;
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potentially
adverse tax consequences, including restrictions on repatriation of
earnings;
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greater
difficulties in collecting accounts receivable;
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the existence
of protectionist laws and business practices favoring local
competition;
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difficulties
and costs of staffing and managing international operations, as a
result of, among other things, distance, language, cultural and
regulatory differences; and
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fluctuations
in currency exchange rates.
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Our Internet-based marketplace depends on the continued growth
of the Internet as a means of commerce. If this growth slows, our
revenue growth may be limited.
Our
Internet-based marketplace depends on increased and sustained acceptance
and use of the Internet as a medium of commerce. Rapid growth in
electronic commerce is a recent phenomenon. This growth may not continue
at recent rates and a sufficiently broad base of business customers may
not adopt or continue to use the Internet as a medium of commerce.
Demand for services and products recently introduced over the Internet
are subject to a high level of uncertainty.
A
number of factors could inhibit such demand, including the
following:
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the necessary
infrastructure for substantial growth in usage of the Internet may not
develop adequately;
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buyers and
suppliers using traditional means for bidding and purchasing may be
unwilling or unable to shift to an on-line forum;
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buyers and
suppliers may have security and confidentiality concerns;
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use of the
Internet and other on-line services may not continue to increase or
may increase more slowly than expected; and
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new and
burdensome governmental regulations or taxation may affect the
viability of electronic commerce.
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Our marketplace depends on the integrity of the Internet,
which is uncertain and is beyond our ability to control.
If
Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it or its performance or reliability may
decline. In addition, our ability to offer our services is limited, in
part, by the speed and reliability of networks operated by third
parties. Internet sites may also experience interruptions in service
from time to time as a result of outages and other delays occurring
throughout the Internet network infrastructure. If these outages or
delays frequently occur in the future, Internet usage, as well as usage
of our marketplace, could be adversely affected.
Security risks and concerns about use of the Internet may
deter potential buyers and suppliers from using our Internet-based
marketplace.
Concern about the security of the transmission of confidential
information over public networks is a significant barrier to electronic
commerce and communication. Advances in computer capabilities, new
discoveries in the field of cryptography or other events or developments
could result in compromises or breaches of Internet security systems
that protect proprietary information. If any well-publicized compromises
of security were to occur, they could substantially reduce the use of
the Internet for commerce and communications.
Anyone who circumvents our security measures could misappropriate
proprietary or confidential information, place false orders or cause
interruptions in our services or operations. Our activities involve the
storage and transmission of proprietary information, such as
confidential buyer and supplier specifications. The Internet is a public
network, and data is sent over this network from many sources. Recently,
some Internet service providers and e-commerce web sites have been
targeted by “denial of service” and other attacks that
overloaded these web sites and forced them to shut down temporarily.
Computer viruses have also been distributed, and have rapidly spread,
over the Internet. Computer viruses could be introduced into our systems
or those of our buyers and suppliers, which could disrupt or make
inaccessible our Internet-based bidding technology. We may be required
to expend significant capital and other resources to protect against the
threat of, or to alleviate problems caused by, security breaches and the
introduction of computer viruses. Our security measures may be
inadequate to prevent security breaches or combat the introduction of
computer viruses, either of which may result in loss of data, increased
operating costs, litigation and other possible liability.
Failure to maintain our buyer and supplier databases could
seriously harm our business and reputation.
We
maintain extensive databases of buyers, suppliers, products and
transactions. Database capacity constraints may result in data
maintenance and accuracy problems, which could cause a disruption in our
service and affect our ability to provide accurate information to our
buyers and suppliers. Such disruptions may result in a loss of buyers
and suppliers, which could severely harm our business.
If we encounter system failure, our Internet-based
marketplace services could be delayed or interrupted, which could
severely harm our business and result in a loss of buyers and
suppliers.
Our
ability to successfully maintain our Internet-based marketplace and
provide acceptable levels of customer service largely depends on the
efficient and uninterrupted operation of our computer and communications
hardware and software systems. Any interruptions could severely harm our
business and result in a loss of buyers and suppliers. Our computer and
communications systems are hosted by a third party, on whom we rely to
manage the security and maintenance procedures at its site. Although we
periodically back up our databases on tape and store the backup tapes
offsite, we do not maintain a redundant site. Our systems and operations
are vulnerable to damage or interruption from human error, sabotage,
fire, flood, earthquake, power loss, telecommunications failure, related
equipment failure and similar events. Although we have taken steps to
prevent a system failure, we cannot assure you that our measures will be
successful and that we will not experience system failures in the
future. Moreover, we have experienced delays and interruptions in our
telephone and Internet access which have prevented buyers and suppliers
from accessing our marketplace and our customer service department.
Furthermore, we do not have a formal disaster recovery plan and do not
carry sufficient business interruption insurance to compensate us for
losses that may occur as a result of any system failure. The occurrence
of any system failure or similar event could harm our business
dramatically.
Capacity limits on our marketplace may be difficult to project
and we may not be able to expand and upgrade our systems to meet
increased use. As a result, we may not be able to grow our
revenue.
As
traffic in our Internet-based marketplace continues to increase, we must
expand and upgrade our transaction processing systems and network
hardware and software. We may not be able to accurately project the rate
of increased usage of our marketplace. In addition, we may not be able
to expand and upgrade our systems and network hardware and software
capabilities to accommodate increased usage. If we do not appropriately
upgrade our systems and network hardware and software, the quality of
our service may decline, which could damage our reputation and
relationships with our buyers and suppliers.
If our intellectual property protection is inadequate,
competitors may gain access to our technology and undermine our
competitive position, causing us to lose business from buyers and
suppliers.
We
regard our copyrights, service marks, trade secrets and other
intellectual property as important to our success, and rely or expect to
rely on patent, trademark, service mark and copyright law, trade secret
protection and confidentiality and/or license agreements with our
employees, buyers and suppliers and business partners to protect our
proprietary rights. Despite our precautions, unauthorized parties may
copy certain portions of our Internet-based marketplace or reverse
engineer or obtain and use information that we regard as proprietary.
End-user license provisions protecting against unauthorized use,
copying, transfer and disclosure may be unenforceable under the laws of
certain jurisdictions and foreign countries. The status of United States
patent protection in the software industry is not well defined and will
evolve as the U.S. Patent and Trademark Office grants additional
patents. We may seek patents on aspects of our technology and processes.
We do not know whether any patents will be issued, and even if some or
all of these patents are issued, we cannot assure you that they will not
be successfully challenged or invalidated, that they will adequately
protect our technology and processes or that they will result in
commercial advantages to us. We have also applied for registration of
several of our brand names and other service marks, but these
protections may not be adequate. In addition, the laws of some foreign
countries do not protect proprietary rights to the same extent as do the
laws of the United States. Our means of protecting our proprietary
rights in the United States or abroad may not be adequate and
competitors may independently develop similar technology, duplicate our
products or design around patents that may be issued to us.
Others may assert that our technology infringes their
intellectual property rights.
We do
not believe that we infringe the proprietary rights of others, and to
date, no third parties have notified us that we have infringed their
rights, but we may be subject to infringement claims in the future. In
particular, because a United States patent application is not publicly
disclosed until the patent is issued, we cannot be certain that there
are no pending applications that, if issued, would restrict our ability
to use or provide our existing or planned technology or services. The
defense of any claims of infringement made against us by third parties
could involve significant legal costs and require our management to
divert time and attention from our business operations. Either of these
consequences of an infringement claim could have a material adverse
effect on our operating results. If we are unsuccessful in defending
against any claims of infringement, we may be forced to obtain licenses
or to pay royalties to continue to use our technology. We may not be
able to obtain any necessary licenses on commercially reasonable terms
or at all. If we fail to obtain necessary licenses or other rights, or
if these licenses are too costly, our operating results may suffer
either from reductions in revenues through our inability to serve our
buyers and suppliers or from increases in costs to license third-party
technology.
Future government regulation of the Internet and of services
offered through our marketplace could limit the number of buyers and
suppliers using our services.
As
with many Internet companies, we operate in an environment of great
uncertainty as to potential government regulation. We believe that we
are not currently subject to direct regulation applicable to e-commerce,
other than regulations applicable to businesses generally. However, the
Internet has rapidly emerged as a commerce medium, and governmental
agencies have not yet adapted many existing regulations to its use.
Future laws, regulations and court decisions may affect the Internet or
other electronic services, covering issues such as user pricing, user
privacy, freedom of expression, access charges, taxation, content and
quality of products and services, advertising, antitrust, intellectual
property rights and user authentication and information security. In
addition, because our Internet-based marketplace is available worldwide,
foreign jurisdictions may claim that we are required to comply with
their laws. Any future law, regulation or court decision may have a
negative impact on our business.
Because we are an Internet company, it is unclear in which
jurisdictions we are actually conducting business. Our failure to
qualify to do business in a jurisdiction that requires us to so qualify
could subject us to fines and penalties and could result in our
inability to enforce agreements.
Numerous states have laws and regulations regarding the conduct of
auctions and the liability of auctioneers. We do not believe that these
laws and regulations, which in most cases were enacted for consumer
protection many years ago, apply to our marketplace. However, one or
more jurisdictions may attempt to impose these or new laws and
regulations on our operations in the future.
We may be exposed to product liability claims and claims based
on faulty information provided by buyers or suppliers.
We
face potential liability for claims based on the type, adequacy and
accuracy of the information and data that we obtain from and make
available to buyers and suppliers. This includes claims for breach of
warranty, product or environmental liability, misrepresentation,
violation of governmental regulations and other commercial claims. We
rely on buyers and suppliers to be truthful when registering to use our
marketplace and to update their registration information as changes
occur. Although we typically make some inquiries about the
creditworthiness or other characteristics of registering buyers and
verify some information about registering suppliers, we do not and
cannot practically perform extensive background checks or audits of
buyers and suppliers. Similarly, we do not screen RFQs for accuracy,
content or clarity. Although we maintain commercial general liability
insurance, including products liability and completed operations
liability, our insurance may not cover some claims. Our insurance is
also subject to policy limits and exclusions, and may not fully
indemnify us or our employees for any civil, governmental or criminal
liability that may be imposed. Furthermore, this insurance may not be
available at commercially reasonable rates in the future. Any liability
not covered by our insurance or in excess of our insurance coverage
could harm our business, results of operations and financial condition.
Our attempts to limit our liability to and to obtain warranties and
indemnification from buyers and suppliers in our contracts may not
absolve us of liability or may not be enforceable.
We may be sued for information and content contained in our
Internet-based marketplace.
As a
publisher and distributor of on-line content, we face potential
liability for defamation, negligence, copyright, patent or trademark
infringement and other claims based on the nature and content of the
materials that we publish or distribute. These claims have been brought,
sometimes successfully, against on-line content providers. We do not and
cannot practically screen all of the content generated by our users and
content partners, including buyer and supplier registration information,
RFQs, entries posted by buyers and suppliers to the on-line bulletin
board within our marketplace, supplier bids, any satisfaction ratings
submitted by buyers and suppliers and articles and other content
provided by our content partners. We could be exposed to liability with
respect to any or all of this content. We could also be subjected to
claims based upon the content that is accessible from our marketplace
through links to other Internet sites or through content and materials
that users may post in on-line bulletin boards. Although we carry
general liability insurance, our insurance may not cover claims of these
types or may not be adequate to indemnify us for all liability that may
be imposed. Any imposition of liability, particularly liability that is
not covered by insurance or is in excess of insurance coverage, could
severely harm our reputation and our business, operating results and
financial condition.
Our quarterly results are subject to significant fluctuations,
and our stock price may decline if we do not meet expectations of
investors and analysts.
We
expect that our quarterly operating results will fluctuate significantly
due to many factors, many of which are outside our control,
including:
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inconsistent
growth, if any, of our buyer and supplier base;
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loss of
strategic partners;
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variations in
the timing and dollar volume of transactions completed in our
Internet-based marketplace;
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timing of the
selection of suppliers by buyers following the completion of bidding
events in our marketplace;
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increased
competition from new on-line marketplaces;
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introduction
of new services or enhancements by our competitors;
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changes in
pricing policies by us or our competitors;
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our ability
to control operating costs during the establishment and growth of our
business; and
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fluctuations
in stock-based compensation expense related to options and warrants
granted to non-employees.
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Because a high percentage of our expenses is fixed, such as
compensation and rent, any of the factors listed above that could cause
significant variations in revenues may harm our financial results in any
given quarter. Any decline in revenues or earnings or a greater than
expected loss for any quarter could lower the market price of our common
stock, even if not reflective of any long-term problems with our
business.
Our common stock has not traded publicly; the initial public
offering price may not be indicative of the market price of our common
stock after this offering, and the market price of our common stock,
like the market prices of the stocks of other Internet companies, may
fluctuate widely and rapidly.
There
is currently no public market for our common stock, and we cannot assure
you that an active trading market will develop or be sustained after
this offering. The initial public offering price will be determined
through negotiation between us and representatives of the underwriters
and may not be indicative of the market price for our common stock after
this offering.
The
market price of our common stock could fluctuate significantly as a
result of:
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quarter-to-quarter variations in our operating results, which
may cause us to fail to meet analysts’ or investors’
expectations;
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economic and
stock market conditions specific to Internet companies;
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changes in
financial estimates by securities analysts following our
stock;
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earnings and
other announcements by, and changes in market evaluations of, Internet
companies;
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changes in
business or regulatory conditions affecting Internet
companies;
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announcements
or implementation by us or our competitors of technological
innovations or new products or services; or
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trading
volume of our common stock.
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The
securities of many companies have experienced extreme price and trading
volume fluctuations in recent years, often unrelated to the companies
’ operating performance. Specifically, market prices for securities
of Internet-related and technology companies have frequently reached
elevated levels, often following their initial public offerings. These
levels may not be sustainable and may not bear any relationship to these
companies’ operating performances. We cannot assure you that the
market price of our common stock will reach an elevated level following
this offering or that, if it does, it will not substantially and rapidly
decline. In the past, following periods of volatility in the market
price of a company’s securities, stockholders have often instituted
securities class action litigation against the company. If we were
involved in a class action suit, it could divert the attention of senior
management, and, if adversely determined, could have a negative impact
on our financial condition.
Substantial sales of our common stock after the offering could
cause our stock price to fall.
All
of our outstanding shares are currently restricted from resale, but some
may be sold into the market in the near future. Sales of these shares
into the market could cause the market price of our common stock to drop
significantly, even if our business is doing well.
Immediately following this offering, we will have outstanding
shares of common stock. This includes the
shares we are selling in this
offering. Assuming that we sell all shares reserved under our directed
share program to the entities or persons for whom these shares have been
reserved, we expect that investors may resell
shares in the public market immediately. The
remaining %, or
shares, of our total
outstanding shares will become available for resale in the public market
as shown in the chart below:
Number of shares / % of
total outstanding
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Date of availability for resale
into public market
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Immediately |
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90 days after the
date of this prospectus. |
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180 days after the
date of this prospectus due to an
agreement many of our stockholders have with the
underwriters. However, the underwriters may waive
this restriction and allow these stockholders to sell
their shares at any time. |
As restrictions on resale end, the market price of our stock
could drop significantly if the holders of these restricted shares
sell them or the market perceives that they intend to sell them. For a
more detailed description, please see “Shares Eligible for Future
Sale.”
You will experience immediate and substantial
dilution.
If you purchase common stock in this offering, you will pay more
for your shares than the amounts paid by existing stockholders for
their shares. As a result, you will experience immediate and
substantial dilution of approximately $ per
share, representing the difference between our net tangible book value
per share after giving effect to this offering and the initial public
offering price. For more information, see “Dilution.
”
Other companies may have difficulty acquiring us,
even if doing so would benefit our stockholders, due to provisions of
our certificate of incorporation and by-laws and Delaware
law.
Provisions in our certificate of incorporation, in our by-laws
and under Delaware law could make it more difficult for other
companies to acquire us, even if doing so would benefit our
stockholders. Our certificate of incorporation and by-laws contain the
following provisions, among others, which may inhibit an acquisition
of our company by a third party:
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advance
notification procedures for matters to be brought before stockholder
meetings;
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a
limitation on who may call stockholder meetings;
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a
prohibition on stockholder action by written consent;
and
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an
authorization of 1,000,000 shares of undesignated preferred stock
that we may issue with special rights, preferences and privileges
and that we could use, for example, to implement a rights plan or
poison pill.
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We are also subject to provisions of Delaware law that prohibit
us from engaging in any business combination with any “interested
stockholder”, meaning generally a stockholder who beneficially
owns more than 15% of our stock, for a period of three years from the
date this person became an interested stockholder, unless various
conditions are met, such as approval of the transaction by our Board.
These provisions could have the effect of delaying or preventing a
change in control. For a more complete discussion of these provisions
of Delaware law, please see “Description of Capital Stock
—Anti-Takeover Provisions—Delaware Law.”
Our affiliates can control matters requiring
stockholder approval because they own a large percentage of our common
stock, and they may vote this common stock in a way with which you do
not agree.
After this offering, our affiliates will own approximately
% of the outstanding shares of our stock. As a
result, if these persons act together, they will have the ability to
exercise substantial control over our affairs and corporate actions
requiring stockholder approval, including the election of directors, a
sale of substantially all our assets, a merger with another entity or
an amendment to our certificate of incorporation. The ownership
position of these stockholders could delay, deter or prevent a change
in control and could adversely affect the price that investors might
be willing to pay in the future for shares of our common
stock.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under “Prospectus Summary”,
“Risk Factors”, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”,
“Business” and elsewhere in this prospectus constitute
forward-looking statements. These statements involve known and unknown
risks, uncertainties and other factors that may cause our or our
industry’s actual results, levels of activity, performance or
achievements to be materially different than any expressed or implied
by these statements. In some cases, you can identify these statements
by terminology such as “may”, “will”, “should
”, “expects”, “plans”, “anticipates
”, “believes”, “estimates”, “predicts
”, “potential”, “continue” or the negative of
these terms or other comparable terminology.
Although we believe that the expectations reflected in these
statements are reasonable, we cannot guarantee future results, levels
of activity, performance or achievements. Except as otherwise required
by federal securities laws, we are under no duty to update any of the
statements after the date of this prospectus to conform these
statements to actual results.
We estimate that we will receive net proceeds from this offering
of approximately $ , at
an assumed initial public offering price of $
per share, net of estimated underwriting
discounts and commissions and offering expenses payable by us. If the
underwriters exercise their over-allotment option in full, we estimate
our net proceeds will be $
million.
We expect to use these proceeds for working capital, other
general corporate purposes and potential acquisitions. Other general
corporate purposes include funding anticipated operating losses,
advertising campaigns, brand-name promotions and other marketing
efforts, research and development and capital expenditures. We also
may use a portion of the net proceeds to acquire or invest in
complementary businesses, technologies, products or services, although
no specific acquisitions are currently planned. As of the date of this
prospectus, we cannot specify with certainty all of the particular
uses for the remaining net proceeds we will have upon completion of
the offering. Accordingly, our management will have broad discretion
in the application of the net proceeds.
Pending these uses, we intend to invest the net proceeds in
interest-bearing, investment-grade instruments, certificates of
deposit, or direct or guaranteed obligations of the United
States.
We have never declared or paid dividends on our capital stock
and do not anticipate declaring or paying any dividends in the
foreseeable future. We currently intend to retain any future earnings
for the expansion of our business.
The following table sets forth our capitalization as of December
31, 1999 on an actual, pro forma and pro forma as adjusted basis. The
pro forma column reflects our actual capitalization as adjusted to
reflect the issuance in January and February 2000 of 1,176,269 shares
of Series B preferred stock and a reduction to additional paid-in
capital of $4.3 million related to the difference between the issuance
price and the fair value of these shares. The pro forma as adjusted
column reflects our actual capitalization and pro forma adjustments
and further adjustments to reflect:
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the
automatic conversion of all shares of outstanding preferred stock
into 21,145,766 shares of common stock upon the closing of this
offering;
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the filing
of an amendment to our certificate of incorporation concurrent with
the closing of this offering to eliminate all existing series of
preferred stock and to create 1,000,000 shares of undesignated
preferred stock; and
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our sale of
shares of common stock at an assumed initial public offering
price of $ per
share, after deducting the underwriting discounts and commissions
and estimated offering expenses.
|
None of the columns reflect 5,251,924 shares of common stock
reserved for issuance under our stock option plan as of December 31,
1999, of which 2,353,808 shares were subject to outstanding options,
or 100,000 shares of common stock issuable upon the exercise of
outstanding warrants.
