As filed with the Securities and Exchange Commission on September 3, 1999
REGISTRATION NO. 333-84443
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO.1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIDELITY HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Nevada 4812 11-329204
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Number)
--------------
80-02 Kew Gardens Road, Kew Gardens, NY 11415
(718) 520-6500
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
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Doron Cohen, President
80-02 Kew Gardens Road, Kew Gardens, NY 11415
(718) 520-6500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
COPIES TO:
Mitchell C. Littman, Esq.
James J. Quinlan, Esq.
Littman Krooks Roth & Ball P.C.
655 Third Avenue
New York, NY 10017
(212 ) 490-2020
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
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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|
<PAGE>
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 filed in 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 of the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE (2) OFFERING PRICE (1) REGISTRATION FEE(3)
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<S> <C> <C> <C> <C>
Common Stock ($.01 par value per share) 2,165,457 $20.00 $43,309,140 $12,040
TOTAL
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</TABLE>
(1) Includes (a) 992,687 shares issued or issuable to the selling shareholders,
(b) 801,342 shares issuable pursuant to warrants to certain selling
shareholders, and (c) an indeterminate number of shares estimated at 371,428,
purchasable pursuant to a warrant issued in connection with a securities
purchase agreement. In addition to the shares set forth in the table, the amount
to be registered includes an indeterminate number of shares issuable upon
exercise of the Warrants, as such number may be adjusted as a result of stock
splits, stock dividends and antidilution provisions in accordance with Rule 416.
(2) Estimated in accordance with Rule 457(c) solely for the purpose of computing
the amount of the registration fee based on the average of the high and low
prices of Fidelity Common Stock as reported on the Nasdaq SmallCap Market System
on July 29, 1999.
(3) This fee has been paid previously.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 1999
PROSPECTUS
2,165,457 Shares of Common Stock
FIDELITY HOLDINGS, INC.
Common Stock ($.01 par value)
This prospectus covers the offer and sale of an estimated 2,165,457 shares
of the common stock of the Company. The common stock is being offered and sold
by certain of our shareholders. As part of a series of private placements
occurring from April 1998 to June 1999, the Company issued (1) 525,715 shares of
common stock, (2) warrants, (3) adjustable warrants, (4) $600,000 principal
amount of 10% convertible subordinated debentures and (5) $2.75 million
principal amount of 12% convertible debentures, $2,337,500 million principal
amount of which were prepaid on June 29, 1999. An aggregate of 801,342 shares of
common stock are issuable upon exercise of the warrants, an indeterminate number
of shares estimated at 371,428 have been deemed issuable pursuant to adjustable
warrants, 306,000 shares of common stock were issued upon conversion of the 10%
debentures and 160,972 shares of common stock were issued upon conversion of the
remaining 12% debentures outstanding on June 29, 1999. Some or all of the
selling shareholders expect to sell their shares.
The selling shareholders may without limitation offer their shares of
common stock for sale through public or private transactions, on or off the
United States exchanges, at prevailing market prices, or at privately negotiated
prices. See "Plan of Distribution." The Company will bear all expenses in
connection with the preparation of this prospectus.
THE PROCEEDS AND DETERMINING THE OFFERING PRICE
All proceeds from the sale of the common stock under this prospectus will
go to the selling shareholders. The Company will not receive any proceeds from
sales of the common stock offered by the selling shareholders. The Company will,
however, receive the exercise price of the warrants at the time of exercise.
Our common stock is currently traded on the Nasdaq National Market under
the symbol "FDHG." On September 2, 1999, the last reported sales price of a
share of Fidelity common stock on the Nasdaq National Market was $19.625 per
share.
INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 3 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is September __ 1999.
<PAGE>
TABLE OF CONTENTS
Page
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Where You Can Find More Information .................................... 2
Prospectus Summary ..................................................... 3
Risk Factors ........................................................... 5
Use of Proceeds ........................................................ 21
Selling Shareholders ................................................... 21
Plan of Distribution ................................................... 25
Legal Matters .......................................................... 26
Experts ................................................................ 26
THIS PROSPECTUS IS A PART OF A REGISTRATION STATEMENT WE FILED WITH THE
SEC. YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE ELSE TO PROVIDE YOU
WITH DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN
ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON
THE FRONT OF THE DOCUMENT.
WHERE CAN YOU FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy the documents we file at the
SEC's public reference room in Washington, D.C., New York, New York and Chicago,
Illinois. You can request copies of these documents by writing to the SEC and
paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public at no cost from the SEC's Website at http://www.sec.gov.
The SEC allows us to "incorporate by reference" information that 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
considered to be 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 we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"):
(1) The Annual Report on Form 10-KSB for the fiscal year ended December 31,
1998, including all matters incorporated by reference therein;
(2) Quarterly Report on Form 10-QSB for the quarter ended March 31, 1999;
(4) Current Report on Form 8-K filed February 3, 1999;
(5) Current Report on Form 8-K filed February 9, 1999;
(6) Current Report on Form 8-K filed July 2, 1999;
(7) Definitive Schedule 14A Proxy Statement filed on July 16, 1999; and
(8) Quarterly Report on Form 10-QSB for the quarter ended June 30, 1999.
Items (1) - (5) above do not give effect to a three -for-two stock split in the
form of a stock dividend effected by Fidelity in June 1999.
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Prospectus Summary
The following summarizes the business and operations of Fidelity Holdings,
Inc. (referred to in this prospectus as "we", "us", "Fidelity" or the
"Company"). This summary highlights certain information about us that is
included and incorporated by reference in this prospectus. This summary is not
complete and does not contain all of the information about us or all of the
information that you should consider before investing in our common stock. You
should read the entire prospectus carefully, including the information under the
caption "Risk Factors" and the information in the financial statements and the
notes to the financial statements that are incorporated by reference in this
prospectus. The securities offered by this prospectus involve a high degree of
risk. See "Risk Factors." Except as otherwise noted, all information in this
prospectus reflects a three-for-two stock split in the form of a stock dividend
effected in June 1999.
The Company
Fidelity is a holding company. We derive all of our revenues from our
operating subsidiaries. Our first full year of operations was 1996. Our
operating subsidiaries are grouped into two divisions:
o Automotive; and
o Technology.
We began operating automobile dealerships in May 1998 when we acquired
Major Automotive Group ("Major Auto"), a leading consolidator of automobile
dealerships in the New York Area. Major Auto:
o operates through five retail automobile
dealerships which sell new and used vehicles;
o sells cars over the Internet through its Web site
www.majorworld.com; and
o provides leasing and other financing services
through our subsidiary, Major Fleet & Leasing
Corp. ("Major Fleet").
In December 1998, we announced our intention to explore the possible
divestiture of our non-automotive activities, specifically, our Technology
Division, by way of sale, merger, consolidation or otherwise. We continue to
maintain these activities in order to maximize their value to potential
acquirors. We believe that this course of action will serve to enhance
shareholder value by providing the investment community the opportunity to focus
separately on each business, thus allowing for appropriate valuations by market
segment.
Our Technology Division consists of:
o voice processing operations;
o computer telephony technology operations; and
o plastics and utility products operations.
Included in our voice processing and computer telephony technology
operations lines are:
o proprietary software which enables consumers to
place long-distance telephone calls at discounted
rates;
o a variety of sophisticated interactive voice
response applications;
o developmental Internet broadband technology and
services; and
o a proprietary computer software system that
provides multi-lingual accounting and business
management applications.
Included in our plastics and utility products operations, which currently
consists of a development-stage company which was acquired in 1996, are the
following proprietary prototypes:
o a line of spa and bath fixtures for use in
whirlpool baths, spas, tubs and swimming pools;
and
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o a light-weight, structurally strong, prefabricated
conduit for underground electrical cables.
We were incorporated in the State of Nevada in November 1995. Our address
is 80-02 Kew Gardens Road, Suite 5000, Kew Gardens, New York 11415 and our
telephone number is (718) 520-6500. Our Web site is www.fdhg.com. Information
contained on our Website is not a part of this Prospectus.
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RISK FACTORS
The following factors should be reviewed carefully, in conjunction with
the other information in this Prospectus and our consolidated financial
statements. These factors, among others, could cause actual results to differ
materially from those currently anticipated and contained in forward-looking
statements made in this Prospectus and presented elsewhere by our management
from time to time. See "Note Regarding Forward-Looking Statements."
Automobile manufacturers exercise significant control over our operations and we
are dependent on them to operate our business.
