<PAGE>
As filed with the Securities and Exchange Commission on November 24, 1999
Reg. No. 333-85507
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
AMENDMENT NO.1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
FOCUS AFFILIATES, INC.
(Exact name of issuer as specified in its charter)
Delaware 95-4467726
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9314 Eton Avenue
Chatsworth, California 91311
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
David Kane, Chief Financial Officer
Focus Affiliates, Inc.
9314 Eton Avenue
Chatsworth, California 91311
(818) 709-2300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Sanford J. Hillsberg, Esq.
Troy & Gould Professional Corporation
1801 Century Park East, Suite 1600
Los Angeles, California 90067
(310) 553-4441
Approximate date of commencement of proposed sale to public:
From time to time 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, 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) 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. [ ]
<PAGE>
The registrant hereby amends this registration statement on the 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 the date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
FOCUS AFFILIATES, INC.
5,140,258 Shares of Common Stock
Our common stock is traded on the Nasdaq SmallCap Market under the symbol
"FONE." On November 19, 1999, the closing price of our common stock was $4.938
per share.
An investment in our common stock involves a high degree of risk. Before
investing in our common stock, you should consider carefully the risks described
under "Risk Factors" beginning on page 3.
Of the 5,140,258 shares of common stock offered by this prospectus, selling
stockholders are selling 3,878,526 shares that are outstanding or are issuable
upon the exercise of outstanding options and warrants and we are selling
1,261,732 shares upon the exercise of outstanding warrants that were distributed
to all of our stockholders as a dividend in 1997. We will not receive any of the
proceeds from the sale of shares by the selling stockholders.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the common stock or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is November 29, 1999.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. This summary may not contain all of the information you should
consider before investing in our common stock. You should read the entire
prospectus carefully before making an investment decision.
GENERAL INFORMATION ABOUT US
We are engaged in the wholesale distribution of wireless communications
products. We offer cellular telephones and accessories from leading
manufacturers, including brand names like AT&T, Audiovox, Ericsson, Mitsubishi,
Motorola, Nokia, NEC, Panasonic, Qualcomm, Samsung and Sony. We have developed a
customer base of more than 2,100 wholesalers, carriers, agents, dealers and
retailers. Historically, we have bought most of our inventory of products from,
and have sold a substantial portion of this inventory to, other distributors. We
are in the process of developing an internet-based method for processing orders
from dealers that we expect to initiate in the fourth quarter of 1999.
In July 1999, we entered into an agreement to acquire Cellular
Wholesalers, Inc., a privately owned wholesale distributor of wireless
communications products, through the merger of Cellular Wholesalers into a
wholly owned subsidiary of Focus. This transaction was completed on October
29, 1999. Reflecting these new developments and our goal of providing new
distribution services to wireless network operators and manufacturers, we
have recently changed the name under which we are conducting business to
Focus Wireless.com. We were incorporated in Delaware in October
1996. Our principal executive offices are located at 9314 Eton Avenue,
Chatsworth, California 91311, and our telephone number is (818) 709-2300.
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Common stock offered ............................... 5,140,258 shares(1)
Common stock currently outstanding ................. 9,264,893 shares(2)
Common stock to be outstanding after the offering... 11,659,396 shares(1)(2)
Nasdaq SmallCap Market Symbol ...................... FONE
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</TABLE>
(1) This assumes the issuance of all shares issuable upon exercise by the
selling stockholders of the warrants and options for the shares of
common stock covered by this prospectus and our sale of the 1,261,732
shares upon the exercise of all the warrants that were issued to our
stockholders in December 1997.
(2) Based on the number of shares of common stock outstanding on November
19, 1999. This number also includes the shares offered by this
prospectus, but excludes 1,400,000 shares reserved for issuance upon
the exercise of options granted or to be granted under our 1996 and
1998 stock option plans and 1,968,570 shares reserved for issuance upon
the exercise of other outstanding warrants and options.
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RISK FACTORS
WE HAVE RECENT AND ANTICIPATED CONTINUING LOSSES
We have incurred operating losses for 1997 and 1998 and the first
three quarters of 1999, and we anticipate that we may incur further, although
reduced, losses for the rest of 1999. Our operating expenses have increased
and can be expected to increase significantly in connection with our
contemplated expansion of operations. This planned expansion will require us
to make substantial up-front expenditures to purchase inventory and increase
marketing efforts. We expect to continue to incur significant operating and
capital expenditures and, as a result, we will need to generate significant
revenues to achieve and maintain profitability. We cannot assure you that we
will generate sufficient revenues to achieve profitability. Even if we do
achieve profitability, we cannot assure you that we can sustain or increase
profitability in the future. If revenues grow slower than we anticipate, or
if operating expenses exceed our expectations or cannot be adjusted
accordingly, our business, results of operations and financial condition will
be materially and adversely affected.