You should read the table below along with our financial
statements and the related notes.
| |
|
As of December
31, 1999
|
| |
|
Actual
|
|
Pro
Forma
|
|
Pro Forma
As Adjusted
|
|
|
| Cash and cash
equivalents |
|
$36,761,018 |
|
|
$39,511,018 |
|
|
$
|
| |
|
|
|
|
|
|
|
|
Redeemable
convertible preferred stock; 22,652,913 shares
authorized, actual and pro forma; no
shares authorized, issued or
outstanding, pro forma as
adjusted: |
|
|
|
|
|
|
|
|
Series A; $.001 par
value; 6,562,873 shares issued and
outstanding, actual and pro forma; no
shares authorized,
issued or outstanding, pro forma as
adjusted |
|
$
6,080,501 |
|
|
$
6,080,501 |
|
|
—
|
Series B; $.001 par
value; 14,863,770 shares issued and
outstanding, actual; 16,040,039 shares
issued and outstanding,
pro forma; no shares authorized, issued or
outstanding, pro
forma as adjusted |
|
34,750,003 |
|
|
41,805,154 |
|
|
—
|
| Stockholders’
(deficit) equity: |
|
|
|
|
|
|
|
|
Preferred stock; $.001
par value; no shares authorized, issued or
outstanding, actual and pro forma;
1,000,000 shares
authorized, no shares issued and
outstanding, pro forma as
adjusted |
|
|
|
|
|
|
|
|
Common stock; $.001 par
value; 85,000,000 shares authorized,
actual and pro forma; 100,000,000 shares
authorized pro
forma as adjusted; 9,884,246 shares issued
and outstanding,
actual and pro forma;
shares issued and outstanding, pro
forma as adjusted |
|
9,884 |
|
|
9,884 |
|
|
|
| Additional paid-in
capital |
|
8,928,415 |
|
|
4,623,264 |
|
|
|
| Deferred
stock-based compensation |
|
(6,367,821 |
) |
|
(6,367,821 |
) |
|
|
| Accumulated
deficit |
|
(6,061,981 |
) |
|
(6,061,981 |
) |
|
|
| |
|
|
|
|
|
|
|
|
|
Total stockholders’
(deficit) equity |
|
(3,491,503 |
) |
|
(7,796,654 |
) |
|
|
| |
|
|
|
|
|
|
|
|
|
Total capitalization |
|
$37,339,001 |
|
|
$40,089,001 |
|
|
$
|
| |
|
|
|
|
|
|
|
|
Our pro forma net tangible book value as of
was $
, or $
per share, assuming conversion of all outstanding
shares of Series A and Series B preferred stock into shares of our
common stock upon the closing of this offering. Pro forma net
tangible book value per share represents the amount of our total
tangible assets, reduced by the amount of our total liabilities, and
then divided by the total number of shares of common stock
outstanding after giving effect to the automatic conversion of all
shares of outstanding preferred stock upon closing of this offering.
Dilution in pro forma net tangible book value per share represents
the difference between the amount paid per share by purchasers of
shares of common stock in this offering and the pro forma net
tangible book value per share of common stock immediately after the
completion of this offering. After giving effect to the sale of the
shares of common stock offered by us at an initial public
offering price of $
per share, and after deducting the
underwriting discounts and commissions and estimated offering
expenses payable, our pro forma net tangible book value at
would have been $
million or $
per share of common stock. This represents
an immediate increase in pro forma net tangible book value of $
per share to existing stockholders and an immediate dilution of $
per share to new investors purchasing shares at the initial
public offering price. The following table illustrates this dilution
of a per share basis:
| Assumed public
offering price |
|
|
|
$
|
|
Pro forma net tangible
book value as of
|
|
$
|
|
|
|
Increase attributable to
new investors |
|
|
|
|
| Pro forma net
tangible book value after the offering |
|
|
|
|
| Dilution to new
investors |
|
|
|
$
|
The following table summarizes, as of
, the differences between the
existing stockholders and new investors with respect to the number of
shares of common stock purchased from us, the total consideration
paid to us and the average price per share paid:
| |
|
Shares
Purchased
|
|
Total
Consideration
|
|
Average Price
Per Share
|
| |
|
Number
|
|
Percent
|
|
Amount
|
|
Percent
|
| Existing
stockholders |
|
|
|
% |
|
$
|
|
% |
|
$
|
| New
investors |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
|
|
% |
|
$
|
|
% |
|
|
| |
|
|
|
|
|
|
|
|
|
|
The preceding tables assume no issuance of shares of common
stock under our stock plans after
. As of
,
shares were subject to outstanding options
at a weighted average exercise price of $
per share. This table also assumes no
exercise of the warrants outstanding as of
for
shares of common stock at a weighted average exercise price of
$ per share. If all
of these options and warrants were exercised, then the total dilution
per share to new investors would be $
.
We derived the selected historical financial data presented
below from our financial statements and related notes. You should
read the selected historical financial data together with our
historical financial statements and related notes and “Management
’s Discussion and Analysis of Financial Condition and Results of
Operations.” Unaudited pro forma loss per share data reflect the
conversion of all preferred stock outstanding as of December 31, 1999
into common stock as if the shares had converted immediately upon
issuance, even though the effect of the conversion is antidilutive.
Net loss per share data includes accretion of offering costs incurred
in connection with our preferred stock issuances in 1999. Unaudited
pro forma loss per share data do not reflect potential shares of
common stock issuable upon exercise of outstanding options and
warrants because the effect would be antidilutive.
PricewaterhouseCoopers LLP, independent accountants, audited
our historical financial statements for the period from inception,
February 12, 1999 through December 31, 1999. Their report appears in
another part of this prospectus.
| |
|
Period From
Inception
(February 12, 1999)
Through
December 31, 1999
|
| Statement of
Operations Data: |
|
|
|
| Revenue |
|
$
51,541 |
|
| Operating
expenses: |
|
|
|
|
Costs of
revenue |
|
107,605 |
|
|
Sales and
marketing |
|
2,397,405 |
|
|
Research and
development |
|
515,993 |
|
|
General and
administrative |
|
636,171 |
|
|
Stock-based
compensation |
|
2,731,515 |
|
| |
|
|
|
|
Total operating
expenses |
|
6,388,689 |
|
| |
|
|
|
| Operating
loss |
|
(6,337,148 |
) |
| Interest
income |
|
280,109 |
|
| |
|
|
|
| Net loss |
|
$(6,057,039 |
) |
| |
|
|
|
| Net loss per share,
basic and diluted |
|
$
(2.66 |
) |
| Weighted average
common shares outstanding, basic and diluted |
|
2,344,874 |
|
| Unaudited pro forma
net loss per share, basic and diluted |
|
$
(0.58 |
) |
| Unaudited pro forma
weighted average common shares outstanding, basic and
diluted |
|
10,446,037 |
|
| |
|
December 31,
1999
|
| Balance Sheet
Data: |
|
|
|
| Cash and cash
equivalents |
|
$36,761,018 |
|
| Working
capital |
|
35,784,958 |
|
| Total
assets |
|
39,141,083 |
|
| Redeemable
convertible preferred stock |
|
40,830,504 |
|
| Total stockholders
’ (deficit) |
|
(3,491,503 |
) |
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of our financial condition and
results of operations should be read together with “Selected
Financial Data” and the financial statements and related notes
included elsewhere in this prospectus.
Overview
SupplierMarket.com is a leading business-to-business
Internet-based marketplace serving the large and fragmented market
for direct materials. Direct materials are those components and
materials used in the manufacturing of finished goods. Our
marketplace enables participants to efficiently and cost effectively
buy and sell direct materials.
We were incorporated in February 1999. From February 1999 to
the launch of our marketplace in October 1999, we were primarily
engaged in raising capital, developing our Internet marketplace,
building corporate infrastructure, marketing our service and
establishing relationships with buyers and suppliers of direct
materials.
We generate revenue from transaction fees earned on bidding
events that result in a buyer selecting a supplier to fulfill its
RFQ. The transaction fee, paid by the supplier, is based on a
percentage of the final dollar value of the selected supplier’s
bid. In February 2000, we updated the terms and conditions of use of
our marketplace to set this percentage to range between 2% and 4%.
Prior to that, this percentage fee ranged from 1% to 4%. We recognize
revenue following the conclusion of the bidding event when a buyer
selects a supplier to fulfill its RFQ.
Costs associated with the operation of our marketplace consist
of costs of revenue, sales and marketing, research and development,
general and administrative and stock-based compensation. Costs of
revenue represent salary and expenses incurred for employees who
contribute directly to our marketplace services. Sales and marketing
expenses consist of compensation expenses for our sales and marketing
personnel, travel and entertainment costs and costs associated with
our marketing and branding activities and amortization of deferred
development costs. We expect to incur additional costs of revenue in
2000 and 2001 in the form of non-cash stock-based charges related to
the anticipated issuance of strategic warrants. We expect to grant
these warrants to some of our strategic buyers, which will be
recorded based on the fair market value of the warrants on the
vesting dates. In 1999, we focused our marketing activities on direct
mail, trade magazine advertising and trade shows. We expect to
substantially increase the dollar amount of sales and marketing
expenses as we continue to increase the size of our sales force and
to build awareness of our brand. Research and development expenses
consist primarily of compensation for our web site development staff
and outside consulting costs. General and administrative expenses
consist primarily of compensation for personnel, facility costs and
professional fees. Stock-based compensation consists of non-cash
expenses related to employee stock option grants with exercise prices
lower than the subsequently determined fair value of the underlying
shares at the time of grant and non-employee stock option grants
which are accounted for at their fair value. Stock-based compensation
for employee stock options granted is amortized over the vesting
period of each individual option award. The options granted to
employees generally vest over four years, which will result in
additional stock-based compensation expense of approximately $2.6
million for years ending after December 31, 1999. If all employee
options outstanding as of December 31, 1999 vest in accordance with
their original terms, we expect to incur charges of at least
$702,000, in each of 2000, 2001 and 2002 and $535,000 in 2003.
Non-employee equity grants are variable and we cannot estimate the
expense we will recognize in future periods as it will depend upon a
number of factors including our stock price. Interest income consists
of interest earned from our investment of the proceeds of our
preferred stock financings.
Since our inception on February 12, 1999, we have incurred net
losses. From inception through December 31, 1999, we had a net loss
of approximately $6.1 million and as of December 31, 1999, our
accumulated deficit totaled $6.1 million. We have not achieved
profitability to date, and we do not expect to achieve profitability
in the foreseeable future.
In February 2000, our board of directors reserved 2,181,416
shares of common stock for issuance under strategic common stock
purchase warrants which we may issue to buyers that have the ability
to place a large dollar amount of RFQs on our marketplace. We have
entered into non-binding letters of intent with several companies
which contemplate the issuance of strategic warrants to these buyers.
We expect that the majority of vesting of these strategic warrants,
if any, will occur over the four fiscal quarters of 2000 and the
first two quarters of 2001. The vesting will be based, in each case,
on the buyer’s attaining specified quarterly targets for the
total dollar value of RFQs posted on our marketplace by such buyer
that result in the signing of a purchase order. We cannot assure you
that we will issue these strategic warrants to any of these buyers at
all or on terms reasonable to us. In addition, these warrants would
not obligate any of the buyers to post any RFQs, or otherwise conduct
any business, on our marketplace.
We expect to record a reduction in additional paid-in capital
of approximately $4.3 million during the first quarter of 2000
related to the difference between the issuance price and the fair
value of shares of Series B preferred stock issued in January and
February 2000. This non-cash charge will be recorded as a reduction
of additional paid-in capital.
We launched our marketplace in October 1999. Our limited
operating history makes predicting future operating results very
difficult. We believe that you should not rely on any
period-to-period comparison of our operating results to predict our
future performance. You must consider our prospects in light of the
risks, expenses and difficulties encountered by companies in new and
rapidly evolving markets, such as ours. We may not be successful in
addressing these risks and difficulties.
Results of Operations
|
Period
from inception on February 12, 1999 through December 31,
1999
|
Revenue. For the period from the
launch of our marketplace in October 1999 through December 31, 1999,
we have earned revenue of $52,000 from the completion of two
successful bidding events. During our development stage from
inception through October 1999, we did not earn any
revenue.
Costs of Revenue. We incurred
costs of revenue of $108,000 for the period from inception through
December 31, 1999, all of which was incurred during the three months
ended December 31, 1999.
Sales and Marketing Expenses.
Sales and marketing expenses for the period from inception
through December 31, 1999 were $2.4 million, comprising $1.2 million
for marketing, $713,000 for sales and $461,000 for advertising
expenses. Sales and marketing expenses increased from $468,000 for
the three months ended September 30, 1999 to $1.9 million for the
three months ended December 31, 1999. This 306% increase resulted
from higher headcount in our sales and marketing departments, as well
as additional travel and public relations expenses related to the
promotion of our marketplace and branding campaign subsequent to its
launch in October 1999.
Research and Development Expenses.
Research and development expenses for the period from inception
through December 31, 1999 were $516,000. Research and development
expenses increased from $131,000 for the three months ended September
30, 1999 to $385,000 for the three months ended December 31, 1999.
This 194% increase related to additional headcount required for the
continued technological development and enhancement of our
marketplace functionality and capacity.
General and Administrative Expenses.
General and administrative expenses for the period from
inception through December 31, 1999 were $636,000. General and
administrative expenses increased from $113,000 for the three months
ended September 30, 1999 to $523,000 for the three months ended
December 31, 1999. This increase of 363% was primarily a result of
additional headcount to support the growth in our
infrastructure.
Stock-Based Compensation. For the
period from inception through December 31, 1999, we recorded
stock-based compensation of approximately $2.7 million in connection
with stock options granted to employees and non-employees.
Stock-based compensation increased from $1.3 million for the three
months ended September 30, 1999, to $1.4 million for the three months
ended December 31, 1999, an increase of 8%.
Interest Income. Interest
income from inception through December 31, 1999 was $280,000.
Interest income increased from $34,000 for the three months ended
September 30, 1999 to $246,000 for the three months ended December
31, 1999. This increase of 624% was the result of the investment of
the proceeds from our issuance of Series B preferred stock in
November 1999.
Liquidity and Capital Resources
Since our inception in February 1999, we have had negative cash
flows from our operations. For the period from inception through
December 31, 1999, we used $2.3 million of cash for operations. Cash
expended for operating activities included costs for the development
of our marketplace, salaries and related employee costs and marketing
and brand development. Since our inception through December 31, 1999,
we have used cash of approximately $1.6 million in investing
activities, which consisted of expenditures for computers and related
equipment, furniture and fixtures and technology costs incurred for
the development of our marketplace. We intend to increase our capital
expenditures in 2000 and 2001 primarily in connection with the
implementation of a financial accounting system and customer
relationship management system.
Since inception, we have financed our operations from the
issuance of preferred stock. From June through August 1999, we
conducted our Series A preferred stock offering and received net
proceeds of approximately $6.1 million. In November 1999, we
commenced our Series B preferred stock offering and received net
proceeds of approximately $34.6 million. We sold additional shares of
Series B preferred stock in January and February 2000 and received an
additional $2.8 million in net proceeds.
We have entered into a non-cancelable lease commitment for our
corporate headquarters that will require an annual payment of
$741,000 in 2000 and annual payments of $761,000 in 2001 through 2004
representing a total commitment of $3.8 million over the next five
years. We believe that we may need to enter into additional leases
for more office space in late 2000 and 2001. New leasing arrangements
will increase our total non-cancelable lease obligations at that
time.
As of December 31, 1999, we had revolving and equipment lines
of credit for a combined facility of $1.5 million with our bank that
we terminated in February 2000. There were no amounts outstanding
under these lines of credit as of December 31, 1999. We are currently
evaluating the need to replace these credit facilities.
As of December 31, 1999, our principal source of liquidity was
$36.8 million of cash and cash equivalents. We believe that we have
sufficient cash and cash equivalents, including the proceeds from
this offering, to fund our operating and investing activities for at
least 12 months. However, we may need to raise additional funds
earlier through public or private financings, or other arrangements
if we consummate acquisitions or otherwise grow our business at a
faster rate than we currently expect. Any additional financings, if
needed, might not be available on reasonable terms or at all. Failure
to raise capital when needed could harm our business, financial
condition and results of operations. If additional funds are raised
through the issuance of equity securities, additional dilution could
result. In addition, any equity securities issued might have rights,
preferences or privileges senior to our common stock.
Market Risk
Our interest income is sensitive to changes in the general
level of United States interest rates, particularly since the
majority of our investments are in short-term
instruments.
Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, “Accounting
for Derivative Instruments and Hedging Activities,” which
established accounting and reporting standards for derivative
instruments and hedging. It requires entities to recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. To
date, we have not engaged in derivative or hedging activities, and
accordingly do not believe the adoption of SFAS No. 133 will have a
material impact on the financial reporting and related disclosures.
We will adopt SFAS No. 133 as required by SFAS No. 137,
“Deferral of Effective Date of the FASB Statement No. 133,”
in calendar 2001.
Overview
SupplierMarket.com is a leading business-to-business
Internet-based marketplace serving the large and fragmented market
for direct materials. Direct materials are used in the manufacture of
finished goods and include a wide variety of components and
materials, from bolts, nuts and fasteners to rubber and glass
products to corrugated packaging to injection and blow-molded plastic
components. Our marketplace enables participants to efficiently and
cost effectively buy and sell direct materials in an open, neutral
exchange that requires no up-front fees, no software installation and
no consulting services. Our solution enables buyers to reduce their
direct material costs, expand and improve their base of suppliers,
reduce their administrative purchasing costs and shorten their
purchasing cycle times by centralizing suppliers and providing an
Internet-based marketplace. Meanwhile, our solution enables suppliers
to gain access to new business opportunities, reduce sales, marketing
and administrative costs and shorten sales cycle times. An important
feature of our marketplace is that companies can participate as both
a buyer, purchasing their manufacturing components or materials, and
a supplier, selling their manufactured products.
We feature a horizontal market approach, allowing our
marketplace participants to buy and sell direct materials across a
wide range of industrial segments. Through our proprietary RFQ
Builder, SmartMatch and competitive bidding technologies, we bring
buyers and suppliers together, streamlining the steps of the direct
materials purchasing cycle. There are no up-front fees for the use of
our marketplace. It is completely free for the buyer, and a supplier
is only required to pay us a transaction fee when it has been
selected by a buyer as a result of a competitive bidding event to
fulfill the RFQ. As of February 25, 2000, we had registered
approximately 2,500 buyers and 8,000 suppliers. Our marketplace
participants include such companies as Masco, U.S. Filter, The
Simmons Company and J.L. French.
Industry Background
|
Business-to-Business Electronic Commerce
|
The Internet has become the fastest growing commerce medium in
history, revolutionizing how individuals and organizations conduct
business. Companies are increasingly using the Internet to increase
revenue, enhance productivity, cut costs and communicate more
effectively. Business-to-business e-commerce marketplaces have been
established to bring together buyers and suppliers of goods and
services and to provide a centralized on-line exchange for sharing
information. These on-line marketplaces reduce the role of
intermediaries and eliminate paper-based process and transaction
inefficiencies, thereby enabling buyers and suppliers to identify new
revenue opportunities, achieve supply chain efficiencies and simplify
complex business processes. The Gartner Group expects the volume of
non-financial goods and services sold through business-to-business
e-commerce to reach $7.3 trillion worldwide in 2004 and that
electronic marketplaces will account for 37%, or $2.7 trillion, of
these sales.
|
The
Direct Materials Market
|
The direct materials market is broad and includes numerous
industrial segments. Some commonly used direct materials in these
industrial segments include fasteners and hardware, metal stampings,
screw machine products, simple plastic parts, die cast products,
rubber products and glass products. We estimate that the annual
market for direct materials in the United States is approximately $2
trillion.
The U.S. market for direct materials is highly fragmented and
inefficient. Based on industry reports, we believe that over 250,000
independent suppliers, ranging from small component manufacturers
with less than $1 million in annual revenues to multi-billion dollar
original equipment manufacturers (OEMs), sell direct materials. Over
90% of these companies have less than $10 million in annual revenue.
This high degree of fragmentation and inefficiency has required
companies to incur significant search, negotiation and
transaction costs. In addition, most companies in the direct materials
market function as both buyers and suppliers and experience the
inefficiencies associated with both the buying and selling
processes.
|
Traditional Direct Materials Purchasing
Process
|
Traditional direct materials purchasing is a highly inefficient
process due to the large size of the market, its high degree of
fragmentation, significant distribution costs and asymmetric flows of
information. Companies in the direct materials market have
traditionally purchased and sold direct materials through the
time-consuming and paper-based RFQ process, illustrated as
follows:
Step 1: A buyer details the
commercial and technical specifications of the component or materials
it seeks to purchase. Technical specifications and drawings are
typically prepared using any one of numerous software design
packages.
Step 2: The buyer’s internal
purchasing professionals or third party agents identify prospective
suppliers for the requested components or materials from a variety of
sources, including supplier directories and catalogs, trade
publications, trade shows and its network of existing suppliers. At
the same time, suppliers employ third-party agents or sales and
marketing personnel to identify prospective buyers and contact or
visit the buyer, often on an unsolicited basis.
Step 3: The buyer contacts
prospective suppliers, shares technical specifications of the direct
materials, typically via paper-based means, including fax, mail or
courier, and solicits more information regarding each supplier’s
capabilities and qualifications.
Step 4: The buyer analyzes the
information gathered from prospective suppliers to determine which,
if any, are qualified to fulfill the buyer’s purchasing
needs.
Step 5: The buyer separately
distributes its RFQ with detailed technical specifications and
drawings to each qualified supplier, typically via paper-based means,
including fax, mail or courier.
Step 6: Each of the qualified
suppliers reviews the buyer’s RFQ. Buyers’ RFQs often vary
in format and level of detail, requiring detailed review, analysis
and clarification. Upon conclusion of this review, the supplier
submits questions to the buyer regarding the bidding process and RFQ
requirements.
