Filed Pursuant to Rule 424b(3)
Registration #333-94099
PROSPECTUS
2,207,602 SHARES
SKYMALL, INC.COMMON STOCK
We have issued 91,320 shares of our Series A Junior Convertible
Preferred Stock, which are convertible into 1,304,571 shares of our common
stock, and 853,031 warrants to purchase 853,031 shares of our common stock in a
private placement completed in December 1999. The private placement was
completed pursuant to the terms of a Stock and Warrant Purchase Agreement dated
as of December 20, 1999. Of such shares of preferred stock and warrants, 91,320
shares of preferred stock and 652,289 warrants were issued to the investors in
the private placement and 200,742 warrants were issued to the placement agents
that assisted the Company in completing the private placement. In addition, we
have issued 50,000 warrants to purchase 50,000 shares of common stock to an
investor relations consultant for the Company. The investors, the placement
agents and the consultant (which we collectively refer 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 will receive by converting the
preferred stock to common stock or 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
$7,229,017 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 March 9, 2000, the last reported sale price for
our common stock was $7.9375.
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 March 10, 2000
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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 REFRENCE
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
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you in the common stock. In addition to previously filed documents that are
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 Current Report on Form 8-K filed January 3, 2000;
o Our Current Report on Form 8-K filed January 4, 2000;
o Our Current Report on Form 8-K filed March 2, 2000;
o Our Definitive Proxy Statement for our 1999 Annual Meeting of
Shareholders held on June 4, 1999;
o Our Definitive Proxy Statement for our Special Meeting of
Shareholders held on March 10, 2000; 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 Securities Exchange Act of 1934, as amended, 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 BY READ BY YOU TOGETHER WITH THE MORE DETAILED
INFORMATION INCLUDED IN 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.
We offer a diverse variety of products from numerous retailers and 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. Some of
the retailers who offer their products and/or services through our print
catalogs or on our Web site are: 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).
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 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
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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
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. 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 featuring merchandise tailored to this audience. 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.
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
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.
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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. 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.
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.
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Participants in our affiliate program include some of our airline partners
and related entities, such as Delta Air Lines, Delta Crown Room, Continental Air
Lines, Northwest Airlines, America West Airlines and US Airways. Other
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. 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............................. 2,207,602 shares of common stock
Common stock outstanding as of
March 9, 2000............................ 10,542,706 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 $7,229,017 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
- ----------------
(1) Does not include (a) 986,001 shares of common stock issuable upon the
exercise of outstanding stock options issued pursuant to the Company's
stock option plans, (b) an additional 760,632 shares of common stock
reserved for issuance pursuant to future awards granted under such stock
option plans, (c) 50,000 shares of common stock issuable upon the exercise
of warrants issued in an acquisition, which are exercisable at $8.00 per
share, (d) 25,000 shares of common stock issuable upon the exercise of
warrants issued to Ryan, Beck & Co., Inc. in connection with Ryan, Beck's
services to the Company related to the Company's financing efforts, which
are exercisable at $9.31 per share, (e) 571,444 shares of common stock
issuable upon the exercise of warrants issued to investors in the Company's
November 1999 private placement, which are exercisable at $8.00 per share,
(f) 129,136 shares of common stock issuable upon the exercise of warrants
issued to 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, (g) 14,420 shares of common stock issuable upon the
exercise of warrants issued upon conversion of an outstanding note, which
are exercisable at $8.00 per share, (h) 1,304,571 shares of common stock
issuable upon the conversion of the Series A Junior Convertible Preferred
Stock issued to investors in the Company's December 20, 1999 private
placement, which are a part of the shares of common stock that are being
offered pursuant to this prospectus, (i) 652,289 shares of common stock
issuable upon the exercise of warrants issued to investors in the Company's
December 20, 1999 private placement, which are exercisable at $8.00 per
share, which are a part of the shares of common stock that are being
offered pursuant to this prospectus, (j) 200,742 shares of common stock
issuable upon the exercise of warrants issued to placement agents in
connection with the Company's December 20, 1999 private placement, which
are exercisable at prices ranging from $7.00 to $9.12 per share, which are
a part of the shares of common stock that are being offered pursuant to
this prospectus, (k) 1,142,857 shares of common stock issuable upon the
conversion of the Series B Junior Convertible Preferred Stock issued to
investors in the Company's December 30, 1999 private placement, (l) 571,429
shares of common stock issuable upon the exercise of warrants issued to
investors in the Company's December 30, 1999 private placement, which are
exercisable at $8.00 per share, (m) 34,286 shares of common stock issuable
upon the exercise of warrants issued to placement agents in connection with
the Company's December 30, 1999 private placement, which are exercisable at
$7.00 per share, (n) 250,000 warrants issued to a financial advisor in
payment of an advisory fee in connection with the transactions contemplated
pursuant to the December 30, 1999 private placement which are exercisable
at $8.00 per share, and (o) 50,000 warrants issued to an investor relations
consultant, which are a part of the shares of common stock that are being
offered pursuant to this prospectus.
