As filed with the Securities and Exchange Commission on May 16, 2001
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
_______________
LIFEMINDERS, INC.
(Exact name of registrant as specified in its charter)
_______________
Delaware 52-1990403
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
_______________
13530 Dulles Technology Drive, Suite 500
Herndon, Virginia 20171-3414
(703) 793-8210
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
_______________
Jonathan B. Bulkeley
Chairman of the Board and Chief Executive Officer
LifeMinders, Inc.
13530 Dulles Technology Dr., Suite 500
Herndon, Virginia 20171-3414
(703) 793-8210
(Name and address, including zip code, and telephone number, including area
code, of agent for service)
_______________
Copies to:
Stephen A. Riddick, Esq.
Jason T. Simon, Esq.
Brobeck, Phleger & Harrison LLP
1333 H Street NW, Suite 800
Washington DC 20005
(202) 220-6000
_______________
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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. [_]
_______________
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Amount to Be Registered Proposed Maximum Proposed Maximum
Securities to be Registered Offering Price Per Aggregate Offering Amount of Registration
Share(1) Price(1) Fee
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Common Stock, $0.01 par value
per share 1,252,198 shares $1.41 $1,765,599.10 $441.40
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(1) The price of $1.41, the average of the high and low prices of the
registrant's common stock on the Nasdaq National Market on May 15, 2001, is set
forth solely for the purpose of computing the registration fee pursuant to Rule
457(c).
_______________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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THE INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 16, 2001
PRELIMINARY PROSPECTUS
1,252,198 Shares
LifeMinders, Inc.
Common Stock
This prospectus relates to the public offering, which is not being
underwritten, of 1,252,198 shares of our common stock, which are held by some of
our current stockholders.
The prices at which such stockholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale of the
shares.
Our common stock is quoted on the Nasdaq National Market under the symbol
"LFMN." On May 15, 2001, the average of the high and low price for the common
stock was $1.41.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. PLEASE SEE
"RISK FACTORS" BEGINNING ON PAGE 2, AND IN THE DOCUMENTS WE FILE WITH THE
SECURITIES AND EXCHANGE COMMISSION THAT ARE INCORPORATED BY REFERENCE IN THIS
PROSPECTUS.
_______________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
_______________
The date of this prospectus is May __, 2001
THE COMPANY
Our principal executive offices are located at 13530 Dulles Technology
Drive, Suite 500, Herndon, Virginia 20171-3414. Our telephone number is (703)
793-8210.
RISK FACTORS
An investment in our company involves a high degree of risk. You should
carefully consider the risks below, together with the other information
contained or incorporated by reference in this prospectus, before you decide to
buy our common stock. The risks and uncertainties described below are not the
only ones facing our company and there may be additional risks that we do not
presently know of or that we currently deem immaterial. If any of these risks
occur, our business, financial condition, cash flow or results of operations
could be materially adversely affected. In such case, the trading price of our
common stock could decline.
Risks Related to the Scaling Down of Our Business Operations and Our Evaluation
of Strategic Alternatives
We are scaling back our business operations and we have significantly reduced
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our work force. We expect that these actions, coupled with continuing weakness
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in the online advertising market, will significantly reduce our future
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revenues.
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As announced on May 10, 2001, our Board of Directors has determined to
significantly scale back our business operations and we have significantly
reduced our work force. We believe that our revenues from online advertising
and our other existing lines of business for the foreseeable future will
continue to decline substantially from that reported in prior periods. We expect
this decline because, among other reasons, we believe that the market for
online advertising will continue to decline significantly, we expect that we
will be producing and delivering a substantially fewer number of emails which
will reduce the opportunity for online advertising revenues, we do not expect to
develop any new email products during this period and our management and other
key employees will continue to spend a significant portion of their time
identifying and evaluating strategic alternatives. In addition, our existing
advertising customers may choose not to place online advertising with our
company as a result of concerns about the future of our business operations.
We have incurred significant losses, we expect losses for the foreseeable
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future, and we may never become profitable.
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We have never achieved profitability and expect to continue to incur operating
losses for the foreseeable future. As of March 31, 2001, we had an accumulated
deficit of $156.6 million. We incurred net losses of $13.0 million for the three
months ended March 31, 2001, and $109.5 million for the year ended December 31,
2000. We cannot be certain that we will ever be able to generate sufficient
revenue to achieve profitability. If our future revenue is lower than we
anticipate, or our operating expenses exceed our estimates, we would incur
greater losses than we had anticipated and we would be required to further
reduce our cash balance to support our continued operations. Such circumstances
may make us less desirable as an acquisition candidate, may reduce our value in
any sale or merger transaction, and would reduce the amount of proceeds
available to our stockholders in the event of a liquidation.
We may not be able to identify or complete a sale or merger of the company.
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2
As announced on May 10, 2001, we are continuing to identify and evaluate
strategic alternatives for the company. Possible alternatives range from a sale
of the company or our assets to a merger with one or more other companies to
liquidation. We may not be able to identify or complete any merger or sale of
the company that our Board of Directors finds to be in the stockholders' best
interests. Even if we are successful in identifying and completing a merger or
sale of the company, we cannot provide any assurance about the timing of any
such transaction or that any individual stockholder will determine that the
transaction is in his, her or its best interests.
If we are unable to conclude that a sale or a merger would be in the best
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interests of our stockholders, our Board of Directors may determine that the
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best alternative is to liquidate and distribute the net proceeds of such
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liquidation to stockholders.
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As also announced on May 10, 2001, if we are unable to conclude that a sale or a
merger would be in the best interests of our stockholders, our Board of
Directors may determine that the best alternative is to liquidate and distribute
the net proceeds of such liquidation to our stockholders. In a liquidation, we
would be dissolved, sell or otherwise dispose of our remaining assets, pay our
existing liabilities, set aside reserves for contingent obligations and
distribute any net proceeds to our stockholders in one or more liquidating
distributions. In a liquidation, we may not receive any material amounts for
the sale or other disposition of our assets. Further, in a liquidation, we will
have significant obligations, including real estate, co-location, equipment
leases and other obligations, that will need to be resolved. Additionally, if
we do not generate sufficient revenue to support our continued operations, we
will be required to reduce our cash balance to support our continued operations
and the amount of any liquidation proceeds available for distribution to our
stockholders would be reduced. Accordingly, the amount and timing of any
distributions to stockholders in a liquidation cannot be determined because they
would depend on a variety of factors, including the amount of proceeds received
from any asset sales or dispositions, the time and amount required to resolve
outstanding obligations and the amount of any reserves for future contingencies.
Our ability to continue to operate our scaled down business and to identify,
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evaluate and complete any strategic alternative are dependent on our ability to
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retain our remaining management and other key employees, and we may not be able
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to do so.
