<PAGE>
As filed with the Securities and Exchange Commission on , 1997
Registration No. 333-________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ELECTRONIC PROCESSING, INC.
(Exact name of issuer as specified in its charter)
MISSOURI 48-1056429
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
501 Kansas Avenue, Kansas City, Kansas 66105
(Address of principal executive offices) (Zip Code)
------------------------
ELECTRONIC PROCESSING, INC.
1995 STOCK OPTION PLAN
(Full title of the plan)
------------------------
Tom W. Olofson
Chairman, President and Chief Executive Officer
Electronic Processing, Inc.
501 Kansas Avenue, Kansas City, Kansas 66105
(Name and address of agent for service)
(913) 321-6392
(Telephone number, including area code, of agent for service)
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
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Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 Stock Option Plan
Options to Purchase Common Stock 270,000 N/A N/A
Common Stock 270,000 $4.75 $1,282,500 $388.64
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
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</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Electronic Processing,
Inc. 1995 Stock Option Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration which results in an increase in the number of the
Registrant's outstanding shares of Common Stock.
(2) Calculated solely for purposes of calculating the amount of the
registration fee under Rule 457(h) of the Securities Act of 1933, as
amended (the "1933 Act"), on the basis of the price at which the Common
Stock was sold on July 1, 1997.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference.
Electronic Processing, Inc. (the "Registrant") hereby incorporates by
reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "Commission"):
(a) The Registrant's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996 filed with the Commission pursuant to Section 13 of the
Securities Exchange Act of 1934 (the "1934 Act").
(b) The Registrant's Quarterly Report on Form 10-QSB for the fiscal
quarter ended March 31, 1997.
(c) The Registrant's prospectus (File No. 333-16805) filed with the
Commission on February 5, 1997.
(d) The Registrant's Registration Statement on Form 8-A (File No. No.
0-22081) filed with the Commission on January 31, 1997, in which there is
described the terms, rights and provisions applicable to the Registrant's
outstanding Common Stock.
All reports and definitive proxy or information statements filed pursuant
to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this
Registration Statement and prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
Item 4. Description of Securities.
Not Applicable.
Item 5. Interests of Named Experts and Counsel.
Not Applicable.
Item 6. Indemnification of Directors and Officers.
The Company's by-laws provide that the Company shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit, or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was a
director or officer of the Company ( or is or was serving at the request of the
Company as a director or officer of another entity) against expenses, including
attorney's fees, judgments, fines, and amounts paid in settlement (except that,
in connection with an action by or in the right of the Company, the indemnity
shall be limited to expenses, including attorneys' fees and amounts paid in
settlement) actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Company
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful.
To the extent that a director, officer, employee, or agent has been
successful on the merits or otherwise in defense of any action, suit, or
proceeding, or in defense of any claim, he shall be indemnified against
expenses,
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<PAGE>
including attorneys' fees, actually and reasonably incurred by him in connection
with the action, suit, or proceeding. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Company in advance of the
final disposition of the action, suit, or proceeding. The indemnification
discussed in this section is not exclusive of any other rights the party may
have seeking indemnification.
Item 7. Exemption from Registration Claimed.
The grant of options to purchase 119,500 shares of the Company's Common
Stock to 6 officers and/or directors and to 46 other employees were deemed
exempt from registration under the 1933 Act by virtue of Section 4(2) and/or
Regulation D promulgated under the 1933 Act. The purchasers acquired the
securities for investment only and not with a view to the distribution thereof.
Item 8. Exhibits.
Exhibit Number Exhibit
-------------- -------
4.0 Instruments Defining Rights of Shareholders. Reference is
made to Registrant's Registration Statement on Form 8-A
(File No. 0-22081) which is incorporated herein by reference
pursuant to Item 3(c).
5.0 Opinion of Petillon & Hansen.
23.1 Consent of Independent Accountants - Baird, Kurtz & Dobson.
23.2 Consent of Petillon & Hansen is contained in Exhibit 5.
24.0 Power of Attorney. Reference is made to page II-3 of this
Registration Statement.
