AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 14, 1998
REGISTRATION NO. 333-16451
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
SAC TECHNOLOGIES, INC.
(Name of Small Business Issuer in its Charter)
MINNESOTA 3577 41-1741861
(State or other jurisdiction (Primary standard industrial (I.R.S. Employer
of incorporation) classification code number) Identification
Number)
4444 WEST 76TH STREET, SUITE 600, EDINA, MINNESOTA 55435
(612) 835-7080
(Address and Telephone Number of Principal Executive Offices)
-----------------------
BARRY M. WENDT, CHIEF EXECUTIVE OFFICER
SAC TECHNOLOGIES, INC., 4444 WEST 76TH STREET, SUITE 600, EDINA, MINNESOTA 55435
TELEPHONE: (612) 835-7080 TELEFAX: (612) 835-6620
(Name, Address, and Telephone Number of Agent for Service)
-----------------------
Copies to:
STEPHEN E. SMITH, ESQ.
DANIEL R. TENENBAUM, ESQ.
SANDRA SCHREUR JONES, ESQ.
DOHERTY, RUMBLE & BUTLER PROFESSIONAL ASSOCIATION
3500 FIFTH STREET TOWERS, 150 SOUTH FIFTH STREET
MINNEAPOLIS, MINNESOTA 55402
TELEPHONE: (612) 340-5555 TELEFAX: (612) 340-5584
-----------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: From time to time
after the effective date of this Registration Statement as determined by market
conditions and other factors.
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 being
offered on a delayed or continuous basis, pursuant to Rule 415 under the
Securities Act of 1933, check the following: |X|
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. |_|
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Proposed Proposed
maximum maximum
Title of securities Amount to be offering price aggregate Amount of
to be registered registered per share(2) offering price(2) registration fee
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 1,455,170 shares(1) $4.84 $7,043,022.88 $2,360
($.01 par value)
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) One million four hundred fifty five thousand and eight (1,455,170)
shares underlying warrants, stock options and convertible
debentures. The amount to registered also includes an indeterminate
number of additional shares of Common Stock that may be issuable
upon conversion of the convertible debenture.
(2) Estimated pursuant to Rule 457(c), solely for the purpose of
calculating the registration fee, based on the average of the high
and low sale prices per share of Common Stock, as reported on the
Nasdaq SmallCap Market, on August 12, 1998.
--------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
SUBJECT TO COMPLETION AUGUST 14, 1998
PROSPECTUS
1,455,170 SHARES
SAC TECHNOLOGIES, INC.
COMMON STOCK
------------------------
This Prospectus relates to the resale of up to 1,455,170 shares of
Common Stock, $.01 par value per share (the "COMMON STOCK"), of SAC
Technologies, Inc., a Minnesota corporation (the "COMPANY"), underlying certain
warrants, stock options and convertible debentures issued to certain investors
(the "SELLING SHAREHOLDERS") by the Company. See "Selling Shareholders."
The securities covered by this Prospectus consist of (i) 83,278
shares of the Company's Common Stock issuable upon exercise of a warrant issued
to Tuschner & Company, Inc. as partial compensation for acting as the Company's
agent in the Company's 1996 Private Placement; (ii) 87,062 shares of the
Company's Common Stock issuable upon exercise of a warrant issued to Tuschner &
Company, Inc. as partial compensation for serving as the Company's underwriter
in the Company's initial public offering; (iii) 200,000 shares of the Company's
Common Stock issuable upon exercise of a warrant issued to Tuschner & Company,
Inc. in exchange for Tuschner & Company, Inc.'s agreement to waive its right of
first refusal to sell the securities of the Company; (iv) 18,000 shares of the
Company's Common Stock issuable upon exercise of a nonqualified stock option
issued to Miros, Inc. in conjunction with the Company's strategic alliance
agreement with Miros, Inc.; (v) 916,668 shares of the Company's Common Stock
issuable to the Shaar Fund upon conversion of a currently outstanding 5%
Convertible Debenture of the Company (the "Convertible Debenture") or in payment
of any interest on the Convertible Debenture that the Company may pay in shares
of its stock; (vi) 100,000 shares of the Company's Common Stock issuable upon
exercise of a warrant issued to the Shaar Fund in conjunction with the
Convertible Debenture; (vii) 50,000 shares of the Company's Common Stock
issuable upon exercise of a warrant issued to Corporate Capital Management in
conjunction with the Company's transaction with the Shaar Fund. The warrants
listed in (i) and (ii) above were assigned to a number of individuals in March
and July of 1998. The Convertible Debenture and accrued interest would convert
into 916,668 shares of the Company's Common Stock at a conversion price of $3.00
per share.
The securities covered by this Prospectus may be sold from time to
time by the Selling Shareholders, and such resales may be effected in one or
more transactions that may take place on the NASDAQ SmallCap Market and Boston
Stock Exchange, including ordinary brokers' transactions, privately negotiated
transactions or through sales to one or more dealers for resale of such
securities as principals, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. Usual
and customary or specifically negotiated brokerage fees or commissions may be
paid by the Selling Shareholders.
The Selling Shareholders and intermediaries through whom such
securities are sold may be deemed "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), with respect to the
securities offered hereby, and any profits realized or commissions received may
be deemed underwriting compensation. The Company has agreed to indemnify the
Selling Shareholders against certain liabilities, including liabilities under
the Securities Act.
The Company will not receive any proceeds from the sale of Common
Stock by the Selling Shareholders. The Company would receive an aggregate of
approximately $1,773,177 upon the exercise of all of the warrants and stock
options by Selling Shareholders. See "Use of Proceeds" and "Selling
Shareholders".
The Company's Common Stock is currently traded on the Nasdaq
SmallCap Market ("NASDAQ") under the symbol SACM and the Boston Stock Exchange
under the symbol SAC.
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<PAGE>
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE, INVOLVE A HIGH
DEGREE OF RISK AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE
THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" ON PAGE 6 OF THIS PROSPECTUS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE
RESPECTIVE DATES AS TO WHICH THE INFORMATION HAS BEEN GIVEN HEREIN OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
The date of this Prospectus is August 14, 1998.
