As filed with the Securities and Exchange Commission on May 8, 1998
SEC File No.333-42477
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------------------------
NEOMEDIA TECHNOLOGIES, INC.
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(Name of Small Business Issuer as specified in its charter)
DELAWARE 36-3680347
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2201 SECOND STREET
SUITE 600
FORT MYERS, FLORIDA 33901
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(Address of Principal Executive Offices)
FILING AMENDED EXHIBIT 23.2 AND NEW EXHIBITS 23.3 AND 99.1
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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23.2 Consent of Coopers and Lybrand L.L.P.
23.3 Consent of KPMG Peat Marwick LLP
99.1 Reoffer Prospectus
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration statement of
NeoMedia Technologies, Inc.(the "Company") on Form S-8 (File No. 333-42477) of
our report dated October 24, 1997, on our audit of the consolidated financial
statements of NeoMedia Technologies, Inc. and subsidiaries as of December 31,
1996, and for the year then ended. We also consent to the references to our firm
under the heading "Experts".
/s/ COOPERS & LYBRAND L.L.P.
Chicago, Illinois
May 8, 1998
EXHIBIT 23.3
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
NeoMedia Technologies, Inc.:
We consent to the use of our report incorporated by reference herein and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG PEAT MARWICK LLP
Miami, Florida
May 7, 1998
REOFFER PROSPECTUS
NEOMEDIA TECHNOLOGIES, INC.
Up to 547,087 Shares of Common Stock, Par Value $.01 Per Share
This Prospectus relates to the public offering and resale of up to 547,087
shares of common stock, $.01 par value ("Common Stock") of NeoMedia
Technologies, Inc., a Delaware corporation (the "Company") issuable to
recipients of options to purchase Common Stock ( the "Options") granted under
the Company's First Amendment and Restatement of 1996 Stock Option Plan (the
"Plan"), which are to be offered for the account of such recipients
(collectively, the "Selling Stockholders"). All of the 547,087 shares of Common
Stock covered by this Prospectus are issuable upon the exercise of the Options.
The shares of Common Stock issuable upon the exercise of the Options are being
registered so that, if and when such Options are exercised, the shares of Common
Stock received upon the exercise may be offered and resold to the public by the
Selling Stockholder owning such shares. While the Company will not receive any
of the proceeds from the resale of the Common Stock by any Selling Stockholder
offered hereby, the Company will receive approximately $1,160,000 from the
payment of the exercise prices of the Options if all are exercised. See "Use of
Proceeds". There is no assurance, however, that any of the Options will be
exercised. All costs and expenses of registration and qualifying these shares
under federal and state securities laws are being borne by the Company, although
all commissions, selling and other expenses incurred in connection with the
resale of shares by a Selling Stockholder will be borne by such Selling
Stockholder. See "Selling Stockholders" and "Plan of Distribution".
The Company's Common Stock is currently traded in The Nasdaq SmallCap Stock
Market ("Nasdaq") under the symbol "NEOM." On May 7, 1998, the closing price of
the Common Stock on Nasdaq was $8.78125 per share.
It is anticipated that the Common Stock may be offered for sale by one or more
of the Selling Stockholders, in their discretion, on a delayed or continuous
basis from time to time in transactions in the open market at prices prevailing
at the time of sale or in negotiated transactions. See "Plan of Distribution".
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY IS SPECULATIVE, INVOLVES A HIGH
DEGREE OF RISK AND SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE
LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is May 8, 1998.
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[INSIDE FRONT COVER]
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder and, in accordance therewith, files annual and quarterly reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed with the Commission may be inspected and copied at the public
reference facilities maintained by the Commission, Room 1024, 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549, and at the offices of the
Commission's New York Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048 and the Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of these
materials may be obtained from the Public Reference Section of the Commission,
Room 1024, 450 Fifth Street N.W., Washington, D.C. 20549 at prescribed rates. In
addition, the Commission maintains a Web site on the Internet that contains
reports, proxy and information statements and other information regarding
registrants, such as the Company, that file such reports, statements and
information electronically with the Commission. The Commission's Web site
address is http://www.sec.gov.
This Prospectus constitutes a part of a Registration Statement on Form S-8
which the Company has filed with the Commission pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), relating to the shares of the
Company's Common Stock offered hereby (referred to herein, together with
amendments and exhibits, as the "Registration Statement"). This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and the
Common Stock offered hereby, reference is hereby made to the Registration
Statement. Statements made or incorporated by reference in this Prospectus as to
the contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
such exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
Copies of the Registration Statement and the exhibits may be inspected, without
charge, at the offices of the Commission, or obtained at prescribed rates from
the Public Reference Section of the Commission at the address set forth above.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY JURISDICTION TO OR
FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION
IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
THIS PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE)ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST
DIRECTED TO NEOMEDIA TECHNOLOGIES, INC., 2201 SECOND STREET, SUITE 600, FORT
MYERS, FLORIDA 33901, ATTENTION: INVESTOR RELATIONS; TELEPHONE NUMBER
941-337-3434.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The information in the following documents filed by the Company with the
Commission are incorporated in this Prospectus by this reference:
(a) The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997;
(b) The Company's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1998;
(c) The Current Reports of the Company on Form 8-K dated February
9, 1998, March 27, 1998 and April 27, 1998; and
(d) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and any
amendment or report filed for the purpose of updating such description.
All reports and other documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the filing of a post-effective amendment to the
Registration Statement that indicates that all of the shares of Common Stock
offered hereby have been sold or that deregisters all shares of Common Stock
then remaining unsold shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the respective dates of filing such
reports and other documents. Any statement or information contained herein or in
any report or document, all or a portion of which is incorporated or deemed to
be 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 subsequently filed report or document which also is
or is deemed to be incorporated by reference 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.
FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference herein may be
deemed to constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance, or achievements of the Company
to be materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such risks,
uncertainties and factors include, without limitation, risks associated with the
expansion of the Company's business and the management of growth, dependence on
key personnel, growth by acquisitions, changing economic conditions, rapidly
changing technology and the competitive environment of the industry in which the
Company transacts business, and other risks, uncertainties and factors described
from time to time in the Company's reports filed with the Commission. Such
risks, uncertainties and factors also include, without limitation, those
described herein under the heading "Risk Factors."
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THE COMPANY
THE FOLLOWING IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. EACH PROSPECTIVE INVESTOR IS
URGED TO CAREFULLY READ THIS PROSPECTUS IN ITS ENTIRETY, INCLUDING BUT NOT
LIMITED TO THE RISK FACTORS.
The Company provides computer software and consulting services:
/BULLET/ through its Intelligent Document/TM/ Solutions Unit ("IDOCs/TM/")
to embed active data elements in standard printed documents or on
physical objects for the purpose of launching computer programs
and creating automated links to the World Wide Web;
/BULLET/ through its Document Systems Solutions Unit to assist clients in
optimizing the creation, production and management of printed
documents and printed document processes; and
/BULLET/ through its Year 2000 / Migration Solutions Unit to enable and
assist clients to implement mass changes in computer software and
hardware systems, including (i) identifying, seeking and
automatically correcting restrictive source and application fields
which store data, including among other items, dates (adding two
digits to a two-digit date field when four digits are required to
correct the Year 2000 problem), stock prices (converting stock
prices from a fractional to a decimal measurement system) and
European currencies (converting to the new European Monetary Unit
of Measure, commonly known as the "Eurodollar"), and (ii)
conversions from legacy to open systems.
