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COMMISSION FILE NO. 333-_____
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 16, 1999
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
NHANCEMENT TECHNOLOGIES INC.
----------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 84-1360852
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
39420 LIBERTY STREET, SUITE 250
FREMONT, CALIFORNIA 94538
(510) 744-3333
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(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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CORPORATION SERVICE COMPANY
1013 CENTRE ROAD
WILMINGTON, DELAWARE 19805
(800) 927-9800
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(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------------------------
COPIES TO:
CYNTHIA M. LOE, ESQ.
TOMLINSON ZISKO MOROSOLI & MASER LLP
200 PAGE MILL ROAD, SECOND FLOOR
PALO ALTO, CALIFORNIA 94306
(650) 325-8666
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Title of Proposed Proposed
Securities Maximum Maximum Amount of
to be Registered Amount to be Offering Price Aggregate Registration
Registered(1) Per Share Offering Price Fee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
NHancement Technologies 2,252,874 $1.8125 $4,083,334.13(3) $1,135.17(3)
Inc. Common Stock, $0.01 shares (2)
par value
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
NHancement Technologies 375,000 $1.37 $ 513,750(5) $ 142.82(5)
Inc. Common Stock, $0.01 shares (4)
par value
- -------------------------------------------------------------------------------------------------------------
Total: $1,277.99
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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(1) In accordance with Rules 416 and 457 under the Securities Act, this
Registration Statement also covers such indeterminate number of
additional shares of Common Stock as may be issuable in connection with
the conversion of the Preferred Stock described in footnote (2) below
and exercise of the warrants described in footnote (4) below, to
prevent dilution resulting from stock splits, stock dividends and
similar transactions.
<PAGE>
(2) A total of 2,252,874 shares of the Registrant's Common Stock are being
registered hereunder for resale upon conversion of shares of Series A
Convertible Preferred Stock into shares of Common Stock and for resale
in connection with the payment of dividends in Common Stock shares on
the Series A Convertible Preferred Stock.
(3) Pursuant to Rule 457(c) under the Securities Act of 1933, the proposed
maximum aggregate offering price and the amount of the registration fee
are calculated based on the closing sales price of the Company's Common
Stock on August 11, 1999, as reported on the Nasdaq SmallCap Market
System.
(4) A total of 375,000 shares of Registrant's Common Stock are being
registered hereunder for resale upon exercise of warrants to purchase
375,000 shares of Common Stock at an exercise price of $1.37 per share.
The exercise of 200,000 of such shares is contingent upon redemption by
the Registrant of shares of Series A Convertible Preferred Stock in
accordance with the provisions of the Securities Purchase Agreement
relating to the sale of the Preferred Stock, as amended, and the
Registrant's Certificate of Designations, as amended.
(5) Pursuant to Rule 457(h)(1) under the Securities Act of 1933, the
proposed maximum aggregate offering price and the amount of the
registration fee are based upon the price at which the warrants to
purchase shares of Common Stock may be exercised.
<PAGE>
PROSPECTUS
NHANCEMENT TECHNOLOGIES INC.
2,627,874 SHARES OF COMMON STOCK
The holders of shares of Series A Convertible Preferred Stock of
NHancement Technologies Inc., a Delaware corporation, named in this
Prospectus (the "SELLING STOCKHOLDERS") are selling up to 2,627,874 shares of
the Company's Common Stock acquired upon conversion of shares of the
Company's Series A Convertible Preferred Stock, payment in shares of Common
Stock of dividends due on the Preferred Stock or exercise of certain warrants
to purchase shares of the Company's Common Stock.
The Selling Stockholders (or their permitted successors or assigns)
propose to sell the shares of Common Stock from time to time in transactions
occurring either on or off the Nasdaq SmallCap Market System at prevailing
market prices or at negotiated prices. Sales may be made to brokers or to
dealers, who are expected to receive customary commissions or discounts.
The Selling Stockholders and any broker-dealers or other persons
acting on their behalf in connection with the sale of Common Stock under this
Prospectus may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and any
commissions received by them and any profits realized by them on their sale
of Common Stock as principals may be deemed to be underwriting compensation
under the Securities Act. As of the date of this Prospectus, there are no
special selling arrangements between any broker-dealer or other person and
the Selling Stockholders.
No period of time has been fixed within which the shares will be
offered or sold. None of the proceeds from the sale of the shares will be
received by the Company. The Company will pay all expenses with respect to
this offering, except for brokerage fees and commissions and transfer taxes
for the Selling Stockholders, which will be borne by the Selling Stockholders.
AN INVESTMENT IN THE SHARES OF NHANCEMENT'S COMMON STOCK OFFERED
HEREBY INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS
PROSPECTUS.
The Company's Common Stock is traded on the Nasdaq SmallCap Market
under the symbol "NHAN." On August 6, 1999, the closing sales price of the
Company's Common Stock on the Nasdaq SmallCap Market was $2.125 (2-1/8) per
share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is August ___, 1999.