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Since the fourth quarter of 2000, we have laid off approximately 85% of our
workforce. We may have difficulty retaining our remaining management and
other key employees on whom we will depend to continue to operate our scaled
down business and to assist in identifying, evaluating and completing any
strategic alternative. If we are unable to retain our management and other key
employees through this process, our continued business operations and our
ability to identify, evaluate and complete a strategic alternative could be
materially and adversely affected.
The market price of our common stock has been declining and may decline further
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as a result of our determination to scale back business operations and evaluate
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strategic alternatives, or as a result of and fluctuations in our quarterly
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results of operations.
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The market price of our common stock has declined from a high of $91.00 per
common share at March 9, 2000 to a low of $0.53 at April 3, 2001. On May 8,
2001, the closing price per share of our common stock as reported on The Nasdaq
National Market was $1.40 per share. We believe that the market price of our
common stock has been significantly and adversely affected by the sharp decline
in the online advertising market. We also believe that our common stock price
may decline in the future as a result of our decision to scale back operations
and evaluate strategic alternatives, and because of the significantly lower
revenues reported in our quarterly results of operations for the quarters ended
December 31, 2000 and March 31, 2001, and our announced expectations for
revenues in the quarter ending June 30, 2001. In addition, we believe that in
the future, fluctuations in our quarterly results and the negative online
advertising market, as well as many of the other risk factors discussed in this
registration statement may negatively affect our quarterly operating results and
contribute to fluctuations in our common stock price.
A further decline in our common stock price may adversely affect our ability to
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complete a strategic alternative involving a stock transaction.
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We are continuing to identify and evaluate potential strategic alternatives,
including a potential sale or merger of our company. However, our ability to
complete a sale or merger transaction involving the company may be adversely
affected by a further decline in our stock price.
If the price of our common stock remains low, it may be delisted by Nasdaq and
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become subject to special rules applicable to low priced stocks, which may
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reduce the liquidity of our shares.
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There are several requirements for continued listing on the Nasdaq National
Market including, but not limited to, maintaining a minimum stock price of $1.00
per share. We may fail to meet these continued listing requirements, with the
result being that our common stock might be delisted. If that were to occur, we
may apply for listing on the Nasdaq Smallcap Market, subject to Nasdaq's
approval. If our stock were to be delisted from the Nasdaq National Market, and
we were unable to list our stock on the Nasdaq Smallcap Market, it is likely
that public trading, if any, in our common stock would thereafter be conducted
in the over-the-counter market in the so-called "pink sheets," or on the NASD's
"Electronic Bulletin Board." In addition, our stock would become subject to the
penny stock rules of the Securities and Exchange Commission, which generally are
applicable to equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges or quoted on the
Nasdaq system, provided that current price and volume information with respect
to transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the SEC that provides information about penny
stocks and the nature and level of risks in the penny stock market. The broker-
dealer also must provide the customer with bid and offer quotations for the
penny stock, the compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market value of each
penny stock held in the customer's account. In addition, the penny stock rules
require that prior to executing a transaction in a penny stock, not otherwise
exempt from such rules, the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules. If our common stock were to be delisted and become subject to the
penny stock rules, investors may find it more difficult to sell their shares or
to obtain quotations as to the price of our stock. Delisting could also have a
long-term negative impact on our ability to raise future capital through a sale
of common stock.
Risks Related to Our Company that Could Affect the Ongoing Operation of Our
Business
If we are unsuccessful in addressing certain risks and uncertainties associated
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with the continued operation of our business, we may not be able to generate
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sufficient revenues and we would be required to reduce our cash balance to
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support our continued operations.
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We have only a limited operating history upon which to evaluate our business and
prospects and the online direct marketing industry is relatively new and rapidly
evolving. This presents many risks and uncertainties including our:
. ability to compete effectively against other companies;
. need to retain and motivate qualified personnel;
. ability to anticipate and adapt to the changing market;
. ability to develop and introduce new products and services and continue to
develop and upgrade technology; and
. need to attract and retain a large number of customers from a variety of
industries.
We have also historically depended on the growing use of the Internet for
advertising, commerce and communications, and on general economic conditions.
We cannot assure you that we will successfully address these risks and
uncertainties. If we are unsuccessful in addressing these risks and
uncertainties, we may not be able to generate sufficient revenue to fund our
operations. In that event, we would be required to reduce our cash balance,
which could make us less desirable as an acquisition candidate or reduce our
value in any sale or merger transaction, and would reduce the amount of proceeds
available for distribution to our stockholders in the event of a liquidation of
our company.
We may not be able to generate sufficient revenue to support our continued
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operations if the acceptance of online advertising, which is new and
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unpredictable, does not develop and expand.
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We have historically derived a substantial portion of our revenue from online
advertising and direct marketing, including both email and Web-based programs.
The profit potential for this business model is unproven. The Internet has not
existed long enough as an advertising medium to demonstrate its effectiveness
relative to traditional advertising. Advertisers and advertising agencies that
have historically relied on traditional advertising may be reluctant or slow to
adopt online advertising. Many potential advertisers have limited or no
experience using email or the Web as an advertising medium. They may have
allocated only a limited portion of their advertising budgets to online
advertising, or may find online advertising to be less effective for promoting
their products and services than traditional advertising media. Further, our
email and Web-based programs may not generate sufficient user traffic with
demographic characteristics attractive to our advertisers. We are also affected
by general industry conditions governing the supply and demand of Internet
advertising. For example, the market for email advertising in general is
vulnerable to the negative public perception associated with unsolicited email,
known as "spam." Public perception, press reports or governmental action related
to spam could reduce the overall demand for email advertising in general. Our
results of operations have been adversely affected in recent quarters as a
result of a significantly declining market for online advertising, and we expect
that those adverse market conditions will continue. If the market for online
advertising fails to improve or deteriorates more than we expect, we may not be
able to generate sufficient revenue to support our continued operations. In that
event, we would be required to reduce our cash balance, which could make us less
desirable as an acquisition candidate or reduce our value in any sale or merger
transaction, and would reduce the amount of proceeds available for distribution
to our stockholders in the event of a liquidation of our company.
Our advertising customers and the companies with which we have other business
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relationships may experience adverse business conditions that could adversely
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affect our business.
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Some of our customers may experience difficulty in supporting their current
operations and implementing their business plans. These customers may reduce
their spending on our products and services, or may not be able to discharge
their payment and other obligations to us. The non-payment or late payment of
amounts due to us from a significant customer would negatively impact our
financial condition. These circumstances are influenced by general economic and
industry conditions, and could have a material adverse impact on our business,
financial condition and results of operations. In addition to intense
competition, the overall market for Internet advertising has been characterized
in recent quarters by increasing softness of demand, the reduction or
cancellation of advertising contracts, an increased risk of uncollectible
receivables from advertisers, and the reduction of Internet advertising budgets,
especially by Internet-related companies. Our customers may experience
difficulty in raising capital, or may be anticipating such difficulties, and
therefore may elect to scale back the resources they devote to advertising,
including on our system. Other companies in the Internet industry have depleted
their available capital, and could cease operations or file for bankruptcy
protection. If the current environment for Internet advertising does not
improve, our business, results of operations and financial condition could be
materially adversely affected.