The Company currently offers its services and products through its three
principal business units the Intelligent Document/TM/ Solutions Unit, the
Document Systems Solutions Unit and the Year 2000 / Migration Solutions Unit -
which, although separate in name, often function as a team in providing
solutions for its customers.
As part of the services provided in connection with the solutions it
offers, the Company often recommends, specifies, supplies and installs equipment
and software products from third-party suppliers, many of whom have strategic
alliances with the Company. The Company acts as a re-marketer of equipment and
software products for a number of suppliers, such as IBM Corporation, Sun
Microsystems Computer Company, Xerox Corporation, Symbol Technologies, Inc. and
Oracle Corporation, and, to date, has generated the largest portion of its
revenue from these activities.
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INTELLIGENT DOCUMENT/TM/ ("IDOCS/TM/") SOLUTIONS UNIT
The Company has developed its own technology, and has rights to use the
technology of others, to generate printed documents and enhance physical objects
which can be automatically "read" by machines, such as computers equipped with
scanners and appropriate software. These "machine readable" documents or
physical objects incorporate printed codes which contain thousands of bytes of
information, including computer programs rendering them functionally equivalent
to a computer floppy disk. With this functionality, a user may access additional
information about, assess validity of, or determine authenticity of the document
or object. These codes are referred to in the industry as "high capacity
symbologies" and "multi-dimensional" or "two-dimensional" bar codes.
Two-dimensional bar code technology has been thoroughly designed, developed
and tested during the past decade. The Company believes its technology is broad
and generally innovative enough to be applied to a variety of industries
including information management services, banking and financial services,
health care and pharmaceuticals, government services, publishing, advertising,
gaming, travel and entertainment. To date, a variety of applications have been
commercially introduced in the United States and abroad, including virtually
fraud-proof negotiable instruments ("Secure Documents"), traceable shipping
documents, and public and medical identification cards.
THE COMPANY'S IDOCS/TM/ TECHNOLOGY LINKS THE WORLDS OF PRINT AND ELECTRONIC
MEDIA. Printed documents provide the basis and infrastructure for formal
communication and commerce worldwide. In addition, the generation of printed
documents has increased significantly, not decreased, with the adoption of
electronic data processing systems during the past half century. However, the
improvement in processes to generate printed documents has been a one way street
- -- from electronic media to a printed form. The process to re-convert human
readable text to machine readable form, which is required in all business
operations, has been labor intensive and exceedingly difficult. Therefore,
management believes that, among other applications, the Company's technology can
be used in all businesses to increase operational efficiencies by reducing
manual re-entry of data for business transaction document and record management
purposes. Management believes, therefore, its Intelligent Documents/TM/
technology will provide the industry standard for linking the worlds of print
and electronic media. Furthermore, the Company intends to label any printed
document or physical object incorporating its technology as "IDOCs/TM/ Enabled".
To date, the Intelligent Document/TM/ Solutions Unit has provided only
limited software and consulting services. However, due to the rapidly emerging
era of electronic commerce fostered by the proliferation of the Internet and the
World Wide Web, the Company anticipates that the large number of potential
Intelligent Document/TM/ applications will, in terms of revenue, make this a
fast growing unit of the Company, although to date this has not occurred and no
assurances can be given that this will occur in the future.
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DOCUMENT SYSTEMS SOLUTIONS UNIT
The Document System Solutions Unit assists clients in optimizing their
document creation, production and management processes. These efforts have
historically focused on designing and providing complete, client specific, high
speed and high volume document formatting and printing solutions. Recently,
services of the Document System Solutions Unit have been expanded to include
Integrated Document Factories ("IDF's"), a complete, client specific system
solution for automating, monitoring and managing print-to-mail processes. IDF's
incorporate manufacturing principles and IDOCs/TM/ technology, enabling clients
not only to achieve maximum efficiencies in their print processes, but to also
ensure document integrity and traceability.
The Company's customers currently using the Document Systems Solutions
Unit's services and products, include Principal Financial Group, Fidelity
Investments, Discover Card Services, Inc., Charles Schwab & Co., Inc. and the
State of Wisconsin, and they are able to reduce their costs through
efficiencies, by generating on demand customized forms instead of purchasing
expensive pre-printed stock forms, and by enabling implementation of their
printing systems on lower-cost distributed client-server platforms. In addition,
clients in the future may realize significant cost savings from obtaining
postage discounts which may be awarded by the United States Postal Service
("USPS") to businesses that, through use of the Document System Solutions Unit's
services and products, prepare and print mail in USPS specified delivery
sequence.
In providing complete document system solutions and IDF's, the Company
often "partners" with companies such as Xerox Corporation, IBM Corporation,
Dazel Corporation, and I-Data. These arrangements often result (i) in the
"partner" introducing to the Company customers which purchase the Company's and
the partner's services and products, (ii) in the use by the partner of the
Company as a subcontractor, (iii) in the re-marketing by the Company of the
partner's hardware and software products, and (iv) in the sharing of the
responsibility with the partner. Depending upon the product or service involved,
the association with the partner may be on an exclusive basis.
Currently, in connection with the services of the Document Systems
Solutions Unit, the Company is a supplier of proprietary and third-party
software and third-party equipment. The companies represented by the Company in
the re-marketing of software and equipment include Oracle Corporation, IBM
Corporation, Sun Microsystems Computer Company, Xerox Corporation, Symbol
Technologies, Dazel Corporation, Elixir Technologies and I-Data.
YEAR 2000 / MIGRATION SOLUTIONS UNIT
The Year 2000 / Migration Solutions Unit provides proprietary and
third-party software tools to assist clients in (i) identifying and
automatically correcting software with the "Year 2000 problem," and (ii)
converting ("migrating") from closed legacy systems to more cost effective and
functional open systems. In addition, due to the unique, flexible architecture
on which the Year 2000 / Migration Solutions Unit's software tools are built,
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solutions for other mass change problems (such as, but not limited to, the
impending Eurodollar problem and the conversion of stock prices from a
fractional to a decimal measurement system) may be easily developed.
RESOLVING "YEAR 2000" AND OTHER RESTRICTIVE SOURCE AND APPLICATION CODE
PROBLEMS. The "Year 2000 problem" refers to the use of a two-digit date field
primarily found in legacy software programs. For example, "89" represents the
calendar year "1989." Programs using such two-digit year codes will become
invalid on January 1, 2000, as they will read "00" as "1900." As a result,
serious errors will occur in calculations dependent upon dates, such as mortgage
calculations, in particular, and calculations used throughout the financial
industry in general.
The Company sells licenses to proprietary software tools (including
"ADAPT/2000") that unlike many other competitive tools, not only identify
occurrences of the date code problem in software programs, but automatically
correct ("remediate") up to what the Company believes to be potentially 90% of
these occurrences. The Company's ADAPT/2000 tool, unlike other competitive
tools, works across various hardware platforms and remediates legacy programs
written in COBOL and new IBM COBOL ("MLE") computer languages. In addition,
ADAPT/2000 works to convert other restrictive source and application code, such
as fractions to a decimal measurement system and monetary systems such as the
impending European Economic Community's Eurodollar.
