Registration No. xx-xxxxx
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-----------------------------
ZAPWORLD.COM
(Exact name of registrant as specified in its charter)
California 94-3210624
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
117 Morris Street
Sebastopol, California 95472
(Address, including zip code, and
telephone number, including area code, of
registrant's principal executive offices)
---------------------------------------------------------
John Dabels
President
Zapworld.com
117 Morris Street
Sebastopol, California 95472
(707) 824-4150
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------------------------------------
with a copy to:
William D. Evers
Foley & Lardner
1 Maritime Plaza, Sixth Floor
San Francisco, California 94111
(415) 434-4484
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) of
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
===================== ============ =========== ============ ==============
Proposed Proposed
Maximum Maximum
Title of Each Amount Offering Aggregate Amount of
Class of Securities to be Price Offering Registration
to be Registered Registered Per Unit) Price * Fee
--------------------- ------------ ----------- ------------ --------------
Common Stock, no par 1,546,392 4.78 7,391,753 1,951
value (1)(2)(3)
===================== ============ =========== ============ ==============
Common Stock, no par 1,030,928 4.78 4,927,835 1,301
value (1)(2)(4)
===================== ============ =========== ============ ==============
Common Stock, no par 231,959 4.78 1,108,764 293
value(1)(2)(5)
===================== ============ =========== ============ ==============
Common Stock,
no par value(6) 816,666 5.43 4,434,496 1,171
===================== ============ =========== ============ ==============
Common Stock,
no par value (7) 363,636 4.85 $ 1,763,635 466
===================== ============ =========== ============ ==============
Total 3,989,581 $19,626,483 $5,182
===================== ============ =========== ============ ==============
<PAGE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average high and low prices of the
common stock reported on the Nasdaq SmallCap Market on August 10, 2000.
(2) In addition to the estimated number of shares set forth in the table,
the amount to be registered includes a presently indeterminate number of shares
issuable upon the conversion of the series A-1 and A-2 convertible preferred
stock and the exercise of the warrants as such number may be adjusted as a
result of stock split, stock dividend and anti-dilution provisions in accordance
with Rule 416.
(3) Consists of shares issuable upon the conversion of series A-1 preferred
stock. Pursuant to the terms of a registration rights agreement with the selling
shareholders, we are required to register 200% of the number of shares issuable
upon conversion of the series A-1 preferred stock. The number of shares being
registered is equal to 200% of the number of shares of common stock which would
be issuable if all shares of the series A-1 preferred stock were converted into
common stock as of August 15, 2000.
(4) Consists of shares issuable upon the conversion of series A-2 preferred
stock. Pursuant to the terms of a registration rights agreement with the selling
shareholders, we are required to register 200% of the number of shares issuable
upon conversion of the series A-2 preferred stock. The number of shares being
registered is equal to 200% of the number of shares of common stock which would
be issuable if the selling shareholders purchased all of the shares of series
A-2 preferred stock they are eligible to purchase and then immediately converted
all of their shares into common stock on August 15, 2000.
(5) Consists of shares issuable upon the payment of dividends to the
holders of the series A-1 and series A-2 preferred stock. Pursuant to the terms
of the registration rights agreement, we are required to register 200% of the
number of shares issuable upon the payment of the dividend. The number of shares
being registered is equal to 200% of the number of shares that would be issued
upon payment of the dividend, assuming that the entire amount of the dividend is
paid in the form of common stock.
(6) Consists of shares purchasable upon the exercise of warrants issued to
the selling shareholders.
(7) Consists of shares purchasable upon the exercise of warrants which the
selling shareholders have the right to purchase under the terms of a securities
purchase agreement, assuming that the selling shareholders purchase the maximum
number of warrants under that agreement.
------------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
The information in this prospectus is not complete and may be changed. These
shares may not be sold until the registration statement filed with the
Securities and Exchange commission is effective. The prospectus is not an offer
to sell these securities and is not a solicitation of offers to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion Preliminary Prospectus
Dated August 16, 2000
____________________ Shares
ZAPWORLD.COM
Common Stock
We are registering ________ shares of common stock upon conversion of
series A-1 and A-2 convertible preferred stock, shares issuable as a dividend
paid to the holders of the series A-1 and A-2 preferred stock and shares issued
upon the exercise of certain warrants.
We will only receive proceeds from the sale of common stock as a result of
the exercise of the warrants. We will use the proceeds, if any, for working
capital.
If and when the owners of series A-1 or A-2 preferred stock or warrants
convert or exercise any of these securities for shares of common stock, that
stock may be resold to the public using this prospectus.
The selling shareholders and any intermediaries through whom they sell
common stock may be considered underwriters within the meaning of the Securities
Act of 1933 as to the common stock they sell. Any profits realized or
commissions received by them may be considered underwriting compensation.
Our shares are currently traded on the Nasdaq SmallCap Market under the
trading symbol ZAPP. On August 15, 2000, the last reported sale price of our
common stock was $5.00 per share.
Investing in our common stock involves risks. See the "Risk Factors"
Section beginning on page 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
This prospectus is dated __________________, 2000.
