As filed with the Securities and Exchange Commission on January 25, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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NEWCOM, INC.
(Exact name of Registrant as specified in its charter)
Delaware 95-4485355
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
31166 Via Colinas, Westlake Village, California 91362 (Address, including
zip code, and telephone number, including area code,
of Registrant's principal executive office)
Sultan W. Khan, Chief Executive Officer
NewCom, Inc.
31166 Via Colinas
Westlake Village, CA 91362
(818) 597-3200
(Name, Address, including zip code, and
telephone number, including area code, of agent for service)
Copy to:
Samuel S. Guzik, Esq.
Guzik & Associates
1800 Century Park East, Fifth Floor
Los Angeles, CA 90067
(310) 788-8600
Approximate date of proposed sale to the public: From time to time after the
effective date of the Registration Statement.
If the only securities registered on this form are being offered pursuant to
dividend or interest reinvestment plans, 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, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(c) 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. [ ]
<TABLE>
<CAPTION>
Calculation of Registration Fee
Proposed
Title of each class Proposed maximum
of securities to be Amount to be maximum offering aggregate offering Amount of
registered registered(2) price per share(1) price(1) registration fee
<S> <C> <C> <C> <C>
Common Stock,
$.001 par value 10,203,404 $1.875 $19,131,382 $5,643.76
</TABLE>
(1) Estimated for the purpose of calculating the registration fee pursuant
to Rule 457(c) on the basis of the high and low price of the Registrant's Common
Stock on January 22, 1999.
(2) Included in this amount are 4,337,533 shares previously issued by the
Registrant, 299,337 shares issuable upon exercise of outstanding Warrants, and
an additional 5,566,534 shares which the Registrant has agreed to register in
respect of: (i) an indeterminate number of shares which may be issued by the
Registrant in connection with outstanding repricing rights, and (ii) an
indeterminate number of shares (and related repricing rights) which may be
issued to certain investors as part of a future sale of $1,000,000 of the
Registrant's securities. In addition to the shares set forth in the table, the
amount to be registered includes an indeterminate number of shares issuable upon
conversion of or in respect of the repricing rights or exercise of or in respect
of the Warrants, as such number may be adjusted as a result of stock splits,
stock dividends and similar provisions in accordance with Rule 416.
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>
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS 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 THE SELLING STOCKHOLDERS
ARE NOT SOLICITING THE OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE SUCH
OFFER OR SALE IS NOT PERMITTED.
Subject to completion, dated January 25, 1999
PROSPECTUS
10,203,404 SHARES OF COMMON STOCK
NEWCOM, INC.
The stockholders of NewCom, Inc. listed below may offer and sell from time
to time shares of our common stock under this prospectus. These shares include:
- 3,000,000 shares of common stock offered by our principal stockholder,
Aura Systems, Inc;
- 1,337,953 shares of common stock sold by us to four stockholders in
private sales;
- 299,337 shares of common stock which four stockholders are entitled
to acquire from us upon exercise of warrants issued by us in
private sales;
- An indeterminate number of shares of our common stock which
may be issued by us to four stockholders pursuant to certain
"repricing rights" granted to these stockholders; and
- An indeterminate number of shares (and related repricing rights)
which may be acquired by certain stockholders between 65-95
days after the date of this prospectus in exchange for an additional
investment into NewCom of $1 million.
The exact number of shares of our common stock which may be acquired by
certain selling stockholders and resold under this prospectus will be determined
based upon a number of factors which are not presently known, including the
future market price of our common stock. The maximum number of shares of common
stock which may be resold under this prospectus is 10,203,404 shares.
Although we will be entitled to receive proceeds from the exercise of
warrants and certain rights by the selling stockholders, we will not receive any
part of the proceeds from sales of common stock by the selling stockholders.
Our common stock is traded on the Nasdaq Stock Market, Inc. National Market
under the trading symbol "NWCM". On January 20, 1999, the last reported sales
price of our common stock on the Nasdaq National Market was $1.97.
THE PURCHASE OF OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS," AT PAGE FOUR, FOR A DISCUSSION OF CERTAIN MATTERS THAT YOU SHOULD
CONSIDER BEFORE PURCHASING OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON
THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is __________ ____, 1999
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
U.S. Securities and Exchange Commission (the "SEC") utilizing a "shelf"
registration process. Under this shelf process, the selling stockholders may
sell up to 4,337,953 shares of our common stock which they presently own and an
indeterminate number of shares of our common stock, up to 566,534 shares of our
common stock, which they may acquire in the future from us. This prospectus
provides you with a general description of our common stock which the selling
stockholders may offer. When the selling stockholders sell our common stock, we
may provide, if necessary, a prospectus supplement that will contain specific
terms of that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with the additional information described
under the heading "Information Available To You."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed under the captions "Risk Factors" and "The
Company" and elsewhere in this prospectus or in the information incorporated by
reference constitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act") and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Some of the forward-looking statements can be identified by the use of
forward-looking words such as "believes," "expects," "may," "will," "should,"
"seeks," "approximately," "intends," "plans," "estimates," or "anticipates" or
the negative of those words or other comparable terminology. The discussion of
financial trends, strategy, plans or intentions may also include forward-looking
statements. Forward-looking statements involve risks and uncertainties that
could cause actual results to differ materially from those projected. These
include factors discussed in this prospectus, including information which we
have incorporated into this prospectus by reference.
INFORMATION AVAILABLE TO YOU
NewCom, Inc. ("NewCom", the "Company", "We" or "Us") files annual,
quarterly and special reports, proxy statements and other information with the
Securities and Exchange Commission ("SEC"). You can inspect and copy the
Registration Statement on Form S-3 of which this prospectus is a part, as well
as reports, proxy statements and other information filed by NewCom, at the
public reference facilities maintained by the SEC at Room 1024, 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. You can
obtain copies of such material from the Public Reference Room of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You can call
the SEC at 1-800-732-0330 for information regarding the operation of its Public
Reference Room. The SEC also maintains a World Wide Web site at
http:\\www.sec.gov that contains reports, proxy and information statements, and
other information regarding registrants (like NewCom) that file electronically.
This prospectus provides you with a general description of the common stock
being registered. This prospectus is part of a Registration Statement that we
have filed with the SEC. To see more detail, you should read the exhibits and
schedules filed with our Registration Statement.
