Filed Pursuant to Rule 424b(3)
Registration #333-91433
PROSPECTUS
413,813 SHARES
SKYMALL, INC.
COMMON STOCK
We have issued a total of 374,393 shares of our common stock and 39,420
warrants to purchase 39,420 shares of our common stock in separate transactions.
Of such shares of common stock and warrants, 25,000 warrants were issued in June
1999 to our investment advisor, 280,555 shares of common stock were issued in
September 1999 upon the acquisition of Disc Publishing, Inc., a Utah
corporation, 28,838 shares of common stock and 14,420 warrants were issued in
November 1999 upon conversion of the principal and interest due on an
outstanding note such note being issued pursuant to the acquisition of Durham &
Company, a Utah corporation, in October 1998, and 65,000 shares of common stock
were issued in November 1999 upon settlement of a litigation matter. The holders
of such common stock and warrants (which we collectively refer to in this
prospectus as the "selling shareholders") can use this prospectus to sell to
other purchasers some or all of the shares of common stock they currently hold
and can use this prospectus to sell to other purchasers some or all of the
shares of common stock they will receive by exercising the warrants. Each
selling shareholder may sell the common stock in ordinary broker's transactions,
directly to market makers in our common stock, in private transactions or any of
the other methods of distribution that are described in this prospectus under
the section titled "Plan of Distribution."
The selling shareholders will receive all of the amounts received upon
any sale by them of the common stock, less any brokerage commissions or other
expenses incurred by them. We will not receive any proceeds from the sale of the
common stock by the selling shareholders. However, we will receive up to
$348,110 as payment of the warrant exercise price for the common stock
underlying the warrants if all of the warrants are exercised. We are paying for
the costs of registering the shares covered by this prospectus.
The selling shareholders and the brokers or other third parties through
whom the selling shareholders sell the common stock may be deemed "underwriters"
as that term is defined in the Securities Act of 1933, as amended, for purposes
of the resale of the shares of common stock offered in this prospectus.
Our common stock is traded on the Nasdaq National Market under the
symbol "SKYM." According to Nasdaq, on December 3, 1999, the last reported sale
price for our common stock was $9.125.
BEFORE PURCHASING ANY OF THE SHARES OF COMMON STOCK COVERED BY THIS PROSPECTUS,
WE URGE YOU TO READ AND CAREFULLY CONSIDER THE RISK FACTORS DISCUSSED IN THIS
PROSPECTUS, BEGINNING ON PAGE 9. YOU SHOULD BE PREPARED TO ACCEPT ALL OF THOSE
RISKS, INCLUDING THE RISK THAT YOU COULD LOSE YOUR ENTIRE INVESTMENT IN THE
COMMON STOCK, AS WELL AS ANY OTHER RISKS THAT MAY BE DISCUSSED IN THIS
PROSPECTUS.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE SALE OF THE
COMMON STOCK OR DETERMINED THAT THE INFORMATION IN THIS PROSPECTUS IS ACCURATE
OR COMPLETE. IT IS ILLEGAL FOR ANY PERSON TO TELL YOU OTHERWISE.
The date of this Prospectus is December 6, 1999
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YOU SHOULD ONLY RELY UPON THE INFORMATION INCLUDED IN OR INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS OR IN ANY PROSPECTUS SUPPLEMENT THAT IS DELIVERED
TO YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH ADDITIONAL OR
DIFFERENT INFORMATION.
THE COMMON STOCK IS NOT BEING OFFERED IN ANY STATE WHERE SUCH AN OFFER IS NOT
PERMITTED.
YOU SHOULD NOT ASSUME THAT THE INFORMATION INCLUDED IN OR INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS OR IN ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS OF
ANY DATE LATER THAN THE DATE OF SUCH DOCUMENT.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other information
with the U.S. Securities and Exchange Commission. You may read and copy any
document that we have filed at the SEC's Public Reference Room located at 450
Fifth Street N.W., Room 1024, Washington, D.C. 20549 and at the SEC's regional
offices located at World Trade Center, 13th Floor, New York, New York, 10048 and
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Please call the SEC at 1-800-732-0330 for more information about
the Public Reference Room facilities. Our SEC filings are also available to you
free of charge at the SEC's website at HTTP://WWW.SEC.GOV.
Copies of publicly available documents that we have filed with the SEC
can also be inspected and copied at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
We have filed a registration statement on Form S-3 with the SEC that
covers the resale of the common stock offered under this prospectus. This
prospectus is part of the registration statement; however, the prospectus does
not include all of the information included in the registration statement and
its exhibits. As a result, you should refer to the registration statement for
additional information about us and the common stock offered under this
prospectus. Statements that we make in this prospectus relating to any documents
filed as an exhibit to the registration statement or any document incorporated
by reference into the registration statement are not necessarily complete and
you should review the referenced document itself for a complete understanding of
its terms.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Some of the information that we are required to include in the
registration statement has been "incorporated by reference." This means that we
have disclosed information to you simply by referring you to documents other
than the registration statement. The documents that have been incorporated by
reference are an important part of the prospectus, and you should be sure to
review that information in order to understand the nature of any investment by
you in the common stock. In addition to previously filed documents that are
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incorporated by reference, documents that we file with the SEC after the date of
this prospectus will automatically update the registration statement. The
documents that we have previously filed and that are incorporated by reference
include the following:
o Our Annual Report on Form 10-K for the fiscal year ended December
31, 1998;
o Our Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, 1999, June 30, 1999 and September 30, 1999;
o Our Current Report on Form 8-K filed April 13, 1999;
o Our Current Report on Form 8-K filed September 23, 1999;
o Our Current Report on Form 8-K filed October 5, 1999;
o Our Definitive Proxy Statement for our 1999 Annual Meeting of
Shareholders dated May 6, 1999; and
o The description of our common stock included in our Registration
Statement on Form 8-A, filed October 31, 1996, including all
amendments or reports filed for the purpose of updating the
description.
All documents and reports filed by us pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and
prior to the date that this offering of our common stock is terminated, will
automatically be incorporated by reference into this prospectus. We will provide
you with copies of any of the documents incorporated by reference, at no charge
to you; however, we will not deliver copies of any exhibits to such documents
unless the exhibit itself is specifically incorporated by reference. If you
would like a copy of any document, please write or call us at:
SKYMALL, INC.
1520 EAST PIMA STREET
PHOENIX, ARIZONA 85034
ATTN: GENERAL COUNSEL
TELEPHONE: (602) 254-9777
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY SHOULD BE READ BY YOU TOGETHER WITH THE MORE
DETAILED INFORMATION INCLUDED AT OTHER SECTIONS OF THIS PROSPECTUS. IN ADDITION,
YOU SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER "RISK FACTORS" AT PAGE
9 OF THIS PROSPECTUS.
Throughout this prospectus, we refer to SkyMall, Inc. and its
subsidiaries as "us," "we," "our," "SkyMall" or the "Company."