<PAGE>
You should only rely on the information incorporated by reference or
provided in this Prospectus or in any supplement to this Prospectus. We have
not authorized anyone else to provide you with different information. The
Common Stock is not being offered in any state where the offer is not
permitted. You should not assume that the information in this Prospectus or
any supplement hereto is accurate as of any date other than the date on the
front of those documents.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Certain Definitions . . . . . . . . . . . . . . . . . . . . 2
Special Note Regarding Forward Looking Statements . . . . . 2
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . 3
Recent Developments . . . . . . . . . . . . . . . . . . . . 9
Selling Stockholders. . . . . . . . . . . . . . . . . . . . 10
Plan of Distribution . . . . . . . . . . . . . . . . . . . 13
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . 14
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Where You Can Find More Information . . . . . . . . . . . . 15
</TABLE>
CERTAIN DEFINITIONS
As used in this Prospectus, the terms the "COMPANY" or "NHANCEMENT"
refer to NHancement Technologies Inc. and its subsidiaries, and the term
"PREFERRED STOCK" means the Company's Series A Convertible Preferred Stock.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
CERTAIN STATEMENTS INCLUDED IN OR INCORPORATED BY REFERENCE INTO
THIS PROSPECTUS MAY BE CONSIDERED "FORWARD-LOOKING" STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). SUCH
STATEMENTS INCLUDE DECLARATIONS REGARDING THE INTENT, BELIEF OR CURRENT
EXPECTATIONS OF THE COMPANY AND ITS MANAGEMENT. SUCH FORWARD-LOOKING
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE A NUMBER OF
RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
INDICATED BY SUCH FORWARD-LOOKING STATEMENTS. WE UNDERTAKE NO OBLIGATION TO
PUBLICLY RELEASE THE RESULTS OF ANY REVISION TO THESE FORWARD-LOOKING
STATEMENTS WHICH MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE
DATE OF THIS PROSPECTUS OR ANY DOCUMENT INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS, OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. AMONG THE
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS ARE:
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- General economic and business conditions, which will, among other
things, impact the demand for the Company's products and services
- Market demand, which generally tends to increase during strong years of
the business cycle and generally tends to decrease during weak years of
the business cycle, although the Company's historical and future
financial performance may not necessarily conform to these stated trends
- Product performance and technological developments, which may affect the
Company's ability to compete with other companies marketing products or
performing services similar to those marketed or performed by the
Company, thereby affecting the Company's ability, among other things, to
generate revenues
- Changes in the Company's business strategy or development plans, which
may, among other things, prolong the time it takes to achieve the
Company's objectives
- The loss of any significant suppliers or customers
- The Company's dependence on key personnel; the quality, judgment and
strategic decisions of management and other personnel
RISK FACTORS
NHancement is a holding company that operates through its two
subsidiaries. The Company's North American subsidiary, NHancement Technologies
North America, Inc. (formerly named Voice Plus, Inc.) specializes in multimedia
systems that improve internal and external communications functions, such as the
new all-in-one NT based communications servers which converge voice and data
systems. These open architectural systems allow us to provide customized
software development services for our clients' individual needs. The Company's
Asian subsidiary, Infotel Technologies (Pte) Ltd, a Singapore company, is an
integrator and distributor of communication systems and test equipment.
AN INVESTMENT IN SHARES OF NHANCEMENT'S COMMON STOCK INVOLVES A HIGH
DEGREE OF RISK RELATING TO THE COMPANY, THE MARKETS IN WHICH THE COMPANY
OPERATES AND THE SECURITIES MARKETS, PARTICULARLY THE MARKETS FOR SECURITIES OF
SMALLER COMPANIES, SUCH AS THE COMPANY. PROSPECTIVE PURCHASERS OF COMMON STOCK
SHOULD CONSIDER CAREFULLY THE INFORMATION SET FORTH BELOW, AS WELL AS THE
FINANCIAL AND OTHER INFORMATION INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN
DETERMINING WHETHER TO PURCHASE THE SHARES OF COMMON STOCK OFFERED UNDER THIS
PROSPECTUS.
The following risk factors should be carefully considered by you in
evaluating whether you wish to make an investment in NHancement's Common Stock:
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RISKS ASSOCIATED WITH AN INVESTMENT IN THE COMPANY'S COMMON STOCK
RISKS ASSOCIATED WITH DELISTING OF COMMON STOCK; PENNY STOCK RULES.
Although the Company's Common Stock was approved for quotation on the Nasdaq
SmallCap Market System in connection with the Company's IPO in February 1997, we
cannot assure you that our Common Stock will remain eligible for listing on the
Nasdaq SmallCap Market. In this regard, until recently, the Company had failed
to comply with the net tangible assets/market capitalization/net income
requirements for continued listing on the Nasdaq SmallCap Market, as required by
Nasdaq under Marketplace Rule 4310(c)(2). This resulted in written notification
from Nasdaq in February 1999 that the Company's Common Stock would be delisted
from the Nasdaq SmallCap Market. In June 1999, following a hearing with the
Nasdaq listing qualifications panel, we received a positive determination on our
request for the continued inclusion of our Common Stock on the Nasdaq SmallCap
Market. As a result, our Common Stock has remained listed to date, without
interruption, on the Nasdaq SmallCap Market.
If our Common Stock were to become delisted from the Nasdaq SmallCap
Market, we would become subject to the SEC's "penny stock" rules. Were this to
occur, you would find it difficult to dispose of, or to obtain accurate
quotations as to the price of, the Company's Common Stock.
The "penny stock" rules under the Exchange Act impose additional sales
practice and market-making requirements on broker-dealers who sell and/or make a
market in a penny stock. For transactions covered by the penny stock rules, a
broker-dealer must make special suitability determinations for purchasers and
must have received the purchaser's written consent to the transaction prior to
sale. In addition, for any transaction involving a penny stock, unless exempt,
the rules require delivery prior to any transaction in a penny stock of a
disclosure schedule prepared by the SEC relating to the penny stock market.
Disclosure is also required to be made about commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market and penny stocks. Consequently, if the Company's Common
Stock were to be delisted from the Nasdaq SmallCap Market and became subject to
the rules on penny stocks, it would negatively affect the ability or willingness
of broker-dealers to sell or make a market in the Company's securities and,
therefore, would severely and adversely affect the market liquidity for, and
your ability to sell, the Company's Common Stock.
VOLATILITY OF STOCK PRICES. The over-the-counter markets for securities
such as our Common Stock historically have experienced extreme price and volume
fluctuations during certain periods. Other factors that also may adversely
affect the market price of our Common Stock include the following:
- New product developments
- Technological and other changes in the voice-messaging and
communications industries
- Fluctuations in the financial markets
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- General economic conditions
- Quarterly variations in the Company's results of operations
RISKS RELATED TO NHANCEMENT'S BUSINESS
PRIOR LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY. Although the Company
recorded net income of $251,800 on net revenues of $6.7 million for its third
quarter ended June 30, 1999, on a fiscal year-to-date basis, the Company has
incurred a loss of $1.1 million on $15.6 million in revenues. Further, the
Company sustained significant losses for the fiscal year ended December 31,
1997, as well as for the nine-month fiscal year ended September 30, 1998.
