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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-58041
PROSPECTUS
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THE ASHTON TECHNOLOGY GROUP, INC.
15,423,921
SHARES
COMMON STOCK $.01 PAR VALUE
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This Prospectus relates to the resale by the Selling Stockholders
identified herein (see "Selling Stockholders and Plan of Distribution") of (i)
an indeterminate number of shares of common stock, par value $.01 per share
("Common Stock") of The Ashton Technology Group, Inc. (the "Company" or
"Ashton"), initially 2,782,562, which may be acquired by one or more of the
Selling Stockholders upon the conversion of the Company's Series D Convertible
Preferred Stock (the "Series D Preferred"); (ii) an indeterminate number of
shares of Common Stock, initially 1,739,130, which may be acquired by one or
more of the Selling Stockholders upon the conversion of the Company's Series E
Convertible Preferred Stock (the "Series E Preferred"); (iii) 200,000 shares of
Common Stock which may be acquired by one or more of the Selling Stockholders
upon the exercise of warrants issued in connection with the sale of the
Company's Series C Convertible Preferred stock (the "Series C Warrants"); (iv)
880,000 shares of Common Stock which may be acquired by one or more of the
Selling Stockholders upon the exercise of warrants issued in connection with the
sale of the Company's Series D Preferred (the "Series D Warrants"); (v) 320,000
shares of Common Stock which may be acquired by one or more of the Selling
Stockholders upon exercise of warrants issued in connection with the sale of the
Company's Series E Preferred (the "Series E Warrants"); and (vi) an
indeterminate number of shares of Common Stock, initially 9,502,229, which may
be sold by the Company and purchased by one or more of the Selling Stockholders,
upon the exercise of certain put rights acquired by the Company in connection
with the sale of the Company's Series D Preferred and Series E Preferred (the
"Put Rights"). (See "Selling Stockholders and Plan of Distribution.") Although
the Company will receive proceeds from the exercise of the outstanding Series C
Warrants, Series D Warrants, Series E Warrants, and Put Rights from time to
time, if and when they are exercised, the Company will not receive any of the
proceeds from the resale of shares of Common Stock by the Selling Stockholders
offered hereby.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS," BEGINNING AT PAGE 5, FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The Common Stock of the Company is traded on The Nasdaq SmallCap Market
("Nasdaq SmallCap") under the symbol "ASTN." On August 10, 1998, the last
reported sales price for Ashton's Common Stock on the Nasdaq SmallCap was
$3.219. The Warrants of the Company are traded on the Nasdaq SmallCap under the
symbol "ASTNW." On August 10, 1998, the last reported sales price for the
Company's Warrants on the Nasdaq SmallCap was $1.25.
The date of this Prospectus is August 13, 1998.
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AVAILABLE INFORMATION
Ashton is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Company can be inspected and copied at prescribed rates
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, DC 20549, and at the Commission's Northeast Regional
Office at 7 World Trade Center, Suite 1300, New York, NY 10048, and the
Commission's Midwest Regional Office at 500 West Madison Street, Suite 1400,
Chicago, IL 60661. The Commission may be reached by telephone at 1-800-SEC-0330,
and maintains a Web site on the Internet, http://www.sec.gov that also contains
such reports, proxy statements and other information filed by the Company.
Ashton's Common Stock and Warrants are listed on Nasdaq SmallCap of The Nasdaq
Stock Market, Inc. (collectively "Nasdaq"), a subsidiary of the National
Association of Securities Dealers, Inc. ("NASD"). Reports, proxy statements, and
other information concerning the Company may be inspected and copied at the
NASD's offices at 1735 K Street, N.W., Washington, DC 20006-1500.
The Company has filed with the Commission a Registration Statement
(together with all amendments and exhibits, the "Registration Statement") on
Form S-3 under the Securities Act of 1933, as amended, (the "Securities Act")
with respect to the Common Stock offered pursuant to this Prospectus. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Statements made in this Prospectus as to the
contents of any agreement or other document referred to herein are not
necessarily complete and reference is made to the Registration Statement and to
the exhibits and schedules filed therewith. Copies of the material containing
this information may be obtained from the Commission upon payment of the
prescribed fee.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, all of which have been previously or concurrently
filed with the Commission pursuant to the Exchange Act, are hereby incorporated
by reference in this Prospectus: (i) the Company's Quarterly Reports on Form 10-
QSB for the fiscal quarters ended June 30, 1997, September 30, 1997, and
December 31, 1997, as amended; (ii) the Company's Current Reports on Form 8-K
dated November 6, 1997, November 12, 1997, January 27, 1998, and April 9, 1998;
(iii) the Company's Proxy Statement dated May 8, 1998; (iv) the Company's Annual
Report on Form 10-KSB for the fiscal year ended March 31, 1998; and (vi) the
Company's Proxy Statement dated July 27, 1998.
All other reports and documents filed by the Company subsequent to the date
of this Prospectus pursuant to Sections 13(a), 13(c), 14, or 15(d) of the
Exchange Act prior to the termination of the offering of the Common Stock
covered by this Prospectus shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing of those
documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that such statement is modified or
replaced by a statement contained in this Prospectus or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference into this Prospectus. Any such statement so modified or superseded
shall not be deemed, except as so modified or replaced, to constitute a part of
this Prospectus. The Company will provide without charge to each person to whom
a copy of this Prospectus has been delivered, upon the written request of any
such person, a copy of any or all of the documents referred to above that have
been or may be incorporated in this Prospectus by reference (other than exhibits
to such documents, unless such exhibits are themselves specifically incorporated
by reference). Written requests for such copies should be directed to John A.
Blohm,
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Executive Vice President and Corporate Secretary, The Ashton Technology
Group, Inc., 1900 Market Street, Suite 701, Philadelphia, PA 19103, (215) 751-
1900.
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act and the Private Securities Litigation Reform Act of
1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the actual results,
performance, or achievements of the Company to differ materially from any future
results, performance, or achievements expressed or implied by such forward-
looking statements. Such risks, uncertainties, and other important factors
include, among others: dependence on arrangements with self-regulatory
organizations; dependence on proprietary technology; technological changes and
costs of technology; industry trends; competition; ability to develop markets;
changes in business strategy or development plans; availability, terms and
deployment of capital; availability of qualified personnel; changes in
government regulation; general economic and business conditions; and other
factors referenced in this Prospectus. Such forward-looking statements speak
only as of the date of this Prospectus. For discussion of the factors that might
cause performance of the Company to differ with actual results, see the
discussion of "Risk Factors" beginning on page 5. The Company expressly
disclaims any obligation or undertaking to disseminate any updates or revisions
to any forward-looking statement contained herein to reflect any change in the
Company's expectations with regard thereto or any change in events, conditions,
or circumstances on which any such statement is based.