MIGRATION SOLUTIONS. Prior to the late 1980's, software and hardware
manufacturers developed business software that would only run on their
proprietary systems in an attempt to "lock in" existing customers. This in turn
resulted in the development of business software which would run only on these
closed proprietary systems. These "closed" systems and applications are referred
to in the industry as "legacy systems." However, in the late 1980's and early
1990's, technological advances resulted in widespread development of software
and hardware in standard computer languages that could be installed in a variety
of systems. Subsequently, these "open" systems have generated price and
performance advantages and greater functionality.
Through the use of the Company's migration tools and services, businesses
desiring to convert from a legacy system may avoid the time and cost of
rewriting applications or the loss of an application's functionality when
transferred directly to an open client-server system. Instead, the Company's
migration tools automatically translate legacy applications from proprietary
source code to code that can be run directly on open systems. This automated
solution provides advantages such as (i) most, if not all, of the functionality
of the original legacy application is maintained, (ii) the conversion entails
less time, resources and disruption risk than the other methods, and (iii) the
conversion provides a base for modernization of the legacy application in the
new open environment.
The Company's "migration and modernization" approach provides one-stop
shopping for clients to migrate existing legacy systems to open platforms and
then modernize these same systems to incorporate current or new technologies. A
variety of modernization paths are
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available to clients upon completing migration. The Company management intends
to use this approach to further the introduction of their IDOCs/TM/ technology.
Dev-Tech Associates, Inc., an Illinois corporation ("Dev-Tech"), the
Company's predecessor, was incorporated in December, 1989. NeoMedia
Technologies, Inc. (the "Company") was incorporated under the laws of the State
of Delaware on July 29, 1996. On August 5, 1996, as the result of a tax-free
merger, the Company acquired all of the shares of Dev-Tech in exchange for the
issuance of shares of the Company's Common Stock to the stockholders of
Dev-Tech. As a result of this merger, the Company is the successor to the
business and operations of Dev-Tech. Immediately prior to the date of the
Company's initial public offering, Dev-Tech Migration, Inc., an Illinois
corporation ("Migration") and an affiliate of Dev-Tech, was merged into NeoMedia
Migration, Inc., a wholly-owned subsidiary of the Company in exchange for the
issuance of shares of the Company's Common Stock to the sole stockholder of
Migration. In November, 1996, the Company completed the initial public offering
(the "Public Offering") of units of its securities. Each unit consisted of one
share of Common Stock and one warrant (the "Public Warrants") to purchase a
share of common stock at $7.375. Joseph Charles & Associates, Inc. was the
representative (the "Representative") of the underwriters in the Public
Offering. In November, 1997, the Company called for the redemption in December,
1997, of all of its then outstanding Public Warrants ("Warrant Redemption"), and
accordingly, as of the date of this Prospectus, there are no Public Warrants
issued and outstanding. Unless otherwise specified, all references herein to the
Company mean and refer to the Company and its wholly-owned subsidiaries,
Migration, NeoMedia Tech, Inc., NeoMedia Technologies Holding Company B.V. (a
Netherlands company), NeoMedia Technologies de Mexico, S.A. de C.V. (a Mexican
company), NeoMedia Migration de Mexico, S.A. de C.V. (a Mexican company),
NeoMedia Technologies do Brasil Ltd. (a Brazilian company), NeoMedia
Technologies UK Limited (a United Kingdom company) and Distribuidora Vallarta
S.A., (a Guatemalan corporation). The Company's executive offices are located at
2201 Second Street, Suite 600, Fort Myers, Florida 33901. Its telephone number
is 941-337-3434.
UNLESS OTHERWISE INDICATED, ALL SHARE AND PER SHARE DATA AND INFORMATION
CONTAINED IN, OR INCORPORATED BY REFERENCE INTO, THIS PROSPECTUS RELATING TO THE
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING (i) DOES NOT INCLUDE 1,292,793
SHARES OF COMMON STOCK RESERVED FOR ISSUANCE UPON EXERCISE OF OPTIONS EITHER
OUTSTANDING OR AVAILABLE FOR GRANT UNDER THE COMPANY'S 1996 STOCK OPTION PLAN
(THE "1996 STOCK OPTION PLAN"), (ii) DOES NOT INCLUDE 8,000,000 SHARES OF COMMON
STOCK RESERVED FOR ISSUANCE UPON EXERCISE OF OPTIONS EITHER OUTSTANDING OR
AVAILABLE FOR GRANT UNDER THE COMPANY'S 1998 STOCK OPTION PLAN (THE "1998 STOCK
OPTION PLAN"), (iii) DOES NOT INCLUDE 170,000 UNITS OF THE COMPANY'S SECURITIES
(EACH CONSISTING OF ONE SHARE OF COMMON STOCK AND ONE WARRANT, AND THE COMMON
STOCK ISSUABLE UPON THE EXERCISE OF SUCH WARRANTS) RESERVED FOR ISSUANCE TO THE
REPRESENTATIVE UPON EXERCISE OF WARRANTS ISSUED TO THE REPRESENTATIVE UPON
CONSUMMATION OF THE PUBLIC OFFERING (THE "REPRESENTATIVE'S OPTIONS"), (vi) DOES
NOT INCLUDE 114,000 SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF A WARRANT
(THE "PRINCIPAL STOCKHOLDER'S WARRANT") ISSUED TO CHARLES W. FRITZ, THE
COMPANY'S PRESIDENT AND CHIEF EXECUTIVE OFFICER, (v) DOES NOT INCLUDE 173,332
SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF A WARRANT TO PURCHASE SHARES OF
COMMON STOCK ISSUED TO COMPASS CAPITAL, INC.
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("COMPASS CAPITAL WARRANT"), (vi) DOES NOT INCLUDE 135,000 SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE OF A WARRANT TO PURCHASE SHARES OF COMMON STOCK
ISSUED TO THORNHILL CAPITAL, L.L.C. ("THORNHILL WARRANT"), (vii) DOES NOT
INCLUDE 300,000 SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF A WARRANT TO
PURCHASE SHARES OF COMMON STOCK ISSUED TO CHARLES W. FRITZ (THE "FRITZ
WARRANT"), (viii) DOES NOT INCLUDE 65,000 SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF A WARRANT TO PURCHASE SHARES OF COMMON STOCK ISSUED TO JOSEPH
CHARLES & ASSOCIATES, INC. ("JOSEPH CHARLES WARRANT"), (ix) DOES NOT INCLUDE
375,000 SHARES OF COMMON STOCK RESERVED FOR ISSUANCE UPON EXERCISE OF A WARRANT
TO PURCHASE SHARES OF COMMON STOCK ISSUED TO DOMINICK & DOMINICK, INCORPORATED
("DOMINICK WARRANT"), AND (x) DOES NOT INCLUDE 100,000 SHARES OF COMMON STOCK
RESERVED FOR ISSUANCE UPON EXERCISE OF A WARRANT TO PURCHASE SHARES OF COMMON
STOCK ISSUED TO SOUTHEAST RESEARCH PARTNERS, INC. ("SOUTHEAST WARRANT").
