<PAGE>
As filed with the Securities and Exchange Commission on May __, 1998
SEC Registration No._________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
QUALMARK CORPORATION
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1232688
- ------------------------ --------------------------
(State of Incorporation) (I.R.S. Employer I.D. No.)
1329 W. 121st Avenue, Denver, Colorado 80234, (303) 254-8800
-----------------------------------------------------------------
(Address, including zip code, and telephone number, including area
code of Registrant's Principal Executive Offices)
W. Preston Wilson
QualMark Corporation
1329 W. 121st Avenue
Denver, Colorado 80234
(303) 254-8800
-------------------------------------------------------
(Name, address, including zip code and telephone number
including area code of agent for service)
Copies to:
-----------
David J. Cook, Esq.
Peter J. Jensen, Esq.
Chrisman, Bynum & Johnson, P.C.
1900 Fifteenth Street
Boulder, CO 80302
(303) 546-1300
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Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. /_/
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. /x /
--------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Proposed
Proposed Maximum
Title of Each Shares Maximum Aggregate Amount of
Class of Securities to be Offering Price Offering Registration
to be Registered Registered Per Share* Price* Fee
- --------------------------------------------------------------------------------
Common Stock
(no par value) 180,000 $7.875 $1,417,500 $418.16
</TABLE>
- --------------------------------------------------------------------------------
*ESTIMATED SOLELY FOR THE PURPOSE OF CALCULATING THE REGISTRATION FEE. COMPUTED
PURSUANT TO RULE 457(c) ON THE BASIS OF THE CLOSING SALE PRICE AS QUOTED ON THE
NASDAQ SMALLCAP STOCK MARKET SYSTEM AS OF THE CLOSE OF TRADING ON MAY __, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS 180,000 SHARES
QUALMARK CORPORATION
COMMON STOCK
(NO PAR VALUE)
------------
This Prospectus relates to up to 180,000 shares (the "Shares") of the
common stock, no par value (the "Common Stock") of QualMark Corporation
("QualMark" or the "Company"), which may be offered from time to time by the
Selling Shareholders named herein under "Selling Shareholders."
The Company will not receive any of the proceeds from the sale of the
Shares. The distribution of the Shares by the Selling Shareholders is not
subject to any underwriting agreement. The Shares offered by the Selling
Shareholders may be sold from time to time at designated prices that may be
changed, at market prices prevailing at the time of sale, at prices relating to
such prevailing market prices or at negotiated prices. In addition, the Selling
Shareholders may sell the Shares through customary brokerage channels, either
through broker-dealers acting as agents or principals. The Selling Shareholders
may effect such transactions by selling Shares to or through broker-dealers, and
such broker-dealers may receive compensation in the form of underwriting
discounts, concessions, commissions, or fees from the Selling Shareholders
and/or purchasers of the Shares for whom such broker-dealers may act as agent,
or to whom they sell as principal, or both (which compensation to a particular
broker-dealer might be in excess of customary commissions). Any broker-dealers
that participate with the Selling Shareholders in the distribution of Shares may
be deemed to be underwriters and any commissions received by them and any profit
on the resale of Shares positioned by them might be deemed to be underwriting
discounts and commissions within the meaning of the Securities Act of 1933, in
connection with such sales.
As of the close of trading on May__, 1998, the closing sale price of the
Common Stock as quoted on the Nasdaq SmallCap Stock Market system was $____ per
share. Total expenses of the offering are estimated to be $10,000, all of which
will be paid by the Selling Shareholders.
SEE "RISK FACTORS" COMMENCING ON PAGE 3 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
------------------
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 date of this Prospectus is May__, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (together with all amendments, exhibits,
schedules and supplements thereto, the "Registration Statement") on Form S-3
under the Securities Act for registration of the shares of Common Stock offered
hereby. This Prospectus, which forms a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement,
certain parts of which have been omitted as permitted by the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement. Statements contained in this Prospectus regarding the
contents of any contract or any other document to which reference is made are
qualified in all respects by the provisions of such exhibit, to which reference
is hereby made.
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files periodic
reports, proxy statements and other information with the Commission. Such
periodic reports, proxy statements and other information, and a copy of the
Registration Statement can be copied and inspected at the public reference
facilities of the Commission at 450 Fifth Street, Washington, D.C. 20549, and
at the Commission's regional offices at 7 World Trade Center, Suite 1300, New
York, New York 10048, and Citicorp Center, 500 West Madison, Suite 1400,
Chicago, Illinois 60661. Copies of all or any portion of the Registration
Statement may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Company files certain of its materials with the Commission electronically. The
Commission maintains a World Wide Web site (www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically.
The Company intends to furnish its shareholders with Annual Reports
containing audited financial statements for each fiscal year.
DOCUMENTS INCORPORATED BY REFERENCE
The Company will furnish without charge to each person, including any
beneficial owner to whom this Prospectus is delivered, upon the request of such
person, a copy of any or all of the documents referred to below, other than
exhibits to such documents. All requests for copies of such documents should be
directed in writing to Vernon W. Settle, Vice President, QualMark Corporation,
1329 W. 121st Avenue, Denver, Colorado 80234.
The following documents filed by the Company with the Commission are
incorporated herein by reference:
1) Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997.
