Prospectus Summary
You should read the entire prospectus carefully, including the financial data and related notes, before making an investment decision.
INTERSHOP Communications We are one of the world's leading providers of electronic commerce software. Electronic commerce software applications are software applications that help businesses market and sell their products and services over the Internet. Our products are targeted toward large businesses, both those that sell their own products and services online and those that assist other businesses in selling their products and services online. Our products can be used to address entry- level electronic commerce storefronts, as well as more advanced electronic commerce business models such as online marketplaces. We market our software applications and professional services to large businesses that have the ability to manage their own electronic commerce sites. We also market our products and services to application service providers, or ASPs. ASPs are companies that, with the help of our software applications, manage electronic commerce sites for the growing number of small- and medium-sized businesses seeking to establish a business presence on the Internet. Businesses also use our software applications to enable sellers of products and services by providing a forum for bringing buyers and sellers together online. By offering products that provide solutions to a range of distinct business models, we can meet the needs of our customers as they evolve from entry-level to more sophisticated electronic commerce operations while remaining on our software platform.
The growth of the Internet has fueled the demand for electronic commerce technologies. These technologies support a wide range of online business functions, from enabling transactions to providing marketing data about customers. According to International Data Corporation, or IDC, the market for Internet commerce applications is expected to grow from $1.7 billion in 1999 to $13.2 billion by 2003.
Many existing electronic commerce software packages provided by our competitors successfully display products and process orders. However, few software packages can combine these basic functions with the ability to integrate with existing business systems, to be deployed rapidly and to provide intelligent merchandising capabilities, such as customer profiling, shopping lists and cross-selling that allow companies to provide their online customers with an individualized shopping experience. We believe that a large market opportunity exists for a solution such as ours that meets the extensive requirements of businesses developing an online presence.
We intend to continue to strengthen our position as a leading provider of electronic commerce software applications enabling businesses to sell products and services over the Internet. Key elements of our strategy include:
. Extending our leadership in the electronic commerce software market;
. Expanding our leadership position in providing software to ASPs;
. Providing solutions for a wide range of electronic commerce business models;
. Continuing to expand our presence in the enterprise market by increasing our sales and marketing capabilities;
. Strengthening our network of sales and technology partners; and . Leveraging our global presence to capitalize on the growth in the electronic commerce market.
We have operations in the United States and Europe and a worldwide network of over 600 channel partners, including PricewaterhouseCoopers, Deutsche Telekom, Unisys, Northern Telecom and MindSpring. Our global presence allows us to work closely with large businesses and ASPs that operate internationally. In 1998, customers using our products established over 5,500 new electronic commerce sites. According to IDC, this placed us in the top three companies cited in the survey in terms of the number of sites established. By December 31, 1999, over 10,000 electronic commerce sites had been licensed to be deployed on our products worldwide by ASPs and enterprises such as Bosch, Canon, Hewlett Packard, MindSpring, Northern Telecom and US West.
We began doing business in 1992 as NetConsult Computersysteme GmbH. In April 1998, we incorporated as a German stock corporation. We are a holding company and own seven subsidiaries that conduct all of our worldwide operations. In 1999, we had net a loss of $18.4 million, and we had an accumulated net deficit of $45.4 million as of December 31, 1999.
Our operational headquarters are located at 600 Townsend Street, Suite 500 West, San Francisco, CA 94103, and our telephone number at that address is (415) 229-0100. Our principal executive offices are located at Amsinckstrabe 57, 20097 Hamburg, Germany. Our website is located at www.intershop.com. The information on our website is not part of this prospectus.
"INTERSHOP" is a registered trademark of our company. This prospectus contains product names and trademarks of our company and other organizations.
The Offering
ADSs offered........................................ 4,350,000 ADSs representing 435,000 ordinary shares Ordinary shares that will be outstanding after this 17,313,104 ordinary shares, which is offering........................................... equivalent to 173,131,040 ADSs Use of proceeds..................................... For working capital and general corporate purposes, including market expansion and financing potential acquisitions. See "Use of Proceeds."
Proposed Nasdaq National Market symbol.............. ISHP Summary Consolidated Financial Data (in thousands, except per share data) The following table summarizes the statement of operations and balance sheet data for our business and our predecessor. The following data should be read in conjunction with "Selected Consolidated Financial Data," "Management Discussion and Analysis of Financial Conditions and Results of Operations" and other financial statements within this prospectus. For convenience only certain euro figures have been translated into U.S. dollars at the rate of (Euro)1.00 = $1.00, the noon buying rate in New York City for cable transfers in foreign currencies certified by the Federal Reserve Bank of New York for customs purposes on December 31, 1999. All prior year balances have been restated from Deutsche marks into euros using the exchange rate as of January 1, 1999. Prior to 1997, there was no common stock outstanding as we were organized as INTERSHOP Communications GmbH, which is a limited liability corporation. Accordingly, no earnings per share have been presented for periods prior to 1997. Financial data as of and for the years ended December 31, 1995 and 1996 represent information for INTERSHOP Communications GmbH.
For the Year Ended December 31,
1995 1996 1997 1998 1999 1999
(Euro) (Euro) (Euro) (Euro) (Euro) US$
(unaudited)
Consolidated Statement of Operations Data: Revenues.................. 885 471 5,035 17,872 46,266 46,266 Gross profit.............. 217 (97) 2,348 12,364 33,015 33,015 Operating expenses........ 234 2,157 9,165 31,331 53,092 53,092 Operating loss............ (17) (2,254) (6,817) (18,967) (20,077) (20,077) Net loss.................. (3) (2,320) (7,015) (17,308) (18,389) (18,389) Basic and diluted net loss per AG share attributable to common shareholders... (1.19) (1.44) (0.97) (0.97) Basic and diluted net loss per American Depositary Share (ADS) attributable to common shareholders... (0.12) (0.14) (0.10) (0.10) Shares used in per AG share calculations....... 6,034 12,145 18,948 18,948 Shares used in per ADS calculations............. 60,340 121,450 189,480 189,480
As of December 31, 1999 Adjusted for the 1995 1996 1997 1998 Actual Actual offering (Euro) (Euro) (Euro) (Euro) (Euro) US$ (Euro) (unaudited)
Consolidated Balance Sheet Data: Cash and cash equivalents............ 57 214 5,058 34,185 12,065 12,065 284,728 Working capital......... (56) 224 (82) 31,709 10,020 10,020 282,683 Total assets............ 283 1,586 10,731 47,221 53,789 53,789 326,452 Long-term liabilities... 3 1,713 6,945 1,978 240 240 240 Accumulated deficit..... (5) (2,324) (9,489) (27,017) (45,406) (45,406) (45,406) Total shareholders' equity................. 47 (2,313) (9,593) 34,225 22,864 22,864 295,527