<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 1999
Registration No. 333-39425
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
POST-EFFECTIVE AMENDMENT NO. 1
ON
FORM S-3
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
C2i SOLUTIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
_______________
DELAWARE 33-0775687
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification Number)
6138 NANCY RIDGE DRIVE
SAN DIEGO, CALIFORNIA 92121
(619) 812-5800
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
_______________
JOHN ANTHONY WHALEN, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
C2I SOLUTIONS, INC.
6138 NANCY RIDGE DRIVE
SAN DIEGO, CALIFORNIA 92121
(619) 812-5800
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
_______________
COPIES TO:
DOUGLAS J. REIN, ESQ.
GRAY CARY WARE & FREIDENRICH LLP
4365 EXECUTIVE DRIVE, SUITE 1600
SAN DIEGO, CA 92121
TELEPHONE: (619) 677-1400
FACSIMILE: (619) 677-1477
_______________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time as described in the Prospectus after the effective date of
this Post-effective Amendment.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.[_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[_]
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 SEC, ACTING PURSUANT
TO SAID SECTION 8(A), MAY DETERMINE.
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PROSPECTUS
- ----------
C2I SOLUTIONS, INC.
1,150,000 SHARES OF COMMON STOCK
This Prospectus relates to the offer and sale by C2i Solutions, Inc., a
Delaware corporation ("C2i") of up to 1,150,000 shares of common stock of C2i
(the "Shares"). The Shares are issuable solely upon exercise of the 1,150,000
outstanding redeemable warrants of C2i (the "Warrants") that were issued in
C2i's initial public offering. On December 31, 1998, C2i reduced the Warrants'
exercise price from $7.50 to $2.00 so that each of the Warrants entitles the
holder to purchase one share of common stock for $2.00. The Warrants are
exercisable during the four year period beginning February 24, 1999.
Commencing on February 24, 1999, C2i may redeem the Warrants for $.01 per
Warrant, on not less than 30 days' written notice, if the last sale price of the
common stock is at least $3.00 per share for 20 consecutive business days ending
on the third day prior to the date on which notice of such redemption is given.
This prospectus relates only to the Shares, and neither the redeemable warrants,
nor any other security is being offered hereby.
C2i has agreed to pay to Gilford Securities Incorporated, the underwriter
of C2i's initial public offering ("Gilford") a fee of 4% of the exercise price
of the Warrants for any exercise of the Warrants pursuant to solicitation by
Gilford under certain conditions. See "Plan of Distribution." C2i's common
stock and the Warrants are traded on the Nasdaq SmallCap Market under the
symbols "CTWO" and "CTWOW," respectively. On February 12, 1999, the last
reported sales prices of the common stock and Warrants as reported on the Nasdaq
SmallCap Market were $1.75 and $0.04375, respectively.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 4.
________________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
<TABLE>
<CAPTION>
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MAXIMUM
PRICE TO PUBLIC SOLICITATION AGENT FEE PROCEEDS TO C2I
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $2.00 $0.08 $1.92
================================================================================
</TABLE>
(1) Before deducting estimated expenses of this offering of $100,000 payable by
C2i.
________________
The date of this prospectus is February ___, 1999.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC by C2i (Commission File No. 0-
23589) are incorporated herein by reference:
. C2i's Annual Report on Form 10-KSB for the fiscal year ended December
31, 1997.
. C2i's Quarterly Report on Form 10-QSB filed on May 15, 1998.
. C2i's Quarterly Report on Form 10-QSB filed on August 14, 1998.
. C2i's Quarterly Report on Form 10-QSB filed on November 13, 1998.
. C2i's Current Report on Form 8-K filed on December 31, 1998; and
. The portions of the registration statement on Form 8-A filed by C2i
pursuant to the Securities Exchange Act which contain a description of
the common stock.
All documents filed by C2i pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act after the date of this Prospectus and prior to the
termination of the offering of securities contemplated hereby shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement in this Prospectus or contained
in a document incorporated by reference or deemed to be incorporated by
reference in this Prospectus shall be modified or superseded for all purposes of
this Prospectus to the extent that a statement contained herein, therein or in
any subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or any
Prospectus Supplement.
C2i will provide without charge to each person to whom this Prospectus is
delivered, including any beneficial owner of a Warrant, upon oral or written
request, a copy of any or all of the foregoing documents incorporated herein by
reference (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates). Written or telephone requests should be directed to Ms. Diane E.
