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As filed with the Securities and Exchange Commission on January 12, 1999
Registration No. ____________________
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SECURITIES AND EXCHANGE COMMISSION
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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THE ASHTON TECHNOLOGY GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-6650372
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1900 Market Street, Suite 701
Philadelphia, Pennsylvania 19103
(215) 751-1900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Fredric W. Rittereiser
President and Chief Executive Officer
The Ashton Technology Group, Inc.
1900 Market Street, Suite 701
Philadelphia, Pennsylvania 19103
(215) 751-1900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
Justin P. Klein, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103
(215) 665-8500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of the Registration Statement.
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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
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Title of each class of Common Stock
securities to be registered $.01 par value
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Amount to be registered (2)
3,734,000
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Proposed maximum offering
price per unit (1) $1.94
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Proposed maximum
aggregate offering price (1) $7,243,960
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Total amount of registration
fee $2,013.82
================================================
(1) The price is based on the average of the reported high and low sales price
of our Common Stock as reported on the Nasdaq SmallCap Market on January 8,
1999. The price is estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(c).
(2) Included in this amount are 347,000 shares of our Common Stock issuable
upon conversion of our Series D Convertible Preferred Stock, 307,000 shares
of our Common Stock issuable upon conversion of our Series E Convertible
Preferred Stock, and 3,080,000 shares of our Common Stock shares issuable
upon the exercise of certain Put Rights granted to the Company in
connection with the sale of the Series D Convertible Preferred Stock and
Series E Convertible Preferred Stock. The estimated number of shares
included in this Registration Statement was calculated at 200% of the
shares required based upon the amount of Series D Convertible Preferred
Stock and Series E Convertible Preferred Stock outstanding and the closing
price of our stock on January 8, 1999, less Common Stock previously
registered and carried forward.
______________
The Registrant hereby amends the Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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PROSPECTUS
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THE ASHTON TECHNOLOGY GROUP, INC.
3,734,000 SHARES
COMMON STOCK $.01 PAR VALUE
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ABOUT THIS PROSPECTUS
The Ashton Technology Group, Inc., Ashton or the Company, filed a registration
statement (No. 333-58041), on August 11, 1998 to initially register 4,521,692
shares of Common Stock which would be acquired by investors in Ashton's Series D
and Series E Convertible Preferred Stock upon conversion of their shares of
preferred stock into Common Stock. The registration statement also included
9,502,229 shares of Common Stock which could be sold by Ashton and purchased by
the Series D and Series E Convertible Preferred Stock holders upon exercise of
put rights Ashton acquired at the same time that it sold the Series D and Series
E Preferred Stock, the "Put Rights".
This Prospectus relates to the resale of additional shares of the Company's
Common Stock by investors in the Company's Series D Convertible Preferred Stock
and Series E Convertible Preferred Stock who elect to convert their shares of
Series D and Series E Convertible Preferred Stock into shares of Common Stock or
purchase shares of Ashton Common Stock as a result of Ashton's exercise of its
Put Rights. These investors are referred to as the Selling Stockholders and
are identified along with the Plan of Distribution beginning on Page 12.
This Prospectus registers:
* 347,000 additional shares of Common Stock which may be acquired by investors
in Series D Convertible Preferred Stock,
* 307,000 additional shares of Common Stock which may be acquired by investors
in Series E Convertible Preferred Stock and
* 3,080,000 additional shares of Common Stock which may be acquired by
investors in the Series D and Series E Convertible Preferred Stock if Ashton
exercises its Put Rights.
These additional shares of Common Stock are being registered due to the decline
in the price of Ashton's Common Stock since the date of the previous
registration statement. The price decline has resulted in an increase in the
number of shares of Common Stock the Company is required to issue when the
holders of the Series D and Series E Convertible Preferred Stock convert their
shares and when the Company exercises its Put Rights.
Although Ashton will receive proceeds from the exercise of the Put Rights from
time to time, if they are exercised, Ashton will not receive any of the proceeds
from the conversion or resale of shares of Common Stock by the Series D and
Series E Convertible Preferred Stock investors.
Investing in our Common Stock involves a high degree of risk. see "Risk
Factors" beginning at Page 6, for a discussion of the factors we believe should
be considered by prospective purchasers of our common stock.
Neither the Securities Exchange Commission nor any state securities commission
has approved or disapproved these securities, or determined if this Prospectus
is truthful, accurate or complete. Any representation to the contrary is a
criminal offense.
The Company's Common Stock is traded on the Nasdaq SmallCap Market. The Common
Stock is listed under the symbol "ASTN". On January 8, 1999, the last reported
sales price for the Common Stock was $1.91.
The date of this Prospectus is January 12, 1999.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission" or
"SEC"). Our SEC filings are available to the public over the Internet at the
SEC's website at http://www.sec.gov. You may also read and copy any document we
file at the SEC's public reference rooms in Washington, D.C., New York, New
York, and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms.
Ashton's Common Stock and Warrants are listed on Nasdaq SmallCap Market, a
subsidiary of the National Association of Securities Dealers, Inc., or NASD.
The Company's filings may be inspected and copied at the NASD's offices at 1735
K Street, N.W., Washington, DC 20006-1500.
The Company has filed a Registration Statement with the SEC on Form S-3 under
the Securities Act of 1933, as amended (the "Securities Act"). The Registration
Statement, together with all amendments and exhibits, registers the Common Stock
offered by this Prospectus. This Prospectus does not contain all the
information set forth in the Registration Statement. The Registration Statement
omits certain information 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. We
refer you to the Registration Statement and to the exhibits and amendments filed
with it for further information. Copies of these documents may be obtained from
the Commission upon payment of the prescribed fee.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is an
important part of this Prospectus, and information that we file later with the
SEC will automatically update and supersede this information.
We incorporate by reference the documents listed below and any future filings
made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until we sell all of the securities.
* the Company's Quarterly Reports on Form 10-QSB for the fiscal quarters ended
September 30, 1998, as amended, and June 30, 1998;
* the Company's Current Reports on Form 8-K dated December 10, 1998,
September 1, 1998, April 9, 1998; and January 27, 1998
* the Company's Proxy Statement dated May 8, 1998;
* the Company's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1998;
* the Company's Proxy Statement dated July 27, 1998; and
* the Company's Prospectus filed pursuant to Rule 424(b) of the Securities Act,
dated August 11, 1998.