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<PAGE>
TABLE OF CONTENTS
PURSUANT TO ITEM 502(f)
ITEM NUMBER IN
FORM S-3 AND TITLE OF ITEM LOCATION IN PROSPECTUS
-------------------------- ----------------------
Item 1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus ......................... 1,2
Item 2. Inside Front and Outside Back Cover
Pages of Prospectus ............................................ 5,22
Item 3. Summary Information and Risk Factors .............................. 6
Item 4. Use of Proceeds................................................... 16
Item 5. Determination of Offering Price ...................... Not applicable
Item 6. Dilution ............................................. Not applicable
Item 7. Selling Security Holders ........................................ 16
Item 8. Plan of Distribution ............................................. 20
Item 9. Description of Securities to Be Registered ........... Not applicable
Item 10 Interests of Named Experts and Counsel ........................... 21
Item 11. Material Changes ..................................... Not applicable
Item 12 Incorporation of Certain Information by
Reference ........................................................ 21
Item 13 Disclosure of Commission Position on
Indemnification for Securities Act Liabilities ................... 22
Item 14 Other Expenses of Issuance and Distribution ...................... 23
Item 15 Indemnification of Directors and Officers ........................ 23
Item 16 Exhibits ......................................................... 24
Item 17 Undertakings...................................................... 25
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and in
accordance therewith files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "COMMISSION"). Such
reports, proxy and information statements and other information filed by the
Company can be inspected and copied at the public reference facilities of the
Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC
20549, as well as at the following Regional Offices: 7 World Trade Center, Suite
1300, New York, New York 10048 and Northwestern Atrium Center, Suite 1400, 500
West Madison Street, Chicago, Illinois 60661. Copies can be obtained from the
Commission by mail at prescribed rates. Requests should be directed to the
Commission's Public Reference Section, Room 1024, Judiciary Plaza, 450 Fifth
Street N.W., Washington, DC 20549. The Commission also maintains a web site
(http:/www.sec.gov) that contains reports, proxy and information statements and
other information regarding the Company.
The Company has filed with the Commission a Registration Statement
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), with
respect to the shares of Common Stock offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement and the
exhibits thereto. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement and
to the exhibits filed therewith. Statements contained in this Prospectus as to
the contents of any contract or other document referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement. The
Registration Statement, together with the exhibits thereto, may be inspected
without charge at the offices of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street N.W., Washington, D.C. 20549, and copies of all or any part of
the Registration Statement may be obtained from the Public Reference Section of
the Commission, Washington, D.C. 20549, upon the payment of the fees prescribed
by the Commission, and may be viewed at or printed from the Commission's
website.
The Company will provide, without charge to each person, including
any beneficial owner, to whom a prospectus is delivered, upon written or oral
request of such person, a copy of any and all information that has been
incorporated by reference (other than exhibits to such documents which are not
specifically incorporated by reference in such documents). Requests for such
documents should be addressed to Ronald A. Burgmeier, Vice President of Finance,
4620 S. Valley View Boulevard, Suite A1, Las Vegas, Nevada 89103, telephone
number (702) 798-9777.
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<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION. INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET
FORTH UNDER THE CAPTION "RISK FACTORS."
COMPANY ADDRESS AND TELEPHONE NUMBER
The Company's principal office is located at 4444 West 76th Street,
Suite 600, Edina, Minnesota 55435. Its telephone number is (612) 835-7080.
THE OFFERING
Common Stock offered by the Company.......................... None
Common Stock offered by Selling Shareholders................. 1,455,170 shares*
Trading Symbols for Common Stock
Nasdaq SmallCap Market....................................... SACM
Boston Stock Exchange........................................ SAC
*The amount to registered also includes an indeterminate number of additional
shares of Common Stock that may be issuable upon conversion of the convertible
debenture.
RISK FACTORS
An investment in the shares of Common Stock offered hereby is highly
speculative, involves a high degree of risk and should only be purchased by
persons who can afford to lose their entire investment. See "Risk Factors" for a
discussion of risk factors that should be considered in connection with an
investment in the shares of Common Stock offered hereby.
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<PAGE>
RISK FACTORS
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE HIGHLY SPECULATIVE AND
INVOLVE A HIGH DEGREE OF RISK AND, ACCORDINGLY, THEY ARE NOT AN APPROPRIATE
INVESTMENT FOR PERSONS WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
PROSPECTIVE INVESTORS SHOULD BE AWARE OF THE FOLLOWING RISK FACTORS AND SHOULD
REVIEW CAREFULLY THE FINANCIAL AND OTHER INFORMATION PROVIDED BY THE COMPANY.
THIS PROSPECTUS, INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN, CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE STATEMENTS CONTAINED IN THIS PROSPECTUS OR INCORPORATED BY
REFERENCE HEREIN THAT ARE NOT PURELY HISTORICAL ARE FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE
EXCHANGE ACT, INCLUDING WITHOUT LIMITATION STATEMENTS REGARDING THE COMPANY'S
EXPECTATIONS, BELIEFS, INTENTIONS OR STRATEGIES REGARDING THE FUTURE. ALL
FORWARD-LOOKING STATEMENTS INCLUDED IN THIS DOCUMENT OR INCORPORATED BY
REFERENCE HEREIN ARE BASED ON INFORMATION AVAILABLE TO THE COMPANY ON THE DATE
HEREOF, AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING
STATEMENTS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THOSE SET FORTH IN "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
DEVELOPMENT STAGE COMPANY, LIMITED OPERATING HISTORY AND OPERATING
LOSSES. The Company is a development stage enterprise, formed in 1993, which has
yet to generate any significant revenues or profits and, since inception through
June 30, 1998, has had accumulated losses of $6,638,863 and negative cash flow
from operations of $5,971,489. In addition, the Company has never successfully
marketed a product and its officers have limited experience in the operation and
development of a business like the Company's. The Company anticipates net losses
will continue for the foreseeable future. There can be no assurance that the
Company will ever be able to generate significant revenues or operate
successfully.
TECHNOLOGY. The success of the Company, among many other factors,
will depend upon the success of the Company's technology which has been utilized
to complete the development of its initial automated fingerprint identification
products including SACMan (a developer toolkit), SACcat and SAC_Remote. The
biometric solution and optic technology are owned by the Company, subject to an
exclusive worldwide license which has been granted to Jasper Consulting, Inc.
("Jasper") to use and sell products incorporating the Company's technology and
Jasper's FIDS technology in certain markets. Accordingly, the Company does not
exclusively own all of the technology incorporated into its products, including
SACcat(TM) and SAC_Remote(TM). The Company has had ongoing discussions with
Jasper regarding the possible recharacterization of the Company's relationship
with Jasper. There can be no assurance of how these conversations will conclude
or that the Company won't lose a portion of the technology currently necessary
for the manufacturing of its products or that the Company won't continue to be
required to pay Jasper royalties which could prohibit the Company's products
from being profitable. While the Company has developed its own vector segment
algorithms with print classification code and is presently utilizing this code
exclusively, there can be
7
<PAGE>
no assurance that such software will ultimately serve as an adequate substitute
for the FIDS technology in the Company's products.
INTELLECTUAL PROPERTY PROTECTION. The Company has applied for a
patent directed to the optic technology and biometric solution; however, none of
the mentioned technologies are patented by the Company. There can be no
assurances given that any patents will ever issue, or that, if issued, the
Company would have the resources to protect any such issued patent. The Company
believes that its technology described does not infringe upon patents held by
others, but the Company cannot give any assurances that such infringements do
not exist. The Company currently has two patents pending, one for fingerprint
imaging which was filed by the Company, and one for FIDS Technology which was
filed by Jasper.
PRODUCT DEFECTS. New products or enhancements, when first released
by the Company, may contain undetected design faults and software errors, or
"bugs" that, despite testing by the Company, are discovered only after a product
has been installed and used by customers. There can be no assurance that faults
or errors in the Company's existing products or in new products introduced by
the Company will not be discovered in the future, causing delays in product
introductions and shipments or requiring design modifications that could
adversely affect the Company's competitive position and results of operations.