Hessler, Chief Financial Officer, C2i Solutions, Inc., 6138 Nancy Ridge Drive,
San Diego CA, 92121, telephone number (619) 812-5800.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus, including information under
"Risks Factors." The Shares offered hereby involve a high degree of risk and
investors should carefully consider the information set forth in "Risk Factors."
Unless otherwise indicated, all information in this Prospectus gives effect to
the exercise of all of the Warrants.
THE COMPANY
C2i provides information technology services and solutions to meet the
needs of business and government for data processing systems transformation and
conversion, and applications re-engineering. In addition, the Company provides a
variety of services for Year 2000 and European Monetary Union currency issues,
including assessment, remediation, testing, conversion, and validation. The
Company's strategic focus embraces information technology systems integration
and re-engineering in its entirety, including such tasks as complex conversions,
operating system migrations, database migrations, programming language upgrades,
application development and maintenance outsourcing, data warehousing and e-
commerce. The Company's full suite of services also includes project assessment,
feasibility studies, planning, implementation, testing, and independent
verification and validation.
To meet the needs of its clients, C2i employs proven methodologies,
advanced software tools, and highly trained and experienced information
technology professionals to deliver its services, often obtaining required
software, hardware, personnel and other tools via business partnerships with
qualified third-party sources, including IBM and Allstate Insurance Corporation.
Transforming legacy applications into new applications includes the
development or deployment of those applications, within the context of an
organization's current information technology infrastructure, without
constraining the organization to use outdated and/or difficult-to-maintain
legacy components. The Company believes this strategy provides the most
flexibility in evolving large information technology infrastructures.
The Company's re-engineering services address the need of customers to
understand the increasing limitations of legacy applications. This
understanding allows the customers to introduce a replacement strategy before an
organization is significantly disadvantaged.
The "Year 2000 problem" arises from widespread use of computer programs
that rely on two-digit date codes to perform computations and decision-making
functions. Many of these computer programs may fail from an inability to
interpret date codes properly. For example, such programs may misinterpret "00"
as the year 1900 rather than 2000. These "date-dependent" programs are found in
computer hardware, software and embedded systems used in many businesses.
The introduction of the Euro represents one of the largest planned changes
to the European economic system in the past century. The impact on multinational
corporations operating within and from Europe is immense. At a time when
companies are preparing for the Year 2000 issue, the addition of Euro issues
poses a complex business challenge.
The Company's independent verification and validation services provide
tools and personnel to run independent tests in the client environment to verify
that the information technology solution selected and implemented internally, or
by another vendor, is fully functional. C2i does not warranty the information
technology solution tested.
The Company's experience and strategies for analyzing and resolving such
information technology issues as the Year 2000 and Euro conversions for business
and government organizations enables it to leverage an initial client contract.
While those contracts may begin relatively small in scope and value, they
provide an opportunity for C2i to establish an ongoing business relationship
with the client. This business model focuses on providing additional and
expanded services to a client, thereby creating a long-term stream of
incremental revenue. When commencing a client engagement, C2i identifies,
evaluates and selects specific strategies, software approaches and tools that it
believes will be the most effective. During this process, the Company gains
knowledge about many areas of the client's computer and business environment,
positioning it to provide an additional broad range of computer consulting
services generally characterized as "Applications Re-Engineering."
C2i was formed as a limited liability company in California in September
1996 under the name Challenge 2000 International, LLC. C2i reorganized as a
Delaware corporation in September 1997 and changed its name to C2i Solutions,
Inc. The Company's principal executive offices are located at 6138 Nancy Ridge
Drive, San Diego, CA 92121-3223 and the telephone number is (619) 812-5800.
3
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RISK FACTORS
In addition to the other information in this Prospectus, Warrant holders
should consider the following risk factors in evaluating C2i and its business
before purchasing any of the common stock offered hereby. This Prospectus
contains forward-looking statements which involve risks and uncertainties.
C2i's actual results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such differences include,
but are not limited to, those discussed below.
C2I HAS A LIMITED OPERATING HISTORY AND LIMITED EXPERIENCE IN YEAR 2000 AND
INFORMATION
TECHNOLOGY SOLUTIONS
C2i was founded in September 1996, has a very limited operating history and
is in the development stage. As a result, C2i's operations to date have not
produced significant revenues. C2i may not generate any future revenues from
the sale of its services or products.
C2i has limited experience in providing Year 2000 and other information
technology solutions. Although C2i has completed its initial assessment
projects, C2i has not completed a large scale Year 2000 conversion project.
