As filed with the Securities and Exchange Commission on December 11, 1998
Registration No. 333-65303
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
COMPU-DAWN, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 11-3344575
(State or Other Jurisdiction (I.R.S. Employer Identification Number)
of Incorporation)
77 Spruce Street
Cedarhurst, New York 11516
Telephone: (516) 374-6700
Telecopier: (516) 374-9410
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Mark Honigsfeld
Chairman of the Board and
Chief Executive Officer
Compu-DAWN, Inc.
77 Spruce Street
Cedarhurst, New York 11516
Telephone: (516) 374-6700
Telecopier: (516) 374-9410
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copies of all communications and notices to:
Fred Skolnik, Esq.
Gavin C. Grusd, Esq.
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Telephone: (516) 296-7000
Telecopier: (516) 296-7111
<PAGE>
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 of 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>
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<CAPTION>
Proposed Maximum Proposed Maximum
Amount to be Offering Price Aggregate Offering Amount of
Title of Each Class of Securities to be Registered Registered Per Share (4) Price (4) Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share, issuable
upon conversion of Series A Convertible Preferred 1,300,000(1) $1.50 $1,950,000.00 $575.25
Stock, registered for the benefit of Selling
Stockholders
Common Stock, $.01 par value per share, issuable
upon conversion of Series B Convertible Preferred 327,103(2) $1.50 $490,654.50 $144.74
Stock, registered for the benefit of Selling
Stockholders
Common Stock, $.01 par value per share, issuable 180,414(3) $1.50 $270,621.00 $79.83
upon exercise of outstanding warrants
Common Stock, $.01 par value per share, 125,000 $1.50 $187,500.00 $55.31
registered for the benefit
of Selling Stockholders
Common Stock, $.01 par value per share, issuable 75,000 $2.44 $183,000.00 $50.87
under certain circumstances, registered for the
benefit of Selling Stockholders
Total Registration Fee: $906.00 (5)
========
====================================================================================================================================
</TABLE>
<PAGE>
(1) For purposes of estimating the number of the Company's shares of Common
Stock to be included in this Registration Statement, the Company calculated
200% of the number of shares of Common Stock issuable upon the conversion
at maturity of 3,250 shares of the Company's Series A Convertible Preferred
Stock, $.01 par value per share (the "Series A Stock"), or otherwise
pursuant to the Certificate of Designations, Preferences and Rights of the
Series A Stock, based on a conversion price of $5.00 per share. Pursuant to
Rule 416 promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), the number of shares of Common Stock to be registered
hereunder also includes an indeterminate number of shares which may become
issuable upon conversion of, or otherwise with respect to, the Series A
Stock to prevent dilution resulting from stock splits, stock dividends or
similar transactions.
(2) Pursuant to Rule 416 promulgated under the Securities Act, the number of
shares of Common Stock to be registered hereunder also includes an
indeterminate number of shares which may become issuable upon conversion of
the Company's Series B Convertible Preferred Stock, $.01 per value per
share, to prevent dilution resulting from stock splits, stock dividends or
similar transactions.
(3) For purposes of estimating the number of the Company's shares of Common
Stock to be included in this Registration Statement, the Company calculated
200% of the number of shares of Common Stock issuable upon the exercise of
warrants for the purchase of 90,207 shares of Common Stock based upon an
exercise price of $8.025 per share. Pursuant to Rule 416 promulgated under
the Securities Act, the number of shares of Common Stock to be registered
hereunder also includes an indeterminate number of shares which may become
issuable upon exercise of the warrants to prevent dilution resulting from
stock splits, stock dividends or similar transactions.
(4) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c).
(5) Previously paid.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until this Registration Statement shall become effective
on such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
PROSPECTUS
----------------
COMPU-DAWN, INC.
2,007,517 SHARES OF COMMON STOCK
The shares of common stock offered A purchase of these securities
by this prospectus are being sold by involves a high degree of risk. See
stockholders of Compu-DAWN, Inc. "Risk Factors," beginning on page 2.
The common stock of Compu-DAWN, Inc. is traded
on the Nasdaq SmallCap Market under the symbol "CODI."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Compu-DAWN, Inc.
77 Spruce Street
Cedarhurst, New York 11516
(516) 374-6700
, 1998
<PAGE>
THE COMPANY
Compu-DAWN is primarily engaged in the business of designing, developing,
licensing, installing and servicing computer software products and systems for
law enforcement and public safety agencies. The software systems include
computer-aided dispatching, computer interfacing with state and national crime
information databases, advanced mobile on-line radio computing, automatic
vehicle location using dynamic map displays, records management and photo-image
database systems. Certain of these applications utilize telecommunications and
space satellite technology, and other infrastructure, provided by third parties.
Compu-DAWN has developed, licensed and installed its systems in approximately 60
agencies primarily located in the State of New York.
Compu-DAWN was incorporated under the name Coastal Computer Systems, Inc.
in New York on March 31, 1983 and was reincorporated in Delaware under its
present name on October 18, 1996.
Compu-DAWN's executive offices are located at 77 Spruce Street, Cedarhurst,
New York 11516 and its telephone number is (516) 374-6700.
RISK FACTORS
An investment by you in the shares offered by this prospectus is
speculative and involves a high degree of risk. You should only purchase these
securities if you can afford to lose your entire investment. Before making an
investment, you should carefully consider the following risks and speculative
factors, as well as the other information contained in this prospectus. As
discussed below, this prospectus contains forward-looking statements that
involve risks and uncertainties. The actual results of Compu-DAWN's operations
could be significantly different from the information contained in those
forward-looking statements. Those differences could result from the risk factors
discussed immediately below, as well as factors discussed in other places in
this prospectus.
In this "Risk Factors" section, "we," "our" and "ours" refer to Compu-DAWN,
and "you," "your" and "yours" refer to a purchaser of the shares of Compu-DAWN
offered by this prospectus.