While we have recently returned to profitability, our financial
condition and results of operations will be adversely affected if we fail to
continue to produce positive operating results. This could also:
- Adversely affect the future value of our Common Stock
- Result in delisting of our Common Stock on the Nasdaq SmallCap
Market System
- Adversely affect our ability to obtain debt or equity financing on
acceptable terms
- Prevent us from engaging in acquisition activity
FINANCING RISKS. The acquisition of complementary businesses and
products is an element of our business strategy. Our ability to engage in
acquisition activity depends on our ability to obtain debt or equity financing,
neither of which may be available or, if available, may not be on terms
acceptable to us. Our inability to obtain such financing would have a material
adverse effect on our acquisition strategy.
Both debt and equity financing involve certain risks. Debt financing
may require us to pay significant amounts of interest and principal payments,
reducing the resources available to us to expand our existing businesses. Equity
financing may be dilutive to our stockholders' interest in the assets and
earnings of the Company. For example, as of June 30, 1999, of a total of 12,500
shares of Series A Convertible Preferred Stock sold in April 1998, those shares
plus accrued dividends had been converted into 1,231,180 shares of Common Stock
at an average price per share of approximately $1.04. Prior to the issuance of
such shares of Preferred Stock in April 1998, a total of approximately 4,437,000
shares of Common Stock had been outstanding. The conversion of the Preferred
Stock sold in June 1999 into shares of Common Stock also is expected to have a
dilutive effect on the Company's existing stockholders. In addition, Common
Stock issued as consideration in an acquisition transaction may be dilutive
under certain circumstances to our existing stockholders.
RELIANCE UPON DISTRIBUTOR AND SUPPLIER RELATIONSHIPS; DEPENDENCE ON
SIGNIFICANT CUSTOMERS. Our North American operations are based upon the
integration of hardware, software, and communications and data processing
equipment manufactured by others into
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systems designed to meet the needs of our customers. Although we have
distributor agreements with a number of equipment manufacturers, a major
portion of our revenues is based upon products manufactured by three
companies. In this regard, we rely to a significant extent on products
manufactured (and services provided) by Centigram Communications Corporation,
products manufactured by Baypoint Innovations, the Mitel Corporation
subsidiary that purchased the customer premises equipment ("CPE") business of
Centigram Communications Corporation, and on products manufactured by
Interactive Intelligence, Inc. ("I3"), principally I3's enterprise
information center ("EIC") product, a next-generation communications server
that merges voice and data functions into a single computer-based system.
Revenues from EIC products accounted for approximately 13% of North American
revenues for the quarter ended June 30, 1999 and are expected to increase
rapidly in future quarters. Legacy voice processing revenues (which includes
CPE product revenues), although declining in importance, accounted for
approximately 87% of our revenues for the quarter ended June 30, 1999. Any
disruption to our relationships with, or to products or services supplied by,
Centigram, Baypoint or I3 would have a significant adverse effect on our
business for an indeterminate period of time until new supplier relationships
could be established. Further, any material change in our other distributor
relationships could adversely affect the Company.
Infotel, our Singapore subsidiary, offers a wide range of
infrastructure communications equipment products. Infotel also has an
established business providing test measuring instrumentation and testing
environments, and is the regional distributor and test and repair center for
Rohde & Schwarz test instruments. Infotel's profitability depends in part on
a steady stream of revenues relating to the services performed for Rohde &
Schwarz test instruments. Since Infotel's revenues comprised approximately
42% of NHancement's total revenues for the nine-month period ended June 30,
1999, any material change in Infotel's relationship with its manufacturers,
including Rohde & Schwarz, and any interruption in the delivery of products
to Infotel by its key suppliers, would materially adversely affect
NHancement's financial condition.
We currently service approximately 1,000 customers through the
operations of our two subsidiaries. The revenues from our single largest
customer accounted for approximately 21% of total revenues during the
nine-month period ended June 30, 1999. No other customers accounted for over
5% of total revenues during this period. This concentration of revenues
results in additional risk to the Company and its operations, and any
disruption of orders from our single largest customer would have an adverse
effect on our financial condition.
INTENSE COMPETITION. The voice-processing and customer premises
equipment markets are highly competitive and competition in this industry is
expected to further intensify with the introduction of new product
enhancements and new competitors. Our North American subsidiary competes with
a number of larger integrated companies that provide competitive
voice-processing products and services as subsets of larger product
offerings. The Company's existing and potential competitors include many
large domestic and international companies that have better name and product
recognition in the market for the Company's products and services, a larger
installed base of customers, and substantially greater financial, marketing
and technical resources than the Company.
Our Singapore subsidiary, Infotel, competes against several large
companies in Singapore that are better capitalized. Although Infotel has in
the past managed to compete successfully
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against these larger companies on the basis of its engineering and product
management expertise, we cannot assure you that this expertise will allow
Infotel to compete effectively with these larger companies in the future.
Further, various large manufacturers headquartered outside of Singapore have
established their own branch offices in Singapore and also compete with
Infotel.
RISKS IN INTEGRATING ACQUIRED COMPANIES. We have in the past pursued,
and plan to continue to pursue, acquisition opportunities. Acquisitions involve
a number of special risks, including among others:
- Adverse short-term effects on our operating results
- The disruption of our ongoing business
- The risk of reduced management attention to normal daily operations
- Our dependence on the retention, hiring and training of key
personnel and the potential risk of loss of such personnel
- Our potential inability to successfully integrate the personnel,
operations, technology and products of acquired companies
- Unanticipated problems or unknown legal liabilities
- Adverse tax or financial consequences
The Company has made three significant acquisitions since its
formation as a holding company in 1996. Two of these acquisitions, namely the
acquisition of Voice Plus (now known as NHancement Technologies North
America) and Advantis Network & Systems Sdn Bhd, a Malaysian company, in the
past yielded operating results that were significantly lower than expected.
In fact, the poor performance of Advantis led to its divestiture less than
one year after the company was acquired by NHancement. Accordingly, we cannot
assure you that the future performance of our subsidiaries will be
commensurate with the consideration paid to acquire these companies. If we
fail to establish the needed controls and to manage growth effectively, our
operating results, cash flows and overall financial condition will be
adversely affected.
