Rule 424(b)(3)
File No. 333-87871
PROSPECTUS
ONTRACK DATA INTERNATIONAL, INC.
215,345 SHARES OF
COMMON STOCK
ONTRACK Data International, Inc. issued 215,345 shares of its common stock
to five individuals when Ontrack acquired Mijenix Corporation in July 1999.
Ontrack agreed to register the shares for resale. The selling shareholders
agreed not to sell or transfer the shares until January 15, 2000. This
prospectus offers the shares for resale after the restriction on resale expires.
Ontrack will pay all expenses of the offering, except that the selling
shareholders will pay any underwriting discounts and commissions the
shareholders incur. Ontrack's common stock is quoted on The Nasdaq National
Market under the symbol "ONDI." On October 6, 1999, the last reported sale price
of Ontrack common stock on The Nasdaq National Market was $5.5625.
FOR INFORMATION CONCERNING RISK FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED IN THIS PROSPECTUS, SEE "RISK
FACTORS" BEGINNING ON PAGE 4.
The selling shareholders have informed Ontrack that, when they can sell the
shares, they intend to sell the shares in one or more transactions on The Nasdaq
National Market at market prices at the time of the sale, or otherwise as
described in this prospectus. The selling shareholders have also informed
Ontrack that they have made no arrangement with any brokerage firm in advance
for the sale of the shares. See "Plan of Distribution."
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SHARES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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October 6, 1999
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TABLE OF CONTENTS
Page
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PROSPECTUS SUMMARY............................................................ 1
RISK FACTORS.................................................................. 4
USE OF PROCEEDS............................................................... 6
SELLING SHAREHOLDERS.......................................................... 6
PLAN OF DISTRIBUTION.......................................................... 7
LEGAL MATTERS................................................................. 8
EXPERTS....................................................................... 8
WHERE YOU CAN FIND MORE INFORMATION
AND INCORPORATION BY REFERENCE.............................................. 8
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PROSPECTUS SUMMARY
BECAUSE THIS IS A SUMMARY, IT DOES NOT CONTAIN ALL OF THE INFORMATION
THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS AND SHOULD
CAREFULLY CONSIDER, AMONG OTHER THINGS, THE MORE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS AND IN DOCUMENTS INCORPORATED IN THIS PROSPECTUS BY
REFERENCE, BEFORE YOU DECIDE TO PURCHASE OUR STOCK.
As used in this prospectus, "we," "Ontrack," "Company," "us" and "our"
refer to ONTRACK Data International, Inc. and our subsidiaries, unless the
context requires otherwise. The term "Mijenix" refers to Mijenix Corporation, a
subsidiary of the Company, unless the context requires otherwise.
THE COMPANY
Ontrack, a world leader in data recovery, provides a wide range of
computer services and software products that enable users to maintain constant
access to their critical data and permit fast recovery from system failure.
Our principal business is data recovery. We can recover lost or
corrupted data from nearly all operating systems and types of storage devices,
using hundreds of proprietary tools and techniques. We perform data recoveries
for Fortune 500 corporations, governmental agencies, educational and financial
institutions, small businesses and individuals. We can perform remote data
recovery via a modem in many cases. In other cases, customers ship disk drives
or other storage media to us for data recovery. We also offer a do-it-yourself
data recovery software product and other data access and protection software. We
believe we are the only company in the world offering this complete range of
data recovery products and services. Ontrack also offers services in related
areas such as computer evidence services for both civil and criminal cases.
We also offer proactive solutions to help prevent system failures and
enable users to maintain access to data. We will develop or acquire technology
that lets us offer a comprehensive single source for client and laptop data
access and recovery:
* We acquired Mijenix Corporation in July 1999. This was our biggest
acquisition to date and lets us offer proactive software tools and
diagnostics to help our customers avoid system failure. Mijenix has
developed several award-winning software products that enhance the use
of Windows-based personal computer systems, including ZipMagic 98 and
FreeSpace compression tools, the PowerDesk Utilities 98 file manager
and Fix-It Utilities 99, a general purpose utility for Windows 95, 98
and NT operating systems. Mijenix also recently released a software
update management tool called EasyUpdate. Mijenix had $4 million in
revenues in 1998.
* We acquired the TIRAMISU(TM) product line in December 1998 from the
German company Plug'n Play Computerberatung GbR. TIRAMISU(TM) is a
do-it-yourself data recovery software product. We sell TIRAMISU(TM)
primarily over the Internet. TIRAMISU(TM) is effective in cases where
the lost data is relatively easy to recover and does not require the
expertise of a data recovery engineer. We are expanding promotion of
the software and integrating the product line into our wide array of
data recovery solutions.