WE OPERATE ON LOW MARGINS
We have historically operated on a high volume and low margin basis. A
recent trend by original equipment manufacturers to reduce prices of wireless
products has and will likely continue to put additional downward pressure on our
margins.
WE PLAN TO EXPAND OUR OPERATIONS
We plan to achieve and maintain operating profitability by expanding
our operations. The success of this plan will be largely dependent on our
ability to
- maintain operating and gross margins
- secure an adequate supply of competitive products
- hire and retain skilled marketing and other personnel
- successfully manage growth by monitoring operations, controlling costs
and maintaining effective management, inventory and credit controls
- develop and maintain relationships with leading manufacturers,
dealers, agents, carriers and sub-agents of wireless products
- acquire and successfully integrate businesses that are complimentary
with our operations
We have limited experience in expansion efforts and we cannot assure you our
planned expansion will be successful.
WE RECENTLY ACQUIRED CELLULAR WHOLESALERS, INC.
We have acquired Cellular Wholesalers, Inc., a privately owned
wholesale distributor of wireless communications products. In connection with
this acquisition:
- we may be unable to successfully integrate its operations with our
current operations
- we have incurred substantial additional debt under a line of credit
that could limit our future financing activities and which we could
have difficulty servicing if we suffer a downturn in our operations
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- we have raised over $5,000,000 in convertible debt financing, which
will require us to issue a substantial number of shares of our common
stock upon conversion of the debt and upon any exercise of warrants
that will be issued in connection with the conversion
- affiliates of Cellular Wholesalers will continue to have significant
transactions with it after our acquisition
- we will generate significant goodwill for accounting purposes that we
will be required to charge against our future reported earnings
WE ARE PURSUING A STRATEGY TO PROVIDE NEW DISTRIBUTION SERVICES
We are pursuing a new strategy to become a value added distributor for
original equipment manufacturers and network operators. As part of this effort,
we may need to expand our warehousing facilities, inventory of products,
computer systems and equipment for repair and refurbishing. We plan to outsource
various services. If we are unable to secure vendors to provide these services
on a cost-effective basis and do not have adequate capital, we may be forced to
abandon this approach. Furthermore, we cannot assure you that manufacturers and
network operators will pay for our services as a value added distributor.
WE PLAN TO INTRODUCE AN INTERNET ORDER SYSTEM
We also plan to introduce a new internet-based method for processing
orders from dealers. We may:
- encounter delays in developing this system
- incur unanticipated costs in establishing or maintaining this system
- encounter customer resistance to using this new system
WE WILL LIKELY NEED TO RAISE ADDITIONAL CAPITAL
We will need additional working capital to significantly expand our
operations as part of our strategy to generate operating profits. We cannot
assure you that we will be able to obtain additional financing on reasonable
terms or at all. Furthermore, if we raise additional capital through equity,
our existing stockholders will experience dilution. If we are unable to raise
additional financing when needed, we may be unable to grow or maintain our
current level of business operations.
We recently obtained a $20,000,000 senior debt facility from Banc of
America Commercial Financial Corporation, which replaced our previous
$5,000,000 credit line. This debt facility contains customary covenants that
limit our activities.
WE ARE DEPENDENT ON OUR PRINCIPAL SUPPLIERS
We are dependent on third-party equipment manufacturers and
distributors for all of our supply of cellular telephones and accessories. We
rely on our suppliers to provide adequate inventories of popular brand name
products on a timely basis and on favorable pricing terms. We generally do not
maintain supply agreements. Instead, we purchase products under purchase orders
on an on-going basis. Our suppliers may not continue to offer competitive
products to us on favorable terms when we need
4
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them. We have failed in the past to sustain significant relationships with
leading manufacturers of analog and digital cellular products. Our supplier
relationships have been primarily other wholesale distributors. As a result,
our supply of products has been inconsistent. Purchases from wholesale
distributors tend to be more expensive and do not include price protection or
promotional allowances.
WE FACE INTENSE COMPETITION FROM OTHER DISTRIBUTORS OF WIRELESS PRODUCTS
The markets for wireless communications products are characterized by
intense price competition and significant price erosion over the life of a
product. We compete with numerous well-established wholesale distributors and
manufacturers of wireless equipment, including our customers and suppliers, as
well as providers of wireless services. Many of our competitors possess greater
financial, marketing, personnel and other resources than us. Brightpoint and
CellStar, historically two of our principal suppliers, are also two of our
primary competitors. Some of our competitors have the financial resources that
allow them to withstand substantial price competition and implement extensive
advertising and promotional programs. The wireless distribution industry is also
characterized by low barriers to entry and frequent introduction of new
products. Our ability to compete successfully will be largely dependent on our
ability to maintain our current vendor relationships and anticipate and respond
to various competitive factors affecting the industry, including:
- new products
- changes in consumer preferences
- demographic trends
- economic conditions, including recessions that decrease consumer
spending
- discount pricing and promotional strategies by carriers
- consolidating trends in the industry
We cannot assure you that we will be able to compete effectively, particularly
as domestic wireless markets mature and we seek to enter into new markets and
market new products.