The SEC allows this prospectus to "incorporate by reference" certain other
information that NewCom files with them, which means that we can disclose
important information to you by referring to those documents. The information
incorporated by reference is an important part of this prospectus, and
information that NewCom files later with the SEC will automatically update and
replace this information. We incorporate by reference the documents listed below
and any future filings made by NewCom with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934 until all of the securities
that we have registered have been sold.
(1) Our Annual Report on Form 10-K for the fiscal year February 28, 1998;
(2) Our Quarterly Reports on Form 10-Q for the quarters ended May 31, 1998
August 31, 1998, and November 30, 1998;
(3) Our Proxy Statement dated July 28, 1998; and
(4) [Our Proxy Statement dated January __, 1999.]
If you make a request for such information in writing or by telephone, we
will provide to you, at no cost, a copy of any or all of the information
incorporated by reference in the Registration Statement of which this prospectus
is a part. Requests should be addressed to us as follows:
NewCom, Inc.
31166 Via Colinas
Westlake Village, CA 91362
Attention: Chief Financial Officer
Telephone: 818-597-3200
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. The selling stockholders
will not make an offer of the shares of our common stock in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of those documents.
SUMMARY
THE COMPANY
NewCom designs, manufactures, markets and sells high performance computer
communication and multimedia products for the personal computer ("PC") market.
Our communication products include high speed external and internal data/fax and
voice modems, and WebPal, an Internet appliance enabling users to access the
worldwide web and perform Internet-specific tasks through their existing
television screens. Our multimedia product line includes a broad range of
subsystems, upgrade kits and Internet access kits that incorporate CD- ROM
drives, speakers, sound cards, modems, microphones and other telephony and
digital video disk drives ("DVD"), audio and video solutions. Our multimedia
products are targeted both to users that desire to convert their PC's into
multimedia systems and to users desiring to upgrade their current multimedia
systems with faster CD-ROM drives and DVD II, to higher quality sound and
increased functionality.
We do not maintain an internal research and development staff. Rather, we
strive to identify key emerging technologies in the PC communication and
multimedia industries and to innovatively combine these technologies in our
products. We also use manufacturing techniques that enable us to rapidly bring
high quality products to market at competitive prices.
NewCom sells its products through a broad network of national and regional
independent distributors and leading retail and mass merchant chains and
catalogues. To a lesser extent we also sell our products to original equipment
manufacturers and value added resellers ("OEMs/VARs"). Our distributor customers
include TechData, D&H, Gates Arrow, and Almo Dinorall Corporation. Our retail
and mass merchant customers include Circuit City Stores, Inc., Best Buy Company,
Inc., Fry's Electronics, Computer City, Staples and Office Max.
We were incorporated under the laws of Delaware in 1994 as a wholly owned
subsidiary of Aura Systems, Inc. ("Aura"). In September 1997, we completed an
initial public offering. In the offering 2,000,000 newly issued shares were sold
to the public by NewCom together with 300,000 shares of Aura's holdings. At the
conclusion of the offering Aura owned approximately 72.1% of NewCom. As a result
of sales by Aura of NewCom Common Stock subsequent to the offering, and
subsequent sales by NewCom of additional shares of Common Stock, Aura owned
approximately 60.7% of NewCom as of January 15, 1999.
Our executive offices are located at 31166 Via Colinas, Westlake Village,
California 91362 and our telephone number is (818) 597-3200.
NEWCOM is our registered trademark. "WebPal" is a NewCom trademark for
which an application is pending.
USE OF PROCEEDS
All net proceeds from the sale of the shares of our common stock will go to
the stockholders who offer and sell their shares. Accordingly, we will not
receive any of the proceeds from the sales of the shares of our Common Stock by
the selling stockholders.
RISK FACTORS
Should you choose to make an investment in our common stock, you must
understand that this investment involves a high degree of risk. You should not
purchase our common stock unless you can afford to lose your entire investment.
Before purchasing our common stock you should carefully consider the following
risk factors as well as the other information contained or incorporated by
reference in this prospectus. Some of the statements contained in this
prospectus and the documents incorporated by reference into this prospectus
contain projections of results of operations and financial condition or state
other "forward looking" information. You should read the cautionary statements
in this prospectus as applying to all related forward looking statements
wherever they appear in this prospectus. Our actual results may differ
significantly from our projections. The risks discussed below, as well as
others, could have a material adverse effect on our business, operating results
or financial condition.
POTENTIAL FLUCTUATIONS IN FUTURE OPERATING RESULTS
Our operating results may vary significantly from period to period as a
result of a number of factors, many of which are beyond our control. These
factors include:
~ the timing and volume of orders received during the period;
~ the impact of price competition on the Company's average selling
prices;
~ the availability and pricing of components for our products;
~ market acceptance of new product introductions by the Company and its
competitors;
~ our ability to timely collect outstanding accounts receivable;
~ changes in product or distribution channel mix;
~ the timing of expenditures in anticipation of future sales;
~ product returns or price protection charges from customers;
~ inventory levels and financial health of our customers; and
~ the overall state of the PC industry and economic conditions
generally.
The volume and timing of orders received during a quarter are difficult to
forecast. Customers generally order on an as-needed basis and, accordingly, we
have historically operated with a relatively small backlog. Also, as often
occurs in the PC industry, a disproportionate percentage of our net sales in any
quarter may be generated in the last month of the quarter. As a result, a
shortfall in sales in any quarter as compared to expectations may not be
identifiable until the end of the quarter. Despite these factors, we generally
must plan production, order components and undertake development, sales and
marketing activities and other commitments months in advance. Therefore, any
shortfall in revenues in a given quarter may impact the Company's operating
results due to an inability to adjust expenses or inventory during the quarter
to match the level of revenues for the quarter. Market factors described above
could result in excess inventory in one or more future quarters. This could
result in cash flow difficulties as well as expenses associated with inventory
writeoffs.
The Company's gross margins have been and will continue to be subject to
quarterly fluctuations. These fluctuations are due to the market factors
described above and changes in our mix of products sold and in the mix of
distribution channels. Our multimedia products typically have higher gross
margins than our communications products. Efforts to increase sales of
communication products as a percentage of total revenues in future periods will
result in a reduction in our overall gross margins. We are currently attempting
to increase sales to OEMs/VARs, which traditionally have had lower gross
margins. We are also attempting to increase sales to the retail/mass merchant
channel. Although sales to retailers and mass merchants typically have higher
gross margins than OEM/VAR, they usually require higher sales and marketing
expenses. In addition, the Company's new product introductions typically have
higher initial development, production and marketing expenses. This may further
negatively impact the Company's future operating results. Also, our industry is
characterized by intense competition and declining average selling prices. As a
result, the Company's margins and results of operations may decline in the
future from the levels experienced to date.