1. Lack of Significant Revenues; Recent and Anticipated Continuing Losses.
Period Ended Revenues Net Loss
December 31, 1996 (year) $477,527 $ 570,769
December 31, 1997 (year) 591,375 4,436,745
September 30, 1998 (nine months) 916,129 1,266,910
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The table above sets out our revenues and net losses for the periods
indicated in the first column. We believe that we will be unable to achieve
enough revenues to offset operating costs for the foreseeable future; therefore,
we anticipate that operating losses will continue for at least the next 12
months. We cannot predict how long these operating losses will continue or what
impact they will have on our financial condition and results of operations. We
cannot assure you that our technology and products will be able to compete
successfully in the marketplace or that they will generate significant revenue;
nor can we assure you that our business will be able to operate profitably.
The net losses are the result of significant expenses, including research
and development expenses, enhancing and refining our product line, marketing
costs, employment agreement costs and general administrative expenses. In
addition, the 1997 loss reflects approximately $1,588,000 in non-recurring
deferred financing charges incurred in connection with a debt offering we made.
Furthermore, the net loss figure for 1998 was higher than it would have been
otherwise because we did not generate significant revenues, but did incur
expenses regarding contemplated business ventures.
2. Frequent Changes in Market for Our Computer Software Products and Risk
of Obsolescence. The markets for our software products are characterized by
evolving industry requirements
rapid technological change
frequent introductions of new products
Our ability to compete will depend on our ability to adapt, enhance and improve
our existing products and technology, and develop and introduce new products and
technology in a timely and cost-competitive manner. We cannot predict whether or
not our competitors will develop technologies or products that will render ours
obsolete or less marketable, or whether we will be able to enhance and adapt our
products and technology successfully. Any one of these factors may result in
product or technology obsolescence. Other companies may be developing
technologies or products of which we are unaware and which may be similar or
superior to some or all of the products and technology we offer.
3. Potential Problems in Developing New Products. All the risks inherent in
the development of new technology and products will accompany our new product
development efforts. These risks include unanticipated delays, expenses and
technical problems. We cannot assure you that (a) we can develop additional
technologies within a reasonable schedule; (b) we will have sufficient economic
or human resources to complete such development; (c) we will have access to
sufficient funding to complete development; or (d) we can make economically
reasonable arrangements for the completion of new products by third parties.
Therefore, we can make no assurances as to when, or whether, new products will
be successfully developed.
3
<PAGE>
Before we can market any additional product, we must successfully
complete a testing program for it. Although we believe our testing program is
adequate, unforseen technical problems arising out of the testing process may
delay or prevent our production or marketing of a commercially acceptable
product. In addition, our current and proposed products must meet the cost and
performance demands of the marketplace. We cannot assure you that new
technologies or products will be developed by us, or that, if they are, they
will meet cost and performance objectives; neither can we assure you that
unforseen technical problems or other problems will not significantly increase
the cost, or delay the introduction, of such products.
4. Need to Integrate Our Products with Those of Others. To compete
successfully, we must be able to integrate our software products with other
systems. We have achieved some success with integration in the past, although we
cannot guarantee that we will continue to do so either with existing
applications or newly created applications. If we are unable to further
integrate our products, there could be a significant negative effect on our
business; even if we do achieve further integration, there is no guarantee that
we will improve our competitive position in the software market.
5. Limited Market: Law Enforcement and Public Safety Agencies. In 1996,
1997 and the first nine months of 1998, almost all of our revenues came from the
licensing of products and the provision of maintenance and support services to
law enforcement and public safety agencies. A shift in the needs of these
customers, or the introduction of superior competitive products, or any
circumstance which would adversely affect the narrow area in which our products
are concentrated, would have a significant negative effect on our financial
condition and results of operations.
6. Lengthy and Uncertain Period of Time to Obtain Customer Orders;
Difficulty in Planning Cash Flow Needs. The public agencies that buy or license
our products usually have a long internal approval procedure, due to the large
expense and the significant change to the customer's infrastructure that is
represented by a purchase from us. These internal acceptance procedures as well
as the customer's budgetary constraints are beyond our control. Therefore, the
sales cycle associated with our products is typically quite long and uncertain.
Due to this lengthy and uncertain sales cycle and the generally large size of
customer orders, it could take a longer time than we anticipate to complete a
sale and receive significant payments. Therefore, it is difficult for us to plan
effectively our cash flow needs.
7. Absence of Sales Staff May Hinder Our Growth. We have no in-house sales,
marketing or distribution staff and only employ a sales manager. Our sales and
marketing efforts are currently conducted by four independent contractors and
two value-added resellers, i.e., independent distributors who primarily sell
other kinds of products. We cannot predict whether the lack of a sales,
marketing and distribution staff will hinder our growth or affect our business,
results of operations or financial position. We are examining whether to
continue marketing our products in this manner.
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8. Small Number of Customers; Reduction, Delay or Cancellation of an Order
Could Have Adverse Consequences. We have, so far, depended on a limited number
of customers for the bulk of our revenues. Although the actual customers have
changed from year to year, generally the number of customers at any one time
remains small. Consequently, any one customer's reduction, delay or cancellation
of an order may adversely affect our financial condition and results of
operations. We generally do not receive repeat business from customers for whom
we have designed and installed software systems. Any additional revenues from
these customers are usually derived from maintenance and support contracts. With
this history and the unlikelihood that we will be selling additional products to
our current customers in the future, we do not believe that the makeup of our
current customers is important to an understanding of our future business
prospects.
We estimate that our current backlog of software system sales is between
$600,000 and $800,000. One of these is a contract for $350,000; another is for
$230,000. During the time it takes to complete a system installation contract,
which generally lasts from three to 12 months, a limited number of large
customers with contracts in progress may represent a significant portion of our
sales.
9. Need to Establish Strategic Business Alliances and Subcontractor
Relationships to Enter Larger Size Markets for Our Products. To enter the "large
size" market segment for our products, we will probably need to establish
strategic business alliances and/or subcontractor relationships with large
systems integrators and public network providers. Although we have entered into
two business alliances, as discussed below, we cannot assure you that we will
receive revenues as a result of them or that we will renew these agreements or
enter into others. Our inability to maintain or enter into business alliances
and/or subcontractor relationships would significantly hinder our implementation
of the "large size" market plan.