WE MAY HAVE LOSSES DUE TO BAD CREDIT
We make most of our sales by extending credit to customers, and we
may be unable to collect payment from some of them. We have been required to
write off significant accounts receivable balances in the past. Our accounts
receivable, minus an allowance for doubtful accounts of $170,000, were
approximately $5,209,000 on September 30, 1999. Delays in collection or
uncollectibility of accounts receivable could harm our liquidity and working
capital position.
WE MAY BE UNABLE TO ADJUST TO EVOLVING INDUSTRY STANDARDS AND RAPID
TECHNOLOGICAL CHANGE.
The markets for wireless communications products are characterized by
rapidly changing technology and evolving industry standards, often resulting in
product obsolescence or short product life cycles. Accordingly, our marketing
strategy and ultimate success is dependent upon our ability to anticipate
technological changes in the industry. A recently introduced digital technology
called the digital personal communications services format, or "PCS," has
decreased demand for the analog and digital products we sell. Manufacturers in
this new market have selected distribution channels which do not currently
include us. We may be unable to secure strategic relationships giving us access
to digital PCS products directly, and our business will be harmed if we fail to
secure a consistent supply of digital PCS products on reasonable terms. The use
of other alternative wireless communications technologies, including satellite
communications systems, may also reduce demand for existing wireless products.
These technologies, upon widespread commercial acceptance, could materially
change the types of products we sell and result in significant price
competition. Our existing customers may be unwilling to purchase the new
equipment necessary to utilize these new technologies.
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WE MAY HAVE EXCESS OR OBSOLETE INVENTORY
We acquire inventory in advance of product shipments. Because
forecasting the desirable level of inventory is difficult, we may forecast
incorrectly and stock excess inventory of particular products. Furthermore, the
value of our inventory may decrease due to price reductions by competitors,
obsolescence due to technological change and product quality problems. We have
in the past incurred significant declines in our inventory value and any future
declines could have a material adverse effect on our business.
WE SELL TO FOREIGN CUSTOMERS
Sales of wireless products to customers in foreign markets, primarily
in Latin America, have accounted for a portion of our revenues. In 1998, sales
to customers outside of the United States accounted for 8% of our total
revenues. We are trying to increase product sales in foreign markets, because we
believe that they present significant growth opportunities. To the extent that
we increase foreign sales, our business will increasingly become subject to
foreign trade risks, including:
- credit risk
- trade restrictions, including customs duties and import quotas
- shipping delays
- political, regulatory and economic instability
- fluctuations in currency rates
Although our foreign sales are currently made in United States dollars, an
increase in the value of the dollar in relation to foreign currencies may
decrease demand for our wireless products in foreign countries. For competitive
reasons, we may make future foreign sales in local currencies, which would
expose us to additional currency fluctuation risks. We do not intend to engage
in foreign currency hedging transactions.
WE RELY ON ASIAN MANUFACTURERS
We currently obtain products from several manufacturers who are based
or affiliated with companies in Asia. These manufacturers have been affected by
the recent and well publicized Asian financial crisis. Our business would be
harmed if these manufacturers were unable to supply us with sufficient
quantities of wireless products.
THERE ARE POSSIBLE MEDICAL RISKS ASSOCIATED WITH WIRELESS TELEPHONES
Lawsuits have been filed against manufacturers of wireless telephones
alleging possible medical risks, including brain cancer, associated with
electromagnetic fields emitted by cellular telephones. Scientific research has
not been conclusive on the effect of cellular telephones on humans. Future
studies confirming health risks associated with cellular telephones could harm
our business. Furthermore, the perception of health risks could harm our ability
to sell wireless telephone products. As a distributor of wireless telephones, we
could be subject to lawsuits filed by plaintiffs alleging health risks. We do
not carry product liability insurance.
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OUR BUSINESS IS DEPENDENT ON OUR NEW MANAGEMENT TEAM
Our future success depends to a significant extent on the continued
services of our senior management, who have only recently joined us. In April
1999, Ben Neman, our chairman of the board and president, and Stephen
Jarrett, an executive vice president and director, resigned their positions.
Michael Hedge, who joined us as an executive vice president in February 1999,
became our president and chief executive officer as well as a director in
April 1999. John Swinehart, who had served as our chief executive officer and
a director since November 1998, became chairman of the board and chief
operating officer in April 1999. Other key officers and employees include
David Kane, our chief financial officer since August 1998; and Mark Fruehan,
our executive vice president since May 1999. Three key officers of Cellular
Wholesalers were appointed as officers of Focus on October 29, 1999: Ronald
Goldberg, our senior vice president -- U.S. Operations; Melvin Cohen, our
vice president -- finance and administration; and Cary Maimon, our vice
president -- general manager. The loss or interruption of the services of one
or more of these individuals could have a material adverse effect on our
business and prospects.