MANAGEMENT OF EXPANSION
Since March 1, 1996, we have experienced a significant expansion in our
overall level of business and operations, including product design, marketing,
technical support and sales and distribution. This expansion resulted in a need
for significant investment in infrastructure and systems. Although the growth of
our business has generated significant accounts receivable, much of our
available cash has been required to finance capital expenditures and operations.
Due to the increases in our overhead and operating expenses resulting from this
expansion, our operating results, and opportunities for future growth, may be
adversely affected if revenues do not grow to the extent anticipated by the
Company.
NewCom's accounts receivable have recently increased significantly due to
greater revenues and also due to its receivables being outstanding for a longer
period. This longer collection period resulted, in part, from the Company's
revenue growth increasing beyond the capacity of its credit and collections
personnel. In response, we have increased the size of our credit and collections
staff. Our inability to collect significant portions of accounts receivable on a
timely basis or to obtain adequate financing to meet cash requirements could
limit the Company's future growth.
Our growth has placed significant demands on our management and on our
financial and internal infrastructure. Our future operating results depend in
part on such factors as our ability to:
~ successfully implement operating, manufacturing and financial
procedures and infrastructure;
~ improve coordination among different operating functions;
~ strengthen management information systems and
telecommunications systems; and
~ hire additional personnel, particularly in its customer service,
accounts receivable, engineering and technical support
organizations.
We may not be able to successfully implement these measures. Our failure to do
so would have a material adverse effect upon our operating results.
FUTURE CAPITAL REQUIREMENTS; FUNDING BY AURA; UNCERTAINTY OF ADDITIONAL
FUNDING
We incurred a net loss of $5.1 million in our fiscal year which ended on
February 29, 1996. Although we achieved revenue growth and profitability on an
annual basis in the following fiscal years which ended in February 1997 and
February 1998, we reported a net loss of approximately $15.6 million and $13.2
million for the three and nine months ended November 30, 1998, respectively.
There is no assurance that revenue growth or profitability will resume.
NewCom operates in a capital-intensive industry. Since our formation, we
have financed our operations and capital requirements primarily from sales
revenues, loans received from Aura and a secured commercial line of credit. Aura
has indicated that it will not provide working capital on a basis consistent
with past practices. We have also experienced delays in collecting our accounts
receivable. In January 1999 we were notified by our principal commercial lender
that they will not continue to advance funds to us and will require us to pay
down the outstanding balance, which was approximately $10.7 million as of
January 15, 1999. Although this lender has expressed a willingness to resume
advances under the line of credit after a portion of the outstanding balance is
repaid and we have adequate receivables, future advances remain within the
discretion of this lender. We are now taking measures to reduce our overhead
until cash flow improves, including reductions in the number of personnel.
Additional funds will be required in order for us to maintain our current
level of operations. If adequate funds are not available, we may be required to
delay, scale back or eliminate product design, manufacturing and marketing
programs. There are no assurances that adequate funds will be available at the
times and in the amounts required, if at all. Our inability to obtain adequate
financing would have a material adverse effect on our business, financial
condition and results of operations. If additional funds are obtained by issuing
equity securities, there may be further dilution to stockholders.
RAPID TECHNOLOGICAL CHANGE; SHORT PRODUCT LIFE CYCLES
The market for our products is characterized by rapid technological change,
frequent new product introductions, evolving industry requirements and short
product life cycles. We believe that these trends will continue into the
foreseeable future. NewCom believes that its future success will depend in large
part upon its ability to enhance its existing products and to successfully bring
to market new products that meet customer requirements and gain market
acceptance. NewCom may not be successful in designing or marketing product
enhancements or new products.
Since we do not develop our own software or hardware technology for our
products, we must depend upon our ability to acquire on commercially reasonable
terms the proprietary technology of others. We must monitor industry trends and
make choices in selecting new technologies and features to incorporate into our
products. Each new product cycle presents new opportunities for current or
prospective competitors of the Company to gain market share. If we do not
successfully introduce new products within a given product cycle, our sales will
be adversely affected for that cycle and possibly subsequent cycles. This could
also impair our brand name and ability to command retail shelf space in future
periods. Moreover, because of the short product life cycles coupled with long
lead times for many components used in our products, we may not be able to
quickly reduce production or inventory levels in response to unexpected
shortfalls in sales. Conversely, we may not be able to increase production in
response to unexpected demand.
Sales of individual products and product lines are typically characterized
by substantial declines in sales, pricing and margins toward the end of the
respective product's life cycle, the precise timing of which may be difficult to
predict. As new products are planned and introduced, we attempt to monitor the
inventory of older products and to phase out their manufacture in a controlled
manner. Nevertheless, we could experience unexpected reductions in sales of
older generation products as customers anticipate new products. These reductions
could give rise to additional charges for obsolete or excess inventory, returns
of older generation products by distributors and mass merchant customers, or
substantial price protection charges. To the extent that we are unsuccessful in
managing product transitions, its business and operating results could be
materially adversely affected.
COMPONENT SHORTAGES; RELIANCE ON LIMITED SOURCE SUPPLIERS AND
THIRD-PARTY ASSEMBLERS
We produce our products using components or subassemblies purchased from
third-party manufacturers and suppliers. Certain of these components,
particularly modem chipsets and application specific integrated circuit ("ASIC")
chipsets which provide multimedia functionality, are available only from a
single source or limited sources. These components are generally in short supply
and frequently subject to allocation by semiconductor manufacturers. In the past
the Company experienced supply shortages of various components. NewCom has
increased its efforts to obtain required supplies of components, including
working closely with component manufacturers and vendors and qualifying
alternative components for inclusion in the Company's products. However,
component shortages are likely to continue and could become acute. Therefore, we
may be unable to obtain adequate supplies as and when needed. We may also be
unable to purchase these supplies as our historical cost levels.