RISK FACTORS
THE PURCHASE OF THE COMMON STOCK BEING OFFERED HEREBY IS SPECULATIVE AND
INVOLVES A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION. THE PURCHASE OF THE
COMMON STOCK SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD TO SUSTAIN A
TOTAL LOSS OF THEIR INVESTMENT IN THE COMPANY. PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER ALL OF THE INFORMATION CONTAINED IN THIS PROSPECTUS AND, IN
PARTICULAR, THE FOLLOWING FACTORS WHICH COULD MATERIALLY AND ADVERSELY AFFECT
THE OPERATIONS AND PROSPECTS OF THE COMPANY OR AN INVESTMENT THEREIN BEFORE
MAKING A DECISION TO PURCHASE THE COMMON STOCK BEING OFFERED HEREBY. THE
FOLLOWING IS NOT INTENDED AS, AND SHOULD NOT BE CONSIDERED, AN EXHAUSTIVE LIST.
RISK FACTORS RELATING TO THE COMPANY
1. HISTORY OF OPERATING LOSSES AND NEGATIVE OPERATING RESULTS. For the
years ended December 31, 1995, 1996 and 1997 and for the three months ended
March 31, 1998, the Company's results of operations were losses of $1,131,000,
$3,076,000, $5,973,000 and $1,276,000, respectively. No assurances can be given
that this pattern will not continue or that the Company will ever become
profitable. In addition, the Company is developing further a third business
unit, its Intelligent Document Solutions Unit, which will provide services and
products in an emerging technological market in which the Company has little
prior experience. The Company's further development of this new unit could
materially adversely affect the Company's future operating results. See "Risk
Factors Relating to the Company - No Assurance of Success of New Business Unit".
In addition, the Company's quarterly operating results may be subject to
significant fluctuations due to many factors not within the Company's control,
such as the unpredictability of when a customer will order products and
services, the size of a customer's order, the demand for the Company's products
and services, the level of competition and general economic conditions.
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2. NO ASSURANCE OF SUCCESS OF NEW BUSINESS UNIT. Prior to the Public
Offering, the business of the Company was to provide system analysis and
integration services for information processing systems, to migrate applications
from closed proprietary legacy systems to open systems platforms and to serve as
a supplier of third party equipment and software products, as well as
proprietary software products, required to implement solutions. In addition to
continuing to offer these "core" services and products, the Company is
developing a third business unit, its Intelligent Document Solutions Unit, the
function of which is to provide software that employs high capacity symbologies
which allows the user to both embed and extract data and programs from printed
materials or physical objects, as well as link these documents to on-line
sources of information, such as the Internet and the World Wide Web. No
assurances can be given that the Company's Intelligent Document Solutions Unit
will be successful, or that the Company's two other business units, which
provide transition and document systems solutions, will not be materially
adversely affected by the Company focusing its efforts and resources in the
Intelligent Document Solutions Unit. No sales of the products and services to be
provided by this Unit have occurred to date and no assurances can be given that
this Unit will ever achieve profitability. In addition, the technology initially
used by the Intelligent Document Solutions Unit has not been developed by the
Company but by third parties and the Company has been granted rights to its use.
Accordingly, failure to maintain these rights would materially adversely affect
the operations of this Unit.
3. DEPENDENCE ON PRODUCT LINE AND SERVICES; LIMITATION ON FINANCING TO
PURCHASE SOFTWARE AND EQUIPMENT. For the years ended December 31, 1995, 1996 and
1997 and for the three months ended March 31, 1998, the Company derived
approximately 76%, 83%, 79% and 66%, respectively, of its net revenue from
software and equipment resales, especially those related to the open systems
computing environment. Absent diversification of the Company's revenue over
other products and services, loss of this revenue would have a materially
adverse effect on the Company. If the marketplace does not continue to accept
this computing environment, or even if accepted, grows less rapidly than
anticipated, or if the Company fails to offer products and services which
respond to the needs of this market, the Company would be materially and
adversely affected. In addition, the Company, in the future, intends to develop
further new software products and to offer products and services related to high
print capacity symbologies thereby reducing its reliance on one or several
products and services by diversifying. There can be no assurance that the
Company will achieve or sustain significant sales growth in either its
historical sales and products or that applications using high print capacity
symbologies can be successfully developed, or if developed, will gain market
acceptance or successfully compete with the products of others. To the extent
demand for the Company's services and products do not develop, due to
competition, product performance, customer assessment of the Company's resources
and expertise, technological change or other factors, the Company's operations
will be materially adversely affected.
The Company receives short-term financing from a finance company to
purchase computer equipment and software that it re-markets. Historically, the
amount of financing which the Company was able to obtain was limited by its
financial condition and results of operations. No assurances can be given that
in the future increased financing commitments will be available to the Company.
Consequently, the Company's ability to increase its revenue through computer
8
<PAGE>
equipment and software resales may be limited until the Company is able to
increase its financing commitments. No assurances can be given that the Company
will obtain an increased line of credit, or if obtained, that increased resales
or revenue will result.
4. DEPENDENCE ON RELATIONSHIPS. The Company maintains many relationships
with companies whose products and services it offers. Among other things, these
relationships provide the Company with discounts when purchasing the products of
such companies. In addition, these relationships often result in the Company
providing services to or for these companies and their customers. The most
significant of these relationships are with Sun Microsystems Computer Company,
IBM Corporation and Xerox Corporation. The Company believes that its
relationships with Sun, IBM and Xerox have been beneficial, and any termination,
or deterioration, of any one or all of these relationships would have a material
adverse effect on the Company's business, operating results and financial
condition.
5. RELIANCE ON MAJOR CUSTOMER AND SINGLE SUPPLIER. Historically, one or
several of the Company's customers has accounted for a significant percentage of
the Company's revenue. One customer, Ameritech Services, Inc., accounted for
approximately 49%, 38%, 39% and 9% of the Company's revenues for the years ended
December 31, 1995, 1996, 1997 and the three months ended March 31, 1998, and for
approximately 49%, 50%, 47% and 8% of the Company's receivables as of December
31, 1995, 1996 and 1997 and March 31, 1998, respectively. The Company hopes that
this trend of declining sales to Ameritech Services, Inc. as a percentage of
total sales will continue; however, no assurances of this can be given. In
addition, the equipment and software which is re-marketed to this customer is
supplied by a single supplier. Accordingly, the loss of this supplier would
materially adversely affect the Company. The loss of any significant customer,
or further significant reductions by them in buying products and services
offered by the Company, or the inability to collect accounts receivable from
them, absent diversification of the Company's revenue over other customers,
products and services, would materially and adversely affect the Company's
revenue and results of operations.
6. SIGNIFICANT CAPITAL REQUIREMENTS; NEED FOR ADDITIONAL CAPITAL. The
Company's capital requirements have been and will continue to be significant.