THE COMPANY
Founded in 1989, SkyMall, Inc., a Nevada corporation, is an integrated
specialty retailer that markets high-quality products and services through a
number of unique channels and partnerships. The Company offers its products and
services via various media, including the SkyMall in-flight print catalogs,
workplace catalogs, multi-media CD-ROM and on the Internet at WWW.SKYMALL.COM,
WWW.SKYMALLTRAVEL.COM and WWW.DURHAM.SKYMALL.COM. Our products and services are
provided by more than 300 retailers, including American Country Home, Australian
Outback Collection, Balducci's, Canadian Geographic, Claire Murray,
Frontgate(R), FTD.com, Garden.com, Hammacher Schlemmer(R), Herrington(R),
Improvements(R), Langenbach, Lillian Vernon(R), L.L. Bean(R), Orvis(R), Samsung,
Seiko, Successories(R), The Sharper Image(R), T. Shipley(R), The Wine
Enthusiast(TM), and WorldClass Concierge Services(R). The Company offers a
diverse variety of products from numerous product categories, including
clothing, fashion accessories, health and beauty aids, children's toys,
executive gifts, educational products, gourmet cooking aids, exercise equipment,
jewelry, luggage, travel aids, and home accessories.
Our principal executive offices are located at and our mailing address
is 1520 East Pima Street, Phoenix, Arizona 85034. Our telephone number is (602)
254-9777.
OUR OPERATIONS
SkyMall is a "one-stop" shopping source for customers who may purchase
a variety of merchandise from many different well-known merchants in a single
transaction. Although most of the merchandise offered in the SkyMall catalogs is
available from other catalog and retail companies, each of these companies
typically has its own policies for shipping and handling charges, merchandise
returns, sales taxes and price guarantees, as well as its own Web site. In
addition, each company typically has different customer service hours and credit
and payment policies. By aggregating the merchandise of our various
participating merchants into a single location in our print catalog and on our
Web site, we afford our customers access to thousands of products offered by
more than 300 merchants and the convenience of one-stop shopping.
Our print media provides consumers with a selection of only the
best-selling products from our most well-known merchant partners. This ensures
that consumers quickly see the most popular items, without having to review
hundreds of items that may be of little interest. Through our online database,
we offer online consumers a greater product selection. For the convenience of
our customers, our online database is searchable by a number of parameters that
allow the customer to quickly locate products that are of interest to that
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consumer. We plan to further expand the selection and variety of our product
offering and implement additional online technologies that will allow us to use
customer recommendation software to offer SkyMall customers personalized
recommendations based on individual tastes and preferences.
PRINT MEDIA
GENERAL. We market our merchandise through a number of print media,
including our in-flight catalogs, international catalogs and workplace catalogs.
We continue to seek additional ways to expand our print media distribution and
are currently testing a number of new channels, including hotels, consumer
loyalty programs and alliances with credit card companies which have access to
significant customer databases. The merchandise of each participating merchant
in our catalogs is presented in a separate section of each catalog to allow
browsing from "store-to-store," providing the convenience and variety of an
upscale shopping mall environment.
SKYMALL DOMESTIC IN-FLIGHT CATALOGS. Our in-flight catalogs, which are
placed in airline seat pockets, represent our largest distribution channel. Over
the past eight years, we have experienced substantial growth in our domestic
in-flight catalog business. Our in-flight catalog is available to over 70% of
all domestic airline passengers annually.
The SkyMall program offers airlines a low-risk means of incrementally
increasing their earnings. In exchange for placement of our catalogs in
seat-back pockets, we pay each airline partner a monthly commission based on net
merchandise sales generated by the Company from sales to that airline's
passengers. Some agreements also require payment of a minimum monthly commission
or a boarding cost that reimburses the airline for the increased fuel costs
attributable to the weight of the catalogs. In addition to increasing airline
earnings, our airline partners also benefit from enhancing the in-flight
experience of their passengers by providing our catalogs as an additional
amenity.
SKYMALL INTERNATIONAL IN-FLIGHT CATALOGS. We believe that the
demographic and technological trends that are driving the domestic consumer to
shift from traditional retail shopping are also present in many international
markets, which we believe are substantially under-served. In early 1998, we
launched an international initiative under which we began making specialized
catalogs available to passengers on certain international flights traveling to
Japan and serving the Pacific Rim. These catalogs feature merchandise tailored
to this audience and are offered in three languages: English, Japanese and
Chinese.
In March 1999, the Company began offering SkyMall catalogs on certain
transatlantic flights originating from New York and Boston and in June 1999, the
Company began offering a European catalog on such flights which is priced in
multiple currencies (US Dollars, British Pound Sterling, French Francs, German
Deutsche Marks, and the Euro), and is printed in English, German and French.
Although international sales have been immaterial to our total net
merchandise sales, we plan to continue exploring opportunities in these markets.
SkyMall continues to gain experience in international markets, including the
areas of merchandising, customer service and fulfillment. The Company plans to
enter into other controlled and carefully planned expansions into large
international markets through cooperative ventures with its current domestic
airline partners, as well as new international partners. The Company believes
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that its experience in the domestic in-flight business, as well as its Web-based
infrastructure that allows it to quickly set-up call center operations in
foreign countries, will enable it to expand into selected international markets,
particularly those with a strong interest in U.S. products or where remote
shopping already has some level of acceptance by consumers.
WORKPLACE MERCHANDISE CATALOGS. Through our subsidiary, Durham &
Company, we offer logo merchandise and recognition products to employees of a
number of blue-chip organizations, primarily through print catalogs and since
September 1999, on the Durham Web site. Competing in the highly fragmented
incentive industry, Durham distinguishes itself by providing high-quality
products and excellent customer service and focuses its marketing efforts on
large organizations. SkyMall provides Durham's clients with unique, high-quality
merchandise offered through other SkyMall channels as well as logo merchandise
and recognition products for corporate gift giving, employee recognition, sales
promotions and incentives, and similar programs.
OTHER PRINT CHANNELS. We provide unique, upscale catalogs to the
membership-oriented airport lounges of one of our major airline partners. The
SkyMall catalogs are also available on certain Northeastern routes of Amtrak. We
continue to test distribution of our print catalogs in a number of other venues,
including hotels and in connection with loyalty and marketing programs. We are
also testing other alliances, including with major credit card companies and
with the cruise line industry. To the extent the test results of these programs
prove successful, we may expand our presence in these channels.
ELECTRONIC MEDIA
GENERAL. We launched our first Internet Web site in January of 1996 and
since then have continued to refine and develop our e-commerce strategies. Our
e-commerce channels showcase products offered in our print catalogs and provide
customers an additional means of customer service and support. In addition,
because the Internet does not pose the same size and weight constraints as our
paper catalogs, we offer products and services from a greater number of
merchants and a full complement of products from merchants who offer only their
best-selling items in our catalogs. Through our wholly-owned subsidiary,
SKYMALL.COM, INC., we plan to increase our revenues from this media by
developing SkyMall's Web site as a premier Internet shopping and travel
destination and increasing the number of partners in our affiliate program.
