<PAGE>
As filed with the Securities and Exchange Commission on August 11, 2000
Registration No. 333-38360
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
5B TECHNOLOGIES CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 11-3529387
(State or jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
------------------------
ONE JERICHO PLAZA
JERICHO, NEW YORK 11753
(516) 938-3400
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
------------------------
COPY TO:
GLENN NORTMAN
CHIEF EXECUTIVE OFFICER JAMES T. SEERY, ESQ.
5B TECHNOLOGIES CORPORATION PIPER MARBURY RUDNICK & WOLFE LLP
ONE JERICHO PLAZA 1251 AVENUE OF THE AMERICAS
JERICHO, NEW YORK 11753 NEW YORK, NEW YORK 10020
(516) 938-3400 (212) 835-6000
(Name, address, including zip code, and
telephone number, including area code, of agent
for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
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, other than securities offered in connection with dividend or interest
reinvestment plans, check the following box: /X/
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
<PAGE>
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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Proposed Maximum
Title of Each Class of Amount to be Offering Proposed Maximum Amount of
Securities to be Registered Registered (1)(2) Price per Share Aggregate Offering Price Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, $0.04 par value 875,913 $3.09375 (3) $2,709,855.80 $715.40
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Common Stock, $0.04 par value 200,000 (4) $10.00 $2,000,000 $528.00
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TOTAL 1,075,913 $4,709,855.80 $1,243.40(5)
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</TABLE>
(1) Pursuant to Rule 416(c) under the Securities Act of 1933, as amended, this
Registration Statement also covers such additional shares of common stock
which may be issued under the terms of the Series B 6% Convertible Preferred
Stock, par value $.01 per share (the "Series B Preferred Stock") and the
Common Stock Purchase Warrant, dated April 17, 2000 (the "Warrants"), held
by the selling stockholder to prevent dilution resulting solely from stock
splits, stock dividends and similar events.
(2) Pursuant to a Registration Rights Agreement between the Registrant and the
selling stockholder entered into in connection with the sale to the selling
stockholder of the Series B Preferred Stock and Warrants, the Registrant
agreed to register hereunder that number of shares of common stock equal to
two times the maximum number of shares of common stock issuable upon
conversion of the Series B Preferred Stock (based upon the conversion
formula contained in the Series B Preferred Stock on the date of the initial
registration) and upon exercise of the Warrants. The shares of common stock
registered hereunder also include shares of common stock issuable as
dividends under the Series B Preferred Stock.
(3) Calculated pursuant to Rule 457(c) under the Securities Act of 1933, as
amended.
(4) Reflects shares of common stock issuable upon exercise of the Warrants. The
Proposed Maximum Offering Price per share was calculated in accordance with
Rule 457(g) of the Securities Act of 1933, as amended.
(5) Previously paid.
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.
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<PAGE>
Information contained in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement 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.
PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION
5B TECHNOLOGIES CORPORATION
1,075,913 SHARES OF COMMON STOCK
--------------------------------
The stockholder selling the shares in this offering has the right to
determine both the number of shares it will offer and the time or times when it
will offer the shares. Such stockholder may sell the shares at the market price
at the time of sale or at such other prices as it may negotiate.
The 1,075,913 shares of common stock covered by this prospectus include
shares issuable upon the filed conversion of the Series B Preferred Stock and
the exercise of the Warrants held by the selling stockholder with the named
within this prospectus. We will not receive any proceeds from the sale of the
shares of this offering, Securities but we will receive an aggregate of
$1,000,000 if the Warrants are exercised. and Exchange
Our common stock is quoted on the Nasdaq SmallCap Market under the symbol
"FIVE." On August 7, 2000, Commission the closing sale price of our common stock
was $2.50 per share.
INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5 FOR GENERAL RISK FACTORS AND BEGINNING ON PAGE 13
FOR RISK FACTORS RELATING TO THESE SECURITIES AND THIS OFFERING.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------------
The date of this prospectus is August , 2000
<PAGE>
You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information contained in or incorporated by reference in this prospectus is
accurate as of any date other than the date on the front of this prospectus.
----------
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
WHERE YOU CAN FIND MORE INFORMATION........................... 1
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS.................... 2
PROSPECTUS SUMMARY............................................ 3
THE OFFERING.................................................. 4
RISK FACTORS.................................................. 5
USE OF PROCEEDS............................................... 13
SELLING STOCKHOLDER........................................... 13
PLAN OF DISTRIBUTION.......................................... 22
LEGAL MATTERS................................................. 23
EXPERTS....................................................... 23
</TABLE>
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public at the SEC's web site at
http://www.sec.gov. Our Common Stock is quoted on the Nasdaq SmallCap Market.
Our reports, proxy statements and other information are also available to the
public at the Nasdaq's web site at http://www.nasdaq.com.
This prospectus is part of a Registration Statement on Form S-3 filed
with the SEC under the Securities Act of 1933. This prospectus omits some of the
information contained in the Registration Statement. You should refer to the
Registration Statement for further information with respect to 5B Technologies
Corporation and the securities offered by this prospectus. Any statement
contained in this prospectus concerning the provisions of any document filed as
an exhibit to the Registration Statement or otherwise filed with the SEC is not
necessarily complete, and in each case you should refer to the copy of the
document filed for complete information.
The SEC allows us to "incorporate by reference" the information we file
with it, which means we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be a part of this prospectus, and later information that we file with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings we make with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until all of the securities covered by this prospectus are sold by the selling
stockholder.
1. Our Annual Report on Form 10-K for the fiscal year ended December
31, 1999, as amended by Amendment No. 1 on Form 10-K/A.
2. Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2000.
3. Our Current Reports on Form 8-K, filed February 15, 2000, April
28, 2000, May 17, 2000, and May 26, 2000, respectively.
4. The description of our common stock contained in our registration
statement on Form 8-A filed pursuant to Section 12 of the
Securities Exchange Act.
5. The description of our Class A Warrants relating to our common
stock contained in our registration statement on Form 8-A filed
pursuant to Section 12 of the Securities Exchange Act.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
5B Technologies Corporation
One Jericho Plaza
Jericho, New York 11753
Attention: Anthony Fernandez, Director of Finance
Telephone: (516) 938-3400
<PAGE>
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Some of the statements contained in or incorporated by reference in
this prospectus discuss our plans and strategies for our business or state other
forward-looking statements, as this term is defined in the Private Securities
Litigation Reform Act. The words "anticipates," "believes," "estimates,"
"expects," "plans," "intends" and similar expressions are intended to identify
these forward-looking statements, but are not the exclusive means of identifying
them. These forward-looking statements reflect the current views of our
management; however, various risks, uncertainties and contingencies could cause
our actual results, performance or achievements to differ materially from those
expressed in, or implied by, these statements, including the following:
- the success or failure of our efforts to implement our business
strategy
- the other factors discussed under the heading "Risk Factors" and
elsewhere in this prospectus
We assume no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
For a discussion of important risks of an investment in our securities,
including factors that could cause actual results to differ materially from
results referred to in the forward-looking statements, see "Risk Factors." You
should carefully consider the information set forth under the caption "Risk
Factors." In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in or incorporated by reference in this
prospectus might not occur.
2
<PAGE>
PROSPECTUS SUMMARY
5B TECHNOLOGIES CORPORATION
5B Technologies Corporation (formerly Paramount Financial Corporation)
and subsidiaries is a comprehensive business solution provider, offering
customers a wide range of integrated services, including Internet solutions,
information technology ("IT") consulting, systems integration and staffing
services. We conduct our operations through two wholly owned subsidiaries:
Paratech Resources, Inc. and Deltaforce Personnel Services, Inc.
On February 14, 2000, we completed a corporate structure reorganization
under Delaware law. As a result of the reorganization, 5B became the new public
parent holding company for our two subsidiaries. The new corporate name and
structure reflect the change, in 1999, of our business focus to our systems
integration and consulting, website development and Internet consulting, and
temporary staffing businesses, and our de-emphasizing of our IT equipment
leasing business. As a final step in our refocusing of our business operations,
on May 2, 2000, we sold the majority of our computer lease portfolio to Stamford
Computer Group, and we announced that we were discontinuing operations of our
leasing business, which had been conducted by Paramount Operations Inc., our
wholly owned subsidiary ("Paramount Operations").
Our evolution from a IT equipment leasing and trading company to a full
service Internet and IT business solution provider began in 1996. During the
first quarter of that year, in response to our need to provide our customers
with more-value added services, we created a new wholly owned subsidiary,
Paratech Resources, Inc. Paratech began offering customers full IT service
solutions, including hardware, software, system design, systems integration and
other value-added support services.
In order to further enhance and expand its system integration services
and solutions business, Paratech acquired Comptech Resources, Inc. in October
1998. Comptech was a systems consulting, software application, Year 2000
compliance and Internet design and development firm. The acquisition of Comptech
brought us a specialization in client-server accounting, sales-force automation,
web development and e-commerce solutions.
To expand our Internet solutions business and to add the ability to
host clients, Paratech acquired, in March 1999, certain assets of Web Business
Systems Inc., a small New York based web hosting and development company. The
acquisitions of Comptech and Web have enabled us to offer a full complement of
state-of-the-art Internet and IT solutions.