Our customers have, so far, been in the "small size" and "medium size"
market segments. These customers generally have fewer than 200 sworn officers or
personnel. Our business strategy includes the development of systems for the
large size market and the establishment of relationships to help us enter that
market.
Business alliances have been entered into with AT&T Wireless Data, Inc. and
GTE MobileNet Service Corp. These arrangements do not relate to a particular
customer; they govern the relationship between us and the other party if a
system installation is done for a mutual customer. These alliance agreements
provide for the two parties to work together to market their respective products
to large public safety agencies. On mutually agreed projects, each partner will
support the other's services and not solicit services or products from other
sources. We believe that these alliances may help us grow by giving us access
to, and helping us meet the requirements of, large customers, like major
metropolitan police departments, whose demands would otherwise be beyond our
capacities.
The agreement between us and AT&T provides for, among other things, minimum
technical support standards and minimum revenue requirements. If we do not meet
the technical support standards, AT&T is entitled to reduce the technical
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<PAGE>
support fees paid to us; the minimum revenue requirements may entitle us to a
goal attainment fee. Failure to meet the minimum revenue requirements entitles
AT&T to terminate the agreement. The agreement with GTE allows GTE to not pay us
during any period in which we fail to materially perform our obligations.
Neither agreement provides revenues to us by itself; revenues will result only
if one of the alliance parties obtains a contract with a large-market client.
Thus, because these alliance agreements do not themselves bring customers to us,
and because they provide that under certain circumstances we may not be paid or
the agreement may be terminated, we cannot be certain that the mere existence of
these agreements will result in growth.
10. Limited Protection of Our Intellectual Property; Others Could
Misappropriate Our Intellectual Property and We May Not be Able to Enforce Our
Rights. Our technology is not patented and we have not filed any patent
applications. We rely on trade secrets and copyright rights to establish and
protect certain proprietary rights in our products. These measures give limited
protection, and it is possible that they will be inadequate to protect
proprietary rights, prevent misappropriation of our technology, or prevent the
independent development by others of similar technology. This potential
inadequacy is compounded by our limited resources and the potential cost of
legal action to enforce our rights.
We have not obtained any copyright registrations. We believe that it would
be impractical and not cost-effective for a third party to attempt to copy
software like that used in our products. Still, unauthorized parties might
attempt to copy or reverse-engineer all or parts of our products, or may obtain
information that we regard as proprietary.
Registration of a copyright with the United States Copyright office is not
a requirement to make a copyright legally effective. However, such a
registration generally reinforces the registrant's claim. In the absence of a
registered copyright, we will be unable to sue anyone for copyright
infringement. A copyright may be registered at any time prior to suing for
infringement. If a copyright is registered before infringement occurs, the law
permits the injured party to recover certain amounts of money even if the actual
harm that's been suffered equals a smaller amount of money. If we register the
copyright after the infringement occurs, and before suing, we may be limited in
our ability to prove our case and in the amount we can recover as damages. The
cost of enforcement by us of our rights could be significant; nevertheless, we
can give no assurance that such proceedings will be effective.
We believe there are no infringement or trade secret misappropriation
claims against us and that there are no grounds for the assertion of any such
claims; however, should such a claim be made, the cost of responding to it could
be significant and we cannot be certain that we would prevail.
11. Dependence on Our CEO and Our Chief Technology Officer; Need to Retain
Key Personnel. Our executive management team consists of Mark Honigsfeld, our
Chairman and Chief Executive Officer, and Louis Libin, our Chief Technology
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Officer. The loss of the services of either Mr. Honigsfeld or Mr. Libin could
have a significantly detrimental effect on our business. Our success is also
partly dependent upon our ability to hire and retain additional key personnel.
We have three-year employment agreements with Messrs. Honigsfeld and Libin.
Each agreement includes non-competition and non-solicitation provisions.
However, each agreement also provides that the employee can terminate it at any
time upon 30 days notice for any reason. Additionally, Mr. Honigsfeld's
employment agreement allows him to devote up to 10% of his working time to other
endeavors that are not competitive with us. Mr. Libin's employment agreement
allows him to devote up to one day a week to such endeavors.
We have obtained "key-man" life insurance policies on the lives of Messrs.
Honigsfeld and Libin, each of which policies provides for a death benefit to us
of $1,000,000. We cannot be certain that the death benefit would be adequate to
fund our needs until a successor could be found.
Qualified and talented executive, technical and marketing personnel are
always in great demand in our business, and our inability to recruit them could
have a materially adverse impact on our business and results of operations. We
cannot say with certainty that we will be able to retain our current management
or other personnel, or that we will be able to attract and retain qualified
personnel in management, engineering and sales in the future.
12. Dependence on Unaffiliated Software Licensors; Termination of Licenses
Would Result in Production Delays. We rely on operating system software owned by
unaffiliated third parties for certain software and platform operating systems
which we use to create our products, and in some cases to bundle with our own
software. Termination of any of the current licenses could result in production
delays of approximately three to six months; these delays would have a material
adverse effect on our business.
The licenses under which we use this software require payment of either an
annual maintenance and enhancement fee, or of a monthly sublicense fee. An
annual fee is based on the number of end users of the operating system software;
a monthly fee is based upon the number of customers to which our products are
licensed, including products where such licensed software is included. We
believe that there are alternatives to the operating system software that we
currently use, and that we could revise our software to make it compatible with
these alternatives.
13. Potential Litigation and Costs Relating to Termination of Merger
Agreement with Rugby National. On September 1, 1998, we terminated an Agreement
and Plan of Merger we had entered into with Rugby National Corp. Although we
believe that we acted properly, there is a possibility that we may have some
liability for terminating the agreement. We may also incur litigation expenses
if an action is started.
