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PROSPECTUS Filed Pursuant to Rule 424(b)(3)
Registration No. 333-37725
2,662,500 SHARES
PRINCETON VIDEO IMAGE, INC.
COMMON STOCK
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This Prospectus relates to the offering of 662,500 shares of common
stock, no par value per share, of Princeton Video Image, Inc. being registered
hereby which are held by some of our current shareholders. The selling
shareholders, or their transferees, may sell these shares of common stock from
time to time on or after the date of this Prospectus. This prospectus also
relates to 2,000,000 shares of common stock and an indeterminate number of
additional shares of common stock as may be sold solely in connection with the
market making activities of Allen & Company Incorporated. The selling
shareholders have acquired the shares of common stock being offered by this
Prospectus in private placement transactions. Our common stock is traded on the
Nasdaq National Market under the symbol "PVII."
The selling shareholders may offer their shares of common stock in one
or more transactions on the Nasdaq National Market at prices then prevailing, in
negotiated transactions or otherwise. The selling shareholders and brokers
through whom the sale of the shares of common stock are made may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act of
1933, as amended. In addition, any profits realized by the selling shareholders
or such brokers on the sale of shares of common stock may be deemed to be
underwriting commissions under the Securities Act. The price at which any of the
shares of common stock may be sold and the commissions paid in connection with
any sale may vary from transaction to transaction. We will pay certain expenses
of this offering. We will not receive any proceeds from sales of the shares of
common stock covered by this Prospectus. See "Plan of Distribution."
Our common stock is quoted on the Nasdaq National Market under the
symbol "PVII." On November 1, 1999, the average of the high and low price for
the common stock was $5.157.
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INVESTING IN OUR COMMON STOCK INVOLVES SOME RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 3.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is November 3, 1999
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THE COMPANY
Princeton Video Image, Inc. developed and is marketing a real-time
video insertion system that, through patented pattern recognition technology,
places computer-generated electronic images into television broadcasts of
sporting and other events. These electronic images range from simple corporate
names or logos to sophisticated 3-D animated productions. Our Live Video
Insertion System (the "L-VISTM System" or "L-VIS System") has been used to
insert images, including advertising images and visual aids, into live and
pre-recorded television broadcasts, including baseball games, soccer matches,
football games, tennis matches, motor sports events, telethons and entertainment
broadcasting. We are developing software to enable the L-VISTM System to be used
in the broadcast of other sporting events.
We were incorporated in New Jersey in July 1990. Our executive offices are
located at 15 Princess Road, Lawrenceville, New Jersey 08648, and our telephone
number is 609-912-9400.
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RISK FACTORS
Investment in our common stock involves substantial risks, including
those described below. You should purchase our common stock only if you can
afford to lose your entire investment. You should carefully consider all of the
information included in this Prospectus to evaluate us and our business. You
should make this evaluation before deciding whether to purchase our common
stock. You should understand that additional risks which we cannot predict at
this time may have negative impact on us in the future. You should also
understand that the risks discussed below might affect us more than or in a
different manner than we now predict.
Some of the information in this Prospectus may contain forward-looking
statements. These statements can be identified by the use of forward-looking
words such as "may," "will," "expect," "anticipate," "estimate," "continue" or
other similar words. These statements discuss future expectations and
projections of results of operations or of financial conditions. When
considering these forward-looking statements, you should keep in mind the risk
factors described below and other cautionary statements made in this Prospectus.
These statements identify some of the factors that may cause actual results to
differ from any projections contained in forward-looking statements. Important
factors that may cause actual results to differ from projections include, for
example:
- adverse economic conditions;
- intense competition, including entry of new competitors and
products;
- adverse federal, state, local and foreign government
regulation;
- inadequate capital to operate our business;
- unexpected costs and operating deficits;
- lower revenues than forecast;
- inability to successfully market the L-VIS(TM) System to
television viewers, advertisers, broadcasters and sporting
events rights holders;
- inability of third party sales forces to sell L-VIS (TM)
System advertising;
- contractual restrictions on use of video insertion technology;
- risks associated with doing business in international markets;
- seasonal fluctuations based upon the game schedules of each
sport;
- manufacturing inexperience;
- challenges to our patent and proprietary technology;
- technological obsolescence of the L-VIS (TM) System;
- inability to upgrade and develop software for use of the L-VIS
(TM) System with new sports and other new uses;
- dependence on a sole source of supply for some hardware
components;
- the possible fluctuation and volatility of our operating
results and financial condition;
- adverse publicity and news coverage;
- loss of key employees, and
- other specific risks shown in this Prospectus.
We do not promise to update forward-looking information or any other information
to reflect actual results or changes in assumptions or other factors that could
affect those statements.
WE MAY NOT GENERATE ENOUGH MONEY TO SUPPORT OUR BUSINESS OPERATIONS.
Our operations relate to the development, introduction and marketing of
the L-VIS (TM) System. We have built 37 L-VIS (TM) System units, of which
approximately 25 units are in use or available for use by customers, potential
customers or foreign marketing partners. We are now trying to convince
advertisers, broadcasters and broadcast rights holders of the value of the L-VIS
(TM) System. We are also trying to enter into contracts to generate enough
revenue to meet our operating expenses. If we do not generate enough revenue, we
will have to either raise additional money or substantially reduce the scale of
our operations. We may not be able
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to raise additional money. We also may not succeed in reaching our business
objectives. Our failure to do so would have a material adverse effect on our
business, financial condition and the results of our operations.
WE HAVE A HISTORY OF OPERATING LOSSES AND EXPECT TO INCUR ADDITIONAL LOSSES.
We have not made a profit in any period of operations since we began
our business. We expect to lose money at least through calendar year 1999 due to
the costs required to manufacture, market and enhance the L-VIS (TM) System. We
incurred net losses of $5,774,711 for the fiscal year ended June 30, 1997,
$9,128,374 for the fiscal year ended June 30, 1998, and $9,698,048 for the
fiscal year ended June 30, 1999. We have earned only $1,222,213 during fiscal
year ended June 30, 1999 through receipts from advertising use of the L-VIS
System, contractual arrangements made with customers and license and royalty
fees from the use of the L-VIS System.