Like other franchised new vehicle dealers, we are significantly dependent
upon our relationships with, and the success of, the manufacturers with which we
have franchised dealerships. We are also dependent on the manufacturers to
provide us with an inventory of new vehicles. The most popular vehicles tend to
provide Major Auto with the highest profit margin and are the most difficult to
obtain from the manufacturers. In order to obtain sufficient quantities of these
vehicles, we may be required to purchase a larger number of less desirable makes
and models than we would otherwise purchase. Sales of less desirable makes and
models may result in lower profit margins than sales of more popular vehicles.
If we are unable to obtain sufficient quantities of the most popular makes and
models, our profitability may be adversely affected.
As is typical of franchised new vehicle dealers, the success of our
franchises depends to a great extent on the success of the respective
manufacturers. Our success will therefore be linked to many factors affecting
the manufacturers such as:
o financial condition;
o marketing strategy;
o vehicle demand;
o production capabilities;
o management;
o events such as labor strikes; and
o negative publicity.
Our franchise agreements contain geographic and other restrictions which could
limit our future growth.
Our franchise agreements with the manufacturers, like those of other
franchised new vehicle dealers, do not grant us the exclusive right to sell that
manufacturer's vehicles within a given geographical area. Accordingly, a
manufacturer could grant another dealer a franchise to start a new dealership or
permit an existing dealer to relocate to a geographic location that would be
directly competitive with us. Such an event could have a material adverse effect
on our business, financial condition and results of operations.
Historically, manufacturers have exercised significant control over
dealerships through the terms and conditions of the franchise agreements
pursuant to which the Major Auto dealerships operate. These franchise agreements
restrict dealerships to specific locations and retain for the manufacturers
approval rights over changes in the dealerships' ownership and management. Our
ability to expand through the acquisition of new dealerships requires the
consent of the manufacturers. To date, Major Auto's acquisitions have been
approved and Major Auto has not been materially adversely affected by other
limitations imposed by the manufacturers. However, there can be no assurance
that in the future we will
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be able to obtain necessary approvals on acceptable terms or that Major Auto
will not be materially adversely affected by other limitations.
The franchise agreements between Major Auto and the manufacturers are for
fixed terms with no renewal obligation on the part of the manufacturers and
permit the manufacturers to terminate the agreements for a variety of causes.
The franchise agreements between Fidelity and the manufacturers have similar
provisions. We believe that we have been and continue to be in material
compliance with the terms of our franchise agreements. While none of the
manufacturers has terminated or failed to renew our franchise agreements, any
such termination or failure to renew could have a material adverse effect on
Fidelity and our business, financial condition and results of operations.
The automobile industry is a mature industry with limited growth potential in
new vehicle sales and automobile sales are cyclical and subject to downturns.
The United States automobile industry is generally considered to be a
mature industry in which minimal growth is expected in unit sales of new
vehicles. In addition, the market for automobiles, particularly new vehicles, is
subject to substantial cyclical variation and has experienced significant
downturns characterized by oversupply and weak demand. Many factors affect the
automobile industry, including:
o general and local economic conditions;
o taxes;
o consumer confidence;
o interest rates;
o credit availability; and
o the level of personal discretionary income.
A material decrease in vehicle sales from the historical level of vehicle
sales achieved by Major Auto would materially adversely affect our business,
financial condition and results of operations.
Our automobile operations are geographically concentrated and subject to local
economic conditions.
All of the Major Auto dealerships we have acquired are located in the New
York metropolitan area. While we may pursue acquisitions outside of the New York
metropolitan area, we expect that our automotive operations will be concentrated
in the New York metropolitan area for the foreseeable future. As a result, our
results of operations will depend substantially on general economic conditions
and consumer spending habits and preferences in the New York metropolitan area,
as well as various other factors, such as tax rates and applicable state and
local regulation. There can be no assurance that we will be able to expand
geographically or that any such expansion will adequately insulate us from the
adverse effects of local or regional economic conditions.
Our future operating results will be directly related to the availability and
cost of capital to us.
The principal sources of financing for new and used automobile inventories
have historically been lines of credit from banks and other financial
institutions and from cash generated from operations. There can be no assurance
that we will be able to continue to obtain capital for our current or expanded
operations on terms and conditions that are acceptable to us.
Our strategy of growth through the acquisition of additional dealerships
will require substantial capital. Our expansion and new acquisitions may involve
cash, the need to incur debt or the need to issue
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equity securities, which could have a dilutive effect on our then outstanding
capital stock. We may seek to obtain funds through borrowings from institutions
or by the public or private sale of our securities. There can be no assurance
that we will be able to obtain capital to finance our growth on terms and
conditions acceptable to us.
Risks associated with expansion may hinder our ability to increase revenues and
earnings.
Our future growth will depend, in part, on our ability to acquire
additional automobile dealerships. In pursuing a strategy of acquiring
additional dealerships, we will face risks commonly encountered with growth
through acquisitions. These risks include:
o incurring significantly higher capital
expenditures and operating expenses;
o failing to assimilate the operations and personnel
of the acquired dealerships;
o disrupting our ongoing business;
o dissipating our limited management resources;
o failing to maintain uniform standards, controls
and policies; and
o impairing relationships with employees and
customers as a result of changes in management.
There can be no assurance that we will be successful in overcoming these
risks or any other problems encountered with such acquisitions. In addition,
acquiring additional dealerships, as we intend, will have a significant impact
on our financial condition and could cause substantial fluctuations in our
quarterly and annual operating results. Acquisitions could result in significant
goodwill and intangible assets, which are likely to result in substantial
amortization charges to Fidelity that would reduce stated earnings.
We are uncertain of our ability to divest our Technology Division.
Although we have determined to seek to divest our Technology Division, no
assurance can be given that we will be able to do so on a profitable basis, or
at all. While we continue to fund certain activities of the Technology Division
in the expectation of enhancing its value, no assurance can be given that even
with such funding, our Technology Division can be sold. Furthermore, due to the
diversity of the activities within the Technology Division, no assurance can be
given that any or all of the Technology Division can be sold on a profitable
basis, or at all. Failure to divest the non-automotive operations at a profit,
or at all, could have an adverse impact on our future ability to increase
revenues and earnings or to realize the value of the related assets.
There is an uncertainty of market acceptance risk in our plastics and utility
products operations.
There can be no assurance that the products being developed by our
plastics and utility products operations, even if developed, will attain a
sufficient level of market acceptance for those operations to become profitable.
In addition, with respect to our spa and bath fixtures and related installation
method, although we have received indications from several manufacturers and
producers of whirlpool baths, spas and tubs that they will purchase our
fixtures, they are not obligated to do so. No assurance can be given that such
manufacturers and producers will make these purchases initially, or if they do,
that they will be sufficiently satisfied with our fixtures to continue making
these purchases. Even if our plastics and utility products operations are
developed, should such operations fail to achieve profitability, we may find it
more difficult, or we may be unable to, divest ourselves of these operations as
planned.
Our computer telephony technology operations are difficult to evaluate because
our subsidiary, IG-2, Inc., has no operating history.
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Because IG-2, Inc. has no operating history to date, there is limited
operating and financial data about its business upon which to base an evaluation
of its performance and its effect on an investment in our common stock. You
should consider the risks, expenses and difficulties we may encounter, including
those frequently encountered by developmental stage companies in new and rapidly
evolving markets. Our plan to divest ourselves of IG-2, Inc. will depend on our
ability to:
o deploy an effective network infrastructure;
o establish collocation and interconnection arrangements with
regional Bell operating companies, or RBOCs, and other
incumbent local exchange carriers, or ILECs;
o develop our billing and operational support systems;
o raise additional capital;
o rapidly expand digital subscriber line, or DSL, service within
the United States;
o attract and retain customers; and
o attract and retain qualified personnel.
If we fail to manage these activities successfully, it would materially
adversely affect IG-2, Inc.'s business, financial condition and results of
operations.
Because the DSL market is new and evolving, we cannot predict the size of the
market.
The market for high-speed data networking services using copper telephone
lines is in the early stages of development. We cannot accurately predict the
rate at which this market will grow, if at all, or whether new or increased
competition will result in market saturation. The security, reliability, ease,
cost of access and quality of service relating to the use of DSL technology for
Internet and local area network access are unresolved and may impact the growth
of these services. To be successful, IG-2, Inc. must develop and market services
that are widely accepted by businesses at profitable prices. If the market for
our DSL services fails to develop, grows more slowly than anticipated or becomes
saturated with competitors, these events could adversely affect our business,
financial condition and results of operations or our ability to divest ourselves
of our Technology Division.