WE MAY EXPERIENCE YEAR 2000 INTERRUPTIONS
We use a number of computer software programs in our internal
operations, including our order, inventory management and distribution systems.
If our computer systems do not correctly recognize the date information for the
year 2000, our operations may be interrupted. The wireless products we
distribute could also experience year 2000 problems, and our customers may alter
their usual purchasing patterns due to year 2000 problems. If any of our
computer systems or products are not year 2000 compliant, our business,
financial condition and results of operations could be materially adversely
affected. In addition, failure by our key suppliers or customers to make their
computer software programs year 2000 compliant could have a material adverse
effect on us. We have completed a project to address various year 2000 issues,
but will continue to monitor our year 2000 risks.
USE OF PROCEEDS
We will receive the exercise price of the warrants and options if
they are exercised by the selling stockholders and the holders of outstanding
warrants that were distributed to all stockholders as a dividend in 1997. We
intend to use these proceeds for working capital. If all of the warrants and
options are exercised, we will receive a total of $2,990,585. Otherwise, we
will not receive any of the proceeds from the sale of the common stock
offered under this prospectus by the selling stockholders. We will bear the
costs and expenses of registration of shares offered, which we currently
estimate to be about $65,000.
ISSUANCE UPON THE EXERCISE OF OUTSTANDING STOCKHOLDER WARRANTS
On November 18, 1997, our board of directors declared a pro rata
distribution to all of our stockholders of a warrant to purchase our common
stock from us as follows: record owners of our common stock on December 10, 1997
(other than Ben Neman, who waived his right to receive this distribution)
received one redeemable warrant for every two shares of common stock held. In
total, stockholder warrants to purchase 1,261,732 shares of common stock were
issued. Each warrant entitled the holder to purchase one share of common stock
at a price of $4, subject to adjustments. The warrants expire on December 10,
2000. The exercise price of these warrants was lowered by our board to $1 per
share, which was approved by our stockholders at our annual meeting of
stockholders in December 1998. We are offering 1,261,732 shares of common stock
to the holders of these stockholder warrants, upon the exercise of these
warrants.
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Prior to their exercise, we may redeem these warrants, in whole or in
part, at a redemption price of $0.10 per warrant if the following conditions are
met:
- we give at least 30 days written notice of the redemption
- the closing bid price of our common stock on all 20 trading days
ending on the third day prior to giving notice has been equal to
or greater than $7.00 per share
- the holders may exercise the warrants until the close of business
on the date fixed for redemption
SELLING STOCKHOLDERS
Except as indicated below, none of the selling stockholders has held
any position or office or had any other material relationship with us within
the past three years. The following table shows the beneficial ownership of
our common stock for each of the selling stockholders on November 19, 1999.
The table assumes that the selling stockholders will sell all of the shares
and that the selling stockholders will make no other purchases or sales of
our common stock. However, the selling stockholders are not obligated to sell
their shares at any time or at any price. Therefore, we cannot state with
certainty the number of shares of common stock that will be owned by each of
the selling stockholders upon the termination of this offering. The number of
shares of common stock that each holder may own may also change due to stock
splits or other anti-dilution adjustments.
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Before Offering(1) After Offering (1)
------------------ ------------------
Number of Number of Shares Number of
Selling Stockholder Shares Percent Being Offered Shares Percent
------------------- ------ ------- ------------- ------ -------
<S> <C> <C> <C> <C> <C>
Paul Skjodt(2) 1,116,667(3) 11.8% 1,116,667 0 0
Carroll Edwards 643,333(4) 6.9% 643,333 0 0
Christopher R. Williams 208,333 2.2% 208,333 0 0
Rhett Baumgartner 166,666(5) 1.8% 166,666 0 0
Edward Kowlowitz 166,666 1.8% 166,666 0 0
Chandler M. Williams 250,000 2.7% 250,000 0 0
Cooper L. Williams 208,333(6) 2.2% 208,333 0 0
Marshall Welton 30,000(7) * 30,000 0 0
Sam Schmutte 16,000(8) * 16,000 0 0
Troy & Gould Professional
Corp. Profit Sharing Plan for
Benefit of Sanford J.