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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. 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
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over the Internet is a new and rapidly evolving market. Our future growth
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
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additional financial resources, acquisition of technology, investments in
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.
11
<PAGE>
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
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 numerous 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 March 9,
2000, Mr. Worsley and his wife (the "Worsleys") beneficially owned 4,798,530
shares, or approximately 45.5% of our outstanding common stock. As a result, the
12
<PAGE>
Worsleys have the ability to significantly influence the affairs of the Company
and matters requiring a shareholder vote, including the election of 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 (i) warrants and options to acquire up to
3,534,747 additional shares of common stock at prices ranging from $2.13 to
$24.50 per share, including the 853,031 warrants issued in the December 20, 1999
private placement which are a part of the shares of common stock that are being
offered pursuant to this prospectus and 50,000 warrants issued to our investor
relations consultant which are a part of the shares of common stock that are
being offered pursuant to this prospectus, (ii) 91,320 shares of Series A Junior
Convertible Preferred Stock which are convertible into 1,304,571 shares of
common stock which are a part of the shares of common stock that are being
offered pursuant to this prospectus, and (iii) 80,000 shares of Series B Junior
Convertible Preferred Stock issued in the December 30, 1999 private placement
which are convertible into 1,142,857 shares of common stock. If exercised and/or
converted, 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,
13
<PAGE>
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
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 implemented 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 have also reviewed
for Year 2000 compliance. In addition, we have surveyed 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 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
14
<PAGE>
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 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 contacted 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.
As of March 9, 2000, we have not experienced any significant disruptions or
computer processing errors or failures related to any Year 2000 Issues.
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
15
<PAGE>
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.
SELLING SHAREHOLDERS
The shares being offered by the selling shareholders were issued in the
private placement pursuant to a Stock and Warrant Purchase Agreement and
pursuant to a consulting agreement. 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 March 9, 2000. None
of these selling shareholders has a material relationship with us except Lyle
Knight, Thomas J. Litle IV and Randy Petersen, who are directors of the Company,
Ryan, Beck & Co., Inc., which is a financial advisor to the Company, including
Michael Kollender and Randy Rock who are representatives of Ryan, Beck, and
Genesis Select Corporation which is an investor relations consultant to the
Company, including Budd Zuckerman who is President of Genesis Select. 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>
American High Growth Equities 221,429 (3) 2.1% 150,000 71,429 *
Retirement Trust
Trump Tower - 24th Floor
725 5th Avenue
New York, New York 10022
Hathaway Partners Investment 40,000 (4) * 30,000 10,000 *
Limited Partnership
119 Royayton Avenue
Rowayton, Connecticut 06853
Lyle R. Knight and Toril Knight 148,586 (5) 1.4% 43,286(6) 105,300 *
c/o First Interstate Banc System
401 N. 31st Street
Billings, Montana 59116-0918
Lyle R. Knight IRA 21,429 (6) * 21,429 0 0%
c/o First Interstate Banc System
401 N. 31st Street
Billings, Montana 59116-0918