If we do not maintain an engaged member base, we may not be able to compete
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effectively for advertisers and our business could be adversely affected.
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Our revenue has been derived primarily from advertisers seeking an engaged,
targeted audience for their advertisements. Although we intend to continue to
produce and distribute emails to our members, we are scaling back our business
operations and intend to reduce the number of emails that we send to members and
we do not expect to develop new products in the near future. If we are unable
to maintain an engaged member base by keeping our current members active (i.e.,
opening our email newsletters and responding to the advertisements contained in
those newsletters), advertisers could find our audience less attractive and
effective for promoting their products and services. We currently expect that
we will experience difficulty retaining our existing advertisers and attracting
additional advertisers, which will likely reduce our future revenues from online
advertising and opt-in advertising, which represent a majority of our revenues
to date.
We could also experience difficulty retaining our existing advertisers and
attracting additional advertisers if a significant number of our current members
stopped using our service. Members may discontinue using our service if they
object to having their online activities tracked or they do not find our content
useful. Members may also discontinue using our service if they have been
saturated by our email newsletters or advertisements or other advertisements or
promotions in their emails or on the Internet. Our service allows our members to
easily unsubscribe at any time by clicking through a link appearing at the
bottom of our email newsletters and selecting the particular categories from
which they want to unsubscribe.
To date, we have relied on referral-based marketing activities to attract a
portion of our members. However, we expect to discontinue these marketing
activities in the near future. Accordingly, we do not expect growth in our
member base. A significant portion of our revenue has historically been
derived from performance-based and revenue sharing arrangements. Under these
arrangements, our advertisers pay us in part based on member responses to
advertisements and promotions placed in our email newsletters. If our members
do not respond to advertisements and promotions placed in our email newsletters,
our revenue could be materially and adversely affected. Further, we expect to
reduce the number of future email newsletters to our members, and we expect that
this could also materially and adversely affect our future revenue.
Competition in the online advertising market industry is intense, and our scaled
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back operations may make it more difficult for us to compete effectively and may
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reduce our ability to retain and attract advertisers.
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We face intense competition from both traditional and online advertising and
direct marketing businesses. Our scaled back operations may make it more
difficult for us to compete effectively with our competitors. If we are not
able to compete effectively, we may not be able to retain current advertisers or
attract new advertisers. This would reduce our revenues and we would be
required to reduce our cash balance to support our continued operations which
could make us less desirable as an acquisition candidate or reduce our value in
any sale or merger transaction, and would reduce the amount of proceeds
available for distribution to our stockholders in the event of a liquidation of
our company. Moreover, we expect that competition will increase due to the lack
of significant barriers to entry in the online advertising market and the
attention the Internet continues to receive as a means of advertising and direct
marketing. We face competition for marketing dollars from online portals and
community Web sites such as AOL, Yahoo!, and CNET Networks, Inc. In addition,
several other companies offer competitive email direct marketing services for
our consumer products, including coolsavings.com, MyPoints.com, NetCreations
(affiliated with SEAT Pagine Gialle SpA), YesMail.com (affiliated with CMGI,
Inc.), Digital Impact and Exactis.com (affiliated with 24/7 Media Inc.).
Principal competitors to our outsourcing business include providers of
eMarketing solutions such as Exactis.com, FloNetwork (proposed to be acquired by
Doubleclick), MessageMedia, Responsys.com, and Netcentives Inc. Additionally,
traditional advertising agencies and direct marketing companies may seek to
offer online products or services that compete with ours.
We believe that our ability to compete depends on many factors both within and
beyond our control, including the following:
. the timing and acceptance of new solutions and enhancements to existing
solutions developed either by us or our competitors;
. customer service and support efforts;
. our ability to adapt and scale our technology, and develop and introduce
new technologies, as customer needs change and grow;
. sales and marketing efforts;
. the features, ease of use, performance, price and reliability of solutions
developed either by us or our competitors; and
. the relative impact of general economic and industry conditions on either
our competitors or us.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than us. These factors may allow them to respond more quickly than we
can to new or emerging technologies and changes in customer requirements. It may
also allow them to devote greater resources than we can to the development,
promotion and sale of their products and services. These competitors may also
engage in more extensive research and development, undertake more far-reaching
marketing campaigns, adopt more aggressive pricing policies and make more
attractive offers to existing and potential employees, strategic partners,
advertisers and direct marketers. We cannot assure you that our competitors will
not develop products or services that are equal or superior to ours or that
achieve greater acceptance than ours. In addition, current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties to increase the ability of their products or
services to address the needs of our current or prospective members or
advertising customers. As a result, it is possible that new competitors may
emerge and rapidly acquire significant market share. Increased competition is
likely to result in price reductions, reduced gross margins and loss of market
share. With the scaling back of our operations, we do not expect to devote
material resources to address the factors affecting our ability to compete.
Accordingly, we cannot assure you that we will be able to compete successfully
or that competitive pressures will not materially and adversely affect our
business, results of operations or financial condition.
We may not compete successfully with traditional advertising media for
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advertising dollars.
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Companies doing business on the Internet, including ours, must also compete with
television, radio, cable and print (traditional advertising media) for a share
of advertisers' total advertising budgets. Advertisers may be reluctant to
devote a significant portion of their advertising budget to Internet advertising
if they perceive the Internet to be a limited or ineffective advertising medium.
In addition, in response to adverse economic or business conditions, many
advertisers reduce their advertising and marketing spending. These circumstances
would increase the competition we face to sell our products and services, and
could materially and adversely affect our business, results of operations or
financial condition.
We rely heavily on our intellectual property rights and other proprietary
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information, and any failure to protect and maintain these rights and
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information could prevent us from competing effectively.
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Our success and ability to compete are substantially dependent on our internally
developed technologies and trademarks, which we seek to protect through a
combination of patent,
copyright, trade secret and trademark law, as well as confidentiality or license
agreements with our employees, consultants, and corporate and strategic
partners. If we are unable to prevent the unauthorized use of our proprietary
information or if our competitors are able to develop similar technologies
independently, the competitive benefits of our technologies, intellectual
property rights and proprietary information will be diminished. These
circumstances could also make us less desirable as an acquisition candidate or
reduce our value in any sale or merger transaction.
We depend heavily on our network infrastructure and if this fails it could
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result in unanticipated expenses and prevent our members from effectively
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utilizing our services, which could negatively impact our ability to attract and
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retain members and advertisers.
