Prospectus Summary
Because this is only a summary, it does not contain all the information that may be important to you. You should read the entire prospectus, especially "Risk Factors" and the consolidated financial statements and notes, before deciding to invest in shares of our common stock. This prospectus assumes that the underwriters have not exercised the over-allotment option and that all shares of preferred stock have been converted into shares of common stock.
Our Company
Mpath develops, licenses and operates technologies that enable Internet sites to create and manage live communities characterized by real-time interaction among multiple simultaneous users. We also operate our own leading live communities serving over 2.6 million registered users with over 50,000 unique daily visitors generating over 100 minutes of average daily usage per visitor, as of January 1999. Our robust and scaleable technology solutions include graphics, text and sound interactivity, such as voice and music over the Internet, as well as integrated network and site management capabilities. We leverage our proprietary technology by licensing third party site operators software products and providing services for building live communities that may be self-managed or hosted by us on an outsourced basis. The real-time nature of live communities creates highly engaging environments that drive long usage times and strong user loyalty, demonstrated by frequent repeat visits. Our technologies offer Internet advertisers a differentiated opportunity to reach targeted audiences participating in absorbing, memorable activities and to do so with message formats that go beyond the simple "banner" ads common to the Web. We believe we thereby deliver high value solutions that significantly enhance the impact of a broad range of e-business sales and marketing efforts.
The Internet is an increasingly significant global interactive medium for communications, content and commerce. According to International Data Corporation ("IDC"), the number of Web users worldwide will grow from 97 million at the end of 1998 to 320 million by the year 2002. The Internet now represents the fastest growing form of media in history. As Internet accessibility, usage and functionality grow, the Internet is increasingly being used as a medium for direct communication as well as a rapidly growing sales and marketing channel. Jupiter Communications estimates that total online advertising revenue in the U.S. in 1997 was $940 million and expects this amount to grow to $4.4 billion by 2000. Although sites representative of the early stages of Internet commercialization provide valuable services, they did not initially enable Web users to interact or communicate with other individuals. As a result, people-to-people communities have emerged to satisfy user demand for interaction and communication. We believe an opportunity exists to create, operate and enable higher quality people-to-people communities characterized by real-time simultaneous interaction among multiple users, which we call live communities. Creating successful live communities presents numerous technological challenges, requiring high standards of scalability, performance, accessibility, ease-of-use, security and content management. Given the attractiveness live communities offer users, advertisers and e-businesses, and given the time and effort required to build such communities, we believe a significant opportunity exists for delivering proven online technologies and services that enable rapid creation and management of full-featured live communities on the Internet.
Through our Mpath Foundation business unit, we are a leading provider of enabling technology and services to a growing customer base of online companies seeking to create and operate live communities on the Internet. With its innovative POP.X technology system, Mpath Foundation offers its customers broad technological expertise in networks, operations, information systems, integration technologies, and the customer support capabilities necessary to deploy live community applications rapidly and manage large Internet communities. In addition, we provide fully-functional online game services through our first generation product and we provide log-in, account management, billing and database management services to companies operating online content through our Customer Management System service. Customers of Mpath Foundation consist of a growing base of leading online entertainment companies such as CSK Sega, Eidos Interactive, Electronic Arts, Fujitsu, GTECH, LG Internet, Macromedia and Sony.
Through our Live Communities business unit we have developed and operate two services, Mplayer.com and HearMe.com. In October 1996, we launched Mplayer.com, a premier live entertainment service on the Internet. The Mplayer.com service now consists of three active communities that are built around common interests and offers over 100 of the most popular online multi-participant games. Total usage time on Mplayer.com exceeds 200 million user minutes per month, as of January 1999, compared to 67 million user minutes as of January 1998. After less than two years of operations, Mplayer.com has become the number eleven Internet site in terms of total usage time per month according to our usage data. In January 1999, we launched HearMe.com, our second live community service. HearMe.com is currently comprised of seven live communities, making live audio interaction available to people whose interests extend beyond entertainment. We intend to build the HearMe.com services through relationships with Web sites that want to offer live audio communities to their members. We intend to continue to expand this business unit by creating additional services and live communities.
To maintain our leadership position in providing enabling technologies for companies seeking to build live communities on the Internet and in operating our own premier live communities, we have adopted the following strategies:
. expand our sales and marketing efforts;
. promote membership growth and usage;
. maintain and extend technology leadership and expertise;
. maximize value for advertisers and e-businesses; and . pursue multiple revenue streams.
We have assembled an impressive group of corporate partners, including Infoseek, XOOM.com, Intel, Yahoo!, Excite, Macromedia, GTECH, Sega and Cox Enterprises. These partners bring capital, brand recognition, promotional strength and technology expertise to our service offering and facilitate the growth of our overall business.