Thomas J. Litle 278,786 (7) 2.6% 214,286 64,500 *
OrderTrust - Advanced
Technology Center
900 Chelmsford Street
Lowell, Massachusetts 01851-8207
</TABLE>
16
<PAGE>
<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>
Peter A. Massaniso 25,000 (8) * 15,000 10,000 *
1548 The Greens Way, Suite 6
Jacksonville Beach, Florida 32250
Narragansett I, L.P. 84,644 (9) * 84,644 0 0%
375 Park Avenue, 14th Floor
New York, New York 10152
Narragansett Offshore Ltd. 22,500 (10) * 22,500 0 0%
375 Park Avenue, 14th Floor
New York, New York 10152
Randy Petersen 50,144 (11) * 5,357 44,787 *
Frequent Flyer Service
1930 Victor Place
Colorado Springs, Colorado 80915
Ponte Vedra Partners, Ltd. 60,000 (12) * 30,000 30,000 *
1548 The Greens Way, Suite 6
Jacksonville Beach, Florida 32250
RS Emerging Growth Pacific 311,798 (13) 3.0% 311,798 0 0%
Partners (Jaguar)
388 Market Street, Second Floor
San Francisco, California 94111
RS Emerging Growth Partners LP 145,698 (14) 1.4% 145,698 0 0%
(Wildcat)
388 Market Street, Second Floor
San Francisco, California 94111
RS Premium Partners LP (Puma) 185,361 (15) 1.8% 185,361 0 0%
388 Market Street, Second Floor
San Francisco, California 94111
Special Situations Cayman 101,265 (17) * 48,215 53,050 *
Fund L.P.(16)
153 E. 53rd Street
New York, New York 10022-1200
Special Situations Fund III 290,879 (18) 2.8% 141,429 149,450 1.2%
L.P.(16)
153 E. 53rd Street
New York, New York 10022-1200
Special Situations Private 277,186 (19) 2.6% 131,786 145,400 1.0%
Equity Fund L.P.(16)
153 E. 53rd Street
New York, New York 10022-1200
The Paisley Fund 75,000 (20) * 75,000 0 0%
388 Market Street, Second Floor
San Francisco, California 94111
The Paisley Pacific Fund 300,000 (21) 2.9% 300,000 0 0%
388 Market Street, Second Floor
San Francisco, California 94111
Budd Zuckerman 151,726 (22) 1.4% 148,726(22) 3,000 *
6587 Lake View Drive
Boulder, Colorado 80303
Ryan, Beck & Co., Inc. 102,790 (23) * 45,000 57,790 *
200 Park Avenue
New York, New York 10166
</TABLE>
17
<PAGE>
<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>
Michael J. Kollender 62,816 (24) * 27,500 35,316 *
c/o Ryan, Beck & Co., Inc.
200 Park Avenue
New York, New York 10166
Randy Rock 62,816 (25) * 27,500 35,316 *
c/o Ryan, Beck & Co., Inc.
200 Park Avenue
New York, New York 10166
Schneider Securities 8,470 (26) * 8,470 0 0%
1625 17th Street, Suite 311
Denver, Colorado 80202
Shoreline Pacific Equity Ltd.(27) 29,507 (28) * 6,227 23,280 *
c/o Shoreline Pacific
Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, California 94965
Harlan P. Kleiman(27) 38,023 (29) * 8,023 30,000 *
c/o Shoreline Pacific
Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, California 94965
Greg Tansey(27) 5,049 (30) * 1,065 3,984 *
c/o Shoreline Pacific
Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, California 94965
Jim Healy(27) 1,947 (31) * 411 1,536 *
c/o Shoreline Pacific
Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, California 94965
Vida Harband(27) 1,156 (32) * 244 912 *
c/o Shoreline Pacific
Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, California 94965
Beth Collins(27) 182 (33) * 38 144 *
c/o Shoreline Pacific
Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, California 94965
Maria Jorajuria(27) 182 (34) * 38 144 *
c/o Shoreline Pacific
Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, California 94965
Genesis Select 50,000(35) * 50,000 0 0%
1625 Seventeenth Street, Suite 311
Denver, Colorado 80202-1203
</TABLE>
_______________
* Less than 1%.
18
<PAGE>
(1) Percentages are based upon 10,542,706 shares of the Company's common stock
outstanding as of March 9, 2000.
(2) Percentages are based upon 12,750,308 shares of the Company's common stock
being outstanding if all of the shares of common stock offered pursuant to
this prospectus are sold by the selling shareholders.
(3) Includes (i) 71,429 shares of common stock issuable to American High Growth
Equities Retirement Trust upon exercise of certain warrants issued in the
Company's November 1999 private placement and (ii) 100,000 shares of common
stock issuable upon conversion of the preferred stock and 50,000 shares of
common stock issuable upon exercise of the warrants issued in the Company's
December 20, 1999 private placement.