AFFILIATE PROGRAM. In addition to developing our own site, we have an
affiliate program through which we provide a turn-key merchant solution to
businesses that are interested in providing SkyMall's merchandise to visitors to
their own Web sites. Our unique proprietary technology and other systems allow
us to quickly and cost-effectively implement affiliate site programs, in many
cases with lead times of less than three weeks. Visitors to SkyMall's affiliate
sites go directly to a SkyMall site, which is typically co-branded with the
affiliate partner, for shopping services. After shopping, the customers are
directed back exclusively to the site from which they began so that the
affiliate partner does not lose the benefit of the traffic to its site. Although
an online store can be privately labeled for our affiliate partners, most of our
affiliate sites are co-branded to increase SkyMall's brand awareness as well as
generate affinity for our online partners.
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Under our agreements with our affiliate partners, we typically pay them
a commission based on net merchandise sales. Our affiliate program offers
advantages to both consumers and our partners. Consumers enjoy the convenience
of SkyMall's online shopping and our partner sites enjoy the benefit of
increased revenue, while ensuring that their customers return to their site.
Early participants in our affiliate program include some of our airline
partners and related entities, such as Delta Air Lines, Delta Crown Room and
Continental Air Lines. In addition, Northwest Airlines and America West Airlines
have joined our affiliate program. New participants are Visa USA, Visa
International, First USA, the largest Visa card issuer and a banking leader in
electronic commerce, and LinkShare(R), a premier provider of partnership-based
marketing on the Web, specializing in brokering revenue-producing links among
complementary e-commerce sites. We also have arrangements with a number of other
high-traffic sites, including the site offered by the best-selling book series,
Chicken Soup for the Soul, Microsoft's online shopping mall called MSN Shopping,
MSNBC, Trip.com, and The Weather Channel site at Weather.com. The Company
continues to evaluate the success of its individual affiliates and, in some
cases, has terminated relationships while it continues to pursue new
affiliations.
THE SKYMALLTRAVEL.COM WEB SITE. As part of SkyMall's previously
announced investment in e-commerce, in July 1999, SkyMall launched its
WWW.SKYMALLTRAVEL.COM Web site targeted to frequent travelers, which provides
one-stop access for all their travel needs. SKYMALLTRAVEL.COM organizes many of
the best travel resources in one place, including linked directories for
airlines, hotels, rental car and online booking services, as well as content and
tools that assist business travelers before, during and after their trips. The
site was designed to help travelers get the most out of online travel planning
while minimizing the effort and time involved. Some of the leading online travel
companies are affiliates at our SKYMALLTRAVEL.COM Web site, including
webflyer.com, Trip.com, ontheroad.com, mapquest.com, weather.com, homefair.com
and MyFamily.com.
THE DURHAM & COMPANY WEB SITE. In September 1999, Durham & Company
launched its Web site at WWW.DURHAM.SKYMALL.COM which offers high quality logo
and corporate identity merchandise to organizations.
DISC PUBLISHING, INC. In September 1999, SkyMall acquired Disc
Publishing, Inc. Disc Publishing's SkyDisc(TM) is a leading interactive CD-ROM
targeted to the business traveler that integrates high-quality print, broadcast
and online media to provide an exciting mix of topics that entertain, inform and
enhance the business travelers' life. SkyDisc offers the business traveler the
option of using the disk on their laptop computer whether onboard the aircraft,
in a hotel, at the office, or at home. While using the disk online, consumers
can link to Web sites promoted on SkyDisc to get more information and services.
With the continued proliferation of new Web sites, SkyDisc will help consumers
sort through the clutter of the Web and drive traffic to the sites of our
program participants. Every other month a new "issue" of SkyDisc is available
free in airline seatback pockets to more than 400,000 SkyWest Airlines
passengers per month. SkyDisc has already attracted many program participants
such as Amazon.com, Earthlink Network, Inc., Interplay Entertainment, Inc. and U
S WEST(R). To the extent sponsorship of this program continues to increase, the
Company will consider expanding distribution of SkyDisc.
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THE OFFERING
Securities offered by the selling
shareholders............................. 413,813 shares of common stock
Common stock outstanding as of
December 3, 1999......................... 10,518,097 shares(1)
Use of Proceeds.......................... We will not receive any proceeds from
the sale of the common stock by the
selling shareholders. However, we
will receive up to $348,110 as the
purchase price for the shares of
common stock underlying the warrants
if all of the warrants are exercised.
See "Use of Proceeds."
Risk Factors............................. The shares of common stock offered
under this prospectus involve a high
degree of risk. See "Risk Factors."
Nasdaq National Market Symbol............ SKYM
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(1) Does not include (i) 1,075,588 shares of common stock issuable upon
exercise of outstanding stock options issued pursuant to the Company's
stock option plans, (ii) an additional 681,878 shares of common stock
reserved for issuance pursuant to future awards granted under such
stock option plans, (iii) 29,700 shares of common stock issuable by the
Company upon the exercise of warrants issued to shareholders in
connection with the Company's 1996 Private Placement, which are
exercisable at $8.00 per share, (iv) 700,580 shares of common stock
issuable by the Company upon the exercise of warrants issued to the
investors and placement agents in connection with the Company's
November 1999 private placement, which are exercisable at prices
ranging from $8.00 to $9.12 per share, (v) 50,000 shares of common
stock issuable upon exercise of warrants issued in an acquisition,
which are exercisable at $8.00 per share, and (v) 39,420 shares of
common stock issuable by the Company upon the exercise of the warrants
which are a part of the shares of common stock that are being offered
hereby.
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RISK FACTORS
BEFORE YOU BUY ANY OF THE SHARES OF COMMON STOCK BEING OFFERED BY THIS
PROSPECTUS, YOU SHOULD CAREFULLY READ AND CONSIDER EACH OF THE RISK FACTORS WE
HAVE DESCRIBED IN THIS SECTION. YOU SHOULD BE PREPARED TO ACCEPT ALL OF THESE
RISKS, INCLUDING THE RISK THAT YOU MAY LOSE YOUR ENTIRE INVESTMENT, BEFORE YOU
MAKE A DECISION TO BUY ANY OF THE SHARES OF COMMON STOCK.
WE MAY NOT BE PROFITABLE IN THE FUTURE. Although we have been
profitable in recent years, we plan to significantly increase spending on our
growth initiatives from historical levels and we expect to incur losses in the
foreseeable future. In addition, although we plan to spend significant
additional resources in connection with the execution of our growth strategy,
including for marketing, technological development and personnel costs, there
can be no assurance that we can successfully deploy such resources to accomplish
the objectives of our growth strategies and increase the revenues of the
Company.