We use contract assemblers, primarily located in the Peoples Republic of
China, Taiwan and Mexico, to assemble our products. The use of foreign
assemblers results in greater political, legal, economic and other uncertainties
than those located in the United States. In addition, we typically use only one
contract assembler for a given design. Products approved for sale in certain
foreign countries require the use of a manufacturing facility that has been
approved by the applicable foreign regulatory authority, which limits the number
of facilities available to assemble products for those countries. The failure of
a contract assembler to provide acceptable quality and timely service, or an
interruption of supplies from an assembler as a result of a fire, natural
calamity, strike, political unrest, increased import/export restrictions or
other significant events, could materially and adversely affect our results of
operations.
COMPETITION
The markets for our products are highly competitive. We compete directly
against a large number of suppliers of communication products and multimedia
add-in subsystems, and indirectly against OEMs to the extent they manufacture
their own products and add-in subsystems. Such competitors may develop superior
products or products of similar quality for sale at the same or lower prices.
Other competitors may have better access than NewCom to emerging technologies
for use in their products, either through their use of in-house research and
development personnel or through their relationships with third-party
semiconductor manufacturers.
Many of our current and potential competitors have significantly greater
market presence, name recognition and financial and technical resources.
Although we believe that our semiconductor vendor flexibility enables us to
select from among the most advanced components available, the captive
semiconductor supplies of certain competitors can provide to them greater
control over component design, availability and cost. We believe that certain of
our current and potential competitors compete in their markets largely on the
basis of price. This may result in significant price competition or lower
margins for our products.
Substantially all of our sales have consisted of sales of PC communication
and multimedia products. A decline in demand or average selling prices for these
products, whether as a result of new product introductions or price competition
from competitors, technological change, incorporation of the products'
functionality onto PC motherboards or otherwise, would have a material adverse
effect on our sales and operating results. In addition, the PC communication and
multimedia industries have been marked by consolidations in recent periods. A
number of firms have suffered significant operating losses and, in certain
cases, cessation of business. Given NewCom's concentration in these markets,
there can be no assurance that the volatility and competition pressure of the
market will not have a material adverse effect on our operations in the future.
DISTRIBUTION RISKS; DIVERSIFICATION OF SALES CHANNELS
We sell our products primarily to independent regional and national
distributors and retailers/mass merchants. and, to a significantly lesser
extent, to OEMs/VARs. The Company's success is dependent on the continued
viability and financial stability of its customer base. The PC distribution and
retail/mass merchant industries have been historically characterized by rapid
change. This has periodically subjected the PC distribution and retail/mass
merchant industries to financial difficulties and consolidation. The loss of, or
reduction in sales to, key customers could have a material adverse effect on our
operating results.
Our independent distributors are not contractually committed to future
purchases of our products, are subject to only limited control by us, and often
carry competitors' products. Therefore, our distributors could discontinue
carrying the Company's products at any time.
The retail/mass merchant channel is substantially different from the
distributor and OEM/VAR channels. Due to competition for limited shelf space,
retailers are in a strong position to negotiate favorable terms of sale,
including price discounts and product return policies. We may be unable to
maintain or increase sales to retailers/mass merchants on favorable terms, if at
all.
We are currently expanding sales and marketing efforts in an attempt to
increase the volume of sales to OEMs. OEMs generally have significantly
different requirements from retailers/mass merchants and distributors, and often
have more stringent quality standards. OEMs generally also require special
distribution arrangements and product pricing. We may not be successful in our
efforts to increase sales to OEMs. The inability to successfully penetrate the
OEM channel could have a material adverse effect on our future operating
results.
PRODUCT RETURN RISKS
We are exposed to the risk of product returns from our retailer/mass
merchant and distributor customers as a result of several factors, including:
~ returns from their customers;
~ contractual stock rotation privileges;
~ returns of defective products or product components; and
~ returns of unsold product from customers with whom we severed our
relationship.
Overstocking by our customers could lead to higher than normal returns,
which could have a material adverse effect on our results of our operations. We
also have a policy of offering price protection to our customers for some or all
of their inventory. Under this policy when the Company reduces its prices for a
product, the customer receives a credit for the difference between the original
purchase price of the product and our reduced price for the product. As a result
of this policy, significant reductions in prices have had, and may in the future
have, a material adverse effect on our results of operations.
DEPENDENCE ON FUTURE GROWTH OF INTERNET AND INTERNET INFRASTRUCTURE
The growth of the markets for PC communication and multimedia products has
been driven in part by the rapid technological change in those markets and
increased use of the Internet. Such rapid technological change may not continue
and the telecommunications infrastructure may not be developed to support the
high-volume adoption of these technologies.
Our future success also depends, in part, upon the continued growth of the
Internet. Such growth is a recent phenomenon and the current rate of growth may
not be sustained in future periods. Factors that could negatively influence the
growth of the Internet in the future include:
~ the availability of the Internet infrastructure to support its
growth;
~ delays in the development or adoption of new standards and
protocols required to handle
increased levels of Internet activity; and
~ increased governmental regulation.
Any of these factors could materially adversely affect the market for PC
communication and multimedia products and our results of operations.
RELIANCE ON KEY EMPLOYEES
Our success will depend in large part on the continued services of our
President and Director, James M. Curran, Chief Executive Officer and Director,
Sultan W. Khan, and other key management employees. We do not maintain life
insurance on the lives of any of these individuals. The loss of one or more key
management employees or the failure to attract and retain additional personnel
could have a material adverse effect on our business.
PROPRIETARY RIGHTS
We do not employ an internal research and development staff. Virtually all
of the software and hardware technology used in our PC communication and
multimedia products is licensed from third-party manufacturers and suppliers. We
establish and protect our proprietary rights in and to our product design,
manufacturing, testing, marketing and customer support methods primarily through
a combination of trade secret and copyright protections. These measures may not
be sufficient to deter or prevent unauthorized use of our trade secrets,
proprietary information or technology. In addition, the laws of certain foreign
countries may not protect our proprietary rights to the same extent as do the
laws of the United States.
DILUTION
Included in the shares of common stock which may be resold under this
prospectus are an indeterminate number of shares issuable under "repricing
rights" issued to certain investors in equity financings conducted in November
and December of 1998. Under these repricing rights the investor may be entitled
to receive additional shares of our common stock at no additional consideration.