91.1 Electronic Processing, Inc. 1995 Stock Option Plan
(incorporated by reference from exhibit 4.3 of Registrant's
Registration Statement on Form SB-2 (File No.333-16805), as
declared effective by the Securities and Exchange Commission
on February 5, 1997 as amended).
99.4 Reoffer Prospectus.
Item 9. Undertakings.
A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include any prospectus required
by Section 10(a)(3) of the 1933 Act, (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, and (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; (2) that for the purpose of determining any liability under the 1933
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; and (3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the Electronic Processing, Inc. 1995 Stock Option Plan.
B. The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into 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. Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers or controlling persons of the
Registrant pursuant to the indemnity provisions summarized in Item 6 or
otherwise, the Registrant has been informed that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
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<PAGE>
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 1933 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 has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Kansas
City, State of Missouri, on this 7th day of July, 1997.
ELECTRONIC PROCESSING, INC.
/s/ Tom W. Olofson
-------------------------------------
By Tom W. Olofson
Chief Executive Officer, President,
Chairman of the Board
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Tom W. Olofson and each of them acting
individually, as such person's true and lawful attorneys-in-fact and agents,
each with full power of substitution, for such person, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file same, with all
exhibits thereto and other 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 connection
therewith, as fully to all intents and purposes as such person might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes, may do or
cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
Signatures Title Date
/s/ Tom W. Olofson Chief Executive Officer; July 7, 1997
- --------------------------------- President; Chairman of
Tom W. Olofson the Board (Principal
Executive Officer)
/s/ Nanci R. Trutna Vice President - Finance July 7, 1997
- --------------------------------- (Principal Financial
Nanci R. Trutna Officer and Principal
Accounting Officer)
/s/ Christopher E. Olofson Chief Operating Officer, July 7, 1997
- --------------------------------- Executive Vice President;
Christopher E. Olofson Director
/s/ Robert C. Levy Director July 7, 1997
- ---------------------------------
Robert C. Levy
/s/ W. Bryan Saterlee Director July 7, 1997
- ---------------------------------
W. Bryan Saterlee
II-4
<PAGE>
EXHIBIT INDEX
Exhibit Number Exhibit
-------------- -------
4.0 Instruments Defining Rights of Shareholders. Reference
is made to Registrant's Registration Statement on Form
8-A (File No. 0-22081) which is incorporated herein by
reference pursuant to Item 3(c).
5.0 Opinion of Petillon & Hansen.
23.1 Consent of Independent Accountants - Baird, Kurtz &
Dobson
23.2 Consent of Petillon & Hansen is contained in Exhibit 5.
24.0 Power of Attorney. Reference is made to page II-3 of
this Registration Statement.
91.1 Electronic Processing, Inc. 1995 Stock Option Plan
(incorporated by reference from exhibit 4.3 of
Registrant's Registration Statement on Form SB-2 (File
No.333-16805), as declared effective by the Securities
and Exchange Commission on February 5, 1997 as
amended).
99.4 Reoffer Prospectus.
II-5
<PAGE>
EXHIBIT 5
July 3, 1997
Electronic Processing, Inc.
501 Kansas Avenue
Kansas City, Kansas 66105
Re: Electronic Processing, Inc. Registration Statement for
Offering of 270,000 shares of Common Stock
Ladies and Gentlemen:
We refer to your registration on Form S-8 (the "Registration Statement")
under the Securities Act of 1933, as amended, of 270,000 shares of the common
stock ("Common Stock") of Electronic Processing, Inc. (the "Company") issuable
under the Electronic Processing, Inc. 1995 Stock Option Plan (the "Plan"). We
advise you that, in our opinion, when such shares have been issued and sold
pursuant to the applicable provisions of the Plan and in accordance with the
Registration Statement, such shares will be validly issued, fully paid and
nonassessable shares of Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Petillon & Hansen
PETILLON & HANSEN
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
Electronic Processing, Inc. on Form S-8 for the registration of 270,000 shares
of its common stock and options to acquire common stock, of our reports dated
February 14, 1997, on our audits of the consolidated financial statements of
Electronic Processing, Inc. as of December 31, 1995 and 1996, and for each of
the years then ended, which reports are included in the Company's 1996 Annual
Report on Form 10-KSB, filed with the Securities and Exchange Commission.