Hillsberg(9) 10,000(10) * 10,000 0 0
Troy & Gould Professional
Corp. Profit Sharing Plan for
Benefit of William D. Gould(9) 10,000(11) * 10,000 0 0
Charles Alimonda(12) 17,950(13) * 2,000 15,950 *
Howard E. Kane 8,000(14) * 8,000 0 0
Martha B. Maus 44,000(15) * 44,000 0 0
Thomas G. Hedge 8,000(16) * 8,000 0 0
Michael King(17) 12,000(18) * 12,000 0 0
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C>
Daniel S. Laikin 93,528(19) 1.0% 93,528 0 0
Stephen Jarrett(20) 100,000(21) 1.1% 100,000 0 0
John Swinehart(22) 300,000(23) 3.2% 200,000 0 0
Mark M. Laisure(24) 200,000(25) 2.1% 200,000 0 0
CIT Group/Crf Securities
Investment, Inc. (26) 15,000(27) * 15,000 0 0
NationsCredit Commerical
Corporation(28) 20,000(29) * 20,000 0 0
MSS Descendants Trust(30) 92,500(31) 1.0% 92,500 0 0
SBS Descendants Trust(30) 92,500(31) 1.0% 92,500 0 0
James Allardice(30) 200(31) * 200 0 0
Howard Allen(30) 1,700(31) * 1,700 0 0
Bill Barkow(30) 250(31) * 250 0 0
Ari Blaine(30) 1,400(31) * 1,400 0 0
Alan Bluestine(30) 90,000(31) 1.0% 90,000 0 0
Jay Bluestine(30) 200(31) * 200 0 0
Robert Bonaventura(30) 6,500(31) * 6,500 0 0
Craig Bonn(30) 1,100(31) * 1,100 0 0
Denny Boys(30) 200(31) * 200 0 0
James Brodie(30) 1,500(31) * 1,500 0 0
Basil Bullard(30) 200(31) * 200 0 0
Todd Cirella(30) 1,000(31) * 1,000 0 0
Kevin Connors(30) 775(31) * 775 0 0
Amy Cooper(30) 8,000(31) * 8,000 0 0
Sabin Danziger(30) 1,500(31) * 1,500 0 0
James Dore(30) 450(31) * 450 0 0
Gareth Evans(30) 700(31) * 700 0 0
Fiona Fahnestock(30) 200(31) * 200 0 0
Gordon Fallone(30) 1,750(31) * 1,750 0 0
Scott Franklin(30) 1,000(31) * 1,000 0 0
Will Georgiadis(30) 450(31) * 450 0 0
George Gleusner(30) 900(31)(32) * 400 500 *
Lars Headley(30) 350(31) * 350 0 0
Robert Hill(30) 950(31) * 950 0 0
Steven Hoffman(30) 425(31) * 425 0 0
Susan Kellogg(30) 200(31) * 200 0 0
Scott Kurland(30) 600(31) * 600 0 0
Peter Landau(30) 1,600(31) * 1,600 0 0
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C>
Bill Lee(30) 450(31) * 450 0 0
Marc Levine(30) 650(31) * 650 0 0
Dean Levy(30) 450(31) * 450 0 0
Hugh Marasa(30) 3,000(31) * 3,000 0 0
Ian McDade(30) 200(31) * 200 0 0
Joseph McGowan(30) 1,600(31) * 1,600 0 0
Gien McKelvey(30) 500(31) * 500 0 0
David Michael(30) 200(31) * 200 0 0
Peter Moore(30) 550(31) * 550 0 0
James Palmer(30) 950(31) * 950 0 0
Kevin Palmer(30) 400(31) * 400 0 0
Matthew Parker(30) 400(31) * 400 0 0
Seth Potter(30) 8,000(31) * 8,000 0 0
Gary Rice(30) 200(31) * 200 0 0
Charles Robinson(30) 1,000(31) * 1,000 0 0
David Roth(30) 2,400(31) * 2,400 0 0
Jason Russo(30) 1,000(31) * 1,000 0 0
Richard Sands(30) 8,500(31)(33) * 6,500 2,000 *
Peter Sarner(30) 450(31) * 450 0 0
Peter Silverman(30) 950(31) * 950 0 0
Gary Slutsky(30) 1,800(31) * 1,800 0 0
Robert Spiegel(30) 6,500(31) * 6,500 0 0
Jeff Tabman(30) 500(31) * 500 0 0
Rick Unser(30) 350(31) * 350 0 0
Simeon Wohlberg(30) 2,100(31) * 2,100 0 0
Robert Zampa(30) 300(31) * 300 0 0
</TABLE>
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* indicates less than 1% beneficial ownership
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock
subject to options, warrants and convertible securities currently
exercisable or convertible, or exercisable or convertible within 60
days, are deemed outstanding, including for purposes of computing the
percentage ownership of the person holding the option, warrant or
convertible security, but not for purposes of computing the percentage
of any other holder.
(2) Paul Skjodt is a member of an advisory board that advises our board of
directors. The advisory board has no voting power or authority.
(3) Includes 200,000 shares issuable upon the exercise of currently
exercisable stock options. These stock options were granted to Mr.
Skojdt as a finder's fee for identifying investors in our private
offering of convertible notes in November 1998.
(4) Includes 30,333 shares issuable upon the exercise of currently
exercisable warrants.
(5) Includes 666 shares issuable upon the exercise of currently exercisable
warrants.
(6) Includes 8 shares issuable upon the exercise of currently exercisable
warrants.
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(7) Includes 15,000 shares issuable upon the exercise of currently
exercisable warrants.