We had entered into the merger agreement with Rugby regarding the right to
operate a national online lottery in Russia. The merger agreement contained
conditions to our obligation to close the transaction; since these conditions
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had not been satisfied by the deadline of August 31, 1998, we terminated the
merger agreement. Subsequently, Rugby and its counsel claimed that we had
breached certain provisions of the merger agreement. We believe that we have
legitimate defenses against Rugby's claims. Rugby has not begun any lawsuit yet;
however, if it does, we intend to defend ourselves vigorously.
The merger agreement provided for "liquidated damages" if we did not close
the merger agreement even though the conditions to our obligation to close were
met. The maximum amount payable to Rugby as liquidated damages is $1,000,000;
but, since we had loaned approximately $125,000 to Rugby, our potential
liability would be the difference between that loan and the $1,000,000. We do
not believe we have any liability for liquidated damages.
We estimate that the total cost to us of the merger agreement and the
related transactions was approximately $300,000, all of which has been included
as an expense in our financial statements.
14. Risks Relating to Unspecified Acquisitions. We are exploring and will
continue to explore opportunities to add or acquire:
technology or products consistent with our current product line
a customer base or sales organization to augment our infrastructure
businesses that make and/or market products or services not in our
current line of business
If any such opportunity involves the acquisition of a business, we cannot be
certain that:
we will successfully integrate the operations of the acquired business
with ours
all the benefits expected from such integration will be realized
delays or unexpected costs related to the integration will not have a
detrimental affect on our combined business, operating results or
financial condition
our respective operations, management and personnel will be compatible
we will not lose key personnel
If we acquire technology or products in the early stage of development or
growth, including technology or products that have not been fully tested or
marketed, we will be subject to numerous risks inherent in developmental
technology, plus the additional high level of risk associated with high
technology industries. Furthermore, these acquisitions may require us to obtain
additional financing from banks or other financial institutions or to undertake
debt or equity financing. We cannot assure you that we will be able to obtain
financing on commercially reasonable terms or at all. Furthermore, equity
financing will result in a dilution to our existing stockholders, i.e., the
number of shares that you own will represent a smaller percentage of our
outstanding stock. The degree of dilution may be significant. In the case of
debt financing, we run the risks of interest rate fluctuations and insufficiency
of cash flow to pay principal and interest, along with other risks traditionally
associated with incurring indebtedness.
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15. We Will Usually Accomplish Acquisitions Without Prior Stockholder
Approval. The Board of Directors will decide whether any opportunity to add
technology, products or a business is in the best interest of our stockholders.
We cannot be certain that any such opportunities will arise, or that, if they
do, we will be able to reach an agreement on terms acceptable to us. In most
cases, an acquisition will be concluded without stockholder approval and our
stockholders will not have an opportunity to review the financial statements of,
or other information relating to, the acquisition candidate. Although we will
attempt to evaluate the risks inherent in a particular acquisition, we cannot be
certain that we will properly ascertain or assess such significant risk factors.
16. Control By Management and Preferred Stockholders. Our directors and
executive officers beneficially own approximately 29% of our outstanding common
stock. The holders of our Series A convertible preferred stock, Series B
convertible preferred stock and certain warrants held by such holders have the
right, if they waive certain limitations, to acquire approximately 27% of the
common stock that would be outstanding following conversion or exercise of their
securities. Thus, these two groups of stockholders, if acting together, have the
potential voting strength to exert significant influence over the election of
our directors and over other matters submitted to our stockholders for approval.
The percentages given in this paragraph do not account for some of the rights
given to the holders of the Series A and Series B stock and the warrants. There
is additional information about the conversion of the Series A stock and the
Series B stock and the exercise of the warrants in the section of this
prospectus entitled "Selling Stockholders."
17. No Dividends. We have never paid any dividends on our common stock and
do not intend to in the foreseeable future. We anticipate retaining any earnings
which we may realize in the foreseeable future to finance our growth.
FORWARD-LOOKING STATEMENTS
Certain information contained herein and/or incorporated by reference in
this prospectus includes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, and is subject to the safe
harbor created by that act. Compu-DAWN cautions readers that certain important
factors may affect Compu-DAWN's actual results and could cause such results to
differ materially from any forward-looking statements which may be deemed to
have been made in this prospectus or which are otherwise made by or on behalf of
Compu-DAWN. For this purpose, any statements contained in this prospectus that
are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the generality of the foregoing, words such as
"may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate,"
or "continue" or the negative variations thereof or comparable terminology are
intended to identify forward-looking statements. Factors which may affect
Compu-DAWN's results include, but are not limited to, the risks and
uncertainties associated with the level of spending by law enforcement and
public safety agencies for computer application software and hardware, the
competitive environment within the industry, the ability of Compu-DAWN to expand
its operations, the competence required, and experience, of management to
effectuate Compu-DAWN's business plan, the level of costs incurred in connection
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with Compu-DAWN's planned expansion efforts, economic conditions in the
industry, the financial strength of Compu-DAWN's customers and suppliers, and
unascertainable risks related to possible unspecified acquisitions. Compu-DAWN
is also subject to other risks detailed herein or detailed from time to time in
Compu-DAWN's SEC filings. Factors that could cause or contribute to such
difference include, but are not limited to, those discussed in "Risk Factors"
above, as well as those discussed elsewhere in this prospectus and in
Compu-DAWN's filings with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Compu-DAWN files reports, proxy and information statements and other
information with the SEC. Such reports, statements and other information filed
by Compu-DAWN with the SEC can be inspected and copied at the public reference
facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following Regional Offices of the SEC: 7 World
Trade Center, Suite 1300, New York, New York 10048; and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can also be obtained from the Public Reference Section of the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Furthermore, the SEC maintains a Web site that contains reports, proxy
and information statements and other information regarding Compu-DAWN. The
address of such Web site is http://www.sec.gov.
The documents listed below have been filed by Compu-DAWN with the SEC under
the Securities Exchange Act of 1934 and are incorporated herein by reference:
(a) Compu-DAWN's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997.
(b) Compu-DAWN's Quarterly Report on Form 10-QSB for the three months
ended March 31, 1998.
(c) Compu-DAWN's Current Report on Form 8-K for an event dated April
22, 1998.
