As filed with the Securities and Exchange Commission, February 4, 1999.
Securities Act File No. 333- ; Exchange Act File No. 0-29098
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM SB-2/A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NAVIDEC, INC.
--------------------------------------------
(Name of small business issuer in its charter)
Colorado 7373 33-0502730
--------------------------- ------------------------- --------------
(State or other jurisdiction (Primary Standard (IRS Employer
of incorporation or Industrial Classification Identification
organization) Code Number) Number)
14 Inverness Drive, Suite F-116
Englewood, CO 80112
(303) 790-7565
(Address and telephone number
of principal executive offices)
---------------------
14 Inverness Drive, Suite F-116
Englewood, CO 80112
(Address of principal place of business or
intended principal place of business)
---------------------
Patrick R. Mawhinney, Chief Financial Officer
NAVIDEC, Inc.
14 Inverness Drive, Suite F-116
Englewood, CO 80112
(303) 790-7565
(Name, address and telephone number of agent for service)
--------------------
Copies of Communications to:
Roger V. Davidson, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1225 17th Street, Suite 2300
Denver, Colorado 80202
(303) 292-2400
Approximate date of commencement of proposed sale to public:
As soon as practicable after the registration statement becomes effective
--------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[X] 333-59091
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]___
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]___
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
================================================================================================================================
Title of Each Class of Securities Amount to be Proposed Maximum Proposed Maximum Amount
to be Registered(5) Offering Price Aggregate Offering of
Registered Per Share Price Registration Fee
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value
held by Selling Security Holders 558,700 Shares $5.875(1)(2) $3,282,362 $ 968
Common Stock underlying Warrants
held by Selling Security Holders 568,000 Shares $5.875(1)(2) $3,337,000 $ 984
Common Stock to be issued upon exercise 59,450 Shares $5.875(1)(2) $ 349,269 $ 103
of Placement Agent Warrants
Common Stock underlying Warrants to
be issued upon exercise of Placement
Agent Warrants 59,450 Shares $5.875(1)(2) $ 349,269 $ 103
Common Stock to be issued upon
Exercise of Warrants sold in initial
public offering 1,000,000 Shares (3) (3) (3)
Common Stock to be issued upon
Exercise of Representative's Options 100,000 (3) (3) (3)
Common Stock to be issued upon
Exercise Rehire Warrants 168,000 $5.875(1)(2) $ 987,000 $ 291
Warrants to purchase Common Stock 623,950 (4) (4) (4)
Common Stock to be issued upon exercise 53,464 $5.875 $ 314,101 $ 93
of McKowen Options
Additional Common Stock to be issued upon 14,862 $5.875 $ 87,314 $ 25
Exercise of other McKowen Options
Common Stock to be issued upon exercise
of Broker Warrants 121,613 $10.3125(6) $ 1,254,134 $ 349
=============================================================================================================================
Total . . . . . . . . . . . $2,916(7)
=============================================================================================================================
(1) Closing price on the Nasdaq SmallCap Market on July 9, 1998 as set forth in
the previously filed registration statement of Form SB-2, SEC No. 333-59019
(2) Estimated solely for the purpose of determining the registration fee and
calculated pursuant to Rule 457(c).
(3) Registration fee previously paid with registration statement on Form SB-2,
SEC No. 333-14497.
(4) No separate registration fee is required for the warrants pursuant to Rule
457(g).
(5) This registration statement covers an additional indeterminate number of
shares of common stock which may be issued in accordance with Rule 416.
(6) The average of the high and low prices of the Common Stock as reported by
the Nasdaq SmallCap Market on February 1, 1999.
(7) A registration fee was previously paid with respect to $2,567 of this fee
with the Registrant's registration statement on Form SB-2, SEC No.
333-59019
</TABLE>
---------------------
Pursuant to Rule 462(b), this Registration Statement is being filed to
register shares of the Registrant's Common Stock in addition to the shares
registered in the Registrant's Form SB-2, File No. 333-59019
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
NAVIDEC, Inc.
No Par Value Common Stock
and
Common Stock Purchase Warrants
NAVIDEC, Inc. (the "Company" or "Navidec") has registered for offer and
sale, on behalf of certain of its security holders, a total of 623,950 warrants
to purchase shares of Common Stock (the "Warrants"), and a total of 1,603,539
shares of the Company's no par value common stock (the "Common Stock"),
including 568,000 shares of Common Stock underlying the Warrants and 68,326
shares of Common Stock underlying certain Options, 168,000 shares of Common
Stock underlying rehire warrants ("Rehire Warrants") and 121,613 shares of
Common Stock underlying broker warrants ("Broker Warrants"). The Common Stock
and Warrants offered hereby are being sold for the accounts of these certain
security holders (the "Selling Security Holders") and the Company will not
receive any proceeds from the sale of Common Stock and Warrants by the Selling
Security Holders. The offering by the Selling Security Holders is referred to as
the "Selling Security Holders Offering".
This Prospectus also relates to Common Stock that may be issued by the
Company upon the exercise of 1,000,000 Warrants, and upon the exercise of
Representative's Options that were issued in the Company's initial public
offering on February 10, 1997. The Representative's Options entitle their
holders to purchase 100,000 shares of Common Stock at a price of $7.38 per share
until February 14, 2002.
The Common Stock and Warrants are traded on the Nasdaq SmallCap Market
("Nasdaq") under the trading symbols "NVDC" and "NVDCW," respectively. The
reported closing bid prices on Nasdaq on January 26, 1999 for the Common Stock
and Warrants were $9.25 and $2.50, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THERE ARE CERTAIN RISKS INVOLVED WITH THE OWNERSHIP OF THE COMPANY'S SECURITIES,
INCLUDING RISKS RELATED TO ITS BUSINESS AND THE MARKETS FOR ITS SECURITIES. (SEE
"RISK FACTORS".)
The Company will pay substantially all of the expenses of any offering and
sale hereunder (not including commissions and discounts of underwriters,
dealers, or agents), estimated to be $55,000.
The Common Stock and Warrants will be sold directly, through agents,
underwriters, or dealers as designated from time to time, or through a
combination of such methods on terms to be determined at the time of sale, at
market prices obtainable at the time of sale or otherwise in privately
negotiated transactions at prices determined by negotiation.
The date of this Prospectus is February 4, 1999
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning the Company may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549; at the Commission's
Regional Office at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and Seven World Trade Center, Thirteenth Floor, New York, New York 10048. Copies
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of such material can also be obtained upon written request addressed to the
Commission, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, such materials filed electronically by
the Company with the Commission are available at the Commission's World Wide Web
site at http://www.sec.gov.
The Company has filed with the Commission a registration statement on Form
SB-2 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). 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, reference is hereby made to the Registration Statement which may be
inspected and copied in the manner and at the sources described above. With
respect to each such agreement, instrument, or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference.
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PROSPECTUS SUMMARY
The following information is qualified in its entirety by reference to the
more detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Each prospective investor is urged to
carefully read this Prospectus in its entirety, including but not limited to the
Risk Factors. As used in this Prospectus, the "Company" and "Navidec" refers to
NAVIDEC, Inc., unless otherwise stated or indicated by the context.
The Company
- -----------
The Company, based in Englewood, Colorado, is a leading provider of
products and solutions that use Web-based technologies to achieve its customers'
business objectives. From commercial Web site development to the design and
implementation of intranet and extranet applications and tools, the Company
helps customers nationwide define, develop and deploy successful online
solutions. The Company provides its services and distributes its products to
over 700 customers as of the date of this Prospectus. The Company also serves as
a distributor of various high technology and other products through traditional
and electronic channels.
The Company's core competencies in Internet/Intranet technology and
traditional product marketing and distribution form its business model of
providing complete Internet/Intranet solutions. These solutions include computer
and network infrastructure equipment, software and services, content and
aggregation, electronic commerce and fulfillment of orders (together,
"Internet/Intranet Solutions"). The Company was organized as ACI Systems, Inc.
in July 1993 and changed its name to NAVIDEC, Inc. in July 1996. The Company's
principal sources of revenue are from the resale of computer equipment, high
technology peripherals and electronic components manufactured by independent
vendors ("Product Distribution") and services related to Internet/Intranet
Solutions and license fees from recurring lead revenue from the Company's Wheels
solution. The Company merged with Interactive Planet, Inc. ("IPI"), a designer
and developer of Internet World Wide Web sites, in July 1996. The Company issued
an aggregate of 678,877 shares of Common Stock to the shareholders of IPI and a
promissory note in the amount of $75,000 to one shareholder of IPI in exchange
for all of the issued and outstanding stock of IPI. The Company acquired
TouchSource, Inc. ("TS"), a designer and developer of interactive kiosks, in
July 1997. The Company issued an aggregate of 207,000 shares of Common Stock to
the shareholders of TS and TS was merged into the Company in exchange for all of
the issued and outstanding stock of TS. The merger and acquisition were
consummated in order to expand the Company's business model of combined
expertise in traditional marketing and distribution and Internet/Intranet
technology.
The Company's strategy is to increase revenue generated by its two core
competencies: (1) Internet/Intranet Solutions, which are focused in five major
market areas, including computer and network infrastructure equipment, software
and services, content aggregation, electronic commerce and order fulfillment,
and (2) Product Distribution. The Company has built and intends to continue to
build an infrastructure that assumes this strategy will succeed. Management
believes that, based on the current product mix, the Company's new Wheels
solution will provide for a substantial portion of its increased revenues in
1998 and years to follow. The Wheels solution combines the Company's two core
competencies of Internet/Intranet Solutions and Product Distribution. Wheels is
designed on a state of the art platform that allows it to distribute electronic
information out to consumers through regional Wheels Web sites, individual
dealer Web sites, remote automotive kiosks and also in mobile sales laptops. The
failure of the Company to achieve this strategy could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company recognizes revenue upon delivery of its Internet/Intranet
Solutions and Product Distribution goods. Internet/Intranet Solutions generally
begin with consulting arrangements that are billed on an hourly basis and
progress to a bid for a proposed project. Deposits are then taken upon
acceptance of the bid. Most of the Company's customers elect to update and
expand their Web sites frequently, and clients are billed monthly on a time and
materials basis for these services. Additional sources of ongoing revenue
include revenue from advertising sold by the Company on clients Web sites,
revenue from sales of merchandise and services over clients Web sites and
revenue from maintenance and hosting of client Web sites.
The Company's principal business office is located at 14 Inverness Drive,
Suite F-116, Englewood, CO 80112. The telephone number at that address is (303)
790-7565.
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The Offering
- ------------
Shares of Common Stock Outstanding Prior to this Offering 4,960,024
Warrants, Consultant Options, and Representative's Options
Outstanding Prior to this Offering 2,587,420
Shares of Common Stock Offered Hereby, Including
Shares of Common Stock Underlying Warrants and Options 3,006,875
Warrants Offered Hereby 653,950
Nasdaq SmallCap Market Symbols: Common Stock (NVDC) and Warrants (NVDCW)
Summary Financial Information
The following tables set forth summary financial information and other
equity information of the Company. The summary financial information in the
tables is derived from the financial statements of the Company, and should be
read in conjunction with and is qualified in its entirety by the more detailed
financial statements and related notes thereto, and other financial information
included therein. The information provided below is in thousands, except share
and per share data.
Fiscal Year Ended Nine Months Ended
Statement of Operations Data December 31, 1997 September 30, 1998
---------------------------- ----------------- ------------------
Net Revenues $6,008 $5,678
Operating Loss (2,578) (1,551)
Net Loss (4,107) (1,656)
Loss Per Share (1.47) (.50)
Weighted Average Shares
Outstanding 2,799,526 3,335,000
Balance Sheet Data
------------------
Cash $369 $395
Working Capital 678 922
Total Assets 3,099 3,907
Long-Term Liabilities 310 69
Stockholders' Equity 1,550 1,745
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RISK FACTORS
Prior to making an investment decision, prospective investors should
carefully consider, together with the other information contained in this
Prospectus, the following factors:
This Prospectus includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of Section 27A of the Securities
Act, and Section 21E of the Exchange Act. All statements, other than statements
of historical facts, included in this Prospectus that address activities, events
or developments that the Company expects, believes or anticipates will or may
occur in the future, including such matters as future capital costs of research
and development, the size of various markets, market share, project margins,
repayment of debt, business strategies, expansion and growth of the Company's
operations and other such matters are forward-looking statements. These
statements are based on certain assumptions and analyses made by the Company in
light of its experience and its perception of historical trends, current
conditions, expected future developments and other factors it believes are
appropriate in the circumstances. Such statements are subject to a number of
assumptions, risks and uncertainties, including the risk factors discussed
below, general economic and business conditions, the business opportunities (or
lack thereof) that may be presented to and pursued by the Company, changes in
laws or regulations and other factors, many of which are beyond the control of
the Company. Prospective investors are cautioned that any such statements are
not guarantees of future performance and that actual results or developments may
differ materially from those projected in the forward-looking statements.
Risk Factors Relating to the Company
1. History of Operating Losses.
----------------------------
Although the Company has been in business since July 1993, its business has
only recently expanded into Internet and Intranet infrastructure equipment,
software and services, content creation and aggregation, commerce and
distribution. As a result of this expansion, the Company is subject to all the
risks inherent in a new business enterprise. The Company has only a very limited
operating history in the Internet/Intranet Solutions business upon which to base
any evaluation of the Company's performance and prospects in such business.
Although there has been growth in annual revenue, the Company incurred losses
and experienced negative cash flow during the year ended December 31, 1997 and
for the three months ended March 31, 1998. The Company plans to focus in the
near future on growing its Internet/Intranet Solutions business and increasing
its distribution activities. In order to do so, it must increase significantly
its expenses for personnel, marketing, equipment and other product purchases. In
addition, the Company may experience fluctuations in future operating results
due to a variety of factors (many of which are out of the Company's control),
including general economic conditions, specific economic conditions in the
Internet industry, capital and other costs relating to the expansion of
operations and the mix of services and distribution channels offered by the
Company. There can be no assurance that the Company's operations will generate
sufficient revenues to become profitable. The likelihood of the Company's
success should be considered relative to the problems, experiences,
difficulties, complications and delays frequently encountered in connection with
the operation and development of a new business and the competitive environment
in which the Company operates.
2. Significant Capital Requirements.
---------------------------------
The Company's capital requirements have been and will continue to be
significant. Prior to the Company's initial public offering, the Company had
been dependent primarily on bank loans and loans from the Company's affiliates
and employees to fund its capital requirements. The Company is dependent on and
intends to use a significant portion of the proceeds of a recent offering of the
Company's securities to fund the ongoing operations of TouchSource as well as to
implement its proposed expansion plans. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The Company
anticipates that the proceeds to the Company from that offering, together with
projected cash flow from operations, will be sufficient to fund the Company's
operations during the twelve months following the consummation of that offering.
In the event that the Company's plans change, there are any delays in
implementing the proposed expansion, the Company's projections prove to be
inaccurate or the proceeds of that offering prove to be insufficient, the
Company may be required to seek additional financing or curtail its operations
and/or expansion activities. In such case, the Company will generally be
required to seek additional debt or equity financing to fund the costs of daily
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operation and of continuing to expand its operations. Any additional equity
financing may involve substantial dilution to the Company's then-existing
shareholders. The Company has no current commitments or arrangements with
respect to, or readily available sources of, additional financing and there can
be no assurance that the current shareholders of the Company will provide any
portion of the Company's future financing requirements. 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. Even if the Company is successful in its expansion plans, no
assurances can be given that the Company will be successful or that investors
will derive a profit from an investment in the Company.
3. Developing Market; Unproven Market for the Company's Product.
-------------------------------------------------------------
The Internet, and particularly the Web, represent markets for the Company's
products and services which have only recently begun to develop, are rapidly
evolving and are characterized by low barriers to entry and an increasing number
of market entrants who have introduced or developed a wide variety of products
and services for communication, information and commerce. As is typical in the
case of a new and rapidly evolving industry, demand and market acceptance for
new products and services are subject to a high level of uncertainty. Moreover,
critical issues concerning the commercial use of the Internet (including
security, reliability, compatibility, cost, difficulty in obtaining user
demographic information, difficulty of use and access, and quality of service)
remain unresolved and may impact the growth of Internet and Web use. There can
be no assurance that marketing or commerce over the Internet will become
widespread, or that products and services which are being developed by the
Company for use on the Internet will become accepted. In particular, enterprises
that have already invested substantial resources in other means of conducting
commerce and exchanging information may be reluctant to adopt a new strategy
that could make their existing products and infrastructure obsolete. In
addition, there can be no assurance that individual personal computer users in
business or at home will adopt the Web for on-line commerce and communication.
Because the market for the Company's products and services is new and evolving,
it is also difficult to predict with any assurance the future growth rate, if
any, and the size of the market. There can be no assurance that the market for
the Company's products and services will continue to expand, that the Company's
products or services will be accepted, or that individual personal computer
users in business or at home will use the Internet or the Company's products and
services for commerce, information and communication. If a significant market
develops more slowly than expected or becomes saturated with competitors, or if
the Company's products do not achieve market acceptance, the Company's business,
operating results and financial condition will be materially adversely affected.
4. Risks Relating to Competition; Dynamic Market.
----------------------------------------------
Existing competitors to the Internet/Intranet. Solutions business include
Online Systems Services, Inc., Eagle River Interactive, Inc. and Open Market,
Inc., all public companies traded on the NASDAQ system, as well as a large
number of regional firms providing similar services to those of the Company.
Potential competitors in this business include browser software vendors, PC and
UNIX software vendors and on-line service providers. Additional competition
comes from numerous client/server companies, database companies, multimedia
companies, advertising agencies, document management companies, networking
software companies, network management companies and educational software
companies. In a broader sense, the Company may compete with the more traditional
advertising and distribution mediums, such as radio, television and mail order
outlets.
Potential competition also comes from the Company's clients, who could
choose to address their Internet/Intranet needs through in-house personnel. Some
of the Company's current and many of the Company's potential competitors have
longer operating histories, greater name recognition, larger installed customer
bases and significantly greater financial, technical and marketing resources
than those of the Company. Competitive factors in the Internet/Intranet
Solutions business include core technology, breadth of services offered,
creative and artistic ability, marketing and distribution resources, customer
service and support and price.
A large number of companies act as re-marketers of computer networks,
graphics equipment and components, and the Company's competition in the high
technology product distribution business is therefore also intense. In some
instances, the Company, in acting as a re-marketer, may compete with the
original manufacturer. In addition, a large number of companies offer the
reprographic services offered by the Company and competition in this area is
also intense. Many of the Company's competitors in the high technology product
distribution business have longer operating histories, greater name recognition,
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larger installed customer bases, larger sales staffs and substantially greater
financial, technical and marketing resources than those of the Company.
Competitive factors in the distribution business include technical expertise,
breadth of products offered, product quality, performance and reliability,
price, name recognition, customer service and support and access to distribution
channels.
There are numerous online automotive sales Web sites on the Internet today,
but none that employ the same total solution strategy as the Company's Wheels.
Other online auto sales products include Carpoint, Auto-by-Tel, AutoConnect, and
AutoVantage. A few Internet developers are also attempting to sell online sales
products to media, but none offer the total sales solution that Wheels offers to
ensure that dealers sell vehicles, including important add-ons such as
touch-screen kiosks and mobile sales laptops. Another important distinction is
that the Company understands the auto sales process and even trains dealers to
help them sell more autos from the leads generated by Wheels. The Company
employees have over 40 years of experience in the automotive industry and have
expended over 190,000 hours into the development of the Wheels solution.
The Company has hired a team of experts well versed in the automotive
business, and has the president of Denver's largest independently owned
dealership group (Burt Automotive) on its board of directors. These experts
enable the Company's access to the latest industry information and a deep
understanding of the automotive business and its processes. This team has
enabled the Company to develop a solution which primarily focus is on enabling
automotive dealers the ability to sell more cars.
Both the Internet/Intranet Solutions business and the high technology
product distribution business are characterized by low financial barriers to
entry and frequent introductions of new products. The Company therefore expects
competition in each of its businesses to increase in the future. There can be no
assurance that the Company will be able to successfully compete in its
businesses. Although the Company believes that it has the requisite management,
technical and creative abilities to successfully compete, the intense level of
competition in each of the Company's businesses could materially adversely
affect the Company's future operating results and financial condition.
5. Rapid Obsolescence and Technological Change
-------------------------------------------
The market for Internet/Intranet Solutions is characterized by rapidly
changing technology, frequent introductions of new products and evolving
industry standards which result in product obsolescence and short product life
cycles. Accordingly, the Company's success is dependent upon its ability to
anticipate technological changes in the industry and to continually identify,
obtain and successfully market new products and services that satisfy evolving
technologies, customer preferences and industry requirements. There can be no
assurance that competitors will not market products and services which have
perceived advantages over those of the Company or which render products and
services to be offered by the Company obsolete or less marketable.
6. Dependence on Internet Infrastructure and Access
------------------------------------------------
The Company's revenues will depend in large part upon a robust industry and
infrastructure for providing Internet access and carrying Internet traffic.
Notwithstanding current interest and worldwide subscriber growth, the Internet
may not prove to be a viable commercial marketplace because of inadequate
development of the necessary infrastructure or complementary products, such as
high speed modems. Because global commerce and on-line exchange of information
on the Internet and other open area networks are new and evolving, it is
difficult to predict with any assurance whether the Internet will prove to be a
viable commercial marketplace. There can be no assurance that the infrastructure
or complementary products necessary to make the Internet a viable commercial
marketplace will be developed or, if developed, that the Internet will in fact
become a viable commercial marketplace. If the necessary infrastructure or
complementary products are not developed, or if the Internet does not become a
viable commercial marketplace, the Company's business, operating results and
financial condition will be materially adversely affected.
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7. Need for Management of Growth
-----------------------------
The Company's rapid growth and plans for further growth have placed, and
are expected to continue to place, a significant strain on its administrative,
operational and financial resources. The Company's ability to sustain growth
effectively will depend, in part, on its ability to manage growth and to train,
motivate and manage its employees. Currently, the Company relies on a limited
staff which is responsible for all of the Company's activities, including sales
and promotion, client planning, product distribution and technical development
of products for clients. Many of the staff members are currently performing a
combination of these functions. The Company's continued growth will require it
to recruit and hire new technical, sales and marketing personnel so that the
staff can be better specialized to market the services of the Company and serve
client needs. The Company plans to use a portion of the net proceeds of its
recent offering of securities to increase its sales force and technical staff,
although no assurances can be given that qualified personnel can be hired.
Market competition for the services of the limited number of people who are
capable of performing the technical services of the Company is intense. The
inability to recruit, hire and retain necessary personnel or the emergence of
unexpected expansion difficulties could adversely affect the Company's business,
operating results and financial condition.
8. Dependence on Relationships
---------------------------
The Company maintains many important relationships with it clients and
suppliers. These relationships often result in opportunities for expanding the
Company's client base, technical capability and revenue base. The most
significant of these relationships are with Banc One, Bluestone, Sun Micro
Systems, Netscape and Sybase. While the Company has contracts with most of these
companies, none of the contracts are exclusive and for the most part these
companies are free to terminate their relationship with the Company at any time.
The termination or deterioration of one or more of these relationships could
have a material adverse effect on the Company's business, operating results and
financial condition.
9. Dependence on Recurring Revenues
--------------------------------
A substantial part of the Company's income is derived from the recurring
revenues associated with sales of supplies to existing clients and periodic
maintenance and upgrades to Internet and Intranet sites. Clients of the Company
are not required to purchase supplies from the Company and may find another
source for such supplies, or their need for such supplies may diminish or
disappear as a result of technological advances or changes in customer
utilization of hardware. In addition, most of the Company's Internet/Intranet
Solutions clients are not required to utilize the Company for periodic
maintenance and updates to their Internet and Intranet sites. Although many of
the sites designed for the Company's clients contain proprietary tools licensed
by the Company to such clients only so long as the Company maintains such sites,
such clients are nonetheless free to take the information content of their sites
to their own servers or servers maintained by competitors of the Company. The
loss of clients who provide recurring revenues could have a material adverse
effect on the Company.
10. Dependence on Proprietary Technology; Lack of Patents and Proprietary
Protection; Risks of Third Party Infringement Claims
---------------------------------------------------------------------------
The Company presently has no patents with respect to its proprietary
technology. Instead, the Company currently relies upon copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions, all
of which afford only limited protection, to protect its proprietary products.
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.
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11. Dependence on Key Personnel
---------------------------
The Company's success depends to a significant extent on the continued
service of certain key management personnel, in particular Ralph Armijo, the
Company's President and Chief Executive Officer. The loss or interruption of Mr.
Armijo's services, for whatever reason, would have a material adverse effect on
the Company. In the event of the loss of services of Mr. Armijo, no assurance
can be given that the Company will be able to obtain the services of adequate
replacement personnel. The loss or interruption of the services of any of the
Company's other senior management personnel would also have an adverse effect on
the Company. The Company has entered into an agreement dated May 1, 1998 with
Mr. Armijo and the Company currently maintains a $2 million life insurance
policy on his life; however, no assurance can be given that the Company will be
able to keep such policy in effect. The Company does not maintain life insurance
policies for any of its other executive officers.
12. Government Regulation and Legal Uncertainties
---------------------------------------------
The Company currently is not subject to direct regulation by any government
agency, other than regulations applicable to businesses generally. However, due
to the increasing popularity and use of the Internet, it is possible that a
number of laws and regulations may be adopted with respect to the Internet,
covering issues such as user privacy, unsolicited marketing, pricing and
characteristics and quality of products and services. The adoption of any such
laws or regulations may decrease the growth of the Internet, which could in turn
decrease the demand for the Company's products, increase the Company's cost of
doing business or otherwise have an adverse effect on the Company's business,
operating results or financial condition. Moreover, the applicability to the
Internet of existing laws governing issues such as real and intellectual
property ownership, libel and personal privacy is uncertain.
13. Elimination of Director Liability
---------------------------------
The Company's Articles of Incorporation contain a provision eliminating a
director's liability to the Company or its shareholders for monetary damages for
a breach of fiduciary duty, except in circumstances involving certain wrongful
acts, such as the breach of a director's duty of loyalty or acts or omissions
which involve intentional misconduct or a knowing violation of law. The
Company's Articles of Incorporation also obligate the Company to indemnify its
directors and officers to the fullest extent permitted under Colorado law. While
the Company believes that these provisions are very standard and necessary to
assist the Company in attracting and retaining qualified individuals to serve as
directors, they could also serve to insulate directors of the Company against
liability for actions which damage the Company or its shareholders.
Risk Factors Relating to this Offering
1. Dilution.
---------
To the extent that any Warrants, options or other securities convertible
into shares of Common Stock currently outstanding or subsequently granted to
purchase the Company's Common Stock are exercisable at a price less than the net
tangible book value per share of the Common Stock, there will be dilution to the
Company's then current shareholders upon the exercise of such securities.