The number of shares which an investor would receive under these repricing
rights will increase as the company's common stock price declines. For example,
if all of the repricing rights were exercised as of the date of this prospectus,
we would issue an additional _________ shares of our common stock upon their
exercise. Sales of common stock by investors under this prospectus could have
the effect of further depressing the price of our common stock. If a further
decline in our stock price were to occur, additional shares would be issued by
us as and when the repricing rights were exercised. For further information
regarding the repricing rights, see "Recent Material Developments" located
elsewhere in this prospectus.
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
All of the shares of Common Stock of the Company covered by this Prospectus
are being sold for the account of the selling stockholders named in the table
below and their pledgees, donees, transferees and other successors in interest
(the "Selling Stockholders"). These shares of Common Stock include:
- 3,000,000 shares of Common Stock offered by the Company's principal
stockholder, Aura Systems, Inc;
- 466,665 shares of Common Stock and 58,000 shares of Common Stock
issuable upon exercise of Warrants, issued in a private placement to
single investors in November 1998 (the "November 1998 Placement");
- 871,288 shares of Common Stock and 241,337 shares of Common Stock
issuable upon exercise of Warrants, issued in a private placement to a
group of three investors in December 1998 (the "December 1998
Placement");
- An indeterminate number of shares of Common Stock which may be
issuable pursuant to "repricing rights" granted to investors in the
November 1998 Placement and the December 1998 Placement; and
- An indeterminate number of shares (including related repricing rights)
which may be acquired by the investors in the December 1998 Placement
between 65-95 days after the date of this Prospectus in exchange for
an additional investment of $1 million.
For additional information regarding the terms of the securities issued or
issuable in the November 1998 Placement and December 1998 Placement, see the
section in this Prospectus entitled "Recent Material Events."
The shares being offered by the Selling Stockholders or their respective
pledgees, donees, transferees or other successors in interest, may be sold in
one or more transactions (which may involve block transactions) on the Nasdaq
National Market or on such other market on which the Common Stock may from time
to time be trading, in privately negotiated transactions, through the writing of
options on the shares, short sales or any combination thereof. The sale price to
the public may be the market price prevailing at the time of sale, a price
related to such prevailing market price, a negotiated price, or such other price
as the Selling Stockholders determine from time to time. The shares may also be
sold pursuant to Section 4(1) of the Securities Act or Rule 144 thereunder
rather than pursuant to this Prospectus.
The Selling Stockholders or their respective pledgees, donees, transferees
or other successors in interest, may also sell the shares directly to market
makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Brokers acting as agents for the Selling
Stockholders will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the shares will
do so for their own account and at their own risk. It is possible that a Selling
Stockholder will attempt to sell shares of Common Stock in block transactions to
market makers or other purchasers at a price per share which may be below the
then market price. There can be no assurance that all or any of the shares
offered hereby will be issued to, or sold by, the Selling Stockholders. The
Selling Stockholders and any brokers, dealers or agents, upon effecting the sale
of any of the shares offered hereby, may be deemed "underwriters" as that term
is defined under the Securities Act or the Exchange Act, or the rules and
regulations thereunder.
The Selling Stockholders and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of the Selling Stockholders and any
other such person. The foregoing may affect the marketability of the shares.
The Company has agreed to indemnify the Selling Stockholders, or their
transferees or assignees, against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the Selling Stockholders
or their respective pledgees, donees, transferees or other successors in
interest, may be required to make in respect thereof.
Listed below are the names of each selling stockholder (the "Selling
Stockholders"), the total number of shares beneficially owned and the number of
shares to be sold in this offering by each Selling Stockholder as of January 15,
1999, and the percentage of Common Stock owned by each Selling Stockholder after
this offering:
<TABLE> <CAPTION>
Number of
Shares of Shares of
Common Stock to Common Stock
Shares of be Offered for Owned
Common Stock Selling After
Owned Stockholder's Completion of
Prior to Offering* Account* Offering(1)
Name Number Number Percent
<S> <C> <C> <C> <C>
Aura Systems, Inc. 6,882,896 3,000,000 3,382,896 29.1%
Excalibur Limited Partnership(2) 915,867(3) 1,607,916(5)(7) -- --
GUNDYCO in trust for
RRSP 550-98868-19 196,758(3) 813,334(5)(7) -- --
P.R.I.F., L.P.(2) 915,867(3) 2,390,829(5)(7) -- --
Dominion Capital Fund 224,856(4) 1,024,854(6) -- --
Sovereign Partners, LP 224,856(4) 1,024,854(6) -- --
Canadian American Partners Ltd. 74,953(4) 341,617(6) -- --
- ----------------------------------
*Assumes the exercise of all Warrants.
</TABLE>
(1) Assumes the sale of all shares offered pursuant to this Prospectus other
than an indeterminate number of shares issuable pursuant to the exercise of
repricing rights.
(2) Excalibur Limited Partnership ("Excalibur") and P.R.I.F., L.P. ("P.R.I.F.")
are members of a group which share the power to dispose, but not the power
to vote, the 374,765 shares owned by Excalibur and the 541,102 shares owned
by P.R.I.F. Accordingly, each of Excalibur and P.R.I.F. may be deemed to
beneficially own such shares acquired by the other Selling Stockholders in
the December 1998 Placement.
(3) The number of shares set forth in the table represents the number of shares
of Common Stock acquired in the December 1998 Placement and the number of
shares issuable upon exercise of Warrants acquired in the December 1998
Placement. This number does not include shares of Common Stock which the
Selling Stockholder may acquire under repricing rights relating to these
shares or shares of Common Stock and related repricing rights which may be
acquired after the date of this Prospectus at the "Second Closing." See
"Recent Material Events - The December 1998 Placement."
(4) The number of shares set forth in the table represents the number of shares
of Common Stock acquired in the November 1998 Placement and the number of
shares issuable upon exercise of Warrants acquired in the November 1998
Placement. This number does not include shares of Common Stock which the
Selling Stockholder may acquire under repricing rights relating to these
shares. See "Recent Material Events - The November 1998 Placement."
(5) The number of shares set forth in the table represents: (i) the number
of shares of Common Stock acquired in the December 1998 Placement; (ii) the
number of shares issuable upon exercise of Warrants acquired in the December
1998 Placement; and (iii) the number of shares of Common Stock which the Company
agreed to register in the Registration Statement to which this Prospectus
relates in respect of repricing rights relating to these shares or shares of
Common Stock and related repricing rights which may be acquired after the date
of this Prospectus at the "Second Closing." See "Recent Material Events - The
December 1998 Placement." The actual number of shares of Common Stock issuable
at the Second Closing of the December 1998 Placement or upon exercise of
repricing rights is indeterminate, is subject to adjustment and could be
materially more or less than the number of shares agreed to be registered in
such Registration Statement, depending on factors which cannot be predicted by
the Company at this time. The actual number of shares of Common Stock offered
hereby, and included in the Registration Statement of which this Prospectus is a
part, includes such additional number of shares of Common Stock as may be issued
or issuable upon exercise of repricing rights by reason of any stock split,
stock dividend or similar transaction involving the Common Stock in accordance
with Rule 416 under the Securities Act.