(4) Includes 20,000 shares of common stock issuable upon conversion of the
preferred stock and 10,000 shares of common stock issuable upon exercise of
the warrants issued to Hathaway Partners Investment Limited Partnership in
the December 20, 1999 private placement.
(5) Mr. Knight serves as a director of the Company. Includes (i) 14,571 shares
of common stock issuable upon conversion of the preferred stock and 7,286
shares of common stock issuable upon exercise of the warrants issued to Mr.
and Mrs. Knight in the Company's December 20, 1999 private placement, (ii)
14,286 shares of common stock issuable upon conversion of the preferred
stock and 7,143 shares of common stock issuable upon exercise of the
warrants issued to Mr. Knight's IRA account in the December 20, 1999
private placement (see Footnote (6), below), and (iii) 38,500 shares of
common stock issuable to Mr. Knight upon exercise of options to purchase
shares of common stock granted pursuant to the Company's Non-Employee
Director Stock Option Plan.
(6) Includes 14,286 shares of common stock issuable upon conversion of the
preferred stock and 7,143 shares of common stock issuable upon exercise of
the warrants issued to Mr. Knight's IRA account in the December 20, 1999
private placement.
(7) Mr. Litle serves as a director of the Company. Includes (i) 142,857 shares
of common stock issuable upon conversion of the preferred stock and 71,429
shares of common stock issuable upon exercise of the warrants issued to Mr.
Litle in the Company's December 20, 1999 private placement, and (ii) 38,500
shares of common stock issuable to Mr. Litle upon exercise of options to
purchase shares of common stock granted pursuant to the Company's
Non-Employee Director Stock Option Plan.
(8) Includes 10,000 shares of common stock issuable upon conversion of the
preferred stock and 5,000 shares of common stock issuable upon exercise of
the warrants issued to Mr. Massaniso in the December 20, 1999 private
placement.
(9) Includes 56,429 shares of common stock issuable upon conversion of the
preferred stock and 28,215 shares of common stock issuable upon exercise of
the warrants issued to Narragansett I, L.P. in the December 20, 1999
private placement.
(10) Includes 15,000 shares of common stock issuable upon conversion of the
preferred stock and 7,500 shares of common stock issuable upon exercise of
the warrants issued to Narragansett Offshore Ltd. in the December 20, 1999
private placement.
(11) Mr. Petersen serves as a director of the Company. Includes (i) 3,571 shares
of common stock issuable upon conversion of the preferred stock and 1,786
shares of common stock issuable upon exercise of the warrants issued to Mr.
Petersen in the December 20, 1999 private placement, and (ii) 38,500 shares
of common stock issuable to Mr. Petersen upon exercise of options to
purchase shares of common stock granted pursuant to the Company's
Non-Employee Director Stock Option Plan.
(12) Includes 20,000 shares of common stock issuable upon conversion of the
preferred stock and 10,000 shares of common stock issuable upon exercise of
the warrants issued to Ponte Vedra Partners, Ltd. in the December 20, 1999
private placement.
(13) Includes 207,865 shares of common stock issuable upon conversion of the
preferred stock and 103,933 shares of common stock issuable upon exercise
of the warrants issued to RS Emerging Growth Pacific Partners (Jaguar) in
the December 20, 1999 private placement.
(14) Includes 97,132 shares of common stock issuable upon conversion of the
preferred stock and 48,566 shares of common stock issuable upon exercise of
the warrants issued to RS Emerging Growth Partners LP (Wildcat) in the
December 20, 1999 private placement.
(15) Includes 123,574 shares of common stock issuable upon conversion of the
preferred stock and 61,787 shares of common stock issuable upon exercise of
the warrants issued to RS Premium Partners LP (Puma) in the December 20,
1999 private placement.
(16) MGP Advisers Limited Partnership (MGP), a Delaware limited partnership, is
the general partner of the Special Situations Fund III, L.P., a Delaware
limited partnership. AWM Investment Company, Inc. (AWM), a Delaware
19
<PAGE>
corporation, is the general partner of MGP and the general partner of and
investment adviser to the Special Situations Cayman Fund, L.P. MG Advisers
L.L.C. (MG), a New York limited liability company, is the general partner
of the Special Situations Private Equity Fund, L.P., a Delaware limited
partnership. Austin W. Marxe and David M. Greenhouse are the principal
owners of MG, MGP and AWM and are principally responsible for the
selection, acquisition and disposition of the portfolios securities by the
investment advisers on behalf of their funds.