You may request a copy of these filings at no cost, by writing or telephoning us
at the following address:
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Chief Financial Officer
The Ashton Technology Group, Inc.
1900 Market Street, Suite 701
Philadelphia, PA 19103
(215) 751-1900.
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus may be "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. A forward-
looking statement involves known and unknown risks, uncertainties and other
important factors that could cause the actual financial performance or
achievements of the Company to differ materially from any future financial
performance or achievements expressed or implied by such forward-looking
statements.
The risks, uncertainties, and other important factors that could affect the
Company include, among others:
* dependence on arrangements with stock exchanges;
* dependence on proprietary technology;
* risks of technological changes and increased 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 discussed in this Prospectus.
Such forward-looking statements speak only as of the date of this Prospectus.
For discussion of the factors that might cause the performance of the Company to
differ with actual results, see the discussion of "Risk Factors" beginning on
Page 6. The Company is not obligated to disseminate any updates or revise any
forward-looking statement contained in this Prospectus to reflect any change in
the Company's expectations with regard to such statement or any change in
events, conditions, or circumstances on which any such statement is based.
THE COMPANY
Ashton develops and markets on-line transaction systems for participants in the
U.S. and international financial markets. We were founded in 1994 to apply
advanced telecommunication and computing technologies to the area of electronic
commerce, or e-commerce. We are currently organized as a parent company with
four subsidiaries. Our subsidiaries are:
* Universal Trading Technologies, Inc., ("UTTC/TM/")
* Gomez Advisors, Inc. ("GA")
* Electronic Market Center, Inc. ("EMC")
* ATG/TM/ International, Inc. ("ATG/TM/ International")
References herein to "us", "our", "we", the "Company" or "Ashton" include Ashton
and its subsidiaries, unless the context indicates otherwise.
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UTTC/TM/
UTTC/TM/ develops, markets and operates electronic pricing and transactional
systems for the securities trading markets. UTTC/TM/'s target customers are
professional investors, which include broker-dealers, pension plans, sponsors,
institutional money managers and mutual funds. We believe these professional
investors would 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. UTS/TM/'s first product module, the Volume
Weighted Average Price ("VWAP/TM/") Trading System ("VTS/TM/"), is an electronic
securities pricing and transaction system for trading exchange listed and Nasdaq
securities.
On April 22, 1995, the Philadelphia Stock Exchange, or the PHLX, and UTTC/TM/
agreed to deploy the VTS/TM/ as a facility of the PHLX. On September 18, 1995,
UTTC/TM/ and the PHLX formalized this contract for a term of five years
commencing from the date VTS/TM/ becomes operational on the PHLX. Operation of
the system was contingent upon approval by the SEC of a rule proposal filed by
the PHLX, amending PHLX Rule 237. On June 9, 1998, the PHLX agreed to be
acquired by the American Stock Exchange, or AMEX. Our contract with the PHLX is
assignable by its terms with the consent of both parties. We do not intend to
agree to the assignment of the contract. At this time, public reports indicate
the structure and terms under which the acquisition of the PHLX by the AMEX
would occur are still being negotiated. We cannot predict the impact the
proposed merger, should it occur, will have upon us.
We have continued to work with the PHLX to obtain regulatory approval of the
Rule 237 for the initial deployment of the VTS/TM/ as filed by the PHLX. In
response to a SEC request, we have agreed to operate the VTS/TM/ through REB
Securities. REB is a broker-dealer registered with the SEC effective June 18,
1998. It is a subsidiary of our subsidiary UTTC. A separate division of REB will
be the facilities manager for the VTS/TM/. On October 20, 1998, REB's
application for PHLX membership was approved by the PHLX. We have been
conducting preparatory system launch sessions with the staff of the PHLX and
have begun joint, full-scale production testing of the VTS/TM/ and PHLX systems.
On April 16, 1998, the SEC proposed new rules and rule amendments that will make
it easier for alternative trading systems, or ATSs, such as ours to operate.
Anticipating adoption of these new regulations, we have explored the best
structure for launching our VTS/TM/ and other electronic trading products while
at the same time maintaining flexibility in our approach and operating plans.
The ATS regulations will permit, among other things, ATSs to choose whether to
register and operate as national securities exchanges or as broker-dealers. In
addition, the SEC has proposed regulatory amendments that will permit registered
exchanges such as the PHLX to introduce pilot trading systems for up to two
years without preliminary SEC approval, the Pilot Rule.
On December 2, 1998, the SEC adopted new rules and rule amendments, which were
similar to the proposed ATS regulations. The ATS regulations and Pilot Rule will
allow us to introduce our products, regardless of whether the PHLX rule
proposal, with amendments, is approved by the SEC. The ATS regulations and Pilot
Rule were published in the Federal Register on December 11, 1998. These new
regulations will become effective in approximately mid-April 1999. Because the
VTS/TM/ will be fully tested for deployment prior to the effective date of the
Pilot Rule, UTTC/TM/ and the PHLX continue to seek SEC approval of the PHLX's
pending rule change filing to permit the VTS/TM/ to commence operations earlier
than mid April. This projection, however, is a forward-looking
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statement and the timing or occurrence of the rule approval could differ
materially from that anticipated.
REB SECURITIES
REB Securities, Inc. ("REB"), a registered broker-dealer, is a wholly-owned
subsidiary of UTTC/TM/. We expect REB to, upon approval of its NASD application,
provide institutional brokerage services to banks, broker-dealers, insurance
companies, and other financial intermediaries.
GOMEZ ADVISORS
Ashton formed GA in May 1997 in conjunction with Julio Gomez, John Robb, and Dr.
Alex Stein. GA provides consumer-based e-commerce research and analysis
concerning on-line financial services. GA also publishes proprietary
evaluations of Internet financial services through its Internet Broker Scorecard
and Internet Banker Scorecard rankings. The Scorecards have grown to include
Internet travel and shopping services and will be expanded to include other
segments of e-commerce. GA also provides clients in the financial services
industry with advisory services concerning the use of the Internet as a tool for
establishing electronic client relationships, marketing, and the interactive
distribution of products. The range of Internet financial consulting services
provided through GA includes strategy development, product and interface design,
and implementation planning.
