As filed with the Securities and Exchange Commission on July 19, 2000
SEC Registration No.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
INFONOW CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Delaware 04-3083360
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(State of Incorporation) (I.R.S. Employer I.D. No.)
1875 Lawrence Street, Suite 1100, Denver, CO 80202, (303) 293-0212
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(Address, including zip code, and telephone
number, including area
code of Registrant's Principal Executive Offices)
Kevin D. Andrew
Chief Financial Officer
InfoNow Corporation
1875 Lawrence Street, Suite 1100
Denver, CO 80202
(303) 293-0212
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(Name, Address, Including Zip Code and Telephone Number
including Area Code of Agent for Service)
Copies to:
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Laurie P. Glasscock, Esq.
Chrisman, Bynum & Johnson, P.C.
1900 Fifteenth Street
Boulder, CO 80302
(303) 546-1300
Approximate date of commencement of proposed sale to the public: as soon as
possible after effectiveness
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. /_/
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. / x /
<PAGE>
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. /_/
If this Form is a post - effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. /_/
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /_/
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed
Proposed Maximum
Title of Each Shares Maximum Aggregate Amount of
Class of Securities to be Offering Price Offering Registration
to be Registered Registered Per Share* Price* Fee
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<S> <C> <C> <C> <C>
Common Stock 536,842 $4.625 $2,482,894 $655.50
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</TABLE>
*Estimated solely for the purpose of calculating the registration fee. Computed
pursuant to Rule 457(c) on the basis of the average of the bid and asked price
on the Nasdaq Electronic Bulletin Board trading system as of the close of
trading on July 12, 2000.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
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PROSPECTUS
INFONOW CORPORATION
536,842 Shares of Common Stock
The selling stockholders identified in this prospectus may offer to sell up
to an aggregate of 536,842 shares of common stock of InfoNow Corporation. These
shares of common stock may be offered by the selling stockholders.
o in transactions on the Nasdaq market or such other markets on which we
may from time to time list our shares of common stock
o in privately negotiated transactions
o through a combination of these methods.
This prospectus is part of a registration statement that we are filing at this
time to fulfill our contractual obligations with the selling stockholders. We
will not receive any of the proceeds from the sale of the common stock by the
selling stockholders.
Our common stock is listed on the Nasdaq Stock Market system under the symbol
"INOW".
You should carefully read the section named "Risk Factors" beginning
on page 5 of this prospectus before investing in our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful of complete. Any representation to the contrary is a
criminal offense.
As of the close of trading on July 12, 2000, the closing
sale price of the Common Stock as quoted on Nasdaq was $4.625 per share.
The date of this Prospectus is , 2000
<PAGE>
SUMMARY
Overview
InfoNow provides e-business services on an outsourced basis to channel
dependent companies and their resellers, dealers, and VARs, collectively called
"channel partners". These services enable our clients to conduct business over
the internet, leveraging their existing brand awareness and established networks
of channel partners, resulting in increased sales and profitability. Through our
iChannel suite of e-business services, InfoNow provides a comprehensive,
internet-based business solution to channel dependent companies that:
o resolves channel conflict by enabling internet sales through their
channel partners, rather than around them.
o enables manufacturers to leverage their brand and other internet
techniques to create deal flow for their channel partners resulting in
more sales for themselves and their partners.
o provides the management systems and feedback information necessary to
evolve an effective multi-channel e-business model to optimize brand
and business over time.
We also deliver e-business solutions to channel partners, small to mid-size
independent companies that resell our clients' products and services. These
companies are aware of the need to develop a strong internet presence but often
lack the expertise and resources to do so. By combining several channel partners
in a vertical industry, we can deliver high quality e-business capabilities
quickly and cost effectively. InfoNow's e-business solution for channel partners
is designed to:
o create more deal flow: increase business from new and existing
customers.
o deliver e-business capabilities: provide e-commerce and customer
relationship management services.
InfoNow delivers these services as an outsourced application service
provider (ASP). We deliver solutions and the functionality of proprietary
software and databases via the internet and secure private extranets with
software resident on InfoNow controlled servers. Our server centers house
proprietary software, databases, and systems that respond to inquiries received
across a client's enterprise, including internet sites, interactive voice
response systems and call centers. This ASP model enables fast delivery of
powerful services with little disruption to our clients' existing enterprise
systems.
We currently have over fifty two clients using our iChannel services. Most
are large, multinational corporations with extensive branch or channel partner
networks. Our clients include Apple, Compaq, Hewlett-Packard, IBM, Intel,
Lucent, Motorola, Novell, and Sony.
InfoNow is organized as a Delaware corporation with its principal executive
offices located at 1875 Lawrence Street, Suite 1100, Denver, CO 80202. Our
telephone number is (303) 293-0212.
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below before making an investment
decision. The risks and uncertainties described below are not the only ones
facing our company. Additional risks and uncertainties not presently known to us
or that we currently deem immaterial may also impair our business operations. If
any of the following events described below actually occur, our business,
financial condition and results of operations would likely suffer. In this case,
the market price of our common stock could decline and you may lose all or part
of the money you paid to buy our common stock.
We have a limited internet-related operating history and expect to encounter
risks and difficulties frequently encountered by early-stage companies in new
and rapidly evolving markets
We began developing our internet web service offerings in 1995 and
completed the implementation of our first contract in July 1996. Accordingly, we
have only a limited operating history upon which to base an evaluation of our
business and future prospects. We operate in markets and provide services that
have only recently developed and are changing rapidly. Projecting demands and
market acceptance for recently introduced products and services is subject to a
high level of uncertainty and risk. The market for our services may not develop
as expected or competitive services or products may emerge that will
significantly change the demand for our services. As a result, we may not be
able to accurately forecast our financial results or the resources required for
our operations. Our limited operating history also hinders our ability to
forecast the transaction load demands on our systems from customers, which may
affect our ability to maintain responsiveness of our systems and provide
services to new and existing customers. We may be unsuccessful in addressing
these risks.
We have a history of losses and may continue to incur operating losses in the
future
We incurred net losses of $2.3 million in 1997, $1.1 million in 1998,
$170,000 in 1999 and $745,000 for the three months ended March 31, 2000. These
continuing losses are a result of expenditures made to develop and market our
service offerings as well as to develop an operating infrastructure to deliver
our services. Our costs are relatively fixed in the short term. If our
assumptions about revenues prove to be incorrect, we may not be able to adjust
our operating expenses in order to achieve profitability, and may never achieve
profitability.
Our future financial results will depend on many factors, including future
economic, market and competitive conditions. These factors are difficult or
impossible to predict accurately and many of them are beyond our ability to
control. In addition, we expect to continue to incur significant costs in
further development and marketing of our service offerings. We may be unable to
sustain revenue growth and manage our development and marketing costs in order
to achieve and sustain profitability.
Fluctuations in our operating results that fail to meet expectations of public
market analysts and investors may cause substantial decreases in the price of
our common stock
Our quarterly and annual operating results have varied in the past and may
vary significantly in the future due to a variety of factors, many of which are
beyond our control. If in any quarter or year our operating results are below
the expectations of public market analysts and investors, the market price of
our common stock may decrease significantly.
<PAGE>
Because our operating results are volatile and difficult to predict, we
believe that period-to-period comparisons of our past operating results are not
necessarily a good indication of our future performance. A variety of factors
can contribute to the fluctuation of our quarterly and annual results,
including:
o significant variations in sales cycles and contract size from customer
to customer, which makes it difficult to predict the timing of
revenues from period to period;
o seasonal fluctuations in sales based on customers' budget calendars
and purchasing cycles;
o our participation in new and rapidly evolving markets;
o fixed fee pricing of some of our contracts, which subjects us to
possible variances in our operating margins;
o the timing of large implementations;
o unexpected delays in the market acceptance or introduction of new or
enhanced service introductions;
o changes in competitors' offerings or pricing and entry of new
competition;
o changes in our pricing strategy;
o changes in key suppliers' terms and conditions; and
o changes in levels of product development expenditures.
Our expense levels are relatively fixed in the short term and are based, in
part, on our expectations of future revenues. As a result, any delay in
generating or recognizing revenues could cause significant variations in our
operating results from period to period and could result in increased operating
losses.
Our performance largely depends on sales of our internet-based iChannel services
Our internet-based iChannel services are substantially dependent on the
sales and market acceptance of those services to generate our operating revenues
and profits. We are in the process of developing the full suite of our iChannel
services and these development efforts may not be successful. We anticipate that
our current service offerings, focused on iChannel services, will continue to
account for a substantial portion of our revenues for the foreseeable future. We
can not be certain that our services will gain the market acceptance that we
expect for a variety of factors, including:
o performance of our services relative to customer expectations;
o functionality of our services relative to competitive offerings; and
o the level of economic benefit delivered by our services.