2. Control by Principal Stockholders
---------------------------------
Based upon the 4,960,024 shares of Common Stock being outstanding as of
January 11, 1999, the Company's officers and directors, as a group, will
beneficially own and control 26.9% of the Company's outstanding Common Stock. In
addition, cumulative voting (which provides that a shareholder can cast votes in
the election of directors equal to the number of shares owned by such
shareholder multiplied by the number of directors to be elected to a single
candidate or among the candidates as the shareholder wishes) is not permitted
with respect to the Company's Common Stock. As a result, these persons acting
together, although not controlling a majority of the Common Stock, will be able
to exercise significant influence over all matters requiring stockholder
approval, including the election of directors and the approval of significant
corporate transactions. See "Security Ownership of Certain Beneficial Owners and
Management."
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3. 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. See
"Market for Common Stock and Related Shareholder Matters."
4. No Assurance of Continued Public Trading Market; Risks Associated with "Penny
Stocks"
-----------------------------------------------------------------------------
The Company's Common Stock and Warrants are listed on Nasdaq. There can be
no assurance that this trading market will be sustained. 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 securities
are not eligible for continued listing, purchasers of the Company's securities
may have difficulty selling their securities should they desire to do so. If the
Company's securities are not eligible for continued listing on Nasdaq, they may
become subject to rules of the Securities and Exchange Commission concerning
penny stocks, which could materially, adversely affect the liquidity of the
Company's securities. The regulations define a penny stock as any equity
security not listed on a regional or national exchange or Nasdaq that has a
market price of less than $5.00 per share, subject to certain exceptions. The
material, adverse effects of such designation could include, among other things,
impaired liquidity with respect to the Company's securities and burdensome
transactional requirements associated with transactions in the Company's
securities, including, but not limited to, waiting periods, account and activity
reviews, disclosure of additional personal financial information and substantial
written documentation. These requirements could lead to a refusal of certain
broker-dealers to trade or make a market in the Company's securities.
5. Possible Volatility of Stock Price
----------------------------------
The trading prices of the Company's securities 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 Internet or other high
technology industries or other factors. In addition, the securities markets
frequently experience extreme price and volume fluctuation 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.
6. Possible Adverse Effects Due to Shares Eligible for Future Sale
---------------------------------------------------------------
The Company currently has 4,960,024 shares of Common Stock outstanding, of
which 1,948,128 shares of Common Stock are freely tradable without restriction
or further registration under the Securities Act. The remaining 3,012,076 shares
of Common Stock are "restricted securities" as that term is defined under Rule
144 promulgated under the Securities Act and may only be sold pursuant to a
registration statement under the Securities Act, in compliance with the
exemption provisions of Rule 144, or pursuant to another exemption under the
Securities Act. 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 Company's securities prevailing from time to
time. The possibility that substantial amounts of the Company's securities may
be sold in the public market may adversely affect prevailing market prices for
the Company's securities and could impair the Company's ability to raise capital
through the sale of its equity securities. See "Description of Securities" and
"Shares Eligible for Future Sale."
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7. Future Issuances of Stock by the Company Without Shareholder Approval
---------------------------------------------------------------------
The Company's authorized but unissued shares of Common Stock not reserved
for specific purposes may be issued without any action or approval of the
Company's shareholders. Any such issuances could be used as a method of
discouraging, delaying or preventing a change in control of the Company or could
significantly dilute the public ownership of the Company, which could adversely
affect the market. There can be no assurance that the Company will not undertake
to issue such shares if it deems it appropriate to do so. The holders of
options, Warrants and other securities convertible into shares of Common Stock
have the opportunity to profit from a rise in the market price of the Common
Stock, if any, without assuming the risk of ownership, with a resulting dilution
in the interest of other shareholders. The existence of the aforementioned
options and Warrants and any other options or warrants that may be granted in
the future may prove to be a hindrance to future equity financing by the
Company. Further, the holders of such warrants and options may exercise them at
a time when the Company would otherwise be able to obtain additional equity
capital on terms more favorable to the Company. See "Description of Securities."
8. Current Prospectus and State Blue Sky Registration Required to Exercise
Warrants
----------------------------------------------------------------------------
The Company will be able to issue shares of its Common Stock upon the
exercise of Warrants only if there is a current prospectus relating to the
Common Stock issuable upon the exercise of the Warrants under an effective
registration statement filed with the Securities and Exchange Commission and
such Common Stock is then qualified for sale or exempt therefrom under
applicable state securities laws of the jurisdictions in which the various
holders of Warrants reside. Although the Company has undertaken to maintain the
effectiveness of a current Prospectus covering the Common Stock underlying the
Warrants, there can be no assurance that the Company will be successful in
maintaining a current registration statement. The Warrants, therefore, may be
deprived of any value if for any reason a current prospectus covering the Common
Stock issuable upon exercise of the Warrants is not kept effective, or if such
Common Stock is not qualified or exempt from qualification in the states in
which the Warrant holders reside.
9. Warrants Subject to Redemption
------------------------------
Each Warrant will entitle the holder to purchase one share of Common Stock
at an exercise price equal to $7.20 until February 10, 2002. The Warrants are
redeemable by the Company for $.05 per Warrant at any time commencing on
February 10, 1998 (which period may be reduced or waived by Joseph Charles &
Associates, Inc.("JCA"), the managing underwriter of the Company's initial
public offering, in its sole discretion) upon at least thirty days' prior
written notice provided the closing price of the Common Stock for twenty
consecutive trading days within the thirty-day period preceding the date of the
notice of redemption equals or exceeds $8.40. In the event the Company exercises
the right to redeem the Warrants, a holder would be forced either to exercise
the Warrant within the period of the notice of redemption (which could occur at
a time when it may be disadvantageous to do so), to sell the Warrants at the
then current market price when the holder might otherwise wish to hold them, or
to accept the redemption. The Company presently expects to call all of the
Warrants for redemption if the trading price of its Common Stock meets the
minimum amount for the specified number of days provided a current prospectus
relating to the Common Stock underlying such Warrants is then in effect. See
"Description of Securities -- Warrants."
USE OF PROCEEDS
All of the proceeds to be realized from the Selling Security Holders
Offering will be paid to the Selling Security Holders. The Company will not
receive any portion of the proceeds of the securities sold by the Selling
Security Holders, but will receive amounts upon exercise of any Warrants, Broker
Warrants or Rehire Warrants or upon exercise of certain Options, which funds
will be used for working capital.
THE COMPANY
Overview
The Company, based in Englewood, Colorado, is a leading provider of
products and solutions that use Web-based technologies to achieve its customers'
business objectives. From commercial Web site development to the design and
implementation of intranet and extranet applications and tools, the Company
helps customers nationwide define, develop and deploy successful online
solutions. The Company provides its services and distributes its products to
over 700 customers as of the date of this Prospectus. The Company also serves as
a distributor of various high technology and other products through traditional
and electronic channels. The Company's core competencies in Internet/Intranet
technology and traditional product marketing and distribution form its business
model of providing complete Internet/Intranet solutions. These solutions include
computer and network infrastructure equipment, software and services, content
and aggregation, electronic commerce and fulfillment of orders.
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The Company was organized as ACI Systems, Inc. in July 1993 and changed its
name to NAVIDEC, Inc. in July 1996. The Company's principal sources of revenue
are from the resale of computer equipment, high technology peripherals and
electronic components manufactured by independent vendors and services related
to Internet/Intranet solutions and license fees from recurring lead revenue from
the Company's Wheels solution. The Company merged with Interactive Planet, Inc.,
a designer and developer of Internet World Wide Web sites, in July 1996. The
Company issued an aggregate of 678,877 shares of Common Stock to the
shareholders of IPI and a promissory note in the amount of $75,000 to one
shareholder of IPI in exchange for all of the issued and outstanding stock of
IPI. The Company acquired TouchSource, Inc., a designer and developer of
interactive Kiosks, in July 1997. The Company issued an aggregate of 207,000
shares of Common Stock to the shareholders of TS and TS was merged into the
Company in exchange for all of the issued and outstanding stock of TS. The
merger and acquisition were consummated in order to expand the Company's
business model of combined expertise in traditional marketing and distribution
and Internet/Intranet technology.
Effective as of December 31, 1998, the Company acquired Lease Source, Inc.
and Car Wizard, Inc., two automotive information web site businesses. See
"Recent Developments."
Business Strategy
The Company's goal is to enhance its position as a leading provider of
comprehensive networking and electronic marketing and distribution solutions to
regional, national and international clients. To achieve this objective, the
Company is pursuing the following strategies.
Leverage Expertise and Core Competencies
The Company leverages its expertise in two core businesses, high technology
product distribution and Internet/Intranet Solutions, into complete electronic
marketing and networking solutions. The Company's solutions span all segments of
the commercial Internet industry, including networking equipment and routers,
Internet software, Internet/Intranet design and implementation, content creation
and aggregation, and promotion. Management believes that the Company's ability
to offer this full range of Internet/Intranet products and services as well as
traditional distribution and marketing services is unique in its industry.
Exploit Recurring Revenue Streams
The Company emphasizes ongoing services to its Internet/Intranet Solutions
clients, which services are a source of recurring revenues often well in excess
of the fees associated with initial Web site development. The Company's primary
focus has been on its Wheels solution. Wheels which was introduced in the 4th
quarter of 1997, provides recurring revenues from lead fees paid by automotive
dealers, and hosting and maintenance fees paid by its media partner (a regional
newspaper, television or radio station).
Develop Strategic Relationships
The Company has developed technology, marketing and distribution
relationships with a number of leading companies. Important relationships
include those with Banc One, AT&T, Silicon Graphics, Sybase, and Netscape.
Wheels is currently under contract in Denver Colorado and in Portland Oregon.
The Company is currently deploying its Wheels solution through a strategic
relationship with Banc One Credit Company which has committed to launching four
additional regional Wheels sites. Banc One Credit has offices in 48 states. Banc
One Credit Company is a subsidiary of Banc One Corporation headquartered in
Columbus, Ohio. It is one of the largest finance companies in the United States
and is a holding company of eight units.
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Banc One chose the Company's "Wheels" solution after two years of reviewing
other automotive solutions. The choice of the Company's solution was based on
its abilities to sell cars for dealers, and Banc One's belief that Wheels could
increase its indirect automotive lending. As a result of the Company's technical
expertise, it has been designated as a Netscape Commercial Applications Products
Provider Partner (NCAPP), which is Netscape's top reseller designation and which
allows the Company to offer all of Netscape's high-end commercial Internet
software products to its clients. These and other strategic relationships have
fueled much of the recent growth of the Company, and management expects them to
continue to generate additional clients and revenue. The Wheels solution
provides the Company revenue from one times fees and recurring monthly fees. The
one time fees come from license fees for each region, one time setup fees from
dealers, and training fees. Recurring fees come from customer lead and lookup
fees, monthly fees which come from dealers and monthly fees charged to regional
media partners.
Emphasize Client Return on Investment
The Company furnishes clients with solutions which are designed to provide
a return on their investment through generation of leads, increased sales,
reduced personnel expenses and/or improved communications within their company.
The Company also intends to emphasize hardware solutions such as on - and
off-site free standing kiosks which include a computer terminal linked to the
Wheels Web site of the client. These kiosks are designed to expand the audience
for the client's electronic marketing presence.
Promote Intranets
The Company believes that many companies can benefit from the ease of use
and familiarity of a Web-style interface for their internal networks. Intranets
can provide an open, non-proprietary enterprise interface to a closed,
proprietary legacy database system, thereby avoiding the need to replace the
entire legacy system when an updated enterprise interface is desired. The
Company has implemented a major Intranet system for KN Energy and Merrick
Engineering and intends to promote its expertise in this area to other large
companies with a need for an easy to use internal network interface.
Expand Traditional Distribution Channels
To date, distribution of high technology products and related services has
accounted for the substantial majority of the Company's revenue. The Company
intends to expand its high technology product distribution business through
solution selling, which will combine the Company's software development and
hardware sales. The Company also plans to implement and promote its own Internet
Web site for direct sales of high technology products.
INTERNET/INTRANET SOLUTIONS
Internet/Intranet Industry Overview
The Internet is a network of computer networks that are both commercially
and publicly owned. The networks all use a common set of nonproprietary
networking protocols. This commonality of protocols provides what appears to the
Internet user to be a seamless, integrated virtual network notwithstanding the
heterogeneity of the computer hardware and communications systems underlying the
Internet. Although the individual networks comprising the Internet are privately
owned, no one organization owns or controls the Internet. Any network may join
or remove itself from the Internet at any time and this open access has allowed
the Internet to grow exponentially as a resource in the United States and
world-wide. Each new network (or individual connecting through a network)
becomes not only a consumer of information available on the Internet but also a
potential information or content provider to other users of the Internet.
Internet networks are connected in a variety of ways, including regular analog
phone lines, high-speed digital lines and fiber optic links. The Internet
permits users to communicate electronically, share or publish information,
download software and participate in commercial transactions. Internet data
15
<PAGE>
packets are transferred through flexible routing protocols which allow signals
to reach their destinations even though portions of the network may be down or
overburdened. Nonetheless, because of the rapidly growing traffic on the
Internet, users sometimes report significant delays in data transfer and some
loss of data. There is a risk that as the Internet grows in popularity, its
infrastructure will become overwhelmed to the point where its functionality is
impaired, perhaps significantly. Because connecting directly to the Internet
requires expensive equipment and considerable technical expertise, most Internet
users connect to the Internet through one of a rapidly growing number of local
and national Internet Service Providers (ISPs), including the major on-line
services such as America Online and CompuServe. The Company is not one of these
ISPs.
The World Wide Web
Much of the recent growth in Internet use has been attributable to a
network of servers and information available via open protocols known as the
World Wide Web. The Web can be accessed through software programs such as
Netscape Navigator and Microsoft Explorer, which allow non-technical users to
exploit the capabilities of the Internet. The Web enables users to find,
retrieve and link to multimedia content on the Internet with easy to use
graphical interfaces. Electronic documents are published on Web servers in a
common format called hypertext markup language (HTML). Web software browsers can
retrieve these documents across the Internet by making requests through a
standard communications protocol called Uniform Resource Locators, or URLs.
The technical capabilities of the Web together with the increasing
availability of user-friendly navigational and utility tools and search engines
such as Yahoo, Excite, Webcrawler, Magellan and Alta Vista are responsible for
the rapid growth in the popularity of the Web as a distribution channel. In
March 1997, International Data Corporation estimated the number of commercial
sites on the World Wide Web is doubling every six months and came to more than
45,000 in 1996 and predicted that the number of business sties would reach
100,000 by 2000.
The term Web site is commonly used to describe the computer screen layouts
and the file server computer that are accessible by users of the Web. Typically,
a Web site has a collection of Web pages which may contain text, graphics,
pictures, sound, animation, video or other multimedia content. One important
feature of the HTML format is that it allows a Web user to travel to other sites
simply by selecting with a mouse or other pointing device a text or graphic
marker on the current Web page. In this manner, users can quickly and
effortlessly connect to Web pages that are part of the same Web site or to Web
pages located on servers in another continent. Web sites vary significantly in
their complexity and interactivity. A simple Web site may have only text in
outline form. More complex sites may have full multimedia content. Web sites may
also vary in their level of interactivity with the user. Many Web sites are for
inquiry only (informational), while others allow the user to interact with,
enter and process information (interactive).
Commercial Uses of the Internet
Commercial uses of the Internet include business-to-business and
business-to-consumer transactions, product marketing, advertising,
entertainment, electronic publishing, electronic services and Internet support.
The Company views the Internet and in particular the Web as presenting
significant opportunities for electronic marketing, sale and distribution of
products. In the Company's view, the Internet's benefits include:
- - - Low cost in comparison to other marketing channels
- - - Direct marketing of products and services
- - - Audio/visual display and demonstration of products
- - - Ability to capture orders electronically at significantly lower personnel
costs than traditional order-taking
- - - Provision of client services such as order tracking and trouble-shooting
- - - Immediate fulfillment and satisfaction of certain orders, such as software
and information deliverable electronically
- - - Customer convenience (24-hour, 7 days a week access)
- - - Potential for narrowly-targeted marketing
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A number of companies have developed systems to maintain the security of
transactions on the Internet and the Company has developed its own proprietary
merchandise engine which provides security for order-taking functions. There can
however be no assurance that breaches in transaction security will not have an
adverse effect on the growth and viability of on-line commerce.
Intranets
Because of the ease of use and widespread acceptance of Internet protocols,
HTML and other scripting languages and tools, a number of companies have
implemented internal networks, or Intranets, based on such protocols. The use of
these protocols allows employees using personal computers and Web browser
software to access and interact with a broad range of information sources within
their company, independent of physical location and underlying computer and
database design, on the familiar platform of Web browser software.
The Company's Internet/Intranet Solutions
The Company provides its Internet/Intranet Solutions through six business
units: Business Development Services, World Wide Web Services, Marketing
Services, Media Services, Client Services and Channel Services. These units
function as a team in providing solutions for clients. The Internet/Intranet
Solutions provided to clients often also involve one or more of the traditional
distribution services offered by the Company.
Business Development Services are delivered through consulting engagements,
generally billed on an hourly basis, in which Company professionals analyze
client business requirements and recommend comprehensive solutions for the
client's Internet or Intranet requirements. Proposed solutions offered by the
Company include one or more of the following components:
- - - Network solutions
- - - Web site specifications
- - - Private Intranets - Web distribution strategies
- - - Traditional channel strategies
- - - Integrated marketing
- - - Image development
- - - Product introduction
- - - Project management
- - - Graphic design
- - - Product distribution
World Wide Web Services provide the design and implementation of a Web site
based upon specifications developed by the Company and the client. The Company's
World Wide Web Services also include the design and implementation of private
Intranets, including hardware and software implementation.
The Company designs many of its Web sites with database system integration,
which allows the Web site to act as an interface to selected portions of the
client's internal legacy or enterprise systems. Such integration allows the Web
site to reflect continuously the most current information concerning the client.
The Company has developed a set of proprietary software tools for
implementation on client Web sites. These tools are licensed to clients for use
on the particular site for so long as the site is maintained by the Company. A
brief description of each of the Company's proprietary tools follows.
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Wheels
Wheels: Navidec's Online Automotive Solution
Wheels provides the first comprehensive regional automotive Internet
solution to the television and newspaper publishing industries. Wheels addresses
the online sales needs of media organizations, automotive dealers and consumers
in the following ways:
Media
With the growing impact of online media on traditional media, television
stations and newspapers are looking to secure revenue from online activities and
gain a competitive advantage in their markets. Wheels offers media organizations
a new online revenue stream from their existing dealer advertiser relationships,
and proactively positions media organizations with these important advertisers.
Automotive Dealers
Wheels offers dealers a total online automotive solution that allows them
to integrate their complete new and pre-owned inventory across dealer franchises
and multiple legacy systems automatically updating that inventory on the Web,
touch-screen kiosks and mobile sales laptops. This solution complements a
dealer's existing traditional media advertising strategy and is proven to help
them sell more vehicles.
Consumers
Consumers can use Wheels to search both new and pre-owned car inventories
of dealers in their region, view digital photographs and maintain personal
interest lists. Wheels allows consumers to search multiple dealer inventories by
make, model, year, price range and mileage. It also allows consumers to request
that dealers assist them in their search for a specific vehicle.
Market opportunity
Navidec believes the market opportunity for Wheels is extremely promising.
The massive automotive market has quickly been impacted by Internet technology
as consumers have adopted the Internet as an important tool for making
automotive purchase decisions. The Internet allows consumers to collect the
large amount of information necessary to choose an auto from the comfort and
convenience of home or work. According to Toyota, Internet auto shoppers buy
within two to three days of visiting a dealership. Prior to the Internet,
consumers bought only after two to three weeks of shopping. Following are
statistics about online buying and its potential impact on the automotive
industry:
Online Auto Buying
- - - 63 percent of all respondents to a recent study would use the Internet to
obtain information about the vehicles they are considering for purchase.
The Dohring Co.
- - - 2.5 million people shopped for cars or parts over the Internet in the last
half of 1996. CommerceNet/Nielson Media
- - - Chrysler believes that 25 percent of its vehicle sales will happen online
within four years. The Economist, March 8, 1997.
Automotive Market
- - - The automotive market in the U.S. generates in excess of $600 billion each
year.
- - - Auto dealers spend approximately $300 in advertising to sell each vehicle in
their inventory. Reynolds & Reynolds
- - - Wheels significantly lowers cost of sales for each participating dealer.
Growth potential of Wheels
Navidec is well-positioned to experience significant growth from Wheels.
Colorado Wheels, Navidec's first Wheels implementation has far exceeded initial
expectations for participating dealers, customer leads and auto sales, as well
as for consumer acceptance. In December 1997, ColoradoWheels included the
inventory of 35 separate dealer franchises in Denver and generated 84 percent
more leads to those dealers than anticipated. Navidec's resulting revenue was
also 97 percent higher than budgeted.
Navidec continues to license Wheels to media partners in the top markets
nationwide and is currently negotiating final contracts in five major markets.
Navidec currently expects to license Wheels in 12 markets in 1998, and expects
to license up to 65 markets within 36 months.
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Competitive positioning
Navidec's Wheels has several features that make it unique in the
marketplace today. First, it is a regional solution. Traditionally consumers
have shopped for autos within five to 10 miles of their home, and Navidec's
experience has shown that the Internet does not change a shopper's desire to
purchase a vehicle from a near by dealer. Consumers use the Internet as a tool
to make a purchase decision and generally want to see and drive the vehicle they
are interested in. Second, Wheels was the first online automotive sales solution
to be licensed to media partners. Wheels provides the sponsoring media with a
method to generate ongoing revenue from new media and secure a competitive
position in a market. Media partnerships ensure that Wheels is heavily promoted
in each market. Navidec does not pay the advertising costs to draw consumers to
the Wheels site in each market--all promotion is provided by its media partner.
Market Entry
Navidec developed the software framework of Wheels based on its experience
and the proven solution it created for the Burt Automotive Group in Denver. Burt
sells more than 46,000 automobiles each year and its 1996 sales were $813
million. Burt sells 100 cars each month from the Internet. Navidec's development
of Burt's online solution allowed Navidec to use its development for Burt as a
research and development tool for Wheels. Wheels has now been launched in
Colorado with all of the functionality required for future markets. Wheels can
literally be launched in additional markets within days, limiting the
time-to-market issues that have traditionally plagued software launches. The
ability to easily roll out markets also ensures that Navidec can enter new
markets quickly prior to other solutions.
LeaseSource.com
LeaseSource provides consumers, industry professional and media outlets with
automobile buying and leasing information, tools and advice over the internet.
Its primary strengths currently lie in the quality and accuracy of its
information and functionality of its tools. LeaseSource primary products are its
two internet sites, LeaseSource.com and CarWizard.com. In additional to being
products in and of themselves, the content and functionality of these sites is
also re-licensed to third parties. The sites content is primary directed towards
end users.
LeaseSource's primary customers include, Motor Trend, Excite, Netscape,
WebCrawler and Prodigy. Through these relationships, LeaseSource's content
either resides on or is promoted and directly accessible through Motor Trend
Online, Excite's Auto Channel, Netscape's Auto Channel, Prodigy's Auto Channel,
Web Crawler's Auto Channel and Navidec's network of "Wheels" sites.
The LeaseSource site provides consumers with the most reliable auto leasing
data, information and advice from anywhere on or off of the Internet. The site
includes four information modules:
Lease Workshop Decision tools, residual values, money factors and
calculators.
Matchmaker Buying, leasing, insurance and finance services.
Leasing Newsroom News and commentary from the leasing industry.
Lease Classroom Leasing fundamentals
Essential Links Links to useful financial and automotive sites
CarWizard.com
CarWizard features the following:
* Professional-grade pricing information updated on a weekly basis
* Fully functional optioning tool with automated option rules and pricing
logic
* ALG residual values and average market money factors
* NHTSA crash test safety information
* Full vehicle technical specifications
* Manufacturer warranty information
* Manufacturer to consumer incentives
* Motor Trend "Quick Look" driving review for virtually all new models
* Compare two vehicle side by side.
* Search for any used vehicle from 1990 through the present, with prices
adjustable for mileage, condition and regional variations.
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CBS.CARWIZARD.COM
Using the Wheels Auto Research Center as their model, CBS has licensed from
Navidec its automotive information and auto locator, to create
cbs.carwizard.com. CBS.carwizard.com primary function will be to provide
visitors to CBS.com with access to the highest quality automobile buying and
leasing information and advice available on the Internet.
CBS.carwizard.com will be designed to distribute leads to automobile dealerships
nationwide. It will be promoted by CBS using national and local on-air promotion
messages, network-developed on-air program content, and CBS.com web-based
promotional messages, which will ultimately serve to drive consumers to
CBS.carwizard.com. Bank One has an excellent opportunity to participate in this
venture on several fronts: provide exclusive financing services on the site,
leverage the Bank One dealer network to exclusively distribute leads to, and to
participate in a high profile promotional campaign.
Products provided by Navidec to the auto industry
Navidec provides the total online automotive solution that includes
regional Wheels Web sites, individual dealer Web sites, touch-screen kiosks, and
mobile sales laptops. These tools use the same vehicle management technology to
present a dealer's inventory through multiple points of presence. Once the
dealer's inventory is available on Wheels, it can easily be channeled into
unique dealer websites, kiosks or laptops. The kiosks provide dealers or Wheels
partners an avenue to reach non-Internet users and consumers in high traffic
locations such as banks and malls. The mobile sales laptops create a portable
inventory manager for a dealer to take to fleet sales calls or trade shows. Both
are powerful tools to leverage Wheels participation and drive more new vehicle
sales.
Potential applications in other vertical markets
Wheels is an inventory management system and its framework could be adapted
to manage and sell a vast array of inventory over the Web. Though Navidec has
not begun selling its technology into other vertical markets, it is examining
its potential applications.
Navidex
The Navidex tool is a dynamic, database driven table of contents that
allows the user to intuitively navigate the Web site.
Navimap
The Navimap tool is a graphical representation of site information with
links to other areas on the site.
Merchandise Engine
The Merchandise Engine creates an on-line catalog of products available for
sale through the Web site. The Merchandise Engine also contains a secure
algorithm for transmitting credit card information and is capable of capturing
contact and marketing information from customers placing orders.
Calendar Tool
The Calendar Tool provides a visual interface for searching through a
database of date oriented activities, announcements, meetings or other events.
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E-Mail Tool
The E-Mail Tool is an e-mail engine which allows e-mail to be sent from the
Web site to e-mail addresses designated by the client for purposes such as
customer feedback, customer information capture and customer service inquiries.
Administration Tools
Administration Tools provide clients with the means to maintain and update
their sites themselves.
Creative Services
Creative Services include digital image capture, post-processing services
for scanned images and graphic arts production. The Company offers these
services to assist clients in developing a uniform company image that spans both
traditional and electronic media. Actual output services provided by the Company
include photographic quality prints, color transparencies and printed output in
all sizes. The Company typically bills Creative Services on a project basis.
Client Services
Client Services include technical support, network implementation, Web site
maintenance and evolution, hosting of Web sites on a Company Internet server,
database management, product support and electronic messaging implementation.
