| CDNow, Inc. | |||
| Ticker: | CDNW | 610 Old York Road, Suite 300 | |
| Exchange: | NASDAQ-National Market | Jenkintown, PA 19046 | |
| Industry: | Retail (SIC Code 5735) | (215) 517-7325 | |
| # of Employees: | 80 | ||
| Type of Shares: | Common Shares | Filing Date: | 11/28/97 | |
| U.S. Shares: | 4,100,000 | Offer Date: | 2/9/98 | |
| Non-U.S. Shares: | 0 | Filing Range: | $13.00 - $15.00 | |
| Primary Shares: | 4,100,000 | Offer Price: | $16.00 | |
| Secondary Shares: | 0 | Gross Spread: | $1.12 | |
| Offering Amount: | $57,400,000 | Selling: | $0.64 | |
| Expenses: | $0 | Reallowance: | $0.10 | |
| Shares Out After: | - |
| Manager | Tier | Phone |
| BT Alex Brown | Lead Manager | (410) 727-1700 |
| Nationsbanc Montgomery Securities, Inc. | Co-manager | (415) 627-2100 |
| Issuer's Law Firm: | Morgan, Lewis & Bockius |
| Bank's Law Firm: | Schnader, Harrison, Segal & Lewis |
| Auditor: | Arthur Andersen |
Dollar amounts in U.S. millions except for per share data | |||||
| 9 Month Ending Financials | |||||
| Full Year Audited Income | Latest Unaudited Income | Prior Unaudited Income | Balance Sheet | ||
| 12/31/96 | 9/30/97 | 9/30/96 | 9/30/97 | ||
| Revenue: | $6.30 | $9.45 | $4.11 | Assets: | $10.40 |
| Net Income: | -$1.81 | -$4.13 | -$0.53 | Curr Assets: | $8.94 |
| EPS: | Liabilities: | $4.54 | |||
| Prior EPS: | -$0.74 | $0.10 | Curr Liabilities: | $0.97 | |
| Cash Flow/Oper: | -$0.12 | $9.24 | -$0.01 | Equity: | $5.86 |
| Cash Flow/Fin: | $1.29 | -$2.04 | -$0.10 | Cash: | $7.24 |
| Cash Flow/Inv: | -$0.44 | -$2.04 | Working Cap: | $7.97 | |
| Business Description |
| The company is the leading online retailer of CDs and other music-related products. Its early entry into the online music retailing industry has helped the Company gain a well-recognized brand and the largest customer base of any online music retailer. The Company strives to combine the advantages of online commerce with superior customer focus in order to be the authoritative source for CDs and other music-related products. The Company's online store, cdnow.com, offers broad selection, informative content, easy-to-use navigation and search capabilities, a high level of customer service, competitive pricing and personalized merchandising and recommendations. With approximately 250,000 items, the Company believes that it provides a selection of readily-available products that is five to ten times that of a typical music retailer. To assist customers in making music selections, the CDnow store contains approximately 70,000 reviews and related articles and 275,000 sound samples. The CDnow store is open 24 hours a day, seven days a week and offers its customers convenient and timely product fulfillment, including an overnight delivery option. |
| Competition |
| The online commerce market is new, rapidly evolving and intensely competitive, and the Company expects that competition will further intensify in the future. Barriers to entry are minimal, and current competititors can launch new sites at a relatively low cost. According to Jupiter, there were approximately 100 online music retailers as of June 1997. In addition, the broader retail music industry is intensely competitive. The Company currently competes with a variety of companies, including (i) online vendors of music, music videos and other related products, (ii) online vendors of movies, books and other related products, (iii) online service providers which offer music products directly or cooperation with other retailers, (iv) traditional retailers of music products, including specialty music retailers, (v) other retailers that offer music products, including mass merchandisers, superstores and consumer electronic stores; and (vi) non-store retailers such as music clubs. Many of these traditional retailers also support dedicated Web sites which compete directly with the Company. The Company believes that the principal competitive factors in its online market are brand recognition, selection, variety of value-added services, ease of use, site content, quality of service, technical expertise and price. Many of the Company's current and potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than the Company. The Company is aware that certain of its competitors have and may continue to adopt aggressive pricing or inventory availability policies and devote substantially more resources to Web site and systems development than the Company. Increased competition may result in reduced operating margins, loss of market share and a diminished brand franchise. |
| Use of Proceeds |
| The proceeds from the proposed offering will be used for repayment of short-term indebtedness; sales and marketing expenses, including payments due under strategic alliances; improvements to the Company's Web site and other capital expenditures; working capital; and other general corporate purposes. |