<PAGE>
TABLE OF CONTENTS
Page
TABLE OF CONTENTS..............................................................1
ABOUT ZAPWORLD.COM.............................................................2
THE OFFERING...................................................................3
FORWARD-LOOKING STATEMENTS.....................................................3
RISK FACTORS...................................................................3
We have never operated profitably since we began operations and
we can provide you with no assurance that we will achieve
profitability...........................................................3
We may not be able to obtain additional capital to fund our
operations when needed..................................................4
We face intense competition which could cause us to lose market
share...................................................................4
Changes in the market for electric vehicles could cause our
products to become obsolete or lose popularity..........................4
We may be unable to keep up with changes in electric vehicle
technology and suffer a decline in our competitive position
as a result.............................................................5
We will need to increase our research and development spending,
which could substantially increase our costs and adversely
affect our operation's cash flow........................................5
The failure of certain key suppliers to provide us with
components could have a severe and negative impact upon our
business................................................................5
Product liability or other claims could have a material adverse
effect on our business..................................................5
Failure to manage our growth effectively could adversely affect
our business............................................................6
The loss of certain key personnel could significantly harm our
business................................................................6
Changes in the law may have a negative impact upon our business...........6
Our success is heavily dependent on protecting our intellectual
property rights, which we may not be able to protect....................7
USE OF PROCEEDS................................................................8
selling shareholders...........................................................8
plan of distribution..........................................................12
description of securities.....................................................13
Series A-1 and A-2 Preferred Stock.......................................13
Warrants.................................................................14
Registration Rights......................................................14
legal matters.................................................................15
<PAGE>
EXPERTS ......................................................................15
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.............................15
signatures....................................................................20
ABOUT ZAPWORLD.COM
Our company, Zapworld.com was incorporated in California in 1994 under the
name "Zap Power Systems, Inc." We produce and sell electric vehicles, including
an electric scooter called the "ZAPPY(R)", electric motorbikes and other
products. We also manufacture and sell non-motorized scooters.
Our principal offices are located at 117 Morris Street, Sebastopol,
California 95472 and our telephone number is (707) 824-4150. Our corporate
website is www.zapworld.com. The information on our website is not incorporated
by reference in this prospectus.
2
<PAGE>
THE OFFERING
Type of security.............................Common stock
Common stock registered by company...........We are registering shares of common
stock which are issuable upon: (1)
the conversion of series A-1
preferred stock and series A-2
preferred stock; (2) upon the
payment of dividends on those
shares; and (3) which are issuable
upon the exercise of certain
presently outstanding warrants as
well as under warrants which we
have agreed to sell to the selling
shareholders.
Use of proceeds..............................We will only receive cash proceeds
upon exercise of the warrants.
Those proceeds, if any will be used
for working capital. All proceeds
from sales of common stock
conducted by selling shareholders
will go to the selling shareholders
and not to us.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents we incorporate by reference into this
prospectus include forward-looking statements. Those statements are sometimes
indicated by words such as "anticipate," "estimate," "believe," "consider,"
"expect," "project," "intend" and similar expressions. Forward-looking
statements are based on assumptions of future events, some of which will not
occur. Actual results will vary from those set forth or implied in the
forward-looking statements and the variances may be material.
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the following risk factors before you decide to buy
our common stock.
We have never operated profitably since we began operations and we can provide
you with no assurance that we will achieve profitability.
We have never generated a profit from operations during any fiscal year of
our existence since we began operation in 1994. We have concentrated primarily
on increasing our revenues and expanding our market share through acquisitions
rather than on maximizing profits to date. As a result, although we experienced
revenue growth from fiscal year 1998 to fiscal year 1999, we incurred net losses
of $1,109,400 and $1,692,600 for the years ended December 31, 1998 and 1999,
respectively. There is no assurance that we will be able to successfully operate
profitably in the future. Because we will ultimately need to operate
3
<PAGE>
profitably or sell our operations, our failure to generate profits from
operations could harm our ability to continue operations in the long term.
We may not be able to obtain additional capital to fund our operations when
needed.
From our inception, we have financed our operations primarily through
private and public offerings of our equity securities. Our planned expenditures
are based primarily on our internal estimates of future sales and ability to
raise additional financing. If revenues or additional financing do not meet our
expectations in any given period of time, the adverse impact on our finances
will be magnified by our inability to adjust spending quickly enough to
compensate for revenue or financing shortfalls. Failure to achieve anticipated
revenues may require us to seek additional financing when none is available or
on extremely unfavorable terms. There can be no assurance that we will be able
to achieve profitability.
We face intense competition which could cause us to lose market share.
Some of our competitors are large manufacturers including Honda, Suzuki,
Sanyo and Yamaha, have significant financial resources, established market
positions, longstanding relationships with other customers, and significantly
greater name recognition, technical, marketing, sales, manufacturing,
distribution and other resources than we do. These factors may make it difficult
for us to compete with these businesses in the production and sale of our
products.
