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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 5, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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REGISTRATION STATEMENT ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
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IAT MULTIMEDIA, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-3920210
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(State or other jurisdiction of Incorporation) (I.R.S. Employer ID No.)
Geschaftshaus Wasserschloss
Aarestrasse 17
CH-5300, Vogelsang-Turgi, Switzerland
011 41 56 223 5022
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(Address and telephone number of Registrant's principal executive offices)
Klaus Grissemann
Chief Financial Officer
Geschaftshaus Wasserschloss
Aarestrasse 17
CH-5300, Vogelsang-Turgi, Switzerland
011 41 56 223 5022
------------------------------------------
(Address and telephone number of agent for service)
Copies to:
Jill Cohen, Esq.
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, New York 10017
(212) 687-7000
Approximate date of proposed commencement of sale to public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
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 for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
Proposed Proposed Maximum
Title of Each Class of Amount to Maximum Aggregate Aggregate Amount of
Securities to be Registered be Registered(1) Price per Security(2) Offering Price Registration Fee
<S> <C> <C> <C> <C>
Common Stock, $.01 par value . . 1,629,503 $8.50 $13,850,775.50 $3,851
================================ ================== ====================== ==================== =====================
</TABLE>
(1) Registered for resale by certain selling stockholders of the Company.
(2) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended,
based on the average of the high and low price of the Common Stock on
the Nasdaq National Market on February 3, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 5, 1999
PROSPECTUS
IAT MULTIMEDIA, INC.
1,629,503 Shares of Common Stock
Certain stockholders named herein are offering for resale 1,629,503
shares of our Common Stock. None of the proceeds from the sale of the shares by
the selling stockholders will be received by us.
Our Common Stock is listed on the Nasdaq National Market under the
symbol "IATA". On February 4, 1999, the last sale price of the Common Stock as
reported on the Nasdaq National Market was $9.125 per share.
INVESTING IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
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.
The date of this Prospectus is February __, 1999
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TABLE OF CONTENTS
PAGE
Available Information 2
Incorporation of Certain Documents by Reference 3
Note Regarding Forward-Looking Statements 4
Enforcement of Civil Liabilities 4
Prospectus Summary 5
Risk Factors 7
Use of Proceeds 21
Selling Stockholders 21
Plan of Distribution 24
Legal Matters 25
Experts 25
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended (the "Securities Act"), covering the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits
thereto. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in each
instance such statement is qualified by reference to each such contract or
document filed (or incorporated by reference) as an exhibit to the Registration
Statement. 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 and other information with the Commission.
Reports and other information filed by the Company with the Commission can be
inspected without charge and copied at the public reference facilities
maintained by the Commission at the following addresses: New York Regional
Office, Seven World Trade Center, New York, New York 10048; and Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained upon written request from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. The Commission maintains a Web site at http://www.sec.gov that
contains reports, proxy statements and other information regarding issuers that
file electronically with the Commission. Reports and other information
concerning the Company may also be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
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The Common Stock is listed on the Nasdaq National Market under the
symbol "IATA" and also trades on the Freiverkehr in Frankfurt, Berlin, Stuttgart
and Dusseldorf Germany. Certain information, reports and proxy statements of
the Company are also available for inspection at the offices of the Nasdaq
National Market Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 000-22101)
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, including any documents or portions thereof incorporated by
reference therein and all amendments thereto;
2. The Company's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1998 and June 30, 1998 and September 30, 1998;
3. The Company's Current Reports on Form 8-K dated March 5, 1998,
June 19, 1998 and December 31, 1998, and on Form 8-K/A dated March 24, 1998;
4. The Company's Definitive Proxy Statement dated October 5, 1998;
5. The Company's Registration Statement on Form 8-A declared effective
on March 26, 1997, registering the Common Stock under the Exchange Act; and
6. All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of this offering, except the
Compensation Committee Report on Executive Compensation and the performance
graph included in the Proxy Statement filed pursuant to Section 14 of the
Exchange Act.
Any statement contained in any document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or 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
modified or superseded, to constitute a part of this Prospectus. The Company
will provide without charge to each person to whom this Prospectus is
delivered, upon written or oral request of any such person, a copy of any or
all of the documents incorporated herein by reference (other than exhibits to
such documents which are not specifically incorporated by reference into such
documents). Requests for such documents should be directed to the Company,
Geschaftshaus Wasserschloss, Aarestrasse 17, CH-5300 Vogelsang-Turgi,
Switzerland, Attention: Chief Financial Officer, telephone
(011)(41)(56)223-5022.
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning
of the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995. Reference is made in particular to the description of the Company's
plans and objectives for future operations, assumptions underlying such plans
and objectives and other forward-looking terminology such as "may," "expects,"
"believes," "anticipates," "intends," "expects," "projects," or similar terms,
variations of such terms or the negative of such terms. Such forward-looking
statements are based on management's current expectations and are subject to a
number of factors and uncertainties which could cause actual results to differ
materially from those described in such forward-looking statements. The Company
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in the Company's expectations with regard thereto or any
changes in events, conditions or circumstances on which any such statement is
based. Factors which could cause such results to differ materially from those
described in the forward-looking statements include, amongst other items, those
set forth under "Risk Factors."
ENFORCEMENT OF CIVIL LIABILITIES
The Company is organized under the laws of the State of Delaware.
Investors in the Common Stock will be able to effect service of process on the
Company in the United States. However, the Company is primarily a holding
company which holds stock in entities in Switzerland and Germany and all or a
substantial portion of the Company's assets are located outside the United
States. In addition, all of the Company's six directors and all of its
executive officers are residents of foreign countries and all or a substantial
portion of the assets of such directors and officers are located outside of the
United States. As a result, it may not be possible for investors to effect
service of process upon the Company's directors and officers or enforce
judgments of U.S. courts predicated upon the civil liability provisions of U.S.
laws against the Company's directors' and officers' assets.
The Company has been advised that there is doubt as to the
enforceability in Switzerland of judgments of U.S. courts and in Germany in
original actions for enforcement of judgments of U.S. courts of civil
liabilities predicated solely upon the laws of the United States, in each case
against the Company's subsidiaries and against its shareholders, directors,
officers and employees who are domiciled in Switzerland and Germany. In
addition, awards of punitive damages in actions brought in the United States or
elsewhere may be unenforceable in Switzerland and in Germany. The market price
of the Common Stock may be affected by the difficulty for investors to enforce
judgments of U.S. courts.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
Prospectus or incorporated by reference herein. It is not complete and may not
contain all of the information that you should consider before investing in our
securities. You should read the entire Prospectus carefully, including the
"Risk Factors" section and the financial statements and notes to those
statements incorporated by reference herein.
THE COMPANY
We market high-performance personal computers in Germany assembled
according to customer specifications and sold under the trade name "Trinology."
We also sell components, peripherals and software for PCs. Our product line
includes:
o high-performance IBM-compatible desktop PCs;
o components, such as motherboards, hard disks, graphic cards and
plug-in cards; and
o peripherals, such as printers, monitors and cabinets.
Our clients include:
o corporate customers, such as industrial, pharmaceutical, service and
trade companies;
o the military;
o value-added resellers; and
o retail computer stores.
Our current customers include:
o Mercedes Benz Leasing;
o Adam Opel AG;
o Novartis Switzerland; and
o the North Atlantic Treaty Organization.
Our products are marketed directly through our internal sales force to dealers
and end-users. We also maintain two retail showrooms and a mail-order
department.