In addition, there can be no assurance that new products or product enhancements
developed by the Company will achieve market acceptance or, if successful, will
not adversely impact sales of the Company's existing products. On occasion, the
Company has discovered minor design defects in its products that have caused
delays in the introduction of products. To date, however, the Company has not
experienced any significant problems in this regard and has not recalled
products as a result of a product defect.
LIMITED SALES AND MARKETING; MARKET ACCEPTANCE. The Company has
recently begun marketing its products, including SACMan (a developer's toolkit),
SACcat and SAC_Remote, principally through agreements with distributors, VAR's,
ISO's and system integrators whereby others are responsible for sales of the
Company's products, and has yet to make any significant sales of such products.
The Company's employees have limited experience in marketing such products and
no effective distribution channel has been developed. While the Company has
plans for developing a significant marketing and sales effort, along with
accessing various distribution channels, there is no significant internal sales
force within the Company and there can be no assurance that the Company will be
successful in attracting and retaining qualified marketing and sales expertise.
The Company's future success will depend, among other factors, upon the extent
to which consumers in the new markets acquire, adopt, and continue to use the
Company's products as well as the extent to which distributors, VAR's, ISO's and
system integrators are able to effectively market products on behalf of the
Company. There can be no assurance that the Company's products will gain wide
acceptance in these markets or that any of the Company's current sales and
marketing activities and strategies will prove effective.
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NO EXPERIENCE IN RETAIL MARKET. While the Company is not currently
distributing its products through available retail sales channels, it may
ultimately attempt to enter such markets. However, the Company anticipates
entering into strategic alliances or using private label distributorships to
penetrate the retail market. The Company has no prior experience in the retail
marketplace and any such sales would be subject to customary risks related
thereto including, without limitation, product returns, price protection,
inability to control promotional credit fluctuations, inability to effectively
establish retail penetration, and other customary retail risks. Given its lack
of retail experience, there can be no assurance that the Company would be able
to effectively manage these risks.
CHANGES IN TECHNOLOGY. The access control market is subject to rapid
technological change and intense competition. There can be no assurance that the
Company will be able to keep pace with this change. The Company's products could
become subject to technological obsolescence and there can be no assurance that
the Company will be able to adapt to rapidly changing technology. If the Company
is unable for technological or other reasons to develop products on a timely
basis in response to technological changes, or if the Company's products or
product enhancements do not achieve market acceptance, the Company's business
would be materially and adversely affected.
DEPENDENCE ON SUCCESS OF STRATEGIC ALLIANCES. During the fourth
quarter of 1997 and the first quarter of 1998, the Company entered into various
strategic alliances which are designed to allow the Company to integrate voice
and facial recognition, encryption, desktop configuration, security and video
conferencing capabilities for utilization with its core product. The success in
integrating these technologies and the integrated products and applications will
not only depend on the Company's efforts and technologies but also the efforts
and technologies of others. No assurance can be made that the companies
providing these technologies will remain in business and continue to provide
technological support to the Company, that these technologies will be
incorporated in a manner acceptable to potential customers, that the integration
will be timely implemented, that the cost of the end products will be acceptable
to the marketplace, that the end products will be priced such that they will be
profitable to the Company or that the Company will have the resources to
complete these efforts. In addition, no assurance can be given that the
technologies will effectively compete with new or existing technologies in all
of these markets or that superior technologies will not be developed which would
obsolete an integrated component or components of the Company's anticipated
layered biometric solution. By integrating other companies' technologies into
the Company's products, the Company may also expose itself to intellectual
property infringement claims because the Company is not in control of all of the
technology in its products. The actual timing of the integration of these
technologies will be subject to a variety of factors including without
limitation, technology and development issues as well as developing an effective
marketing approach. The Company has entered into a letter of intent with ImEdge
Technologies, Inc. If the Company executes an agreement with ImEdge
Technologies, Inc., the nature of the optic component of the Company's
technology may change as the Company would attempt to integrate holographic
technology into its technology and products. The Company anticipates that the
integration of holographic technology would reduce the size and cost of
production of its products. No assurance can be given that the Company will
execute an agreement with ImEdge Technologies, Inc. or that the Company will be
able to successfully integrate ImEdge Technologies, Inc.'s holographic
technology into the Company's technology and products.
NEED FOR ADDITIONAL FUNDS. The Company expects that it may need to
raise substantial additional capital to fund the ongoing development and
expansion of its business, including its research, development, marketing and
sales efforts, and to attain profitability. There is no assurance that any
additional funds needed will be available to the Company on favorable terms, or
at all. Although based on assumptions that the Company considers reasonable,
there is also no assurance that the Company's estimate of its anticipated
liquidity needs is accurate or that new business
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developments or other unforeseen events will not occur, resulting in the need to
raise additional funds. In addition, it is probable that raising additional
funds would result in a substantial additional dilution and reduction in
returns, if any, to investors.
COMPETITION. The Company is engaged in a rapidly evolving field. In
addition to existing commonplace methods of restricting access to facilities
such as pass cards, personal identification numbers, password access, and locks
and keys, there are numerous companies involved in the development, manufacture,
and marketing of fingerprint biometric products to government, law enforcement,
prison, and consumer markets. Competition from other companies is intense and
expected to increase. Some of these companies include Computer Research Labs,
Digital Biometric, Inc., PRINTRAK International, Indenticator, Indentix,
Fingermatrix, Inc., Mytec Technologies, Inc., the National Registry, Sandia
Labs, Fujitsu, Biometric Identification, Inc., Ultrascan, Inc., I/O Software,
Mission Data Systems and Hi-Key Technologies. Many of the Company's competitors
have substantially greater resources, research and development staffs, sales and
marketing staffs, and facilities than does the Company. In addition, the
integration of the Company's products with those of its strategic partners will
likely subject the integrated products to competition with a variety of other
competitors in varying industries. Many of these competitors have substantially
greater resources and experience in marketing biometric products. Other recently
developed technologies are, or may in the future be, the basis of competitive
products. There can be no assurance that the Company's competitors will not
develop technologies and products that are more effective than those being
developed by the Company or that would render the Company's technology and
products obsolete or noncompetitive.
PRODUCT LIABILITY; INSURANCE. The Company faces an inherent business
risk of exposure to product liability claims in the event that the use of its
products are alleged to have resulted in injuries or losses related to their
manufacture and use. Although the Company hopes to employ provisions limiting
liability in contractual relationships with customers, there can be no assurance
that the Company will be able to effectively avoid significant liability
exposure. The Company does not own any product liability insurance. The Company
may attempt to obtain insurance to minimize the impact of any potential product
liability; however, there can be no assurance that the Company will be able to
obtain such insurance on acceptable terms, or at all. Consequently, a product
liability claim or recall or other claims with respect to any uninsured
liabilities could have a material adverse effect on the business or financial
condition of the Company.
ABSENCE OF DIVIDENDS. The Company has never declared or paid a cash
dividend on its common stock. The Company intends to retain earnings, if any,
for use in the operation and expansion of its business and, therefore, does not
anticipate paying any cash dividends in the foreseeable future, including on the
Shares offered hereby.