A decline in the price of or demand for our current and planned iChannel
services, or their failure to gain the market acceptance we expect, would
seriously harm our business, financial condition and results of operations.
<PAGE>
If we are not able to enhance and develop new capabilities for our service
offerings on a timely basis, our competitive position and business will likely
suffer
Our current business plan anticipates that significant amounts of future
revenue will be derived from services and product enhancements that either do
not exist today or have not been sold in large enough quantities to ensure
market acceptance. A significant portion of our success will depend on our
ability to design, develop, test, market, sell and support new services and
enhance our current services on a timely basis in response to competitive
products and the evolving demands of our clients. The internet web services
markets are characterized by rapid technological change. New services developed
by others based on new and existing technologies could render our services
obsolete. We must develop and introduce service enhancements and new services in
a timely and cost-effective manner in response to changing market conditions and
client requirements. The development of new systems is a complex, expensive and
uncertain process requiring technical innovation and the accurate anticipation
of technological and markets trends as well as good management controls over the
cost of developing new services. In addition, enhancements or new services may
fail to meet the requirements of the marketplace or achieve market acceptance.
We may also experience difficulties that could delay or prevent the successful
development and introduction of service enhancements or new services. Our
business will suffer if we fail to develop and introduce new services or service
enhancements, or if our new services and service enhancements fail to achieve
market acceptance and generate revenue. Our financial and technological
resources may not be adequate to develop or market new services successfully or
respond effectively to technological and competitive challenges.
We depend upon a limited number of customers for our current revenues
A substantial amount of our revenue comes from a limited number of
customers. As of December 31, 1999, we had service contracts with approximately
fifty-two clients. Contracts with clients who accounted for more than 10% of our
revenues resulted in approximately 33% of our total revenues in 1998 and 17% of
our total revenues in 1999. Our service contracts generally have service terms
of one to three years, subject in some cases to earlier termination by our
clients upon written notice. We currently depend, and expect to depend in the
foreseeable future, on the retention of the recurring service revenues from
these contracts to finance our operations, to fund a portion of the future
development of our services and to market our services to new clients. The loss
of one or more major clients would have a negative impact on our business,
financial condition and results of operations.
Our performance will depend on the continued growth and acceptance of the
internet for commerce
Use of the internet and of services that we provide is in an early stage of
development. Our success is largely dependent upon acceptance and use of the
unique capabilities of the internet and private intranets to deliver our
services. There can be no assurance that commerce over the internet will
continue to expand. The internet may not prove to be a viable commercial
marketplace for a number of reasons, including:
o inadequate development of the necessary telecommunications
infrastructure to support growth of the internet;
o delays in the development of new standards and protocols required to
handle increased internet activity; and
o concerns over data security and integrity for information transmitted
over the internet.
Inadequate development of telecommunications services to support the
internet could result in slower response times and adversely affect
usage of the internet and our services. If use of the internet does
not continue to grow, or if the internet infrastructure does not
effectively support growth that may occur, our business, results of
operations and financial condition would likely suffer.
We depend on the continued growth of our client base and the retention of our
clients. If we fail to generate repeat or expanded business from our current and
future clients, our business will be seriously harmed
Our success depends on the continued growth of our client base and the
retention of our clients. We currently depend on a limited number of key, high
profile clients. Our ability to attract new clients will depend on a variety of
factors, including the accuracy, reliability and cost-effectiveness of our
service offerings and our ability to effectively market such services. We cannot
be certain that our current clients will continue at the levels of previous
periods, or that we will be able to do a significant amount of business with new
clients. If we fail to generate repeat and expanded business from our current
and future clients, our business, financial condition and results of operations
would be seriously harmed.
We face intense competition in the markets for our services
We are one of the first companies to market an integrated set of
internet-based ecommerce solutions for channel dependent companies and their
channel partners. We believe that the market for these services is currently
fragmented and rapidly evolving. We further believe that this market will become
intensely competitive as market acceptance for our services continues to
develop. Many of our potential competitors are larger and have substantially
greater financial, technical, and marketing resources than we do. This could
give them a competitive advantage over us. Also, some competitors and potential
competitors offer a broader line of software and services than we do, which may
affect current and potential clients' purchasing decisions, especially if
clients wish to consolidate their services with a single or limited number of
service providers. Increased competition in these markets could force us to
reduce prices for our services or may result in the introduction of new products
or services superior to our own offerings. If we are not able to compete
successfully, our business and financial results will likely suffer from
increased competition from new and existing competitors. Our future performance
will be dependent upon our ability to remain competitive with respect to the
technical capabilities and economic value of the services we offer.
<PAGE>
We plan to increase our participation in international markets, which will
expose us to greater risks associated with international operations
We market and sell our services in the United States and internationally,
and many of our clients are multinational corporations. We intend to expand the
sale of our services in international markets. To date, we have limited
experience in marketing our services internationally. Expansion into
international markets will subject us to inherent risks, including:
o the impact of economic fluctuations in economies outside the United
States;
o greater difficulty in accounts receivable collection and longer
collection periods;
o expenses associated with customizing services for foreign countries;
o difficulties in obtaining adequate geographic and demographic data for
our international service offerings;
o unexpected changes in regulatory requirements, tariffs and other trade
barriers;
o difficulties and costs of staffing and managing foreign operations;
o political and economic instability;
o currency exchange fluctuations;
o potentially adverse tax consequences;
o reduced protection for intellectual property outside the United
States.
The expansion into international markets will require significant
management attention and financial resources. We cannot assure you that we can
successfully manage the risks involved in expanding our services internationally
or that the acceptance of the internet and the use of our services will be
similar to our experiences in the United States. If we are unable to expand our
business internationally as planned, our business will likely suffer.
We depend on key personnel, and may be adversely affected if we lose key
personnel or if we fail to attract, retain and integrate highly skilled
technical and marketing personnel in the future
Our success depends largely on the skills, experience and performance of
our management team and key employees, including Michael Johnson, our Chief
Executive Officer. If we were to lose one or more of these key individuals, our
business would likely suffer. We do not carry key life insurance for any officer
or key employee. Our future growth and success depends, in large part, upon our
ability to attract, retain and integrate highly skilled technical and marketing
personnel. The competition for technical and sales personnel with the skills
that we require for successful operation of our business is intense. We may be
unsuccessful in our efforts to attract, retain or integrate those personnel in
the future.
We use technology and databases licensed from third parties. Our business
would likely suffer if this technology and data is not accurate, is not updated
on a timely basis or the terms of these licenses were to substantially change or
be canceled
Our primary services incorporate technology and databases developed and
owned by third parties. We rely on these third parties to provide accurate
technology and data, to enhance and update products to meet the changing needs
of our clients and to respond to competitive and technological changes on a
timely basis. If we were to breach our license agreements with these third
parties or if any of these license agreements were terminated, we would lose the
right to use the licensed software or data. There can be no assurance that we
will be able to replace the functionality provided by the third party software
or data currently integrated into our services. In addition, if we are not able
to obtain adequate support for third party software and data or it becomes
incompatible with our software and systems, we would need to redesign our
software and systems or seek comparable replacements. We cannot assure you that
we could successfully redesign our software and systems or that adequate
replacement software or data could be located or developed and integrated into
our systems.
<PAGE>
Delivery of our services could be delayed if third party software incorporated
in our services is no longer available
We integrate third-party software as a component of our services. This
third-party software may not continue to be available to us on commercially
reasonable terms, or at all. If we cannot maintain licenses to key third-party
software, delivery of our products could be delayed until equivalent software
could be developed or licensed and integrated into our products, which could
harm our business and operating results.
We may be susceptible to breaches of database security
A party who is able to circumvent our security measures could
misappropriate proprietary database information or cause interruptions in our
operations. As a result we may be required to expend significant capital and
other resources to protect against such security breaches or to alleviate
problems caused by such breaches, which could harm our business.
We may experience significant interruptions in our services due to failure of
our data centers, which could seriously harm our business
Delivery of our services depends upon our ability to protect our data
centers against damage from fire, earthquakes, power loss, telecommunications
failures and similar events. We carry property insurance in the event of
equipment damage. However, our system safeguards and insurance may not be
adequate to compensate for all losses that may occur from business
interruptions. Our principal web server equipment and operations are housed and
maintained by Qwest Communications at its operations center in Denver, Colorado.
We also recently completed the installation of a redundant operations site
co-located with Verio, which is also located in Denver, Colorado. We may
experience outages due to multiple failures of systems or area-wide natural
disasters that would affect both sites located in Denver. In addition, our
servers may be vulnerable to computer viruses and similar disruptions from
unauthorized tampering with our computer systems.
