<PAGE>
As filed with the Securities and Exchange Commission on July 31, 2000
Registration No. 333-38840
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------------------------
Amendment No. 2
to
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------------------------------------------
MICROWARE SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
IOWA 98-0169495
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1500 NORTHWEST 118TH STREET, DES MOINES, IOWA 50325
(515) 223-8000
(Address, including zip code, and telephone number,
including area code of registrant's principal executive offices)
KENNETH B. KAPLAN
MICROWARE SYSTEMS CORPORATION
1500 NORTHWEST 118TH STREET
DES MOINES, IOWA 50325
(515) 223-8000
(Name, address and telephone number of agent for service)
Copies to:
Arthur Don, Esq.
D'Ancona & Pflaum
111 E. Wacker Drive, Ste. 2800
Chicago, Illinois 60601
(312) 602-2000
FAX (312) 602-3000
---------------------------------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
================================================================================
<PAGE>
[Registration Cover Page Continued]
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 only 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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Title of Securities to be Amount to be Proposed maximum Proposed maximum Amount of
registered registered offering price per aggregate offering Registration fee
share price
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5,122,078
Common Stock See notes (1) (2) $2.1875 (4) $11,204,545 (4) $2,958 (4)
----------------------------------------------------------------------------------------------------------------------
Common Stock 668,556 (2) (3) $2.1875 (4) $1,462,467 (4) $387 (4)
----------------------------------------------------------------------------------------------------------------------
Total Securities to be
Registered and Registration
Fee 5,790,634 $3,345 (5)
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to the terms of a Securities Purchase Agreement, the
number of shares to be registered represents two hundred percent (200%) of the
following: (a) 891,342 shares issuable upon conversion of the Series I
Preferred Stock held by the selling shareholders, calculated by multiplying
the number of shares of Series I Preferred Stock outstanding (1,922 shares)
by the liquidation preference ($1,000) and then dividing the product
($1,922,000) by the conversion price (estimated to be $2.1563 for purposes of
this registration statement), (b) 618,595 shares issuable upon the exercise
of options, calculated by dividing the aggregate purchase price ($3,000,000)
by the exercise price per share ($4.8497) and (c) 87,500 shares issuable upon
the exercise of warrants, or a total of 3,194,874 shares. In addition, due to
the fact that the conversion price of the Series I Preferred Stock is tied to
the market price of the common stock just prior to conversion, and in case
there is a decline in the market price of the common stock, 1,927,204
additional shares are being registered to ensure that a sufficient number of
shares will be available upon the conversion of the Series I Preferred Stock.
(2) This Registration Statement also relates to such indeterminate
number of additional shares of common stock as may be issuable as a result of
stock dividends, stock splits, reclassifications and other changes affecting the
common stock of the registrant. Notwithstanding the foregoing, this Registration
<PAGE>
Statement shall not cover any additional shares issuable upon the conversion
of the preferred shares, beyond the shares covered by this Registration
Statement, due to conversion rate adjustments resulting from decreases in the
market price of the common stock.
(3) On June 16, 2000, 668,556 shares of common stock were issued
pursuant to the conversion of 1,578 shares of Series I Preferred Stock with a
liquidation preference of $1,006.222 and a conversion price of $2.375.
(4) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457 (c) under the Securities Act of 1933, based on the average
of the high and low prices per share of the common stock as reported on Nasdaq
on July 26, 2000.
(5) A fee of $3,345 was paid to the Securities and Exchange Commission
on June 7, 2000 via wire transfer.
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, as amended, or until this registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
<PAGE>
----------------------
PROSPECTUS
----------------------
5,790,634 SHARES OF
COMMON STOCK OF
MICROWARE SYSTEMS CORPORATION
The selling shareholders identified in this prospectus, and any of
their pledgees, donees, transferees or other successors in interest, may offer
to sell up to a maximum of 5,790,634 shares of common stock of Microware
Systems Corporation. These shares of common stock may be offered by the selling
shareholders:
- in transactions on the Nasdaq National Market or such other
markets on which we may from time to time list our shares of
common stock
- in privately negotiated transactions
- through a combination of these methods
This prospectus is part of a registration statement that we are filing
at this time to fulfill our contractual obligations with the selling
shareholders. We will not receive any of the proceeds from the sale of the
common stock by the selling shareholders.
Our common stock is listed on the Nasdaq National Market under the
symbol "MWAR."
You should carefully read the section named "Risk Factors" beginning on
page four of this prospectus before investing in our common stock.
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY
STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. IT IS ILLEGAL FOR ANY
PERSON TO TELL YOU OTHERWISE.
