S-1/A 1 ds1a.htm AMENDMENT NO. 3 TO FORM S-1 Amendment No. 3 to Form S-1
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As filed with the Securities and Exchange Commission on July 16, 2003

Registration No. 333-102851


 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

AMENDMENT NO. 3

TO

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 


 

INTERVIDEO, INC.

(Exact name of Registrant as specified in its charter)

 


 

Delaware   7372
  94-3300070

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

47350 Fremont Boulevard

Fremont, California 94538

(510) 651-0888

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 


 

Steve Ro

Chief Executive Officer

InterVideo, Inc.

47350 Fremont Boulevard

Fremont, California 94538

(510) 651-0888

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 


 

Copies to:

 

Matthew W. Sonsini, Esq.

Christine S. Wong, Esq.

Wilson Sonsini Goodrich & Rosati, P.C.

650 Page Mill Road

Palo Alto, CA 94304

(650) 493-9300

 

Timothy R. Curry, Esq.

Stephen B. Sonne, Esq.

Brian Covotta, Esq.

O’Melveny & Myers LLP

990 Marsh Road

Menlo Park, CA 94025

(650) 473-2600

 


 

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, 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, please 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    Number of Shares
Registered(1)
   Proposed Maximum
Offering Price
Per Share(2)
   Proposed Maximum
Aggregate Offering
Amount(2)
  Amount of
Registration Fee(3)

Common Stock, $0.001 par value

   3,220,000    $13.00    $41,860,000   $3,387

(1)   Includes 420,000 shares subject to underwriters’ over-allotment option.
(2)   Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
(3)   A registration fee of $4,761 was previously paid in connection with the Registration Statement on Form S-1 (No. 333-76640) filed by the Registrant on January 11, 2002 and withdrawn on January 30, 2003. An additional fee of $423 was paid in connection with the subsequent filing of this registration statement on April 26, 2002 relating to an increase in the aggregate offering amount. Thus, pursuant to Rule 457(p) under the Securities Act, the filing fee of $5,184 previously paid by the Registrant may be applied to the total filing fee of $3,387 for this Registration Statement. As a result, no filing fee is due in connection with this filing.

 


 

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 that specifically states that this registration statement shall then 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 Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

 



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The information in this preliminary 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 it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED JULY 16, 2003

PRELIMINARY PROSPECTUS

 

 

2,800,000 Shares

 

 

LOGO

 

Common Stock

 

We are selling 2,800,000 shares of our common stock. This is our initial public offering of shares of our common stock. No public market currently exists for any shares of our common stock. We currently estimate that the initial public offering price of our common stock will be between $11.00 and $13.00 per share.

 

Our common stock has been approved for quotation on the Nasdaq National Market under the symbol “IVII,” subject to official notice of issuance.

 

Our business and an investment in our common stock involve risks. These risks are described under the caption “ Risk Factors” beginning on page 5 of this prospectus.

 

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.

 


 

     Per Share

   Total

Public offering price

   $                          $                      

Underwriting discounts and commissions

   $    $

Proceeds, before expenses, to us

   $    $

 

The underwriters may also purchase up to 420,000 shares of our common stock from us at the public offering price, less underwriting discounts and commissions, to cover over-allotments.

 

The underwriters expect to deliver the shares in New York, New York on or about                 , 2003.

 


 

SG COWEN

 

SOUNDVIEW TECHNOLOGY GROUP

 

                        , 2003


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EDGAR DESCRIPTION OF INSIDE FRONT COVER ARTWORK

 

The phrase “A Technology Platform for the Digital Media Cycle” heads the page and the InterVideo logo is located in the bottom right hand corner. An orange arrow curves around the center of the page next to images of a DVR, CD and other CE products. The terms “Capture,” “Edit,” “Author,” “Burn,” “Distribute” and “Watch” are listed around the arrow. Images of InterVideo’s DVD Copy, WinDVD Creator and WinDVD Platinum product boxes are illustrated across the bottom of the page.


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Through and including                                 , 2003 (25 days after the date of this prospectus), all dealers selling shares of our common stock, whether or not participating in this offering, may need to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

TABLE OF CONTENTS

 

Prospectus Summary

   1

The Offering

   3

Summary Consolidated Financial Data

   4

Risk Factors

   5

Forward-Looking Information

   21

Use of Proceeds

   22

Dividend Policy

   22

Capitalization

   23

Dilution

   24

Selected Consolidated Financial Data

   25

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   27

Business

   46

Management

   61

Related Party Transactions

   70

Principal Stockholders

   72

Description of Capital Stock

   74

Shares Eligible for Future Sale

   77

Underwriting

   79

Legal Matters

   81

Experts

   81

Where You Can Find More Information

   82

Index to Consolidated Financial Statements

   F-1


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PROSPECTUS SUMMARY

 

This summary highlights the information contained elsewhere in this prospectus. You should read the entire prospectus carefully, especially the risks of investing in our common stock discussed under “Risk Factors.”