DESCRIPTION OF THE COMPANY
The Company is engaged in the development and commercialization of on-line
transaction systems for participants in the U.S. and international financial
markets. The Company was founded in 1994 to take advantage of commercial
opportunities through the application of advanced telecommunication and
computing technologies to the area of electronic commerce. The Company is
currently organized as a parent company which has four subsidiaries as follows:
(1) Universal Trading Technologies, Inc., ("UTTC(TM)"); (2) Gomez Advisors, Inc.
("GA"); (3) Electronic Market Center, Inc. ("EMC"); and (4) ATG(TM)
International, Inc. ("ATG(TM) International"). REB Securities, Inc. ("REB"), a
broker-dealer whose application for registration with the Commission is pending,
is a wholly-owned subsidiary of UTTC(TM).
UTTC(TM)'s business is to develop, market and operate electronic pricing
and transactional systems for the securities trading market. UTTC(TM)'s target
customers are the professional investment community which includes broker-
dealers, pension plan sponsors, institutional money managers and mutual funds.
These professional investors may benefit from UTTC(TM)'s proprietary
technologies and pricing mechanisms which are expected to enable them to trade
efficiently and cost effectively in an electronic trading environment. UTTC(TM)
has developed the Universal Trading System ("UTS(TM)"), which incorporates
advanced computer and telecommunications technology, and UTS(TM)'s first product
module, the Volume Weighted Average Price ("VWAP(TM)") Trading System
("VTS(TM)"), an electronic securities pricing and transaction system for trading
exchange listed and Nasdaq National Market securities.
On April 22, 1995, the Philadelphia Stock Exchange (the "PHLX") and
UTTC(TM) agreed to deploy the UTS(TM) as a facility of the PHLX. On September
18, 1995, UTTC(TM) and the PHLX memorialized the agreement in a formal contract
for a term of five years commencing from the date UTS(TM) becomes operational on
the PHLX (the "PHLX" Agreement"). Operation of the system is contingent upon
approval by the Commission of a rule proposal filed by the PHLX. The PHLX
Agreement provides, among other things, for the development of the VTS(TM)
system as a new trading product of the PHLX.
The Company has developed a working system in accordance with the PHLX
Agreement. On April 16, 1998, the Commission proposed new rules and rule
amendments that, if adopted, will permit, among other things, alternate trading
systems ("ATSs") to choose whether to register as national
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securities exchanges or to register as broker-dealers. If adopted, the
Commission regulations may allow the Company to introduce its products,
regardless of whether the PHLX rule proposal is approved by the Commission.
Anticipating adoption of these new regulations, the Company currently is
exploring the best structure for launching its electronic trading products under
development, e.g., as an existing facility of a self-regulatory organization
("SRO"), a broker-dealer, or as a new and independent registered exchange.
The PHLX recently entered into an agreement pursuant to which it would be
acquired by the American Stock Exchange (the "AMEX"). The Company's contract
with the PHLX is assignable by its terms with the consent of both parties to the
contract. The Company presently does not intend to agree to the assignment of
the contract.
GA was formed in May 1997 as a wholly owned subsidiary by the Company in
conjunction with Julio Gomez and John Robb, formerly of Forrester Research,
Inc., and Dr. Alex Stein, of FarSight Financial. GA provides independent advice
with respect to online investing and provides clients in the financial services
industry with consulting advice concerning the use of the Internet as a tool for
establishing electronic client relationships, marketing, and the interactive
distribution of securities. The range of Internet financial consulting services
provided through GA includes strategy development, product and interface design,
and implementation planning. GA also publishes proprietary evaluations of
Internet financial services through its Internet Broker Scorecard and Internet
Banker Scorecard rankings.
EMC is a wholly owned subsidiary of the Company that is expected to operate
and market the Company's to-be-developed open finance system, the Electronic
Market Center ("eMC(TM)"). The Company has designed eMC(TM) for interactive
market access by member users and to provide a global electronic distribution
channel for all types of financial products and services. Although the Company
has designed the specifications for the eMC(TM), there can be no assurance that
the Company will be able to finance the development or to actually develop such
a finance system. See "Risk Factors."
REB is a wholly owned broker-dealer subsidiary of UTTC(TM). REB expects
that, upon approval of its application for registration with the Commission,
NASD, and state authorities, it will provide institutional "soft dollar
services" (pursuant to Section 28(e) of the Exchange Act) and brokerage services
to banks, broker-dealers, insurance companies, and other financial
intermediaries.
The Company recently formed a wholly owned subsidiary, ATG(TM)
International. The international markets represent potentially significant
growth for the application of ATG(TM)'s technology and skills to the development
of proprietary online transaction systems for global financial markets. In
November 1997, the Company entered into a strategic initiative with Tianjin New
Hong Chen Technology & Trading Company to introduce its online trading
technology and systems to the financial markets in China.
Computer Science Innovations, Inc. ("CSI(R)") was a subsidiary of the
Company. CSI(R) was incorporated in Florida in March 1983, and specialized in
utilizing computer technologies and sophisticated mathematical techniques to
address complex information retrieval and management problems. On November 6,
1997, the Company sold CSI(R) to an Employee Stock Ownership Plan controlled by,
and for the benefit of, CSI(R)'s management and employees.
Following the sale of CSI(R), revenues for the Company have significantly
decreased, with GA providing the only revenue since the sale. Except for GA,
all of the subsidiaries described above are in the development stage and are
subject to significant risks associated with development stage businesses. None
of the subsidiaries other than GA has realized any revenue to date.
References herein to the "Company" or "Ashton" include Ashton and its
subsidiaries, unless the context indicates otherwise. The Company's headquarters
are located at 1900 Market Street, Suite 701, Philadelphia, PA 19103, and its
telephone number is (215) 751-1900.