Ashton and GA management recently agreed to a restructuring of GA. GA's
management team will have a direct equity ownership interest in GA. The
restructuring is expected to be completed during January 1999. As a result of
the restructuring, Ashton's initial voting equity ownership of GA will be
reduced from 100% to approximately 70%. GA is expected to then complete a
private placement of securities. The proceeds from the private placement will
be used to expand staffing at GA, for capital expenditures to build an online
research station and advanced database system, to develop and market new
products and services, and for general corporate purposes. This projection,
however, is a forward-looking statement and the timing or occurrence of the
reorganization and sale of GA's securities could differ materially from that
anticipated.
EMC
EMC is a wholly owned subsidiary that is expected to operate and market our to-
be-developed open finance system, the Electronic Market Center ("eMC"). We have
designed eMC for interactive market access by member users and to provide a
global electronic distribution channel for all types of financial products and
services. While we have designed the specifications for the eMC, there can be
no assurance that we will be able to finance its development or to actually
develop such a finance system. See "Risk Factors."
ATG/TM/ INTERNATIONAL
ATG/TM/ International is a wholly owned subsidiary that was created to develop
proprietary online transaction systems for global financial markets,
specifically China and Canada. The international markets represent potentially
significant growth for the application of ATG/TM/'s technology and skills. In
November 1997, we entered into a strategic initiative with Tianjin New Hong Chen
Technology & Trading Company to introduce Ashton's online trading technology and
systems to the financial markets in China.
CSI/TM/
Computer Science Innovations, Inc. ("CSI/TM/") was a subsidiary of the Company.
CSI/TM/ 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/TM/ to an Employee Stock
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Ownership Plan controlled by, and for the benefit of, CSI/TM/'s management and
employees.
Following the sale of CSI/TM/, our revenues 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 Ashton's
current subsidiaries other than GA has realized any revenue to date.
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 an investment in our securities. If any of the
following risks actually occur, our financial performance or business outlook
could be adversely affected, the trading price of our securities could decline,
and you might lose all or part of your investment.
WE HAVE A LIMITED OPERATING HISTORY AND A LARGE ACCUMULATED DEFICIT
We were founded in 1994 as a development stage company with no operating
history. Until recently our only revenue was generated by CSI/TM/. Because we
felt CSI/TM/ no longer fit into our long-term strategic plan involving
e-commerce, we sold CSI/TM/ on November 6, 1997. Since then, our only other
source of revenue has been GA, which was formed on May 22, 1997. Our revenue for
the six months ended September 30, 1998 was $651,952. We have never realized any
operating profit and have generated a significant accumulated deficit as a
result of the reported losses.
OUR DIRECTORS AND OFFICERS MAY BE ABLE TO EXERT CONTROL
Ashton's directors and officers beneficially own approximately 8.6% of the
outstanding shares of our Common Stock. In addition, directors and officers
have been granted options to purchase our Common Stock. Should all these
options be exercised and converted into Common Stock, the directors and officers
would own 33.5% of the outstanding shares of Common Stock. In the event all of
our outstanding shares of Series D and Series E Convertible Preferred Stock were
converted into Common Stock and in the event we exercised all our Put Rights
permitted by the Private Equity Line of Credit Agreement, Ashton's directors and
officers would beneficially own 23.8% of the outstanding shares of our Common
Stock. Because Ashton's Certificate of Incorporation provides no cumulative
voting rights, our directors and officers, acting together, are in a position
effectively to control the election of the members of the Board of Directors of
Ashton and to control most corporate actions, as well as any actions requiring
the approval of stockholders, such as mergers and acquisitions.
WE DEPEND ON OUR AGREEMENT WITH THE PHLX AND THE NEW REGULATORY ENVIRONMENT
We are a development stage company that has generated limited revenue to date.
On April 22, 1995, our subsidiary, UTTC/TM/, and the PHLX agreed to deploy the
VTS/TM/ as a facility of the exchange. Although the design and development of
the VTS/TM/ module was completed in April 1997, there can be no assurance that
it will operate as designed.
On June 9, 1998, the PHLX announced that its Board of Directors approved a plan
to merge with the AMEX. We are unable to predict the impact that the proposed
merger will have on our agreement with the PHLX or on the Company.
On December 2, 1998, the SEC adopted new ATS regulations that take effect
approximately 120 days after publication in the Federal Register. Until the ATS
regulations become effective, we are unable to commence operation
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of the VTS/TM/ as a facility of the PHLX or in an effective alternative format.
After the ATS regulations are effective, there can be no assurance that the
operation of VTS will commence or, if so, when it will commence.
WE WILL NEED ADDITIONAL FINANCING
Our current plan of operations and financial performance indicate that the
private financing we have obtained will provide sufficient working capital for
our next fiscal year. However, in order for us to receive all of the proceeds of
this financing, we must comply with all of the requirements to allow us to
exercise the Put Rights. There can be no assurance that we will comply with all
of these requirements. If we do not comply, the proceeds of the financing will
be unavailable to us. Unless we are able to obtain financing on other terms, it
would have a material adverse effect on the Company. Excluding GA, we expect to
begin generating revenue during our fiscal year ended March 31, 2000 which will
commence on April 1, 1999. However, additional financing could be required
should we encounter additional delays in implementing the VTS/TM/ as a facility
of the PHLX or if we fail to develop successfully the market for the VTS/TM/. In
addition, our plans currently include enhancements to the VTS/TM/, development
of new products including full-scale development of eMC and equity offerings in
GA. To implement these plans, we intend to raise additional financing. The
financing may not be available on attractive terms or at all. The financing may
take the form of spin-offs, joint ventures, equity offerings or other
collaborative relationships, which may require us to share revenue from our
products. These financing strategies could impose operating restrictions on us
or be dilutive to you as a holder of Common Stock. This projection, however, is
a forward-looking statement and our actual results could differ materially from
those anticipated.