Step 7: The buyer responds to
each supplier’s question independently, clarifies the RFQ
requirements as needed and communicates any additional information
independently to all of the suppliers.
Step 8: Each supplier prepares
and submits one bid for the components or materials without knowing
what price the other suppliers have offered to the buyer.
Step 9: The buyer evaluates the
bids from each qualified supplier, based on price, quality and timing
considerations and follows up separately with each supplier to ask
questions and to negotiate bid terms.
Step 10: The buyer selects one
supplier. The remaining suppliers often must contact the buyer to
learn the outcome of the bidding process.
Step 11: The buyer and supplier
complete a purchase order for the direct materials in
question.
The traditional method of direct materials purchasing suffers
from a number of inefficiencies affecting both buyers and suppliers.
First, the highly decentralized purchasing process hinders the
efficient matching of buyers and suppliers. Second, the interactive,
multi-step process can take up to several months. Third, the length
of this process forces buyers and suppliers to engage in substantial
advanced planning to ensure they have sufficient components and
materials to meet their production needs. As a result, buyers and
suppliers may hold higher inventories, maintain higher working
capital levels and increase production lead times.
We believe buyers often pay more for direct materials because
they lack easy access to new suppliers in a centralized and efficient
marketplace, which can limit the quality of their supplier base and
can inhibit their ability to obtain competitive prices. In addition,
buyers must employ significant resources for purchasing professionals
to search for and review the qualifications of suppliers to ensure a
competitive bid. The traditional bidding process minimizes the
opportunity for suppliers to adjust their prices during the bidding.
Suppliers also find the traditional purchasing process difficult and
expensive. The lack of a centralized source for RFQs, high sales
costs, and poor communication within the market can restrict buyers
to using a limited number of known suppliers, in turn reducing
business opportunities for other qualified suppliers. Therefore,
suppliers incur significant costs for their sales force, advertising
and travel used to identify buyers for their products.
The SupplierMarket.com Solution
We provide a secure Internet-based marketplace that centralizes
buyers and suppliers, matches companies with multiple qualified
trading partners and promotes a competitive pricing environment. Our
solution eliminates many of the steps in the traditional direct
materials purchasing process. The SupplierMarket.com purchasing
process for our registered participants consists of the following
steps:
Step 1: A buyer completes a
standardized online RFQ using our proprietary RFQ Builder technology
and includes technical specifications and drawings using their
existing design software package.
Step 2: Our proprietary
SmartMatch technology identifies qualified suppliers who can
immediately view the buyer’s posted RFQ, including technical
specifications and engineering drawings presented in a standard
format.
Step 3: If necessary, suppliers
post questions regarding the RFQ on an electronic bulletin board
located on our marketplace and the buyer responds with
clarifications. All suppliers are able to view this information,
thereby eliminating redundant questions.
Step 4: Qualified suppliers
participate in an anonymous bidding event featuring a competitive,
reverse auction during which the buyer and suppliers can view all
bids as they are submitted as well as supplier
qualifications.
Step 5: The buyer selects one
supplier, at which time SupplierMarket.com provides the buyer and
chosen supplier with each other’s names and contact information
to complete the transaction. Our marketplace then automatically
notifies the other suppliers that they have not been
selected.
Step 6: The buyer and supplier
complete a purchase order for the direct materials and may complete a
satisfaction rating of the transaction and each other for
SupplierMarket.com.
The simplicity and efficiency of the SupplierMarket.com
solution is driven by our proprietary RFQ Builder, SmartMatch and
competitive bidding technologies. The RFQ Builder provides buyers
with a standardized, on-line form for RFQs and the ability to easily
include all necessary technical specifications and engineering
drawings for the direct materials. SmartMatch eliminates many of the
steps in the traditional purchasing process by searching our
registered supplier base to identify suppliers capable of meeting the
buyer’s strict quality and capability requirements as set forth
in its RFQ. Our competitive bidding technology allows the buyer and
suppliers to view all bids submitted in real time and allows
suppliers to adjust their bids in a dynamic process.
Benefits to Buyers and Suppliers
There are several key differences between our marketplace and
alternatives offered by other business-to-business e-commerce
companies. First, any registered buyer or supplier can immediately
access our entirely Internet-based marketplace with a standard
browser connection; there is no required installation of software on
their information technology (IT) system. Second, there are no
up-front fees for the use of our marketplace. It
is completely free for the buyer, and a supplier is only required to
pay us a transaction fee when it has been selected by a buyer as a
result of a competitive bidding event to fulfill the RFQ. Third, our
technology-based solution does not require the use of consultants for
implementation or ongoing support.
We believe our marketplace benefits buyers in the following
ways:
Ÿ
|
Reduced
costs of direct materials. Transactions
completed on our marketplace to date have indicated that buyers
using our marketplace have reduced the costs of their direct
materials when compared to previous purchases using the traditional
RFQ process. This is due primarily to the competitive nature of our
marketplace, which enables a number of suppliers to bid
aggressively to win new business.
|
Ÿ
|
Access
to increased base of new and qualified suppliers.
Access to our registered supplier base makes it more
likely that a buyer will find new suppliers that can satisfy the
criteria set forth in its RFQ. In addition, our marketplace allows
a buyer to quickly compare and contrast the qualifications of
multiple suppliers, enabling them to select from a higher quality
pool.
|
Ÿ
|
Shorter
cycle times for purchasing. Our
marketplace provides quicker and more efficient identification of
prospective suppliers and a simplified RFQ and bidding process.
This results in additional cost savings to the buyer through
improved staff efficiency and resource utilization in the
purchasing process. Buyers that have completed transactions on our
marketplace to date have reported to us that they have
significantly reduced their purchasing cycle from as long as
several months to approximately one month.
|
Ÿ
|
Standardized RFQ data format.
Our marketplace utilizes a standardized communication format
called extensible markup language (XML) for preparing and
transmitting RFQs. This digital transfer standard enables our
marketplace to be easily integrated with a variety of enterprise
software packages.
|
We believe our marketplace benefits suppliers in the following
ways:
Ÿ
|
Increased access to new buyers.
Registering on our marketplace increases the probability a
supplier will find prospective customers. This increased access
comes without any up-front fee to the supplier, making our
marketplace a cost effective way for the supplier to find new
business opportunities.
|
Ÿ
|
Reduced
sales and marketing costs. Our
marketplace creates a single medium through which buyers and
suppliers can exchange information. This single medium minimizes
the need for suppliers to disseminate information through other
traditional channels, reducing selling costs and requiring less
time and sales effort.
|
Ÿ
|
Rewarded for expertise and efficiency.
A buyer can quickly compare and contrast suppliers
’ qualifications and expertise on our marketplace, such as
quality certifications and delivery capabilities. Therefore, a
highly qualified supplier with efficient operations is more likely
to be selected by multiple buyers, generating additional
revenue.
|
Ÿ
|
Centralized market intelligence.
During a bidding event, each participating supplier is able
to view the qualifications and bids submitted by the other
suppliers including those of the supplier ultimately chosen by the
buyer. This market intelligence allows a supplier to analyze the
bid and to compete more successfully in subsequent bidding
events.
|
As more businesses adopt our marketplace, its value to
individual participants will increase, as they will be able to
conduct increasing amounts of both their purchasing and selling
on-line. For example, a company that supplies systems to a finished
goods manufacturer through our marketplace can also submit RFQs to
purchase assemblies from other registered suppliers. As momentum
towards adoption of our marketplace continues to grow, we believe
buyers and suppliers who are quick to adopt our solution will become
more competitive.
The SupplierMarket.com Strategy
Our goal is to become the primary marketplace through which
buyers and suppliers conduct most, if not all, of their direct
materials purchasing and selling. We believe we are the first
entirely Internet-based e-commerce solution for buying and selling of
direct materials, and we intend to capitalize on our early mover
position to increase our market share through the following
strategies:
Ÿ
|
Increase marketplace participation.
We intend to increase the number of marketplace participants
and the frequency of their participation in three ways. First, we
intend to focus our sales and marketing efforts on attracting new
buyers that will post more RFQs on our marketplace. We expect that
our participant base will continue to grow because of the lack of
up-front fees and continued enhancements of our brand recognition
and awareness. Second, as our participant base grows, we expect to
focus our efforts on encouraging existing suppliers to use our
marketplace for their buying needs and likewise encouraging buyers
to use our marketplace for their selling needs. Third, we plan to
enter into and capitalize on strategic alliances with companies
such as software companies, content providers and complementary
marketplaces that will provide us with access to large numbers of
additional buyers and suppliers. By aggressively pursuing these
strategic relationships, we believe we can secure and extend our
position as a leading Internet-based marketplace for direct
materials.
|
Ÿ
|
Expand
our service offerings. We intend to
continue to expand the range of services offered through our
Internet-based marketplace. These service offerings may include
financing services, logistics services and order tracking and
billing services for suppliers. By providing a comprehensive suite
of services, we expect to enhance the value of our marketplace to
our participants.
|
Ÿ
|
Maintain technological leadership.
We intend to continue to extend our Internet-based technology
leadership to meet the evolving needs of our buyers and suppliers.
In particular, we will continue to focus substantial efforts on
developing and enhancing our bidding technology and our data
management tools such as SmartMatch and RFQ Builder. We will
continue to expend substantial efforts to develop, purchase or
license technological advancements for our marketplace to enhance
its reliability and functionality. We intend to capitalize on our
technology leadership to increase the attractiveness of our
marketplace to buyers and suppliers.
|
Ÿ
|
Pursue
strategic acquisitions. We intend to
seek acquisition or investment opportunities with businesses that
will supplement our existing marketplace with additional
participants, enhance our technology or otherwise provide
complementary value to our business. We may also use acquisitions
to facilitate our entry into new markets.
|
Ÿ
|
Expand
internationally. We intend to expand our
marketplace internationally to enhance the breadth of registered
suppliers while introducing international buyers to our unique
offering. Initially, we will target deeper penetration of Canadian
and Mexican companies.
|
Our Marketplace and Market Making
Process
Our Internet-based marketplace matches buyers and suppliers of
direct materials. Our database stores in a standardized format
commercial and technical information about buyers and suppliers and
the qualities they desire when searching for new business
relationships. SmartMatch, our proprietary matching technology,
enables a supplier to search for RFQs matching its manufacturing
capabilities. Similarly, SmartMatch assists the buyer in qualifying
prospective suppliers. Our bidding technology allows for competitive
bidding events to match supply and demand in an efficient
manner.
The steps taken by buyers and suppliers who use our
marketplace are as follows:
[Graphic depiction of pictures and associated text arranged in
a "T" formation. The top left branch bears a right-pointing arrow, a
picture of a computer keyboard and the text "Buyer Registers". The
top right branch bears a left-pointing arrow, a picture of a computer
keyboard and the text "Suppliers Register". The top center bears a
downward-pointing arrow and a picture of an industrial part. The
remaining pictures and text are arranged along the vertical axis of
the "T" from top to bottom as follows: picture of a mousepad with
text "Buyer completes online RFQ"; picture of a computer with text
"SmartMatch identifies qualified suppliers"; picture of a
clipboard with text "Q&A via online bulletin board"; picture of a
graph with text "Anonymous online bidding event"; picture of a
handshake with text "Buyer chooses supplier" and picture of a check
mark with text "Buyer and supplier complete purchase
order".]
Each new buyer or supplier initially registers on-line for
inclusion on our marketplace’s database. A company registering
as a buyer provides general commercial information about its business
and information about the type of supplier with which the buyer
prefers to do business. Suppliers provide similar commercial
information as well as detailed technical capability, quality
certifications and information about their manufacturing processes.
Suppliers must also confirm by telephone their information with a
SupplierMarket.com representative. Registration information is not
available to other participants, and access to our marketplace is
password restricted.
Any registered buyer can submit an RFQ to our marketplace. Our
RFQ Builder technology provides a standardized, easy-to-use, on-line
RFQ form on which the prospective buyer may specify information about
the product, including design specifications, materials, quantity,
quality levels and delivery date. The buyer can also post on-line
blueprints or engineering drawings via fax or electronic file upload.
Our marketplace supports most major computer aided design (CAD)
software, including Parametric Technology’s ProEngineer and
AutoDesk’s AutoCAD.
Once a buyer posts an RFQ, we match it with prospective
suppliers using our proprietary SmartMatch technology, and the buyer
’s commercial and product data with the exception of its
identity is made available for prospective suppliers to evaluate.
SmartMatch automatically identifies prospective suppliers that have
expertise in the products or processes required to fulfill the RFQ
and that meet the buyer’s criteria, and notifies those suppliers
by e-mail. SmartMatch achieves this matching through keyword searches
and intelligent selection criteria. In addition, all registered
suppliers are able to browse and search a database of submitted RFQs
and can nominate themselves to be included in the list of prospective
suppliers. A buyer may also nominate a particular supplier, choose to
eliminate any supplier or limit the number of prospective suppliers
allowed to participate in the bidding event.
We employ a small group of experienced industry professionals
as market makers. Our market makers supervise bidding events and
complement our SmartMatch technology by ensuring that a sufficient
number of suppliers participate in each bidding event to result in a
successful outcome. In the event that a bidding event has a limited
number of supplier participants, our market makers use their
extensive industry knowledge and contacts to invite additional
non-registered suppliers to register and participate. As the number
of buyers and suppliers that regularly use our system increases, our
market makers will become less involved in the matching process. This
will allow us to increase the number of bidding events processed
without a directly proportionate increase in the number of our market
makers.
At a time specified by the buyer, all qualified suppliers
participate in a competitive on-line bidding event to fulfill the
RFQ. At the buyer’s option, suppliers may bid not only on the
entire RFQ but also on separate line items on an RFQ composed of
multiple components or materials. Participants in the bidding event
can view each supplier’s bid and commercial and technical data,
but not the supplier’s identity. The bidding typically takes
place over a fixed period of time, usually one to two
hours.
Upon completion of the bidding process, the buyer selects one
supplier with which to complete a purchase order. Our marketplace
provides a combination of price, technical and commercial data to the
buyer upon which the buyer can make its selection. Only after the
buyer has made its selection do we reveal the identities of the
selected supplier and the buyer to each other. We then invoice the
selected supplier for our services in the form of a transaction fee
which is based on the dollar value of the selected supplier’s
bid. The buyer and supplier then typically close the transaction
within several weeks.
Case Studies
The examples that follow highlight the benefits that buyers and
suppliers realize by using our marketplace. Each competitive bidding
event is a distinct event with a different buyer and a different mix
of suppliers and direct materials. The cost savings and other
benefits of our marketplace may differ from bidding event to bidding
event. For the bidding events completed to date, direct materials
cost savings for buyers have typically ranged from 5 to 40%. The
companies discussed in the following case studies continue to
actively participate in our marketplace by posting or responding to
RFQs.
The Simmons Company. Simmons is
one of the world’s leading manufacturers of mattresses. In 2000
alone, Simmons estimates that it will require over 8.5 million pounds
of polyethylene film to produce protective bags for mattresses.
According to Simmons, the traditional purchasing process can involve
months to research and qualify suppliers, which adds to the already
significant cost for direct materials. Using the SupplierMarket.com
marketplace, Simmons was able to build an RFQ, watch the on-line
bidding for its RFQ in real time, and ultimately choose a supplier
from among eight qualified bidders. This process took approximately
26 days using our marketplace compared to several months using
traditional means. Compared to historical prices paid by Simmons,
Simmons estimates it saved $425,000, or 7%, in direct materials
costs.
Shamrock Industrial Fasteners.
Shamrock is a small fastener manufacturer and distributor, with
limited resources for sales and marketing staff. To find new business
opportunities, the company registered on SupplierMarket.com’s
marketplace, listing its technical and commercial qualifications.
After being qualified by SmartMatch to bid on two separate RFQs
posted by a buyer seeking to purchase specialized fasteners, Shamrock
prepared its bids based on the engineering diagrams and
specifications that were available on-line on our marketplace. Based
on a combination of Shamrock’s qualifications and the
competitive bids it placed during the bidding event, the buyer, a
major automotive company, selected Shamrock to provide over $250,000
in direct materials. Without investing in up-front sales or
marketing, and within twenty days of the RFQs being posted on
SupplierMarket.com’s marketplace, Shamrock secured two new
orders with a new customer.
Markets and Market Participants
Our marketplace features a horizontal approach allowing
participants to buy and sell direct materials across a wide range of
industrial segments. Since the launch of our marketplace in October
1999, we have conducted bidding events for various direct materials
including the following:
| Ÿ
Metal stampings |
|
Ÿ
Machine tooling |
| Ÿ
Casted metal products |
|
Ÿ
Precision machine parts |
| Ÿ
Bolts, nuts and fasteners |
|
Ÿ
Molded rubber products |
| Ÿ
Screw products |
|
Ÿ
Corrugated packaging |
| Ÿ
Metal tubing |
|
Ÿ Wire
and cord products |
| Ÿ
Extruded plastic film and sheet |
|
Ÿ
Fabric |
| Ÿ
Injection and blow-molded plastic components |
|
|
The buyers and suppliers that participate in our marketplace
comprise a diverse mix of companies in the direct materials market,
ranging from small components manufacturers to multi-billion dollar
OEMs. Buyers and suppliers who have posted RFQs or participated in
bidding events on our marketplace include:
| Ÿ
Affordable Interiors |
|
Ÿ
Masco |
| Ÿ
Becker Group |
|
Ÿ
Pentair |
| Ÿ
Center Point Golf |
|
Ÿ
Quality Farm and Country |
| Ÿ
Century Plastics |
|
Ÿ
Shamrock Industrial Fasteners |
| Ÿ
Dunlap Industries |
|
Ÿ
Simmons Company |
| Ÿ
EdgeCraft Corp. |
|
Ÿ
Universal Products |
| Ÿ IPS
Industries |
|
Ÿ U.S.
Filter |
| Ÿ J.L.
French Automotive Castings |
|
|
To date, we have depended substantially on a small group of
buyers, comprising portfolio companies affiliated with some of our
principal stockholders and directors, for the RFQs they have posted
on our marketplace. All revenue earned in 1999 resulted from RFQs
posted on our marketplace by one portfolio company. This year through
February 25, a substantial majority of our revenues resulted from
RFQs posted by portfolio company buyers. We expect to continue to
depend on these portfolio companies as buyers, particularly if other
buyers are slow to adopt or to conduct significant business on our
marketplace. If any of these buyers discontinue use of our
marketplace, or reduce the aggregate dollar value of RFQs they post,
our business could be severely harmed.
We have recently depended and expect to depend substantially on
several strategic buyers who have the ability to place a large amount
of RFQs on our marketplace. We intend to issue strategic warrants to
purchase our common stock to these strategic buyers that will vest
depending upon the total dollar amount of RFQs they post that result
in signed purchase orders. This year through February 25, these
strategic buyers have posted RFQs constituting a significant
percentage of the dollar value of all RFQs posted. We have obtained
no commitments from these strategic buyers or any other buyers to
post RFQs or conduct any other activities on our marketplace. Our
strategy to expand our marketplace and grow our business depends on
the continued and increasing use of our marketplace by these buyers.
The loss or partial loss of one or more of these buyers could be
harmful to our business and could force us to curtail our growth
plans.
Strategic Relationships
We have entered into or are negotiating to enter into several
strategic relationships that should improve our ability to execute
our business plan. We will partner with other companies to grow our
base of participants, broaden the range of our marketplace services
and continually improve our technologies.
We have four main categories of strategic alliances: commerce
partners, service partners, knowledge partners and technology
partners. We plan to integrate with our commerce partners’
solutions to help expand
our participant base and drive usage of our marketplace. Our commerce
partners are typically companies that market software or technology
solutions to manufacturing or design engineering companies. Our
service partners are typically companies that provide services that
complement our service offering. We expect that alliances with
service partners will broaden the range of services provided to our
customers, including financing, logistics and order fulfillment
providers. We plan to enter into agreements with knowledge partners
to provide industry-related content and information relevant to our
participants, and may include regional, national and international
companies publishing journals related to such industries as
manufacturing, engineering, component design and purchasing. Our
technology partners provide hardware and software that may be used to
enhance the operation and maintenance of our marketplace.
We are pursuing strategic alliances with commerce partners that
deliver Internet- enabled products and services to companies who buy
and sell direct materials. We have executed non-binding letters of
intent with a wide range of companies, including component modeling
and collaborative design, process lifecycle management, enterprise
resource planning and supply chain management software providers. The
following is a description of our relationships with two commerce
partners that we expect to help grow our base of participants through
technology integration with their product offerings.
Parametric Technology Corporation.
Parametric is a leading provider of integrated product
development and process lifecycle management solutions, with more
than 230,000 users. We have entered into a non-binding letter of
intent that contemplates a co-development and co-marketing agreement
with Parametric providing for the integration of our marketplace with
Parametric’s software. When this integration is completed, it
will allow Parametric users to automatically convert their RFQs into
our standardized format for submission to our marketplace. In
addition, this will allow Parametric users to obtain reports on RFQ
status and bidding event results through Parametric’s software,
all without abandoning their investment in Parametric’s
software.
