Prospectus Summary
This summary highlights certain information from this prospectus. It has been provided for your convenience only, and you should not consider it to be complete. To better understand this offering, you should read this entire prospectus carefully.
Except as otherwise indicated, all references to the number of outstanding shares of Razorfish's Class A Common Stock (the "Common Stock") do not include the number of shares that Razorfish will issue if the representatives of the underwriters exercise their over-allotment option in full. In addition, the information in this prospectus assumes that the initial public offering price will be $ per share.
The Company
Razorfish is a leading-edge international digital communications solutions provider. These digital communications solutions help our clients increase sales, improve communications and create brand identities. Our solutions have included (1) a re-designed on-line trading system for Charles Schwab, (2) an enhanced on-line brand identity for IBM's RS/6000 product line, (3) a user- interface and front-end application for Road Runner, the high speed modem service that is owned by ServiceCo, a joint venture among Time Warner, MediaOne, Microsoft, Compaq and Advance Newhouse, and (4) a unique interface design and user experience for theglobe.com. We offer an integrated package of services consisting of strategic consulting, design of information architectures and end-user interfaces and creation and customization of software necessary to implement our digital communications solutions. We primarily use Internet-based technologies to create digital communications solutions for the World Wide Web. However, our solutions will increasingly incorporate additional communications technologies, such as wireless, satellite and broadband communications, for use with a variety of digital devices, including mobile phones, pagers and personal digital assistants.
With the growth in the use of the Internet, companies are increasingly seeking to improve their business practices through Internet-based digital communications solutions. Forrester Research, Inc. projects that the size of the worldwide Internet professional services market will grow from $2.4 billion in 1997 to $32.8 billion in 2002, a compound annual growth rate of 68.7%.
As the informational requirements of companies have become more complex, organizations have required a broader range of information technology ("IT") services including strategy, architecture design, application development and systems integration. As a result, numerous firms are active in the IT services market; few, however, offer the creativity, breadth of services and technical expertise necessary to fully address an organization's needs. In addition, because the IT services market is fragmented by the cultural and language differences among countries, firms that lack a presence and expertise in important local markets are unable to compete effectively in those markets. The growing demand for creative digital communications solutions has led to a significant market opportunity for firms such as Razorfish that combine an international presence with local expertise and provide an integrated package of services.
We have grown rapidly since our inception in 1995. In 1998, we expanded our geographic presence by acquiring five companies. In January 1999, we acquired Spray for 50% of our Common Stock on a fully-diluted basis (after giving effect to this acquisition). Spray had $11.0 million in revenues for the nine months ended September 30, 1998. We currently have offices in New York, San Francisco, Los Angeles, London, Stockholm, Oslo, Helsinki and Hamburg.
Our principal executive office is located at 107 Grand Street, 3rd Floor, New York, New York 10013, and our telephone number is (212) 966-5960. We maintain a site on the World Wide Web at www.razorfish.com which is not part of this prospectus. We are currently incorporated in New York, but we intend to reincorporate in Delaware prior to the consummation of this offering and to amend our certificate of incorporation.
The Offering
Common Stock offered by Razorfish............... shares Common Stock to be outstanding after this offering................ shares(1)(2) Use of proceeds.......... General corporate purposes, including expanding our human resources department and hiring qualified personnel, developing a formal sales and marketing department, strategic acquisitions, international expansion, technical upgrades of internal systems and working capital requirements. See "Use of Proceeds."
Proposed Nasdaq National Market Symbol........... " " (1) Does not include shares of Common Stock that will be offered if the underwriters' over-allotment option is exercised in full.
(2) Based on shares of Common Stock outstanding at September 30, 1998. Does not include 2,345,096 shares of Common Stock reserved for issuance pursuant to Razorfish's 1997 Stock Option and Incentive Plan (the "1997 Stock Option Plan") of which options to purchase 1,801,928 shares were outstanding and options to purchase 746,575 shares were exercisable. See "Capitalization" and "Management--Employee Benefit Plans" for a more complete description of the capitalization of Razorfish and our employee benefit plans.
Summary Condensed Consolidated and Pro Forma Financial Information The following table presents summary condensed consolidated and pro forma financial information with respect to Razorfish and has been derived from (1) the audited financial statements of Razorfish for the three years ended December 31, 1997, the audited consolidated financial statements of Razorfish as of September 30, 1998 and for the nine months ended September 30, 1998 and the unaudited financial statements of Razorfish for the nine months ended September 30, 1997 and (2) the unaudited pro forma consolidated financial statements included elsewhere in this prospectus that give effect to the Acquisitions, including Spray, the exercise of the 10% Option (each as we have defined elsewhere in this prospectus) and this offering. The summary financial information for Razorfish for the nine months ended September 30, 1997 is derived from unaudited financial statements that, in the opinion of management, include all adjustments necessary for the fair presentation of such information. Results from interim periods are not necessarily indicative of the results for the full year. The information set forth below should be read in conjunction with the consolidated financial statements and notes thereto, the pro forma consolidated financial statements and the notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.
Actual Pro forma
Nine months Nine months
Year ended ended ended
December 31, September 30, Year ended September 30,
------------------- -------------- December 31, ---------------
1995 1996 1997 1997 1998 1997 1997 1998
(in thousands)
Statement of Operations Data: Revenues................ $312 $1,218 $3,618 $1,836 $9,118 $17,895 $11,565 $21,808 Direct salaries and costs.................. 107 895 1,906 1,268 5,090 14,972 10,250 16,208 Gross profit............ 205 323 1,712 568 4,027 2,922 1,314 5,599 Operating expenses...... 158 629 1,051 738 2,323 4,591 3,252 5,253 Amortization of good- will................... -- -- -- -- 65 3,123 1,916 1,573 Non-cash compensation expense................ -- -- 79 53 2,141 79 53 2,141 Net income (loss)....... 36 (254) 297 (125) (394) (4,207)
September 30, 1998 Pro forma Actual as adjusted
Balance Sheet Data: Cash and cash equivalents................................... $ 192 $ Total assets................................................ 10,621 Total debt.................................................. 4,859 Stockholders' equity........................................ 2,457