(17) Includes (i) 32,150 shares of common stock issuable to Special Situations
Cayman Fund L.P. upon exercise of certain warrants issued in the November
1999 private placement and (ii) 32,143 shares of common stock issuable upon
conversion of the preferred stock and 16,072 shares of common stock
issuable upon exercise of the warrants issued to Special Situations Cayman
Fund L.P. in the December 1999 private placement.
(18) Includes (i) 96,450 shares of common stock issuable to Special Situations
Fund III L.P. upon exercise of certain warrants issued in the November 1999
private placement and (ii) 94,286 shares of common stock issuable upon
conversion of the preferred stock and 47,143 shares of common stock
issuable upon exercise of the warrants issued to Special Situations Fund
III L.P. in the December 20, 1999 private placement.
(19) Includes (i) 85,700 shares of common stock issuable to Special Situations
Private Equity Fund L.P. upon exercise of certain warrants issued in the
November 1999 private placement and (ii) 87,857 shares of common stock
issuable upon conversion of the preferred stock and 43,929 shares of common
stock issuable upon exercise of the warrants issued to Special Situations
Private Equity Fund L.P. in the December 20, 1999 private placement.
(20) Includes 50,000 shares of common stock issuable upon conversion of the
preferred stock and 25,000 shares of common stock issuable upon exercise of
the warrants issued to The Paisley Fund in the December 20, 1999 private
placement.
(21) Includes 200,000 shares of common stock issuable upon conversion of the
preferred stock and 100,000 shares of common stock issuable upon exercise
of the warrants issued to The Paisley Pacific Fund in the December 20, 1999
private placement.
(22) In addition to being an investor in the December 20, 1999 private
placement, as an associate of Schneider Securities, which acted as a
placement agent in such private placement, Mr. Zuckerman received
additional warrants to purchase shares of common stock. Mr. Zuckerman is
also President of Genesis Select Corporation, an investor relations
consultant to the Company. The number of shares beneficially owned by Mr.
Zuckerman includes (i) 76,226 shares of common stock issuable upon exercise
of warrants granted to him in connection with Schneider Securities'
services as a placement agent in the December 20, 1999 private placement,
(ii) 15,000 shares of common stock issuable upon conversion of the
preferred stock and 7,500 shares of common stock issuable upon exercise of
the warrants issued to him in the December 20, 1999 private placement, and
(iii) 50,000 shares of common stock issuable upon exercise of the warrants
granted to Genesis Select Corporation for investor relations services (see
Footnote (35), below).
(23) Ryan, Beck & Co., Inc. acted as a placement agent in connection with the
November 1999, December 20, 1999 and December 30, 1999 private placements
of the Company and as an investment advisor to the Company. The number of
shares beneficially owned by Ryan, Beck includes (i) 11,250 shares of
common stock issuable upon exercise of warrants to purchase common stock
granted to Ryan, Beck in connection with the Company's financing efforts
relating to private placements, (ii) 31,112 shares of common stock issuable
upon exercise of warrants granted to Ryan, Beck as a placement agent in
connection with November 1999 private placement, (iii) 45,000 shares of
common stock issuable upon exercise of warrants granted to Ryan, Beck as a
placement agent in connection with December 20, 1999 private placement, and
(iv) 15,428 shares of common stock issuable upon exercise of warrants
granted to Ryan, Beck as a placement agent in connection with December 30,
1999 private placement.
(24) As an associate of Ryan, Beck & Co., Inc., Mr. Kollender received warrants
to purchase shares of common stock in connection with the November 1999,
December 20, 1999 and December 30, 1999 private placements of the Company
and in connection with Ryan, Beck's services to the Company relating to the
Company's financing efforts. The number of shares beneficially owned by Mr.