Our strategic diversification and expansion strategy also resulted in
two other acquisitions during 1998. In January 1998, we completed the
acquisition of Deltaforce Personnel Services, Inc., a privately held New York
City based staffing company specializing in legal support staffing. This
acquisition further enhanced our product offerings by including staffing
services to our expanding list of integrated services. The Deltaforce
acquisition was followed in August 1998 by our acquisition of RBW Staffing
Services, Inc. (d/b/a Wordsmiths), a New York City based staffing company also
specializing in legal support staffing. Following this second acquisition, we
merged the operations of Wordsmiths into Deltaforce to form "The DeltaGroup." As
a result of the Deltaforce and Wordsmiths acquisitions, 5B became able to offer
not only temporary legal support staffing, but also temporary and permanent IT
placements.
RECENT DEVELOPMENTS
As a final step in our refocusing of our business operations to our
systems integration and consulting, website development and Internet consulting,
and temporary staffing business, on May 2, 2000, we sold the majority of our
compute lease portfolio (the "Assets") to Stamford Computer Group Inc.
("Stamford"), and we announced that we were discontinuing operations of our
leasing business, which had been conducted by Paramount Operations. In exchange
for the Assets, Stamford paid us cash consideration of $700,114 and assumed
$6,116,865 of indebtedness related to the Assets. In conjunction with the
discontinuance of our leasing business, we recorded a predominantly non-cash,
one-time pre-tax charge of approximately $977,000 in the quarter ended March 31,
2000.
ADDRESS
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Our executive offices are located at One Jericho Plaza, Jericho, New
York, 11753, (516) 938-3400.
THE OFFERING
<TABLE>
<S> <C>
Common stock offered..................................1,075,913 shares(1)
Common stock outstanding as of August 2, 2000..........2,135,500 shares(2)
Nasdaq SmallCap symbol................................FIVE
Use of proceeds.......................................We will not receive any proceeds from the
sale of the common stock sold by the
selling stockholder(3)
</TABLE>
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(1) Pursuant to our contractual agreement with the selling stockholder, the
number of shares represents two times the maximum number of shares that may
be issued to the selling stockholder (A) upon the conversion of the Series B
Preferred Stock (based upon a conversion formula set forth in the
Certificate of Designations of the Series B Preferred Stock), and (B) the
exercise of the Warrants. The number of shares offered also includes shares
of common stock which may be issued as dividends under the Series B
Preferred Stock.
(2) This number does not include: (i) 500,000 shares and 12,500 shares reserved
under our stock option and director option plans, respectively (of which
457,766 and 1,000, respectively, are subject to outstanding options), (ii)
747,500 shares underlying our publicly traded Class A Warrants, and (iii)
893,333 shares underlying other outstanding warrants, of which an aggregate
of 143,333 have been registered for resale under another registration
statement.
(3) We will receive proceeds of $1,000,000 if all of the Warrants are exercised
in full.
The purpose of this offering is to register the resale of the shares of
common stock owned by the selling stockholder. The selling stockholder is
required to deliver a copy of this prospectus in connection with any sale of
these shares.
4
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER EACH OF THE FOLLOWING RISKS AND ALL OF
THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN
OUR COMMON STOCK. SOME OF THE FOLLOWING RISKS RELATE PRINCIPALLY TO OUR BUSINESS
IN GENERAL AND THE INDUSTRIES IN WHICH WE OPERATE. OTHER RISKS RELATE
PRINCIPALLY TO THE SECURITIES MARKETS AND OWNERSHIP OF OUR SECURITIES. THE RISKS
AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES FACING OUR COMPANY.
ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT WE
CURRENTLY BELIEVE TO BE IMMATERIAL MAY ALSO ADVERSELY AFFECT OUR BUSINESS. IF
ANY OF THE FOLLOWING RISKS AND UNCERTAINTIES DEVELOP INTO ACTUAL EVENTS, OUR
BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE MATERIALLY
ADVERSELY AFFECTED.
GENERAL RISK FACTORS
The following risks relate to our company and our business generally.
WE HAVE DISCONTINUED OUR IT EQUIPMENT LEASING BUSINESS AND CHANGED OUR BUSINESS
FOCUS TO SYSTEMS INTEGRATION AND CONSULTING, WEBSITE DEVELOPMENT AND CONSULTING,
AND TEMPORARY STAFFING AND WE MAY BE NOT SUCCESSFUL IN OUR BUSINESS STRATEGIES
In 1999, we changed the focus of our operations from IT equipment
leasing, which was our primary business since 1991, to systems integration and
consulting, website development and consulting, and temporary staffing. . As a
final step in our refocusing of our business operations, on May 2, 2000, we sold
the majority of our computer lease portfolio to Stamford Computer Group, and we
announced that we were discontinuing operations of our leasing business, which
had been conducted by Paramount Operations. Our strategy is to continue to focus
on these lines of business, and our future success will depend on our ability to
grow these businesses. Because we have focused on these businesses for only a
short period of time, we do not have an historical record upon which to judge
our ability to successfully grow these businesses. If we are not able to
successfully operate and grow these businesses, we will suffer significant
adverse results, including losses from operations, an inability to raise
additional capital, and downward pressures on our stock price.
WE MAY NOT BE ABLE TO OPERATE PROFITABLY
Since our initial public offering in January 1996, we have reported
annual losses of ($804,411), ($496,338), ($1,833,804) and ($261,072). Although
our ($261,072) loss in 1999 is significantly less than in 1998, which reflects
our re-focus in our lines of business, our company faces significant challenges
in order to reach profitability. These challenges are discussed in detail in
these Risk Factors. In order for our company to be successful and to grow, we
will need to successfully address these challenges, but, for the reasons
explained in these Risk Factors, we cannot give assurances that we will ever
operate profitably.
WE CURRENTLY HAVE LIMITED CAPITAL RESOURCES AND WE WILL NEED SIGNIFICANT
ADDITIONAL FINANCING TO ENABLE US TO EXPAND OUR BUSINESSES
At March 31, 1999, we had $1.4 million in cash and cash equivalents and
investments available for sale. Substantially this entire amount was invested in
interest-bearing savings accounts, money market accounts established by major
commercial banks or in United States Government, other AA rated obligations and
mutual funds. Investments available for sale also includes 250,000 shares and a
warrant to purchase 50,000 shares of a privately held company, which had a fair
market value of approximately $438,000. Subsequent to March 31, 2000, we raised
approximately $1,000,000 from the sale to the selling stockholder of our Series
B Preferred Stock and the Warrants, the underlying shares of common stock of
which are being sold by this prospectus. We continue to use our cash balances to
fund our operations and, to the extent we suffer operating losses, we would need
our cash reserves to fund these losses. However, in order to expand our systems
integration, website development and temporary staffing businesses, we will
require significant additional cash resources to make acquisitions of
complementary businesses; fund internal growth through expanding our client base
in these business lines and adding consultants, engineers and temporary
employees; expand our sales and marketing capabilities; and support overall
increased expenses attendant to growing a business. We do not have any current
opportunities to raise such significant additional financing, and we cannot give
assurances that any opportunities to raise financing will arise in the future or
that, if they do arise, the terms thereof would be acceptable to us. If
5
<PAGE>
we are not able to raise additional financing to allow us to grow our
businesses, it is likely that our company will suffer significant adverse
effects.
SYSTEMS INTEGRATION AND WEBSITE DEVELOPMENT RISK FACTORS
WE GENERALLY DO NOT HAVE LONG-TERM SERVICE CONTRACTS AND OUR NEED TO
ESTABLISH RELATIONSHIPS WITH NEW CLIENTS CREATES AN UNCERTAIN REVENUE
STREAM
In the systems integration and website development business, our
clients generally retain us on a project basis, rather than under long-term
contracts. As a result, a client may or may not engage us for further services
once a project is completed. As a result, establishment and development of
relationships with additional companies and other users of information
technology and securing repeat engagements with existing clients are important
components of our business operations. The absence of long-term contracts and
the need for new clients create an uncertain revenue stream. A client that
accounts for a significant portion of our revenues in a given period may not
generate a similar amount of revenue, if any, in subsequent periods. We cannot
assure you that we will be able to add new major clients or to secure new
engagements with existing clients. In addition, some of our existing clients may
unilaterally reduce the scope of, or terminate, existing projects. We cannot
assure you that we will be able to maintain our business relationship with or
avoid a material reduction in the use of our services by any of our significant
existing clients.
WE ARE DEPENDENT ON OUR ABILITY TO RECRUIT, TRAIN AND RETAIN HIGHLY
QUALIFIED SYSTEMS INTEGRATION AND WEBSITE DEVELOPMENT PROFESSIONALS WHO
ARE IN SHORT SUPPLY
We believe continued hiring of new personnel will be required to
support our systems integration and website development businesses. These
business operations depend in large part on our ability to identify, hire, train
and retain highly qualified systems integration and website development
professionals who can provide the technical, strategic consulting, creative and
marketing skills required by clients. There is a shortage of these highly
qualified personnel and we compete with other companies for this limited pool of
persons. We cannot assure you that we will be able to attract, train or retain
qualified personnel. Failure to do so could have a material adverse effect on
our financial condition, operating results and business.