2) Quarterly Report on Form 10-QSB for fiscal quarter ended
March 31, 1998
3) A description of the Common Stock contained in the
Company's Registration Statement No. 333-1454-D on Form
SB-2 dated April 8, 1996.
All documents filed subsequent to the date of this Prospectus by the
Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 prior to the termination of the offering of
the Shares shall be deemed to be incorporated herein by reference from the date
of filing of such documents. Any statement contained in a document incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
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<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS
BUSINESS BEFORE PURCHASING THE SECURITIES OFFERED HEREBY.
ACCUMULATED DEFICIT; HISTORY OF OPERATING LOSSES; RISK OF INSUFFICIENT
CAPITAL AND LIQUIDITY. The Company was formed in July 1991 and had an
accumulated deficit of $3,370,000 as of December 31, 1997. The Company had an
operating loss of $901,000 for the year ended December 31, 1997. It is
anticipated that the Company's operations in the near term may result in
quarterly losses. Additionally, there can be no assurance that the Company will
be able to achieve and maintain profitable operations in the future. There can
be no assurance that the Company will be profitable in the future or that funds
provided by operations and presently available capital will be sufficient to
fund the Company's ongoing operations in the future. If the Company has
insufficient funds, there can be no assurance that additional financing can be
obtained on acceptable terms, if at all. The absence of such financing would
have a material adverse effect on the Company's business, including a possible
reduction or cessation of operations.
PATENT LITIGATION. The Company is a defendant in a patent infringement
litigation with a competitor, Screening Systems, Inc. ("SSI"). The suit alleges
that the Company's products infringe three United States patents owned by Hughes
Electronics Company ("Hughes") and licensed to SSI. The court ordered that
Hughes, the owner of the patents, be joined as an interested party. When Hughes
declined to join the action as a plaintiff, SSI joined Hughes as a defendant.
The Company has been aware of the patents in question since the Company
commenced its operations and designed its vibration system, components of which
are also patented, so as not to infringe the patents. The Company's vibration
system has been used continuously in its products since 1991. The Company has
raised several defenses, including that one or more of the patent claims are
invalid or unenforceable. No assurance can be given that the Company will be
successful in its defense. In March and April 1997 the Court held a "MARKMAN
hearing" to determine the scope and meaning of the relevant patent claims In
October, 1997 the Court issued its Order re Construction of Patent Claims.
Based on that Order, in November, 1997 the Company moved for summary judgment of
non-infringement with respect to each of the patents in issue. SSI has moved
for summary judgment of infringement with respect to one of the patents in issue
and filed a summary judgment motion on several of the Company's defenses. The
Court has not yet ruled on any of these motions and has not yet set a trial
date. There can be no assurance that the Company will reach a successful
resolution of this matter. The suit may have a material adverse effect on the
business and financial condition of the Company in terms of legal fees and costs
for defending the claims, the possibility of a significant award of damages, and
of the loss of management time needed to deal with the suit.
PROPRIETARY PROTECTION. The Company currently holds United States and
foreign patents covering certain features of its system and has applied for
certain additional patents. The Company also intends to seek patent protection
in the future for certain aspects of any new systems which may be developed.
However, no assurance can be given that the patents currently held or that new
patents, if issued, will be valid or will provide any significant competitive
advantage to the Company. Further, if it were determined that another product
infringed on the Company's patents, there can be no assurance that the Company
would be financially capable of enforcing its patents. Although the Company is
not aware of any infringement of patents or intellectual property held by third
parties, there can be no assurance that the Company is not infringing on the
intellectual property rights of others.
COMPETITION. The electronic product test/screening industry is highly
competitive. The Company's primary competitors in the market segment for
multi-axis vibration tables combined with thermal stress systems are believed
to be Screening Systems, Inc. and Hanse Environmental, Inc. The Company is
currently involved in patent litigation with Screening Systems, Inc. See "Risk
Factors - Patent Litigation". Competing products and services also include
traditional environmental stress screening equipment, electro-dynamic vibration
systems and thermal chambers, and laboratory services. Many of the foregoing
products and services provide design and process screening at a price which may
be lower than the cost of the Company's products. The traditional equipment
marketed by these manufacturers is well-accepted in the market, since the
equipment supports traditional "pass-fail" specification test protocols that
have been in use for several decades. The Company's technology supports new
accelerated test protocols relating to
3
<PAGE>
improving product design and manufacturing processes rather than the "pass-fail"
test processes. As such, the Company is attempting to create a new market
segment and expects to allocate considerable resources to convincing prospective
customers to adopt accelerated test protocols in addition to, or in replacement
of, traditional methods. There can be no assurance that the Company will be
successful in this regard. Further, many of the companies with which the
Company competes have substantially greater financial and other resources.