The Company charges a variety of fees for these services, ranging from a
specific one time fee for change requests to a monthly fee for site maintenance.
Channel Services
Channel Services include all of the functions necessary to implement an
Internet marketing and distribution plan, including on-line sales of
merchandise, warehousing and order fulfillment. The Company generates revenues
from these services principally through sales commissions which vary depending
upon the level of Company involvement in the distribution plan.
Significant Clients
The Company's major Internet/Intranet Solutions clients include the
following:
Account: Colorado Wheels by The Denver Post / Navidec
Industry: Retail Automobile Market
Description: Navidec developed Colorado Wheels to allow consumers to
search for new and pre-owned cars from the inventories of
multiple auto dealers in the local Denver metropolitan area.
Navidec's vision was to develop a system that would generate
sales leads to enable automobile dealers to sell cars using
the Internet as a new distribution channel. The vision
includes working with media partners within local
metropolitan markets who create awareness of the Web site
through advertising. Bank One is Navidec's national partner
to produce Wheels in markets nationwide.
The first regional Wheels site, Colorado Wheels,
coloradowheels.com, was unveiled in late 1997, and is
promoted by The Denver Post. Northwest Wheels was announced
in February 1998, and will be promoted by KOIN-Channel 6, a
CBS affiliate, to consumers in Portland and southern
Washington.
Shoppers who access the site can search for autos using a
variety of criteria, including make, model, year and price.
The site contains an inventory of thousands of new and
pre-owned vehicles, representing virtually all automobile
manufacturer makes and models. In addition to determining
which dealers have desired vehicles in inventory, shoppers
may view digital photos of the autos. Inventory is updated
on a daily basis to reflect additions and subtractions due
to sales or the arrival of additional vehicles.
For auto dealers, the system provides a new incremental
distribution channel, which generates highly qualified sales
leads. The system generates recurring revenues for both
Navidec and The Denver Post.
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Architecture: The Colorado Wheels site was written in Java, using high
performance Java servlets. The servlet architecture enables
complex query functions to be handled on the server end of
the system. Sybase is the underlying database used for the
site.
Development
Features: - Locate a vehicle yourself or request an assisted search.
Search by the following criteria:
- Range according to your zip code
- Year, make, model, type & price
- Construct an interest list based on your search results
- Search for dealers within your range based on your zip
code
- Java development allows vendor and system independence
- Shared common code baseline and database with dealer Web
sites and Navidec's Interactive Auto Sales Kiosks allow
synchronized updates across multiple systems
- Highly responsive query capabilities
Account: Denver Metro Convention and Visitor's Bureau
Industry: Conference Marketing and Reservations
Description: The Denver Metro Convention and Visitor's Bureau's (DMCVB),
primary responsibility is to market and promote the city of
Denver, Colo., as a prime convention location to businesses,
organizations and individuals worldwide.
The bureau's vision was to develop and implement a Web site
that would help market Denver to potential conventioneers
and visitors as well as to provide meeting planners,
visitors and local members with information regarding
activities, restaurants, accommodations, shopping and other
services available once they arrived. The goal was to
provide users with a single comprehensive resource for
information.
Highlights of the site include information about Denver and
the Rocky Mountain region. Detailed information is available
on Denver shopping, restaurants and menus, accommodation,
attractions and other services of interest to convention
groups and visitors to the city and region. A database
driven event calendar provides local events listings.
Architecture: The Web site is hosted on a Unix server running Netscape
Enterprise server. All of the software was developed using
HTML, CGI script, and Javascript. Functionality was cutting
edge when the site was developed in 1996.
Development
Features: The DMCVB Web site is comprehensive with a vast breadth of
information. Key features of the site include:
- Database driven events calendar
- Database of convention bureau membership
- Searchable by type of product or service
- Searchable by name
- Database driven directories for the following local
information:
- Dining
- Accommodations
- Transportation
- Attractions
- Art & Culture
- Recreation
- Services & Relocation
- Kid Stuff
- Shopping
- Meeting planning assistance
- Maps for convention sites
- Online booking services
- Rotating banner ads
- Interactive map constrains database driven searches by
region
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Account: Primestar by TCI
Industry: Broadcast/Entertainment
Description: Primestar by TCI is a division of TCI Satellite
Entertainment, Inc. Primestar markets satellite television
services to approximately 40 percent of the United States.
The majority of its customers primarily are families
residing in rural parts of the country as opposed to major
metropolitan areas. Primestar's current offerings include
160 video and audio viewing channels, equipment to receive
and display television satellite signals which may be
purchased or rented, high quality digital picture or sound,
in-home service, 24-hour customer service and support, and a
full line of accessory products.
Primestar by TCI's vision was to build a Web site to market
its products to new markets, particularly metropolitan
markets. The goal was to design a family oriented site that
presents Primestar systems and programming as the premium
product on the market.
Navidec used state-of-the-art 3D rendered graphics to design
a colorful, three-dimensional Primestar Town. The Web site
created a typical small town setting, including such
features as the town hall, schoolhouse, newsstand, and
shopping mall.
Web site users are able to navigate around the town and into
buildings to receive up-to-date information about Primestar.
The site also allows users to participate in events like the
Virtual Town Meeting to address family issues and provide
information feedback to Primestar on such issues as
TVratings and current program airings.
After perusing the most in-depth information available for
Primestar products, users can initiate their purchase with
an online order form or request a demo.
Architecture: The Primestar Web site is hosted on a Unix system using
Netscape Enterprise server. Navigation and mouse-over events
were designed using Java applets. The zip code search and
validation functions are database driven.
3D rendered artwork was used to maximize the adaptability
for changes and updates. For example, a holiday 'Layer'
could be created for every scene and scheduled during the
holiday season. Or, Primestar could change a light source to
be driven by the time the user logs on. For example, if a
user logs on in the A.M., the sun is in the east, and if the
user logs on at night, the town is moonlit. The screen shot
on the previous page shows an empty lot on the left side.
That lot is reserved for a sports complex where users can
get the latest information on sports programming. When
ready, Navidec can plug the stadium module into the existing
artwork.
Development
Features: 3D rendered graphics
Java pop-up mouse events
Java content driven button bar navigation Zip code
validation database Zip code driven marketing data
collection Online order form Demo request form Town meeting
forum
Account: Live Entertainment
Industry: Broadcast/Entertainment
Description: Live Entertainment is a diversified company that specializes
in the marketing and distribution of media entertainment
both within the United States and internationally. Live's
primary business focus is the selling of motion pictures and
related movie merchandise used to promote and advertise
films.
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Live Entertainment's goal was to develop a site which would
enable Live to provide information to the public as well as
enable users to purchase directly from the Live inventory of
videocassettes, interactive CDs and movie-related
merchandise.
Navidec designed the Live Web site to appear as a 3D store.
Visitors to the site enter the store and are able to click
on a piece of clothing merchandise to determine colors,
sizes and pricing prior to ordering online. The site also
has a home theater, enabling visitors to view video clips of
Live movies. Users also have access to Club Live, a video
club where site visitors can register and join to get new
information about special Live Entertainment movie,
merchandise and promotional offerings.
Architecture: The Web site is hosted on a Silicon Graphics Challenge-S
running the Irix operating system. The Web server software
is Netscape Enterprise Server 3.0. The animation was
developed using Macromedia Director 6.0. A Verity search
engine, Quicktime video and an MSQL Database are other
technologies used to develop and support the site.
Development
Features: - Registration database with a variety of client reporting
tools
- Suite of page update tools
- Career opportunities
- Home page text
- Financial form
- International page(s)
- Web site monitoring and statistics
- Keyword search capability
- Shockwave animation throughout the site
- Awarded Shocked Site of the Day 3/16/97
- Custom secure E-Commerce engine, developed by Navidec
Account: Destination Hotels & Resorts
Industry: Travel
Description: Destination Hotels and Resorts (DH&R) is the management
corporation for world-class luxury hotel and resort
properties located throughout the country. The distinctive
properties are designed to restore your spirit and stir your
imagination. The properties also include spacious and
well-designed conference facilities for business meetings.
This service enables users to shop for gift shop merchandise
from DH&R resorts.
DH&R's vision was to develop a unique, comprehensive Web
site which would enable potential customers the ability to
obtain the latest information regarding DH&R's resort
properties and provide them with tools for planning their
vacations and business travel. In addition to providing a
trip planning tool, DH&R also wanted to give customers who
had stayed at their properties as well as potential
customers the ability to relive or dream about their
vacations through online purchases of resort merchandise.
Architecture: The DH&R E-Commerce system is based on AT&T's Secure Buy.
This was one of the first Secure Buy systems implemented in
the country. In addition to providing access to the DH&R
Destination Express site via the Web, Navidec developed
on-site kiosks, which were deployed throughout DH&R's resort
properties.
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Development Key information and features of the DH&R Web site include:
Features:
- Resort properties
- Offer special resort value packages (coming soon)
- On line access to the DH&R site via kiosks located at
resorts On line store for purchasing merchandise
- Navidec is also the fulfillment agent
Account: Bryan Memorial Hospital
Industry: Healthcare
Description: Bryan Memorial Hospital is the largest healthcare provider
in the state of Nebraska. In addition to providing
healthcare services for its customer base, the hospital
interfaces with numerous private and governmental agencies.
Bryan Memorial processes information and performs thousands
of data transactions in paper formats everyday.
Bryan's vision is to implement a state-of-the-art, open
systems solution to provide an effective, highly secure way
to perform all of its business transactions electronically.
Its goal is to operate much more efficiently and
productively and save operating costs in the process.
Navidec has installed a 700 seat pilot solution using
Netscape servers. This Netscape pilot replaced Bryan
Memorial's previous proprietary Novell GroupWare system. The
pilot program enables Bryan Memorial to implement new
e-mail, calendar, and Web capabilities for internal and
external communication. Netscape Directory Services with
LDAP and the Certificate Server provide ease of
administration and the security needed to perform electronic
data transfers. Annual overall savings for Bryan Memorial
are expected to be in excess of $200,000.
Architecture: The 700 seat pilot program involved the installation of
seven Netscape servers on a DEC Alpha server running NT 4.0
SP3. The server was a two processor configuration with 512MB
of RAM and RAID 5 backup. Desktop clients were TCP/IP
enabled.
Development
Features: Open TCP/IP E-Mail (No gateways to Internet) Open
Calendaring (Unified LDAP Directory) Open Web Publishing
(Secure, controlled access) LDAP Directory Services (Single,
unified resource directory) Proxy Services (User
authentication & secure data transactions) Desktop
Management Services (consistent desktop user interface with
remote administration capabilities)
Account: Merrick & Company
Industry: Engineering
Description: Merrick & Company is a multi-discipline engineering and
architectural firm headquartered in Denver, Colo. Merrick
serves a variety of clients including Advanced Technologies,
Government, Light Industry and Heavy Industry. Merrick
employs a professional base of nearly 500 and has offices
throughout the United States.
Merrick's vision for its corporate intranet was the
comprehensive integration of all corporate systems and
organizations. Key corporate information is integrated from
HR, Marketing, Project Management, Administration,
Accounting and Project Tracking and Information Systems
organizations.
The goals and expected benefits of the Merrick Intranet are
as follows:
- Reduce operating costs
- Improve the accuracy and distribution of critical
information
- Improve service to employees Automate key processes
- Migrate from paper to electronic management of vital
corporate information
- Control increasing data synchronization, management and
security problems
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Architecture: Navidec developed a completely custom intranet solution
supported by a data warehouse integrating data from seven
legacy systems. The intranet was developed using Microsoft
Web technology exclusively due to the client's requirements.
All departments and information driven functions are
integrated or impacted by the intranet.
Development
Features: Developed on the Microsoft IIS Web server on an NT system.
Custom applications for complex, state driven, multiple user
functions were developed in Java. The data warehouse was
developed in MS-SQL and integrates a total of seven Oracle,
MS Access and proprietary database systems. The data
warehouse will ultimately replace all of the minor legacy
systems and provides the quality control gate for
synchronizing data between the primary databases.
Database driven, custom applications include:
- Online organization charts
- Function and role based 'Yellow Pages' for the online
help desk
- Bid and proposal generation and tracking
- Project creation and tracking system
- Key corporate financial information
- Marketing and forecast reports
- Quality assurance procedure, including training and
tracking
Other sites developed by the Company include Sunstrand Fluid Handling
(http://www.sfh.com) Richmond American Homes (http://richmondamerican.com)
currently under development, Denver Metro Convention & Visitors Bureau
(http://www.denver.org), Christopher Dodge (http://www.cdodge.com), Plastiprint
(http://plastiprint.com), On Sale Online (http://onsaleoneline.com), Lakewood
Hospitality Association (http://denverwesthotels.com), Cohen Brame & Smith PC
(http://www.cbspc.com), Kloppenberg (http://kloppenber.com ), Belmar Pharmacy
(http://www.belmarpharmacy.com), Kimmon Electric Co., Ltd.
(http://www.kimmon.com), KUSA-9 News (http://www.9news.com), , Colorado
Recreation (http://www.coloradorecreation.com) and the American Animal Hospital
Association (http:// www.healthypet.com).
DISTRIBUTION AND RELATED SERVICES
The Company distributes high technology systems and components manufactured
by third parties and provides related services such as system integration and
installation. Product distribution clients range from small businesses to
Fortune 100 companies. Significant product distribution clients include Lockheed
Martin, Johnson Controls, Hughes Aircraft and US West. The Company serves both
as a national manufacturer's representative for the products of certain
international manufacturers and as a reseller of selected computer products in
the Rocky Mountain region. The Company focuses its distribution efforts towards
selling specialized, higher margin products. The Company intends to expand its
product distribution activities into electronic channels, including sales over
the Internet on the Company's Web site.
Distribution activities usually involve the receipt by the Company of
orders for equipment from prospective purchasers and the delivery and/or
installation of the equipment by the Company.
The Company purchases the equipment directly from the manufacturer or
vendor and resells it to the purchaser at a price which includes the Company's
cost and a profit margin. With the exception of graphics supplies and certain
imported components, the Company does not generally maintain an inventory of
products it distributes. The Company specializes in components, lasers,
graphics, supplies, and systems integration.
Components
The Company represents and distributes component products from several
Japanese manufacturers, principally Hayashi Denko and Sunmoulon. Products
include temperature sensors, push-button switches and numerous other specialized
components. These products are sold primarily through phone sales as well as
through a national network of manufacturer's representatives. Most of these
components are sold to original equipment manufactures ("OEMs") which
incorporate these components into their product designs. Key industries for the
Company's component products include: industrial process control, heating,
ventilation and air conditioning (HVAC), energy management, food processing,
consumer appliances and medical monitoring.
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Graphics
The Company sells graphics products focused in the areas of data capture
(scanning, digital cameras and X-terminals) and color output (color printers and
LCD projection devices). The sale of many of these products is through
territorial authorizations granted to the Company by the manufacturers. The
Company has significant manufacturer alliances with Xerox, Tektronix, Sony,
InFocus and Hewlett Packard. Graphics products are sold primarily to end-user
customers by a direct sales team operating both in the field as well as through
an inside sales group which takes orders from existing customers.
Supplies
The Company sells consumable supplies for color graphic output devices. The
Company stocks an inventory of popular consumables in order to provide prompt
response for customer orders. In addition, the supplies division sells
third-party extended warranty agreements for all hardware products.
Systems Integration
The Company offers network design and implementation services to corporate
customers in the Rocky Mountain region, which services often include the
acquisition and location of network equipment and servers. These services are
performed by a direct sales team. The primary manufacturers of network equipment
and servers distributed by the Company are Compaq, IBM and Hewlett Packard.
EMPLOYEES
There are currently 51 full-time employees of the Company. These include
nine in Client Services, five in creative services, thirteen in World Wide Web
Services, two in Marketing Services, fourteen in sales, and eight in management
and administration.
COMPETITION
Existing competitors to the Internet/Internet Solutions business include
Online Systems Services, Inc., Eagle River Interactive, Inc. and Open Market,
Inc., all public companies traded on NASDAQ, as well as a large number of
regional firms providing similar services to those of the Company. Potential
competitors in this business include browser software vendors, PC and UNIX
software vendors and on-line service providers. Additional competition comes
from numerous client/server companies, database companies, multimedia companies,
advertising agencies, document management companies, networking software
companies, network management companies and educational software companies. In a
broader sense, the Company may compete with the more traditional advertising and
distribution mediums, such as radio, television and mail order outlets.
Potential competition also comes from the Company's clients, who could
choose to address their Internet/Intranet needs through in-house personnel. Some
of the Company's current and many of the Company's potential competitors have
longer operating histories, greater name recognition, larger installed customer
bases and significantly greater financial, technical and marketing resources
than those of the Company. Competitive factors in the Internet/Intranet
Solutions business include core technology, breadth of services offered,
creative and artistic ability, marketing and distribution resources, customer
service and support and price.
A large number of companies act as re-marketers of computer networks,
graphics equipment and components, and the Company's competition in the high
technology product distribution business is therefore also intense. In some
instances, the Company, in acting as a re-marketer, may compete with the
original manufacturer. In addition, a large number of companies offer the
reprographic services offered by the Company and competition in this area is
also intense. Many of the Company's competitors in the high technology product
distribution business have longer operating histories, greater name recognition,
larger installed customer bases, larger sales staffs and substantially greater
financial, technical and marketing resources than those of the Company.
Competitive factors in the distribution business include technical
expertise, breadth of products offered, product quality, performance and
reliability, price, name recognition, customer service and support and access to
distribution channels.
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Competitors in the automotive market
There are numerous online automotive sales Web sites on the Internet today,
but none that employ the same total solution strategy as Wheels. Other online
auto sales products include Carpoint, Auto-by-Tel, AutoConnect, and AutoVantage.
A few Internet developers are also attempting to sell online sales products to
media, but none offer the total sales solution that Wheels offers to ensure that
dealers sell vehicles, including important add-ons such as touch-screen kiosks
and mobile sales laptops. Another important distinction is that Navidec
understands the auto sales process and even trains dealers to help them sell
more autos from the leads generated by Wheels. Navidec employees have over 40
years of experience in the automotive industry and have expended over 190,000
hours into the development of the Wheels solution.
Navidec has hired a team of experts well versed in the automotive business,
and has the president of Denver's largest independently owned dealership group
(Burt Automotive) on its board of directors. These experts enable Navidec's
access to the latest industry information and a deep understanding of the
automotive business and its processes. This team has enabled Navidec to develop
a solution which primary focus is on enabling automotive dealers the ability to
sell more cars.
Both the Internet/Intranet Solutions business and the high technology
product distribution business are characterized by low financial barriers to
entry and frequent introductions of new products. The Company therefore expects
competition in each of its businesses to increase in the future. There can be no
assurance that the Company will be able to successfully compete in its
businesses. Although the Company believes that it has the requisite management,
technical and creative abilities to successfully compete, the intense level of
competition in each of the Company's businesses could materially adversely
affect the Company's future operating results and financial condition.
PROPERTIES
The Company's headquarters are located at 14 Inverness Drive, Building F,
Suite 116, Englewood, Colorado, in a 8,900 square foot facility, which includes
approximately 1,500 square feet in warehouse space. The facility is occupied
under a lease with an unaffiliated party expiring in June 2001 and providing for
a current monthly lease rate of $8,150. The Company also leases space at 1300
Plaza North, Suite 101, Lafayette, CO, this is a 1,500 square foot facility. The
facility is occupied under a lease with an unaffiliated party expiring in June
1999 and providing for a monthly lease rate of $2,180. The Company may lease
additional warehouse and office space if needed to support the growth in
traditional and on-line product distribution.
LEGAL MATTERS
The Company currently is not involved in any material legal proceedings.
RECENT DEVELOPMENTS
On August 5, 1998 the Company announced that it signed a letter of intent
to merge with VSI Holdings Inc. ("VSIH"). VSIH is engaged in the business of
providing technology and systems for relationship marketing, entertainment
products, education and training for clients. On August 20, 1998, the Company
announced that discussions relating to the potential merger with VSIH were
suspended and that the Company does not have any plans to renew the
negotiations. On August 31, 1998 in consideration for a $800,000 loan from VSIH
the Company granted 177,165 options to purchase shares of Common Stock at $4.50
and 354,350 shares of Common Stock at $6.50. Both options mature on December 31,
1999. The Company determined that the fair market value of the options was
$300,000 and accordingly discounted the VSIH loan of $800,000 to $500,000. The
$300,000 loan discount is being amortized over the four month term of the loan.
Effective as of December 31, 1998, the Company acquired Ohio-based
LeaseSource, Inc. and CarWizard, Inc. The Company believes these companies
operate two of the Internet's top automotive information web
sites-LeaseSource.com and CarWizard.com. That acquisition brings the existing
relationships of LeaseSource, Inc. and CarWizard, Inc. with industry leaders
including Excite, Netscape, Prodigy and Motor Trend into Navidec's successful
Automotive Group.
Navidec acquired the two companies for 250,000 shares of Common Stock. In
addition, shareholders of LeaseSource and CarWizard will be entitled to an
earn-out based on the profitability of the two companies. The Company will
continue operating LeaseSource.com and CarWizard. com, while expanding the
custom relicensing of the content and technology behind the sites. The Company
believes that when combined with Navidec's existing USWheels.com program, the
new technology will make Navidec one of the nation's leading providers of retail
automotive Internet solutions. There is not however any assurance that the
Company's beliefs will prove to be correct.
LeaseSource.com offers consumers general leasing information as well as
current information on leasing, specials and industry-standard residual values.
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The site was named Kiplinger's automotive leasing site of the year in 1997 and
is also recommended in numerous publications including Consumer Reports, Motor
Trent, Automobile and Money.
Launched in early 1998 and already receiving more than 4.5 million page
views per month, CarWizard.com offers Internet users accurate research available
on new and used vehicles. The site quickly has become one of the top auto
information sites on the web and is the automotive research provider for
Navidec's USWheels.com Auto Research Center.
Founded by nationally recognized consumer leasing expert Michael Kranitz in
October 1997, LeaseSource, Inc. and CarWizard, Inc. achieved a 275 percent
increase in monthly revenues with expected 1998 revenues of more than $600,000.
The companies were profitable from their inception with gross margins of 80
percent. As newly incorporated divisions of Navidec, they are expected to
generate revenue in excess of $1.7 million in 1999.
As part of the acquisition, both companies became a part of Navidec's
Automotive Group and Michael Kranitz became a vice president and board member
for the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OFOPERATIONS
Cautionary Statement Regarding Forward Looking Statements. The matters
discussed here and elsewhere in this Prospectus, when not historical matters,
are forward looking statements that involve a number of risks and uncertainties
that could cause actual results to differ materially from projected results.
Such factors include, among other things, the rapidly developing and
unpredictable nature of the Internet, intense competition in all of the
Company's markets, obsolescence of products and technological changes, the need
for management of growth and the dependence on relationships of the Company with
its customers and suppliers, as well as other risk factors described elsewhere
in this Prospectus.
Overview
The Company was organized as ACI Systems, Inc. in July 1993 and changed its
name to NAVIDEC, Inc. in July 1996 when it acquired IPI, a designer and
developer of Internet World Wide Web sites. The Company's principal sources of
revenue are from the resale of computer equipment, high technology peripherals
and electronic components manufactured by independent vendors (Product
Distribution) and services related to Internet/Intranet Solutions, license fees
from recurring lead revenue from the Wheels solution. The Company issued an
aggregate of 678,877 shares of Common Stock to the shareholders of IPI and a
promissory note in the amount of $75,000 to one shareholder of IPI in exchange
for all of the issued and outstanding stock of IPI. The Company acquired
TouchSource, Inc., a designer and developer of interactive Kiosks, in July 1997.
The Company issued an aggregate of 207,000 shares of Common Stock to the
shareholders of TS and TS was merged into the Company in exchange for all of the
issued and outstanding stock of TS. The merger and acquisition were consummated
in order to expand the Company's business model of combined expertise in
traditional marketing and distribution and Internet/ Intranet technology.
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The Company's strategy is to increase revenue generated by its two core
competencies: (1) Internet/Intranet Solutions, which are focused in five major
market areas, including computer and network infrastructure equipment, software
and services, content aggregation, electronic commerce and order fulfillment,
and (2) Product Distribution. The Company has built and intends to continue to
build an infrastructure that assumes this strategy will succeed. Management
believes that, based on the current product mix, the Company's new Wheels
solution will provided for the majority of its increased revenues in 1998 and
years to follows. The Wheels solution combines the companies two core
competencies of Internet/Intranet solutions and product distribution. Wheels is
designed on a state of the art platform that allows it to distribute electronic
information out to consumers through regional wheels web sites, individual
dealer web sites, remote automotive kiosks and also in mobile sales laptops. The
failure of the Company to achieve this strategy could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company recognizes revenue upon delivery of its Internet/Intranet
Solutions and Product Distribution goods. Internet/Intranet Solutions generally
begin with consulting arrangements that are billed on an hourly basis and
progress to a bid for a proposed project. Deposits are then taken upon
acceptance of the bid. Most of the Company's customers elect to update and
expand their Web sites frequently, and clients are billed monthly on a time and
materials basis for these services. Additional sources of ongoing revenue
include revenue from advertising sold by the Company on clients Web sites,
revenue from sales of merchandise and services over clients Web sites and
revenue from maintenance and hosting of client Web sites.
From August through October, 1996, the Company raised net proceeds of
approximately $1,233,000 from the sale of 10% Unsecured Subordinated Convertible
Promissory Notes (the "Bridge Promissory Notes") in a private placement (the
"Bridge Private Placement"). These notes were converted by their terms into an
aggregate of 349,126 Units upon consummation of the Company's public offering
described below. The Units were identical to the Units offered in the public
offering.
On February 14, 1997, the Company consummated a public offering of
1,000,000 Units consisting of one share of Common Stock and one Common Stock
purchase warrant ("Warrant"). Each Warrant entitles the holder to purchase one
share of Common Stock at a price of $7.20 per share until February 10, 2002. The
Warrants are redeemable at the option of the Company, at $.05 per Warrant, at
any time on or after February 10, 1998 or such earlier date as may be determined
by JCA. Of the 1,000,000 shares of Common Stock and 1,000,000 Warrants included
in the offering, 755,000 shares of Common Stock and 1,000,000 Warrants were sold
by the Company, for net proceeds of approximately $3,436,000 (after subtracting
the underwriting discount and other expenses of the offering). The remaining
255,000 shares of Common Stock were sold by the investors in the Bridge Private
Placement.
From November 1997 to April 1998, the Company raised net proceeds of
approximately $2,229,750 from the issuance of 594,500 shares of commons stock
and warrants from a private placement. Each Warrant entitles the holder to
purchase one share of Common Stock at a price of $7.20 per share until February
10, 2002. The Warrants are redeemable at the option of the Company, at $.05 per
Warrant, at any time on or after February 10, 1998 when the Company's Common
Stock on 20 consecutive trading days has closed above $8.40 per share and there
is an effective registration statement on file with the Securities and Exchange
Commission.