Agile Software. Agile develops
Internet-based collaborative manufacturing commerce solutions that
enable manufacturers to collaborate over the Internet with their
supply chain partners about new product content, and then source and
procure the required components. Agile currently has more than 25,000
users. We have entered into a non-binding letter of intent that
contemplates a co-development and co-marketing agreement with Agile
providing for the integration of our marketplace with Agile’s
software. When this integration is completed, it will allow Agile
users to automatically convert their RFQs into a standardized format
for submission to our marketplace and to obtain RFQ status and
bidding event results from Agile’s Internet site.
In February 2000, our board of directors reserved 2,181,416
shares of common stock for issuance in connection with strategic
common stock purchase warrants which we may issue to strategic buyers
that have the ability to place a large dollar amount of RFQs on our
marketplace. We have entered into non-binding letters of intent with
several buyers to issue these strategic warrants. We expect that the
vesting of these strategic warrants will be based, in each case, on
the buyer’s attaining specified quarterly targets for the total
dollar value of RFQs posted on our marketplace by that buyer that
result in the signing of a purchase order. We cannot assure you that
we will be able to issue these strategic warrants with any of these
buyers at all or on terms reasonable to us. Even if we issue
strategic warrants to these buyers, the warrants would not obligate
any of the buyers to post any RFQs, or otherwise conduct any business
on our marketplace.
Technology
We operate our marketplace from our headquarters in Burlington,
Massachusetts to ensure that each bidding event is actively managed
by our market making team and runs smoothly. Our bidding event
architecture contains many features to monitor and control bidding
events so that our market making team can quickly respond in the
event of technical or other difficulties. Our marketplace is hosted
from a state-of-the-art data center managed by a third-party host,
which provides a controlled environment with backup power, high
bandwidth redundant network connections and 24-hour security and
monitoring.
In an effort to ease integration and communications in the
direct materials market, we have become a leading contributor to the
efforts of the Open Applications Group, Inc. to standardize RFQs in
XML format. The Open Applications Group is a non-profit consortium
that seeks to promote greater business software interoperability and
is the largest publisher of XML content for business software
interoperability in the world. The Open Applications Group also
builds and publishes detailed specifications necessary to use the XML
format.
Since the successful launch of our marketplace in October 1999,
we have enhanced our marketplace’s functionality through several
upgrades as summarized below:
| |
Release
Date |
|
Version
|
|
Primary
Features |
|
|
|
| |
October 18,
1999 |
|
1.0
|
|
Ÿ
On-line bidding |
|
|
|
(initial release) |
|
|
|
Ÿ On-line RFQ
Builder |
|
| |
|
|
|
|
Ÿ
SmartMatch technology |
|
| |
|
|
|
|
Ÿ
View blueprints and engineering drawings |
|
| |
|
|
|
|
Ÿ RFQ
search capability |
|
|
|
| |
December 6,
1999 |
|
2.0
|
|
Ÿ
Advance searching of RFQs |
|
| |
|
|
|
|
Ÿ
Industry-related content |
|
| |
|
|
|
|
Ÿ
On-line RFQ bulletin board |
|
| |
|
|
|
|
Ÿ
Enhanced bidding features |
|
|
|
| |
January 23,
2000 |
|
3.0
|
|
Ÿ
Line item RFQ generation |
|
| |
|
|
|
|
Ÿ
Line item bidding |
|
| |
|
|
|
|
Ÿ
Enhanced RFQ bulletin board |
|
| |
|
|
|
|
Ÿ
Buyer analysis tools |
|
In addition, we completed an infrastructure upgrade in
February 2000 to further enhance the reliability, security and
scalability of our technology architecture. This infrastructure
upgrade enabled us to support a greater number of concurrent
bidding events and provided greater reliability and security
through increased redundancy of firewalls, networks and web
servers.
Sales and Marketing
We sell our solution through our field-based regional
sales teams and a national accounts sales team. Each regional team
focuses on selling our solution to regional or local manufacturers
located within its geographic territory. The national accounts
team focuses on larger companies that have a presence across the
U.S. Our sales teams have extensive experience in selling
industrial goods and services to industrial manufacturing
companies. The expertise of our sales force in the direct
materials market covers a variety of industrial segments. As of
March 1, 2000, our direct sales force consisted of 28 sales
professionals.
Our sales teams concentrate their efforts on serving
and attracting buyers in our marketplace. In addition, they
encourage existing suppliers in our marketplace to become buyers
and existing buyers to become suppliers. Finally, they gauge
participants’ satisfaction with our marketplace and collect
feedback that we may use to improve the overall quality and
effectiveness of our marketplace. We continue to build and expand
our direct sales force domestically and expect to hire sales
representatives internationally during 2000.
Our marketing efforts focus on general communications,
obtaining referrals from marketplace participants, targeted
promotions and selected advertising. For example, we participate
in trade conferences and purchasing industry forums, advertise
through national and industry-targeted publications and regionally
targeted radio, and conduct facsimile, telemarketing and direct
mail campaigns. We intend to increase our advertising and
marketing expenditures in an effort to penetrate our target
industrial segments and build our brand as the leading marketplace
for direct materials. These marketing expenditures will cover
additional personnel, increased advertising in professional
journals and general business and trade media, increased media
relations and increased presence at purchasing and technology
trade conferences.
Competition
The market for business-to-business e-commerce is
rapidly evolving and intensely competitive, and we expect
competition to further intensify in the future. A number of
companies offer services or products to this market, and existing
and potential users of our marketplace can choose from a variety
of current and potential competitors’ offerings. We currently
or, may in the future, compete with a number of other companies,
including:
Ÿ
|
consulting-oriented companies that offer similar services
or services that may be perceived to be similar, such as
FreeMarkets and A.T. Kearney;
|
Ÿ
|
in-house or specialized on-line marketplaces of large
individual buyers or suppliers or groups of companies in one or
more related industrial segments. For example, the three major
automotive manufacturers announced on February 25, 2000 their
joint intention to establish a consolidated on-line exchange for
buyers and suppliers in the automotive industry;
|
Ÿ
|
e-commerce communities, such as VerticalNet;
|
Ÿ
|
companies that have historically focused on developing
enterprise purchasing software systems within the indirect
materials market and may introduce or further expand their
e-commerce services, such as Ariba and Commerce One;
|
Ÿ
|
companies that offer a broad array of Internet-related
services or software that currently include, or may in the
future include, business-to-business e-commerce
services;
|
Ÿ
|
companies that develop enterprise resource planning
software and may introduce or further expand their provision of
related e-commerce services;
|
Ÿ
|
companies that provide electronic data interchanges;
and
|
Ÿ
|
traditional third-party agents.
|
The principal competitive factors that affect our
business are breadth of industrial segments served, depth of the
pool of qualified suppliers, buyer selection, usefulness and cost
effectiveness of service offerings, time and cost of adoption,
brand loyalty and strategic relationships. We believe that we
compete favorably with respect to each of these factors. If we
fail to effectively compete in any one of these areas, we may lose
existing and potential buyers and suppliers.
Intellectual Property
We believe our intellectual property rights are
important to our business. We rely or expect to rely on a
combination of patent, copyright, trademark, service mark and
trade secret restrictions and contractual provisions to protect
our intellectual property rights. We require employees and
independent contractors to enter into nondisclosure and
development agreements. We require buyers and suppliers using our
marketplace to agree to terms and conditions of use, which include
provisions limiting the scope of permissible uses of our
marketplace. The contractual provisions and the other steps we
have taken to protect our intellectual property may not prevent
misappropriation of our technology or deter third parties from
developing similar or competing technologies.
We may seek patents with respect to proprietary
features of our technology that we currently use or intend to use
in the future. We cannot assure you that any patents will be
issued or, even if issued, that these patents will adequately
protect our technology or processes or otherwise result in
commercial advantages to us.
We have applied for United States registration of our
service marks “SupplierMarket.com”, “SmartMatch
”, “People buy parts. People sell parts. This is where
they meet.” “RFQ Builder” and “SMC
”.
Government Regulation
As with many Internet companies, we operate in an
environment of great uncertainty as to potential government
regulation. We believe that we are not currently subject to direct
regulation applicable to e-commerce, other than regulations
applicable to businesses generally. However, the Internet has
rapidly emerged as a commerce medium, and governmental agencies
have not yet been able to adapt existing regulations to its use.
Future laws, regulations and court decisions may affect the
Internet or other electronic services, covering issues such as
user pricing, user privacy, freedom of expression, access charges,
taxation, content and quality of products and services,
advertising, antitrust, intellectual property rights and user
authentication and information security. In addition, because our
marketplace is available worldwide, foreign jurisdictions may
claim that we are required to comply with their laws. Any future
law, regulation or court decision may have a negative impact on
our business.
Because we are an Internet company, it is unclear in
which jurisdictions we are actually conducting business. Our
failure to qualify to do business in a jurisdiction that requires
us to so qualify could subject us to fines and penalties and could
result in our inability to enforce agreements.
Numerous states have laws and regulations regarding
the conduct of auctions and the liability of auctioneers. We do
not believe that these laws and regulations, which in most cases
were enacted for consumer protection many years ago, apply to the
auctions we conduct on our marketplace. However, one or more
jurisdictions may attempt to impose these or new laws and
regulations on our operations in the future.
Employees
As of March 1, 2000, we had 103 employees. Of our
employees, 46 are engaged in sales and marketing, 23 in research
and development, 20 in general and administrative and 14 in
operations. None of our employees is represented by a collective
bargaining agreement, and we believe that we have satisfactory
relations with our employees.
Facilities
Our headquarters in Burlington, Massachusetts
currently occupies approximately 28,000 square feet under a lease
that expires in December 2004. We believe that our existing
facilities in Burlington are adequate for the anticipated needs of
our headquarters for the next 12 to 18 months. We also maintain
sales presences in the following U.S. manufacturing centers:
Birmingham, Buffalo, Chicago, Cincinnati, Cleveland, Detroit,
Grand Rapids, Hartford, Los Angeles, Milwaukee, Newark, Phoenix,
San Diego, Seattle and Troy, Michigan.
Legal Proceedings
We are not currently involved in any material legal
proceedings.
Executive Officers and Directors
The following table sets forth information regarding
our executive officers and directors as of February 29,
2000.
Name
|
|
Age
|
|
Position(s)
|
| Jonathan
Burgstone |
|
28 |
|
Chief Executive
Officer and Director |
| Asif
Satchu |
|
28 |
|
Chairman,
President, Secretary and Director |
| Richard
Feldt |
|
48 |
|
Chief Operating
Officer |
| Brian
Bethers |
|
39 |
|
Chief Financial
Officer and Treasurer |
| Richard
Bierwagen |
|
38 |
|
Vice President
of Sales and Marketing |
| Scott
Donnelly |
|
46 |
|
Vice President
of Human Resources |
| Brad
Hafer |
|
34 |
|
Vice President
of Corporate Development |
| Murali
Menon |
|
40 |
|
Vice President
of Engineering |
| Reza
Satchu |
|
33 |
|
Executive Vice
President |
| William
Sheehan |
|
31 |
|
Vice President
of Business Development |
| Robert
Barrett(1) |
|
55 |
|
Director |
| Marco
Iansiti(2) |
|
38 |
|
Director |
| Peter
Lamm(1) |
|
48 |
|
Director |
| Marc
Lipschultz(2) |
|
31 |
|
Director |
| Ravi
Mohan(2) |
|
33 |
|
Director |
(1)
|
Member
of the compensation committee.
|
(2)
|
Member
of the audit committee.
|
Jonathan Burgstone is one of our founders and
has served as our Chief Executive Officer and one of our directors
since our inception in February 1999 and as our Treasurer from
inception until February 2000. Prior to our founding, Mr.
Burgstone worked in various management positions in manufacturing
at Ford Motor Company from 1994 to 1997. Mr. Burgstone received a
bachelor’s degree in industrial engineering from the
University of Illinois, a master’s degree in industrial and
systems engineering from the University of Michigan and a master
’s degree in business administration from Harvard Business
School.
Asif Satchu is one of our founders and has
served as our President since August 1999 and as our Chairman and
Secretary and one of our directors since our inception in February
1999. Prior to our founding, Mr. Satchu worked at Tiger Real
Estate Partners, an affiliate of Tiger Management Corporation, a
private equity fund manager, from 1995 to 1997, and at Morgan
Stanley & Co., from 1993 to 1995. Mr. Satchu received a
bachelor’s degree in economics and political science from
McGill University and a master’s degree in business
administration from Harvard Business School.
Richard Feldt has served as our Chief Operating
Officer since January 2000. Prior to joining us, Mr. Feldt worked
for Symbol Technologies, a mobile data management systems
manufacturing company, from 1995 to 2000, most recently serving as
senior vice president and general manager of worldwide operations.
Prior to joining Symbol, Mr. Feldt held senior operations
positions at A.T. Cross from 1991 to 1995, at Eastman Kodak
Company from 1988 to 1991 and at Spectra-Physics, Inc. from 1980
to 1988. He currently serves as a board member of GSW, Inc., a
diversified Canadian manufacturer. Mr. Feldt received a bachelor
’s degree in industrial engineering from Northeastern
University.
Brian Bethers has served as our Chief Financial
Officer since January 2000 and as our Treasurer since February
2000. Prior to joining us, Mr. Bethers worked for Host Marriott
Services from 1995 to 1999, serving as chief financial officer.
From 1993 to 1995, Mr. Bethers served as vice president of
development for Host Marriott Corporation. From 1985 to 1993, Mr.
Bethers worked for Marriott Corporation most recently serving
as director of finance. Mr. Bethers received a bachelor’s
degree in public policy and a master’s degree in business
administration from Brigham Young University.
Richard Bierwagen has served as our Vice
President of Sales and Marketing since September 1999. Prior to
joining us, Mr. Bierwagen worked for GKN, plc, a global
manufacturing company from 1986 to 1999, most recently serving as
vice president and general manager. Mr. Bierwagen received a
bachelor’s degree in business from Montana State University
and a master’s degree in business administration from the
Owen School at Vanderbilt University.
Scott Donnelly has served as our Vice President
of Human Resources since January 2000. Prior to joining us, Mr.
Donnelly worked for Nortel Networks, previously Bay Networks, from
1993 to 1999, most recently serving as director of human resources
for worldwide field operations. Prior to that he served as human
resources manager at Hewlett Packard and Wang Laboratories. Mr.
Donnelly received a bachelor’s degree in psychology from
Hartwick College and a master’s of science degree in
industrial relations from West Virginia University.
Brad Hafer has served as our Vice President of
Corporate Development since February 2000. Prior to joining us,
Mr. Hafer worked for A.T. Kearney from 1993 to 1999, most recently
serving as a principal. Mr. Hafer received a bachelor’s
degree in engineering from Lafayette College and a master’s
degree in management from Northwestern University’s J.L.
Kellogg Graduate School of Management.
Murali Menon has served as our Vice President
of Engineering since June 1999. Prior to joining us, Mr. Menon
worked for Epsilon Data Management, a database marketing company,
from 1998 to 1999, serving as senior director of the Internet
group. From 1996 to 1998, Mr. Menon worked for Ordertrust, a
company providing back-end payment and order processing services
for on-line merchants serving as vice president of product
management. From 1987 to 1996, Mr. Menon worked at the
Massachusetts Institute of Technology’s Lincoln Laboratory as
a researcher. Mr. Menon received a bachelor’s degree, a master
’s degree and a doctorate in engineering from Case Western
Reserve University.
Reza Satchu has served as our Executive Vice
President since February 2000. Mr. Satchu is also a managing
director at Fenway Partners, a direct investment firm for
institutional investors, which is one of our principal investors.
Prior to joining Fenway Partners in 1996, Mr. Satchu worked as an
investment banker at Merrill Lynch & Co. Mr. Satchu currently
serves as a director of Decorative Concepts, New Creative
Enterprises and Iron Age Corporation. Mr. Satchu received a
bachelor’s degree in economics and political science from
McGill University and a master’s degree in business
administration from Harvard Business School.
William Sheehan has served as our Vice
President of Business Development since February 2000 and has been
with us since August 1999. Prior to joining us, Mr. Sheehan worked
for Precision Castparts Corporation, an industrial manufacturing
company, from 1998 to 1999, serving as vice president of business
development. From 1995 to 1998, Mr. Sheehan worked for A.T.
Kearney as a management consultant. Mr. Sheehan received a bachelor
’s degree in electrical engineering from the University of
Massachusetts and a master’s degree in management from
Northwestern University’s J.L. Kellogg Graduate School of
Management.
Robert Barrett has served as one of our
directors since June 1999. Mr. Barrett has served as managing
partner since 1983 at Battery Ventures, a venture capital firm he
founded, which is one of our principal investors. Mr. Barrett
currently serves as a director of a number of companies, including
Brooktrout Technologies and Peerless Systems. Mr. Barrett received
a bachelor’s degree in history from Harvard College and a
master’s degree in business administration from Harvard
Business School.
Marco Iansiti has served as one of our
directors since February 2000. Mr. Iansiti has been a professor in
the Technology and Operations Management Area at Harvard Business
School since 1989, where he focuses his research and teaching on
the management of technology, product development and the design
and start-up of new ventures. He is a member of the advisory
boards of Desktop.com, Inc. and PDF Solutions, Inc., and is a
director of Integrated Development Enterprise, Inc. and Model N,
Inc. Mr. Iansiti received a bachelor’s degree and a Ph.D. in
physics from Harvard University.
Peter Lamm has served as one of our directors
since November 1999. Mr. Lamm is chairman and chief executive
officer and a founding partner of Fenway Partners, which he
co-founded in 1994 and which is one of our principal investors.
Mr. Lamm currently serves as a director of a number of Fenway
Partners’ portfolio companies, including Aurora Foods,
Quality Stores, Iron Age Corporation, Simmons Company, Delimex
Holdings, Decorative Concepts and Blue Capital Management. Mr.
Lamm received a bachelor’s degree in English literature from
Boston University and a master’s degree in business
administration from Columbia University School of
Business.
Marc Lipschultz has served as one of our
directors since December 1999. Mr. Lipschultz has worked since
1995 at Kohlberg Kravis Roberts & Co., one of our principal
investors. Prior to joining Kohlberg Kravis Roberts & Co., Mr.
Lipschultz worked as an investment banker at Goldman, Sachs &
Co. Mr. Lipschultz serves as a director of Amphenol Corporation,
The Boyd’s Collection, Ltd., Evenflo Company and Spaulding
Sports Worldwide. Mr. Lipschultz received a bachelor’s degree
from Stanford University and received a master’s degree in
business administration from Harvard Business School.
Ravi Mohan has served as one of our directors
since June 1999. Mr. Mohan has worked with Battery Ventures since
1996, most recently as a principal. Prior to joining Battery
Ventures, Mr. Mohan worked for McKinsey & Company from 1994 to
1996. Mr. Mohan currently serves as a director for Corillian
Software. Mr. Mohan received a bachelor’s degree in
operations research and industrial engineering from Cornell
University and a master’s degree in business administration
from the University of Michigan Business School.
Our board of directors currently consists of seven
directors. Each director is elected for a period of one year at
our annual meeting of stockholders and serves until the next
annual meeting or until his or her successor is duly elected and
qualified.
The board of directors appoints our executive officers
on an annual basis, and they serve until successors have been duly
elected and qualified. Asif Satchu and Reza Satchu are brothers.
There are no further family relationships among any of our
directors, officers or key employees.
The board of directors intends to name two additional
outside directors.
The election of Messrs. Barrett and Mohan to our board
of directors in June 1999 was required by our stockholders
agreement with the holders of our Series A preferred stock and of
substantially all of our common stock. The election of Mr. Lamm in
November 1999 and Mr. Lipschultz in December 1999 was required by
our voting agreement with the holders of our Series A preferred
stock, our Series B preferred stock and substantially all of our
common stock. Both the stockholders agreement and the voting
agreement automatically terminate upon the closing of this
offering.
Our board of directors has established an audit
committee and a compensation committee, both in January 2000. The
audit committee reviews our internal accounting procedures and
consults with and reviews the services provided by our independent
accountants. The compensation committee reviews and determines the
compensation and benefits of all of our officers, establishes and
reviews general policies relating to the compensation and benefits
of all of our employees, and upon the closing of this offering
will administer our 1999 Stock Option Plan.
|
Compensation Committee Interlocks and Insider
Participation
|
Prior to establishing the compensation committee, the
board of directors as a whole performed the functions delegated to
the compensation committee. No member of our current compensation
committee has ever served as one of our officers or employees.
None of our executive officers serves as a member of the board of
directors or compensation committee of any entity that has one or
more executive officers serving on our board of directors or
compensation committee.
Our directors currently do not receive any cash
compensation from us for their services as members of the board of
directors. We reimburse our directors for out-of-pocket expenses
in connection with attendance at board and committee meetings. All
of our directors, including non-employee directors, are eligible
to participate in our 1999 Stock Option Plan.
In February 2000, we granted options to purchase
15,000 shares of common stock to each member of the board of
directors other than Messrs. Burgstone and Satchu. These options
vest ratably over twelve months following the date of
grant.
We have entered into employment agreements with each
of Messrs. Burgstone and Satchu. Our agreements with Messrs.