In order to manage our anticipated growth, we must be able to attract new
personnel and improve our financial and operational systems on a timely basis
Our business plans and strategies assume a rapidly increasing size of the
market for outsourced ecommerce business solutions and our participation in
those markets. This planned growth will require us to make significant
improvements in our financial and operational systems and procedures. Our
business would likely suffer if we are not able to make changes needed to our
systems and procedures that are needed to accommodate our anticipated growth on
a timely basis. Our planned growth will also require us to attract and train
skilled sales, operations, technical and administrative personnel to
successfully sell and deliver our services as planned. Many of our systems are
proprietary and require a period of training before a new employee can be fully
productive. Like many high technology companies, we face intense competition in
attracting personnel with the skills needed to conduct our business. We cannot
be certain that we will continue to be successful in attracting, training and
retaining skilled personnel needed to successfully expand our business.
<PAGE>
Our business relies on our intellectual property. We have a limited ability to
protect our intellectual property rights and could incur substantial costs to
enforce our intellectual property or defending against claims of third parties
for infringement on their intellectual property rights
Our success is dependent on our ability to protect our intellectual
property rights. We rely on a combination of copyright and trademark law,
non-disclosure agreements and contractual provisions in agreements with our
clients to establish and maintain proprietary rights in our services and other
intellectual property. These measures can afford only limited protection for our
intellectual property, as they do not prevent competitors from independently
developing equivalent or superior technology.
We believe that our products, trademarks, service marks and other
proprietary rights do not infringe on the intellectual property rights of others
and we know of no claims, existing or threatened, alleging such infringement.
Third parties may assert infringement claims against us in the future that may
lead to litigation. If we litigated to enforce our rights or to defend against
an infringement claim, it would be expensive, divert management resources and
may not be adequate to protect our business. Additionally, as a result of such
litigation we could be required to pay damages, a license fee or royalties to
obtain intellectual property rights that are needed to continue to sell our
products and services. These royalties or licensing agreements may be
unavailable or may be offered on terms unacceptable to us. Delays or
interruptions in our services that would have a material adverse impact on our
business may occur if we are unable to obtain the necessary licensing or royalty
agreements.
The software and data in our systems used to provide our services might contain
undetected errors that may result in product liability or other claims, which
may seriously harm our business
We use highly complex software and data in the systems that deliver our
services. Our testing procedures are designed to detect material errors in our
data and systems but may not be adequate to detect all errors that may exist in
the software and data in our systems. In the event that an error in our systems
harms our clients or other third parties, or fails to meet our clients'
expectations, the harm to our reputation may diminish market acceptance for our
services. We may also be exposed to possible litigation or our clients may
withhold payment for our services. We rely on contractual provisions to limit
our liabilities for such claims. However, these provisions may not be adequate
to protect us from all possible claims. A product liability or other claim
brought against us, even if not successful, would likely be time-consuming and
costly. A product liability or other claim could seriously harm our business,
financial condition and results of operations.
We may not be able to successfully manage our expansion
In order to execute our business plan, we must grow significantly. As of
December 31, 1998, we had a total of 34 employees and as of June 23, 2000, we
had a total of approximately 89 employees. We expect that the number of our
employees will continue to increase for the foreseeable future. This growth has
placed, and our anticipated future growth will continue to place, a significant
strain on our management systems and resources. We expect that we will need to
continue to expand and maintain close coordination among our technical,
accounting, finance and sales and marketing organizations. Our inability to
manage growth effectively could seriously harm our business, financial condition
and results of operations.
Our business could be seriously impacted by the privacy concerns of electronic
commerce users
Some of our services and services under development are designed to capture
demographic, customer preference and profile information each time a customer
visits a web site or volunteers information in response to survey questions.
Privacy concerns may cause visitors to resist providing the personal data
<PAGE>
necessary to support this profiling capability. More importantly, even the
perception of privacy concerns, whether or not valid, may indirectly inhibit
market acceptance of our services. In addition, legislative or regulatory
requirements may heighten these concerns if web site users must be notified that
the data captured after visiting web sites may be used by companies to
unilaterally direct product promotion and advertising to that user. We are not
aware of any such legislation or regulatory requirements currently in effect in
the United States. Various other countries and political entities, such as the
European Economic Community, have adopted such legislation or regulatory
requirements. The United States may adopt similar legislation or regulatory
requirements. If customer privacy concerns are not adequately addressed or if
restrictive legislation is adopted in the United States, our business, financial
condition and results of operations could be seriously harmed.
Our business could be adversely affected by the enactment of new laws or
regulations governing the exchange and capture of information and commerce over
the internet
Our business could be seriously harmed if new legislation or regulations,
or the application or interpretation of existing laws, results in reduced use of
the internet, changes the usage of our services or otherwise impairs our ability
to provide service to our clients. There is an increasing number of laws and
regulations pertaining to the internet. In addition, there are a number of
legislative and regulatory proposals by state, local and foreign jurisdictions
that are under consideration, including proposals relating to protection of
information gathered over the internet and taxation of services provided over
the internet. Although many of these regulations may not apply to our business
directly, we expect that laws regulating the solicitation, collection or
processing of personal/consumer information could indirectly affect our
business. The Telecommunications Act of 1996 prohibits certain types of
information and content from being transmitted over the internet. The
prohibition's scope and the liability associated with a Telecommunications Act
violation are currently unsettled. In addition, although substantial portions of
the Communications Decency Act were held to be unconstitutional, we cannot be
certain that similar legislation will not be enacted and upheld in the future.
This type of legislation could possibly expose companies involved in internet
commerce to liability, which could limit the growth of internet commerce
generally. Legislation like the Telecommunications Act and the Communications
Decency Act could dampen the growth in web usage and decrease its acceptance as
a communications and commercial medium.
You May Have Difficulty Selling Your Shares if We Lose Our Listing on the Nasdaq
Stock Market Because of the Limited Trading Volume on the Over-the-Counter
Bulletin Board or if Our Stock Becomes Subject to the SEC's Penny Stock
Regulations.
If we continue to incur losses and cannot maintain the standards for
continued listing on the Nasdaq Stock Market, our common stock could be subject
to delisting. Trading, if any, in our common stock would then be conducted in
the over-the-counter market on the OTC Bulletin Board or in what are commonly
referred to as the pink sheets. As a result, you may find it more difficult to
sell your shares or to obtain accurate quotations as to the price of our shares.
In addition, if our shares were delisted from the Nasdaq Stock Market, our
common stock could become subject to the penny stock rules of the SEC. These
rules impose additional sales practice requirements on broker-dealers before our
stock could be sold to the customers of the broker-dealers. The additional sales
practice requirements could materially adversely affect the willingness or
ability of broker-dealers to sell our common stock. This would reduce the market
liquidity for our shares and therefore adversely affect your ability to sell
shares in the secondary market.
<PAGE>
Volatility in the price of our common stock may make us the target of securities
litigation, which could adversely affect our business
The price of our common stock has been volatile in the past and may
continue to be volatile in the future due to a variety of factors, many of which
are beyond our ability to control. Factors affecting the trading price of our
common stock include:
o responses to period-to-period variations in our results of operations;
o announcement of new products, services or enhancements by us or our
competitors;
o technological innovation by us or our competitors;
o sales of common stock following the expiration of legal or contractual
sales restrictions;
o general market conditions or market conditions specific to the
internet or software industries; and
o changes in earnings estimates or recommendations by securities
analysts. Securities class action litigation has often been brought
against companies following periods of volatility in the market price
of its securities. We may be the a target of securities litigation in
the future, which could result in substantial costs and divert
management's attention and resources away from management of the
business.
Our management and principal stockholders exercise significant control over
InfoNow
The officers, directors and principal stockholders own beneficially
approximately 35% of our outstanding common stock. As a result, these
stockholders acting together are able to exercise control over all matters
requiring stockholder approval, including the election of directors and the
approval of significant corporate transactions. This concentration of ownership
may also have the effect of delaying or preventing a change in control of our
company, which could negatively affect our stock price.
We are subject to risks associated with potential acquisitions or investments
In the past, we have had discussions with companies regarding acquiring or
investing in their business, products, services or technology. We do not
currently have any plans to make any acquisitions or investments in other
companies but we may do so in the future. If we make an acquisition or major
investment in another company, we could have difficulty assimilating the
acquired company's operations and personnel. In addition, we could face
difficulties integrating any acquired products, services and technologies into
our operations. These difficulties could disrupt our on-going business, distract
our management, and significantly increase our operating expenses. As a result,
our business and financial condition would likely suffer.