There can be no assurance that C2i will be successful in completing large scale
conversions, that C2i will not experience delays or failures in providing its
Year 2000 solutions or that the Year 2000 solutions will be effective. The
failure of C2i's Year 2000 solutions to function properly or the existence of
errors or bugs following completion of a Year 2000 conversion project could
necessitate significant expenditures by C2i in order to attempt to remedy the
problems. The consequences of failures, errors and bugs could have a material
adverse effect on C2i's business, operating results and financial condition.
HISTORY OF OPERATING LOSSES; NEED FOR ADDITIONAL FINANCING; POSSIBLE DELISTING
FROM NASDAQ
C2i has experienced significant operating losses since its inception in
September 1996. As of September 30, 1998, C2i's accumulated deficit was
approximately $3,825,000, which includes a non-cash charge of approximately $1.2
million in 1997, as a result of sales of equity securities to key employees at
less than deemed value for financial statement purposes. Losses have been
principally the result of the various costs associated with C2i's selling,
general and administrative expenses as C2i commenced operations, and began
marketing activities. C2i expects that it will incur operating losses over at
least the next year. C2i believes that the net proceeds from the exercise of the
Warrants, together with its existing capital resources, will enable it to fund
its operations until approximately September 30, 1999. C2i will be required to
seek additional capital to continue its operations beyond that time. C2i has no
commitments for any future funding, and C2i may not be able to obtain additional
capital in the future. If C2i is unable to obtain the necessary capital, it
will be required to significantly curtail its activities or cease operations.
C2i is required to meet certain financial tests to maintain its listing on
the Nasdaq SmallCap Market. If continued losses by C2i cause C2i to fail to
meet such continued listing requirements, C2i's securities may be delisted from
the Nasdaq SmallCap Market and the liquidity of C2i's securities would be
impaired.
INTENSE INDUSTRY COMPETITION IN THE INFORMATION TECHNOLOGY SERVICES INDUSTRY;
COMPETITIVE DISADVANTAGES
The market for information technology service providers is highly
competitive. C2i's lack of resources and limited experience compared to other
providers makes it extremely vulnerable to competition from larger companies,
all of which benefit from greater recognition, larger lists of reference clients
and significantly greater financial, technical and marketing resources. Leading
competitors have proven products which can provide them with a significant
advantage over C2i because C2i's services have not been widely deployed and
therefore present potential customers with uncertainty not associated with
existing solutions from larger companies. In addition, many of C2i's potential
clients are reluctant to choose small companies as key suppliers or service
providers due to concerns about long term viability and, especially with respect
to Year 2000 conversion projects, the consequences
4
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to the organization of a failure of a proposed solution. There can be no
assurance that C2i will overcome these disadvantages.
Competitors may develop new products or services or improve their existing
products or services which, when combined with their existing market presence,
would make C2i's solutions obsolete or unmarketable. Any such development would
have a material adverse effect on C2i. C2i also expects that competition will
arise from new competitors and from new technological approaches adopted by new
and existing competitors. Competitive technologies may be developed which could
make C2i's services obsolete or of diminished utility, thereby materially
adversely affecting C2i. If C2i is unable to respond to the challenges of
competition, it would be unable to achieve or maintain profitability at a level
required to support its survival or growth.
UNCERTAIN AND UNDEVELOPED MARKET
The primary focus of C2i's services to date has been resolving the Year
2000 problem. Although C2i believes that the demand for Year 2000 consulting
services will grow as the year 2000 approaches, this demand may not increase to
the extent anticipated by C2i, if at all. To date, companies have generally not
been willing or able to allocate the resources to outside service providers to
address this problem in a timely manner. Most companies appear to be attempting
to resolve the problem internally rather than contracting with firms such as
C2i. As a result, demand for C2i's Year 2000 solutions is uncertain and
unpredictable. If the demand for C2i's Year 2000 solutions fails to grow, or
grows more slowly than anticipated, C2i's business, operating results and
financial condition could be materially adversely affected.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
At least initially, C2i expects to derive a substantial portion of its
revenues from a relatively small number of contracts. As a result, a small
delay during a quarter in the achievement of milestones triggering payment to
C2i could have a material adverse effect on C2i's revenues and results of
operations for that quarter. In addition, the need for continued investment by
C2i in marketing, customer service and support capabilities will limit C2i's
ability to reduce expenses in response to any such decrease in sales. Moreover,
because customer purchase orders are subject to cancellation or rescheduling by
the customer, backlog at any particular date is not necessarily representative
of actual revenues for any succeeding period. If C2i's anticipated level of
revenues is not achieved for a particular period, C2i's operating results could
be adversely affected by its inability to reduce costs. C2i cannot accurately
forecast the impact of these and other factors on C2i's operating results in any
future period.