RISKS PERTAINING TO INTERNATIONAL OPERATIONS. Infotel, our Singapore
subsidiary, accounted for approximately 42% of our revenues for the
nine-month period ended June 30, 1999. There are risks associated with our
international operations, including:
- Our dependence on members of management of Infotel and the risk of
loss of customers in the event of the departure of key personnel
- Unexpected changes in or impositions of legislative or regulatory
requirements
- Potentially adverse taxes and adverse tax consequences
- The burdens of complying with a variety of foreign laws
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- Political, social and economic instability
- Potential hostilities
- Changes in diplomatic and trade relationships
Any one or more of these factors could negatively affect the
performance of Infotel and result in a material adverse change in the
business, operations and financial condition of NHancement.
RISKS INVOLVED IN CHANGES IN MANAGEMENT. Management changes often
have a disruptive effect on businesses and can lead to the loss of key
employees because of the uncertainty inherent in change. Earlier this year,
the President and Chief Executive Officer of NHancement resigned his position
and, more recently, the acting Chief Financial Officer and the Secretary and
General Counsel of NHancement left the Company to pursue other opportunities.
Douglas S. Zorn, the former Chief Financial Officer of the Company, was
promoted to President and Chief Executive Officer to fill the vacancies
created by the resignation of our former President and Chief Executive
Officer. We have hired a new Chief Financial Officer whose employment will
begin in late August 1999. However, while hiring efforts are underway to fill
the vacancies created by the departure of other key employees, there is no
assurance that these posts will be filled in the near future since the job
market in the greater San Francisco Bay Area is intensely competitive. The
loss of these or other key employees of the Company could have a material
adverse effect on the Company's operations. Furthermore, the recent changes
in management may not be adequate to sustain the Company's profitability or
to meet its future growth targets.
RISKS ASSOCIATED WITH YEAR 2000 ISSUE. The "Year 2000" issue is the
result of computer programs being written using two digits (rather than four)
to define the applicable year. Software programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a major system failure or miscalculations.
We have completed our assessment of the Year 2000 problem and
presently believe that, with modification to or replacement of existing
software, the Year 2000 problem will not pose significant operational
problems for the Company's computer systems. Further, we believe that the
costs associated with any such upgrade or replacement of software will not be
material, and that all such changes will be implemented by the end of
calendar year 1999. However, if such modifications are not made in a timely
manner, or are not made properly, the Company may be unable to implement
appropriate Year 2000 solutions, which could have a material adverse effect
on the Company's business, financial condition and results of operations.
The estimated cost of the new business systems for North American
locations combined is $425,000, of which $350,000 has been incurred. Such
systems are needed not only to remedy Year 2000 compliance problems but also
to maintain proper controls for the Company. The estimated cost of the new
business systems for Infotel is $180,000.
Where potential Year 2000 computer problems contained in the
products used or distributed by the Company have been identified, the
manufacturers have stated that they have committed resources to resolve such
problems prior to year 2000. However, there can be no
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assurance that these manufacturers will, in fact, timely complete the
resolution of their Year 2000 problems or, even if timely completed, that
those solutions will be acceptable in the marketplace. The solution to be
provided by some manufacturers will involve a significant upgrade cost to the
end user, which may give rise to disputes and/or litigation between the end
user and the manufacturer, which may also involve the Company. The costs of
such possible disputes or litigation could be significant, thereby resulting
in a material adverse effect on our business, financial condition and results
of operations. We also have not been able to determine whether the legal
systems of Singapore would result in more or less litigation exposure to the
Company and its subsidiaries if there were disputes between the end user of a
product installed by Infotel, and the manufacturer.
We believe we have taken reasonable steps to identify and correct
all Year 2000 problems within our control. However, the Company may suffer
business interruptions if customers, vendors and other third parties with
which we conduct business are unsuccessful in remedying their own Year 2000
problems. Further, the Company could be adversely affected by any widespread
economic or financial market disruption. We have not adopted a contingency
plan that addresses widespread economic or financial market disruption that
is outside of our control.
RECENT DEVELOPMENTS
We recently entered into a letter of intent to acquire the assets of
Eastern Systems Technology, Inc., a Company engaged in the business of
software development ("EASTERN"). Under our agreement in principal with
Eastern, we would acquire the assets of Eastern in exchange for initial
consideration of 675,000 shares of our Common Stock, the transfer of which is
expected to be restricted for at least one year, and additional consideration
of additional shares of our Common Stock (the "ADDITIONAL SHARES"), in an
amount equal to $400,000 divided by the closing bid price of our shares of
Common Stock as quoted on the Nasdaq SmallCap Market on the date prior to the
filing of a registration statement on Form S-3 providing for the registration
of the Additional Shares. None of the shares of the Company's Common Stock
issuable in connection with this transaction will be registered for resale
under this Prospectus; instead, a separate registration statement will be
filed to register the Additional Shares.
In connection with the acquisition of Eastern's assets, we plan to
enter into employment and non-compete agreements with two key employees of
Eastern, and to employ certain other key employees of Eastern on an "at-will"
basis. It is also anticipated that we will pay one of these key employees
royalties on certain software licenses developed by such employee for the
Company.
Upon closing of the acquisition transaction, the Company will loan
Eastern $250,000 secured by the Additional Shares. The loan will bear
interest and generally will be payable in full on the earlier of (i) one year
following the closing of the acquisition or (ii) within 30 days following the
effective date of the registration statement covering the Additional Shares.
Closing of this proposed acquisition has been approved by
NHancement's Board of Directors and is subject only to the approval of
certain of the holders of the Company's Preferred
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Stock. The holders of the Company's Preferred Stock are the Selling
Stockholders named in this Prospectus.
SELLING STOCKHOLDERS
This Prospectus relates to shares of the Company's Common Stock that
may be acquired by the Selling Stockholders named below upon conversion of
the shares of Preferred Stock held by the Selling Stockholders, the payment
in shares of Common Stock of dividends due on the Preferred Stock and the
exercise of certain warrants to purchase shares of the Company's Common Stock
issued to the Selling Stockholders.