DEPENDENCE ON SIGNIFICANT CUSTOMERS. The Company derives revenue primarily
from system sales and secondarily from test center services. In 1996, system
revenue accounted for 70% of net revenue, and test center revenue accounted for
30% of net revenue, and for the year ended December 31, 1997, system revenue
accounted for 72% of net revenue, and test center revenue accounted for 28% of
net revenue. The Company's average system order is in excess of $100,000 and
the selling cycle is typically between two and four months. As a result, the
Company's quarterly revenues can be materially dependent on a relatively limited
number of individually significant orders. In 1995, one customer, Allied Signal
Corporation - 12%, accounted for more than 10% of the Company's net revenues.
In 1996, one customer, AT&T Corporation - 16%, accounted for more than 10% of
the Company's net revenues. For the year ended December 31, 1997, no customer
accounted for more than 10% of revenue in the respective periods.
SEASONALITY; FLUCTUATION IN QUARTERLY REVENUES; CAPITAL SPENDING CYCLES.
Because the average system price is in excess of $100,000, most of the Company s
customers treat the purchase of the Company's systems as a capital purchase.
This historically has resulted in higher sales in the second and fourth quarters
of the calendar year, as customers delay purchasing capital equipment until
funds for the purchase have been built into a particular customer's annual
capital budget. A limited number of large orders may continue to account for a
significant portion of the Company's revenues and as such, the Company s
quarterly revenues and results of operations may continue to be materially
affected by the receipt or loss of any such orders and by the timing of
shipments and deliveries. Furthermore, overall capital spending cycles will
likely impact the Company's revenue growth. Accordingly, the Company's future
operating results are likely to be subject to significant variability from
quarter to quarter and could be adversely affected in any particular quarter.
Due to the foregoing factors, it is possible that the Company's operating
results may from time to time be below the expectations of public market
analysts and investors. In such event, the price of the Company's securities
could be adversely affected.
NEW TEST FACILITIES. The Company's plans call for adding to existing
capacity in certain test facilities which may require the Company to add
equipment and personnel, enter into long-term leases and otherwise incur
significant fixed costs associated with operating these test centers. There can
be no assurance that demand for the Company's testing services will be adequate
to sustain the operations of new test facilities. Additions to existing
capacity may be dependent on the company having adequate capital resources and
upon the Company's ability to find highly-qualified engineering personnel.
DEPENDENCE ON KEY PERSONNEL. The Company's operations are materially
dependent upon the services of W. Preston Wilson, President and Chief Executive
Officer of the Company, and the loss of the services of Mr. Wilson would
materially and adversely affect the Company's business. The Company has an
employment agreement with Mr. Wilson, which prohibits Mr. Wilson from competing
with the Company for a period of two years following his voluntary or
involuntary termination from the Company. The Company has purchased key man
life insurance on Mr. Wilson in the amount of $1,000,000. There can be no
assurance that the Company will retain the members of its current management or
that it will successfully attract and retain qualified management and sales
personnel in the future.
PRODUCT LIABILITY RISKS. The Company's systems consist of high performance
thermal chambers and vibration apparatus, which if misused could cause injury.
To minimize the risk of injury, the Company has designed its systems with
several redundant safety features. The Company is not aware of any injury
caused by its systems, and the Company has not experienced any claims for
product liability to date. There can be no assurance, however, that such claims
will not be made in the future. The Company maintains product liability
insurance in the aggregate amount of $2,000,000 per year and has additional
insurance in the amount of $1,000,000 for liability in excess of its initial
$2,000,000 of coverage. A successful claim against the Company in excess of
such coverage could have a material
4
<PAGE>
adverse effect on the Company. Further, such insurance is expensive and may not
be available in the future on acceptable terms, if at all.
NEED FOR CONTINUED PRODUCT DEVELOPMENT. Because of the nature of the
Company's products and services, there is the need to work to improve existing
products and to develop new products. As a result, the Company is dependent
upon the acquisition and retention of key technical personnel, who may be
difficult to recruit and who may command high salaries. The Company currently
has a development program in process to make significant additions to the
system's control software. There is no assurance that this or any other
development program will be successful.
LIMITED DATA ON RELIABILITY OF PRODUCTS. To date the Company's systems
have, for the most part, performed adequately without significant maintenance
requirements. However, because the number of systems that have been installed
since inception is relatively limited, data on long term maintenance
requirements and performance of the Company's products is limited. If future
maintenance requirements are significantly greater than those experienced to
date, customers may be reluctant to place future orders and the Company s
finances could be adversely affected.
DEPENDENCE ON SUPPLIERS. The Company's manufacturing activities to date
have been limited to assembling components provided by outside vendors.
Interruptions in supply of such components could have a material adverse effect
on the Company's ability to supply its products to customers until a new source
is available and, as a result, could have a material adverse effect on the
Company's business, financial condition and results of operations. Because the
components of the Company's products are manufactured by outside vendors, the
Company's ability to control the quality of its products is somewhat limited.
Although the Company has attempted to contract only with reliable suppliers,
there is no assurance that it will continue to be successful in this regard.