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Our ability to successfully create and deliver our email newsletters depends in
large part on the capacity, reliability and security of our networking hardware,
software and telecommunications infrastructure. Failures of our network
infrastructure could result in unanticipated expenses to address such failures
and could prevent our members from effectively utilizing our services, which
could prevent us from retaining and attracting members and advertisers. We do
not currently have fully redundant systems or a formal disaster recovery plan.
Our system is susceptible to natural and man-made disasters, including
earthquakes, fires, floods, power loss and vandalism. Further,
telecommunications failures, computer viruses, electronic break-ins or other
similar disruptive problems could adversely affect the operation of our systems.
Our insurance policies may not adequately compensate us for any losses that may
occur due to any damages or interruptions in our systems. Accordingly, we could
be required to make capital expenditures in the event of unanticipated damage.
In addition, our members depend on Internet service providers, or ISPs, for
access to our Web site. Due to the rapid growth of the Internet, ISPs and Web
sites have experienced significant system failures and could experience outages,
delays and other difficulties due to system failures unrelated to our systems.
These problems could harm our business by preventing our members from
effectively utilizing our services.
Our current management team has only worked together for a short period of time
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and the inability of our management team to function effectively could seriously
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harm our business.
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Many of our executive officers, including our Chief Executive Officer,
President, and Chief Technology Officer have joined our company only recently.
We may not successfully assimilate our recently hired officers, which could
seriously harm our business by impairing our ability to implement our business
strategy and operate our business. Our business is largely dependent on the
personal efforts and abilities of our senior management and other key personnel.
Our officers or employees can terminate their respective employment
relationships at any time. The loss of these key employees could seriously harm
our business.
Our quarterly results of operations may fluctuate in future periods and we may
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be subject to seasonal and cyclical patterns that may negatively impact our
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stock price.
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We believe that our business may be subject to seasonal fluctuations.
Advertisers historically have placed fewer advertisements during the first and
third calendar quarters of each year.
Further, Internet user traffic typically drops during the summer months, which
potentially could reduce the amount of advertising placed during that period.
Expenditures by advertisers and direct marketers tend to vary in cycles that
reflect overall economic conditions as well as budgeting and buying patterns.
Our revenue has in the past been, and may in the future be, materially affected
by a decline in the economic prospects of our customers or in the economy in
general, which could alter our current or prospective customers' spending
priorities or budget cycles or extend our sales cycle. Due to these and other
factors, our revenues and operating results may vary significantly from quarter-
to-quarter.
We may have to obtain additional capital to operate our business, which could
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result in significant costs and dilution that could adversely affect our stock
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price.
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Operating our business, even with the scaling back of our operations, will
require significant cash expenditures. If our cash on hand, cash generated from
operations and existing loan and credit arrangements are not sufficient to meet
our cash requirements, we would need to seek additional capital, which could
result in significant costs and dilute the ownership interest of our
stockholders and thereby adversely affect our stock price. Additional financing
may not be available on terms favorable to us, or at all, which could result in
significant costs to obtain the necessary capital and limit our ability to
maintain and expand our member base and number of advertisers, or otherwise
respond to competitive pressures. In addition, if we raise additional funds
through the issuance of equity or equity-linked securities, the percentage
ownership of our current stockholders would be reduced. These securities may
have rights, preferences or privileges senior to those of our stockholders. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" for a discussion of working capital
and capital expenditures.
The content contained in our emails may subject us to significant liability for
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negligence, copyright or trademark infringement or other matters.
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If any of the content that we create and deliver to our members or any content
that is accessible from our emails through links to other Web sites contains
errors, third parties could make claims against us for losses incurred in
reliance on such information. In addition, the content contained in or
accessible from our emails could include material that is defamatory, violates
the copyright or trademark rights of third parties, or subjects us to liability
for other types of claims. Our general liability insurance may not cover claims
of these types or may not be adequate to indemnify us for all liability that may
be imposed. Any imposition of liability, particularly liability that is not
covered by insurance or is in excess of insurance coverage, could result in
significant costs and expenses and damage our reputation.
We also enter into agreements with certain e-commerce partners under which we
may be entitled to receive a share of certain revenue generated from the
purchase of goods and services through direct links to our e-commerce partners
from our emails. These agreements may expose us to additional legal risks and
uncertainties, including potential liabilities to consumers of those products
and services by virtue of our involvement in providing access to those products
or services, even if we do not provide those products or services. Any
indemnification provided to us in our agreements with these parties, if
available, may not adequately protect us.
Concerns about, or breaches of, the security of our member database could result
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in significant expenses to prevent breaches, and subject us to liability for
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failing to protect our members' information.
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We maintain a database containing information on our members. Unauthorized users
accessing our systems remotely may access our database. As a result of these
security and privacy concerns, we may incur significant costs to protect against
the threat of security breaches or to alleviate problems caused by security
breaches, and we may be unable to effectively target direct marketing offers to
members or may be subject to legal claims of members if unauthorized third
parties gain access to our system and alter or destroy information in our
database. Also, any public perception that we engaged in the unauthorized
release of member information, whether or not correct, would adversely affect
our ability to retain members.
Our business may be adversely affected by the refusal of one or more electronic
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email delivery providers to deliver our, or our customers', messages.
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Our business may be adversely affected by the unilateral election of certain
domain administrators to block, filter or otherwise prevent the delivery of
Internet advertising or commercial emails to their users. We cannot assure you
that the number of domains which establish policies against their users, receipt
of commercial deliveries as consideration for receiving service will not become
increasingly more popular, thereby diminishing the reach of our service, or the
service of our customers.
Our business may be adversely affected by products offered by third parties.
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Our business may be adversely affected by the adoption by computer users of
technologies that harm the performance of our products and services. For
example, our business may be adversely affected by the increased use of
technologies that allow domain administrators on the aggregate level, or
individual users managing their own electronic email accounts, to block, filter
or otherwise prevent the delivery of Internet advertising or commercial emails,
or to block access to any services that use cookies or other tracking
technologies. We cannot assure you that the number of domains or individual
computer users who employ these or other similar technologies will not increase,
thereby diminishing the efficacy of our, or our customer's, services. In the
case that one or more of these technologies are widely adopted, our business,
financial condition and results of operations could be materially and adversely
affected.
Sweepstakes regulation may limit our ability to conduct sweepstakes and other
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contests, which could negatively impact our ability to attract and retain
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members.
- -------
The conduct of sweepstakes, lotteries and similar contests, including by means
of the Internet, is subject to extensive federal, state and local regulation,
which may restrict our ability to offer contests and sweepstakes in some
geographic areas or altogether. Any restrictions on these promotions could
adversely affect our ability to attract and retain members.