(6) The number of shares set forth in the table represents: (i) the number
of shares of Common Stock acquired in the November 1998 Placement; (ii) the
number of shares issuable upon exercise of Warrants acquired in the November
1998 Placement; and (iii) the number of shares of Common Stock which the Company
agreed to register in the Registration Statement to which this Prospectus
relates in respect of repricing rights relating to these shares or shares of
Common Stock. The actual number of shares of Common Stock issuable upon exercise
of repricing rights is indeterminate, is subject to adjustment and could be
materially more or less than the number agreed to be registered in such
Registration Statement, depending on factors which cannot be predicted by the
Company at this time. See "Recent Material Events - The November 1998
Placement." The actual number of shares of Common Stock offered hereby, and
included in such Registration Statement, includes such additional number of
shares of Common Stock as may be issued or issuable upon exercise of repricing
rights by reason of any stock split, stock dividend or similar transaction
involving the Common Stock in accordance with Rule 416 under the Securities Act.
(7) Pursuant to the terms of the agreements with these three investors, the
repricing rights and Warrants are 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 unexercised
repricing rights or Warrants) would not exceed 9.9% of the then outstanding
Common Stock as determined in accordance with Section 13(d) of the Exchange
Act. Accordingly, the number of shares of Common Stock set forth in the
table for each of these Selling Stockholders may exceed the number of
shares of Common Stock that these Selling Stockholders could own
beneficially at any given time through their ownership of shares, repricing
rights and Warrants. In that regard, beneficial ownership of these Selling
Stockholders set forth in the table is not determined in accordance with
Rule 13d-3 under the Exchange Act.
Prior to NewCom's initial public offering in September 1997 NewCom was a
wholly owned subsidiary of Aura. Certain officers and directors of Aura are also
officers and directors of NewCom. No other Selling Stockholders have held any
positions or office or had any other material relationship with the Company or
any of its affiliates within the past three years.
RECENT MATERIAL EVENTS
In November 1998 and December 1998 the Company completed equity and debt
financings. Following is a description of certain terms of these financings.
The December 1998 Placement
On December 1, 1998 (the "Initial Closing Date"), the Company consummated a
private placement of its Common Stock, Warrants and Repricing Rights pursuant to
Regulation D of the Securities Act of 1933 to three private investors. On the
Initial Closing Date the Company received gross proceeds of $3 million in
exchange for the issuance of 871,288 shares of its Common Stock, Warrants
exercisable for five years for up to 166,337 shares of Common Stock at an
exercise price of $4.545, and 792,088 Repricing Rights.
Under the terms of this financing the parties are committed to fund an
additional $1 million in exchange for Common Stock and Repricing Rights between
65-95 days after a Registration Statement covering the resale of the securities
issued in connection with the initial $3 million financing has been declared
effective by the Securities and Exchange Commission ("SEC"), subject to the
satisfaction of certain conditions (the "Second Closing"). These conditions
include the requirement that the average market price of NewCom's Common Stock
(defined as the two lowest closing bid prices during the 20 trading days
immediately preceding the Second Closing date) be at least $4.00 at the time of
the Second Closing.
At the Second Closing the investors are entitled to receive the number of
shares of Common Stock equal to 110% of the amount determined by dividing $1
million by the market value of the Common Stock at the time of the Second
Closing (the "Second Closing Date Price," which is equal to the average closing
bid prices for the five consecutive trading days ending on the day immediately
preceding the Second Closing date)(the "Second Closing Shares"). The investors
are also entitled to receive Repricing Rights at the Second Closing equal to
90.91% of the number of Second Closing Shares issued.
On December 28, 1998, the same investors consummated an additional
financing with NewCom and Aura whereby they advanced an aggregate of $1.0
million to NewCom pursuant to certain Notes secured by a junior lien on NewCom's
inventory and accounts receivable and issued an aggregate of 75,000 Warrants to
purchase NewCom Common Stock. The Notes bear interest at the rate of 10% and are
due and payable on the earlier of January 31, 1999, or the date on which NewCom
increases its existing line of credit. The 75,000 Warrants have a term of five
years and are initially exercisable for 75,000 shares of Common Stock at an
exercise price of $3.75. The exercise price is automatically adjusted six months
following their issuance to the lower of $3.75 or the market price of NewCom
Common Stock at such time, in accordance with a specified formula. References in
this Prospectus to the December 1998 Placement include the financing consummated
on December 1, 1998 and the additional financing consummated on December 28,
1998.
Repricing Rights
The Repricing Rights entitle the holder to purchase that number of shares
of Common Stock ("Repricing Shares") determined by multiplying the number of
Repricing Rights by a fraction, the numerator of which is the Repricing Price
minus the Average Market Price (as defined below), and the denominator of which
is the Average Market Price (defined as the two lowest closing bid prices during
the 20 trading days immediately preceding the exercise date of the Repricing
Rights).
The "Repricing Price" for the 792,088 Repricing Rights received on the
Initial Closing Date is $4.32, being 114% of the Initial Closing Date Price of
$3.79 (computed based upon the average closing bid prices for the five
consecutive trading days ending on the day immediately preceding the Initial
Closing Date) if the Repricing Rights are exercised within 135 days of the
Initial Closing Date; $4.40, being 116% of the Initial Closing Date Price, if
the Repricing Rights are exercised between the 136th and 180th day of the
Initial Closing Date; and an additional 2% during each 45 day period following
180 days from the Initial Closing Date.
The "Repricing Price" for the Repricing Rights issuable at the Second
Closing is 114% of the Second Closing Date Price if the Repricing Rights are
exercised within 45 days of the Second Closing Date; 116% if the Repricing
Rights are exercised between the 46th and 90th day of the Second Closing Date;
and an additional 2% during each 45 day period following 180 days from the
Second Closing Date.