We may never earn a profit. Further, we may not be able to continue our
operations. Our limited operating history makes the prediction of future
operating results difficult or impossible. You should consider our prospects in
light of the risks, expenses and difficulties frequently encountered by early
stage companies, particularly companies in new or rapidly evolving markets.
WE MAY NOT BE ABLE TO SUCCESSFULLY MARKET THE L-VIS SYSTEM WHICH WILL ADVERSELY
AFFECT OUR ABILITY TO RAISE REVENUES.
We expect to derive almost all of our revenues from the operation of
the L-VIS System. We intend to spend additional money to hire more sales and
marketing personnel and on making the product more market friendly. Any benefits
from the expansion may take one year or longer. We will lose more money if sales
do not increase by an amount at least equal to the increase in expenses. Our
expansion will depend on, among other things, our ability to identify markets,
to manage growth, and to hire and retain skilled personnel. Our failure to
successfully market the L-VIS System would have a material adverse effect on our
business, financial condition and the results of our operations. Our ability to
market successfully the L-VIS System will depend upon its acceptance by at least
four groups: television viewers, advertisers, broadcasters and broadcast rights
holders. To date, only a few broadcasters, broadcast rights holders and
advertisers have agreed to use the L-VIS System. No data exists about television
viewers' reactions to the L-VIS System. However, some press coverage of our
technology has raised concerns about its desirability and potential misuse. For
instance, one article described inserted advertising images as subliminal
advertising. The technology has also been described as allowing unethical
tampering with a television picture. Others have complained that television
viewers will see too many advertisements. We may not be able to combat
successfully any negative publicity about inserted advertising. We may not be
able to maintain or increase our commercial arrangements. The failure of any one
or more of the four groups to accept the L-VIS System may prevent us from
successfully marketing the L-VIS System. That result could cause the holders of
our common stock to lose their entire investment.
WE MAY NOT BE ABLE TO PROTECT OUR PROPRIETARY RIGHTS AND THERE CAN BE NO
ASSURANCE THAT THESE RIGHTS ARE SUFFICIENT TO PROTECT OUR TECHNOLOGY.
We must maintain the proprietary nature of our technology to compete
effectively. We have been assigned six issued United States patents and four
allowed European patents. We have licensed several other patented technologies
from third parties and we have filed applications for a number of patents in the
United States and abroad. However, the degree of protection offered by these
patents is not certain and the pending patents may not be issued. Any patents
issued to us or our licensors in a foreign country may provide less protection
than provided in the United States. Competitors may obtain patents that
interfere with our ability to make L-VIS System units and to market the L-VIS
System. Competitors may intentionally infringe our patents. Competitors or
strategic partners may copy or independently develop technologies that are the
same or similar to our technologies.
Our patents may be challenged in court proceedings. There has been no
court test of our patents or patent applications. We are aware of other
companies that have patents or patent applications relating to video
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insertion technology. Other companies may claim that we infringe their patents
or rights. These companies may infringe our patents. In June 1999, we sued
Scidel USA, Ltd. for patent infringement. Scidel has responded by denying our
claims and alleging that our patents are invalid. In September 1999, we filed a
request with the United States Patent and Trademark Office to correct the
ownership of US Patent 5,917,553. In October 1999, we received a complaint filed
by Sportvision and Fox Sports Productions, Inc., which has licensed the patent
to Sportvision. Based upon our preliminary assessment of the claim, we believe
that we are the owner of the basic subject matter of the disputed patent and
that the claim lacks merit. We plan to vigorously defend our ownership of the
patent.
Patent litigation involves complex legal and factual issues. The
outcome of such actions are highly uncertain. In addition, patent litigation
involves considerable costs. We cannot assure you that we do not or will not
infringe the patent or intellectual property rights of another company. If we
lose a patent infringement action, we may be required to pay a significant
amount of money or to stop selling our products. We may also need to license
disputed technology from another company, if possible. If our patents are
successfully challenged, our business, financial condition and the results of
our operations will be adversely affected.
We also rely on unpatented trade secrets, improvements and proprietary
technology. Others may copy or independently develop similar technology or gain
access to our technology. We require our employees and some third parties to
enter into confidentiality agreements. We also use copyright, trademark and
trade secret protection. These steps may not protect our trade secrets, know-how
or other proprietary information.
WE MAY NOT BE ABLE TO RETAIN OUR KEY PERSONNEL OR HIRE ADDITIONAL PERSONNEL.
We depend on a number of key technical and management employees,
including:
- Brown F Williams, our Co-Founder and Chairman of the Board;
- Dennis P. Wilkinson, our President and Chief Executive Officer;
- Samuel A. McCleery, our Vice President, Business Development;
- Lawrence L. Epstein, our Vice President of Finance, Chief
Financial Officer and Treasurer; and
- Paul Slagle, our Vice President of Sales and Marketing
If one or more of these individuals leaves us, our ability to conduct
operations may be materially and negatively affected. Our success depends on our
ability to attract and retain qualified financial, technical, marketing and
other management personnel. We face competition for this personnel. We have
employment agreements with Messrs. Williams, Wilkinson, McCleery, Epstein and
Slagle. We have obtained key man life insurance on the life of Mr. Williams for
$2 million and on the life of Mr. McCleery for $1 million. Although our
employees sign confidentiality and non-competition agreements, our key personnel
might leave us and work for a competitor. We also rely on consultants to assist
us in research and development strategy. Our consultants are employed by third
parties and may have commitments to others that may limit their availability.
OUR DEPENDENCE ON THIRD PARTY SALES FORCES MAY ADVERSELY AFFECT ADVERTISING
REVENUES.
Under many of our contracts, the broadcast rights holders market and
sell the L-VIS System advertising. We typically receive a percentage of the
advertising revenues earned by the broadcast rights holders. The broadcast
rights holders may not be successful in selling L-VIS System advertising. If the
broadcast rights holders are unable to enter into arrangements with a
substantial number of advertisers, their failure will have a material adverse
effect on our business, financial condition and the results of our operations.
USE OF THE L-VIS SYSTEM MAY BE RESTRICTED BY AGREEMENTS WHICH WILL AFFECT OUR
ABILITY TO EARN REVENUES.