IG-2, Inc.'s operations and prospects will be subject to a number of risks
common to the developing high-speed data networking services industry including:
o DSL technology may not operate as expected on incumbent local
carrier networks and may interfere with or be affected by
other transport technologies;
o The data networking industry is undergoing rapid technological
changes, and new technologies may be superior to the
technology IG-2, Inc. uses;
o IG-2, Inc.'s failure to achieve or sustain market acceptance
at desired pricing levels could impair its ability to achieve
profitability or positive cash flow;
o IG-2, Inc. will be dependent on ILECs, and others for copper
telephone lines, collocation space and transmission
facilities, and the ILECs reluctance to cooperate with IG-2,
Inc. or inability to provide the services or facilities it
needs could adversely affect its business;
o IG-2, Inc. will be unable to control the terms and conditions
under which it gains access to the ILECs collocation and
transmission facilities;
o IG-2, Inc. will be unable to control the terms or timing of
extending its interconnection agreements;
o IG-2, Inc.'s arrangements with the ILECs will be subject to
review and revision by various regulatory entities;
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o IG-2, Inc. may not be successful in completing the upgrade of
its network or achieving competitive transmission speeds;
o IG-2, Inc. will depend on peering relationships that may be
adversely modified in the future;
o A system failure or breach of security could cause delays or
interruptions of service to IG-2, Inc.'s customers; and
o IG-2, Inc. will depend on third parties to provide equipment
which is critical to providing its DSL and web hosting
services.
The loss of key personnel and our limited management and personnel resources
could adversely affect our operations and growth.
Our future success will depend to a significant extent on key personnel
and on the continued services of our senior management and other key personnel,
particularly Bruce Bendell, our Chairman and Chief Executive Officer, and Doron
Cohen, our President. The loss of the services of these, or certain other key
employees, would likely have a material adverse effect on our business. The
consulting agreement with Mr. Bendell and employment agreement with Mr. Cohen
both expired on December 31, 1998 and are in the process of being renegotiated.
Messrs. Bendell and Cohen are currently employed at will. We do not maintain
"key person" life insurance for any of our personnel. Our future success will
depend on our continuing ability to attract, retain and motivate other highly
skilled employees. Competition for such personnel in our industry is intense. We
may be unable to retain our key employees or attract, assimilate or retain other
highly qualified employees in the future. If we do not succeed in attracting new
personnel or retaining and motivating our current personnel, our business,
financial condition and operations will be adversely affected.
Potential conflicts of interest between Fidelity and its management personnel
could adversely affect our future performance.
We have entered into, or contemplate that we may enter into, several
transactions with our Chairman and controlling stockholder, Bruce Bendell,
and/or his brother Harold Bendell, a senior executive of Major Auto. Such
transactions include the following:
- In 1996, we acquired Major Fleet from the Bendell brothers. In exchange,
the Bendell brothers received (a) shares of the Company's 1996-MAJOR Series of
Convertible Preferred Stock, (b) warrants that carry registration rights and (c)
the right to manage the operations of Major Auto's vehicle leasing activities
pursuant to a management agreement.
- We acquired Major Auto from Bruce and Harold Bendell in May 1998. Bruce
and Harold Bendell received shares of Fidelity's 1997A-MAJOR AUTOMOTIVE GROUP
Series of Preferred Stock in that transaction and Bruce Bendell has a proxy to
vote the 50 shares of the 1997A-MAJOR AUTOMOTIVE GROUP Series of Preferred Stock
owned by Harold Bendell for a seven-year period which commenced on January 7,
1998. These shares allow the Bendell brothers to elect a majority of the
directors of Major Auto. The Bendell brothers are also parties to a management
agreement with Major Auto that gives them control over its day-to-day
operations. Should the Board of Directors of Major Auto and Fidelity disagree as
to a particular course of action, the Board of Directors of Major Auto will be
able to take that action over the objection of Fidelity. Conflicts could arise
between the Board of Directors of Fidelity and the Board of Directors of Major
Auto as to the appropriate course of action to be taken in the future. The
management agreement does prohibit certain actions from being taken without the
prior approval of Fidelity's Board of Directors, including:
o disposition of any of the Major Auto dealerships;
o acquisition of new dealerships; and
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o Fidelity incurring liability for Major Auto
indebtedness.
Should either of the Bendell brothers cease managing the dealerships, the
management agreement provides that ownership of his 1997A-MAJOR AUTOMOTIVE GROUP
Series of Preferred Stock shares and his management rights under the management
agreement will be automatically transferred to the other, and should both
brothers cease managing the dealerships for any reason, the shares and
management rights will be automatically transferred to a successor manager
designated in a successor addendum to each dealership agreement or, failing such
designation, to a successor manager designated by Fidelity (subject to approval
by the applicable manufacturers).
- Fidelity and Mr. Bendell are currently negotiating a letter of intent
concerning Fidelity's acquisition of Oyster Bay Nissan, a dealership
majority-owned by Mr. Bendell.
These transactions may involve situations in which Bruce Bendell's
interests as a director and shareholder of Fidelity conflict with his or his
brother Harold's interests as Major Auto's counterpart.
The markets in which we operate is highly competitive, and we may not be able to
compete effectively, especially against established industry competitors with
significantly greater financial resources.
Automotive Division
The automobile dealership business is highly competitive. Our competitors
include:
o automobile dealers;
o private sellers of used vehicles;
o used vehicle dealers;
o other franchised dealers;
o service center chains; and
o independent service and repair shops.
Gross profit margins on the sale of new vehicles have been decreasing over
the past two decades and the used car market faces increasing competition from
independent leasing companies and from used vehicle "superstores" that may have
inventories that are larger and more varied than Major Auto's. Some of Major
Auto's competitors may be larger, have access to greater financial resources and
be capable of operating on smaller gross margins than Major Auto. There can be
no assurance that we will continue to compete effectively or that manufacturers
will not modify the historical automobile franchise system in a manner that
increases competition among dealers or market and sell their vehicles through
other distribution channels.
Technology Division
The markets in which the Technology Division sells its products or intends
to sell its products are highly competitive. There are at present no significant
barriers to entry into such markets. Many of the producers of products that
presently compete with or may in the future compete with our products, as well
as companies wishing to enter the market in which our products compete, have
well established reputations, customer relationships and marketing and
distribution networks. Many of these companies also have greater financial,
technical, manufacturing, marketing, management and research and development
resources than do we. They may be more successful than we are in manufacturing
and marketing their products and they may be able to use their greater resources
to leverage existing relationships to obtain a competitive advantage over us.
There can be no assurance that we will continue to compete effectively. All of
these factors may negatively impact our ability to divest ourselves of these
operations.
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The market for IG-2, Inc.'s data networking solutions and Web hosting
services is rapidly evolving and intensely competitive. Many of its competitors
are offering, or may soon offer, technologies and services that will directly
compete with some or all of IG-2, Inc.'s planned service offerings. IG-2, Inc.'s
competitors use technologies for local access connections that include DSL,
wireless data systems, cable modems and ISDN technologies. Some of these
technologies may provide performance advantages in some respects over DSL and
other technologies using existing copper telephone wires.
IG-2, Inc. expects to face competition for its DSL and leased line
services from ILECs, alternative DSL providers, competitive local exchange
carriers, Internet service providers, wireless and cable companies. In the
Boston, New York, Philadelphia and Washington, D.C. metropolitan areas, IG-2,
Inc. expects to compete directly against other DSL providers such as Covad
Communications Group, Inc., Network Access Solutions Corporation, NorthPoint
Communications Group Inc. and Rhythms NetConnections, Inc. It also expect to
compete with cable companies in the New England area for telecommuting and work
at home applications.
ILECs are both an essential supplier of facilities and services for DSL
and other Internet connectivity services and a significant competitor and pose a
significant risk to the success of IG-2, Inc.'s business. ILECs have existing
networks in local areas and across the major metropolitan areas in IG-2, Inc.'s
target market, currently provides basic telephony service to substantially all
of the customers that it hopes to serve and have their own Internet service
provider businesses. Absent oversight by federal and state regulators, ILECs
have the ability to benefit their own DSL operations by providing them with
essential service inputs, such as copper telephone lines, transmission
facilities and collocation on more favorable terms than those provided to IG-2,
Inc. ILECs are deploying DSL services in selected markets and could deploy DSL
services on a widespread basis which could have a material adverse effect on our
ability to divest ourselves of IG-2, Inc.