(d) Compu-DAWN's Current Report on Form 8-K for an event dated April
23, 1998.
(e) Compu-DAWN's Current Report on Form 8-K for an event dated June
8, 1998.
(f) Compu-DAWN's Quarterly Report on Form 10-QSB for the three months
ended June 30, 1998.
(g) Compu-DAWN's Current Report on Form 8-K for an event dated
September 1, 1998.
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(h) Compu-DAWN's Current Report on Form 8-K for an event dated
September 25, 1998.
(i) Compu-DAWN's Quarterly Report on Form 10-QSB for the three months
ended September 30, 1998.
(j) Compu-DAWN's Current Report on Form 8-K for an event dated
November 18, 1998.
(k) The description of Compu-DAWN's common stock contained in Compu-
DAWN's Registration Statement on Form 8-A (File No. 000-22611),
which was declared effective by the SEC on June 10, 1997.
All documents filed by Compu-DAWN pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this prospectus, and prior to the
termination of the offering of the 2,007,517 shares of common stock of
Compu-DAWN offered hereby, shall be deemed to be incorporated by reference into
this prospectus and to be a part hereof from their respective dates of filing.
Compu-DAWN will provide without charge to each person to whom a copy of
this prospectus is delivered, upon the written or oral request of any such
person, a copy of any or all of the documents referred to above which have been
incorporated into this prospectus by reference, other than exhibits to such
documents. Requests for such copies should be directed to the Secretary,
Compu-DAWN, Inc., 77 Spruce Street, Cedarhurst, New York 11516; telephone
number: (516) 374-6700.
This prospectus was created after all of the documents listed in items (a)
through (k) above were filed with the SEC. Therefore, there may be certain
conflicts between the information contained in this prospectus and information
contained in those other documents. If there are any inconsistencies, then the
statements in those earlier documents should be read as if they agree with the
statements in this prospectus.
SELLING STOCKHOLDERS
Of the 2,007,517 shares being offered hereby:
1,300,000 shares are issuable upon conversion of, or otherwise with
respect to, 3,250 shares of Series A stock held by JNC Opportunity
Fund, Ltd. ("Opportunity");
327,103 shares are issuable upon conversion of 1,750 shares of Series
B stock held by JNC Strategic Fund, Ltd. ("Strategic" and together
with Opportunity, the "JNC Selling Stockholders");
180,414 shares are issuable upon the exercise of the warrants held by
the JNC Selling Stockholders;
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<PAGE>
75,000 shares may be issuable to the JNC Selling Stockholders pursuant
to certain registration-related rights Compu-DAWN has agreed in
principle to grant to them; and
125,000 shares are owned by three other individuals (the "Other
Selling Stockholders").
The Series A stock was issued by Compu-DAWN to Opportunity and the warrants
were issued by Compu-DAWN to the JNC Selling Stockholders on June 5, 1998 in a
private transaction. The Series B stock was issued by Compu-DAWN to Strategic as
of September 25, 1998 in connection with the private placement. The Other
Selling Stockholders acquired their respective shares in non-issuer private
transactions.
In connection with the private placement to the JNC Selling Stockholders,
Compu-DAWN granted them certain registration rights pursuant to which Compu-DAWN
agreed to keep the registration statement, of which this prospectus is a part,
effective until the earlier of (1) the date that all of their above shares have
been sold pursuant to the registration statement, or (2) the date upon which
such shares may be immediately sold to the public without registration or
restriction pursuant to Rule 144(k) promulgated under the Securities Act of
1933. Compu-DAWN has agreed to indemnify the JNC Selling Stockholders and each
of their officers, directors, members, employees, partners, agents and each
person who controls either of the JNC Selling Stockholders against certain
expenses, claims, losses, damages and liabilities, or action, proceeding or
inquiry by any regulatory or self-regulatory organization in respect thereof.
Compu-DAWN has agreed to pay its expenses of registering the shares under the
Securities Act, including registration and filing fees, blue sky expenses,
printing expenses, accounting fees, administrative expenses and its own counsel
fees.
The following table sets forth the name of each selling stockholder, the
number of shares of common stock of Compu-DAWN beneficially owned by such
selling stockholder as of November 15, 1998 and the number of shares being
offered by such selling stockholder. The shares being offered hereby are being
registered to permit public secondary trading, and the selling stockholders may
offer all or part of the shares for resale from time to time. However, such
selling stockholders are under no obligation to sell all or any portion of such
shares nor are such selling stockholders obligated to sell any shares
immediately under this prospectus. All information with respect to share
ownership has been furnished by the selling stockholders. Because the selling
stockholders may sell all or part of their shares, no estimates can be given as
to the number of shares that will be held by any selling stockholder upon
termination of any offering made hereby. See "Plan of Distribution."
The reflection in the table of shares beneficially owned or to be sold in
the offering is not intended to constitute a prediction as to the number of
shares into which the Series A stock or Series B stock will be converted or the
warrants will be exercised.
12
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Shares Owned after
Shares Beneficially Shares to be the Offering if All
Owned Prior to the Sold in the Offered Shares are
Name of Selling Stockholder Offering Offering Sold
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JNC Opportunity Fund, Ltd.(1) 141,686(2) 1,463,744(2)(3) 0
- --------------------------------------------------------------------------------------------------------------------------
JNC Strategic Fund, Ltd.(1) 141,686(2) 418,773(2)(3) 0
- --------------------------------------------------------------------------------------------------------------------------
Edwin J. Gerstley 62,500 62,500 0
- --------------------------------------------------------------------------------------------------------------------------
Gusti Gross 54,500 54,500 0
- --------------------------------------------------------------------------------------------------------------------------
Sidney Blumenthal 8,000 8,000 0
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Opportunity and Strategic are the beneficial owners of the shares to
be sold by them hereunder. They do not hold the shares as nominees for
any other person. Encore Capital Management, L.L.C., a registered
investment adviser under the Investment Advisers Act of 1940, acts as
investment adviser to, and manager of, Opportunity and Strategic.