The date of this prospectus is July __, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Incorporation by Reference.................................................................................... 2
Prospectus Summary ........................................................................................... 3
Risk Factors.................................................................................................. 4
Use of Proceeds .............................................................................................. 8
Selling Shareholders.......................................................................................... 8
Plan of Distribution.......................................................................................... 9
Legal Matters.................................................................................................12
Experts ......................................................................................................12
Forward-Looking Statements ...................................................................................12
Where You Can Find More Information About Us..................................................................13
</TABLE>
------------------
INCORPORATION BY REFERENCE
The United States Securities and Exchange Commission (the "Commission")
allows us to incorporate by reference information filed with it, which means
that we can disclose important information to you by referring you directly to
those documents. The information incorporated by reference is considered to be
part of this prospectus. In addition, information that we file with the
Commission in the future will automatically update and supersede information
contained in this prospectus and any accompanying prospectus supplement. We are
incorporating by reference into this prospectus:
- our Annual Report on Form 10-K for the fiscal year ended March 31,
2000, as amended under Form 10-K/A filed on July 19, 2000
- our Current Report on Form 8-K dated April 19, 2000 and filed May 4, 2000
- the description of our common stock on Form 8-A filed March 14, 1996,
including any amendment or report filed for the purpose of updating such
description
- any future filings made with the Commission under Sections 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934 until all of the shares
are sold.
Upon your request, we will furnish to you at no charge a copy of any
documents incorporated by reference. Requests should be addressed to 1500
Northwest 118th Street, Des Moines, Iowa 50325, or by telephoning us at (515)
223-8000, Attn: Beth E. Law.
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone to provide you with
any different information. You should not assume that the information in this
prospectus or the documents incorporated by reference is accurate as of any date
other than the date on the front of the prospectus or those documents.
2
<PAGE>
PROSPECTUS SUMMARY
MICROWARE SYSTEMS CORPORATION
We develop, market and support sophisticated real-time operating system
software and development tools for the traditional embedded systems,
communications, and consumer products markets. Our product line is built around
the OS-9 real-time operating system, which was first introduced in 1980 and has
been continually refined to incorporate advances in technology. OS-9 is a
real-time operating system targeted at "embedded systems" computers dedicated to
specialized tasks embedded within application-specific industrial or computer
products. We market our products through our sales forces in North America,
Europe and Japan.
Our business is focused on developing and marketing OS-9 for use in
traditional embedded systems, including industrial automation, transportation,
medical, and government/military systems; communications infrastructure
products, including networking equipment, ATM, ISDN, digital subscriber loop,
Ethernet and fast Ethernet, and custom connectivity applications; and higher
volume embedded systems for consumer and business uses, such as digital
television decoders, advanced wireless telephones and pagers, point-of-sale
equipment, workforce automation devices, in-car navigation systems and Internet
appliances.
Our principal executive office is 1500 Northwest 118th Street, Des
Moines, Iowa 50325, and our telephone number is (515) 223-8000.
Additional information regarding us, including our audited financial
statements and a more detailed description of our business, is contained in the
documents incorporated by reference in this prospectus. See "Incorporation by
reference" and "Where you can find more information about us" on pages two and
three, respectively.
THE OFFERING
We are registering a maximum of 5,790,634 shares of our common stock
to be offered for sale by the selling shareholders described in this prospectus.
Those shares consist of the following:
- Shares issuable upon conversion of 1,922 shares of Series I
Preferred Stock, each with an initial liquidation value of $1,000
per share, with the liquidation value (including any accumulated
dividends) convertible into common stock at a conversion price of
the lower of (a) $4.8497 or (b) the average of the two lowest
closing bid prices of the common stock, as recorded on Nasdaq,
during the fifteen trading days prior to the conversion date (the
"Preferred Stock")
- Shares issuable upon exercise of stock options to purchase
618,595 shares of common stock at an exercise price of $4.8497
per share (the "Options")
- Shares issuable upon exercise of warrants to purchase 87,500
shares of common stock at an exercise price of $5.3116 per share
(the "Warrants")
- 668,556 shares of common stock which were issued to the selling
shareholders on
3
<PAGE>
June 16, 2000 upon the conversion of 1,578 shares of Series I
Preferred Stock.
We are registering a maximum of 5,790,634 shares of the common stock
which are covered by this prospectus. Of such shares, 3,194,874 shares are
registered in order to fulfill our contractual obligations under a
registration rights agreement with the selling shareholders which obligates
us to register 200% of the common stock acquirable upon conversion of the
Preferred Stock and exercise of the Options and Warrants. In addition, to
ensure that a sufficient number of shares will be available upon any
conversion or exercise, an additional 1,927,204 shares are being registered.
Previously, 668,556 shares were issued pursuant to the conversion of certain
shares of the Preferred Stock. Our registration of the common stock does not
necessarily mean that the selling shareholders will sell all or any portion
of the common stock.
We will not receive any proceeds if the selling shareholders decide to
sell any of the common stock offered under this prospectus.
RISK FACTORS
BEFORE YOU PURCHASE SHARES OF OUR COMMON STOCK FROM THE SELLING
SHAREHOLDERS, YOU SHOULD BE AWARE THAT THERE ARE VARIOUS RISKS IN MAKING SUCH AN
INVESTMENT, INCLUDING THOSE DESCRIBED BELOW. YOU SHOULD CAREFULLY CONSIDER THESE
RISK FACTORS TOGETHER WITH ALL OF THE INFORMATION INCLUDED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS BEFORE YOU DECIDE TO PURCHASE SHARES OF OUR COMMON
STOCK. THIS SECTION INCLUDES OR REFERS TO CERTAIN FORWARD-LOOKING STATEMENTS.