Agreements among advertisers, sponsors, syndicators, promoters,
broadcasters and cable operators may include provisions that restrict the use of
video insertion technology in television broadcasts. These restrictions may have
a material adverse effect on our business, financial condition and the results
of our operations.
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Businesses might not enter into amendments of these agreements to help us. We
believe that one manufacturer of scrolling billboards used in stadiums has
included these restrictions in its contracts.
OUR INTERNATIONAL MARKETING PLANS MAY BE ADVERSELY AFFECTED BY INTERNATIONAL
BUSINESS CONDITIONS, INCLUDING FOREIGN MARKETS AND REGULATORY REQUIREMENTS.
We plan to continue to market the L-VIS System outside the United
States through agreements with others. We may not succeed in creating a material
business internationally. We have granted some parties exclusive rights to
territories or specific sporting events which means that we must rely on their
success in these areas. Their failure could have a material adverse effect on
our business, financial condition and the results of our operations.
Furthermore, there are some risks inherent in doing business in
international markets, such as:
- unexpected changes in regulatory requirements;
- tariffs and other trade barriers;
- difficulties in staffing and managing foreign operations;
- political instability;
- fluctuations in currency exchange rates;
- reduced protection for intellectual property rights;
- seasonal reductions in business activity during the summer months;
and
- adverse tax consequences.
Any of these or other risks inherent in doing business in international
markets could have a material adverse impact upon the success of our
international operations and thus could have a material adverse effect on our
business, financial condition and the results of our operations.
THE SEASONALITY OF SPORTS MAY CAUSE FLUCTUATIONS IN OUR REVENUES.
If we are unsuccessful in expanding the market for use of the L-VIS
System beyond a limited number of sports, our revenues will fluctuate seasonally
based upon the game schedules associated with each of these sports.
TECHNICAL UNCERTAINTIES RELATING TO THE OPERATION OF THE L-VIS SYSTEM COULD
LIMIT ITS USE.
The L-VIS System can only be used for some sports under limited
circumstances. We must have the cooperation of the broadcaster to obtain
acceptable results. The L-VIS System has been operated mainly by our personnel
and operators trained by us. We will have to develop additional software and
hardware and train personnel to achieve wider use. Future operational
difficulties of the L-VIS System could increase the cost of, or delay
implementation of, our business plan which, in turn, could materially adversely
affect our success.
OUR FAILURE TO KEEP PACE WITH TECHNOLOGICAL CHANGES AND CUSTOMER PREFERENCES
WOULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
We operate in a rapidly developing commercial and technological
environment. Our success will depend in part upon our ability to develop product
enhancements that keep pace with continuing changes in technology and customer
preferences. Our failure to develop product enhancements on a timely basis would
have a material adverse effect on our business, financial condition and the
results of our operations. The video, electronics, data processing, broadcast
television and cable television industries are changing rapidly due to, among
other things, technological improvements, consolidations of companies and
changes in consumer preferences and customs. In particular, the live video image
insertion market is new and undeveloped. We anticipate that as the market
develops, it will be affected by technological change and product improvements.
Changes in industry broadcast standards may adversely affect our competitive
position.
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WE HAVE LIMITED EXPERIENCE IN MANUFACTURING THE L-VIS SYSTEM IN COMMERCIAL
QUANTITIES.
We have limited experience in manufacturing L-VIS System units in large
quantities for commercial purposes. Our current modest manufacturing facilities
are designed to meet the current demand for use of the L-VIS System. We will
have to redesign our manufacturing facilities if we are able to develop a
substantially larger market for use of the L-VIS System. Any manufacturing
difficulties and any cost increases may materially adversely affect our profit
margin, if any, on the sale, lease or use of future L-VIS System units.
Manufacturing difficulties and cost increases may also affect our ability to
develop and deliver L-VIS System units on a timely basis. We believe that the
eventual manufacturing cost of L-VIS System units will be based upon the cost of
the components of the L-VIS System units purchased from the manufacturers of
these components and the cost of the digital signal processing circuits used to
perform identification, recognition and insertion functions which we produce. As
we increase our product development activities, we may find it desirable to
enter into contracts to have outside parties manufacture the L-VIS System units.
Any increased reliance on outside parties will require that we devote additional
resources to monitoring operations, controlling costs and maintaining effective
quality, inventory and service controls.
OUR DEPENDENCE ON A SOLE SUPPLIER OF SOME HARDWARE COMPONENTS MAY DELAY
MANUFACTURING OR REQUIRE REDESIGN OF THE L-VIS SYSTEM.
We depend upon a single supplier, Lucent Technologies, for some
hardware components. Although these hardware components are stock items, Lucent
may decide to stop selling them. We do not have an agreement with Lucent. If we
cannot get hardware components on a timely basis or if we have to pay
substantially more for them, we will have to find other sources for similar
components. This would require a redesign of some of our systems and our
business, financial condition and the results of our operations may be
materially adversely affected.
WE FACE INTENSE COMPETITION FROM COMPANIES INVOLVED WITH VIDEO INSERTION
TECHNOLOGY AND FROM COMPANIES INVOLVED WITH TRADITIONAL ADVERTISING.
Competition may have a material adverse effect on our business,
financial condition and the results of our operations. The market for electronic
video insertion technology is new and evolving. We are aware of three
competitors with video technologies used for advertising: Symah Vision-SA, Orad
Hi Tech Systems, Ltd. and Scidel Technologies, Ltd. Orad is partly owned by ISL,
a Swiss sports-marketing firm. We recently expanded the services we offer to
include, for a fee, the electronic insertion of visual aids in live sporting
events, such as a virtual first-down marker in live television broadcasts of
football games. We are aware that another U.S. company, Sportvision, Inc., is
also in the business of inserting visual aids in live sporting events. If the
market for electronic video insertion technology grows, we also expect
substantial competition from established broadcast businesses. These broadcast
businesses have greater resources and more highly skilled individuals than we
do. Many potential competitors could gain significant market share due to their
greater name recognition and more extensive customer bases. These competitors
may be able to:
- produce a product superior to ours;
- undertake more extensive promotional activities than ours;
- offer more attractive terms to customers than we do; and
- adopt more aggressive pricing policies than we have.