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RISK FACTORS
In addition to the other information contained or incorporated by reference
in this Prospectus, prospective investors should consider carefully the
following risk factors in evaluating the Company and its business before
purchasing Common Stock. The following discussion identifies important factors
that could cause Ashton's actual results to differ materially from results
predicted or implied in any forward-looking statements made in this Prospectus
or elsewhere by or on behalf of Ashton.
Control of Ashton by Directors and Officers. Ashton's directors and
officers beneficially own approximately 22.8% of the outstanding shares of the
Common Stock. In addition, on July 15, 1998 the Company granted directors and
officers of the Company options to purchase the Company's Common Stock which, if
fully converted into Common Stock, would increase the beneficial ownership of
the Company by its directors and officers to 46.1%. In contrast, if each of the
Company's outstanding shares of Convertible Preferred Stock and related Warrants
were converted into Common Stock, Ashton's directors and officers would
beneficially own 24% of the outstanding shares of Common Stock. If the Company
additionally exercised the Put Rights granted in connection with the Private
Equity Line of Credit Agreement (see "Description of Capital Stock"), Ashton's
directors and officers would beneficially own 16.75% of the outstanding Common
Stock. Since there are no cumulative voting rights provided in Ashton's
Certificate of Incorporation, the directors and officers are in a position
effectively to control the election of the members of the Board of Directors of
Ashton and thus control most corporate actions, as well as any actions requiring
the approval of stockholders, such as mergers and acquisitions.
Dependence Upon Former Subsidiary; Limited Operating History; Accumulated
Deficit. From its inception in 1994 until its acquisition of CSI(R), a former
subsidiary, in 1995, Ashton was a development stage company with no operating
history. The Company operated CSI(R) as a subsidiary until November 6, 1997,
when the Company consummated its sale. CSI(R) is a software development company
headquartered in Melbourne, Florida, which assisted in the design of the Ashton
Technology Encryption Device ("ATED") and the development of the server which
handles the ATED. The Company has since determined that CSI(R) no longer fits
into its long-range strategic plan. Other than through CSI(R), the Company has
generated revenues only through GA. The Company has never realized any operating
profit and has a significant accumulated deficit. The Company is unable to
predict whether or when its other subsidiaries and/or product lines will begin
to generate revenue.
UTTC(TM)'s Reliance Upon its Agreement with the PHLX; New Regulatory
Environment. UTTC(TM) is a development stage company which has generated no
revenue to date. On April 22, 1995, UTTC(TM) and the PHLX agreed to deploy the
UTS(TM) as a facility of the exchange. In September 1995, UTTC(TM) and the PHLX
memorialized the agreement into a formal contract whereby the PHLX agreed to
employ the UTS(TM) system on its equity trading floor for a term of five years
from the first date that the UTS(TM) system becomes operational on the PHLX.
Although UTTC(TM) completed the design and development of the UTS(TM) and its
VTS(TM) module in April 1997, there can be no assurance that either will operate
as designed or that the PHLX will obtain the regulatory approvals necessary to
commence operation of the UTS(TM) as a facility of the exchange.
The operation of the UTS(TM) as a facility of the PHLX is dependent upon
regulatory approval by the Commission. The concept of the UTS(TM), which would
constitute a new PHLX facility accompanied by new PHLX rules, must be filed as a
proposed rule change with the Commission. The PHLX filed its proposal for a rule
change, which was published in the Federal Register on September 4, 1996. In
order to approve the proposed rule change, the Commission must determine that
the UTS(TM) filing is consistent with the purposes of the Exchange Act,
particularly Section 6 thereof, which provides standards governing the rules of
national securities exchanges. On October 28, 1997, the PHLX filed an amendment
to the proposed rule change. The Commission published a notice of the amended
rule proposal in the Federal Register on December 31, 1997. There can be no
assurance that the Commission will not require further amendment to the proposed
PHLX rule change application or that the Commission will approve the proposed
rule change in the amended form. The Company is unable to predict whether or
when such approval of the PHLX request will be received.
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The PHLX proposed rule change, if approved, would authorize the conducting
of a morning session at the PHLX for the placing of orders for eligible
securities through the UTS(TM) prior to the commencement of each regular trading
session on the PHLX's equity trading floor. In addition, and separate from the
proposed rule change, the PHLX has sought certain interpretive and exemptive
relief in connection with the operation of UTS(TM) as a facility. As of the date
hereof, the Commission has not granted such interpretive and exemptive relief in
connection with this proposed rule change and there is no assurance that such
relief will be granted by the Commission. If Commission approval of the proposed
rule change and grant of the interpretive and exemptive relief are not obtained,
the UTS(TM) as described would not be utilized at the PHLX and consequently
there could be a delay in implementing the UTS(TM) into an alternative market.
The Company is currently seeking alternatives for the marketing and
implementation of the UTS(TM), including the formation of its own broker-dealer
subsidiary.
On June 9, 1998, the PHLX announced that its Board of Directors approved a
plan to merge with AMEX. The Company is unable to predict the impact that the
proposed merger will have on its agreement with the PHLX. However, the Company
does not presently intend to agree to the assignment of the PHLX Agreement to
the AMEX.
Development Stage Company. As a development stage company which has had a
limited operating history, the Company is subject to the risks and difficulties
common to new businesses. The viability of the Company must be considered in
light of problems normally encountered in the early stages of business
development, and the likelihood of the successful deployment of the UTS(TM) and
other products must be considered in light of the problems, difficulties,
complications and delays frequently encountered in connection with the
deployment of new technologies. No assurance can be given that such problems
will not arise or will be overcome or that the Company will achieve
profitability.
Capital Requirements; Need for Additional Financing. Based upon the
Company's current plan of operations, it is anticipated that the net proceeds
from the private placements of the Series D Preferred, completed in April 1998
and the Series E Preferred, completed in July 1998, along with the exercise of
the Put Rights will provide sufficient working capital for at least the next 18
months. The Company may need additional financing in the future if (i) the
Company experiences unexpected costs, (ii) there is a delay in the introduction
of the UTS(TM) system, (iii) the Company fails to develop successfully the
market for its products, (iv) other opportunities arise which require
significant investment, or (v) the net proceeds from the Series D Preferred and
Series E Preferred private placements prove to be insufficient for the Company's
continued operations. In order for the Company to exercise the Put Rights,
certain conditions must be met, of which there can be no assurance. In addition,
the Company may require additional financing to complete any acquisition it may
undertake. If financing is required, such financing may be raised through
additional equity offerings, joint ventures or other collaborative
relationships, borrowings, and other sources. There can be no assurance that
additional financing will be available or, if it is available, that it will be
available on acceptable terms. If additional funds are raised through the
issuance of additional equity securities, the percentage ownership of the then-
current stockholders of the Company may be reduced and such equity securities
may have rights, preferences, or privileges senior to those of the holders of
Common Stock.