WE MAY NOT BE ABLE TO RAISE SUFFICIENT CAPITAL. We currently have a
working capital deficit and our existing line of credit is not sufficient to
permit the Company to fully implement its business plan. In order to fully
implement our growth strategy, we will need to raise additional capital from
third parties or otherwise secure additional financing for the Company. There
can be no assurance that the Company will be able to successfully raise
additional capital or secure other financing, or that such funding will be
available on terms that are favorable to the Company. To the extent we are
unable to raise sufficient additional capital or secure other financing, this
could have a material adverse effect on the Company and we may be unable to
fully implement our planned growth strategy.
OUR BUSINESS MAY NOT GROW IN THE FUTURE. Since our inception, we have
rapidly expanded our operations, growing from total revenues of $200,000 in 1990
to total revenues of $66.3 million in 1998. Our continued future growth will
depend to a significant degree on our ability to increase revenues from our
existing businesses, maintain existing channel partner relationships and develop
new channel partner relationships, expand our product and content offering to
consumers, while maintaining adequate gross margins, and implement other
programs that increase the circulation of the SkyMall print catalogs and
generate traffic for our e-commerce programs. Our ability to implement our
growth strategy will also depend on a number of other factors, many of which are
or may be beyond our control, including (i) our ability to select products that
appeal to our customer base and effectively market them to our target audience,
(ii) sustained or increased levels of airline travel, particularly in domestic
airline markets, (iii) increasing adoption by consumers of the Internet for
shopping, (iv) the continued perception by participating merchants that we offer
an effective marketing channel for their products and services, and (v) our
ability to attract, train and retain qualified employees and management. There
can be no assurance that we will be able to successfully implement our growth
strategy.
OUR FUTURE GROWTH IS IN PART DEPENDENT UPON THE CONTINUED GROWTH OF THE
ELECTRONIC COMMERCE MARKET. The market for the sale of products and services
over the Internet is a new and rapidly evolving market. Our future growth
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strategy is partially dependent upon the widespread acceptance and use of online
services as an avenue for retail purchases. Consumers have only recently begun
to make purchases over the Internet and there is no assurance that they will
continue to do so in the future. In order for us to grow our online customer
base, we will need to attract purchasers who have historically relied upon
traditional venues for making their retail purchases. If use of online services
does not continue to grow as expected, or if the technological infrastructure
for the Internet is unable to effectively support its growing use, our growth
strategy may be materially adversely affected.
WE MAY BE UNABLE TO MANAGE THE POTENTIAL GROWTH OF OUR BUSINESS. Our
potential growth may place significant demands upon our personnel, management
and financial resources. In order to manage this growth, we may have to hire
additional personnel and develop additional management infrastructure. There is
no assurance that people with the necessary skills and experience will be
available as needed or on terms favorable to us. There is no assurance that our
current and planned personnel, systems, procedures and controls will be adequate
to support our future operations, that we will be able to attract, hire, train,
retain, motivate and manage necessary personnel, or that our management will be
able to identify, manage and exploit existing and potential strategic
relationships and market opportunities. If we are unable to effectively manage
any potential growth, our business and financial condition could be adversely
affected.
OUR PLANS FOR INTERNATIONAL EXPANSION POSE ADDITIONAL RISKS. A
significant aspect of our growth strategy is to expand our business
internationally, through our in-flight catalog program as well as the Internet.
We have limited experience in selling our products and services internationally.
Such expansion will place additional burdens upon our management, personnel and
financial resources and may cause the Company to incur losses. We will also face
different and additional competition in these international markets. In
addition, international expansion has certain unique risks, such as regulatory
requirements, legal uncertainty regarding liability, tariffs and other trade
barriers, difficulties in staffing and managing foreign operations, longer
payment cycles, political instability and potentially adverse tax implications.
To the extent we expand our business internationally, we will also become
subject to risks associated with international monetary exchange fluctuations.
Any one of these risks could impair our ability to expand internationally as
well as have a material adverse impact upon our overall business operations,
growth and financial condition.
WE FACE INTENSE COMPETITION. The distribution channels for our products
are highly competitive. From time to time in our airline catalog business,
competitors, typically other catalog retailers, have attempted to secure
contracts with various airlines to offer merchandise to their customers.
American Airlines currently offers merchandise catalogs to its customers through
a competitor. In addition, in July 1999, TWA, a former SkyMall partner, began
carrying a competitor's catalog. We also face competition for customers from
airport-based retailers, duty-free retailers, specialty stores, department
stores and specialty and general merchandise catalogs, many of which have
greater financial and marketing resources than we have. In addition, we compete
for customers with other in-flight marketing media, such as airline-sponsored
in-flight magazines and airline video programming. In our electronic commerce
sales, we face intense competition from other content providers and retailers
who seek to offer their products and/or services at their own Web sites or those
of other third parties. The success of online marketing cannot be currently
determined, and further penetration in this market will require substantial
additional financial resources, acquisition of technology, investments in
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marketing and contractual relationships with third parties. Results will also be
affected by existing competition, which the Company anticipates will intensify,
and by additional entrants to the market who may already have the necessary
technology and expertise, many of whom may have substantially greater resources
than the Company.
DEPENDENCE ON CHANNEL RELATIONSHIPS. Our business depends significantly
on our relationships with the airlines, affiliate Web sites, hotels and other
channel partners. Our agreements with our channel partners are typically
short-term allowing the partner to terminate the relationship on 60-to-180 days'
advance notice. There is no assurance that our channel partners will continue
their relationships with us and the loss of one or more of our significant
channel partners could have a material adverse effect on our financial condition
and results of operations.
WE MAY BE UNABLE TO MAINTAIN HISTORICAL MARGIN LEVELS. We may be unable
to increase or maintain our gross margins at historical levels, particularly for
our electronic commerce initiatives. As competition in online shopping
intensifies, our merchant participants may be unable or unwilling to participate
in our programs when more favorable economic arrangements may be available from
other third parties. Although many of our merchants have participated with us
for several years, most of our relationships are short-term and may be
re-negotiated by the merchant every 90 days. To the extent our gross margins
decline from historical levels, our financial condition and results of
operations may be adversely affected.
WE FACE CREDIT RISKS. Some participating merchants agree to pay a
placement fee to us for including their merchandise in our programs. We record
an account receivable from the merchant for the placement fee. In some cases, we
collect the placement fee either from the merchant or by withholding it from
amounts due to the merchant for merchandise sold. To the extent that the
placement fee receivable exceeds the sales of the merchant's products and the
merchant is unable or unwilling to pay the difference to us, we may experience
credit losses which could have a material adverse effect on our financial
condition and results of operations.
WE ARE VULNERABLE TO INCREASES IN PAPER COSTS AND AIRLINE FUEL PRICES.