We work directly with a wide range of suppliers to evaluate the latest
developments in related technology and engage in extensive testing to optimize
the compatibility and speed of the components which are sold and integrated
into our Trinology PCs. Components and peripherals used in Trinology PCs and
sold by us are manufactured by companies such as:
o Actebis Computer Handels GmbH;
o Peacock AG;
o CTX Computer GmbH;
o Ingram Micro GmbH;
o Iiyama;
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o Asus Computer GmbH; and
o Matrox Electronic Systems.
We offer a comprehensive service and support program to all end-users and our
Trinology PCs, components and peripherals come with warranties ranging from one
to three years. We also maintain a free service hotline providing operational
and technical support and a "support mailbox" for our customers, through which
customers may send inquiries to technical support personnel via computer.
We expect to receive licensing fees and royalty payments from the
licensing and sale of our visual communication technology, wavelet data
compression/decompression software technology and related technology. We intend
to offer products incorporating our visual communication system technology in
our Trinology PCs.
We were incorporated in Delaware in September 1996. Our address is
Geschaftshaus Wasserschloss, Aarestrasse 17 CH-5300, Vogelsang-Turgi,
Switzerland and our telephone number is (011)(41)(56) 223 5022. Unless the
context otherwise requires, the "Company" refers to IAT Multimedia, Inc., the
Delaware corporation, and:
o our majority-owned subsidiary FSE Computer-Handel GmbH & Co. KG, a
German corporation; and
o our wholly-owned subsidiaries Columbus Computer Handels-und Vertriebs
GmbH & Co. KG, a German corporation, IAT AG, a Swiss corporation, and
IAT Deutschland GmbH Interaktive Medien Systeme, a German
corporation.
RECENT DEVELOPMENTS
We are currently in discussions with the entities which were formed
following our restructuring in March 1998 relating to our potential sale to
these entities of:
o our 15% equity interest in each of such entities; and
o our visual communications and wavelet technology proprietary rights.
Our discussions propose that in exchange for our sale of such assets, we would
receive:
o cash;
o an equity interest in a newly formed entity which will continue the
operations of the entities which were formed following our
restructuring; and
o certain royalty and license fees.
These negotiations are ongoing and the terms of any proposed transaction have
not been finalized. We cannot predict whether this proposed transaction will be
consummated on terms favorable to us or at all.
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RISK FACTORS
The following factors should be reviewed carefully, in conjunction
with the other information in this Prospectus and our consolidated financial
statements. These factors, among others, could cause actual results to differ
materially from those currently anticipated and contained in forward-looking
statements made in this Prospectus and presented elsewhere by our management
from time to time. See "Note Regarding Forward-Looking Statements."
HISTORY OF OPERATING LOSSES; CHARGES TO OPERATIONS. We have
experienced significant operating losses since our inception. At September 30,
1998, we had an accumulated deficit of approximately $20.7 million. For the
year ended December 31, 1997 and the nine months ended September 30, 1998, we
incurred operating losses of approximately $7.1 million and $1.5 million,
respectively. We cannot predict if we will ever achieve or sustain
profitability.
As a result of certain acquisitions in 1997 and 1998 and our
restructuring in 1998, substantially all of our revenues are now generated from
the sale and distribution of our Trinology PCs and PC components, peripherals
and software in Germany through FSE Computer-Handel GmbH & Co. KG which we
acquired in November 1997 and Columbus Computer Handels-und Vertriebs GmbH & Co.
KG which we acquired in November 1998. Our PC business is subject to significant
price competition which substantially affects profit margins. We cannot predict
whether:
o we will achieve profitability; or
o any potential increase in sales or revenue will be offset by
devaluations of the Deutsche Mark or euro against the U.S. dollar.
See "--Risks Relating to Euro."
Our strategy is growth through acquisitions. In connection with our
acquisition of FSE and Columbus, we incurred an aggregate of approximately $6.0
million of goodwill. We are amortizing this goodwill over 10 years, which will
cause us to record in our financial statements an annual expense of
approximately $600,000. In addition, in connection with our acquisition of
Columbus, we restructured the operations of FSE. We expect to take an
additional charge to operations of approximately $150,000 during the quarter
ended December 31, 1998 for such restructuring. As we acquire additional
businesses, we may incur significant charges for depreciation and amortization
and, to the extent financed through borrowing, interest expense. Such charges
could further adversely affect our future results of operations and may result
in increased net losses. See "--Limited History of Combined Operations; New
Business Activities" and "--Risks Relating to Acquisitions and Managing Growth;
Need for Additional Funds."
LIMITED HISTORY OF COMBINED OPERATIONS; NEW BUSINESS ACTIVITIES. Prior
to entering into our PC business with the acquisition of FSE, our sole business
was developing and marketing visual communications technology and related
products. The sale and distribution of PCs and related hardware and software is
a new business for our management group. We have only limited experience
operating this business and we cannot assure that our management group will be
successful in managing such business. Our inability to successfully manage this
business could materially adversely affect our operations and financial
condition.
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RISKS RELATING TO ACQUISITIONS AND MANAGING GROWTH; NEED FOR
ADDITIONAL FUNDS. An integral part of our business strategy is growth through
acquisitions. This acquisition strategy presents risks that could materially
adversely affect our business and financial performance, including:
o the diversion of our management's attention;
o the assimilation of the operations and personnel of the acquired
business;
o the contingent and latent risks associated with the past operations
of and other unanticipated problems arising in the acquired business;
and
o increased competition for acquisition opportunities.
As part of our acquisition strategy, we may seek opportunities to
expand the marketing and sale of our products into markets in the United
States. We have no experience operating a business in the United States and in
the event we expand into the United States:
o we will face substantial increased competition from companies with
substantially greater name recognition and marketing and other
resources; and
o we would be required to make substantial expenditures for, among
other things, marketing, office space and sales and marketing
personnel and other employees in the United States.
As we expand through acquisitions, we will be required to hire and
retain additional management and administrative personnel and develop and
expand operational systems to support our growth. Competition for qualified
employees is intense and an inability to attract and retain such individuals
could adversely affect our business and prospects. This growth strategy will
continue to place significant demands on our management, technical, financial
and other resources. We cannot predict whether:
o we will be able to acquire additional businesses on terms favorable
to us;
o the operations of any such businesses can be successfully integrated
into our business;
o any anticipated benefits of completed acquisitions will be realized;
or
o there will be substantial unanticipated costs associated with such
acquisitions.
The failure to manage growth effectively could materially adversely affect our
operations and financial condition. We are evaluating and are in various stages
of discussions in connection with the potential acquisition of assets or equity
of certain related businesses. However, we have no agreements or arrangements
with respect to any particular acquisitions. We cannot predict whether we will
be able to acquire the assets or capital stock of or profitably integrate and
operate any other businesses that may be acquired in the future. See "--History
of Operating Losses; Charges to Operations."
Based upon our current level of operations, we believe that existing
cash resources and cash flow expected to be generated from operations will be
sufficient to meet our capital requirements for approximately the next 12
months, depending on cash requirements for future acquisitions. Although we
intend to use existing cash resources and cash flow expected to be generated
from operations for future acquisitions, we may require additional funds for
additional acquisitions and integration and management of acquired businesses.
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COMPETITION. The German PC industry is highly competitive, especially
with respect to pricing and the introduction of new products and features. We
compete with our competitors primarily on the basis of adding new performance
features without corresponding price increases. We may not be able to continue
to compete successfully by:
o introducing products or performance features on a timely basis; or
o adding new features to our products without corresponding increases
in prices.