Ashton is authorized to issue up to 3,000,000 shares of Preferred Stock. We
have already issued the following five series:
* 251,969 shares of Series A Convertible PIK Preferred Stock;
* 592,500 shares of Series B Convertible Preferred Stock;
* 55,000 shares of Series C Convertible Preferred Stock;
* 3.17 shares of Series D Convertible Preferred Stock; and
* 2.1 shares of Series E Convertible Preferred Stock.
The Company may issue further series of Preferred Stock. The Board of Directors
will determine the terms of any further Series without input from Ashton's
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, may have 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. If the Company issues
additional Preferred Stock, your rights as holders of Common Stock could be
affected and the value of your Common Stock could be reduced.
OUR INDUSTRY IS HIGHLY COMPETITIVE
Our products 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. We also compete with
other companies that develop proprietary electronic trading systems. We believe
that the key competitive criteria include quality of trade
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execution, pricing, and reliability of trade processing and settlement
operations. Although we feel the VTS/TM/ will offer improved trading
performance, trading flexibility and commercial benefits, there is no assurance
that the VTS/TM/ will be accepted by an extended customer base. Nor can we be
sure our products will be able to address adequately the competitive criteria in
a manner that results in a competitive advantage. We also compete with various
national, regional and foreign securities exchanges for trade execution
services. The regulatory and operating environment for these entities has been
undergoing significant changes. We could face increased competition should these
exchanges take steps to retain transaction volume or to compete with the VTS/TM/
system by establishing similar trading systems.
The success of our VTS/TM/ is heavily dependent upon the acceptance of the
product by institutional investors. Failure to obtain such acceptance could
result in lower volumes and a lack of liquidity on the VTS/TM/. Market and
customer acceptance of the VTS/TM/ will depend upon, among other things,
VTS/TM/'s operational performance, which has not yet been tested in the
environment of actual equity market trading activity. In addition, once
operational, the VTS/TM/'s institutional customers may discontinue use of the
VTS/TM/ at any time. While we continue to solicit customers to use the VTS/TM/,
any commitments are dependent upon the VTS/TM/ becoming operational at the PHLX.
There can be no assurance that we will attract a sufficient number of customers
to the VTS/TM/.
GA competes with Forrester Research, Inc., Gartner Group, Inc., and J.D. Power &
Associates. Indirect competitors include the internal planning and marketing
staffs of GA's current and prospective clients as well as other information
providers. GA also competes with large and established search engines such as
Yahoo, Excite and Lycos for on-line advertising and sponsorship revenues. There
are relatively few barriers to entry into GA's market and new competitors could
seek to compete against GA in one or more market segments. These competitors may
have substantially greater financial, information gathering and marketing
resources than GA. There can be no assurance that GA will be able to compete
successfully against existing or new competitors.
Our automated trade execution and analytical services, including eMC will also
compete with services offered by leading brokerage firms and other information
service and transaction processing firms. Many of our competitors have
substantially greater financial, research, development and other resources than
us and many of their products have substantial operating histories. While we
believe our products, when operational, will offer certain competitive
advantages, our ability to maintain these advantages will require continued
investment in the development of additional marketing activities and customer
support services. We may be unable to marshal sufficient resources to continue
to make this investment while our competitors may continue to devote
significantly more resources to competing services.
OUR PRODUCTS MAY NOT BE ABLE TO GENERATE ANTICIPATED REVENUES
GA has recently begun selling advertising on its website. GA has had no
significant advertising revenue until recently. Advertising revenue, which
constituted 40% of GA's total revenue for the quarter ended September 30, 1998,
is expected to increase rapidly. This projection, however, is a forward-looking
statement and our actual results could differ materially from those anticipated.
WE MAY BE EXPOSED TO RISKS OF INTELLECTUAL PROPERTY INFRINGEMENT
We regard our products and the research and development that went into
developing them as property. We 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 these property rights.
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However, we do not currently hold any material patents in or have we filed for
copyright protection relating to current product lines. We are currently
considering whether to patent or copyright certain aspects of its product line,
including the method for pricing securities traded on the VWAP/TM/ system.
Unauthorized third parties could copy or reverse engineer certain portions of
our products or obtain or use information that we regard as proprietary.
Nondisclosure and other contractual arrangements used to protect our proprietary
rights could be breached and we may not have adequate remedies for any breach.
We cannot be sure the actions we have undertaken or are contemplating will be
adequate to deter misappropriation of proprietary information or enable us to
detect unauthorized use of proprietary information. If faced with these
situations we may not be able to afford the high cost required to enforce
intellectual property rights or we may not have adequate remedies for any
breach. In addition, our trade secrets could become known to or be independently
developed by our competitors. While our competitive position may be adversely
affected by the unauthorized use of our proprietary information, we believe the
ability to protect fully our intellectual property is less significant to our
success than other factors, such as the knowledge, ability and experience of our
employees and our ongoing product development and customer support activities.
Although we believe our services and products 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 us in the future. Any
such assertions by third parties could result in costly litigation, in which we
may not prevail. Also, in such event, we may be unable to license any patents or
other intellectual property rights from third parties on commercially reasonable
terms, if at all. Litigation, regardless of its outcome, could also result in
substantial cost and diversion of our resources. Any infringement claims or
other litigation against us could materially impact our business, operating
results, and consolidated financial condition.
OUR MARKETS WILL UNDERGO RAPID CHANGES IN TECHNOLOGY
The technologies underlying our products and services are subject to rapid
evolution and change. Our future success depends upon our ability to respond
quickly and successfully to technological advances by developing and introducing
new and improved products and services. We may not be able to respond to such
advances. Competitors, including those with greater financial and other
resources, could also succeed in developing technologies, products, or services
that could be superior to ours.
OUR FUTURE REVENUE WILL BE BASED UPON TRADING VOLUMES
Our revenues will depend on the volume of securities traded on our systems.
National and international economic and political conditions and broad trends
may affect securities trading volumes. Any one or all of these factors could
result in lower share volumes offered through the VTS/TM/ and could adversely
impact our results of operations once the VTS/TM/ becomes operational.
Variations in transaction volume could result in significant volatility in
operating results.