Burgstone and Satchu require that we employ each of them in a
position no lower in authority than Executive Vice President. Each
of them will receive a salary of $150,000 annually, subject to
adjustment from time to time by the board, plus a discretionary
bonus. All work product and intellectual property created by
Messrs. Burgstone and Satchu during the term of the agreements
belong to us. Our agreements prohibit Messrs. Burgstone and Satchu
from working for a competitor of ours and from soliciting any of
our employees to work for either of them at another company for
two years following termination of employment with us. The
employment agreements provide that we may terminate Mr. Burgstone
’s or Mr. Satchu’s employment upon 30 days notice, or
earlier if the termination is for cause. If we terminate Mr.
Burgstone’s or Mr. Satchu’s employment without cause or
either of them terminates his employment for good reason, we must
continue to pay each of them his base salary for 12
months.
We have also entered into stock restriction agreements
with each of Messrs. Burgstone and Satchu. Under these stock
restriction agreements, as of January 2000, 1,747,625 shares held
by each vest ratably each month through June 2001. Our stock
restriction agreement with each provides, among other things, that
the vesting schedule of all shares of common stock owned by each
will be accelerated by 12 months if we terminate him without cause
or if he resigns for good reason.
The following table sets forth a summary of the
compensation paid during the fiscal year ended December 31, 1999
to our Chief Executive Officer. No other executive officer earned
more than $100,000. Mr. Burgstone was paid a salary from July 1
through December 31, 1999. His annual salary is $150,000.
Compensation in the form of perquisites and other personal
benefits has been omitted because the aggregate amount of these
perquisites and other personal benefits constituted less than the
lesser of $50,000 or 10% of his total annual salary and bonus for
1999. We did not award any long term compensation to Mr. Burgstone
in 1999.
Summary Compensation Table
| |
|
|
|
|
Name and
Principal Position
|
|
Salary
|
|
Bonus
|
| Jonathan
Burgstone |
|
$73,365 |
|
$50,000 |
|
Chief Executive Officer |
|
|
|
|
Option Grants
Since our inception we have not granted any options to
Mr. Burgstone.
1999 Stock Option Plan
Our board of directors and shareholders adopted our
1999 Stock Option Plan in June 1999. We have reserved 5,251,924
shares of common stock for issuance under the plan. The plan
terminates in June 2009, unless terminated earlier by our board of
directors.
Effective upon the closing of this offering the
compensation committee of our board of directors will administer
the plan. The compensation committee has authority to interpret
the plan, grant awards and make all other determinations necessary
to administer the plan.
The plan provides for the grant of both incentive
stock options, commonly called ISOs, that qualify under Section
422 of the Internal Revenue Code, and nonqualified stock options,
commonly called NQSOs. ISOs may be granted only to our employees
or employees of a parent or subsidiary. NQSOs may be granted to
our employees, directors and consultants. Generally, the exercise
price of ISOs must be at least equal to the fair market value of
our common stock on the date of grant. Any grant of an ISO to a
holder of 10% or more of our outstanding shares of common stock
must have an exercise price of at least 110% of the fair market
value of our common stock on the date of grant. The exercise price
of NQSOs must be at least equal to 85% of the fair market value of
our common stock on the date of grant. Options granted under the
plan have a maximum term of 10 years. Options granted under the
plan may not be transferred other than by will or by the laws of
descent and distribution. They generally also must be exercised
during the lifetime of the optionee and only by the
optionee.
Options granted under the plan generally expire three
months after the termination of the optionee’s service,
except in the case of death or disability, in which case the
options generally may be exercised up to 12 months following the
date of death. If we are dissolved or liquidated or experience a
“change in control”, the successor corporation, if any,
may assume or substitute for outstanding awards. If a successor
corporation does not assume or substitute for the awards, the
compensation committee may accelerate the vesting of outstanding
options.
Limitation of Liability and Indemnification
Matters
Our certificate of incorporation limits the liability
of directors to the maximum extent permitted by Delaware law.
Delaware law provides that directors of a corporation will not be
personally liable for monetary damages for breach of their
fiduciary duties as directors, except liability for:
Ÿ
|
any
breach of their duty of loyalty to the corporation or its
stockholders;
|
Ÿ
|
acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
|
Ÿ
|
unlawful payments of dividends or unlawful stock
repurchases or redemption; or
|
Ÿ
|
any
transaction from which the director derived an improper personal
benefit.
|
This limitation of liability does not apply to
liabilities arising under the federal securities laws and does not
affect the availability of equitable remedies such as injunctive
relief or rescission.
Our by-laws provide that we shall indemnify our
directors, officers, employees and agents to the fullest extent
permitted by law. We believe that indemnification under our
by-laws covers negligence and gross negligence on the part of
indemnified parties. Our by-laws also permit us to secure
insurance on behalf of any officer, director, employee or other
agent for any liability arising out of his or her actions in that
capacity, regardless of whether the by-laws would permit
indemnification. We intend to obtain director and officer
liability insurance that covers these matters, including matters
arising under the Securities Act.
At present, we are not aware of any pending or
threatened litigation or proceeding involving any of our
directors, officers, employees or agents in which indemnification
would be required or permitted.
RELATED PARTY TRANSACTIONS
From June through July 1999, we sold 6,562,873 shares
of Series A preferred stock at $0.93 per share. In this private
placement, we sold 4,317,324 shares to Battery Ventures V L.P. and
affiliated entities, 1,618,997 shares to Sequoia Capital VIII and
affiliated entities, 86,346 shares to Rustom and Zarina Satchu,
Mr. Satchu’s parents, 68,357 shares to Peter Lamm and 68,357
shares to Reza Satchu, Mr. Satchu’s brother. Each share of
Series A preferred stock is convertible into two shares of common
stock.
From November 1999 through February 2000, we sold
16,040,039 shares of Series B preferred stock at $2.34 per share.
In this private placement, we sold 2,138,672 shares to Battery
Ventures V L.P. and affiliated entities, 3,421,875 shares to
Aurora Investments LLC, 3,421,875 shares to Fenway Partners
Capital Fund II, L.P., 1,283,203 shares to Sequoia Capital VIII
and affiliated entities, 155,954 shares to Rustom and Zarina
Satchu, 78,630 shares to Peter Lamm, 78,630 shares to Reza Satchu
and 56,632 shares to Karen Andrews, Mr. Burgstone’s mother.
Each share of Series B preferred stock is convertible into one
half of one share of common stock.
In November 1999, we granted an option to purchase
172,328 shares of common stock at $0.94 per share to Reza Satchu
in connection with his provision of advisory services to
us.
From June 1999 through February 2000, we loaned a
total of $133,634 to Asif Satchu. No interest was charged on the
loan. We expect that Mr. Satchu will repay the loaned amounts on
or prior to March 31, 2000.
Since the launch of our marketplace in October 1999,
portfolio companies in which some of our directors and some of our
principal stockholders or their affiliates have an ownership
interest have participated in our marketplace and have accounted
for a substantial amount of the total dollar value of RFQs posted.
See “Risk Factors.”
In each transaction set forth above where executive
officers, directors, five percent or greater stockholders or
family members of any of these persons purchased shares, these
shares were purchased at the same price and on the same terms as
shares purchased by other investors at those times.
We will require that all future transactions with
parties affiliated with us, including loans between us and our
officers, directors, principal stockholders and their affiliates,
be approved by a majority of the board of directors, including a
majority of independent and disinterested directors, and that such
transactions be on terms no less favorable to us than could be
obtained from unaffiliated third parties.
The following table sets forth information known to us
with respect to the beneficial ownership of our common stock by
the following persons as of March 1, 2000:
Ÿ
|
each
person or group of affiliated persons known by us to own
beneficially more than 5% of the outstanding shares of common
stock;
|
Ÿ
|
each of
our executive officers named in the summary compensation table;
and
|
Ÿ
|
all
directors and executive officers as a group.
|
Percentage ownership in the following table is based
on 31,127,282 shares of common stock outstanding as of March 1,
2000. Percentage ownership assumes conversion of all shares of
preferred stock outstanding as of March 1, 2000 into shares of
common stock, which will occur upon the closing of this
offering.
We have determined beneficial ownership in the table
in accordance with the rules of the Securities and Exchange
Commission. In computing the number of shares beneficially owned
by a person and the percentage ownership of that person, we have
deemed shares of common stock subject to options or warrants held
by that person that are currently exercisable or will become
exercisable within 60 days of March 1, 2000, assuming that this
offering occurs in that 60-day period, to be outstanding, but we
have not deemed these shares to be outstanding for computing the
percentage ownership of any other person. To our knowledge, except
as set forth in the footnotes below, each stockholder identified
in the table possesses sole voting and investment power with
respect to all shares of common stock shown as beneficially owned
by that stockholder.
The address for each listed director and officer is
c/o SupplierMarket.com, Inc., 10 Mall Road, Burlington, MA 01803.
The address of the entities affiliated with Battery Ventures is
c/o Battery Ventures, 901 Mariner’s Island Boulevard, Suite
475, San Mateo, CA 94404. The address for Sequoia Capital is 3000
Sandhill Road, Building 4, Suite 280, Menlo Park, CA 94025. The
address of the Fenway Partners Capital Fund II, L.P. is c/o Fenway
Partners, Inc., 152 West 57th St., New York, NY 10019. The address
of Aurora Investments LLC is c/o Kohlberg Kravis Roberts &
Co., 9 West 57th St., New York, NY 10019.
Beneficial Ownership
Name of
Beneficial Owner
|
|
|
|
Percentage of
Shares
Outstanding
|
| |
Number of
Shares
Beneficially Owned
|
|
Before
Offering
|
|
After
Offering
|
| Entities
affiliated with Battery Ventures(1) |
|
9,955,499 |
|
32.0 |
% |
|
|
| Entities
affiliated with Sequoia Capital(2) |
|
4,131,110 |
|
13.3 |
% |
|
|
| Jonathan
Burgstone |
|
3,535,218 |
|
11.4 |
% |
|
|
| Asif
Satchu |
|
3,535,218 |
|
11.4 |
% |
|
|
| Fenway Partners
Capital Fund II, L.P. |
|
1,792,072 |
|
5.8 |
% |
|
|
| Aurora
Investments LLC, executives of KKR & Co. |
|
1,751,505 |
|
5.6 |
% |
|
|
| Robert
Barrett(1) |
|
9,957,999 |
|
32.0 |
% |
|
|
| Marco
Iansiti |
|
54,229 |
|
* |
|
|
|
| Peter
Lamm(3) |
|
1,970,601 |
|
6.3 |
% |
|
|
| Marc
Lipschultz(4) |
|
1,754,005 |
|
5.6 |
% |
|
|
| Ravi
Mohan(1) |
|
9,957,999 |
|
32.0 |
% |
|
|
| All directors
and officers as a group (14 persons)(1)(3)(4) |
|
21,288,848 |
|
68.3 |
% |
|
|
*
|
Less
than 1% of the outstanding shares of common stock.
|
(1)
|
Includes 8,515,061 shares held by Battery Ventures V
L.P., 195,999 shares held by Battery Investment Partners V, LLC
and 1,244,439 shares held by Battery Ventures Convergence Fund,
L.P. Mr. Barrett and Mr. Mohan disclaim beneficial ownership of
the shares held by these entities except to the extent of their
pecuniary interest in those shares.
|
(2)
|
Includes 3,517,489 shares held by Sequoia Capital VIII,
75,732 shares held by Sequoia International Technology Partners
VIII, 201,659 shares held by Sequoia International Technology
Partners VIII (Q), 77,592 shares held by CMS Partners LLC, 7,124
shares held by Sequoia 1997, 221,332 shares held by Sequoia
Capital Franchise Fund and 30,182 shares held by Sequoia Capital
Franchise Partners.
|
(3)
|
Includes 1,792,072 shares held by Fenway Partners Capital
Fund II, L.P. and 176,029 shares held directly by Mr. Lamm. Mr.
Lamm is a managing member of Fenway Partners II, LLC, the
general partner of Fenway Partners Capital Fund II, L.P. Mr.
Lamm disclaims beneficial ownership of the shares held by Fenway
Partners Capital Fund II, L.P. except to the extent of his
pecuniary interest in those shares.
|
(4)
|
Includes 1,751,505 shares held by Aurora Investments LLC,
an entity with which Mr. Lipschultz is affiliated. Mr.
Lipschultz disclaims beneficial ownership of the shares held by
this entity except to the extent of his pecuniary interest in
those shares.
|
DESCRIPTION OF CAPITAL STOCK
General
Upon the completion of this offering, we will be
authorized to issue 100,000,000 shares of common stock, $0.001 par
value per share, and 1,000,000 shares of undesignated preferred
stock, $0.001 par value per share. The following description of
our capital stock does not purport to be complete and is subject
to, and qualified in its entirety by, our certificate of
incorporation and by-laws, which we have included as exhibits to
the registration statement of which this prospectus forms a
part.
Common Stock
As of December 31, 1999, there were 9,884,246 shares
of common stock outstanding, held of record by five stockholders.
In addition, as of December 31, 1999, there were 2,353,808 shares
of common stock subject to outstanding options. Upon completion of
this offering, there will be
shares of common stock outstanding, assuming no exercise of
outstanding stock options, as all outstanding shares of preferred
stock will convert into common stock upon the closing of this
offering.
Each share of common stock entitles its holder to one
vote on all matters to be voted upon by stockholders. Subject to
preferences that may apply to any outstanding preferred stock,
holders of common stock will receive ratably any dividends that
the board of directors may declare out of funds legally available
for that purpose. In the event of our liquidation, dissolution or
winding up, the holders of common stock are entitled to share
ratably in all assets remaining after payment of liabilities and
any liquidation preference of preferred stock that may be
outstanding. The common stock has no preemptive rights, conversion
rights or other subscription rights or redemption or sinking fund
provisions. All outstanding shares of common stock are fully paid
and non-assessable, and the shares of common stock that we will
issue upon completion of this offering will be fully paid and
non-assessable.
Preferred Stock
As of December 31, 1999, we had two series of
convertible preferred stock: Series A and Series B. As of December
31, 1999, the number of outstanding shares for each series of our
preferred stock was:
Ÿ
|
6,562,873 shares of Series A; and
|
Ÿ
|
14,863,770 shares of Series B.
|
In January and February 2000, we issued 1,176,269
additional shares of Series B preferred stock. Upon the closing of
this offering, all outstanding shares of Series A preferred stock
will convert on a one-to-two basis into 13,125,746 shares of
common stock and all outstanding shares of Series B preferred
stock will convert on a two-to-one basis into 8,020,020 shares of
common stock. Thereafter, the board of directors will have the
authority, without further action by the stockholders, to issue up
to 1,000,000 shares of preferred stock in one or more series and
to designate the rights, preferences, privileges and restrictions
of each series. The issuance of preferred stock could have the
effect of restricting dividends on the common stock, diluting the
voting power of the common stock, impairing the liquidation rights
of the common stock or delaying or preventing a change in control
without further action by the stockholders. We have no present
plans to issue any shares of preferred stock after the completion
of this offering.
Warrants
In September, 1999 we issued a warrant to purchase
50,000 shares of Series A preferred stock at an exercise price of
$0.9265 per share. This warrant was outstanding at December 31,
1999 and is exercisable until September 21, 2006. Upon the closing
of this offering, this warrant will automatically convert into a
warrant to purchase 100,000 shares of common stock at an exercise
price of $0.46.
In February 2000, our board of directors authorized
the issuance of strategic warrants to various companies to
purchase up to a total of 2,181,416 shares of common stock. We
have entered into non-binding letters of intent with several
companies to issue warrants under this program. We expect that
these warrants will vest quarterly, based on the warrant holder
attaining quarterly minimum targets for the total dollar value of
RFQs posted by the warrant holder through our marketplace that
result in the warrant holder selecting a supplier to fulfill an
RFQ.
Registration Rights
Set forth below is a summary of the registration
rights we have granted under our registration rights agreement and
our warrantholders registration rights agreement. All holders of
our preferred stock, each of Jonathan Burgstone and Asif Satchu
and the holder of the warrant to purchase shares of our Series A
preferred stock have registration rights under our registration
rights agreement. Holders of warrants to purchase our common stock
have registration rights under our warrant holders registration
rights agreement. These registration rights apply to the shares of
our common stock that holders of preferred stock or warrants will
receive upon conversion or exercise of the security they currently
hold.
Required Registrations.
At any time following 90 days after this offering, holders
of the registration rights, excluding Messrs. Burgstone and
Satchu, granted under our registration rights agreement may
request us to register shares of common stock, provided the
holders own at least 35% of the common stock issued upon
conversion of preferred stock. These required registrations are
subject to our right, upon advice of our underwriters, to reduce
the number of shares proposed to be registered. We are obligated
to effect only three registrations pursuant to requests for
required registrations. If, pursuant to advice from our
underwriters, we exclude shares requested to be included in a
registration, the shares registered on behalf of the selling
shareholders will be allocated among all holders of shares with
rights to be included in the registration on the basis of the
number of shares with associated registration rights held by these
shareholders.
Incidental Registrations.
The holders of incidental registration rights, which, in
addition to holders of preferred stock, include Jonathan Burgstone
and Asif Satchu under the registration rights agreement, have
unlimited rights to require us to register their shares when we
undertake a public offering, subject to the discretion of the
managing underwriter of the offering to decrease, or in the case
of this offering, to eliminate, the number of shares that the
holders may register.
Registrations on Form S-3.
After we have qualified for registration on Form S-3, which
will not be available until at least 12 months after we become a
publicly reporting company, holders of registration rights may
request in writing that we effect registrations on Form S-3.
Holders of registration rights granted under our registration
rights agreement may request an unlimited number of registrations
on Form S-3.
Restrictions. Under our
registration rights agreement, if our board of directors
determines that a registration of our common stock would have a
material adverse effect on one of our underwritten public
offerings or would require premature disclosure of pending
negotiations of a significant transaction, our board of directors
may suspend these rights to register shares for so long as the
condition exists, but in no event for longer than 90 days and not
more than once in any twelve-month period.
Under our warrantholders registration rights
agreement, we may postpone the filing of a registration statement
on Form S-3 for up to 120 days if we file any other registration
statement under the Securities Act, other than on Form S-4 or Form
S-8, if we receive a request to file a registration statement from
a holder of registration rights granted under our registration
rights agreement or if our board of directors determines that a
registration of our common stock on Form S-3 would have a material
adverse effect on a significant transaction.
Transferability. The
registration rights granted under the registration rights
agreement are transferable provided the transfer is to a person or
entity holding at least 50,000 shares or to a partner, member,
shareholder
or affiliate of an existing party to the registration rights
agreement, and provided the transferee agrees in writing to be
bound by the terms of the registration rights
agreement.
Termination. All
registration rights terminate six years after the closing of this
offering.
Expenses. We must bear
all expenses associated with the filing of registration statements
on behalf of holders of registration rights, except for
underwriting discounts and selling commissions, which holders of
registration rights selling in the offering must bear.
Anti-Takeover Provisions
We are subject to Section 203 of the Delaware General
Corporation Law, which regulates acquisitions of some Delaware
corporations. In general, Section 203 prohibits a publicly held
Delaware corporation from engaging in a “business combination
” with an “interested stockholder” for a period of
three years following the date the person becomes an interested
stockholder, unless:
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the
corporation’s board of directors approved the business
combination or the transaction in which the person became an
interested stockholder prior to the time the person attained
this status;
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upon
consummation of the transaction that resulted in the person
becoming an interested stockholder, the person owned at least
85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding shares owned by
persons who are directors and also officers; or
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at or
subsequent to the time the person became an interested
stockholder, the corporation’s board of directors approved
the business combination and the stockholders other than the
interested stockholder authorized the transaction at an annual
or special meeting of stockholders by the affirmative vote of at
least 66 2
/3% of the outstanding voting
stock not owned by the interested stockholder.
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A “business combination” generally includes
a merger, asset or stock sale or other transaction with or caused
by the interested stockholder. In general, an “interested
stockholder” is a person who, together with the person’s
affiliates and associates, owns, or within three years prior to
the determination of interested stockholder status did own, 15% or
more of a corporation’s voting stock.
This statute could prohibit or delay mergers or other
takeover or change-in-control attempts with respect to us and,
accordingly, may discourage attempts to acquire us.
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Certificate of Incorporation and Bylaw
Provisions
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Elimination of Stockholder Action by Written
Consent. Our certificate of
incorporation and by-laws will provide that any action required or
permitted to be taken by our stockholders at an annual or special
meeting may be taken only if properly brought before the meeting,
and may not be taken by written consent in lieu of a
meeting.
Stockholder Meetings.
The by-laws will also provide that special meetings of the
stockholders may be called only by the board of directors, the
chairman of the board or the chief executive officer.
Notice Requirements for Stockholder Nominations and
Proposals. Under our by-laws to be
effective upon the closing of this offering, stockholders wishing
to propose business to be brought before a meeting of stockholders
will be required to comply with various advance notice
requirements.
Undesignated Preferred Stock.