 

Our Business

 

We are a leading provider of DVD software. We have developed a technology platform from which we have created a broad suite of integrated multimedia software products. These products span the digital video cycle by allowing users to capture, edit, author, distribute, burn and play digital video. Our multimedia software products bring the functionality of popular consumer electronics, or CE, products such as the DVD player and the digital video recorder, or DVR (also known as a PVR), to personal computers, or PCs. Our software is also used to enhance the functionality of next-generation CE devices.

 

As of March 31, 2003, we had sold more than 50 million copies of our WinDVD product, a software DVD player for PCs. Our strategy for growth is to sell multiple products, for multiple platforms, through multiple channels. We have historically derived nearly all of our revenue from sales of WinDVD to PC original equipment manufacturers, or OEMs. In the future, we expect to derive an increasing percentage of our revenue from sales of other products, including WinCreator, a video editing and DVD authoring and burning application; InterVideo Home Theater, a media center suite for the viewing and managing of digital media content; Linux-based software designed for CE devices and Linux-based PCs; and products sold through our retail and web-based sales channels.

 

Our software is bundled with products sold by eight of the top ten PC OEMs ranked in terms of sales by IDC. Our PC OEM customers include Dell Products, L.P., Fujitsu Limited, Fujitsu Siemens Computer GmbH, Hewlett-Packard Company (including the former Compaq Computer Corporation), International Business Machines Corporation, or IBM, Sony Corporation and Toshiba Corporation. In addition to PC OEMs, we have recently begun to sell our products to CE manufacturers, such as Sony. We also sell our products to PC peripherals manufacturers worldwide and through leading retailers, including over 1,000 U.S. retail stores, and our websites.

 

Market Opportunity

 

Advances in digital technology, including improvements in storage technology, microprocessor technology and multimedia applications, have enabled the PC to serve as a versatile, feature-rich and reasonably priced digital entertainment platform. The rapid growth in consumer interest in digital multimedia functionality has increased the demand for DVD-ROM and DVD-recordable drives. Gartner Dataquest estimates that the total market for PC DVD-ROM drives, combination DVD-ROM and CD-RW drives as well as DVD-recordable drives will grow from approximately 33 million units in 2001 to approximately 160 million units in 2006, a compound annual growth rate of 37%.

 

All PC multimedia hardware components require software to operate. As a result, we believe that multimedia software has become a standard PC feature and has enabled PC OEMs to add value to their products, improve margins and differentiate their products from those of their competitors.

 

As CE manufacturers migrate from dedicated hardware solutions to a PC architecture in order to reduce the cost and increase the flexibility of their products, we expect the market opportunity for multimedia software to grow in the CE market segment as well. We believe that all of these factors will create market opportunities for a complete multimedia software solution in both the PC and CE market segments.

 

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The InterVideo Solution

 

Key elements of our solution include the following:

 

    A broad, integrated multimedia software solution for the PC.    Our broad software suite provides OEMs and consumers with a single solution for a variety of multimedia functions. PCs running our integrated multimedia software can replace several dedicated hardware components such as separate DVD players, DVRs, MP3 players, CD players and digital television set-top boxes. Our products have a common look and feel and allow users to toggle quickly and seamlessly between multimedia functions.

 

    Core technology that operates on a variety of platforms.    A significant portion of the software code in each of our products is platform independent which allows us to quickly port our existing products to new operating systems or hardware platforms, including CE devices. We have developed versions of our key products for the Linux operating system, a primary operating system used in next-generation CE devices.

 

    Layered architecture that we have adapted to new technologies and upgraded to incorporate new features.    Our core technology is based on a layered architecture that enables us to respond and adapt to new technologies in an industry characterized by rapid change. Our architecture has allowed us to efficiently add new features and develop new products for consumers and PC OEMs.

 

Our Strategy

 

Our goal is to be the leading global provider of advanced digital video and audio multimedia software solutions for PCs, CE devices, PC peripherals, and home networks and other emerging markets. Key elements of our strategy include the following:

 

    Increase PC OEM penetration and leverage existing and prospective OEM relationships to promote adoption of new products.    We will seek to increase our market share by aggressively pursuing additional OEM relationships. We plan to leverage our strong market position and broad, integrated product suite to encourage our current OEM customers to license additional software products.

 

    Grow our established retail channel.    We intend to increase the sales of our products through retail channels and our websites. Our products are sold in more than 1,000 U.S. retail stores, including Best Buy, CompUSA, Fry’s and Microcenter. We are currently in negotiations with several additional national retailers that sell software for PCs.

 

    Capitalize on emerging product markets.    We have adapted our technology for use in CE devices and have agreements with three CE manufacturers to incorporate our software in their DVR devices. We believe we can adapt our technology for use in a variety of emerging technologies.