WE MAY BE EXPOSED TO RISKS OF SOFTWARE "BUGS", ERRORS AND MALFUNCTIONS
Complex software such as ours often contains undetected errors, defects or
imperfections (often referred to as "bugs"). Despite rigorous testing, the
VTS/TM/ could still be subject to various risks associated with systems errors
and malfunctions and employee errors. These bugs could result in service
interruptions. In addition, because our products often work with software
developed by others, including
9
<PAGE>
customers, bugs in others' software could damage the marketability and
reputation of our products. Given the competitive environment for electronic
equity trading execution, investors could elect to use our competitors' products
on a temporary or permanent basis to complete their trades. Prolonged service
interruptions resulting from natural disasters could also result in decreased
trading volumes and the loss of customers.
WE MAY BE EXPOSED TO YEAR 2000 RISKS
Many currently installed computer systems and software products are designed to
accept only two digit entries in the date code field. Beginning in the year
2000, these code fields will need to accept four digit entries to distinguish
21st century dates. As a result, computer systems and/or software products used
by many companies may need to be upgraded to comply with such year 2000
requirements, the Y2K problem.
We believe none of the applications we have developed or the critical internal
systems and equipment used by us present Y2K issues. However, our systems
interact electronically and operationally with software, hardware and equipment
outside of our control. We also depend on third parties for services such as
telecommunications. We are currently evaluating the public disclosures made by
our key vendors. However, we are not independently verifying the Y2K compliance
of these vendors. If our vendors are not Y2K compliant, this could adversely
affect our business and results of operations. Y2K compliance issues could also
cause a significant number of companies, including our potential customers, to
experience problems that impact us.
We cannot assure you that we will not experience unanticipated negative
consequences, including material costs caused by undetected errors or defects in
the technology used in our internal systems. If it should come to our attention
that certain of our services need modification, or certain of our third-party
hardware and software is not year 2000 compliant, then we will seek
modifications to our services and systems on a timely basis.
WE MAY BE EXPOSED TO DOW 10,000 RISKS
We are assessing the potential impact of the Dow exceeding 10,000. Some
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. We believe the systems we have
developed do not present Dow 10,000 compliance issues. However, our products and
operating results could be materially impacted by the failure of others to
become Dow 10,000 compliant. At this time, the potential liabilities and costs
associated with Dow 10,000 compliance cannot be estimated with certainty.
GOVERNMENT REGULATION IMPACTS MANY OF OUR BUSINESS STRATEGIES
The VTS/TM/ will be subject to regulation by the SEC, the PHLX, and other self-
regulatory organizations such as the NASD, which are charged with protecting the
interests of the investing public and the integrity of the securities markets.
In addition, these regulations are subject to change and the timing of any
changes could impact our ability to launch new products.
For example, on December 2, 1998, the SEC adopted new rules that allow
alternative trading systems, such as ours, 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 SEC rules allow stock exchanges, such as the
PHLX, to implement, for a period of two years, pilot trading systems without
prior SEC approval. Any failure to comply with the rules or
10
<PAGE>
regulations established by these entities may subject us to suspension or
penalties that could have a material adverse effect on us and our operations and
financial performance.
WE DEPEND ON KEY EMPLOYEES
Our future success depends upon the continued service of certain of our
executive officers and key technology personnel. If we lost the services of one
or more of our key employees it could have a material adverse effect on our
business. In particular, the services of Fredric W. Rittereiser, Chief Executive
Officer, Fred S.Weingard, Chief Technology Officer, and William W. Uchimoto,
General Counsel, would be difficult to replace. Our subsidiary, GA, is dependent
upon the services of Julio Gomez, Dr. Alex Stein and John Robb. We have entered
into multi-year employment agreements with Messrs. Weingard, Gomez, Stein, Robb
and certain other officers. We have obtained "key-man" life insurance on each of
these individuals. We further believe our future success will depend upon our
ability to attract and retain additional highly skilled technical, managerial,
sales and marketing personnel. Competition for such personnel in the information
technology development industry is intense. If we are unable to attract and
retain such personnel, it could have a material adverse effect on our business,
operating results, and consolidated financial operations.
WE DO NOT EXPECT TO PAY DIVIDENDS
Our Board of Directors has discretion to pay cash dividends on our Common Stock
and Preferred Stocks. In determining whether to pay dividends, the Board of
Directors considers many factors including our earnings, capital requirements
and financial condition. We have not paid or declared any cash dividends upon
our Common Stock since our inception. While there are no contractual limitations
on our ability to pay Common Stock dividends, based on our present financial
status and contemplated future financial requirements, we do not anticipate
declaring any cash dividends on the Common Stock. If we pay dividends, we will
have to comply with certain provisions of Delaware law.
FUTURE CONVERSION OF OUR PREFERRED STOCKS OR EXERCISE OF OUR PUT RIGHTS MAY
DEPRESS OUR STOCK PRICE
We have four classes of preferred stock outstanding. The conversion formulas for
the Series D and Series E Convertible Preferred Stock are not fixed and may
result in substantial dilution to the percentage ownership of current
stockholders. Depending on the market price of the Common Stock, the number of
shares issued to holders of Series D and Series E Convertible Preferred Stock
could be significantly greater than anticipated.
In addition, the Put Rights available to us under the terms of our private
financing enable us to issue additional shares of Common Stock to the investors
in the Series D and Series E Preferred Stocks. The put price for these Common
Stock shares is not fixed and could result in the number of shares issued to be
larger than anticipated. You could experience substantial dilution of your
investment upon conversion of any or all of the outstanding shares of Series D
and Series E 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 and a previous registration statement. The availability of these
shares for resale may increase the potential for dilution to current
stockholders. The holders of our Series A and Series B Convertible Preferred
Stock may also convert their shares of preferred stock into Common Stock. These
shares of Common Stock could then be sold without registration pursuant to an
available
11
<PAGE>
exemption from registration such as Rule 144.