On November 24, 1998, the Company completed an offering of its Common
Stock. The Company raised $1,305,000 from the issuance of 700,000 shares of
Common Stock in that offering.
30
<PAGE>
Results of Operations
The following tables set forth for the periods indicated the percentage of
net sales represented by certain line items included in the Company's statements
of operations.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31 Sept 30
------------------------------------------ ------------------------------------------
1997 1996 1998 1997
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales
Net Solutions 2,657,000 44% 1,519,000 28% $ 3,121,000 55% $ 2,065,000 42%
Wheels 232,000 4% 0 0 806,000 14 25,000 1
Product 3,113,000 52% 3,951,000 72% 1,751,000 31 2,787,000 57
Net Sales 6,008,000 100% 5,470,000 100% $ 5,678,000 100% $ 4,877,000 100%
COGS 4,219,000 70 4,425,000 81 3,733,000 66 3,234,000 66
Gross Profit 1,789,000 30 1,045,000 19 1,945,000 34 1,643,000 34
Operating
Expenses 4,367,000 73 2,259,000 40 3,496,000 62 2,959,000 61
Other Expense (1,529,000) (25) (201,000) (3) (105,000) (2) (254,000) (5)
Net Loss (4,107,000) (68) (1,415,000) (24) $(1,656,000) (29)% $(1,570,000) (32)%
</TABLE>
Nine Months Ended September 30, 1998 and 1997
Net sales for the nine months ended September 30, 1998 were $5,678,000
which represents an increase of $801,000 or 16% over net sales of $4,877,000 for
the first nine months of 1997. The increase is primarily attributed to increased
sales of NetSolutions (Internet/Intranet solutions), which accounted for
$3,121,000 or 55% of total sales for the first nine months an increase of
$1,056,000 or 51% over net sales of $2,065,000 during the first nine months of
1997. Sales of the Company's Wheels solution, increased from $25,000 in 1997 to
$806,000 for the nine months ended September 30, 1998 and accounted for 14% of
the total sales same period. The increase in net sales in both categories was
primarily attributable to increased marketing activities, greater market
acceptance and greater market penetration.
Net sales in Product division were $1,751,000 for the first nine months of
1998 a decrease of 37% from net sales of $2,787,000 during the first nine months
of 1997. The decrease in sales is attributed to the discontinuation of products
that did not have strong gross profit and or recurring sales.
Gross margin was 34% during nine months ended September 30, 1998, which is
the same as the 34% during the same period in 1997. The Company's gross margin
continues to remain strong which is attributed to management's elimination of
several distribution products that carried low gross margin and the strong gross
margin on NetSolutions and Wheels.
Operating expenses for the first nine months of 1998 were $3,496,000 or 62%
of sales compared with $2,959,000 or 61% for the same period in 1997. The
increase in operating expenses was primarily the result of an increase in staff
and marketing activities associated with expanding the Wheels product and its
market area. Operating expenses are expected to remain stable as the Company
continues to invest in the development of high end Internet/Intranet Solutions.
Net interest expense for first nine months of 1998 was $101,000 compared
with $255,000 for the first nine months of 1997. The decrease was a result of
the Bridge Promissory Notes that were converted in February of 1997. The Company
expects interest expense to increase due to the use of debt to finance growth
during the remainder of 1998.
31
<PAGE>
Years Ended December 31, 1997 and 1996
Net sales for fiscal 1997 were $6,008,000 which represents an increase of
10% over net sales of $5,470,000 in fiscal 1996. The increase is primarily
attributed to sales of Internet/Intranet Solutions, which were $1,519,000 an
increase of 290% over net sales of $389,000 in fiscal 1996. Wheels which was
introduced in the fourth quarter of 1997 accounted for $232,000 or 56% of the
$413,000 in Internet revenue during the quarter. In addition, net sales of
Computer Infrastructure were $1,819,000 an increase of 49% over net sales of
$1,221,000. The increase in net sales in all two categories was primarily
attributable to increased marketing activities and greater market penetration.
Net sales in product distribution were $2,662,000 a decrease of 31% from
net sales of $3,860,000 in fiscal 1996. The decrease in sales is attributed to
the discontinuation of distribution products that didn't have strong gross
profit and or recurring sales. In 1997 Kimmon Electric, Inc., the Company's
supplier of laser products, began marketing its lasers directly in the United
States through Kimmon Electric USA, Inc. This resulted in a decrease in sales of
$863,000. The decrease affected the Company's net sales but due to the lower
margins of distribution did not materially adversely effect the gross margin for
1997.
Overall gross margin for the Company was 30% during fiscal 1997, an
increase of 11% over a gross margin of 19% in fiscal 1996. The increase in the
Company's gross margin was attributed to management's elimination of several
distribution products that carried low gross margin and the strong gross margin
on Internet/Intranet Solutions which were at 57%.
Operating expenses for fiscal 1997 were $4,367,000 compared with $2,259,000
for fiscal 1996. The increase in operating expenses was primarily the result of
an increase in staff and marketing activity and legal and consulting fees.
Operating expenses are expected to remain stable as the Company continues to
invest in the development of high end Internet/Intranet Solutions.
Net interest expense for fiscal 1997 was $236,000 compared with $204,000
for fiscal 1996. The increase was a result of the Bridge Promissory Notes. The
Company expects interest expense to decrease in 1998.
In 1997 the Company experienced $1,305,000 in expense for the impairment of
goodwill. The goodwill was the result of the merger with IPI in 1996 and the
acquisition of TS (see additional discussion on impairment, which follows) in
1997.
Liquidity and Capital Resources
Through September 30, 1998, the Company funded its operations primarily
through equity investments, from the Company's IPO and a subsequent Private
Placement that was completed in April of 1998, and revenues generated from
operations, lines of credit made available by banks and other institutions and
factoring arrangements made available to it by banks. On September 30, 1998 the
Company had cash and cash equivalents of $395,000 and a net working capital of
$922,000 compared to cash and cash equivalents of $369,000 and a net working
capital of $678,000 as of December 31, 1997.
Cash used in operating activities for the Company totaled $1,940,000 and
$3,224,000 for the first nine months of 1998 and 1997, respectively. Cash used
in investing activities consisted of expenditures for property and equipment.
Capital expenditures increased to $432,000 in the first nine months of 1998 from
$403,000 during the first nine months of 1997.
Cash from financing activities during the first nine months of 1998
consisted of advances from factoring arrangements of $1,059,000 net of
repayments of $1,047,000, proceeds from the issuance of common stock of
$1,551,000. This compares to 1997 advances from factoring arrangements of
$240,000 net of repayments of $747,000 repayments of Notes of $1,014,000 from
the Bridge Private Placement, $226,000 in loans from shareholders and employees.
The Company has not recorded a deferred tax asset as it cannot conclude to
date that it is more likely than not that the deferred tax asset will be
realized.
32
<PAGE>
Impairment of Long-Lived Assets
Effective July 1, 1996 the Company acquired 100% of the stock of IPI for
679,000 shares of common stock of the Company and a $75,000 note payable in a
purchase transaction. The acquisition was valued at approximately $750,000 and
resulted in goodwill of approximately $850,000 being recorded. The expected
future cash flows associated with the technology previously developed by IPI
declined due to rapidly changing technologies and increased competition for
products developed with the IPI technology. In addition, during the fourth
quarter of 1997, after the introduction of new Internet solutions by the
Company, management decided to focus the Company on its automotive solution. As
such, the Company reevaluated the goodwill related to this acquisition and
recorded an impairment expense of $598,000, resulting in a remaining net balance
of $20,000. This amount will be amortized during 1998.
Effective July 31, 1997, the Company acquired 100% of the stock of TS for
207,000 shares of Common Stock of the Company in a purchase transaction. The
acquisition was valued at approximately $760,000 and resulted in goodwill of
approximately $859,000 being recorded. Subsequent to the acquisition, Java
technologies developed far more rapidly than expected, causing the Company to
replace a large portion of the software developed by TS which has reduced the
expected future cash flows associated the TS technology. Furthermore, the
Company intends to integrate the TS technology with its other products and
market it primarily to the automotive industry, which was not a market focus of
TS. As such, the Company also reevaluated the related goodwill, and recorded an
impairment expense of $707,000 resulting in a remaining net balance of $80,000.
This amount is being amortized during 1998.
Inflation
The Company does not believe that inflation will have a material impact on
the Company's future operations.
Year 2000
Computer programs or other embedded technology that have been written using
two digits (rather than four) to define the applicable year and that have
time-sensitive logic may recognize a date using "00" as the Year 1900 rather
than the Year 2000, which could result in widespread miscalculations or system
failures. Both information technology ("IT") systems and non-IT systems using
embedded technology may be affected by the Year 2000.
The Company initiated an enterprise-wide program to prepare the Company's
IT systems and applications for the Year 2000. The Company has completed its
internal assessment phase of its Year 2000 program and has not incurred any
material costs associated with that assessment. The Company believes that all of
its IT systems are Year 2000 compliant; however there is no assurance such
belief is correct. The Company has not completed the process of verification of
whether vendors, suppliers and significant customers with which the Company has
material relationships are Year 2000 compliant. If the Company and such third
parties are unable to address Year 2000 issues in a timely manner, it could
result in material financial risk to the Company, including the loss of revenue
and substantial unanticipated costs. Accordingly, the Company plans to devote
all resources necessary to resolve significant Year 2000 issues in a timely
manner. In addition, the Company plans to develop a Year 2000 contingency plan
in the event that its IT systems and applications are not Year 2000 compliant.
The Company expects that it will incur internal staff costs as well as
consulting and other expenses related to the completion of its Year 2000
program. However, the Company currently is not able to determine the total costs
for its Year 2000 program or whether the Year 2000 will have a material effect
on the Company's financial condition, results of operations or cash flows.
33
<PAGE>
New Pronouncements
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
was issued in June 1998. This statement establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This statement is effective for the Company's financial statements for the year
ended December 31, 2000 and the adoption of this standard is not expected to
have a material effect on the Company's financial statements.
SFAS No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits, was issued in February 1998. This statement revises the
disclosure requirement for pensions and other postretirement benefits. This
statement is effective for the Company's financial statements for the year ended
December 31, 1998 and the adoption of this standard is not expected to have a
material effect on the Company's financial statements.
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, was issued in June 1997. This statement establishes standards for
the way public business enterprises report information about operating segments.
It also establishes standards for related disclosure about products and
services, geographical areas and major customers. This statement is effective
for the Company's financial statements for the year ended December 31, 1998 and
the adoption of this standard is not expected to have a material effect on the
Company's financial statements.
MANAGEMENT
Directors and Officers
The following table sets forth the name, age and position with the Company
of each officer, director and nominees for director of the Company as of the
date of this Prospectus.
Period from
Name Age Position Which Served
- ---- --- -------- ------------
Ralph Armijo 45 President, Chief Executive 7/93
Officer and Director
Patrick R.
Mawhinney 34 Chief Financial Officer, 7/96
Treasurer and Director
Andrew Davis 45 Director 4/97
Lloyd G.
Chavez, Jr. 48 Director 4/97
Gerald A.
Marroney 46 Director 4/97
Harold
Anderson II 34 Vice President of 7/96
Automotive
Kenneth P. Bero 44 Vice President of Sales 12/97
James
Hosch 45 Director 6/98
Michael Kranitz 38 Director and Vice President of 12/98
Strategic Development
The officers are elected by the Board of Directors at the first meeting
after each annual meeting of the Company shareholders and hold office until
their successors are duly elected and qualified in accordance with the Bylaws of
the Company.
34
<PAGE>
RALPH ARMIJO has served as the Pres ident, Chief Executive Officer and a
director of the Company since its inception in 1993. From 1981 to 1993, Mr.
Armijo was employed by Tektronix, Inc., a large communications company which
also produced testing and measuring equipment. Mr. Armijo's responsibilities at
Tektronix progressed from sales manager, to branch manager, to district manager
and, ultimately, to Western Regional Manager, a position he held for five years.
In that position, he was responsible for a $100 million budget in sales,
graphics, technical support and administration, and he was responsible for
developing new distribution channels, including reseller agreements. From 1976
to 1981, Mr. Armijo was employed by IBM Corporation, where he sold computerized
accounting and financial applications to small and medium-sized businesses. Mr.
Armijo received his B.A. from Colorado College and his M.B.A. from the
University of California, Los Angeles.
ANDREW DAVIS served as Vice President of Sales and Marketing of the Company
from May 1996 until December 1997. He became a director of the Company in April
1997. From January 1994 to May 1996, Mr. Davis was manager of wholesale
distribution at InFocus Systems, a manufacturer of high resolution projection
systems. From September 1982 to January 1994, Mr. Davis held various sales and
marketing positions in Tektronix, Inc. including Director of Marketing for the
Interactive Technologies Division. Mr. Davis attended the University of Denver
from 1971 to 1974 where he studied Business Management and Marketing.
PATRICK R. MAWHINNEY served as the President of Interactive Planet, Inc.
("IPI") from its inception until its merger with the Company in July 1996 and
since that time has served as Chief Financial Officer, Treasurer and a director
of the Company. From May 1995 until May 1996, Mr. Mawhinney also served as a
financial/accounting consultant for MIS\Sunguard, a provider of accounting and
investment software. Mr. Mawhinney was employed as an Assistant Vice President
of The Bank of Cherry Creek from November 1993 to May 1995; as a Vice President
of Vectra Banking Corporation from June 1989 to November 1993; and as Operations
Coordinator for Zions Bancorporation from August 1986 to June 1989. He received
his B.S. from Colorado State University.
LLOYD G. CHAVEZ, JR. became a director of the Company in April 1997. He has
been a director of the Burt group of automobile dealerships in Denver, Colorado
since 1988 and Director of Automotive Markets of the Burt group since 1994. From
1983 to 1994, Mr. Chavez was Vice President of Fort Dodge Laboratories, a
subsidiary of American Home Products, where he was responsible for business
acquisitions, new products and technologies, joint ventures, intellectual
property acquisitions, strategic planning, market research and sale projections.
From 1982 to 1983, Mr. Chavez was Vice President of General Genetics
Corporation, where he was responsible for management of biological and
pharmaceutical research and development. Mr. Chavez received his B.A. in
Molecular, Cellular, Development Biology from the University of Colorado, his
M.A. in Old Testament Studies from Denver Seminary, his Ph.D. in Microbiology
and Immunology from the University of Virginia, and was a post-doctoral Fellow
in Chemistry at Cornell University.
GERALD A. MARRONEY became a director of the Company in April 1997. He has
served as a State of Colorado District Court Judge in Pueblo County, Colorado
since 1990. Prior to such time he was a practicing attorney in Pueblo, Colorado.
Mr. Marroney received his B.S. in Political Science from Southern Colorado State
College in 1973 and his J.D. from Oklahoma City University in 1976.
HAROLD ANDERSON II served as Vice President of Business Development for IPI
from July 1995 until its merger with the Company in July 1996. He has served as
Vice President of Business Development of the Company commencing in July 1996,
and from June 1997 as Vice President of Automotive. From September 1986 to July
1995, Mr. Anderson was employed by U.S. West Advance Technologies and
Communications, where he worked in Distributed Technology Platform Security,
served as the Technical Project Manager, and later acted as a Product Marketing
Specialist for the U.S. West Internet Services Provider/On-line Service Project.
Mr. Anderson received his B.S. degree in Business Administration from the
University of Arizona in 1986 and a Masters degree in Computer Information
Systems from the University of Denver in 1991.
35
<PAGE>
KENNETH P. BERO has served as Vice President of Sales of the Company since
December 1997. From July 1996 to December 1997, Mr. Bero was Director of Sales,
SGI Business Group at Access Graphics, a wholesale distributor of UNIX based
hardware and software products. From September 1989 to June 1996, Mr. Bero held
various sales and sales management positions at Tektronix, Inc. including
Business Development Manager, Major Account Group Manager and National Reseller
Group Manager for the Display Products Division. Mr. Bero received his B.A. from
Bates College and his M.B.A. from Northeastern University.
JAMES HOSCH has been a director of the Company since June 1998. Since
November 1998, Mr. Hosch has been an independent representative for Bathgate
McColley Capital Group LLC, an NASD registered broker dealer. From September
1995 until November 1998 Mr. Hosch was a Senior Vice President of Joseph Charles
& Associates, Inc., an NASD registered broker dealer. From January 1993 until
September 1995, he was Executive Vice President of Cohig & Associates, Inc., an
NASD registered broker dealer. From 1989 until January 1993, he was President of
Kober Corporation, a publicly traded real estate firm.
MICHAEL KRANITZ has been a director and Vice President of Strategic
Development of the Company since December 1998. From October 1997 until December
1998, Mr. Kranitz was the CEO and President of Lease Source, Inc. From January
1997 until October 1997, Mr. Kranitz worked with a computer company primarily on
the development of the intellectual property used by LeaseSource, Inc. and in
October f1997, Mr. Kranitz acquired from that company those intellectual
property rights. From 1994 until December 1996, Mr. Kranitz was a partner with
the law firm of Benesch, Friedlander, Coplan & Aronoff, LLP located in
Cleveland, Ohio. Mr. Kranitz is also the author of "Look Before You Lease:
Secrets to Smart Vehicle Leasing," Mr. Kranitz received a BS in Economices with
high honors from the University of Florida in 1982 and a JD from Vanderbilt
School of Law in 1985.
No director or executive officer of the Company is related to any other
director or executive officer. None of the Company's officers or directors hold
any directorships in any other public company.
Director Compensation
None of the Company's directors received any compensation during the most
recent fiscal year for serving in their position as a director. Members of the
Board of Directors may receive stock options issued under the stock option plan
voted upon at the Annual Meeting of Shareholders held June 24, 1998.
EXECUTIVE COMPENSATION
The following table sets out the annual compensation paid to Ralph Armijo
for the last three fiscal years and to Andrew Davis during the last fiscal year.
No other executive officer has received annual compensation in excess of
$100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
ANNUAL LONG TERM COMPENSATION ALL OTHER
NAME AND COMPENSATION RESTRICTED STOCK COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS OPTIONS ($)
- ------------------ ---- --------- -------- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ralph Armijo, Chief 1997 $156,141 $12,869 0 0 $9,600(1)
Executive Officer 1996 $124,384 $ -0- 0 0 $9,000(1)
1995 $111,444 $24,000 0 0 $9,000(1)
Andrew Davis, 1997 $100,625 $ 5,250 0 0 $4,800(1)
Director (2)
- ----------
(1) Consists of an automobile allowance.
(2) The Company was not a reporting company pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 at any time during 1996 or 1995.
Information concerning the compensation for 1996 or 1995 of the person
indicated has not previously been required to be reported and therefore is
not provided herein.
</TABLE>
36
<PAGE>
No officer or director received any form of compensation other than cash
during 1997 and no long term incentive, bonus or option plans were or are in
place. The Compensation Committee may at its discretion, award discretionary
bonuses in the future.
The current annual salaries of the executive officers of the Company are as
follows: Ralph Armijo, President, $150,000; Kenneth Bero, Vice President of
Sales, $85,000; Patrick Mawhinney, Chief Financial Officer, $87,500; and Harold
Anderson II, Vice President of Automotive, $87,500. Total annual compensation
for all executive officers is $410,000.
Employment Agreements and Termination of Employment and Change-in-Control
Arrangements
- --------------------------------------------------------------------------------
The Company entered an Employment Agreement with Mr. Armijo that is
effective May 1, 1998. The term of that agreement is for one year and it may
renew automatically for two additional one-year periods provided that neither
Mr. Armijo nor the Company provides the other with notice of its intent to not
renew the agreement at least thirty days before the anniversary date of the
agreement. Mr. Armijo's current annual salary under the agreement is $150,000
and his salary is reviewed annually. The agreement also provides that Mr. Armijo
will be paid an annual bonus. If Mr. Armijo remains employed with the Company
through the first anniversary date of the agreement, the Company must pay Mr.
Armijo a special bonus (the "Special Bonus") in the event that there is a
"Change in Control" of the Company (as defined in the agreement). The Special
Bonus will be equal to Mr. Armijo's then effective annual salary, plus the
greater of (i) the annual bonus paid or payable for the most recently completed
fiscal year during the term of the agreement, and (ii) the average of the
bonuses paid or payable to Mr. Armijo in respect of 1997, 1996 and 1995 (the
higher of the two numbers is referred to as the "Highest Annual Bonus"). The
agreement provides that if the Company terminates Mr. Armijo other than for
"Cause" or "Disability" (as such terms are defined in the agreement) or Mr.
Armijo terminates his employment either for "Good Reason" (as such term is
defined in the agreement) or without any reason during a thirty day period
immediately following May 1, 1999, the Company must pay Mr. Armijo a lump sum
cash payment equal to (i) his annual salary through the date of termination,
(ii) the Highest Annual Bonus through the date of termination, (iii) the Special
Bonus, if any, (iv) an amount equal to the product of two times his then
effective annual salary, the Highest Annual Bonus and the Special Bonus, if any.
The Company may terminate Mr. Armijo's employment for "Cause" and shall be
obligated only to pay Mr. Armijo his annual salary through the date of
termination.
401(k) Plan.
- ------------
The Company has a 401(k) profit sharing plan (the "Plan"). Eligible
employees may make voluntary contributions to the Plan. The amount of employee
contributions is limited as specified in the Plan. The Company may, at its
discretion, make additional contributions to the Plan. The Company made no
contributions in 1997.
Stock Option Plan.
- ------------------
The officers of the Company may receive stock options issued under the
Company's stock option plan.
37
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of the date of this Prospectus, the
Common Stock ownership of each person known by the Company to be the beneficial
owner of five percent or more of the Company's Common Stock, all directors
individually, each executive officer and all directors and executive officers of
the Company as a group. Except as otherwise indicated, each person has sole
voting and investment power, as well as record and beneficial ownership, with
respect to the shares shown. As of the date of this Prospectus, there were
4,960,024 shares of Common Stock outstanding.
COMMON STOCK PERCENT OF
NAME AND ADDRESS OF BENEFICIALLY BENEFICIAL
BENEFICIAL OWNER(1) OWNED OWNERSHIP
------------------- ------------ ---------
Ralph Armijo........................... 831,659 16.8%
Patrick R. Mawhinney................... 149,357 3.0%
Harold Anderson II..................... 61,073 1.2%
Andrew Davis........................... 21,250 (3)
Gerald A. Marroney..................... -0- 0%
Lloyd G. Chavez, Jr.................... 4,250 (2) (3)
Kenneth P. Bero........................ -0- 0%
James Hosch............................ 18,000 (4) (3)
Michael Kranitz........................ 250,000 (5) 5.0%
All directors and executive officers as
a Group (Seven Persons)............. 1,335,589 26.9%
- ------------------------
Rule 13d-3 under the Securities Exchange Act of 1934, involving the
determination of beneficial owners of securities, includes as beneficial owners
of securities, among others, any person who directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise has, or shares,
voting power and/or investment power with respect to such securities; and, any
person who has the right to acquire beneficial ownership of such security within
sixty days through means, including, but not limited to, the exercise of any
option, warrant or conversion of a security. In making this calculation, options
and warrants which are significantly "out-of-the-money" and therefore unlikely
to be exercised within sixty days are not included in the calculation of
beneficial ownership. For this purpose, the Company deems options and warrants
with an exercise price above $7.00 as unlikely to be exercised within the next
sixty days. Any securities not outstanding which are subject to such options,
warrants or conversion privileges are deemed to be outstanding for the purpose
of computing the percentage of outstanding securities of the class owned by such
person, but are not deemed to be outstanding for the purpose of computing the
percentage of the class by any other person.
(1) Except as indicated herein, the address for each person is 14 Inverness
Drive, Building. F, Suite 116, Englewood, Colorado 80112.
(2) LGC Management owns 4,250 shares of Common Stock. Mr. Chavez is President
of LGC Management and may be deemed the beneficial owner of such shares.
(3) Less than one percent.
(4) The number indicated represents 18,000 shares of Common Stock underlying
certain options currently exercisable.
(5) The number indicated includes 61,250 shares of Common Stock owned by Mr.
Kranitz's wife, Abby L. Kranitz. Mr. Kranitz is deemed to beneficially own
the shares held by Ms. Kranitz.
38
<PAGE>
SELLING SECURITY HOLDERS
The following table shows for the Selling Security Holders, (i) the number
of Warrants and shares of Common Stock beneficially owned by them as of July 2,
1998, (ii) the number of Warrants and shares of Common Stock covered by this
Prospectus, and (iii) the number of Warrants and shares of Common Stock to be
retained after this offering, if any.
