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As filed with the Securities and Exchange Commission on August 26, 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INFORMATION ARCHITECTS CORPORATION
(Exact name of Registrant as specified in its charter)
NORTH CAROLINA 7372 87-0399301
- ------------------------------ --------------------------- ---------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation organization) Classification Code Number) Identification
Number)
4064 Colony Road
Charlotte, North Carolina 28211
(704) 365-2324
(Address, including zip code and telephone number,
including area code, of Registrant's
principal executive offices)
----------------------
J. Dain Dulaney
INFORMATION ARCHITECTS CORPORATION
4064 Colony Road
Charlotte, North Carolina 28211
(704) 365-2324
(Name, address, including zip code and telephone number, including area code,
of agent for service)
----------------------
COPY TO:
Jeffrey S. Hay
McGUIRE, WOODS, BATTLE & BOOTHE LLP
100 North Tryon Street
Suite 2900
Charlotte, North Carolina 28202
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
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If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Per Aggregate Offering Amount of
Securities to be Registered Registered Share (1) Price Registration Fee
<S> <C> <C> <C> <C>
Common Stock of Information
Architects Corporation (par
value $.001 per share) 100,000 $2.375 $237,500 $67.00
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee,
based on the average of the high and low sales prices of the
Registrant's Common Stock, par value $.001 per share (the "Common
Stock"), as reported on the Nasdaq National Market on August 25, 1999
in accordance with Rule 457 under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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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 AUGUST 26, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
100,000 Shares
Information Architects Corporation
--------------------
Common Stock
($0.001 par value)
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This prospectus relates to the public offering of shares of our common
stock by the selling stockholder. These shares were issued to the selling
stockholder in connection with a Promissory Note entered into with the selling
stockholder. We will not receive any of the proceeds from the sale of the
shares. We will pay all expenses of registration incurred in connection with
this offering, but the selling stockholder will pay all of its selling
commissions, brokerage fees and related expenses.
The selling stockholder has advised us that it will sell the shares
from time to time in the open market, on the Nasdaq Stock Market, in privately
negotiated transactions or a combination of these methods, at market prices
prevailing at the time of sale, at prices related to the prevailing market
prices, at negotiated prices, or otherwise as described under "Plan of
Distribution."
Our common stock is traded on the Nasdaq National Market (Nasdaq
Symbol: IARC). On August , 1999, the closing price of the common stock was $
per share.
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 2.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------------------------------
The date of this prospectus is August , 1999.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements or other information that we file at the Securities
and Exchange Commission's public reference room at 450 Fifth Street N.W.,
Washington, D.C. 20549 or at its regional public reference rooms in New York,
New York and Chicago, Illinois. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the operations and
locations of the public reference rooms. Our Securities and Exchange Commission
filings are also available to the public from commercial document retrieval
services and at the Internet World Wide Web site maintained by the Securities
and Exchange Commission at "http://www.sec.gov."
This prospectus is a part of a registration statement we filed with the
Securities and Exchange Commission. As allowed by the rules of the Securities
and Exchange Commission, this prospectus does not contain all of the information
that can be found in the registration statement or in the exhibits to the
registration statement. You should read the registration statement and its
exhibits for a complete understanding of all of the information included in the
registration statement.
The Securities and Exchange Commission allows us to "incorporate by
reference" information into this prospectus, which means that we can disclose
important information to you by referring you to another document filed
separately with the Securities and Exchange Commission. The information
incorporated by reference becomes part of this prospectus, and information that
we file later with the Securities and Exchange Commission will automatically
update and supercede this information. We incorporate by reference the documents
listed below that we have previously filed with the Securities and Exchange
Commission:
1. Annual Report on Form 10-K for the fiscal year ended
December 31, 1998;
2. Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1999;
3. Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 12, 1999;
4. Current Report on Form 8-K filed with the Securities and
Exchange Commission on April 8, 1999;
5. Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1999; and
6. Amendment No. 7 to our General Form for Registration of
Securities on Form 10 filed with the Securities and Exchange
Commission on July 1, 1999.
We also incorporate by reference in this prospectus additional
documents that we may file with the Securities and Exchange Commission under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after
the date of this prospectus. These include periodic reports, such as annual
reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form
8-K.