IG-2, Inc. will compete in the Web hosting and collocation segment of its
business with a variety of companies, including AboveNet Communications Inc.,
Concentric Network Corporation, Digex Incorporated, Exodus Communications, Inc.,
GTE Internetworking, Level 3 Communications, Inc. and NaviSite, Inc.
Many of IG-2, Inc.'s potential competitors, as well as a number of its
potential new competitors, have longer operating histories, greater name
recognition and substantially greater financial, technical and marketing
resources. Some of its potential competitors may have the financial resources to
withstand substantial price competition. Moreover, IG-2, Inc.'s competitors may
be able to negotiate contracts with suppliers of telecommunications products and
services which are more favorable than contracts negotiated by it. Our ability
to divest ourselves of IG-2, Inc. may be adversely affected by each of these
factors.
In addition, we may face increasing competition with respect our Talkie
Power Web Line Machine as a result of deregulation in foreign countries which
could result in competition from other service providers with large, established
customer bases or close ties to governmental authorities in their home countries
and decreased prices for direct-dialed international calls. Customers could
become unwilling to use our services, which would adversely affect our ability
to derive revenues from our Talkie Power Web Line Machines and ultimately divest
ourselves of this operations.
Government regulation and environmental regulation compliance costs may
adversely affect our profitability.
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Automotive Division
Our operations are subject to various Federal, state and local laws and
regulations including those relating to local licensing and consumer protection.
While we believe that we maintain all requisite licenses and permits and that we
are in substantial compliance with all applicable laws and regulations, there
can be no assurance that we will be able to continue to maintain all requisite
licenses and permits or to comply with applicable laws and regulations, and our
failure to do so could have a material adverse effect on our business, financial
condition and results of operations. In addition, the adoption of any new laws
or regulations and the cost to Fidelity of complying with any new laws or
regulations, could have a material adverse effect on our business, financial
condition and results of operations.
In addition, as with automobile dealerships generally, and parts and
service operations in particular, Major Auto's business involves the use,
handling and contracting for recycling or disposal of hazardous or toxic
substances or wastes, including environmentally sensitive materials such as:
o motor oil;
o waste motor oil and filters;
o transmission fluid;
o antifreeze;
o freon;
o waste paint and lacquer thinner;
o batteries;
o solvents;
o lubricants;
o degreasing agents; and
o gasoline and diesel fuels.
Accordingly, we are subject to Federal, state and local environmental laws
governing health, environmental quality, and remediation of contamination at
facilities Major Auto operates or to which it sends hazardous or toxic
substances or wastes for treatment, recycling or disposal. We believe that we
are in material compliance with all environmental laws and that such compliance
will not have a material adverse effect on our business, financial condition or
results of operations. However, environmental laws are complex and subject to
frequent change. There can be no assurance that compliance with amended, new or
more stringent laws, stricter interpretations of existing laws or the future
discovery of environmentally hazardous conditions will not require material
expenditures by Fidelity.
Technology Division
Because many of the facilities and services IG-2, Inc. will need in order
to provide DSL are subject to regulation at the federal, state and local levels,
changes in applicable laws or regulations could have an adverse impact on its
business and accordingly on our ability to divest ourselves of this operation.
For example, the FCC and state telecommunications regulators help determine the
terms under which collocation space will be provided. The FCC also oversees the
terms under which it will gain access to an incumbent local carrier's copper
telephone lines and transport facilities that it will need in order to provide
DSL services. Future federal or state regulations and legislation may be less
favorable to IG-2, Inc. than current regulations and legislation and could have
a material adverse effect on its business, financial condition or results of
operations. In addition, IG-2, Inc. may choose to expend significant resources
to participate in regulatory proceedings at the federal or state level without
achieving favorable results. IG-2, Inc. expects ILECs and other incumbent local
carriers to pursue litigation in courts, institute administrative proceedings
with the FCC and state telecommunications regulators and lobby the U.S. Congress
in an effort to affect the applicable laws and regulations in a manner that
would be more favorable to them and may be against IG-2, Inc.'s interests. Any
changes in IG-2, Inc.'s regulatory environment could create greater competitive
advantages for all or some of its competitors or could make it easier for
additional parties to provide DSL services.
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IG-2, Inc. will be subject to FCC and state regulation for its
interconnection arrangements with the incumbent local carriers in its markets,
but the scope of this regulation is uncertain because it is the subject of
ongoing court and administrative proceedings. Several parties have brought court
challenges to the FCC's interconnection rules, including the rules that
establish the terms under which a competitive telecommunications company may use
portions of an incumbent local carrier's network and that define the particular
network elements to which IG-2, Inc. will be entitled. Although the Supreme
Court recently held that the FCC has the authority to adopt interconnection
rules and specifically upheld several of these rules, the Supreme Court also
reversed and remanded the FCC's specification of the network elements it will be
entitled to obtain from ILECs and other incumbent local carriers. The FCC is
conducting a proceeding to re-specify those elements and may not require the
continued availability of elements IG-2, Inc. will need. Other rules are still
being considered by the courts and the FCC. If a rule that is beneficial to
IG-2, Inc.'s business is struck down by the courts, it could harm its ability to
compete. In particular, the courts have not yet resolved the lawfulness of the
methodology that the FCC established to determine the price that competitive
telecommunications companies would have to pay incumbent local carriers for use
of the incumbent local carriers' networks. The courts may determine that the
FCC's pricing rules are unlawful, which would require the FCC to establish a new
pricing methodology. If this occurs, the new pricing methodology that the FCC
adopts may result in IG-2, Inc.'s having to pay a higher price to incumbent
local carriers to use a portion of their networks in providing its services, and
this could have a material adverse effect on its business, financial condition
and results of operations.
Recently, the FCC issued a decision that an incumbent local carrier's data
services are subject to unbundling and resale requirements. The FCC is still
considering alternative corporate structures for the incumbent local carriers
that would allow them to compete more directly with DSL providers like IG-2,
Inc. on an unregulated basis. This issue is still pending before the FCC. An FCC
decision in favor of the incumbent local carriers could have a material adverse
effect on IG-2, Inc.'s business, financial condition and results of operations.
Although the FCC recently adopted new rules designed to provide greater access
to central office space at less cost, these new rules potentially could benefit
IG-2, Inc.'s competitors to a greater extent than they benefit it, which could
harm its competitiveness.
A January 1999 decision by the U.S. Supreme Court has raised questions
about whether IG-2, Inc. will be able to obtain the network elements from the
ILECs necessary to provide DSL in the future. In that decision, the Supreme
Court invalidated an FCC rule which defines the particular elements of an
incumbent local carrier's network that must be provided to competitors like us,
and it sent the matter back to the FCC with instructions to consider further the
question of which elements of an incumbent local carrier's network must be
provided to competitors. The FCC recently initiated a proceeding to establish
which network elements are required to be provided by incumbent carriers to
competitors. The FCC has stated that it plans to issue a new decision on this
matter later this year. IG-2, Inc. would be adversely affected if the FCC were
to specify a set of elements that does not include the elements that it will
need to provide its services.
Recently, various ILECs have requested the FCC grant them regulatory
relief in the provision of data transmission services, including DSL services,
which would allow the ILECs to compete more directly with DSL providers such as
IG-2, Inc. In response, the FCC issued a decision that data services generally
are telecommunications services that, when provided by ILECs, are subject to the
FCC's interconnection rules, including the rule requiring that an ILEC's data
services be subject to unbundling and resale requirements. This issue is still
pending before the FCC, and we cannot be certain that the FCC will not
reconsider its decision. Moreover, although the FCC recently adopted new rules
designed to provide greater access to central office space at less cost, these
new rules may benefit our competitors to a greater extent than they benefit us,
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<PAGE>
which could harm our competitiveness. Additionally, since the FCC issued its
decision, various ILECs have again asked the FCC for regulatory relief with
respect to their provision of data transmission services. The FCC has not yet
resolved these later requests. We would expect that an FCC decision in favor of
the ILECs could have a material adverse effect on IG-2, Inc.'s business,
prospects, financial condition and results of operations.
We face risks in our international operations.
We intend to expand our new and used vehicle purchasing service to foreign
markets through licensing our technology, business processes and tradenames and
by establishing relationships with vehicle dealers and strategic partners
located in certain foreign markets.