YOU SHOULD REFER TO THE EXPLANATION OF THE QUALIFICATIONS AND LIMITATIONS ON
SUCH FORWARD-LOOKING STATEMENTS DISCUSSED ON PAGE 10.
WE HAVE EXPERIENCED OPERATING LOSSES WHICH MAY CONTINUE IN THE FUTURE AND OUR
OPERATING RESULTS HAVE VARIED SUBSTANTIALLY FROM QUARTER TO QUARTER.
We have experienced significant operating losses for the past four
fiscal years. While we have taken a number of measures to increase our revenues,
decrease our operating expenses, and attain profitability, it is uncertain that
these measures will be successful or that we will become profitable. In
addition, our revenues and operating results have varied substantially from
quarter to quarter, remain difficult to foresee due to the nature of the
embedded systems market and our business, and should not be relied upon as an
indication of future performance.
WE HAVE INVESTED IN EMERGING MARKETS WHICH MAY NOT RESULT IN REVENUES OR
EARNINGS.
We have invested substantial resources in the development of emerging
markets, in particular the digital television and wireless and Internet
communications devices markets. While we have achieved a substantial number of
licenses from Original Equipment Manufacturers (OEMs) in these markets and a
number of the devices are currently in commercial deployment, these markets
remain at an early stage and are increasingly competitive, and it is therefore
uncertain that we will receive substantial revenues or earnings from products or
services in these markets.
We have continued our focus on the traditional embedded systems
business in an effort to decrease the variability of our quarterly operating
results and attain profitability. The traditional embedded systems business is
diverse and increasingly competitive, and it is uncertain that we will be able
to substantially increase our revenues from that particular market.
4
<PAGE>
The communications infrastructure device market is highly fragmented,
very competitive, and technically demanding. While we believe the technological
sophistication and openness of our product architecture for the market will
allow us to establish a substantial revenue base in the communications
infrastructure market, it is uncertain that we will be able to do so.
WE MAY BE UNABLE TO KEEP PACE WITH OUR COMPETITORS AND THE RAPID CHANGES IN
TECHNOLOGY.
The embedded systems markets are highly diverse and do not have
established technology standards. A majority of embedded operating systems and
applications are developed in-house by Original Equipment Manufacturers (OEMs),
and no single processor platform accounts for a majority or even a substantial
minority of the embedded systems under development. Moreover, the market is
increasingly competitive, with a number of industry-leading companies with
substantially greater financial and technical resources than us devoting
substantial resources to the development of a significant market share in the
embedded systems business. While we try to support the industry-leading 32-bit
microprocessors which we believe represent the best market opportunities, and to
offer the best possible array of incremental software functionalities, it is
uncertain that our current products will meet the demands of the market in an
environment of increasing competition and rapid technological changes.
WE MAY EXPERIENCE DELAYS IN PRODUCT DEVELOPMENT AND TRANSITIONS.
We have experienced delays in software development in the past and we
may experience similar delays in the future. Such delays, which can occur
because of resource constraints, unforeseen technological obstacles within or
outside our control, and changes in market requirements, can have a material
adverse effect on our business.
THERE IS SUBSTANTIAL COMPETITION IN ALL OF OUR TARGETED MARKETS.
There is substantial competition in all of our targeted markets. Many
of our traditional competitors have grown substantially as a result of
successful exploitation of growth in the embedded systems market, and in some
cases have expanded their businesses in a manner which competes more directly
with us. Wind River Systems Incorporated is a strong competitor in all of the
embedded operating system markets. Microsoft Corporation has devoted substantial
resources to the development of the embedded operating system business with its
Windows CE product, which is attempting to capture a significant market share in
the handheld computer market. Sun Microsystems, Inc. has developed an embedded
operating system product called JavaOS which it markets together with its Java
technology, and has made a number of business and technology acquisitions in the
past fiscal years related to the development of its embedded systems business.
As a result, we may be unable to successfully attain new market share or even
maintain our existing market share in this increasingly competitive market.
OUR COMPETITIVE POSITION DEPENDS ON OUR ABILITY TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL.
Our future performance depends to a significant degree upon the
continued contributions of our key management, product development, marketing
and sales personnel, many of whom have joined us recently. We have experienced
significant turnover in personnel during the past few fiscal years. Our ability
to execute our market strategy will depend to a large degree upon
5
<PAGE>
our ability to integrate new personnel into the Company. Competition for
qualified personnel throughout the software industry is intense and it is
uncertain that we will be successful in attracting and retaining such personnel.
WE DEPEND ON OUR INTERNATIONAL OPERATIONS WHICH INVOLVE CERTAIN RISKS.