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You may obtain the documents incorporated by reference as described
above. You may also request a copy of these filings, at no cost, from us by
writing or telephoning us at:
Information Architects Corporation
4064 Colony Road
Charlotte, North Carolina 28211
(704) 365-2324
RISK FACTORS
In evaluating our business, prospective investors should carefully
consider the following risks in addition to the other information in this
prospectus or in the documents referred to in this prospectus. Any of the
following risks could materially adversely impact our business, operating
results and financial condition and result in a complete loss of your
investment.
The statements made in this prospectus, including the information
incorporated by reference, that are not historical facts, contain
"forward-looking information" within the meaning of the Private Securities
Litigation Reform Act of 1995, and Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, both as amended, which can
be identified by the use of forward-looking terminology such as "may," "will,"
"anticipates," "expects," "projects," "estimates," "believes" or "continue", the
negative thereof, other variations or comparable terminology. Important factors,
including certain risks and uncertainties with respect to such forward-looking
statements that could cause actual results to differ materially from those
reflected in such forward looking statements include, but are not limited to,
the risk factors discussed below.
IF NEW STRATEGIES TO REPLACE REVENUE FROM OUR YEAR 2000 BUSINESS ARE
UNSUCCESSFUL, OUR REVENUES WILL DECLINE.
If we are unable to complete our announced acquisitions or develop
other sources of revenues or funding, we will be required to reduce our expenses
commensurate with the lower revenues and seek other acquisitions or business
combinations to replace the revenues generated by our Year 2000 business. We
currently derive more than ninety-five percent (95%) of our revenues from our
Year 2000 business. We anticipate that our revenues from the Year 2000 business
may decline by 50 percent or more after December 31, 1999. In order for us to
sustain growth and viability after December 31, 1999, we have acquired the
Metaphoria software and entered into agreements to acquire Data Systems and
Tumble Interactive Media. The successful implementation of the acquisitions of
Data Systems, Tumble, Metaphoria software and other possible acquisitions are
dependent on a number of factors, including management's ability to assimilate
the operations, personnel and technology of the acquired companies and provide
sufficient capital either from internally generated revenues or external sources
to properly fund the integration and future growth of the combined entities. We
may not be successful in the integration of these entities.
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THE MARKET PRICE OF OUR COMMON STOCK COULD DECLINE IF OUR QUARTERLY RESULTS ARE
BELOW EXPECTATIONS.
We have experienced quarterly fluctuations in revenues and operating
results, including a drop in revenues from the third to the fourth quarter of
1998, and believe similar fluctuations may occur in the future. The price of our
common stock may decline in future quarters if our revenues or operating results
are below expectations. Quarterly revenue and operating results fluctuations may
occur and have occurred due to a number of factors including:
* disruption in customer relationships, such as those caused by the
major restructuring of the sales and marketing departments during the
third and early fourth quarters of 1998;
* market shifts, such as the reduction of revenue and profit resulting
from our receiving more of our business from lower priced services that
validate Year 2000 compliance for mainframe computer software rather
than from our higher priced services relating to detection and
correction of the Year 2000 problem in mainframe computer software;
* the timing of revenues and costs related to new product and service
introductions; and
* the timing of closing for any acquisitions and associated costs.
OUR RECENT AND PLANNED ACQUISITIONS WILL REDUCE THE PERCENTAGE OWNERSHIP
INTEREST OF EXISTING STOCKHOLDERS.
We will issue common stock to complete each of our recent and planned
acquisitions. These issuances of common stock will result in the reduction of
each stockholder's percentage ownership interest in us and could result in a
decrease in the market price of our common stock. For example, under the terms
of the merger agreement with Data Systems, the total number of shares of our
common stock issued in the merger is subject to adjustment based on the average
ten day closing price per share for the 10 trading days before the merger. If
the average ten-day closing price is between $6.00 per share and $16.00 per
share, we will issue a total of 1,611,047 shares in the merger. If the average
ten-day closing price is below $6.00 per share, we will issue a greater number
of shares equal to 9,666,282 divided by the average closing price.