<TABLE>
<CAPTION>
Number of Number of Number of
Number of Shares of Warrants Shares of
Warrants Common Stock Number of Beneficially Common Stock
Beneficially Beneficially Number of Shares of Owned Beneficially
Owned Before Owned Before Warrants Common Stock After the Owned After
Name the Offering the Offering(1) to be Sold to be Sold Offering(2) the Offering(2)
---- ------------ --------------- ---------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Abbott, David & Linda 9,000 18,000 9,000 18,000 -0- -0-
Abott, David 3,000 6,000 3,000 6,000 -0- -0-
Almeida, Donald, 3,000 6,000 3,000 6,000 -0- -0-
Amico, Guy 869 22,926 869 22,926 -0- -0-
Amico, Roy 5,506 31,537 5,506 31,537 -0- -0-
Anderson, Evan -0- 800 -0- 800 -0- -0-
Andersen, Sherry -0- 4,000 -0- 4,000 -0- -0-
Anesthesia Pension Plan 12,000 24,000 12,000 24,000 -0- -0-
Apera, Luca 3,000 6,000 3,000 6,000 -0- -0-
Balog, John or Cecilia 3,000 6,000 3,000 6,000 -0- -0-
Bausch, Eric 6,000 12,000 6,000 12,000 -0- -0-
Boehler, Jeffrey or Barbara -0- 3,000 -0- 3,000 -0- -0-
Buckman, Jim -0- 250 -0- 250 -0- -0-
Buddie, Gina 869 5,638 869 5,638 -0- -0-
Burgin, Mark or Tammy 3,000 6,000 3,000 6,000 -0- -0-
Burton, Robert 10,000 18,000 10,000 18,000 -0- -0-
Campbell, Michael 3,000 6,000 3,000 6,000 -0- -0-
Castro, William 9,000 18,000 9,000 18,000 -0- -0-
Cissel, Vincent 6,000 12,000 6,000 12,000 -0- -0-
Comcor Holding Inc. 8,000 16,000 8,000 16,000 -0- -0-
Cooley, John 9,000 18,000 9,000 18,000 -0- -0-
Crane Rental Service 3,000 6,000 3,000 6,000 -0- -0-
Crowe, Robert -0- 3,000 -0- 3,000 -0- -0-
Daly, Ken -0- 1,500 -0- 1,500 -0- -0-
Daroga, Norrie 14,000 28,000 14,000 28,000 -0- -0-
D Alessio, Robert 3,000 6,000 3,000 6,000 -0- -0-
Derescher, Eddie or Linda 3,000 6,000 3,000 6,000 -0- -0-
Dietz, Thomas 14,000 28,000 14,000 28,000 -0- -0-
Esposito, Chris -0- 1,000 -0- 1,000 -0- -0-
Evans, Kathyleen 3,000 6,000 3,000 6,000 -0- -0-
Friend, Doug -0- 250 -0- 250 -0- -0-
Gardener, John 12,000 24,000 12,000 24,000 -0- -0-
Gardener, John Lewis 12,000 24,000 12,000 24,000 -0- -0-
Garry, John 3,000 6,000 3,000 6,000 -0- -0-
Goldstein, Scott 869 22,925 869 22,925 -0- -0-
Hall, Robert & Pat 6,000 12,000 6,000 12,000 -0- -0-
Harmon, Homer 12,000 24,000 12,000 24,000 -0- -0-
Harmon, Homer or Kathy 6,000 12,000 6,000 12,000 -0- -0-
Hartley, Douglas 6,000 12,000 6,000 12,000 -0- -0-
Helen S. Nagel Trustee -0- 27,500 -0- 27,500 -0- -0-
Herdina, Bob -0- 1,550 -0- 1,550 -0- -0-
Hill, Anthony 3,000 6,000 3,000 6,000 -0- -0-
Homburger, John or Susan 6,000 12,000 6,000 12,000 -0- -0-
Hosch, James(3) 11,298 58,596 11,298 58,596 -0- -0-
Houston, Kia -0- 250 -0- 250 -0- -0-
Itokazu, John or Sheila 3,000 6,000 3,000 6,000 -0- -0-
Kaiser, Doug 5,506 40,037 5,506 40,037 -0- -0-
Kent, David & Priscilla 6,000 12,000 6,000 12,000 -0- -0-
Koller, Paul or Betsy 6,000 12,000 6,000 12,000 -0- -0-
Krenek, Lenny -0- 250 -0- 250 -0- -0-
Landis, David J. 9,000 18,000 9,000 18,000 -0- -0-
Leiberman, Norman -0- 250 -0- 250 -0- -0-
Levenrich, David 33,000 66,000 33,000 66,000 -0- -0-
39
<PAGE>
Lorber, David -0- 1,000 -0- 1,000 -0- -0-
Lorge, Robert 6,000 6,000 6,000 6,000 -0- -0-
Lundell, Don & Gail 6,000 6,000 6,000 6,000 -0- -0-
Marks, Randy -0- 250 -0- 250 -0- -0-
Marron, Thomas D. -0- 24,575 -0- 24,575 -0- -0-
McCarter, Larry or Kristy 6,000 12,000 6,000 12,000 -0- -0-
McClintock, Catherine 6,000 12,000 6,000 12,000 -0- -0-
McCollaum, Dixie 3,000 6,000 3,000 6,000 -0- -0-
McCoy, Greg or Betty 3,000 6,000 3,000 6,000 -0- -0-
McGuire, Rich -0- 250 -0- 250 -0- -0-
McKowen, John -0- 68,326 -0- 68,326 -0- -0-
McNamara, Steven 9,000 18,000 9,000 18,000 -0- -0-
McWilliams, Michael 8,000 16,000 8,000 16,000 -0- -0-
Mehigan, Patrick & Ann 6,000 12,000 6,000 12,000 -0- -0-
Miller, Timothy K. -0- 6,750 -0- 6,750 -0- -0-
Montanarella, Paul 9,000 18,000 9,000 18,000 -0- -0-
Morano, Christopher 7,500 15,000 7,500 15,000 -0- -0-
Morrison, Roger 12,000 24,000 12,000 24,000 -0- -0-
Mortensen, Michael V. -0- 10,775 -0- 10,775 -0- -0-
Moser Holdings 24,000 48,000 24,000 48,000 -0- -0-
Murphy, Brett -0- 2,000 -0- 2,000 -0- -0-
Newman, Guy J. -0- 60,575 -0- 60,575 -0- -0-
Nosel, Rob -0- 250 -0- 250 -0- -0-
O'Sullivan, Patrick 3,000 6,000 3,000 6,000 -0- -0-
Parker, Bradley or Brooke 3,000 6,000 3,000 6,000 -0- -0-
Patel, Kaushik or Parul 6,000 -0- 6,000 -0- -0- -0-
Peck, Edgar 6,000 12,000 6,000 12,000 -0- -0-
Penic, Michael & Madeline 6,000 12,000 6,000 12,000 -0- -0-
Phelps, Steven -0- 3,000 -0- 3,000 -0- -0-
Phelps, Steven K. & Kimberly J. -0- 17,100 -0- 17,100 -0- -0-
Pintsopoulos, Tony -0- 2,000 -0- 2,000 -0- -0-
Pirozzi, Tony -0- 500 -0- 500 -0- -0-
Powers, Larry 3,000 6,000 3,000 6,000 -0- -0-
Prestidge, Tom & Valerie 12,000 24,000 12,000 24,000 -0- -0-
Pudelko, Michael 21,000 42,000 21,000 42,000 -0- -0-
Quinn, Sean -0- 250 -0- 250 -0- -0-
Rappaport, Dave -0- 250 -0- 250 -0- -0-
Rappaport, Rick 19,174 72,048 19,174 72,048 -0- -0-
Richter, Scott -0- 1,000 -0- 1,000 -0- -0-
Roberts, Jody Lynn -0- 6,919 -0- 6,919 -0- -0-
Ruggiere, Pete -0- 250 -0- 250 -0- -0-
Ryan, Robert & Jamie 3,000 6,000 3,000 6,000 -0- -0-
Salvatore, Angela -0- 1,000 -0- 1,000 -0- -0-
Salvatore, Frank 5,506 31,537 5,506 31,537 -0- -0-
Sceurman, Joe -0- 500 -0- 500 -0- -0-
Schmidt, Ara -0- 250 -0- 250 -0- -0-
Sciarra, Joseph -0- 2,000 -0- 2,000 -0- -0-
Shulter, Paul 6,000 12,000 6,000 12,000 -0- -0-
Shults, Stanley 4,000 8,000 4,000 8,000 -0- -0-
Shults, Stan or Diane 6,000 12,000 6,000 12,000 -0- -0-
Sibilla, Vic -0- 5,000 -0- 5,000 -0- -0-
Sibilla, Vic & Geri -0- 6,919 -0- 6,919 -0- -0-
Sims, George 6,000 12,000 6,000 12,000 -0- -0-
Sirota, Brian -0- 1,700 -0- 1,700 -0- -0-
Small, Leonard 3,000 6,000 3,000 6,000 -0- -0-
Stone, Douglas 3,000 6,000 3,000 6,000 -0- -0-
Stone, Todd -0- 1,000 -0- 1,000 -0- -0-
Struharik, Paul 3,000 6,000 3,000 6,000 -0- -0-
Texas Cardiovascular Institute 12,000 14,200 12,000 14,200 -0- -0-
Van Vliet, Edward 42,000 84,000 42,000 84,000 -0- -0-
Van Zudan, David L. 6,000 12,000 6,000 12,000 -0- -0-
40
<PAGE>
Vanzuidam, David & Deborah 4,000 8,000 4,000 8,000 -0- -0-
Visconti, Joseph 9,853 55,856 9,853 55,856 -0- -0-
Wagner, David 3,000 6,000 3,000 6,000 -0- -0-
War, William 6,000 12,000 6,000 12,000 -0- -0-
Wechaler, Mike -0- 250 -0- 250 -0- -0-
Weinstein, Dave -0- 250 -0- 250 -0- -0-
White, Jimmy 6,000 12,000 6,000 12,000 -0- -0-
White, Marsha 6,000 12,000 6,000 12,000 -0- -0-
Wilbur, Rick 24,000 48,000 24,000 48,000 -0- -0-
Wyman, Jeff -0- 250 -0- 250 -0- -0-
Wyman, Steve -0- 250 -0- 250 -0- -0-
Yapp, Ronald 6,000 12,000 6,000 12,000 -0- -0-
Zadrozny, Greg -0- 250 -0- 250 -0- -0-
Totals 623,950 1,703,539 623,950 1,703,539 -0- -0-
- ----------
(1) The number of shares of Common Stock indicated includes those shares
underlying Warrants and certain Options held by a Selling Security Holder.
(2) The Selling Security Holder will not own in excess of one (1%) percent of
the Company's outstanding securities subsequent to the offering when
combined with other offerings in which other securities owned by the
Selling Security Holder have been registered.
(3) James Hosch is a director of the Company.
Information set forth in the tables regarding the securities owned by each
Selling Security Holder is provided to the best knowledge of the Company
based on information furnished to the Company by the respective Selling
Security Holder and/or available to the Company through its stock transfer
records.
</TABLE>
PLAN OF DISTRIBUTION
The Warrants and shares of Common Stock offered hereby may be sold by the
Selling Security Holders or by pledgees, donees, transferees or other
successors-in-interest (including sales after exercise of the Warrants). Such
sales may be made in the over-the-counter market through Nasdaq, in privately
negotiated transactions, or otherwise, at prices and at terms then prevailing,
at prices related to the then current market prices or at negotiated prices. The
Warrants and shares of Common Stock may be sold by one or more of the following
methods: (a) a block trade in which the broker or dealer so engaged will attempt
to sell the stock as agent but may position and resell a portion of the block as
principal in order to consummate the transaction; (b) a purchase by a broker or
dealer as principal, and the resale by such broker or dealer for its account
pursuant to this Prospectus, including resale to another broker or dealer; or
(c) ordinary brokerage transactions and transactions in which the broker
solicits purchasers. In effecting sales, brokers or dealers engaged by a Selling
Security Holder may arrange for other brokers or dealers to participate. Any
such brokers or dealers will receive commissions or discounts from a Selling
Security Holder in amounts to be negotiated immediately prior to the sale. Such
brokers or dealers and any other participating brokers or dealers may be deemed
to be "underwriters" within the meaning of the Securities Act. Any gain realized
by such a broker or dealer on the sale of shares which it purchases as a
principal may be deemed to be compensation to the broker or dealer in addition
to any commission paid to the broker by a Selling Security Holder.
41
<PAGE>
The securities covered by this Prospectus may in the future also be sold
under Rule 144 instead of under this Prospectus. Rule 144 provides an exemption
from registration for the resale of securities by persons other than the issuer
after the securities have been held by persons for at least one (1) year from
original issuance, and such securities are sold in strict compliance with Rule
144 requirements and maximum number of shares requirements. The Company will not
receive any portion of the proceeds of the securities sold by the Selling
Security Holders, but will receive amounts upon exercise of Warrants, which
funds will be used for working capital. There is no assurance that the Selling
Security Holders will sell any or all of the securities offered hereby.
The Selling Security Holders have been advised by the Company that during
the time each is engaged in distribution of the securities covered by this
Prospectus, each must comply with Rule 10b-5 and Regulation M under the Exchange
Act, and pursuant thereto: (i) each must not engage in any stabilization
activity in connection with the Company's securities; (ii) each must furnish
each broker through which securities covered by this Prospectus may be offered
the number of copies of this Prospectus which are required by each broker; and
(iii) each must not bid for or purchase any securities of the Company or attempt
to induce any person to purchase any of the Company's securities other than as
permitted under the Exchange Act. Any Selling Security Holders who may be
"affiliated purchasers" of the Company as defined in Regulation M, have been
further advised that pursuant to Securities Exchange Act Release 34-38067
(December 20, 1996), they must coordinate their sales under this Prospectus with
each other and the Company for purposes of Regulation M.
CERTAIN TRANSACTIONS
In October 1993, Arthur Armijo, brother of the Company's President, Ralph
Armijo, made a $119,199 loan to the Company. The loan was evidenced by a
promissory note dated October 1, 1993 bearing interest at the rate of 5% per
year. The note was paid in full in February 1997 out of the proceeds of the
Company's public offering.
In November 1993, Arthur Armijo and Ralph Armijo each personally guaranteed
a line of credit in the amount of $200,000 extended by Vectra Bank, Denver,
Colorado, to the Company. Such line of credit and Messrs. Armijo's personal
guarantees were terminated in February 1996. No compensation was paid by the
Company for such personal guarantees. In February 1996, Arthur Armijo and Ralph
Armijo each personally guaranteed the factoring arrangement of the Company with
Colorado State Bank of Denver for a maximum of $750,000. No compensation was
paid by the Company for such personal guarantees. The factoring arrangement was
terminated in February 1997.
In July 1996, Littleton Land Company made a $182,500 loan to the Company.
The loan was evidenced by a non-interest bearing promissory note with a maturity
date of August 31, 1996. Such note was prepaid in full on August 22, 1996. John
McKowen, an employee of the Company, is an affiliate of Littleton Land Company.
In August 1996, the Company granted options to Mr. McKowen to purchase 212,500
shares of Common Stock at an exercise price of $4.12 per share, exercisable from
February 1999 to August 2001.
On March 31, 1996, Patrick Mawhinney, a shareholder, director and Chief
Financial Officer of the Company, made a $45,110 loan to IPI. The loan is
evidenced by a promissory note dated March 31, 1996, which provides for the
accrual of interest at a fixed rate of 10% per year and a maturity date of
December 31, 1997. The loan was repaid in April 1997.
In June 1996, Schneider Mawhinney & Associates, P.C. advanced $32,500 to
IPI. This advance was repayable on demand without interest. Patrick Mawhinney's
spouse is a principal of Schneider Mawhinney & Associates. In July 1996, Mr.
Mawhinney made a loan to the Company in the amount of $30,000, evidenced by a
promissory note dated July 26, 1996 and bearing interest at the rate of 9.75
percent per year. These loans were repaid in February 1997 out of the proceeds
of the Company's public offering.
In July 1996, Cindy Simmons, a principal shareholder of the Company, was
issued a promissory note of the Company in the amount of $75,000 as part of the
purchase price for IPI. The promissory note provides for monthly payments of
$6,250 due on the first day of each month beginning August 1, 1996 and maturing
on July 1, 1997. The note was repaid in July 1997.
In August 1996, Ralph Armijo made a loan to the Company in the amount of
$70,000, evidenced by a promissory note dated August 6, 1996 and bearing
interest at the rate of 9.75 percent per year. Such note was prepaid in full in
October 1996.
In January 1997, Ralph Armijo and Patrick Mawhinney guaranteed a short term
promissory note of the Company in the amount of $70,000. This note was repaid
from the resale of equipment which was purchased with the borrowed funds. No
compensation was paid by the Company for such guarantees.
42
<PAGE>
In October 1997, Pat Mawhinney made a $30,000 loan to the Company,
evidenced by a promissory note dated October 5, 1997, which did not bear
interest. The loan was repaid in November 1997.
In March 1998, Pat Mawhinney made a $40,000 loan to the Company, evidenced
by a promissory note dated March 13, 1998, which did not bear interest. The loan
was repaid on March 31, 1998.
In October 1997, Ralph Armijo guaranteed a line of credit in the amount of
$750,000 extended to the Company by USA Funding, Dallas, Texas. No compensation
was paid by the Company for such personal guarantee.
James Hosch, a former Executive Vice President of Joseph Charles &
Associates, Inc., has been a director of the Company since June, 1998. JCA
received $143,750 in commissions and $35,938 in expenses as the placement agent
for a private placement of an aggregate of $1,437,500 principal amount of the
Company's 10% Unsecured Subordinated Convertible Promissory Notes. The notes
were sold from August 1996 until October 18, 1996, and were automatically
converted into an aggregate of 349,126 units in the Company's initial public
offering of securities.
JCA was the managing underwriter for the Company's initial public offering
of securities. The Company offered 1,000,000 units consisting of one share of
the Company's Common Stock and one common stock purchase warrant ("Warrant"). Of
the 1,000,000 shares of Common Stock and 1,000,000 Warrants included in the
offering, 755,000 shares of Common Stock and 1,000,000 Warrants were sold by the
Company and 245,000 shares of Common Stock were sold by certain shareholders as
the Company. The units were sold on a firm commitment basis and JCA received a
10% discount on the public offering price of $6.00 per unit. JCA received
pursuant to the underwriting agreement for that offering a non-accountable
expense allowance equal to 3% of the total proceeds of the offering, or
$180,000. The Company also agreed to retain JCA as a financial consultant for a
period of two years, commencing on February 10, 1997 for a fee of $3,000 per
month. The Company agreed pursuant to the underwriting agreement to sell JCA,
for an aggregate purchase price of $100 as additional compensation in connection
with the offering, options to purchase up to 100,000 shares of the Company's
Common Stock. Those options are exercisable for four years beginning on February
10, 1998 and at an exercise price of $7.38 per share.
The Company also has entered into an engagement letter with JCA to assist
the Company to complete an offering of up to 600,000 units, with each unit
consisting of one share of Common Stock and one Warrant, for an offering price
of $4.50 per unit, or an aggregate offering price of $2,700,000. In
consideration for its services, the Company has agreed to pay JCA a sales
commission of 10% of the funds raised in the offering. JCA also is entitled to
purchase a number of units equal to 10% of the units sold in the offering for a
period of five years from the date of closing of the offering at a purchase
price of $4.50 per unit. JCA also is entitled to receive a 3% non-accountable
expense allowance based on all funds raised in the offering. The Company issued
358,476 in that offering. That offering was closed during April 1998 with an
aggregate of 594,500 Units being sold. On February 16, 1998 the Company entered
into an agreement with JCA to engage it on an exclusive basis to complete the
private placement that was started in November 1997.
Although the foregoing transactions were determined without arm's length
negotiations and necessarily involved conflicts of interest between the
interests of the related parties and the Company, the Company believes that all
of the foregoing transactions were entered into on terms no less favorable to
the Company than could have been obtained from independent third parties. All
future transactions by the Company with officers, directors and 5% stockholders
and their affiliates will be entered into only if a majority of the outside
directors determine that the terms of such transactions are no less favorable to
the Company than could be obtained from unaffiliated parties. There are
currently no new proposed related party transactions contemplated by the
Company.
43
<PAGE>
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 20,000,000 shares of Common Stock, no
par value, of which 4,718,721 shares are currently outstanding. Holders of
Common Stock are entitled to dividends when, as and if declared by the Board of
Directors out of funds available therefor, subject to any priority as to
dividends for any preferred stock that may be outstanding. There currently is no
preferred stock authorized or outstanding. Holders of Common Stock are entitled
to cast one vote for each share held at all stockholder meetings for all
purposes including the election of directors. Cumulative voting for the election
of directors is not permitted. The holders of a majority of the Common Stock
issued and outstanding and entitled to vote, in person or by proxy, constitute a
quorum at meetings of stockholders and the vote of the holders of a majority of
Common Stock present at such a meeting will decide any question brought before
such meeting, except for certain actions such as amendments to the Company's
Articles of Incorporation, mergers or dissolutions, all of which require the
vote of the holders of a majority of the outstanding Common Stock. Upon
liquidation or dissolution, the holder of each outstanding share of Common Stock
will be entitled to share ratably in the net assets of the Company legally
available for distribution to such stockholder after the payment of all debts
and other liabilities and after distributions to preferred stockholders, if any,
legally entitled thereto. No holder of Common Stock has any preemptive or
preferential rights to purchase or subscribe for any part of any unissued or any
additional authorized stock or any securities of the Company convertible into
shares of its stock, nor does any holder of Common Stock have redemption or
conversion rights. The outstanding shares of Common Stock are, and the Common
Stock offered hereby will be when issued and paid, fully paid and nonassessable.
Stock Purchase Warrants
The Company currently has 2,043,626 Warrants outstanding. Each Warrant
entitles the holder to purchase one share of Common Stock at an exercise price
equal to $7.20, subject to adjustment, for a period of five years commencing on
February 10, 1997. No holder of Warrants, as such, will be entitled to vote or
receive dividends or be deemed the holder of shares of Common Stock for any
purpose whatsoever until such Warrants have been duly exercised and the purchase
price has been paid in full. Each Warrant will be redeemable by the Company for
$.05 per Warrant at any time commencing on February 10, 1998 (which period may
be reduced or waived by JCA in its sole discretion), upon thirty days' prior
written notice, at any time when the closing price per share of Common Stock for
twenty consecutive trading days within the thirty-day period prior to the date
notice of redemption is given equals or exceeds $8.40 and at such time there is
a current effective registration statement covering the shares of Common Stock
underlying the Warrants. The Company presently expects to call all of the
Warrants for redemption as soon as permitted provided that a current prospectus
relating to the Common Stock underlying such Warrants is effective at that time.
In the event the Company gives notice of its intention to redeem, a holder may
exercise his Warrants within the period set forth in the notice of redemption or
they will be redeemed upon payment of the redemption price. The Warrants will be
entitled to the benefit of adjustments in the exercise price and in the number
of shares of Common Stock delivered upon the exercise thereof upon the
occurrence of certain events, such as stock dividends, stock splits,
recapitalizations, consolidations or mergers.
The Warrants will be exercisable only when there is a current effective
registration statement covering the shares of Common Stock underlying the
Warrants. If the Company does not or is unable to maintain a current effective
registration statement, the Warrant holders will be unable to exercise the
Warrants and the Warrants may become valueless. Because the Warrants may be
transferred, it is possible that the Warrants may be acquired by persons
residing in states where the Company has not registered them, or is not exempt
from registration, such that the shares of Common Stock underlying the Warrants
may not be sold or transferred upon exercise of the Warrants. Warrant holders
residing in those states would have no choice but to attempt to sell their
Warrants or let them expire unexercised.
Each Warrant will be exercisable by surrendering the Warrant certificate,
with the formal subscription form on the reverse side of the Warrant certificate
properly completed and executed, together with payment of the exercise price to
the Warrant Agent. Prior to their expiration or redemption by the Company, the
Warrants will be exercisable from time to time in whole or in part. If less than
all of the Warrants evidenced by a Warrant certificate are exercised, a new
Warrant certificate will be issued for the remaining number of Warrants.
44
<PAGE>
The Company has agreed with JCA not to solicit Warrant exercises other than
through the JCA. Upon exercise of any Warrants, the Company will pay JCA a fee
of three percent of the aggregate exercise price, if (i) the market price of the
Common Stock on the date the Warrant is exercised is greater than the then
exercise price of the Warrant; (ii) the exercise of the Warrant was solicited by
a member of the National Association of Securities Dealers, Inc., who is
designated in writing by the holder exercising the Warrant; (iii) the Warrant is
not held in a discretionary account except where prior specific written approval
for the exercise has been received; (iv) disclosure of compensation arrangements
was made both at the time of the offering and at the time of exercise of the
Warrants; (v) the solicitation of the exercise of the Warrant was not in
violation of Regulation M promulgated under the Exchange Act; and (vi) JCA
provides bona fide services in connection with the solicitation of the Warrant.
No solicitation fee will be paid to JCA on Warrants voluntarily exercised at any
time without solicitation. In addition, unless granted an exemption by the
Commission from Regulation M under the Exchange Act, JCA will be prohibited from
engaging in any market making activities or solicited brokerage activities until
the later of the termination of such solicitations activity or the termination
by waiver or otherwise of any right JCA may have to receive a fee for the
exercise of the Warrants following such solicitation. Such a prohibition, while
in effect, could impair the liquidity and market price of the Securities.
Representative's Options
Subject to the terms and condition of the Underwriting Agreement between
the Company and JCA, the Company has sold for an aggregate purchase price of
$100, as additional compensation in connection with the initial public offering,
options (the "Representative's Options") to purchase up to 100,000 shares of
Common Stock. The Representative's Options are exercisable for a four-year
period commencing on February 10, 1998 and entitle their holders to purchase up
to 100,000 shares of Common Stock at $7.38 per share subject to adjustment in
certain events. The Representative's Options contain anti-dilution provisions
providing for adjustment of the exercise prices as well as the number of shares
issuable upon the occurrence of certain events, including the issuance of shares
of Common Stock or Warrants at a price per share or per Warrant less than the
exercise price or the market price of the security, or in the event of any
recapitalization, reclassification, stock dividend, stock split, stock
combination or similar transaction. The Representative's Options grant to the
holders thereof certain piggyback and demand registration rights as described
below.
If the holders of at least a majority of the Representative's Options or
the securities underlying them wish to register the Representative's Options or
any of the securities underlying them during the period commencing February 10,
1998 and ending February 10, 2002, the Company has agreed to register or qualify
such securities, one time only, upon the request of the holders of at least a
majority of such Representative's Options or the securities underlying them
("Demand Registration Right"). The Company will bear the full expense of such
registration which may be substantial. If the Demand Registration Right is
exercised, the Company at such time at its option may purchase the
Representative's Options for the difference between their exercise price and
fair market value of the shares issuable upon exercise. In addition, the Company
has also agreed for a period of five years commencing February 10, 1997 to give
notice to the holder or holders of the Representative's Options, or the Common
Stock underlying the Representative's Options, of its intention to file a
registration statement under the Securities Act, and in that event the holders
of the Representative's Options or the securities underlying such options shall
have the right to request the Company to include the Representative's Options
and the underlying common stock in such Registration Statement.
The holders of the Representative's Options have no voting, dividend or
other rights as shareholders of the Company with respect to the shares of Common
Stock underlying the Representative's Options until the Representative's Options
have been exercised. The Company is obligated at all times to set aside and have
available sufficient number of authorized but unissued shares of Common Stock to
be issued upon exercise of the Representative's Options.
McKowen Options
John McKowen, an employee of the Company, was granted options to purchase
212,500 shares of the Company's Common Stock in August 1996. These options are
exercisable at $4.12 per share commencing February 1999 until August 2001.
Management is registering the common shares underlying these options as part of
this registration statement. On April 13, 1998 Mr. McKowen was issued additional
options to acquire 14,862 shares of the Company's Common Stock at an exercise
price of $4.50 per share commencing September 13, 1998 for a period of five
years from the date of the grant. The exercise price was the closing sales price
of the Company's stock on the date of the grant.
45
<PAGE>
Broker Warrants
Each Broker Warrant entitles its holder to purchase shares of the Company's
Common Stock at a price of $4.50 per share. All Broker Warrants expire on April
13, 2003. If the closing bid price of the Company's Common Stock is equal to or
above $8.40 per share for twenty consecutive trading days at any time prior to
the expiration date, the Company may call the Broker Warrants. The Broker
Warrants will be entitled to the benefit of adjustments in the exercise price
and in the number of shares of Common Stock delivered upon the exercise thereof
upon the occurrence of certain events, such as stock dividends, stock splits,
recapitalizations, consolidations or mergers.
Rehire Warrants
Each Rehire Warrant entitles its holder to purchase shares of the Company's
Common Stock at a price of $3.50 per share. All Rehire Warrants expire on
February 15, 2003. If the closing bid price of the Company's Common Stock is
equal to or above $8.40 per share for twenty consecutive trading days at any
time prior to the expiration date, the Company may call the Rehire Warrants. The
Rehire Warrants will be entitled to the benefit of adjustments in the exercise
price and in the number of shares of Common Stock delivered upon the exercise
thereof upon the occurrence of certain events, such as stock dividends, stock
splits, recapitalizations, consolidations or mergers.