In recent years, we received at least 50% of our total revenue from
sales outside North America, and this trend is anticipated to continue in the
future. This dependence on international operations subjects us to certain
risks, including tariffs and other barriers, difficulty in staffing and managing
foreign subsidiary operations, difficulty in managing distributors and
resellers, difficulty in accounts receivable collection, foreign currency
exposure and adverse tax consequences. We are also subject to the risks
associated with the imposition of protective import or export legislation and
regulations by the United States or other countries. We cannot predict whether
quotas, duties, taxes or other charges or restrictions will be implemented on
our products in the future. These factors and/or the adoption of restrictive
policies may have a material adverse effect on our business, financial condition
and results of operations.
WE DEPEND ON OUR PROPRIETARY TECHNOLOGY.
Because substantially all of our revenues are derived from OS-9, a
real-time operating system targeted at embedded systems, and related products,
any impairment of OS-9 could have a material adverse impact on our business. Our
business is therefore dependent on the adequacy of our intellectual property
protection through patents, copyrights, trade secrets, and license agreements;
the adequacy and continued availability of our licenses of integrated technology
from third parties; and the absence of any material technology litigation
related to our products.
OUR BOARD OF DIRECTORS HAS THE AUTHORITY TO ISSUE SHARES OF PREFERRED STOCK.
Our Board of Directors has the authority to issue, without vote or
action of stockholders, shares of preferred stock, including fixing the rights,
preferences, privileges and restrictions of any such series. Such preferred
stock could contain dividend rights, conversion rights, voting rights, terms of
redemption, redemption prices, liquidation preferences or other rights superior
to the rights of holders of common stock. Additionally, the selling shareholders
have certain rights to participate in future issuances of preferred stock, if
any.
WE HAVE ISSUED CERTAIN PREFERRED STOCK, OPTIONS AND WARRANTS.
We have issued:
TO THE SELLING STOCKHOLDERS:
- 3,500 shares of Series I Preferred Stock, of which 1,922 shares
remain outstanding, convertible into shares of common stock at a
conversion price of the lower of (a) $4.8497 or (b) the average
of the two lowest closing bid prices of the common stock, as
recorded on Nasdaq, during the fifteen trading days prior to the
conversion date (there is no minimum average closing price that
fixes the maximum number of shares issuable upon conversion of
the Series I Preferred Stock)
6
<PAGE>
- stock options to purchase 618,595 shares of common stock at an
exercise price of $4.8497 per share
- warrants to purchase 87,500 shares of common stock at an exercise
price of $5.3116 per share
TO MOTOROLA:
- warrants to acquire 1,803,728 shares of Common Stock for $10.81
per share as may be adjusted, of which warrants to purchase
554,992 shares have terminated, warrants to purchase 554,992
shares are currently exercisable, and warrants to purchase an
additional 693,744 shares will become exercisable on August 1,
2000
The selling stockholders through its ownership of the Preferred Stock, Options
and Warrants have the opportunity to profit from a rise in the market price of
our common stock, thus resulting in a possible dilution in the interest of other
security holders. In addition, we have issued and will continue to issue
substantial stock options to employees.
Our ability to obtain additional capital might be adversely affected as
long as these convertible securities remain unexercised. Moreover, the holders
of such convertible securities may exercise such securities at a time when we
may be able to obtain capital by a new offering of our securities on terms more
favorable than those under which the existing warrants or options are
exercisable.
THE REMAINING PREFERRED STOCK COULD LEAD TO SIGNIFICANT DILUTION OF THE PER
SHARE VALUE OF THE COMMON STOCK AND DEPRESS MARKET PRICES.
The total number of shares of common stock which may be issued to the
selling shareholders upon the conversion of the Preferred Stock is based on a
formula which is tied to the market price of the common stock just prior to the
time of conversion. Thus, the conversion of the remaining 1,922 shares of Series
I Preferred Stock held by the selling shareholders could significantly dilute
the per share value of the common stock held by the current investors. More
specifically, the lower the average of the two lowest closing bid prices of the
common stock as recorded on Nasdaq and reported by the Bloomberg financial
network or any successor reporting service during the fifteen trading days prior
to the conversion date, the greater the number of shares of common stock that
can be issued to the selling shareholders, and the greater the risk of dilution
to other investors. There is no minimum average closing price that fixes the
maximum number of shares issuable upon conversion of the Series I Preferred
Stock. Additionally, a low conversion price may cause the selling shareholders
to convert their shares of Preferred Stock and immediately sell their common
shares, thereby contributing to a downward movement in the stock price of the
common stock. Similarly, the downward pressure on the trading price of the
common stock could encourage the selling shareholders and other shareholders to
engage in short sales of the common stock, which would further contribute to the
downward movement of the stock price of the common stock.
7
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common
stock sold by the selling shareholders.
SELLING SHAREHOLDERS
The following selling shareholders own or beneficially own as of
July 26, 2000 and may offer hereby the number of shares of common stock set
forth opposite their respective names in the table below (assuming the
conversion or exercise of all of the shares of Preferred Stock, Options and
Warrants held by such holders into shares of common stock as of the date of
this prospectus, without regard to restrictions on ownership percentage
applicable to said securities, and based on the assumptions and estimates
described herein, including those set forth in footnote (1) to this table).