James Q. Chau and Neil T. Chau are the managing members of Encore.
(2) The number of "Shares Beneficially Owned Prior to the Offering" for
each of Opportunity and Strategic equals 4.99% of the outstanding
common stock of Compu- DAWN as of November 15, 1998.
Pursuant to the terms of the Series A stock, Series B stock and the
warrants, the shares of Series A stock and Series B stock and the
warrants are currently convertible or exercisable by any holder only
to the extent that the number of shares of common stock thereby
issuable, together with the number of shares of common stock owned by
such holder and its affiliates, but not including shares of common
stock underlying unconverted shares of Series A stock and Series B
stock or unexercised portions of the warrants, would not exceed 4.99%
of the then outstanding common stock as determined in accordance with
Section 13(d) of the Exchange Act.
The holders of the Series A stock, Series B stock and warrants may
waive such restriction upon not less than 61 days notice. Therefore,
the number of shares set forth herein and which a JNC Selling
Stockholder may sell pursuant to this prospectus, as provided for in
footnote (3) hereof, may exceed the number of shares such JNC Selling
Stockholder may beneficially own as determined pursuant to Section
13(d) of the Exchange Act.
(3) The number of "Shares to be Sold in the Offering" for Opportunity
includes an estimate of the number of shares of common stock that
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<PAGE>
would be issuable upon conversion of, or otherwise with respect to,
the Series A stock based on 200% of the number of shares of common
stock that would be issuable at a conversion price of $5.00 per share
(1,300,000 shares). In addition, the registration statement covers
327,103 shares that are issuable to Strategic upon conversion of the
Series B stock. Further, the number of "Shares to be Sold in the
Offering" for the JNC Selling Stockholders includes:
an estimate of the number of shares of common stock that would be
issuable upon the exercise of the warrants based on 200% of the
number of shares of common stock that would be issuable at an
exercise price of $8.025 per share (114,994 shares for
Opportunity and 65,420 shares for Strategic) and
75,000 shares of common stock that may be issuable to them
pursuant to certain registration-related rights that Compu-DAWN
has agreed in principle to grant to them (48,750 shares for
Opportunity and 26,250 shares for Strategic).
The actual number of shares of common stock issuable upon
conversion of the Series A stock is determined by a formula based
on the market price at the time of conversion, and is therefore
subject to adjustment and could be materially less or more than
such estimated number depending on factors which cannot be
predicted by Compu-DAWN. Specifically, at any given time, the
Series A stock is convertible into a number of shares of common
stock determined by dividing
the sum of
the stated value of the Series A stock,
a premium amount equal to 5%, on an annualized basis, of the
stated value of the Series A stock and
any Conversion Default amount, as defined in the Certificate
of Designations, Preferences and Rights for the Series A
stock, by
the conversion price at the time of conversion.
The conversion price is calculated generally as the lesser of (1)
$8.025 and (2) 85% of the average of the five lowest closing bid
prices of the common stock for the 25 consecutive trading dates
immediately preceding the date of determination. Such 85%
calculation as of June 5, 1998, the date of issuance of the
Series A stock, would have resulted in a conversion price of
$5.6525 per share, subject to certain restrictions and
adjustments. Generally the conversion price cannot be less than
$5.00 per share.
14
<PAGE>
The number of shares of common stock issuable upon exercise of
the warrants is subject to increase to the extent the exercise
price is reduced pursuant to the antidilution adjustment
provisions of the warrants.
The shares offered hereby, and included in the registration
statement of which this prospectus is a part, include such
additional number of shares of common stock as may be issued or
issuable upon conversion of the Series A stock or Series B stock
or upon exercise of the warrants by reason of any stock split,
stock dividend or similar transaction involving the common stock,
in each case in order to prevent dilution, in accordance with
Rule 416. In the event the number of shares of common stock
issuable upon conversion of the Series A stock or upon exercise
of the warrants exceeds the number of shares included in the
registration statement, an additional registration statement
would be required to cover the excess.
To Compu-DAWN's knowledge, no selling stockholder has had any position,
office or other material relationship with Compu-DAWN or any of its affiliates
during the past three years other than as a holder of Compu-DAWN's securities.
USE OF PROCEEDS
All the shares offered hereby are being offered for the account of the
selling stockholders. Accordingly, Compu-DAWN will not receive any proceeds of
any sales made hereunder, but will receive the exercise price of any warrants
exercised by the JNC Selling Stockholders. Based on currently available
information, Compu-DAWN intends to utilize any proceeds received from the
exercise of warrants for working capital and general corporate purposes.
Compu-DAWN may use all or a portion of such proceeds for other purposes, should
a reapportionment or redirection of funds be determined to be in the best
interests of Compu-DAWN.
PLAN OF DISTRIBUTION
The shares may be sold or distributed from time to time by the selling
stockholders or by pledgees, donees or transferees of, or successors in interest
to, the selling stockholders directly to one or more purchasers, including
pledgees, or through brokers, dealers or underwriters who may act solely as
agents or may acquire shares as principals, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices, which may be changed.
The distribution of the shares may be effected in one or more of the
following methods:
ordinary brokers transactions, which may include long or short sales,
15
<PAGE>
purchases by brokers, dealers or underwriters as principal and resale by
such purchasers for their own accounts pursuant to this prospectus,
"at the market" to or through market makers or into an existing market for
the common stock,
in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents,
through transactions in options, swaps or other derivatives, whether
exchange listed or otherwise, or
any combination of the foregoing, or by any other legally available means.
In addition, the selling stockholders or their successors in interest may
enter into hedging transactions with broker-dealers who may engage in short
sales of shares of common stock in the course of hedging the positions they
assume with the selling stockholders. The selling stockholders or their
successors in interest may also enter into option or other transactions with
broker-dealers that require the delivery by such broker-dealers of the shares,
which shares may be resold thereafter pursuant to this prospectus.