 

    Extend our technology platform.    We intend to continue our technology development efforts to expand our portfolio of intellectual property, enhance the functionality of our multimedia software solutions and offer new solutions to our customers.

 

    Maintain and enhance strategic relationships and acquire companies and technologies.    We have established strategic relationships with Microsoft and Intel Corporation and intend to pursue additional strategic relationships. We also intend to pursue acquisitions of complementary products, technologies and companies.

 

Company Information

 

We incorporated in California in April 1998 and reincorporated in Delaware in May 2002. Our headquarters are located at 47350 Fremont Boulevard, Fremont, CA 94538. Our telephone number is (510) 651-0888. Our website is www.intervideo.com. The information found on our website is not a part of this prospectus.

 

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THE OFFERING

 

Common stock we are offering

2,800,000 shares

 

Common stock to be outstanding after this offering

12,397,139 shares

 

Proposed Nasdaq National Market symbol

IVII

 

Use of proceeds

For general corporate purposes, including working capital and capital expenditures. In addition, we may use a portion of the net proceeds to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. See “Use of Proceeds.”

 

Except as otherwise indicated, whenever we present the number of shares of our common stock outstanding, we have:

 

    based this information on the shares outstanding as of March 31, 2003, excluding:

 

    3,192,142 shares of common stock issuable upon exercise of outstanding options at a weighted average exercise price of $2.24 per share;

 

    988,266 shares of common stock available for issuance under our existing stock option plan and our stock option plan adopted in connection with this offering;

 

    an additional 216,480 shares of common stock reserved for issuance under our employee stock purchase plan adopted in connection with this offering;

 

    given effect to a 0.44-for-one reverse stock split of our common stock effected in May 2002 and a 1.23-for-one forward stock split of our common stock effected in June 2003;

 

    given effect to the automatic conversion of our outstanding preferred stock into common stock upon completion of this offering;

 

    assumed no exercise of stock options after March 31, 2003; and

 

    assumed no exercise of the underwriters’ over-allotment option.

 

InterVideo and WinDVD are registered trademarks and WinDVD Creator, WinDVD Recorder, LinDVD, LinDVR, WinDVR, WinProducer, WinDTV and WinRip are trademarks or service marks of InterVideo. This prospectus also contains brand names, trademarks and service marks of companies other than InterVideo, and these brand names, trademarks and service marks are the property of their respective holders.

 

This prospectus contains market data and industry forecasts that were obtained from industry publications. These publications generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. While we believe that these market data and industry forecasts are reliable, we have not independently verified, and make no representation as to the accuracy of, such information. Information provided by Gartner Dataquest represents Gartner Dataquest’s estimates. Information provided by IDC is derived from the IDC Worldwide Quarterly PC Tracker, March 2003, and the IDC Worldwide Digital Set-Top Box and PVR Forecast and Analysis, 2001-2006, December 2002.

 

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SUMMARY CONSOLIDATED FINANCIAL DATA

 

Our summary consolidated financial data is presented in the following table to aid you in your analysis of a potential investment in our common stock. You should read this data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our consolidated financial statements and the notes to those consolidated financial statements appearing elsewhere in this prospectus. Pro forma net income per common share reflects the conversion of all outstanding preferred stock into common stock from the beginning of the period presented or at the date of original issuance, if later. The as adjusted balance sheet data reflects our receipt of the estimated net proceeds from the sale of 2,800,000 shares of our common stock in this offering at an assumed initial public offering price of $12.00 per share after deducting the estimated underwriting discounts and commissions and the estimated expenses of this offering.

 

In May 2002, we terminated Arthur Andersen LLP as our independent auditors. Subsequently, we engaged KPMG LLP and, as a result of their reaudit, restated our financial statements as of December 31, 2000 and 2001 and for each of the years in the two-year period ended December 31, 2001.

 

     Year ended December 31,

         Three months ended      
March 31,


     2000(1)

    2001

    2002

   2002

   2003

     Restated(2)     Restated(2)          Restated(2)     
(in thousands, except per share data)                     (unaudited)
Consolidated Statement of Operations Data                           

Revenue

   $ 15,426     $ 33,763     $ 45,494    $ 11,167    $ 13,373

Product costs

     5,133       16,895       16,850      3,956      5,430

Amortization of software license agreement

           1,000       29      13      5
    


 


 

  

  

Gross profit

     10,293       15,868       28,615      7,198      7,938

Operating expenses:

                                    

Research and development

     6,581       9,035       7,185      2,022      1,714

Sales and marketing

     4,916       7,878       8,179      1,759      2,275

General and administrative

     2,667       2,990       3,778      896      951

Stock compensation(3)

     2,909       1,854       2,469      921      333

Other operating expenses(4)

     174       2,408       1,708              
    


 