By expanding our operations to various other countries, we may become
subject to laws or treaties that regulate the marketing, distribution and sale
of motor vehicles. In addition, the laws of other countries may impose
licensing, bonding or similar requirements on us as a condition to doing
business therein. In addition, there are certain risks inherent in doing
business in international markets, such as:
o changes in political conditions;
o regulatory requirements;
o potentially weaker intellectual property
protections;
o tariffs and other trade barriers;
o fluctuations in currency exchange rates;
o potentially adverse tax consequences;
o difficulties in managing or overseeing foreign
operations;
o seasonal reductions in business activities during
summer months in Europe and other areas; and
o educating consumers and dealers who may be
unfamiliar with the benefits of online marketing
and commerce.
One or more of such factors may have a material adverse effect on our
current or future international operations and, consequently, on our business,
results of operations and financial condition.
Our Talkie Power Web Line Machine and Talkie-Globe system are used to
provide services to foreign countries. These products are subject to the risks
associated with international operations enumerated above, as well as:
o difficulty in accounts receivable collection;
o longer payment cycles;
o difficulty in maintaining and repairing equipment
abroad; and
o possible confiscation of equipment and potentially
adverse tax consequences.
The realization of these risks by purchasers of our Talkie products could
adversely affect our ability to sell our Talkie products and could reduce our
income therefrom and therefore make divestiture of such operations difficult or
untenable.
Government-owned monopolies operate the telephone systems of many of the
countries to which our Talkie Power Web Line Machine is used to provide
telephone services. While we are not aware that any such action is contemplated
by any of these entities, there can be no assurance that in the future one or
more of them will not adopt regulations limiting or prohibiting us from
providing such services. The effect of such regulation could be to reduce our
ability to operate the Talkie Power Web Line Machine profitably and therefore
adversely affect our ability to divest ourselves of this operation
We may be unable to protect our intellectual property.
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<PAGE>
The success of our Technology Division depends in part upon the strength
of our patents and our ability to operate without infringing the proprietary
rights of others. To protect our intellectual property we have:
o registered the name "Talkie" as a trademark in
Canada;
o registered the names "Talkie" and "Talkie-Globe"
as trademarks in the United States Patent and
Trademark Office
o filed applications in the United States Patent and
Trademark Office for the names "BCS" and "IG2" as
trademarks;
o acquired two United States patents, issued in June
1993 and May 1994, respectively, relating to the
armored conduit technology and a Canadian patent
application relating to such technology;
o obtained two United States patents and filed two
additional United States parent applications
relating to the spa and bath fixtures and related
installation method; and
o filed one application relating to the spa and bath
fixtures and related installation method in Canada
and the European Patent Office (listing six
countries) and filed another application relating
to the spa and bath fixtures and related
installation method under the Patent Cooperation
Treaty designating Australia, Canada, China, Japan
and the European Patent Office (up to eighteen
countries) as recipient countries. Under such
treaty, we will have the option to individually
file separate applications in the designated
countries at an appropriate future date.
There can be no assurance that we will choose to file such separate
applications, that any of our applications for patents or trademarks will be
granted or that we will maintain issued patents, patent applications or
trademarks. Nor can there be any assurance that any patents that issue from such
applications or our issued patents will not be challenged and, if challenged,
will be upheld. Nor can there be any assurance that issued patents will provide
us with a significant competitive advantage.
Moreover, we may be required to defend a claim of infringement or to
institute litigation to prevent infringement. The costs of such litigation, even
if we are successful, can be substantial and may be beyond our financial
capability. If we were unsuccessful in our defense of an infringement claim, we
could be liable for substantial damages and could be enjoined from manufacturing
or selling the infringing product or required to obtain a license which may not
be available on acceptable terms or at all.
In addition, we have no federally or state registered trademark on the
Major name. Future use of the Major name by a third party could have a negative
impact on our business.
We face risks in connection with legal proceedings in which we are involved.
Fidelity and our wholly-owned subsidiaries, Computer Business Sciences and
Info Systems, are plaintiffs in a legal action against Michael Marom and M.M.
Telecom, Corp. The plaintiffs claim damages of $5,000,000 for breach of
contract, libel, slander, disparagement, violation of copyright laws, fraud and
misrepresentation. The defendants have counterclaimed for damages of $50,000,000
for breach of contract and violation of the Lanham Act. While we believe that
the our asserted claims have merit and that we have substantial defenses to the
asserted counterclaims, a judgment against us with respect to this action could
have a material adverse effect on our financial condition.
A legal action has been commenced against us in Federal District Court in
Nevada in connection with a dispute regarding ownership of 240,000 shares of our
common stock. While we believe that we
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<PAGE>
have substantial defenses to the asserted claims and intend to vigorously defend
this suit, a judgment against us with respect to this action could have a
material adverse effect on our financial condition.
We are dependent on changing technology to keep our products competitive.
The computer and telecommunications industries are undergoing rapid
technological changes. The success of the Technology Division will depend upon
our ability to understand and utilize changing technology to keep our products
competitive. Failure to develop and introduce new products or enhancements to
our existing products in a timely fashion could result in product obsolescence,
diminished market acceptance of our products and a loss of business, which could
have a material adverse effect on our business, financial condition and results
of operations and on our divestiture plans for the Technology Division.
We face risks associated with the sale of automobiles over the Internet.
-Competition
Our Internet vehicle purchasing services compete against a variety of
Internet and traditional vehicle purchasing services and automotive brokers. The
market for Internet-based commercial services is new, and competition among
commercial Web sites is expected to increase significantly in the future. The
Internet is characterized by minimal barriers to entry, and new competitors can
launch new Web sites at relatively low cost. To compete successfully over the
Internet, we must significantly increase awareness of our services and brand
name.
We compete with other entities which maintain similar commercial Web
sites, including:
o Autoweb.com;
o Autobytel.com;
o Cendant Membership Service, Inc.'s AutoVantage;
and
o Microsoft Corporation's Carpoint and Stoneage
Corporation.
AutoNation, Inc., a large consolidator of dealers, has announced its
intention to launch a Web site for marketing vehicles. We also compete
indirectly against vehicle brokerage firms and affinity programs offered by
several companies, including Costco Wholesale Corporation and Wal-Mart Stores,
Inc. In addition, all major vehicle manufacturers have their own Web sites and
many have recently launched or announced plans to launch online buying services,
such as General Motors Corporation's BuyPower. We also compete with vehicle
insurers, lenders and lessors as well as other dealers that are not part of our
network. Such companies may already maintain or may introduce Web sites which
compete with ours.
We cannot assure you that we can compete successfully against current or
future competitors, many of which have substantially more capital, existing
brand recognition, resources and access to additional financing. In addition,
competitive pressures may result in increased marketing costs, decreased Web
site traffic or loss of market share or otherwise may materially and adversely
affect our business, results of operations and financial condition.
- The Internet industry is characterized by rapid technological change.
Rapid technological developments, evolving industry standards and consumer
demands, and frequent new product introductions and enhancements characterize
the market for Internet products and services. These market characteristics are
exacerbated by the emerging nature of the market and the fact that many
companies are expected to introduce new Internet products and services in the
near future. Our future success will significantly depend on our ability to
continually improve the vehicle purchasing
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<PAGE>
experience, the addition of new and useful services and content to our Web site,
and the performance, features and reliability of our Web site. In addition, the
widespread adoption of developing multimedia-enabling technologies could require
fundamental and costly changes in our technology and could fundamentally affect
the nature, viability and measurability of Internet-based advertising, which
could adversely affect our business, results of operations and financial
condition.
- We could face liability for information retrieved from or transmitted
over the Internet and liability for products sold over the Internet.
We could be exposed to liability with respect to third-party information
that may be accessible through our Web site, or content and materials that may
be posted by consumers through our www.majorworld.com service. Such claims might
assert, among other things, that, by directly or indirectly providing links to
Web sites operated by third parties, we should be liable for copyright or
trademark infringement or other wrongful actions by such third parties through
such Web sites. It is also possible that, if any third-party content information
provided on our Web site contains errors, consumers could make claims against us
for losses incurred in reliance on such information.
We also may enter into agreements with other companies under which any
revenue that results from the purchase of services through direct links to or
from our Web site is shared. Such arrangements may expose us to additional legal
risks and uncertainties, including local, state, federal and foreign government
regulation and potential liabilities to consumers of these services, even if we
do not provide the services ourselves. We cannot assure you that any
indemnification provided to us in our agreements with these parties, if
available, will be adequate.