Competition; Product Acceptance. The UTS(TM) will compete with other
electronic trading systems, including Instinet Corporation's Instinet system,
Investment Technology Group Inc.'s POSIT system, and OptiMark Technologies,
Inc.'s proposed OptiMark system. The Company believes that competitive criteria
include quality of trade execution, pricing, and reliability of post-execution
processing and settlement operations. Although the Company believes the UTS(TM)
will offer improved trading performance, trading flexibility and commercial
benefits, there can be no assurance that the UTS(TM) will be accepted by an
extended customer base, specifically, institutional investors, or that it will
be able to address adequately the competitive criteria in a manner that results
in a competitive advantage. The UTS(TM) will also compete with various national,
regional and foreign securities exchanges for trade execution services. There
can be no assurance that these exchanges will not take steps to attempt to
retain
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transaction volume or to compete with the UTS(TM) system by establishing or
creating their own pilot alternative trading systems, which in turn, could limit
the future growth of the UTS(TM) system.
The automated trade execution and analytical services to be offered by the
UTS(TM) will also compete with services offered by leading brokerage firms and
other information service and transaction processing firms. Many of the
Company's competitors have substantially greater financial, research,
development and other resources than the Company and many of their products have
substantial operating histories. Although the Company believes that the UTS(TM),
when operational, will offer certain competitive advantages, UTTC(TM)'s ability
to maintain these advantages will require continued investment in the
development of its services, additional marketing activities and customer
support services. There can be no assurance that the Company will have
sufficient resources to continue to make this investment, other than through the
recent private placements of convertible preferred stock, or that the Company's
competitors will not devote significantly more resources to competing services.
The electronic product advisory and research services provided by GA compete
with Forrester Research, Inc., Gartner Group, Inc., and J.D. Power & Associates.
UTTC(TM)'s success is heavily dependent upon the acceptance of the UTS(TM)
by institutional investors. Failure to obtain such acceptance could result in
lower share volumes and a lack of liquidity on the UTS(TM). Market and customer
acceptance of the UTS(TM) will depend upon, among other things, UTS(TM)'s
operational performance, which has not yet been tested in the environment of
actual equity market trading activity. In addition, once operational, the
UTS(TM)'s institutional customers may discontinue use of the UTS(TM) at any
time. While the Company's management continues to solicit customers to use the
UTS(TM), any commitments are dependent upon the UTS(TM) becoming operational at
the PHLX or, in the alternative, at an independent broker-dealer or exchange.
There can be no assurance that UTTC(TM) will attract a sufficient number of
customers to the UTS(TM). Failure to introduce successfully and market the
UTS(TM) could result in a material adverse effect on UTTC(TM) and the
consolidated operations of the Company.
Dependence Upon Proprietary Technology; Intellectual Property Rights. The
Company and its subsidiaries regard their respective products as proprietary and
rely primarily on a combination of trademark and trade secret protection,
employee and third party confidentiality and non-disclosure agreements, license
agreements, and other intellectual property protection methods to protect their
proprietary rights. However, neither Ashton, UTTC(TM), nor the Company's other
subsidiaries currently hold any material patents or have filed for copyright
protection relating to current product lines. The Company is currently
considering whether to patent or copyright certain aspects of its product line,
including the pricing algorithm utilized in connection with the VWAP(TM) system.
It may be possible for unauthorized third parties to copy or reverse engineer
certain portions of the Company's products or obtain or use information that the
Company regards as proprietary. There can be no assurance that the steps taken
by the Company will be adequate to deter misappropriation of proprietary
information, that the Company will be able to detect unauthorized use of
proprietary information, or that the Company will be able to afford the high
cost required to enforce intellectual property rights. Further, no assurance can
be given that nondisclosure and other contractual arrangements to protect the
Company's proprietary rights will not be breached, that the Company will have
adequate remedies for any breach, or that trade secrets will not otherwise
become known to or be independently developed by competitors. Although the
Company's competitive position may be adversely affected by the unauthorized use
of its proprietary information, the Company believes that the ability to protect
fully its intellectual property is less significant to the Company's success
than are other factors, such as the knowledge, ability and experience of its
employees and its ongoing product development and customer support activities.
Although the Company believes that the services and products it offers do
not infringe on the intellectual property rights of others, there can also be no
assurance that third parties will not assert infringement claims against the
Company in the future, that such assertions by third parties will not result in
costly litigation, that the Company will prevail in such litigation, or that the
Company will be able
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to license any patents or other intellectual property rights from third parties
on commercially reasonable terms, if at all. Litigation, in and of itself and
regardless of its outcome, could also result in substantial cost and diversion
of resources of the Company. Any infringement claim or other litigation against
or by the Company could have a material adverse affect on the Company's
business, operating results, and consolidated financial condition.
Rapid Changes in Technology; Maintaining Technological Advantage. The
technologies underlying the Company's products and services are subject to rapid
evolution and change. The Company's future success depends, in large measure,
upon its ability to respond quickly and successfully to technological advances
by developing and introducing new and improved products and services. There can
be no assurance that the Company will be able to foresee and respond to such
advances or that competitors, including those with greater financial and other
resources, will not succeed in developing technologies, products, or services
that could be superior to the those of the Company.
Dependence on High Trading Volumes. UTTC(TM)'s revenues may depend upon the
volume of securities trading. Securities trading volumes may be affected by
national and international economic and political conditions and broad trends in
business and finance. Any of these factors may result in lower share volumes
offered through the UTS(TM) and adversely affect the Company's results of
operations once the UTS(TM) becomes operational. Variations in transaction
volume could also cause the Company's operating results to fluctuate on a
quarterly basis.
Risk of Errors and Malfunctions. The UTS(TM) may be subject to various
risks associated with systems errors and malfunctions and employee errors.