Prior to the Public Offering, there was limited equity investment in the
Company. As of December 31, 1997 and March 31, 1998, the Company's accumulated
deficit was $10,499,000 and $11,775,000, respectively, and total stockholders'
equity was $13,126,000 and $11,925,000, respectively. A significant portion of
the proceeds of the Public Offering was used to fund ongoing operations as well
as to implement proposed expansion plans and repay loans. The Company
anticipated that the proceeds to it from the Public Offering, together with
projected cash flow from operations, would be sufficient to fund its operations
during the twelve months following the consummation of the Public Offering.
However, the Company's experience following the Public Offering was that the
proceeds from the Public Offering, together with the cash flow from operations,
were sufficient to fund its operations for approximately nine months. From
September, 1997, through December 18, 1997, the Company received net proceeds of
approximately $12.9 million from the partial exercise of the Principal
Stockholder's Warrant and the Public Warrants, both of which were used to fund
operations. No assurances can be given that additional financing will not be
required by the Company. Any additional equity financing
9
<PAGE>
may involve substantial dilution to the Company's then-existing stockholders.
The Company has no current commitments or arrangements with respect to, or
readily available sources of, additional financing. There can be no assurance
that additional financing will be available to the Company when needed or, if
available, that it can be obtained on commercially reasonable terms. Any
inability to obtain additional financing when needed would have a material
adverse effect on the Company including requiring the Company to curtail the
expansion of its operations and possibly causing the Company to cease its
operations. In addition, the Company's current business plan is highly dependent
upon the realization of revenue from certain migration tools and software,
including Intelligent Documents, in which the Company has made substantial
capital investments. If the Company's substantial capital investments in these
migration tools and software are not recovered through revenue generated from
them, and given the Company's continued reliance on obtaining additional
financing, substantial concerns exist concerning the Company's ability to
achieve its business plan which could result in the Company materially
curtailing, and possibly ceasing, operations. Prospective investors should be
aware that if the Company is not successful in its operations, future
acquisitions or expansion, their entire investment in the Company could become
worthless. Even if the Company is successful in its expansion plans, no
assurances can be given that such expansion or acquisitions will be successful
or that investors will derive a profit from their investment.
7. DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a significant
extent on the continued service of certain key management personnel, in
particular Charles W. Fritz, the Company's President. The loss or interruption
of Mr. Charles Fritz's services, for whatever reason, would have a material
adverse effect on the Company. The loss of services of Robert T. Durst, Jr.,
Executive Vice-President and the Company's Chief Technical Officer, would
materially adversely affect the Company and, in particular, the Company's
operations with respect to its high capacity symbologies operations and the
further development of its Intelligent Document Solutions Unit. In the event of
the loss of services of either Messrs. Fritz or Durst, no assurances can be
given that the Company will be able to obtain the services of adequate
replacement personnel. The Company has entered into five year employment
agreements with both Messrs. Fritz and Durst, which terminate on April 30, 2001
and March 31, 2001, respectively. Under the terms of his employment agreement,
Mr. Fritz may perform services for family owned businesses, other entities and
individuals whether or not affiliated with the Company provided that such
services do not prevent him from attending to the affairs of the Company and he
is not in competition with the Company. The Company currently maintains $2.4
million and $1 million life insurance policies on the lives of Messrs. Fritz and
Durst, respectively. The Company's success also depends in part on its ability
to attract and retain qualified professional, technical, managerial and
marketing personnel. Competition for such personnel in the markets in which the
Company competes is intense, and there can be no assurance the Company will be
successful in attracting and retaining the personnel it requires to conduct its
operations successfully. The Company's results of operations could be materially
adversely affected if the Company were unable to attract, hire, train and manage
these personnel.
8. ABILITY TO MANAGE GROWTH OF THE COMPANY. The introduction of products
and services using high capacity symbologies will require the Company to
continue to expand and grow. In addition, the Company intends to expand and grow
through acquisitions. Accordingly,
10
<PAGE>
the Company could experience a period of significant growth, which could place a
significant strain on the Company's management, infra-structure and other
resources. The Company's ability to manage and sustain growth effectively will
depend, in part, on the ability of its management to manage growth through the
implementation of appropriate management, operational and financial systems and
controls, and successfully to train, motivate and manage its employees. If the
Company's management is unable to manage its growth effectively, the Company's
results of operations could be materially adversely affected. While management
believes it can manage such growth, there can be no assurance that it will be
able to do so.
9. PERSONNEL. The Company's success depends to a significant extent on the
performance of its senior management and certain key employees. In addition, the
Company's growth and expansion (and, in particular, further development of its
Intelligent Document Solutions Unit) is dependent upon hiring and keeping
qualified personnel. Competition for highly skilled employees, including sales,
technical and management personnel, is intense in the computer industry. No
assurances can be given that qualified personnel (including software developers)
can be hired, or if hired, can be retained. The Company's failure to attract
additional qualified employees or to retain the services of key personnel could
materially adversely affect the Company's business.
10. INTENSE COMPETITION. The markets in which the Company competes are highly
competitive and rapidly changing. A number of companies offer products and
services similar to those offered by the Company, and target the same customers
as the Company. The Company's ability to compete depends upon many factors
within and outside its control. Since the Company offers a variety of products
and services, no generalities can be made as to its competitors, all of which
differ depending upon the product or service offered. The Company believes that
it has been able to compete to date primarily through product quality, technical
excellence, customer service and its ability to achieve desired results. The
Company's ability to compete in the future will depend upon many factors,
including the ability to attract new customers and to diversify its customer
base and products and services so as not to be dependent upon any one or several
customers or product or service, to attract and retain qualified management,
sales and technical personnel, to develop new products and services and to
respond quickly and efficiently to new technology. There are many
well-established competitors possessing substantially greater financial,
marketing and technical resources and established, extensive direct and indirect
channels of distribution for their products and services. As a result, they may
be able to respond more quickly to new or emerging technologies and changes in
customer requirements, or to devote greater resources to the development,
promotion and sale of their products and services than the Company. The Company
also anticipates that competition within these markets will increase as a result
of the consolidation of companies. In addition, many of the Company's
competitors have established, or may establish, cooperative relationships among
themselves or with prospective customers. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. There can be no assurance that the Company will be
able to compete successfully against current or future competitors, or that
competitive pressures will not have a material adverse effect on the Company's
business, operating results and financial condition.
11
<PAGE>
11. RAPID TECHNOLOGICAL CHANGE. The markets in which the Company competes
are characterized by rapid technological change, frequent new product and
service introductions, evolving industry standards and changes in customer
demands. The introduction of products and services embodying new technologies
and the emergence of new industry standards can, in a relatively short period of
time, render existing products obsolete and unmarketable. The Company believes
that its success will depend upon its ability continuously to develop new
products and services (and in particular its high capacity symbologies
applications) and to enhance its current products and to introduce them promptly
into the market. There can be no assurance that the Company will be successful
in developing and marketing new product enhancements, new products or services
(and in particular its high capacity symbologies applications) that respond to
technological change or evolving industry standards, that the Company will not
experience difficulties that could delay or prevent the success or development,
introduction and marketing of these products, enhancements and services, or that
any new product, product enhancement and services it may introduce will achieve
market acceptance. Failure to develop and introduce new products, product
enhancements or services, or to gain customer acceptance of such products,
product enhancements or services in a timely fashion could harm the Company's
competitive position and materially adversely affect it.
