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As Of Filer Filing As/For/On Docs:Pgs Issuer Agent 5/05/04 PRN Corp S-1 18:582 RR Donnelley/FA
Document/Exhibit Description Pages Size
1: S-1 Registration Statement (General Form) HTML 1,675K
2: EX-3.(I).1 Amended and Restated Certificate of Incorporation HTML 133K
of the Registrant.
3: EX-3.(II).1 By-Laws of the Registrant. HTML 53K
4: EX-3.(II).2 Form of Amended and Restated Bylaws of the HTML 105K
Registrant,
5: EX-4.2 Form of Warrant to Purchase Class A Common Stock HTML 72K
of Prn Corporation, As Amended
6: EX-4.3 Form of Warrant to Purchase Class A Common Stock HTML 52K
of Qorvis Media Group, Inc.
7: EX-4.4 Form of Warrant to Purchase Class A Common Stock HTML 55K
of Prn Corporation
8: EX-4.5 Warrant to Purchase Series C Preferred Stock of HTML 54K
Qorvis Media Group, Inc. 4/15/99
9: EX-4.6 Warrant to Purchase Series C Preferred Stock of HTML 54K
Qorvis Media Group, Inc., 6/4/99
10: EX-4.7 Warrant to Purchase Series C Preferred Stock of HTML 52K
Qorvis Media Group, Inc.12/13/99
11: EX-10.1 Form of Indemnification Agreement Btn the HTML 62K
Registrant & Officers and Directors
12: EX-10.2 1992 Stock Option Plan HTML 58K
13: EX-10.3 1997 Stock Option Plan and Form of Agreements HTML 71K
Thereunder.
14: EX-10.5 Form of 2004 Employee Stock Purchase Plan HTML 81K
15: EX-10.6 Restated Investor Rights Agreement, Dated As of HTML 257K
August 14, 2001 and Amendments.
16: EX-10.7 Sublease, Dated May 16, 2003, Between the HTML 1,430K
Registrant and Cmp Media Llc.
17: EX-21.1 List of Subsidiaries. HTML 8K
18: EX-23.1 Consent of Ernst & Young Llp, Independent Auditors HTML 10K
| Form S-1 |
As filed with the Securities and Exchange Commission on May 5, 2004
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
PRN CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 4833 | 54-1615029 | ||
| (State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) |
600 Harrison Street
4th Floor
(415) 808-3500
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Charles A. Nooney
Chief Executive Officer and Chairman of the Board
PRN Corporation
600 Harrison Street, 4th Floor
(415) 808-3500
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
| Jorge del Calvo, Esq. Stanley F. Pierson, Esq. Mary A. Helvey, Esq. Pillsbury Winthrop LLP 2475 Hanover Street Palo Alto, California 94304-1114 (650) 233-4500 |
Craig W. Adas, Esq. Anthony S. Wang, Esq. Weil, Gotshal & Manges LLP 201 Redwood Shores Parkway Redwood Shores, California 94065 (650) 802-3000 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. ¨
CALCULATION OF REGISTRATION FEE
| Title of each class of securities to be registered |
Proposed maximum aggregate |
Amount of registration fee | ||
| Common Stock, $0.001 par value per share |
$126,500,000 | $16,028 | ||
| (1) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933. |
| (2) | Includes shares the Underwriters have the option to purchase to cover over-allotments. |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting any offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion, dated May 5, 2004
PROSPECTUS
Shares
Common Stock
We are offering shares of our common stock in this initial public offering. No public market currently exists for our common stock.
We have applied to have our common stock approved for quotation on the Nasdaq National Market under the symbol “PRNC.” We anticipate that the initial public offering price will be between $ and $ per share.
Investing in our common stock involves risks. See “ Risk Factors” beginning on page 8.
| Per Share |
Total | |||||
| Public Offering Price |
$ | $ | ||||
| Underwriting Discount |
$ | $ | ||||
| Proceeds to PRN (before expenses) |
$ | $ | ||||
We have granted the underwriters a 30-day option to purchase up to an aggregate of additional shares of common stock on the same terms and conditions set forth above to cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Lehman Brothers, on behalf of the underwriters, expects to deliver the shares on or about , 2004.
LEHMAN BROTHERS
CREDIT SUISSE FIRST BOSTON
UBS INVESTMENT BANK
, 2004
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| 27 | ||
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
30 | |
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| 61 | ||
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| 69 | ||
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| 80 | ||
| Material U.S. Federal Tax Considerations for Non-U.S. Holders of Our Common Stock |
83 | |
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| 89 | ||
| 91 | ||
| 91 | ||
| 91 | ||
| F-1 | ||
Until , 2004 (25 days after the commencement of this offering), all dealers that effect transactions in our shares, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different from that contained in this prospectus. This prospectus is not an offer to sell or a solicitation of an offer to buy shares in any jurisdiction where such offer or any sales of shares would be unlawful. The information in this prospectus is complete and accurate only as of the date of the front cover regardless of the time of delivery of this prospectus or of any sale of shares.