WE MUST MAINTAIN REQUIREMENTS FOR QUOTATION ON THE NASDAQ SMALLCAP
Our Common Stock and 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 we expect to meet such
criteria, there can be no assurance we will be able to maintain the standards
for continued quotation. Continued inclusion on Nasdaq SmallCap generally
requires:
* that the registrant maintain at least $2,000,000 in net tangible assets,
* the minimum bid price of the registrant's stock must be $1.00 per share,
* there must be at least 500,000 shares in the public float valued at
$1,000,000 or more,
* the stock must have at least two active market makers; and
* the stock must be held by at least 300 holders.
If any company fails to meet the standards for continued quotation, the stock
may be delisted or no longer quoted and the market for their securities may be
affected adversely and any holders of those securities may be unable to sell
their securities. Trading in those 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
sell, or to obtain accurate quotations as to the price of, the securities.
The Commission also adopted regulations under the Exchange Act which generally
define a "penny stock" to be any equity security that has a market price of less
than $5.00 per share or an exercise price of less than $5.00 per share, subject
to certain exceptions. If our Common Stock were to be removed from the Nasdaq
SmallCap, our Common Stock, at its current market price, would be deemed to be
"penny stock" and become subject to rules that impose additional sales practice
requirements on broker-dealers who sell such securities. Should the above-
described rules become applicable to our Common Stock, it could have a material
adverse affect on the liquidity for the market of your securities. These rules
could also affect the ability of broker-dealers to sell your securities and
could impede your ability or the ability of subsequent holders of the shares of
our Common Stock, Warrants and Preferred Stock to purchase Common Stock or to
sell those 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. The Company has obtained Put Rights under the terms
of its private financing that enable it to receive up to $13,000,000 from
holders of Series D and Series E Convertible Preferred Stock. The Company has
already obtained $3,000,000 of this financing. Upon exercise of all of the
remaining Put Rights by the Company, the Company will receive an aggregate of up
to $10,000,000, which will be used for general corporate purposes. There can be
no assurance that the Company will be in compliance with all of the requirements
necessary to permit the exercise of the Put Rights and receive the proceeds.
See "Risk Factors - We Need Additional Financing."
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 holders of the Series D Convertible Preferred
and the holders
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<PAGE>
of the Series E Convertible Preferred. The Series D Convertible Preferred
Stockholders and Series E Convertible 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 and
Series E Convertible Preferred Stock. This Prospectus also covers the shares of
Common Stock to be issued upon exercise of these Put Rights.
The Series D Preferred Stockholders upon conversion of the Series D Preferred
stock are offering 347,000 shares of Common Stock for resale. Previously, the
Company registered 2,782,562 shares, of which 2,694,948 have been issued. When
the remaining shares under the previous registration statement are combined with
the shares being registered under this Registration Statement, the Series D
Preferred Stockholders will be able to offer a total of 434,614 additional
shares of Common Stock for resale.
The Series E Preferred Stockholders upon conversion of the Series E Preferred
Stock are offering 307,000 shares of Common Stock for resale. Previously, the
Company registered 1,739,130 shares, of which 763,497 have been issued. When the
remaining shares under the previous registration statement are combined with the
shares being registered under this Registration Statement, the Series E
Preferred Stockholders will be able to offer a total of 1,282,633 additional
shares of Common Stock for resale.
Ashton may cause the Series D and Series E Preferred Stockholders to purchase
Common Stock pursuant to its Put Rights. 3,080,000 shares of Common Stock are
being offered for resale by the Series D and Series E Preferred Stockholders
upon the exercise by the Company of the Put Rights. Previously, the Company
registered 9,502,229 shares, of which 2,423,802 have been issued by the Company
pursuant to its Put Rights. When the remaining shares under the previous
registration statement are combined with the shares being registered under this
Registration Statement, the Preferred Stockholders will be able to offer a total
of 10,158,427 additional shares of Common Stock for resale.
The shares of Common Stock being offered by the Selling Stockholders or anyone
to whom they legally transfer such stock 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 any one to whom they legally transfer such stock 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.
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<PAGE>
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 STOCK SHARES OF
SHARES OF BEING OFFERED FOR COMMON STOCK
COMMON STOCK SELLING OWNED OF RECORD
OWNED OF RECORD STOCKHOLDER'S AFTER COMPLETION
NAME PRIOR TO OFFERING ACCOUNT OF OFFERING
- ----------------------------------------------------------------------------------------------------
Number Percent
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dominion Capital Fund,
Inc.(1) 1,491,116 (2) 1,491,116 0 0
- ----------------------------------------------------------------------------------------------------
Canadian Advantage
Limited Partnership (1) 1,077,414 (3) 1,077,414 0 0
- ----------------------------------------------------------------------------------------------------
Excalibur Limited
Partner (1) 312,291 (4) 312,291 0 0
- ----------------------------------------------------------------------------------------------------
Sovereign Partners
Limited Partnership (1) 853,179 (5) 853,179 0 0
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) The shares listed in the table are an estimate of the number of shares of
Common Stock to be offered by the Series D and Series E Convertible
Preferred Stockholders. The actual number of shares of Common Stock that the
Company will issue when the Series D Convertible Preferred Stock and Series
E Convertible Preferred Stock are converted and when the Company's Put
Rights are exercised, cannot be precisely determined, may be adjusted, and
could be materially less or more than such estimate depending on factors
which the Company cannot predict at this time, including, among other
factors, the future market price of the Common Stock. The Private Equity
Line of Credit Agreement, as amended, pursuant to which the Series D
Convertible Preferred Stock and Series E Convertible Preferred Stock, and
the Put Rights, were sold, contains provisions which limit the number of
shares of Common Stock into which the Series D Convertible Preferred Stock
and Series E Convertible Preferred Stock are convertible and the number of
shares the Company may Put at any one time. Under these provisions, the
number of shares of Common Stock into which the Series D Convertible
Preferred Stock and Series E Convertible Preferred Stock are convertible
(together with any additional shares of Common Stock held by these Selling
Stockholders) will not exceed 4.99% of the Company's Common Stock
outstanding at the time of conversion. Moreover, the Company is limited in
its ability to make a Put if such Selling Shareholders beneficially was
4.99% of the Company's common stock outstanding at the time of the Put.
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. In
addition, the Company cannot predict with certainty the precise allocation
of the shares of Common Stock, to be issued upon exercise of the Put rights,
among the Selling Shareholders, which may depend, among other factors, upon
the 4.99% limitation discussed above.