Systems errors and malfunctions which could affect any electronic system could
result in service interruptions. In a competitive environment for electronic
equity trading execution, investors may turn to the Company's competitors on a
temporary or permanent basis to complete their trades. Prolonged service
interruptions resulting from natural disasters or otherwise could result in
decreased trading volumes and the loss of customers.
Year 2000 Compliance. The Company is assessing the potential impact of what
is commonly referred to as the "Year 2000" issue, concerning the inability of
certain information systems and automated equipment to properly recognize and
process dates containing the Year 2000 and beyond. If not corrected, these
systems and equipment could fail or create erroneous results. The Company is
currently in the process of determining if any of its systems and equipment
present Year 2000 issues. Regardless of the Year 2000 compliance of the
Company's systems, there can be no assurance that the Company will not be
adversely affected by the failure of others to become Year 2000 compliant.
Because of these uncertainties regarding the failure of others, there can be no
assurance that the Year 2000 issue will not have a material financial impact in
any future period.
Dow 10,000 Compliance. The Company is assessing the potential impact of the
Dow Jones Industrial Average (the "Dow") exceeding 10,000 ("Dow 10,000"). The
potential issue involves whether certain information systems and automated
equipment may be unable to process and recognize a Dow in excess of 9,999. If
not corrected, these systems and equipment could fail or create erroneous
results. The Company currently is in the process of determining if any of its
systems and equipment present Dow 10,000 compliance issues. Regardless of the
Dow 10,000 compliance of the Company's systems, there can be no assurance that
the Company will not be adversely affected by the failure of others to become
Dow 10,000 compliant. The potential liabilities and costs associated with Dow
10,000 compliance cannot be estimated with certainty at this time. Because of
these uncertainties regarding others, there can be no assurance that the Dow
10,000 issue will not have a material financial impact in any future period.
Government Regulation. The UTS(TM) will be subject to regulation by the
Commission, the PHLX, and other SRO's, which are charged with protecting the
interests of the investing public and the integrity of the securities markets.
Failure to comply with any rule or regulation established by these
8
<PAGE>
entities may subject UTTC(TM) to suspension or penalties which could have a
material adverse effect on UTTC(TM) and the consolidated operations of the
Company.
On April 17, 1998, the Commission proposed new rules that would allow
alternative trading systems, such as the UTS(TM), to register and operate as
broker-dealers or national securities exchanges independently, rather than
relying on a sponsoring exchange to incorporate such alternative trading system
as a facility of the exchange. In addition, the Commission proposed rules that
would allow national securities exchanges, such as the PHLX, to implement, for a
period of two years, pilot alternative trading systems without prior Commission
approval. Ashton and UTTC(TM) intend to take advantage of opportunities
presented by the new Commission rules. However, there can be no assurance that
the Commission will issue such rules in final form, whether the Commission will
alter the scope or form of the proposed rules, or whether such rules will
ultimately be adopted. In the event such alternative trading system rules are
not adopted in their current form, the Company will seek other avenues to
implement its electronic trading systems.
Dependence on Key Employees. The Company's success is dependent to a
significant degree upon the services of its key employees Fredric W.
Rittereiser, Robert A. Eprile, John A. Blohm, Fred S. Weingard, and Julio Gomez.
The loss of any one or more of these key employees could have a material adverse
effect on the Company's operations. Ashton has entered into a multi-year
employment agreement with Mr. Weingard. In October 1995, the Company obtained
key-man term life insurance policies in the amount of $900,000 each on the lives
of Fred S. Weingard, John A. Blohm, and Robert A. Eprile, and $5,000,000 on the
life of Fred W. Rittereiser in November 1997. The Company further believes that
its future success will depend in large part upon its ability to attract and
retain additional highly-skilled technical, managerial, sales and marketing
personnel. There can be no assurance that the Company will succeed in its effort
to attract appropriate personnel. Competition for such personnel in the
information technology development industry is intense. Failure to attract and
retain such personnel could have a material adverse effect on the consolidated
operations of the Company.
Possible Unspecified Acquisitions. One of the Company's strategies is to
attempt to grow through the acquisition of one or more products or companies
focused on advanced information technologies. Stockholders of the Company may
not have the power to approve or disapprove an acquisition. The Company receives
and expects to continue to receive inquiries as to its interest in acquiring
other products and companies and forming other business combinations. There can
be no assurance that the Company will find suitable acquisitions or that an
acquisition or other business combination can be completed upon terms acceptable
to the Company. Additionally, the Company may require significant additional
financing to complete any acquisition. There can be no assurance that such
financing will be available, or if it is available, that it will be available on
acceptable terms.
No Dividends and None Anticipated. The payment by Ashton of cash dividends
on its Common Stock, if any, in the future rests within the discretion of its
Board of Directors and will depend, among other things, upon Ashton's earnings,
its capital requirements and its financial condition as well as other relevant
factors. Ashton has not paid or declared any cash dividends upon its Common
Stock since its inception. While there are no contractual limitations on the
Company's ability to pay dividends, by reason of its present financial status
and its contemplated future financial requirements, the Company does not
anticipate making any cash distributions on its Common Stock in the foreseeable
future. The payment of dividends by the Company must also be in compliance with
the provisions of the General Corporation Law of the State of Delaware (the
"GCL").
Possible Issuance of Additional Preferred Stock. Ashton is authorized to
issue up to 3,000,000 shares of Preferred Stock, par value $.01 per share
("Preferred Stock"). As described in further detail herein, Preferred Stock has
been issued in the following five series: Series A Convertible PIK Preferred
Stock ("Series A Preferred"); Series B Convertible Preferred Stock ("Series B
Preferred"); Series C Convertible Preferred Stock ("Series C Preferred"); Series
D Preferred; and Series E Preferred. Further
9
<PAGE>
series of Preferred Stock may be issued in one or more series, the terms of
which may be determined at the time of issuance by the Board of Directors
without further action by stockholders. The terms of any issuance of Preferred
Stock may include voting rights (including the right to vote as a series on
particular matters) which could be superior to those of the shares of Common
Stock, preferences over the shares of Common Stock as to dividends and
distributions in liquidation, conversion and redemption rights (including the
right to convert into shares of Common Stock) and sinking fund provisions. In
the aggregate 837,505.25 shares are currently outstanding (250,000 shares of
Series A Preferred, 587,500 shares of Series B Preferred, 3.15 shares of Series
D Preferred, and 2.1 shares of Series E). Ashton has no current plans for the
issuance of any additional Preferred Stock. The issuance of any additional
Preferred Stock could affect the rights of the holders of Common Stock and could
reduce the value of the Common Stock.