If our stock price remains volatile, we may become subject to securities
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litigation, which is expensive and could divert our resources.
- -------------------------------------------------------------
In the past, following periods of market volatility in the price of a company's
securities, security holders have instituted class action litigation. Many
companies in our industry have been subject to this type of litigation. Our
stock price has been volatile since our initial public offering in November
1999. If the market value of our stock continues to experience adverse
fluctuations, and we become involved in this type of litigation, regardless of
the outcome, we could incur substantial legal costs and our management's
attention could be diverted, causing our business to suffer.
Our executive officers and directors have and may continue to have substantial
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voting control, which will allow them to influence the outcome of matters
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submitted to stockholders for approval in a manner that may be adverse to your
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interests.
- ---------
Our executive officers, our directors and entities affiliated with them, in the
aggregate, beneficially own approximately 27% of our outstanding common stock as
of February 28, 2001. As a result, these stockholders will retain substantial
control over matters requiring approval by our stockholders, including the
election of directors and approval of significant corporate transactions. This
concentration of ownership may also have the effect of delaying or preventing a
change in control, which could have an adverse affect on our stock price.
Anti-takeover provisions in our charter documents and Delaware law could prevent
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or delay a change in control of our company, which could adversely affect our
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stock price.
- -----------
Our Restated Certificate of Incorporation and Bylaws may discourage, delay or
prevent a merger or acquisition that a stockholder may consider favorable by
authorizing the issuance of "blank check" preferred stock and providing for a
classified board of directors with staggered, three-year terms. Certain
provisions of Delaware law may also discourage, delay or prevent someone from
acquiring or merging with us. These anti-takeover provisions could adversely
affect our stock price.
Risks Related to Our Industry that Could Affect the Ongoing Operation of Our
Business
Our business may be adversely affected if demand for Internet advertising fails
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to grow as predicted or diminishes.
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The Internet advertising industry is new and rapidly evolving, and it cannot yet
be compared with traditional advertising media to gauge its effectiveness. As a
result, demand and acceptance for Internet advertising solutions is uncertain.
Many of our current or potential advertising customers have limited experience
using the Internet for advertising purposes and they have allocated only a
limited portion of their advertising budgets to Internet advertising. The
adoption
of Internet advertising, particularly by those entities that have historically
relied upon traditional media for advertising, requires the acceptance of a new
way of conducting business, exchanging information and advertising products and
services. These customers may find Internet advertising to be less effective for
promoting their products and services relative to traditional advertising media.
We cannot assure you that current or potential advertising customers will
continue to allocate a portion of their advertising budget to Internet
advertising or that the demand for Internet advertising will continue to develop
to sufficiently support Internet advertising as a significant advertising
medium. Our results of operations have been adversely affected in recent
quarters as a result of a significantly declining market for online advertising,
and we expect that these adverse market conditions will continue. If the market
for online advertising fails to improve or deteriorates more than we expect,
then our business, results of operations and financial condition could be
materially and adversely affected.
There are currently no generally accepted standards or tools for the measurement
of the effectiveness of Internet advertising or the planning of advertising
purchases, and generally accepted standard measurements and tools may need to be
developed to support and promote Internet advertising as a significant
advertising medium. Our advertising customers may challenge or refuse to accept
our or a third-party's measurements of advertisement delivery results. Our
customers may not accept any errors in such measurements. In addition, the
accuracy of database information used to target advertisements is essential to
the effectiveness of Internet advertising that may be developed in the future.
The information in our database, like any database, may contain inaccuracies
that our customers may not accept.
A significant portion of our revenue is derived from the delivery of
advertisements, which are designed to contain the features and measuring
capabilities requested by advertisers. If advertisers determine that those ads
are ineffective or unattractive as an advertising medium or if we are unable to
deliver the features or measuring capabilities requested by advertisers, the
long-term growth of our online advertising business could be limited and our
revenue levels could decline. There are also 'filter' software programs that
limit or prevent advertising from being delivered to a user's computer. The
commercial viability of Internet advertising, and our business, results of
operations and financial condition, would be materially and adversely affected
by Web users' widespread adoption of this software.
The unauthorized access of confidential member information that we transmit over
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public networks could adversely affect our ability to retain members.
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Our members transmit confidential information to us over public networks and the
unauthorized access of such information by third parties could harm our
reputation and significantly hinder our efforts to retain members. We rely on a
variety of security techniques and authentication technology licensed from third
parties to provide the security and authentication technology to effect secure
transmission of confidential information, including customer credit card
numbers. Advances in computer capabilities, new discoveries in the field of
cryptography or other developments may result in a compromise or breach of the
technology used by us to protect customer transaction data.
Problems with the performance and reliability of the Internet infrastructure
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could adversely affect the quality and reliability of the products and services
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we offer our members and advertisers.
- ------------------------------------
We depend significantly on the Internet infrastructure to deliver attractive,
reliable and timely email newsletters to our members. If Internet usage grows,
the Internet infrastructure may not be able to support the demands placed on it
by this growth, and its performance and reliability may decline. Among other
things, continued development of the Internet infrastructure will require a
reliable network backbone with necessary speed, data capacity and security.
Currently, there are regular failures of the Internet network infrastructure,
including outages and delays, and the frequency of these failures may increase
in the future. These failures may reduce the benefits of our products and
services to our members and undermine our advertising partners' and our members'
confidence in the Internet as a viable commercial medium. In addition, the
Internet could lose its viability as a commercial medium due to delays in the
development or adoption of new technology required to accommodate increased
levels of Internet activity or due to government regulation.
We may have to litigate to protect our intellectual property and other
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proprietary rights or to defend claims of third parties, and such litigation may
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subject us to significant liability and be time consuming and expensive.
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There is a substantial risk of litigation regarding intellectual property rights
in Internet-related businesses and legal standards relating to the validity,
enforceability and scope of protection of certain proprietary rights in
Internet-related businesses are uncertain and still evolving. We may have to
litigate in the future to enforce our intellectual property rights, protect our
trade secrets or defend ourselves against claims of violating the proprietary
rights of third parties. This litigation may subject us to significant liability
for damages, result in invalidation of our proprietary rights, be time-consuming
and expensive to defend, even if not meritorious, and result in the diversion of
management time and attention. Any of these factors could adversely affect our
business operations, financial results, condition and cash flows.
Changes in government regulation could decrease our revenue and increase our
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costs.
- -----
Laws applicable to Internet communications, on-line privacy, digital
advertising, data protection and direct marketing are becoming more prevalent.
Any legislation enacted or regulation issued could dampen the growth and
acceptance of the digital marketing industry in general and of our offerings in
particular. Existing and proposed legislation in the United States, Europe
(following the directive of the European Union) and Canada may impose limits on
our collection and use of certain kinds of information about our users.