The Repricing Price is increased by 7.5% if the Common Stock is listed for
trading on the Nasdaq SmallCap Market, and 15% if the Common Stock is not listed
on a national stock exchange or the Nasdaq Stock Market or upon the occurrence
of a "Repurchase Event" as described below.
The investors also have the right to elect to receive shares of Aura Common
Stock ("Aura Repricing Shares") upon exercise of the Repricing Rights in lieu of
NewCom Common Stock, based upon the Average Market Price of Aura Common Stock at
the time of exercise of the Repricing Rights.
Restrictions On Exercise of Repricing Rights
During each consecutive 30 day period during which any Repricing Rights
first become exercisable until June 29, 1999, the investor may not exercise more
than 20% of the then issued Repricing Rights. Any unutilized Repricing Rights in
a 30 day period may be carried forward to subsequent periods. In no event may
Repricing Rights be exercisable if such exercise would result in the investor
and its affiliates beneficially owning more than 9.9% of the Company's
outstanding Common Stock.
Termination of Repricing Rights
Subject to certain terms and conditions, so long as each of the Company and
Aura Systems, Inc. is in compliance in all material respects with the terms of
the financing documents and a Registration Statement covering the Common Stock
held by the investors is in effect, 20% of the Repricing Rights shall terminate
on the first trading date in a calendar month if in the preceding month the
average market price during the preceding month is greater than $4.73 and the
average daily trading volume in such preceding month is greater than the average
daily trading volume for the 30 days prior to December 1, 1998.
Repurchase of Repricing Rights
The Company is entitled to repurchase exercised Repricing Rights within
seven trading days of the date of exercise of Repricing Rights by paying to the
holder an amount in cash equal to the closing sale price of the Common Stock on
the date of exercise multiplied by the number of Repricing Shares otherwise
required to be issued.
Repurchase Right of Investor
Upon the occurrence of a "Repurchase Event" described below, each investor
has been granted the right to require the Company to repurchase the Common Stock
and Repricing Rights acquired from the Company at the per share price equal to
the average of the closing sale prices of the Common Stock for the five trading
days ending on the trading day preceding the date of repurchase. In addition, if
the Company fails to obtain stockholder approval for this financing on or before
January 29, 1999, the investors are entitled to require the Company to
repurchase the Common Stock, Repricing Rights and Warrants for the amount equal
to the number of shares of Common Stock received by the investor at the Initial
Closing multiplied by $4.17, being 110% of the Initial Closing Date Price.
For purposes of exercising the investor's repurchase right, a Repurchase
Event includes the following events: no closing bid prices are reported for the
Common Stock on a national securities exchange or the Nasdaq Stock Market for
five consecutive days; the Common Stock ceases to be listed for trading on a
national securities exchange or the Nasdaq Stock Market; a Registration
Statement covering the Common Stock issued or issuable to the investors is not
filed with the SEC by January 29, 1999, or the Registration Statement is not
declared effective by the SEC by March 31, 1999; the investor is unable to sell
shares under the Registration Statement for 30 or more days after the
Registration Statement becomes\effective; the Company fails to issue Repricing
Shares as and when required; the Company fails to remove restrictive legends
from share certificates for the Common Stock as and when required; the Company
or Aura defaults under material obligations under the placement documents and
such default remains uncured for a period of 15 days after an investor provides
notice of the default to the Company; NewCom merges with or is acquired by
another company whose common stock is not listed for trading on a national
securities exchange or The Nasdaq Stock Market; or the Company amends its
certificate of incorporation or bylaws in a manner which materially and
adversely affects the rights of the investors.
Restrictions on Issuance of Additional Securities
The financing documents contain certain restrictions on the Company's
ability to issue additional securities. Specifically, the Company may not issue
any additional securities which would require stockholder approval under Nasdaq
rules without either obtaining a waiver from Nasdaq or obtaining stockholder
approval if such issuance would be deemed by Nasdaq to be part of the December
1998 Placement. In addition, until June 26, 1999, subject to certain exceptions,
the Company is prohibited from issuing its equity securities without the consent
of the investors. The investors have also been granted a right of first refusal
for any financings similar to the December 1998 Placement during the period from
the Second Closing Date to December 1, 1999, and for any other proposed
financings involving the sale of Common Stock at a discount during the period
between June 26, 1999 and December 1, 1999.
Restrictions on Transfer of Purchased Securities
The securities issued or proposed to be issued in the December 1998
Placement are being issued under exemptions from registration afforded under
Regulation D of the Securities Act and Section 4(2). Therefore, these securities
cannot be transferred unless the resale of these securities is registered under
the Securities Act or an exemption from registration is available. The Company
has filed a Registration Statement to which this Prospectus relates in order to
register the Common Stock acquired by the investors in the December 1998
Placement, including Repricing Shares and shares issuable upon exercise of the
Warrants, and to allow their resale under this Prospectus. Aura has also agreed
to use its best efforts to register Aura Common Stock issuable upon exercise of
the Repricing Rights.
The November 1998 Placement
In November 1998, the Company completed a private placement of its Common
Stock, Warrants and repricing rights pursuant to Regulation D of the Securities
Act of 1933 to private investors. Under the terms of the placement the Company
received gross proceeds of $1.75 million in exchange for the issuance of 466,665
shares of its Common Stock ("November Placement Shares"), Warrants exercisable
for up to 58,000 shares of Common Stock at an exercise price of $4.87, and
repricing rights (the "November Repricing Rights") for the November Placement
Shares.
Repricing Rights
The November Repricing Rights entitle the holder to purchase that number of
shares of Common Stock ("November Repricing Shares") determined by multiplying
the number of November Repricing Rights during a repricing period by a fraction,
the numerator of which is the November Repricing Price (as determined below)
minus the average market price (defined as the average of the 20 lowest bid
prices in the 45 day period preceding the repricing date), and the denominator
of which is the average market price. 50% of the November Repricing Rights are
automatically exercised on the 45th and 90th days following the effective date
of a Registration Statement covering the Common Stock issued or issuable in
connection with the November 1998 Placement. If no shares are issuable upon the
exercise of the November Repricing Rights, the November Repricing Rights
terminate.
The "November Repricing Price" for the November Repricing Rights is $4.275
(114% of the initial per share purchase price) if the November Repricing Rights
are exercised on the 45th day following the effectiveness of the Registration
Statement; $4.35 (116% of the initial per share per share purchase price) if the
November Repricing Rights are exercised on 90th day following the effective date
of the Registration Statement.