Possible Dilution from Conversion of Preferred Stock; Market Overhang. The
number of shares of Common Stock issuable upon conversion of the Company's
837,505.25 outstanding shares of Preferred Stock is not fixed and may result in
substantial dilution to current stockholders. Depending on the market conditions
at the time of conversion, the number of shares issuable could prove to be
significantly greater in the event of a decrease in the trading price of the
Common Stock. Purchasers of Common Stock could therefore experience substantial
dilution of their investment upon conversion of any or all of the outstanding
series of Convertible Preferred Stock. The shares of Convertible Preferred Stock
are not registered and may be sold only if registered under the Securities Act
or sold in accordance with an applicable exemption from registration, such as
Rule 144. Shares of Common Stock into which certain series of the Preferred
Stock may be converted are being registered pursuant to this Registration
Statement. The availability of these shares for resale would exacerbate the
market overhang related to the Preferred Stock.
Requirements for Listing Securities on the Nasdaq SmallCap. The Common
Stock and the Warrants have been approved for quotation on Nasdaq SmallCap. The
rules of the Nasdaq SmallCap establish criteria for continued quotation of
securities on The Nasdaq SmallCap. While the Company expects to meet such
criteria, there can be no assurance that it will be able to maintain the
standards for continued quotation. Continued inclusion on Nasdaq SmallCap
generally requires that: (i) the Company maintain at least $2,000,000 in net
tangible assets, (ii) the minimum bid price of the Common Stock be $1.00 per
share, (iii) there be at least 500,000 shares in the public float valued at $1
million or more, (iv) the shares of Common Stock have at least two active market
makers; and (v) the shares of Common Stock be held by at least 300 holders. If
the Company fails to meet the standards for continued quotation, the market for
the securities may be affected adversely and holders may be unable to sell their
shares of Common Stock or Warrants. Trading, if any, in the securities would
thereafter be conducted in the over-the-counter market in what are commonly
referred to as the "pink sheets." If this were to occur, an investor would find
it more difficult to dispose of, or to obtain accurate quotations as to the
price of the securities.
"Penny Stock" Regulations. The Commission has adopted regulations under the
Exchange Act which generally define a "penny stock" to be any equity security
that has a market price (as defined in the Exchange Act) of less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. If the securities are removed from the Nasdaq SmallCap, at the
market prices of the Common Stock and Warrants on the date hereof, the
securities may be deemed to be "penny stocks" and become subject to rules that
impose additional sales practice requirements on broker-dealers who sell such
securities. For any transaction involving a penny stock, unless exempt, the
rules require delivery, prior to the transaction, of a disclosure schedule
prepared by the Commission relating to the penny stock market. The broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, current quotations for the securities, information on
the limited market in penny stocks and, if the broker-dealer is the sole market
maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market. In addition, the broker-dealer must obtain a
written acknowledgment from the customer that such disclosure information was
provided and must retain such acknowledgment for at least three years. Further,
monthly statements must be sent disclosing current price
10
<PAGE>
information for the penny stock held in the account. While many securities
quoted on Nasdaq would otherwise be covered by the definition of penny stock,
transactions in a non-Nasdaq security would be exempt from all but the sole
market maker provision for: (i) securities priced at $5.00 or more, (ii)
securities registered on a national securities exchange, (iii) securities
authorized for quotation on Nasdaq and (iv) securities whose issuer has net
tangible assets in excess of $2,000,000, if the issuer has been in continuous
operation for at least three years, or $5,000,000, if the issuer has been in
continuous operation for less than three years, or the issuer has average
revenue of at least $6,000,000 for the last 3 years. In addition, transactions
in a Nasdaq security directly with a Nasdaq market maker for such securities
would be subject only to the sole market maker disclosure and the disclosure
with respect to commissions to be paid to the broker-dealer and the registered
representative.
The above-described rules, if applicable to the Common Stock or Warrants,
may have a material adverse affect on the liquidity for the market of the
Company's securities should they cease to be quoted on the Nasdaq SmallCap. Such
rules may also affect the ability of broker-dealers to sell the securities and
may impede the ability of Warrantholders or subsequent holders of the shares of
Common Stock, Warrants and Preferred Stock to purchase Common Stock or to sell
such securities in the secondary market.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Common Stock
by the Selling Stockholders. Upon exercise of the Series C Warrants, Series D
Warrants, and Series E Warrants held by the Selling Stockholders, the Company
will receive approximately $350,532, $2,042,920, and $742,880, respectively,
which will be used for general corporate purposes. Upon exercise of all of the
Put Rights by the Company, the Company will receive an aggregate of up to
$13,000,000, which will be used for general corporate purposes.
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
All of the shares of Common Stock of the Company covered by this Prospectus
are being sold for the accounts of the (i) holders of the Series D Preferred,
including Settondown Capital International, Ltd., the placement agent
("Placement Agent") for the sale of such Preferred Stock (the "Series D
Preferred Stockholders"); (ii) holders of the Series E Preferred, including the
Placement Agent for the sale of such Preferred Stock (the "Series E Preferred
Stockholders"); (iii) holders of the Series C Warrants, including the Placement
Agent for the sale of such Warrants (the "Series C Warrantholders"); (iv)
holders of the Series D Warrants, including the Placement Agent for the sale of
such Warrants (the "Series D Warrantholders"); and (v) holders of the Series E
Warrants, including the Placement Agent for the sale of such Warrants (the
"Series E Warrantholders"). The Series D Preferred Stockholders and Series E
Preferred Stockholders are also obligated to purchase shares of the Company's
Common Stock upon the exercise of the Put Rights obtained by the Company in
connection with the sale of the Series D Preferred Stock and Series E Preferred
Stock.
An indeterminate number of shares of Common Stock, initially 2,782,562 as
of the date of this Prospectus, are being offered for resale by the Series D
Preferred Stockholders upon conversion of the Series D Preferred. An
indeterminate number of shares of Common Stock, initially 1,739,130 as of the
date of this Prospectus, are being offered for resale by the Series E Preferred
Stockholders upon conversion of the Series E Preferred. A total of up to 200,000
shares of Common Stock are being offered for resale by the Series C
Warrantholders upon the exercise of outstanding, unexercised Series C Warrants.