/s/ Baird, Kurtz & Dobson
Kansas City, Missouri
June 27, 1997
<PAGE>
Exhibit 99.4
119,500 Shares
ELECTRONIC PROCESSING, INC.
COMMON STOCK
---------------------
This Prospectus relates to the public offering, which is not being
underwritten, of 119,500 shares of Common Stock, $0.01 par value per share, of
Electronic Processing, Inc. ("EPI", the "Company" or the "Registrant"). All
119,500 shares (the "Shares") may be offered by certain shareholders of the
Company or by pledgees, donees, transferees or other successors in interest that
receive such shares as a gift, partnership distribution or other non-sale
related transfer (the "Selling Shareholders"). All of the Shares may be
originally issued by the Company in connection with the exercise of options that
have been granted pursuant to the Company' s 1995 Stock Option Plan. The
options were issued, and the Shares to be issued upon exercise of the options
will be issued, pursuant to an exemption from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), provided by
Section 4(2) thereof.
The Shares may be offered by the Selling Shareholders from time to time in
transactions in the over-the-counter market, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Selling Shareholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of the Shares
for whom such broker-dealers may act as agents or to whom they sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions). See "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares. The Company has agreed to bear certain expenses in connection with the
registration of the Shares being offered and sold by the Selling Shareholders.
The Company's Common Stock is quoted on the Nasdaq SmallCap Market under
the symbol "EPIQ."
--------------------------------
The Selling Shareholders and any broker-dealers or agents that participate
with the Selling Shareholders in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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- --------------------------------------------------------------------------------
The date of this Prospectus is July 7, 1997
1
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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, any Selling Shareholder or by any other person. Neither the delivery
of this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that information herein is correct as of any time
subsequent to the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any security other than the securities
covered by this Prospectus, nor does it constitute an offer to or solicitation
of any person in any jurisdiction in which such offer or solicitation may not
lawfully be made.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, information statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information filed by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices located at 75 Park Place, New York, New York
10007 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material can be obtained by mail from the Public Reference Branch
of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. The Common Stock of the Company is quoted on the Nasdaq
SmallCap Market, and such material may also be inspected at the offices of
Nasdaq Operations, 1735 K Street N.W. Washington, D.C. 20006. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the Commission's web site is
http://www.sec.gov.
The Company has filed with the Commission a registration statement on Form
S-8 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information regarding the Company
and the Common Stock offered hereby, reference is hereby made to the
Registration Statement and to the exhibits and schedules filed therewith. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and copies of all or
any part thereof may be obtained from such office upon payment of the prescribed
fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Securities and Exchange
Commission (the "Commission") are incorporated reference into this Registration
Statement:
(a) The Registrant's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996 filed with the Commission pursuant to Section 13 of the
Securities Exchange Act of 1934 (the "1934 Act").
(b) The Registrant's Quarterly Report on Form 10-QSB for the fiscal
quarter ended March 31, 1997.
(c) The Registrant's Registration Statement No. 0-22081 on Form 8-A filed
with the Commission on January 31, 1997, in which there is described the terms,
rights and provisions applicable to the Registrant's outstanding Common Stock.
All reports and definitive proxy or information statements filed pursuant
to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this
Registration Statement and prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters
2
<PAGE>
all securities then remaining unsold shall be deemed to be incorporated by
reference into this Registration Statement and to be a part hereof from the date
of filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Registration Statement to the extent that a
statement contained herein or in any subsequently filed document which also is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
The Company will provide without charge to each person to whom this
Prospectus is delivered a copy of any or all of such documents which are
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into the documents that
this Prospectus incorporates). Written requests for copies should be directed
to the executive offices of the Company at 501 Kansas Avenue, Kansas City,
Kansas, 66105. The Company's telephone number is (913) 321-6392.
THE COMPANY
The executive offices of the Company at 501 Kansas Avenue, Kansas City,
Kansas, 66105. The Company's telephone number is (913) 321-6392.
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, ALONG WITH THE
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING CONSIDERATIONS AND
RISKS BEFORE PURCHASING THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS.