There are many smaller manufacturers which are experienced in selling
electric bicycles to the U.S., European and Asian markets, all of which are key
segments of our market. We also compete against the makers of electric scooters
as well as non-motorized scooters and bicycles. Although we believe we have a
competitive advantage from our name recognition in the electric vehicle industry
and ownership of fundamental technology, the market for the sale of these
products is subject to rapid change and ease of entry by new competitors. We
cannot be certain that we will be able to meet the changes in the marketplace
that will allow us to remain competitive.
Changes in the market for electric vehicles could cause our products to become
obsolete or lose popularity.
The electric vehicle industry is in its infancy and has experienced
substantial growth and change in the last few years. Demand for and interest in
electric vehicles appears to be increasing. However, growth in the electric
vehicle industry may depend on: continued development of product technology and
recharge infrastructure, the environmental consciousness of customers, the
ability of electric vehicles to successfully compete with vehicles powered by
internal combustion engines, and future regulation and legislation requiring
more use of nonpolluting vehicles. We can provide you with no assurance that
growth in the electric vehicle industry will continue, and our business may
suffer should such growth cease.
There has also been a substantial increase in the number of electric
vehicles and non-motorized vehicles which are competitive with our products in
the last several years. One of
4
<PAGE>
our principal challenges will be to continue to develop and market products
which keep pace with the rapid changes in the market. We can provide you with no
assurance that we will be able to introduce new products and maintain the market
share of our current products. If we are not able to do so, we will likely be
unable to continue to increase revenue or begin to operate profitably.
We may be unable to keep up with changes in electric vehicle technology and
suffer a decline in our competitive position as a result.
Our existing products are designed for use with, and are dependent upon,
existing electric vehicle technology. As technologies change, we plan to upgrade
or adapt our products in order to continue to provide products with the latest
technology. However, we cannot be certain that our products will not become
obsolete or that our research and development efforts will be able to adapt to
changes in or create the necessary technology. Therefore, changes in technology
in the electric vehicle industry may harm our competitive position.
We will need to increase our research and development spending, which could
substantially increase our costs and adversely affect our operation's cash flow.
To keep pace with technological changes and developments in the market for
electronic vehicles, we have substantially increased spending on research and
development. Our research and development costs in 1999 were $364,600, as
compared to $202,600 in 1998, an 80% increase. Because we plan to develop new
electric vehicle products and tooling that will broaden our product line in 2000
and 2001, we expect to continue incurring increased research and development
costs in 2000 and 2001.. There is no assurance that we will be able to raise
sufficient funds to meet our research and development costs. Failure to provide
sufficient funds to support our research and development efforts could have a
material adverse effect on our business, results of operations or financial
condition.
The failure of certain key suppliers to provide us with components could have a
severe and negative impact upon our business.
We rely on a small group of suppliers to provide us with some components
for our products. If these suppliers are unwilling or unable to provide these
parts, there are only a limited number of alternative suppliers who could
provide them. Some of these suppliers are located outside of the United States,
changes in business conditions, wars, governmental changes and other factors
beyond our control or which we do not presently anticipate will occur could
affect our ability to receive components from suppliers. A failure of these
suppliers to provide these components could severely restrict our ability to
manufacture our products and prevent us from filling customer orders in a timely
fashion.
Product liability or other claims could have a material adverse effect on our
business.
As producers of electric vehicles, we face the risk of product liability
claims and unfavorable publicity in the event that the use of our products
causes injury or has other adverse effects. Although we have product liability
insurance for risks of up to $10,000,000,
5
<PAGE>
such insurance may be inadequate to cover all potential product claims. In
addition, we may not be able to maintain such insurance indefinitely or be able
to avoid product liability exposure.
Failure to manage our growth effectively could adversely affect our business.
We plan to increase sales and expand our operations substantially during
the next several years through internally generated growth and the acquisition
of businesses and products which we view strategically advantageous.
To manage our growth, we believe we must continue to implement and improve
our operational, manufacturing and research and development departments. We may
not have adequately evaluated the costs and risks associated with this
expansion, and our systems, procedures and controls may not be adequate to
support our operations. In addition, our management may not be able to achieve
the rapid execution necessary to successfully offer our products and services
and implement our business plan on a profitable basis. The success of our future
operating activities will also depend on our ability to expand our support
system to meet with the growth of our business. Any failure by our management to
effectively anticipate, implement and manage changes required to sustain our
growth would have a material adverse effect on our business, financial condition
and results of operations. There can be no assurance that we will be able to
successfully operate the acquired businesses and become profitable in the future
and we may not be able to effectively manage such change. Our inability to
successfully integrate or operate the recently acquired businesses would have a
material adverse effect on our business, financial condition and results of
operations.
The loss of certain key personnel could significantly harm our business.
Our performance is heavily dependent on the performance of our executive
officers and key employees all of whom have worked together for a relatively
short period of time. In particular, John Dabels was recently appointed as our
President on June 1, 2000 which allows our prior President and Chief Executive
Officer, Gary Starr, to devote his time to serving as the CEO. At the present
time, we do not have any life insurance policy taken on the life of any of our
employees. The loss of the services of any of our executive officers or other
key employees could adversely affect our business.