The L-VIS System competes with advertisers' use of traditional
30-second advertising spots. These 30-second advertising spots are the standard
in the television advertising industry. The L-VIS System also competes with
advertisers' use of conventional billboard products, including advertising
placed on playing surfaces, such as outfield walls, football fields and ice
hockey rinks and scrolling billboards. Scrolling billboards are physically
located at the site of an event and can display a series of different
advertisements during an event. Scrolling billboards can achieve an effect
similar to the L-VIS System for the television viewing audience in some
circumstances.
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We expect to generate revenue primarily by causing existing advertisers
and sponsors to use the L-VIS System and by attracting new advertisers and
sponsors to the advertising and sponsorship market. However, existing
advertisers may be reluctant to use a new technology. Advertisers may not
believe that their sales will increase as a result of the use of our technology.
The competition is likely to be more intense where we are competing for
television advertising and sponsorship dollars that are currently spent on
traditional media, such as 30-second spots or scrolling billboards. We need the
cooperation of the sponsorship advertising sales departments of team owners,
other rights holders and broadcasters. We rely on these entities for the sale of
our products to advertisers, but they may have incentives to sell alternative
advertising or sponsorship inventory rather than our services. This will have a
material adverse effect on our business, financial condition and the results of
our operations.
DOMESTIC AND FOREIGN REGULATIONS MAY RESTRICT THE USE OF THE L-VIS SYSTEM.
We believe that no federal or state regulations directly restrict the
use of the L-VIS System. There are existing regulations imposed on broadcasters,
which may require disclosure that the L-VIS System is being used in a particular
broadcast. There may be regulations or restrictions in the future which
adversely affect the use of the L-VIS System. These regulations or restrictions
could have a material adverse effect on our business, financial condition and
the results of our operations.
Regulatory agencies in foreign jurisdictions may have adopted, or may
adopt in the future, regulations or restrictions affecting the use of the L-VIS
System. The adoption of these regulations or restrictions may reduce or
eliminate the market for our products in any country where these regulations or
restrictions are adopted. This would have a material adverse effect on our
business, financial condition and the results of our operations.
WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL FINANCING THAT WE MAY NEED TO SUPPORT
OUR FUTURE OPERATIONS.
In the future we may need to raise money for our operations if we do
not generate enough revenues. We may not be able to obtain additional financing
on acceptable terms, or at all. If we cannot raise money, our business,
financial condition and the results of our operations will be adversely
affected.
We intend to use the net proceeds from our 1999 private placement,
which resulted in net proceeds of approximately $8,260,000, our other existing
cash, our cash flow from operations and our borrowings to support operations.
Our need for money may be affected by market changes or changes in our business.
In addition, our required payments for some electronic imaging rights total
$2,000,000 for the two fiscal years ending June 30, 2000. We may need to raise
money earlier than expected to expand, develop or enhance products, respond to
competition or acquire businesses. Our need for money will also depend on:
- the size of our research and development programs;
- the cost of our manufacturing and marketing activities;
- our ability to market products successfully;
- the length of time required to collect accounts receivable; and
- the need to address competing technological and market
developments.
If we raise money by selling stock or convertible debt securities,
shareholders could experience substantial dilution. In addition, the securities
could have greater rights, preferences and privileges than you have as a holder
of our common stock. If we cannot generate sufficient revenues or raise money,
we will be required to reduce growth to a level that can be supported by
internally generated cash flow.
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THIRD PARTY AGREEMENTS MAY PROHIBIT USE OF THE L-VIS SYSTEM.
The broadcast of a sporting event is governed by agreements among the
applicable teams, leagues, broadcasters and the sports federation, if any.
Impediments to use of the L-VIS System during the broadcast of the sporting
events covered by any of these agreements could have a material adverse effect
on our business, financial condition and the results of our operations. In many
instances, these agreements provide that different persons control the
copyrights to the broadcasts in differing circumstances, for instance, regular
season play versus playoffs. Agreements often govern permitted forms of
advertising and modifications to the broadcast. Use of live video insertion
technology is not specifically discussed in some existing agreements. Under
these circumstances it is not clear whose permission must be obtained to use the
L-VIS System. If the L-VIS System is used without the permission of the
appropriate parties, the use of the L-VIS System can be challenged. The defense
and prosecution of copyright suits is both costly and time-consuming. Current
broadcast copyright holders might not agree to amend current agreements on terms
acceptable to us.
WE MAY BE REMOVED FROM THE NASDAQ NATIONAL MARKET IF WE FAIL TO MEET CERTAIN
MAINTENANCE CRITERIA AND THE MARKET FOR OUR COMMON STOCK COULD BE ADVERSELY
AFFECTED IF WE BECOME GOVERNED BY REGULATIONS GOVERNING LOW PRICE STOCKS.
Our common stock is quoted on the Nasdaq National Market. The continued
listing of our common stock is conditioned upon our meeting certain asset, stock
price and other criteria. If we fail any listing criteria, our common stock may
be delisted. The effects of delisting include limited news coverage and the
limited release of the market prices of our common stock. Delisting may diminish
investors' interest in our common stock, restrict the trading market and reduce
the price for our common stock. Delisting may also restrict us from issuing
additional securities or securing additional financing.
Companies with low price stocks are governed by additional federal and
state regulatory requirements and could lose an effective trading market for
their stock. For instance, if our common stock is delisted from the Nasdaq
National Market and the trading price of our common stock is less than $5.00 per
share, our common stock could be governed by Rule 15g-9 under the Securities
Exchange Act of 1934. This rule requires that broker-dealers satisfy special
sales practice requirements before any transaction, including suitability
determinations and receiving any purchaser's written consent. The additional
burdens imposed upon broker-dealers may discourage broker-dealers from effecting
transactions in our common stock. This would reduce the liquidity of our common
stock. If these rules become applicable to our common stock, they could have a
material adverse effect on the trading market for our common stock. In addition,
our common stock could be deemed "penny stock" under the Securities Enforcement
and Penny Stock Reform Act of 1990. If this occurs, additional disclosure will
be required if you wish to make a trade in our common stock. The disclosure
includes the delivery of a disclosure schedule explaining the nature and risks
of the penny stock market. These requirements could severely limit the liquidity
of our common stock and the ability of purchasers to sell their shares of our
common stock in the secondary market.
FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET COULD ADVERSELY AFFECT OUR
STOCK PRICE AND OUR ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS.
The market price of our common stock could drop as a result of sales of
a large number of shares of our common stock in the marketplace, or the
perception that the sales could occur. These factors could also make it more
difficult for us to raise money through future offerings of securities.
In addition to the 1,592,797 shares being offered pursuant to this
Prospectus, 8,213,805 shares of our common stock were outstanding on September
10, 1999. Of these shares, 4,600,000 were sold through our initial public
offering and are freely transferable under the Securities Act of 1933. An
additional 412,500 shares of our common stock are issuable upon exercise of some
warrants and will be freely transferable pursuant to a registration statement on
Form S-3, filed by us with the SEC. 777,130 shares are also issuable upon
exercise of other outstanding warrants and will be "restricted securities" as
defined under Rule 144 under the Securities Act.
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Finally, the 2,160,000 shares of our common stock which may be issued under our
1993 Amended Stock Option Plan have been registered by us by filing a
registration statement on Form S-8 with the Securities and Exchange Commission.
"Restricted securities" may be sold only under Rule 144 or under an
effective registration statement under the Securities Act or an exemption from
the registration requirement. As of September 30, 1999, almost all shares of our
outstanding common stock were eligible for resale under Rule 144, including Rule
144(k).
We granted some demand and piggyback registration rights to the holders
of 3,583,652 shares of our common stock and to the holders of warrants
exercisable for an aggregate of 1,392,130 shares of our common stock, including
the 400,000 shares underlying the warrants held by the representatives of the
several underwriters of our initial public offering and the 200,000 shares
underlying the warrants issued to the placement agent in our 1999 private
placement. These registration rights require us to register under the Securities
Act those shares of our common stock and the shares of our common stock issuable
upon exercise of the warrants. If the holders, by exercising their registration
rights, cause a large number of shares to be registered and sold in the public
market, the sales could have a material adverse effect on the market price for
our common stock.
THE PRICE OF OUR COMMON STOCK MAY BE HIGHLY VOLATILE.
The market prices of equity securities of technology companies have
experienced substantial price volatility in recent years for reasons both
related and unrelated to the individual performance of specific companies.
Accordingly, the market price of our common stock may be highly volatile.
Factors such as announcements by us or our competitors concerning the following
matters may have a significant impact on the market price of our common stock
and could cause it to fluctuate substantially:
- products;
- patents and technology;
- governmental regulatory actions;
- events affecting technology companies generally; and
- general market conditions.
In addition, there are a relatively small number of shares of our
common stock trading publicly. Accordingly, shareholders may experience
difficulty selling or otherwise disposing of shares of our common stock at
favorable prices, or at all.
OUR OFFICERS, DIRECTORS AND EXISTING 5% SHAREHOLDERS HAVE SIGNIFICANT INFLUENCE
OVER OUR AFFAIRS AND MAY DELAY OR PREVENT A CHANGE IN CONTROL OF US.
As of September 1, 1999, our executive officers and directors, together
with entities affiliated with these individuals, and other holders of five
percent or more of our outstanding capital stock beneficially owned over 30% of
our common stock, assuming the exercise of all vested stock options and
warrants. Effectively, these shareholders will be able to elect a majority of
our directors, will have the voting power to approve all matters requiring
shareholder approval and will continue to have significant influence over our
affairs. This concentration of ownership could have the effect of delaying or
preventing a change in control of our company. As of September 1, 1999, Allen &
Company Incorporated was the beneficial owner of 12.0% of our common stock.
Enrique F. Senior, one of our directors, is an Executive Vice President and
Managing Director of Allen & Company Incorporated and as such may be deemed to
be the beneficial owner of 12.2% of our common stock, which includes the shares
of our common stock beneficially owned by Allen & Company Incorporated. These
factors could lead to conflicts of interest between us, on the one hand, and
Allen & Company Incorporated and/or Mr. Senior, on the other hand. In the event
any conflict of interest arises between us and Allen & Company Incorporated or
Mr. Senior in the future, we intend that the issue will be resolved by a
majority of directors who do not have a personal interest in the issue.
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<PAGE> 11
We issued a total of 262,000 shares of our common stock, or 3.2% of the
shares of our common stock outstanding on September 1, 1999, to Brown F Williams
and Samuel A. McCleery as a result of the exercise of warrants in July 1997. The
total number of shares issued to these individuals was in exchange for
promissory notes. In December 1997 we lent money to Mr. Williams and Mr.
McCleery to allow them to pay the tax liabilities they each incurred as a result
of the exercise of their warrants in July 1997. They executed additional
promissory notes in December 1997 for these loans. All of these promissory notes
were outstanding as of September 1, 1999. Mr. Williams and Mr. McCleery have
significant influence over our affairs. Among other effects, this influence
could result in a delay of payment by Mr. Williams and Mr. McCleery to us.
OUR ABILITY TO UTILIZE OUR INCOME TAX LOSS CARRYFORWARDS TO OFFSET POSSIBLE
FUTURE CORPORATE INCOME WILL BE SEVERELY LIMITED BY THE INTERNAL REVENUE CODE.
As a result of our initial public offering of our common stock in
December 1997, we underwent an additional "ownership change" within the meaning
of Section 382 of the Internal Revenue Code of 1986. Under Section 382 of the
Internal Revenue Code, upon undergoing the ownership change, our right to use
existing net operating loss carryforwards is limited during each future year to
a percentage of the fair market value of our outstanding capital stock
immediately before the ownership change. If other ownership changes have
occurred before this ownership change, we may be further limited in using the
losses. As of June 30,1999, we had net operating loss carryforwards for federal
income tax purposes of approximately $30,311,000. These net operating loss
carryforwards expire in the years 2006 through 2019. The timing and manner in
which we may use the net operating loss carryforwards to offset possible future
corporate income will be severely limited by Section 382 of the Internal Revenue
Code.
OUR ISSUANCE OF PREFERRED STOCK AND THE NEW JERSEY SHAREHOLDER PROTECTION ACT
COULD ADVERSELY AFFECT THE VALUE OF OUR COMMON STOCK.