LACK OF PRODUCT DIVERSIFICATION AND PRODUCT CONCENTRATION
Historically, the Company's revenues have been generated primarily by sales
of its MIDRANGE Chapter 13 product and the accompanying services. In 1996, the
Company introduced a Windows version of its TCMS Chapter 7 product, which
increasingly is contributing to the Company's total revenues. The Company's
Chapter 7 and Chapter 13 bankruptcy software and services are expected to
provide substantially all of its revenues for the foreseeable future. The
Company's results will therefore depend on continued and increased market
acceptance of its products and the Company's ability to meet the needs of its
customers. Any reduction in demand for, or increasing competition with respect
to, these products would have a material adverse effect on the Company's
financial condition and results of operations.
LIMITED NUMBER OF POTENTIAL CUSTOMERS; HIGHLY COMPETITIVE MARKET
The Company works in an industry with a finite number of Chapter 7 and
Chapter 13 trustees. The Company estimates that there are approximately 550,000
pending Chapter 13 cases being managed by approximately 180 Chapter 13 trustees,
and that there is approximately $2 billion of liquidated asset proceeds on
deposit being managed by approximately 1,200 Chapter 7 trustees. There are
several companies in the market all competing to sell to this finite group of
customers, and some of the Company's competitors have substantially greater
financial and marketing resources than does the Company. For its Chapter 7
product, the Company competes with the Chase Manhattan Bank and Union Bank of
California, as well as other regional competitors in selected markets. For its
Chapter 13 product, the Company competes with DCI Corporation of Memphis,
Tennessee, a private company, and other competitors. Although there are
presently a limited number of firms that offer services that directly compete
with the Company's, there can be no assurance that other firms with resources
significantly greater than the Company's will not enter the Company's industry.
The Company's future financial performance will depend on its ability to
maintain existing customer accounts and to attract business from customer
accounts which are currently using a competitor's software product.
CUSTOMER CONCENTRATION
Each trustee manages many cases, and the Company's revenues are related to
the number of cases managed by the Company's software. Accordingly, a large
trustee client can comprise an important portion of the Company's operating
revenues, although sales to no one client presently exceed 10% of the Company's
revenues. The Company's future financial performance will be affected by its
ability to retain existing major accounts and to attract new major accounts. The
loss of even a small number of clients would have a substantial detrimental
effect on the Company's financial condition and results of operations.
DEPENDENCE ON ON-GOING BANKRUPTCY FILINGS
The Company's business is highly dependent on the number of bankruptcy
filings in the United States. Economic fluctuations in the United States could
impact the number of bankruptcy filings and/or the dollar volume flowing through
the federal bankruptcy system. The Company's financial results depend on the
continual influx of new filings into the national bankruptcy system. A
significant reduction in the number of pending bankruptcy cases would adversely
affect the financial condition and operating results of the Company.
3
<PAGE>
RELIANCE ON MARKETING ARRANGEMENT
Chapter 7 trustees are discouraged from incurring direct administrative
costs for computer expenses. It is therefore important for EPI to align with a
bank or series of banks to earn revenues in Chapter 7. The Company promotes its
Chapter 7 product through an exclusive national marketing arrangement with
NationsBank of Texas, N.A. ("NationsBank"). While both the Company and
NationsBank have expressed a long term commitment to this agreement, either
party has the option to end the agreement upon 90 days' notice. If either party
were to end the marketing arrangement, the Company could experience adverse
financial results while a replacement marketing arrangement or arrangements were
established. Revenues from the NationsBank marketing arrangement presently
represent between 15% to 20% of the Company's total revenues. Although the
Company has other Chapter 7 banking relationships that predate its relationship
with NationsBank, there is no assurance that another marketing arrangement could
be found with terms comparable to those in the NationsBank agreement.
INTRODUCTION OF NEW CHAPTER 13 PRODUCT
The Company plans to release for general distribution a new major software
product for Chapter 13 trustees in early 1997. Although the Company does not
anticipate any delays in releasing this product, there can be no assurance that
its national release will be timely or completed. In addition, this product is
intended to replace the Company's existing Chapter 13 product, which has
contributed the majority of the Company's revenues to date. Consequently, any
unforeseen problems with this new software product would materially affect the
Company's results of operations and financial position. There can be no
assurance that the market will accept the new product.