Additionally, to successfully implement our projected and anticipated
growth, we will be dependent on our ability to retain existing personnel to hire
additional qualified personnel. There can be no assurance that we will be able
to retain or hire other necessary personnel. Our success is dependent, in part,
on our key management and technical personnel. The loss of one or more of these
personnel could adversely affect our business.
Changes in the law may have a negative impact upon our business.
Our products are subject to substantial regulation under federal, state and
local laws. We believe that our products are materially in compliance with all
laws governing their manufacture, sale and use. However, to the extent such laws
change or that we may introduce new products in the future, there can be no
assurance that any of our other products will
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<PAGE>
continue to comply with applicable state or federal or foreign laws. Further,
certain foreign country, federal and state laws and industrial standards
currently regulate electrical and electronics equipment. Standards for electric
vehicles are not yet generally available or accepted as industry standards.
There can be no assurance that our products may not become subject to such
federal and/or state regulation in the future. Compliance with any future
federal or state regulations may be burdensome, time consuming and expensive. We
cannot predict the effect of possible future legislation and regulation on our
business.
Our success is heavily dependent on protecting our intellectual property rights,
which we may not be able to protect.
We rely on a combination of patent, trademark and trade secret protections
to protect our proprietary technology. Our success will, in part, depend on our
ability to obtain trademarks and patents and to operate without infringing on
the proprietary rights of others. We may not be able to do this successfully,
however. For example, at the present time one of our U.S. patents (Pat. No.
5,491,390) covering various aspects of our electric bicycle is being reexamined
by the United States Patent and Trademark Office to determine if one or more of
its claims are invalid. If that proceeding results in an adverse ruling against
us, the patent will be declared invalid. If this occurs, this could severely and
adversely affect our ability to prevent competitors from copying and using key
elements of our technology in developing and marketing their own products.
Additionally, we have recently learned that at least one company is attempting
to sell an electric scooter in the United States which we believe infringes one
or more of our patents and trademarks. In this regard we may have to incur
substantial legal fees and costs in preventing these infringing activities.
We have registered several trademarks with the United States Patent and
Trademark Office and have obtained several overseas trademark registrations as
well. There can be no assurance that the trademarks and patents issued to us
will not be challenged, invalidated or circumvented, or that the rights granted
under those registrations will provide competitive advantages to us.
We also rely on trade secrets and new technologies to maintain our
competitive position. Although we have entered into confidentiality agreements
with our employees and consultants, we cannot be certain that others will not
gain access to these trade secrets. In addition, others may independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to our trade secrets.
Although we have conducted searches to discover any patents and trademarks
which our products or their use might infringe and are not aware of any such
patents and trademarks, we cannot be certain that no such infringement has or
will occur. We could incur substantial costs in defending any patent or
trademark infringement suits or in asserting any patent or trademark rights, in
a suit with another party.
7
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the conversion of shares of series
A-1 and A-2 preferred stock or the sale of any shares of the common stock by the
selling shareholders.
If all of the warrants which we have issued or which we have agreed to sell
to the selling shareholders are exercised in full, , we would receive total
proceeds of approximately $4,435,523. We will use these proceeds, assuming we
receive any, for working capital. The amounts we actually expend for such
working capital may vary significantly and we cannot predict the proceeds we may
receive from the exercise of the warrants. If we do receive funds from the
exercise of the warrants, the manner in which we use the proceeds will depend on
a number of factors including, but not limited to, the actual net proceeds
received, the amount of our future revenues and other factors described in this
prospectus. Accordingly, our management will retain broad discretion in the
allocation of net proceeds of this offering.
SELLING SHAREHOLDERS
The following tables set forth certain information concerning each of the
selling shareholders. The shares are being registered to permit the selling
shareholders and their transferees or other successors in interest to offer the
shares from time to time. None of the selling shareholders has held any position
or office or had a material relationship with Zapworld.com or any of our
affiliates within the past three years other than as a result of the ownership
of our common stock.
Selling shareholders are under no obligation to sell all or any portion of
their shares. Particular selling shareholders may not have a present intention
of selling their shares and may sell less than the number of shares indicated.
The following table assumes that the selling shareholders will sell all of their
shares.
<TABLE>
<CAPTION>
-------------------------------- ------------------ ----------- ----------- ------------ ------------
Selling Shareholders Number of
Number of Shares Number of Percentage Percentage
Owned and to be Number of Shares of Shares of Shares
Owned Prior to Shares Owned Owned Owned
Offering(1) Being After Prior to After
(2)(3)(4)(5) Offered Offering Offering Offering
-------------------------------- ------------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
The Endeavour Capital Fund, 1,159,481 1,159,481 0 21.71% *
S.A.