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* In July 1999, we signed a worldwide product licencing agreement with
Connected Corporation. Connected is a leader in data backup and
recovery software and services for personal computers. Many of these
products and services are Internet-based. Ontrack will license
Connected's award-winning network backup and online backup solutions.
We will sell these solutions through our direct and Internet sales
channels. We will private-label an Ontrack product with the "Powered by
Connected" tag line for added validity and recognition.
We also continue to market DISK MANAGER(R), our first software product.
DISK MANAGER(R) is a hard disk drive installation and partitioning utility for
personal computers. The product facilitates the process of installing
replacement or upgrade hard disk drives on personal computers. It also optimizes
storage capacity on hard disk drives. We generally sell DISK MANAGER(R) through
hard disk drive manufacturers on an original equipment manufacturer (OEM) basis.
Our main office is in Minneapolis, Minnesota. We also have offices in
Los Angeles, Washington, D.C., New York, London, England, Stuttgart, Germany,
and Paris, France. Each office has stand-alone data recovery capabilities,
except for the Paris office, which is strictly a sales office. We also offer
data recovery, data conversion and consulting services in Japan through a
licensing arrangement with a division of a major Japanese company. Mijenix also
maintains its office in Boulder, Colorado.
Ontrack was incorporated in 1985 under the laws of the State of
Minnesota. Our main office is located at 9023 Columbine Drive, Eden Prairie,
Minnesota 55347, and our telephone number is (612) 937-1107.
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THE OFFERING
Common stock offered by selling shareholders................... 215,345 shares
Common Stock outstanding after offering (1).................... 9,944,064 shares
Nasdaq symbol.................................................. ONDI
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(1) Excludes up to 1,543,728 shares of Common Stock issuable under the
Company's stock option plans, of which options covering 1,535,950
shares were outstanding as of September 23, 1999.
FORWARD-LOOKING STATEMENTS
The information we have provided in this prospectus, and in our public
documents to which we refer, contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements include information about
possible or assumed future results of operations and are subject to risks and
uncertainties. Also, when we use the words "believe," "expect," "intend,"
"anticipate" or similar expressions, we are making forward-looking statements.
Many possible events or factors could affect our future financial results and
performance, including the risks described under "Risk Factors" on page 4. This
could cause our actual results or performance to differ significantly from those
we express in our forward-looking statements. You should consider these risks,
and carefully review the risk factors described in this prospectus, before you
purchase shares of our common stock.
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RISK FACTORS
IF YOU ARE CONSIDERING A PURCHASE OF OUR COMMON STOCK OFFERED BY THIS
PROSPECTUS, YOU SHOULD CONSIDER CAREFULLY ALL THE INFORMATION CONTAINED IN THIS
PROSPECTUS. YOU SHOULD ESPECIALLY CONSIDER THE FOLLOWING RISK FACTORS:
WE MAY NOT ACHIEVE THE DESIRED RESULTS FROM OUR ACQUISITIONS AND OTHER
PROJECTS. We have started to diversify our business in order to increase our
revenues. We purchased the TIRAMISU(TM) software product line in December 1998,
and we acquired Mijenix Corporation in July 1999. We also entered into a
licensing agreement with Connected Corporation in July 1999 to allow us to offer
Connected network backup and online backup solutions to our customers. These
changes in our business are all fairly new, and we can't be certain how
successful any of the changes will be. To make the Mijenix acquisition succeed,
we must successfully integrate the business of Mijenix into our existing
business. We have not completed a significant acquisition before, and we may not
be able to integrate Mijenix's business successfully. Mijenix's products are
sold through retail software channels, and the revenues from these sales may
fluctuate. Also, the retail software business is unpredictable, and product
returns can affect net revenues significantly. Our new product offerings from
Connected also represent a new business area for us. Online back-up is new
technology, and there is no guarantee that customers will accept it.
We may make other acquisitions and participate in joint ventures and
other projects in the future, and we will continue to develop new products and
services. These acquisitions and other projects may not yield the desired growth
in revenues and earnings.
DEVELOPMENTS IN TECHNOLOGY MAY REDUCE THE NEED FOR OUR SERVICES. Other
businesses are making major investments in development of automatic data backup
systems, improved data storage technology and other data protection techniques.
These businesses are constantly making new developments in these areas. Future
developments in computer technology may reduce the demand for our data recovery
services, and this factor may reduce our service revenues.