DEPENDENCE ON KEY PERSONNEL. The Company's operations are materially
dependent upon the services of Barry M. Wendt, the Chief Executive Officer of
the Company and the co-inventor of SACMan(TM) and its underlying components,
Richard T. Fiskum, the President of the Company and the co-inventor of the
optics technology, Gary E. Wendt, the Chief Financial Officer of the Company,
10
<PAGE>
and Benedict A. Wittig, Director of Systems Software and co-inventor of
SACMan(TM) and the Biometric Solution. The loss of the services of any of these
individuals would materially and adversely affect the Company's business. The
Company has agreements with these individuals prohibiting competition with the
Company for a period of three years if the Company terminates an individual's
employment for "cause" (as defined in the agreements), and a period of two years
if an individual voluntarily terminates employment. There can be no assurance
that the Company will retain these individuals, or that it will successfully
attract and retain additional or replacement personnel with the requisite
experience and capabilities to enable the Company to profitably and effectively
evaluate, develop, and market the Company's product line. The Company holds key
man insurance policies each in the amount of $500,000 on Barry M. Wendt, the
Chief Executive Officer, Richard T. Fiskum, President, and Benedict A. Wittig,
Director of Systems Software and Secretary. No assurance can be given that the
amount of the key man insurance policies is adequate.
MANAGEMENT OF EXPECTED GROWTH. The Company hopes to significantly
expand its business. Such anticipated expansion will likely place further
demands on the Company's existing management and operations. The Company's
future growth and profitability will depend, in part, on its ability to
successfully manage a growing sales force and implement management and operating
systems which react efficiently and timely to short and long-term trends or
changes in its business. There can be no assurance that the Company will be able
to effectively manage the anticipated expansion of its business.
CONTROL BY EXISTING MANAGEMENT. The Company's directors and officers
will continue to own, after this offering, a significant amount of the Company's
outstanding capital stock and may be able to control the Company's business and
affairs, including electing directors, appointing officers and determining
officers' compensation.
LIMITATIONS OF LIABILITY. The Company's Articles of Incorporation
provide, as permitted by Minnesota law, that a director of the Company shall not
be personally liable to its shareholders for monetary damages for breach of his
or her fiduciary duty of care as a director, with certain exceptions. In
addition, the Company's bylaws provide for mandatory indemnification of
directors and officers to the fullest extent permitted by Minnesota law.
VOLATILITY OF STOCK PRICE. The trading price of the Common Stock has
from time to time fluctuated widely and in the future may be subject to similar
fluctuations in response to quarter-to- quarter variations in the Company's
operating results, announcements of innovations or new products by the Company
or its competitors, general conditions in the biometric and access control
industries and other events or factors. The Company only has one market maker,
Tuschner & Company, Inc., in its Common Stock. No assurance can be given that
Tuschner & Company, Inc. has or will have the financial capability to stabilize
or continue to support the Company's Common Stock. In addition, in recent years
broad stock market indices, in general, and the securities of technology
companies, in particular, have experienced substantial price fluctuations. Such
broad market fluctuations may adversely affect the future trading price of the
Common Stock.
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POSSIBLE DILUTIVE EFFECT OF OUTSTANDING OPTIONS, WARRANTS AND
CONVERTIBLE DEBENTURES. As of August 1, 1998, there were 1,087,382 shares of
Common Stock reserved for issuance upon exercise of stock options and warrants
that have been granted or issued. Additional shares of the Company's Common
Stock are reserved for issuance upon the exercise of options available for
future grant under the Company's 1996 Stock Option Plan. The Company issued the
Shaar Fund a 5% Convertible Debenture in the amount of $2,500,000 on June 30,
1998. Pursuant to its agreements with the Shaar Fund, the Company may issue the
Shaar Fund a 5% Convertible Debenture in the amount of $1,000,000 in the future.
The terms of the Convertible Debenture are such that if the price of the
Company's Common Stock decreases dramatically the number of shares issuable to
the Shaar Fund upon conversion would increase thereby further diluting the
Company's Common Stock. The Convertible Debenture and accrued interest would
convert into 916,668 shares of the Company's Common Stock at a conversion price
of $3.00 per share. Most of the shares underlying the stock options, warrants
and convertible debentures have been registered or are being registered hereby.
Upon exercise of the stock options or warrants or upon conversion of the
convertible debentures, a significant number of freely tradeable shares of
Common Stock could enter into the public marketplace. The issuance of the freely
tradeable shares underlying the stock options, warrants and convertible
debentures would have a dilutive effect on the Company's shareholders as well as
a commensurate negative impact on the price of the Company's Common Stock.
QUOTATION BY NASDAQ AND THE BOSTON STOCK EXCHANGE; APPLICABILITY OF
"PENNY STOCK RULES;" POSSIBLE IMPACT ON LIQUIDITY OF STOCK. The Common Stock is
traded on Nasdaq and the Boston Stock Exchange. There can be no assurance that
such listings will be maintained. To maintain its listing on Nasdaq, the Company
must, in addition to other requirements, have total assets of at least $2
million or a market capitalization of at least $35 million or net income of at
least $500,000, a minimum bid price of at least $1.00 and a market value for its
publicly held shares of at least $1,000,000. To maintain its listing on the
Boston Stock Exchange, the Company must, in addition to other requirements, have
total assets of at least $1 million and a market value for its publicly held
shares of at least $500,000. If the Company fails to satisfy the Nasdaq or
Boston Stock Exchange requirements to maintain listing on Nasdaq or the Boston
Stock Exchange in the future, the Common Stock will likely be quoted only on the
Nasdaq OTC Bulletin Board. In the event of delisting of the Common Stock, the
public trading market for the Common Stock could be adversely affected. If the
Common Stock is subsequently delisted for failure to meet the Nasdaq or Boston
Stock Exchange maintenance requirements, the Common Stock would be subject to
the rules promulgated under the Securities Exchange Act of 1934 relating to
"penny stocks." These rules require brokers who sell securities subject to such
rules to persons other than established customers and "institutional accredited
investors" to complete certain documentation, make suitability inquiries of
investors and provide investors with certain information concerning the risks of
trading in the security. These rules may restrict the ability of brokers to sell
the Common Stock and may affect the ability of purchasers in this offering to
sell their Shares in the secondary market.
MANUFACTURE OF PRODUCTS. The Company intends to have other companies
manufacture its products in the future rather than producing its own products.
The Company has not entered into
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<PAGE>
any agreement to have another company manufacture the Company's products. The
Company is also exploring having its products manufactured by overseas
manufacturers in order to attempt to lower production costs. Possible overseas
manufacturing, if attempted, could lead to risks associated therewith,
including, without limitation, foreign currency and economic fluctuations and
import/export related restrictions. No assurance can be given that the Company
will be able to enter into a manufacturing agreement on terms favorable to the
Company, or that having another company manufacture the Company's products would
reduce the Company's cost of manufacturing. In addition, no assurance can be
given that the company manufacturing the Company's products will do so in a
timely manner or in a manner consistent with quality standards of the Company
and its customers.