The authorization of undesignated preferred stock makes it
possible for our board of directors to issue preferred stock with
voting or other rights or preferences that could impede the
success of any attempt to acquire us. These and other provisions may
have the effect of deterring hostile takeovers or delaying changes
in control of us.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock
is American Stock Transfer and Trust. The transfer agent’s
address is 40 Wall Street, New York, NY 10005.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for
our common stock. Future sales of substantial amounts of our
common stock in the public market could adversely affect
prevailing market prices. Sales of substantial amounts of our
common stock in the public market after any restrictions on sale
lapse could adversely affect the prevailing market price of the
common stock and impair our ability to raise equity capital in the
future.
Upon completion of the offering, we will have
outstanding shares of common stock, outstanding options to
purchase 2,353,808 shares of common stock and outstanding warrants
to purchase 100,000 shares of common stock, assuming no additional
option or warrant grants or exercises after December 31, 1999. Of
the shares sold
in the offering,
shares will be subject to the lock-up
agreements described below assuming that we sell all shares
reserved under our directed share program to the entities or
persons for whom these shares have been reserved. We expect that
the remaining
shares sold in the offering, plus any
shares issued upon exercise of the underwriters’
over-allotment option, will be freely tradable without restriction
under the Securities Act, unless purchased by our “affiliates
” as that term is defined in Rule 144 under the Securities
Act. In general, affiliates include officers, directors and 10% or
greater stockholders.
The remaining
shares outstanding and
2,453,808 shares subject to outstanding options and warrants are
“restricted securities” within the meaning of Rule 144.
Restricted securities may be sold in the public market only if the
sale is registered or if it qualifies for an exemption from
registration, or if the securities can be sold under Rules 144,
144(k) or 701 promulgated under the Securities Act, which are
summarized below. Sales of restricted securities in the public
market, or the availability of these shares for sale, could
adversely affect the market price of the common stock.
Lock-Up Agreements
Our directors, officers, employees and various other
stockholders, who together hold substantially all of our
securities, have entered into lock-up agreements in connection
with this offering. These lock-up agreements generally provide
that these holders will not offer, sell, contract to sell, grant
any option to purchase or otherwise dispose of our common stock or
any securities exercisable for or convertible into our common
stock owned by them for a period of 180 days after the date of
this prospectus without the prior written consent of the
representatives of the underwriters of this offering. The lock-up
agreements executed by our employees, officers, directors and
certain affiliates also cover any shares acquired through our
directed share program. Notwithstanding possible earlier
eligibility for sale under the provisions of Rules 144, 144(k) and
701, shares subject to lock-up agreements may not be sold until
these agreements expire or are waived by the representatives of
the underwriters of this offering. Assuming that the
representatives of the underwriters of this offering do not
release any security holders from the lock-up agreements, the
following shares will be eligible for sale in the public market at
the following times:
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Beginning on the effective date of the registration
statement of which this prospectus forms a part,
of the
shares sold in this offering will
be immediately available for sale in the public
market.
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Beginning
days after the effective date, an additional
shares will be eligible for
sale pursuant to Rule 144, Rule 144(k) and Rule 701.
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Rule 144
In general, under Rule 144 as currently in effect,
after the expiration of the lock-up agreements, a person who has
beneficially owned restricted securities for at least one year
would be entitled to sell within any three-month period a number
of shares that does not exceed the greater of:
Ÿ
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one
percent of the number of shares of common stock then
outstanding, which will equal approximately
shares
immediately after this offering; and
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the
average weekly trading volume of our common stock during the
four calendar weeks preceding the sale.
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Sales under Rule 144 are also subject to requirements
with respect to manner of sale, notice and the availability of
current public information about us.
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have
been our affiliate at any time during the three months preceding a
sale, and who has beneficially owned the shares proposed to be
sold for at least two years, may sell these shares without
complying with the manner of sale, public information, volume
limitation or notice requirements of Rule 144.
Rule 701
Rule 701, as currently in effect, permits our
employees, officers, directors or consultants who purchased shares
pursuant to a written compensatory plan or contract to resell
these shares in reliance upon Rule 144, but without compliance
with certain restrictions. Rule 701 provides that affiliates may
sell their Rule 701 shares under Rule 144 ninety days after
effectiveness without complying with the holding period
requirement and that non-affiliates may sell these shares in
reliance on Rule 144 ninety days after effectiveness without
complying with the holding period, public information, volume
limitation or notice requirements of Rule 144.
Employee Plans
We intend to file a registration statement under the
Securities Act after the effective date of this offering to
register shares to be issued pursuant to our employee benefit
plans. As a result, any options or rights exercised under our 1999
Stock Option Plan will also be freely tradable in the public
market. However, shares held by affiliates will still be subject
to the volume limitation, manner of sale, notice and public
information requirements of Rule 144, unless otherwise resellable
under Rule 701. As of December 31, 1999, we had granted options to
purchase 1,650,584 shares of common stock to employees that had
not been exercised, of which options to purchase 49,921 shares
were exercisable. See “Management—1999 Stock Option Plan
” and “Description of Capital Stock—Registration
Rights.”
CERTAIN UNITED STATES FEDERAL TAX
CONSIDERATIONS FOR NON-UNITED STATES
HOLDERS
General
This section summarizes the material U.S. Federal tax
consequences to holders of common stock that are non-U.S. holders.
In general, you are a non-U.S. holder if you are:
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an
individual who is a nonresident alien of the U.S;
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a
corporation or other entity taxed as a corporation organized or
created under non-U.S. law;
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an
estate that is not taxable in the U.S. on its worldwide income;
or
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a trust
that is either not subject to primary supervision over its
administration by a U.S. Court or not subject to the control of
a U.S. person with respect to substantial trust
decisions.
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If a partnership holds common stock, the tax treatment
of a partner will generally depend upon the status of the partner
and upon the activities of the partnership. If you are a partner
of a partnership holding common stock, we suggest that you consult
your tax advisor.
This discussion does not address all aspects of U.S.
Federal taxation, and in particular is limited in the following
ways:
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the
discussion assumes that you hold your common stock as a capital
asset (that is, for investment purposes), and that you do not
have a special tax status;
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the
discussion does not consider tax consequences that depend upon
your particular tax situation in addition to your ownership of
the common stock;
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the
discussion does not consider special tax provisions that may be
applicable to you if you have relinquished U.S. citizenship or
residence;
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the
discussion is based on current law. Changes in the law may
change the tax treatment of the common stock;
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the
discussion does not cover state, local or foreign law;
or
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we have
not requested a ruling from the IRS on the tax consequences of
owning the common stock. As a result, the IRS could disagree
with portions of this discussion.
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If you are considering buying common stock, we suggest
that you consult your tax advisors about the tax consequences of
holding and disposing of the common stock in your particular
situation.
Distributions
Distributions paid on the shares of common stock
generally will constitute dividends for U.S. Federal income tax
purposes to the extent paid from our current or accumulated
earnings and profits, as determined under U.S. Federal income tax
principles. To the extent that the amount of any distributions
exceeds our current or accumulated earnings and profits for a
taxable year, the distribution will first be treated as a tax-free
return of your basis in the shares of common stock, causing a
reduction in the adjusted basis of the common stock, and the
balance in excess of adjusted basis will be taxed as capital gain
recognized on a disposition of the common stock (as discussed
below). Dividends paid to you generally will be subject to U.S.
withholding tax at a 30% rate or, if a tax treaty applies, a lower
rate specified by the treaty, unless you receive the dividends in
connection with a trade or business you conduct in the U.S. To
receive a reduced treaty rate, you must furnish to us or our
paying agent a duly completed Form 1001 or Form W-8BEN (or
substitute form) certifying to your qualification for the reduced
rate.
Currently, withholding generally is imposed on the
gross amount of a distribution, regardless of whether we have
sufficient earnings and profits to cause the distribution to be a
dividend for U.S. Federal income tax purposes. However,
withholding on distributions made after December 31, 2000, may be
on less than the gross amount of the distribution if the
distribution exceeds a reasonable estimate of our accumulated and
current earnings and profits.
In order to claim an exemption from withholding on the
ground that the dividends are effectively connected with a U.S.
trade or business, you must provide to us or our paying agent a
duly completed Form 4224 or Form W-8ECI (or substitute form)
certifying your exemption. However, dividends exempt from U.S.
withholding because they are effectively connected generally are
subject to U.S. Federal income tax on a net income basis at the
regular graduated tax rates. These rules might be altered by an
applicable tax treaty. If you are a corporation, any effectively
connected dividends received by you may, under certain
circumstances, be subject to an additional branch profits tax at a
30% rate or a lower rate specified by an applicable income tax
treaty.
Under current U.S. Treasury regulations, dividends
paid before January 1, 2001, to an address outside the U.S. are
presumed to be paid to a resident of the country of address,
unless the payor has knowledge to the contrary, for purposes of
the withholding discussed above and for purposes of determining
the applicability of a tax treaty rate. However, U.S. Treasury
regulations applicable to dividends paid after December 31, 2000
eliminate this presumption, subject to certain transition
rules.
For dividends paid after December 31, 2000, you
generally will be subject to U.S. backup withholding tax at a 31%
rate under the backup withholding rules described below, rather
than at the 30% or reduced tax treaty rate, as described above,
unless you comply with certain IRS certification or documentary
evidence procedures. Certain changes to these rules apply to
dividend payments made after December 31, 2000 to certain non-U.S.
holders or foreign intermediaries. You should consult your own tax
advisor concerning the effect, if any, of the rules affecting
post-December 31, 2000 dividends on your possible investment in
common stock.
You may obtain a refund of any excess amounts withheld
by filing an appropriate claim for refund along with the required
information with the IRS.
Gain on Disposition of Common
Stock
You generally will not be subject to U.S. Federal
income tax on a sale or other disposition of the common stock
unless one of the following apply:
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if the
gain is effectively connected with a trade or business you
conduct in the U.S. you will, unless an applicable treaty
provides otherwise, be taxed on your net gain on the sale under
regular graduated U.S. Federal income tax rates. If you are a
foreign corporation, you may be subject to an additional branch
profits tax at a 30% rate, unless an applicable income tax
treaty provides for a lower rate.
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if you
are an individual and are present in the U.S. for 183 or more
days in the taxable year of the disposition and certain other
conditions are met, you will be subject to a flat 30% tax on
your gain from the sale, which may be offset by certain U.S.
capital losses.
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if we
are or have been a U.S. real property holding corporation for
U.S. Federal income tax purposes at any time during the shorter
of the five-year period ending on the date of the disposition or
the period during which you held the common stock, and certain
other conditions apply, you may be taxable in the U.S. on your
gain from a sale of the common stock pursuant to the effectively
connected rules described above. We believe that we never have
been, are not currently and are not likely in the future to
become, a U.S. real property holding corporation for U.S.
Federal income tax purposes.
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Federal Estate Tax
If you are an individual who owns or is treated as
owning common stock at the time of your death or if you have made
certain lifetime transfers of an interest in common stock, you
will be required to include the value of the common stock in your
gross estate for U.S. Federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding
Tax
We must report annually to the IRS the amount of
dividends paid to you and the tax withheld with respect to the
dividends. These requirements apply even if withholding was not
required on payments to you. Pursuant to an applicable tax treaty,
that information may also be made available to the tax authorities
in your country of residence.
Backup withholding tax generally may be imposed at the
rate of 31% on certain payments to persons that fail to furnish
certain required information. Backup withholding generally will
not apply to dividends paid before January 1, 2001 to non-U.S.
holders. See the discussion under “Distributions” above
for rules regarding reporting requirements to avoid backup
withholding on dividends paid after December 31, 2000.
As a general matter, information reporting and backup
withholding will not apply to a payment to you by or through a
foreign office of a foreign broker of the proceeds of a sale of
common stock effected outside the U.S. However, information
reporting requirements, but not backup withholding, will apply to
such a payment if the broker:
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is a
foreign person that derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the
U.S.;
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is a
controlled foreign corporation as defined in the Internal
Revenue Code; or
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is a
foreign partnership with certain U.S. connections (for payments
made after December 31, 2000).
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Information reporting requirements will not apply in
the above cases if the broker has documentary evidence in its
records that you are a non-U.S. holder and certain conditions are
met or you otherwise establish an exemption.
Payment of the proceeds of a sale of common stock by
or through a U.S. office of a broker is subject to both backup
withholding and information reporting unless you certify to the
payor in the manner required as to your non-U.S. status under
penalties of perjury or otherwise establish an
exemption.
Amounts withheld under the backup withholding rules do
not constitute a separate U.S. Federal income tax. Rather, any
amounts withheld under the backup withholding rules will be
refunded or allowed as a credit against your U.S. Federal income
tax liability, if any, provided the required information or
appropriate claim for refund is filed with the IRS.
The foregoing discussion is only a summary of certain
U.S. Federal income and estate tax consequences of the ownership,
sale or other disposition of common stock by non-U.S. holders. You
are urged to consult your own tax advisor with respect to the
particular tax consequences to you of ownership and disposition of
common stock, including the effect of any state, local, foreign or
other tax laws and any applicable income or estate tax
treaties.
Under the terms and subject to the conditions
contained in an underwriting agreement dated
, 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation,
Lehman Brothers Inc. and FleetBoston Robertson Stephens Inc. are
acting as representatives, the following respective numbers of
shares of common stock:
Underwriter
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Number
of Shares
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| Credit Suisse
First Boston Corporation |
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| Lehman Brothers
Inc. |
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| FleetBoston
Robertson Stephens Inc. |
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|
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|
|
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|
|
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|
|
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Total |
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The underwriting agreement provides that the
underwriters are obligated to purchase all the shares of common
stock in the offering if any are purchased, other than those
shares covered by the over-allotment option described below. The
underwriting agreement also provides that if an underwriter
defaults the purchase commitments of non-defaulting underwriters
may be increased or the offering of common stock may be
terminated.
We have granted to the underwriters a 30-day option to
purchase on a pro rata basis up to
additional shares from us at the initial public offering price
less the underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common
stock.
The underwriters propose to offer the shares of common
stock initially at the public offering price on the cover page of
this prospectus and to selling group members at that price less a
concession of $ per share. The
underwriters and the selling group members may allow a discount of
$ per share on sales to other
broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may
be changed by the representatives.
The following table summarizes the compensation and
estimated expenses we will pay.
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Per
Share
|
|
Total
|
| |
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Without
Over-allotment
|
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With
Over-allotment
|
|
Without
Over-allotment
|
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With
Over-allotment
|
Underwriting
Discounts and
Commissions paid by us |
|
$
|
|
$
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|
$
|
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$
|
| Expenses payable
by us |
|
$
|
|
$
|
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$
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$
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The underwriters have informed us that they do not
expect discretionary sales to exceed 5% of the shares of common
stock being offered.
We have agreed that we will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Securities Exchange Commission a
registration statement under the Securities Act relating to, any
shares of our common stock or securities convertible into or
exchangeable or exercisable for any of shares of our common stock,
or publicly disclose the intention to make any such offer, sale,
pledge, disposition or filing, without the prior written consent
of Credit Suisse First Boston Corporation for a period of 180 days
after the date of this prospectus, except for grants of employee
stock options pursuant to the terms of any plan in effect on the
date of this prospectus, issuances of securities pursuant to the
exercise of employee stock options outstanding on the date of this
prospectus, employee stock purchases pursuant to the terms of a
plan in effect on the date of this prospectus or the issuance of
shares pursuant to the exercise of any other stock options or
warrants outstanding on the date of this prospectus.
Our officers, directors, employees and various other
stockholders, who together hold substantially all of our stock,
have agreed that they will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any shares
of our common stock or securities convertible into or exchangeable
or exercisable for any of our common stock, enter into a
transaction that would have the same effect, or enter into any
swap, hedge or other arrangement that transfers, in whole or in
part, any of the economic consequences of ownership of our common
stock, whether any such aforementioned transaction is to be
settled by delivery of our common stock or such other securities,
in cash or otherwise, or publicly disclose the intention to make
any such offer, sale, pledge or disposition, or enter into any
such transaction, swap, hedge or other arrangement, without, in
each case, the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this
prospectus.
The underwriters have reserved for sale at the initial
public offering price up to shares of
common stock for employees, directors and certain other persons
associated with us who have expressed an interest in purchasing
our common stock in the offering. The number of shares available
for sale to the general public in the offering will be reduced to
the extent such persons purchase such reserved shares. Any
reserved shares not so purchased will be offered by the
underwriters to the general public on the same terms as the other
shares.
We have agreed to indemnify the underwriters against
liabilities under the Securities Act, or contribute to payments
which the underwriters may be required to make in that
respect.
We have applied to list the shares of common stock on
The Nasdaq Stock Market’s National Market under the symbol
“SMKT”.
Prior to this offering, there has been no public
market for the common stock. The initial public offering price
will be determined by negotiation between us and the
representatives, and may not reflect the market price for the
common stock following this offering. We will consider, among
others, the following principal factors in determining the initial
public offering price:
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the
information in this prospectus and otherwise available to the
representatives;
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market
conditions for initial public offerings;
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the
history of and prospects for the industry in which we will
compete;
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our
past and present operations;
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our
past and present earnings and current financial
position;
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the
ability of our management;
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our
prospects for future earnings;
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|
the
present state of our development and our current financial
condition;
|
Ÿ
|
the
recent prices of, and the demand for, publicly traded common
stock of generally comparable companies;
|
Ÿ
|
the
general condition of the securities markets at the time of this
offering; and
|
Ÿ
|
other
relevant factors.
|
We can offer no assurance that the initial public
offering price will correspond to the price at which the common
stock will trade in the public market subsequent to this offering
or that an active trading market for the common stock will develop
and continue after this offering.
The representatives may engage in over-allotment,
stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities
Exchange Act of 1934.
Ÿ
|
Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short
position.
|
Ÿ
|
Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not
exceed a specified maximum.
|
Ÿ
|
Syndicate covering transactions involve purchases of the
common stock in the open market after the distribution has been
completed in order to cover syndicate short
positions.
|
Ÿ
|
Penalty
bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by
the syndicate member is purchased in a stabilizing or syndicate
covering transaction to cover syndicate short
positions.
|
These stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the common
stock to be higher than it would otherwise be in the absence of
the transactions. These transactions may be effected on The Nasdaq
National Market or otherwise and, if commenced, may be
discontinued at any time.
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is
being made only on a private placement basis exempt from the
requirement that we prepare and file a prospectus with the
securities regulatory authorities in each province where trades of
common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable
securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made in
accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek
legal advice prior to any resale of the common stock.
Representations of Purchasers
Each purchaser of the common stock in Canada who
receives a purchase confirmation will be deemed to represent to us
and the dealer from whom such purchase confirmation is received
that (i) such purchaser is entitled under applicable provincial
securities laws to purchase such common stock without the benefit
of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal
and not as agent, and (iii) such purchaser has reviewed the text
above under “Resale Restrictions”.
Rights of Action (Ontario
Purchasers)
The securities being offered are those of a foreign
issuer and Ontario purchasers will not receive the contractual
right of action prescribed by Ontario securities law. As a result,
Ontario purchasers must rely on other remedies that may be
available, including common law rights of action for damages or
rescission or rights of action under the civil liability
provisions of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer’s directors and officers as
well as the experts named herein may be located outside of Canada
and, as a result, it may not be possible for Canadian purchasers
to effect service of process within Canada upon the issuer or such
persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a
result, it may not be possible to satisfy a judgment against the
issuer or such persons in Canada or to enforce a judgment obtained
in Canadian courts against such issuer or persons outside of
Canada.
Notice to British Columbia
Residents
A purchaser of common stock to whom the Securities
Act (British Columbia) applies is advised that such purchaser
is required to file with the British Columbia Securities
Commission a report within ten days of the sale of any common
stock acquired by such purchaser pursuant to this offering. Such
report must be in the form attached to British Columbia Securities
Commission Blanket Order BOR #95/17, a copy of which may be
obtained from us. Only one such report must be filed in respect of
common stock acquired on the same date and under the same
prospectus exemption.
Taxation and Eligibility for
Investment
Canadian purchasers of common stock should consult
their own legal and tax advisors with respect to the tax
consequences of an investment in the common stock in their
particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant
Canadian legislation.
The validity of the common stock offered hereby will
be passed upon for us by Ropes & Gray, Boston, Massachusetts.
Cravath, Swaine & Moore, New York, New York, has represented
the underwriters in this offering. Attorneys of Ropes & Gray
own 10,694 shares of our common stock through a collective
investment vehicle.
The financial statements as of December 31, 1999 and
for the period from inception, February 12, 1999 to December 31,
1999 included in this Prospectus have been so included in reliance
on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We have filed with the Securities and Exchange
Commission a registration statement on Form S-1 under the
Securities Act concerning the common stock offered in this
offering. This prospectus does not contain all of the information
set forth in the registration statement or its exhibits and
schedules. For further information about us and our common stock,
we refer you to the registration statement and to its attached
exhibits and schedules. Statements made in this prospectus
concerning the contents of any document are not necessarily
complete. With respect to each document filed as an exhibit to the
registration statement, we refer you to the exhibit for a more
complete description of the matter involved.