OUR MARKETING APPROACHES MAY NOT BE SUCCESSFUL. We are expanding and
changing our marketing efforts to achieve growth in data recovery revenues. We
continue to develop and support our Web site, and we hope to develop further
products to serve the needs of a range of potential customers visiting the Web
site. We also have dedicated resources to obtain referral relationships with
other computer service companies, among other strategies. These strategies have
been slower to increase our revenues than we expected, and there is no guarantee
that our marketing strategies will have a greater impact in the future.
INTENSE COMPETITION WILL CONTINUE. In recent years, competition for our
data recovery services has increased sharply, especially at the lower end of the
data recovery market. New competitors who seek to offer data recovery services
can start their business and penetrate the market relatively quickly and
cheaply. The Internet offers these new competitors increased access to potential
customers. This increased competition may continue in the future, and this could
restrict future revenue growth or reduce revenues.
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Mijenix sells software products that enhance the use of personal
computer systems. These products must compete with products offered by much
larger companies such as Network Associates, Inc. and Symantec Corporation.
These competitors have greater economic resources and name recognition than
Ontrack or Mijenix, and there is no guarantee that Mijenix products will compete
successfully in the future.
WE MUST ADAPT OUR PRODUCTS AND SERVICES TO TECHNOLOGICAL CHANGE. In the
computer industry there are rapid technological changes and frequent
introductions of new and enhanced products. Customer demands are continually
changing, and industry standards are constantly evolving. To stay competitive,
we must constantly adapt our data recovery techniques to adapt to this
technological change. We must also develop enhancements and upgrades to our
software products. There is no guarantee that we will make these changes
successfully. If we fail to do so, we may be unable to compete and our sales
will suffer.
WE DEPEND ON OUR TECHNICAL PERSONNEL. Our success depends on our
ability to hire and train qualified technical personnel. We depend on our
software developers and data recovery engineers for our continued success in the
data recovery business and the commercial software business. Competition for
these personnel in the computer industry is intense. If we cannot hire and
retain qualified personnel, this may restrict our future growth.
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USE OF PROCEEDS
The Shares will be offered solely by the selling shareholders, who will
receive all of the proceeds from the sale of the Shares offered with this
prospectus. We will not receive any of the proceeds from the sale of the Shares.
SELLING SHAREHOLDERS
The selling shareholders, who were formerly the majority shareholder
and some of the option holders of Mijenix, acquired the Shares from Ontrack in a
private transaction on July 15, 1999 as part of the purchase price for the
acquisition of Mijenix. The following table provides information about the
beneficial ownership of Ontrack common stock by the selling shareholders as of
the date of this prospectus, and as adjusted to reflect the possible sale of the
shares under this prospectus.
Number of Maximum Shares to be
Shares Beneficially Number of Beneficially
Owned Prior Shares to Owned After
Name to Offering be Sold The Offering(1)
---- ------------------- --------- ---------------
Jennifer Kronenberg (2)......... 163,414 163,414 0
Alex Eckelberry................. 32,683 32,683 0
Pierre Michel Kronenberg (2).... 3,995 3,995 0
Derek Zahn ..................... 10,895 10,895 0
Francis Salmon.................. 4,358 4,358 0
------- ------- ---
Total................... 215,345 215,345 0
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(1) Assumes the sale of all the shares offered by this prospectus.
(2) Jennifer Kronenberg and Pierre Michel Kronenberg are married. Each
disclaims beneficial ownership of the shares held by the other.
In the table above, the share ownership information includes shares
held in an escrow account to satisfy indemnification obligations to Ontrack, if
any, under the stock purchase agreement for the purchase of Mijenix. The
following numbers of shares are held in the escrow account: Ms. Kronenberg,
20,521 shares; Mr. Eckelberry, 4,026 shares; Mr. Kronenberg, 492 shares; Mr.
Zahn, 1,342 shares; Mr. Salmon, 537 shares; total, 26,918 shares. The table does
not include additional shares of Ontrack stock that may be issued to these
shareholders as contingent consideration, depending on the revenues of Mijenix
for the period from July 15, 1999 through December 31, 1999.
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PLAN OF DISTRIBUTION
The selling shareholders have informed Ontrack that the common stock
may be sold or distributed from time to time by the selling shareholders, or by
pledgees, donees or transferees of, or other successors in interest to the
selling shareholders, directly to one or more purchasers (including pledgees) or
through brokers, dealers or underwriters who may act solely as agents or may
acquire common stock as principals, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, at negotiated prices,
or at fixed prices, which may be changed.
The shares may be sold by one or more of the following:
* ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
* purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this prospectus;
* transactions involving cross or block trades or otherwise on the Nasdaq
National Market;
* "at the market" to or through market makers or into an existing market
for the shares;
* in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected through
agents;
* through transactions in options, swaps or other derivatives (whether
exchange-listed or otherwise); or
* any combination of the foregoing.