Kollender includes (i) 6,875 shares of common stock issuable upon exercise
of warrants granted to him relating to Ryan, Beck's services in connection
with the Company's financing efforts relating to private placements, (ii)
19,012 shares of common stock issuable upon exercise of warrants granted to
him in connection with Ryan, Beck's services as a placement agent in the
November 1999 private placement, (iii) 27,500 shares of common stock
issuable upon exercise of warrants granted to him in connection with Ryan,
Beck's services as a placement agent in the December 20, 1999 private
placement, and (iii) 9,429 shares of common stock issuable upon exercise of
warrants granted to him in connection with Ryan, Beck's services as a
placement agent in the December 30, 1999 private placement.
(25) As an associate of Ryan, Beck & Co., Inc., Mr. Rock received warrants to
purchase shares of common stock in connection with the November 1999,
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December 20, 1999 and December 30, 1999 private placements of the Company
and in connection with Ryan, Beck's services to the Company relating to the
Company's financing efforts. The number of shares beneficially owned by Mr.
Rock includes (i) 6,875 shares of common stock issuable upon exercise of
warrants granted to him relating to Ryan, Beck's services in connection
with the Company's financing efforts relating to private placements, (ii)
19,012 shares of common stock issuable upon exercise of warrants granted to
him in connection with Ryan, Beck's services as a placement agent in the
November 1999 private placement, (iii) 27,500 shares of common stock
issuable upon exercise of warrants granted to him in connection with Ryan,
Beck's services as a placement agent in the December 20, 1999 private
placement, and (iii) 9,429 shares of common stock issuable upon exercise of
warrants granted to him in connection with Ryan, Beck's services as a
placement agent in the December 30, 1999 private placement.
(26) Schneider Securities acted as a placement agent in connection with the
private placement. The number of shares beneficially owned by Schneider
Securities represents 8,470 shares of common stock issuable upon exercise
of warrants to purchase common stock granted to Schneider Securities as a
placement agent in connection with the private placement.
(27) Shoreline Pacific Institutional Finance ("Shoreline") acted as a placement
agent in connection with the November 1999 private placement and the
December 1999 private placement of the Company. Pursuant to the agreement
with Shoreline, Shoreline received (i) 60,000 warrants as a placement agent
in connection with November 1999 private placement, and (ii) 16,046
warrants as a placement agent in connection with December 20, 1999 private
placement. Pursuant to the terms of an agreement between the Company and
Shoreline, such warrants have been issued to Shoreline Pacific Equity Ltd.
and certain employees of Shoreline Pacific Institutional Finance.
(28) The number of shares beneficially owned by Shoreline Pacific Equity Ltd.
includes (i) 23,280 shares of common stock issuable upon exercise of
warrants granted in connection with November 1999 private placement, and
(ii) 6,227 shares of common stock issuable upon exercise of warrants
granted in connection with the December 20, 1999 private placement.
(29) Mr. Kleiman, as an associate of Shoreline, received warrants to purchase
shares of common stock in connection with the November 1999 and December
20, 1999 private placements of the Company. The number of shares
beneficially owned by Mr. Kleiman includes (i) 30,000 shares of common
stock issuable upon exercise of warrants granted to him in connection with
the November 1999 private placement, and (ii) 8,023 shares of common stock
issuable upon exercise of warrants granted to him in connection with the
December 20, 1999 private placement.
(30) Mr. Tansey, as an associate of Shoreline, received warrants to purchase
shares of common stock in connection with the November 1999 and December
20, 1999 private placements of the Company. The number of shares
beneficially owned by Mr. Tansey includes (i) 3,984 shares of common stock
issuable upon exercise of warrants granted to him in connection with the
November 1999 private placement, and (ii) 1,065 shares of common stock
issuable upon exercise of warrants granted to him in connection with the
December 20, 1999 private placement.
(31) Mr. Healy, as an associate of Shoreline, received warrants to purchase
shares of common stock in connection with the November 1999 and December
20, 1999 private placements of the Company. The number of shares
beneficially owned by Mr. Healy includes (i) 1,536 shares of common stock
issuable upon exercise of warrants granted to him in connection with the
November 1999 private placement, and (ii) 411 shares of common stock
issuable upon exercise of warrants granted to him in connection with the
December 20, 1999 private placement.