(8) Includes 8,000 shares issuable upon the exercise of currently
exercisable warrants.
(9) Mr. Hillsberg and Mr. Gould are members of Troy & Gould Professional
Corporation, which is giving a legal opinion on the validity of the
shares covered by this prospectus.
(10) Includes 5,000 shares issuable upon the exercise of currently
exercisable warrants.
(11) Includes 5,000 shares issuable upon the exercise of currently
exercisable warrants.
(12) Mr. Alimonda is employed as our national sales manager.
(13) Includes 1,000 shares issuable upon the exercise of currently
exercisable warrants, and includes 15,000 shares issuable upon the
exercise of currently exercisable stock options.
(14) Includes 4,000 shares issuable upon the exercise of currently
exercisable warrants.
(15) Includes 22,000 shares issuable upon the exercise of currently
exercisable warrants.
(16) Includes 4,000 shares issuable upon the exercise of currently
exercisable warrants.
(17) Mr. King is one of our vice presidents.
(18) Includes 6,000 shares issuable upon the exercise of currently
exercisable warrants.
(19) Includes 46,764 shares issuable upon the exercise of currently
exercisable warrants.
(20) Stephen Jarrett served as our executive vice president and one of our
directors until April 1999.
(21) Mr. Jarrett granted an irrevocable proxy to John Swinehart, or his
successors as chief executive officer of Intellicell, for his shares of
common stock until April 30, 2000.
(22) John Swinehart served as our chief executive officer between November
1998 and April 1999. He became our chief operating officer in April
1999. He has also served as one of our directors since November 1998.
(23) Includes 200,000 shares issuable upon the exercise of currently
exercisable stock options. Also includes 100,000 shares which Mr.
Swinehart is deemed to beneficially owned by reason of the irrevocable
proxy desscribed in footnote 21.
(24) Mark M. Laisure has served as one of our directors since November 1998.
(25) Includes 200,000 shares issuable upon the exercise of currently
exercisable stock options.
(26) CIT Group/Crf Securities Investment, Inc. had provided a line of credit
to us pursuant to a financing agreement entered into with them in June
1996.
(27) Includes 15,000 shares issuable upon the exercise of currently
exercisable warrants.
(28) Nationscredit Commercial Corporation had provided a line of credit to
us pursuant to a financing agreement that we entered into with them in
May 1999.
(29) Includes 20,000 shares issuable upon the exercise of currently
exercisable warrants.
(30) Sands Brothers & Co., Ltd. served as the representative of the
underwriters in our initial public offering and as our financial
advisor in connection with our private offering of convertible notes in
November 1998 and in connection with our acquisition of Cellular
Wholesalers, Inc. Sands Brothers transferred warrants to purchase
350,000 shares of common stock that it received from us to trusts
controlled by two of its principals and to its employees indicated by
this footnote.
(31) Consists of shares issuable upon the exercise of currently exercisable
warrants.
(32) Also includes 500 shares of common stock.
(33) Also includes 2,000 shares of common stock.
11
<PAGE>
PLAN OF DISTRIBUTION
STOCKHOLDER WARRANTS
Subject to the provisions of the warrant agreement covering the
warrants issued to our stockholders as a dividend in 1997, a holder of these
warrants may receive the shares of common stock by doing both of the following:
- surrendering the warrant to Continental Stock Transfer & Trust
Company, the warrant agent, along with a completed subscription
form
- delivering the appropriate exercise price to the warrant
agent--the payment should be made in cash, certified check or
bank draft to the order of Intellicell Corp.
Upon surrender of the warrant and payment of the appropriate exercise price, we
will issue and deliver a certificate or certificates for the appropriate number
of shares of common stock.
SELLING STOCKHOLDERS
As used in this prospectus, "selling stockholders" includes the
pledgees, donees, transferees or others who may later hold the selling
stockholders' shares of common stock We will pay the costs and fees of
registering the shares of common stock, but the selling stockholders will pay
any brokerage commissions, discounts or other expenses relating to the sale of
these shares.
The selling stockholders may sell the shares of common stock in the
over-the-counter market or otherwise, at market prices prevailing at the time of
sale, at prices related to the prevailing market prices or at negotiated prices.
In addition, the selling stockholders may sell some or all of their shares
through:
- a block trade in which a broker-dealer may resell a portion of
the block, as principal, in order to facilitate the transaction;
- purchases by a broker-dealer, as principal, and resale by the
broker-dealer for its account; or
- ordinary brokerage transactions and transactions in which a
broker solicits purchasers.
When selling the shares of common stock, the selling stockholders may
enter into hedging transactions. For example, the selling stockholders may:
- enter into transactions involving short sales of the shares by
broker-dealers;
- sell shares short themselves and redeliver the shares to close
out their short positions;
- enter into option or other types of transactions that require the
selling stockholder to deliver shares to a broker-dealer, who
will then resell or transfer the common shares under this
prospectus; or
- loan or pledge the shares to a broker-dealer, who may sell the
loaned shares or, in the event of default, sell the pledged
shares.