Furthermore, in recent years we and many of our competitors have
regularly lowered prices, and we expect these pricing pressures to continue. If
these pricing pressures are not mitigated by increases in volume, cost
reductions or changes in product mix, our revenues and profits could be
substantially reduced. As compared to us, many of our competitors have:
o significantly longer operating histories;
o significantly greater managerial, financial, marketing, technical and
other competitive resources; and
o greater name recognition.
As a result, our competitors may be able to:
o adapt more quickly to new or emerging technologies and changes in
customer requirements;
o devote greater resources to the promotion and sale of their products
and services; and
o respond more effectively to pricing pressures.
These factors could materially adversely affect our operations and financial
condition. We also compete with other PC direct marketers as well as with PC
manufacturers that market their products in distribution channels in which we
have not participated. We cannot predict whether we will be able to compete
successfully with existing or new competitors. In addition, competition could
increase if:
o new companies enter the market;
o existing competitors expand their service offerings; or
o we expand into new markets.
An increase in competition could result in material price reductions
or loss of our market share and could materially adversely affect our
operations and financial condition. See "--Dependence on New Products and
Rapidly Developing Technologies."
SUBSTANTIAL INDEBTEDNESS; RISKS OF FINANCIAL LEVERAGE. As of September
30, 1998, our consolidated indebtedness was approximately $7.2 million,
representing approximately 57.4% of our total capitalization. Our indebtedness
as of January 31, 1999 consisted of:
o borrowings under bank lines of credit in the aggregate amount of
approximately $150,000 which are due on demand and are secured by
our accounts receivable;
o unsecured stockholder loans in the aggregate amount of approximately
$1.0 million; and
o unsecured convertible debentures in the aggregate amount of $3.0
million.
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Accordingly, we are subject to all of the risks associated with substantial
indebtedness, including:
o a substantial portion of our cash flow from operations will be used
to pay our indebtedness; and
o we have reduced the funds available to us for operations, future
business opportunities and other purposes.
In the event we default under any of our debt instruments or if our
creditors demand payment of a portion or all of our indebtedness, we may not
have sufficient funds available to make such payments. Failure to repay such
indebtedness would materially adversely affect our operations and financial
condition.
Our substantial debt may also adversely effect us in the following
ways:
o our ability to obtain additional financing for acquisitions, working
capital, capital expenditures, general corporate or other purposes
may be impaired; and
o we will be more vulnerable to economic downturns, less able to
withstand competitive pressures and less flexible in reacting to
changes in our industry and general economic conditions.
Certain of our competitors have less debt and have significantly greater
operating and financial flexibility than us.
DEPENDENCE ON KEY PERSONNEL. We are dependent on our executive
officers, including Jacob Agam, our Chairman and Chief Executive Officer, as
well as principal members of our management team. We cannot assure that any of
our management personnel, including Mr. Agam, will continue to devote
sufficient time to our business. The loss of services of, or a material
reduction in the amount of time devoted to our business by, such individuals
could adversely affect our operations and financial condition. Competition for
qualified executive officers is intense. The loss of any of such persons, or an
inability to attract, retain and motivate highly skilled employees, could
adversely affect our business and prospects. We may not be able to attract
additional qualified employees or retain our existing personnel.
DEPENDENCE ON NEW PRODUCTS AND RAPIDLY DEVELOPING TECHNOLOGIES. The PC
industry is characterized by short product life cycles resulting from:
o rapid changes in technology;
o rapid changes in consumer preferences; and
o declining product prices.
To maintain our competitive position in the PC industry, we must continue to
introduce new products and features that address the needs and preferences of
our target markets. We cannot assure that:
o we will be able to compete successfully by introducing products or
features on a timely basis;
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o the introduction of new products or features by our competitors will
not adversely affect the sale of our products; or
o we will be able to adapt to future changes in the PC gindustry.
Although we do not conduct internal research and development, we work
closely with PC component suppliers and other technology developers to evaluate
the latest developments in PC-related technology. We may not:
o continue to have access to new technology;
o be successful in incorporating such new technology in our products;
or
o be able to deliver commercial quantities of new products or features
in a timely manner.
SUPPLY RISK. We require a high volume of quality PC components,
peripherals and software for:
o integration into our Trinology PCs; and
o sale to our customers.
We do not maintain any supplier contracts. We generally use one or two
suppliers for certain components, peripherals and software. The PC industry
periodically experiences shortages of certain components and peripherals. Many
of the suppliers that we rely upon for PC components and peripherals are
located in countries outside of Germany. The availability of such PC components
and peripherals is affected by factors such as:
o world-wide demand for components, peripherals and software;
o seasonal reductions in business activities; and
o political and economic downturns in the countries in which such
suppliers are located.
Our inability to obtain key components, peripherals or software in a timely
manner could materially adversely affect our operations and financial
condition.
LIMITED PROPRIETARY PROTECTION. We believe the tradename Trinology is
important to our business and we intend to vigorously protect this tradename.
We also have proprietary rights in our visual communication, wavelet and certain
other related technology. However, we may not be able to prevent
misappropriation of such rights.
The laws of some foreign countries where we may in the future sell our
products may not protect our proprietary rights to the same extent as do laws
in the United States and, we believe, Germany and Switzerland. The protections
afforded by the laws of such countries may not be adequate to protect our
intellectual property rights. Our inability to protect our proprietary rights
could materially adversely affect our operations and financial condition.
Litigation may be necessary to:
o enforce our intellectual property rights;
o protect our trade secrets; and
o determine the scope and validity of such intellectual property
rights.
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Any such litigation, whether or not successful, could result in substantial
costs and diversion of resources and could materially adversely affect our
operations and financial condition.
We may receive notice of claims of infringement of other parties'
proprietary rights. Such actions could result in litigation and we could incur
significant costs and diversion of resources in defending such claims. The
party making such claims could secure a judgment awarding substantial damages,
as well as injunctive or other equitable relief. Such relief could effectively
block our ability to make, use, sell, distribute or market our products and
services in such jurisdiction. We may also be required to seek licenses to such
intellectual property. We cannot predict, however, whether such licenses would
be available or, if available, that such licenses could be obtained on terms
that are commercially reasonable and acceptable to us. The failure to obtain
the necessary licenses or other rights could preclude the sale, manufacture or
distribution of our products and could materially adversely affect our
operations and financial condition.
RISKS ASSOCIATED WITH FOREIGN MARKETS. Substantially all of our
revenues in the year ended December 31, 1997 and the nine months ended
September 30, 1998 were generated from operations located in Germany and
Switzerland. While these countries have well developed economic markets, annual
growth of the gross domestic product has averaged 2.9% in 1996 and 2.2% in 1997
for Germany and 0.2% in 1996 and 0.7% in 1997 for Switzerland. Historically,
all of our revenues have been denominated in Swiss Francs and Deutsche Marks.
We anticipate that we will continue to generate most of our revenues in these
currencies until the companies we conduct business with choose to settle
transactions in Euros. See "--Risks Relating to Euro."
Any depreciation in the value of the Swiss Franc, Deutsche Mark or
Euro against the U.S. dollar that we are unable to offset through price
adjustments could materially adversely affect our operations and financial
condition. Conducting an international business inherently involves a number of
other difficulties and risks, such as:
o export restrictions;
o export controls relating to technology;
o compliance with existing and changing regulatory requirements;
o tariffs and other trade barriers;
o difficulties in staffing and managing international operations;
o longer payment cycles;
o problems in collecting accounts receivable;
o software piracy;
o political instability and economic downturns;
o seasonal reductions in business activity in Europe during the summer
months; and
o potentially adverse tax consequences.