RAPID TECHNOLOGICAL AND MARKET CHANGE
The software industry and the related market for support services are
characterized by rapidly evolving technology and industry standards. The
introduction of products embodying new technology and the emergence of new
industry standards can rapidly render existing products obsolete and
unmarketable. The Company's future success will depend on its ability to
continue to develop and manufacture new competitive products and to enhance
existing products.
NEED FOR PRODUCT COMPLIANCE WITH GOVERNMENT REGULATION; GOVERNMENT REGULATION OF
FEE-BASED PRODUCTS AND SERVICES
Although the Company's products are not directly regulated by the
government, the products must allow trustees to perform their duties within the
applicable legal regulatory guidelines. The United States Department of Justice
and the United States bankruptcy courts both have authority to regulate aspects
of the bankruptcy industry. If the Company's products did not allow trustees to
remain in compliance with the applicable regulations, the Company would be
adversely affected. If any regulatory entity were to restrict or disallow the
types of fee-based products and services that the Company provides to the
bankruptcy market, the Company would be severely adversely affected.
DEPENDENCE UPON KEY PERSONNEL
The Company's future success will depend in significant part upon the
continued service of certain key technical and senior management personnel and
the Company's continuing ability to attract and retain highly qualified
technical, managerial and sales and marketing personnel. Competition for such
personnel is intense, and there is no assurance that the Company can retain its
key personnel or that it can attract, assimilate and retain such employees in
the future. The Company does not have employment agreements with any of its
executive officers. The Company maintains a $1,500,000 and $1,000,000 key-man
life insurance policy on the Company's Chief Executive Officer
4
<PAGE>
and its Executive Vice President/Chief Operating Officer, respectively. The
loss of these persons or other key personnel or the inability to hire or
retain qualified personnel in the future could have a material adverse effect
upon the Company's results of operations.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
Historically, the Company has not protected its intellectual property rights
through patents or formal copyright registration. The Company believes, however,
that its financial performance will depend more upon the innovation,
technological expertise and marketing abilities of its employees than upon such
protection.
There is no assurance that the Company will be able to protect its trade
secrets or that others will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to the Company's
trade secrets. There is no assurance that foreign intellectual property laws
will protect the Company's intellectual property rights. In addition, litigation
may be necessary to enforce the Company's intellectual property rights, to
protect the Company's trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringements. Such
litigation could result in substantial costs and diversion of management and
other resources and could have a material adverse effect on the Company's
business, financial condition and results of operation.
REPAYMENT OF DEBT TO AFFILIATE
The Company intends to apply $400,000 of net proceeds of the Offering to
retire a $400,000 subordinated note owned by Tom W. Olofson, the Company's
Chairman and Chief Executive Officer. The note, which bears interest at a rate
of 10%, matures on July 15, 1998. Mr. Olofson has personally guaranteed
substantially all of the Company's outstanding debt. Upon application of the
proceeds of the Offering, Mr. Olofson's guarantees with respect to such debt
will be extinguished.
CONTROL BY MANAGEMENT
Following completion of the Offering, the Common Stock currently owned
beneficially by the executive officers, directors and principal stockholders of
the Company and their affiliates will represent approximately 51.8% of the
outstanding Common Stock. Accordingly, such persons, if voting in concert, may
elect the entire Board of Directors, and generally continue to exercise control
over the Company's business and affairs following completion of the Offering.
FUTURE CAPITAL NEEDS
The Company's future capital requirements will depend on many factors,
including cash flow from operations, progress in its competing technological and
market developments, and the Company's ability to market its proposed products
successfully. Although the Company currently has no specific plans or
arrangements for financing other than the Offering, any additional equity
financings could result in substantial dilution to the Company's then existing
stockholders. Sources of debt financing may result in higher interest expense.
Any financing, if available, may be on terms unfavorable to the Company. The
Company anticipates that its existing capital resources and cash flow from
operations, together with the net proceeds of the Offering, will be adequate to
satisfy its operating expenses and capital requirements for at least 12 months
after the Offering. However, such projections may prove to be inaccurate.