P.O.B. 57116
Jerusalem 91570 Israel
-------------------------------- ------------------ ----------- ----------- ------------ ------------
Celeste Trust Reg. 386,494 386,494 0 7.24% *
c/o Trevisa-Treuhand-Anstalt
Landstrasse 8
Furstentums 9496
Balzers, Liechtenstein
-------------------------------- ------------------ ----------- ----------- ------------ ------------
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<PAGE>
<CAPTION>
-------------------------------- ------------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Esquire Trade & Finance 386,494 386,494 0 7.24% *
Trident Chambers
P.O. Box 146
Road Town, Tortola
British Virgin Islands
-------------------------------- ------------------ ----------- ----------- ------------ ------------
Nesher Limited 139,138 139,138 0 2.61% *
c/o KCM LLC
135 W. 50th Street
Suite 1700
New York, NY 10020
-------------------------------- ------------------ ----------- ----------- ------------ ------------
Keshet L.P. 104,353 104,353 0 1.95% *
c/o KCM LLC
135 W. 50th Street
New York, NY 10020
-------------------------------- ------------------ ----------- ----------- ------------ ------------
The Keshet Fund L.P. 65,704 65,704 0 1.23% *
c/o KCM LLC
135 W. 50th Street
New York, NY 10020
-------------------------------- ------------------ ----------- ----------- ------------ ------------
West Capital & Associates, Inc. 77,299 77,299 0 1.45% *
14 Rue du Conseil General
CH-1205 Geneva, Switzerland
-------------------------------- ------------------ ----------- ----------- ------------ ------------
Samuel Krieger 10,000 10,000 0 * *
c/o Krieger & Prager LLP, Esqs.
39 Broadway
Suite 1440
New York, NY 10006
-------------------------------- ------------------ ----------- ----------- ------------ ------------
Ronald Nussbaum 10,000 10,000 0 * *
c/o Krieger & Prager LLP, Esqs.
39 Broadway
Suite 1440
New York, NY 10006
-------------------------------- ------------------ ----------- ----------- ------------ ------------
9
<PAGE>
<CAPTION>
-------------------------------- ------------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Union Atlantic Capital L.C. 104,000 104,000 0 1.95% *
1401 Brickell Avenue
Suite 660
Miami, Florida 33131
-------------------------------- ------------------ ----------- ----------- ------------ ------------
Union Atlantic LC 26,000 26,000 0 * *
3300 PGA Boulevard
Suite 810
Palm Beach Gardens, FL 33410
-------------------------------- ------------------ ----------- ----------- ------------ ------------
</TABLE>
(1) Based upon the information we have received, we assume that the selling
shareholders have sole voting and investment power with respect to all shares
owned.
(2) The above chart sets forth the number of shares that the selling
shareholders presently own or have a right to acquire within 60 days of the date
of this prospectus. The number of shares consists of:
o The total number of shares of common stock presently issuable
upon conversion of the series A-1 preferred stock,
o The total number of shares which would be presently issuable upon
conversion of the series A-2 preferred stock which the holders
have a present right to acquire.
o The number of shares issuable upon exercise of warrants granted
to the selling shareholders; and
o The number of shares issuable upon exercise of warrants which the
selling shareholders have a present right to purchase from us.
The number of shares which the selling shareholders may receive could vary
significantly from that estimate. No holder of the series A-1 preferred stock,
series A-2 preferred stock or any of the warrants may convert shares into common
stock or exercise warrants to purchase common stock if the number of shares of
common stock that shareholder will own after conversion or exercise will exceed
9.99% of our outstanding shares of common stock.
(3) Share ownership is calculated in accordance with Rule 13d-3 of the
Securities Exchange Act of 1934. All shares of common stock which that
shareholder has a right to receive or acquire within 60 days of the date of this
prospectus upon the conversion of the series A-1 or series A-2 preferred stock
or warrants are deemed to be outstanding for the purpose the percentage of the
outstanding shares that shareholder may acquire. However,
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<PAGE>
those shares are not deemed outstanding for the purpose of calculating the
percentage of the outstanding shares any other selling shareholder owns.
(4) Each holder of series A-1 and series A-2 convertible preferred stock
may convert that holder's shares into common stock at any time. The number of
shares of common stock that each holder of series A-1 or series A-2 preferred
stock is entitled to receive is determined by dividing the stated value of the
series A-1 and A-2 convertible preferred stock, which is presently $1,000 by the
conversion price for those shares. The conversion price for the series A-1
convertible preferred stock is the lesser of $4.50 per share or the variable
conversion price for those shares. The conversion price for the series A-2
preferred stock is the lesser of $5.50 per share or the variable conversion
price for those shares. The variable conversion price means an amount equal to
the following:
o if shares of series A-1 preferred stock or series A-2 preferred
stock are converted within one year of the sale of those shares,
85% of the average of the three lowest closing bid prices over
the 22 trading days prior to the day the shares are converted;
o if shares of series A-1 preferred stock or series A-2 preferred
stock are converted between one and two years after those shares
were sold, 80% of the average of the three lowest closing bid
prices over the 22 trading days prior to the day the shares are
converted; and
o if series A-1 or series A-2 preferred shares are converted
between two and three years after they were initially issued, 70%
of the average of the three lowest closing bid prices over the 45
days prior to the day the shares are converted.
If any shares of series A-1 or series A-2 preferred stock have not been
converted prior to the third year anniversary of the sale of those shares, then
those shares shall be automatically converted into common stock on that date.