<PAGE>
We may not be able to raise additional capital if needed in the future, and any
future equity offering could result in substantial dilution to existing
stockholders
We may need to raise additional funds in the future in order to fund more
aggressive marketing or product development programs or acquire complementary
businesses, technologies or services. Any required additional financing may be
unavailable at terms acceptable to us or may not be available at all. If we
raise additional funds by issuing equity securities, these securities may have
rights senior to existing stockholders and existing stockholders may experience
significant dilution of their ownership interest. If we are unable to obtain
financing when required, we may be unable to fund our expansion, successfully
exploit business opportunities, or adequately respond to competitive pressures
which would likely cause harm to our business. There can be no assurances that
we will be able to obtain additional financing, if necessary, on terms
acceptable to us, or at all.
Substantial sales of our common stock could adversely affect our stock price
The market price of our common stock could decline as a result of sales of
a large number of shares of our common stock or the perception that those sales
could occur in the market. These sales also might make it more difficult for us
to sell equity securities in the future at a time and a price that we deem
appropriate. There are no lockup agreements for shares held by our officers or
principal stockholders.
USE OF PROCEEDS
All net proceeds from the sale of the shares covered by this prospectus
will go to the Selling Stockholders who offer and sell their shares. We will not
receive any proceeds from the sale of the shares by the Selling Stockholders.
BUSINESS
Industry Background
Our iChannel services address six fundamental trends common to our targeted
customer base of branded channel dependent companies and their channel partners:
Growth of business-to-business transactions conducted over the internet.
The internet is rapidly evolving into a principal vehicle for interaction
between businesses and their individual and business customers. International
Data Corporation, or IDC, estimates that by the end of 1998 there were over 97
million users of the World Wide Web and that, by the end of 2002, that number
will increase to over 319 million. The interactive capabilities of the internet
can help companies better pinpoint the needs of customers, more effectively
answer customer inquiries, and provide a faster, more convenient, and more cost
effective response than traditional customer service approaches.
Transactions conducted over the internet are increasing dramatically,
particularly in the business-to-business sector with predictions of $7.3
trillion by 2004, representing 7% of the global business-to-business volume.
This growth in internet has resulted in the emergence of internet service
companies that provide value-added services to clients on an outsourced basis.
The Standard predicts that these activities will make up 37% of the
business-to-business e-commerce market, worth $2.71 trillion, by the year 2004.
We believe there exists significant opportunity to participate in this growing
internet services market to establish e-commerce capabilities for channel
dependent companies and their channel partners.
<PAGE>
Increasing channel conflicts as companies consider selling over the
internet. Traditional brick-and-mortar companies are struggling to find
effective ways to grow their business using the internet as their primary
business communication and transaction vehicle. Many major computer,
electronics, or similar manufacturing companies rely on third party channel
partners to distribute all or some of their products. These companies are
struggling with the dual challenges of competing with internet merchants who
sell directly to customers and maintaining the effectiveness of their channel
partner networks. These channel partners are often essential for the sale,
installation and support of more complex and typically higher margin products,
making effective channel management a key success factor.
This environment creates a conflict between the manufacturer and their
channel partners called "channel conflict." Channel partners typically sell
similar products made by various manufacturers and when companies bypass their
channel partners, channel partners will often begin selling a competitor's
products to customers. A recent Forrester Research survey of manufacturers
indicated the 66% of manufacturers surveyed identified channel conflict as their
single biggest issue hindering online sales efforts.
Opportunities to improve channel management include reducing the time from
initial inquiry to channel partner response from days or weeks to minutes,
enabling channel members to participate in electronic commerce opportunities,
and establishing a closed loop system to ensure effective channel evaluation and
management. These opportunities are especially difficult to take advantage of in
an environment where manufacturers are being forced to bypass their channel
partners and sell more commodity-oriented products directly to consumers for
competitive reasons.
Growing pressure to develop an Internet model for channel dependent
companies and their channel partners. Although traditional brick-and-mortar
companies are under increasing pressure from internet-based companies that sell
directly to customers, we believe that these companies are uniquely positioned
to successfully compete in the internet economy. Most manufacturers with a
strong brand have two very powerful differentiators when compared to strictly
internet-based companies: brand recognition and local physical presence. We
believe there exists a significant opportunity to leverage these assets in a
business model that integrates traditional business processes, including channel
partners, with the capabilities of the internet and reduces channel conflict
experienced by many traditional business.
Modest internet presence among channel partners due to high cost of
e-commerce business solutions. Channel partners are increasingly aware of the
importance of a strong internet presence as more vendors sell direct, vertical
industry portals drive down margins and internet merchants enter their market.
The cost of developing and implementing a full e-commerce business capability is
cost prohibitive for many channel partners. A competitive e-commerce presence,
defined as both the ability to bring customers to the web site to create deal
flow and to deliver full sales and service capabilities over the internet, can
cost several hundreds of thousands or even millions of dollars. Many channel
partners are small to medium sized independent businesses. Consequently, channel
partners often are able to have only an informational Internet presence to
describe their business and services, but lack the resources to draw reasonable
deal flow to their web site, to consummate a sale over the internet or to use
the internet to serve and grow business activity among their existing customer
base.
Substantial growth in the number of internet-enabled devices, including
wireless data devices like WAP phones and the Palm VII. IDC predicts that the
number of internet-enabled devices will grow from 10.5 million in 1998 to 150.8
million in 2002. A substantial portion of this growth is expected to come from
wireless data devices, including wireless application protocol (WAP) cell
phones, other types of cell phones, and wireless organizers like the Palm VII
handheld organizer. Effective internet and online commerce and commerce-enabling
solutions and services will likely need to support a broad range of
internet-enabled devices, including wireless data devices.
<PAGE>
Growing trend to outsource and use of application service providers. In
order to remain competitive, many companies have found that they must focus on
their core competencies and outsource activities that can be more rapidly,
effectively, and economically performed by specialized third parties. Many
companies often lack sufficient resources, expertise or infrastructure to create
and implement e-business business strategies quickly and cost effectively. The
increasing complexity of these strategies and the rapid pace of technological
change are driving many companies to outsource the development of their
e-business initiatives.
According to Forrester Research, companies in the United States are now
spending approximately one quarter of their overall information technology
budgets on outsourced services. The growing acceptance of the internet as a
trusted medium for business critical activities should increase the level of
outsourcing to service providers that maintain a centralized infrastructure of
software, information databases, server assets and extensive communications
infrastructure to provide value-added services to businesses or consumers over
the internet. We further believe that as companies face increased pressure to
develop complex e-business capabilities quickly, they will seek service
providers that offer a more complete range of services required to rapidly and
cost effectively deploy these capabilities.
In addition, an important component of outsourcing these functions is the
increased use of Application Service Providers (ASPs) to deliver proprietary
software and database management over the internet. An ASP maintains all
software and databases on its own hardware and delivers only the solution and
functionality to the customer, relieving the customer of software development
and maintenance costs and providing the ability to deliver solutions very
quickly.
Limitations of Current Solutions
The industry trends discussed above present several obstacles and
opportunities for both the channel dependent manufacturer and their channel
partners. Unfortunately, many of the opportunities for the manufacturer result
in either loss of control and brand dilution and erosion of the traditional
channel partner relationship. For the channel partner, most options result in
loss of business or erosion of margins.
Channel dependent manufacturers have several options:
1. They can sell direct by providing a web site with product catalog and
warehousing capabilities to fulfill orders in attempt to cut out the
middle man resulting in reduced costs and lower prices to compete more
effectively.
Depending on the product and the customers' buying desires, this is a
good option for many companies. However, even if it is a good
long-term option, the channel conflict this strategy could create
could significantly disrupt the company's immediate growth plans.
For nearly all channel dependent manufacturers, this is a challenge of
the transition to e-commerce. Many companies know they will need at
least a partial sell direct model, but face the risk of losing
substantial business and market share in the short term to competitors
as channel partners switch brand loyalties.
The challenge here is to gradually evolve to an e-commerce model that
will meet customer needs and keep competitors at bay without
destroying the existing distribution structure.
<PAGE>
2. Manufacturers can sell through catalogers, Internet merchants,
distributors and vertical portals.
The risk with this strategy is that the manufacturer loses control of
its brand as the customer commoditizes their products over time. When
products are sold without the added value of service, customers
isolate the value in their minds as product only and see no value
added by a local reseller. There is no opportunity for the local
business to differentiate with supporting services when products are
sold direct.
If a manufacturer were selling books or other products where the
product itself is the difference, this strategy would be more
successful. For many products, however, such as computer hardware,
local resellers play an important role in increasing the value of the
product to customers by providing services. The manufacturer's product
and their brand is gradually diminished in the customers' eyes when
the reseller is removed from the sales process.