FLUCTUATIONS IN OUR FINANCIAL PERFORMANCE COULD ADVERSELY AFFECT THE
TRADING PRICE OF OUR COMMON STOCK
Our operating results may fluctuate as a result of a variety of factors
affecting our systems integration and website development business, many of
which are outside of our control, including:
- the number, size and scope of our client engagements
- reductions, cancellations or completions of major projects
- the loss of significant clients or a change of scope in a
significant client engagement
- our relative mix of business
- changes in pricing by us or our competitors
- the efficiency with which we utilize our billable professionals,
plan and manage our existing and new client engagements and manage
our future growth
- variability in market demand for Internet services
- our ability to retain and attract qualified professionals
- our ability to complete fixed-fee engagements within the assigned
budget
6
<PAGE>
- costs related to expansion of our systems integration and website
development businesses
- increased competition
As a result of these possible fluctuations, period-to-period
comparisons of our operating results may not be reliable indicators of future
performance. A high percentage of our expenses, including those related to
employee compensation and facilities, are fixed. If the number and size of our
projects decreases in any period, then our revenues and operating results may
also decrease. In some quarters, our operating results may fall below the
expectations of securities analysts and investors due to many factors, including
those described above. In such event, the trading price of our common stock
would likely decline and the decline could be significant.
OUR FIXED PRICE CONTRACTS INVOLVE FINANCIAL RISK
Many of our systems integration and website development contracts are
currently on a fixed price basis, rather than a time and materials basis. We
assume greater financial risk on fixed price contracts than on time and
materials engagements because our source of revenue remains fixed while our
costs may be rising. We have only a limited history in estimating our costs for
our engagements, particularly for larger projects. We have had to commit
unanticipated resources to complete some of our projects, resulting in lower
gross margins on such contracts. We may experience similar situations in the
future. If we fail to estimate accurately the resources and time required for an
engagement, to manage client expectations effectively or to complete fixed price
engagements within our budget, on time and to our clients' satisfaction, we
would be exposed to cost overruns, potentially leading to losses on these
engagements.
OUR SYSTEMS INTEGRATION AND WEBSITE DEVELOPMENT REVENUES COULD BE
NEGATIVELY AFFECTED BY THE LOSS OF MAJOR CLIENTS
We derive a significant portion of our systems integration and website
development revenues from a limited number of clients. In 1999, we estimate that
our three largest clients accounted for approximately 21% of our systems
integration and website development revenues. The loss of major clients could
significantly reduce our revenues, which could have a material adverse effect on
our financial condition, operating results and business.
OUR SUCCESS DEPENDS UPON STRATEGIC RELATIONSHIPS
In connection with our systems integration and website development
business, we have established strategic relationships with Microsoft
Corporation, Cisco Systems, Inc. and Intershop which may be terminated at any
time. The loss of any of these or other strategic relationships would deprive us
of the opportunity to :
- gain early access to leading-edge technology
- cooperatively market products with these vendors
- cross-sell additional services
- gain early and enhanced access to vendor training and support
OUR WEBSITE DEVELOPMENT BUSINESS DEPENDS ON THE GROWING DEMAND FOR
INTERNET SOLUTIONS
If the usage and volume of commercial transactions on the Internet does
not continue to increase, demand for our services may decrease and our financial
condition, operating results and business could be materially and adversely
affected. Our future success depends on the continued expansion of, and reliance
of consumers and businesses on, the Internet and related technical solutions.
The Internet may not be able to support an increased number of users or an
increase in the volume of data transmitted over it. As a result, the performance
or reliability of the Internet may be adversely affected as use increases. The
improvement of the Internet in response to increased demands will require timely
improvement of the high speed modems and other
7
<PAGE>
communications equipment that form the Internet infrastructure. The Internet has
already experienced outages and delays as a result of damage to portions of its
infrastructure. The effectiveness of the Internet may also decline due to delays
in the development or adoption of new technical standards and protocols designed
to support increased levels of activity. We cannot assure you that the
infrastructure, products or services necessary to maintain and expand the
Internet will be developed. Other factors that may adversely affect Internet
usage or e-commerce adoption include:
- actual or perceived lack of security of information
- congestion of Internet traffic or other usage delays
- inconsistent quality of service
- increases in Internet access costs
- increases in government regulation of the Internet
- uncertainty regarding intellectual property ownership
- reluctance to adopt new business methods
- costs associated with the obsolescence of existing infrastructure
- economic viability of e-commerce models
OUR SYSTEMS INTEGRATION AND WEBSITE DEVELOPMENT BUSINESS OPERATIONS
DEPEND ON OUR ABILITY TO ADAPT TO TECHNOLOGICAL INNOVATIONS
Our systems integration and website development business operations
depend, in part, on our ability to keep pace with rapid technological change,
new products and services embodying new processes and technologies and industry
standards and practices. Failure to respond to these changes could render our
existing service practices and methodologies obsolete. We cannot assure you that
we will be able to respond quickly, cost-effectively or sufficiently to these
developments.
OTHER PARTIES MAY CLAIM THAT OUR SYSTEMS INTEGRATION AND WEBSITE
DEVELOPMENT PRODUCTS MAY HAVE INFRINGED UPON THEIR INTELLECTUAL
PROPERTY RIGHTS, RESULTING IN SUBSTANTIAL COSTS TO US AND A DIVERSION
OF OUR RESOURCES
It is possible that third parties, including our clients, may claim our
systems integration and website development products may have infringed upon
their intellectual property rights. While we believe that currently there is no
basis for such a claim, we cannot assure you that an infringement claim will not
be brought against us in the future. The material and adverse consequences of a
successful infringement claim against us are as follows:
- liability for litigation costs and damages
- we may be enjoined from using specific intellectual property in
the future
- we may incur costs for licensing specific intellectual property
from others
- we may incur significant costs associated with the development of
non-infringing alternatives
- we may have to indemnify clients with respect to losses as a
result of our infringement of the intellectual property
8
<PAGE>
Even if we are successful in defending against an infringement claim,
we may incur substantial costs defending ourselves. Additionally, these claims
could divert needed resources, management's attention and could harm our
reputation.
WE MAY BE SUBJECT TO LEGAL LIABILITY TO OUR SYSTEMS INTEGRATION AND
WEBSITE DEVELOPMENT CLIENTS
Many of our systems integration and website development engagements
involve the development and implementation of services that are important to our
clients' businesses. Our failure or inability to meet a client's expectations in
the performance of services could injure our business reputation or result in a
claim for substantial damages against us regardless of our responsibility for
such failure. In addition, the services we provide for our clients may include
confidential or proprietary client information. Although we have implemented
policies to prevent such client information from being disclosed to unauthorized
parties or used inappropriately, any such unauthorized disclosure or use could
result in a claim against us for substantial damages. Our contractual provisions
attempting to limit such damages may not be enforceable in all instances or may
otherwise fail to protect us from liability for damages.
OUR SYSTEMS INTEGRATION AND WEBSITE DEVELOPMENT BUSINESSES COULD BE
ADVERSELY AFFECTED BY YEAR 2000 ISSUES
Year 2000 risks exist because of the potential occurrence of computer
system or related processing failures caused by the inability of the computers
to recognize date-related data arising from the use of two digits rather than
four digits to define a particular year. Currently, our systems have functioned
properly with respect to dates starting in the Year 2000 and our clients have
not reported experiencing any Year 2000 problems. However, there may still be
Year 2000 problems that affect us or our clients, and any potential future Year
2000 problem may cause us to incur material financial losses, liability to our
clients or damage to our reputation.
GOVERNMENTAL REGULATION OF THE INTERNET COULD IMPACT OUR WEBSITE
DEVELOPMENT BUSINESS
Currently, our website development business is not subject to any
direct governmental regulation other than laws and regulations applicable to
businesses generally. Few laws or regulations are directly applicable to access
to, or commerce on, the Internet. Due to the increasing popularity and use of
the Internet, it is likely that a number of laws and regulations may be adopted
at the local, state, national or international levels with respect to the
Internet, including the possible levying of tax on e-commerce transactions. Any
new legislation could inhibit the growth in use of the Internet and decrease the
acceptance of the Internet as a communications and commercial medium, which
could in turn decrease the demand for our services or otherwise have a material
adverse effect on our future operating performance and business.
STAFFING BUSINESS RISK FACTORS
OUR STAFFING BUSINESS HAS SIGNIFICANT DEPENDENCE ON MAJOR CUSTOMERS AND
WE WOULD BE ADVERSELY EFFECTED IF WE LOST OUR MAJOR CUSTOMERS
Approximately 28% percent of our staffing revenues for 1999 came from,
and a significant portion of our staffing resources have been devoted to, our
largest three customers. The loss of one or more of these customers or a
substantial reduction in the hiring activities of these customers through us
would have a material adverse effect on our financial performance. In addition,
the termination of employees with whom we have a strong relationship by these
customers could also adversely affect our financial performance. Further, there
is no assurance that our staffing business will not continue to be dependent
upon a small number of major customers for a significant portion of our staffing
business revenues and earnings.
9
<PAGE>
OUR STAFFING BUSINESS IS DEPENDENT ON RECRUITMENT OF TEMPORARY
EMPLOYEES
Our staffing business, similar to other staffing businesses, requires
that we have at all times an active roster of qualified temporary employees to
place with our law firm clients. Competition in the New York City metropolitan
area to obtain and retain these persons is intense, particularly during periods
of high demand. Our ability to grow our staffing business will depend on our
ability to not only attract more law firm clients, which we may not be able to
do, but also to obtain and retain greater numbers of temporary personnel.
OUR STAFFING BUSINESS IS DEPENDENT ON RECRUITMENT AND PLACEMENT
COUNSELORS
Our staffing business's revenues and future success also are very
dependent on the skills of our recruitment and placement counselors in
attracting clients, matching their needs to appropriate candidates in each
recruiting opportunity and in establishing successful long-term relationships
with these clients. The failure to attract and retain qualified recruitment and
placement counselors, or the failure of recruitment and placement counselors to
effectively perform these tasks, may have a material adverse effect on our
staffing business's revenues, profitability and growth.