The selling stockholders may negotiate and pay broker-dealers
commissions, discounts or concessions for their services. Broker-dealers engaged
by the selling stockholders may allow other broker-dealers to participate in
resales. However, the selling stockholders and any broker-dealers involved in
the sale or resale of the shares of common stock may qualify as "underwriters"
within the meaning of the Section 2(a)(11) of the Securities Act of 1933. In
addition, the broker-dealers' commissions, discounts or concession may qualify
as underwriters' compensation under the Securities Act of 1933.
In addition to selling their shares under this prospectus, the selling
stockholders may:
12
<PAGE>
- agree to indemnify any broker-dealer or agent against liabilities
related to the selling of the shares, including liabilities
arising under the Securities Act of 1933;
- transfer their shares in other ways not involving market makers
or established trading markets, including directly by gift,
distribution or other transfer; or
- sell their shares under Rule 144 of the Securities Act of 1933
rather than under this prospectus, if the transaction meets the
requirements of Rule 144.
LEGAL MATTERS
Troy & Gould Professional Corporation, Los Angeles, California, has
rendered an opinion with respect to the validity of the shares of common stock
covered by this prospectus. The profit sharing plans for Sanford J. Hillsberg
and William D. Gould, who are members of Troy & Gould Professional Corporation,
each own 5,000 shares of common stock and warrants to acquire an additional
5,000 shares of common stock. These shares and the shares issuable upon the
exercise of these warrants are included in this prospectus, as described under
the section "Selling Stockholders."
EXPERTS
Our financial statements appearing in our form 10-K/A No. 2 for the
year ended December 31, 1998, have been audited by Hollander, Lumer & Co. LLP,
independent auditors, as set forth in their report, which is incorporated by
reference into this prospectus. These financial statements are incorporated by
reference into this prospectus in reliance on their report, given on the
authority of that firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934 and, as a result, file reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
the reports, proxy statements and other information that we file at the public
reference facilities maintained by the Securities and Exchange Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at
the following regional offices: 7 World Trade Center, New York, New York 10048,
and Northwestern Atrium Center, 500 W. Madison Street, Suite 1400, Chicago,
Illinois 60661. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the public reference rooms. The
Securities and Exchange Commission maintains a web site at http://www.sec.gov
that contains our reports, proxy statements and other information that we file
electronically with the Securities and Exchange Commission. You can also inspect
our reports, proxy statements and other information at the offices of the Nasdaq
Stock Market.
The Securities and Exchange Commission allows us to incorporate by
reference the information we file with it, which means that we can disclose
important information to you by referring you to those documents. The
information that we incorporate by reference is considered to be part of this
prospectus, and later information that we file with the Securities and Exchange
Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934:
- Our annual report on form 10-K for the fiscal year ended December
31, 1998, as amended by amendment no. 1 on form 10-K/A and
amendment no. 2 on form 10-K/A
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- Our quarterly reports on form 10-Q for the fiscal quarters ended
March 31, 1999, June 30, 1999 and September 30, 1999
- Our current reports on form 8-K filed on February 8, 1999, April
20, 1999, April 28, 1999, August 6, 1999, August 26, 1999, and
November 10, 1999
- The description of our common stock contained in the registration
statement on form 8-A filed on December 16, 1996
This prospectus is part of a registration statement on form S-3 that we
have filed with the Securities and Exchange Commission (registration no.
333-85507). If you request a copy of any or all of the documents incorporated
by reference, we will send you the copies requested at no charge. We will not
send exhibits to these documents, however, unless the exhibits are specifically
incorporated by reference in this prospectus. You should direct requests to:
Focus Affiliates, Inc.
Attn: David Kane, Chief Financial Officer
9314 Eton Avenue
Chatsworth, California 91311
(818) 709-2300
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
Some of the information in this prospectus, or incorporated in this
prospectus by reference, may contain forward-looking statements which involve
known and unknown risks and uncertainties. These risks and uncertainties may
cause our actual results, performance or achievements to be materially different
from the future results, performance or achievements described or implied by the
statements. These statements discuss future revenue and expenditure expectations
in addition to anticipated strategies and events. When considering the
forward-looking statements, you should keep in mind the risk factors and other
cautionary statements contained in this prospectus.
14
<PAGE>
============================================== ===========================
We have not authorized anyone to give any
information or make any representations, other
than those contained in this prospectus. You
must not rely on any unauthorized information
or representations. Only the shares described
within this prospectus are being offered, and
only under circumstances and in jurisdictions
where it is lawful to do so. The information
contained in this prospectus is current only
as of its date. 5,140,258 Shares of
Common Stock
---------------
TABLE OF CONTENTS
PAGE
------
Prospectus Summary...................... 2 FOCUS AFFILIATES, INC.