Our board of directors may issue up to 1,000,000 shares of our
preferred stock in one or more series and may determine the price, rights,
preferences and privileges of those shares without any further vote or action by
our shareholders. We may issue up to 167,000 shares of our Series A Preferred
Stock and 93,300 shares of our Series B Preferred Stock. As of June 30, 1999,
67,600 shares of our Series A Preferred Stock were outstanding and 86,041 shares
of our Series B Preferred Stock were outstanding. As a holder of our common
stock, you may be negatively affected by the rights of the holders of our
preferred stock. The issuance of additional shares of our preferred stock would
provide flexibility for possible acquisitions and other corporate purposes.
However, our preferred stock can also be used to delay, defer or prevent a
change in control and, thus, entrench our existing management. We are governed
by the anti-takeover provisions of the New Jersey Shareholder Protection Act.
This act restricts certain business combinations with interested shareholders
for five years following the date the person becomes an interested shareholder,
unless the board of directors approves the business combination. These
provisions could adversely affect the value of our common stock since they delay
and deter unsolicited takeover attempts.
IF THE COMPUTER SYSTEMS WE RELY UPON ARE NOT YEAR 2000 COMPLIANT, OUR BUSINESS
COULD BE NEGATIVELY IMPACTED.
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. Beginning in the
year 2000, these date code fields need to recognize four digit entries to
identify correctly dates in the 21st century. If not corrected, many computer
applications could fail or create erroneous results at the year 2000. To the
extent that all internal and external systems and services relating to our
operations, including, but not limited to, all computer hardware and software
systems, both those produced by us and those produced by others for our use, the
systems of our suppliers, significant third party vendors and broadcasters, and
our own internal information systems, databases and programs are not year 2000
compliant, our planned operations could be significantly disrupted. This could
have a material adverse effect on our business, financial condition and planned
results of operations. Further, to the extent that, while becoming year 2000
compliant, there are failures by governmental agencies causing delays in
approval of new products or
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<PAGE> 12
sales of approved products, failures in global banking systems and capital
markets, failures by public and private utility companies supplying services to
us, or failures in identifying critical systems within our company, these
failures could have a material adverse effect on our business, financial
condition and planned results of operations.
USE OF PROCEEDS
We will receive no proceeds from the sale of shares of our common stock
by the selling shareholders but will receive proceeds from the exercise of the
warrants to purchase shares of our common stock. Proceeds from the exercise of
the warrants are expected to be used for general corporate purposes.
SELLING SHAREHOLDERS
The following table sets forth the name of each person who is a selling
shareholder, the number of shares of our common stock beneficially owned for
each selling shareholder's account as of the dates indicated below, the number
of shares being sold by each selling shareholder, the number of shares of our
common stock each selling shareholder will beneficially own after the completion
of this offering, and the percentage of outstanding shares of our common stock
owned by each selling shareholder after the completion of this offering. The
table assumes that each selling shareholder will sell all shares they are
offering under this Prospectus, and that each selling shareholder will not
acquire additional shares of our common stock prior to completion of this
offering. The shares are being registered to permit secondary trading of the
shares, and each selling shareholder may offer such shares for resale from time
to time. See "Plan of Distribution."
<TABLE>
<CAPTION>
Percentage of
Number of Number of Outstanding
Shares Maximum Number Shares Common Stock
Beneficially of Shares Beneficially Beneficially
Number of Selling Owned Before Being Owned After Owned After
Shareholder Offering(1)(2) Offered(3) Offering(1)(2) Offering(1)(2)
- ----------- -------------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
Acorn Technology
Fund, L.P.(4) 6,500 6,500 0 *
Bader M. Al-
Humaidhi 8,540 5,000 3,540 *
Allen & Company
Incorporated(5) 1,085,972 380,000 705,972 7.7%
Taleb A. Ali 10,000 10,000 0 *
Al-Mal Kuwaiti
Company 7,500 7,500 0 *
Fahad Al-Rajaan 8,540 5,000 3,540 *
Peder A. Arneson 2,500 2,500 0 *
</TABLE>
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<PAGE> 13
<TABLE>
<CAPTION>
Percentage of
Number of Number of Outstanding
Shares Maximum Number Shares Common Stock
Beneficially of Shares Beneficially Beneficially
Number of Selling Owned Before Being Owned After Owned After
Shareholder Offering(1)(2) Offered(3) Offering(1)(2) Offering(1)(2)
- ----------- -------------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
Aus. Per. No. 1, Inc 32,250 7,500 24,750 *
Stephen D. Baksa 8,250 1,250 7,000 *
Barington *
Capital Group, L.P.(6) 20,000 20,000 0
Leonard Barrack 21,500 21,500 0 *
C.A.L.M
Venture Partners, L.P 6,296 2,500 3,796 *
Nicholas E. Chimicles 2,500 2,500 0 *
Patrick Coughlin 8,500 2,500 6,000 *
Jonathan W. Cuneo 1,000 1,000 0 *
Falah Partners 4,586 2,500 2,086 *
Gary J. and Miriam I.
Greenberg(7) 6,000 2,500 3,500 *
Douglas J. Greenlaw (8) 121,126 10,000 111,126 1.3%
The M and B Weiss
Family Limited
Partnership of 1996 25,000 10,000 0 *
William S. Lerach 25,000 10,000 0 *
Dennis Mensch 10,092 2,500 7,592 *
Presencia en Medios,
S.A. de C.V.(9) 614,308 130,000 484,308 5.9%
Richard Y. Roberts 5,000 5,000 0 *
Gerald J. Rodos 17,000 2,500 14,500 *
Paula P. Runnells 7,250 1,250 6,000 *
John T. Shea 5,582 2,500 3,082 *
</TABLE>
- ----------
* Less than one percent
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<PAGE> 14
(1) Applicable percentage of ownership is based on 8,213,665 shares of our
common stock outstanding as of September 1, 1999. The number of shares
beneficially owned before offering is based upon beneficial ownership
of the applicable selling shareholders as of September 1, 1999 for
Acorn Technology Fund, L.P., Allen & Company Incorporated, Douglas J.