This summary highlights key aspects of the information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially the risks of investing in our common stock discussed under “Risk Factors” beginning on page 8.
PRN Corporation
Overview
We are the fifth largest broadcast network, after ABC, CBS, Fox and NBC, and the largest in-store television network in the United States based on monthly reach. Through our proprietary broadcasting network, the PRN Network, we enable national and local advertisers to target consumers in over 5,000 retail stores in all of the 210 designated market areas, or DMAs, in the United States. Based on information provided by several third-party research firms and retailers, we estimate that the PRN Network delivers approximately 180 million monthly gross impressions to consumers in the stores of leading national retailers including Best Buy, Circuit City, Costco, Ralphs, SAM’s Club, Sears and Wal-Mart Stores. For the year ended December 31, 2003, we generated $112 million of revenues and $10 million of net income.
The PRN Network is aired on video displays located in retail stores where we estimate consumers purchased over $250 billion in products and services in 2003. Programming on the PRN Network is targeted to a captive audience of shoppers in the stores of our retailers. Consumers can view and listen to our programming in high traffic areas, key departments, areas where consumers wait for service and check-out lanes. Over the last ten years, we have developed a television programming format that we believe improves the shopping experience by providing relevant, informative and entertaining content to consumers in the retail environment. Our programming consists primarily of traditional television advertising, custom advertising segments and other content supplied by leading media companies including Discovery, ESPN, the Food Network and Lifetime.
In 2003, more than 150 advertisers purchased airtime on the PRN Network, including consumer product companies such as Procter & Gamble, entertainment companies such as Walt Disney, consumer electronics companies such as Sony, satellite service providers such as DIRECTV and television networks such as NBC. The PRN Network enables advertisers to target busy, purchase-oriented consumers with relevant and timely advertising messages resulting in significant brand recall. In a March 2002 custom study of a major U.S. retailer, Nielsen Media Research reported average aided plus unaided brand recall of 66.4%, as a percentage of Modeled Claimed Commercial Audience, among viewers ten years of age and older.
We have developed software and other proprietary technologies for operating the PRN Network for which we have received eight patents. Our network consists of a media management center that is connected, primarily via a satellite network, to media servers in each retail store location that carries the PRN Network. Our patented technology enables us to cost-effectively manage, distribute and air thousands of media elements on a regular basis and manage media by store, by department and by day in order to reach our advertisers’ desired audience.
We believe our target addressable market is the $53 billion television advertising market, the largest segment of the $149 billion U.S. major media advertising market as defined by Zenith Optimedia. We believe the effectiveness of traditional network television advertising is weakening due to evolving viewing habits, emerging technologies and additional at-home entertainment alternatives. As television advertisers are seeking alternative and more effective ways to reach consumers, the PRN Network provides a solution to the challenges facing traditional broadcast television.
1
Factors Driving Advertiser Adoption of the PRN Network
We believe we are well-positioned to take advantage of the anticipated shift of advertising dollars away from traditional broadcast television. The following factors should lead to increased adoption of the PRN Network:
| • | National Reach. Through the PRN Network, we enable national and local advertisers to target consumers in over 5,000 retail stores in all of the 210 DMAs in the United States. |
| • | Captive Audience. We estimate that each month there are more than 680 million shopping visits to retailers carrying the PRN Network. Unlike viewers of at-home broadcast television, viewers of our network do not have the ability to change channels, skip commercials or time-shift their viewing. |
| • | Relevant Content. Our programming integrates advertisers’ messages in a relevant, informative and entertaining context that is specifically tailored to consumers in the retail environment. According to a Point-Of-Purchase Advertising International study, approximately 70% of brand decisions are made while consumers are in stores. |
| • | Targeted Media. Our network has the capability to deliver highly targeted messages for our advertisers based on demographics, product distribution, geography, type of retail store and location within the store. |
| • | Timely Delivery. We believe the PRN Network enables advertisers to deliver their messages at the precise time when they create the most value. |
Our Competitive Strengths
First Mover Advantage. The PRN Network is the largest in-store network in the U.S. based on audience. In our retail locations there are over 5,000 installed media servers and approximately 34,000 consumer viewing areas, or CVAs, comprised of an estimated 250,000 video displays, and, generally, satellite equipment to receive our programming.
Established Advertiser Base. In 2003, more than 150 advertisers spanning most major advertising categories, including apparel, consumer packaged goods, electronics, entertainment, financial services, office supplies, pharmaceutical, retail and telecommunication services, purchased airtime on the PRN Network.