5
<PAGE>
PUBLIC MARKET RISKS; ABSENCE OF PUBLIC TRADING HISTORY; POSSIBLE FLUCTUATIONS IN
TRADING PRICE
Prior to this Offering, there has been no market for the Company's
securities and there is no assurance that an active trading market will develop
or be sustained following the Offering. The initial public offering price of the
Common Stock will be determined in negotiations between the Company and the
Underwriter and may be greater or less than the price established by market
trading following the Offering. Sales in the public market of substantial
numbers of Common Stock can be expected to affect the price of the Common Stock
and could impair the Company's ability to raise additional capital through
equity offerings. Securities of many companies, in particular, newer and smaller
companies, have experienced substantial fluctuations and volatility that, in
some cases, were unrelated or disproportionate to the performance of the
companies themselves. Any such fluctuations, or general economic or market
trends, could adversely affect the price of the Common Stock. Due to all of the
foregoing factors, it is likely that in some future quarter the Company's
operating results will be below the expectations of public market analysts and
investors. In that event, the price of the Common Stock would likely be
materially adversely affected. Investors in the Offering will also experience
substantial dilution because the initial public offering price of the Common
Stock is greater than the net tangible book value per share of the Company.
EFFECTS OF DELISTING FROM NASDAQ SMALLCAP MARKET-TM-
The Company's application for quotation of its Common Stock on the Nasdaq
SmallCap Market is pending approval. There can be no assurance that the Company
will be able to maintain the qualification standards for listing of the Common
Stock on the Nasdaq SmallCap Market. If the Company fails to maintain the
listing criteria, the Common Stock will be subject to delisting. Consequently,
the liquidity of the Company's Common Stock would likely be impaired, not only
in the number of shares which could be bought and sold, but also through delays
in the timing of the transactions, and reduction in security analysts' and the
news media's coverage, if any, of the Company. As a result, prices for the
Company's shares of Common Stock may be lower than might otherwise prevail.
APPLICABILITY OF "PENNY STOCK RULES"
Federal regulations under the Securities and Exchange Act of 1934, as
amended (the "Exchange Act") regulate the trading of so-called "penny stocks"
(the "Penny Stock Rules"), which are generally defined as any security not
listed on a national securities exchange or Nasdaq, priced at less than $5.00
per share and offered by an issuer with limited net tangible assets and
revenues. In addition, equity securities listed on Nasdaq which are priced at
less then $5.00 are deemed penny stocks for the limited purpose of Section
15(b)(6) of the Exchange Act. Therefore, if, during the time in which the Common
Stock is quoted on the Nasdaq SmallCap Market, the Common Stock is priced below
$5.00 per share, trading of the Common Stock will be subject to the provisions
of Section 15(b)(6) of the Exchange Act which make it unlawful for any
broker-dealer to participate in a distribution of any penny stock without the
consent of the Securities and Exchange Commission if, in the exercise of
reasonable care, the broker-dealer is aware of or should have been aware of the
participation of a previously sanctioned
6
<PAGE>
person. In such event, it may be more difficult for broker-dealers to sell
the Common Stock and purchasers of the shares of Common Stock offered hereby
may have difficulty in selling their shares in the future in the secondary
trading market.
In the event that the Company's Common Stock is delisted from the Nasdaq
SmallCap Market and the Company fails other relevant criteria, trading, if
any, of the Common Stock would be subject to the full range of the Penny
Stock Rules. Accordingly, delisting from the Nasdaq SmallCap Market and the
application of the comprehensive Penny Stock Rules may make it more difficult
for broker-dealers to sell the Company's Common Stock and purchasers of the
shares of Common Stock in the Offering may have difficulty in selling their
shares in the future in the secondary trading market.
ABSENCE OF DIVIDENDS
Although the Company made cash distributions prior to the Offering while it
was taxable as an S Corporation, and will pay a final S Corporation distribution
to present stockholders following termination of the Company's S Corporation
status, it does not intend to pay any other cash or stock dividends in the
foreseeable future. The Company intends to retain all earnings, if any, to
invest in the Company's operations. The payment of future dividends is within
the discretion of the Board of Directors and will depend upon the Company's
future earnings, if any, its capital requirements, financial condition and other
relevant factors.