(2) Represents 33,443 shares to be issued on the conversion of the remaining
Series D Convertible Preferred, 164,074 shares to be issued on the
conversion of the remaining Series E Convertible Preferred, and 1,293,600
shares to be issued upon exercise of the Put.
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<PAGE>
(3) Represents 0 shares to be issued on the conversion of the remaining Series D
Convertible Preferred, 51,774 shares to be issued on the conversion of
the remaining Series E Convertible Preferred, and 1,025,640 shares to be
issued upon exercise of the Put.
(4) Represents 36,722 shares to be issued on the conversion of the remaining
Series D Convertible Preferred, 29,169 shares to be issued on the
conversion of the remaining Series E Convertible Preferred, and 246,400
shares to be issued upon exercise of the Put.
(5) Represents 276,835 shares to be issued on the conversion of the remaining
Series D Convertible Preferred, 61,983 shares to be issued on the
conversion of the remaining Series E Convertible Preferred, and 514,361
shares to be issued upon exercise of the Put.
15
<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of January 8, 1999, the authorized capital stock of the Company consisted of
60,000,000 shares of Common Stock, par value $.01 per share, of which 15,046,409
were issued and outstanding, and 3,000,000 shares of Preferred Stock, of which
789,345.7 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, that are declared by the Board of Directors. The Common
Stock has no other rights attached to it 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 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 and Series E Preferred Stockholders, among others.
Pursuant to the Line of Credit, the Company was granted Put Rights allowing the
Company to cause the Series D Preferred Stockholders and the 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
determined by a conversion formula set forth in the Line of Credit.
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 D Preferred and Series E Preferred (and other offerings),
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 each time the Company exercises its put rights in
connection with these offerings. As of the date of this Prospectus, Adirondack
has been paid $150,000 pursuant to these arrangements.
Since August 28, 1998, the Company has exercised the Put Rights and sold
2,423,802 shares of Common Stock for an aggregate price of $3,000,000. For
purposes of this Registration Statement, were the remaining Put Rights to be
exercised in their entirety as of January 8, 1999, at the closing stock price of
$1.97, the Series D Preferred Stockholders and Series E Preferred Stockholders
would be obligated to purchase 5,975,724 shares of Common Stock. See Risk
Factors -"Future Conversion of our Preferred Stocks or Exercise of Our Put
Rights May Depress Our Stock Price."
ANTI-TAKEOVER PROVISIONS
The Company is subject to 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 became an interested
stockholder unless (with certain exceptions) the Company approves the business
combination 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,
16
<PAGE>
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.
The Company's Bylaws also provide that the Board of Directors be notified not
less than 60 and not more than 90 days prior to any stockholders meeting of any
nominations of directors by the stockholders. These provisions could delay,
deter, or prevent a change in control of the Company or depress the market price
of Common Stock or discourage 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.
INDEMNIFICATION
The Delaware General Corporation Law allows the Company to indemnify its
directors and officers in terms sufficiently broad to indemnify such persons for
liabilities arising under the Securities Act. The Company has a directors and
officers liability insurance policy that, under certain circumstances, could
serve to indemnify the Company's directors and officers against liabilities
under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company 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.
TRANSFER AGENT AND REGISTRAR
North American Transfer Company is the transfer agent and registrar for the
Company's Common Stock.
LEGAL MATTERS
Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, PA, the Company's legal
counsel, has given an opinion on certain legal matters with respect to the
shares of Common Stock offered by this Prospectus.
EXPERTS
Goldstein Golub Kessler LLP, or GGK, has audited 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. The Company has relied on GGK's report in incorporating
these financial statements and schedules given GGK's expertise in accounting and
auditing.
17
<PAGE>
We have not authorized any dealer, salesman or other person to give any
information or to make any representation other than those contained in this
Prospectus. If any person makes a representation or gives any information other
than those contained in this Prospectus, you should not rely on it 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
offered by this Prospectus. This Prospectus does not constitute an offer or
solicitation to any person in any state where such an offer or solicitation
would be unlawful. If you receive this Prospectus or purchase any of the Common
Stock offered by this Prospectus, you should not assume that the information
contained in this Prospectus is correct as of any date after the date written on
this Prospectus.
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More Information 2
Incorporation by Reference 2
Forward-Looking Statements 3
The Company 3
Risk Factors 6
Use of Proceeds 12
Selling Stockholders
and Plan of Distribution 12
Description of Capital Stock 16
Indemnification 17
Transfer Agent and Registrar 17
Legal Matters 17
Experts 17
</TABLE>
3,734,000 Shares
THE ASHTON TECHNOLOGY
GROUP, INC.
Common Stock
________________
PROSPECTUS
________________
January 12, 1999
<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 of the sale and
distribution of the securities being registered, all of which are being borne by
the Company.
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission filing fee...... $
Printing expenses.................................. $ 5,000
Legal fees and expenses............................ $10,000
Accounting Fees.................................... $ 2,000
Miscellaneous...................................... $ -0-
======
Total.......................................... $19,014
</TABLE>
All of the amounts shown are estimates, except for the fee payable to the
Securities and Exchange Commission.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law authorizes the Company to grant
indemnities to directors and officers in terms sufficiently broad to permit
indemnification of such persons under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the Securities
Act. In addition, the Company has obtained Directors' and Officers' Liability
Insurance, which insures its officers and directors against certain liabilities
such persons may incur in their capacities as officers or directors of the
Company. The Company pays annual premiums of approximately $106,000 on this
policy.
Article 7 of the Company's Amended Certificate of Incorporation provides as
follows:
SEVENTH: Directors of the Corporation shall not be liable to either the
corporation or its stockholders for monetary damages for a breach of
fiduciary duties unless the breach involves: (1) a duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability for unlawful payments of dividends or unlawful stock purchase or
II-1
<PAGE>
redemption by the corporation, or (4) a transaction from which the director
derived an improper personal benefit.
ITEM 16. EXHIBITS
The following is a list of exhibits filed as part of this Registration
Statement, as amended.