Media Management Expertise. Over the past ten years, we have invested in software and other proprietary technologies for operating the PRN Network. These technologies combined with our management know-how enable us to produce, manage and distribute thousands of media elements on a regular basis across the PRN Network.
Operating Leverage. We believe our established retail distribution infrastructure and low variable cost operating model will lead to an increase in our operating income margin if we succeed in growing our revenues.
Acquisition and Integration Experience. We have successfully completed three acquisitions in the past eight years, through which we have broadened our retailer base to include Best Buy, Circuit City, Ralphs and Sears.
Our Strategy
Our objective is to be the broadcast network that consumers look for while they shop, advertisers rely upon to build their brands, and retailers feature to differentiate the shopping experience. We believe that our strategy of expanding our reach, driving adoption of the PRN Network, investing in new network deployments and developing localized programming content will enable us to increase the distribution and viewership of our network, generate additional advertising revenues, enhance our profitability and maintain our position as the leading in-store broadcaster in the U.S.
2
Corporate Information
We were incorporated in Delaware in February 1992 as JMC Acquisitions, Inc. We changed our name to PICS Previews, Inc. in January 1994, to Qorvis Media Group in April 1997 and to PRN Corporation in June 2000. Our principal executive offices are located at 600 Harrison Street, 4th Floor, San Francisco, California 94107 and our telephone number is (415) 808-3500. We maintain a web site at www.prn.com. The reference to our web address does not constitute incorporation by reference of the information contained on this web site.
PRN®, and the PRN name and design logo are our registered trademarks. We also use the following trademarks, some of which are pending registration as intent-to-use applications: Interactive Department, Redefining Mass Media, Digital Department, The Mass Channel, Aisles vs. Miles, Premier Retail Networks, Media Where It Matters, HD A to Z, This is HD and Design, Supermarket Network and Design, and Sample Size. Other trade names, trademarks and service marks appearing in this prospectus are the property of their respective holders.
In this prospectus, “PRN,” “we,” “us” and “our” refer to PRN Corporation and its consolidated subsidiaries.
This prospectus contains statistical data that we obtained from industry publications and reports generated by IDC, Jack Myers Report, National Cable & Telecommunications Association, Nielsen Media Research, Point-Of-Purchase Advertising International, Veronis Suhler Stevenson and Zenith Optimedia. These industry publications generally indicate that they have obtained their information from sources believed to be reliable, but do not guarantee the accuracy and completeness of their information. While we believe these publications are reliable, we have not independently verified their data.
3
The Offering
| Common stock offered by PRN |
shares |
| Common stock to be outstanding after this offering |
shares |
| Use of proceeds |
We intend to use approximately $44.6 million of the net proceeds from this offering to redeem 2,361,276 shares of our currently outstanding series E redeemable convertible preferred stock. From this redemption consideration, consistent with a prior agreement with holders of our series E redeemable convertible preferred stock, approximately $1.1 million will be further distributed to holders of our series B, C and D redeemable convertible preferred stock and approximately $1.1 million will be further distributed to members of our management and other key employees. We intend to use the remaining $ of the net proceeds from this offering for general corporate purposes, including working capital, and possible acquisitions of businesses, products or technologies that we believe complement our business. See “Use of Proceeds” and “Certain Relationships and Related Transactions.” |
| Proposed Nasdaq National Market symbol |
PRNC |
The number of shares of common stock that will be outstanding immediately after this offering is based on the number of shares outstanding on March 31, 2004 and excludes:
| • | 917,150 shares of common stock subject to warrants outstanding as of March 31, 2004, with a weighted average exercise price of $8.10 per share; |
| • | 3,867,849 shares of common stock subject to options outstanding as of March 31, 2004, with a weighted average exercise price of $4.55 per share; and |
| • | 2,780,231 shares of common stock available for future issuance under our stock option plans and employee stock purchase plan. |
Unless otherwise stated, all information in this prospectus:
| • | assumes an initial public offering price of $ per share, the midpoint of the initial public offering price range indicated on the cover of this prospectus; |
| • | reflects the filing, prior to the completion of this offering, of our amended and restated certificate of incorporation, referred to in this prospectus as our certificate of incorporation, and the adoption of our amended and restated bylaws, referred to in this prospectus as our bylaws, implementing the provisions described under “Description of Capital Stock;” |
| • | assumes the issuance to the holders of series E redeemable convertible preferred stock of warrants to purchase 1,400,000 shares of common stock and, at the completion of this offering, the exercise of these warrants and of other outstanding warrants to purchase 1,141,898 shares of common stock; |
| • | assumes the redemption of 2,361,276 shares of our series E redeemable convertible preferred stock at the completion of this offering; |
| • | reflects the automatic conversion of all of our outstanding shares of series A convertible preferred stock and all of our remaining outstanding shares of redeemable convertible preferred stock, except for all shares of our series D redeemable convertible preferred stock which will remain outstanding, into shares of common stock, and the automatic conversion of all of our outstanding shares of class A common stock into shares of common stock; and |
| • | assumes no exercise of the over-allotment option granted to the underwriters. |
4
Summary Consolidated Financial Data
The following table provides summary historical consolidated financial data for the periods indicated. You should read this information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.