The challenge here is to find an e-commerce model that leverages brand
and local presence where both remain important to the customer to
prevent brand erosion to commodity status.
3. Manufacturers can elect to collaborate with their channel partners to
leverage their brand and drive deal flow to a channel partner site.
This option works well if there is a real or perceived value added
among customers with local presence. This value could be in the
form of inventory, the need to see, touch, try or feel a product,
expertise, ease of doing business, installation and other services
that are valued by the end customer.
The challenge here is to develop a model that will both support
the channel partner and maintain control over the manufacturer's
brand and the buying process.
Overall, the primary challenge for the manufacturer is to evolve a
multi-channel e-business model that serves their customers well while
maintaining brand loyalty and leveraging local presence where desired.
Channel partners also have several options with unique challenges:
1. Channel Partners can develop an e-commerce presence themselves by
going to mass purveyors of e-commerce capabilities such as Yahoo.com.
The challenge for channel partners to successfully implement an
e-commerce strategy is twofold: they must both create deal flow and
build the web site. To create deal flow, channel partners must invest
heavily in branding and promotion of their web site.
Building the web site requires technical capabilities such as easy
cataloging, developing pricing models and ongoing maintenance. Typical
channel partners purchase these items from several distributors and
many manufacturers and carry many thousands of items suitable for sale
over the Internet, not including repair parts. Although they may have
brochures and other descriptive material, they have no convenient way
of electronically populating a full e-commerce catalog.
The time and cost required to implement this strategy, as well as the
ongoing demands are generally beyond the resources of the small to
medium sized channel partners.
<PAGE>
2. Channel Partners can add their name to a vertical or manufacturer
portal and let others drive business to them based on the products
they carry.
The challenge channel partners face with this strategy is to maintain
an identity and protect margins. Vertical portals are the price
shopper's dream but further reducing both the manufacturer's brand and
the channel partner's perceived service and relationship edge.
Overall, the primary challenge for the channel partner is creating deal
flow and developing a competitive e-business capability at an affordable cost.
The InfoNow Opportunity
We believe the opportunity exists to significantly improve the
effectiveness and efficiency with which major branded companies integrate with
their channel partners to deliver products and services over the Internet. We
further believe that this opportunity can best be addressed delivering powerful
e-business capabilities which support both manufacturers and their channel
partners, as well as leveraging automated systems and a broad array of databases
to provide services over the Internet that are able to:
o Deliver deal flow and e-commerce capabilities to channel partners to
produce increased market share and sales for both manufacturer and
channel partner immediately.
o Provide information and management systems to the manufacturer to
evolve a high powered e-business model to best serve their customers
over time.
o Provide an integrated set of e-business solutions to manufacturers and
their channel partners quickly and cost effectively.
o Strengthen visibility and ongoing relationships with channel partners.
The InfoNow Solution
We deliver an integrated suite of e-business services over the Internet to
channel dependent companies and their channel partners. Our iChannel services
enable our clients to:
1. Leverage their brand both as a portal to local channel partners on their
web site and locally on a manufacturer-controlled, co-branded channel
partner web site. In this way, they are able to control their channel
partners' use of the web site and their presentation and use of their brand
while at the same time, delivering business and thus significant value to
their channel partners.
2. Embrace their channel partners as a collaborative strategic asset by
setting them up with a comprehensive e-business capability for closing
sales, maintaining customer relationships and streamlining their business
processes.
3. Direct significant deal flow from their web site to the most appropriate
channel partners.
4. Measure the results of these actions and evolve, over time, the best
Internet model to serve their customers. For most manufacturers, this model
will be a multi-channel e-business model. This means the manufacturer will
probably sell products through a number of channels, including local
resellers, and use the Internet as the primary communication and
transaction vehicle.
InfoNow provides this solution with a robust technology platform. In
addition, as an ASP, InfoNow can deploy customized solutions to each of its
brand name clients quickly and cost effectively. InfoNow customers buy solutions
not software.
<PAGE>
iChannel Services
InfoNow's suite of iChannel services provides e-business solutions for
manufacturers and their channel partners. We provide the following iChannel
services to our clients:
1. iLocator - Matches sales inquiries to the most appropriate local channel
partner using specific business rules (e.g. proximity, expertise, product
carried, in-stock, etc.) set by client manufacturer. Service includes
incentives for the customer to buy our client's products rather than switch
when visiting the local reseller.
2. iLeads - A comprehensive closed loop lead management capability that
captures, qualifies, assigns, distributes, and tracks the outcome of leads
with a company's channel partners. Leads are captured, though real-time
interfaces or off-line batch sources, qualified using a set of
client-specific criteria, assigned to the optimal channel partner,
distributed and updated via channel partner-specific extranets, and tracked
throughout the closing process. This system provides deal flow to the local
channel partner while speeding lead response and monitoring the process and
partner response.
3. iPartner - Enables channel partners to network with other channel partners
for sales opportunities, filling skill and geographic gaps. One partner may
provide product, but not cabling or other installation services, or, a
partner in one city may sign a customer and need the capability of serving
the customer nationally. This system enables channel partners to
collaborate to close more deals.
4. iCommerce - Scheduled to be available for deployment by mid 2000, iCommerce
provides co-branded e-commerce sites for partners to enable on-line sales
to end customers by the local partner--includes industry catalog and
pricing. This service includes reference pricing and catalog templates to
ease the time and cost of entry. InfoNow's goal is for a channel partner to
set-up full e-commerce capability in less than an hour.
Reporting. InfoNow's iChannel services are supported by a wide range of
reporting capabilities, providing sophisticated screening, data mining and
manipulation capabilities to enable clients to analyze the results of
promotional campaigns, Internet lead generating techniques, channel partner
initiatives, customers who purchased competitive products, etc. The manufacturer
can then apply best practices across the channel network to all partners.
Interface options/touch points. All of our services support inquiries
received through customer touch points across a client's enterprise, including
Internet sites, private extranet and intranet sites, and call centers. Our
iLocator, iLeads and iPartner services currently support automated phone and
wireless device access, including interactive voice response systems (IVRs),
wireless application protocol (WAP) cell phones and wireless Palm VII devices.
Geographic coverage. To provide the targeted, geographic component of our
one-to-one response, our services utilize precision geographic information
system, or GIS, technology that uses latitude and longitude coordinates to
pinpoint locations, calculate the location proximity and generates customized
maps. This geographic precision is currently available to our clients for
fifteen countries, including the United States, Canada, the United Kingdom,
Australia and major European countries. We provide worldwide coverage via text
based and postal code searching methods for all areas not currently covered by
GIS technology.
Multi-language Support. Our services are currently available to clients in
ten languages.
Special services. We also offer various other special services, on a
consulting basis, to support client programs related to our iChannel service
offerings. These include custom reporting requests, database enhancement and
management, maps to be used in promotional literature and custom business rules
and software development to meet special client requirements.
<PAGE>
Fees and pricing. Our services are typically sold through annual or
multi-year service contracts. The initial term of these contracts are typically
one to three years and are renewable upon mutual agreement of InfoNow and the
client. A typical contract fee includes two components, a setup fee and a
recurring service fee. The setup fee covers the development of a customized,
client-specific interface to the service, and the design and implementation of
client databases. The recurring monthly or annual service fee covers hosting and
provision of the service and performance of recurring maintenance to client
databases and core iChannel engine systems.
Currently, the combined fees for an initial year of service typically range
from $45,000 for a simple implementation to greater than $750,000 for a complex
deployment involving multiple services across several prospect touch points and
geographies. The actual setup and monthly service fees are determined based on a
variety of factors, including the type(s) of service selected, anticipated and
actual transaction volumes, client touch points supported, geographic coverage
of the service, and the level of service customization requested by the client.
We also may charge additional transaction fees for some elements of our services
depending upon the specific client configuration such as fax transactions, voice
recordings or dedicated telecommunication lines.
Currently, manufacturers pay our fees. We expect, however, to begin
charging channel partners and expect our fees to be based on a percentage of the
volume of transactions conducted. We also may charge additional transaction fees
for some elements of our services depending upon the specific client
configuration such as fax transactions, voice recordings or dedicated
telecommunication lines.
Business Strategy
Our objective is to be the leading worldwide provider of e-business
services to channel dependent companies and their channel partners. Our
strategies to achieve this objective include:
Broadening services to existing clients. We believe that significant
opportunities exist to expand the breadth and depth of services provided to our
existing clients. Most of our current clients use only a portion of the services
that we currently offer and no current clients currently use new services we are
planning to offer in 2000. Service expansion can be accomplished along many
dimensions, depending upon our clients' specific needs, including:
o the addition of existing services not currently used by the client,
including iLeads, iPartner, and iCommerce.
o increase in the number of prospect touch points to include interactive
voice response systems, call centers, WAP phones, Palm VII, etc.; and
o expansion of geographic coverage.