The shares may be offered from time to time by the selling shareholders named
below or their nominees. The selling shareholders are under no obligation to
sell all or any portion of the Shares pursuant to this prospectus. This
prospectus relates to a maximum of 5,790,634 shares of common stock which
includes the 668,556 shares of common stock currently owned by the selling
shareholders as a result of the conversion on June 16, 2000, 3,194,874 shares
of common stock which represent 200% of the shares of common stock issuable
to the selling shareholders upon conversion of all outstanding shares of
Preferred Stock and exercise of all Options and Warrants (without regard to
restrictions on ownership percentage applicable to said securities), and
1,927,204 shares of common stock registered to ensure that a sufficient
number of shares will be available upon any conversion of the Series I
Preferred Stock or exercise of the Options or Warrants.
To the knowledge of the Company, all persons listed below have sole
voting and investment power with respect to their securities. The information in
the table concerning the selling shareholders is based on information provided
to, or known by, the Company, except for the assumed conversion ratio of shares
of Preferred Stock into Common Stock, which is based solely on the assumptions
discussed or referenced in footnote (1) to the table. Information concerning the
selling shareholders may change from time to time after the date of this
prospectus.
<TABLE>
<CAPTION>
Name of Shares held Shares Offered Beneficial
Selling Prior to Pursuant to Ownership
Shareholder Offering (1)(2) Offering(1)(2) After Offering(3)
----------- --------------- -------------- -----------------
<S> <C> <C> <C>
*Elliott Associates, L.P. 1,132,997 1,132,997 0
**Westgate International, L.P. 1,132,997 1,132,997 0
</TABLE>
---------------------
* Elliott Associates, L.P., a Delaware limited partnership, is a private
investment partnership based in New York City whose general partners are Paul E.
Singer and Elliott Capital Advisors, L.P., a Delaware limited partnership
controlled by Mr. Singer.
** Westgate International, L.P., a Cayman Islands limited partnership, is a
private investment partnership whose general partner is Hambledon, Inc., a
Cayman Islands
8
<PAGE>
corporation controlled by Mr. Singer, and whose investment
manager is Elliott International Capital Advisors Inc., a Delaware corporation
also controlled by Mr. Singer.
(1) Other than with respect to the shares offered upon the exercise of
outstanding Options and Warrants as described in footnote (2) below, the
beneficial ownership and shares offered data represent (a) 334,278 shares of
common stock previously issued to each selling shareholder pursuant to a
conversion of 789 shares of Series I Preferred Stock and (b) 445,671 shares
of common stock estimated to be issuable upon the conversion of, or otherwise
in respect to, the 961 shares of Preferred Stock currently beneficially owned
by each selling shareholder, using a price of $2.1563 (the average of the two
lowest closing bid prices of the common stock during the fifteen trading days
immediately prior to the filing date of this registration statement) in
determining the number of shares of common stock issuable, and without regard
to restrictions on ownership percentage applicable to said securities. The
actual number of shares of common stock offered hereby is subject to
adjustment and could be materially less or more than the estimated amount
indicated depending upon factors which cannot be predicted by the Company at
this time, including, among others, application of the conversion provisions
based on market prices prevailing at the actual date of conversion and
whether or to what extent dividends are paid in shares of Preferred Stock.
This presentation is not intended to constitute a prediction as to the future
market price of the common stock. The shares of Series I Preferred Stock were
issued in a private placement in April 2000.
(2) This table assumes that an aggregate of (a) 618,595 shares of common stock
(subject to adjustments) are issuable upon the exercise of Options to purchase
shares of common stock at an exercise price of $4.8497 per share (subject to
adjustments) and (b) 87,500 shares of common stock (subject to adjustments) are
issuable upon the exercise of Warrants to purchase shares of common stock at an
exercise price of $5.3116 per share (subject to adjustments), issued to the
holders of the Series I Preferred Stock in connection with the private placement
in April 2000.
(3) This table assumes that all of the shares of common stock will be sold by
the selling shareholders.
The selling shareholders will receive all of the proceeds from the sale
of the shares offered hereby. The Company will not receive any proceeds from the
sale of such shares. However, 706,095 shares of the shares offered hereby are
issuable upon the exercise of outstanding Warrants and Options to purchase
shares of common stock (subject to adjustments). If all of the Warrants and
Options were exercised by the selling shareholders, the Company estimates that
it would receive gross cash proceeds of approximately $3.46 million in the
aggregate (assuming none of the Warrants were exercised pursuant to the cashless
exercise provisions contained therein). Holders of the Warrants have the right
to exercise the Warrants held by them by delivering shares of common stock as
payment therefore pursuant to the terms of the Warrants. The Company will bear
the expenses of this offering. No selling shareholder has held any position or
office or had any other material relationship with the Company.
PLAN OF DISTRIBUTION
Some of the maximum of 5,790,634 shares of our common stock being
offered under this prospectus may be sold by the selling shareholders. Such
shares of our common stock have been included in the registration statement of
which this prospectus forms a part.
