Summary
The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information, including "Risk Factors" and the Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. This Prospectus contains forward-looking statements based upon current expectations that involve risks and uncertainties. The Company's actual results and timing of certain events could differ materially from the results discussed in the forward-looking statements. Factors that could cause or contribute such a difference include those set forth under "Risk Factors," as well as those discussed elsewhere in this Prospectus.
The Company
Value America is an Internet-based destination retailer that offers a wide selection of technology, office and consumer products for sale at its Internet site, www.valueamerica.com. The products offered for sale in the Company's online store are branded goods from national and international manufacturers such as Hewlett-Packard and IBM. These products are presented to customers utilizing information-rich multi-media product presentations designed to take advantage of the online selling environment. The Company's online store has been created to provide consumers with product information, shopping convenience and value on brand name products, and to offer manufacturers the ability to communicate effectively the features and benefits of their products. The Company generates revenues primarily from the sale of branded products. Customers visit the Company's online store as a result of direct response marketing and co-operative advertising programs in which brand name manufacturers share in the cost of advertising. The Company also receives revenue from manufacturers for the creation of product presentations shown on the Value America online store.
In recent years, a number of companies have developed new business models that have significantly altered the competitive environment in the retailing industry. Superstore retailers such as Circuit City and Staples seek to attract customers by emphasizing very broad selections of a few related categories of merchandise. Volume discount retailers such as Sam's Wholesale Club and Price/Costco generally seek to attract customers by de-emphasizing traditional retail concepts such as personalized customer service and breadth of merchandise in order to sell fewer products at substantial discounts. In order to remain competitive, many traditional retailers have responded by lowering prices and seeking to lower costs, in part by offering lower quality merchandise and employing fewer, less experienced customer service and sales employees.
The market for electronic commerce is large and growing. One industry source estimates that the total value of goods and services purchased over the Internet reached $12.4 billion in 1997 and projects the market may grow to $425 billion by 2002. The sale of technology, office and consumer products has begun to generate significant online revenues for segment-specific retailers such as Dell Computer, Office Depot and Amazon.com. The Company believes that this rapid growth in electronic commerce is being driven in large part by the unique nature of the Internet, which gives online retailers such as Value America the ability to provide their customers (i) high quality goods at lower prices, (ii) convenient in-home or in-office access 24-hours-a-day, 365-days-a-year, (iii) increased product selection and (iv) access to detailed information about product features, functions, benefits and applications. Unlike traditional retailers, online retailers are not limited by the constraints of real estate selection, store construction or shelf space, and they can react quickly and cost-effectively to change product descriptions, pricing and mix.
The Company has developed and continues to expand relationships with manufacturers and distributors of branded technology, office and consumer products. The Company has formed relationships with manufacturers of more than 200 technology and office products brands, including (i) technology manufacturers such as Compaq, Hewlett-Packard, IBM and Toshiba, (ii) computer peripheral manufacturers such as Brother, Canon, Epson, Iomega and US Robotics, and (iii) office products suppliers such as 3M, Avery, Pitney-Bowes and Texas Instruments. In order to expand its line of products and to leverage its current customer base, the Company has also integrated more than 300 consumer product brands into its online store, including Amana, Braun, Delta, Hoover, Kodak, Norelco, Philips/Magnavox, Polaroid, Sharp and Singer.
The Company has created an integrated technology platform to support its online store. The Company believes that its software and system architecture has been designed to accommodate peak transaction loads and that it will "scale up" efficiently as transaction volume on the Company's online store increases. The Company has also devised a proprietary Web-based authoring tool that enables the Company's marketing department to effectively integrate copy, graphics, pictures, and audio and video streaming into the Company's product presentations with a minimal amount of technology expertise.
The Company's objective is to create the leading online destination store that offers consumers, businesses, educational institutions and government agencies access to, and information about, a wide variety of products from brand name manufacturers. In order to achieve this objective, the Company is (i) initially emphasizing the sale of business technology and office products, (ii) moving rapidly into the business-to-consumer market, (iii) expanding relationships with leading brand name manufacturers, (iv) continuing to enhance its customers' online shopping experience and (v) developing and expanding direct response marketing campaigns and strategic partnerships.