The cost of paper used to print our catalogs and the fees paid to airlines to
reimburse them for the increased fuel costs associated with carrying our
catalogs are significant expenses of our operations. Historically, paper and
airline fuel prices have fluctuated significantly from time to time. Prices in
the paper market can and often do change dramatically over a short period of
time. Any significant increases in paper or airline fuel costs that we must pay
could have a material adverse effect on our financial condition and results of
operations.
OUR INFORMATION AND TELECOMMUNICATIONS SYSTEMS MAY FAIL OR BE
INADEQUATE. We process a large volume of relatively small orders. Consequently,
our success depends to a significant degree on the effective operation of our
information and telecommunications systems. These systems could fail for
unanticipated reasons or they may be inadequate to process any increase in our
sales volume that may occur. Any extended failure of our information and
telecommunications systems could have a material adverse effect on our financial
condition and results of operations.
WE FACE RISKS ASSOCIATED WITH ONLINE SECURITY BREACHES OR FAILURES. In
order to successfully make sales over the Internet, it is necessary that we be
able to ensure the secure transmission of confidential customer information over
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<PAGE>
public telecommunications networks. We employ certain technology in order to
protect such information, including customer credit card information. However,
there is no assurance that such information will not be intercepted illegally.
Advances in cryptography or other developments that could compromise the
security of confidential customer information could have a direct negative
impact upon our electronic commerce business. In addition, the perception by
consumers that making purchases over the Internet is not secure, even if
unfounded, will mean that fewer consumers are likely to make purchases through
that medium. Finally, any breach in security, whether or not a result of our
acts or omissions, may cause us to be the subject of litigation, which could be
very time-consuming and expensive to defend.
OUR BUSINESS IS SEASONAL. Our business is seasonal in nature, with the
greatest volume of sales typically occurring during the Holiday selling season
of the fourth calendar quarter. During 1998, approximately 41% of our net
merchandise sales were generated in the fourth quarter. Any substantial decrease
in sales for the fourth quarter could have a material adverse effect on our
results of operations.
WE FACE RISKS OF INCREASED GOVERNMENTAL REGULATION AND OTHER LEGAL
UNCERTAINTIES. Our electronic commerce activities are not currently subject to
significant regulation, other than those applicable to businesses generally.
However, electronic commerce is a new market and it is likely that regulations
and laws may be enacted in the future which would apply to our electronic
commerce activities. Any such laws or regulations could result in additional
costs associated with such activities, reduce or inhibit the growth of Internet
use, thereby reducing the growth of our electronic commerce business, or have
other adverse effects. Additionally, certain states or international
jurisdictions could enact laws that would require us to register in such
jurisdictions, pay fees or otherwise increase our costs of doing business.
WE FACE A RISK OF PRODUCT LIABILITY CLAIMS. Our catalogs and our
electronic commerce sites feature products and services from more than 300
participating merchants. Generally, our agreements with these participating
merchants require the merchants to indemnify us and thereby be solely
responsible for any losses arising from product liability claims made by
customers, including the costs of defending any such claims, and to carry
product liability insurance that names SkyMall as an additional insured. In
addition, we maintain product liability insurance in the aggregate amount of
$2.0 million and $1.0 million per occurrence. If a merchant was unable or
unwilling to indemnify us as required, and any such losses exceeded our
insurance coverage or were not covered by our insurer, our financial condition
and results of operations could be materially adversely affected.
WE RELY UPON OUR PRESIDENT AND OTHER KEY PERSONNEL. We depend on the
continued services of Robert M. Worsley, our chairman, president and chief
executive officer, and on the services of certain other executive officers. The
loss of Mr. Worsley's services or of the services of certain other executive
officers could have a material adverse effect on our business.
THE WORSLEYS CAN CONTROL MANY IMPORTANT COMPANY DECISIONS. As of
December 3, 1999, Mr. Worsley and his wife (the "Worsleys") beneficially owned
4,798,530 shares, or approximately 45.6% of our outstanding common stock. As a
result, the Worsleys have the ability to significantly influence the affairs of
the Company and matters requiring a shareholder vote, including the election of
12
<PAGE>
the Company's directors, the amendment of the Company's charter documents, the
merger or dissolution of the Company, and the sale of all or substantially all
of the Company's assets. The voting power of the Worsleys may also discourage or
prevent any proposed takeover of the Company pursuant to a tender offer.
THE PRICE OF OUR COMMON STOCK IS EXTREMELY VOLATILE. The market price
of our common stock has been highly volatile. Occurrences that could cause the
trading price of our common stock to fluctuate dramatically in the future
include:
o new merchant agreements
o the acquisition or loss of one or more airline, electronic
commerce or other channel partners
o fluctuations in our operating results
o analyst reports, media stories, Internet chat room discussions,
news broadcasts and interviews
o market conditions for retailers and electronic commerce companies
in general
o changes in airline fuel, paper or our other significant expenses
o changes in the commissions we are able to negotiate with our
merchants
The stock market has from time to time experienced extreme price and
volume fluctuations that have particularly affected the market price for
companies that do some or all of their business on the Internet. During the
third quarter of 1999, net merchandise sales from the Internet represented
approximately 21% of our net merchandise sales. Accordingly, the price of our
common stock may be impacted by these or other trends.
OUR OUTSTANDING SHARES MAY BE DILUTED. The market price of our common
stock may decrease as more shares of common stock become available for trading.
Certain events over which you have no control result in the issuance of
additional shares of our common stock, which would dilute your ownership
percentage in SkyMall. We may issue additional shares of common stock or
preferred stock:
o to raise additional capital or finance acquisitions; or
o upon the exercise or conversion of outstanding options and
warrants
There are currently outstanding warrants and options to acquire up to
1,895,288 additional shares of common stock at prices ranging from $2.13 to
$24.50 per share, including the 39,420 warrants described in this Prospectus and
the underlying shares which are included in the shares of common stock that are
being offered hereby. If exercised, these securities will dilute your percentage
ownership of common stock. These securities, unlike the common stock, provide
for antidilution protection upon the occurrence of stock splits, redemptions,
mergers, reclassifications, reorganizations and other similar corporate
transactions, and, in some cases, major corporate announcements. If one or more
of these events occurs, the number of shares of common stock that may be
acquired upon conversion or exercise would increase.
RISK THAT FORWARD-LOOKING STATEMENTS MAY NOT COME TRUE. This prospectus
and the documents incorporated herein by reference, contain forward-looking
statements that involve risks and uncertainties. We use words such as "believe,"
"expect," "anticipate," "plan" or similar words to identify forward-looking
statements. Forward-looking statements are made based upon our belief as of the
date that such statements are made. These forward-looking statements are based
largely on our current expectations and are subject to a number of risks and
13
<PAGE>
uncertainties, many of which are beyond our control. You should not place undue
reliance on these forward-looking statements, which apply only as of the date of
such documents. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by us described above and elsewhere in this prospectus.