We cannot predict whether any of these factors will materially
adversely affect our operations and financial condition. In addition, we may
seek opportunities to expand our operations into the United States and into
other countries. The transfers of funds to and from those countries to Germany
and Switzerland may be taxable events for us. Our results of operations and the
market price of our Common Stock may be affected by changes in German and Swiss
policy, taxation and economic developments.
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Our subsidiaries are subject to German and Swiss law. These countries
require, among other things, that companies which incur losses have to take
appropriate measures to ensure that the claims of its obligees are covered by
the assets of those companies. Such measures include, among others, increasing
paid-in capital or obtaining declarations from the obligees which subordinate
their claims. If those measures are not taken, the board of directors of such
company must notify a judge in order to commence bankruptcy proceedings which,
under Swiss and German law, usually leads to the dissolution of the corporate
existence. We have undertaken measures to obtain and maintain operating funds
for our subsidiaries in the past. However, we may need to undertake additional
measures in the future and we cannot predict whether the corporate existence of
any of our subsidiaries can be maintained. Failure to maintain the corporate
existence of certain of our subsidiaries would materially adversely affect our
operations and financial condition.
RISKS RELATING TO EURO. On January 1, 1999, certain members of the
European Union, including Germany, introduced a single currency, the Euro. Euro
notes and coins will not be issued until January 1, 2002. However, during a
transition period commencing January 1, 1999 and ending January 1, 2002,
European Monetary Union (EMU) countries will have the option of settling
transactions in local currencies or in the Euro. We have not yet determined
whether we intend to transact business in Euros. The conversion to the Euro
will result in increased costs to us related to updating operating systems to
convert to the Euro, review of the effect of the Euro on our contracts and
updating catalogues and sales material for our products. In addition, there are
significant legal, practical and regulatory uncertainties associated with the
introduction of the Euro. Adoption of the Euro by us or third parties with whom
we transact business could adversely affect our contracts and operations and
could result in unforeseen risks which could materially adversely affect our
operations and financial condition. In addition, adoption of the Euro will
limit the ability of an individual EMU country to manage fluctuations in the
business cycles through monetary policy.
ENFORCEMENT OF CIVIL LIABILITIES. We are organized under the laws of
the State of Delaware. Investors in our Common Stock will be able to effect
service of process on us in the United States. However, we are primarily a
holding company which holds stock in entities in Switzerland and Germany and
all or a substantial portion of our assets are located outside the United
States. In addition, all of our six directors and all of our executive officers
are residents of foreign countries and all or a substantial portion of the
assets of such directors and officers are located outside of the United States.
As a result, it may not be possible for investors to:
o effect service of process upon our directors and officers; or
o enforce judgments of U.S. courts predicated upon the civil liability
provisions of U.S. laws against our directors' and officers' assets.
We have been advised that there is doubt as to the enforceability in
Switzerland of judgments of U.S. courts and in Germany in original actions for
enforcement of judgments of U.S. courts of civil liabilities predicated solely
upon the laws of the United States, in each case against our subsidiaries and
against our shareholders, directors, officers and employees who are domiciled
in Switzerland and Germany. In addition, awards of punitive damages in actions
brought in the United States or elsewhere may be unenforceable in Switzerland
and in Germany. The market price of our Common Stock may be affected by the
difficulty for investors to enforce judgments of U.S. courts.
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RISK OF SYSTEM DEFECTS; PRODUCT LIABILITY EXPOSURE. Our Trinology PCs
must:
o meet standards established by the European FCC (CE declarations) for
radio frequency emissions; and
o receive appropriate certification prior to being marketed.
A delay or inability to obtain certification may delay or prevent us
from introducing new products or features. As a result, our operations and
financial condition could be materially adversely affected.
Trinology PCs assembled by us may contain significant operating errors
which we did not detect through our own testing. Any operating error in our
products may result in decreased revenue or increased expenses because of:
o adverse publicity;
o reduced orders;
o product returns;
o uncollectible accounts receivable;
o delays in collecting accounts receivable; and
o additional and unexpected costs of further product development to
correct the errors.
Sale of our products also involves the inherent risk of product
liability claims against us. We do not maintain product liability insurance and
believe that such insurance cannot be obtained except at a substantial cost.
While no product liability claims have been made against us in the past, we
cannot predict whether such claims will arise in the future. Any substantial
uninsured liability would have a material adverse effect on our operations and
financial condition.
YEAR 2000 COMPLIANCE. Computers, software, and other equipment
utilizing microprocessors that use only two digits to identify a year in a date
field may be unable to process accurately certain date-based information at or
after the year 2000. This is commonly referred to as the "Year 2000 issue", and
we are addressing this issue. We believe that all hardware products included in
Trinology PCs shipped since the fourth quarter of 1997 are Year 2000 compliant.
We also believe that hardware products included in Trinology PCs shipped prior
to such time can be made Year 2000 compliant through upgrades or software
patches. We have requested Year 2000 compliance certification from each of our
major vendors and suppliers for their hardware and software products and for
their internal business applications and processes but cannot predict whether
such vendors will confirm compliance. Achieving Year 2000 compliance is
dependent on many factors, some of which are not completely within our control.
If we fail to achieve Year 2000 compliance for our internal systems or if our
vendors or suppliers fail to achieve Year 2000 compliance for their internal
systems we could be materially adversely affected.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS. The PC industry
generally, and our operating results specifically, have been subject to
seasonality and to significant quarterly and annual fluctuations. Fluctuations
in the PC industry can be the result of a wide variety of factors, including:
o new product developments or introductions;
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o availability of components and peripherals;
o changes in product mix and pricing;
o product reviews and other media coverage;
o seasonal reductions in business activity in Europe during the summer
months; and
o the spending patterns of customers, which in turn are subject to
prevailing economic conditions.
Our revenues and net income are subject to fluctuations in the value of the
Deutsche Mark, and will be subject to fluctuations in the value of the euro,
against the U.S. dollar. We currently engage in limited hedging transactions
which are not material to our operations, to offset the risk of currency
fluctuations. Such hedging activities may be increased or discontinued in the
future and we are unable to predict whether such transactions will offset the
risk of currency fluctuations. As a result of the foregoing factors, it is
possible that in certain quarters our results of operations will be below:
o the results of operations for the corresponding quarter of the prior
fiscal year;
o the results operations for the preceding quarters of the then current
fiscal year; or
o the expectations of analysts and investors.
In such event, the market price of our Common Stock may decline. See "--Risks
Associated with Foreign Markets" and "--Risks Relating to Euro."
CONTROL BY EXISTING STOCKHOLDERS; POTENTIAL ANTI-TAKEOVER PROVISIONS.
As of January 31, 1999, our officers, directors and significant stockholders
owned approximately 42.4% of the outstanding Common Stock. As a result, such
stockholders are able to influence significantly:
o the election of our directors; and
o the outcome of corporate transactions or other matters submitted for
stockholder approval.
Furthermore, pursuant to an Investor Rights Agreement between Vertical
Financial Holdings Establishment, one of the selling stockholders in this
offering, and us, Vertical has the right, but not the obligation, to nominate
two persons as members of the management slate for election to our Board of
Directors so long as Vertical holds at least 10% of:
o the 1,875,000 shares of Common Stock issued by us upon conversion of
our Series A Preferred Stock in April 1997; or
o the 1,875,000 shares of Common Stock issuable upon exercise of
warrants.
Vertical has the right, but not the obligation, to nominate one person as a
member of the management slate for election to our Board of Directors so long
as Vertical holds at least 5% of:
o the 1,875,000 shares of Common Stock issued by us upon conversion of
our Series A Preferred Stock in April 1997; or
o the 1,875,000 shares of Common Stock issuable upon exercise of the
warrants.