RESOURCE AND TIME-INTENSIVE SALES PROCESS
Sales of C2i's services and solutions are characterized by a relatively
complex sales cycle due to such factors as the magnitude of the expenses
associated with implementation of a comprehensive solution at most
organizations, the substantial time required by potential customers to evaluate
C2i's solutions and those of competitors, and the potential consequences to the
organization of a wrong decision. These factors suggest that the decision will
ultimately be made at a level in an organization that is relatively higher than
would otherwise be involved in information system matters. As a result, C2i
will likely continue to be required to devote additional sales and marketing
efforts to concluding sales decisions.
NEED TO DEVELOP NEW PRODUCTS AND SERVICES UNRELATED TO YEAR 2000 SOLUTIONS
C2i currently generates substantially all of its revenues from, and devotes
most of its resources to, its Year 2000 solutions. Although C2i believes that
the demand for its Year 2000 solutions will continue to exist for a limited
period of time after the Year 2000, this demand will diminish significantly over
time and will eventually disappear. Therefore, C2i plans to actively pursue
business opportunities unrelated to the Year 2000 problem in the information
technology consulting services market, and to develop products and services to
take advantage of those opportunities. C2i believes that its future success
will depend upon its ability to develop and enhance its relationships with
customers so that it will continue to be called upon to assist in data
conversion projects following the year 2000. To the extent product offerings
and services provided by C2i are based upon anticipated changes,
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sales of such products and services may be adversely affected if other
technologies become accepted in the industry. If C2i does not successfully
introduce new products or services in a timely manner, any competitive position
C2i may develop would be lost and C2i's sales would be reduced. C2i may be
unable to develop and introduce enhanced or new products or services which
satisfy customer needs and achieve market acceptance. The failure of C2i to
implement a successful new business development program would have a material
adverse effect upon its business and prospects.
DEPENDENCE ON LICENSES AND THIRD PARTY TECHNOLOGY
Substantially all of the tools that C2i uses to provide its Year 2000
solutions are licensed from third parties. C2i's proprietary software, as well
as licensed software, is designed to work on or in conjunction with certain
third party hardware and/or software products. If any of these licensors or
third party vendors were to discontinue making their products available to C2i,
or to increase materially the cost to C2i to acquire, license or purchase the
products, or if a material problem were to arise in connection with the ability
of C2i to use and operate with third party hardware and/or software products,
C2i would be required to redesign its solutions to function with or on
alternative third party products or attempt to develop internally a replacement
for the third party products. In such an event, interruptions in the
availability or functioning in C2i's Year 2000 solutions and delays in the
introduction of new products and services may occur until replacement technology
is obtained. There can be no assurance that alternative sources of suitable
technology would be available or that C2i would be able to develop an
alternative product in sufficient time or at a reasonable cost. The failure of
C2i to obtain or develop alternative technologies or products on a timely basis
and at a reasonable cost could have a material adverse effect on C2i's business,
financial condition and results of operations.
CUSTOMER AND SUPPLIER CONCENTRATION; UNCERTAINTY OF FOLLOW-ON BUSINESS
A large portion of C2i's revenues have been dependent on a few customer
projects. C2i derived approximately 97% of its revenues for the nine months
ended September 30, 1998 from two customers and 91% of its revenues for the year
ended December 31, 1997 from three customers. As of September 30, 1998, 100% of
the accounts receivable balance related to four customers. In addition, C2i has
experienced a supplier concentration, with 99% of its total cost of revenues for
the year ended December 31, 1997 resulting from purchases from three suppliers,
and 37% of its total cost of revenues for the period ended September 30, 1998
resulting from purchases from two suppliers. C2i expects that as it continues to
develop, it will continue to derive a majority of its revenues from a small
number of customers and to incur the majority of its costs with a small number
of suppliers. Therefore, a loss of any significant customer or supplier would
have a material adverse effect on C2i's business, financial condition and
results of operations.