Maintaining and extending innovation and technology leadership in iChannel
services. We intend to offer a more comprehensive menu of services through
internal development efforts and the integration of third party applications or
databases into our systems. Expansion of our technology will be driven by a
combination of customer input and our knowledge of using the Internet to
effectively generate deal flow and deliver e-business services.
<PAGE>
During 1999, we introduced several new services, including:
o Enhanced iLocator services, to interact with real time data warehouses
o iPartner services to enable partner-to-partner collaboration; and
o Expanded iLeads services to more effectively manage leads in a closed loop
system.
o Support for a broad range of wireless data access devices and WAP phones.
We expect to continue to expand the iChannel suite of services throughout 2000.
Expanding strategic alliances. We plan to continue to pursue relationships
that can accelerate the marketing and development of our services. We are
presently working with a number of companies to enhance our service offering for
our clients and their resellers and to accelerate the delivery and quality of
the total iChannel service offerings.
Acquiring new industry leading corporate customers. We typically focus our
client development efforts on specific vertical markets. Within these vertical
markets, we initially focus on the leading companies. Historically, our client
development efforts have focused on technology, manufacturing and financial
services companies, especially where third parties are used to sell all or some
of a company's products or services. We plan grow our penetration of our target
vertical markets as well as increase our presence in additional, attractive
vertical markets.
Building sustainable competitive advantage through information-based
assets. We have developed proprietary databases through activities with our
current customer base and have secured exclusive access to selected other
databases through client and third party agreements. We currently have an
exclusive license for certain geographic data in Canada and non-exclusive
licenses for a variety of other databases and information assets, including
geographic data for fourteen other countries covering the United States, Western
Europe and Australia. We intend to utilize these information assets as well as
other databases we may acquire or build to enhance and distinguish our services
and build sustainable competitive advantage.
Continuing to develop and leverage our expertise in iChannel services. Our
relationship with our clients has allowed us to develop a significant body of
knowledge in the application of the Internet and services to address the
challenge of an effective e-business strategy for channel dependent companies.
We intend to maintain strong working relationships with our clients that will
allow us to continue to build our knowledge base and provide superior solutions
to our clients in the future.
Continuing to expand the scope of our services globally. We intend to
extend geographic coverage of our services to address the global adoption of the
Internet and to respond to our multinational customers' requests to provide them
with a complete solution for their worldwide networks. We believe that
international markets present an attractive growth opportunity and an early
presence in those markets will enhance our long-term competitive position.
We intend to increase our presence initially though relationships with our
current clients and then later through direct sales efforts initiated from both
the U.S. and possibly from direct sales and support operations located in
selected European and Asian markets. We may also form alliances with selected
partners to assist in the marketing and localization of our services for certain
markets.
Technology Overview
Our proprietary iChannel engine is the platform for all of our solutions.
This proprietary software and data currently resides in our two production
server centers. These centers are linked to our clients' web sites, intranets,
extranets, call centers or interactive voice response systems via the Internet
or via private extranets or intranets.
<PAGE>
Our multiple UNIX servers comprise the core computing capacity at each of
our server centers. These centers are co-located with two separate major
Internet service providers in Denver, Colorado that maintain redundant
high-bandwidth connections to the Internet. These centers are also directly
connected into the frame clouds of two leading frame relay providers that are
used for connection to client sites that require greater reliability than is
currently available over public Internet connections. Our systems are designed
to operate 24 hours a day, seven days a week. Continuous monitoring of our
systems is achieved through automated fault detection test scripts and daily ad
hoc testing conducted by our operations personnel.
Our iChannel engine is based on a distributed server architecture. This
architecture allows efficient balancing of load in high usage periods and can be
easily scalable to accommodate higher transaction volumes without the need for
clients to purchase new equipment or software. The modular structure of our
system also allows us to quickly tailor the application for changing client
needs and simplifies the addition of new features to the system as they are
developed. These servers can be accessed through HTML pages via our proprietary
Common Gateway Interface, which facilitates communication between our core
iChannel applications and public Internet or private intranets or extranets.
Communication with interactive voice response systems and wireless data devices
is conducted via specialized interface servers. These interfaces also include
the development tools we use to customize our interface to duplicate the look
and feel of our clients' site and systems. The separation of the interface tools
from the core application servers results in a highly flexible user interface
that may be customized or modified quickly while maintaining the stability and
integrity of the core server functions.
The targeted, one-to-one nature of our response is facilitated by the use
of a wide range of proprietary and third-party provided databases. These
include:
o geographic databases, which can include information to allow us to
pinpoint the latitude and longitude of an inquirer's specific location
and the locations of channel partners or enable us to provide maps to
and from a specific location;
o demographic databases, which can include information to help us
complete a profile of a prospect's characteristics or interests or
better qualify leads that we capture; and
o industry-specific databases, which can include information on channel
partner characteristics, information on ATM locations worldwide or
other information useful to target or enhance our inquiry response.
We capture key information for transactions occurring within our systems.
This information is the foundation used to develop reports required by our
clients. We also create customized reports and customized interfaces to view and
gather data for our clients. Our reporting systems can generate reports based on
any category in the transaction data, as well as reports that have categories
joined across several tables, such as lead data, follow-up data and call center
statistics. Clients can define the exact structure of their individual reports.
These reports can also be tailored to evaluate the success of advertising
campaigns based on prospects' profiles. Examples of reports that can be produced
include transaction activity levels, comparisons of channel partner
effectiveness, inquiry-to-sale closing rates and promotional effectiveness.
Sales and Marketing
Our sales efforts rely primarily on direct sales contact, such as
promotional presentations delivered via notebook computers and requests from
existing customers for new services. We use a consultative approach to determine
prospective client needs and to determine the optimal application of our
services to meet the identified needs. We currently focus our efforts on target
<PAGE>
industries, including technology, manufacturing and financial services
companies. We are growing our staff of 15 sales and marketing professionals
headquartered in Denver, Colorado that sell to national and international
accounts. Our primary sales and marketing efforts have been directed at
increasing the visibility of our services through the use of direct sales
efforts, though we may use indirect selling approaches in the future, via client
or third party partners as appropriate.
We expect to significantly increase our marketing expenditures in 2000 to
increase the name recognition of InfoNow's iChannel services. These expected
expenditures include increased participation in sponsorship of trade shows,
direct email marketing campaigns, production of sales materials and demos and
other promotional efforts.
Clients
Our client base has grown from 46 customers at the beginning of 1999 to 53
as of March 31, 2000. We serve clients in fifteen countries, including eight of
the largest global computer and networking firms and six of the largest banks in
North America.
During the year ended December 31, 1999, we received 17% of our revenues
from one customer. All other customers accounted for less than 10% of our
revenues.
<PAGE>
The table below is a list of selected clients.
Channel Dependent Mfgrs Financial Services Other
----------------------- ------------------ -----
3Com Allstate American Airlines
Apple Computer Bank of America FedEx
Compaq Bank One Meredith
Fujitsu Citibank Shell
Hewlett-Packard Diners Club UPS
IBM First Union Vision Service Plan
Intel Royal Bank Group
Lucent The Hartford
Novell Transamerica
Sony Europe Visa
Suzuki Kenwood
Maytag
The quality and depth of our customer base and our customer retention rate
of over 86%, based on total contracted service fees from when we first began
providing services in the third quarter of 1996 through June 23, 2000, reflects
our position as an accepted and proven iChannel solution.
We have also been able to grow our recurring monthly service fees from
current and new clients by 72% since January 1999. These fees, which consist of
monthly fees from ongoing service contracts, increased from $279,000 at the
beginning of 1999 to $481,000 at June 23, 2000.
Product Development
We believe that our success will largely depend on our ability to enhance
the functionality of our services and to develop other related products and
services to meet the changing needs of our clients. Our current research and
development efforts are influenced significantly by client requirements. New
features are often configured initially for delivery to a single client and then
incorporated into future versions of our products and services for other
clients. We continually evaluate our products and services to determine what
additional products or enhancements are required by our clients and plan to
utilize both purchased and internally developed technologies, software, and
information assets to enhance our product offerings.
We incurred product development expense for the years ended December 31,
1999 and 1998 of $229,000 and $175,000 respectively. We expect to incur
significantly greater direct product development expenses in the future as we
develop new capabilities for our iChannel services beyond those deployed to
address immediate client needs.