Assuming that all presently outstanding shares of series A-1 preferred
stock were converted into common stock as of August 15, 2000, the total number
of shares issuable upon conversion of those shares would be 773,196. This
calculation is based upon the application of a conversion price of $3.88, which
would be the conversion price if the series A-1 preferred stock were converted
as of that date. If the selling shareholders purchased all of the shares of
series A-2 preferred stock they are entitled to purchase under the terms of a
securities purchase agreement with us, and then converted those shares
immediately into common stock, the total number of shares they would receive
would be 515,464. This calculation is based upon the application of a conversion
price of $3.88.
(5) The number of shares includes the common stock purchasable upon
warrants issued to the selling shareholders. The selling shareholders currently
hold warrants to purchase 816,666 shares of common stock and have a right to
acquire warrants to purchase an additional 363,636 shares of common stock. All
warrants are immediately exercisable upon issuance.
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PLAN OF DISTRIBUTION
The shares being offered through this prospectus will be offered and sold
by the selling shareholders, transferees or successors in interest. We have
agreed to bear the expenses of the registration of the shares, including legal
and accounting fees, and to pay up to $4,000 for the legal fees of the selling
shareholders for separate legal counsel they obtain to review the registration
statement and $2,000 for the review of post-effective amendments to that
registration statement. We will not be responsible for paying any discounts or
commissions with respect to sales of the shares.
None of the selling shareholders has informed us of any arrangements into
which he, she or it has entered with respect to the sale of the shares. The
selling shareholders may sell their shares at such prices as they choose in
their discretion. The selling shareholders are not obligated to sell any
specific number of their shares. The selling shareholders may effect the sale or
distribution of their shares directly to purchasers from time to time on the
Nasdaq SmallCap Market at prices and at terms prevailing at the time of sale.
The shares may be sold by one or more of the following methods:
o a block trade in which the broker or dealer so engaged will
attempt to sell the shares of common stock as an agent, but may
position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker or dealer as principal and re-sales by that
broker or dealer for its own account pursuant to this prospectus;
o a Nasdaq SmallCap distribution in accordance with the rules of
the Nasdaq SmallCap Market;
o in ordinary brokerage transactions or transactions in which the
broker solicits purchasers;
o in transactions otherwise than on any stock exchange or in the
Nasdaq SmallCap market; or
o pursuant to Rule 144 of the SEC.
The selling shareholders may effect any of these transactions at market
prices prevailing at the time of sale, at prices related to the prevailing
market prices, at varying prices determined at the time of sale or at negotiated
or fixed prices, in each case as the selling shareholder determines, or by
agreement between the selling shareholder and underwriters, brokers, dealers or
agents, or purchasers. In effecting sales, brokers or dealers engaged by the
selling shareholders may arrange for other brokers or dealers to participate.
Brokers or dealers may receive commissions or discounts from the selling
shareholders in amounts to be negotiated prior to the sale. The selling
shareholders, and any brokers, dealers or agents that participate in the
distribution of the shares may be deemed to be underwriters, and any profit on
the sale of the common stock by them and any discounts, concessions or
commissions any
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underwriters, brokers, dealers or agents receive may be deemed to be
underwriting discounts and commissions under the Securities Act. Under the
securities laws of certain states, the shares may be sold in those states only
through registered or licensed brokers or dealers. In addition, in certain
states the shares may not be sold unless they have been registered or qualified
for sale in that state or an exemption from registration or qualification is
available and is met.
DESCRIPTION OF SECURITIES
The only shares were are registering under this prospectus are those which
the selling shareholders own or have a right to acquire. These shares consist of
common stock purchasable upon the conversion of series A-1 and series A-2
preferred stock, shares of common stock issuable as dividends on the series A-1
and series A-2 preferred stock and common stock purchasable upon the exercise of
warrants.
SERIES A-1 AND A-2 PREFERRED STOCK
Our articles of incorporation authorize us to issue up to 10,000,000 shares
of preferred stock in one or more series. The board of directors has the
authority to designate different series of preferred stock and to prescribe the
rights preferences and restrictions for those series of shares. Depending upon
the rights given to the preferred stock, the issuance of preferred stock may
have the effect of delaying or preventing a change in control. The issuance of
preferred stock could also decrease the earnings available for distribution to
the holders of the common stock.
As of the date of this prospectus, we have authorized and designated 3,300
shares of series A-1 convertible preferred stock and 2,200 shares of series A-2
convertible preferred stock. No other series of preferred stock has been
designated. As of August 10, 2000, there were 3,000 shares of series A-1
convertible preferred stock outstanding and no shares of series A-2 convertible
preferred stock outstanding. Pursuant to the terms of a securities purchase
agreement between us and the selling shareholders, the selling shareholders may
purchase up to 2,200 shares of series A-2 preferred stock at a price of $1,000
per share. The series A-1 and series A-2 convertible preferred shares have a par
value of $1,000 per share and a stated value of $1,000 per share
Holders of the series A-1 and A-2 convertible preferred stock are entitled
to receive a dividend, payable in cash at a rate of 6% per annum of the stated
value of the preferred stock. Dividends are payable upon June 30 of each year
and accrue if not paid. Failure to pay dividends will result in an increase in
the number of shares of common stock into which the series A-1 and A-2 preferred
stock is convertible. The liquidation preference on the series A-1 and Series
A-2 preferred stock is equal to the stated value per share. This payment shall
be prior to any payment we make to the holders of our common stock or other
shares of stock which are junior to the series A-1 and A-2 preferred stock.