At the conclusion of a project by C2i, a particular customer may not have
an immediate need for follow-on services or additional projects. C2i does not
enter into long term or volume service contracts with its customers, and
customers may discontinue further purchases of C2i's services with little or no
advance notice. There can be no assurance that any of C2i's limited number of
past or current customers will require C2i's services or products in the future,
or if they do, that they will engage C2i to perform such services or provide
such products. The failure of any of C2i's significant customers to meet their
obligations to C2i would have a material adverse effect on its business,
financial condition and results of operations. To generate future revenues, C2i
must identify and obtain business from companies in its existing base of
customers or with new customers. There can be no assurance that any of C2i's
current customers will engage C2i for projects in the future or that C2i will be
able to obtain additional new customers.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
C2i relies on trade secret and copyright protection for its products and
technology. C2i believes that its licensors use similar means of protecting
their technologies.
In the absence of significant proprietary protection, competitors may be
able to copy C2i's technology or design approaches, replicate its processes or
gain access to its trade secrets. Moreover, there can be no assurance
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that competitors will not be able to develop technologies similar to or more
advanced than those used by C2i or design around any protected aspects of C2i's
technology rights. No assurance can be given that C2i's current or future
products or services will not infringe on the rights of others.
There has been substantial litigation regarding intellectual property
rights in computer software related industries. In the future, litigation may be
necessary to enforce technological rights of C2i, to protect trade secrets or
know-how owned or licensed by C2i or to defend C2i against claimed infringement
of the rights of others and to determine the scope and validity of the
proprietary rights of others. Any such litigation would likely result in
substantial cost and diversion of effort by C2i, which by itself could have a
material adverse effect on C2i's business, financial condition and operating
results. Further, adverse determinations in such litigation could result in
C2i's loss of proprietary rights, subject C2i to significant liabilities to
third parties, require C2i to seek licenses from third parties or prevent C2i
from providing its services, any of which could have a material adverse effect
on C2i's business, financial condition and results of operations.
C2i also relies on trade secrets and proprietary technology that it seeks
to protect, in part, through confidentiality agreements with employees,
consultants and other parties. There can be no assurance that these agreements
will not be breached, that C2i will have adequate remedies for any breach, or
that C2i's trade secrets will not otherwise become known to or independently
developed by others.
DEPENDENCE ON KEY PERSONNEL; MANAGEMENT OF EXPANDING INFORMATION TECHNOLOGY
OPERATIONS
C2i's success will, to a large extent, depend upon the continued services
of its executive officers who have limited experience at managing a business
like C2i's. Although one of C2i's four executive officers has only been with
C2i since January 1999, the loss of services of any of these four executive
officers may materially and adversely affect C2i. C2i's employment agreements
with its key personnel may be terminated by either party, with or without cause,
with the exception of its agreements with Mr. Whalen and Ms. Hessler. Mr.
Whalen's employment agreement has a term of five years, expiring in May 2002,
and limits C2i's ability to terminate him, except for cause, and provides for
six months severance pay, unless Mr. Whalen voluntarily resigns his position.
Ms. Hessler's employment agreement is terminable at will, but if her employment
with C2i is terminated prior September, 2002 for any reason. Ms. Hessler will
receive six months severance pay unless she voluntarily resign her position.
C2i has key man life insurance in the amount of $1,000,000 on Mr. Whalen.
C2i's plans to expand its business are expected to place a significant
strain on C2i's management, operational and financial resources and systems. To
manage its expanding operations, C2i must, among other things, improve its
operational, financial and management information systems, including its
billing, accounts receivable and payable tracking, fixed assets and other
financial management systems. C2i must also attract, retain and train additional
highly qualified management, technical, sales and marketing and customer support
personnel. The process of locating such personnel with the combination of skills
and attributes required to implement C2i's strategy is often lengthy.
In particular, C2i faces significant competition in the attraction and
retention of qualified professional and technical personnel who possess skills
in the area of information technology. Between now and the year 2000, C2i
expects there will be intense competition for people with the technical skills
necessary to provide solutions for the Year 2000 problem as more companies
become aware of and begin to deal with this problem. C2i believes it has
identified reliable sources of competent outside consultants skilled in these
areas, and so believes it employs or will be able to engage as consultants an
adequate number of personnel skilled in both general information technology and
Year 2000 solutions so that it will be able to complete the projects it has
already, and those it anticipates contracting to provide. Nevertheless, C2i
could face shortages of skilled personnel, and these shortages might delay or
otherwise impair C2i's ability to perform under its service agreements and
obtain new business, which may materially adversely affect C2i's business,
operating results and financial condition.