Competition
The market for iChannel services delivered over the Internet is at an early
stage of development and no one competitor has established a dominant position
in the market. However, we believe that these markets will be highly competitive
and characterized by rapidly changing technologies, evolving industry standards,
frequent new product introductions or enhancements and rapid changes in customer
requirements. As the growth in these markets continues, we expect competition
will intensify. We believe that the size and diversity within these markets will
allow more than one supplier of products and services similar to ours. We are
aware of several other providers of products and services that are in various
stages of development as well as other new entrants which may ultimately compete
with our offerings, including
<PAGE>
o web site developers and catalog service providers, such as Modem
Media.Poppe Tyson and AGENCY.COM, and PC Order and VAR-Street;
o lead management services such as ChannelWave and MarketSoft;
o call center outsourcing companies, such as Harte-Hanks and TeleTech;
o providers of mapping services, such as MapQuest and Vicinity;
o customer management software companies; such as Siebel Systems and
PeopleSoft; and
o partner relationship management solution providers such as Webridge
Partnerware and Allegis.
In many cases, these competitors are larger, more established and have
substantially greater financial, technical and marketing resources than we do.
We may not be able to compete successfully against our current or future
competitors, which will have a material adverse effect on our business, results
of operations and financial condition.
We believe that the business critical nature of our services, the data and
transaction information we compile, and the benefits of our relationships with
industry leading companies to future technology development, would represent a
substantial cost for clients in switching to a competitor.
We believe the principal competitive factors that will determine success in
the market for our services are:
o functionality and features of the services;
o ability to adapt to specific customer needs;
o reliability and effectiveness of the services provided;
o speed of implementation and level of perceived implementation risk;
o product reputation based on customer's served and client referrals;
o pricing relative to capabilities offered;
o quality of customer support; and
o ability to develop strong customer relationships and strong market
presence.
Intellectual Property
We have received a federal trademark registration for the name InfoNow and
consider our software, information databases, trade secrets, service marks and
similar intellectual property to be proprietary. We rely on a combination of
copyright and trademark law, non-disclosure agreements and certain contractual
provisions within our customer agreements to establish and maintain proprietary
rights in our services and other intellectual property. However, these measures
can afford only limited protection for our intellectual property, as it does not
prevent competitors from independently developing equivalent or superior
technology. As a result, we may have a limited ability to prevent others from
developing similar technologies. However, we believe this protection is less
significant to the future success of our business than other factors, including:
<PAGE>
o the knowledge, ability and experience of our personnel in delivering
our services to and supporting our clients;
o the development of unique and proprietary information assets;
o the effectiveness of our ongoing product development activities in
responding to client needs;
o client loyalty to our services; and
o the overall market position of our products and services.
We believe that our products, trademarks, service marks and other
proprietary rights do not infringe on the intellectual property rights of
others. However, third parties may assert infringement claims against us in the
future which may lead to litigation that could be expensive and divert our
management's attention. We may be required to pay a license fee or royalties to
obtain intellectual property rights which are needed to continue to sell our
products and services. These royalties or licensing agreements may be
unavailable or may be offered at terms unacceptable to us. Delays or
interruptions in our services to our clients may occur if we are unable to
obtain the necessary licensing or royalty agreements, which could harm our
business, operating results and financial condition.
We rely on software and data that we license from third parties, including
software and data that is integrated with internally developed software used in
providing our services. These third party software licenses may not continue to
be available or may be available on terms unacceptable to us. We are also
dependent upon the ability of the licensors and vendors of such third party
software and data to enhance their current products in order to meet the
changing needs of our clients. If we are not able to acquire software and data
licenses and needed enhancements from our current vendors, equivalent software
and data will need to be developed or purchased and integrated into our systems.
Although other alternative sources exist for the technology and data embodied in
these license agreements, we may not be able to replace the functionality of our
current systems or be able to successfully integrate new software and data into
our current systems. Delays and interruptions could occur in our service to our
clients that could result in a material adverse impact on our business,
operating results and financial condition.
Employees
As of June 23, 2000, we had a total of 89 full time employees including 23
in sales and marketing, 41 in software implementation, development, system
operations, and client support, 16 in product development and 9 in finance,
management and administration. We use outside contractors on an as-needed basis.
We consider our relations with our employees to be good and have not
experienced any interruption of operations as a result of labor disagreements.
None of our employees are subject to a collective bargaining agreement
We believe that we must continue to attract and retain qualified personnel
so that we may successfully deliver services to our clients. The competition for
technical personnel with the skills that we require for successful operation of
our business is intense. It could have a material adverse effect on our
operations if we are unable to retain key technical personnel or obtain
additional qualified personnel needed for the planned growth of our business.
<PAGE>
We lease approximately 13,000 square feet of office space at our
headquarters in Denver, Colorado for our product development, marketing,
operations and administrative activities. This lease is with an unrelated party
and terminates on June 30, 2005. We believe that the facilities are adequate for
our current needs and that suitable additional space can be acquired as needed
to accommodate planned growth in the number of personnel for the foreseeable
future.
Our principal server equipment and operations are housed and maintained by
Qwest Communications at our operations center in Denver, Colorado. We also have
a redundant operations site co-located with Verio that is also located in
Denver, Colorado. Our operations are dependent in part upon our ability to
protect our systems against physical damage from fire, floods, power loss,
telecommunications failures and similar events. These facilities have safeguard
protections such as a halon fire system, redundant telecommunications access,
off-site storage of backups and 24 hour systems maintenance support. However, we
still may experience service outages due to multiple failures of systems or
area-wide natural disasters, as both sites are located in Denver. In addition,
despite our implementation of network security measures, our servers may still
be vulnerable to computer viruses, and similar disruptions from unauthorized
tampering with our computer systems. The occurrence of any of these events could
result in interruptions or delays in service to our clients that could have a
material adverse effect on our business, results of operations and financial
condition.
Company History
InfoNow was incorporated under the laws of the State of Delaware on October
29, 1990, and was initially focused on the sale of software through the use of
encrypted CD-ROM technology. Early in 1995, we fundamentally changed our
business focus and began developing Internet-based iChannel services for large
corporate clients. As part of our strategy, we acquired Cimarron International,
Inc. and Navigist, Inc. Cimarron provided interactive media authoring and
business services. Navigist offered network engineering and Internet consulting
services. These acquisitions allowed the company to utilize the resources and
capabilities of Navigist and Cimarron to facilitate our change in strategic
direction as well as to provide an operating infrastructure and revenues as the
Company completed its transition to selling and providing web-based services.
After the acquisitions of Cimarron and Navigist, we ceased selling software
using encrypted CD-ROM technology and installed a new senior management team,
led by Michael Johnson, who became President and Chief Executive Officer in
October of 1995. After the transition to its new business was completed in 1996,
InfoNow sold Navigist on December 13, 1996, and sold Cimarron on December 11,
1997. We are now solely focused on the sale and provision of iChannel services
over the Internet.
WHERE YOU CAN FIND MORE INFORMATION
Government Filings - We file annual, quarterly and special reports and other
information with the Securities and Exchange Commission. You may read and copy
any document that we file at the SEC's public reference rooms in Washington,
D.C., New York, New York, and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to you free of charge at the SEC's web site at
http://www.sec.gov. Most of our SEC filings are also available to you free of
charge at our web site at http:/www.infonow.com.
Stock Market. Our common stock is traded on the Nasdaq Stock Market. Material
filed by us can be inspected at the offices of the National Association of
Securities Dealers, Inc., Reports Section, 1735 K Street, N.W., Washington, D.C.
20006.
<PAGE>
Information Incorporated by Reference. The SEC allows us to incorporate by
reference the information we file with them, which means that we can disclose
important information to you be referring you to those documents. The
information incorporated by reference is considered to be part of this
Prospectus, and information that we file later with the SEC will automatically
update and supersede previously filed information, including information
contained in this document.
We incorporate be reference the documents listed below and any future filings we
will make with the SEC uder Sectios 13(a), 13(c) 14 or 15(d) of the Securities
Exchange Act of 1934 until this offering has been completed:
1. Annual Report on Form 10-KSB for the fiscal year ended December 31,
1999.
2. Current Report on Form 8-K dated March 30, 2000.
3. Quarterly Report on Form 10-QSB for fiscal quarter ended March 31,
2000.
4. Definitive Proxy Statement dated April 21, 2000.
5. A description of the Common Stock contained in the Company's
Registration Statement No. 33-43035 on S-1.
DETERMINATION OF OFFERING PRICE
This prospectus may be used from time to time by the selling stockholders
who offer the shares registered hereby for sale. The offering price of such
shares will be determined by the selling stockholders and may be based on market
prices prevailing at the time of sale, at prices relating to such prevailing
market prices, or at negotiated prices.