The shares of the Preferred Stock, and the warrants to acquire
shares of the Company's Common Stock, held by the Selling Stockholders were
acquired by the Selling Stockholders on June 15, 1999, pursuant to the terms
of a Securities Purchase Agreement dated April 1998, as later amended,
entered into between the Company and the Selling Stockholders. The Preferred
Stock, valued at its liquidation preference of $100 per share, is convertible
into shares of Common Stock at the lesser of $2.90 per share (the conversion
price in effect on April 13, 1998) or 75% of the current market price on the
conversion date, but not less than $0.60 per share. The current market price
is the average closing bid price of the Common Stock for the five trading
days preceding the conversion date. On August 6, 1999, the conversion rate
was $1.631250 per share. In addition, dividends payable on the Preferred
Stock, at the rate of $5.00 per share per annum, may be converted, at the
option of the Company, into shares of Common Stock (based on the same
conversion rate formula). A total of 17,500 shares of Preferred Stock were
issued to the Selling Stockholders on June 15, 1999. The Selling Stockholders
also received warrants to purchase a total of 175,000 shares of Common Stock,
at an exercise price of $1.37 per share. In addition, the Selling
Stockholders received warrants to purchase a total of an additional 200,000
shares of Common Stock, at an exercise price per share of $1.37; exercise of
these warrants is contingent upon the redemption by the Company of shares of
the Preferred Stock.
The terms of the Preferred Stock and of the warrants specify that a
Selling Stockholder cannot convert the Preferred Stock or exercise its
warrants to the extent that such conversion or exercise would result in the
Selling Stockholder and its affiliates beneficially owning more than 9.99% of
the then-outstanding Common Stock. Thus, although some of the shares listed
in the table below might not be subject to purchase by a Selling Stockholder,
during that 60-day period, they are nevertheless included in the table.
The following table sets forth, to the knowledge of the Company, the
number of shares of Common Stock and the percentage of the outstanding shares
of Common Stock beneficially owned by each Selling Stockholder, and the
number of shares to be offered and sold by such Selling Stockholder. Assuming
that all of the shares offered by each Selling Stockholder are in fact sold,
no Selling Stockholder, other than AMRO International S.A., is expected to
beneficially own any shares of the Company's Common Stock following
completion of the offering and sale of shares under this Prospectus. Unless
otherwise indicated, each person has sole investment and voting power with
respect to the shares set forth in the following table. As of August 6, 1999,
the Company had 6,954,000 shares of Common Stock issued and outstanding, and
17,500 shares of Series A Convertible Preferred Stock issued and outstanding.
10
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
SHARES OF COMMON STOCK SHARES OF COMMON
BENEFICIALLY OWNED BEFORE STOCK OFFERED
NAME OFFERING(1) FOR SALE (3) (4)
- -------------------------------------------------------------------------------------------------
NUMBER PERCENT(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Endeavour Capital Fund S.A. 520,573 6.96% 520,573
- -------------------------------------------------------------------------------------------------
AMRO International S.A.(5) 653,492 8.98% 325,358
- -------------------------------------------------------------------------------------------------
Olympia Partners LLC 130,142 1.84% 130,142
- -------------------------------------------------------------------------------------------------
Balmore Funds S.A. 176,622 2.48% 176,622
- -------------------------------------------------------------------------------------------------
Austost Anstalt Schaan 148,735 2.09% 148,735
- -------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
(1) For each Selling Stockholder, includes shares of Common Stock issuable
upon conversion of shares of Series A Convertible Preferred Stock
issued to date and payment in shares of Common Stock of dividends due
on the Preferred Stock (assuming in each case a conversion rate based
on 75% of the average closing bid price of the Common Stock for the
five trading days ending on August 5, 1999, or a conversion rate of
$1.631250 per share), and also includes shares of Common Stock issuable
upon exercise in full of such Selling Stockholder's pro rata share of
warrants to purchase a total of 175,000 shares of Common Stock. Does
not include such Selling Stockholder's pro rata share of warrants to
purchase an additional 200,000 shares of Common Stock, as the exercise
of such warrants is conditioned upon the redemption by the Company of
shares of the Series A Convertible Preferred Stock, pursuant to the
terms of the Securities Purchase Agreement, as amended, relating to the
sale by the Company to the Selling Stockholders of the Preferred Stock
and the terms of the Company's Certificate of Designations, as filed
with the Secretary of State of the State of Delaware.
As required by SEC regulations, the number of shares shown as
beneficially owned includes shares which could be purchased within 60
days, which in this instance excludes the warrants to purchase 200,000
Common Stock shares, the exercise of which is contingent on the
redemption by the Company of shares of the Preferred Stock. In the case
of each Selling Stockholder, however, the number of shares indicated
may be more than the shares which can be purchased in that 60-day
period. For such Selling Stockholder, the table shows the estimated
total of the shares which would be issued on the conversion of all of
its Preferred Stock and the issuance of shares to pay for the accrued
dividends on those shares of Preferred Stock (at an assumed conversion
price of $1.631250 per share) and the exercise by such Selling
Stockholder of its pro rata share of the warrants to purchase 175,000
shares. However, the terms of the Preferred Stock and of the warrants
specify that a Selling Stockholder cannot convert the Preferred Stock
or exercise its warrants to the extent that such conversion or exercise
would result in the Selling Stockholder and its affiliates beneficially
owning more than 9.99% of the then-outstanding Common Stock. Thus,
although some of the shares listed in the table might not be subject to
purchase by a Selling Stockholder, during that 60-day period, they are
nevertheless included in this table. As described in greater detail in
footnote (4) below, the actual number of shares of Common Stock
issuable upon conversion of the Preferred Stock and exercise of the
warrants is subject to adjustment and could be materially less or
11
<PAGE>
more than the number estimated in the table. This variation is due to
factors that cannot be predicted by us at this time. The most
significant of these factors is the future market price of the
Company's Common Stock.
