Summary
This summary may not contain all of the information that is important to you. You should read the entire prospectus, including "Risk Factors" and the financial statements and related notes, before deciding to invest in our common stock.
Our Company
We are a leading Internet-based local merchant network interconnecting consumers, merchants and national advertisers. We connect consumers searching for specific products and services with the merchants that provide them. We offer our users local information about people and businesses across the United States, including listings of over 96 million individuals, 12 million businesses and four million e-mail addresses. Our online network gives merchants a fast, easy, cost-effective way to get their businesses represented online and facilitates commerce by connecting them with consumers. We provide an effective online lead generation engine for these local merchants and for national advertisers that reaches consumers motivated to buy products and services in specific geographic locations.
We entered into a strategic relationship with CBS in June 1999 providing for $95.0 million in advertising and promotion through 2006 across CBS media properties, including television, radio and outdoor advertising. Our strategic alliance with CBS positions us to build our brand, attract consumers and increase the credibility of our service with local merchants. In addition to our CBS relationship, we reach a large base of consumers and local merchants through our relationships with financial services, telecommunications and newspaper companies and Internet destinations. Through these relationships, we aggregate new merchants into our network and increase the number of consumers using our Web site.
The number of Internet users worldwide is projected to increase to 500 million by the end of 2003 from approximately 195 million in 1999, according to International Data Corporation. According to Forrester Research, total online commerce is projected to increase to $42.0 billion in 2002 from approximately $7.3 billion in 1998. Forrester Research also estimates that, along with this growth of online commerce, total online advertising will increase to $10.4 billion in 2003 from approximately $1.3 billion in 1998.
Historically, consumers have used printed materials such as yellow pages directories and maps to identify and seek out businesses that provide specific products and services in their area. These sources, however, typically cover narrowly defined geographic areas and are updated only once per year. Recently, consumers have turned to online directories as an alternative source of local information. Consumers, however, continue to encounter difficulties obtaining the relevant information they seek because of the volume and fragmented nature of online local information.
Local merchants are increasingly recognizing the need to establish an online presence to remain competitive. According to Forrester Research, the number of small businesses with a Web presence is projected to increase to 4.2 million by the end of 2003 from approximately 2.1 million in 1999. Forrester Research also predicts local online commerce will increase to $6.1 billion in 2003 from approximately $680 million in 1998. Creating an online presence, however, is often a difficult and costly task for small businesses. Local merchants may struggle with the financial, technical and administrative challenges associated with creating, maintaining and promoting an effective Web site.
We have created a single online destination, Switchboard.com, that satisfies consumers' need for easily accessible detailed local information and merchants' need to establish and maintain an online presence. Switchboard.com attracted approximately three million unique visitors in September 1999 according to Media Metrix and we have over 2.4 million registered users. Additionally, our users viewed over 55 million pages in August 1999.
We provide the following benefits to consumers:
Extensive information base. We provide our users with links to a growing base of over 350,000 business Web sites. This provides our users with a powerful tool to research and compare competitive products and services and to ultimately conduct business, both online and offline.
Powerful search capability. Our proprietary directory architecture combined with our intuitive screen display allows search results to be delivered quickly with fewer page views. Search results can be organized alphabetically or by geographic proximity.
Integrated maps and driving directions. Our Maps On Us maps and driving directions technology is fully integrated with our directory services. Once a consumer identifies a desired address, Maps On Us allows the consumer to plot the most effective route to that destination, including intermediate stopping points.
We also provide the following benefits to merchants and national advertisers:
Fast cost-effective Web presence. We quickly and cost-effectively develop and deploy multi-page Web sites for local merchants while eliminating the associated technical, administrative and financial challenges.
Participation in a leading online local merchant network. We provide local merchants with access to our nationally recognized, highly trafficked merchant network, Switchboard.com, which provides merchants with exposure to customers beyond their immediate local area.
Lead generation. Our online network attracts self-qualified consumers and helps to connect them with our merchant customers.
Customized advertising options for national advertisers. We offer national advertisers a wide range of customized advertising options designed to generate leads at the local or national level.
We intend to be the leading Internet-based local merchant network by:
. building our brand;
. expanding our merchant aggregation programs;
. creating specialized vertical directories;
. extending our technology leadership; and . expanding our operations internationally.
Our Offices
We were incorporated in Delaware on April 18, 1996. We are a majority-owned subsidiary of Banyan Systems Incorporated, or Banyan Worldwide. Our principal executive offices are located at 115 Flanders Road, Westboro, Massachusetts 01581, and our telephone number at that location is (508) 898-1122. Our Web site address is www.Switchboard.com. The information on our Web site is not incorporated by reference into this prospectus and should not be considered to be a part of this prospectus.