OUR STAFFING BUSINESS WOULD SUFFER IF LAW FIRM INDUSTRY CONDITIONS WERE
TO DETERIORATE
Our staffing business offers services primarily to the law firms.
During periods of poor performance by the economy or the capital markets, law
firm business decreases, and the law firms do not expand existing services and
operations and do not employ new personnel or require the services of temporary
employees. Accordingly, during these periods of poor performance, the demand for
our staffing business's services may decrease, which would adversely affect our
operations. Since we intend to continue our emphasis on the law firm industry,
we expect that our staffing business's results of operations for any given year
will depend on the performance of the law firm industry.
WE FACE SIGNIFICANT COMPETITION IN ALL OF OUR LINES OF BUSINESS
SYSTEMS INTEGRATION COMPETITION
Competition in the systems integration business is intense. We directly
compete with local, regional and national systems integrators, value added
resellers and distributors, as well as with certain computer manufacturers that
market through direct sales forces. We also expect to face further competition
from new market entrants. In our systems integration business, we compete
primarily on the basis of quality and reliability of services, breadth of
product and service offerings and product and service pricing. In order to be
competitive, we also have to maintain systems integrators and other technically
trained consultants and personnel to compete for customers and to respond to the
demands of our customers. Most of our current and potential competitors in the
systems integration business have greater financial, technical, marketing and
other resources than we have. As a result, these competitors may be able to
better attract customers, respond more quickly to new or emerging technologies
and changes in customer requirements, to devote greater resources to the
development, promotion and sales of their services and products, and to attract
the required systems integrators and other technically trained personnel on
which our systems integration business depends. There can be no assurance that
we will be able to compete effectively against such competitors in the future.
WEBSITE DEVELOPMENT COMPETITION
The market for Internet services is relatively new, intensely
competitive, rapidly evolving and subject to rapid technology change. While
relatively new, this market is already highly competitive and characterized by
an increasing number of entrants who have introduced or developed products and
services similar to those offered by us. We expect competition not only to
persist but to increase. Increased competition may result in price reductions,
reduced margins and loss of customers.
Our competitors in website development include:
- Internet services providers
10
<PAGE>
- large systems integrators
- specialty systems integrators
- strategic consulting firms
- interactive marketing firms
Many of our current and potential competitors in website development
have longer operating histories, larger installed customer bases, greater name
recognition, longer relationships with clients and significantly greater
financial, technical, marketing and public relations resources than we do. We
expect to face additional competition from new market entrants in the future as
the barriers to entry into our business are also relatively low. Our current or
future competitors in web site development may also be better positioned to
address technological and market developments or may react more favorably to
technological changes. We compete on the basis of a number of factors, including
the attractiveness of the Internet services we offer, the breadth and quality of
these services, creative design and systems engineering expertise, pricing,
technological innovation and understanding clients' strategies and needs.
Existing or future competitors may develop or offer strategic Internet services
that provide significant technological, creative, performance, price or other
advantages over the services offered by us. There can be no assurance that we
will be able to compete effectively against such competitors in the future.
STAFFING BUSINESS COMPETITION
Competition in the temporary staffing business is intense. We are in
competition with numerous firms, many of which have far greater financial
resources and more extensive industry relationships than we have. In addition,
many of such organizations have longer operating histories in temporary staffing
than we have, which may afford these firms significant advantages in obtaining
future clients, arranging financing and attracting skilled personnel. We compete
on the basis of client service and responsiveness, and there can be no assurance
that this strategy can continue to be successfully implemented. The human
resource management industry is highly fragmented, with a very large number of
companies providing similar employment services. In addition, we may encounter
substantial competition from new market entrants. Some of our current and future
competitors may be significantly larger, have greater recognition and have
greater financial marketing and other resources than we have. There can be no
assurance that we will be able to compete effectively against such competitors
in the future.
WE ARE DEPENDENT ON OUR TWO EXECUTIVE OFFICERS AND WE WILL NEED MORE PARENT
COMPANY OFFICERS IN THE FUTURE
Our success is dependent upon the continued active participation of
Messrs. Glenn Nortman and Jeffrey Nortman, our Chief Executive Officer and Chief
Operating Officer, respectively. In the event the services of either of these
two individuals is lost for any reason whatsoever, our business, financial
condition and results of operation would be materially adversely effected. We
will also require additional executive-level personnel if we are successful in
growing our businesses. Competition for qualified individuals to fill
executive-level positions, particularly with experience in systems integration,
website development and financial management, can be significant, and we will be
adversely impacted if we cannot add executive-level personnel when our business
requires their services.
OUR STOCK PRICE HAS GONE UP GREATLY RECENTLY AND THERE MAY BE SIGNIFICANT
VOLATILITY IN OUR STOCK PRICE
During 2000 the market price of our common stock has ranged from $1.43
to $19.75, and may continue to experience significant fluctuations. The stock
market in general, and the market for technology companies in particular, has
experienced significant volume and price fluctuations. The trading price of our
common stock has reached historical highs during 2000 and has reflected relative
valuations substantially above historical levels. You may not be able to resell
your shares following periods of volatility because of the market's adverse
reaction to that volatility. We cannot assure that our stock will continue to
trade at the same levels as it has during 2000.
11
<PAGE>
OUR PRINCIPAL STOCKHOLDERS CONTROL A SIGNIFICANT AMOUNT OF OUR VOTING STOCK AND
OUR CERTIFICATE OF INCORPORATION CONTAINS PROVISIONS WHICH COULD LIMIT A CHANGE
IN CONTROL OF 5B TECHNOLOGIES
Our principal stockholders, Glenn Nortman and Jeffrey Nortman, control
approximately 35% of our outstanding common stock. Accordingly, Messrs. Nortman
have a substantial influence on the election all of our directors, and therefore
substantial control of the direction of the affairs of 5B Technologies. In
addition, our stockholders do not have the right to cumulative voting in the
election of directors, which has the effect of making it unlikely that our
public stockholders will be able to cause any director (other than those
nominated by our principal stockholders) to be elected to our Board of
Directors. Our Board of Directors has the authority, without further approval of
our stockholders, to issue shares of our preferred stock, having such rights,
preferences and privileges as our Board of Directors may determine. Any such
issuance of additional shares of preferred stock could, under certain
circumstances, have the effect of delaying or preventing a change in control of
5B Technologies and may adversely affect the rights of our stockholders. In
addition, we are subject to a Delaware statute regulating business combinations
which may also hinder or delay a change in control of the Company.
THE ISSUANCE OF SHARES OF COMMON STOCK UPON THE EXERCISE OF OPTIONS AND WARRANTS
WILL CAUSE DILUTION TO OUR CURRENT STOCKHOLDERS
We are authorized to issue 17,500,000 shares of common stock of which
2,135,500 shares are outstanding. In addition to the shares of our common stock
being offered by this prospectus:
- 512,500 shares are issuable upon the exercise of options under our
stock option plans, and we intend to register the sale of these
shares on a registration statement on Form S-8
- 747,500 shares are issuable upon the exercise of our outstanding
publicly traded class A warrants
- 893,333 shares are issuable upon exercise of other outstanding
warrants, of which an aggregate of 143,333 have been registered
for resale under another registration statement
If and when we issue these shares, the percentage of common stock owned
by each holder of common stock would be diluted. Moreover, the prevailing market
price for the common stock may be materially and adversely affected by the
addition of a substantial number of shares, including the shares offered by this
prospectus, into the market.
WE DO NOT EXPECT TO PAY DIVIDENDS ON OUR STOCK
We have not paid any cash or other dividends on our common stock and do
not expect to declare or pay any cash dividends in the foreseeable future. In
addition, our current credit agreement with our bank restricts the payment of
any dividends without the bank's prior consent.
RISK FACTORS RELATING TO THESE SECURITIES AND THIS OFFERING
The following risks relate specifically to the Series B Preferred
Stock, the Warrants and the effects on our company and our publicly traded
common stock that may occur as a result of the issuance of the common stock
underlying the Series B Preferred Stock and Warrants.
THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE SERIES B
PREFERRED STOCK WILL INCREASE AS THE MARKET PRICE OF OUR COMMON STOCK DECREASES
Each share of the Series B Preferred Stock is convertible, at any time
and from time to time at the election of the selling stockholder, into shares of
our common stock based upon a formula. This formula says that each share of
Series B Preferred Stock converts at any time into shares of our common stock
determined by dividing $1,000 by the lower of either (1) $9.00, or (2) 80% of
the average of the three lowest closing bid prices of our common stock during
the thirty days before the date of conversion. The practical effects of this
conversion formula are:
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<PAGE>
- If the lowest three closing bid prices of our common stock is
above $11.25, then the conversion price is based upon the $9.00
formula
- If the lowest three closing bid prices of our common stock is less
than $11.25, then the conversion price is determined by the 80%
formula
The number of shares of our common stock that may ultimately be issued
upon the conversion of the Series B Preferred Stock cannot be determined,
however, because of the "floating" aspect of the 80% formula (when the lowest
three closing bid prices is less than $11.25). The following table sets forth
the number of shares of common stock that would be issuable upon conversion of
the Series B Preferred Stock at various conversion prices:
<TABLE>
<CAPTION>
SHARES ISSUED UPON PERCENTAGE OF OUTSTANDING
MARKET PRICE CONVERSION PRICE CONVERSION SHARES(1)
-------------------------------- ---------------- ------------------ -------------------------
<S> <C> <C> <C>
$11.25 and above $9.00(2) 111,111 5.2%
$8.4375 (25% less than $11.25) $6.75(3) 148,148 6.9%
$5.625 (50% less than $11.25) $4.50(3) 222,222 10.4%
$3.25 (actual price at 7/20/00) $2.60(3) 384,615 18.0%
$2.8125 (75% less than $11.25) $2.25(3) 444,444 20.8%(4)
</TABLE>
----------
(1) Based upon 2,135,500 shares issued and outstanding.