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WARRANTS
We have issued warrants to purchase an aggregate of 816,666 shares of
common stock to the selling shareholders. The warrants allow the holders to
purchase at a price equal to $5.43125 per share. The holders of the warrants may
pay for the shares in cash or through the use of a net exercise procedure
without the payment of cash by surrendering shares otherwise purchasable upon
exercise of the warrant with a fair market value equal to the exercise price for
the shares they are purchasing. The exercise price is subject to adjustments if
we declare a stock split or dividend of our common stock and will be adjusted
lower on a weighted average basis if we issue shares of our common stock at
below the exercise price then in effect for the warrant. The warrants are
presently exercisable and have a term of five years.
Under the terms of the securities purchase agreement, the selling
shareholders may acquire from us additional warrants to purchase 363,636 shares
of common stock at a price equal to the average of the closing bid prices for
our common stock for the five day period prior to the issuance of the warrants.
The exercise price for those warrants will equal the average of the closing bid
prices for the common stock for the five days prior to the issuance of the
warrants. The warrants will have a term of five years from the date of issuance.
The other terms and conditions of the additional warrants are the same as those
in the warrants which we have already issued to the selling shareholders.
REGISTRATION RIGHTS
We have entered into a registration rights agreement with the selling
shareholders which requires that we file a registration statement with the SEC
to register under the Securities Act all shares of common stock issued to them
or issuable upon the conversion of the series A preferred stock and exercise of
the common stock purchase warrants. The registration rights agreement provides
that we must pay all expenses incurred in the registration and certain expenses
of the selling shareholders, including legal fees of counsel to the selling
shareholders equal to $4,500 for the review of each registration statement and
$2,000 for each post-effective amendment to a registration statement. We are
obligated to keep the registration statement effective with respect to those
shares until the earliest of: (i) three (3) years after the last day of the
calendar month following the month in which the relevant registration statement
is declared effective by the SEC; (ii) the date when the selling shareholders
may sell the registrable securities under Rule 144 without volume or other
restrictions; or (iii) the date the selling shareholders no longer own any of
the registrable securities.
Under the terms of the registration rights agreement we are required to
register: (i) 200% of the number of common shares into which the preferred stock
and all dividends through the third anniversary of their issuance would be
convertible; plus (ii) 100% of the maximum number of shares of common stock
issuable upon the exercise of the warrants.
The registration rights agreement provides that we must pay the selling
shareholders liquidated damages equal to: 1% of the purchase price of all
preferred shares for the first 30
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days after the certain events occur; plus 2% of the purchase price of all
preferred shares for each subsequent 30 day period. Principal among these events
are:
o If the registration statement is not filed by the SEC by August
17, 2000; and
o If the SEC does not declare the registration statement for the
registration of the selling shareholders' shares effective by
November 14, 2000.
For example, if the registration statement is timely filed but is not
declared effective until 70 days after November 14, 2000, we would have to pay
liquidated damages of 5% of the purchase price of the preferred shares (1% for
days 1-30, plus 2% for days 31-60, plus 2% for days 61-70).
LEGAL MATTERS
Certain legal matters relating to the validity of the common stock covered
by this prospectus will be passed upon by Foley & Lardner, One Maritime Plaza,
Sixth Floor, San Francisco, California 94111-3404.
William D. Evers is a member of our Board of Directors. Mr. Evers' previous
firm, Evers & Hendrickson LLP, provided legal services for our company during
1999 and until July 31, 2000. Evers & Hendrickson LLP received $430,408 in
compensation for these services. Additionally, Mr. Evers was granted stock
options to acquire 75,000 shares ranging in price from $3.02 to $6.50 per share.
In August, 2000, Mr. Evers became a partner with Foley & Lardner which continues
to provide legal services for our company.
EXPERTS
The audited financial statements incorporated by reference in this
prospectus and elsewhere in the registration statement have been so incorporated
in reliance on the report of Grant Thornton LLP, independent auditors, given on
the authority of said firm as experts in auditing and accounting.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
We are a reporting company and file annual, quarterly and current reports,
and other information with the Securities and Exchange Commission, or the SEC.
You may read and copy these reports, and other information at the SEC's public
reference rooms at 450 Fifth Street, N.W. Washington, D.C. You can request
copies of these documents by writing to the SEC and paying a fee for the copying
cost. Please call the SEC at 1-800-SEC-0330 for more information about the
operation of the public reference rooms. Our SEC filings are also available at
the SEC's web site at http://www.sec.gov. In addition, you can read and copy our
SEC filings at the office of the National Association of Securities Dealers,
Inc. at 1735 K Street, Washington, D.C. 20006.