The summary consolidated statement of operations data for each of the fiscal years ended December 31, 2001, 2002 and 2003 and the summary consolidated balance sheet data as of December 31, 2002 and 2003 are derived from our audited consolidated financial statements, which are included elsewhere in this prospectus. The summary consolidated statements of operations data for each of the three-month periods ended March 31, 2003 and 2004 and the summary consolidated balance sheet data as of March 31, 2004 are derived from our unaudited consolidated financial statements, which are included elsewhere in this prospectus. The summary consolidated balance sheet data as of December 31, 2001 are derived from our audited consolidated financial statements not included in this prospectus and as of March 31, 2003 are derived from our unaudited consolidated financial statements not included in this prospectus.
| Year Ended December 31, |
Three Months Ended March 31, |
|||||||||||||||||||
| 2001 |
2002 |
2003 |
2003 |
2004 |
||||||||||||||||
| ($ in thousands, except per share and per CVA data) | ||||||||||||||||||||
| Consolidated statements of operations data: |
||||||||||||||||||||
| Revenues |
$ | 58,146 | $ | 82,164 | $ | 112,082 | $ | 21,616 | $ | 26,691 | ||||||||||
| Impairment of PRN Network equipment |
— | 10,866 | — | — | — | |||||||||||||||
| Other operating costs and expenses |
59,501 | 77,539 | 102,937 | 21,022 | 25,771 | |||||||||||||||
| Income (loss) from operations |
(1,355 | ) | (6,241 | ) | 9,145 | 594 | 920 | |||||||||||||
| Other income, net |
185 | 442 | 1,083 | 964 | 257 | |||||||||||||||
| Income (loss) before provision for income taxes |
(1,170 | ) | (5,799 | ) | 10,228 | 1,558 | 1,177 | |||||||||||||
| Provision for income taxes |
— | 225 | 140 | 21 | 210 | |||||||||||||||
| Net income (loss) |
$ | (1,170 | ) | $ | (6,024 | ) | $ | 10,088 | $ | 1,537 | $ | 967 | ||||||||
| Less: Accretion of redeemable convertible preferred stock and warrants |
(6,584 | ) | (18,605 | ) | (25,955 | ) | (6,004 | ) | (7,683 | ) | ||||||||||
| Net loss attributable to common stockholders |
$ | (7,754 | ) | $ | (24,629 | ) | $ | (15,867 | ) | $ | (4,467 | ) | $ | (6,716 | ) | |||||
| Net income (loss) per common share attributable to common stockholders: |
||||||||||||||||||||
| Basic and diluted |
$ | (1.75 | ) | $ | (4.33 | ) | $ | (2.79 | ) | $ | (0.79 | ) | $ | (1.15 | ) | |||||
| Pro forma basic (1) |
$ | $ | ||||||||||||||||||
| Pro forma diluted (1) |
$ | $ | ||||||||||||||||||
| Weighted average common shares used in per share calculations (in thousands): |
||||||||||||||||||||
| Basic and diluted |
4,438 | 5,690 | 5,681 | 5,671 | 5,847 | |||||||||||||||
| Pro forma basic (1) |
||||||||||||||||||||
| Pro forma diluted (1) |
||||||||||||||||||||
| Balance sheet data (at end of period): |
||||||||||||||||||||
| Cash and equivalents |
$ | 28,699 | $ | 19,070 | $ | 16,119 | $ | 26,549 | $ | 13,459 | ||||||||||
| Short-term investments |
— | — | 10,400 | — | 17,503 | |||||||||||||||
| Total assets |
60,442 | 60,845 | 79,543 | 65,252 | 77,036 | |||||||||||||||
| Redeemable convertible preferred stock |
63,485 | 88,577 | 114,532 | 94,581 | 122,215 | |||||||||||||||
| Total stockholders’ deficit |
(27,439 | ) | (51,225 | ) | (67,253 | ) | (55,665 | ) | (73,918 | ) | ||||||||||
| Other financial and operating data: |
||||||||||||||||||||
| EBITDA (2) |
$ | 838 | $ | 7,526 | $ | 13,907 | $ | 1,630 | $ | 1,938 | ||||||||||
| EBITDA margin (3) |
1.4 | % | 9.2 | % | 12.4 | % | 7.5 | % | 7.3 | % | ||||||||||
| Average number of CVAs (4) |
31,151 | 31,484 | 33,772 | 32,764 | 34,794 | |||||||||||||||
| Advertising revenues per CVA (5) |
$ | 986 | $ | |||||||||||||||||