 

  

  

Total operating expenses

     17,247       24,165       23,319      5,598      5,273
    


 


 

  

  

Income (loss) from operations

   $ (6,954 )   $ (8,297 )   $ 5,296    $ 1,600    $ 2,665
    


 


 

  

  

Net income (loss)

   $ (6,951 )   $ (8,684 )   $ 7,729    $ 1,080    $ 1,608
    


 


 

  

  

Net income (loss) per common share, basic

   $ (4.89 )   $ (4.61 )   $ 3.15    $ 0.47    $ 0.63
    


 


 

  

  

Net income (loss) per common share, diluted

   $ (4.89 )   $ (4.61 )   $ 0.65    $ 0.09    $ 0.13
    


 


 

  

  

Pro forma net income per common share, basic (unaudited)

                   $ 0.83           $ 0.17
                    

         

Pro forma net income per common share, diluted (unaudited)

                   $ 0.65           $ 0.13
                    

         

 

     As of March 31, 2003

     Actual

   As adjusted

(in thousands)    (unaudited)
Consolidated Balance Sheet Data     

Cash and cash equivalents

   $ 18,518    $ 48,116

Working capital

     17,741      47,339

Total assets

     38,428      68,026

Total stockholders’ equity

     24,386      53,984

(1)   Excludes the results of operations of the Audio/Video Products Division of Formosoft International Inc., or AVPD, prior to its acquisition on June 7, 2000. See the financial statements of AVPD included elsewhere in this prospectus.
(2)   See Note 2 of notes to consolidated financial statements.
(3)   Stock compensation is allocated among the operating expense classifications as follows:
     Year ended December 31,

   Three months ended
March 31,


     2000

   2001

   2002

   2002

   2003

     Restated(2)    Restated(2)         Restated(2)     
(in thousands)                   (unaudited)

Research and development

   $ 745    $ 581    $ 969    $ 268    $ 111

Sales and marketing

     1,523      605      761      377      115

General and administrative

     641      668      739      276      107
    

  

  

  

  

     $   2,909    $   1,854    $   2,469    $    921    $     333
    

  

  

  

  

 

(4)   See “Selected Consolidated Financial Data” and “Consolidated Financial Statements.”

 

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RISK FACTORS

 

You should carefully consider the risks described below together with all of the other information included in this prospectus before making an investment decision. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that we are unaware of, or that we may currently deem immaterial, may become important factors that harm our business. If any of the following risks actually occurs, our business could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

 

Risks Related to Our Business

 

We have a history of losses, and we may not sustain profitability on a quarterly or annual basis.

 

We have incurred losses since our inception and have only achieved profitability in our fiscal year ended December 31, 2002 and the three months ended March 31, 2003. As of March 31, 2003, we had an accumulated deficit of $8.5 million. We expect to incur significant operating expenses over the next several years in connection with the continued development and expansion of our business. Our expenses include research and development and marketing expenses relating to products that will not be introduced and will not generate revenue until later periods, if at all. We may not sustain or increase profitability on a quarterly or annual basis in the future.

 

Our limited operating history and the rapidly evolving nature of our industry make it difficult to forecast our future results.

 

We were incorporated in April 1998 and began selling our products in February 1999. Prior to February 1999, our operations consisted primarily of research and development efforts. As a result of our limited operating history, our historical financial and operating information is of limited value in predicting our future operating results. In addition, any evaluation of our business and prospects must be made in light of the risks and difficulties encountered by companies offering products or services in new and rapidly evolving markets. The market for software-based digital video and audio solutions for incorporation in products in the PC and consumer electronics industries is rapidly evolving, and it is difficult to forecast the future growth rate, if any, or size of the market for our products. We may not accurately forecast customer behavior and recognize or respond to emerging trends, changing preferences or competitive factors facing us, and, therefore, we may fail to make accurate financial forecasts. Our current and future expense levels are based largely on our investment plans and estimates of future revenue and are, to a large extent, fixed. As a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected revenue shortfall, which would harm our operating results.

 

We expect our operating results to fluctuate on an annual and quarterly basis, which may result in volatility of our stock price.

 

We expect our operating results to fluctuate on an annual and quarterly basis, which may cause our stock price to be volatile. Important factors, many of which are outside our control, that could cause our operating results to fluctuate include:

 

    fluctuations in demand for, and sales of, our products and the PCs and CE devices with which our products are bundled;

 

    timely and accurate reporting to us by our OEM customers of units shipped, which determines the timing and level of revenue received from these customers;

 

    changes in the timing of orders or the completion of customer contracts with significant OEM customers;

 

    competitive factors, including introductions of new products, product enhancements and the introduction of new technologies by our competitors and the entry of new competitors into the digital video and audio software markets;

 

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    changes in consumer demand for our products due to the marketing of alternative technologies by our OEM customers;