AUTHORIZATION OF PREFERRED STOCK. The Company's Articles of Incorporation
authorize the issuance of up to 2,000,000 shares of Preferred Stock with such
rights and preferences as may be determined from time to time by the Board of
Directors ("Preferred Stock"). Accordingly, under the Articles of Incorporation
the Board of Directors may, without shareholder approval, issue Preferred Stock
with dividend, liquidation, conversion, voting, redemption or other rights which
could adversely affect the voting power or other rights of the holders of Common
Stock. The issuance of any shares of Preferred Stock having rights superior to
those of the Common Stock, may result in a decrease of the value or market price
of the Common Stock and could be used by the Board of Directors as a device to
prevent a change in control of the Company. Holders of Preferred Stock may have
the right to receive dividends, certain preferences in liquidation and
conversion rights. The Company has no plans to issue shares of Preferred Stock.
LIMITATIONS ON DIRECTOR LIABILITY. The Company's Articles of Incorporation
provide, as permitted by governing Colorado law, that a director of the Company
shall not be personally liable to the Company or its shareholders for monetary
damages for breach of fiduciary duty as a director, with certain exceptions.
These provisions may discourage shareholders from bringing suit against a
director for breach of fiduciary duty and may reduce the likelihood of
derivative litigation brought by shareholders on behalf of the Company against a
director. In addition, the Company's Bylaws provide for mandatory
indemnification of directors and officers to the fullest extent permitted by
Colorado law.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS. This Registration
Statement contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934 and the Company intends that such forward-looking statements be subject
to the safe harbors for such statements under such sections. The
forward-looking statements herein are based on current expectations that involve
a number of risks and uncertainties. Such forward-looking statements are based
on numerous assumptions, including, but not limited to, the assumption that the
SSI litigation will be resolved in a manner that does not adversely impact the
ability of the Company to manufacture its products, that as the Company's
revenue base expands quarterly results of operations will become more
consistent, that the Company will be able to continue to find and retain
qualified personnel for its manufacturing and existing and anticipated test
center operations, and that demand for the Company's products and services will
continue to grow.
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The foregoing assumptions are based on judgments with respect to, among other
things, future economic, competitive and market conditions, and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond the Company's control. Accordingly, although the
Company believes that the assumptions underlying the forward-looking statements
are reasonable, any such assumption could prove to be inaccurate and therefore
there can be no assurance that the results contemplated in forward-looking
statements will be realized. The forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ materially
from those set forth in or implied by the forward-looking statements, including,
but not limited to, the risk of an unfavorable outcome in the SSI litigation,
variability in order flow and operating results, the ability of the Company to
find and retain qualified personnel to staff its manufacturing and marketing
operations and existing and anticipated test centers, and the risk that the
demand for the Company's systems will not continue to grow.
NO DIVIDENDS. The Company has not paid any dividends on its Common Stock
and does not intend to pay dividends in the foreseeable future.
THINLY TRADED STOCK AND VOLATILITY OF STOCK PRICE. The Company's Common
Stock is thinly traded and is subject to significant price volatility. Between
the Company's April 1996 initial public offering and December 31, 1997, the
Company's Common Stock closing prices ranged from a high of $6.50 to a low of
$2.88.
NASDAQ LISTING; "PENNY STOCK" RULES. Although the Common Stock is listed
on the Nasdaq SmallCap Market, there can be no assurance that such listing will
be maintained. If the Company's Common Stock is delisted for failure to meet the
Nasdaq listing maintenance requirements, the Common Stock would be subject to
the rules promulgated under the Securities Exchange Act of 1934 relating to
"penny stocks" which apply to non-Nasdaq companies whose stock trades at less
than $5 per share or whose tangible net worth is less than $2,000,000. These
rules require brokers who sell securities subject to such rules to persons other
than established customers and "accredited investors" to complete certain
documentation, make suitability inquiries of investors and provide investors
with certain information concerning the risks of trading in the security. These
rules may restrict the ability of brokers to sell the Company's Common Stock and
may affect the ability of purchasers in this offering to sell such Common Stock
in the secondary market.
USE OF PROCEEDS
The Company will not receive any part of the proceeds from the sale of the
Shares. All net proceeds of sale will go to the Selling Shareholders.
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
Common Stock owned by each Selling Shareholder as of the date of the Prospectus,
and as adjusted to give effect to the sale of such securities. The Shares are
being registered to permit public secondary trading of such securities, and the
Selling Shareholders may offer such securities for resale from time to time.
See "Plan of Distribution".