Even to the extent such claims do not result in liability to us, we could
incur significant costs in investigating and defending against such claims. The
imposition on us of potential liability for information carried on or
disseminated through our system could require us to implement measures to reduce
our exposure to such liability, which might require the expenditure of
substantial resources or limit the attractiveness of our services to consumers,
member dealers, automotive-related vendors and others.
Our general liability insurance and our communications liability insurance
may not cover all potential claims to which we are exposed and may not be
adequate to indemnify us for all liability that may be imposed. Any imposition
of liability that is not covered by insurance or is in excess of insurance
coverage could have a material adverse effect on our business, results of
operations and financial condition.
- We face risks associated with security breaches involving confidential
information transmitted via the Internet.
We rely on technology licensed from third parties that is designed to
facilitate the secure transmission of confidential information. Nevertheless,
our computer infrastructure is potentially vulnerable to physical or electronic
computer break-ins, viruses and similar disruptive problems. A party who is able
to circumvent our security measures could misappropriate proprietary
information, jeopardize the confidential nature of information transmitted over
the Internet or cause interruptions in our operations. Concerns over the
security of Internet transactions and the privacy of users could also inhibit
the growth of the Internet in general, particularly as a means of conducting
commercial transactions. To the extent that our activities or those of third
party contractors involve the storage and transmission of proprietary
information (such as personal financial information), security breaches could
expose us to a risk of financial loss, litigation and other liabilities. Our
insurance does not currently protect against such losses. Any such security
breach would have a material adverse effect on our business, results of
operations and financial condition.
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<PAGE>
- Major Auto and IG-2, Inc. face risks associated with government
regulation and legal uncertainties associated with the Internet.
There are numerous state laws regarding the sale of vehicles. In addition,
government authorities may take the position that state or federal insurance
licensing laws, motor vehicle dealer laws or related consumer protection or
product liability laws apply to aspects of our business. As we introduce new
services and expand our operations to other countries, we will need to comply
with additional licensing and regulatory requirements.
A number of legislative and regulatory proposals under consideration by
federal, state, local and foreign governmental organizations may lead to laws or
regulations concerning various aspects of the Internet, including, but not
limited to:
o online content;
o user privacy;
o taxation;
o access charges;
o liability for third-party activities; and
o jurisdiction.
Additionally, it is uncertain as to how existing laws will be applied to
the Internet. The adoption of new laws or the application of existing laws may
decrease the growth in the use of the Internet, which could in turn decrease the
demand for our services, increase our cost of doing business or otherwise have a
material adverse effect on our business, results of operations and financial
condition.
The tax treatment of the Internet and e-commerce is currently unsettled. A
number of proposals have been made at the federal, state and local level and by
certain foreign governments that could impose taxes on the sale of goods and
services and certain other Internet activities. Recently, the Internet Tax
Information Act was signed into law placing a three-year moratorium on new state
and local taxes on Internet commerce. However, we cannot assure you that future
laws imposing taxes or other regulations on commerce over the Internet would not
substantially impair the growth of e-commerce and as a result have a material
adverse effect on our business, results of operations and financial condition.
Concentration of voting power and anti-takeover provisions in our charter
documents may reduce stockholder value in any potential change of control of
Fidelity.
Doron Cohen is the beneficial owner of approximately 29% and Bruce Bendell
is the beneficial owner of approximately 42% of our common stock. Mr. Bendell
also has a proxy (expiring in October 1999) to vote an additional 1,125,000
shares (all of which are legally owned by Doron Cohen). This concentration of
voting power will severely limit the ability of other stockholders of Fidelity
to elect directors or influence other corporate decisions and may, among other
things, have the effect of delaying or preventing a change in control of
Fidelity or preventing our stockholders from realizing a premium on the sale of
their shares upon an acquisition of Fidelity.
Our Board of Directors has the authority to issue shares of preferred
stock and to determine the price, rights, preferences and privileges, including
voting rights, of those shares without any further action by our stockholders.
The rights of holders of our common stock will be subject to and may be
adversely affected by the rights of the holders of any preferred stock. Any
future designation and issuance of preferred stock could have the effect of
making it more difficult for a third party to acquire control of Fidelity. We
are also subject to the provisions of the Nevada General Corporation Law
regulating business combinations, takeovers and control share acquisitions,
which also might hinder or delay a change in control of Fidelity. Anti-takeover
provisions that could be included in the preferred stock when designated and
issued and the Nevada statutes can have a depressive effect on the market
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<PAGE>
price of our common stock and can prevent the our stockholders from realizing a
premium on the sale of their shares by discouraging takeover and tender offer
bids. In addition, under the dealer agreement that we entered into with General
Motors after we acquired Major Auto, we may be at risk of losing the Chevrolet
franchise if any person or entity acquires 20% or more of our voting stock
without the approval of General Motors.
Future sales of our common stock may depress our stock price.
Future sales of shares of common stock by existing shareholders
under Rule 144 of the Securities Act or through the exercise of outstanding
registration rights or the issuance of shares of common stock upon the exercise
of options or warrants or the conversion of the Convertible Preferred Stock
could materially adversely affect the market price of the common stock and could
materially impair Fidelity's future ability to raise capital through an offering
of equity securities. A substantial number of shares of common stock are
available for sale under Rule 144 in the public market or will become available
for sale in the near future and no predictions can be made as to the effect, if
any, that market sales of such shares or the availability of such shares for
future sale will have on the market price of the common stock prevailing from
time to time.
Holders of Fidelity's outstanding options and warrants are likely to
exercise them when, in all likelihood, Fidelity could obtain additional capital
on terms more favorable than those provided in the options and warrants.
Fidelity's ability to obtain additional financing may also be adversely affected
by its obligation to register shares of common stock under the Securities Act.
Castle Trust and Management Services Limited, as Trustee under the Millennium
Trust created under that certain Deed of Settlement dated October 2, 1996, the
principal beneficiary of which is Bruce Bendell, has the right (on an unlimited
number of occasions) to require Fidelity to register all or any portion of the
common stock (a minimum of 250,000 shares) into which the 125,000 shares of
Fidelity's 1996-MAJOR Series of Convertible Preferred Stock is convertible (the
"1996 Demand Shares"). In addition, Bruce Bendell has the right to require
Fidelity (on an unlimited number of occasions) to register all or any portion of
the 50,000 shares of common stock underlying a warrant held by him (the "Warrant
Demand Shares"). Further, if Fidelity registers any shares of common stock, it
will have to offer to include the 1996 Demand Shares, the Warrant Demand Shares
and the shares of common stock (a minimum of 2.7 million shares) into which the
1997-MAJOR Series of Convertible Preferred Stock, issued to Bruce Bendell in the
Major Auto Acquisition, is convertible.
We may be required to issue additional shares to recent investors pursuant to
certain adjustable warrants without receiving additional payment, which could
result in dilution to our shareholders.
In connection with the sale of shares of our common stock on June 24, 1999
to three investors, who are selling shareholders hereunder, we may be required
to issue adjustment shares to them for no additional consideration pursuant to
certain adjustable warrants. Declines in the market price of our common stock
could result in the issuance of a significant number of adjustment shares. This
could have a substantial dilutive effect on our common stock. The number of
adjustment shares to be issued depends on the average of the lowest 10 days
closing bid prices for our common stock during each of the three consecutive 40
day periods after the date of this prospectus. If the price of our common stock
should decline to below $14.00 per share, at our option, we may either issue
further additional shares or pay a cash amount in lieu of issuance of such
further additional shares. If, under certain conditions and for certain periods
the average price of our stock exceeds $31.50 per share, no additional shares
may be required to be issued. The following table sets forth the number of
adjustment shares that we would be required to issue to the investors if the
relevant average closing bid prices were at different levels, including if the
relevant average closing bid prices were $19.625 per share, the closing price
of our common stock on September 2, 1999. See "Selling Shareholders."
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Average Closing Bid
Average Closing Bid Price As A Percentage Of
Price Per Share 9/2/99 Closing Price Total Adjustment Shares
--------------- -------------------- -----------------------
$ 19.625 100% 65,878
$ 14.71875 75% 183,076
$ 9.8125 50% 207,143(1)
$ 4.90625 25% 207,143(2)
- ----------
(1) Represents the maximum number of shares Fidelity is obligated to issue
if we elected to pay $2,063,839 in cash in lieu of the further issuance of an
additional 210,328 shares. Each such cash payment and issuance of shares
represents the difference between $9.8125 and $14.00.