Moreover, the laws governing the Internet remain largely unsettled, even in
areas where there has been some legislative action. It may take years to
determine whether, and how, existing laws such as those governing intellectual
property, data protection, libel and taxation apply to the Internet and Internet
advertising. In addition, the growth and development of Internet commerce may
prompt calls for more stringent consumer protection laws, both in the United
States and abroad, that may impose additional burdens on companies conducting
business over the Internet.
Our business, results of operations and financial condition could be materially
and adversely affected by the adoption or modification of laws or regulations
relating to our businesses.
Changes in laws relating to data collection and use practices and the privacy of
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Internet users and other individuals could harm our business.
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New limitations on the collection and use of information relating to Internet
users are currently being considered by legislatures and regulatory agencies in
the United States and internationally. We are unable to predict whether any
particular proposal will pass, or the nature of the limitations in those
proposals that do pass. Since many of the proposals are in their developmental
stages, we cannot yet determine the impact these may have on our businesses. In
addition, it is possible that changes to existing law, including new
interpretations of existing law, could have a material and adverse impact on our
business, financial condition and results of operations.
The following are examples of proposals currently being considered in the United
States and internationally:
Certain data protection officials in European countries are lobbying for the
notion that an IP address is personally identifiable information. In those
countries in which this opinion may prevail, the applicable national data
protection law could be interpreted to subject us to a more restrictive
regulatory regime. The cost of such compliance could be material, and we may not
be able to comply with the applicable national regulations in a timely or cost-
effective manner.
Legislation has been proposed to prohibit the sending of 'unsolicited commercial
email' or 'spam.' With respect to our own permission-based email service, we
believe we should not, as a matter of policy, be affected by this kind of
legislation. However, it is possible that some of the customers for whom we
deliver emails on their behalf may be affected by this kind of legislation and
we may be prohibited from continuing their service. And depending on the final
form and substance of any legislation passed, we may be required to change our
current practices or suffer an increase in the possibility of legal liability
for our practices.
These and other circumstances leading to changes in the existing law could have
a material and adverse impact on our business, financial condition and results
of operations.
PLAN OF DISTRIBUTION
We are registering all 1,252,198 shares on behalf of certain selling
stockholders. All of the shares were issued by us in connection with our
acquisition of Smartray Network, Inc. We will receive no proceeds from this
offering. The selling stockholders named in the table below or pledgees, donees,
transferees or other successors-in-interest selling shares received from a named
selling stockholder as a gift, partnership distribution or other non-sale
related transfer after the date of this prospectus (collectively, the "Selling
Stockholders") may sell the shares from time to time. The Selling Stockholders
will act independently of us in making decisions with respect to the timing,
manner and size of each sale. The sales may be made on one or more exchanges or
in the over-the-counter market or otherwise, at prices and at terms then
prevailing or at prices related to the then-current market price, or in
negotiated transactions. The Selling Stockholders may effect such transactions
by selling the shares to or through broker-dealers. The shares may be sold by
one or more of, or a combination of, the following:
. a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
. purchases by a broker-dealer as principal and resale by such broker-
dealer for its account pursuant to this prospectus;
. an exchange distribution in accordance with the rules of such
exchange;
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
. in privately negotiated transactions.
To the extent required, this prospectus may be amended or supplemented from
time to time to describe a specific plan of distribution. In effecting sales,
broker-dealers engaged by the Selling Stockholders may arrange for other broker-
dealers to participate in the resales.
The Selling Stockholders may enter into hedging transactions with broker-
dealers in connection with distributions of the shares or otherwise. In such
transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with Selling Stockholders. The
Selling Stockholders also may sell shares short and redeliver the shares to
close out such short positions. The Selling Stockholders may enter into option
or other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus. The Selling Stockholders also
may loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
shares so loaned, or upon a default the broker-dealer may sell the pledged
shares pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Stockholders. Broker-dealers
or agents may also receive compensation from the purchasers of the shares for
whom they act as agents or to whom they sell as principals, or both.
Compensation as to a particular broker-dealer might be in excess of customary
commissions and will be in amounts to be negotiated in connection with the sale.
Broker-dealers or agents and any other participating broker-dealers or the
Selling Stockholders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act of 1933, as amended, in connection with
sales of the shares. Accordingly, any such commission, discount or concession
received by them and any profit on the resale of the shares purchased by them
may be deemed to be underwriting discounts or commissions under the Securities
Act. Because Selling Stockholders may be deemed to be "underwriters" within the
17
meaning of Section 2(11) of the Securities Act, the Selling Stockholders will be
subject to the prospectus delivery requirements of the Securities Act. In
addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 promulgated under the Securities Act may be sold under
Rule 144 rather than pursuant to this prospectus. The Selling Stockholders have
not, to our knowledge, entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of their
shares. To our knowledge, there is no underwriter or coordinating broker acting
in connection with the proposed sale of shares by Selling Stockholders.
The shares may be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Securities Exchange Act of
1934, as amended, any person engaged in the distribution of the shares may not
simultaneously engage in market making activities with respect to our common
stock for a period of two business days prior to the commencement of such
distribution. In addition, each Selling Stockholder will be subject to
applicable provisions of the Exchange Act and the associated rules and
regulations under the Exchange Act, including Regulation M, which provisions may
limit the timing of purchases and sales of shares of our common stock by the
Selling Stockholders. We will make copies of this prospectus available to the
Selling Stockholders and have informed them of the need for delivery of copies
of this prospectus to purchasers at or prior to the time of any sale of the
shares.
We will file a supplement to this prospectus, if required, pursuant to Rule
424(b) under the Securities Act upon being notified by a Selling Stockholder
that any material arrangement has been entered into with a broker-dealer for the
sale of shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer. Such supplement will
disclose:
. the name of each such Selling Stockholder and of the participating
broker-dealer(s);
. the number of shares involved;
. the price at which such shares were sold;
. the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
. that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this
prospectus; and
. other facts material to the transaction.
In addition, upon being notified by a Selling Stockholder that a donee
or pledgee intends to sell more than 500 shares, we will file a supplement to
this prospectus.
We will be permitted to suspend the use of this prospectus for a period of
up to 90 days under certain circumstances relating to pending corporate
developments and similar events.
We will bear all costs, expenses and fees in connection with the
registration of the shares. The Selling Stockholders will bear all commissions
and discounts, if any, attributable to the sales of the shares. The Selling
Stockholders may agree to indemnify any broker-dealer or agent that participates
in transactions involving sales of the shares against certain liabilities,
including liabilities arising under the
18
Securities Act.