In addition, the selling shareholders or their successors in interest
may enter into hedging transactions with broker-dealers who may engage in short
sales of the common stock in the course of hedging the positions they assume
with the selling shareholders. The selling shareholders or their successors in
interest may also enter into option or other transactions with broker-dealers
that require the broker-dealers to deliver common stock, which may be resold
thereafter pursuant to this prospectus. The selling shareholders or their
successors in interest may also pledge the common stock in connection with
hedging transactions or other transactions.
The selling shareholders have informed Ontrack that, as of the date of
this prospectus, the selling shareholders have made no arrangement with any
broker for the sale of the shares. Underwriters, brokers or dealers may
participate in such transactions as agents and may receive brokerage commissions
in that capacity from the selling shareholders or purchasers of the shares
(which compensation as to a particular broker-dealer may be less than or in
excess of customary commissions). These underwriters, brokers or dealers may
also purchase shares and resell these shares for their own account as described
above. The selling shareholders and the underwriters, brokers or dealers may be
considered underwriters as that term is defined by the Securities Act of 1933.
However, the selling shareholders disclaim any status as underwriters. Any
commissions, discounts or profits received by underwriters, brokers or dealers
in the foregoing transactions described above may be considered underwriting
discounts and commissions under the Securities Act of 1933.
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LEGAL MATTERS
Lindquist & Vennum P.L.L.P., Minneapolis, Minnesota will give its
opinion about the validity of the issuance of the common stock offered under
this prospectus.
EXPERTS
The consolidated financial statements of Ontrack as of December 31,
1998 and for the year then ended, incorporated by reference in this prospectus
and elsewhere in the Registration Statement have been audited by Grant Thornton
LLP, independent certified public accountants, as indicated in their report
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in accounting and auditing.
The financial statements as of December 31, 1997 and for each of the
two years in the period ended December 31, 1997 incorporated in this prospectus
by reference to the Annual Report on Form 10-K for the year ended December 31,
1998, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
AND INCORPORATION BY REFERENCE
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public over
the Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file with the SEC at its public reference facilities at 450
Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. You can also obtain copies of the documents
at prescribed rates by writing to the Public Reference Section of the SEC at 450
Fifth Street N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference facilities.
We "incorporate by reference" into this prospectus the information we
file with the SEC (File No. 000-21375), which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this prospectus.
Information that we file subsequently with the SEC will automatically update
this prospectus. We incorporate by reference the documents listed below, and any
filings we make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 after the initial filing of the registration
statement that contains this prospectus and before the time that the selling
shareholders sell all the securities offered by this prospectus:
* Annual Report on Form 10-K for the year ended December 31,
1998;
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* Quarterly Reports on Form 10-Q for the quarters ended March
31, 1999 and June 30, 1999;
* Current Report on Form 8-K filed July 27, 1999; and
* The description of our common stock in our Form 8-A
registration statement filed on September 17, 1996, which
incorporated the material under "Description of Capital Stock"
in our registration statement on Form SB-2 filed on August 21,
1996 (Registration No. 333-05470C), including any amendment or
report filed for the purpose of updating such description.
Our Common Stock is quoted on The Nasdaq National Market, and some of our
reports, proxy materials and other information may also be available for
inspection at the offices of Nasdaq at 1735 K Street, N.W., Washington, D.C.
20006.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15 of the 1934 Act after the date of this prospectus and prior to the
termination of the offering of securities contemplated hereby shall also be
deemed to be incorporated by reference in this prospectus and to be a part of
this prospectus from the date of filing of such documents or reports. Any
statement contained in a document incorporated or deemed to be incorporated by
reference in this prospectus shall be deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement contained in this
prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated by reference in this prospectus modifies or supersedes
that statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus.
This prospectus is part of a registration statement on Form S-3 which
we have filed with the SEC. As permitted by SEC rules, this prospectus does not
contain all of the information contained in the registration statement and
accompanying exhibits and schedules filed with the SEC. You may refer to the
registration statement, the exhibits and schedules for more information about us
and our shares. The registration statement, exhibits and schedules are also
available at the SEC's public reference rooms or through its web site on the
Internet. These documents (other than exhibits to the documents, unless the
exhibits are specifically incorporated by reference to the documents) are also
available, without charge, to any person, including any beneficial owner, to
whom this prospectus is delivered, on written or oral request, to ONTRACK Data
International, Inc., 9023 Columbine Drive, Eden Prairie, Minnesota 55347,
Attention: Investor Relations, or by telephone at (612) 937-1107. You may also
contact us via our Internet web site at http://www.ontrack.com.
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