(2) Calculated on the basis of 6,954,000 shares of Common Stock outstanding
on August 6, 1999. The percentage interest of each Selling Stockholder
is based on the beneficial ownership of that Selling Stockholder
divided by the sum of the current outstanding shares of Common Stock
plus the additional shares, if any, which would be issued to that
Selling Stockholder (but not any other Selling Stockholder) when
converting Preferred Stock or exercising any warrant or other right in
the future. For purposes of presentation in the table above, the 9.99%
limit referred to in footnote (1) above has been disregarded.
(3) Assumes sale of all shares of Common Stock offered by the Selling
Stockholders, based on the conversion ratio described in footnote (1)
above, and exercise of warrants to purchase 175,000 shares of Common
Stock; excludes the warrants that may be exercised only in the event of
the redemption by the Company of the Preferred Stock. The actual number
of shares of Common Stock issued or issuable upon conversion of the
Preferred Stock and payment in shares of Common Stock of dividends on
the Preferred Stock is subject to adjustment, based on a floating
conversion rate (which in no event may be less than $0.60 per share),
and could be materially more or less than the number of shares of
Common Stock reflected in the table above. The Company has registered
for resale under this Prospectus a maximum of up to 2,627,874 shares of
its Common Stock. Based on the conversion price in effect on August 6,
1999, as reflected in the table above, significantly fewer shares of
Common Stock are available for resale under this Prospectus than the
2,627,874 shares registered for resale, even assuming the exercise of
175,000 of the 375,000 warrants. Were the conversion price to decrease
by a significant amount, considerably more shares would be available
for resale under this Prospectus, up to a maximum of 2,627,874 shares.
For example, based on the conversion price in effect on June 15, 1999,
the date of the closing of the sale of the Preferred Stock (calculated
on the basis of a conversion price of 75% of the average closing bid
price of the Common Stock for the five trading days ending June 14,
1999 or $0.862500 per share), a total of approximately 2,305,435 shares
would be available for resale upon conversion of the Preferred Stock
into Common Stock, the payment in shares of Common Stock of dividends
on the Preferred Stock and the exercise of warrants to purchase 175,000
shares. Were the conversion rate to be equal to the minimum conversion
price of $0.60 per share, the Selling Stockholders would be entitled to
receive a total of approximately 3,237,500 shares of Common Stock, upon
conversion of the Preferred Stock into Common Stock, the payment in
shares of Common Stock of dividends on the Preferred Stock and the
exercise of warrants to purchase 175,000 shares. Notwithstanding
anything to the contrary contained in the foregoing, a maximum of
2,627,874 shares are available for resale under this Prospectus.
However, under the terms of our agreement with the Selling
Stockholders, we are obligated to register any shares in excess of that
number registered for resale under this Prospectus. In addition, the
actual number of shares of Common Stock offered for resale may be
higher or lower based on issuances of additional shares in the event of
any future stock dividends, stock distributions, stock splits or
similar capital readjustments. There are also limitations on the number
of shares of Common Stock that may be converted at any time. Generally,
as described in footnote (1) above, the Selling
12
<PAGE>
Stockholders may not convert the Preferred Stock to the extent
that such conversion would result in a Selling Stockholder owning
more than 9.99% of the then-outstanding Common Stock.
(4) The number of shares registered for resale by each Selling Stockholder
under this Prospectus is equal to 201.921% of the amount specified in
the table, to take into account the floating conversion rate described
in footnote (3) above.
(5) The beneficial holdings of this Selling Stockholder include 328,134
shares of Common Stock acquired by the Selling Stockholder upon the
conversion of shares of Series A Convertible Preferred Stock (including
Common Stock share dividends payable thereon) acquired in April 1998.
These shares of Common Stock are registered for resale under a
Registration Statement on Form S-3 (SEC File No. 333-52709) declared
effective by the SEC on June 2, 1998. Assuming that all shares of
Common Stock covered by the Registration Statement of which this
Prospectus is a part, and all shares of Common Stock covered by the
Registration Statement declared effective by the SEC in June 1998, are
in fact sold by this Selling Stockholder, the Selling Stockholder would
not hold beneficially or of record any shares of Common Stock following
completion of this offering and sale of shares. If the 328,134 shares
of Common Stock covered by the earlier Registration Statement are not
sold by this Selling Stockholder, then the Selling Stockholder would
hold approximately 3.97% of the Company's issued and outstanding shares
following completion of the offering and sale of shares under this
Prospectus, assuming all such shares are in fact sold.
PLAN OF DISTRIBUTION
The shares may be offered and sold from time to time by the Selling
Stockholders. No Selling Stockholder is required to offer or sell any of its
shares. Any such sales may be made on the Nasdaq SmallCap Market System or
such other national securities exchange on which shares of the Company's
Common Stock are then-listed, through negotiated transactions or otherwise at
prices and at terms then prevailing or at prices related to the then-current
market price or in negotiated transactions. The Selling Stockholders
directly, or through agents designated from time to time, or through
underwriters, brokers or dealers also to be designated, may sell the shares
from time to time on terms to be determined at the time of sale. Any such
underwriters, brokers or dealers may receive compensation in the form of
commissions or otherwise in such amounts as may be negotiated by them. As of
the date of this Prospectus, no agreements had been reached for the sale of
the shares or the amount of any compensation to be paid to underwriters,
brokers or dealers in connection therewith.
We will bear all expenses in connection with the registration and
sale of the shares, other than commissions, concessions or discounts to
underwriters, brokers or dealers, transfer taxes and certain of the fees and
expenses of counsel and other advisors to the Selling Stockholders. The
Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholders.
13
<PAGE>
We have agreed to indemnify the Selling Stockholders and the Selling
Stockholders have agreed to indemnify us and our officers, directors,
employees, agents and controlling persons from certain damages or liabilities
arising out of or based upon any untrue statement or alleged untrue statement
of any material fact contained in or material omission or alleged omission
from the Registration Statement, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement thereto, to the extent such
untrue statement or omission was made in the Registration Statement or other
document in reliance upon information furnished by the indemnifying party.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, the Company has
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification of such
liabilities (other than the payment by the Company of expenses incurred by a
director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered hereby, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The Selling Stockholders and any underwriter, broker or dealer who
acts in connection with the sale of the shares hereunder may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act, and
any compensation received by them and any profit on any resale of the shares
as principals might be deemed to be underwriting discounts and commissions
under the Securities Act.