OUR DEBENTURE FINANCING WILL REDUCE THE PERCENTAGE OWNERSHIP INTEREST OF
EXISTING STOCKHOLDERS AND MAY CAUSE A REDUCTION IN THE SHARE PRICE.
In July 1999, we raised $5 million by issuing debentures, which are
convertible into shares of our common stock. If the debenture holder converts
the debentures into shares of common stock, we will be required to issue no less
than 1,855,287 shares of common stock. If the trading price of the common stock
is low when the conversion price of the debentures is determined, we would be
required to issue a higher number of shares of common stock, which could cause a
further reduction in each stockholders percentage ownership of us. The initial
conversion price of the debentures is set at a premium to the closing price on
the day before the debenture was issued. The conversion price can be
periodically adjusted downward when eighty five percent of the trading price of
our common stock for any five trading days in a twenty trading day period is
less than the initial conversion price. In addition, if the debenture holder
converts our debentures and sells the common stock, this could result in an
imbalance of supply and demand for our common stock and a decrease in the market
price of our common stock. The further our stock price declines, the further the
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periodic adjustment of the conversion price will fall and the greater the number
of shares we will have to issue upon conversion.
OUR DEBENTURE FINANCING MAY CAUSE OTHER SIGNIFICANT CORPORATE ACTIONS BY US.
We could be required to issue up to 19.999% of our outstanding common
stock (3,878,000 shares based on 19,393,809 shares outstanding on July 30, 1999)
upon conversion of our outstanding debentures and exercise of the related
warrants without stockholder approval. We have agreed that if our stock price
drops to a level where we are required to issue more than 19.999% of our common
stock, we will seek shareholder approval to issue more than 19.999% of our
outstanding common stock. If we are unable to obtain shareholder approval for
issuance of the additional shares, we are required to remove ourselves from the
NASDAQ stock market, and to issue the number of shares required upon conversion
of the debenture.
OUR DEBENTURE FINANCING LIMITS OUR ABILITY TO ENTER FUTURE TRANSACTIONS AND THE
DEBENTURE HOLDERS CAN REQUIRE US TO REDEEM THE DEBENTURES AT A PREMIUM IF
CERTAIN EVENTS HAPPEN.
The debentures and related agreements contain significant covenants.
These covenants may limit our ability to enter into future transactions,
including financing transactions and transactions involving a change in control
or acquisition of us. The debenture holder can require us to redeem the
debentures, at a redemption price of 122% of the outstanding principal amount,
if at any time, we challenge, dispute or deny the right of the holder to convert
the debentures into shares of common stock or otherwise dishonor or reject any
conversion notice.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL THAT COULD REDUCE EXISTING STOCKHOLDERS'
PERCENTAGE OWNERSHIP INTEREST AND LIMIT OUR OPERATING FLEXIBILITY.
If we decide to expand more rapidly than currently anticipated or we do
not meet our revenue projections, we may need to raise additional capital. In
anticipation of these possible future financing needs, we have entered into a
letter with the debenture holder to potentially establish a $5,000,000 equity
line. This potential financing or any other additional financing using our
common or preferred stock will result in the reduction of each stockholder's
percentage ownership interest in us and may result in a decrease in the market
price of our common stock. Any additional debt financing likely will involve
restrictive covenants, which may limit our operating flexibility. If financing
is not available on acceptable terms, we may be unable to develop or enhance our
products, take advantage of future opportunities, respond to competitive
pressures, meet unanticipated requirements, or continue to operate at our
current levels.
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WE FACE POTENTIAL LIABILITY AS A RESULT OF PENDING SHAREHOLDER SUITS.
Between May 14, 1999 and July 13, 1999, we, and current and former
officers and directors were named as defendants in four purported class action
lawsuits. The suits are filed in the United States District Court for the
Western District of North Carolina. The legal costs incurred by us in defending
ourselves and our officers and directors against this litigation, whether or not
we prevail, could materially impact the operating results in the quarters in
which those expenses are incurred. Further, in the event that the plaintiffs
prevail, we also could be required to pay damages that would materially impact
the operating results in the quarter and year in which the damages are paid and
could materially impact our financial condition. Also, this litigation may be
protracted and may result in a diversion of our management and other resources.