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As of the date of this Prospectus, Vertical held 890,152 of such shares of
Common Stock and held warrants to purchase 690,152 shares of Common Stock.
The existence of such rights solidifies control over us by certain
stockholders. Pursuant to the Investor Rights Agreement, Vertical has
nominated, and our stockholders have elected, Jacob Agam as a director.
Pursuant to a Stock Purchase Agreement, Vertical nominated and Mr. Agam was
elected as our Chairman. Mr. Agam is the Chairman of the Board of Vertical. In
addition, pursuant to the Stock Purchase Agreement, we maintain an Underwriting
Committee which consists of four members with two members appointed by each of
us and Vertical. The Underwriting Committee currently consists of Jacob Agam,
Dr. Viktor Vogt and Klaus Grissemann, all members of our Board of Directors.
Mr. Agam, as designated by Vertical, serves as the Chairman of the Underwriting
Committee. Vertical has not yet named its second nominee to the Underwriting
Committee. The Underwriting Committee is vested with full and exclusive
responsibility and authority on our behalf to select an underwriter and to
negotiate all of the terms and conditions of any underwriting. In the event
that the Underwriting Committee is unable to produce a majority vote on any
particular issue, such issue shall be decided by a vote of the full Board of
Directors provided that the resolution of any such issue by the Board of
Directors shall not be effectuated without the written consent of Vertical.
We are subject to a Delaware statute regulating business combinations
which could discourage, hinder or preclude an unsolicited acquisition of the
Company and could make it less likely that stockholders receive a premium for
their shares as a result of any such attempt. In addition, our Board of
Directors is authorized to issue from time to time, without stockholder
approval, shares of preferred stock with such terms and conditions as the Board
of Directors may determine in its sole discretion.
CHARGE TO EARNINGS IN THE EVENT OF RELEASE OF ESCROW SHARES. 498,285
shares of Common Stock were deposited in escrow pursuant to an escrow agreement
in connection with our initial public offering in March 1997. These shares will
be released from escrow if:
o we attain certain revenue levels for the years ending December 31,
1998 and 1999; or
o the Common Stock trades at certain levels for any 30 consecutive
trading days, commencing in April 1999.
These shares are not deemed to be outstanding for the purpose of calculating
earnings per share until either of such conditions is probable of being met.
The position of the Securities and Exchange Commission with respect to such
escrow arrangements provides that in the event any shares are released from
escrow to stockholders who are our officers, directors, employees or
consultants, a non-cash compensation charge will be recorded for financial
reporting purposes. Accordingly, in the event of the release of such shares, we
will recognize during the period in which the earnings thresholds are probable
of being met or such stock levels achieved, a substantial non-cash charge to
operations, equal to the then fair value of such shares. This charge to
operations will not be deductible for income tax purposes and would have the
effect of significantly increasing our loss or reducing or eliminating
earnings, if any, at such time. By way of example, if at the time of the
release of such shares the market price of the Common Stock was $14.00, we
would be required to recognize compensation expense of approximately $2.2
million. The recognition of such compensation expense may depress the market
price of the Common Stock. We cannot predict whether our earnings or our stock
price will attain the targets that would enable the shares to be released from
escrow.
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POSSIBLE DELISTING OF COMMON STOCK FROM THE NASDAQ NATIONAL MARKET. We
cannot assure that we will continue to meet the criteria for continued listing
on the Nasdaq National Market. Continued inclusion on the Nasdaq National
Market generally requires that we maintain:
o at least $4,000,000 in "net tangible assets" (total assets less total
liabilities and goodwill);
o a minimum bid price of the Common Stock of $1.00 per share;
o at least 750,000 shares in the public float valued at $5,000,000 or
more;
o at least two active market makers for the Common Stock; and
o at least 400 holders of the Common Stock.
If we are unable to satisfy the Nasdaq National Market's maintenance
requirements, our Common Stock may be delisted from the Nasdaq National Market.
In such event, trading, if any, in our Common Stock would thereafter be
conducted:
o on the Nasdaq SmallCap Market, subject to meeting the requirements
for listing on the Nasdaq SmallCap Market;
o in the over-the-counter market in the "pink sheets;" or
o on the National Association of Securities Dealers, Inc.'s "Electronic
Bulletin Board."
Consequently, the liquidity of our securities could be impaired, not only in
the number of securities which could be bought and sold, but also through
delays in the timing of transactions, reduction in security analysts and the
news media's coverage of the Company and lower prices for our Common Stock than
might otherwise be attained.
RISKS OF LOW-PRICED STOCK. If our Common Stock was delisted from
Nasdaq National Market and could not be quoted on Nasdaq SmallCap Market (see
"--Possible Delisting of Common Stock from the Nasdaq National Market"), it
could become subject to Rule 15g-9 under the Exchange Act of 1934, as amended
(the "Exchange Act"), which imposes additional sales practice requirements on
broker-dealers which sell such securities to persons other than established
customers and "accredited investors" (generally, individuals with net worth in
excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together
with their spouses). For transactions covered by this rule, a broker-dealer
must make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to sale.
Consequently, such rule may adversely affect the ability of broker-dealers to
sell our Common Stock and may adversely affect the ability of stockholders to
sell any of the shares of Common Stock in the secondary market.
Commission regulations, subject to certain exceptions, define a "penny
stock" to be, among others, any non-exchange listed equity security:
o that has a Market Price (as therein defined) of less than $5.00 per
share; or
o with an exercise price of less than $5.00 per share.
For any transaction involving a penny stock, unless exempt, the rules require:
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o delivery, prior to any transaction in a penny stock, of a disclosure
schedule prepared by the Commission relating to the penny stock
market;
o disclosure about commissions payable to both the broker-dealer and
the registered representative and current quotations for the
securities; and
o monthly statements to be sent disclosing recent price information for
the penny stock held in the account and information on the limited
market in penny stocks.
The foregoing required penny stock restrictions will not apply to the
Common Stock if:
o such securities are quoted on the Nasdaq National Market or the
Nasdaq SmallCap Market and have certain price and volume information
provided on a current and continuing basis; or
o we meet certain minimum net tangible assets or average revenue
criteria.
We cannot predict whether the Common Stock will qualify for exemption
from these restrictions. In any event, even if the Common Stock was exempt from
such restrictions, it would remain subject to Section 15(b)(6) of the Exchange
Act, which gives the Commission the authority to prohibit any person that is
engaged in unlawful conduct while participating in a distribution of a penny
stock from associating with a broker-dealer or participating in a distribution
of a penny stock, if the Commission finds that such a restriction would be in
the public interest. If the Common Stock were subject to the rules on penny
stocks, the market liquidity for the Common Stock could be severely adversely
affected.
NO DIVIDENDS. We have not paid any cash dividends on our Common Stock
and do not expect to do so in the foreseeable future.
POTENTIAL VOLATILITY OF STOCK PRICE. The market price for our
securities and for securities of similar companies have from time to time
experienced significant price and volume fluctuations that are unrelated to
operating performance. Factors which may affect our market price include:
o market conditions in the computer industry;
o competition;
o sales or the possibility of sales of our Common Stock;
o our results of operations and financial condition; and
o general economic conditions.
Furthermore, the stock market has experienced significant price and volume
fluctuation unrelated to the operating performance of particular companies.
