Summary
You should read the following summary together with the more detailed information in this prospectus, including risk factors, regarding our company and the common stock being sold in this offering.
Digimarc Corporation
Digimarc is a leading provider of patented digital watermarking technologies that allow imperceptible digital code to be embedded in traditional and digital content, including movies, photographic or artistic images and valuable documents such as financial instruments, passports and event tickets. Our technologies enable new communications capabilities related to protecting copyrights, deterring counterfeiting or piracy and, for the first time, directly linking physical content with the Internet.
Digimarc has been awarded a multi-year contract by a consortium of leading central banks to develop a system to deter the use of personal computers in the counterfeiting of currency. We are also using our technologies to develop products we call Paper-as-Portal applications, the first of which, named b'doop, is planned for release in the second half of 2000. This application is intended to enable imperceptible digital code to be embedded within print media, such as magazine advertisements or articles, direct mail coupons or catalogs and bank cards or business cards. When recognized by PC cameras enabled by our patented reader technology, the code will automatically launch the user to the specific Internet destination chosen by the producer of the printed content. In this way, we believe that b'doop will deliver more efficient Internet navigation and access to consumers and more effective means for print advertisers to link readers directly to a targeted e-commerce point- of-sale.
Recent advances in multimedia, digital imaging and printing technologies have given computer users at every level of sophistication access to highly advanced image manipulation and reproduction capabilities. This access has led to new challenges in the areas of document security and counterfeiting and piracy deterrence by allowing virtually any user to create expert-quality copies of traditional and digital content. At the same time, advances in technology have introduced millions of people to the Internet. The growth of the Internet has allowed the Web to become a global distribution channel for unauthorized reproductions of proprietary content. At the same time, the increasing volume of Internet content and number of Web destinations has made navigation and information retrieval more challenging. Despite the availability of numerous search methods, research indicates that users often experience difficulty when retrieving information on desired products or services, causing a loss of potential e-commerce revenue.
Applications of Digimarc's technologies will address both the security and the access problems that are increasingly arising as the world grows more dependent on multimedia computing and the Internet. Our core goals are to establish our technologies as basic components of industry standards for controlling the use or consumption of visual content and to establish our Paper-as-Portal applications as a leading means of Internet access and navigation. We intend to achieve this objective by driving proliferation of our reader technology as a resident application on personal computers and related devices, and to this end we have executed letters of intent with leading PC camera vendors such as 3Com and Logitech. We are simultaneously developing other new applications for our digital watermarking technologies. We will focus on expansion of our reader technology installed base as a means of driving demand for our applications and, in a complementary fashion, will continue developing compelling applications in order to push proliferation of our reader technology. We intend to maintain our intellectual property leadership in digital watermarking technologies through continued innovation and rigorous intellectual property development and protection. By broadly licensing our technologies for deterring copyright infringement, counterfeiting and piracy, and for linking digital content with the physical world, we intend to build long-term demand for our technologies and promote public awareness of our brand.
We believe that our applications offer strong advantages over other image commerce and secure documents approaches because our digital watermarks are imperceptible, persistent and format-independent, allowing them to operate in both analog and digital environments. Our applications are compatible with a wide variety of Internet, computing and communications solutions because virtually any visual content can contain our imperceptible digital watermarking codes.
We were incorporated in Oregon on January 3, 1995, and we intend to reincorporate in Delaware prior to the closing of this offering. Our principal executive offices are located at One Centerpointe Drive, Suite 500, Lake Oswego, Oregon 97035-8615, and our telephone number is (503) 968-2908. Our Web site is located at www.digimarc.com. Information contained on our Web site does not constitute part of this prospectus.
Unless otherwise indicated, the information in this prospectus assumes the automatic conversion of all outstanding shares of preferred stock into 11,169,573 shares of common stock effective automatically upon the closing of this offering and no exercise by the underwriters of their option to purchase additional shares of common stock.
The Offering
Common stock offered............................ shares Common stock to be outstanding after this offering....................................... shares Use of proceeds................................. For repayment of indebtedness and for general corporate purposes, including working capital, expansion of our sales and marketing efforts, product development, expansion of our customer support organization and capital expenditures. See "Use of Proceeds." Proposed Nasdaq National Market Symbol.......... DMRC The number of shares of common stock to be outstanding after this offering is based on the number of shares outstanding as of June 30, 1999 and excludes:
. 320,000 shares of common stock issuable upon conversion of our Series D-X preferred stock;
. 21,565 shares of common stock issued subsequent to June 30, 1999 upon exercise of options;
. 4,431,923 shares of common stock issuable upon exercise of options outstanding as of September 20, 1999 at a weighted average exercise price of $0.58 per share; and . 4,624,213 shares of common stock reserved for future issuance under our 1995 stock incentive plan, our 1999 stock incentive plan and our 1999 employee stock purchase plan.
Summary Financial Data (in thousands, except share and per share data) The pro forma basic and diluted net loss per share data in the statement of operations data below and the pro forma data in the balance sheet data below reflect the automatic conversion of all outstanding preferred stock into common stock effective upon the closing of this offering. The pro forma as adjusted data reflects adjustments to the pro forma data to show our receipt of the estimated net proceeds of $ from the sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses.
Six Months Ended
Period from June 30,
January 3, 1995 Year Ended December 31, (unaudited)
(inception) to -------------------------------- ---------------------
December 31, 1995 1996 1997 1998 1998 1999
Statement of Operations Data: Total revenue........... $-- $ 236 $ 186 $ 984 $ 407 $2,055 Gross margin............ -- 229 60 (596) (122) 1,120 Total operating expenses............... 840 1,900 3,999 2,890 1,519 1,669 Operating loss.......... (840) (1,671) (3,939) (3,486) (1,641) (549) Net loss................ $ (874) $(1,578) $(3,979) $(3,442) $(1,609) $ (577) Basic and diluted net loss per share......... $(0.50) $ (0.35) $ (0.94) $ (0.75) $ (0.35) $ (0.12) Weighted average shares used in basic and diluted net loss per share.................. 1,738,956 4,453,038 4,240,955 4,576,884 4,564,061 4,657,874 Pro forma basic and diluted net loss per share.................. $ (0.27) $ (0.04) Weighted average shares used in pro forma basic and diluted net loss per share.............. 12,894,457 13,003,580 June 30, 1999 (unaudited) Pro Forma Actual Pro Forma As Adjusted
Balance Sheet Data: Cash and cash equivalents........................ $ 6,169 $6,169 $ Working capital.................................. 6,607 6,607 Total assets..................................... 8,623 8,623 Redeemable convertible preferred stock........... 16,476 -- Total stockholders' equity (deficit)............. (9,634) 6,842