| N2K, Inc. | |||
| (www.n2k.com) | |||
| Ticker: | NTKI | 55 Broad Street, 10th Floor | |
| Exchange: | NASDAQ-National Market | New York, NY 10004 | |
| Industry: | High-Tech (SIC Code 7375) | (212) 378-5555 | |
| # of Employees: | 190 | ||
| Type of Shares: | Common Shares | Filing Date: | 8/7/97 | |
| U.S. Shares: | 3,330,221 | Offer Date: | 10/17/97 | |
| Non-U.S. Shares: | 0 | Filing Range: | - | |
| Primary Shares: | 3,330,221 | Offer Price: | $19.00 | |
| Secondary Shares: | 0 | Gross Spread: | $1.33 | |
| Offering Amount: | Selling: | $0.79 | ||
| Expenses: | - | Reallowance: | $0.10 | |
| Shares Out After: | - |
| Manager | Tier | Phone |
| PaineWebber Incorporated | Lead Manager | (212) 713-2626 |
| Unterberg Harris | Co-manager | (212) 572-8060 |
| Issuer's Law Firm: | Dewey Ballantine |
| Bank's Law Firm: | O'Sullivan Graev & Karaball, L.LP |
| Auditor: | Arthur Andersen |
Dollar amounts in U.S. millions except for per share data | |||||
| 3 Month Ending Financials | |||||
| Full Year Audited Income | Latest Unaudited Income | Prior Unaudited Income | Balance Sheet | ||
| 12/31/96 | 3/31/97 | 3/31/96 | 3/31/97 | ||
| Revenue: | $1.66 | $1.12 | $0.22 | Assets: | $7.82 |
| Net Income: | -$18.91 | -$4.52 | -$5.38 | Curr Assets: | $2.79 |
| EPS: | Liabilities: | $7.43 | |||
| Prior EPS: | -$3.39 | -$1.25 | Curr Liabilities: | $4.62 | |
| Cash Flow/Oper: | -$10.73 | $0.80 | $2.58 | Equity: | $0.39 |
| Cash Flow/Fin: | $18.50 | -$0.78 | -$0.39 | Cash: | $1.12 |
| Cash Flow/Inv: | -$3.83 | -$0.78 | Working Cap: | -$1.83 | |
| Business Description |
| The company is a music entertainment company planning to use the Internet to market, promote and distribute compact disks, cassettes and related music merchandise. By combining its music industry and technical expertise, N2K has created and interactive, entertaining and content-rich online environment, which includes its award-winning merchandising website, Music Boulevard, music genre websites, Jazz Central Station and Rocktropolis, and individual artist websites for such artists as David Bowie and the Rolling Stones. These websites provide a comprehensive entertainment and information resource enabling users to search and sample music and artist information interactively through sound, video, graphics. Each of the music genre and individual artist websites features a hotlink directly with Music Boulevard to facilitate purchases of CDs, casettes and related merchandise. The Company plans to introduce its own recorded music label, N2K Encoded Music, with its first release scheduled for October 1996. |
| Competition |
| The market for Internet content providers is highly competitive and rapidly changing. Since the Internet's commercialization in the early 1990's, the number of websites on the Internet competing for consumers' attention and spending has proliferated. With no substantial barriers to entry, the Company expects that competition will continue to intensify. Currently, there are more than one hundred music retailing websites on the Internet. With respect to competing for consumers' attention, in addition to intense competition from Internet content providers, the Company also faces competition from traditional media such as radio, television and print. N2K Encoded Music competes with the major, and other independent, record labels. With respect to recorded music sales, the Company competes with numerous Internet retailers, including traditional music retail chains, record labels and independents with websites on the Internet. In addition, the Company competes with traditional retail stores, including chains and megastores, mass merchandisers, consumer electronics stores and music clubs. The Company believes that the primary competitive factors in providing music entertainment products and services via the Internet are name recognition, variety of value-added services, ease of use, price, quality of service, availability of customer support, reliability, technical expertise and experience. The Company's success in this market will depend heavily upon its ability to provide high quality, entertaining content, along with cutting-edge technology and value-added Internet services. Other factors that will affect the Company's success include the Company's continued ability to attract experienced marketing, sales and management talent. In addition, the competition for advertising revenues, both on Internet websites and in more traditional media, is intense. The Company believes that its editorial commitment to high-quality music-related content, offered free of charge, is an important differentiator from other music-related and music-merchandising websites. Many of the Company's current and potential competitors in the Internet and music entertainment businesses have longer operating histories, significantly greater financial, technical and marketing resources, greater name recognition and larger existing customer bases than the Company. These competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements and to devote greater resources to the development, promotion and sale of their products or services than the Company. There can be no assurance that the Company will be able to compete successfully against current or future competitors. |
| Business Plan |
| The company's strategy includes the following key elements: (I) Create Strong Brand Awareness, (ii) Develop Key Industry and Website Alliances, (iii) Offer Largest Selection of Music and Related Merchandise, (iv) Build User Communities and Attract Advertising, (v) Leverage Infrastructure Through Multiple Websites, (vi) Expand International Presence and (vii) Build and Leverage N2K Encoded Music Label. |
| Use of Proceeds |
| The proceeds from the proposed offering will be used for sales and marketing, research and development, working capital and other general coprorate purposes, which may include acquisitions of or investments in complementary businesses, products and technologies. |
| Officer Name | Title | Age |
| Lawrence L. Rosen | Chairman of the Board of Directors and Chief Executive Officer | 57 |
| James E. Coane | President, Chief Operating Officer and Director | 57 |
| Philip Ramone | President, N2K Encoded Music | 58 |
| Jerold Rosen | Senior Vice President and General Manager -- On-line Entertainment | 29 |
| Daniel E. Meyer | Senior Vice President and General Manager -- On-line Information | 41 |
| Robert David Gruisin | Vice Chairman and Director | 63 |
| Jonathan V. Diamond | Vice Chairman and Director | 38 |
| Bruce Johnson | Vice President, Secretary, Treasurer, Chief Financial Officer and Director | 47 |