The Offering
Common stock offered by Switchboard................. shares Common stock to be outstanding after this offering.. shares Use of proceeds..................................... For working capital and general corporate purposes. Please see "Use of Proceeds." Proposed Nasdaq National Market symbol.............. SWBD The number of shares of our common stock that will be outstanding after this offering is based on 18,128,477 shares outstanding on June 30, 1999. This number includes one share issuable upon the conversion of our one outstanding share of series E special voting preferred stock, which will not convert automatically upon the closing of this offering, and the following shares issuable upon the conversion of series A, series C and series D convertible preferred stock, which will convert automatically upon the closing of this offering:
. 750,000 shares issuable upon the conversion of 750,000 shares of series A convertible preferred stock;
. 2,655,916 shares issuable upon the conversion of 2,655,916 shares of series C convertible preferred stock; and . 87,345 shares issuable upon the conversion of 87,345 shares of series D convertible preferred stock.
The number of shares outstanding excludes:
. 1,393,825 shares subject to outstanding options as of June 30, 1999 at a weighted average exercise price of $2.88 per share;
. 1,751,174 shares subject to outstanding warrants at a weighted average exercise price of $2.71 per share, assuming these warrants are all exercised in full;
. outstanding principal and interest on a convertible note convertible into 67,704 shares of common stock at a conversion price of $7.50 per share; and . 1,574,176 shares reserved for issuance under our 1996 stock incentive plan.
In addition, there are an aggregate of 1,500,000 shares reserved for issuance under our 1999 stock incentive plan and 300,000 shares reserved for issuance under our 1999 employee stock purchase plan, each of which was adopted in October 1999.
Recent Development
On October 27, 1999, Banyan Worldwide issued a press release summarizing Banyan Worldwide's consolidated financial results for the three and nine months ended September 30, 1999. Some of our financial results were included in Banyan Worldwide's consolidated financial results. For the three months ended September 30, 1999, our revenue was approximately $2.5 million and our gross profit was approximately $1.7 million. For the nine months ended September 30, 1999, our revenue was approximately $6.1 million and our gross profit was approximately $4.6 million.
Additional Information Except as set forth in the financial statements and related notes or as otherwise indicated, all information in this prospectus:
. assumes no exercise of the underwriters' over-allotment option;
. reflects the conversion of all outstanding shares of our convertible preferred stock into shares of common stock, with the exception of the one outstanding share of series E special voting preferred stock; and . reflects the filing, as of the closing of this offering, of our amended and restated certificate of incorporation and the adoption of our amended and restated by-laws.
Industry data included in this prospectus has been obtained from third parties and has not been independently verified by us.
"Switchboard," "Maps On Us" and "SideClick" are our registered service marks. We have applied for service mark registrations for "Ad Studio," "What's Nearby," "Think Outside the Book," "My Corner" and "My Studio." "CBS" and the CBS "eye" device are registered trademarks of CBS Broadcasting Inc. This prospectus also contains other trademarks, tradenames and service marks of ours and other companies which are the property of their respective owners.
Summary Financial Data The following summary historical and pro forma financial data should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes included elsewhere in this prospectus. The summary pro forma data do not purport to represent what our results would have been if the events below had occurred at the dates indicated.
Period from
Inception Year Ended Six Months Ended
to December 31, June 30,
December 31, ---------------- ------------------
1996 1997 1998 1998 1999
(unaudited)
(in thousands, except per share data)
Statement of Operations Data: Revenue.................... $ 170 $ 650 $ 6,536 $ 2,761 $ 3,168 Gross profit............... 141 (143) 5,229 2,139 2,572 Loss from operations....... (1,530) (5,334) (4,961) (3,737) (1,105) Net loss................... $(1,515) $(5,329) $(5,365) $ (3,899) $ (1,318) Basic and diluted net loss per share................ $ (0.22) $ (0.81) $ (0.81) $ (0.58) $ (0.21) Shares used in computing basic and diluted net loss per share........... 7,000 7,000 7,011 7,005 7,056 Unaudited pro forma basic and diluted net loss per share.................... $ (0.69) $ (0.50) $ (0.17) Shares used in computing unaudited pro forma basic and diluted net loss per share.................... 7,761 7,755 7,814 The following table is a summary of our balance sheet at June 30, 1999. The pro forma as adjusted data give effect to:
. the conversion of 750,000 shares of our series A convertible preferred stock into 750,000 shares of common stock;
. the conversion of 2,655,916 shares of our series C convertible preferred stock into 2,655,916 shares of common stock;
. the conversion of 87,345 shares of our series D convertible preferred stock into 87,345 shares of common stock; and
. the sale of shares of common stock at an assumed initial public
offering price of $ per share, after deducting underwriting
discounts and commissions and estimated offering expenses payable by
Switchboard.
As of June 30, 1999 Pro Forma Actual As Adjusted (unaudited) (in thousands)
Balance Sheet Data: Cash and cash equivalents.................................. $ 6,806 $ Working capital............................................ 5,603 Total assets............................................... 10,935 Total current liabilities.................................. 3,599 Redeemable convertible preferred stock..................... 15,091 Total stockholders' equity (deficit)....................... (7,755)