These market fluctuations may also adversely affect the market price of our
Common Stock. See "Shares Eligible for Future Sale; Registration Rights."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. Future sales of
shares of Common Stock by existing stockholders through the exercise of
outstanding registration rights or through the issuance of shares of Common
Stock upon exercise of options, warrants or otherwise could have an adverse
effect on the price of our Common Stock. As of January 31, 1999, we had
9,800,571 shares of Common Stock outstanding (excluding treasury shares).
Substantially all of these shares are eligible for sale without restriction or
under Rule 144, subject to the lock-up described below. In general, under
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Rule 144 as currently in effect, a person (or persons whose shares are
aggregated), including persons who may be deemed to be "affiliates" of the
Company as that term is defined under the Securities Act of 1933, is entitled
to sell within any three-month period a number of restricted shares
beneficially owned for at least one year that does not exceed the greater of:
o one percent of the then outstanding shares of Common Stock; or
o the average weekly trading volume in the Common Stock during the four
calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain requirements as to the manner
of sale, notice and the availability of current public information about the
Company. However, a person who is not an affiliate and has beneficially owned
such shares for at least two years is entitled to sell such shares without
regard to the volume or other requirements.
In addition to the 1,629,503 shares of Common Stock being registered
for resale in this offering, we have an outstanding registration statement on
Form S-3 relating to the resale of an aggregate of 2,367,082 shares of Common
Stock (substantially all of which are issuable upon exercise or conversion of
our convertible securities).
Certain of our officers, directors and stockholders (including those
stockholders whose shares of Common Stock are being registered for resale in
this offering) who hold, in the aggregate, approximately 4,500,000 shares of
Common Stock and approximately 2,500,000 vested options and warrants, entered
into lock-up agreements with the underwriters in our initial public offering.
Such officers, directors and stockholders agreed that until March 27, 1999,
without the prior written consent of Royce Investment Group, Inc., they would
not:
o sell or otherwise dispose of any shares of Common Stock (other than
shares of Common Stock acquired in the public market); or
o exercise registration rights.
However, such stockholders (other than our officers and directors) may sell or
otherwise dispose of shares of Common Stock in one or more private sales
without such consent if the acquirors (and any subsequent acquirors) of such
shares enter into a lock-up agreement with Royce restricting the
transferability of such shares for the remainder of period between March 26,
1997 and March 26, 1999. These stockholders have also executed a stockholders'
agreement. Certain of these stockholders have agreed that until March 27, 1999,
they would not sell or otherwise dispose of any shares of Common Stock or seek
the consent of Royce to sell or otherwise dispose of any shares of Common Stock
without the consent of Vertical and certain of our other stockholders. Certain
other stockholders have also agreed not to exercise any registration rights
until March 27, 1999 without the consent of Vertical. The agreement provides
that the observance of any term of the stockholders' agreement may be waived
only with the written consent of Vertical. The stockholders' agreement does
not contain any restrictions on the registration of shares of Common Stock
included in this offering.
Royce has released the selling stockholders from the restriction
relating to the registration for resale of the shares of Common Stock offered
in this offering. Royce has not released such selling stockholders from any
other restriction contained in the lock-up agreements, including the
restrictions on the ability of the selling stockholders to sell the shares
offered for resale in this offering and the registration for resale of shares
of Common Stock issuable upon exercise of warrants held by the selling
stockholders or any other stockholder. Royce may in its sole discretion waive
any restriction contained in the lock-up agreements.
The holders, including the selling stockholders, of an aggregate of
approximately 4,100,000 additional shares of Common Stock and warrants to
purchase Common Stock (excludes the 1,679,503 shares in this offering) have
demand and piggy-back registration rights with respect to their respective
securities. These holders have entered into the lock-up agreements with Royce
and Royce has not released these holders from such
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lock-up agreements. Sales of Common Stock or the possibility of such sales, in
the public market may adversely affect the market price of the securities
offered hereby.
EFFECT OF OUTSTANDING OPTIONS; WARRANTS AND CONVERTIBLE SECURITIES. We
also have outstanding:
o warrants to purchase an aggregate of approximately 2,800,000 shares
of Common Stock;
o Series B Convertible Preferred Stock which is convertible into
198,255 shares of Common Stock; and
o Series A Convertible Debentures which are convertible into
approximately 727,000 shares of Common Stock at the conversion price
as of February 1, 1999.
The actual number of shares of Common Stock that may be issued upon
conversion of the debentures and payments of interest on the debentures in the
form of shares of Common Stock will depend on the conversion price in effect
from time to time during the term of the debentures, the timing of any such
conversion and the decision by us to make any payments of interest in the form
of shares of Common Stock. The conversion price will vary from time to time
during the term of the debentures. Therefore, it is not possible to estimate
with any degree of certainty the total number of shares of Common Stock that
would actually be issued upon any conversions of the debentures, the total
number of shares of Common Stock, if available, that could be issued in payment
of interest, or the availability of shares of Common Stock for payments of
interest. The conversion price of the debentures could be substantially below
the market price of our Common Stock on any date of conversion. The maximum
number of shares of our Common Stock that we can issue upon conversion of the
debentures and payment of interest without stockholder approval is 1,939,419
shares.
We have also reserved for issuance:
o 500,000 shares of Common Stock in connection with our 1996 Stock
Option Plan, 100,000 of which have been granted; and
o 430,000 shares of Common Stock issuable upon exercise of options
granted outside of our 1996 Stock Option Plan.
The existence of these securities could have an adverse effect on the
market price of our Common Stock. If any of these securities are exercised, the
value of the Common Stock held by public investors will be diluted if the value
of such stock immediately prior to the exercise of such securities exceeds the
exercise price thereof, with the extent of such dilution depending upon such
excess. These securities afford the holders thereof the opportunity, at nominal
cost, to profit from a rise in the market price of the Common Stock. This may
adversely affect the terms upon which we could issue additional Common Stock
during the term thereof. Holders of warrants and options are also likely to
exercise them when, in all likelihood, we could obtain additional capital on
terms more favorable than those provided by the warrants and options. While
these securities are outstanding, our ability to obtain additional financing on
favorable terms may be adversely affected.
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USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares
of Common Stock (the "Shares") by the selling stockholders named in this
Prospectus (the "Selling Stockholders").
SELLING STOCKHOLDERS
The Shares are being registered to permit public secondary trading of
the Shares, and the Selling Stockholders may offer all or any portion of the
Shares for resale from time to time. See "Plan of Distribution."
The Company has filed with the Commission under the Securities Act a
Registration Statement on Form S-3, of which this Prospectus forms a part, with
respect to the resale of the Shares. The Company has agreed, among other
things, to bear certain expenses in connection with the registration and sale
of the Shares being offered by the Selling Stockholders. See "Plan of
Distribution."
In October 1996, the Company sold an aggregate of 1,780,303 shares of
the Company's Series A Convertible Preferred Stock and warrants to purchase
1,780,303 shares of Common Stock to the Selling Stockholders for an aggregate
purchase price of approximately $1.4 million. The Selling Stockholders received
registration rights in connection with the purchase of such securities from the
Company. The Shares are being registered for resale in this offering pursuant
to such registration rights. Royce has released the Selling Stockholders from
the restrictions contained in the lock-up agreements executed by the Selling
Stockholders in connection with the Company's initial public offering in March
1997 with respect to the registration for resale of the Shares. However, Royce
has not released the Selling Stockholders from any other restrictions contained
in the lock-up agreements including the restrictions on the ability of the
selling stockholders to sell the Shares and the registration for resale of
shares of Common Stock issuable upon exercise of warrants held by the Selling
Stockholders. See "Risk Factors -- Shares Eligible for Future Sale;
Registration Rights." Upon consummation of the Company's initial public
offering in March 1997 all of the outstanding shares of Series A Preferred
Stock were converted into shares of Common Stock. The Selling Stockholders are
principal stockholders of the Company. Mr. Agam, the Chairman and Chief
Executive Officer of the Company, is the Chairman of Vertical Financial
Holdings Establishment ("Vertical"), a Selling Stockholder in this offering.