General Information About Us.......... 2
The Offering.......................... 2
Risk Factors............................ 3
Use of Proceeds......................... 7
Issuance Upon the Exercise of
Outstanding Stockholder Warrants..... 7
Selling Stockholders................... 8
Plan of Distribution.................... 12
Legal Matters........................... 13
Experts................................. 13
Where You Can Find More Information..... 13
Cautionary Statement Converning
Forward-Looking Information.......... 14 ------------
PROSPECTUS
------------
November 29, 1999
============================================== ===========================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The registrant estimates that expenses in connection with the
distribution described in this registration statement (other than brokerage
commissions, discounts or other expenses relating to the sale of the shares by
the selling stockholders) will be as set forth below. All of the expenses as set
forth below that are incurred with respect to the distribution will be paid by
the registrant, and such amounts, with the exception of the Securities and
Exchange Commission registration and Nasdaq listing fees, are estimates.
SEC registration fee............................. $6,888
Nasdaq listing fees.............................. 7,500
Accounting fees and expenses..................... 5,000
Legal fees and expenses.......................... 35,000
Printing expenses................................ 8,000
Miscellaneous.................................... 2,000
---------
Total......................................... $64,388
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides that a corporation may indemnify its directors and officers, as well as
other employees and individuals, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation -- a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification in which the person seeking
indemnification has been found liable to the corporation. The statute provides
that it is not exclusive of other indemnification that may be granted by a
corporation's charter, bylaws, disinterested director vote, stockholder vote,
agreement or otherwise.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability for (i) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) payments of unlawful dividends or unlawful
stock repurchases or redemptions or (iv) any transaction from which the director
derived an improper personal benefit.
Article Nine of the registrant's Certificate of Incorporation and the
registrant's By-laws provide that all persons who the registrant is empowered to
indemnify pursuant to the provisions of Section 145 of the DGCL (or any similar
provision or provisions of applicable law at the time in effect), shall be
indemnified by the registrant to the full extent permitted thereby. The
foregoing right of indemnification shall not be deemed to be exclusive of any
other rights to which those seeking indemnification may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or otherwise.
Article Ten of the registrant's Certificate of Incorporation provides
that no director of the registrant shall be personally liable to the registrant
or its stockholders for any monetary damages for breaches of fiduciary duty as a
II-1
<PAGE>
director, provided that this provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the registrant or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the DGCL or (iv) for any transaction from which the
director derived an improper personal benefit.
ITEM 16. EXHIBITS
The following exhibits, which are furnished with this registration
statement or incorporated by reference, are filed as part of this registration
statement:
4 Specimen Common Stock Certificate (previously filed as an exhibit
to the registrant's registration statement on Form S-1 (file no.
333-15447) and incorporated by reference.)
5 Opinion of Counsel as to the legality of securities being
registered.**
23.1 Consent of Accountants.*
23.2 Consent of Counsel (included in Exhibit 5).**
24 Power of Attorney.**
- -----------------
* Included herewith.
** Previously filed.
ITEM 17. UNDERTAKINGS
A. Rule 415 Offering
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. 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 (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
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<PAGE>
(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.
B. Filings Incorporating Subsequent Exchange Act Documents by Reference
The undersigned registrant hereby 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 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to 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.
C. Request for Acceleration of Effective Date
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant 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 registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
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 registrant 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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in Chatsworth, California, on November 23, 1999.
INTELLICELL CORP.
By /s/ Michael Hedge
-------------------------
Michael Hedge
Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following person in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ----------- ------ ------
<S> <C> <C>
/s/ Michael Hedge President, Chief Executive Officer and November 23, 1999
- ----------------------------- Director (Principal Executive Officer)
Michael Hedge
* Chief Operating Officer and November 23, 1999
- ----------------------------- Chairman of the Board
John F. Swinehart
/s/ David M. Kane Chief Financial Officer (Principal November 23, 1999
- ----------------------------- Financial and Accounting Officer)
David M. Kane
* Director November 23, 1999
- -----------------------------
J. Sherman Henderson
* Director November 23, 1999
- -----------------------------
Mark M. Laisure
* Director November 23, 1999
- -----------------------------
Vinay Sharma
</TABLE>
* By David M. Kane
as attorney-in-fact
II-4
<PAGE>
EXHIBIT INDEX
---------------
23.1 Consent of Accountants.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Intellicell Corp.
We hereby consent to the incorporation by reference in this Amendment No. 1
to the Registration Statement on Form S-3 of our report dated May 14, 1999,
relating to the financial statements, which appears in Intellicell Corp.'s
Annual Report on Form 10-K/A No. 2 for the year ended December 31, 1998. We
also consent to the reference to us under the heading "Experts" in such
Registration Statement.
/s/ Hollander, Lumer & Co. LLP
Hollander, Lumer & Co. LLP
Los Angeles, California
November 22, 1999