The Company was incorporated in March 1996 in the State of Nevada and was reincorporated in October 1997 in the Commonwealth of Virginia. Its principal executive offices are located at 2300 Commonwealth Drive, Charlottesville, Virginia 22901, and its telephone number is (804) 817-7700.
The Offering
Common Stock Offered by the Company ................... shares Common Stock to be Outstanding after the Offering ..... shares(1) Use of Proceeds ....................................... For working capital and other general corporate purposes, including marketing and advertising, development of system enhancements, and expansion of facilities. See "Use of Proceeds." Proposed Nasdaq National Market Symbol ................ VUSA (1) Based on shares outstanding as of June 30, 1998. Includes 4,737,162 shares of common stock, without par value (the "Common Stock"), to be issued upon conversion of the Company's Series A Preferred Stock, without par value (the "Series A Stock"), and Series B Preferred Stock, without par value (the "Series B Stock"), concurrently with the closing of the offering made hereby (based on the respective conversion rates of the Series A Stock and the Series B Stock as of June 30, 1998). Excludes as of June 30, 1998 (i) 3,287,625 shares of Common Stock issuable upon exercise of stock options outstanding under the Company's 1997 Stock Incentive Plan (the "Incentive Plan"); (ii) 462,375 shares of Common Stock reserved for grants of future options pursuant to the Incentive Plan; and (iii) 213,750 shares of Common Stock issuable upon exercises of outstanding warrants. See "Management -- Incentive Plan," "Certain Transactions" and "Description of Capital Stock -- Warrants."
Summary Financial Data (in thousands, except per share amounts)
Period from
Inception Three Months Ended
(March 13, 1996) March 31,
Through Year Ended -----------------------
December 31, 1996 December 31, 1997 1997 1998
Statement of Operations Data: Total revenues ................................................. $ -- $ 134 $ -- $ 2,192 Total cost of revenues ......................................... (97) (486) (29) (2,392) Gross profit (loss) ............................................ (97) (352) (29) (200) Total operating expenses ....................................... (331) (1,519) (118) (3,438) Operating income (loss) ........................................ (428) (1,871) (147) (3,638) Other income ................................................... 3 18 -- 99 Net loss ....................................................... (425) (1,853) (147) (3,539) Net loss per share -- basic and diluted ........................ $ (0.02) $ (0.09) $ (0.01) $ (0.20) Weighted average number of shares -- basic and diluted ......... 22,500 22,616 22,500 23,153
March 31, 1998 Pro Forma Actual Pro Forma(1) as Adjusted(2)
Balance Sheet Data: Cash and cash equivalents ...................... $ 6,944 $24,548 Working capital ................................ 5,993 23,597 Total assets ................................... 10,083 27,687 Long-term debt ................................. 50 50 Mandatorily redeemable preferred stock ......... 10,481 -- Total stockholders' (deficit) equity ........... (5,663) 22,422
(1) Gives effect, as of March 31, 1998, to the issuance and sale by the Company of 617,979 shares of Series B Stock, which was completed as of June 26, 1998, and the conversion of all outstanding shares of the Series A Stock and the Series B Stock into an aggregate of 4,737,162 shares of Common Stock (based on the respective conversion rates of the Series A Stock and the Series B Stock as of June 30, 1998) upon the closing of this offering. See "Capitalization" and Notes 5 and 12 of Notes to Financial Statements.
(2) Adjusted to give effect to the sale of the shares of Common Stock offered hereby at an assumed initial public offering price of $ per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by the Company, and the application of the net proceeds thereof. See "Use of Proceeds," "Capitalization" and Notes 5 and 12 of Notes to Financial Statements.
Except as otherwise noted, all information in this Prospectus (i) gives effect to the conversion of all of the outstanding shares of Series A Stock and Series B Stock into an aggregate of 4,737,162 shares of Common Stock concurrently with the closing of this offering (based on the respective conversion rates of the Series A Stock and the Series B Stock as of June 30, 1998), (ii) gives effect to a 3-for-1 split of the Common Stock effected as of July 1, 1998, and (iii) assumes no exercise of the Underwriters' over-allotment option. See "Description of Capital Stock" and "Underwriting."