A total of up to 880,000 shares of Common Stock are being offered for resale by
the Series D Warrantholders upon the exercise of outstanding, unexercised Series
D Warrants. A total of up to 320,000 shares of Common Stock are being offered
for resale by the Series E Warrantholders upon the exercise of outstanding,
unexercised Series E Warrants. An indeterminate number of Shares of Common
Stock, initially 9,502,229 shares as of the date of this Prospectus, are being
offered for resale by the Series D Preferred Stockholders and Series E Preferred
Stockholders upon the exercise by the Company of the Put Rights.
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<PAGE>
The shares of Common Stock being offered by the Selling Stockholders or
their respective pledgees, donees, transferees or other successors in interest,
may be sold in one or more transactions (which may involve block transactions)
on the Nasdaq SmallCap or on such other market on which the Common Stock may
from time to time be trading, in privately-negotiated transactions, through the
writing of options on the shares, short sales, or any combination thereof. The
sale price to the public may be the market price prevailing at the time of sale,
a price related to such prevailing market price or such other price as the
Selling Stockholders determine from time to time. The shares may also be sold
pursuant to Section 4(1) of the Securities Act or Rule 144 thereunder.
The Selling Stockholders or their respective pledgees, donees, transferees,
or other successors in interest, may also sell the shares of Common Stock
directly to market makers acting as principals and/or broker-dealers acting as
agents for themselves or their customers. Brokers acting as agents for the
Selling Stockholders will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the shares will
do so for their own account and at their own risk. It is possible that a Selling
Stockholder will attempt to sell shares of Common Stock in block transactions to
market makers or other purchasers at a price per share which may be below the
market price at that time. There can be no assurance that all or any of the
shares of Common Stock offered hereby will be issued to, or sold by, the Selling
Stockholders. The Selling Stockholders and any brokers, dealers, or agents, upon
effecting the sale of any of the shares offered hereby, may be deemed
"underwriters" as that term is defined under the Securities Act or the Exchange
Act, or the rules and regulations thereunder.
The Selling Stockholders and any other persons participating in the sale or
distribution of the shares of Common Stock will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder, which
provisions of the Exchange Act may limit the timing of purchases and sales of
any other such person. The foregoing may affect the marketability of the shares.
The Company has agreed to indemnify certain Selling Stockholders against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments certain Selling Stockholders or their respective pledgees, donees,
transferees, or other successors in interest, may be required to make in respect
thereof.
Listed below are the names of each Selling Stockholder, the total number of
shares owned and the number of shares to be offered for each Selling Stockholder
account, and the percentage of Common Stock owned by each Selling Stockholder
before and after this Offering:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
SHARES OF COMMON SHARES OF COMMON
SHARES OF COMMON STOCK BEING STOCK OWNED OF
STOCK OWNED OF OFFERED FOR RECORD AFTER
RECORD PRIOR TO SELLING COMPLETION OF
OFFERING STOCKHOLDER'S OFFERING
NAME ACCOUNT
- ---------------------------------------------------------------------------------------
Number Percent
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Avalon Capital Limited 50,000 50,000(1) 0 0
- ---------------------------------------------------------------------------------------
Balmore Funds, S.A. 50,000 50,000(1) 0 0
- ---------------------------------------------------------------------------------------
Settondown Capital 486,020(3) 457,658 28,362 *
International, Ltd. (2)(4)
- ---------------------------------------------------------------------------------------
Dominion Capital Fund, 919,477 919,477(5) 0 0
Inc.(4)
- ---------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
Canadian Advantage 838,263 838,263(6) 0 0
Limited Partnership (4)
- ---------------------------------------------------------------------------------------
Excalibur Limited 463,369 463,369(7) 0 0
Partner (4)
- ---------------------------------------------------------------------------------------
Sovereign Partners 282,079 282,079(8) 0 0
Limited Partnership (4)
- ---------------------------------------------------------------------------------------
</TABLE>
_______________________________________________________________________________
* Less than 1%.
(1) Represents shares issuable upon conversion of the Series C Warrants.
(2) Acted as Placement Agent for the Company in connection with sale of Series
C, Series D, and Series E Preferred Stock and Warrants.
(3) Represents: (i) 28,362 shares issued in connection with the Series C
Preferred; (ii) 100,000 issuable upon conversion of the Series C Warrants;
(iii) 256,251 issuable upon conversion of the Series D Preferred and
Warrants; and (iv) 101,407 issuable upon conversion of the Series E
Preferred and Warrants.
(4) The number of shares set forth in the table represents an estimate of the
number of shares of Common Stock to be offered by the Series D Preferred
Stockholders and Warrantholders and Series E Preferred Stockholders and
Warrantholders. The actual number of shares of Common Stock issuable upon
conversion of the Series D Preferred and Series E Preferred and the exercise
of the Series D Warrants and Series E Warrants is indeterminate, subject to
adjustment and could be materially less or more than such estimated number
depending on factors which cannot be predicted by the Company at this time,
including, among other factors, the future market price of the Common Stock.
The actual number of shares of Common Stock offered hereby, and included in
the Registration Statement of which this Prospectus is a part, includes such
additional number of shares of Common Stock as may be issued or issuable
upon conversion of the Series D Preferred and Series E Preferred and the
exercise of the Series D Warrants and Series E Warrants by reason of the
floating rate conversion price mechanism or other adjustment mechanisms
described therein, or by reason of any stock split, stock dividend or
similar transaction involving the Common Stock, in order to prevent
dilution, in accordance with Rule 416 under the Securities Act. The Private
Equity Line of Credit Agreement, pursuant to which the Series D Preferred
and Series E Preferred, the Series D Warrants and Series E Warrants, and the
Put Rights, were sold, contains provisions which limit the number of shares
of Common Stock into which the Series D Preferred and Series E Preferred are
convertible. Under these provisions, the number of shares of Common Stock
into which the Series D Preferred and Series E Preferred are convertible
(together with any additional shares of Common Stock held by these Selling
Stockholders) will not exceed 4.99% of the Company's then outstanding Common
Stock. Accordingly, the number of shares of Common Stock set forth in the
table for these Selling Stockholders may exceed the number of shares of
Common Stock that these Selling Stockholders could own beneficially at any
given time through their ownership of the Series D Preferred and Series E
Preferred.