WE FACE RISKS ASSOCIATED WITH THE YEAR 2000. Many software programs use
only two digits to identify the year in the date field. If such programs are not
corrected, data that includes a date in the Year 2000 or later could cause many
computer applications to fail, lock-up or generate erroneous results. Further,
certain computer programs may not properly process certain dates. This potential
problem is generally referred to as the "Year 2000 Issue." We have initiated a
program to evaluate and address our exposure to the Year 2000 Issue. If not
corrected, many computer applications could fail or create erroneous results.
We have a program in process to identify our exposure to the Year 2000
Issue and we have begun to implement measures to mitigate any problems. We
believe we have identified all significant internal systems and applications
that require attention of some form in order to address Year 2000 Issue risks.
Our information or production systems which consist of order entry,
order conveyance and customer service are primarily based on the Microsoft suite
of products and the hardware is principally late model Compaq and Dell servers,
which are designed and represented to meet Year 2000 Issue functional
requirements. A testing program has been performed by an outside contractor to
certify that such systems are Year 2000 compliant. The certification program
also included the hardware and operating systems that support the applications.
We have other non-production systems such as internal security systems,
telephone systems, and network computer equipment, which we are also currently
reviewing for Year 2000 compliance. In addition, we are surveying certain third
parties, such as our vendor partners, banks and telephone service providers, to
attempt to determine the Year 2000 Issue capability of their critical systems
upon which our essential business operations are dependent.
We believe we have identified all of the major information systems used
in our internal operations and have substantially completed all modifications,
upgrades or replacements to minimize the possibility of a material disruption of
our business. The expenditures that we have incurred to date and the
expenditures we expect to incur in this regard have not been and are not
expected to be material to our business, results of operations and financial
condition. However, failure of third-party equipment, software or content to
operate properly with regard to the Year 2000 Issue could require the Company to
incur unanticipated expenses to remedy problems, which could have a material
adverse effect on its business, operating results and financial condition.
We believe that our most significant worst case Year 2000 Issue
scenarios involve the inability of our vendors to process orders and conduct
business such as arranging deliveries to customers and replenishing inventories
and that the computer systems necessary to maintain the viability of the
Internet or the Web sites that direct consumers to the Company's online catalog
and related sites may not be Year 2000 compliant. In addition, computers used by
14
<PAGE>
customers to access the Company's online catalog and related sites may not be
Year 2000 compliant, delaying customers' product purchases. Furthermore, a
reduction in airline travel due to concerns about the Year 2000 Issue in the
airline industry, even if based on unfounded fears, could materially impact the
Company's business.
The Company has initiated formal communications with significant
suppliers and service providers to determine the extent to which its systems may
be vulnerable if they fail to address and correct their own Year 2000 Issues.
The Company cannot guarantee that the systems of suppliers or other companies on
which it relies will be Year 2000 compliant. Failure by suppliers or other
companies to convert their systems could disrupt the Company's systems.
To the extent we are unable to adequately identify, evaluate and
address all of the Year 2000 Issues relating to our business, or are unable to
develop and implement effective contingency plans, we could experience a
significant disruption of our ability to receive and process customer orders, in
which case our financial condition and results of operations would be likely to
be materially adversely affected.
FORWARD-LOOKING STATEMENTS
Certain statements made herein, in future filings by the Company with
the SEC and in the Company's written and oral statements made by or with the
approval of an authorized executive officer, constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, and the Company intends that
such forward-looking statements be subject to the safe harbors created thereby.
These statements discuss, among other items, the Company's growth strategy and
anticipated trends in our business. Words and phrases such as "should be," "will
be," "believes," "expects," "anticipates," "plans," "intends," "may" and similar
expressions identify forward-looking statements. Forward-looking statements are
made based upon our belief as of the date that such statements are made. These
forward-looking statements are based largely on our current expectations and are
subject to a number of risks and uncertainties, many of which are beyond our
control. Actual results could differ materially from these forward-looking
statements as a result of the factors described herein, including, among others,
regulatory or economic influences. Examples of uncertainties which could cause
such differences include, but are not limited to, the Company's dependence on
its relationships with its airline, merchant, and other partners, the ability of
the Company to attract and retain key personnel, especially highly skilled
technology personnel, the ability of the Company to secure additional capital to
finance its business strategy, fluctuations in paper prices and airline fuel
costs, customer credit risks, competition from other catalog companies,
retailers and e-commerce companies, and the Company's reliance on technology and
information and telecommunications systems, all of which are discussed more
fully above and in the Company's other filings with the Securities and Exchange
Commission. The Company undertakes no obligation to publicly update or revise
any forward-looking statements whether as a result of new information, future
events, or otherwise.
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<PAGE>
SELLING SHAREHOLDERS
The shares being offered by the selling shareholders were issued in
separate transactions. We are registering the shares in order to permit the
selling shareholders to offer these shares for resale from time to time.
The following table provides certain information with respect to the
common stock beneficially owned by each selling shareholder as of December 3,
1999. None of these selling shareholders has a material relationship with us
except Lorne Grierson, who is the President of Disc Publishing, Inc., a
subsidiary of the Company, Ryan Beck & Co., Inc., who is a financial advisor to
the Company, and Mark P. Durham who provides consulting services to the Company
in connection with its subsidiary, Durham & Company. We believe that the selling
shareholders named in the following table have sole voting and investment power
with respect to the respective shares of common stock set forth opposite their
names. The shares of common stock offered by this prospectus may be offered from
time to time by the selling shareholders named below or their nominees.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior Number of Owned After
to the Offering Shares the Offering
------------------------- Offered ------------------------
---------
Name Number Percent(1) Number Percent(2)
- ---- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Lorne Grierson 148,044 (3) 1.4% 132,044 16,000 (3) *
Warren Osborn 100,634 * 100,634 0 0%
Flamingo Partnership 30,495 * 30,495 0 0%
David E. Hardy 5,794 * 5,794 0 0%
Bart Howell 6,794 * 5,794 1,000 *
Kyle B. Love, Trustee 5,794 * 5,794 0 0%
KCL NACT Unitrust
Mark P. Durham, Trustee 36,470 (4) * 21,629 14,841(4) *
Mark P. Durham Trust Dated
December 10, 1997
Mary R. Durham, Trustee 22,755 * 21,629 1,126 *
Mark P. Durham Trust Dated
December 10, 1997
Andrew P. Campbell 19,363 * 19,363 0 0%
Jonathan H. Waller 3,300 * 3,300 0 0%
Charles A. McCallum III 2,200 * 2,200 0 0%
Janet R. Varnell 4,875 * 4,875 0 0%
Marcia W. Aldridge 2,762 * 2,762 0 0%
Harry Scoufos 32,500 * 32,500 0 0%
Ryan, Beck & Co., Inc. 56,112 (5) * 25,000 31,112 *
</TABLE>
_______________
* Less than 1%.