(32) Mr. Harband, as an associate of Shoreline, received warrants to purchase
shares of common stock in connection with the November 1999 and December
20, 1999 private placements of the Company. The number of shares
beneficially owned by Mr. Harband includes (i) 912 shares of common stock
issuable upon exercise of warrants granted to him in connection with the
November 1999 private placement, and (ii) 244 shares of common stock
issuable upon exercise of warrants granted to him in connection with the
December 20, 1999 private placement.
(33) Ms. Collins, as an associate of Shoreline, received warrants to purchase
shares of common stock in connection with the November 1999 and December
20, 1999 private placements of the Company. The number of shares
beneficially owned by Ms. Collins includes (i) 144 shares of common stock
issuable upon exercise of warrants granted to her in connection with the
November 1999 private placement, and (ii) 38 shares of common stock
issuable upon exercise of warrants granted to her in connection with the
December 20, 1999 private placement.
(34) Ms. Jorajuria, as an associate of Shoreline, received warrants to purchase
shares of common stock in connection with the November 1999 and December
20, 1999 private placements of the Company. The number of shares
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beneficially owned by Ms. Jorajuria includes (i) 144 shares of common stock
issuable upon exercise of warrants granted to her in connection with the
November 1999 private placement, and (ii) 38 shares of common stock
issuable upon exercise of warrants granted to her in connection with the
December 20, 1999 private placement.
(35) Genesis Select Corporation is an investor relations consultant to the
Company. The number of shares beneficially owned by Genesis Select includes
50,000 shares of common stock issuable upon exercise of warrants granted in
connection with consulting services to the Company.
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 $7,229,017 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 Series A
Junior Convertible Preferred Stock and warrants, we provided to them certain
registration rights and have subsequently filed a registration statement on Form
S-3 with the SEC. 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
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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
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
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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.
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.
SERIES A JUNIOR CONVERTIBLE PREFERRED STOCK
Pursuant to a Stock and Warrant Purchase Agreement dated as of December 20,
1999, we issued shares of Series A Junior Convertible Preferred Stock, $.001 par
value, to the investors in the December 20, 1999 private placement.
The Series A Junior Convertible Preferred Stock is automatically
convertible into shares of our common stock upon the approval of our
shareholders of the issuance of common stock upon the conversion of such
preferred stock. Such shareholder approval was obtained at a Special Meeting of
Shareholders held on March 10, 2000. Each share of Series A Junior Convertible
Preferred Stock is convertible into an amount of our common stock equal to a
conversion ratio of: (1) a liquidation preference of $100 plus any penalties
divided by (2) $7.00. The conversion ratio is subject to adjustment if we pay a
dividend or make a distribution to the holders of our common stock, we subdivide
or combine our common stock, we reclassify our common stock or we issue or
distribute rights or warrants.
The Series A Junior Convertible Preferred Stock is not entitled to receive
any dividends or any other type of distribution. The holders of such preferred
stock will not have any voting rights other than those they are required to have
by law. The Series A Junior Convertible Preferred Stock ranks senior to our
common stock for purposes of distributing our assets in the event we must
liquidate, dissolve or wind up our business.
We must have the approval of at least a majority of the then outstanding
Series A Junior Convertible Preferred Stock to:
o alter, amend or repeal any of the rights or privileges of such
preferred stock or any other capital stock that would adversely affect
such preferred stock;
o create any series or class of capital stock that is equal or senior in
rights to such preferred stock;
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o increase the authorized number of shares of such preferred stock; and
o increase the par value of our common stock.
SERIES B JUNIOR CONVERTIBLE PREFERRED STOCK ISSUED TO SELLING SHAREHOLDERS
PURSUANT TO THE DECEMBER 30, 1999 PRIVATE PLACEMENT
Pursuant to a Stock and Warrant Purchase Agreement dated as of December 30,
1999, we issued shares of Series B Junior Convertible Preferred Stock, $.001 par
value, to the investors in the December 30, 1999 private placement.
The Series B Junior Convertible Preferred Stock is automatically
convertible into shares of our common stock upon the approval of our
shareholders of the issuance of common stock upon the conversion of such
preferred stock. Such shareholder approval was obtained at a Special Meeting of
Shareholders held on March 10, 2000. Each share of Series B Junior Convertible
Preferred Stock is convertible into an amount of our common stock equal to a
conversion ratio of: (1) a liquidation preference of $100 plus any penalties
divided by (2) $7.00. The conversion ratio is subject to adjustment if we pay a
dividend or make a distribution to the holders of our common stock, we subdivide
or combine our common stock, we reclassify our common stock or we issue or
distribute rights or warrants.