SELLING STOCKHOLDERS
The following table sets forth the number of shares beneficially owned
by each of the Selling Stockholders. None of the Selling Stockholders has had,
to our knowledge, a material relationship with us within the past three years
other than as a result of the ownership of the shares or our other securities or
as a result of their employment with us as of and/or after the date of the
closing of our acquisition of Smartray Network. No estimate can be given as to
the amount of shares that will be held by the Selling Stockholders after
completion of this offering because the Selling Stockholders may offer all, some
or none of the shares and because there currently are no agreements,
arrangements or understandings with respect to the sale of any of the shares.
The shares offered by this prospectus may be offered from time to time by the
Selling Stockholders named below during the period commencing on the date of
this prospectus and ending on September 13, 2001.
The information contained in the following table with respect to the
Selling Stockholders and the respective number of shares of common stock
beneficially owned by them and which may be sold by them under this prospectus
is provided to the best of our knowledge based on information available to us
through our stock records or provided to us by the Selling Stockholders. We have
not independently verified the information provided to us by the Selling
Stockholders. Each of the Selling Stockholders owns less then 1% of our
outstanding shares of common stock.
Number of Shares Number of Shares
Beneficially Registered for
Name Owned (1) (2) Sale Hereby
---- --------------- -----------
Julius J. Barnhardt............................ 1,919 1,919
David Blume.................................... 3,839 3,839
Steve Bozich and Stana Bozich.................. 3,379 3,379
James H. Carlisle.............................. 19,196 19,196
Charles Schwab fbo Richard Frankel IRA......... 3,839 3,839
Michael J. Christoi............................ 1,690 1,690
Max H. Cohen................................... 1,351 1,351
Ludovic Collin................................. 1,351 1,351
Connected Ventures, LLC (3).................... 72,589 72,589
Timothy E. Czarney and Nancy J. Czarney........ 1,919 1,919
Lawrence Daum.................................. 1,919 1,919
Luis S. Diaz-Albertini and
Lourdes C. Diaz-Albertini................. 3,379 3,379
DLMH Holdings LLC.............................. 10,139 10,139
Thomas P. Dougherty and Barbara Dougherty...... 3,379 3,379
Dale Drew Vermillion and
Margaret B. Vermillion.................... 6,759 6,759
Jill S. Duhl................................... 1,919 1,919
Luke Evans..................................... 959 959
Marian W. Ferrel............................... 11,597 (4) 959
Robert W. and Marian W. Ferrel................. 11,597 (4) 8,638
Robert Ferrel, Jr. and Elizabeth P. Ferrel..... 3,850 2,879
Susan Goodman.................................. 1,919 1,919
Paul C.P. Higgitt.............................. 6,759 6,759
Gary Howe and Collette Howe.................... 1,919 1,919
I3 Group, Inc.................................. 3,379 3,379
International Tool & Machine Company Ltd....... 27,037 27,037
Ardith D. Jones................................ 3,379 3,379
Ralph Jones and Wendy Jones.................... 959 959
Weston Jones................................... 1,919 1,919
George Kakouris and Elizabeth Kakouris......... 6,759 6,759
Chris Kemsley.................................. 3,839 3,839
Dr. Steven J. Kidder........................... 1,850 1,535
David Kidder................................... 110,764 110,764
Kistler Associates............................. 81,112 81,112
Larry Kopald................................... 4,799 4,799
Robert F. Leslie............................... 1,689 1,689
Marvin L. Schoffstall Revocable Trust.......... 43,100 (5) 6,718
19
Number of Shares Number of Shares
Beneficially Registered for
Name Owned (1) (2) Sale Hereby
---- --------------- -----------
Martin L. Schoffstall Revocable Trust
dated February 23, 1996.................... 93,299 (5) 56,917
Andrew J. McKelvey............................. 33,796 33,796
Edward W. McNabola............................. 3,379 3,379
MLS-I, LP...................................... 36,382 36,382
MRW Smartray, LLC.............................. 78,173 78,173
Christine V. Muhlke............................ 4,622 4,622
Joseph Nelson.................................. 3,839 3,839
Ryan Nitz...................................... 2,399 2,399
NP Ventures I LLC.............................. 6,759 6,759
Pauchin Limited................................ 1,983 1,983
Christ J. Pavlatos and Michael J. Pavlatos..... 3,379 3,379
Bradford G. Peters............................. 67,592 (6) 33,796
Brian Pfeifler................................. 13,518 13,518
Andrew Playford................................ 193,822 193,822
Quality InterConnect........................... 313 313
Richard S. Rock................................ 3,380 3,380
Guy Ross....................................... 959 959
Bradley E. Ruff................................ 3,379 3,379
Eugene Ruiz.................................... 13,518 13,518
Square Earth Ventures Fund I, LLC.............. 38,393 38,393
Jeffry Stewart................................. 3,839 3,839
Vernon Steward................................. 1,919 1,919
Bill Toliver................................... 1,919 1,919
Troy Tyler..................................... 264,913 264,913
Verbena Servicos e Investimentos S.A........... 27,037 27,037
Francisco X. Vilasuso.......................... 3,379 3,379
_________________________
(1) Information set forth in the table regarding shares owned by the Selling
Stockholders is provided to the best of our knowledge based on information
available to us through our stock records or provided to us by the Selling
Stockholders.
(2) Includes shares held in escrow for the benefit of the Selling Stockholders
to secure indemnification obligations of the Selling Stockholders under the
terms of the Agreement and Plan of Merger pursuant to which we acquired
Smartray Network. An aggregate of 62,610 shares were deposited in escrow on
a pro rata basis in accordance with the relative ownership percentages in
Smartray Network of the Selling Stockholders. To the extent that any of the
shares held in escrow are returned to us in satisfaction of the
indemnification obligations, the total number of shares initially owned by
the Selling Stockholders would be reduced according to their respective pro
rata interests in the shares held in escrow that are returned to us.
(3) Subsequent to the date of this prospectus, the shares held by Connected
Ventures, LLC may be distributed to Adrian Chua, Ronald Mahabir, Kevin
McCollum, N.R.J. Werrett, Chanond Ruangkritya, the Sachs Family Trust, Tan
Wee Cheng, Calvin Young Khoa Lee, Blake Olafson, Andrew Sachs, Rika
Nakazawa, Jayne Noh and/or Katie Scheding.
(4) Includes 10,638 shares owned jointly by Robert W. Ferrel and Marian W.
Ferrel, and 959 shares owned by Marian W. Ferrel.
(5) Includes 36,382 shares beneficially owned by MLS-I, LP. Martin L.
Schoffstall and Marvin L. Schoffstall are general partners of MLS-I, LP.
(6) Includes 33,796 shares owned by Andrew J. McKelvey. Mr. Peters serves as an
investment advisor to Mr. McKelvey, and may be deemed to beneficially own
these shares.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference room located at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information on the operation of the SEC's public
reference facilities by calling the SEC at 1-800-SEC-0330. Our SEC filings are
also available to the public at the SEC's web site at http://www.sec.gov.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Section 13a, 13(c), 14, or 15(d) of the Securities Exchange
Act of 1934, as amended, after the date of this prospectus and until our
offering is completed.