(2) Represents the maximum number of shares Fidelity is obligated to issue
if we elected to pay $4,481,920 in cash in lieu of the further issuance of an
additional 913,512 shares. Each such cash payment and issuance of shares
represents the difference between $4.90625 and $14.00.
We have never paid cash dividends on our common stock.
We have never paid cash dividends on our common stock. We intend to retain
any future earnings to finance our growth. In addition, dividends on common
stock are subject to the preferences for dividends on the preferred stock. Any
future dividends will depend upon our earnings, if any, our financial
requirements, and other factors.
We face year 2000 risks.
The year 2000 issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when information
using year 2000 dates is processed. In addition, similar problems may arise in
some systems which use certain dates in 1999 to represent something other than a
date. The effects of the year 2000 issue may be experienced before, on, or after
January 1, 2000, and if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the year 2000 issue affecting
Fidelity, including these relating to the efforts of customers, suppliers or
other third parties, will be fully resolved.
We have made a preliminary assessment of our Year 2000 readiness. We plan
to perform a Year 2000 simulation on our software during the third quarter of
1999. We are also in the process of contacting certain vendors licensors and
providers of software, hardware and services regarding their Year 2000
readiness. Following this testing and after contacting these vendors, we will be
better able to make a complete evaluation of our Year 2000 readiness to
determine what costs will be necessary to be Year 2000 compliant, and to
determine whether contingency plans need to be developed. Efforts to comply with
Year 2000 requirements may disrupt or delay our ability to continue developing
and marketing our services. We may also incur certain unexpected costs in
connection with Year 2000 compliance.
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Note Regarding Forward-looking Statements
This prospectus contains forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. We use forward- looking statements in our description of our plans and
objectives for future operations, assumptions underlying these plans and
objectives. Forward-looking terminology includes the words "may," "expects,"
"believes," "anticipates," "intends," "projects," or similar terms, variations
of such terms or the negative of such terms. These forward-looking statements
are based on management's current expectations and are subject to factors and
uncertainties which could cause actual results to differ materially from those
described in such forward-looking statements. We expressly disclaim any
obligation or undertaking to release publicly any updates or revisions to any
forward-looking statements contained in this prospectus to reflect any change in
our expectations or any changes in events, conditions or circumstances on which
any forward-looking statement is based. Factors which could cause such results
to differ materially from those described in the forward-looking statements
include those set forth under "Risk Factors."
USE OF PROCEEDS
The shares of common stock offered hereby are being registered for the
account of the selling shareholders identified in this prospectus. See "Selling
Shareholders." All net proceeds from the sale of the common stock will go to the
shareholders who offer and sell their shares of common stock. We will not
receive any part of the proceeds from such sales of common stock. We will
receive proceeds upon the exercise of the warrants. We will use such net
proceeds for general corporate purposes.
SELLING SHAREHOLDERS
The following list of selling shareholders includes (1) the number of
shares of common stock currently owned by each selling shareholder, (2) the
number of shares being offered for resale hereby by each selling shareholder,
and (3) the number and percentage of shares of common stock to be held by each
selling shareholder after the completion of this offering. Except as otherwise
indicated in the footnotes to such table, no such selling shareholder has been
an officer, director or employee of the Company for the past three years. The
registration of the shares does not necessarily mean that the selling
shareholders will sell all or any of the shares.
The selling shareholders provided us with all information with respect to
their share ownership. Because the selling shareholders may sell all, part or
none of their shares, we are unable to estimate the number of shares that will
be held by any selling shareholders upon resale of shares of common stock being
registered hereby. See "Plan of Distribution."
The terms of the warrants issued to certain selling shareholders prohibit
the holders thereof from exercising such warrants to the extent that such
exercise would result in the holders, together with any affiliates thereof,
beneficially owning in excess of 4.999% of the outstanding shares of common
stock, following such exercise. Such restrictions may be waived by the each
holder of the respective warrants as to itself upon not less than 61 days'
notice to the Company.
Pursuant to Rule 416 under the Securities Act, selling shareholders may
also offer and sell shares issued with respect to the warrants, debentures and
preferred stock as a result of (1) stock splits, stock dividends or similar
transactions and (2) the effect of anti-dilution provisions contained in the
underlying documents.
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<PAGE>
<TABLE>
<CAPTION>
Shares to be
Shares Beneficially owned prior to the sold in Shares Beneficially Owned After
Name Offering(1) Offering(2) Offering(3)
- ---- ------------ ----------- -----------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Robert Kaszovitz 63,750(4) * 63,750 0 0
Harvey Glicker 51,000(5) * 51,000 0 0
Gross Foundation, Inc. 191,250(6) 1.40 191,250 0 0
Richard Feinstein 60,000(7) * 15,000 45,000 *
Zanett Lombardier, LTD. 156,910(8) 1.14 156,910 0 0
Goldman Sachs 201,091(9) 1.46 201,091 0 0
Performance Partners, L.P.
Goldman Sachs 158,000(10) 1.15 158,000 0 0
Performance Partners
(Offshore), L.P.
Bruno Guazzoni 127,626(11) * 127,626 0 0
David McCarthy 103,676(12) * 103,676 0 0
Claudio Guazzoni 92,579(13) * 92,579 0 0
Samuel Milbank 61,719(14) * 61,719 0 0
Strong River Investments, 190,476(15) 1.38 314,286(16) 0 0
Inc.
Bay Harbor Investments, 190,476(15) 1.38 314,285(16) 0 0
Inc.
Augusta Street LLC 190,476(15) 1.38 314,285(16) 0 0
</TABLE>
* Less than one percent
(1) Beneficial ownership is determined in accordance with SEC rules and
generally include voting or investment power with respect to
securities. Shares of common stock subject to options, warrants and
convertible preferred stock currently exercisable or convertible, or
exercisable or convertible within sixty (60) days, are counted as
outstanding for computing the percentage of the person holding such
options or warrants but are not counted as outstanding for computing
the percentage of any other person.
(2) Except under certain circumstances, none of the selling
shareholders, except for Messrs. Kaszovitz, Glicker and Feinstein
and the Gross Foundation, Inc., may exercise warrants to the extent
that such exercise would cause the selling shareholder to
beneficially own more than 4.99% of the total outstanding common
stock of the Company. Therefore, the number of shares listed here
and which a selling shareholder may sell pursuant to this prospectus
may exceed the number of shares such selling shareholder may
beneficially own as determined pursuant to Section 13(d) of the
Exchange Act.
(3) Assumes that all of the shares held by the selling shareholders and
being offered under this prospectus are sold and that the selling
shareholders acquire no additional shares of common stock before the
completion of this offering. The actual number of shares of common
stock offered hereby is subject to change and
-22-
<PAGE>
could be materially greater or less than the estimated amount
indicated, depending upon a number of factors, including whether the
number of shares of common stock outstanding have been adjusted to
account for any stock dividend, stock split and similar transactions
or adjustment.
(4) Represents shares of common stock resulting from the conversion of
$125,000 principal amount of Fidelity's 10% convertible debentures.
(5) Represents shares of common stock resulting from the conversion of
$375,000 principal amount of Fidelity's 10% convertible debentures.
(6) Represents shares of common stock resulting from the conversion of
$100,000 principal amount of Fidelity's 10% convertible debentures.
(7) Richard Feinstein is Chief Financial Officer of Fidelity.
(8) Represents 27,273 shares of common stock purchased in a January 1999
private placement, 62,501 shares of common stock issuable upon
exercise of warrants issued in connection therewith and 67,136
shares of common stock issued upon conversion of debentures issued
in connection therewith.
(9) Represents 61,091 shares of common stock purchased in a January 1999
private placement and 140,000 shares of common stock issuable upon
exercise of warrants issued in connection therewith.
(10) Represents 48,000 shares of common stock purchased in a January 1999
private placement and 110,000 shares of common stock issuable upon
exercise of warrants issued in connection therewith.
(11) Represents 12,546 shares of common stock purchased in a January 1999
private placement, 28,751 shares of common stock issuable upon
exercise of warrants issued in connection therewith and 86,329
shares of common stock issued upon conversion of debentures issued
in connection therewith.
(12) Represents 29,216 shares of common stock purchased and received as
compensation in a January 1999 private placement, 66,953 shares of
common stock issuable upon exercise of warrants issued in connection
therewith and 7,507 shares of common stock issued upon conversion of
debentures issued in connection therewith.
(13) Represents 28,125 shares of common stock received as compensation in
a January 1999 private placement and 64,454 shares of common stock
issuable upon exercise of warrants issued in connection therewith.