The Series B Junior Convertible Preferred Stock is not entitled to receive
any dividends or any other type of distribution. Other than as described below,
the holders of such preferred stock will not have any voting rights other than
those they are required to have by law. So long as the Series B Convertible
Preferred Stock is outstanding, the holders of such preferred stock shall have
the exclusive right, voting separately as a class, to elect one director to the
Board of Directors of the Company. The Series B Junior Convertible Preferred
Stock will rank senior to our common stock for purposes of distributing our
assets in the event we must liquidate, dissolve or wind up our business.
We must have the approval of at least a majority of the then outstanding
Series B Junior Convertible Preferred Stock to:
o alter, amend or repeal any of the rights, preferences or privileges of
such preferred stock or any other capital stock that would adversely
affect such preferred stock;
o create any series or class of capital stock that is equal or senior in
rights to such preferred stock;
o increase the authorized number of shares of such preferred stock;
o increase the par value of our common stock;
o create a new class or series of preferred stock entitled to payment of
dividends;
o authorize or approve any liquidation, dissolution, or winding up of
the Company or any filing of a voluntary petition in bankruptcy;
o authorize or approve any transaction, including, without limitation, a
merger, consolidation, sale of all or substantially all of the
Company's assets or recapitalization;
o pay any dividends or distributions on any capital stock other than
capital stock senior in rights to such preferred stock; or
o redeem or repurchase (or make funds available for a sinking fund for
the redemption or repurchase of) any capital stock.
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WARRANTS ISSUED TO SELLING SHAREHOLDERS PURSUANT TO THE STOCK AND WARRANT
PURCHASE AGREEMENT
Pursuant to the Stock and Warrant Purchase Agreement dated as of December
20, 1999, we issued the warrants to the investors in the private placement. 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 Registration
Rights Agreement entered into between the Company and the investors, or the
Company provides notice of its election to redeem the warrants, 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:
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 election to redeem;
and
o our common stock is listed on Nasdaq National Market, the American
Stock Exchange or the New York Stock Exchange.
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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 are 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.
WARRANTS ISSUED THE PLACEMENT AGENTS IN CONNECTION WITH THE PRIVATE PLACEMENT
In connection with services performed as placement agents, we issued
warrants to the placement agents in connection with the private placement. The
warrants expire five years after issuance.
EXERCISE OF WARRANTS. The warrants may be exercised at any time after
issuance.
EXERCISE PRICE. The exercise prices of the warrants range from $7.00 to
$9.12 per share of common stock represented by the warrants. The exercise price
of the warrants is subject to customary anti-dilution adjustments upon such
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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.
WARRANTS ISSUED THE GENESIS SELECT CORPORATION
In connection with consulting services performed and to be performed
relating to investor relations matters, we issued warrants to Genesis Select
Corporation. The warrants expire five years after issuance.
EXERCISE OF WARRANTS. The warrants may be exercised at any time after
issuance.
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EXERCISE PRICE. The exercise prices of the warrants range from $8.19 to
$14.40 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 our common stock, the distribution
of our assets to holders of common stock, and other similar events.
CASHLESS EXERCISE OPTION. The consultant is entitled to a "cashless
exercise" option. This option entitles the consultant 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.
LEGAL MATTERS
Certain legal matters have been passed upon for the Company by Squire,
Sanders & Dempsey L.L.P., Phoenix, Arizona.
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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.
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<S> <C>
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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 2,207,602 SHARES
the information contained herein is correct COMMON STOCK
as of any time subsequent to the date hereof.
---------------------
PROSPECTUS
TABLE OF CONTENTS
Page
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Where You Can Find More Information...... 2
Incorporation of Certain Documents
By Reference........................... 2
Prospectus Summary....................... 4
The Company.............................. 4
Our Operations........................... 4 March 10, 2000
The Offering............................. 8
Risk Factors............................. 9
Selling Shareholders..................... 16
Use of Proceeds.......................... 22
Determination of Offering Price.......... 22
Plan of Distribution..................... 22
Description of Securities................ 24
Legal Matters............................ 29
Experts.................................. 30
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