The Shares of Common Stock being offered by the Selling Shareholders were
acquired by them privately from a person who is arguably an "affiliate" of the
Company. None of such Selling Shareholders has had a material relationship with
the Company within the past three years other than as a result of ownership of
the securities of the Company. The Shares may be offered from time to time by
the Selling Shareholders named below or their nominees, and this Prospectus may
be required to be delivered by persons who may be deemed to be underwriters in
connection with the offer or sale of such securities. See "Plan of
Distribution". In accordance with the rules of the Commission, the columns
"Common Stock Owned After Offering" show the amount of securities owned by
Selling Shareholders after the offering. The numbers in such columns assume all
Shares registered and offered by this Prospectus, shown in the
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column "Common Stock Offered" are sold by the Selling Shareholders. However,
the Selling Shareholders are not required to sell any of the Shares offered, and
the Selling Shareholders may sell as many or as few Shares as they choose. See
"Plan of Distribution".
<TABLE>
<CAPTION>
Name of Common Stock Common Stock Common Stock
Selling Shareholders Owned Prior to Offering(1) Offered(1) Owned After Offering
- -------------------- -------------------------- ------- --------------------
Amount Percent(2) Amount(3) Percent(2)(4)
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Okabena Partnership K 145,000 4.3% 145,000 -0- 0%
Compass Management Partners, L.P. 2,000 0% 2,000 -0- 0%
Compass Technology Partners, L.P. 22,000 .6% 22,000 -0- 0%
Compass Chicago Partners, L.P. 11,000 .3% 11,000 -0- 0%
</TABLE>
PLAN OF DISTRIBUTION
The distribution of the Shares by the Selling Shareholders is not subject
to any underwriting agreement. The Shares offered by the Selling Shareholders
may be sold from time to time at designated prices that may be changed, at
market prices prevailing at the time of sale, at prices relating to such
prevailing market prices or at negotiated prices. The Selling Shareholders are
not required to sell any of the Shares offered, and the Selling Shareholders may
sell as many or as few Shares as they choose. In addition, the Selling
Shareholders may sell the Shares through customary brokerage channels, either
through broker-dealers acting as agents or principals. The Selling Shareholders
may effect such transactions by selling Shares to or through broker-dealers, and
such broker-dealers may receive compensation in the form of underwriting
discounts, concessions, commissions, or fees from the Selling Shareholders
and/or purchasers of the Shares for whom such broker-dealers may act as agent,
or to whom they sell as principal, or both (which compensation to a particular
broker-dealer might be in excess of customary commissions). Certain Selling
Shareholders, and any broker-dealers that participate with the Selling
Shareholders in the distribution of Shares, may be deemed to be underwriters and
any commissions received by them and any profit on the resale of Shares
positioned by them might be deemed to be underwriting discounts and commissions
within the meaning of the Securities Act of 1933, in connection with such sales.
The Company has entered into a Selling Agreement with holders of all of the
Shares offered hereby, which contains the Company's agreement to indemnify the
Selling Shareholders for losses or damages, including losses or damages under
the Securities Act to which the Selling Shareholders may become subject arising
out of or based upon untrue statements of fact contained in the registration
statement of which this Prospectus is a part.
INDEMNIFICATION
The Colorado Business Corporation Act (the "Colorado Act") permits the
Company to indemnify an officer or director who was or is a party or is
threatened to be made a party to any proceeding because of his or her position,
if: (i) the officer or director acted in good faith; (ii) the person reasonably
believed, in the case of conduct in an official capacity with the Company, that
his or her conduct was in the best interests of the Company, or in all other
cases, that his or her conduct was at least not opposed to the Company's best
interests; and, (iii) in the case of a criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful. If the officer or
director is successful on the merits in such a proceeding, the Colorado Act
requires the Company to indemnify the officer or director against all expenses,
including attorneys' fees incurred in connection with any such proceeding. The
Colorado Act authorizes the Company to advance expenses incurred in defending
any such proceeding under certain
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circumstances. Article XII of the Company's Articles of Incorporation provide
that the Company shall indemnify its officers and directors to the fullest
extent permitted by the Colorado Act.
The Colorado Act permits the Company to limit the personal liability of its
directors for monetary damages for breaches of fiduciary duty as a director,
except for breaches that involve the director's duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, acts involving unlawful dividends or stock redemptions or
transactions from which the director derived an improper personal benefit.
Article XIII of the Company's Articles of Incorporation includes such a
provision which limits the personal monetary liability of its directors.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 (the "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.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997 have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given upon the authority of said firm
as experts in auditing and accounting.
LEGAL OPINION
The legality of the Common Stock offered will be passed upon for the
Company by Chrisman, Bynum & Johnson, P.C., 1900 Fifteenth Street, Boulder, CO
80302.
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----------------------------------------------------
No person has been authorized to give any information or make any
representations other than those contained in this Prospectus in connection with
the sale or offering of any Shares of Common Stock covered by this Prospectus,
and if given or made, such other information or representations must not be
relied upon as having been authorized by QualMark Corporation or the Selling
Shareholders. This Prospectus does not constitute an offer of any securities
other than those to which it relates or an offer to sell, or a solicitation of
an offer to buy, in any jurisdiction to any person to whom it is not lawful to
make such offer or solicitation in such jurisdiction. Under no circumstances
should the delivery of this Prospectus or the sale or offering of any Shares of
Common Stock covered by this Prospectus create any implication that there has
been no change in the business or operations of QualMark Corporation since the
date of this Prospectus.