12. DEPENDENCE ON PROPRIETARY TECHNOLOGY; RISKS OF THIRD PARTY INFRINGEMENT
CLAIMS. The Company presently has patent applications pending with respect to
certain of its proprietary technology; however, no assurances can be given that
any patent for such technology will be granted. Furthermore, if there are other
patents or patents pending by competitors for technology similar to the
Company's, this would materially adversely affect the business of the Company's
Intelligent Document Solutions Unit and the Company's competitive position, and
would materially adversely affect the Company's operating results and financial
condition. The Company currently relies upon copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect its
proprietary technology, all of which afford only limited protection.
Accordingly, there can be no assurance that the Company's measures to protect
its current proprietary rights will be adequate to prevent misappropriation of
such rights or that the Company's competitors will not independently develop or
patent technologies that are substantially equivalent or superior to the
Company's technologies. Additionally, although the Company believes that its
products and technologies do not infringe upon the proprietary rights of any
third parties, there can be no assurance that third parties will not assert
infringement claims against the Company. Similarly, infringement claims could be
asserted against products and technologies which the Company licenses, or has
the rights to use, from third parties. Any such claims, if proved, could
materially and adversely affect the Company's business and results of
operations. In addition, although any such claims may ultimately prove to be
without merit, the necessary management attention to, and legal costs associated
with, litigation or other resolution of such claims could materially and
adversely affect the Company's business and results of operations.
13. INSUFFICIENT PRODUCT LIABILITY OR ERRORS AND OMISSIONS INSURANCE. Many
of the Company's engagements involve projects that are critical to the
operations of its clients' businesses. Any failure in a client's information
system could result in a claim for substantial damages against the Company,
regardless of the Company's responsibility for such failure. The
12
<PAGE>
Company could, therefore, be subject to claims in connection with the products
and services that it sells. There can be no assurance that the Company has
adequately, or at all, contractually limited its liability for such claims or
that such limitations of liability, if any, would be enforceable or would
otherwise protect the Company from any liability. In addition, there can be no
assurance that the Company would have sufficient resources to satisfy any
liability resulting from any such claim, or that it would be able to have its
customers indemnify or insure it against any such liability. The Company
currently maintains product liability and errors and omissions insurance;
however, there can be no assurance that, in the future, insurance companies will
continue to provide such coverage or further coverage of certain of the
Company's products and services relating to the Year 2000 problem, or coverage,
if available, will be adequate in term and scope to protect the Company against
material adverse effects in the event of a successful claim, or that the
Company's insurer will not disclaim coverage as to any future claim. The
successful assertion of one or more large claims against the Company that exceed
available insurance coverage or changes in the Company's insurance policies,
including premium increases or the imposition of large deductible or
co-insurance requirements, could adversely affect the Company's business,
financial condition and results of operations.
14. DILUTIVE EFFECT OF OPTIONS; INCREASED AUTHORIZED SHARES. A maximum of
1,500,000 and 8,000,000 options to purchase shares of Common Stock of the
Company may be granted under the Company's 1996 Stock Option Plan and 1998 Stock
Option Plan, respectively. Of such 1,500,000 and 8,000,000 options, there are
currently options granted and outstanding to purchase an aggregate of 1,266,445
and 965,000 shares of Common Stock under the 1996 Stock Option Plan and the 1998
Stock Option Plan, respectively, and 207,207 options under the 1996 Stock Option
Plan have been exercised. In addition, the stockholders approved an increase in
the number of shares of Common Stock that the Company is authorized to issue to
50,000,000 from 15,000,000, and authorized the creation of 10,000,000 shares of
preferred stock, par value $.01. To the extent that current and subsequent stock
options are exercised, and additional shares of Common Stock are issued by the
Company, dilution of the percentage ownership of the Company's stockholders will
occur, and any sales in the public market of the Common Stock underlying options
might adversely affect prevailing market prices for the Common Stock.
RISK FACTORS RELATING TO THIS OFFERING
1. CONTROL AND INFLUENCE BY PRINCIPAL STOCKHOLDERS. The Company's by-laws
provide that the holders of more than thirty-three and one-third percent of the
issued and outstanding Common Stock constitute a quorum at stockholder meetings,
and the vote of the holders of a majority of Common Stock present at a meeting
will decide any question brought before it, except for certain actions, such as
amendments to the Company's Certificate of Incorporation, mergers or
dissolutions, all of which require the vote of the holders of a majority of the
outstanding Common Stock. In addition, cumulative voting (which provides that a
stockholder can cast votes in the election of directors equal to the number of
shares owned by such stockholder multiplied by the number of directors to be
elected to a single candidate or among the candidates as the stockholders
wishes) is not permitted with respect to the Company's Common Stock. As a
result, the Company's principal stockholders, acting together, may be able to
control or exercise significant influence over all matters requiring stockholder
approval,
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<PAGE>
including the election of directors and the approval of significant
corporate actions. It is likely, therefore, that purchasers of Common Stock in
this offering will have little or no voice in the direction of the Company's
operations.
2. NO DIVIDENDS ON COMMON STOCK. The Company has not previously paid any
cash or other dividends on its Common Stock and does not anticipate payment of
any dividends for the foreseeable future; it being anticipated that any earnings
would be retained by the Company to finance its operations and future growth and
expansion. In addition, the Company's prior credit facility prohibited the
payment of any cash dividends, and any future credit facility may also prohibit
the payment of cash dividends.
3. NO ASSURANCE OF CONTINUED PUBLIC TRADING MARKET; POSSIBLE VOLATILITY OF
STOCK PRICE. The Common Stock is currently listed for quotation on NASDAQ, and
no assurance can be given that an active trading market for the Common Stock
will continue. If the Company should experience losses from operations, it may
be unable to maintain the standards for continued quotation on NASDAQ. If, for
any reason, the Company's Common Stock is not eligible for continued listing,
purchasers of the Common Stock may have difficulty selling their Common Stock
should they desire to do so. The trading prices of the Company's Common Stock
could be subject to wide fluctuations in response to quarterly variations in
actual or anticipated results of operations of the Company, changes in analysts'
earnings estimates, announcements of technological innovations or new products
or services by the Company or its competitors, general conditions in the
computer industry, or other factors. In addition, the securities markets
frequently experience extreme price and volume fluctuations which affect market
prices for securities of companies generally, and technology companies in
particular. Such fluctuations are often unrelated to the operating performance
of the affected companies. Broad market fluctuations may adversely affect the
market price of the Company's securities. Furthermore, securities class action
litigation is not uncommon against issuers, particularly following periods of
volatility in the market price of an issuer's securities. There can be no
assurance that such litigation will not occur in the future with respect to the
Company. Such litigation could result in substantial costs and a diversion of
management's attention and resources, which could have a material adverse effect
on the Company's business, financial condition and results of operations. Any
adverse determination in such litigation could subject the Company to
significant liabilities.