SELLING STOCKHOLDERS
The following table sets forth the names of the Selling Stockholders, the
number of shares owed by each of them as of the date of this prospectus and the
number of shares of common stock which may be offered pursuant to this
prospectus. This information is based upon information provided by or on behalf
of the Selling Stockholders. The Selling Stockholders may offer all, some or
none of their shares.
-------------------------------------------------------------------------------
Name Common Stock Common Stock
Beneficially Owned (1) Offered Hereby
-------------------------------------------------------------------------------
NR Ventures Ltd. 210,527 210,527
-------------------------------------------------------------------------------
-RIT Capital Partners, PLC 210,526 210,526
-------------------------------------------------------------------------------
Putnam Emerging Information 105,263 105,263
Sciences Trust S.A. (2)
-------------------------------------------------------------------------------
Needham & Co. (3) 10,526 10,526
-------------------------------------------------------------------------------
Total 745,967 536,842
-------------------------------------------------------------------------------
(1) Beneficial ownership is determined in accordance with the Rules of the
SEC and generally includes voting or investment power with respect to
securities. Except where indicated by footnote, the entities named in
the table have sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by them.
(2) Putnam Emerging Information Sciences Trust S.A. is managed by a
subsidiary of Putnam Investments who also beneficially owns such
shares.
(3) Needham & Co. owns a Warrant to purchase 10,526 shares of Common
Stock, exercisable as of March 30, 2000 through March 30, 2005.
Needham also owns a Warrant to purchase 5,000 shares of Series B
Preferred Stock, convertible at a rate of 3.802281 for a total of
19,011 shares of Common Stock and is exercisable as of December 31,
1999 through December 31, 2004.
<PAGE>
PLAN OF DISTRIBUTION
The distribution of the Shares by the Selling Stockholders is not subject
to any underwriting agreement. The Shares offered by the Selling Stockholders
may be sold from time to time at designated prices that may be changed, at
market prices prevailing at the time of sale, at prices relating to such
prevailing market prices or at negotiated prices. In addition, the Selling
Stockholders may sell the Shares through customary brokerage channels, either
through broker-dealers acting as agents or principals. The Selling Stockholders
may effect such transactions by selling Shares to or through broker-dealers, and
such broker-dealers may receive compensation in the form of underwriting
discounts, concessions, commissions, or fees from the Selling Stockholders
and/or purchasers of the Shares for whom such broker-dealers may act as agent,
or to whom they sell as principal, or both. Any broker-dealers that participate
with the Selling Stockholders in the distribution of Shares may be deemed to be
underwriters and any commissions received by them and any profit on the resale
of Shares positioned by them might be deemed to be underwriting discounts and
commissions within the meaning of the Securities Act of 1933, in connection with
such sales.
INDEMNIFICATION
Article VII of InfoNow's Certificate of Incorporation provides that the
personal liability of the directors to InfoNow or its stockholders for monetary
damages for a breach of fiduciary duty as a director is eliminated to the
maximum extent permitted by Delaware law. Article V of InfoNow's Bylaws provides
for the indemnification of InfoNow's directors and officers in a variety of
circumstances, which may include liabilities under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the
registrant, pursuant to the foregoing provisions, we have been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
EXPERTS
The financial statements of InfoNow incorporated by reference in this
Prospectus and elsewhere in the Registration Statement have been audited by Hein
+ Associates, LLP, independent certified public accountants, as indicated in
their report with respect thereto, and are included in reliance upon the
authority of said firm as experts in giving said reports
LEGAL OPINION
The legality of the Common Stock offered will be passed upon for InfoNow by
Chrisman, Bynum & Johnson, P.C., 1900 Fifteenth Street, Boulder, CO 80302.
<PAGE>
No person has been authorized to give any
information or make any representations other
than those contained in this Prospectus in
connection with the sale or offering of any
Shares of Common Stock covered by this
Prospectus, and if given or made, such other
information or representations must not be
relied upon as having been authorized by
InfoNow Corporation or the Selling INFONOW CORPORATION
Stockholders. This Prospectus does not
constitute an offer of any securities other
than those to which it relates or an offer to
sell, or a solicitation of an offer to buy, Common Stock ($.001 Par Value)
in any jurisdiction to any person to whom it
is not lawful to make such offer or
solicitation in such jurisdiction. Under no PROSPECTUS
circumstances should the delivery of this
Prospectus or the sale or offering of any
Shares of Common Stock covered by this , 2000
Prospectus create any implication that there ------------
has been no change in the business or
operations of InfoNow Corporation since the
date of this Prospectus.
536,842 Shares
TABLE OF CONTENTS
Page
Available Information....................1
Documents Incorporated by Reference......1
The Company..............................4
Risk Factors.............................5
Use of Proceeds.........................14
Determination of Offering Price.........28
Selling Stockholders....................28
Plan of Distribution....................29
Indemnification.........................29
Experts.................................29
Legal Opinion...........................30
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
--------------------------------------------
The expenses in connection with the issuance and distribution of the
securities being registered, other than brokerage discounts, fees or
commissions, are:
Commission Registration Fee $ 665.50
Accounting Fees and Expenses 3000.00
Legal Fees and Expenses 10000.00
Miscellaneous Expenses 1334.50
-----------
Total $ 15000.00
All expenses, except the registration fee, are estimated. The Company will
pay all expenses in connection with this Offering.
ITEM 15. Indemnification of Officers and Directors.
------------------------------------------
Section 145 of the General Corporation Law of the State of Delaware
contains provisions permitting corporations organized thereunder to indemnify
directors, officers and other representatives from liabilities in connection
with any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person was or is a director, officer, employee or agent of the corporation,
against liabilities arising in any such action, suit or proceeding, expenses
incurred in connection therewith, and against certain other liabilities. Article
Seven of the Registrant's Certificate of Incorporation provides that the
personal liability of the directors of the Registrant to the Registrant or its
stockholders for monetary damages for a breach of fiduciary duty as a director
is eliminated to the maximum extent permitted by Delaware law. Article Five of
the Registrant's Bylaws provides for indemnification of the Registrant's
directors and officers in a variety of circumstances, which may include
liabilities under the Securities Act of 1933.
ITEM 16. Exhibits
4.1 Specimen Common Stock Certificate (1)
5.1 Opinion of Chrisman, Bynum & Johnson, P.C.
23.1 Consent of Hein + Associates LLP, certified public
accountants - InfoNow Corporation
23.2 Consent of Chrisman, Bynum & Johnson, P.C.
(contained in the opinion filed as Exhibit 5.1)
24.1 Power of attorney (contained in Part II of this
Registration Statement)
II-1
<PAGE>
---------
(1) Denoted as Exhibit 4.1 to Registration Statement No. 33-43035 on Form S-1
and incorporated herein by reference.
ITEM 17. Undertakings
------------
(1) The undersigned Registrant hereby undertakes:
A. To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-3 are not set
forth in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
B. That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification by the Company for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that the
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted against the Company by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, State of Colorado, on the 17th day of July,
2000.
INFONOW CORPORATION
By: /s/ Michael W. Johnson
-----------------------
/s/ Kevin D. Andrew
-------------------
Michael W. Johnson, President
Kevin D. Andrew,
Chief Financial Officer
II-3
<PAGE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael W. Johnson or Kevin D. Andrew his
true and lawful attorney-in-fact and agent, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement,
including post-effective amendments, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, and hereby ratifies and confirms all
his said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Michael W. Johnson Chairman, Chief Executive
------------------------- Officer (Principal
Michael W. Johnson Executive Officer) July 21, 2000
/s/ Kevin D. Andrew Chief Financial Officer,
------------------------- Treasurer and Secretary
Kevin D. Andrew (Principal Financial
and Accounting Officer) July 21, 2000
/s/ Duane H. Wentworth Director July 21, 2000
-------------------------
Duane H. Wentworth
/s/ Michael D. Basch Director July 21, 2000
-------------------------
Michael D. Basch
II-4
<PAGE>
EXHIBIT INDEX
Exhibits Page
-------- ----
4.1 Specimen Common Stock Certificate (1)
5.1 Opinion of Chrisman, Bynum & Johnson, P.C.
23.1 Consent of Hein + Associates LLP, certified
public accountants
23.2 Consent of Chrisman, Bynum & Johnson, P.C.
(contained in the opinion filed as Exhibit 5.1)
24.1 Power of attorney (contained in Part II of this
Registration Statement)
---------
(1) Denoted as Exhibit 4.1 to Registration Statement 33-43035 on Form S-1 and
incorporated herein by reference.