----------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . 2
Documents Incorporated by Reference. . . . . . . . . . . . . . . . . . 2
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 6
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 7
Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
180,000 Shares
QUALMARK CORPORATION
Common Stock (No Par Value)
PROSPECTUS
________________________________________
________________________________________
[QUALMARK LOGO]_________________________
____________, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities being registered, other than brokerage discounts, fees or
commissions, are:
<TABLE>
<S> <C>
Commission Registration Fee $
Accounting Fees and Expenses
Legal Fees and Expenses
Miscellaneous Expenses ---------
Total $ 10,000
</TABLE>
All expenses, except the registration fee, are estimated. The Selling
Shareholders will pay all expenses in connection with this Offering up to
$10,000 and the Company will pay all expenses in excess thereof.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Colorado Business Corporation Act (the "Colorado Act") permits the
Company to indemnify an officer or director who was or is a party or is
threatened to be made a party to any proceeding because of his or her position,
if: (i) the officer or director acted in good faith; (ii) the person reasonably
believed, in the case of conduct in an official capacity with the Company, that
his or her conduct was in the best interests of the Company, or in all other
cases, that his or her conduct was at least not opposed to the Company's best
interests; and, (iii) in the case of a criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful. If the officer or
director is successful on the merits in such a proceeding, the Colorado Act
requires the Company to indemnify the officer or director against all expenses,
including attorneys' fees incurred in connection with any such proceeding. The
Colorado Act authorizes the Company to advance expenses incurred in defending
any such proceeding under certain circumstances. The Company's Articles of
Incorporation provide that the Company shall indemnify its officers and
directors to the fullest extent permitted by the Colorado Act.
The Colorado Act permits the Company to limit the personal liability of its
directors for monetary damages for breaches of fiduciary duty as a director,
except for breaches that involve the director's duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, acts involving unlawful dividends or stock redemptions or
transactions from which the director derived an improper personal benefit. The
Company's Articles of Incorporation include such a provision which limits the
personal monetary liability of its directors.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------- ----------------------
<S> <C>
1.1 Form of Selling Agreement.
4.1 Form of Certificate for Shares of Common Stock.(1)
5.1 Opinion of Chrisman, Bynum & Johnson, P.C.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Chrisman, Bynum & Johnson, P.C. (contained in the opinion
filed as Exhibit 5.1).
24.1 Power of attorney (included in signature page of original filing).
</TABLE>
_________
(1) Incorporated by reference from the Company's Registration Statement No.
333-1454-D on Form SB-2 dated April 8, 1996.
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant hereby undertakes:
A. To file, during any period in which offers or sales are being
made of the securities registered hereby, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration
Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
provided, however, that the undertakings set forth in Paragraph (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.
B. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-2
<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 Denver, State of Colorado, on the _______ day of May,
1998.
QUALMARK CORPORATION
By:
----------------------------------------
W. Preston Wilson, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints W. Preston Wilson, Vernon W. Settle, or either of
them, his true and lawful attorney-in-fact and agent, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, including post-effective amendments, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, and hereby ratifies and
confirms all his said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------------------------- President, Chief Executive May __, 1998
W. Preston Wilson Officer and Director
(Principal Executive Officer)
- --------------------------- Vice President of Finance and May __, 1998
Vernon W. Settle Administration (Principal
Financial and Accounting Officer)
- --------------------------- Chairman of the Board
H. Robert Gill and Director May __, 1998
- --------------------------- Director May __, 1998
Charles A. French
II-3
<PAGE>
- --------------------------- Director May __, 1998
Philip A. Gordon
- --------------------------- Director May __, 1998
William B. Phillips
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Page
- ------ ---------------------- ----
<S> <C> <C>
1.1 Form of Selling Agreement.
4.1 Form of Certificate for Shares of Common Stock.(1)
5.1 Opinion of Chrisman, Bynum & Johnson, P.C.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Chrisman, Bynum & Johnson, P.C. (contained in the opinion
filed as Exhibit 5.1).
</TABLE>
_________
(1) Incorporated by reference from the Company's Registration Statement No.
333-1454-D on Form SB-2 dated April 8, 1996.
II-5
<PAGE>
EXHIBIT NO. 1.1
SELLING AGREEMENT
This SELLING AGREEMENT is made as of this 27th day of January, 1998,
between QUALMARK CORPORATION, a Colorado corporation ("Company"), with principal
offices at 1329 W. 121st Avenue, Denver, CO 80234, and those persons whose names
appear on the signature pages hereof ("Selling Shareholders").
RECITALS:
WHEREAS, the Company has issued to Selling Shareholders shares of the
Company's common stock ("Shares");
WHEREAS, the Company intends to file a registration statement on Form
S-3 ("Registration Statement") with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933 (the "Act"), registering the
Shares for sale;
WHEREAS, this Agreement is entered into between the Company and the
Selling Shareholders to facilitate a legal and orderly distribution of the
Shares pursuant to the Registration Statement.