4. POTENTIAL FUTURE SALES OF COMMON STOCK. Upon consummation of this
offering, the Company will have 19,470,281 shares of Common Stock outstanding
out of a total of 50,000,000 shares of Common Stock authorized, assuming (1)
exercise of options to purchase 1,292,793 shares of Common Stock under the 1996
Stock Option Plan, (2) 170,000 shares of Common Stock issuable upon exercise of
the Representative's Options, (3) 170,000 shares of Common Stock issuable upon
exercise of the warrants included in the Representative's Options, (4) 114,000
shares of Common Stock issuable upon further exercise of Principal Stockholder's
Warrant, (5) 65,000 shares of Common Stock issuable upon exercise of the Joseph
Charles Warrant, (6) 375,000 shares of Common Stock issuable upon exercise of
the Dominick Warrant, (7) 173,332 shares of Common Stock issuable upon exercise
of the Compass Capital Warrant, (8) 135,000 shares of Common Stock issuable upon
exercise of the Thornhill Warrant, (9)
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<PAGE>
300,000 shares of Common Stock exercisable upon exercise of the Fritz Warrant,
(10) the exercise of 8,000,000 shares of Common Stock under the 1998 Stock
Option Plan and (11) 100,000 shares of Common Stock issuable upon exercise of
the Southeast Warrant. No prediction can be made as to the effect, if any, that
sales of shares of Common Stock or even the availability of such shares for sale
will have on the market prices of the Common Stock prevailing from time to time.
The possibility that substantial amounts of the Common Stock may be sold in the
public market may adversely affect prevailing market prices for the Common Stock
and could impair the Company's ability to raise capital through the sale of its
equity securities. As of the date of this offering, none of the 10,000,000
shares of preferred stock were outstanding.
Prospective investors should be aware that the possibility of sales may, in
the future, have a depressive effect on the price of the Common Stock and,
therefore, the ability of any investor to sell his Common Stock may be dependent
directly upon the number of shares of Common Stock that are offered and sold. No
prediction can be made as to the effect, if any, that sales of Common Stock or
even the availability of such Common Stock for sale will have on the market
prices prevailing from time to time.
5. LIMITATION ON DIRECTOR LIABILITY. As permitted by the Delaware General
Corporation Law, the Company's Certificate of Incorporation limits the liability
of directors to the Company or its stockholders for monetary damages for breach
of a director's fiduciary duty except for liability for (i) any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) acts or
omissions not in good faith or which involved intentional misconduct or knowing
violation of law, (iii) unlawful payments of dividends or unlawful stock
purchases or redemptions as provided in Section 174 of the Delaware General
Corporation Law, or (iv) any transaction from which the director derived an
improper personal benefit. As a result of the Company's certificate of
incorporation provision and Delaware law, stockholders may have limited rights
to recover against directors for breach of fiduciary duty.
FOR ALL OF THE AFORESAID REASONS, AND OTHERS WHICH MAY NOT BE SET FORTH
HEREIN, THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. THE COMMON STOCK SHOULD
BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD A TOTAL LOSS OF THEIR ENTIRE
INVESTMENT IN THE COMPANY AND HAVE NO IMMEDIATE NEED FOR A RETURN OF THEIR
INVESTMENT.
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USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Common Stock offered for resale by any of the Selling Stockholders. If all of
the Options to purchase 547,087 shares of Common Stock are exercised, the
Company will receive gross proceeds of approximately $1,160,000, all of which
will be added to the Company's general working capital and used for general
business purposes. No assurance can be given, however, that any Options will be
exercised.
SELLING STOCKHOLDERS
The following table sets forth information with respect to the listed
Selling Stockholders. An aggregate of up to 547,087 shares of Common Stock are
being offered for resale by the holders of such shares. The Company will not
receive any proceeds from the resale of these shares. The costs and expenses
incurred in qualifying these shares under federal and state securities laws will
be borne by the Company, but all commissions, selling and other expenses
incurred in connection with the resale of shares by a Selling Stockholder will
be borne by such Selling Stockholder. The Company will, however, receive payment
of the exercise prices of the Selling Stockholders' Options to the extent any of
the Selling Stockholder's Options are exercised. The Company does not know if
any of the Selling Stockholders that currently hold Options will exercise any of
their Options, and if exercised, when such Selling Stockholder will thereafter
offer for sale any or all of the shares of Common Stock received upon exercise.
Each Selling Stockholder will determine when and the number of shares of Common
Stock such Selling Stockholder will sell from time to time.
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<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING AFTER THE OFFERING
---------------------------- -------------------------------
SHARES
SHARES OF ISSUABLE UPON
COMMON EXERCISE OF NUMBER OF PERCENTAGE
NAME STOCK OPTIONS (1) SHARES OF SHARES(2)
- ---- --------- ------------- --------- ----------
<S> <C> <C> <C> <C>
A. HAYES BARCLAY (3) 10,000(4) 4,000 10,000(4)(5) * (4)(5)(6)
ROBERT T. DURST, JR. (7) 153,657 -- (5)(8) --(5)(8)(9)
RICK HOLLINGSWORTH (10) 40,674 -- (5) --(5)(6)
CHARLES T. JENSEN (11) 90,386 -- (5)(8) --(5)(8)(12)
JAMES J. KEIL (3) 5,000(13) 4,000 5,000(5)(13) * (5)(6)(13)
KEVIN LEININGER (14) 94,906 -- (5) --(5)(15)
PAUL REECE (3) 2,000(13) 4,000 2,000(5)(13) * (5)(6)(13)
DAN TRAMPEL (16) 90,386 -- (5) --(5)(17)
TOM TRAYLOR (18) 65,078 -- (5) --(5)(6)
-------
TOTAL 547,087
=======
<FN>
- -----------------
* Less than one percent of the Company's issued and outstanding Common Stock.
(1) None of the Options have been exercised prior to the date of this
Prospectus.
(2) The percentage is based on a total of 8,575,176 outstanding shares of Common
Stock as of May 1, 1998.
(3) Has been a director of the Company since August 6, 1996.
(4) Does not include (i) options to purchase 14,000 shares of Common Stock under
the Company's 1998 Stock Option Plan, and (ii) 1,740 shares of Common Stock
owned by Mr. Barclay's adult child living at Mr. Barclay's home, beneficial
ownership of which is disclaimed.
(5) Since each Selling Stockholder will determine when and the number of shares
such Selling Stockholder will from time to time sell, this assumes that each
Selling Stockholder exercises his Options to its fullest extent and that all
shares received upon such exercise are thereafter resold.
(6) If none of the shares of Common Stock received upon exercise of the Options
are sold, less than one percent of the Company's issued and outstanding
Common Stock will be owned.
(7) Mr. Durst has been an executive officer of the Company since April, 1996,
and a director since August 6, 1996.
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<PAGE>
(8) Does not include options to purchase 90,000 shares of Common Stock under the
Company's 1998 Stock Option Plan.
(9) If none of the shares received upon exercise of his Options are sold, Mr.
Durst will own approximately 1.8% of the Company's outstanding shares of
Common Stock, not including options to purchase 90,000 shares of Common
Stock under the Company's 1998 Stock Option Plan.
(10) Mr. Hollingsworth has been an officer of the Company since August, 1996.
(11) Mr. Jensen has been an executive officer of the Company since May 1, 1996,
and a director since August 6, 1996.