The suits purport to be brought on behalf of a class of persons that purchased
our common stock between November 14, 1997 and April 1, 1999 and allege
violations of the federal securities laws. The suits allege that the defendants
made material omissions and misrepresentations in public filings, press releases
and other public statements during the purported class period. The suits seek
class action status and an unspecified amount of damages, including compensatory
damages, interest, attorney's and expert's fees and reasonable costs and
expenses.
IF WE ARE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, OUR
BUSINESS COULD SUFFER.
Our success is dependent upon our ability to use our proprietary
technology to create revenue-producing opportunities. If we are not able to
adequately protect our proprietary technology, we will be required to seek
revenue from sources other than our current proprietary technology. We currently
protect our proprietary rights through a combination of patent, copyright,
trademark, trade secret law, confidentiality agreements and contractual
provision. Provisions of our client agreements, including provisions protecting
against unauthorized use, copying, transfer and disclosure, may be unenforceable
against unauthorized use, copying, transfer and disclosure, under the laws of
some jurisdictions. We are also required to negotiate limits on these provisions
from time to time. We may not be able to adequately deter misappropriation of
proprietary information or to detect unauthorized use and take appropriate steps
to enforce our intellectual property rights.
IF OUR INTELLECTUAL PROPERTY RIGHTS ARE CHALLENGED, WE MAY FACE POTENTIAL
LIABILITY.
In recent years, litigation involving patents and other intellectual
property rights has increased. Patents exist which cover solutions to the Year
2000 problem. We believe that we are either not using these patented solutions
or have utilized the solutions prior to the patent filing date. Regardless, we
may be a party to litigation in the future to protect our intellectual property
or for allegedly infringing other intellectual property rights. Such litigation
may force us to do one or more of the following:
* cease selling or using products or services that incorporate the
challenged intellectual property, such as our Year 2000 compliance
methodology;
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* obtain from the holder of the infringed intellectual property a
license to sell or use the relevant technology, which license may not
be available on reasonable pricing or business terms;
* redesign our affected products or services at additional cost to us.
WE MAY SUFFER LOSSES ARISING OUT OF POTENTIAL LIABILITY TO CUSTOMERS FROM OUR
YEAR 2000 BUSINESS.
There is increasing litigation arising out of failures or potential
failures in computer systems as a result of the Year 2000 problem. In the event
we become a party to any such litigation, the cost of defending the litigation
or an adverse outcome could result in payment of extraordinary expenses that
will affect our operational results. To date, we are not a party to any
litigation arising out of a Year 2000 failure. We have attempted to limit our
liability for Year 2000 claims through provisions in our contracts with
customers, limiting our damages, generally providing no warranties on our
services through the Year 2000, and disclaiming all other warranties. These
contractual protections may not be enforceable in all instances, and may not
otherwise protect us from the costs involved in defending a Year 2000 claim.
FAILURE TO RESPOND TO RAPID TECHNOLOGICAL CHANGE COULD ADVERSELY AFFECT OUR
ABILITY TO GENERATE REVENUE.
Rapid technological change characterizes the markets for internet
professional services and Year 2000 services. Our future success will depend on
our ability to improve existing services and products, offer new services,
enhance recently acquired products and develop, acquire and market new products
and services. Our failure to adequately and timely respond to changing
technology could result in us not remaining competitive in the marketplace.
WE DO NOT PLAN TO PAY CASH DIVIDENDS ON OUR STOCK.
Since our inception, we have not paid, and do not intend to pay, any
cash dividends on our common stock in the foreseeable future. As a result, an
investor in the common stock would only receive a return on the investment if
the market price of the common stock increases.
VOLATILITY IN OUR STOCK PRICE MAY ADVERSELY AFFECT OUR BUSINESS.
Fluctuations in the market price of our stock may adversely affect our
ability to complete any planned acquisitions, our access to capital and
financing and our ability to attract and retain qualified personnel.