9
<PAGE>
The following table illustrates the increasing number and percentage of
shares of common stock that would be actually owned by all the selling
shareholders together which would result from an increasingly discounted trading
price of the common stock, assuming conversion of all of the remaining shares of
Series I Preferred Stock at a conversion price equal to the following discounts
from the average trading price of the common stock on July 26, 2000 (assuming
for these purposes that the limitations on percentage ownership and other
limitations contained in the terms of the Series I Preferred Stock, as described
in footnote 3 to the table, did not exist).
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Shares of Common Percentage Owned by
Discount Conversion Price Stock Issued (2) Selling Shareholders Together (3)
Percentage (1)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0% $2.1875 1,547,185 9.75%
--------------------------------------------------------------------------------------------------------------------
4% $2.0982 1,584,599 9.99%
--------------------------------------------------------------------------------------------------------------------
25% $1.6406 1,840,079 11.60%
--------------------------------------------------------------------------------------------------------------------
50% $1.0938 2,425,735 15.29%
--------------------------------------------------------------------------------------------------------------------
63% $0.8119 3,035,841 19.14%
--------------------------------------------------------------------------------------------------------------------
75% $0.5469 4,182,910 26.38%
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The conversion price is based on discounts of the average of the
high and low prices per share of the common stock as reported on Nasdaq on July
26, 2000, or a value of $2.1875, and is calculated by multiplying 1.00 minus
the discount percentage by the $2.1875 value. The actual conversion price will
be based on the average of the two lowest closing bid prices of the common
stock, as recorded on Nasdaq, during the fifteen trading days prior to the
conversion date. Again, there is no minimum average closing price that fixes
the maximum number of shares issuable upon conversion of the Series I Preferred
Stock.
(2) The shares of common stock issued is calculated by adding (1) the
shares of common stock already held by the selling shareholders as a result of
the conversion of certain of the Series I Preferred Stock on June 16, 2000
(668,556 shares) to (2) the product of the number of shares of Preferred Stock
outstanding (1,922 shares) multiplied by the liquidation preference ($1,000 -
assuming no dividends have accrued) or ($1,922,000) divided by the conversion
price. The number does not include any shares exercisable under the Options or
Warrants granted to the selling shareholders, which under the hypothetical fact
situations would be "out-of-the money."
(3) The percentage owned by the selling shareholders is calculated by
dividing the shares
10
<PAGE>
of common stock issued by the number of shares of common stock outstanding as of
July 26, 2000, or 15,861,856 shares. The terms of the Series I Preferred
Stock, included in our First Articles of Amendment to Restated and Amended
Articles of Incorporation, however, set the following limitations: (1) the
number of shares of common stock that may be acquired by each of the selling
shareholders upon conversion of the Series I Preferred Stock, when added to the
total number of shares of common stock deemed beneficially owned by such holder
and the holder's affiliates that would be aggregated for purposes of determining
whether a group exists under Section 13(d) of the Securities Exchange Act of
1934, as amended, shall not exceed 9.99% of the total issued and outstanding
shares of the common stock; (2) each selling shareholder shall not acquire,
during the 61-day period after either giving notice of an intent to convert
Series I Preferred Stock or the acquisition of common stock, additional shares
of common stock pursuant to existing rights-to-acquire if the aggregate amount
of such additional shares so acquired would exceed 9.99% of the number of shares
of common stock outstanding at the time minus the number of shares of common
stock actually owned by the selling shareholder at the time; and (3) the number
of shares of common stock issuable to the selling shareholders collectively upon
the conversion of the Series I Preferred Stock, together with the shares of
common stock issuable under the Warrants and Options, shall not exceed 19.99% of
the shares of common stock outstanding on April 19, 2000 (15,186,800 shares), or
3,035,841 shares, except upon shareholder approval. If such issuable shares
would exceed the 19.99% limitation, we are required to promptly call a
shareholders meeting to obtain shareholder approval for the issuance of the
shares in excess of the 19.99% limitation, and if such shareholder approval is
not obtained within 60 days, then each selling shareholder has the right to sell
to us the number of Preferred Shares, Warrants and Options which cannot be so
converted or exercised. Thus, as illustrated in the table above, although the
selling shareholders are able to acquire an increasing number of shares of
common stock upon the conversion of the Preferred Shares at an increasingly
discounted trading price of the common stock, the amount of shares acquirable is
limited pursuant to the terms of the Series I Preferred Stock as described in
this paragraph.
The maximum of 5,790,634 shares of our common stock being offered by
the selling shareholders pursuant to this prospectus may be offered and sold
from time to time on the Nasdaq Stock Exchange or such other markets upon which
we may list shares of our common stock from time to time or in privately
negotiated transactions or otherwise. In addition, the selling shareholders may
engage in short sales and other transactions in the common stock or derivatives
thereof, and may pledge, sell, deliver or otherwise transfer the common stock
offered under this prospectus in connection with such transactions. The shares
of our common stock may be sold by one or more of the following methods, without
limitations:
- block trades in which a 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
- purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus
11
<PAGE>
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers
- face-to-face transactions between sellers and purchasers without
a broker/dealer
In effecting sales, brokers or dealers engaged by the selling
shareholders may arrange for other brokers or dealers to participate. These
brokers or dealers may receive commissions or discounts from the selling
shareholders in amounts to be negotiated. These brokers and dealers and any
other participating brokers and dealers may use this prospectus.