YEAR 2000. The Company is currently working to minimize the
potential impact of the year 2000 on the processing of date-sensitive
information by the Company's computerized information systems. The year 2000
problem is the result of computer programs being written using two digits
(rather than four) to define the applicable year, which could result in
miscalculation or system failures. All of the Company's products are believed to
be Year 2000 compliant. Any software used by the Company for internal operations
that is not Year 2000 compliant is expected to be exchanged for Year 2000
compliant software prior to the occurrence of any internal problems. Based on
preliminary information, costs of addressing potential problems are currently
not expected to have a material adverse impact on the Company's financial
position, results of operations or cash flows in future periods. However, if the
Company, its customers, strategic partners or vendors are unable to resolve any
processing issues in a timely manner, it could result in material financial risk
to the Company. Accordingly, the Company plans to devote the necessary resources
to resolve all potential significant year 2000 issues in a timely manner.
Specifically, the Company has also contacted its customers, strategic partners
and suppliers to identify any Year 2000 problems which might impact the Company.
The Company has only received a response from one of its strategic partners,
Pinnacle Technology, Inc., which stated that it believed that its products are
Year 2000 compliant.
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<PAGE>
THE COMPANY
Incorporated in 1993, the Company develops and markets fingerprint
identification products for use in general commercial and consumer applications.
The Company's goal has been to develop automated fingerprint identification
products which are portable, easily integrated with existing applications, and
affordable for mass commercialization. The Company's more significant current
and anticipated product offerings incorporate FIDS Technology, a biometric
technology developed by the Company for Jasper Consulting, Inc. ("Jasper"), with
other technologies developed by the Company, along with the integration of
technology developed by recently identified strategic partners. The Company has
a world-wide license agreement with Jasper for use of the FIDS Technology in all
access control markets. Jasper has the right to exploit FIDS technology in all
other markets including specifically financial services, law enforcement,
national identification systems and personal identification systems for
government and some medical patient identification applications.
The Company's underlying technology consists of (i) the Optic
Technology, which captures the image of a fingerprint; (ii) hardware and
software which translates and standardizes the image of the fingerprint for
computer analysis ("Biometric Solution"); and (iii) a license to the FIDS
Technology, which is software which classifies the fingerprint. Utilizing these
technologies, the Company has continued the development of its initial automated
fingerprint identification products. Its products, SACMan(TM) (a developer
toolkit), SACcat(TM), and SAC_Remote(TM) are principally targeted to control
access to information resources and facilities, such that only individuals
comprising an approved fingerprint database are allowed access.
The Company's current plan is to develop and market products which
address industry- specific security applications. The Company has developed some
limited manufacturing and product assembly capability and is contracting for
outside manufacturing and assembly of its products, as needed. The Company's
SACMan is a developer toolkit (DTK) for a biometrics database application
generator. The DTK includes all required hardware and software components to
evaluate the integration of the Company's biometric technology into an original
equipment manufacture ("OEM") or system integrator application.
The Company's SACcat product is a biometrics information access
control solution that provides for workstation log-on, screen saver, and
security at one single location or across several networked workstations. SACcat
creates a computer model code (Bio-Key (TM)) of a fingerprint to identify a live
scan of a fingerprint without the use of a key, password card or token. The
SACcat product is intended for the information security marketplace and
currently supports a Windows N/T environment, Windows 95 and a Novel
environment. The SACcat product also runs on a unix environment for
identification purposes.
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<PAGE>
The Company's SAC_Remote product is a personal computer ("PC")
programmable finger print identification product package in a stand-alone
central processing unit. The SAC_Remote is designed to interface with a wide
range of OEM product applications such as: facility access, gate control, time
and attendance, vending/kiosk applications, ATM/credit card transactions, and
point-of-sale terminals.
As currently produced, the Company's products use a camera to take a
visual image of an approximately one-half inch by one-half inch area of a
fingerprint. The image is produced at an effective resolution of approximately
1,000 dots per inch (DPI). The products then make several passes on the image to
optimize and clarify it. Subsequently the products identify distinguishing
characteristics of a fingerprint. These distinguishing characteristics are
mapped by the Company's technology such that the product can verify whether the
characteristics match those of a previously mapped fingerprint. The Company has
entered into a letter of intent with ImEdge Technologies, Inc. If the Company
executes an agreement with ImEdge Technologies, Inc., the nature of the optic
component of the Company's technology may change as the Company would attempt to
integrate holographic technology into its technology and products. The Company
anticipates that the integration of holographic technology would reduce the size
and cost of production of its products. No assurance can be given that the
Company will execute an agreement with ImEdge Technologies, Inc. or that the
Company will be able to successfully integrate ImEdge Technologies, Inc.'s
holographic technology into the Company's technology and products.
Each SACMan product scans and analyzes a fingerprint in
approximately three seconds and generates an identification code which can be
used to identify the owner of the print from an online database located on an
attached personal computer. The SACMan can verify the identity of a computer
user desiring access and can be used to allow or disallow the user from
accessing a computer, computer network, or specific application. The Company
currently plans to make this product available in desk-top and wall-mount
enclosures created for cost-effective uses in existing mass marketplaces.
The Company believes that its products will have a broad range of
possible applications relating to high technology security solutions. The
potential applications for secure access control include the following:
i. General access control - Every doorway presently utilizing any form
of controlled access represents a possible sale opportunity for the
Company. Secure access control was estimated by Security Management
Magazine (January 1996) to be a $1.4 billion market in the United
States during 1997.
ii Information resource and network access control - Every existing
computer network and stand-alone computer system represents an
opportunity for use of the Company's technology, which the Company
believes could provide a cost-effective method for securing
information resources.
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<PAGE>
During the past year, the Company has entered into strategic
alliance agreements with various biometric and security control companies
including Miros, Inc., Keyware Technologies, Certicom Corporation, Pinnacle
Technology, Inc., and Baraka IntraCom, Inc. The Company has also entered into a
letter of intent to enter into a strategic alliance agreement with ImEdge
Technology, Inc. The Company's goal is to integrate the technologies of its
strategic partners into the Company's technology and products. No assurance can
be given that the companies providing these technologies will remain in business
and continue to provide technical support to the Company, that these
technologies will be incorporated in a manner acceptable to potential customers,
that the integration will be timely implemented, that the cost of the end
products will be acceptable to the marketplace, that the end products will be
priced such that they will be profitable to the Company or that Company will
have the resources to complete these efforts. In addition, no assurance can be
given that the technologies will effectively compete with new or existing
technologies in all of these markets or that superior technologies will not be
developed which would obsolete an integrated component or components of the
Company's anticipated layered biometric solution.
The Company is currently working to minimize the potential impact of
the year 2000 on the processing of date-sensitive information by the Company's
computerized information systems. The year 2000 problem is the result of
computer programs being written using two digits (rather than four) to define
the applicable year, which could result in miscalculation or system failures.