46
<PAGE>
Transfer Agent and Registrar
The transfer agent for the Company's Common Stock and the Warrant Agent for
the Company's Warrants is American Securities Transfer & Trust, Inc.
SHARES ELIGIBLE FOR FUTURE SALE
The Company currently has 4,960,024 shares of Common Stock outstanding, of
which 1,948,128 shares of Common Stock are freely tradable without restriction
or further registration under the Securities Act, except for any shares
purchased by an affiliate of the Company (in general, a person who has a control
relationship with the Company), which shares will be subject to the resale
limitations of Rule 144 under the Securities Act. The remaining 3,012,076 shares
of Common Stock are "restricted securities" as that term is defined under Rule
144 promulgated under the Securities Act and may only be sold pursuant to a
registration statement under the Securities Act, in compliance with the
exemption provisions of Rule 144, or pursuant to another exemption under the
Securities Act. Rule 144 provides, in essence, that a person (including a group
of persons whose shares are aggregated) and including any person who may be
deemed an "affiliate" of the Company, as that term is defined under the
Securities Act, who has satisfied a one-year holding period for such restricted
securities may sell within any three-month period, under certain circumstances,
an amount of restricted securities which does not exceed the greater of one
percent of that class of the Company's outstanding securities or the average
weekly trading volume of that class of securities during the four calendar weeks
prior to such sale. Sales under Rule 144 are also subject to certain manner of
sale provisions, notice requirements and the availability of current public
information about the Company. In addition, pursuant to Rule 144, persons who
are not affiliated with the Company and who have held their restricted
securities for at least two years are not subject to the quantity limitations or
the manner of sale restrictions of the rule. A sale of shares by the Company's
current shareholders, whether pursuant to Rule 144 or otherwise, may have a
depressing effect upon the market price of the Company's Common Stock and
Warrants in any market for them that may develop. To the extent that these
shares enter the market, the value of the Common Stock in the over-the-counter
market may be reduced. See "Risk Factors."
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock commenced trading on the Nasdaq SmallCap Market
under the symbol "NVDC" on February 11, 1997. The Company also has a class of
common stock purchase warrants ("Warrants") listed on the Nasdaq SmallCap Market
under the symbol "NVDCW." The Warrants also commenced trading on February 11,
1997. The quotations set forth below reflect inter-dealer prices, without retail
mark-up, mark-down or commission and many not represent actual transactions.
Common Stock Warrants
-------------------- ---------------------
Quarter Ended High Low High Low
March 31, 1997 $5.625 $5.125 $0.750 $0.625
June 30, 1997 $6.000 $3.250 $0.875 $0.375
September 30, 1997 $7.000 $5.250 $1.031 $0.625
December 31, 1997 $7.000 $4.063 $1.031 $0.025
March 31, 1998 $7.125 $3.000 $0.891 $0.050
June 30, 1998 $6.813 $5.750 $1.250 $0.625
September 30, 1998 $7.219 $2.438 $1.250 $0.375
December 31, 1998 $6.000 $2.063 $0.938 $0.188
The closing price as of January 26, 1999 was $9.25 and $2.50 for the Common
Stock and Warrants respectively.
As of January 8, 1999, the Company had 78 common shareholders of record and
believes that approximately 1,400 persons beneficial owns street named
positions.
The Company has not declared any cash dividends on its common shares for
the last two fiscal years. The Company currently intends to retain funds from
earnings, if any, from future grow and therefore does not intend to pay any cash
dividends in the foreseeable future on its Common Stock. The Company is not
currently a party to any agreement restricting the payment of dividends.
47
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the shares offered hereby have been
passed upon for the Company by Ballard Spahr Andrews & Ingersoll, LLP, Denver,
Colorado.
EXPERTS
The Company's financial statements for the year ended December 31, 1997 in
this Prospectus have been audited by Hein + Associates LLP, independent
certified public accountants, to the extent and for the periods set forth in
their report, and are set forth herein in reliance upon such report given upon
the authority of said firm as experts in auditing and accounting.
SECURITIES AND EXCHANGE COMMISSION POSITION ON CERTAIN INDEMNIFICATION
The Colorado Business Corporation Act provides for indemnification by a
corporation of costs incurred by directors, employees, and agents in connection
with an action suit, or proceeding brought by reason of their position as a
director, employee, or agent. The person being indemnified must have acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation.
The Company's Articles of Incorporation obligate the Company to indemnify
its directors and officers to the fullest extent permitted under Colorado law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
48
<PAGE>
NAVIDEC, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditor's Report................................................F-2
Balance Sheets - September 30, 1998 (Unaudited) and December 31, 1997.......F-3
Statements of Operations and Comprehensive Loss - For the Nine Months Ended
September 30, 1998 and 1997 (Unaudited), and for the Years Ended
December 31, 1997 and 1996..........................................F-4
Statements of Changes in Stockholders' Equity (Deficit) - For the
Nine Months Ended September 30, 1998 and 1997 (Unaudited),
and for the Years Ended December 31, 1997 and 1996..................F-5
Statements of Cash Flows - For the Nine Months Ended September 30, 1998
and 1997 (Unaudited), and for the Years Ended December 31,
1997 and 1996.......................................................F-6
Notes to Financial Statements...............................................F-7
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
NAVIDEC, Inc.
Englewood, Colorado
We have audited the accompanying balance sheet of NAVIDEC, Inc. as of December
31, 1997 and the related statements of operations and comprehensive loss,
changes in stockholders' equity (deficit), and cash flows for the years ended
December 31, 1997 and 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1997, and the results of its operations and its cash flows for the years ended
December 31, 1997 and 1996, in conformity with generally accepted accounting
principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
March 5, 1998
F-2
<PAGE>
<TABLE>
<CAPTION>
NAVIDEC, INC.
BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1998 1997
---- ----
(Unaudited)
ASSETS
------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 395,000 $ 369,000
Accounts receivable:
Trade, net of $50,000 allowance for doubtful accounts 1,523,000 726,000
Retainage -- 21,000
Costs and estimated earnings in excess of billings 325,000 106,000
Note receivable, related party 23,000 60,000
Inventories 502,000 549,000
Prepaid expenses and other current assets 247,000 86,000
----------- -----------
Total current assets 3,015,000 1,917,000
PROPERTY AND EQUIPMENT, net 808,000 713,000
OTHER ASSETS:
Intangibles, net 84,000 169,000
Restricted certificate of deposit -- 300,000
----------- -----------
TOTAL ASSETS $ 3,907,000 $ 3,099,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of capital lease obligations $ 36,000 $ 37,000
Notes payable 578,000 63,000
Accounts payable 1,032,000 778,000
Accrued liabilities 245,000 171,000
Payable to factor 202,000 190,000
----------- -----------
Total current liabilities 2,093,000 1,239,000
----------- -----------
CAPITAL LEASE OBLIGATIONS, net of current portion 69,000 95,000
NOTES PAYABLE, net of current portion -- 215,000
COMMITMENTS AND CONTINGENCIES (Notes 2 and 8)
STOCKHOLDERS' EQUITY:
Common stock, no par value; 20,000,000 shares authorized;
3,606,000 and 3,201,000 shares issued and outstanding,
respectively 8,619,000 6,768,000
Accumulated deficit (6,874,000) (5,218,000)
----------- -----------
Total stockholders' equity 1,745,000 1,550,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,907,000 $ 3,099,000
=========== ===========
See accompanying notes to these financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAVIDEC, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE NINE
MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------- ------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
NET SALES $ 5,678,000 $ 4,877,000 $ 6,008,000 $ 5,470,000
Cost of sales 3,733,000 3,234,000 4,219,000 4,425,000
----------- ----------- ----------- -----------
GROSS MARGIN 1,945,000 1,643,000 1,789,000 1,045,000
Operating expense 3,496,000 2,959,000 4,367,000 2,259,000
----------- ----------- ----------- -----------
OPERATING LOSS (1,551,000) (1,316,000) (2,578,000) (1,214,000)
OTHER INCOME (EXPENSE):
Interest expense, net (101,000) (255,000) (236,000) (204,000)
Other (4,000) 1,000 12,000 3,000
Impairment of goodwill -- -- (1,305,000) --
----------- ----------- ----------- -----------
Other, Net (105,000) (254,000) (1,529,000) (201,000)
----------- ----------- ----------- -----------
NET LOSS AND COMPREHENSIVE LOSS $(1,656,000) $(1,570,000) $(4,107,000) $(1,415,000)
=========== =========== =========== ===========
NET LOSS PER SHARE
(Basic and Diluted) $ (.50) $ (.60) $ (1.47) $ (.73)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
AND EQUIVALENTS OUTSTANDING 3,335,000 2,610,000 2,799,526 1,948,000
=========== =========== =========== ===========
See accompanying notes to these financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAVIDEC, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
COMMON STOCK
------------------------- ACCUMULATED
SHARES Amount Deficit Total
------ ------ ------- -----
<S> <C> <C> <C> <C>
BALANCES, January 1, 1996 217,000 $ 63,000 $ (118,000) $ (55,000)
Exercise of stock options 805,000 2,000 -- 2,000
Compensation recognized related to
transfers of common stock to
employees -- 83,000 -- 83,000
Shares issued in acquisition of IPI 679,000 675,000 -- 675,000
Reclassification of accumulated
deficit in connection with
termination of tax status as a
Subchapter S-Corporation -- (422,000) 422,000 --
Net loss -- -- (1,415,000) (1,415,000)
----------- ----------- ----------- -----------
BALANCES, December 31, 1996 1,701,000 401,000 (1,111,000) (710,000)
Conversion of unsecured promissory
notes to common stock 104,000 1,438,000 -- 1,438,000
Issuance of common stock and
warrants in a public offering, net
of offering costs 1,000,000 3,436,000 -- 3,436,000
Issuance of common stock for
acquisition of TouchSource 207,000 776,000 -- 776,000
Issuance of common stock and
warrants in a private placement,
net of offering costs 189,000 717,000 -- 717,000
Net loss -- -- (4,107,000) (4,107,000)
----------- ----------- ----------- -----------
BALANCES, December 31, 1997 3,201,000 6,768,000 (5,218,000) 1,550,000
Issuance of warrants for loan
(unaudited) -- 300,000 -- 300,000
Issuance of common stock and
warrants in a private placement,
net of offering cost (unaudited) 405,000 1,551,000 -- 1,551,000
Net loss (unaudited) -- -- (1,656,000) (1,656,000)
----------- ----------- ----------- -----------
BALANCES, September 30, 1998
(Unaudited) 3,606,000 $ 8,619,000 $(6,874,000) $ 1,745,000
=========== =========== =========== ===========
See accompanying notes to these financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAVIDEC, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE
MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
-------------------------- --------------------------
1998 1997 1997 1996
----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,656,000) $(1,570,000) $(4,107,000) $(1,415,000)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 422,000 233,000 865,000 173,000
Impairment of goodwill -- -- 1,305,000 --
Amortization of loan discount 75,000 -- -- --
Stock based compensation -- -- -- 83,000
Provision for bad debt -- -- 41,000 59,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (776,000) (800,000) (627,000) (56,000)
Costs and estimated earnings in excess
of billings (219,000) (153,000) (106,000) --
Inventories 47,000 (105,000) (315,000) 8,000
Other assets (161,000) (66,000) (52,000) (33,000)
Increase (decrease) in:
Accounts payable and accrued liabilities 254,000 (536,000) (92,000) 352,000
Other liabilities 74,000 (227,000) (271,000) 198,000
----------- ----------- ----------- -----------
Net cash used in operating activities (1,940,000) (3,224,000) (3,359,000) (631,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Release of restricted certificate of deposit 300,000 -- -- --
Decrease (increase) in notes receivable 37,000 -- -- --
Capital expenditures for property and
equipment (432,000) (403,000) (475,000) (472,000)
Cash acquired in mergers -- 7,000 7,000 5,000
Acquisition costs incurred -- -- (32,000) (38,000)
----------- ----------- ----------- -----------
Net cash used in investing activities (95,000) (396,000) (500,000) (505,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from factoring of accounts receivable 1,059,000 240,000 634,000 491,000
Payments to factor (1,047,000) (747,000) (444,000) --
Proceeds from issuance of common stock 1,551,000 5,349,000 4,153,000 2,000
Proceeds from issuance of notes payable 800,000 300,000 333,000 5,887,000
Proceeds from notes payable - related parties 40,000 -- -- --
Payment on notes payable - related parties (40,000) -- -- --
Payment on notes payable and capital leases (302,000) (1,202,000) (369,000) (4,608,000)
Payment for deferred financing and offering costs -- (38,000) (10,000) (405,000)
----------- ----------- ----------- -----------
Net cash provided by financing activities 2,061,000 3,902,000 4,297,000 1,367,000
INCREASE IN CASH AND CASH EQUIVALENTS 26,000 282,000 438,000 231,000
CASH AND CASH EQUIVALENTS, beginning of
period 369,000 231,000 231,000 --
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 395,000 $ 513,000 $ 669,000 $ 231,000
=========== =========== =========== ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW
INFORMATION:
Cash payments for interest $ 18,000 $ 231,000 $ 79,000 $ 155,000
=========== =========== =========== ===========
Net assets, net of cash assumed,
acquired in merger of NAVIDEC with IPI and TouchSource $ -- $ -- $ 769,000 $ 670,000
=========== =========== =========== ===========
Debentures converted to common stock $ -- $ 1,437,000 $ -- $ --
=========== =========== =========== ===========
Valued assigned to warrants attached to debt financing
$ 300,000 $ -- $ -- $ --
=========== =========== =========== ===========
See accompanying notes to these financial statements.
F-6
</TABLE>
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1997 is Unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------------
Organization and Nature of Operations - The Company was incorporated in the
State of Colorado in 1993 and distributes various high technology and other
products through traditional and electronic channels. Effective on July 1,
1996, the Company merged with Interactive Planet, Inc. (IPI) and as a
result, the Company also provides comprehensive Internet and Intranet
solutions, including design and development of World Wide Web sites,
marketing, database integration, electronic commerce and order
fulfillments. Effective July 31, 1997, the Company acquired TouchSource,
and as a result, the Company designs and markets touch screen computer
kiosks. Subsequent to September 1998, the Company acquired CarWizard.Com,
Inc. and LeaseSource Online, Inc. (see Note 12).
Cash Equivalents - For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments with original maturities of
three months or less to be cash equivalents.
Inventories - Inventories are stated at the lower of cost or market,
determined by the first-in, first-out method and consist primarily of
products held for resale.
Property and Equipment - Property and equipment is stated at cost.
Depreciation is computed over the estimated useful lives of the assets
using the 200% declining balance method generally over a three to seven
year period. Leasehold improvements are amortized on the straight-line
method over the lesser of the lease term or the useful life. Expenditures
for ordinary maintenance and repairs are charged to expense as incurred.
Upon retirement or disposal of assets, the cost and accumulated
depreciation are eliminated from the account and any gain or loss is
reflected in the statements of operations.
Intangibles - Intangibles represents organization costs and the excess of
the purchase price paid over the net liabilities acquired in the IPI and
the TouchSource acquisition, net of amortization costs and impairment loss.
The remaining balance in intangibles will be amortized during 1998.
Impairment of Long-Lived Assets - In fiscal 1997, the Company adopted
Financial Accounting Standards Board Statement No. 121, Accounting for
Impairment of Long-Lived Assets (FAS 121). In the event that facts and
circumstances indicate that the cost of assets or other assets may be
impaired, an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset's carrying amount
to determine if a write-down to market value or discounted cash flow value
is required. Adoption of FAS 121 had no effect on the December 31, 1997
financial statements other than to impair the goodwill associated with the
IPI and TouchSource acquisitions to the value of the expected future cash
flows associated with the acquired assets.
Fair Value of Financial Instruments - The estimated fair values for
financial instruments are determined at discrete points in time based on
relevant market information. These estimates involve uncertainties and
cannot be determined with precision. The carrying amounts of cash, trade
accounts receivable, accounts payable, and accrued liabilities approximate
fair value.
F-7
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1997 is Unaudited)
Revenue Recognition - The Company recognizes revenue upon delivery of its
Internet/Intranet and Kiosk Solutions and Product Distribution goods.
Internet/Intranet and Kiosk Solutions generally begin with consulting
arrangements, which are billed on an hourly basis and/or on a percentage of
completion method on fixed bid projects. Most of the Company's customers
elect to update and expand their Web site frequently, and clients are
billed monthly on a time and materials basis for these services. Additional
sources of ongoing revenue include revenue from advertising sold by the
Company on clients' Web sites, revenue from sales of merchandise and
services over clients' Web sites and revenue from maintenance of client Web
sites. The Company receives and records a percentage of the gross revenue
from advertising and merchandise sales immediately upon completion of these
sales.
Revenues from long-term contracts are recognized on the
percentage-of-completion method for indi vidual contracts, commencing when
progress reaches a point where experience is sufficient to estimate final
results with reasonable accuracy. Revenues are recognized in the ratio that
costs incurred bear to total estimated costs. Changes in job performance,
estimated profitability and final contract settlements may result in
revisions to costs and income, and are recognized in the period in which
the revisions are determined.
Contract costs include all labor costs and those indirect costs related to
contract performance. General and administrative costs are charged to
expense as incurred. Profits on short-term contracts are recorded upon
substantial completion of each contract. Revenues from time and material
contracts are recognized currently as the work is performed. At the time a
loss on a contract becomes known, the entire amount of the estimated
ultimate loss on both short and long-term contracts is accrued.
Costs and estimated earnings in excess of billings on uncompleted
contracts," represents revenues recognized in excess of amounts billed. The
liability, "billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues
recognized.
Loss Per Share - Loss per share is presented in accordance with the
provisions of Statement of Financial Accounting Standards No. 128, Earnings
Per Share (FAS 128). FAS 128 replaced the presentation of primary and fully
diluted earnings (loss) per share (EPS) with a presentation of basic EPS
and diluted EPS. Basic EPS is calculated by dividing the income or loss
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur is securities or other contracts to issue common
stock were exercised or converted into common stock. Basic and diluted EPS
were the same for the nine months ended September 30, 1998 and 1997 and for
the years ended December 31, 1997 and 1996 because the Company had losses
from operations and therefore, the effect of all potential common stocks
was anti-dilutive.
Income Taxes - During 1996, the Company converted to a "C Corporation" and
adopted Statement of Financial Accounting Standards No. 109, which requires
recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
F-8
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1997 is Unaudited)
liabilities are determined, based on the difference between the financial
statements and tax bases of asset and liabilities using enacted tax rates
in effect for the year in which the differences are expected to reverse.
Use of Estimates - The preparation of the Company's financial statements in
conformity with generally accepted accounting principles requires the
Company's management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying notes.
Actual results could differ from those estimates. The Company makes
significant estimates, including the allowance for doubtful accounts and
the life of the excess of purchase price over net assets acquired
(goodwill) in both the IPI merger and the TouchSource acquisition.
Comprehensive Income - In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income. (FAS 130). FAS 130, which is effective for fiscal
years beginning after December 15, 1997, defines comprehensive income as
all changes in shareholder equity exclusive of transactions with owners,
such as capital investments. Comprehensive income includes net income or
loss, changes in certain assets and liabilities that are reported directly
in equity such as changes in minimum pension liabilities. The Company's
comprehensive income (loss) was equal to its net income (loss) for the nine
months ended September 30, 1998 and 1997 and the years ended December 31,
1998 and 1997.
New Pronouncements - SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, was issued in June 1998. This statement establishes
accounting and reporting standards for derivative instruments and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and
measure those instruments at fair value. This statement is effective for
the Company's financial statements for the year ended December 31, 2000 and
the adoption of this standard is not expected to have a material effect on
the Company's financial statements.
SFAS No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits, was issued in February 1998. This statement
revises the disclosure requirement for pensions and other postretirement
benefits. This statement is effective for the Company's financial
statements for the year ended December 31, 1998 and the adoption of this
standard is not expected to have a material effect on the Company's
financial statements.
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, was issued in June 1997. This statement establishes standards
for the way public business enterprises report information about operating
segments. It also establishes standards for related disclosure about
products and services, geographical areas and major customers. This
statement is effective for the Company's financial statements for the year
ended December 31, 1998 and the adoption of this standard is not expected
to have a material effect on the Company's financial statements, however,
additional financial disclosures will be provided for financial segments.
Unaudited Information - The balance sheet as of September 30, 1998 and the
statements of operations for the nine-month periods ended September 30,
F-9
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1997 is Unaudited)
1998 and 1997 were taken from the Company's books and records without
audit. However, in the opinion of management, such information includes all
adjustments (consisting only of normal accruals), which are necessary to
properly reflect the Company's financial position as of September 30, 1998
and the results of operations for the nine months ended September 30, 1998
and 1997. The results of operations for the interim periods presented are
not necessarily indicative of those expected for the year.
2. LIQUIDITY:
----------
The Company has incurred net losses since inception and has experienced
negative cash flows from operations. As described in Note 9, management has
taken the following actions to improve the Company's financial position
through offerings of its common stock.
* In February 1997, the Company completed an initial public
offering for the sale of its common stock and warrants which
resulted in gross proceeds of approximately $4,555,000.
* The Company raised approximately $2,268,000 additional capital in
a private placement from November 1997 through April 1998.
* The Company raised $1,305,000 additional capital in a private
placement during October and November 1998.
* The Company received approximately $944,000 from the exercise of
stock options from October 1998 through January 11, 1998.
The Company is also aggressively working to increase revenues and improve
operating results, which will be necessary to ultimately achieve
profitability. The Company most likely will also be required to raise
additional capital to fund continuing losses. No assurances can be given
that the Company will be successful in raising additional capital or
ultimately achieving profitability.
3. ACQUISITION AND IMPAIRMENT OF IPI AND TOUCHSOURCE TECHNOLOGIES:
---------------------------------------------------------------
Effective July 1, 1996, the Company acquired 100% of the stock of IPI for
679,000 shares of common stock of the Company and a $75,000 note payable in
a purchase transaction. The acquisition was valued at approximately
$750,000 and resulted in goodwill of approximately $850,000 being recorded.
Projected future cash flows associated with the technology previously
developed by IPI declined due to rapidly changing technologies and
increased competition for products developed with the IPI technology. In
addition, in 1997, after the introduction of new Internet solutions by the
Company, management decided to focus the Company on its automotive
solution. As such, the Company reevaluated the goodwill related to this
acquisition and recorded an impairment expense of $598,000, resulting in a
remaining net balance of $20,000. This amount will be amortized during
1998.
F-10
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1997 is Unaudited)
Effective July 31, 1997, the Company acquired 100% of the stock of
TouchSource for 207,000 shares of common stock of the Company in a purchase
transaction. The acquisition was valued at approximately $776,000 and
resulted in goodwill of approximately $859,000 being recorded. Subsequent
to the acquisition, technologies developed more rapidly than expected,
which has reduced the expected future cash flows associated with the
TouchSource technology. Furthermore, the Company intends to integrate the
TouchSource technology with its other products and market it primarily to
the automotive industry, which was not a market focus of TouchSource. As
such, the Company also reevaluated the related goodwill, and recorded an
impairment expense of $707,000, resulting in a remaining net balance of
$80,000. This amount is being amortized during 1998.
The unaudited following pro forma information presents the effect of the
TouchSource merger as if it occurred on January 1, 1996.
For the Years Ended
December 31,
-------------------------
1997 1996
---- ----
Revenue $ 6,362,000 $ 6,046,000
=========== ===========
Net loss $(4,377,000) $(1,541,000)
=========== ===========
Loss per share $ (1.50) $ (.72)
=========== ===========
Common share and equivalents outstanding 2,920,000 2,155,000
=========== ===========
The above pro forma information is not necessarily indicative of the
financial results which would have occurred if such acquisition had taken
place at the earlier date, nor of future operating results.
4. CONCENTRATION OF CREDIT RISK:
-----------------------------
Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed completely to perform as
contracted. Concentrations of credit risk (whether on or off balance sheet)
that arise from financial instruments exist for groups of customers or
counterparties when they have similar economic characteristics that would
cause their ability to meet contractual obligations to be similarly
effected by changes in economic or other conditions described below. The
Company intends to market a significant portion of its products to the
automotive industry in the forthcoming year. This may create a market
concentration in future years. Sales to this industry have not been
significant in the past.
A geographic concentration exists because the Company has historically sold
approximately 40% of its products and services in the State of Colorado
with remaining revenue derived from sales throughout the United States.
Financial instruments that subject the Company to credit risk consist
F-11
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1997 is Unaudited)
principally of accounts receivable. The Company performs periodic credit
evaluations on its customers' financial condition to reduce its exposure to
credit risks.
At December 31, 1997, the Company maintained cash balances with a
commercial bank, which were approximately $414,000 in excess of FDIC
insurance limits.
The Company is dependent on four key suppliers. The Company has contracts
with these suppliers, however, they are not exclusive and can be terminated
at any time. Management believes that while the Company may suffer a
short-term adverse impact, it would be able to replace anyone of these
suppliers.
5. CONTRACTS IN PROGRESS:
----------------------
The following applies to contracts in progress:
September 30, December 31,
1998 1997
---- ----
(Unaudited)
Costs incurred on contracts in progress $109,000 $ 30,000
Estimated earnings 216,000 76,000
-------- --------
325,000 106,000
Less progress billings -- --
-------- --------
Costs and estimated earnings in excess of billings $325,000 $106,000
======== ========
6. PROPERTY AND EQUIPMENT:
-----------------------
Property and equipment consists of the following:
September 30, December 31,
1998 1997
---- ----
(Unaudited)
Furniture, fixtures and equipment $ 1,369,000 $ 1,036,000
Leasehold improvements 43,000 41,000
----------- -----------
1,412,000 1,077,000
Less accumulated depreciation (604,000) (364,000)
----------- -----------
$ 808,000 $ 713,000
=========== ===========
F-12
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1997 is Unaudited)
7. NOTES PAYABLE:
-------------
Notes payable consists of the following:
September 30, December 31,
1998 1997
---- ----
(Unaudited)
Note payable, publicly held corporation, $ 575,000 $ --
at 9%, with principal and interest due
December 31, 1998, collateralized by the
assets of the Company. The Company also
issued options for the purchase of
470,000 shares of common stock to the
lender as consideration for the loan.(1)
Note payable, financial institution, due -- 275,000
in monthly principal installments of
$5,000 plus interest at prime plus 1/4%
(8.75% at December 31, 1997), due July
15, 2002, collateralized by a
certificate of deposit. The loan
agreement contains covenants, which,
among other items, restricts the Company
from incurring certain debt. As of
December 31, 1997, the Company is in
compliance with these covenants.
Other. 3,000 3,000
--------- ---------
578,000 278,000
Less current portion (578,000) (63,000)
--------- ---------
$ -- $ 215,000
========= =========
- ------------------------
(1) The estimated fair value of the options of $300,000 is treated as a
discount on the note payable and is being amortized over 4 months (the term
of the loan) using the interest method.