Historically, our common stock price and trading volume have fluctuated widely,
with a 52-week range as of August 10, 1999 of $14.00 to $1.625. We expect these
fluctuations to continue in the future for a number of reasons, including the
following:
* our success or failure in meeting market expectations of our
quarterly or annual revenues, net income or earnings per share;
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* our or competitor's announcements regarding new services and products
or technological innovations;
* stock prices for many technology companies fluctuate widely for
reasons, including perceived potential value, that may be unrelated to
operating results; and
* announcements of unusual events, such as acquisitions.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY RISKS IN OUR INTERNATIONAL OPERATIONS.
Our international sales, primarily in France, England and the rest of
Europe, attributed approximately 18% of our total consolidated revenues for the
year ended December 31, 1998. We anticipate that international business may
account for a similar percentage of our revenues in 1999. The risks inherent in
international markets that may adversely affect our potential revenues and costs
include:
* unexpected changes in regulatory requirements;
* difficulties in staffing and managing foreign operations;
* potentially adverse tax consequences;
* potentially adverse differences in language, business customs,
practices and norms;
* differences in accounting practices;
* problems in collecting accounts receivable;
* fluctuations in currency exchange rates; and
* seasonal reductions in business activity during the summer
months in Europe.
MR. GRUDER EXERCISES SIGNIFICANT CONTROL OVER US.
Mr. Gruder, our Chief Executive Officer and Chairman of the Board, is
presently the beneficial owner of approximately 35% of our outstanding common
stock. Although Mr. Gruder's percentage ownership of our outstanding common
stock will be reduced as a result of planned acquisitions and financing, Mr.
Gruder will continue to be in a position to influence the election of directors
and generally to direct our affairs, including significant corporate actions
such as acquisitions, the sale or purchase of assets and the issuance and sale
of our securities.
INTENSE COMPETITION FOR YEAR 2000 SERVICES MAY ADVERSELY AFFECT OUR REVENUES AND
PROFITS.
Our Year 2000 services face intense competition from two different
sources: (i) correction performed in-house and (ii) software that corrects Year
2000 errors and validates Year 2000 compliance and other services offered by
direct competitors. Many of our competitors are better established, have
existing relationships with customers and have far greater resources than us. As
a result of this competition, our revenues or our profits on such revenues for
Year 2000 services could decrease, resulting in a negative effect on our common
stock price.
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OUR BUSINESS PROSPECTS MAY BE ADVERSELY AFFECTED IF WE ARE NOT ABLE TO ATTRACT
AND RETAIN QUALIFIED PROFESSIONALS.
If we are not successful in attracting, assimilating, transitioning or
retaining qualified technological personnel in the future, then we may not
remain competitive. We believe that there is a shortage of, and significant
competition for, professionals with the advanced technological skills necessary
to perform the services offered by our new internet services. We also intend to
transfer current employees from our Year 2000 business to our new internet
business. The transition will require training in new technology and new skills
sets applicable to internet technology. Once trained, such individuals will be
in higher demand because of their new skill set. Additionally, not all of our
current personnel will be able to acquire the skills necessary to transition to
our new business.
DELAY OR LACK OF SUCCESS IN DEVELOPING AND MARKETING OUR NEW PRODUCTS AND
SERVICES COULD ADVERSELY AFFECT THE BUSINESS.
We recently acquired and plan to develop new software products
designed to facilitate communication and commerce over the internet. This
software is in a development stage and will require continued expenditures of
resources to complete the development effort. These products will involve a new
approach to the conduct of online business and, as a result, intensive marketing
and sales efforts may be necessary to educate prospective customers regarding
the uses and benefits of our products. Delays or lack of success in developing
and releasing enhanced or new products or in market acceptance of the new
technology could adversely affect our revenues.
INTENSE COMPETITION FOR INTERNET PRODUCTS AND SERVICES MAY ADVERSELY AFFECT OUR
REVENUES AND PROFITS.
The market for internet professional services and products is
relatively new, intensely competitive and subject to rapid technological change.
There is competition on two distinct levels: (i) from in-house development
efforts by potential customers, and (ii) third party competitors. Many of our
current and potential competitors have longer operating histories, established
name recognition, longer relationships with clients and significantly greater
financial, technical, marketing and public relations resources. If we are not
able to successfully compete in this internet market, our revenues or our
profits on those revenues could be reduced. Such lower revenues or profits could
negatively affect our common stock price.