LEGAL MATTERS
The validity of the Common Stock offered under this Prospectus has
been passed upon for the Company by Tomlinson Zisko Morosoli & Maser LLP, 200
Page Mill Road, Second Floor, Palo Alto, California 94306.
EXPERTS
The financial statements incorporated by reference in this
Prospectus have been audited by BDO Seidman, LLP, independent certified
public accountants, to the extent and for the periods set forth in their
report (which contains an explanatory paragraph regarding the fact that the
Company purchased substantially all of its inventory from two vendors during
the nine months ended September 30, 1998) incorporated herein by reference,
and are incorporated herein in reliance upon such report given upon the
authority of said firm as experts in auditing and accounting.
14
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
NHancement Technologies Inc., a Delaware corporation, files with the
SEC annual, quarterly and special reports, proxy statements and other
information required by the Exchange Act. You may read and copy any document
we file at the SEC's public reference room located at 450 5th Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the SEC's public reference rooms. Our SEC filings are also
available to the public from the SEC's web site at: http://www.sec.gov or at
our website at: http://www.nhan.com.
The Company has filed with the SEC a Registration Statement on Form
S-3 under the Securities Act, with respect to the shares of the Company's
Common Stock registered hereby. This Prospectus, which constitutes a part of
that Registration Statement, does not contain all of the information
contained in that Registration Statement and its exhibits. For further
information with respect to NHancement and its shares of Common Stock, you
should consult the Registration Statement and its exhibits. Statements
contained in this Prospectus concerning the provisions of any documents are
necessarily summaries of those documents, and each statement is qualified in
its entirety by reference to the copy of the document filed with the SEC. The
Registration Statement and any of its amendments, including exhibits filed as
a part of the Registration Statement or an amendment to the Registration
Statement, are available for inspection and copying as described above.
The SEC allows the Company to "incorporate by reference" the
information we file with them, which means that we can disclose important
information to you by referring you to the other information we have filed
with the SEC. The information that we incorporate by reference is considered
to be part of this Prospectus, and information that we later file with the
SEC will automatically update and supersede this information.
The following documents filed by NHancement with the SEC pursuant to
Section 13 of the Exchange Act (File No. 0-21999) and any future filings
under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act made prior to
the termination of the offering are incorporated by reference:
(a) The Company's Annual Report on Form 10-KSB for the nine-month fiscal
year ended September 30, 1998 filed with the SEC pursuant to Section 13
of the Exchange Act on January 13, 1999, as amended by the Amendment to
the Registrant's Annual Report on Form 10-KSB for the nine-month fiscal
year ended September 30, 1999 filed with the SEC pursuant to Section 13
of the Exchange Act on January 29, 1999.
(b) The Company's Quarterly Reports on Form 10-QSB for the fiscal quarters
ended December 31, 1998, March 31, 1999 and June 30, 1999 filed with
the SEC on February 16, 1999, May 13, 1999 and July 28, 1999,
respectively, pursuant to Section 13 of the Exchange Act.
(c) The Company's Reports on Form 8-K filed with the SEC on February 12,
1999 and June 15, 1999, respectively, pursuant to Section 13 of the
Exchange Act.
15
<PAGE>
(d) The Company's Registration Statement No. 0-21999 on Form 8-A filed with
the SEC on January 17, 1997, pursuant to Section 12 of the Exchange
Act, in which there is described the terms, rights and provisions
applicable to the Company's Common Stock, including any amendments or
reports filed for the purpose of updating such description.
The Company will provide without charge to each person to whom a
copy of this Prospectus is delivered a copy of any or all documents
incorporated by reference into this Prospectus except the exhibits to such
documents (unless such exhibits are specifically incorporated by reference in
such documents). Requests for copies can be made by writing or telephoning us
at NHancement Technologies Inc., 39420 Liberty Street, Suite 250, Fremont,
California 94538; Telephone number: (510) 744-3333.
16
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Expenses payable by the Company in connection with the issuance and
distribution of the securities being registered hereby (estimated, including
the registration fees) are as follows:
<TABLE>
<S> <C>
Registration Fee $ 1,277.99(1)
Legal Fees and Expenses $ 18,000.00(2)
Accounting Fees and Expenses $ 5,000.00
Printing $ 1,500.00
Transfer Agent and Registrar Fee $ 1,000.00
Miscellaneous $ 1,250.00
TOTAL $ 28,027.99
</TABLE>
- -------------------------
(1) Pursuant to Rule 457(c) promulgated by the SEC under the Securities
Act, the registration fee for 2,252,874 shares of the Company's Common
Stock was calculated based on the average of the bid and asked price of
the Company's Common Stock on August 6, 1999, as reported on the Nasdaq
SmallCap Market System. Pursuant to Rule 457(h)(1) promulgated by the
SEC under the Securities Act, the registration fee for 375,000 shares
of the Company's Common Stock was calculated on the basis of the price
of $1.37 per share at which warrants to purchase 375,000 shares of the
Company's Common Stock may be exercised.
(2) Excludes legal fees incurred in connection with the Series A
Convertible Preferred Stock offering. Also excludes legal fees related
to the proxy solicitation required in connection with the special
meeting of stockholders held in April 1999 for the purpose of approving
the terms of the Series A Convertible Preferred Stock issuance, the
issuance of shares of Common Stock into which the Preferred Stock is
convertible, and the issuance of shares of Common Stock in payment of
the dividend amounts due on the Preferred Stock.
Item 15. Indemnification of Officers and Directors.
The Company has included in its Certificate of Incorporation and in
its Bylaws provisions to (i) eliminate the personal liability of its
directors for monetary damages resulting from breaches of their fiduciary
duty to the extent permitted by the General Corporation Law of the State of
Delaware and (ii) indemnify its directors and officers to the fullest extent
permitted by the Delaware General Corporation Law, including circumstances in
which indemnification is
II-1
<PAGE>
otherwise discretionary. The Company believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
The Company has purchased a directors' and officers' insurance
policy with a $5.0 million coverage limit per occurrence and $5.0 million in
the aggregate per policy year.