(1) Percentages are based upon 10,518,097 shares of the Company's common stock
outstanding as of December 3, 1999.
(2) Percentages are based upon 10,557,517 shares of the Company's common stock
outstanding, assuming all of the shares of common stock offered pursuant to
this prospectus are sold by the selling shareholders.
(3) Includes 15,000 shares of common stock issuable upon exercise of options
held by Mr. Grierson pursuant to the Company's 1994 Stock Option Plan, as
amended.
(4) Includes 5,000 shares of common stock issuable upon exercise of options
held by Mr. Durham pursuant to the Company's 1994 Stock Option Plan, as
amended.
(5) Includes 31,112 shares of common stock issuable upon exercise of warrants
held by Ryan, Beck & Co., Inc. issued to Ryan, Beck as a placement agent in
connection with the Company's 1999 private placement.
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<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock by
the selling shareholders. However, we will receive up to $348,110 upon payment
of the exercise price for the common stock underlying the warrants if all of the
warrants are exercised. We will use all of these proceeds for working capital
for our operations.
DETERMINATION OF OFFERING PRICE
Because this prospectus relates only to the resale of previously issued
shares of common stock, we did not determine an offering price. The selling
shareholders will individually determine the offering price of the common stock.
The selling shareholders may use this prospectus from time to time to sell their
common stock. The price at which the common stock is sold may be based on market
prices prevailing at the time of sale, at prices relating to such prevailing
market prices, or at negotiated prices.
PLAN OF DISTRIBUTION
In connection with our issuance to the selling shareholders of our
common stock and warrants, we provided to them certain registration rights and
have subsequently filed a registration statement on Form S-3 with the Securities
and Exchange Commission. That registration statement covers the resale of the
common stock from time to time on the Nasdaq National Market or other national
security exchange or automated quotation system upon which our common stock is
then traded or in privately negotiated transactions. This prospectus forms a
part of that registration statement. We have also agreed to prepare and file any
amendments and supplements to the registration statement as may be necessary to
keep it effective until this prospectus is no longer required for the selling
shareholders to sell their shares of common stock and to indemnify and hold the
selling shareholders harmless against certain liabilities under the Securities
Act that could arise in connection with the selling shareholders' sale of their
shares. We have agreed to pay all reasonable fees and expenses incident to the
filing of the registration statement.
The selling shareholder may sell the shares of common stock described
in this prospectus directly or through underwriters, broker-dealers or agents.
The selling shareholders may also transfer, devise or gift their shares by other
means not described in this prospectus. As a result, pledgees, donees,
transferees or other successors in interest that receive such shares as a gift,
partnership distribution or other non-sale related transfer may offer shares of
common stock. In addition, if any shares covered by this prospectus qualify for
sale pursuant to Rule 144 under the Securities Act, the selling shareholders may
sell such shares under Rule 144 rather than pursuant to this prospectus.
The selling shareholders may sell shares of common stock from time to
time in one or more transactions:
o at fixed prices that may be changed,
o at market prices prevailing at the time of sale, or
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<PAGE>
o at prices related to such prevailing market prices or at
negotiated prices.
The selling shareholders may offer their shares of common stock in one
or more of the following transactions:
o on any national securities exchange or quotation service on which
the common stock may be listed or quoted at the time of sale,
including the Nasdaq National Market,
o in the over-the-counter market,
o in privately negotiated transactions,
o through options,
o by pledge to secure debts and other obligations,
o by a combination of the above methods of sale, or
o to cover short sales made pursuant to this prospectus.
In effecting sales, brokers or dealers engaged by the selling
shareholders may arrange for other brokers or dealers to participate in the
resales. The selling shareholders may enter into hedging transactions with
broker-dealers, and in connection with those transactions, broker-dealers may
engage in short sales of the shares. The selling shareholders also may sell
shares short and deliver the shares to close out such short positions. The
selling shareholders also may enter into option or other transactions with
broker-dealers that require the delivery to the broker-dealer of the shares,
which the broker-dealer may resell pursuant to this prospectus. The selling
shareholders also may pledge the shares to a broker or dealer, and upon a
default, the broker or dealer may effect sales of the pledged shares pursuant to
this prospectus.
In order to comply with the securities laws of certain states, the
selling shareholders must offer or sell the shares only through registered or
licensed brokers or dealers. In addition, in certain states, the selling
shareholders can not offer or sell the shares unless the shares have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied with.
The SEC may deem the selling shareholders and any underwriters,
broker-dealers or agents that participate in the distribution of the shares of
common stock to be "underwriters" within the meaning of the Securities Act. The
Commission may deem any profits on the resale of the shares of common stock and
any compensation received by any underwriter, broker-dealer or agent to be
underwriting discounts and commission under the Securities Act.
Under the Exchange Act, any person engaged in the distribution of the
shares of common stock may not simultaneously engage in market-making activities
with respect to the common stock for five business days prior to the start of
the distribution. In addition, each selling shareholder and any other person
participating in a distribution will be subject to the Exchange Act, which may
limit the timing of purchases and sales of common stock by the selling
shareholder or any such other person.
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<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
For a description of our common stock, see our Registration Statement
on Form 8-A filed with the SEC on October 31, 1996 and incorporated by reference
into this prospectus.
RIGHTS
In September 1999, we adopted a Shareholder Rights Plan for the
protection of our shareholders. For a description of the Rights relating to our
Shareholder Rights Plan, see our Form 8-K filed with the SEC on September 23,
1999 and incorporated by reference into this prospectus.
WARRANTS ISSUED TO THE DURHAM TRUSTS
Pursuant to the conversion of the outstanding note, we issued warrants
to the Mark P. Durham and Mary R. Durham Trusts. The warrants expire five years
after issuance.
EXERCISE OF WARRANTS. The warrants may be exercised at any time after
issuance.
EXERCISE PRICE. The exercise price of each warrant is $8.00 per share
of common stock represented by the warrant. The exercise price of the warrants
is subject to customary anti-dilution adjustments upon such events as the
subdivision or combination of the common stock, the distribution of our assets
to holders of common stock, and other similar events.
CASHLESS EXERCISE OPTION. If the common stock to be issued in exchange
for the warrants is not registered for resale in accordance with the provisions
of the note conversion, the warrant holders are entitled to a "cashless
exercise" option. This option entitles the warrant holders to elect to receive
fewer shares of common stock without paying the cash exercise price. The number
of shares to be issued would be determined by a formula based on the total
number of shares to which the warrant holder is entitled, the last reported sale
price of the common stock and the applicable exercise price of the warrants.