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act of 1933 with respect to the common stock offered in connection
with this prospectus.
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This prospectus does not contain all of the information set forth in the
registration statement. We have omitted certain parts of the registration
statement in accordance with the rules and regulations of the SEC. For further
information with respect to us and the common stock, you should refer to the
registration statement. Statements contained in this prospectus as to the
contents of any contract or other document are not necessarily complete and, in
each instance, you should refer to the copy of such contract or document filed
as an exhibit to or incorporated by reference in the registration statement.
Each statement as to contents of such contract or document is qualified in all
respects by such reference. You may obtain copies of the registration statement
from the SEC's principal office in Washington, D.C. upon payment of the fees
prescribed by the SEC, or you may examine the registration statement without
charge at the offices of the SEC described above.
The SEC allows us to incorporate by reference information that we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings we will make with
the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934:
o Annual Reports on Form 10-KSB and 10-KSB/A for the fiscal year
ended December 31, 1999;
o Quarterly Report on Form 10-QSB for the period ended June 30,
2000 and the period ended June 30 1999;
o Definitive Proxy Statement dated June 1, 2000; and
o Current Report on Form 8-K dated June 7, 2000.
You may request a copy of these filings at no cost by writing or
telephoning us at the following address:
Zapworld.com
Attention: Investor Relations
117 Morris Street
Sebastopol, CA 95472
(707) 824-4150
You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
We are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of the document.
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Part II Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth all expenses payable by the registrant in
connection with the sale of the common stock being registered. All the amounts
shown are estimates except for the registration fee.
Registration fee.....................................$ 5,182
Printing and engraving expenses......................$ 5,000
Legal fees and expenses..............................$17,000
Accounting Fees and Expenses.........................$10,000
Miscellaneous........................................$ 5,000
Total................................................$42,182
Item 15. Indemnification of Directors and Officers.
Article VII of our Bylaws provides that we may indemnify any director,
officer, agent or employee against all expenses and liabilities, including
counsel fees, reasonably incurred by or imposed upon such persons in connection
with any proceeding to which any such persons may become involved by reason of
such persons being or having been a director, officer, employee or agent of our
company. Moreover, our Bylaws provide that we shall have the right to purchase
and maintain insurance on behalf of any such persons whether or not we would
have the power to indemnify such person against the liability insured against.
Our Articles of Incorporation provide that we may indemnify our directors and
officers to the fullest extent permissible under California law. In accordance
with these Articles of Incorporation, the liability of our directors for
monetary damages is eliminated to the fullest extent permissible under
California law. As to indemnification for liabilities arising under the
ecurities Act, we have 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.
Item 16. Exhibits
Exhibit
Number Description of Document
------- -----------------------
4.1 Certificate of Determination of Rights and Preferences of the
Series A-1 Convertible Preferred Stock and Series A-2 Convertible
Preferred Stock of Zapworld.com
4.2 Form of Securities Purchase Agreement between Zapworld.com and
the Selling Shareholders
4.3 Form of Registration Rights Agreement between Zapworld.com and
the Selling Shareholders
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4.4 Form of Warrant
4.5 Specimen stock certificate representing shares ofSeries A-1
Preferred Stock
4.6 Specimen stock certificate representing shares of Series A-2
Preferred Stock
5.1 Opinion of Foley & Lardner*
23.1 Consent of Foley & Lardner (included in Exhibit 5.1)
23.2 Consent of Grant Thornton, LLP
* To be filed by amendment
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Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) 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; provided, however, that paragraphs (a)(1)(i)
and (a)(1)(ii) do not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof; and
(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; and
(b) The undersigned registrant hereby further undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe the registrant
meets all of the requirements of filing on Form S-3 and duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in San Francisco, California, on August 16, 2000.
Zapworld.com
By: /s/ John Dabels
-----------------------------------
John Dabels, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ John Dabels President August 16, 2000
---------------------------
John Dabels
/s/ Gary Starr Chief Executive Officer August 16, 2000
--------------------------- and Chief Financial
Gary Starr Officer
/s/ Robert E. Swanson Chairman of the Board August 16, 2000
---------------------------
Robert E. Swanson
/s/ William D. Evers Director August 16, 2000
---------------------------
William D. Evers
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Exhibit
Number Description of Document
------- -----------------------
4.1 Certificate of Determination of Rights and Preferences of the
Series A-1 Convertible Preferred Stock and Series A-2 Convertible
Preferred Stock of Zapworld.com
4.2 Form of Securities Purchase Agreement between Zapworld.com and
the Selling Shareholders
4.3 Form of Registration Rights Agreement between Zapworld.com and
the Selling Shareholders
4.4 Form of Warrant
4.5 Specimen stock certificate representing shares ofSeries A-1
Preferred Stock
4.6 Specimen stock certificate representing shares of Series A-2
Preferred Stock
5.1 Opinion of Foley & Lardner*
23.1 Consent of Foley & Lardner (included in Exhibit 5.1)
23.2 Consent of Grant Thornton, LLP
* To be filed by amendment
21