THE COMPANY
We are presently engaged in the business of providing
software-reengineering services. These services include (i) the correction and
validation of existing mainframe computer software systems' ability to manage
the Year 2000 problem and (ii) software conversion services. In October 1998, we
also announced a new strategic direction, establishing an Internet services
business providing management consulting, design, development and communication
solutions. Through this new strategic direction, we plan to assist organizations
in transforming their existing mainframe computer systems to support Internet,
Intranet and Extranet applications. Our executive offices are located at 4064
Colony Road, Charlotte, North Carolina 28211. Our telephone number at that
address is (704) 365-2324.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares offered by
the selling stockholder.
SELLING STOCKHOLDER
On June 1, 1999, we borrowed from the selling stockholder $1,000,000,
payable on July 1, 1999 with a 10% per anum interest rate. In addition, we
issued the selling stockholder 50,000 shares of our common stock in connection
with the loan and an additional 50,000 shares for waiver of a payment in advance
of the due date under the Promissory Note. The selling stockholder holds no
shares of our common stock other than those offered pursuant to this prospectus.
The following table sets forth the aggregate number of shares of common
stock held by the selling stockholder and offered by the selling stockholder
hereunder and the percentage of all shares of common stock held by the selling
stockholder after giving effect to the offering (based on 19,393,809 shares of
common stock outstanding as of July 21, 1999). Other than the ownership of our
securities, the selling stockholder has had no material relationship with us
within the past three years.
<TABLE>
<CAPTION>
- ------------------------ ----------------------- --------------------- -------------------
Percent of
Number of Shares Outstanding Common
Name of Selling Beneficially Owned Number of Shares Stock Owned After
Stockholder Before Offering Offered Offering (1)
- ------------------------ ----------------------- --------------------- -------------------
<S> <C> <C> <C>
Rodney R. Schoemann, Sr. 100,000 (2) 100,000
- ------------------------ ----------------------- --------------------- -------------------
</TABLE>
- ------------------------
1. Because the selling stockholder may offer all or some of the common
stock pursuant to the offering contemplated by this prospectus, no
estimate can be given as to the amount of shares of common stock that
will be held by the selling stockholder after completion of this
offering. See "Plan of Distribution."
2. Includes 100,000 shares of common stock issued in connection with the
Promissory Note granted to the selling stockholder.
PLAN OF DISTRIBUTION
The selling stockholder has advised us that the common stock may be
sold or distributed from time to time by the selling stockholder, directly to
one or more purchasers (including pledgees) or through brokers, dealers or
underwriters who may act solely as agents or may acquire common stock as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices, at negotiated prices, or at fixed prices,
which may be changed. The common stock may be sold by one or more of the
following distribution methods: (i) ordinary brokers' transactions, which may
include long or short sales; (ii) transactions involving cross or block trades,
or otherwise on the Nasdaq National Market; (iii) purchases by brokers, dealers
or underwriters as principal and resale by such purchasers for their own
accounts pursuant to this prospectus; (iv) "at the market" to or through market
makers or into an existing market for the common stock; (v) in other ways not
involving market makers or established trading markets, including direct sales
to
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purchasers or sales effected through agents; (vi) through transactions in
options, swaps or other derivatives (whether exchange-listed or otherwise);
(vii) pursuant to Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"); or (viii) any combination of the foregoing, or by any other
legally available means. In addition, the selling stockholder may enter into
hedging transactions with broker-dealers who may engage in short sales of common
stock in the course of hedging the positions they assume with the selling
stockholder. The selling stockholder may also enter into option or other
transactions with broker-dealers that require the delivery by such
broker-dealers of the common stock, which common stock may be resold thereafter
pursuant to this prospectus. In connection with any sales, the selling
stockholder and any brokers or dealers participating in such sales may be deemed
to be underwriters within the meaning of the Securities Act. We will receive no
part of the proceeds of sales made hereunder.