FAILURE TO DELIVER THE COMMON STOCK UNDERLYING THE WARRANTS. If we fail
to deliver the common stock underlying the warrants upon exercise of such
warrants within two business days of receipt of the notice of exercise, we will
be required to pay to the exercising holder of the warrant an amount equal to
0.5% of the product of:
o the number of shares of common stock not issued to the holder,
and
o the average last closing price of the common stock for the five
consecutive trading days immediately preceding the last possible
day we could have issued the common stock.
REDEMPTION AT OUR ELECTION. We may redeem the warrants upon 30 days
prior written notice to the holder, in our sole discretion, at $.01 per share of
common stock underlying the warrants provided the following conditions have been
met:
19
<PAGE>
o this Registration Statement is effective;
o the closing bid price of our common stock is greater than $12.00
(as equitably adjusted to reflect any merger, consolidation or
reorganization of the Company or any stock split, subdivision,
reverse stock split or combination effected by the Company) for
twenty consecutive trading days immediately preceding our
exercise; and
o our common stock is listed on Nasdaq National Market, the
American Stock Exchange or the New York Stock Exchange.
COVENANTS. We made certain customary covenants with respect to the
warrants, including, among others:
o the warrants, and any common stock to be issued upon exercise of
the warrants, are and will be duly authorized and validly issued;
o we will have 100% of the underlying shares of common stock
authorized and reserved for issuance during the term of the
warrants;
o we must reserve at least 100% of the number of shares of common
stock issuable upon exercise of the warrants;
o the common stock issuable upon exercise of the warrants shall be
listed on each national securities exchange or automated
quotation system upon which our common stock is then listed; and
o we will act in good faith in carrying out the provisions of the
warrants.
If we grant any dividend rights to holders of common stock, the holders
of the warrants and entitled to acquire the aggregate amount of rights which
such holder could have acquired if such holder had completely exercised their
warrant immediately prior to the record date for the granting of such rights.
In addition, upon any conveyance or exchange of all or substantially
all of our assets to another corporation or entity, or a recapitalization,
reorganization, reclassification, consolidation, or merger in which the holders
of our common stock are entitled to receive stock, securities or assets with
respect to or in exchange for our common stock in which we are not the surviving
entity, we will obtain from the acquiring person or entity a written agreement
to deliver to each holder of the warrants, in exchange for the warrants, a
security from the acquiring entity evidenced by a written instrument
substantially similar in form and substance to the warrant.
AMENDMENT. The provisions of the warrants may be amended only after we
have obtained the written consent of warrant holders representing 66.7% of the
shares of common stock issuable upon exercise of the warrants then outstanding.
However, we may not increase the exercise price of the warrants, decrease the
term of the warrants or decrease the amount of common stock issuable upon
exercise of any warrant or otherwise materially adversely effect the rights of
the holder without the written consent of the holder of such warrant.
20
<PAGE>
WARRANTS ISSUED TO RYAN, BECK & CO., INC.
The warrants issued to Ryan, Beck & Co., Inc. were issued in connection
with services performed as investment advisor to the Company. The warrants
expire five years after issuance.
EXERCISE OF WARRANTS. The warrants may be exercised at any time after
issuance.
EXERCISE PRICE. The exercise price of the warrants is $9.31 per share
of common stock represented by the warrants. The exercise price of the warrants
is subject to customary anti-dilution adjustments upon such events as the
subdivision or combination of the common stock, the distribution of our assets
to holders of common stock, and other similar events.
CASHLESS EXERCISE OPTION. The placement agents are entitled to a
"cashless exercise" option. This option entitles the placement agents to elect
to receive fewer shares of common stock without paying the cash exercise price.
The number of shares to be issued would be determined by a formula based on the
total number of shares to which the warrant holder is entitled, the last
reported sale price of the common stock and the applicable exercise price of the
warrants.
COVENANTS. We made certain customary covenants with respect to the
warrants, including, among others:
o the warrants, and any common stock to be issued upon exercise of
the warrants, are and will be duly authorized and validly issued;
o we will have 100% of the underlying shares of common stock
authorized and reserved for issuance during the term of the
warrants;
o we must reserve at least 100% of the number of shares of common
stock issuable upon exercise of the warrants;
o the common stock issuable upon exercise of the warrants shall be
listed on each national securities exchange or automated
quotation system upon which our common stock is then listed; and
o we will act in good faith in carrying out the provisions of the
warrants.
In addition, upon any conveyance or exchange of all or substantially
all of our assets to another corporation or entity, or a recapitalization,
reorganization, reclassification, consolidation, or merger in which the holders
of our common stock are entitled to receive stock, securities or assets with
respect to or in exchange for our common stock in which we are not the surviving
entity, we will obtain from the acquiring person or entity a written agreement
to deliver to each holder of the warrants, in exchange for the warrants, a
security from the acquiring entity evidenced by a written instrument
substantially similar in form and substance to the warrants.
AMENDMENT. We may not increase the exercise price of the warrants,
decrease the term of the warrants or decrease the amount of common stock
issuable upon exercise of any warrant or otherwise substantially alter the
rights of the holder without the written consent of the holder of such warrant.
21
<PAGE>
LEGAL MATTERS
Certain legal matters have been passed upon for the Company by Squire,
Sanders & Dempsey L.L.P., Phoenix, Arizona.
EXPERTS
The audited financial statements of the Company as of and for each of
the three years in the period ended December 31, 1998, incorporated by reference
in this prospectus and elsewhere in the registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
22
<PAGE>
<TABLE>
<S> <C>
============================================== ============================================
No dealer, salesman or other person has
been authorized to give any information
or to make any representations other than
those contained or incorporated by
reference in this prospectus in connection
with the offering described herein, and,
if given or made, such information or
representation must not be relied upon as
having been authorized by the Company or
by any selling shareholder. This prospectus
does not constitute an offer to sell, or a
solicitation of an offer to buy, any
securities other than the registered
securities to which it relates, or an offer
to sell, or a solicitation of an offer to
buy, in any jurisdiction in which it is
unlawful to make such offer or solicitation. SKYMALL, INC.
Neither the delivery of this prospectus nor
any sale made hereunder shall, under any
circumstances, create an implication that
there has been no change in the affairs of
the Company since the date hereof or that 413,813 SHARES
the information contained herein is correct COMMON STOCK
as of any time subsequent to the date hereof.
---------------------
PROSPECTUS
TABLE OF CONTENTS
Page
----
Where You Can Find More Information...... 2
Incorporation of Certain Documents
By Reference............................ 2
Prospectus Summary....................... 4
The Company.............................. 4
Our Operations........................... 4 DECEMBER 6, 1999
The Offering............................. 8
Risk Factors............................. 9
Selling Shareholders..................... 16
Use of Proceeds.......................... 17
Determination of Offering Price.......... 17
Plan of Distribution..................... 17
Description of Securities................ 19
Legal Matters............................ 22
Experts.................................. 22
============================================== ============================================
</TABLE>