(5) Represents: (i) 525,010 shares issuable upon conversion of the Series D
Preferred and Series D Warrants; and (ii) 394,467 shares issuable upon
conversion of the Series E Preferred and the Series E Warrants.
(6) Represents: (i) 525,010 shares issuable upon conversion of the Series D
Preferred and Series D Warrants; and (ii) 313,253 shares issuable upon
conversion of the Series E Preferred and the Series E Warrants.
(7) Represents: (i) 393,757 shares issuable upon conversion of the Series D
Preferred and Series D Warrants; and (ii) 69,612 shares issuable upon
conversion of the Series E Preferred and the Series E Warrants.
(8) Represents: (i) 131,253 shares issuable upon conversion of the Series D
Preferred and Series D Warrants; and (ii) 150,826 shares issuable upon
conversion of the Series E Preferred and the Series E Warrants.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of August 10, 1998, the authorized capital stock of the Company
consisted of 60,000,000 shares of Common Stock, par value $.01 per share, of
which 8,477,913 were issued and outstanding, and 3,000,000 shares of Preferred
Stock, of which 837,505.25 were issued and outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by the stockholders. Holders of Common Stock are entitled to
receive such dividends, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefor. The Common Stock has
no preemptive or conversion rights or other subscription rights and there are no
redemptive or sinking funds provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and non-assessable, and all
the shares of Common Stock offered by the Company hereby will, when issued, be
fully paid and non-assessable.
On January 27, 1998, the Company completed the sale of 100,000 shares of
the Series C Preferred to a group of foreign investors, including the Placement
Agent for such sale, (the "Series C Investors"), with a liquidation preference
of $10.00 per share, for an aggregate purchase price of $1,000,000. Holders of
the Series C Preferred have the right to convert each share of Series C
Preferred into shares of Common Stock at a prescribed conversion price. Each of
the holders of the Series C Preferred exercised their conversion rights in March
and April 1998. In March and April 1998, holders of Series C Preferred converted
their Shares into 574,610 shares of the Company's Common Stock. In connection
with the sale of the Series C Preferred, the Series C Investors and the
Placement Agent received Warrants to purchase an aggregate of 200,000 shares of
Common Stock at an exercise price of 105% of the Market Price, as defined in the
Series C Preferred Certificate of Designation, for a period of five years.
On April 2, 1998, the Company entered into a Private Equity Line of Credit
Agreement (the "Line of Credit"), pursuant to Regulation D under the Securities
Act, with the Series D Preferred Stockholders and the Series E Preferred
Stockholders. Pursuant to, and upon the satisfaction of certain conditions set
forth in the Line of Credit, the Company was granted Put Rights allowing the
Company to cause the Series D Preferred Stockholders and Series E Preferred
Stockholders to purchase up to $13,000,000 in Common Stock at certain intervals,
and at certain volumes and prices. The number of shares to be purchased is to be
determined by a conversion formula set forth in the Line of Credit. For purposes
of this Registration Statement, were the Put Rights to be exercised in their
entirety as of August 10, 1998 at a stock price of $2.736, the Series D
Preferred Stockholders and Series E Preferred Stockholders would be obligated to
purchase 4,751,115 shares of Common Stock. In addition, pursuant to the Line of
Credit, the Series D Preferred Stockholders and Series E Preferred Stockholders
and the Placement Agent acquired warrants to purchase, in the aggregate, 600,000
shares of Common Stock at prices to be determined in the Line of Credit
Agreement. In connection with the foregoing offerings of Series C Preferred,
Series D Preferred, and Series E Preferred, Adirondack Capital, L.L.C.
("Adirondack") received $200,000 and an option to purchase 600,000 shares of
Common Stock at an exercise price of $1.875 per share for its services in
structuring the investments. K. Ivan F. Gothner, the managing director of
Adirondack, is a director of the Company. In addition, the Company expects to
pay Adirondack additional compensation in the amount of 5% of the proceeds
received at the time of conversion in connection with these offerings.
ANTI-TAKEOVER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date that the
person
14
<PAGE>
became an interested stockholder unless (with certain exceptions) the business
combination or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the stockholder. Generally, an "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years prior, did own) 15% or more of the corporation's voting
stock.
The Company's Bylaws provide that (i) the authorized number of directors
may be changed only by resolution of the Board of Directors, and (ii) directors
can only be removed with or without cause by a majority vote of the
stockholders. These provisions could have the effect of delaying, deterring, or
preventing a change in control of the Company or depressing the market price of
Common Stock or discouraging hostile bids in which stockholders of the Company
could receive a premium for their shares of Common Stock. The Company is
considering whether to adopt additional anti-takeover measures.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is North
American Transfer Company.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of Common
Stock offered hereby will be passed upon for the Company by Ballard Spahr
Andrews & Ingersoll, LLP, Philadelphia, PA.
EXPERTS
The consolidated financial statements of the Company and subsidiaries for
the two fiscal years ended March 31, 1997 and March 31, 1998, incorporated by
reference in this Prospectus and Registration Statement, have been audited by
Goldstein Golub Kessler LLP. Such financial statements and schedules have been
so incorporated in reliance upon such report given the authority of such firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement under
the Securities Act, with respect to the Common Stock offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock, reference is hereby made to such
Registration Statement, exhibits, and schedules. Statements contained in this
Prospectus regarding the contents of any contract or other document are not
necessarily complete with respect to each such contract or document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. The Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge at the Commission in Washington, D.C. and copies of such material
may be obtained from such upon payment of the fees prescribed by the Commission.
15
<PAGE>
================================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SHARES OF COMMON STOCK TO WHICH IT RELATES OR AN OFFER OR
SOLICITATION TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER DELIVERY OF THIS PROSPECTUS NOR SALE
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
-----------------
PAGE
----
Available Information 2
Incorporation of Certain
Documents by Reference 2
Forward-Looking Statements 3
Description of the Company 3
Risk Factors 5
Use of Proceeds 11
Selling Stockholders
and Plan of Distribution 11
Description of Capital Stock 14
Legal Matters 15
Experts 15
Additional Information 15
_____________________
15,423,921 Shares
THE ASTON TECHNOLOGY GROUP, INC.
COMMON STOCK
------------
PROSPECTUS
------------
August 13, 1998
================================================================================