You may inspect our registration statement and the
attached exhibits and schedules without charge at the public
reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices
of the Commission located at Seven World Trade Center, 13th Floor,
New York, NY 10048, and at 500 West Madison Street, Suite 1400,
Chicago, IL 60661. You may obtain information on the operation of
these reference facilities by calling the Commission at 1 (800)
SEC-0330. You may obtain copies of all or any part of our
registration statement from the Commission upon payment of
prescribed fees. You may also inspect reports, proxy and
information statements and other information that we file
electronically with the Commission without charge at the Commission
’s Internet site, http://www.sec.gov.
We intend to furnish our stockholders with annual
reports containing financial statements audited by our independent
auditors.
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of
SupplierMarket.com, Inc.:
In our opinion, the accompanying balance sheet and the
related statements of operations, of stockholders’ deficit
and of cash flows present fairly, in all material respects, the
financial position of SupplierMarket.com, Inc. (the “Company
”) as of December 31, 1999 and the results of its operations
and cash flows for the period from inception (February 12, 1999)
through December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These
financial statements are the responsibility of the Company’s
management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit in
accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion expressed
above.
/s/ PricewaterhouseCoopers
LLP
Boston, Massachusetts
March 1, 2000
SUPPLIERMARKET.COM, INC.
BALANCE SHEETS
| |
|
December 31,
1999
|
|
Pro Forma
December 31, 1999
|
| |
|
|
|
(unaudited) |
| Assets |
|
|
|
|
|
|
| Current
assets: |
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
$36,761,018 |
|
|
$36,761,018 |
|
|
Accounts
receivable |
|
7,475 |
|
|
7,475 |
|
|
Prepaid expenses
and other assets |
|
684,913 |
|
|
684,913 |
|
|
Loan receivable
from related party |
|
133,634 |
|
|
133,634 |
|
| |
|
|
|
|
|
|
|
Total current
assets |
|
37,587,040 |
|
|
37,587,040 |
|
|
Property and
equipment, net |
|
1,554,043 |
|
|
1,554,043 |
|
| |
|
|
|
|
|
|
|
Total
assets |
|
$39,141,083 |
|
|
$39,141,083 |
|
| |
|
|
|
|
|
|
Liabilities,
Redeemable Convertible Preferred Stock and Stockholders’
(Deficit) Equity |
|
|
|
|
|
|
| Current
liabilities: |
|
|
|
|
|
|
|
Accounts
payable |
|
$
1,405,508 |
|
|
$
1,405,508 |
|
|
Accrued expenses
and other liabilities |
|
396,574 |
|
|
396,574 |
|
| |
|
|
|
|
|
|
|
Total current
liabilities |
|
1,802,082 |
|
|
1,802,082 |
|
| Commitments and
contingencies (Note 9) |
|
|
|
|
|
|
Redeemable
convertible Series A preferred stock, $0.001 par value,
6,612,873 shares authorized, 6,562,873
shares issued and
outstanding; No shares issued and
outstanding on a pro forma
basis |
|
6,080,501 |
|
|
—
|
|
Redeemable
convertible Series B preferred stock, $0.001 par value,
16,040,040 shares authorized, 14,863,770
shares issued and
outstanding; No
shares issued and outstanding on a pro forma
basis |
|
34,750,003 |
|
|
—
|
|
| Stockholders
’ (deficit) equity: |
|
|
|
|
|
|
Common stock,
$0.001 par value, 85,000,000 shares authorized,
9,884,246 shares issued and outstanding;
30,441,877 shares
issued and outstanding on a pro forma
basis |
|
9,884 |
|
|
30,442 |
|
|
Additional
paid-in capital |
|
8,928,415 |
|
|
49,738,361 |
|
|
Deferred
stock-based compensation |
|
(6,367,821 |
) |
|
(6,367,821 |
) |
|
Accumulated
deficit |
|
(6,061,981 |
) |
|
(6,061,981 |
) |
| |
|
|
|
|
|
|
|
Total
stockholders’ (deficit) equity |
|
(3,491,503 |
) |
|
37,339,001 |
|
| |
|
|
|
|
|
|
Total
liabilities, redeemable convertible preferred stock and
stockholders’ (deficit) equity
|
|
$39,141,083 |
|
|
$39,141,083 |
|
| |
|
|
|
|
|
|
The accompanying notes are an integral part of
these financial statements.
STATEMENT OF OPERATIONS
| |
|
Period From
Inception
(February 12, 1999)
Through
December 31, 1999
|
| Revenue |
|
$
51,541 |
|
| Operating
expenses: |
|
|
|
|
Costs of
revenue |
|
107,605 |
|
|
Sales and
marketing |
|
2,397,405 |
|
|
Research and
development |
|
515,993 |
|
|
General and
administrative |
|
636,171 |
|
|
Stock-based
compensation |
|
2,731,515 |
|
| |
|
|
|
|
Total operating
expenses |
|
6,388,689 |
|
| |
|
|
|
|
Operating
loss |
|
(6,337,148 |
) |
| Interest
income |
|
280,109 |
|
| |
|
|
|
|
Net
loss |
|
$
(6,057,039 |
) |
| |
|
|
|
| Net loss per
share, basic and diluted |
|
$
(2.66 |
) |
| |
|
|
|
| Weighted average
common shares outstanding, basic and diluted |
|
2,344,874 |
|
| |
|
|
|
| Unaudited pro
forma net loss per share, basic and diluted |
|
$
(0.58 |
) |
| |
|
|
|
| Unaudited pro
forma weighted average common shares outstanding, basic and
diluted |
|
10,446,037 |
|
| |
|
|
|
The accompanying notes are an integral part of
these financial statements.
STATEMENT OF STOCKHOLDERS’
DEFICIT
| |
|
Common
Stock
|
|
Additional
Paid-in Capital
|
|
Deferred
Stock-Based
Compensation
|
|
Accumulated
Deficit
|
|
Total
Stockholders’
Deficit
|
Issuance of
9,859,246 shares of common
stock |
|
$9,859 |
|
$
—
|
|
|
$
—
|
|
|
$
(4,930 |
) |
|
$
4,929 |
|
Issuance of
25,000 shares of common
stock upon exercise of stock
options |
|
25 |
|
—
|
|
|
—
|
|
|
(12 |
) |
|
13 |
|
| Deferred
stock-based compensation |
|
—
|
|
9,099,336 |
|
|
(9,099,336 |
) |
|
—
|
|
|
—
|
|
| Amortization of
deferred compensation |
|
—
|
|
—
|
|
|
2,731,515 |
|
|
—
|
|
|
2,731,515 |
|
Accretion of
preferred stock to redemption
value |
|
—
|
|
(170,921 |
) |
|
—
|
|
|
—
|
|
|
(170,921 |
) |
| Net
loss |
|
—
|
|
—
|
|
|
—
|
|
|
(6,057,039 |
) |
|
(6,057,039 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at
December 31, 1999 |
|
$9,884 |
|
$8,928,415 |
|
|
$(6,367,821 |
) |
|
$(6,061,981 |
) |
|
$(3,491,503 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of
these financial statements.
STATEMENT OF CASH FLOWS
| |
|
Period From
Inception
(February 12, 1999)
Through
December 31, 1999
|
| Cash flows
from operating activities: |
|
|
|
|
Net
loss |
|
$
(6,057,039 |
) |
|
Adjustments to
reconcile net loss to net cash used in operating
activities: |
|
|
|
|
Depreciation and
amortization |
|
95,526 |
|
|
Stock-based
compensation |
|
2,731,515 |
|
|
Changes in
operating assets and liabilities: |
|
|
|
|
Accounts
receivable |
|
(7,475 |
) |
|
Prepaid expenses
and other assets |
|
(684,913 |
) |
|
Loan receivable
from related party |
|
(133,634 |
) |
|
Accounts
payable |
|
1,405,508 |
|
|
Accrued expenses
and other liabilities |
|
396,574 |
|
| |
|
|
|
|
Net cash used in
operating activities |
|
(2,253,938 |
) |
| Cash flows
from investing activities: |
|
|
|
|
Purchases of
property and equipment |
|
(1,649,569 |
) |
| |
|
|
|
|
Net cash used in
investing activities |
|
(1,649,569 |
) |
| Cash flows
from financing activities: |
|
|
|
|
Proceeds from
issuance of redeemable convertible preferred stock |
|
40,659,583 |
|
|
Proceeds from
issuance of common stock |
|
4,942 |
|
| |
|
|
|
|
Net cash
provided by financing activities |
|
40,664,525 |
|
| |
|
|
|
| Net increase in
cash and cash equivalents |
|
36,761,018 |
|
| Cash and cash
equivalents, beginning of period |
|
—
|
|
| |
|
|
|
| Cash and cash
equivalents, end of period |
|
$36,761,018 |
|
| |
|
|
|
The accompanying notes are an integral part of
these financial statements
NOTES TO FINANCIAL STATEMENTS
Note 1. Description of
Business
SupplierMarket.com, Inc. (the “Company”) is
a business-to-business Internet-based marketplace serving the
direct materials market. Our marketplace allows participants to
buy and sell direct materials across a wide variety of industrial
segments. We feature an anonymous bidding event with a
competitive, reverse auction.
The Company was formed on February 12, 1999 under the
laws of the state of Delaware. During the period from inception
through October 1999, the Company was a development stage
enterprise, and did not have any revenue. During this period, the
Company’s operating activities related to the design and
development of our Internet-based marketplace, corporate
infrastructure and the establishment of relationships with buyers
and suppliers of direct materials. The Company has incurred
operating losses and negative cash flows from operations to date
and had an accumulated deficit of approximately $6.1 million at
December 31, 1999. The Company’s activities have been
financed through private placements of equity securities. The
Company began providing business-to-business online bidding events
in October 1999 through the launch of its Internet-based
marketplace.
The Company expects to experience continuing operating
losses and negative cash flows as management executes its current
business plan. At December 31, 1999, the Company had cash and cash
equivalents totaling approximately $36.8 million. In June 1999,
the Company completed its Series A preferred stock offering and
received net proceeds of approximately $6.1 million. In November
1999, the Company conducted a Series B preferred stock offering
and received net proceeds of approximately $34.6 million. The
Company’s Board of Directors has authorized the filing of a
registration statement with the Securities and Exchange Commission
(the “SEC”) that would permit the Company to sell shares
of the Company’s common stock in a proposed initial public
offering. Management believes that it has sufficient funds,
excluding any proceeds from this offering, to sustain its current
business plan through March 31, 2001.
Note 2. Summary of
Significant Accounting Policies
|
Cash
and cash equivalents
|
The Company considers all unrestricted, highly liquid
investments with initial maturities of less than three months to
be cash equivalents. Such investments are carried at cost, which
approximates fair value.
Property and equipment are recorded at cost and
depreciated using the straight-line method over their estimated
useful lives ranging from three to five years. Upon sale or
retirement, the cost and related accumulated depreciation are
eliminated from the respective accounts, and the resulting gain or
loss is included in income or loss for the period. Repair and
maintenance expenditures are expensed as incurred. Depreciation
expense was $48,384 in 1999.
The Company generates revenue from transaction fees
earned on bidding events that result in a buyer selecting a
supplier to fulfill its request for quote (“RFQ”). The
transaction fee, paid by the supplier, is based on a percentage of
the final dollar value of the selected supplier’s bid. The
Company recognizes revenue upon the selection of a supplier to
fulfill an RFQ following a successful bidding event.
Costs of revenue consist primarily of expenses related
to staffing and operation of the Company’s Internet-based
marketplace services and amortization of capitalized website
development costs.
SUPPLIERMARKET.COM, INC.
NOTES TO FINANCIAL STATEMENTS
—(Continued)
Advertising costs are expensed at the time the first
advertisement is aired or printed or when the promotion occurs. No
amounts have been deferred on the balance sheet as of December 31,
1999. Advertising expense was $461,361 for the period from
inception (February 12, 1999) through December 31,
1999.
|
Capitalized website development costs
|
The Company accounts for costs incurred to design and
develop its Internet-based marketplace in accordance with
Statement of Position 98-1, which requires computer software costs
associated with internal use software to be charged to operations
until certain capitalization criteria are met. Internal costs of
$424,281 were capitalized in 1999 and are being amortized over 18
months. Amortization expense was $47,142 in 1999. These costs are
included in property and equipment (Note 3).
Start-up costs are expensed as incurred, and primarily
include costs to establish the Company, new locations or
operations.
|
Stock-based compensation expense
|
The Company accounts for stock-based employee
compensation arrangements in accordance with the provisions of
Accounting Principles Board (“APB”) Opinion No. 25,
“Accounting for Stock Issued to Employees,” and complies
with the disclosure provisions of Statement of Financial
Accounting Standards (“SFAS”) No. 123, “Accounting
for Stock-Based Compensation.” Under APB No. 25, compensation
expense is based on the difference, if any, on the date of the
grant, between the fair value of the Company’s stock and the
exercise price. All stock-based awards to non-employees are
accounted for at their fair value in accordance with SFAS No. 123
and Emerging Issues Task Force Issue No. 96-18. Stock-based
compensation expense of $5,942, $97,552, $43,190 and $2,584,831
related to costs of revenue, sales and marketing, research and
development and general and administrative expenses, respectively,
during the period from inception (February 12, 1999) through
December 31, 1999.
Basic and diluted net loss per common share is
presented in conformity with SFAS 128, “Earnings Per Share.
” Basic net loss per share is computed by dividing the net
loss for the period by the weighted average number of common
shares outstanding during the period. Diluted net loss per share
is computed by dividing the net loss for the period by the
weighted average number of common and potentially dilutive common
shares outstanding during the period. Potentially dilutive common
shares consist of the common shares issuable upon the exercise of
stock options and warrants (using the treasury stock method) and
upon the conversion of convertible preferred stock (using the
if-converted method). Potentially dilutive common shares are
excluded from the calculation if their effect is
antidilutive.
Pro forma net loss per share is computed assuming the
conversion of all outstanding shares of convertible preferred
stock, which will automatically convert into common stock upon an
initial public offering as if the shares converted at the original
date of issuance.
SUPPLIERMARKET.COM, INC.
NOTES TO FINANCIAL STATEMENTS
—(Continued)
The following table sets forth the computation of
net loss per share:
| |
|
For the
period from
Inception (February 12, 1999)
to December 31, 1999
|
| |
|
As
Reported
|
|
Pro
Forma
|
| Basic and
diluted: |
|
|
|
|
|
|
| Net
loss |
|
$(6,057,039 |
) |
|
$(6,057,039 |
) |
| Accretion of
preferred stock to redemption value |
|
(170,921 |
) |
|
—
|
|
| |
|
|
|
|
|
|
| Net loss
attributable to common shareholders |
|
(6,227,960 |
) |
|
(6,057,039 |
) |
| |
|
|
|
|
|
|
|
Weighted average
common shares outstanding |
|
2,344,874 |
|
|
2,344,874 |
|
Weighted average
impact of conversion of preferred stock to
common stock |
|
—
|
|
|
8,101,163 |
|
| |
|
|
|
|
|
|
|
Total |
|
2,344,874 |
|
|
10,446,037 |
|
| |
|
|
|
|
|
|
| Net loss per
share, basic and diluted |
|
$
(2.66 |
) |
|
$
(0.58 |
) |
| |
|
|
|
|
|
|
For the period from inception (February 12, 1999)
through December 31, 1999, as reported, 10,554,971 potentially
dilutive common shares in the form of stock options, warrants and
convertible preferred stock were excluded from the calculation of
net loss per share because their effect was antidilutive. In
addition, 3,919,205 shares of restricted stock at December 31,
1999 were excluded from the basic and diluted
calculations.
|
Pro
forma balance sheet (unaudited)
|
Upon the closing of the Company’s proposed
initial public offering, all of the shares of redeemable
convertible Series A and Series B preferred stock outstanding as
of December 31, 1999 will automatically convert into 20,557,631
shares of the Company’s common stock. The unaudited pro forma
presentation of the balance sheet has been prepared assuming the
conversion of the preferred stock into common stock as of December
31, 1999. All references to pro forma information in the notes to
these financial statements are unaudited.
|
Fair
value of financial instruments
|
The Company’s financial instruments, including
cash and cash equivalents, accounts receivable and accounts
payable are carried at cost, which approximates their fair value
because of the short-term nature of these instruments.
The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
|
Concentration of credit risk
|
Financial instruments that potentially subject the
Company to a concentration of credit risk consist of cash and cash
equivalents and accounts receivable. Cash and cash equivalents are
deposited with high credit quality financial institutions. The
Company’s accounts receivable are derived from revenue earned
from customers located in the U.S. and are denominated in U.S.
dollars. Portions of the Company’s accounts receivable
balances are settled through electronic fund transfers. As a
result, the majority of accounts receivable are collected upon
processing of those transactions. As of December 31, 1999, two
customers accounted for 100% of accounts receivable and, during
the period from inception through December 31, 1999, these
customers accounted for 100% of revenue.
SUPPLIERMARKET.COM, INC.
NOTES TO FINANCIAL STATEMENTS
—(Continued)
Deferred taxes are determined based on the difference
between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse. Valuation
allowances are provided if, based upon the weight of available
evidence, it is more likely than not some or all of the deferred
tax assets will not be realized.
|
Comprehensive income (loss)
|
The Company has adopted SFAS 130, “Reporting
Comprehensive Income,” effective February 12, 1999. No
material differences exist between net loss and comprehensive
loss.
|
Recent accounting pronouncements
|
In June 1998, the FASB issued SFAS No. 133,
“Accounting for Derivative Instruments and Hedging Activities,
” which established accounting and reporting standards for
derivative instruments and hedging. It requires entities to
recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. The
Company, to date, has not engaged in derivative or hedging
activities, and accordingly does not believe the adoption of SFAS
No. 133 will have a material impact on the financial reporting and
related disclosures of the Company. The Company will adopt SFAS
No. 133 as required by SFAS No. 137, “Deferral of Effective
Date of the FASB Statement No. 133,” in 2001.
Note 3. Property and
Equipment
Property and equipment consists of the following as of
December 31, 1999:
| Computer
equipment |
|
$
511,184 |
| Purchased
software |
|
437,806 |
| Website
development costs |
|
424,281 |
| Office
equipment |
|
161,720 |
| Furniture and
fixtures |
|
114,578 |
| |
|
|
| |
|
1,649,569 |
| Accumulated
depreciation and amortization |
|
95,526 |
| |
|
|
| |
|
$1,554,043 |
| |
|
|
Depreciation and amortization expense was $95,526 for
the period from inception through December 31, 1999.
Note 4. Accrued
Expenses
Accrued expenses consist of the following as of
December 31, 1999:
| Accrued payroll
and related |
|
$114,422 |
| Accrued
commissions |
|
106,750 |
| Accrued other
expenses |
|
175,402 |
| |
|
|
| |
|
$396,574 |
| |
|
|
Note 5. Lines of
Credit
In September 1999, the Company entered into working
capital and equipment lines of credit with its bank. The working
capital line of credit provided for borrowings up to a maximum of
$500,000. The equipment line
of credit agreement allowed for borrowings of up to $1.0 million.
Borrowings under these facilities were payable in 36 equal monthly
installments of principal and interest. The underlying notes were
secured by substantially all of the assets of the Company.
Interest on the working capital line was charged at the prime rate
plus 1% (9.5% as of December 31, 1999). Interest on the equipment
line was charged at the 36-month U.S. Treasury rate plus 245 basis
points (8.71% as of December 31, 1999). As of December 31, 1999,
there were no amounts outstanding under either facility. These
facilities were terminated by the Company on February 17, 2000
(Note 11).
In connection with these agreements, the Company
issued a detachable warrant, which permits the holder to purchase
50,000 shares of the Company’s Series A Redeemable
Convertible Preferred stock at an exercise price of $0.9265 per
share. The warrant is exercisable immediately and expires on
September 21, 2006. The fair value of the warrant at the date of
issuance was not material to the Company’s financial
statements.
Note 6. Income
Taxes
The Company had no income tax provision during the
period from inception through December 31, 1999 since the Company
had a net taxable loss during this period.
Deferred tax assets and liabilities consist of the
following as of December 31, 1999:
| Net operating
losses |
|
$1,712,606 |
|
| Stock-based
compensation |
|
935,617 |
|
| Research and
development tax credits and other |
|
81,580 |
|
| |
|
|
|
| Net deferred tax
assets |
|
2,729,803 |
|
| Valuation
allowance |
|
(2,729,803 |
) |
| |
|
|
|
| Net deferred tax
assets |
|
$
—
|
|
| |
|
|
|
In assessing the realizability of net deferred tax
assets, management considers whether it is more likely than not
that some portion of the net deferred tax assets will not be
realized. The ultimate realization of net deferred tax assets is
dependent upon the generation of future taxable income during the
periods in which temporary differences representing net future
deductible amounts become deductible. Management has established a
full valuation allowance against the net deferred tax assets at
December 31, 1999, since it is more likely than not that these
future tax benefits will not be realized.
As of December 31, 1999, the Company had available
federal and state net operating loss carryforwards of $4.2 million
and $4.1 million, respectively. These net operating loss
carryforwards may be used to offset future federal and state
income taxes through 2019 and 2009, respectively. However, changes
in the Company’s ownership as defined in the Internal Revenue
Code, may limit the Company’s ability to utilize the net
operating loss and tax credit carryforwards.