In the event of a "distribution" of the shares, the selling
shareholders, any selling broker or dealer and any "affiliated purchasers" may
be subject to Regulation M under the Exchange Act, which regulation would
prohibit, with certain exceptions, any such person from bidding for or
purchasing any security which is the subject of such distribution until his
participation in that distribution is completed. In addition, Regulation M
prohibits any stabilizing bid or stabilizing purchase for the purpose of
pegging, fixing or stabilizing the price of common stock in connection with this
offering.
We have entered into an agreement with the selling shareholders to
register the shares of common stock offered hereby under applicable federal and
state securities laws. The agreements between us and the selling shareholders
provide for cross-indemnification of the selling shareholders and us for losses,
claims, damages, liabilities and expenses arising, under certain circumstances,
out of registration of these shares.
To comply with certain states' securities laws, if applicable, the
shares of common stock registered hereunder will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers.
LEGAL MATTERS
Certain legal matters in connection with the shares of common stock
offered hereby will be passed upon for us by D'Ancona & Pflaum. Arthur Don, a
member of D'Ancona & Pflaum, is one of our directors.
EXPERTS
The audited financial statements as of March 31, 1999 and 2000, and
each of the years in the three-year period ended March 31, 2000, incorporated by
reference in this prospectus have been audited by KPMG LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in auditing and accounting in giving such reports.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. Words such as
"expects", "anticipates", "intends", "believes", "plans", "seeks", "estimates"
and similar expressions or variations of these words are intended to identify
forward-looking statements, but are not the only means of identifying
forward-looking statements in this prospectus. Additionally,
12
<PAGE>
statements that refer to our estimated or anticipated future results, sales or
marketing strategies, new product development or performance or other
non-historical facts are forward-looking and reflect our current perspective of
existing information. Forward-looking statements are inherently subject to risks
and uncertainties that cannot be predicted or quantified, and actual results and
outcomes may differ materially from the results and outcomes discussed in the
forward-looking statements depending on a variety of factors including our
recent history of losses, the dilution and potential dilution relating to the
preferred stock, options and warrants, the volume and timing of orders received
during the quarter, our ability to successfully market our products, our ability
to keep pace with our competition and with rapid technological change, our
ability to manage turnover in our sales and marketing and other personnel and to
attract and maintain personnel generally, as well as other risk factors
mentioned throughout this prospectus and in our other filings with the
Securities and Exchange Commission. Readers are urged not to place undue
reliance on forward-looking statements and we disclaim any obligation to update
any of the forward-looking statements contained in this prospectus to reflect
any future events or developments.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We have filed a Registration Statement on Form S-3 relating to the
securities offered by this prospectus with the Commission. This prospectus does
not contain all of the information set forth in the Registration Statement and
its accompanying exhibits. Statements contained in this prospectus as to the
contents of any contract or other document referred to are not necessarily
complete; however, all material information with respect to these contracts and
documents are disclosed in this prospectus. In each instance, we refer you to
the copy of the contract or other document filed as an exhibit to the
Registration Statement, each of those statements being qualified in all respects
by the actual contract or other document.
For further information with respect to us and the securities offered
in this prospectus, we refer you to the Registration Statement, exhibits and
schedules. A copy of the Registration Statement may be inspected by anyone
without charge at the public reference facilities maintained by the Commission
at:
Room 1024, Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
and will also be available for inspection and copying at the regional offices of
the Commission located at:
<TABLE>
<S> <C>
Citicorp Atrium Center and and 7 World Trade Center
500 West Madison Street, Suite 1400 New York, New York 10048
Chicago, Illinois 60661
</TABLE>
Copies of this material may also be obtained at prescribed rates from the Public
Reference Section of the Commission at:
450 Fifth Street, N.W.
Washington, D.C. 20549
13
<PAGE>
This material may also be accessed electronically by means of the Commission's
home page on the Internet at http://www.sec.gov.
We are governed by the reporting requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, we file annual, quarterly and
special reports, proxy statements and other information with the Securities and
Exchange Commission.
These reports, proxy statements and other information can be inspected
and copied at the public reference facilities of the Commission set forth above,
and copies of these materials can be obtained from the Commission's Public
Reference Section at prescribed rates or from us at 1500 Northwest 118th Street,
Des Moines, Iowa (telephone: (515) 223-8000) Attn: Beth E. Law. We furnish our
stockholders with annual reports containing audited financial statements and any
other periodic reports we deem appropriate or as may be required by law.
14
<PAGE>
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS,
INCORPORATED HEREIN OR BY REFERENCE OR CONTAINED IN A PROSPECTUS SUPPLEMENT.
NEITHER WE NOR EITHER OF THE SELLING SHAREHOLDERS HAS AUTHORIZED ANYONE ELSE TO
PROVIDE YOU WITH DIFFERENT OR ADDITIONAL INFORMATION. THE SELLING SHAREHOLDERS
ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS, OR
INCORPORATED HEREIN BY REFERENCE, OR IN ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS
OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THE DOCUMENTS.