(2) Any time the market price is at $11.25 or above, the conversion price is
fixed at $9.00.
(3) These amounts are 80% of the related market prices.
(4) The terms of the Series B Preferred Stock do not permit the issuance of
more than 19.9% of our common stock upon the conversion of the
Series B Preferred Stock without obtaining all approvals, including the
obtaining of our stockholders' approval, required by the Nasdaq Stock
Market. This is more fully described below under the caption "Selling
Stockholder-Description of Series B Preferred Stock-Limitations on Issuances
of Shares of Common Stock."
THE VARIABLE CONVERSION PRICE FORMULA OF THE SERIES B PREFERRED STOCK COULD
NEGATIVELY AFFECT OUR COMMON STOCK
The following are special risks which result from the variable
conversion price formula of the Series B Preferred Stock:
- Reduction in Stock Price. At any time when our common stock trades
at a price less than $11.25 per share, the Series B Preferred
Stock will be convertible into shares of our common stock at a
variable rate based on future trading prices of our common stock
and events that may occur in the future. The number of shares of
common stock issuable upon conversion of the Series B Preferred
Stock will be inversely proportional to the market price of the
common stock at the dates upon which the conversion price may be
determined.
- Effect of Additional Shares in Market. To the extent that holder
of the Series B Preferred Stock converts and then sell its common
stock in the open market, our common stock price may decrease due
to the additional shares in the market, possibly allowing the
holder to convert the additional shares of Series B Preferred
Stock into greater amounts of common stock, further depressing the
stock price.
- Impact of Dilution. The additional shares of our common stock
issued upon conversion of the Series B Preferred Stock would
dilute the percentage interest of each of our existing common
13
<PAGE>
stockholders, and this dilution would increase as more shares of
common stock are issued due to the impact of the variable
conversion price. Each additional issuance of shares upon
conversion would increase the supply of shares in the market and,
as a result, may cause the market price of our common stock to
decline. The effect of this increased supply of common stock
leading to a lower market price may be magnified if there are
sequential conversions of the Series B Preferred Stock.
- Possible Nasdaq Delisting. In order for our common stock to retain
its listing on the Nasdaq SmallCap Market, various maintenance
tests must be met by 5B Technologies. In particular, the minimum
bid price of our common stock must be $1.00 or more. If the
cumulative effect of the foregoing negative affects on our common
stock resulting from the variable conversion price formula of the
Series B Preferred Stock was to cause the price of the common
stock to trade at levels below $1.00, our common stock could be
subject to delisting, after which trading would only be conducted
in the over-the-counter market in the "pink sheets" or on the NASD
OTC Bulletin Board.
CERTAIN OF OUR AGREEMENTS WITH THE SELLING STOCKHOLDER MAY MAKE RAISING
ADDITIONAL FINANCINGS DIFFICULT
In connection with our sale to the selling stockholder of the Series B
Preferred Stock and Warrants, we made certain agreements with the selling
stockholder which are described in detail in this prospectus under the caption
"Selling Stockholder-Description of Series B Preferred Stock-Description of
Certain Agreements with the Selling Stockholder." In general, these agreements
are:
- We agreed to not sell securities senior to the Series B Preferred
Stock
- We agreed not to sell any of our shares (except for specifically
listed types of sales) for 270 days after the registration
statement of which this prospectus is a part becomes effective
- We agreed to limit granting registration rights to others
Although the selling stockholder may permit us to engage in any of the
foregoing activities, we have no agreement or understanding that any such
permission will be granted in the future. Unless the selling stockholder did
permit us to take any or all of the foregoing actions we may be severely
restricted in our ability to raise additional capital when we require funding to
implement our business plan, make acquisitions, fund working capital, or
otherwise.
USE OF PROCEEDS
We will not realize any proceeds from the sale of the shares pursuant
to this prospectus, but will derive proceeds of $1,000,000 if the Warrants are
exercised in full. Such proceeds will be available to us for working capital and
general corporate purposes.
SELLING STOCKHOLDER
GENERAL
The following table sets forth:
(1) the name of the selling stockholder,
(2) the nature of any position, office or other material relationship
which such selling stockholder has had with us or any of our
affiliates within the last three years,
(3) the number of shares of common stock owned by such selling
stockholder prior to the offering,
(4) the number of shares of common stock offered for such selling
stockholder's account, and
14
<PAGE>
(5) the number of shares of common stock and the percentage owned by
such selling stockholder after completion of the offering.
<TABLE>
<CAPTION>
Number
Number of of Shares
Shares Number of Owned Percentage
Relationship to Owned Prior to Shares After Owned After
Selling Stockholder Company Offering to be Sold Offering Offering
------------------- --------------- --------------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
La Vista Investors LLC(1) Equity Investor in 1,075,913(2) 1,075,913(2) 0 --
5B Technologies
</TABLE>
----------
(1) La Vista Investors LLC is a private investment fund that is owned by all of
its investors and managed by WEC Asset Management LLC. WEC Asset Management
LLC has voting and investment control over the shares owned by La Vista
Investors LLC. Messrs. Ethan Benovitz, Jaime Hartman, Mark Nordlicht and
Daniel Saks are the managing members and controlling persons of WEC Asset
Management LLC.
(2) This number equals the number of shares of common stock underlying the
Warrants plus the number of shares issuable to the selling stockholder
pursuant to the formula set forth in the Certificate of Designations of the
Series A Preferred Stock, calculated as of June 1, 2000. The actual number
of shares of Common Stock issuable upon conversion of the Series B Preferred
Stock will depend upon the calculation of the conversion formula at the time
or times the selling stockholder converts such shares of Series B Preferred
Stock.
The selling stockholder was initially introduced to us in March
2000 by Institutional Finance Group, Inc., and Banyan Investment Advisors,
Inc., a registrant broker-dealer. Prior to such initial introduction, we had
no relationship of any nature with the selling stockholder.
Once the selling stockholder was introduced to us, neither
Institutional Finance Group, Inc. nor Banyan Investment Advisors, Inc.
participated in the transaction, and in particular did not (A) participate in
document preparation or marketing of the securities purchased by the selling
stockholder, (B) conduct due diligence, (C) perform services or analyses for us
or the selling stockholder, or (D) give advice on how the private placement with
the selling stockholder should be structured.
We originally had an Engagement Agreement with Banyan Investment
Advisors, Inc. under which Banyan was to assist us in identifying financing
opportunities. Banyan, in turn, sought the further assistance of Institutional
Finance Group, Inc. and it was Institutional Finance Group, Inc. that introduced
us to the selling stockholder. Pursuant to an amendment to our original
Engagement Agreement, in respect of Banyan's and Institutional Advisor's success
in finding the selling stockholder, we paid (A) total cash consideration equal
to 8% of the private placement (or $80,000), which was paid $50,000 to
Institutional Advisors and $30,000 to Banyan, and (B) total warrant compensation
of 1% of the private placement (or 10,000 warrants), which was paid 6,000
warrants to Institutional Advisors and 4,000 warrants to Banyan. The amount of
compensation paid to Banyan and Institutional Advisors was proposed to us by
Banyan and Institutional Advisors as compensation comparable to levels of
compensation paid to other finders in similar transactions. We, in turn,
determined that the amount we paid Banyan and Institutional Advisors was fair
and within the scope of compensatory arrangements for other similar financings.
DESCRIPTION OF SERIES B PREFERRED STOCK
On April 17, 2000, we completed a private placement transaction
in which we sold to the selling stockholder (A) 1,000 shares of our 6%
Convertible Series A Preferred Stock (the "Series A Preferred Stock"), and
(B) common stock purchase Warrants to purchase an aggregate of 100,000 shares
of our common stock, for an aggregate cash investment by the selling
stockholder of $1,000,000. Following the issuance of the Series A Preferred
15
<PAGE>
Stock, the holders of the Series A Preferred Stock and the Company agreed
to exchange the Series A Preferred Stock for the Series B Preferred Stock on
a one-for-one basis. The terms of the Series A Preferred Stock were identical
to those of the Series B Preferred Stock except that the holders of the
Series A Preferred Stock had the right to vote together with the holders of
Common Stock as a single class. The following is a summary of the material
terms of the Series B Preferred Stock and the complete terms can be obtained
by reviewing Exhibit 3.3 of the registration statement of which this
prospectus forms a part or by contacting us at the address set forth on page
1 of this prospectus.