Note payable, due December 31, 1998 $ 800,000
Less unamortized discount at September 30, 1998 (225,000)
---------
Net carrying value $ 575,000
=========
8. COMMITMENTS AND CONTINGENCIES:
------------------------------
Capital Lease Obligations - The Company leases certain equipment under
agreements classified as capital leases. Equipment under the leases has a
F-13
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1997 is Unaudited)
cost of approximately $174,000 and accumulated amortization of
approximately $43,000. The following is a schedule of future minimum lease
payments under capital leases at December 31, 1997.
Future minimum lease payments $ 177,000
Less amount representing interest (45,000)
---------
Present value of net minimum lease payments 132,000
Less current portion (37,000)
---------
$ 95,000
=========
Office Leases - The Company leases its office space under operating leases
for a term expiring 2001. The lease calls for monthly payments of $10,000.
The aggregate minimum annual lease payments are as follows:
Operating
Year Ending December 31, Leases
------------------------ ------
1998 $ 121,000
1999 111,000
2000 101,000
2001 42,000
---------
Total minimum lease payments $ 375,000
=========
Receivables Factored With Recourse - In 1997, the Company entered into an
agreement with a bank to factor, with full recourse, existing and future
accounts receivable to a maximum of $750,000. The Company must maintain a
cash reserve account with the bank of up to 20% of the face amount of
receivables sold to the bank. The Company's recourse obligation is secured
by all of the Company's assets and is guaranteed by one of the Company's
shareholders. As of September 30, 1998 and December 31, 1997, the face
amount of receivables factored was $263,000 and $249,000 resulting in a
recourse obligation of $202,000 and $190,000, respectively. For financial
presentation purposes, the related receivable and outstanding recourse
liability have been included as an asset and liability, respectively, on
the balance sheet.
Employment Agreements - In July 1996, the Company entered into employment
agreements with two shareholders. The agreements provide for payments
totaling $165,000 per year through June 30, 1998 and include covenants not
to compete during the term of employment and for one year thereafter.
F-14
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1997 is Unaudited)
The Company entered into a service agreement with a shareholder which
commenced on August 1, 1996, and was subsequently extended through February
1999. The agreement provides for payments of approximately $5,000 per month
plus options to purchase 212,500 shares of the Company's common stock at
$4.12 per share. The options are exercisable from April 1999 to October
2001. The agreement also contains a covenant not to compete during the term
of the service agreement and for one year thereafter. During 1997, the
Company loaned $60,000 to this shareholder at 5.5% interest, due in
semi-monthly installments of $2,300 beginning January 1, 1998,
collateralized by the options discussed above.
In April 1997, the Company entered into an additional service agreement
with this shareholder. This agreement provides for additional payments of
$5,000 per month plus 2 1/2% of any capital raised as a result of the
shareholder's efforts in the form of options and warrants for the Company's
stock. These options shall be exercisable at the closing price of the
Company's stock on the date of closing of any transaction, exercisable
commencing six months after each grant and expire five years from the date
of each grant. The agreement expired on October 1, 1997. As a result of
this agreement, 14,862 and 4,717 options were outstanding at September 30,
1998 and December 31, 1997, respectively.
9. STOCKHOLDERS' EQUITY (DEFICIT):
-------------------------------
Termination of S-Corporation Status - Effective July 1, 1996, the Company
terminated its S-Corporation status and became a C-Corporation. As a
result, the Company reclassified its accumulated deficit attributable to
the S-Corporation as a reduction in common stock upon termination of
S-Corporation status.
Public Stock Offering - In February 1997, the Company completed an initial
public stock offering of 1,000,000 Units (comprised of 1,000,000 shares of
common stock and warrants for the purchase of 1,000,000 shares of common
stock) which provided gross proceeds to the Company of approximately
$4,555,000. Included in the 1,000,000 shares were 245,000 shares offered by
the holders of unsecured subordinated convertible promissory notes. Each
warrant allows the holder to purchase one share of common stock at an
exercise price of $7.20 through February 2002. The warrants are redeemable
by the Company at $.05 per warrant upon 30 days notice if the market price
of the common stock for 20 consecutive trading days within the 30-day
period preceding the date the notice is given equals or exceeds $8.40. The
Company also sold to the underwriter at the close of the public offering
underwriters warrants, at a price of $0.001 per warrant, to purchase
100,000 shares of common stock. The underwriters warrants are exercisable
through February 2002 at $7.38 per share.
Private Placement - From November 1997 to April 1998, the Company raised
additional capital in a private placement offering of 594,500 units at
$4.50 per unit (comprised of 594,500 shares of common stock and warrants
for the purchase of 594,500 shares of common stock) which provided gross
proceeds to the Company of approximately $2,268,000. Each warrant allows
the holder to purchase one share of common stock at an exercise price of
F-15
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1997 is Unaudited)
$7.20 for a period extending through February 10, 2002. The warrants are
redeemable by the Company at $.05 per warrant upon 30 days notice if the
market price of the Company's common stock for 20 consecutive trading days
within the 30-day period preceding the date the notice is given equals or
exceeds $8.40. Offering costs associated with the private placement
included sales commissions and non-accountable expenses totaling 13% of the
proceeds of the offering, as well as placement agent warrants to purchase
59,450 units for 5 years from the date of closing at $4.50 per unit and
warrants for the purchase of 250,000 shares of common stock for $3.50 per
share. In addition, the Company agreed to issue any broker or registered
agent who placed four or more units (consisting of 6,000 units or $27,000
each) one broker warrant for each $20 sold. During the private placement,
the Company issued 180,369 warrants to brokers or registered agents. The
warrants are exercisable at $4.50 for five years.
From October 1998 to November 1998, the Company raised additional capital
in a private placement offering of 700,000 shares at $2.00 per share of
common stock which provided gross proceeds to the Company of approximately
$1,305,000. Offering costs associated with the private placement included
sales commissions totaling 8% of the proceeds of the offering. In addition,
the Company agreed to issue any broker or registered agent who placed
50,000 or more shares, one broker warrant for each $20 sold. During the
private placement, the Company issued 48,000 broker warrants to brokers or
registered agents. The warrants are exercisable at $2.00 for five years.
Stock Split - During 1996, the Company declared a 1 for 2 reverse stock
split and 510.2041 for 1 stock split. The Company also declared a .85 for 1
reverse stock split to be effective immediately prior to the initial public
offering. Accordingly, all common stock reflected in the financial
statements and accompanying notes reflect the effect of the split and
reverse splits.
Common Stock Transfers, Warrants, and Options - In June 1996, an officer
and a shareholder transferred 83,725 shares of common stock to employees at
no cost. The Company recognized $83,000 in compensation expense related to
this transfer.
During 1994 and 1993, the Company issued stock options to an officer and
shareholder to purchase 804,881 shares of common stock at an aggregate
exercise price of $1,745. During June 1996, these options were exercised.
During September 1997, the Board of Directors granted options for the
purchase of 84,500 shares of common stock under the Stock Option Plan, at
an exercise price of $5.50 (quoted market price at grant date). As of
December 31, 1998, options for the purchase of 4,550 has been forfeited as
a result of employee terminations. All remaining options vested in
September 1998 and expire in September 2002.
The Board of Directors granted options for the purchase of 935,300 and
429,834 shares of common stock under the Stock Option Plan during the nine
months ended September 30, 1998 and subsequent to September 30, 1998,
respectively. The exercise prices of those options range from $2.44 to
$9.50 per share (quoted market price at grant date). For options granted
F-16
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1997 is Unaudited)
during 1998, options for the purchase of 142,300 shares of common stock
have been forfeited as a result of employee terminations. The remaining
options expire from February 2003 through March 2005. As of December 31,
1998, options for the purchase of 114,500 shares of common stock have
vested. The remaining options vest from February 1999 through October 2001.
During the nine months ended September 30, 1998, the Company borrowed
$800,000 from a publicly held entity. As consideration for the loan, the
Company issued options for the purchase of 177,165 and 354,350 shares of
common stock at $4.50 and $6.50, respectively, per share. The options
expire in December 1999 (see Note 7).
From October 1, 1998 through January 11, 1999, options for the purchase of
241,536 shares of commons stock were exercised, net proceeds of $943,980
was received by the Company.
Pro Forma Stock-Based Compensation Disclosures - The Company applies APB
Opinion 25 and related interpretations in accounting for stock options
granted to employees and directors. Accordingly, no compensation cost has
been recorded for grants of options to employees and directors where the
exercise price is not less than the fair market value of the Company's
common stock on the measurement date. Had compensation cost been determined
using the fair value method pursuant to FAS 123, the Company's net loss and
net loss per share would have increased to the pro forma amounts indicated
in the following table:
Years Ended December 31,
------------------------------
1997 1996
---- ----
Net loss
As reported $ (4,107,000) $ (1,415,000)
Pro forma (4,219,000) (1,415,000)
Net loss per common share
As reported $ (1.47) $ (.73)
Pro forma (1.51) (.73)
The fair value of all options granted was estimated as of the date of grant
using the Black-Scholes option pricing model using the following weighted
average assumptions:
Years Ended December 31,
------------------------
1997 1996
---- ----
Estimated fair value per option $ 4.33 $ --
Expected volatility 104% - %
Risk-free interest rate 5.5% 6.5%
Expected dividends -- --
Expected term (in years) 4.4 3.5
F-17
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1997 is Unaudited)
10. INCOME TAXES:
-------------
As of December 31, 1997, the Company has a net operating loss (NOL)
carryforward for tax reporting purposes of approximately $3,750,000. This
NOL expires in the years 2011 through 2017.
Deferred income taxes are provided for differences between the tax and book
basis of assets and liabilities as a result of temporary differences in the
recognition of revenues or expenses for tax and financial reporting
purposes, which relates primarily to certain items not currently deductible
for tax purposes until paid.
Deferred tax assets (liabilities) resulting from these differences consist
of the following:
Net operating loss carryforward $ 1,398,000
Other (30,000)
-----------
Total 1,368,000
Less valuation allowance (1,368,000)
-----------
Net deferred tax asset $ --
===========
The valuation allowance for deferred tax assets increased from $236,000 at
December 31, 1996 to $1,330,000 at December 31, 1997, due primarily to an
increase in the Company NOL carryforwards.
11. DEFINED CONTRIBUTION PLAN:
--------------------------
The Company has a 401(k) profit sharing plan (the Plan). Eligible employees
may make voluntary contributions to the Plan. The amount of employee
contributions is limited as specified in the Plan. The Company may, at its
discretion, make additional contributions to the Plan. The Company made no
contributions in 1997 and 1996.
12. SUBSEQUENT EVENTS:
------------------
Effective December 31, 1998, the Company acquired LeaseSource, Inc. and
CarWizard, Inc. in a purchase transaction for 250,000 shares of common
stock of the Company. In addition, the shareholders of LeaseSource and
CarWizard will be entitled to an earn-out based on the profitability of the
two companies. Both acquired companies operate automotive information Web
sites.
Also see Note 9 on the subsequent sale of common stock.
F-18
<PAGE>
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in the Registration Statement and Prospectus of NAVIDEC,
Inc. of our report dated March 5, 1998, accompanying the consolidated financial
statements of NAVIDEC, Inc. contained in such Registration Statement, and to the
use of our name and the statements with respect to us, as appearing under the
heading "Experts" in the Registration Statement.
HEIN + ASSOCIATES LLP
Denver, Colorado
January 26, 1999
<PAGE>
============================================ =================================
No dealer, salesperson or any other person
has been authorized to give any information
or to make any representations in connection
with this offering other than those
contained in this Prospectus. Any
information or representation not herein
contained, if given or made, 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 NAVIDEC, INC.
offer to buy any security 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
where such offer or solicitation is not
authorized, or in which the person making
such offer is not qualified to do so, or to
any person to whom it is unlawful to make Common Stock
such offer or solicitation. The delivery of
this Prospectus shall not, under any and
circumstances, create any implication that
there has been no change in the affairs of Common Stock Purchase Warrants
the Company since the date hereof.
TABLE OF CONTENTS
Page
----
Available Information 2
Prospectus Summary 3
Risk Factors 5 ----------
Use of Proceeds 11
The Company 11 PROSPECTUS
Management's Discussion &
Analysis of Financial ----------
Condition and Results of Operations 22
Management 25
Executive Compensation 27
Security Ownership of Certain
Beneficial Owners
and Management 28
Selling Security Holders 29
Plan of Distribution 31
Certain Transactions 32
Description of Securities 33
Shares Eligible for Future Sale 35
Market for Common Stock and
Related Shareholder Matters 36 February 4, 1999
Legal Matters 36
Experts 36
Securities And Exchange
Commission Position
on Certain Indemnification 36
Index to Financial Statements F-1
=========================================== ==================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
------------------------------------------
The Company's Articles of Incorporation eliminate the personal liability of
directors to the Company or its stockholders for monetary damages for breach of
fiduciary duty to the extent permitted by Colorado law. The Company's Articles
of Incorporation and By-Laws provide that the Company shall indemnify its
officers and directors to the extent permitted by Colorado law, which authorizes
a corporation to indemnify directors, officers, employees or agents of the
corporation in non-derivative suits if such party acted in good faith and in a
manner such party reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The Colorado Business Corporation Act further provides that indemnification
shall be provided if the party in question is successful on the merits or
otherwise.
Item 25. Other Expenses of Issuance and Distribution
-------------------------------------------
The estimated expenses of the offering, all of which are to be borne by the
Company, are as follows:
Total Registration Fee Under Securities Act of 1933 $ 3,441(1)
Printing and Engraving.......................................... 15,000 *
Accounting Fees and Expenses.................................... 5,000 *
Legal Fees and Expenses......................................... 25,000 *
Blue Sky Fees and Expenses (including related legal fees)....... 3,000 *
Transfer Agent Fees............................................. 2,000 *
Miscellaneous................................................... 1,559 *
-------
Total.................................................. $55,000
*Estimated
(1) Includes a registration fee of $3,092 paid with the Registrants
registration statement on Form SB-2, SEC No. 333-59019.
Item 26. Recent Sales of Unregistered Securities
---------------------------------------
In July 1996, the Company issued an aggregate of 678,877 shares of Common
Stock to the existing shareholders of Interactive Planet, Inc. ("IPI") in
exchange for all of this issued and outstanding shares of IPI in connection with
the merger of IPI with and into the Company. The Company relied on the statutory
exemption provided by Section 4(2) of the Securities Act of 1933 in accordance
with the preliminary note of Rule 145 whereby the exchange was made with a group
of 14 shareholders of IPI not involving any public offering.
In August 1996, the Company issued to John McKowen, pursuant to an
employment agreement, options to purchase 212,500 shares of Common Stock at an
exercise price of $4.12 per share. Such options are exercisable after February
1, 1999 and expire August 1, 2001. This was a privately negotiated transaction
with a sophisticated investor not involving any public offering and exempt
pursuant to Section 4(2) of the Securities Act of 1933.
From August through October 1996, the Company consummated the sale of an
aggregate of $1,437,500 principal amount of 10% Unsecured Subordinated
Convertible Promissory Notes, due December 31, 1997, in a private placement to
investors. The Notes were automatically converted into an aggregate of 349,126
units, with each unit consisting of one share of Common Stock and one Common
Stock purchase warrant, upon the consummation of the Company's initial public
offering. Joseph Charles & Associates, Inc., received $143,750 in commissions
and $35,938 in expenses as placement agent in such private placement. This
offering was made pursuant to Rule 506 of Regulation D promulgated pursuant to
the Securities Act of 1933 as an offering not involving any public offering
solely to accredited investors.
In June 1996, Ralph Armijo exercised options to purchase 804,881 shares of
Common Stock for an aggregate exercise price of $1,745. These options were
granted during 1993 and 1994 in lieu of salary. Mr. Armijo was and is the chief
executive officer of the Company and the transaction was exempt as a transaction
not involving any public offering pursuant to Section 4(2) of the Securities Act
of 1933.
II-1
<PAGE>
From November 1997 to April 1998, the Company raised net proceeds of
approximately $2,229,750 from the issuance of 594,500 shares of common stock and
warrants from a private placement. Each warrant entitles the holder to purchase
one share of Common Stock at a price of $7.20 per share until February 10, 2002.
The warrants are redeemable at the option of the Company, at $.05 per warrant,
at any time on or after February 10, 1998. This offering was made pursuant to
Rule 506 of Regulation D promulgated pursuant to the Securities Act of 1933 as
an offering not involving any public offering solely to accredited and
sophisticated investors.
On November 24, 1998, the Company completed an offering of 700,000 shares
of its Common Stock to seven investors. The Company raised $1,305,000 from that
offering. That offering was made pursuant to Rule 506 of Regulation D
promulgated pursuant to the Securities Act of 1933 as an offering not involving
any public offering solely to accredited and sophisticated investors.
Item 27. Exhibits
--------
The following Exhibits are filed as part of this Form SB-2 Registration
Statement pursuant to Item 601 of Regulation S-B by incorporation by reference
to other filings:
3.1 Amended and Restated Articles of Incorporation of ACI Systems, Inc.*
3.2 Amended and Restated Bylaws of ACI Systems, Inc.*
3.3 Articles of Merger and Agreement and Plan of Merger Between ACI
Systems, Inc. and Interactive Planet, Inc.*
4.1 Form of Certificate for Common Stock of NAVIDEC, Inc.*
4.2 Form of Warrant*
4.3 Form of Warrant Agreement*
4.4 Form of Option.****
4.5 Form of Broker Warrant. Filed herewith.
4.6 Form of Rehire Warrant. Filed herewith
5.1 Opinion, with Consent, of Ballard Spahr Andrews & Ingersoll, LLP.
Filed herewith.
10.1 Form of "Lock Up" Letter entered into by the Company's current
shareholders.*
10.2 Form of Shareholders' Agreement dated July 12, 1996, among NAVIDEC,
Inc. and its shareholders on such date.*
10.3 Form of Confidentiality and Non-Disclosure Agreement between the
Company and its significant technical employees.*
10.4 Employment Agreement dated July 3, 1996 between NAVIDEC, Inc. and
Ralph Armijo.*
10.5 Employment Agreement between NAVIDEC, Inc. and John R. McKowen.*
10.6 Lease Agreement dated February 23, 1996 for the premises located at 14
Inverness Dr., Building F, Suite 116, Englewood, Colorado 80112.*
10.7 Lease Agreement dated October 27, 1993 for the premises located at
7002 S. Revere Parkway, Suite 40, Englewood, Colorado 80112
[Terminated in December 1996].*
10.8 Promissory Note as of October 1, 1993, in the principal amount of
$119,199, from ACI Systems, Inc. payable to Arthur Armijo.*
10.9 Promissory Note as of March 31, 1996, in the principal amount of
$45,110 from Interactive Planet, Inc. payable to Patrick Mawhinney*
10.10 Promissory Note as of July 9, 1996, in the principal amount of $75,000
from NAVIDEC, Inc. payable to Cynthia Simmons.*
10.11 Business/Manager Agreement and Commercial Security Agreement, each
dated February 27, 1996, between NAVIDEC, Inc. and Colorado State Bank
of Denver.*
10.12 Form of Commercial Guarantee of Ralph Armijo and Arthur Armijo in
favor of Colorado State Bank of Denver in connection with February 27,
1996 Promissory Note.*
10.13 Form of Commercial Continuing Guarantee of Ralph Armijo and Arthur
Armijo dated November 17, 1993 in favor of Vectra Bank in connection
with line of credit terminated in February 1996.*
10.14 Promissory Note as of August 6, 1996, in the principal amount of
$70,000 from NAVIDEC, INC. payable to Ralph Armijo.*
10.15 Promissory Note as of July 26, 1996 in the principal amount of $30,000
from NAVIDEC, INC. payable to Patrick Mawhinney.*
10.16 Promissory Note as of July 25, 1996, in the principal amount of
$182,500 from NAVIDEC, INC. payable to Little Land Company.*
10.17 Netscape Commercial Applications Partner Program (NCAPP) Guidelines.*
10.18 Form of Restated Agreement Not to Sell with Bridge Financing Selling
Stockholders.*
10.19 Form of Insider's Lock-up Agreement to be entered into by the
Company's officers, directors and 5% shareholders.*
10.20 Form of Promissory Note in the principal amount of $70,000 from
NAVIDEC, Inc. payable to Trust Company of America FBO Michael
Hendricks SEP IRA and guaranteed by Ralph Armijo and Patrick
Mawhinney.*
10.21 Wheels licence agreement with the Denver Post.**
10.22 Wheels licence agreement with KOIN TV.**
10.23 The Company's stock option plan.***
10.24 Agreement to provide services with John McKowen.****
II-2
<PAGE>
10.25 Engagement Letter dated October 27, 1997 with Joseph Charles &
Associates.****
10.26 Engagement Agreement dated February 16, 1998 with Joseph Charles
Assoicates.****
10.27 Employment Agreement between NAVIDEC, Inc. and Ralph Armijo dated
May 1, 1998.****
10.28 Employment Agreement between NAVIDEC, Inc. and Hal Anderson dated
May 1, 1998.****
10.29 Employment Agreement between NAVIDEC, Inc. and Patrick Mawhinney dated
May 1, 1998.****
10.30 Employment Agreement between NAVIDEC, Inc. and Kenneth Bero dated
December 15, 1997. ****
21.1 Subsidiaries of the Company.*
23.1 Consent of Hein & Associates LLP. Filed herewith.
23.2 Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in Exhibit
5.1). Filed herewith.
- ----------------
* Incorporated by reference from the like numbered exhibit to the
Company's Registration Statement on Form SB-2 declared effective
February 10, 1997 (SEC File Number 333-14497).
** Incorporated by reference from the Company's Annual Report on From
10-KSB for the year ended December 31, 1997.
*** Incorporated by reference from the Company's preliminary proxy
statement for the 1998 Annual Shareholders' Meeting.
**** Incorporated by reference from the Company's Registration Statement on
Form SB-2 declared effective July 22, 1998 (SEC File Number
333-59019).
Item 28. Undertakings
------------
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Company hereby undertakes:
(1) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(4) To file, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the mos
recent post-effective amendment thereto) that, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(iii) to include any additional or changed material information on
the plan of distribution.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Englewood, State of Colorado on the 3rd day of February, 1999.
NAVIDEC, INC.
By: /s/ Ralph Armijo
-----------------------------------------------
Ralph Armijo, President, Chief Executive Officer
and Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Signature Title Date
- --------- ----- ----
/s/ Ralph Armijo President, Chief February 3, 1999
- --------------------------- Executive Officer
Ralph Armijo and Director
/s/ Andrew Davis Director February 3, 1999
- ---------------------------
Andrew Davis
/s/ Patrick R. Mawhinney Chief Financial Officer, February 3, 1999
- --------------------------- Treasurer and Director
Patrick R. Mawhinney
/s/ Lloyd G. Chavez, Jr. Director February 3, 1999
- ---------------------------
Lloyd G. Chavez, Jr.
/s/ Gerald A. Marroney Director February 3, 1999
- ---------------------------
Gerald A. Marroney
/s/ James Hosch Director February 3, 1999
- ---------------------------
James Hosch
/s/ Michael Kranitz Director and Vice President February 3, 1999
- --------------------------- of Strategic Development
Michael Kranitz
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
-----------------
EXHIBITS
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933, AS AMENDED
NAVIDEC, INC.
-------------
(Name of Company as specified in charter)
<PAGE>
NAVIDEC, INC.
FORM SB-2 REGISTRATION STATEMENT
The following Exhibits are filed as part of the Company's Form SB-2
Registration Statement pursuant to Item 601 of Regulation S-B.
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of ACI Systems, Inc.*
3.2 Amended and Restated Bylaws of ACI Systems, Inc.*
3.3 Articles of Merger and Agreement and Plan of Merger Between ACI Systems, Inc. and Interactive Planet, Inc.*
4.1 Form of Certificate for Common Stock of NAVIDEC, Inc.*
4.2 Form of Warrant*
4.3 Form of Warrant Agreement*
4.4 Form of Option.****
4.5 Form of Broker Warrant. Filed herewith.
4.6 Form of Rehire Warrant. Filed herewith
5.1 Opinion, with Consent, of Ballard Spahr Andrews & Ingersoll, LLP. Filed herewith.
10.1 Form of "Lock Up" Letter entered into by the Company's current shareholders.*
10.2 Form of Shareholders' Agreement dated July 12, 1996, among NAVIDEC, Inc. and its shareholders on such date.*
10.3 Form of Confidentiality and Non-Disclosure Agreement between the Company and its significant technical employees.*
10.4 Employment Agreement dated July 3, 1996 between NAVIDEC, Inc. and Ralph Armijo.*
10.5 Employment Agreement between NAVIDEC, Inc. and John R. McKowen.*
10.6 Lease Agreement dated February 23, 1996 for the premises located at 14 Inverness Dr., Building F, Suite 116,
Englewood, Colorado 80112.*
10.7 Lease Agreement dated October 27, 1993 for the premises located at 7002 S. Revere Parkway, Suite 40, Englewood,
Colorado 80112 [Terminated in December 1996].*
10.8 Promissory Note as of October 1, 1993, in the principal amount of $119,199, from ACI Systems, Inc. payable
to Arthur Armijo.*
10.9 Promissory Note as of March 31, 1996, in the principal amount of $45,110 from Interactive Planet, Inc. payable to
Patrick Mawhinney*
10.10 Promissory Note as of July 9, 1996, in the principal amount of $75,000 from NAVIDEC, Inc. payable to Cynthia Simmons.*
10.11 Business/Manager Agreement and Commercial Security Agreement, each dated February 27, 1996, between NAVIDEC, Inc.
and Colorado State Bank of Denver.*
10.12 Form of Commercial Guarantee of Ralph Armijo and Arthur Armijo in favor of Colorado State Bank of Denver in connection
with February 27, 1996 Promissory Note.*
10.13 Form of Commercial Continuing Guarantee of Ralph Armijo and Arthur Armijo dated November 17, 1993 in favor of Vectra
Bank in connection with line of credit terminated in February 1996.*
10.14 Promissory Note as of August 6, 1996, in the principal amount of $70,000 from NAVIDEC, INC. payable to Ralph Armijo.*
10.15 Promissory Note as of July 26, 1996 in the principal amount of $30,000 from NAVIDEC, INC. payable to Patrick
Mawhinney.*
10.16 Promissory Note as of July 25, 1996, in the principal amount of $182,500 from NAVIDEC, INC. payable to Little Land
Company.*
10.17 Netscape Commercial Applications Partner Program (NCAPP) Guidelines.*
10.18 Form of Restated Agreement Not to Sell with Bridge Financing Selling Stockholders.*
10.19 Form of Insider's Lock-up Agreement to be entered into by the Company's officers, directors and 5% shareholders.*
10.20 Form of Promissory Note in the principal amount of $70,000 from NAVIDEC, Inc. payable to Trust Company of America FBO
Michael Hendricks SEP IRA and guaranteed by Ralph Armijo and Patrick Mawhinney.*
10.21 Wheels licence agreement with the Denver Post.**
10.22 Wheels licence agreement with KOIN TV.**
10.23 The Company's stock option plan.***
10.24 Agreement to provide services with John McKowen.****
10.25 Engagement Letter dated October 27, 1997 with Joseph Charles & Associates.****
10.26 Engagement Agreement dated February 16, 1998 with Joseph Charles & Associates.****
10.27 Employment Agreement between NAVIDEC, Inc. and Ralph Armijo dated May 1, 1998.****
10.28 Employment Agreement between NAVIDEC, Inc. and Hal Anderson dated May 1, 1998.****
10.29 Employment Agreement between NAVIDEC, Inc. and Patrick Mawhinney dated May 1, 1998.****
10.30 Employment Agreement between NAVIDEC, Inc. and Kenneth Bero dated December 15, 1997.****
21.1 Subsidiaries of the Company.*
23.1 Consent of Hein & Associates LLP. Filed herewith.
23.2 Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in Exhibit 5.1). Filed herewith.