(12) If none of the shares received upon exercise of his Options are sold, Mr.
Jensen will own approximately 1.0% Of the Company's outstanding shares of
Common Stock, not including options to purchase 90,000 shares of Common
Stock under the Company's 1998 Stock Option Plan.
(13) Does not include options to purchase 14,000 shares of Common Stock under
the Company's 1998 Stock Option Plan.
(14) Mr. Leininger has been an officer of the Company since April, 1997.
(15) If none of the shares received upon exercise of his Options are sold, Mr.
Leininger will own approximately 1.1% of the Company's outstanding shares of
Common Stock.
(16) Mr. Trampel was an officer of the Company from July, 1996 to January, 1998,
when he resigned his employment with the Company.
(17) If none of the shares received upon exercise of his Options are sold, Mr.
Trampel will own approximately 1.0% of the Company's outstanding shares of
Common Stock.
(18) Mr. Traylor has been employed by the Company since 1992.
</FN>
</TABLE>
18
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock may be sold, from time to time, to purchasers
directly by any of the Selling Stockholders. The Selling Stockholders will act
independently of the Company in making decisions with respect to the timing,
manner and size of each sale. Such sales may be made on NASDAQ, in negotiated
transactions, through the writing of options on the shares of Common Stock, or
through a combination of such methods of sale, at market prices prevailing at
the time of sale, prices related to the then-current market price or at
negotiated prices, including pursuant to an underwritten offering or one or more
of the following methods: (a) purchases by a broker/dealer as principal and
resale by such broker or dealer for its account; (b) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and (c)
block trades in which the broker/dealer so engaged will attempt to sell the
shares as an agent, but may position and resell a portion of the block as a
principal to facilitate the transaction. The Selling Stockholders may also
pledge the shares of Common Stock as collateral for margin accounts and such
shares could be resold pursuant to the terms of such accounts. In effecting
sales, broker/dealers engaged by the Selling Stockholders may arrange for other
broker/dealers to participate. Such broker/dealers may receive compensation in
the form of discounts, concessions or commissions from the Selling Stockholders
and/or the purchasers of the shares for which such broker/dealers may act as
agent or to whom they may sell as principal, or both, (which compensation is
negotiated and which, as to a particular broker/dealer, may be in excess of
customary compensation). Any broker/dealer may act as broker/dealer on behalf of
one or more of the Selling Stockholders in connection with the offering of
shares of Selling Stockholders. The Company will pay the expenses, in connection
with this offering, other than transfer taxes, discounts, commissions, fees or
expenses of underwriters, selling brokers, dealer, managers or similar
securities industry professionals relating to the distribution of the shares of
Common Stock, or legal expenses of any person other than the Company.
There is no underwriter or coordinating broker acting in connection with
this offering. In offering the shares of Common Stock covered hereby, the
Selling Stockholders and any broker/dealers and any other participating
broker/dealers who execute sales of the Selling Stockholders may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), in connection with such sales, and any profits realized by
the Selling Stockholders and the compensation of such broker/dealer may be
deemed to be underwriting discounts and commissions.
At the time a particular sale or distribution is made, a Prospectus
supplement, to the extent required, will be distributed which will set forth the
aggregate amount of shares being offered, the names of the Selling Stockholders,
the purchase price, the amount of expenses and the terms of the sale or
distribution, including the name or names of any underwriters, brokers, dealers
or agents, any discounts, commissions and other items constituting compensation
from the Selling Stockholders and any discounts, commissions or concessions
allowed or paid to underwriters, brokers, dealers or agents.
Underwriters, brokers, dealers and agents may be entitled under agreements
entered into with the Selling Stockholders to indemnification by the Selling
Stockholders against certain civil
19
<PAGE>
liabilities, including liabilities under the Securities Act. Such underwriters,
brokers, dealers and agents may be customers of, may engage in transactions
with, or perform services for the Selling Stockholders in the ordinary course of
business.
COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
As permitted by the Delaware General Corporation Law ("DGCL"), the Company
has included in its Certificate of Incorporation a provision to eliminate the
personal liability of its directors for monetary damages for breach or alleged
breach of their fiduciary duties as directors, except for liability (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involved intentional
misconduct or a knowing violation of law, (iii) in respect of certain unlawful
dividend payments or stock redemptions or repurchases, as provided in Section
174 of the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit. The effect of this provision in the Company's
Certificate of Incorporation is to eliminate the rights of the Company and its
stockholders (through stockholders' derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of the fiduciary duty
of care as a director except in the situations described in (i) through (iv)
above. This provision does not limit nor eliminate the rights of the Company or
any stockholder to seek non-monetary relief such as an injunction or rescission
in the event of a breach of a director's duty of care. These provisions will not
alter the liability of directors under federal securities laws.
The Certificate of Incorporation and the by-laws of the Company provide
that the Company is required and permitted to indemnify its officers and
directors, employees and agents under certain circumstances. In addition, if
permitted by law, the Company is required to advance expenses to its officers
and directors as incurred in connection with proceedings against them in their
capacity as a director or officer for which they may be indemnified upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not entitled to
indemnification. At present, the Company is not aware of any pending or
threatened litigation or proceeding involving a director, officer, employee or
agent of the Company in which indemnification would be required or permitted. In
accordance with its agreement with the Representative, the Company has obtained
directors' and officers' liability insurance. The Company believes that its
charter provisions and indemnification agreements are necessary to attract and
retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
20
<PAGE>
VALIDITY OF SHARES
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Fishman, Merrick, Miller, Genelly, Springer, Klimek &
Anderson, P.C., 125 South Wacker Drive, Suite 2800, Chicago, Illinois 60606.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-KSB for the year ended December 31,
1997, have been incorporated in reliance on the report of KPMG Peat Marwick LLP,
independent certified public accountants, regarding the year ended December 31,
1997, and Coopers & Lybrand L.L.P., independent certified public accountants,
regarding the year ended December 31, 1996, given on the authority of those
respective firms as experts in accounting and auditing.
21
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[OUTSIDE BACK COVER]
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROSPECTUS OTHER
THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY EITHER THE COMPANY OR THE SELLING STOCKHOLDERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
BY ANY PERSON IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fort Myers, State of
Florida, on the 8th day of May, 1998.
NEOMEDIA TECHNOLOGIES, INC.
By: /s/ CHARLES W. FRITZ
-----------------------
Charles W. Fritz
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ CHARLES W. FRITZ President, Chief Executive May 8, 1998
- ------------------------ Officer and Director
Charles W. Fritz
* Secretary and Director May 8, 1998
- ------------------------
William E. Fritz
* Chief Financial Officer, May 8, 1998
- ------------------------ Treasurer and Director
Charles T. Jensen
* Director May 8, 1998
- -------------------------
Robert T. Durst, Jr.
* Director May 8, 1998
- -------------------------
A. Hayes Barclay
* Director May 8, 1998
- -------------------------
James J. Keil
* Director May 8, 1998
- -------------------------
Paul Reece
/s/ CHARLES W. FRITZ
- -------------------------
* by Charles W. Fritz, Attorney-in-fact,
pursuant to a power of attorney heretofore filed
</TABLE>