All of the Company's products are believed to be Year 2000 compliant. Any
software used by the Company for internal operations that is not Year 2000
compliant is expected to be exchanged for Year 2000 compliant software prior to
the occurrence of any internal problems. Based on preliminary information, costs
of addressing potential problems are currently not expected to have a material
adverse impact on the Company's financial position, results of operations or
cash flows in future periods. However, if the Company, its customers, strategic
partners or vendors are unable to resolve any processing issues in a timely
manner, it could result in material financial risk to the Company. Accordingly,
the Company plans to devote the necessary resources to resolve all potential
significant year 2000 issues in a timely manner. Specifically, the Company has
also contacted its customers, strategic partners and suppliers to identify any
Year 2000 problems which might impact the Company. The Company has only received
a response from of its strategic partners, Pinnacle Technology, Inc., which
stated that it believed that its products are Year 2000 compliant.
USE OF PROCEEDS
The Company will receive no proceeds from the sale of the Common
Stock offered hereby. The Company will receive at most an aggregate of
approximately $1,773,177 upon the exercise of all of the warrants and stock
options by Selling Shareholders.
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to
each Selling Shareholder for whom the Company is registering Shares of Common
Stock (underlying warrants, stock options and convertible debentures issued to
the Selling Shareholders) for resale to the public. The securities covered by
this Prospectus consist of (i) 83,278 shares of the Company's Common Stock
issuable upon exercise of a warrant issued to Tuschner & Company, Inc. as
partial compensation for acting as the Company's agent in the Company's 1996
Private Placement; (ii) 87,224 shares of the Company's Common Stock issuable
upon exercise of a warrant issued to Tuschner & Company, Inc. as partial
compensation for serving as the Company's underwriter in the Company's initial
public offering; (iii) 200,000 shares of the Company's Common Stock issuable
upon exercise of a warrant
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<PAGE>
issued to Tuschner & Company, Inc. in exchange for Tuschner & Company, Inc.'s
agreement to waive its right of first refusal to sell the securities of the
Company; (iv) 18,000 shares of the Company's Common Stock issuable upon exercise
of a nonqualified stock option issued to Miros, Inc. in conjunction with the
Company's strategic alliance agreement with Miros, Inc.; (v) 916,668 shares of
the Company's Common Stock issuable to the Shaar Fund upon conversion of a
currently outstanding 5% Convertible Debenture of the Company (the "Convertible
Debenture") or in payment of any interest on the Convertible Debenture that the
Company may pay in shares of its stock; (vi) 100,000 shares of the Company's
Common Stock issuable upon exercise of a warrant issued to the Shaar Fund in
conjunction with the Convertible Debenture; (vii) 50,000 shares of the Company's
Common Stock issuable upon exercise of a warrant issued to Corporate Capital
Management in conjunction with the Company's transaction with the Shaar Fund.
The warrants listed in (i) and (ii) above were assigned to a number of
individuals in March and July of 1998. The Convertible Debenture and accrued
interest would convert into 916,668 shares of the Company's Common Stock at a
conversion price of $3.00 per share.
The Company issued warrants to Selling Shareholders to purchase
520,340 shares of the Company's Common Stock at exercise prices ranging from
$3.00 to $7.50 per share. The Company issued options to Miros, Inc. to purchase
48,000 shares of the Company's Common Stock at an exercise price of $6.42 per
share. The Company issued the Shaar Fund a 5% Convertible Debenture in the
amount of $2,500,000 due on June 30, 2001. The conversion price is the lesser of
$7.15 per share or the market price of the Company's Common Stock multiplied by
a discount ranging between 85% and 78% of the market price of the Company's
Common Stock during the period of conversion. The amount of the discount depends
upon when the Convertible Debenture is converted into the Company's Common
Stock. The Convertible Debenture may be converted anytime during the period
October 29, 1998 to June 30, 2001. The Company may also issue the Shaar Fund an
additional 5% Convertible Debenture in the amount of $1,000,000.
Except as indicated, no material relationships exist between any of
the Selling Shareholders and the Company nor have any such material
relationships existed within the past three years, except as set forth below.
The sale of the Selling Shareholders' Common Stock may be effected
from time to time in transactions (which may include block transactions by or
for the account of the Selling Shareholders) on the Nasdaq SmallCap Market,
Boston Stock Exchange or in negotiated transactions, a combination of such
methods of sale or otherwise. Sales may be made at fixed prices which may be
changed, at market prices prevailing at the time of sale, or at negotiated
prices.
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<PAGE>
<TABLE>
<CAPTION>
Names of Amount Before Amount Percentage After
Security Holders Offering Amount Offered After Offering Offering
---------------- -------- -------------- -------------- --------
(1) (2) (2)
<S> <C> <C> <C> <C>
The Shaar Fund 1,021,668(6) 1,016,668 5,000 *
Corporate Capital 50,000(7) 50,000 0 *
Management L.L.C.
Miros, Inc.(3) 48,000(3) 18,000 30,000 *
John Anderson 921(8) 921 0 *
Francis Dahlberg(4) 2,819(8) 2,819 0 *
Rick Geislinger 4,385(8) 2,885 1,500 *
Joseph A. Geraci II 2,753(8) 2,753 0 *
Don M. Hedlund 1,120(8) 1,120 0 *
Kerry Hiben(5) 1,566(8) 1,566 0 *
Sam Johnson 2,844(8) 2,844 0 *
W. Larry Keene 1,310(8) 1,310 0 *
Darrel Kluge(5) 38,343(8) 38,743 0 *
Eric J. Overvig(5) 14,793(8) 8,293 6,500 *
John E. Penshorn 979(8) 979 0 *
Dennis B. Reiter(4) 719(8) 719 0 *
Patrick Schrantz 162(8) 162 0 *
Estate of Jerome H. 9,915(8) 9,915 0 *
Shapiro (5)
V. Chad Smolik 1,155(8) 1,155 0 *
Tuschner & 289,575(8)(9) 289,575 (9) (9)
Company, Inc. (4)
John Tuschner (4) 921(8) 921 0 *
Ron Webster 1,662(8) 1,662 0 *
Jerry Wolinski 2,160(8) 2,160 0 *
TOTAL.................... 1,498,170 1,455,170 43,000 *
</TABLE>
- --------------------------
* Less than one percent.
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<PAGE>
(1) Includes shares of Common Stock issuable upon exercise of warrants
and options and conversion of convertible debentures all of which
are exercisable or convertible within 90 days from the date hereof.
(2) Assumes that the Selling Shareholders will dispose of all shares
owned or issuable of them that are being registered for sale by this
Prospectus.
(3) The Company entered into a Strategic Alliance, Bundling &
Authorization to Replace Agreement for the Integration of SAC
Technologies Fingerprint Technology and Miros Trueface Software
Products with Miros, Inc. on February 13, 1998. As part of that
agreement, the Company granted Miros, Inc. a nonqualified stock
option to purchase 48,000 shares of Common Stock with an exercise
price $6.42 per share. Eighteen thousand (18,000) shares underlying
the nonqualified stock option are currently vested.