Exhibit
Number Description
- ------ -----------
4.1, 4.2 Certificates of Designation for the Company's Series D and E
Convertible Preferred Stock. Incorporated by reference to the
Company's Registration Statement No. 333-58041, dated August 11,
1998.
5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP
23.1 Consent of Goldstein Golub Kessler LLP
27.1 Financial Data Schedule
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) Include any additional or changed material information
on the plan of distribution;
Provided, however, that, for small business issuers, paragraphs (1)(i)
and (1)(ii) of this section do not apply if the Registration Statement is on
Form S-3 or Form S-8, and the information required in a post-effective amendment
is incorporated by reference from periodic reports filed by the small business
issuer under the Exchange Act.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement of the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To file a post-effective amendment to remove from registration any
of the securities being registered, which remain, unsold at the end of the
offering.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Philadelphia, Commonwealth of Pennsylvania, on
January 12, 1999.
THE ASHTON TECHNOLOGY GROUP, INC.
By: /s/ Arthur J. Bacci
----------------------
Arthur J. Bacci
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/ Fredric W. Rittereiser Director, President and Chief Executive January 12, 1999
- --------------------------- Officer (Principal Executive Officer)
Fredric W. Rittereiser
- ------------------------------------------------------------------------------------------------------------------------------------
/s/ Robert A. Eprile Chairman of the Board January 12, 1999
- ---------------------------
Robert A. Eprile
- ------------------------------------------------------------------------------------------------------------------------------------
/s/ John A. Blohm Director and Secretary January 12, 1999
- ---------------------------
John A. Blohm
- ------------------------------------------------------------------------------------------------------------------------------------
/s/ Fred S. Weingard Director January 12, 1999
- ---------------------------
Fred S. Weingard
- ------------------------------------------------------------------------------------------------------------------------------------
/s/ K. Ivan F. Gothner Director January 12, 1999
- ---------------------------
K. Ivan F. Gothner
- ------------------------------------------------------------------------------------------------------------------------------------
/s/ Richard E. Butler Director January 12, 1999
- ---------------------------
Richard E. Butler
- ------------------------------------------------------------------------------------------------------------------------------------
/s/ William W. Uchimoto Director and General Counsel January 12, 1999
- ---------------------------
William W. Uchimoto
- -----------------------------------------------------------------------------------------------------------------------------------
/s/ Arthur J. Bacci Principal Financial Officer and January 12, 1999
- --------------------------- Principal Accounting Officer
Arthur J. Bacci
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Number
- --------------
4.1 Certificate of Designation of the Company's
Series D Convertible Preferred Stock*
4.2 Certificate of Designation of the Company's
Series E Convertible Preferred Stock*
5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP
23.1 Consent of Goldstein Golub Kessler LLP
27.1 Financial Data Schedule
* Incorporated by reference to the Company's Registration Statement no. 333-
58041, dated August 11, 1998.
<PAGE>
Exhibit 5.1
(Letterhead of Ballard Spahr Andrews & Ingersoll, LLP)
January 12, 1999
VIA EDGAR
The Ashton Technology Group
1900 Market Street, Suite 701
Philadelphia, PA 19103
Re: The Ashton Technology Group, Inc.
Registration Statement on Form S-3 dated January 12, 1999
---------------------------------------------------------
Ladies and Gentlemen:
You have requested our opinion regarding the validity of the issuance
of shares of The Ashton Technology Group, Inc. (the "Company") Common Stock
covered by the above-referenced Registration Statement on Form S-3 (the
"Registration Statement"). These shares include: (i) 347,000 shares issuable
-------
upon the conversion of outstanding Series D Convertible Preferred Stock; (ii)
307,000 shares issuable upon the conversion of outstanding Series E Convertible
- -------
Preferred Stock; and (vi) 3,080,000 shares issuable upon the exercise of certain
---------
Put Rights by the Company.
In our opinion the 654,000 shares of Common Stock issuable upon
-------
conversion of the Series D and Series E Convertible Preferred Stock and the
3,080,000 shares of Common Stock issuable upon exercise of the Put Rights, when
- ---------
issued in accordance with the terms of the Convertible Preferred Stock and Put
Rights, as the case may be, will be duly and validly issued by the Company,
fully paid and non-assessable.
We hereby consent to the inclusion of this opinion in the Registration
Statement, including any amendments thereto, and to the reference to this firm
in the Registration Statement under the section entitled "Legal Matters."
Very truly yours,
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Stockholders of
The Ashton Technology Group, Inc.
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 of our report dated
May 7, 1998, except for the last paragraph of Note 7 and the 8th paragraph of
Note 14, as to which the date is May 29, 1998, on the consolidated financial
statements of The Ashton Technology Group, Inc. and Subsidiaries as of March 31,
1998, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the two years in the period then ended, which
report appears in the March 31, 1998 annual report on Form 10-KSB of The Ashton
Technology Group, Inc. and Subsidiaries. We also consent to the reference to our
firm under the caption "experts" in such Prospectus.
/s/ Goldstein Golub Kessler LLP
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
January 12, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1999
<PERIOD-START> JUL-01-1998 APR-01-1998
<PERIOD-END> SEP-30-1998 SEP-30-1998
<CASH> 1,197,548 1,197,548
<SECURITIES> 0 0
<RECEIVABLES> 313,938 313,938
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,618,713 1,618,713
<PP&E> 1,719,093 1,719,093
<DEPRECIATION> (671,525) (671,525)
<TOTAL-ASSETS> 3,804,918 3,804,918
<CURRENT-LIABILITIES> 253,117 253,117
<BONDS> 0 0
0 0
12,843,638 12,843,638
<COMMON> 98,843 98,843
<OTHER-SE> (9,390,680) (9,390,680)
<TOTAL-LIABILITY-AND-EQUITY> 3,804,918 3,804,918
<SALES> 208,390 651,952
<TOTAL-REVENUES> 208,390 651,952
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 7,478,086 9,770,302
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (7,229,723) (9,042,909)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (7,229,723) (9,042,909)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (7,229,723) (9,042,909)
<EPS-PRIMARY> (.99) (1.68)
<EPS-DILUTED> (.99) (1.68)
</TABLE>