CONVERSION. Each share of the Series B Preferred Stock is convertible,
at any time and from time to time at the election of the selling stockholder,
into shares of our common stock based upon a formula. This formula says that
each share of Series B Preferred Stock converts at any time into shares of our
common stock determined by dividing $1,000 by the lower of either (1) $9.00, or
(2) 80% of the average of the three lowest closing bid prices of our common
stock during the thirty days before the date of conversion. The practical
effects of this conversion formula are:
- If the lowest three closing bid prices of our common stock is
above $11.25, then the conversion price is based upon the $9.00
formula
- If the lowest three closing bid prices of our common stock is less
than $11.25, then the conversion price is determined by the 80%
formula
The number of shares of our common stock that may ultimately be issued
upon the conversion of the Series B Preferred Stock cannot be determined,
however, because of the "floating" aspect of the 80% formula (when the lowest
three closing bid prices is less than $11.25). The following table sets forth
the number of shares of common stock that would be issuable upon conversion of
the Series B Preferred Stock at various conversion prices:
16
<PAGE>
<TABLE>
<CAPTION>
Shares Issued Upon Percentage of Outstanding
Market Price Conversion Price Conversion Shares(1)
------------------------------- ---------------- ------------------ -------------------------
<S> <C> <C> <C>
$11.25 and above $9.00(2) 111,111 5.2%
$8.4375 (25% less than $11.25) $6.75(3) 148,148 6.9%
$5.625 (50% less than $11.25) $4.50(3) 222,222 10.4%
$3.25 (actual price at 7/20/00) $2.60(3) 384,615 18.0%
$2.8125 (75% less than $11.25) $2.25(3) 444,444 20.8%(4)
</TABLE>
----------
(1) Based upon 2,135,500 shares issued and outstanding.
(2) Any time the market price is at $11.25 or above, the conversion price is
fixed at $9.00.
(3) These amounts are 80% of the related market prices.
(4) The terms of the Series B Preferred Stock do not permit the issuance of
more than 19.9% of our common stock upon the conversion of the
Series B Preferred Stock without obtaining all approvals, including the
obtaining of our stockholders' approval, required by the Nasdaq Stock
Market. This is more fully described below under the caption "Limitations on
Issuances of Shares of Common Stock."
The variable conversion price formula of the Series B Preferred Stock
could negatively affect our common stock as follows:
- Reduction in Stock Price. At any time when our common stock trades
at a price less than $11.25 per share, the Series B Preferred
Stock will be convertible into shares of our common stock at a
variable rate based on future trading prices of our common stock
and events that may occur in the future. The number of shares of
common stock issuable upon conversion of the Series B Preferred
Stock will be inversely proportional to the market price of the
common stock at the dates upon which the conversion price may be
determined.
- Effect of Additional Shares in Market. To the extent that holder
of the Series B Preferred Stock converts and then sell its common
stock in the open market, our common stock price may decrease due
to the additional shares in the market, possibly allowing the
holder to convert the additional shares of Series B Preferred
Stock into greater amounts of common stock, further depressing the
stock price.
- Impact of Dilution. The additional shares of our common stock
issued upon conversion of the Series B Preferred Stock would
dilute the percentage interest of each of our existing common
stockholders, and this dilution would increase as more shares of
common stock are issued due to the impact of the variable
conversion price. Each additional issuance of shares upon
conversion would increase the supply of shares in the market and,
as a result, may cause the market price of our common stock to
decline. The effect of this increased supply of common stock
leading to a lower market price may be magnified if there are
sequential conversions of the Series B Preferred Stock.
- Possible Nasdaq Delisting. In order for our common stock to retain
its listing on the Nasdaq SmallCap Market, various maintenance
tests must be met by 5B Technologies. In particular, the minimum
bid price of our common stock must be $1.00 or more. If the
cumulative effect of the foregoing negative affects on our common
stock resulting from the variable conversion price formula of the
Series B Preferred Stock was to cause the price of the common
stock to trade at levels below $1.00, our common stock could be
subject to delisting, after which trading would only
17
<PAGE>
be conducted in the over-the-counter market in the "pink sheets"
or on the NASD OTC Bulletin Board.
In addition to the right of the selling stockholder to voluntarily
convert its Series B Preferred Stock into shares of our common stock, all
unconverted shares of the Series B Preferred Stock will automatically convert
into shares of common stock, at the then-applicable conversion formula, on
April 17, 2003.
REDEMPTION. We may be obligated to redeem the Series B Preferred Stock
in two types of situations: (1) if the number of shares issued upon conversion
of the Series B Preferred Stock were to exceed 19.9% of our outstanding common
stock, and (2) if we fail to conclude certain required actions of if certain
enumerated events were to occur.
- If the Underlying Shares Exceed 19.9%. If the number of shares of
common stock issued upon conversion of the Series B Preferred
Stock and in lieu of cash dividends (see below for a description
of this concept) exceeds 19.9% of our outstanding common stock, we
must take, at our option, one of two actions:
- redeem all of the remaining shares of Series B Preferred
Stock at a price equal to 120% of the Liquidation Preference
(see below for a description of this concept), or
- call a special meeting of our stockholders to approve of the
issuance of the common stock (and any other matters requiring
stockholder approval under the applicable rules of the Nasdaq
Stock Market) and use our best efforts to obtain such
approval
We cannot predict which of the foregoing two alternatives we will
elect. In any event, our ability to elect the first alternative (i.e., make a
redemption at 120% of the Liquidation Value of the Series B Preferred Stock)
will depend on numerous factors in the future, including whether we have
sufficient funds to make such redemption.
- Failure to Conclude Actions/Occurrence of Events. We will be
required to redeem the outstanding Series B Preferred Stock if any
of the following events (among others) were to happen (unless the
selling stockholder at the time agreed with us otherwise):
- if the registration statement of which this prospectus is a
part is not effective by September 27, 2000
- if we breach the terms of the Series B Preferred Stock and do
not cure such breach within 10 days of notice to us of such
breach
- if we become bankrupt by court order or if we voluntarily
institute bankruptcy proceedings or if other similar events
occur
- if we default under any of our material contracts in our
businesses or lose a final judgment, where the default or
judgment is in excess of $250,000
- if there is a "Change of Control" (as defined)
LIMITATIONS ON ISSUANCES OF SHARES OF COMMON STOCK. The terms of the
Series B Preferred Stock contain two limitations on when we can issue shares
of our common stock when the selling stockholder seeks to convert the Series B
Preferred Stock. These limitations are as follows:
- 19.9% Limitation. Rule 4310(c)(25)(G)(i) of the Nasdaq Stock
Market requires us to obtain stockholder approval if we want to
issue 20% or more of our common stock at less than the market
value of the common stock (other than in a public offering). In
every case the conversion of the Series B Preferred Stock will
result in a below-market-value issuance of our common stock to the
selling stockholder, and we, therefore, cannot issue 20% (or more)
of our common stock to the
18
<PAGE>
selling stockholder even if the floating conversion formula
described above would result in such an issuance.
To address this issue in advance, the Series B Preferred Stock provides
that no issuances of common stock which would require prior stockholder approval
(as a result of the 20% share issuance restriction or for any other reason
mandated by the Nasdaq Stock Market) may be made without our first obtaining
stockholder approval. If the "floating" conversion formula were, in fact, to
result in 20% (or more) of our common stock being issued to the selling
stockholder, the Series B Preferred Stock requires that we take, at our option,
one of two actions:
- redeem all of the remaining shares of Series B Preferred
Stock at a price equal to 120% of the Liquidation Preference
(see below for a description of this concept), or
- call a special meeting of our stockholders to approve of the
issuance of the common stock (and any other matters requiring
stockholder approval under the applicable rules of the Nasdaq
Stock Market) and use our best efforts to obtain such
approval
We cannot predict which of the foregoing two alternatives we will
elect. In any event, our ability to elect the first alternative (i.e., make a
redemption at 120% of the Liquidation Value of the Series B Preferred Stock)
will depend on numerous factors in the future, including whether we have
sufficient funds to make such redemption.
- 4.999% Limitation. The terms of the Series B Preferred Stock
provide that the selling stockholder may not convert the Series B
Preferred Stock and/or receive shares of common stock in lieu of
dividends if such conversion and/or receipt would result in the
selling stockholder beneficially owning in excess of 4.999% of the
then issued and outstanding shares of our common stock. This
provision also provides that the selling stockholder may waive
this restriction with 61 days prior notice to us. The practical
effect of this provision will allow the selling stockholder to
control the amount of its share ownership so that it can determine
when and if it will be required to file certain ownership reports
of our common stock under Section 13(d) of the Securities Exchange
Act of 1934 (which requires any person beneficially owning 5.0% or
more of our common stock to file reports with the SEC).
VOTING. The Series B Preferred Stock is not entitled to vote
together with the holders of Common Stock as a single class.
DIVIDENDS. Holders of the Series B Preferred Stock are entitled to
receive a preferential cumulative dividend of $60 per share per year (or an
aggregate of $60,000 per year). The dividends payable on the Series B Preferred
Stock may be paid by us, at our option, either in cash or in shares of our
common stock. If we elect to pay these dividends in shares of our common stock,
the result will be that additional shares of common stock will be issued and
there will be further dilution to our other stockholders. Further, the
registration statement of which this prospectus is a part has registered shares
of our common stock which may be issued as such dividends, and such shares may
therefore be sold into the market which may result in further depression of our
common stock price.
LIQUIDATION. Upon liquidation of 5B Technologies, the holders of the
Series B Preferred Stock will be entitled to receive a liquidation payment,
before any payment is made to the holders of our common stock, equal to $1,000
per share (or $1,000,000 in the aggregate) plus any accrued and unpaid
dividends.
SINKING FUND. There is no sinking fund for the payment of dividends or
liquidation preference on the Series B Preferred Stock.