Item 16. Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER TITLE OF EXHIBIT
- -------------- ----------------
<S> <C>
5 Opinion of Tomlinson Zisko Morosoli & Maser LLP, regarding
legality of securities being registered
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Tomlinson Zisko Morosoli & Maser LLP (included in
Exhibit 5)
24 Power of Attorney (included in signature pages to
Registration Statement)
</TABLE>
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(a) 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;
(ii) to reflect in the Prospectus any facts or events arising after
the effective date of this 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 this Registration Statement.
Notwithstanding the foregoing, any increase or decrease in the
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 Securities and Exchange
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a twenty
percent (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 additional or changed material information with
respect to the plan of distribution not previously disclosed
in this Registration Statement; provided, however, that the
undertakings set forth in paragraphs (i) and (ii) above do not
apply to the Registrant if the information required to be
included in a post-
II-2
<PAGE>
effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section
13 or Section 15(d) of the Exchange Act that are incorporated
by reference in this Registration Statement.
(b) That, for the purpose of determining any liability under the Securities
Act, 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.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered hereby which remain unsold at the
termination of the offering.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "ACT") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
referred to in Item 15 of this Registration Statement, 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 such 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 hereby, 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 such Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 the City of Fremont, State of
California, on the 12th day of August, 1999.
NHANCEMENT TECHNOLOGIES INC.
By: /s/ DOUGLAS S. ZORN
---------------------------------------
Douglas S. Zorn
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Douglas S. Zorn and James S.
Gillespie, and each of them, his attorneys-in-fact and agents, each with the
power of substitution, for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to sign any registration
statement for the same offering covered by this Registration Statement that
is to be effective upon filing pursuant to Rule 462(b) promulgated under the
Securities Act of 1933, as amended, and all post-effective amendments
thereto, and to file the same, with all exhibits thereto and all documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
Principal Executive Officer and
Acting Principal Financial and Accounting Officer:
<TABLE>
<S> <C> <C>
/s/ DOUGLAS S. ZORN President, Chief Executive August 12, 1999
- ------------------------------------ Officer and a Director
Douglas S. Zorn (Acting Principal Financial
Officer)
</TABLE>
<PAGE>
Additional Directors:
<TABLE>
<S> <C> <C>
/s/ JAMES S. GILLESPIE Director August 12, 1999
- ------------------------------------
James S. Gillespie
/s/ ROBERT J. SCHMIER Director August 12, 1999
- ------------------------------------
Robert J. Schmier
/s/ N. BRUCE WALKO Chairman of the Board August 12, 1999
- ------------------------------------ and a Director
N. Bruce Walko
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER TITLE OF EXHIBIT
- -------------- ----------------
<S> <C>
5 Opinion of Tomlinson Zisko Morosoli & Maser LLP, regarding
legality of securities being registered
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Tomlinson Zisko Morosoli & Maser LLP (included
in Exhibit 5)
24 Power of Attorney (included in signature pages to
Registration Statement)
</TABLE>
<PAGE>
Exhibit 5
August 12, 1999
NHancement Technologies Inc.
39420 Liberty Street, Suite 250
Fremont, CA 94338
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We furnish this opinion as counsel for NHancement Technologies Inc.,
a Delaware corporation ("NHANCEMENT"), in connection with the Registration
Statement on Form S-3 (the "REGISTRATION STATEMENT") expected to be filed by
NHancement with the Securities and Exchange Commission on or about August 16,
1999, providing for the registration under the Securities Act of 1933, as
amended, of 2,627,874 shares of NHancement's Common Stock (the "SHARES")
issuable to the persons who acquired shares of the Company's Series A
Convertible Preferred Stock on June 15, 1999 (the "PREFERRED STOCK"), upon
conversion of the shares of Preferred Stock (and the payment in shares of
Common Stock of the dividends payable thereon) or the exercise of the
warrants (the "WARRANTS") to purchase Common Stock issued to such investors
(the "INVESTORS").
In our capacity as counsel to NHancement, we have examined, among
other things, originals, or copies identified to our satisfaction as being
true copies, of such documents as we have deemed necessary, including
resolutions by the stockholders and the board of directors authorizing the
issuance of the Shares to the Investors upon conversion of the shares of
Preferred Stock (and the payment in shares of Common Stock of the dividends
payable thereon) or the exercise of the Warrants held by the Investors, and
filing of the Registration Statement, and we have obtained from officers and
representatives of NHancement such other certificates and assurances as we
consider necessary for the purpose of this opinion.
In those cases in which we have not been involved directly in the
preparation, execution or the filing of a document, we have assumed that (i)
the document reviewed by us is an original document, or a true and accurate
copy of the original document, and has not been subsequently amended, (ii)
the signatures on each original document are genuine, and (iii) each party
who executed the document had proper authority and capacity to execute such
document.
On the basis of our examination, and in reliance thereon and on our
consideration of such other matters of fact and questions of law as we
consider relevant in the circumstances, we are of the opinion that (i) when
issued and paid for in accordance with the terms of, and after satisfaction
of the conditions stated in the agreements, documents and other instruments
<PAGE>
governing the issuance of the Preferred Stock and the Warrants, the Shares
will be legally issued, fully paid and nonassessable.
We hereby consent to the use of our name under the caption "Legal
Matters" in the Prospectus which constitutes a part of the above-mentioned
Registration Statement, and to the filing of this opinion as an exhibit to said
Registration Statement.
Very truly yours,
/s/ Tomlinson Zisko Morosoli & Maser LLP
Tomlinson Zisko Morosoli & Maser LLP
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
NHancement Technologies Inc.
Fremont, California
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated
December 8, 1998, except for Note 17 which is as of January 6, 1999, relating
to the consolidated financial statements of NHancement Technologies Inc.
appearing in the Company's Annual Report on Form 10-KSB, as amended, for the
nine months ended September 30, 1998. Our report contains an explanatory
paragraph regarding the fact that the Company purchased substantially all of
its inventory from two vendors during the nine months ended September 30,
1998.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
San Francisco, California
August 12, 1999