Brokers, dealers, underwriters or agents participating in the distribution
of the shares may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders and/or the purchasers of shares for
whom such broker-dealers may act as agent or to whom they may sell as principal,
or both. Such compensation as to a particular broker-dealer may be in excess of
customary commissions. The selling stockholders and any broker-dealers acting 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
commission received by them and any profit realized by them on the resale of
shares as principals may be deemed underwriting compensation under the
Securities Act. Neither Compu-DAWN nor any selling stockholder can presently
estimate the amount of such compensation. Compu-DAWN knows of no existing
arrangements between any selling stockholder and any such stockholder, broker,
dealer, underwriter or agent relating to the sale or distribution of the shares.
Each selling stockholder and any other person participating in a
distribution of securities will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M, which may restrict certain activities of, and limit
the timing of purchases and sales of securities by, selling stockholders and
other persons participating in a distribution of securities. Furthermore, under
Regulation M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions, subject to specified exceptions or
exemptions. All of the foregoing may affect the marketability of the securities
offered hereby.
16
<PAGE>
Any securities covered by this prospectus that qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under that rule rather than
pursuant to this prospectus.
There can be no assurance that the selling stockholders will sell any or
all of the shares of common stock offered by them hereunder.
NASDAQ LISTING AND "PENNY STOCK" RULES
THAT COULD AFFECT COMMON STOCK
Nasdaq Listing. Our common stock is currently traded on the Nasdaq SmallCap
Market. If we are unable to satisfy the requirements for continued quotation on
that market, trading of our common stock would be conducted in the
over-the-counter market, in what is commonly referred to as the "pink sheets" or
on the NASD OTC Electronic Bulletin Board. If you buy the common stock offered
by this prospectus and our common stock is afterwards traded only in the "pink
sheets" or on the Electronic Bulletin Board, you may find it more difficult to
dispose of the shares or obtain accurate quotations as to their price.
For continued listing on the Nasdaq SmallCap Market, we are required to
have, among other things, all of the following:
either net tangible assets of $2,000,000, or market capitalization of
$35,000,000, or net income for two of the last three fiscal years of
$500,000
minimum market value or public float of $1,000,000
minimum bid price of $1.00 per share
Nasdaq also requires that we have at least two independent directors and an
Audit Committee, a majority of whose members must also be independent directors.
We currently satisfy all of the above requirements.
"Penny Stock" Rules. The SEC has regulations that generally define "penny
stock" to be common stock that has a market price of less than $5.00 per share.
Our common stock currently trades below $5.00 per share. The common stock
offered by this prospectus is authorized for quotation on the Nasdaq SmallCap
Market; therefore, it is exempt from the definition of "penny stock." However,
if our common stock is removed from the SmallCap Market at any time, then, based
on the current market price of our common stock, it will be subject to rules
that impose additional sales practice requirements. The "penny stock" rules may
restrict the ability of broker-dealers to sell our common stock, and may affect
your ability to sell our common stock in the secondary market as well as the
price at which such sales can be made. Also, some brokerage firms will decide
not to effect transactions in "penny stocks" and it is unlikely that any bank or
financial institution will accept "penny stock" as collateral.
For transactions covered by these rules, the broker-dealer must make a
special determination that a purchaser is suitable to purchase the common stock
17
<PAGE>
and must have received the purchaser's written consent to the transaction prior
to the purchase. The "penny stock" rules also require the delivery, prior to the
transaction, of a risk disclosure document mandated by the SEC relating to the
penny stock market. The broker-dealer must also disclose (a) the commission
payable to both the broker-dealer and the registered representative, (b) current
quotations for the common stock, and (c) if the broker-dealer is the sole market
maker, the broker-dealer must disclose this fact and the broker- dealer's
presumed control over the market. Finally, monthly statements must be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks. These rules would apply to
sales by broker-dealers to persons other than established customers and
accredited investors until our common stock trades above $5.00 per share.
Accredited investors are generally those with assets in excess of $1,000,000 or
annual income exceeding $200,000, or $300,000 together with their spouse.
CERTIFICATE OF INCORPORATION, BY-LAW AND STATE LAW PROVISIONS
THAT COULD ADVERSELY AFFECT COMMON STOCKHOLDERS
Our Certificate of Incorporation provides that a director shall not be
personally liable to us or our stockholders for monetary damages for breach of
fiduciary duty as a director, with certain exceptions. These provisions may
discourage stockholders from suing a director for breach of fiduciary duty and
may reduce the likelihood of derivative lawsuits against any director. A
"derivative lawsuit" is one in which a stockholder sues an officer or director
of the corporation on behalf of the corporation, claiming that the officer or
director did some harm to the corporation. In addition, our Certificate of
Incorporation provides for mandatory indemnification of directors and officers
to the fullest extent permitted or not prohibited by Delaware law.
Our Certificate of Incorporation also allows us to issue additional
preferred stock without approval of the holders of common stock. If we issue
preferred stock, it could discourage a third party from buying a majority of our
outstanding common stock. This, in turn, could prevent our stockholders from
selling their shares at a price above the market price. The rights that the
holders of common stock have will be subject to, and may be negatively affected
by, the rights that holders of preferred stock might be given. In addition, our
being governed by a staggered Board of Directors, certain provisions of our
By-Laws, and certain provisions of Delaware law that are applicable to us all
could delay or complicate a merger, tender offer or proxy contest involving us.
LEGAL MATTERS
Certain matters relating to the legality of the securities being offered
hereby are being passed upon for Compu-DAWN by Certilman Balin Adler & Hyman,
LLP, 90 Merrick Avenue, East Meadow, New York 11554.
EXPERTS
The consolidated financial statements of Compu-DAWN appearing in
Compu-DAWN's 1997 Form 10-KSB have been audited by Lazar Levine & Felix, LLP,
18
<PAGE>
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
Compu-DAWN has filed a Registration Statement on Form S-3 with the SEC
under the Securities Act with respect to the securities offered hereby. This
prospectus does not contain all of the information set forth in the registration
statement. For further information with respect to Compu-DAWN and the securities
offered hereby, reference is made to the registration statement and to the
exhibits filed therewith, copies of which may be obtained upon payment of a fee
prescribed by the SEC, or may be examined free of charge at the public reference
facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Each statement made in this prospectus referring to a
document filed as an exhibit to the registration statement is qualified by
reference to the exhibit for a complete statement of its terms and conditions.