The Company has been advised that pursuant to agreements with third party
investors in each of the other Selling Stockholders, Vertical owns equity
interests in each such other Selling Stockholder entitling it to varying
percentages of the profits resulting from the sale of the Shares of each such
other Selling Stockholder. In addition, pursuant to agreements with the other
Selling Stockholders, the Trustee of each of the other Selling Stockholders has
voting and dispositive power over the shares of Common Stock held by each such
other Selling Stockholder, although Vertical retains the right to appoint or
terminate the appointment of the Trustee.
Based on information provided by each Selling Stockholder, the
following table sets forth the names of each of the Selling Stockholders and
for each, the number of shares of Common Stock beneficially owned before the
commencement of the offering, the number of shares of Common Stock offered for
sale in this offering and the number of shares and percentage of Common Stock
owned after this offering:
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<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY
NUMBER OF SHARES OF OWNED AFTER THE OFFERING (1)
COMMON STOCK NUMBER OF SHARES OF -------------------------------
BENEFICIALLY OWNED COMMON STOCK BEING NUMBER PERCENT OF
SELLING SECURITY HOLDER PRIOR TO THE OFFERING OFFERED IN THE OFFERING OF SHARES OUTSTANDING
- ----------------------- --------------------- ----------------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Vertical Financial Holdings
Establishment 1,580,304 (2)(3) 890,152(7) 690,152(8) 6.0%
Behala Anstalt 592,804 (4) 296,402(7) 296,402(8) 2.6
Lupin Investments Services Ltd. 592,804 (5) 296,402(7) 296,402(8) 2.6
Henilia Financial Ltd. 443,894 (6) 146,547(7) 297,347(8) 2.6
</TABLE>
(1) Assuming the sale, subject to certain restrictions, of all Shares by
such Selling Stockholder. See "Risk Factors--Shares Eligible
For Future Sale; Registration Rights."
(2) Jacob Agam, the Chairman and Chief Executive Officer of the Company,
is the Chairman of the Board of Vertical. Pursuant to an agreement
between Orida Capital and Vertical, Orida has the right to receive a
portion of the profits from the sale of the shares held by Vertical.
Mr. Agam is the Chairman of Orida. Mr. Agam disclaims beneficial
ownership of the shares held by Vertical.
(3) Includes (i) 690,152 shares of Common Stock issuable upon exercise of
warrants beneficially owned by Vertical and exercisable within 60 days
and (ii) 71,212 shares of Common Stock which are held in escrow but
which Vertical retains the power to vote. See "Risk Factors -- Charges
to Earnings in the Event of Release of Escrow Shares." Excludes an
aggregate of 739,351 shares of Common Stock and 890,151 shares of
Common Stock issuable upon exercise of warrants held by Behala
Anstalt, Lupin Investments Services Ltd. and Henilia Financial Ltd.
(the "Vertical Assignees"). An aggregate of 739,351 shares of
outstanding Common Stock held by the Vertical Assignees are also
being registered for resale in this offering. The Company has been
advised that pursuant to agreements with third party investors in
each Vertical Assignee, Vertical owns equity interests in each
Vertical Assignee entitling it to varying percentages of the profits
resulting from the sale of the shares of Common Stock held by each
Vertical Assignee. In addition, pursuant to agreements with the
Vertical Assignees, the Trustee of each Vertical Assignee has voting
and dispositive power over the shares of Common Stock held by each
Vertical Assignee, although Vertical retains the right to appoint or
terminate the appointment of the Trustee.
(4) Includes (i) 296,402 shares of Common Stock issuable upon exercise of
warrants beneficially owned by Behala Anstalt and exercisable within
60 days and (ii) 23,712 shares of Common Stock which are held in
escrow but in respect of which Behala Anstalt retains the power to
vote. "Risk Factors -- Charges to Earnings in the Event of Release of
Escrow Shares." The Company has been advised that pursuant to an
agreement with third party investors in Behala Anstalt, Vertical owns
an equity interest in Behala Anstalt entitling it to a percentage of
the
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profits resulting from the sale of the shares of Common Stock held by
Behala Anstalt. In addition, pursuant to an agreement with Behala
Anstalt, the Trustee of Behala Anstalt has voting and dispositive
power over the shares of Common Stock held by Behala Anstalt, although
Vertical retains the right to appoint or terminate the appointment of
the Trustee.
(5) Includes (i) 296,402 shares of Common Stock issuable upon exercise of
warrants beneficially owned by Lupin Investments Services Ltd. and
exercisable within 60 days and (ii) 23,712 shares of Common Stock
which are held in escrow but in respect of which Lupin Investments
Services Ltd. retains the power to vote. "Risk Factors -- Charges to
Earnings in the Event of Release of Escrow Shares." The Company has
been advised that pursuant to an agreement with third party investors
in Lupin Investments Services Ltd., Vertical owns an equity interest
in Lupin Investments Services Ltd. entitling it to a percentage of the
profits resulting from the sale of the shares of Common Stock held by
Lupin Investments Services Ltd. In addition, pursuant to an agreement
with Lupin Investments Services Ltd., the Trustee of Lupin Investments
Services Ltd. has voting and dispositive power over the shares of
Common Stock held by Lupin Investments Services Ltd., although
Vertical retains the right to appoint or terminate the appointment of
the Trustee.
(6) Includes (i) 297,347 shares of Common Stock issuable upon exercise of
warrants beneficially owned by Henilia Financial Ltd. and exercisable
within 60 days and (ii) 23,788 shares of Common Stock which are held
in escrow but in respect of which Henilia Financial Ltd. retains the
power to vote. "Risk Factors -- Charges to Earnings in the Event of
Release of Escrow Shares." The Company has been advised that pursuant
to an agreement with third party investors in Henilia Financial Ltd.,
Vertical owns an equity interest in Henilia Financial Ltd. entitling
it to a percentage of the profits resulting from the sale of the
shares of Common Stock held by Henilia Financial Ltd. In addition,
pursuant to an agreement with Henilia Financial Ltd., the Trustee of
Henilia Financial Ltd. has voting and dispositive power over the
shares of Common Stock held by Henilia Financial Ltd., although
Vertical retains the right to appoint or terminate the appointment of
the Trustee.
(7) Certain of these shares of Common Stock are held in escrow. See
"Risk Factors--Charges to Earnings in the Event of Release of Escrow
Shares."
(8) Represents shares of Common Stock issuable upon exercise of warrants
beneficially owned by such Selling Stockholder and exercisable within
60 days.