Any broker-dealer participating in such transactions as agent may
receive commissions from the selling stockholder and/or purchasers of the shares
offered hereby (and, if it acts as agent for the purchaser of such shares, from
such purchaser). Usual and customary brokerage fees will be paid by the selling
stockholder. Broker-dealers may agree with the selling stockholder to sell a
specified number of shares at a stipulated price per share, and, to the extent
such a broker-dealer is unable to do so acting as agent for the selling
stockholder, to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer commitment to the selling stockholder. Broker-dealers
who acquire shares as principal may thereafter resell such shares from time to
time in transactions (which may involve cross and block transactions and which
may involve sales to and through other broker-dealers, including transactions of
the nature described above) in the over-the-counter market, in negotiated
transactions or otherwise at market prices prevailing at the time of sale or at
negotiated prices, and in connection with such resales may pay to or receive
from the purchasers of such shares commissions computed as described above.
We have advised the selling stockholder that Regulation M promulgated
under the Exchange Act may apply to our sales in the market, have furnished the
selling stockholder with a copy of this regulation and have informed it of the
need for delivery of copies of this prospectus. The selling stockholder may
indemnify any broker-dealer that participates in transactions involving the sale
of the shares against certain liabilities, including liabilities arising under
the Securities Act. Any commissions paid or any discounts or concessions allowed
to any such broker-dealers, and any profits received on the resale of such
shares, may be deemed to be underwriting discounts and commissions under the
Securities Act if any such broker-dealers purchase shares as principal. We have
agreed to indemnify the selling stockholder against certain liabilities,
including liabilities under the Securities Act.
Any shares of common stock which qualify for sale pursuant to Rule 144
under the Securities Act may be sold under that Rule rather than pursuant to
this prospectus.
There can be no assurance that the selling stockholder will sell any or
all of the shares of common stock offered by them hereunder.
10
<PAGE> 14
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, 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 of 1933 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 our 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 of 1933 and will be governed by the final adjudication of such
issue.
LEGAL MATTERS
The validity of the common stock offered pursuant to this prospectus
will be passed upon for us by McGuire, Woods, Battle & Boothe LLP, Charlotte,
North Carolina.
EXPERTS
The financial statements appearing in our Annual Report (Form 10-K) for
the year ended December 31, 1998, have been audited by Holtz Rubenstein & Co.,
LLP, independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
We have authorized no one to give any information or to make any
representations that are not contained in this prospectus. You should rely only
on the information incorporated by reference or provided in this prospectus. You
must not rely on any unauthorized information.
This prospectus does not offer to sell or buy any shares in any
jurisdiction where it is unlawful. You should not assume that the information in
this prospectus is accurate as of any date other than the date on the front of
this document.
11
<PAGE> 15
-----------------
TABLE OF CONTENTS
-----------------
Page
----
Where You Can Find More Information....................................... 1
Risk Factors.............................................................. 2
The Company............................................................... 8
Use of Proceeds........................................................... 9
Selling Stockholder....................................................... 9
Plan of Distribution...................................................... 9
Indemnification........................................................... 11
Legal Matters............................................................. 11
Experts................................................................... 11
12
<PAGE> 16
SHARES
[INFORMATION ARCHITECTS
CORPORATION]
COMMON STOCK
--------------
PROSPECTUS
--------------
AUGUST , 1999
<PAGE> 17
INFORMATION ARCHITECTS CORPORATION
REGISTRATION STATEMENT ON FORM S-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item
Number
- ------
Item 14 Other Expenses of Issuance and Distribution.
The following table sets forth costs and expenses of the sale and
distribution of the securities being registered. All amounts except Securities
and Exchange Commission fees are estimates.
Registration Statement--Securities and Exchange Commission.. $ 67.00
Accounting fees............................................. $
Legal fees ................................................. $
Miscellaneous............................................... $
Total....................................................... $
Item 15 Indemnification of Directors and Officers.
Reference is made to the North Carolina Business Corporation Act, G.S.
55-8-52 and 55-8-56, which provides that unless limited by our articles of
incorporation, a North Carolina corporation must indemnify a director or officer
who has been wholly successful, on the merits or otherwise, in the defense of
any actual or threatened proceeding to which he was, or was threatened to be
made, a party because he is or was a director or officer of the corporation.
This statutory right of indemnification covers all reasonable expenses incurred
by the officer or director in connection with the proceeding, including counsel
fees.