Our principal executive offices are located at 665 Clyde Avenue, Mountain View, California 94043. Our telephone number at that location is (650) 429- 3900. Information contained on our Web sites at http://www.mpath.com, http://www.mplayer.com and http://www.hearme.com do not constitute part of this prospectus.
The Offering
Common stock offered by Mpath...................... shares Common stock to be outstanding after the offering.. shares(1) Use of proceeds.................................... Working capital and general corporate purposes(2) Proposed Nasdaq National Market symbol............. MPTH (1) Based on the number of shares outstanding as of December 31, 1998. Includes the conversion of 10,416,615 shares of preferred stock outstanding at December 31, 1998 and the conversion of 3,035,306 shares of preferred stock we sold to certain investors in January 1999. Also includes the exercise and subsequent conversion to common stock of warrants for 77,422 shares of Series E Preferred Stock issued in January 1999 and assumed to be exercised immediately before completion of this offering. Excludes (a) shares issuable upon conversion of a promissory note, in the principal amount of $1,864,000 that is convertible upon a sale of us or this offering, (b) 1,673,410 shares subject to outstanding options under our 1995 Stock Option/Stock Issuance Plan, (c) 1,986,282 shares subject to outstanding warrants, (d) 2,500,000 shares reserved for issuance under our 1999 Stock Incentive Plan, (e) 300,000 shares reserved for issuance under our 1999 Directors' Stock Option Plan, (f) 750,000 shares reserved for issuance under our 1999 Employee Stock Purchase Plan. See "Management--Stock Plans" and the notes to our consolidated financial statements.
(2) Please see "How We Intend to Use the Proceeds from this Offering."
Summary Consolidated Financial Information (in thousands, except per share data) In the following summary consolidated financial data, the consolidated statement of operations data for the years ended December 31, 1996, 1997 and 1998 and consolidated balance sheet data as of December 31, 1998 are derived from and qualified in their entirety by the annual consolidated financial statements of Mpath. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Year Ended December 31, 1996 1997 1998
Statement of Operations Data:
Net revenues:
Live Communities.......................... $ 12 $ 686 $ 3,022
Foundation................................ 112 2,041 5,005
Total revenues.......................... 124 2,727 8,027
Cost of net revenues:
Live Communities.......................... 35 1,808 2,221
Foundation................................ 90 620 790
Total cost of revenues.................. 125 2,428 3,011
Gross profit (loss)................... (1) 299 5,016
Operating expenses.......................... 25,328 13,852 16,848
Loss from operations........................ (25,329) (13,553) (11,832)
Net loss.................................... $(25,039) $(13,648) $(11,945)
Basic and diluted net loss per share........ $ (3.99)
Weighted average shares outstanding used in
basic and diluted net loss per share
calculation................................ 2,992
December 31, 1998 1996 1997 1998
Selected Non-Financial Data: Total registered users..................... -- 317 2,340 Total user minutes per month............... -- 45,917 181,341
December 31, 1998
Pro Pro Forma
Actual Forma(1) As Adjusted(2)
Balance Sheet Data: Cash and cash equivalents................... $ 1,114 $ 20,158 Working capital............................. (2,067) (18,477) Property and equipment, net................. 1,878 1,878 Total assets................................ 6,177 25,221 Long term notes payable..................... 1,864 1,864 Stockholders' deficit (equity).............. (4,348) 16,196
(1) Reflects (i) the sale of 3,035,306 shares of preferred stock we sold to certain investors in January 1999 for an aggregate purchase price of $20.0 million, (ii) the proceeds of $510,985 from the exercise of warrants to purchase 77,422 shares of stock that will be exercised effective as of the closing of this offering (iii) the repayment of $1,500,000 in notes payable upon the sale of preferred stock in January 1999 and (iv) the conversion of all outstanding shares of preferred stock into shares of common stock upon the closing of this offering. (2) Reflects the receipt of the net proceeds from the sale of the shares of common stock sold in this offering at an assumed initial public offering price of $ per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses. Please see "How We Intend to Use the Proceeds from this Offering" and "Capitalization."
Unless otherwise indicated, all information in this prospectus assumes (1) the sale of 3,035,306 shares of preferred stock in January 1999, (2) the exercise and subsequent conversion into common stock of warrants to purchase 77,422 shares of preferred stock, (3) the repayment of $1,500,000 in notes payable upon the sale of preferred stock in January 1999 and (4) the conversion of each outstanding share of preferred stock into one share of common stock, all of which will occur on or before the closing of this offering. In addition, all information in this prospectus assumes no exercise of the Underwriters' over-allotment option.