S-1 summary and Link to the entire S-1 for those that want to read...
sec.gov
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, all share and per
share data and information in this Prospectus (i) gives retroactive effect to
the 100,000-for-one split of the Common Stock effected in June 1998, (ii)
assumes a reverse split of approximately 0.73298-for-one of the Company's
Common Stock that, subject to adjustment, will be effected prior to the
Offering Closing Date and (iii) assumes no exercise of the Underwriters' over-
allotment option. This Prospectus contains forward-looking statements that
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in "Risk Factors."
THE COMPANY
uBid operates an online auction for excess merchandise, offering close-out
and refurbished products to consumers and small to medium-sized businesses. The
Company believes that its online auction represents an exciting sales format
for users that leverages the interactive nature of the Internet. The Company's
Internet auctions feature a rotating selection of brand name computer, consumer
electronics and home and leisure products which typically sell at significant
discounts to prices found at traditional retailers. uBid currently runs
auctions seven days a week, offering on the average over 1,000 total items in
each of its auctions. From its first auction in December 1997 through September
30, 1998, the Company auctioned over 138,000 merchandise units, registered over
120,000 users and recorded more than eight million visits to its Website. In
the month of September alone, the Company auctioned approximately 38,000
merchandise units, registered over 21,000 users and recorded approximately 1.9
million visits to its Website.
The Company's net revenues grew from $157,000 in the month of January 1998 to
$5.8 million in September 1998 and $24.1 million for the nine months ended
September 30, 1998. The Company had a net loss of approximately $3.0 million
and an accumulated deficit of approximately $3.3 million for the nine months
ended September 30, 1998 and as of September 30, 1998, respectively.
The Company operates in the rapidly growing Internet commerce industry.
Jupiter Communications estimates that U.S. retail consumer purchases of goods
and services over the Internet will increase from $2.6 billion in 1997 to $37.5
billion in 2002. The single largest online retail category in the U.S. is
projected to be computers and consumer electronics, which is forecast to grow
from $836 million in 1997 to $10.5 billion by the year 2002. The personal
computer and consumer electronics markets are characterized by significant
quantities of excess merchandise due to extremely short product life cycles and
the prevalence of returned items through the consumer retail channel. Because
of the highly fragmented and relatively undeveloped liquidator channel, prices
received by vendors for excess goods tend to be highly variable. The Company
estimates that the value of such products exceeded $4 billion in 1997 in the
U.S. alone.
uBid's online auctions provide an ideal distribution channel for
unpredictable, odd-lot quantities of close-out and refurbished goods. The
frequency of the Company's auctions and its ability to continuously add new
items allow vendors to dispose of inventory quickly to minimize the risk of
price erosion. Online sales also allow vendors to liquidate excess merchandise
directly to a nationwide audience, without cannibalizing their primary
distribution channels. Furthermore, uBid offers customers a unique retail
experience--the opportunity to set their own prices on popular, brand name
products with the convenience of shopping 24 hours a day, seven days a week.
The element of gamesmanship, combined with an ever-changing merchandise mix,
entices customers to participate in the auction in hopes of "hitting the
jackpot" and winning a bargain.
The Company employs sophisticated merchandising techniques to manage the
auction process, which allows the Company to maximize revenues on products put
into auction. uBid's sophisticated auction management methodology capitalizes
on the Company's direct marketing and merchandising expertise to help predict
the level of customer traffic to the Website, the appropriate product mix of
each auction and the ultimate price realized on each product.
3
<PAGE>
The Company has designed its online auctions to offer a superior customer
experience and to encourage repeat visits by customers and potential customers.
The Company believes it offers a consistently superior experience to its
customers through an entertaining and fast auction process, tight control of
the order process and a high level of customer support. Approximately 90% of
the products shipped from the Company's warehouse are shipped the next business
day after an auction closes. In addition, uBid has established multiple
channels for communicating with customers before and after the sale, including
telephone, e-mail and online support. The Company has also incorporated other
features to encourage repeat visits, including a personalized page with a
user's bidding history. Repeat customers accounted for approximately 68% of
customer orders for the three months ended September 30, 1998.
In the electronic commerce industry, a strong brand is critical to creating a
high level of vendor awareness and attracting customer traffic. Accordingly,
the Company's strategy is to aggressively increase its visibility and brand
recognition through a variety of marketing and promotional efforts.
Specifically, the Company intends to increase points of access by establishing
relationships with other online companies similar to its existing relationships
with America Online, Inc. ("AOL"), CNET, Inc. ("CNET") and Wired Digital, Inc.
("Wired Digital").
The Company obtains merchandise directly from computer, consumer electronics
and home and leisure products manufacturers and indirectly through other
vendors, such as retailers and distributors. Currently, this merchandise is
sourced from over 100 vendors. uBid's merchandise has included brands such as
AST, AT&T, Aiwa, Apple, Canon, Casio, Compaq, Dell, Gateway, Hewlett-Packard,
IBM, JVC, Lexmark, Micron, NEC, Panasonic, Seagate, Sony, Toshiba and Uniden.
The Company is currently a wholly-owned, indirect subsidiary of the Parent.
The Company is a Delaware corporation with its principal executive offices
located at 2525 Busse Road, Elk Grove Village, IL 60007, and its telephone
number at that address is (847) 860-5000. The Company maintains a Website at
www.ubid.com. The information contained in the Company's Website is not, and
shall not be deemed to be, a part of this Prospectus.
SEPARATION FROM THE PARENT
In June 1998, the Parent announced its intention to separate the Internet
auction business of the Company and the associated assets and liabilities of
such Internet auction business and operations from the Parent's other
businesses and operations (the "Separation"). The Parent also announced its
intention to consummate the Offering and to complete the Separation by the
distribution to the Parent's stockholders in no event prior to 180 days after
consummation of the Offering, subject to certain conditions and consents, of
all of the Parent's remaining interest in the Company (the "Distribution"). For
a period from the Offering Closing Date until three years from the date of the
Distribution, the Company will be subject to restrictions on its ability to
issue additional equity securities (but not debt securities), and these
restrictions may impede the ability of the Company to raise necessary capital
or to complete acquisitions using its equity securities. See "Risk Factors--Tax
Indemnification Obligation; Limitations on Issuances of Equity Securities
Following the Distribution" and "--Limited Ability to Issue Common Stock Prior
to Distribution" and "Separation from the Parent--Conditions to the
Distribution."
The Company and the Parent have entered into or will enter into, on or prior
to the consummation of the Offering, certain agreements providing for the
Separation and Distribution and governing various interim and ongoing
relationships between the companies after completion of the Offering and the
Distribution, including an agreement between the Company and the Parent
providing for the purchase by the Company of certain services from the Parent.
The Company has amounts due to the Parent for working capital and fixed asset
purchases (the "Payable"), which equaled approximately $3.7 million as of
September 30, 1998. See "Separation from the Parent" and "Certain
Transactions."
On the Offering Closing Date, the Parent will own approximately 82.3% of the
outstanding shares of Common Stock (80.1% if the Underwriters exercise their
over-allotment option in full). See "Description of Capital Stock."
4
<PAGE>
|