19
<PAGE>
DESCRIPTION OF WARRANTS
On April 17, 2000, we completed a private placement transaction
in which we sold to the selling stockholder (A) 1,000 shares of our 6%
Convertible Series A Preferred Stock, and (B) common stock purchase Warrants
to purchase an aggregate of 100,000 shares of our common stock, for an
aggregate cash investment by the selling stockholder of $1,000,000. Following
the issuance of the Series A Preferred Stock, the holders of the Series A
Preferred Stock and the Company agreed to exchange the Series A Preferred
Stock for the Series B Preferred Stock on a one-for-one basis. The terms of
the Series A Preferred Stock were identical to those of the Series B
Preferred Stock except that the holders of the Series A Preferred Stock were
entitled to vote together with the holders of Common Stock as a single class.
The following is a summary of the material terms of the Warrants, and the
complete terms can be obtained by reviewing Exhibit 4.6 of the registration
statement of which this prospectus forms a part or by contacting us at the
address set forth on page 1 of this prospectus.
The Warrants permit the selling stockholders to acquire, at any time
and from time to time until April 17, 2005, up to 100,000 shares of our common
stock at an original exercise price of $10.00 per share. The Warrants do not
permit cashless exercises. The shares of our common stock issuable upon exercise
of the Warrants are registered in the registration statement of which this
prospectus is a part. We will derive proceeds of $1,000,000 if the Warrants are
exercised in full.
The Warrants contain a "reset" provision under which the $10.00
exercise price may be decreased (and then any such decreased exercise price may
be successively decreased) if we sell any common stock, or any rights, options
or warrants to all holders of record of our common stock entitling all holders
to subscribe for or purchase shares of our common stock, below the "Market
Price" of our common stock. The "Market Price" is, generally, the closing bid
price on the Nasdaq Stock Market (or in the over-the-counter market if our
common stock is not traded on Nasdaq).
By way of example, under this "reset" provision, if the $10.00 exercise
is still in effect and we were to issue 100,000 shares of common stock at $5.00
per share at a time when the Market Price was $8.00 and our 2,135,500 shares of
common stock were outstanding, the $10.00 exercise price would be reset to $9.83
per share. In addition, this new "reset" exercise price of $9.83 per share would
be subsequently reset (and that new reset exercise price subsequently reset,
etc.) each time we were to sell common stock below the Market Price. This
"reset" provision has the effect of potentially reducing the cost of the shares
of common stock issuable upon exercise of the Warrants to a price substantially
below the original $10.00 per share exercise price, which could result in the
selling stockholder being able to acquire our common stock at a price
substantially below the then-market price of our common stock.
DESCRIPTION OF CERTAIN AGREEMENTS WITH THE SELLING STOCKHOLDER
We have agreed to the following important matters with the selling
stockholder:
REGISTRATION RIGHTS. We agreed with the selling stockholder to register
the shares of common stock issuable (A) upon conversion of the Series B
Preferred Stock, (B) upon exercise of the Warrants, and (C) in lieu of cash
dividends. Because we do not know how many shares of common stock we will
ultimately issue upon conversion of the Series B Preferred Stock (due to the
"floating" conversion formula) and since we are not able to predict how many
shares of common stock we will issue in lieu of cash dividends, we agreed to
register hereunder that number of shares of common stock equal to two times the
maximum number of shares of common stock issuable upon conversion of the Series
B Preferred Stock (based upon the conversion formula contained in the Series B
Preferred Stock on the date of the initial registration) and upon exercise of
the Warrants. These shares of our common stock are those offered by this
prospectus.
We will pay all expenses required to comply with our registration
obligations, other than the selling stockholder's brokerage or similar
commissions or expenses.
We are obligated to keep the selling stockholder's shares registered
for resale until the earlier of (A) the date when all of the selling
stockholder's shares are sold, (B) the date when the selling stockholder's
shares are all eligible to be sold without registration under applicable
securities laws, and (C) 24 months from the date the registration statement of
which this prospectus is a part is declared effective.
We have agreed to use our best efforts to file the registration
statement covering the selling stockholder's shares by May 17, 2000 and to
complete the registration of the selling stockholder's shares by no
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<PAGE>
later than July 17, 2000. If we fail to timely complete such filing, or if the
registration statement is not completed in time, or if certain other enumerated
events occur, we are obligated to pay the selling stockholder an aggregate
$20,000 per month until we satisfy our obligations.
LIMITATION ON SENIOR SHARE SALES. We agreed with the selling
stockholder that, without its consent, we will not issue any of our shares with
provisions which would be senior or superior to the Series B Preferred Stock.
This limitation may in the future impede us in efforts to raise additional
capital at times when we require funding to implement our business plan, make
acquisitions, fund working capital, or otherwise.
LIMITATION ON SALES OF ADDITIONAL SHARES. We agreed with the selling
stockholder that, without its consent, for a period of 270 days from the date
the registration statement of which this prospectus is a part is declared
effective, we will not sell any of our securities. We are, however, permitted to
sell our securities in certain listed situations, including in a public offering
of $7,000,000 or more; in acquisitions; and upon exercise of options under our
option plans and other outstanding options, warrants and other rights. Until the
expiration of this 270 day period, we will not be able to raise additional funds
through the sale of our securities (unless we obtain the selling stockholder's
consent) which will impede us in efforts to raise additional capital at times
when we require funding to implement our business plan, make acquisitions, fund
working capital, or otherwise.
RIGHT TO FIRST REFUSAL. We agreed with the selling stockholder that
until October 17, 2001, if we want to sell any of our securities to a
prospective investor, we must first notify the selling stockholder. The selling
stockholder then has the right to elect to buy all (but not less than all) of
the securities we want to sell to the prospective investor on the same terms and
conditions we would have sold the securities to such prospective investor.
LIMITATIONS OF GRANTING REGISTRATION RIGHTS. We agreed with the selling
stockholder that we cannot have any other registration statement registering our
securities become effective until the registration statement of which this
prospectus is a part has been effective for six consecutive months (with the
exception of certain listed registration statements). We also agreed with the
selling stockholder that we will not file any registration statement (or have a
registration declared effective) that registers any of our securities we were to
issue in connection with any acquisitions or financings in the future until the
later of (A) 270 days after the registration statement of which this prospectus
is a part is declared effective, and (B) the date when the registration
statement has been effective for at least 270 days (which need not be
consecutive). These restrictions on our registering any of our shares is likely
to impede us in efforts to raise additional capital at times when we require
funding to implement our business plan, make acquisitions, fund working capital,
or otherwise.
PLAN OF DISTRIBUTION
We will receive no part of the proceeds of any sales made hereunder. We
will pay all expenses of registration incurred in connection with this offering
and in connection with the offering and sale of the shares, other than
commissions, discounts and fees of underwriters, dealers or agents. All selling
and other expenses incurred by the selling stockholder will be borne by the
selling stockholder.
The selling stockholder and any broker-dealers participating in the
distribution of the shares may be deemed to be "underwriters" within the meaning
of the Securities Act of 1933, and any commissions or discounts given to any
such broker-dealer may be regarded as underwriting commissions or discounts
under that Act.
The selling stockholder may from time to time sell all or a portion of
the shares on the Nasdaq SmallCap Market or on any national securities exchange
on which our common stock may be listed or traded, in negotiated transactions or
otherwise, at prices then prevailing or related to the then current market price
or at negotiated prices. The shares will not be sold in an underwritten public
offering. The shares may be sold directly or through brokers or dealers. The
methods by which the shares may be sold include:
(1) a block trade (which may involve crosses) in which the broker or
dealer so engaged will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to
facilitate the transaction;
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<PAGE>
(2) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus;
(3) ordinary brokerage transactions and transactions in which the
broker solicits purchasers; and
(4) privately negotiated transactions.
In effecting sales, brokers and dealers engaged by the selling
stockholder may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from the selling stockholder (or,
if any such broker-dealer acts as agent for the purchaser of such shares, from
such purchaser) in amounts to be negotiated which are not expected to exceed
those customary in the types of transactions involved. Broker-dealers may agree
with the selling stockholder to sell a specified number of such shares at a
stipulated price per share, and, to the extent such broker-dealer is unable to
do so acting as agent for a selling stockholder, to purchase as principal any
unsold shares at the price required to fulfill the broker-dealer commitment to
such selling stockholder. Broker-dealers who acquire shares as principal may
thereafter resell such shares from time to time in transactions (which may
involve crosses and block transactions and sales to and through other
broker-dealers, including transactions of the nature described above) in the
over-the-counter market or otherwise at prices and on terms then prevailing at
the time of sale, at prices then related to the then-current market price or in
negotiated transactions and, in connection with such resales, may receive from
the purchasers of such shares commissions as described above.
In connection with the distribution of the shares, the selling
stockholder may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the shares in the course of hedging the positions they assume with the selling
stockholder. The selling stockholder may also sell the shares short and
redeliver the shares to close out the short positions. The selling stockholder
may also enter into option or other transactions with broker-dealers, which
require the delivery to the broker-dealer of the shares. The selling stockholder
may also loan or pledge the shares to a broker-dealer and the broker-dealer may
sell the shares so loaned or upon a default the broker-dealer may effect sales
of the pledged shares. In addition to the foregoing, the selling stockholder may
enter into, from time to time, other types of hedging transactions.
The selling stockholder and any broker-dealers participating in the
distributions of the shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933 and any profit on the
sale of shares by the selling stockholder and any commissions or discounts given
to any such broker-dealer may be deemed to be underwriting commissions or
discounts under that Act.
The shares may also be sold pursuant to Rule 144 under the Securities
Act of 1933 beginning (A) one year after the shares underlying the Warrants are
issued and (B) April 18, 2001 with respect to the shares issuable upon
conversion of the Series B Preferred Stock.