No one has been authorized to give any information or make any
representation not contained in, or incorporated by reference into, this
prospectus. Therefore, you cannot rely on any information you receive or
representations made that are not in, or incorporated by reference into, this
prospectus.
If the laws of the place where you live require (a) the authorization of
any offer to sell our shares, or the solicitation of any offer to buy our
shares, through this prospectus, or (b) the qualification of the person making
the offer or solicitation, and that authorization or qualification has not been
obtained, then this prospectus is not an offer to sell our shares or the
solicitation of an offer to buy our shares. Also, if it is unlawful for us to
offer our shares to, or solicit an offer to buy our shares from, a particular
person, this prospectus is not an offer to or solicitation from such a person.
Under no circumstances should you assume that the information in this prospectus
is correct after the date on the cover page.
19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses (estimated except for the
Registration Fee) in connection with the offering described in the Registration
Statement:
Registration Fee.................................................... $ 906.00
Accountants' Fees and Expenses...................................... 1,000.00
Legal Fees and Expenses............................................. 12,000.00
Miscellaneous....................................................... 1,094.00
Total............................................................... $15,000.00
Item 15. Indemnification of Directors and Officers.
Article X of the Company's Certificate of Incorporation eliminates the
personal liability of directors to the Company and its stockholders for monetary
damages for breach of fiduciary duty as a director to the fullest extent
permitted by Section 102 of the Delaware General Corporation Law, provided that
this provision shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) arising under Section 174 of the
Delaware General Corporation Law (with respect to unlawful dividend payments and
unlawful stock purchases or redemptions), or (iv) for any transaction from which
the director derived an improper personal benefit.
Additionally, the Company has included in its Certificate of Incorporation
and its by-laws provisions to indemnify its directors, officers, employees and
agents and to purchase insurance with respect to liability arising out of the
performance of their duties as directors, officers, employees and agents as
permitted by Section 145 of the Delaware General Corporation Law. The Delaware
General Corporation Law provides further that the indemnification permitted
thereunder shall not be deemed exclusive of any other rights to which the
directors, officers, employees and agents may be entitled under the Company's
by-laws, any agreement, vote of stockholders or otherwise.
The effect of the foregoing is to require the Company to the extent
permitted by law to indemnify the officers, directors, employees and agents of
the Company for any claim arising against such persons in their official
capacities if such person acted in good faith and in a manner that 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.
20
<PAGE>
In connection with this Registration Statement, the JNC Selling
Stockholders, severally but not jointly, have agreed to indemnify the Company,
its directors, each of its officers who signed this Registration Statement, its
employees, agents and each person who controls it within the meaning of Section
15 of the Securities Act with respect to any statement in or omission from the
Registration Statement or the Prospectus or any amendment or supplement thereto
if such statement or omission was made in reliance upon information furnished in
writing to the Company by the JNC Selling Stockholders specifically for use in
connection with the preparation of the Registration Statement. Each JNC Selling
Stockholder's indemnification obligations are limited to the amount such JNC
Selling Stockholder actually receives as a result of the sale of the shares
registered for resale hereunder.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
Item 16. Exhibits.
Exhibit Number Description of Exhibit
4 Specimen Stock Certificate1
5 Opinion of Certilman Balin Adler & Hyman, LLP
23.1 Consent of Lazar Levine & Felix, LLP
23.2 Consent of Certilman Balin Adler & Hyman, LLP (included in
its opinion filed as Exhibit 5)
24 Powers of Attorney (included in signature page forming a
part hereof).
- -----------
(1) Filed as Exhibit 4.1 to the Company's Registration Statement on Form
SB-2 (Registration No. 333-18667) and incorporated herein by
reference.
Item 17. Undertakings.
The undersigned Company hereby undertakes:
(l) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to:
21
<PAGE>
(i) Include any Prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the Prospectus any facts or events which, individually
or together represent a fundamental change in the information set
forth in the Registration Statement; notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of the securities offered
would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
Registration Statement; and
(iii)Include any additional or changed material information on the
plan of distribution; provided, however, that paragraphs (l)(i)
and (l)(ii) do not apply if the Registration Statement is on Form
S-3 or Form S-8, and the information required in a post-effective
amendment is incorporated by reference from periodic reports
filed by the Company under the Exchange Act.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment as a new Registration Statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities being registered which remain unsold at the end of the offering.
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 provisions described under Item 15 above, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Compu-DAWN,
Inc. 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 amendment to
its registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Cedarhurst, New York, on the 10th day of December,
1998.
COMPU-DAWN, INC.
By:/s/ Mark Honigsfeld
Mark Honigsfeld
Chief Executive Officer and
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
*
- ---------------- Chief Executive Officer, December 10, 1998
Mark Honigsfeld Chairman of the Board,
Secretary and Director
(Principal Executive Officer and
Principal Financial and
Accounting Officer)
*
- ---------------- Chief Technology Officer December 10, 1998
Louis Libin and Director
*
- ---------------- Director December 10, 1998
William D. Rizzardi
*
- ---------------- Director December 10, 1998
Harold Lazarus, Ph.D.
*
- ---------------- Director December 10, 1998
Alfred J. Luciani
<PAGE>
* Mark Honigsfeld, pursuant to Powers of Attorney (executed by each of the
persons listed above and indicated as signed above, and filed with the
Securities and Exchange Commission), by signing his name hereto does hereby sign
and execute this amendment to the registration statement on behalf of each of
the persons named above and indicated as signing above in the capacities in
which the names of each appear above, and does hereby sign and execute this
amendment to the registration statement in his own behalf in the capacity of
Chief Executive Officer, Chairman of the Board, Secretary and Director.
December 10, 1998 /s/ Mark Honigsfeld
------------------------
Mark Honigsfeld
<PAGE>