(4) Tuschner & Company, Inc. served as the selling agent for the Company
in its 1996 Private Placement and underwriter for the Company in its
initial public offering effective February 14, 1997. Francis
Dahlberg, Dennis B. Reiter and John Tuschner are all officers or
owners of Tuschner & Company, Inc.
(5) Kerry Hiben, Darrel Kluge, Eric J. Overvig and the Estate of Jerome
H. Shapiro are all officers, directors or owners of Aultimate
Technology Marketing, Inc. ("ATM") which entered into a Purchase,
Supply and Distributor Agreement with the Company on March 13, 1998.
As part of that agreement, the Company granted to ATM a nonqualified
stock option to purchase 100,000 shares of Common Stock with an
exercise price of $8.46 per share.
(6) The Company issued the Shaar Fund a 5% Convertible Debenture in the
amount of $2,500,000 due on June 30, 2001. The conversion price is
the lesser of $7.15 per share or the market price of the Company's
Common Stock multiplied by a discount ranging between 85% and 78% of
the market price of the Company's Common Stock on during the period
of conversion. The amount of the discount depends upon when the
Convertible Debenture is converted into the Company's Common Stock.
The Convertible Debenture may be converted anytime during the period
October 29, 1998 to June 30, 2001. The Company may also issue the
Shaar Fund an additional 5% Convertible Debenture in the amount of
$1,000,000. At a conversion rate of $3.00 per share, the Convertible
Debenture and accrued interest would convert into 916,668 shares of
the Company's Common Stock. The Company also issued the Shaar Fund a
warrant to purchase 100,000 shares of the Company's Common Stock at
a exercise price of $6.725 per share.
(7) Corporate Capital Management acted as an agent for the transaction
with the Shaar Fund. As compensation for serving as its agent, the
Company issued Corporate Capital Management a warrant to purchase
50,000 shares of the Company's Common Stock. The warrant has an
exercise price of $6.725 per share.
(8) Tuschner & Company, Inc. was issued a warrant to purchase 83,278
shares of the Company's Common Stock at an exercise price of $3.00
per share as partial compensation for acting as the Company's agent
in the Company's 1996 Private Placement. Tuschner & Company, Inc.
was also issued a warrant to purchase 88,938 shares of the Company's
Common Stock at an exercise price of $3.60 per share as partial
compensation for serving as the Company's underwriter in the
Company's initial public offering. During March and July 1998,
Tuschner
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<PAGE>
& Company, Inc. assigned warrants to purchase 82,641 shares of the
Company's Common Stock to some of the other Selling Shareholders.
The Company also issued Tuschner & Company, Inc. a warrant to
purchase 200,000 shares of the Company's Common Stock at an exercise
price of $7.50 per share in exchange for Tuschner & Company, Inc.'s
agreement to waive its right of first refusal to sell the securities
of the Company.
(9) Tuschner & Company, Inc. is the only market maker in the Company's
Common Stock. In its role as market maker, Tuschner & Company, Inc.
holds a different number of shares of the Company's Common Stock at
different times.
Selling Shareholders may effect such transactions by selling their
Common Stock directly to purchasers, through broker-dealers acting as agents for
the Selling Shareholders or to broker-dealers who may purchase Common Stock as
principals and thereafter sell the Common Stock from time to time in the
over-the-counter market in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders and/or the purchasers
for whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer may
exceed customary commissions).
The Selling Shareholders and broker-dealers, if any, acting in
connection with such sales might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any commission received by
them any profit on the resale of the Common Stock might be deemed to be
underwriting discounts and commissions under the Securities Act.
PLAN OF DISTRIBUTION
The shares offered by the Selling Shareholders may be sold from time
to time by the Selling Shareholders, or by pledgees, donees, transferees or
other successors in interest of the Selling Shareholders, at their sole
discretion. Such sales may be made in the Nasdaq SmallCap Market, Boston Stock
Exchange or otherwise at prices and at terms then prevailing or at prices
related to the then current market price, or in negotiated transactions. The
shares of Common Stock offered by the Selling Shareholders are not being
underwritten except as described below. The Company will not receive any
proceeds from the sale of any Common Stock by the Selling Shareholders.
In general, the shares may be sold by one or more of the following
means: (a) a block trade in which the broker or dealer so engaged will attempt
to sell the securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction; (b) purchases by a broker or
dealer as principal and resale by such broker or dealer for its account pursuant
to this Prospectus; (c) an exchange distribution in accordance with the rules of
such exchange (if the securities are then listed on an exchange); and (d)
ordinary brokerage transactions and transaction in which the broker solicits
purchasers. In effecting sales, brokers or dealers engaged by the Selling
Shareholders may arrange for other brokers or dealers to participate. Brokers or
dealers will receive commissions or
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<PAGE>
discounts from the Selling Shareholders in amounts to be negotiated immediately
prior to the sale. Such brokers or dealers and any other participating brokers
or dealers may be deemed "underwriters" within the meaning of the Securities Act
of 1933, as amended, in connection with such sales. In addition, any securities
covered by this Prospectus which qualify for sale pursuant to Rule 144 may be
sold under Rule 144 rather than pursuant to this Prospectus.
INTERESTS OF NAMED EXPERTS AND COUNSEL
The financial statements contained in the Company's Annual Report on
Form 10-KSB for year ended December 31, 1997 and incorporated by reference into
this Prospectus have been audited by Divine, Scherzer & Brody, Ltd., independent
certified public accountants, to the extent and for the periods set forth in
their report thereon. These financial statements are included in reliance upon
such reports given upon the authority of such firms as experts in accounting and
auditing. The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Doherty, Rumble & Butler Professional
Association, Minneapolis, Minnesota. Neither Divine, Scherzer & Brody, Ltd. nor
Doherty Rumble & Butler Professional Association has or will receive a direct or
indirect interest in the Company.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by SAC
Technologies, Inc. (the "Company") are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997.
(b) The Company's Quarterly Reports on Form 10-QSB for the periods
ended March 31, 1998, and June 30, 1998.
(c) The Company's Current Report on Form 8-K dated July 7, 1998.
(d) The description of the Company's securities contained in the
Company's Registration Statement under Section 12 of the Exchange Act, and any
and all amendments and reports filed for the purpose of updating such
description.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14, and 15(d) of the Exchange Act, subsequent to the date of this
Prospectus and prior to the termination of the offering of the Shares hereby
offered shall be deemed to be incorporated by reference into this Prospectus and
to be a part of this Prospectus from the date of filing such documents. Any
statement contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
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<PAGE>
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
The Minnesota Business Corporation Act provides that Officers and
Directors of the Company have the right to indemnification by the Company for
liability arising out of certain actions. Such indemnification may be available
for liabilities arising in connection with the offering. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the Company, pursuant to
such indemnification provisions, the Company has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy, as expressed in the Act and is, therefore, unenforceable.