NOW, THEREFORE, in consideration of the promises made herein and for
other good and valuable consideration, the parties agree as follows:
1. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company shall use its best efforts to keep the Registration
Statement effective so as to permit the public sale of the Shares for a period
of one (1) year after the effective date of the Registration Statement.
(b) The Company will provide the Selling Shareholders with sufficient
copies of the Registration Statement (and prospectus contained therein) as shall
be required to satisfy prospectus delivery requirements under federal and state
securities laws.
(c) The Company will pay all expenses of the public offering of the
Shares which exceed $10,000 except for fees of attorneys, accountants and other
advisors retained by the Selling Shareholders and brokerage and other selling
commissions associated with the distribution of the Shares.
(d)
(i) In the case of the happening, at any time after the
commencement of the offering of the Shares, and prior to its termination,
of any event which materially affects the Company or the Shares which
should be set forth in an amendment of or supplement to
<PAGE>
the Registration Statement in order to make the statements therein not
misleading, the Company agrees, upon receiving knowledge of such event,
to notify the Selling Shareholders as promptly as possible of the
happening of such an event.
(ii) In such event, the Company agrees to prepare and
furnish to the Selling Shareholders copies of an amended Registration
Statement or a supplement to the Registration Statement (including the
prospectus contained therein) in such quantities as the Selling
Shareholders may reasonably request, in order that the Registration
Statement as so amended or supplemented will not contain any untrue
statement of material fact, or omit to state any material fact necessary
in order to make the statements therein not misleading in light of the
circumstances under which they were made. The Selling Shareholders agree
temporarily to terminate the offering of the Shares during the period
between the notification by the Company to the Selling Shareholders of
the need for such amendment or supplement to the Registration Statement
and the time such amendment or supplement has been completed. The
duration of this time period shall be at the sole discretion of the
Company.
(e) The Company agrees to obtain the necessary state securities
and blue sky registrations or clearances in only those states in which it elects
to do so.
(f) No order preventing or suspending the use of any
preliminary prospectus contained in the Registration Statement has been issued
by the Commission, and such preliminary prospectus, at the time of filing
thereof, conformed in all material respects to the requirements of the Act and
the rules and regulations of the Commission thereunder, and did not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty does not apply to any statements or
omissions made in reliance upon and in conformity with information furnished in
writing to the Company by and with respect to the Selling Shareholders expressly
for use therein.
(g) The Company meets the requirements for the use of Form S-3
under the Act and the rules and regulations of the Commission.
(h) The Registration Statement and the final prospectus
contained therein and any further amendments or supplements thereto (including
any document incorporated by reference therein filed after the effective date of
the Registration Statement) will, when they become effective or are filed with
the Commission, as the case may be, conform in all material respects to the
requirements of the Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations of the Commission thereunder; all
documents incorporated by reference into the Registration Statement will conform
in all material respects to the requirements of the Commission thereunder; and
no part of the Registration Statement, the prospectus or any such amendment or
supplement (including documents incorporated by reference therein) will contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to any
statements or omissions in the Registration Statement or
-2-
<PAGE>
prospectus made in reliance upon and in conformity with substantive information
furnished in writing to the Company by and with respect to the Selling
Shareholders expressly for use therein.
2. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS.
(a) In the case of the happening, at any time after the commencement
of the offering of the Shares, and prior to its termination, of any event which
materially affects the plan of distribution of the Shares, which event should be
set forth in an amendment of or supplement to the Registration Statement in
order to make the statements therein not misleading, the Selling Shareholders,
upon receiving knowledge of such event, agrees to notify the Company, as
promptly as possible, of the happening of such an event, whereupon the
provisions of Section l(d) (ii) above shall then apply.
(b) Each Selling Shareholder agrees to deliver copies of the final
prospectus contained in the Registration Statement, as it may be amended and
supplemented from time to time, to purchasers of the Shares as required by
applicable federal and state securities laws. Each Selling Shareholder agrees
that it will offer and sell the Shares in only those states as to which counsel
for the Company has advised each Selling Shareholder in writing that the
necessary state securities or blue sky clearances have been obtained. The
Selling Shareholders will notify the Company in writing at the time the
distribution of the Shares has been completed.
(c) Statements contained in the Registration Statement, the
prospectus or any amendments or supplements thereto (including any document
incorporated by reference therein) made in reliance upon and in conformity with
substantive information furnished in writing to the Company by and with respect
to the Selling Shareholders expressly for use therein do not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make such statements therein not misleading.
(d) If during the effectiveness of the Registration Statement, the
Company notifies the Selling Shareholders of the occurrence of any intervening
event that, in the opinion of the Company's legal counsel, causes the prospectus
included in the Registration Statement not to comply with the Act, each Selling
Shareholder, promptly after receipt of the Company's notice, shall cease making
any offers, sales, or other dispositions of the Shares included in the
Registration Statement until the Selling Shareholders receive from the Company
copies of a new, amended, or supplemented prospectus complying with the Act.