Greenlaw and Presencia en Medious, S.A. de C.V. See the notes below
with respect to each such selling shareholder. The number of shares
beneficially owned before offering is based upon beneficial ownership
of the applicable selling shareholders as of February 28, 1999 with
respect to all other selling shareholders. Outstanding shares of our
Series A and Series B Preferred Stock are not reflected above because
such preferred stock has no voting rights and is not convertible.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of our common stock
subject to stock options and warrants currently exercisable or
exercisable within 60 days from the record date are deemed outstanding
for computing the percentage ownership of the person holding such
options and the percentage ownership of any group of which the holder
is a member, but are not deemed outstanding for computing the
percentage ownership of any other person. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons named in the table have sole voting and investment power with
respect to all shares of our common stock shown as beneficially owned
by them.
(3) See "Plan of Distribution."
(4) Mr. John B. Torkelsen, a member of our board of directors, is the
Manager and a member of Acorn Technology Partners, L.L.C., the general
partner of Acorn Technology Fund., L.P. Does not reflect beneficial
ownership of 5,992 shares of our common stock held by Pamela R.
Torkelsen, Mr. Torkelsen's wife, 48,200 shares of our common stock
underlying warrants held by Princeton Venture Research, Inc., a company
of which Mr. Torkelsen is the sole shareholder, and 26,944 shares of
our common stock underlying options held by Mr. Torkelsen that were
exercisable within 60 days of September 1, 1999. Mr. Torkelsen
disclaims beneficial ownership of the shares of our common stock that
are owned by Mrs. Torkelsen.
(5) Mr. Enrique F. Senior, a member of our board of directors, is an
Executive Vice President and Managing Director of Allen & Company
Incorporated, one of our principal shareholders. Allen & Company
Incorporated may serve as a market maker for our common stock. See
"Plan of Distribution." Includes 227,746 shares of our common stock and
478,226 shares of our common stock underlying warrants owned of record
by Allen & Company Incorporated. Includes 380,000 shares of our common
stock underlying the warrants received by Allen & Company Incorporated
as partial consideration for services rendered on our behalf with
respect to our initial public offering. Does not include 200,000 shares
of our common stock underlying the warrants received by Allen & Company
Incorporated as partial consideration for services rendered on our
behalf as placement agent in the private placement of securities on
October 20, 1999. Does not include shares of our common stock
underlying options held by Mr. Senior that were exercisable within 60
days of September 1, 1999. Does not include shares of our common stock
held directly by some officers, directors or employees of Allen &
Company Incorporated. Does not include shares of common stock held by
Allen & Company Incorporated in its capacity as a market maker.
(6) Barington Capital Group, L.P. acted, along with Allen & Company
Incorporated, as the representatives of the several underwriters for
the initial public offering of our common stock in December 1997.
(7) Does not include (a) 100 shares of our common stock owned by Gary J.
Greenberg, as custodian for Theresa Greenberg, (b) 100 shares of our
common stock owned by Gary J. Greenberg, as custodian for Carson
Kleiner, or (c) 100 shares of our common stock owned by Gary J.
Greenberg, as custodian for Emma Greenberg.
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<PAGE> 15
(8) Mr. Greenlaw served as our President and Chief Executive Officer from
January 1997 until November 1998 and as a member of our board of
directors from October 1997 until November 1998. Includes 22,500 shares
of our common stock and 98,626 shares of our common stock underlying
options held by Mr. Greenlaw that were exercisable within 60 days of
September 1, 1999.
(9) Mr. Eduardo Sitt, a member of our board of directors, is the President
of Presencia en Medios, S.A. de C.V., one of our principal
shareholders. Does not include 36,944 shares of our common stock
underlying options held by Mr. Sitt that were exercisable within 60
days of September 1, 1999.
PLAN OF DISTRIBUTION
The distribution of shares of our common stock held by the selling
shareholders may be effected from time to time in transactions on the Nasdaq
National Market, in negotiated transactions, through the writing of options on
the shares, or a combination of these methods of sale, at fixed prices that may
be changed, at market prices prevailing at the time of the sale, at prices
related to the prevailing market prices or at negotiated prices. The selling
shareholders may effect these transactions by the sale of shares to or through
broker-dealers, and the broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling shareholders and/or the
purchasers of the shares for whom the broker-dealers may act as agent or to whom
they may sell as principal, or both. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the selling shareholders
who sell their shares. The selling shareholders have not entered into any
underwriting arrangements. The selling shareholders may also effect the transfer
of shares of our common stock under Rule 144 of the Securities Act or other
applicable exemptions from the registration requirement of the Securities Act.
2,000,000 shares of our common stock and an indeterminate number of
additional shares of our common stock as may be sold solely in connection with
the market making activities of Allen & Company Incorporated are registered
under this registration statement. Enrique F. Senior, a member of our board of
directors, is a Managing Director and Executive Vice President of Allen &
Company Incorporated, which is one of our principal shareholders, furnishes
general financial advisory services to us from time to time and acted as a
representative of the several underwriters in our initial public offering. Allen
& Company Incorporated and some of its affiliates beneficially own an aggregate
of 1,085,972 shares of our common stock. For these reasons, Allen & Company
Incorporated may be deemed to have an ability to influence our policies and thus
may be deemed to be an "affiliate" of our company under prevailing
interpretations of what constitutes an affiliate relationship. Any sales of
shares of our common stock by the selling shareholders under this registration
statement will be made in conformity with the applicable provisions of the rules
of the National Association of Securities Dealers, Inc. We will not receive any
proceeds from sales of shares by the selling shareholders or the market making
activities of Allen & Company Incorporated.
The selling shareholders and intermediaries through whom the shares are
sold may be deemed "underwriters" within the meaning of the Securities Act with
respect to the securities offered and any profits realized or commissions
received may be deemed underwriting compensation. We have agreed to indemnify
the selling shareholders against some liabilities, including liabilities under
the Securities Act.
ABOUT THIS PROSPECTUS
You should rely only on the information provided in this Prospectus,
including the information incorporated by reference. We have not authorized
anyone to provide you with different information. You should not assume that the
information in this Prospectus is accurate at any date other than the date
indicated on the cover page of this Prospectus. We are not offering the
securities in any state where the offer is not permitted.