A North Carolina corporation can eliminate an individual's statutory
right to indemnification. However, the Registrant's Bylaws provide that
directors and officers shall have the right to be indemnified "to the fullest
permitted by law" and further provide that expenses incurred by an officer or
director shall be paid in advance of the final disposition of any investigation,
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Registrant.
In addition, a North Carolina corporation may, but is not required to,
indemnify a director or officer against liability who has been named or
threatened to be named a party to a proceeding because he is or was acting in
that capacity if the officer or director (i) conducted himself in good faith,
(ii) had the reasonable belief that his conduct was in the corporation's best
interests if he was acting in his official capacity, or if not acting in an
official capacity, a reasonable belief that his conduct was not opposed to the
corporation's best interests, and (iii) in the case of a criminal proceeding,
had no reasonable cause to believe his conduct was unlawful. A North Carolina
corporation may also purchase and maintain insurance on behalf of an officer or
II-1
<PAGE> 18
director against liability incurred by him in that capacity, whether or not the
corporation would have the power to indemnify him under the statutory provisions
of North Carolina.
Item 16 Exhibits.
Exhibit
Number
------
5.1* Opinion of McGuire, Woods, Battle & Boothe LLP.
23.1* Consent of Holtz Rubenstein & Co., LLP, independent auditors.
23.2* Consent of McGuire, Woods, Battle & Boothe LLP (included in
Exhibit 5.1).
24.1 Power of Attorney (included in signature page).
------------
* To be filed by amendment.
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:
(a) to include any prospectus required by Section 10(a)(3) of
the Securities Act;
(b) to reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most recent
post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b), if in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(c) to include any material information with respect to the
plan of distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement;
provided, however, that the undertakings set forth in paragraphs (a) and (b)
above shall not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") that are incorporated by reference in
this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
II-2
<PAGE> 19
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.
(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 of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 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.
For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective. For the purpose of
determining any liability under the Securities Act of 1933, 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.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Information Architects Corporation, a corporation organized and
existing under the laws of the State of North Carolina, certifies that it has
reasonable cause to believe that it meets all of the requirements for filing on
Form S-3 and has duly caused this Registration Statement to be signed on our
behalf by the undersigned, thereunto duly authorized, in the City of Charlotte,
State of North Carolina, on the 17th day of August, 1999.
II-3
<PAGE> 20
INFORMATION ARCHITECTS CORPORATION
By: /s/ ROBERT F. GRUDER
-------------------------------------
Robert F. Gruder
Chief Executive Officer and Chairman
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
hereby appoints Robert F. Gruder as such person's true and lawful attorney, with
full power to him to sign, for such person and in such person's name and
capacity indicated below, any and all amendments to this registration statement,
hereby ratifying and confirming such person's signature as it may be signed by
said attorney to any and all amendments.
SIGNATURE TITLE DATE
- -------------------------- -------------------------- ---------------
/s/ ROBERT F. GRUDER Chief Executive Officer August 17, 1999
- ------------------------ and Chairman of the Board
(Robert F. Gruder) (Principal Executive Officer)
/s/ FRANK G. MILLIGAN President and Director August 17, 1999
- ------------------------
(Frank G. Milligan)
/s/ J. WAYNE THOMAS Chief Financial Officer August 17, 1999
- ------------------------ (Principal Financial and
(J. Wayne Thomas) Accounting Officer)
/s/ THOMAS J. DUDCHIK Senior Vice President and August 17, 1999
- ------------------------ Director
(Thomas J. Dudchik)
/s/ RICHARD J. BLUMBERG Director August 17, 1999
- ------------------------
(Richard J. Blumberg)
/s/ JAMES H. MCLAUGHLIN Director August 17, 1999
- ------------------------
(James H. McLaughlin)
II-4
<PAGE> 21
INDEX TO EXHIBITS
Exhibit
Number
- ------
5.1* Opinion of McGuire, Woods, Battle & Boothe LLP.
23.1* Consent of Holtz Rubenstein & Co., LLP, independent auditors.
23.2* Consent of McGuire, Woods, Battle & Boothe LLP (included in Exhibit
5.1).
24.1 Power of Attorney (included in signature page).
------------
* To be filed by amendment.