(14) Represents 18,750 shares of common stock received as compensation in
a January 1999 private placement and 42,969 shares of common stock
issuable upon exercise of warrants issued in connection therewith.
(15) Represents 95,238 shares of common stock purchased in the
transaction described below and 95,238 shares of common stock
issuable upon exercise of warrants issued in connection therewith.
(16) Represents the shares indicated as beneficially owned by the selling
shareholders as well as shares issuable to the selling shareholder
pursuant to certain adjustable warrants. Since the number of shares
issuable upon exercise of such adjustable warrants depends in part
upon the market price of the common stock prior to issuance, the
actual number of shares that will be issued and, consequently,
offered for sale under this registration statement, cannot be
determined at this time. In order to provide a cushion for any
fluctuations in the market price of the common stock, Fidelity has
contractually agreed to include herein the number of
-23-
<PAGE>
shares of common stock as would be issuable upon exercise in full of
the adjustable warrants assuming the market price at each vesting
date thereunder were $10.50. Fidelity has the option, if the
relevant average market price per share at a vesting date is below
$14.00, of paying cash in lieu of issuing shares for any adjustment
below $14.00. In the event that the relevant average market price on
each vesting were $10.50 and Fidelity exercised this option, the
shares to be sold in this Offering would be 259,524, 259,524 and
259,523 for Strong River Investments, Inc., Bay Harbor Investments,
Inc. and Augusta Street LLC, respectively.
Sales to selling shareholders
In June 1999, we entered into a securities purchase agreement with certain
of the selling shareholders. The agreement provided for the sale in a private
placement of an aggregate of $6.0 million of our common stock. The agreement
also provided for the issuance of warrants to the selling shareholders,
including certain adjustable warrants.
-24-
<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The Selling Stockholders may also engage in short sales against the box,
puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in connection
with these trades. The Selling Stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a Selling
Stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
-25-
<PAGE>
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
the Company by Littman Krooks Roth & Ball P.C., New York, New York.
EXPERTS
The consolidated balance sheet as of December 31, 1997 and the
consolidated statements of operations, of shareholders' equity and of cash flows
for the year ended December 31, 1997 incorporated by reference in this
prospectus, have been incorporated herein in reliance on the report by Peter C.
Cosmas Co., CPAs, independent accountants, given on the authority of that firm
as experts on accounting and auditing. The consolidated balance sheets as of
December 31, 1998 and the consolidated statements of operations, of
shareholders' equity and of cash flows for the year ended December 31, 1998
incorporated by reference in this prospectus, have been incorporated herein in
reliance on the report by BDO Seidman LLP, independent accountants, given on the
authority of that firm as experts on accounting and auditing.
-26-
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. 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, TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
2,165,457 SHARES
FIDELITY HOLDINGS, INC.
COMMON STOCK
PROSPECTUS
SEPTEMBER__, 1999
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses payable by the Company in
connection with the sale, issuance and distribution of the securities being
registered, other than underwriting discounts and commissions. All amounts are
estimates except the SEC registration fee.
SEC Registration Fee ............................ $12,040
Printing and Engraving Expenses ................. $ 2,500
Legal Fees and Expenses ......................... $25,000
Accounting Fees and Expenses .................... $ 2,500
Blue Sky Fees and Expenses ...................... NA
Miscellaneous ................................... $ 2,960
Total ........................................... $45,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles of Incorporation and Bylaws include provisions to (i)
eliminate the personal liability of its directors for monetary damages resulting
from breaches of their fiduciary duty to the extent permitted by Nevada law and
(ii) require us to indemnify our directors and officers to the fullest extent
permitted by Nevada law, including circumstances in which indemnification is
otherwise discretionary. Pursuant to Nevada law, a corporation generally has the
power to indemnify its present and former directors, officers, employees and
agents against expenses incurred by them in connection with any suit to which
they are, or are threatened to be made, a party by reason of their serving in
such positions so long as they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of a
corporation, and, with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. We believe that these provisions
are necessary to attract and retain qualified persons as directors and officers.
These provisions do not eliminate liability for breach of the director's duty of
loyalty to Fidelity or its stockholders, for acts or omissions not in good faith
or involving intentional misconduct or knowing violations of law, for any
transaction from which the director derived an improper personal benefit or for
any willful or negligent payment of any unlawful dividend or any unlawful stock
purchase agreement or redemption.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT
NUMBER DESCRIPTION
5.1 Opinion of Littman Krooks Roth & Ball P.C.
23.1 Consent of Peter C. Cosmas Co., CPAs, Independent Accountants.
23.2 Consent of BDO Seidman LLP, Independent Accountants.
23.3 Consent of Littman Krooks Roth & Ball P.C. Reference is made to 5.1.
24.1 Power of Attorney (included on signature page II-3).
II-1
<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 include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
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; and
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering. The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each
filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 15, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Pre-Effective Amendment No.1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the city
of Kew Gardens, State of New York, on September 2, 1999.
FIDELITY HOLDINGS, INC.
By /s/ Doron Cohen
--------------------------
Doron Cohen
President
Pursuant to the requirements of the Securities Act, this Report has been
signed by the following persons on behalf of the Registrant and in the
capacities and on the date indicated. Each of the undersigned officers and
directors of Fidelity Holdings, Inc. hereby constitutes and appoints each of
Bruce Bendell, Doron Cohen and Richard Feinstein as true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him in his name in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Report and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and to prepare any and all exhibits thereto,
and other documents in connection therewith, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite or necessary to be done to enable Fidelity
Holdings, Inc. to comply with the provisions of the Securities Act and all
requirements of the Securities and Exchange Commission, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Signature Title Date
- --------- ----- ----
/s/ Doron Cohen President,
- ------------------------ Treasurer and Director September 2, 1999
Doron Cohen
* Chairman of the Board and September 2, 1999
- ------------------------ Chief Executive Officer
Bruce Bendell
* Director September 2, 1999
- ------------------------
David Edelstein
* Director September 2, 1999
- ------------------------
James Wallick
* Director September 2, 1999
- ------------------------
Jeffrey Weiner
/s/ Richard L. Feinstein Chief Financial Officer September 2, 1999
- ------------------------
Richard L. Feinstein
* By Richard Feinstein, Attorney-in-Fact
II-3
Exhibit 5.1
September 2, 1999
The Board of Directors
Fidelity Holdings, Inc.
80-02 Kew Gardens Road
Kew Gardens, New York 11415
Re: Fidelity Holdings, Inc.
Registration Statement on Form S-3
File No. 333-84443
Gentlemen:
You have requested our opinion with respect to the public offering for
resale by certain shareholders of Fidelity Holdings, Inc., a Nevada corporation
(the "Company"), pursuant to a Registration Statement (the "Registration
Statement") on Form S-3 (no. 333-84443), under the Securities Act of 1933, as
amended (the "Act"), of up to 2,165,457 common shares, par value $.01 per share
(the "Shares").
We have examined originals, or copies certified or otherwise identified to
our satisfaction, of such documents and corporate and public records as we deem
necessary as a basis for the opinion hereinafter expressed. With respect to such
examination, we have assumed the genuineness of all signatures appearing on all
documents presented to us as originals, and the conformity to the originals of
all documents presented to us as conformed or reproduced copies. Where factual
matters relevant to such opinion were not independently established, we have
relied upon certificates of appropriate state and local officials, and upon
certificates of executive officers and responsible employees and agents of the
Company.
Based upon the foregoing, it is our opinion that the Shares being offered
in the above-captioned offering, when sold and issued in accordance with the
terms of such offering, will be validly issued, fully paid and non-assessable.
Please be advised that we consent to the use of our name under "Legal
Matters" in your Registration Statement on Form S-3 and Prospectus filed with
the Securities and Exchange Commission.
By giving this consent, we do not concede that we come within the
categories of persons whose consent is required under the Act or the General
Rules and Regulations promulgated thereunder.
Very truly yours,
/s/ Littman Krooks Roth & Ball P.C.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-3 (File No.
333-84443) of our report dated March 31, 1998 on our audits of the consolidated
financial statements and financial statement schedule of Fidelity Holdings, Inc.
We also consent to the reference to our firm under the caption "Experts."
/s/ PETER C. COSMAS CO., CPAs
September 2, 1999
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
Fidelity Holdings, Inc.
New York, New York
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of the Registration Statement on Form S-3of our report dated
March 20, 1999 relating to the financial statements of Fidelity Holdings, Inc.,
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
New York, New York
September 2, 1999