Right of Redemption by NewCom
The Company is entitled to repurchase the November Placement Shares and the
Warrants for a purchase price equal to the amount of the original purchase price
of the securities plus 1.67% per month for each month following the closing of
the November 1998 Placement. The Company is also entitled to repurchase the
November Repricing Rights for the market value of the November Repricing Rights.
Restrictions on Transfer of Purchased Securities
The securities issued or proposed to be issued in the November 1998
Placement are being issued under exemptions from registration afforded under
Regulation D of the Securities Act and Section 4(2). Therefore, these securities
cannot be transferred unless the resale of these securities is registered under
the Securities Act or an exemption from registration is available. The Company
has filed a Registration Statement to which this Prospectus relates in order to
register the Common Stock acquired by the investors in the November 1998
Placement, including Repricing Shares and shares issuable upon exercise of the
Warrants, and to allow their resale under this Prospectus.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of Common
Stock offered hereby will be passed upon for the Company by Guzik & Associates,
Los Angeles, California.
EXPERTS
The consolidated financial statements of the Company and subsidiaries for
the years ended February 28, 1998, February 28, 1997 and February 29, 1996,
incorporated by reference in this Prospectus and Registration Statement, have
been audited by Pannell Kerr Forster, independent auditors. Such financial
statements and schedules have been so incorporated in reliance upon such report
given the authority of such firm as experts in accounting and auditing.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the expenses payable by the Registrant in
connection with the sale and distribution of the securities being registered
hereby. All amounts are estimated except the Securities and Exchange Commission
registration fee.
SEC registration fee . . . . . . . . . . . . . . . . . $6,724.35
Blue Sky fees and expenses . . . . . . . . . . . . . . . 1,000.00
Accounting fees and expenses . . . . . . . . . . . . . . 1,000.00
Legal fees and expenses . . . . . . . . . . . . . . . . 7,500.00
Printing and engraving expenses . . . . . . . . . . . 1,000.00
Registrar and Transfer Agent's fees . . . . . . . . . . . 500.00
Miscellaneous fees and expenses . . . . . . . . . . . . . 500.00
Total . . . . . . . . . . . . . . . . . . . . . . $18,224.35
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law provides for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). The Registrant's Restated
Certificate of Incorporation and the Registrant's Bylaws provide for
indemnification of the Registrant's directors, officers, employees and other
agents to the extent and under the circumstances permitted by the Delaware
General Corporation Law. The Registrant has also entered into agreements with
its directors to provide indemnity to such persons to the maximum extent
permitted under applicable laws.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits:
(1) 4.1 Amended and Restated Certificate of Incorporation of Registrant.
(1) 4.2 Bylaws of Registrant.
(2) 4.3 Form of Subscription Agreement dated as of November 30, 1998, by and
between the Registrant and the Buyers.
(2) 4.4 Form of Warrant issued on December 1, 1998.
(2) 4.5 Parent Agreement dated as of November 30, 1998, by and among the
Registrant, Aura Systems, Inc. and the Original Holders.
(2) 4.6 Note Purchase Agreement dated as of November 30, 1998, by and between
the Registrant and the Buyers.
(2) 4.7 Form of Warrant issued on December 28, 1998.
(2) 4.8 Amendment Agreement dated as of December 28, 1998, by and among
the Registrant, Aura Systems, Inc. and the Original Holders.
5.1 Opinion of Guzik & Associates.
(3) 23.1 Consent of Pannell Kerr Forster, certified public accountants.
(4) 23.2 Consent of Guzik & Associates.
24.1 Power of Attorney (included in signature page)
- ---------------------------
(1) Incorporated by reference to the Exhibits to the Registration Statement on
Form S-1 (File No. 333-31431).
(2) Incorporated by reference to the Exhibits to the Registrant's Form 10-Q for
the period ended November 30, 1998.
(3) To be filed by amendment to this Registration Statement.
(4) Included in Exhibit 5.1.
(b) Financial Statement Schedules
None.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section do
not apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Westlake, State of
California, on the 21st day of January, 1999.
NEWCOM, INC.
By /s/ Sultan W. Khan
Sultan W. Khan,
Chief Executive Officer
KNOW BY ALL MEN THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Steven C. Veen and Sultan W. Khan or either of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and his name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and ratifying
and confirming all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue thereof.
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.
/s/ Sultan W. Khan Chief Executive Officer January 21, 1999
Sultan W. Khan and Director
(Chief Executive Officer)
/s/ Asif M. Khan Executive January 21, 1999
Asif M. Khan Vice President, Director
/s/ Steven C. Veen Chief Financial Officer January 21, 1999
Steven C. Veen (Principal Financial Officer
and Principal Accounting Officer).
Director
/s/ Michael I. Froch Director January 21, 1999
Michael I. Froch
/s/ Zane R. Alsabery Director January 21, 1999
Zane R. Alsabery
/s/ James M. Curran President, Director January 21, 1999
James M. Curran
/s/ Gerald S. Papazian Director January 21, 1999
Gerald S. Papazian
/s/ Alexander Remington Director January 21, 1999
Alexander Remington
______________________ Director January , 1999
Richard Rappaport
______________________ Director January , 1999
Saied Kashani
<PAGE>
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS. . . . . . . . . . . . . . . . . . . . . .
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS. . . . . . . .
INFORMATION AVAILABLE TO YOU . . . . . . . . . . . . . . . . . .
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . .
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION. . . . . . . . . .
RECENT MATERIAL EVENTS . . . . . . . . . . . . . . . . . . . . .
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . .
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GUZIK & ASSOCIATES
1800 Century Park East, Fifth Floor
Los Angeles, California 90067
Telephone 310-788-8600
Facsimile 310-788-2835
January 22, 1999
VIA EDGAR
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: NewCom, Inc. Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to NewCom, Inc. (the "Company") in connection with
its Registration Statement on Form S-3.
In our opinion, the 4,337,533 outstanding shares of Common Stock included
in the Registration Statement have been, and the remaining shares of Common
Stock covered by the Registration Statement which may be issued, when issued in
accordance with the terms of their governing agreements, will be, legally
issued, fully paid and non-assessable shares of the Company's Common Stock.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as Exhibit 5.1.
Very truly yours,
/s/ Samuel S. Guzik
For Guzik & Associates