PLAN OF DISTRIBUTION
The Company will receive no proceeds from this offering. The Shares
offered hereby may be sold by the Selling Shareholders from time to time in
transactions in the over-the-counter market, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Selling Shareholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of the Shares
for whom such broker-dealers may act as agents or to whom they sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions).
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
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<PAGE>
The Selling Shareholders and any broker-dealers or agents that participate
with the Selling Shareholders in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit on the resale of the Shares purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares may not simultaneously engage in
market making activities with respect to the Common Stock of the Company for a
period of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, each Selling Shareholder will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Regulation M, which
provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Shareholders.
SELLING SHAREHOLDERS
The following table sets forth the number of shares of Common Stock that
may be acquired by each of the Selling Shareholders upon exercise of stock
options issued under the Company's 1995 Stock Option Plan. Except as indicated,
none of the Selling Shareholders has had a material relationship with the
Company within the past three years other than as a result of the ownership of
the Shares or other securities of the Company. Because the Selling Shareholders
may offer all or some of the Shares pursuant to the offering contemplated by
this Prospectus, and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the Shares, no estimate can be
given as to the amount of Shares that will be held by the Selling Shareholders
after completion of this offering. The Shares offered by this Prospectus may be
offered from time to time by the Selling Shareholders named below.
The number of Shares to be sold by each Selling Shareholder may not exceed,
during any three-month period, the amount specified in Rule 144(e) under the
Securities Act. In general, the amount of Shares to be sold by each Selling
Shareholder, together with all sales of the Company's Common Stock for the
account of the Selling Shareholder within the preceding three months, shall not
exceed the greater of: (i) one percent of the outstanding shares of Common
Stock as shown in the most recent report or statement published by the Company'
or (ii) the average weekly reported volume of trading in such securities during
the four calendar weeks preceding the date of sale.
<TABLE>
<CAPTION>
Number of Number of
Shares Percentage of Shares
Beneficially Outstanding Registered for
Name of Selling Shareholder Owned Owned Sale Hereby(1)
--------------------------- ------------ ------------- --------------
<S> <C> <C> <C>
Christopher Olofson (2) 109,500 3.2% 25,000
Albert Anillo (4) * * 7,500
W.Bryan Satterlee (3) * * 7,500
Reed Eichner (5) * * 5,000
Sally MacDonald (6) * * 5,000
Nanci Trutna (7) * * 5,000
Curtis Albert (8) * * 3,000
Kelly Amerine (8) * * 3,000
Mary Ann Davis (8) * * 3,000
Mark Dereberry (8) * * 3,000
Ken Luther (8) * * 3,000
Mike Rider (8) * * 3,000
Judy Schuberger (8) * * 3,000
Dale Shelton (8) * * 3,000
Don Beadle (9) * * 2,000
Lou Harris (9) * * 2,000
Reese Isbell (9) * * 2,000
Nick Russell (9) * * 2,000
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Brent Sliefert (9) * * 2,000
Others (10) 30,500
Total 119,500
</TABLE>
__________________________________
*Represents beneficial ownership of less than 1%.
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable in connection with the shares registered for
sale hereby by reason of any stock divided, stock split, recapitalization or
other similar transaction effected without the receipt of consideration which
results in an increase in the number of the Registrant's outstanding shares of
Common Stock.
(2) Executive Vice President, Chief Operating Officer, and Director
(3) Director
(4) Senior Vice President
(5) Vice President - Operations
(6) Vice President - Human Resources
(7) Vice President - Finance
(8) Team Leaders
(9) Developers
(10) Includes employees who each hold options to acquire not more
than 1,000 shares of Common Stock.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Petillon & Hansen, a partnership of professional corporations,
Torrance, California.
EXPERTS
The financial statements for the years ended December 31, 1995 and 1996,
incorporated by reference in this prospectus, have been incorporated herein in
reliance on the report of Baird, Kurtz & Dobson, independent accountants, given
on the authority of that firm as experts in auditing and accounting.
9