The Company has adopted, in its Articles of Incorporation, a
provision which limits personal liability for breach of the fiduciary duty of
its Directors, to the extent provided by Section 302A of the Minnesota Business
Corporation Act. Such provision eliminates the personal liability of directors,
for damages occasioned by breach of fiduciary duty, except based on the
director's duty of loyalty to the Company, liability for acts or omissions not
made in good faith, liability for acts or omissions involving intentional
misconduct, liability based on payments of improper dividends, liability based
on violations of state securities laws, and liability for acts occurring prior
to the date such provision was added.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses of the offering, which are to be borne by the Company,
are estimated as follows:
Securities and Exchange Commission registration fee $ 2,360
NASD registration fee 7,500
Legal services 30,000
Accounting services 7,500
Blue Sky fees and expenses 0
Transfer Agent Fees 0
Printing 1,500
Miscellaneous 0
Total $48,860
All of the above expenses except the registration fee are estimated.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 302A.521, Minnesota Statutes, the Company is required
to indemnify its directors, officers, employees and agents against liability
under certain circumstances, including liability under the Securities Act of
1933, as amended (the "Act"). Article XI of the Company's Articles of
Incorporation contains substantially similar provisions. The general effect of
such provisions is to relieve the directors and officers of the Company from
personal liability which may be imposed for certain acts performed in their
capacity as directors or officers of the Company, except where such persons have
not acted in good faith.
As permitted under Minnesota Statutes, the Articles of Incorporation
of the Company provide that directors shall have no personal liability to the
Company or to its shareholders for monetary damages arising from breach of the
director's duty of care in the affairs of the Company. Minnesota Statutes do not
permit elimination of liability for breach of a director's duty of loyalty to
the Company or with respect to certain enumerated matters, including payment of
illegal dividends, acts not in good faith, and acts resulting in an improper
personal benefit to the director.
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<PAGE>
EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1* Amended and Restated Articles of Incorporation of Small
Business Issuer
4.1* Specimen of Common Stock Certificate
5.1 Opinion re: legality
24.1 Consent of Independent Certified Public Accountants
24.2 Consent of Legal Counsel (included in Exhibit 5.1)
25.1 Power of Attorney (included in the signature page to the
Registration Statement)
*Previously filed as an exhibit to the Company's Registration Statement on Form
SB-2, filed February 14, 1997 (File No. 333-16451).
24
<PAGE>
UNDERTAKINGS
(a) Rule 415 Offering.
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:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the Registration or any material change
to such information in the Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in the post-effective
amendment by those paragraphs is contained in periodic reports filed by
the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in
the 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 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.
25
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing Form S-3 and has authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Minneapolis, State of Minnesota, on August 14, 1998.
SAC TECHNOLOGIES, INC.
REGISTRANT
By /s/ Barry M. Wendt
------------------------------------
Name: Barry M. Wendt
Title: Chief Executive Officer
By /s/ Gary E. Wendt
------------------------------------
Name: Gary E. Wendt
Title: Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Barry M. Wendt and Gary E. Wendt, each or
either of them, his true and lawful attorney-in-fact and agents, with full power
of substitution and resubstitution for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and to file the same with all
exhibits thereto, and other documents in connection therewith with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his substitutes, may lawfully do or cause to be done by
virtue thereof.
26
<PAGE>
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement has been signed below on August 14, 1998, by the
following persons in the capacities indicated:
Name Title
---- -----
* Chairman of the Board, Chief
- ------------------------- Executive Officer, Director (PRINCIPAL
Barry M. Wendt EXECUTIVE OFFICER)
* Chief Financial Officer (PRINCIPAL
- ------------------------- FINANCIAL AND ACCOUNTING OFFICER)
Gary E. Wendt
* Director
- -------------------------
Richard A. Fiskum
* Director
- -------------------------
Benedict A. Wittig
* Director
- -------------------------
Thomas J. Schrade
* Director
- -------------------------
Lars T. Carlson
*By /s/ Barry M. Wendt
------------------------------------
Barry M. Wendt, as Attorney-in-Fact
27
EXHIBIT 5.1 OPINION RE: LEGALITY
(612) 343-5627
August 14, 1998
SAC Technologies, Inc.
4444 West 76th Street
Suite 600
Edina, Minnesota 55435
RE: REGISTRATION STATEMENT ON FORM S-3
Dear Ladies and Gentlemen:
We have acted as legal counsel on behalf of SAC Technologies, Inc., a
Minnesota corporation (the "Company"), in connection with a Registration
Statement on Form S-3, File No. 333-16451, (the "Registration Statement") filed
by the Company with the Securities and Exchange Commission relating to (i)
83,278 shares of the Company's Common Stock issuable upon exercise of a warrant
issued to Tuschner & Company, Inc. as partial compensation for acting as the
Company's agent in the Company's 1996 Private Placement; (ii) 87,062 shares of
the Company's Common Stock issuable upon exercise of a warrant issued to
Tuschner & Company, Inc. as partial compensation for serving as the Company's
underwriter in the Company's initial public offering; (iii) 200,000 shares of
the Company's Common Stock issuable upon exercise of a warrant issued to
Tuschner & Company, Inc. in exchange for Tuschner & Company, Inc.'s agreement to
waive its right of first refusal to sell the securities of the Company; (iv)
18,000 shares of the Company's Common Stock issuable upon exercise of a
nonqualified stock option issued to Miros, Inc. in conjunction with the
Company's strategic alliance agreement with Miros, Inc.; (v) 916,668 shares of
the Company's Common Stock issuable to the Shaar Fund, Ltd. ("Shaar") upon
conversion of a currently outstanding 5% Convertible Debenture of the Company
(the "Convertible Debenture") or in payment of any interest on the Convertible
Debenture that the Company may pay in shares of its stock; (vi) 100,000 shares
of the Company's Common Stock issuable upon exercise of a warrant issued to
Shaar in conjunction with the Convertible Debenture; (vii) 50,000 shares of the
Company's Common Stock issuable upon exercise of a warrant issued to Corporate
Capital Management in conjunction with the Company's transaction with Shaar, all
of which are to be issued by the Company (the "Shares"). The warrants listed in
(i) and (ii) above were assigned to a number of individuals in March and July of
1998. The Convertible Debenture and accrued interest would convert into 916,668
shares of the Company's Common Stock at a conversion price of $3.00 per share.
Upon examination of such corporate documents and records as we have
deemed necessary or advisable for the purposes hereof and including and in
reliance upon certain certificates by the Company, it is our opinion that:
1. The Company is validly existing corporation in good standing
under the laws of the State of Minnesota.
<PAGE>
SAC Technologies, Inc.
August 14, 1998
Page 2
2. The Shares when issued and sold as contemplated in the
Registration Statement, will be validly issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
DOHERTY RUMBLE & BUTLER
PROFESSIONAL ASSOCIATION
/s/ Daniel R. Tenenbaum
Daniel R. Tenenbaum
EXHIBIT 24.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 13, 1998 accompanying the financial
statements of SAC Technologies, Inc. included in the Annual Report on Form
10-KSB for the year ended December 31, 1997, which is incorporated by reference
in this Registration Statement. We consent to the incorporation by reference in
this Registration Statement of the aforementioned report.
/s/ Divine, Scherzer & Brody, Ltd.
Minneapolis, Minnesota
August 14, 1998