- -----------------
* Incorporated by reference from the like numbered exhibit to the Company's Registration Statement on Form SB-2 declared
effective February 10, 1997 (SEC File Number 333-14497).
** Incorporated by reference from the Company's Annual Report on From 10-KSB for the year ended December 31, 1997.
*** Incorporated by reference from the Company's preliminary proxy statement for the 1998 Annual Shareholders' Meeting.
**** Incorporated by reference from the Company's Registration Statement on Form SB-2 declared effective July 22, 1998 (SEC File
Number 333-59019).
</TABLE>
NAVIDEC, INC.
BROKER
WARRANT TO PURCHASE COMMON STOCK
Certificate No. Warrants
----------- ------------
April 13, 1998
Navidec, Inc. ("Company") certifies that, for valuable consideration,
receipt of which is hereby acknowledged, that _____________________ ("Holder")
is entitled to purchase from the Company _________ (the "Shares") at the price
of $4.50 per Share ("Purchase Price").
1. Exercise.
--------
a. Time of Exercise. This Warrant may be exercised in whole or in
part (but not as to fractional shares) at the office of the Company, at any
time or from time to time on or after April 13, 1998, provided, however,
that this Warrant shall expire and be null and void if not exercised in the
manner herein provided, by 5:00 p.m. EST, on April 13, 2003, the
"Expiration Date."
b. Manner of Exercise. This Warrant is exercisable at the
Purchase Price, payable in cash or by check, payable to the order of the
Company, subject to adjustment as provided in Section 3 hereof. Upon
surrender of this Warrant with the annexed Subscription Form duly executed,
together with payment of the Purchase Price for the Units purchased (and
any applicable transfer taxes) at the offices of the Company's Transfer
Agent, American Securities Transfer and Trust, Inc., 938 Quail Street,
Suite 101, Lakewood, Colorado 80215, the Holder shall be entitled to
receive a certificate or certificates for the Shares so purchased.
c. Delivery of Stock Certificates. As soon as practicable, but
not exceeding 10 days, after complete or partial exercise of this Warrant,
the Company, at its expense, shall cause to be issued in the name of the
Holder (or upon payment by the Holder of any applicable transfer taxes, the
Holder's assigns) certificate or certificates for the number of fully paid
and non-assessable Shares to which the Holder shall be entitled upon such
exercise, to which the Holder shall be entitled upon such exercise,
determined in accordance with Section 2 hereof.
d. Record Date of Issuance of Shares. Irrespective of the date of
issuance and delivery of certificates for any stock or securities issuable
upon the exercise of this Warrant, each person (including a corporation or
partnership) in whose name any such certificate is to be issued shall for
all purposes be deemed to have become the holder of record of the stock or
other securities represented thereby immediately prior to the close of
business on the date on which a duly executed Subscription Form containing
notice of exercise of this Warrant and payment of the Purchase Price is
received by the Company's Transfer Agent.
<PAGE>
2. Adjustment of Purchase Price. The Purchase Price shall be subject to
adjustment as follows:
a. In case the Company shall (1) pay a dividend in shares of its
capital stock (other than an issuance of shares of capital stock to holders
of Common Stock who have elected to receive a dividend in shares in lieu of
cash), (ii) subdivide its outstanding shares of Common Stock, (iii) reduce,
consolidate or combine its outstanding shares of Common Stock into a
smaller number of shares, or (iv) Issue by reclassification of its shares
of Common Stock any shares of the Company, the Purchase Price in effect
immediately prior thereto shall be adjusted to that amount determined by
multiplying the Purchase Price in effect immediately prior to such date by
a fraction, of which the numerator shall be the number of shares of Common
Stock outstanding on such date before giving effect to such divisions,
subdivision, reduction, combination or consolidation or stock dividend and
of which the denominator shall be the number of shares of Common Stock
after giving affect thereto. The number of shares issuable shall also be
adjusted upward or downward determined by multiplying the number of
warrants owned by the Holder by a fraction of which the denominator shall
be the number of shares of Common Stock outstanding on such date before
giving effect to such divisions, subdivision, reduction, combination or
consolidation or stock dividend and of which the numerator shall be the
number of shares of Common Stock after giving affect thereto. Such
adjustment shall be made successively whenever any such effective date or
record date shall occur. An adjustment made pursuant to this subsection (a)
shall become effective retroactively to the Effective Date immediately
after the record date in the case of a dividend and shall become effective
immediately after the effective date In the case of a subdivision,
reduction, consolidation, combination or reclassification.
b. If the Common Stock issuable upon the conversion of the
Warrant shall be changed into the same or a different number of shares of
any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a reorganization, merger,
consolidation or sale of assets provided for in this Section 2), then, and
in each such event, the Holder of this Warrant shall have the right
thereafter to convert such Warrant into the kind and amount of shares of
Common Stock and other securities and property receivable upon such
reorganization, reclassification, or other change by the Holders of the
number of shares of Common Stock into which such Warrant might have been
converted, as reasonably determined by the Company's board of directors,
immediately prior to such reorganization, reclassification, or change, all
subject to further adjustment as provided herein.
c. If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision, combination,
2
<PAGE>
reclassification or exchange of shares provided for elsewhere in this
Section 2) or a merger or consolidation of the Company with or into another
corporation, or the sale of all or substantially all of the Company's
properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation or sale, provision shall be made as
reasonably determined by the Company's board of directors so that the
Holder of the Warrant shall thereafter be entitled to receive upon
conversion of such Warrant, the number of shares of stock or other
securities or property of the Company or of the successor corporation
resulting from such merger or consolidation or sale, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
capital reorganization, merger, consolidation or sale.
d. The adjustments provided for in this Section 2 are cumulative
and shall apply to successive divisions, subdivisions, reductions,
combinations, consolidations, issues, distributions or other events
contemplated herein resulting in any adjustment under the provisions or
this section, provided that, notwithstanding any other provision of this
section, no adjustment of the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
Purchase Price then In effect; provided, however, that any adjustment which
by reason of this subsection (a) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
e. Upon each adjustment of the Purchase Price, the Company shall
give prompt written notice thereof addressed to the Holder at the address
of such Holder as shown on the records of the Company, which notice shall
state the Purchase Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares issuable upon the conversion of
the Holder's warrants, setting forth in reasonable detail the method of
calculation and the facts upon which such calculations is based.
f. In the event of any question arising with respect to the
adjustments provided for In this Section 2, such question shall be
conclusively determined by an opinion of independent certified public
accountants appointed by the Company (who may be the auditors of the
Company) and acceptable to the Holder of this Warrant. Such accountants
shall have access to all necessary records of the Company, and such
determination shall be binding upon the Company and the Holder.
g. The Company may in its sole discretion and without any
obligation to do so reduce the Purchase Price then in effect by giving 15
days' written notice to the Holders. The Company may limit such reduction
as to its temporal duration or may impose other conditions thereto in its
sole discretion.
3. Call Provision. If the closing bid price of the Company's Common Stock
is equal to or above $8.40 per share for 20 consecutive trading days at any time
prior to the Expiration Date the Company may call this Warrant. Notice of the
call will be mailed at least thirty (30) days before the date fixed by the board
of directors of the Company as the date of the call (the "Call Date"). If the
3
<PAGE>
Holder fails to exercise the Warrant prior to the Call Date, it will expire. For
purposes of this Section the closing bid price of the Common Stock on any
particular date means (i) if the shares are listed on any national securities
exchange or reported in the Nasdaq System, the closing bid price as reported for
transactions on the exchange or Nasdaq for the period in question, or (ii) if
the Common Stock is publicly traded on the OTC bulletin board ("OTCBB") but not
listed on any exchange or reported on Nasdaq, the average of the means between
bona fide bid and asked prices on the dates in question as quoted by three
independent market makers. This right of call shall not restrict the right of
the Holder to Exercise the Warrants prior to the Call Date.
4. Restriction on Transfer. The Holder, by its acceptance hereof,
represents, warrants, covenants and agrees that (i) the Holder has knowledge of
the business and affairs of the Company, and (ii) this Warrant and the Shares
issuable upon the exercise of this Warrant are being acquired for investment and
not with a view to the distribution hereof and that absent an effective
registration statement under the Securities Act of 1933 as amended (the "Act")
covering the disposition of this Warrant or the Shares issued or issuable upon
exercise of this Warrant, they will not be sold, transferred, assigned,
hypothecated or otherwise disposed of without first providing the Company with
an opinion of counsel (which may be counsel for the Company) or other evidence,
reasonably acceptable to the Company, to the effect that such sale, transfer,
assignment, hypothecation or other disposal will be exempt from the registration
and prospectus delivery requirements of the Act and the registration or
qualification requirements of any applicable state securities laws. The Holder
consents to the making of a notation in the Company's records or giving to any
transfer agent of the Warrant or the Shares an order to implement such
restriction on transferability.
This Warrant shall beer the following legend or a legend of similar import,
provided, however, that such legend shall be removed or not placed upon the
Warrant if such legend Is no longer necessary to assure compliance with the
Securities Act of 1933, as amended:
THESE WARRANTS AND THE SHARES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE BECAUSE THEY ARE BELIEVED TO BE EXEMPT FROM
REGISTRATION UNDER REGULATION S PROMULGATED PURSUANT TO THE ACT. THIS WARRANT IS
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED NOR MAY THE WARRANT BE
EXERCISED BY OR ON BEHALF OF ANY U. S. PERSON EXCEPT AS PERMITTED UNDER THE ACT
PURSUANT TO THE REGISTRATION OF THE SECURITIES OR EXEMPTION THEREFROM.
5. Payment of Taxes. All Shares issued upon the exercise of this Warrant
shall be validly issued, fully paid and non-assessable and the Company shall pay
all taxes and other governmental charges (other than income tax) that may be
imposed in respect of the issue or delivery thereof. The Company shall not be
required, however, to pay any tax or other charge imposed In connection with any
transfer involved in the issue of any certificate for Shares in any name other
4
<PAGE>
than that of the Holder surrendered in connection with the purchase of such
Shares, and In such case the Company shall not be required to issue or deliver
any stock certificate until such tax or other charge has been paid or it has
been established to the Company's satisfaction that no tax or other charge is
due.
6. Reservation of Common Stock. The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of issuance upon the exercise of this Warrant, such number of
shares of Common Stock as shall be issuable upon the exercise hereof. The
Company covenants and agrees that, upon exercise of this Warrant and payment of
the Purchase Price thereof, all Shares of Common Stock issuable upon such
exercise shall be duly and validly issued, fully paid and non-assessable.
7. Notices to Holder. Nothing contained in this Warrant shall be construed
as conferring upon the Holder hereof the right to vote or to consent or to
receive notice as a shareholder in respect of any meetings of shareholders for
the election of directors or any other matter or as having any rights whatsoever
as a shareholder of the Company. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered or mailed by registered or certified mail, postage
prepaid, return receipt requested:
a. If to the Holder, to the address of such Holder as shown on
the books of the Company, or
b. If to the Company, to the address set forth in Section 2(b)
hereof or to any other address notice of which is delivered to the Holder
by regular mail.
8. Replacement of Warrant. Upon receipt of evidence reasonably satisfactory
to the Company of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and (in case of loss, theft or destruction) upon
delivery of an indemnity agreement in an amount reasonably satisfactory to the
Company, or (in the case of mutilation) upon surrender and cancellation of the
mutilated Warrant, the Company will execute and deliver, in lieu thereof, a new
Warrant of like tenor.
9. Successors. All the covenants, agreements, representations and
warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
10. Changes or Waiver. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
5
<PAGE>
11. Headings. The section headings in this Warrant are inserted for
purposes of convenience only and shall have no substantive effect.
12. Governing Law. This Warrant shall for all purposes be construed and
enforced in accordance with, and governed by, the internal laws of the United
States and the State of Colorado, without giving effect to principles of
conflict of laws.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer and this Warrant to be dated as of the date first above
written.
NAVIDEC, INC.
By:
-------------------------------------------
Ralph Armijo, President
Countersigned:
By:
------------------------------------------
Secretary
7
<PAGE>
EXHIBIT A
---------
SUBSCRIPTION FORM
(To be Executed by the Registered Holder in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to purchase
of the Shares covered by this Warrant according to the conditions hereof and
herewith makes payment of the Purchase Price of such Shares in full.
No. of Warrants Exercised _______________________
Amount of exercise price delivered $______________
Dated _________________, 199___.
----------------------------------------------------
Signature (must be as listed on Warrant Certificate)
Name Shares to be issued to:
----------------------------------------------------
Address for delivery:
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
8
NAVIDEC, INC.
REHIRE
WARRANT TO PURCHASE COMMON STOCK
Certificate No. Warrants
---------- -------
February 16, 1998
Navidec, Inc. ("Company") certifies that, for valuable consideration,
receipt of which is hereby acknowledged, that ___________________________
("Holder") is entitled to purchase from the Company ________ (the "Shares") at
the price of $3.50 per Share ("Purchase Price").
1. Exercise.
--------
a. Time of Exercise. This Warrant may be exercised in whole or in
part (but not as to fractional shares) at the office of the Company, at any
time or from time to time on or after February 16, 1998, provided, however,
that this Warrant shall expire and be null and void if not exercised in the
manner herein provided, by 5:00 p.m. EST, on February 15, 2003, the
"Expiration Date."
b. Manner of Exercise. This Warrant is exercisable at the
Purchase Price, payable in cash or by check, payable to the order of the
Company, subject to adjustment as provided in Section 3 hereof. Upon
surrender of this Warrant with the annexed Subscription Form duly executed,
together with payment of the Purchase Price for the Units purchased (and
any applicable transfer taxes) at the offices of the Company's Transfer
Agent, American Securities Transfer and Trust, Inc., 938 Quail Street,
Suite 101, Lakewood, Colorado 80215, the Holder shall be entitled to
receive a certificate or certificates for the Shares so purchased.
c. Delivery of Stock Certificates. As soon as practicable, but
not exceeding 10 days, after complete or partial exercise of this Warrant,
the Company, at its expense, shall cause to be issued in the name of the
Holder (or upon payment by the Holder of any applicable transfer taxes, the
Holder's assigns) certificate or certificates for the number of fully paid
and non-assessable Shares to which the Holder shall be entitled upon such
exercise, to which the Holder shall be entitled upon such exercise,
determined in accordance with Section 2 hereof.
d. Record Date of Issuance of Shares. Irrespective of the date of
issuance and delivery of certificates for any stock or securities issuable
upon the exercise of this Warrant, each person (including a corporation or
partnership) in whose name any such certificate is to be issued shall for
all purposes be deemed to have become the holder of record of the stock or
other securities represented thereby immediately prior to the close of
business on the date on which a duly executed Subscription Form containing
notice of exercise of this Warrant and payment of the Purchase Price is
received by the Company's Transfer Agent.
<PAGE>
2. Adjustment of Purchase Price. The Purchase Price shall be subject to
adjustment as follows:
a. In case the Company shall (1) pay a dividend in shares of its
capital stock (other than an issuance of shares of capital stock to holders
of Common Stock who have elected to receive a dividend in shares in lieu of
cash), (ii) subdivide its outstanding shares of Common Stock, (iii) reduce,
consolidate or combine its outstanding shares of Common Stock into a
smaller number of shares, or (iv) Issue by reclassification of its shares
of Common Stock any shares of the Company, the Purchase Price in effect
immediately prior thereto shall be adjusted to that amount determined by
multiplying the Purchase Price in effect immediately prior to such date by
a fraction, of which the numerator shall be the number of shares of Common
Stock outstanding on such date before giving effect to such divisions,
subdivision, reduction, combination or consolidation or stock dividend and
of which the denominator shall be the number of shares of Common Stock
after giving affect thereto. The number of shares issuable shall also be
adjusted upward or downward determined by multiplying the number of
warrants owned by the Holder by a fraction of which the denominator shall
be the number of shares of Common Stock outstanding on such date before
giving effect to such divisions, subdivision, reduction, combination or
consolidation or stock dividend and of which the numerator shall be the
number of shares of Common Stock after giving affect thereto. Such
adjustment shall be made successively whenever any such effective date or
record date shall occur. An adjustment made pursuant to this subsection (a)
shall become effective retroactively to the Effective Date immediately
after the record date in the case of a dividend and shall become effective
immediately after the effective date In the case of a subdivision,
reduction, consolidation, combination or reclassification.
b. If the Common Stock issuable upon the conversion of the
Warrant shall be changed into the same or a different number of shares of
any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a reorganization, merger,
consolidation or sale of assets provided for in this Section 2), then, and
in each such event, the Holder of this Warrant shall have the right
thereafter to convert such Warrant into the kind and amount of shares of
Common Stock and other securities and property receivable upon such
reorganization, reclassification, or other change by the Holders of the
number of shares of Common Stock into which such Warrant might have been
converted, as reasonably determined by the Company's board of directors,
immediately prior to such reorganization, reclassification, or change, all
subject to further adjustment as provided herein.
c. If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision, combination,
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reclassification or exchange of shares provided for elsewhere in this
Section 2) or a merger or consolidation of the Company with or into another
corporation, or the sale of all or substantially all of the Company's
properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation or sale, provision shall be made as
reasonably determined by the Company's board of directors so that the
Holder of the Warrant shall thereafter be entitled to receive upon
conversion of such Warrant, the number of shares of stock or other
securities or property of the Company or of the successor corporation
resulting from such merger or consolidation or sale, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
capital reorganization, merger, consolidation or sale.
d. The adjustments provided for in this Section 2 are cumulative
and shall apply to successive divisions, subdivisions, reductions,
combinations, consolidations, issues, distributions or other events
contemplated herein resulting in any adjustment under the provisions or
this section, provided that, notwithstanding any other provision of this
section, no adjustment of the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
Purchase Price then In effect; provided, however, that any adjustment which
by reason of this subsection (a) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
e. Upon each adjustment of the Purchase Price, the Company shall
give prompt written notice thereof addressed to the Holder at the address
of such Holder as shown on the records of the Company, which notice shall
state the Purchase Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares issuable upon the conversion of
the Holder's warrants, setting forth in reasonable detail the method of
calculation and the facts upon which such calculations is based.
f. In the event of any question arising with respect to the
adjustments provided for In this Section 2, such question shall be
conclusively determined by an opinion of independent certified public
accountants appointed by the Company (who may be the auditors of the
Company) and acceptable to the Holder of this Warrant. Such accountants
shall have access to all necessary records of the Company, and such
determination shall be binding upon the Company and the Holder.
g. The Company may in its sole discretion and without any
obligation to do so reduce the Purchase Price then in effect by giving 15
days' written notice to the Holders. The Company may limit such reduction
as to its temporal duration or may impose other conditions thereto in its
sole discretion.
3. Call Provision. If the closing bid price of the Company's Common Stock
is equal to or above $8.40 per share for 20 consecutive trading days at any time
prior to the Expiration Date the Company may call this Warrant. Notice of the
call will be mailed at least thirty (30) days before the date fixed by the board
of directors of the Company as the date of the call (the "Call Date"). If the
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Holder fails to exercise the Warrant prior to the Call Date, it will expire. For
purposes of this Section the closing bid price of the Common Stock on any
particular date means (i) if the shares are listed on any national securities
exchange or reported in the Nasdaq System, the closing bid price as reported for
transactions on the exchange or Nasdaq for the period in question, or (ii) if
the Common Stock is publicly traded on the OTC bulletin board ("OTCBB") but not
listed on any exchange or reported on Nasdaq, the average of the means between
bona fide bid and asked prices on the dates in question as quoted by three
independent market makers. This right of call shall not restrict the right of
the Holder to Exercise the Warrants prior to the Call Date.
4. Restriction on Transfer. The Holder, by its acceptance hereof,
represents, warrants, covenants and agrees that (i) the Holder has knowledge of
the business and affairs of the Company, and (ii) this Warrant and the Shares
issuable upon the exercise of this Warrant are being acquired for investment and
not with a view to the distribution hereof and that absent an effective
registration statement under the Securities Act of 1933 as amended (the "Act")
covering the disposition of this Warrant or the Shares issued or issuable upon
exercise of this Warrant, they will not be sold, transferred, assigned,
hypothecated or otherwise disposed of without first providing the Company with
an opinion of counsel (which may be counsel for the Company) or other evidence,
reasonably acceptable to the Company, to the effect that such sale, transfer,
assignment, hypothecation or other disposal will be exempt from the registration
and prospectus delivery requirements of the Act and the registration or
qualification requirements of any applicable state securities laws. The Holder
consents to the making of a notation in the Company's records or giving to any
transfer agent of the Warrant or the Shares an order to implement such
restriction on transferability.
This Warrant shall beer the following legend or a legend of similar import,
provided, however, that such legend shall be removed or not placed upon the
Warrant if such legend Is no longer necessary to assure compliance with the
Securities Act of 1933, as amended:
THESE WARRANTS AND THE SHARES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE BECAUSE THEY ARE BELIEVED TO BE EXEMPT FROM
REGISTRATION UNDER REGULATION S PROMULGATED PURSUANT TO THE ACT. THIS WARRANT IS
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED NOR MAY THE WARRANT BE
EXERCISED BY OR ON BEHALF OF ANY U. S. PERSON EXCEPT AS PERMITTED UNDER THE ACT
PURSUANT TO THE REGISTRATION OF THE SECURITIES OR EXEMPTION THEREFROM.
5. Payment of Taxes. All Shares issued upon the exercise of this Warrant
shall be validly issued, fully paid and non-assessable and the Company shall pay
all taxes and other governmental charges (other than income tax) that may be
imposed in respect of the issue or delivery thereof. The Company shall not be
required, however, to pay any tax or other charge imposed In connection with any
transfer involved in the issue of any certificate for Shares in any name other
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than that of the Holder surrendered in connection with the purchase of such
Shares, and In such case the Company shall not be required to issue or deliver
any stock certificate until such tax or other charge has been paid or it has
been established to the Company's satisfaction that no tax or other charge is
due.
6. Reservation of Common Stock. The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of issuance upon the exercise of this Warrant, such number of
shares of Common Stock as shall be issuable upon the exercise hereof. The
Company covenants and agrees that, upon exercise of this Warrant and payment of
the Purchase Price thereof, all Shares of Common Stock issuable upon such
exercise shall be duly and validly issued, fully paid and non-assessable.
7. Notices to Holder. Nothing contained in this Warrant shall be construed
as conferring upon the Holder hereof the right to vote or to consent or to
receive notice as a shareholder in respect of any meetings of shareholders for
the election of directors or any other matter or as having any rights whatsoever
as a shareholder of the Company. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered or mailed by registered or certified mail, postage
prepaid, return receipt requested:
a. If to the Holder, to the address of such Holder as shown on
the books of the Company, or
b. If to the Company, to the address set forth in Section 2(b)
hereof or to any other address notice of which is delivered to the Holder
by regular mail.
8. Replacement of Warrant. Upon receipt of evidence reasonably satisfactory
to the Company of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and (in case of loss, theft or destruction) upon
delivery of an indemnity agreement in an amount reasonably satisfactory to the
Company, or (in the case of mutilation) upon surrender and cancellation of the
mutilated Warrant, the Company will execute and deliver, in lieu thereof, a new
Warrant of like tenor.
9. Successors. All the covenants, agreements, representations and
warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
10. Changes or Waiver. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
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11. Headings. The section headings in this Warrant are inserted for
purposes of convenience only and shall have no substantive effect.
12. Governing Law. This Warrant shall for all purposes be construed and
enforced in accordance with, and governed by, the internal laws of the United
States and the State of Colorado, without giving effect to principles of
conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer and this Warrant to be dated as of the date first above
written.
NAVIDEC, INC.
By:
-----------------------------------------
Ralph Armijo, President
Countersigned:
By:
-----------------------------------------
Secretary
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EXHIBIT A
SUBSCRIPTION FORM
(To be Executed by the Registered Holder in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to purchase
of the Shares covered by this Warrant according to the conditions hereof and
herewith makes payment of the Purchase Price of such Shares in full.
No. of Warrants Exercised _______________________
Amount of exercise price delivered $______________
Dated _________________, 199___.
----------------------------------------------------
Signature (must be as listed on Warrant Certificate)
Name Shares to be issued to:
----------------------------------------------------
Address for delivery:
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
7
Law Offices
Ballard Spahr Andrews & Ingersoll, LLP
1225 17th Street, Suite 2300
Denver, Colorado 80202
(303) 292-2400
Fax: 303-296-3956
January 26, 1999
NAVIDEC, Inc.
14 Inverness Drive, Suite F-116
Englewood, Colorado 80112
Re: Form SB-2 Registration Statement relating to shares of no par value Common
Stock and Warrants for Selling Security Holders
Ladies and Gentlemen:
We have acted as counsel for NAVIDEC, Inc. (the "Company") in connection
with the preparation of the Form SB-2 Registration Statement to be filed by the
Company with the Securities and Exchange Commission relating to the shares of
the Company's no par value common stock (the "Common Stock") and the resale of
outstanding warrants of the Company that may be exercised at a price of $7.20
per share (the "Warrants") being offered for sale by certain holders of the
Company's securities. As such counsel, we have examined and relied upon such
records, documents, certificates and other instruments and have made such other
investigation as we deemed appropriate as in our judgment are necessary or
appropriate to form the basis for the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that the shares of Common
Stock being offered, including those shares of Common Stock underlying the
Warrants, when sold in accordance with the terms set forth in the Registration
Statement will be validly issued and outstanding, fully paid and nonassessable.
We express no opinion concerning the laws of any jurisdiction other than
the federal law of the United States of America and the State of Colorado. We
consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to this firm under the caption "Legal Matters" in
the Registration Statement and the Prospectus forming a part thereof.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll, LLP
------------------------------------------
Exhibit 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in the Registration Statement and Prospectus of NAVIDEC,
Inc. of our report dated March 5, 1998, accompanying the consolidated financial
statements of NAVIDEC, Inc. contained in such Registration Statement, and to the
use of our name and the statements with respect to us, as appearing under the
heading "Experts" in the Registration Statement.
/s/ Hein + Associates LLP
- --------------------------
HEIN + ASSOCIATES LLP
Denver, Colorado
January 26, 1999