5,790,634 shares of
common stock of
Microware Systems Corporation
The date of this prospectus is July __, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, payable in connection
with the sale of the shares of common stock being registered hereby. All amounts
are estimates: the total estimated fees set forth below shall be paid in full by
the Company.
<TABLE>
<S> <C>
SEC Registration Fees........................................ $ 3,345
Accountants' Fees and Expenses............................... $ 8,000
Legal Fees and Expenses...................................... $25,000
Miscellaneous................................................ $ 655
-------
Total.................................................... $37,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Sections 851 and 856 of the Iowa Business Corporation Act ("Iowa BCA")
empower a corporation, subject to certain limitations, to indemnify its
directors and officers against expenses (including attorney's fees, judgments,
fines and certain settlements) actually and reasonably incurred by them in
connection with any suit or proceeding to which they are a party so long as they
acted in good faith and in a manner reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to a criminal action
or proceedings, so long as they had no reasonable cause to believe their conduct
to have been unlawful. The Registrant's Restated and Amended Articles of
Incorporation provide that the Registrant shall indemnify its directors and such
of its officers, employees and agents as the Board of Directors may determine
from time to time, to the fullest extent permitted by Iowa law.
Section 832 of the Iowa BCA permits an Iowa corporation to include in
its articles of incorporation a provision eliminating or limiting a director's
liability to a corporation or its shareholders for monetary damages for breaches
of fiduciary duty. The enabling statute provides, however, that liability for
breaches of the duty of loyalty, acts or omissions not in good faith or
involving intentional misconduct, or knowing violation of the law, and the
unlawful purchase or redemption of stock or payment of unlawful dividends or the
receipt of improper personal benefits cannot be eliminated or limited in this
manner. The Registrant's Restated and Amended Articles of Incorporation include
a provision which eliminates, to the fullest extent permitted, director
liability for monetary damages for breaches of fiduciary duty.
ITEM 16. EXHIBITS
(a) Exhibits. The following exhibits are filed herewith or incorporated by
reference as indicated. Exhibit numbers refer to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
<S> <C>
4.1 Articles of Amendment to the Restated and Amended
Articles of Incorporation of the Company describing
the terms of the 4% cumulative convertible preferred
stock. (1)
5.1 Opinion of D'Ancona & Pflaum LLC
II-1
<PAGE>
<CAPTION>
<S> <C>
10.1 Securities Purchase Agreement, dated as of April 19,
2000, between the Company and Elliott Associates,
L.P. and Westgate International, L.P. (1)
10.2 Registration Rights Agreement, dated as of April 19,
2000, between the Company and Elliott Associates,
L.P. and Westgate International, L.P. (1)
10.3 Form of Option Agreement, dated as of April 19, 2000,
issued to Elliott Associates, L.P. and Westgate
International, L.P. (1)
10.4 From of Warrant Agreement, dated as of April 19,
2000, issued to Elliott Associates, L.P. and Westgate
International, L.P. (1)
23.1* Consent of KPMG LLP
23.2 Consent of D'Ancona & Pflaum LLC (included in Exhibit
5.1)
</TABLE>
---------------
*Filed herewith. All other exhibits previously filed or incorporated by
reference.
(1) Incorporated by reference to the Registrant's Current Report on Form 8-K
filed with the Securities and Exchange Commission on May 4, 2000.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(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 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% 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;
II-2
<PAGE>
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this
section 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 section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the registration
statement.
(b) 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.
(c) 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.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") 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 is asserted (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) 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.
(e) 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 section 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 Act 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.
II-3
<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 Registration Statement to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Des Moines, State of
Iowa, on the 28th day of July, 2000.
Microware Systems Corporation
By: /s/ Kenneth B. Kaplan
--------------------------------------------
Kenneth B. Kaplan, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
----------------------- ---------------- ----------
<S> <C> <C>
/s/ Kenneth B. Kaplan
---------------------- Chairman, President and Chief
Kenneth B. Kaplan Executive Officer (Principal
Executive Officer) July 28, 2000
II-4
<PAGE>
<S> <C> <C>
*
----------------------
George E. Leonard Director, Executive Vice July 28, 2000
President, Chief Financial
Officer, Chief Operating
Officer, Treasurer and
Secretary (Principal
Financial
Officer)
*
----------------------
Beth E. Law Chief Accounting Officer, July 28, 2000
Controller and Assistant
Treasurer (Principal
Accounting Officer)
*
----------------------
James A. Gordon Director July 28, 2000
*
----------------------
Daniel P. Howell Director July 28, 2000
*
----------------------
Dennis E. Young Director July 28, 2000
*
----------------------
Arthur Don Director July 28, 2000
</TABLE>
------------------
* by: Kenneth B. Kaplan,
Attorney in fact
II-5
<PAGE>
EXHIBIT INDEX*
23.1 Consent of KPMG LLP
---------------
* Exhibits previously filed or incorporated by reference not included. See Part
II, Item 16.
II-6