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<PAGE> 16
WHERE YOU CAN FIND MORE INFORMATION
This Prospectus, which constitutes a part of a registration statement
on Form S-3 (the "Registration Statement") filed by us with the Securities and
Exchange Commission under the Securities Act, omits some of the information
shown in the Registration Statement. Reference is made to the Registration
Statement and to the exhibits to the Registration Statement for further
information with respect to our company and the securities offered by this
Prospectus. Copies of the Registration Statement and the exhibits to the
Registration Statement are on file at the offices of the SEC and may be obtained
upon payment of the prescribed fee or may be examined without charge at the
public reference facilities of the SEC described below.
We are governed by the informational requirements of the Securities
Exchange Act, which require us to file reports, proxy statements and other
information with the SEC. Reports, proxy statements and other information which
we file can be read and copied at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the following regional offices of
the SEC: 7 World Trade Center, New York, New York 10048 and 500 West Madison
Street, 14th Floor, Chicago, Illinois 60661. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy
and information statements, and other information regarding issues at
http://www.sec.gov. Our common stock is listed and traded on the Nasdaq National
Market. Reports, proxy statements and other information which we file may also
be inspected at the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20002.
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<PAGE> 17
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed with the SEC are incorporated in this
Prospectus by reference:
(a) Our Annual Report on Form 10-KSB for the fiscal year ended June
30, 1999 which we filed under Section 13(a) or 15(d) of the Securities Exchange
Act;
(b) Our Proxy Statement and Notice of Meeting relative to the Annual
Meeting of Shareholders to be held on December 3, 1999, as filed with the SEC;
(c) All other reports filed under Section 13 or 15(d) of the
Securities Exchange Act since June 30, 1999; and
(d) The description of our common stock, no par value, which is
contained in our latest registration statement filed under the Securities
Exchange Act, including any amendments or reports filed for the purpose of
updating the description.
All documents which we file under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act after the date of this Prospectus and before
termination of the offering shall be deemed to be incorporated by reference in
this Prospectus and to be a part of this Prospectus from the date of the filing
of this Prospectus. Any statement contained in this Prospectus or in a document
incorporated by reference or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that the statement is modified or superseded by any
other subsequently filed document which is incorporated or is deemed to be
incorporated by reference in this Prospectus. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not
presented in this Prospectus or delivered with this Prospectus. We undertake to
provide without charge to each person, including any beneficial owner, to whom
this Prospectus is delivered, on the written or oral request of the person, a
copy of any or all of the documents referred to above which have been or may be
incorporated into this Prospectus and deemed to be a part of this Prospectus,
other than exhibits to the documents unless the exhibits are specifically
incorporated by reference in the documents. These documents are available upon
request from Elizabeth Dumont, Controller, Princeton Video Image, Inc., 15
Princess Road, Lawrenceville, New Jersey 08648, (609) 912-9400.
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<PAGE> 18
INDEMNIFICATION
We have agreed to indemnify the underwriters of our initial public
offering and the placement agent in our October 20, 1999 private placement,
including Allen & Company Incorporated, which may be deemed to be an affiliate
or control person of our company, and each person who controls any of these
underwriters, including Enrique F. Senior, a member of our board of directors
who is an Executive Vice President and Managing Director of Allen & Company
Incorporated, against some liabilities in connection with the Registration
Statement, including liabilities under the Securities Act.
Our Bylaws provide that our directors shall not be personally liable to
us or our shareholders for monetary damages for breach of fiduciary duty as a
director. However, our Bylaws do not eliminate or limit the liability of a
director:
- for any breach of the director's duty of loyalty to us or our
shareholders;
- for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law;
- under Section 14A:6-12 of the New Jersey Business Corporation Act;
or
- for any transaction from which the director derived an improper
personal benefit.
Furthermore, our Bylaws provide that we shall indemnify our directors and
officers to the full extent permitted by Section 14A:3-5 of the New Jersey
Business Corporation Act or any successor statute thereto.
Section 14A:3-5 of the New Jersey Business Corporation Act gives a
corporation the power to indemnify a corporate agent, including a director
and/or officer, against expenses and liabilities incurred in connection with
certain proceedings involving the corporate agent by reason of his or her being
or having been a corporate agent, provided that with regard to a proceeding
other than one by or in the right of the corporation, the corporate agent must
have acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal proceeding, have had no reasonable cause to believe his or her conduct
was unlawful. In any of these proceedings, the termination of the proceeding by
judgment, order, settlement, conviction or upon plea of nolo contendere or its
equivalent does not of itself create a presumption that any corporate agent
failed to meet the above applicable standards of conduct. The indemnification
provided by the New Jersey Business Corporation Act does not exclude any rights
to which a corporate agent may be entitled under a certificate of incorporation,
by-law, agreement, vote of shareholders or otherwise. No indemnification, other
than that required when a corporate agent is successful on the merits or
otherwise in any of the above proceedings, shall be allowed if the
indemnification would be inconsistent with a provision of the certificate of
incorporation, a by-law, a resolution of the board of directors or of the
shareholders, an agreement or other proper corporate action in effect at the
time of the accrual of the alleged cause of action which prohibits, limits or
otherwise conditions the exercise of indemnification powers by the corporation
or the rights of indemnification to which a corporate agent may be entitled.
We currently carry liability insurance for the benefit of our directors
and officers which provides coverage for losses of directors and officers for
liabilities arising out of claims against the persons acting as directors or
officers of our company, or any subsidiary of our company, due to any breach of
duty, neglect, error, misstatement, misleading statement, omission or act done
by these directors and officers, except as prohibited by law. Our current policy
includes coverage for any claim made against the directors and officers based
upon (a) the purchase, sale or offer of any of our securities, and (b) any claim
brought by one of our security holders. The coverage includes claims which
allege a violation of the Securities Act and the Securities Exchange Act.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of our
company under these provisions, or otherwise, we have been advised that, in the
opinion of the SEC, the indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable.
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<PAGE> 19
LEGAL MATTERS
The validity of our common stock offered by this Prospectus and legal
matters will be passed upon for us by Smith, Stratton, Wise, Heher & Brennan,
Princeton, New Jersey. A member of Smith, Stratton, Wise, Heher & Brennan serves
as the Secretary of our company, for which services he is not compensated.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Annual Report on form 10-KSB for the year ended June 30, 1999 have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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