Note 7. Stockholders
’ Equity
|
Redeemable Convertible Preferred Stock
|
The Company has authorized 22,652,913 shares of
preferred stock. The Company designated 6,612,873 of these shares
as Series A Convertible Preferred Stock, par value $0.001 (
“Series A”), and 16,040,040 of these shares as Series B
Convertible Preferred Stock, par value $0.001 (“Series B
”). In July and August 1999, the Company sold 6,562,873
Series A shares at $0.9265 per share. Proceeds from the offering
totaled $6,040,708, net of offering costs of approximately
$39,793. In November 1999, the Company sold 14,863,770 Series B
shares at $2.3379 per share. Proceeds from the offering totaled
$34,618,875, net of offering costs of $131,128.
SUPPLIERMARKET.COM, INC.
NOTES TO FINANCIAL STATEMENTS
—(Continued)
The Company’s Series A and Series B preferred
stock are convertible into common stock upon a conversion ratio of
one-to-two and two-to-one, respectively, which is subject to
adjustment as defined in the Company’s Amended and Restated
Certificate of Incorporation. All series of preferred stock will
be converted automatically into an appropriate number of common
stock immediately preceding the closing of an initial public
offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended. The holders of Series A and
Series B preferred stock each have the right to elect two
directors, for a total of four directors. The holders of the
Series A and Series B preferred stock have a liquidation
preference equal to the purchase price of the preferred stock,
adjusted for certain events as defined in the Amended and Restated
Certificate of Incorporation, over the holders of common stock,
and have certain anti-dilution protection.
The Company is required to redeem the Series A and
Series B redeemable convertible preferred stock from the holders
upon receipt of request from holders of shares representing a
majority of the then outstanding shares of preferred stock.
Redemption could first be required by the holders on June 28, 2004
for Series A and on November 18, 2004 for Series B and later upon
the first anniversaries thereof. The redemption price is equal to
the purchase price of the preferred stock plus accrued, unpaid
dividends at the redemption date.
The Company has granted preemptive rights to the
holders of Series A and Series B preferred stock. In the event
that the Company seeks to raise additional capital, these rights
allow holders, under certain circumstances, to maintain their
percentage ownership of the Company. All preemptive rights
terminate upon an initial public offering of the Company’s
common stock.
The Company has authorized 85,000,000 shares of common
stock. On February 29, 2000, the Company effected a one-for-two
reverse stock split of the common stock. All common share and per
share amounts in the accompanying financial statements, including
stock options and warrants, have been restated to reflect the
effect of this reverse stock split. The preferred shares were not
affected by the reverse stock split; however, the conversion
features discussed above reflect the effect of this reverse stock
split.
The Company has entered into stock restriction
agreements with two officers of the Company pursuant to which
6,988,500 shares of common stock were subject to restriction.
Under these stock restriction agreements, 3,493,250 shares of
common stock owned by the two officers were fully vested and no
longer subject to restriction at December 31, 1999. The remaining
3,495,250 shares vest ratably each month through June
2001.
Note 8. Stock
Plans
In 1999, the Company adopted the 1999 Stock Option
Plan, the “1999 Plan”, that provides for the granting of
incentive and nonqualified stock options. The exercise price for
incentive stock options issued under the 1999 Plan are equal to
100% of the fair market value of the stock on the date of grant,
and 110% for stockholders with 10% or more ownership of the
Company, if applicable, as determined by the Company’s Board
of Directors. The exercise price of nonqualified stock options may
be less than the fair market value of the common stock on the date
of grant, as determined by the Board of Directors, but in no case
may the exercise price be less than the statutory minimum. The
options have a term of ten years. Vesting of options granted is at
the discretion of the Board of Directors, but is generally 12.5%
after six months, and then monthly for the next 42 months. The
aggregate number of common shares authorized to be issued under
the 1999 Plan is 5,251,924.
SUPPLIERMARKET.COM, INC.
NOTES TO FINANCIAL STATEMENTS
—(Continued)
Through December 31, 1999, the Company had issued
options to purchase a total of 728,224 shares to non-employees,
including options to purchase 172,328 shares issued to a related
party, with exercise prices ranging from $0.001-$0.93. In
connection with the grant of these options to non-employees, the
Company recorded deferred compensation of $6.3 million.
Compensation expense related to non-employee stock options was
$2.5 million in 1999.
In connection with the grant of certain stock options
to employees during 1999, the Company recorded deferred
compensation of approximately $2.8 million, representing the
difference between the option exercise price and the subsequently
determined fair value of the common stock at the grant date
multiplied by the number of shares under option. Such amount is
presented as an increase to stockholders’ deficit and
amortized over the vesting period of the applicable options. The
Company recorded compensation expense of approximately $0.2
million in 1999 related to these options.
A summary of the options granted to employees under
the 1999 Plan during the period from inception (February 12, 1999)
through December 31, 1999 and as of December 31, 1999 is presented
below (this does not include 728,224 options granted to
non-employees as of December 31, 1999):
| |
|
Number of
Shares
|
|
Weighted
Average
Exercise
Price
|
| Granted |
|
1,650,584 |
|
$0.31 |
| Exercised |
|
—
|
|
—
|
| Cancelled |
|
—
|
|
—
|
| |
|
|
|
|
|
Options
outstanding at December 31, 1999 |
|
1,650,584 |
|
$0.31 |
| |
|
|
|
|
The following table summarizes information about the
options outstanding as of December 31, 1999:
| |
|
Options
Outstanding
|
|
Options
Exercisable
|
Range
of
Prices
|
|
Number
Outstanding
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
Weighted
Average
Exercise Price
|
|
Number
Exercisable
|
|
Weighted
Average
Exercise Price
|
| $0.093-$0.935 |
|
1,650,584 |
|
9.74 |
|
$0.31 |
|
49,921 |
|
$0.093 |
The Company applies the provisions of APB No. 25 and
its related interpretations in accounting for its stock option
plans. Had the Company accounted for these plans under SFAS No.
123, the Company’s net loss and net loss per share would have
been increased to the following pro forma amounts for the period
from inception through December 31, 1999:
| Net loss
attributable to common stockholders: |
|
|
|
As
reported |
|
$(6,227,960 |
) |
| |
|
|
|
|
Pro
forma |
|
$(6,274,960 |
) |
| |
|
|
|
| Net loss per
share, basic and diluted |
|
|
|
|
As
reported |
|
$
(2.66 |
) |
| |
|
|
|
|
Pro
forma |
|
$
(2.68 |
) |
| |
|
|
|
For the purpose of determining stock-based
compensation expense, the fair value of each option grant is
estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions
used for grants during the period from inception through December
31, 1999: risk-free interest rate of 6%; no expected dividend
yield; expected life of 4.0 years; and an expected volatility of
0%.
Note 9. Commitments and
Contingencies
The Company is party to a non-cancelable lease
agreement for its corporate headquarters. Rent expense under this
non-cancelable operating lease totaled $131,525 for the period
from inception (February 12, 1999) through December 31, 1999.
Minimum future lease obligations under the non-cancelable
operating lease in effect at December 31, 1999 are as
follows:
| Year Ending
December 31, |
|
|
|
2000 |
|
$
741,051 |
|
2001 |
|
761,089 |
|
2002 |
|
761,089 |
|
2003 |
|
761,089 |
|
2004 |
|
761,089 |
| |
|
|
|
Total |
|
$3,785,407 |
| |
|
|
Note 10. Loan Receivable
from Related Party
During 1999, the Company loaned $133,634 to its
President. The loan is payable in full in March 2000.
Note 11. Subsequent
Events
|
Common stock purchase warrants
|
The Company has executed non-binding letters of intent
with several strategic partners (“Partners”) whereby the
Partners receive consideration, in the form of common stock
purchase warrants, in exchange for utilizing the Company’s
service for their direct materials purchasing. It is expected that
the majority of the warrants issued will vest contingent upon the
volume of each Partners’ RFQs submitted to the Company’s
marketplace which result in an executed purchase order between the
Company and the Supplier for the RFQ, during each calendar quarter
of 2000 and the first and second quarter of 2001.
|
Termination of the lines of credit
|
The Company terminated its working capital and
equipment lines of credit with its bank on February 17,
2000.
|
Issuance of preferred stock
|
In January and February 2000, the Company issued
1,176,269 shares of Series B Redeemable Convertible preferred
stock for net proceeds of $2.8 million. Approximately 386,954
shares were sold to related parties. The intrinsic value of the
associated beneficial conversion feature of approximately $4.3
million will be recognized as a preferred stock preference in the
first quarter of 2000 and will represent a non-cash charge in the
determination of net loss attributable to common
shareholders.
[Inside back cover graphic and textual
description to be filed by amendment.]
[Back cover graphics and textual description to
be filed by amendment.]
PART II
INFORMATION NOT REQUIRED IN
PROSPECTUS
Item 13. Other
Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses,
other than underwriting discounts and commissions, payable by the
registrant in connection with the sale of the securities being
registered. All amounts are estimates except the SEC registration
fee, the NASD fee and the Nasdaq National Market listing
fee.
| SEC registration
fee |
|
$26,400 |
| NASD filing
fee |
|
10,500 |
| Nasdaq National
Market listing fee |
|
*
|
| Printing |
|
*
|
| Legal fees and
expenses |
|
*
|
| Accounting fees
and expenses |
|
*
|
| Blue sky fees
and expenses |
|
*
|
| Transfer agent
and registrar fees |
|
*
|
| Miscellaneous |
|
*
|
| |
|
|
|
Total |
|
$
* |
| |
|
|
|
*
|
To be
provided by amendment
|
Item 14.
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, indemnity 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, as
amended (the “Securities Act”).
As permitted by the Delaware General Corporation Law,
the Registrant’s certificate of incorporation includes a
provision that eliminates the personal liability of its directors
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 Registrant or its stockholders, (ii) for
acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) under section 174
of the Delaware General Corporation Law (regarding unlawful
dividends and stock purchases) or (iv) for any transaction from
which the director derived an improper personal
benefit.
As permitted by the Delaware General Corporation Law,
the by-laws of the Registrant provide that (i) the Registrant is
required to indemnify its directors, officers, employees and
agents to the fullest extent permitted by the Delaware General
Corporation Law, subject to certain very limited exceptions, (ii)
the Registrant is required to advance expenses, as incurred, to
its directors, officers, employees and agents in connection with a
legal proceeding to the fullest extent permitted by the Delaware
General Corporation Law, subject to certain very limited
exceptions and (iii) the rights conferred in the by-laws are not
exclusive. At present, the Registrant is not aware of any pending
or threatened litigation or proceeding involving a director,
officer, employee or agent of the Registrant which may result in
claims for indemnification.
Reference is also made to Section 7 of the
Underwriting Agreement, which provides for the indemnification of
officers, directors and controlling persons of the Registrant
against certain liabilities. The indemnification provisions in the
Registrant’s certificate of incorporation, by-laws and the
Indemnification Agreements entered into between the Registrant and
each of its directors and executive officers may be sufficiently
broad to permit indemnification of the Registrant’s directors
and executive officers for liabilities arising under the
Securities Act.
The Registrant, with approval from the Registrant
’s board of directors, expects to obtain directors’ and
officers’ liability insurance.
Reference is made to the following documents filed as
exhibits to this Registration Statement regarding relevant
indemnification provisions described above and elsewhere
herein:
Document
|
|
Exhibit
Number
|
| Form of
Underwriting Agreement |
|
1.1 |
| Amended and
Restated Certificate of Incorporation |
|
3.1 |
| Form of Third
Amended and Restated Certificate of Incorporation |
|
3.3 |
| By-laws |
|
3.4 |
| Form of Amended
and Restated By-laws |
|
3.5 |
Item 15. Recent Sales
of Unregistered Securities.
From our inception in February, 1999 we have issued
the following securities:
1.
|
On June
2, 1999, we issued 9,710,000 shares of common stock to our
founders and two other investors for aggregate consideration of
$4,855.
|
2.
|
On June
18, 1999, we issued 149,246 shares of common stock to one
investor for aggregate consideration of $75.
|
3.
|
On June
28, 1999, we issued 4,317,324 shares of Series A preferred stock
to three investors for aggregate consideration of
$4,000,001.
|
4.
|
On July
22, 1999, we issued 1,618,997 shares of Series A preferred stock
to five investors for aggregate consideration of
$1,500,001.
|
5.
|
On
August 17, 1999, we issued 626,552 shares of Series A preferred
stock to 14 investors for aggregate consideration of
$580,500.
|
6.
|
On
September 21, 1999, we issued a warrant to purchase 50,000
shares of Series A preferred stock to one investor for aggregate
consideration of $1.00.
|
7.
|
On
November 18, 1999, we issued 14,863,770 shares of Series B
preferred stock to 17 investors for aggregate consideration of
$34,750,003.
|
8.
|
On
January 21, 2000, we issued 1,011,676 shares of Series B
preferred stock to 25 investors for aggregate consideration of
$2,365,197.
|
9.
|
On
February 18, 2000, we issued 164,593 shares of Series B
preferred stock to four investors for aggregate consideration of
$384,803.
|
10.
|
We have
granted options to purchase an aggregate of 3,864,912 shares of
common stock to a number of our employees and consultants. We
have not received consideration from any grantee of any of our
options. As of this date, options to purchase 122,271 shares
have been exercised for an aggregate consideration of
$9,025.
|
We intended that the above issuances of our securities
be exempt from registration under the Securities Act in reliance
on Section 4(2) of the Securities Act as transactions by an issuer
not involving any public offering. In addition, we intended that
the issuances described in Item 10 be exempt from registration
under the Securities Act in reliance upon Rule 701 and/or Section
4(2) promulgated under the Securities Act. The recipients of
securities in each transaction described above represented to us
their intentions to acquire the securities for investment only and
not with a view to, or for sale in connection with, any
distribution. We affixed appropriate legends to the share
certificates, warrants and options issued in the transactions
described above. We believe that all recipients had adequate
access, through their relationships with us, to information about
us.
Item 16. Exhibits and
Financial Statement Schedules
(a) Exhibits.
The following exhibits are filed as part of this
registration statement:
Number
|
|
Description
|
| 1.1*
|
|
Form of
Underwriting Agreement. |
| 3.1
|
|
Amended and
Restated Certificate of Incorporation of the
Registrant. |
| 3.2
|
|
Certificate of
Amendment to the Amended and Restated Certificate of
Incorporation of the
Registrant. |
| 3.3*
|
|
Form of Third
Amended and Restated Certificate of Incorporation of the
Registrant (to be filed with
the Delaware Secretary of State immediately prior to the
effectiveness of this registration statement). |
| 3.4
|
|
By-laws of the
Registrant. |
| 3.5*
|
|
Form of Amended
and Restated By-laws of the Registrant (to be effective upon the
closing of this
offering). |
| 4.1*
|
|
Form of Specimen
Certificate for Common Stock of the Registrant. |
| 4.2
|
|
Amended and
Restated Registration Rights Agreement dated as of November 18,
1999 among the
Registrant, the Purchasers (as defined therein) and the Founders
(as defined therein). |
| 4.3*
|
|
Warrant to
Purchase Stock issued by the Registrant to Silicon Valley Bank
on September 21, 1999. |
| 5.1*
|
|
Opinion of Ropes
& Gray. |
| 10.1
|
|
Lease dated
December 15, 1999 between the Registrant and Mortimer Zuckerman
and Edward
Linde, as Trustees of Mall Road Trust dated October 11,
1983. |
| 10.2*
|
|
Employment
Agreement dated March 1, 2000 between the Registrant and Asif
Satchu |
| 10.3
|
|
Employment
Agreement dated January 24, 2000 between the Registrant and
Jonathan Burgstone. |
| 10.4*
|
|
Amended and
Restated Stock Restriction Agreement dated March 1, 2000 between
the Registrant
and Asif Satchu. |
| 10.5
|
|
Amended and
Restated Stock Restriction Agreement dated January 24, 2000
between the Registrant
and Jonathan Burgstone. |
| 10.6
|
|
1999 Stock
Option Plan. |
| 10.7
|
|
Service
Agreement dated July 1, 1999 between the Registrant and TriNet
Employer Group, Inc. |
| 23.1
|
|
Consent of
PricewaterhouseCoopers LLP. |
| 23.2*
|
|
Consent of Ropes
& Gray (included in Exhibit 5.1). |
| 24.1
|
|
Power of
Attorney (included on signature page). |
| 27.1
|
|
Financial Data
Schedule. |
*
|
To be
filed by amendment.
|
(b) Financial Statement
Schedules.
Financial statement schedules have been omitted
because they are inapplicable or are not required under applicable
provisions of Regulation S-X or because the information that would
otherwise be included in such schedules is contained in
SupplierMarket.com’s financial statements or notes
thereto.
Item 17.
Undertakings.
The undersigned Registrant hereby undertakes to
provide to the Underwriters at the closing specified in the
Underwriting Agreement, certificates in such denominations and
registered in such names as required by the Underwriters to permit
prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
provisions described under Item 14 above, 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 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 and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes
that:
(1) For purposes of determining any
liability under the Securities Act, the information omitted from
the form of prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part
of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any
liability under the Securities Act, each post-effective amendment
that contains a form of prospectus 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.
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boston, State of Massachusetts, on
the 2nd day of March, 2000.
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears immediately below constitutes and appoints
Jonathan Burgstone, Asif Satchu or Brian Bethers, or any of them,
his or her true and lawful attorney-in-fact and agent, with full
power of substitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this
Registration Statement, and any and all additional registration
statements pursuant to Rule 462(b) under the Securities Act of
1933, as amended, in connection with or related to the offering
contemplated by this Registration Statement and its amendments, if
any, and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Commission, granting
unto said attorney-in-fact and agent full power and authority to
do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act
of 1933, this Registration Statement has been signed by the
following persons in the capacities indicated on March 2,
2000.
Signature
|
|
Title
|
|
|
/S
/ JONATHAN
BURGSTONE
Jonathan Burgstone |
|
Chief Executive
Officer and Director |
|
|
/S
/ ASIF
SATCHU
Asif Satchu |
|
Chairman,
President, Secretary and Director |
|
|
/S
/ BRIAN
BETHERS
Brian Bethers |
|
Chief
Financial Officer (Principal Financial and Accounting
Officer) and Treasurer |
|
|
/S
/ ROBERT
BARRETT
Robert Barrett |
|
Director |
|
|
/S
/ PETER
LAMM
Peter Lamm |
|
Director |
|
|
/S
/ MARC
LIPSCHULTZ
MARC
LIPSCHULTZ
|
|
Director |
|
|
/S
/ RAVI
MOHAN
Ravi Mohan |
|
Director |
|
|
/S
/ MARCO
IANSITI
MARCO
IANSITI
|
|
Director |
EXHIBIT INDEX
Number
|
|
Description
|
| 1.1* |
|
|
Form of
Underwriting Agreement. |
| 3.1 |
|
|
Amended and
Restated Certificate of Incorporation of the
Registrant. |
| 3.2 |
|
|
Certificate of
Amendment to the Amended and Restated Certificate of
Incorporation of the
Registrant. |
| 3.3* |
|
|
Form of Third
Amended and Restated Certificate of Incorporation of the
Registrant (to be filed with
the Delaware Secretary of State immediately prior to the
effectiveness of this registration statement). |
| 3.4 |
|
|
By-laws of the
Registrant. |
| 3.5* |
|
|
Form of
Amended and Restated By-laws of the Registrant (to be
effective upon the closing of this
offering). |
| 4.1* |
|
|
Form of
Specimen Certificate for Common Stock of the
Registrant. |
| 4.2 |
|
|
Amended and
Restated Registration Rights Agreement dated as of November
18, 1999 among the
Registrant, the Purchasers (as defined therein) and the Founders
(as defined therein). |
| 4.3 |
* |
|
Warrant to
Purchase Stock issued by the Registrant to Silicon Valley Bank
on September 21, 1999. |
| 5.1* |
|
|
Opinion of
Ropes & Gray. |
| 10.1 |
|
|
Lease dated
December 15, 1999 between the Registrant and Mortimer
Zuckerman and Edward
Linde, as Trustees of Mall Road Trust dated October 11,
1983. |
| 10.2 |
* |
|
Employment
Agreement dated March 1, 2000 between the Registrant and Asif
Satchu. |
| 10.3 |
|
|
Employment
Agreement dated January 24, 2000 between the Registrant and
Jonathan Burgstone. |
| 10.4 |
* |
|
Amended and
Restated Stock Restriction Agreement dated March 1, 2000
between the Registrant
and Asif Satchu. |
| 10.5 |
|
|
Amended and
Restated Stock Restriction Agreement dated January 24, 2000
between the Registrant
and Jonathan Burgstone. |
| 10.6 |
|
|
1999 Stock
Option Plan. |
| 10.7 |
|
|
Service
Agreement dated July 1, 1999 between the Registrant and the
TriNet Employer Group, Inc. |
| 23.1 |
|
|
Consent of
PricewaterhouseCoopers LLP. |
| 23.2* |
|
|
Consent of
Ropes & Gray (included in Exhibit 5.1). |
| 24.1 |
|
|
Power of
Attorney (included on signature page). |
| 27.1 |
|
|
Financial Data
Schedule. |
*
|
To be filed by amendment.
|