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<PAGE>
PLAN OF DISTRIBUTION
The Company has been advised that the Selling Stockholders, their
pledgees, donees, transferees or other successors-in-interest, may from time to
time, sell all or a portion of the Shares, subject to certain restrictions set
forth under "Risk Factors--Shares Eligible For Future Sale; Registration
Rights," in privately negotiated transactions or otherwise, at fixed prices
that may be changed, at market prices prevailing at the time of sale, at prices
related to such market prices or at negotiated prices. The Shares may be sold
by the Selling Stockholders by one or more of the following methods, without
limitation: (a) block trades in which the broker or dealer so engaged will
attempt to sell the Shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction, (b) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus, (c) an exchange distribution in accordance with
the rules of the applicable exchange, (d) ordinary brokerage transactions and
transactions in which broker solicits purchasers, (e) privately negotiated
transactions, (f) short sales, (g) a combination of any such methods of sale
and (h) any other method permitted pursuant to applicable law. In addition to
being sold on the Nasdaq National Market, the Shares may also be sold by the
Selling Stockholders on the Freiverkehr in Frankfurt, Berlin Stuttgart and
Dusseldorf, Germany. The Selling Stockholders are not restricted as to the
price or prices at which they may sell their Shares. Sales of Shares by the
Selling Stockholders may depress the market price of the Company's Common Stock
since the number of Shares which may be sold by the Selling Stockholders is
relatively large compared to the historical average weekly trading of the
Company's Common Stock, and therefore, if the Selling Stockholders were to
sell, or attempt to sell, all of such Shares at once, the Company believes such
a transaction could adversely impact the market price for the Company's Common
Stock.
From time to time the Selling Stockholders may engage in short sales,
short sales against the box, puts and calls and other transactions in
securities of the Company or derivatives thereof, and can sell and deliver the
Shares in connection therewith or in settlement of securities loans. From time
to time the Selling Stockholders may pledge their Shares pursuant to the margin
provisions of its customer agreements with its brokers. Upon a default by the
Selling Stockholders, the broker may offer and sell the pledged Shares from
time to time.
In effecting sales, brokers and dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate in such
sales. Brokers or dealers may receive commissions or discounts from the Selling
Stockholders (or, if any such broker-dealer acts as agent for the purchaser of
such shares, from such purchaser) in amounts to be negotiated which are not
expected to exceed those customary in the types of transactions involved.
Broker-dealers may agree with the Selling Stockholders to sell a specified
number of such Shares at a stipulated price per share, and to the extent such
broker-dealer is unable to do so acting as agent for a Selling Stockholder, to
purchase as principal any unsold Shares at the price required to fulfill the
broker-dealer commitment to the Selling Stockholders. Broker-dealers who
acquire Shares as principal may thereafter resell such Shares from time to time
in transactions (which may involve block transactions and sales to and through
other broker-dealers, including transactions of the nature described above) in
the over-the counter market or otherwise at prices and on terms then prevailing
at the time of sale, at prices then related to the then-current market price or
in negotiated transactions and, in connection with such sales, may pay to or
receive from the purchasers of such Shares commissions as described above. The
Selling
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<PAGE>
Stockholders may also sell the Shares in accordance with Rule 144 under the
Securities Act, rather than pursuant to this Prospectus.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in sales of the Shares may be deemed
to be "underwriters" within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-dealers
or agents 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.
The Company is required to pay all fees and expenses incident to the
registration of the Shares, including fees and disbursements of counsel to the
Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act. Selling Stockholders may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the Shares against certain liabilities, including
liabilities arising under the Securities Act. The Company will not receive any
proceeds from the sale of Shares by the Selling Stockholders.
At the time a particular offer of Shares is made, to the extent
required, a supplement to this Prospectus will be distributed which will
identify and set forth the aggregate amount of Shares being offered and the
terms of the offering.
The Selling Stockholders are 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 the Shares by the Selling Stockholders.
In order to comply with certain states' securities laws, if
applicable, the Shares may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In certain states the Shares may not
be sold unless the Shares have been registered or qualified for sale in such
state, or unless an exemption from registration or qualification is available
and is obtained.
LEGAL MATTERS
The validity of the securities offered hereby have been passed upon
for the Company by Bachner, Tally, Polevoy & Misher LLP, New York, New York.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Company's Annual Report on Form 10-K, as of December 31, 1997 and 1996,
and for each of the three years ended December 31, 1997, 1996 and 1995 have
been incorporated herein in reliance on the report of Rothstein, Kass &
Company, P.C., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
-25-
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. THE COMPANY HAS NOT AUTHORIZED ANYONE TO PROVIDE PROSPECTIVE
INVESTORS WITH INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS.
THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY
SALE OF THESE SECURITIES.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
IAT MULTIMEDIA, INC.
1,629,503 SHARES OF COMMON STOCK
PROSPECTUS
FEBRUARY __, 1999
- -------------------------------------------------------------------------------
<PAGE>
PART II
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses payable by the Registrant in connection with
the issuance and distribution of the securities being registered are as
follows:
SEC Registration Fee $ 3,851
Accounting Fees and Expenses *
Legal Fees and Expenses *
Miscellaneous Expenses *
-------
Total $ *
- -------------
* To be filed by amendment.
Item 15. Indemnification of Directors and Officers.
The Certificate of Incorporation and By-Laws of the Company provide
that the Company shall indemnify any person to the full extent permitted by the
Delaware General Corporation Law.
Reference is hereby made to Section 145 of the Delaware General
Corporation Law relating to the indemnification of officers and directors which
Section is hereby incorporated herein by reference.
Item 16. Exhibits.
4.4 -- Warrant issued to Vertical Financial Holdings Establishment
(one in a series of warrants with identical terms)(1)
5.1 -- Opinion of Bachner, Tally, Polevoy & Misher LLP
10.3 -- Investor's Rights Agreement dated as of October 24, 1996 by
and between the Registrant and Vertical Financial Holdings Establishment (1)
23.1 -- Consent of Rothstein, Kass & Company, P.C. - Included on II-4
23.2 -- Consent of Bachner, Tally, Polevoy & Misher LLP -- Included in
Exhibit 5.1
24 -- Power of Attorney - Included on II-3
- ------------
* To be filed by amendment.
II-1
<PAGE>
- -----------
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (File No. 333- 18529) declared effective on March 26, 1997.
Item 17. Undertakings
Undertaking Required by Regulation S-K, Item 512(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 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
Securities Act of 1933, as amended (the "Act"), each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
Undertaking Required by Regulation S-K, Item 512(b).
The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
initial bona fide offering thereof.
Undertaking required by Regulation S-K, Item 512(h).
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or controlling persons
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on form S-3 and has duly caused this
Registration Statement or amendment thereto to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York on the 4th day
of February 1999.
IAT MULTIMEDIA, INC.
/s/ Jacob Agam
-----------------------
By: Jacob Agam
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below under the heading "Signature" constitutes and appoints Klaus
Grissemann and Jacob Agam or either of them, his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
or all amendments (including post-effective amendments) to this Registration
Statement filed under Rule 462(b), and to file the 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, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
for all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, each
acting alone, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement or amendment thereto has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
/s/ Jacob Agam Chairman of the Board and Chief February 4, 1999
- ----------------------- Executive Officer (principal executive officer)
Jacob Agam
/s/ Klaus Grissemann Chief Financial Officer and February 4, 1999
- ----------------------- Director (principal financial officer)
Klaus Grissemann
Director February __, 1999
- -----------------------
Robert Weiss
/s/ Viktor Vogt Director February 4, 1999
- -----------------------
Viktor Vogt
Director February __, 1999
- -----------------------
Volker Walther
/s/ Erich Weber Director February 4, 1999
- -----------------------
Erich Weber
</TABLE>
II-3
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of IAT Multimedia, Inc. and Subsidiaries on Form S-3 of our report
dated March 25, 1998, on our audits of the consolidated financial statements
and the financial statement schedule of IAT Multimedia, Inc. and Subsidiaries
as of December 31, 1997 and 1996, and for the years ended December 31, 1997,
1996, and 1995, which report is included in the Annual Report on Form 10-K. We
also consent to the reference to our Firm under the caption "Experts."
/s/ ROTHSTEIN, KASS & COMPANY, P.C.
Roseland, New Jersey
February 4, 1999
II-4