1. Our Annual Report on Form 10-K/A for the year ended December 31, 2000,
as filed on May 16, 2001;
2. Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2001;
3. Our Current Reports on Form 8-K filed on February 9, 2001 and May 11,
2001; and
4. The description of our common stock contained in our registration
statement on Form 8-A filed November 16, 1999, including any
amendments or reports filed for the purpose of updating such
descriptions.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
LifeMinders, Inc.
13530 Dulles Technology Drive, Suite 500
Herndon VA 20171-3414
Attention: Investor Relations
703-793-8210
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on the front of the document.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the Selling
Stockholders.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for us by
Brobeck, Phleger & Harrison LLP, Washington, D.C.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K/A for the year ended December 31,
2000, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
21
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We have not authorized any person to make a statement that differs from what is
in this prospectus. If any person does make a statement that differs from what
is in this prospectus, you should not rely on it. This prospectus is not an
offer to sell, nor is it seeking an offer to buy, these securities in any state
in which the offer or sale is not permitted. The information in this prospectus
is complete and accurate as of its date, but the information may change after
that date.
________________
TABLE OF CONTENTS
Page
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THE COMPANY 2
RISK FACTORS 2
PLAN OF DISTRIBUTION 17
SELLING STOCKHOLDERS 19
WHERE YOU CAN FIND MORE INFORMATION 20
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 21
USE OF PROCEEDS 21
LEGAL MATTERS 21
EXPERTS 21
TABLE OF CONTENTS 22
LIFEMINDERS, INC.
1,252,198 Shares
of Common Stock
-----------------------
PROSPECTUS
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May ____, 2001
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of Common Stock being registered. All amounts are estimates except the SEC
registration fee.
SEC registration fee $ 441.40
Legal fees and expenses 20,000.00
Accounting fees and expenses 20,000.00
Printing fees 5,000.00
Transfer agent fees 5,000.00
Miscellaneous fees and expenses 10,000.00
Total $60,441.40
Item 15. Indemnification of Directors and Officers.
Our Restated Certificate of Incorporation provides that our company
shall indemnify our current and former directors and officers, and may indemnify
our current and former employees and agents, against any and all liabilities and
expenses incurred in connection with their services in those capacities to the
maximum extent permitted by Delaware law.
The Delaware General Corporation Law (the "DGCL") provides that a
Delaware corporation has the power generally to indemnify its current and former
directors, officers, employees and other agents (each, a "Corporate Agent")
against expenses and liabilities (including amounts paid in settlement) in
connection with any proceeding involving such person by reason of his or her
being a Corporate Agent, other than a proceeding by or in the right of the
corporation, if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal proceeding, such person had no
reasonable cause to believe his or her conduct was unlawful.
In the case of an action brought by or in the right of the
corporation, indemnification of a Corporate Agent is permitted if such person
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation. However, no
indemnification is permitted in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation,
unless and only to the extent that the court in which such proceeding was
brought shall determine upon application that despite the adjudication of
liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to such indemnification.
To the extent that a Corporate Agent has been successful on the merits
or otherwise in the defense of such proceeding, whether or not by or in the
right of the corporation, or in the defense of any claim, issue or matter
therein, the corporation is required to indemnify such person for expenses in
connection therewith. Under the DGCL, the corporation may advance expenses
incurred by a Corporate Agent in connection with a proceeding, provided that the
Corporate
II-1
Agent undertakes to repay such amount if it shall ultimately be determined that
such person is not entitled to indemnification. Our Restated Certificate of
Incorporation requires us to advance expenses to any person entitled to
indemnification, provided that such person undertakes to repay the advancement
if it is determined in a final judicial decision from which there is no appeal
that such person is not entitled to indemnification.
The power to indemnify and advance the expenses under the DGCL does
not exclude other rights to which a Corporate Agent may be entitled to under the
certificate of incorporation, by laws, agreement, vote of stockholders or
disinterested directors or otherwise.
Our Restated Certificate of Incorporation permits us to secure
insurance on behalf of our directors, officers, employees and agents for any
expense, liability or loss incurred in such capacities, regardless of whether
the Restated Certificate of Incorporation or Delaware law would permit
indemnification against such expense, liability or loss. The purpose of these
provisions is to help us in retaining qualified individuals to serve as our
directors, officers, employees and agents by limiting their exposure to personal
liability for serving as such.
Item 16. Exhibits.
4 Form of common stock certificate*
5.1 Opinion of Brobeck, Phleger & Harrison LLP**
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants
23.2 Consent of Brobeck, Phleger & Harrison LLP (to be included in Exhibit 5.1)
24 Power of Attorney (included on signature page of this Registration
Statement)
- ------------------
* Incorporated by reference to Amendment No. 3 to the registrant's
Registration Statement on Form S-1, as filed with the SEC on November 17,
1999 (File No. 333-87785).
** To be filed by amendment.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) to include
any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; and (iii) to include
any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing
II-2
provisions, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act 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.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Herndon, State of Virginia, on May 16, 2001.
LIFEMINDERS, INC.
By: /s/ Jonathan B. Bulkeley
-------------------------------
Jonathan B. Bulkeley
Chairman of the Board and Chief
Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jonathan B. Bulkeley and Joseph S.
Grabias, and each of them, as his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his or her
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated:
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ Jonathan B. Bulkeley Chairman of the Board and Chief Executive
- ----------------------------------------- Officer
Jonathan B. Bulkeley (Principal Executive Officer) May 16, 2001
/s/ Joseph S. Grabias Vice President and Chief May 16, 2001
- ----------------------------------------- Financial Officer (Principal Financial
Joseph S. Grabias and Accounting Officer)
/s/ Allison Abraham Director May 16, 2001
- -----------------------------------------
Allison Abraham
/s/ B. Gene Riechers Director May 16, 2001
- -----------------------------------------
B. Gene Riechers
II-4
Director May , 2001
- -----------------------------------------
Douglas A. Lindgren
/s/ Philip D. Black Director May 16, 2001
- -----------------------------------------
Philip D. Black
Director May , 2001
- -----------------------------------------
Sunil Paul
II-5
EXHIBIT INDEX
Exhibit
Number Exhibit Title
- ------ -------------
4 Form of common stock certificate*
5.1 Opinion of Brobeck, Phleger & Harrison LLP**
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP (to be included in Exhibit
5.1)
24 Power of Attorney (included on page II-4 of this Registration
Statement)
- ---------------------
* Incorporated by reference to Amendment No. 3 to the registrant's
Registration Statement on Form S-1, as filed with the SEC on November
17, 1999 (File No. 333-87785).
** To be filed by amendment.