(e) The Selling Shareholders will pay pro-rata all expenses of the
public offering of the Shares up to $10,000 and, in addition, will pay fees of
attorneys, accountants and other advisors retained by them and brokerage and
other selling commissions associated with the distribution of the Shares.
3. SUSPENSION OF OFFERING. It is understood that the Company and the
Selling Shareholders will advise each other immediately, in writing, of the
receipt of any threat or the initiation of any steps or procedures by any
federal or state instrumentality or any individual which would impair or
-3-
<PAGE>
prevent the offer of the Shares or the issuance of any suspension orders or
other prohibitions preventing or impairing the proposed offering. In the case
of the happening of any such event, neither the Company nor the Selling
Shareholders will acquiesce in such steps, procedures or suspension orders, and
the Company agrees actively to defend against any such actions or orders unless
all parties agree in writing to the acquiescence in such actions or orders.
4. INDEMNIFICATION.
(a) COMPANY'S INDEMNIFICATION. The Company hereby agrees to
indemnify and hold harmless each Selling Shareholder, its officers and
directors, and each other person, if any, who controls the Selling Shareholders
within the meaning of the Act, against any losses, claims, damages or
liabilities, joint or several, to which the Selling Shareholders or any such
person controlling the Selling Shareholders may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained, on the
effective date thereof, in the Registration Statement, or in any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein not misleading, and will reimburse the Selling Shareholders or such
person controlling the Selling Shareholders for any legal or other expenses
reasonably incurred in connection with investigating or defending any such loss,
claim, damage, liability or proceeding; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such Registration
Statement, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by the Selling Shareholders.
(b) SELLING SHAREHOLDER'S INDEMNIFICATION. Each Selling Shareholder
hereby agrees to indemnify and hold harmless the Company, its officers and
directors, and each other person, if any, who controls the Company within the
meaning of the Act, against any losses, claims, damages or liabilities, joint or
several, to which the Company or such other person controlling the Company may
become subject under the Act or otherwise, but only to the extent that such
losses, claims, damages or liabilities (or proceedings in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in the Registration
Statement or in any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein not misleading, which, in each such
case, has been made in or omitted from the Registration Statement, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by the Selling Shareholders and will reimburse the Company or
such person controlling the Company for any legal or other expenses reasonably
incurred in connection with investigating or defending any such loss, claim,
damage, liability or proceeding.
-4-
<PAGE>
5. MISCELLANEOUS:
(a) This Agreement is made pursuant to and governed by the laws of
the State of Colorado.
(b) Any notices by the Company to Selling Shareholders shall be
deemed delivered if in writing and delivered personally, or sent by certified
mail, to the Selling Shareholders addressed to them at their addresses as set
forth in the Company's books and records. Any notice by Selling Shareholders to
the Company shall be deemed delivered if in writing and delivered personally, or
sent by certified mail, addressed to the Company at its address as set forth at
the beginning hereof.
IN WITNESS WHEREOF, the parties have executed this Selling Agreement as of
the date first above written.
COMPANY: QUALMARK CORPORATION
SELLING SHAREHOLDERS By: /s/ W. Preston Wilson
----------------------------------------
W. Preston Wilson, President
OKABENA PARTNERSHIP K
By: Kohler Capiutal Management, Inc.
Attorney in Fact for Okabena
Investment Services Managing
Okabena Parnership K
COMPASS MANAGEMENT PARTNERS, L.P.
By: /s/ David G. Arsott
------------------------------
General Partner
COMPASS TECHNOLOGY PARTNERS, L.P.
By: /s/ David G. Arsott
------------------------------
General Partner
COMPASS CHICAGO PARTNERS, L.P.
By: /s/ David G. Arsott
------------------------------
-5-
<PAGE>
[LETTERHEAD]
EXHIBIT 5.1
May 5, 1998
QualMark Corporation
1329 W. 121st Avenue
Denver, CO 80234
Ladies and Gentlemen:
We have acted as counsel to QualMark Corporation (the "Company") in connection
with the preparation and filing of a Registration Statement on Form S-3 (the
"Registration Statement") registering under the Securities Act of 1933, as
amended, an aggregate of 180,000 shares (the "Shares") of common stock of the
Company, no par value. As such, we have examined the Registration Statement,
the Company's Articles of Incorporation, as amended, Bylaws, and minutes of
meetings of the Company's Board of Directors.
Based upon the foregoing, we are of the opinion that the Shares are validly
issued, fully paid and non-assessable securities of the Company.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the references to our firm in the Prospectus which is made a
part of the Registration Statement.
Very truly yours,
CHRISMAN, BYNUM & JOHNSON, P.C.
/s/ David J. Cook
- -------------------
David J. Cook
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
February 6, 1998, which appears on page 12 of the 1998 Annual Report to
Shareholders of QualMark Corporation, which is incorporated in the QualMark
Corporation's Annual Report on Form 10-KSB for the year ended December 31,
1997. We also consent to the reference to us under the heading "Experts" in
such prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Denver, Colorado
May 5, 1998