We have advised the selling stockholder that, during such time as it
may be engaged in a distribution of any of the shares or our common stock being
offered by this prospectus, it is required to comply with Regulation M
promulgated under the Securities Exchange Act of 1934. In general, Regulation M
precludes any selling stockholder, any affiliated purchasers and any
broker-dealer or other person who participates in such distribution from bidding
for or purchasing, or attempting to induce any person to bid for or purchase,
any security which is the subject of the distribution until the entire
distribution is complete. Regulation M defines a "distribution" as an offering
of securities that is distinguished from ordinary trading activities by the
magnitude of the offering and the presence of special selling efforts and
selling methods. Regulation M also defines a "distribution participant" as an
underwriter, prospective underwriter, broker, dealer or other person who has
agreed to participate, or who is participating, in a distribution.
Regulation M prohibits any bids or purchases made in order to stabilize
the price of a security in connection with the distribution of that security,
except as specifically permitted by Rule 104 of Regulation M. These stabilizing
transactions may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. We have advised the selling
stockholder that stabilizing transactions permitted by Regulation M allow bids
to purchase our common stock so long as the stabilizing bids do not exceed a
specified maximum, and that Regulation M specifically prohibits stabilizing that
is the result of fraudulent, manipulative or deceptive practices. The selling
stockholder and distribution participants will be required to consult with their
own legal counsel to ensure compliance with Regulation M.
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<PAGE>
In addition to the restrictions provided under Regulation M, we have
advised the selling stockholder that, pursuant to the Securities Exchange Act of
1934, any person engaged in a distribution of our common stock being offered by
this prospectus may not simultaneously engage in market making activities for
our common stock during the applicable "cooling off" periods prior to the
commencement of such distribution.
LEGAL MATTERS
Our counsel, Piper Marbury Rudnick & Wolfe LLP, New York, New York,
will issue an opinion to us on certain legal matters relating to the shares of
common stock.
EXPERTS
Our consolidated financial statements for the year ended December 31,
1999, incorporated by reference in this prospectus, have been audited by BDO
Seidman, LLP, independent certified public accountants, to the extent and for
the period set forth in their report incorporated herein by reference, and is
incorporated herein in reliance upon such report given upon the authority of
said firm as experts in accounting and auditing.
Our consolidated financial statements for the years ended December 31,
1998 and 1997, incorporated by reference in this prospectus, have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and have been incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
and giving said report.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth our estimates (other than the Securities
and Exchange Commission registration fee and the Nasdaq SmallCap Market
additional shares listing fee) of the expenses to be incurred in connection with
the issuance and distribution of the shares of Common Stock being registered:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee $ 1,243.40
Printing and engraving expenses 2,000.00*
Legal fees and expenses 5,000.00*
Accounting fees and expenses 5,000.00*
Transfer agent and registrar fees 2,000.00*
Miscellaneous expenses 2,256.60*
-----------
Total $17,500.00*
-----------
-----------
</TABLE>
----------
* estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Certificate of Incorporation includes a provision that eliminates
the personal liability of our directors to us or our stockholders for monetary
damages for breach of fiduciary duty as a director to the maximum extent
permitted by the Delaware General Corporation Law ("DGCL"). The DGCL does not
permit liability to be eliminated (i) for any breach of one of our director's
duty of loyalty to 5B Technologies or our stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) for unlawful payments of dividends or unlawful stock
repurchases or redemptions, as provided in Section 174 of the DGCL, or (iv) for
any transaction for which one of our directors derived an improper personal
benefit. Our Certificate of Incorporation also provides that 5B Technologies
shall indemnify our directors and executive officers to the fullest extent
permitted by the DGCL, including those circumstances in which indemnification
would otherwise be discretionary, subject to certain exceptions. Our Certificate
of Incorporation also provides that 5B Technologies will advance expenses to
directors and executive officers incurred in connection with an action or
proceeding as to which they may be entitled to indemnification, subject to
certain exceptions.
Section 145 of the DGCL provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was a
director, officer, employee or agent of 5B Technologies or is or was serving at
our request in such capacity in another corporation or business association,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of 5B
Technologies, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
We have entered into indemnification agreements with certain of our
directors and executive officers that provide the maximum indemnity allowed to
directors and executive officers by the DGCL and our Certificate of
Incorporation, subject to certain exceptions as well as certain additional
procedural protections. In addition, the indemnification agreements provide
generally that we will advance expenses incurred by directors
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<PAGE>
and executives officers in any action or proceeding as to which they may be
entitled to indemnification, subject to certain exceptions.
The indemnification provisions in our Certificate of Incorporation and
the indemnity agreements entered into between us and certain of our directors
and executive officers may permit indemnification for liabilities arising under
the Securities Act of 1933. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officer and
controlling persons of 5B Technologies pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
****2.1 - Agreement and Plan of Merger, dated as of February 11,
2000, by and among Paramount Financial Corporation, 5B
Technologies Corporation and Paramount Merger
Corporation
*****3.1 - Certificate of Incorporation of the Registrant
*****3.2 - By-laws of the Registrant
******3.3 - Certificate of Designations of Series A 6% Convertible
Preferred Stock of 5B Technologies Corporation, filed
with the Secretary of State of the State of Delaware on
April 14, 2000.
++3.4 - Certificate of Designations of Series B 6% Convertible
Preferred Stock of 5B Technologies Corporation.
*4.1 - Specimen Common Stock Certificate
*4.2 - Form of Underwriter's Unit Purchase Option, as amended
*4.3 - Form of Class A and Class B Warrant Agreement, as
amended
*4.4 - Specimen Class A Warrant Certificate
*4.5 - Specimen Class B Warrant Certificate
******4.6 - Common Stock Purchase Warrant, dated April 17, 2000,
issued to La Vista Investors LLC by 5B Technologies
Corporation
+5.1 - Opinion of Piper Marbury Rudnick & Wolfe LLP
*10.1 - Employment Agreement between Registrant and Jeffrey
Nortman dated as of January 22, 1996
*10.2 - Employment Agreement between Registrant and Glenn
Nortman dated as of January 22, 1996
10.3 - Intentionally Omitted
*10.4 - Form of Master Lease Agreement relating to Computer
Equipment Leases
*10.5 - 1995 Stock Option Plan
**10.6 - Stock Purchase Agreement dated January 6, 1998 by and
among Paramount Financial Corporation and Lawrence P.
Kagan and Steven Lippel relating to Deltaforce Personnel
Services, Inc.
*10.7 - Form of Indemnification Agreement
*10.8 - Sublease Agreement, dated September 15, 1995, between
the Company and Lehman Brothers Inc.
*10.9 - Consent to Sublease, dated September 15, 1995, among
Chasco Company, Lehman Brothers Inc. and the Company
*10.10 - 1995 Director Option Plan
***10.11 - Stock Purchase Agreement dated October 23, 1998 between
the Registrant and Abbey, Garrett & Seth, Ltd. relating
to Comptech Resources, Inc.
***10.12 - Asset Purchase Agreement dated July 28, 1998 between the
Registrant and RBW Staffing Services, Inc. relating to
WordSmiths
</TABLE>
25
<PAGE>
<TABLE>
<S> <C>
******10.13 - Securities Purchase Agreement, dated April 17, 2000, by
and between 5B Technologies Corporation and La Vista
Investors LLC
******10.14 - Registration Rights Agreement, dated April 17, 2000, by
and between 5B Technologies Corporation and La Vista
Investors LLC
*******10.15 - Purchase Agreement, dated May 2, 2000, by and between
Paramount Operations Inc. (a wholly -owned subsidiary of
5B Technologies Corporation) and Stamford Computer
Group, Inc.
*****21 - List of Subsidiaries
+23.1 - Consent of Piper Marbury Rudnick & Wolfe LLP (included
in Exhibit 5.1)
++23.2 - Consent of BDO Seidman, LLP
++23.3 - Consent of Arthur Andersen LLP
++24 - Power of attorney (included on the signature page to
this registration statement).
</TABLE>
----------
+ Previously filed.
++ Filed herewith.
* Incorporated by Reference from the Registrant's Registration Statement
on Form S-1, Registration No. 33-96382.
** Incorporated by reference from the Registrant's Form 10-K for the year
ended December 31, 1997.
*** Incorporated by reference from the Registrant's Form 10-K for the year
ended December 31, 1998.
**** Incorporated by reference from the Registrant's Form 8-K filed on
February 15, 2000.
***** Incorporated by reference from the Registrant's Form 10-K for the year
ended December 31, 1999.
****** Incorporated by reference from the Registrant's Form 8-K filed on April
28, 2000.
******* Incorporated by reference from the Registrant's Form 8-K filed on May
17, 2000.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
26
<PAGE>
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
do not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 1 to this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jericho, State of New
York, on this 11th day of August, 2000.
5B TECHOLOGIES CORPORATION
By: /s/GLENN NORTMAN
---------------------------
Glenn Nortman
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/GLENN NORTMAN Chief Executive Officer August 11, 2000
--------------------- and Director
Glenn Nortman (Principal Executive Officer)
/s/JEFFREY NORTMAN Chief Operating Officer August 11, 2000
--------------------- and Director
Jeffrey Nortman
/s/ANTHONY FERNANDEZ Director of Finance August 11, 2000
-------------------- (Principal Financial
Anthony Fernandez Officer and Principal
Accounting Officer)
* Director August 11, 2000
--------------------
William H. Kelly
28
<PAGE>
* Director August 11, 2000
--------------------
Larry Austin
*By:/s/GLENN NORTMAN
----------------
Glenn Nortman
Attorney-in-Fact
29