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C2I MAY NOT FIND ADEQUATE ALTERNATIVE FACILITIES
C2i currently leases its headquarters facility at 6138 Nancy Ridge Drive in
San Diego, California on a month-to-month basis. As a result, C2i's tenancy at
this facility may be terminated by its landlord upon 30 days written notice. C2i
is currently seeking an adequate facility elsewhere in San Diego County, which
currently has a relative shortage of viable commercial space. If C2i's tenancy
is terminated by its landlord before C2i finds an adequate facility, C2i may
need to relocate to temporary facilities at above-market costs or suspend its
headquarters' operations, either of which may have a material adverse impact on
its business, operating results, and financial condition.
RISKS ASSOCIATED WITH POTENTIAL UNSPECIFIED ACQUISITIONS
C2i plans to acquire assets or businesses complimentary to its operations,
although no specific acquisitions are currently in negotiation or planned. Any
such future acquisitions would be accompanied by the risks commonly encountered
in acquisitions of companies. Such risks include, among other things:
. The assumption of unforeseen liabilities;
. The difficulty of assimilating the operations and personnel of the
acquired companies;
. The potential disruption of C2i's business;
. The inability of C2i's management to maximize the financial and
strategic position of C2i by the incorporation of acquired technology
or business into C2i's service offerings;
. The difficulty of maintaining uniform standards, controls, procedures
and policies;
. The potential loss of key employees of the acquiring or acquired
companies; and
. The impairment of relationships with employees consultants, customers,
and suppliers as a result of changes in management.
No assurance can be given that C2i will undertake acquisition activities, will
complete any acquisitions, or that if an acquisition does occur it will not
materially and adversely affect C2i or will be successful in enhancing C2i's
business. If C2i proceeds with one or more significant acquisitions, a
substantial portion of C2i's available cash could be used to consummate those
transactions. Alternatively, C2i might issue equity securities as consideration
for an acquisition which might result in significant dilution of the
stockholders' ownership interest in C2i, or C2i could issue debt securities to
finance an acquisition, which might reduce the book value and earnings per share
of C2i common stock. The accounting for business acquisitions by C2i is likely
to involve the recognition of significant goodwill and intangible assets in
connection with the acquisition and, as a result, would typically result in
substantial charges against C2i's reported future operating results.
RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
A key component of C2i's strategy is its expansion into international
markets. C2i has very limited previous experience in operating outside of the
United States and C2i may not be able to successfully market, sell and deliver
its products and services in the international marketplace. In addition to the
uncertainty as to C2i's ability to create an international presence, there are
risks inherent in doing business on an international level, including:
. More diverse, complex, unfamiliar and unexpectedly changing regulatory
requirements;
. Export restrictions, export controls, tariffs and other trade barriers
including cultural and structural impediments to trade;
. Difficulties in staffing and managing foreign operations;
. Longer payment cycles;
8
<PAGE>
. Problems in collecting accounts receivable;
. Political instability;
. Fluctuations in currency exchange rates; and
. Potential adverse tax consequences that could adversely affect C2i's
international operations.
Any of these factors could have a material adverse effect on C2i's business,
financial conditions and results of operations.
POTENTIAL LIABILITIES ASSOCIATED WITH YEAR 2000 SERVICES
C2i's Year 2000 solutions involve key aspects of its client's computer
systems. A failure in a client's system could result in a claim for substantial
damages against C2i, regardless of C2i's responsibility for such failure. C2i
attempts to limit by contract, both with its customers and with the parties that
license technology to C2i, its liability for damages arising in rendering its
products and services. Despite this precaution, there can be no assurance that
the limitations of liabilities set forth in its contracts would be enforceable
or would otherwise protect C2i from liability for damages. There can be no
assurance that C2i will be able to obtain or maintain insurance coverage for
such liabilities, that such coverage will continue to be available on acceptable
terms, or that such coverage will be available in amounts to cover one or more
large claims. The assertion of claims against C2i that exceed available
insurance coverage, or changes in C2i's insurance policies, including premium
increases or the imposition of large deductible or co-insurance requirements,
could have a material adverse effect on C2i's business, financial condition and
results of operation. Furthermore, litigation, regardless of its outcome, could
result in substantial cost to C2i and divert management's attention from C2i's
operations. Any contract liability claim or litigation against C2i could,
therefore, have a material adverse effect on C2i's business, financial condition
or results of operations.
IMMEDIATE AND SUBSTANTIAL DILUTION OF THE SHARES
The exercise price of the Warrants is substantially higher than the
tangible book value per share of common stock. Investors purchasing Shares upon
exercise of a Warrant will therefore incur immediate, substantial dilution of
$0.88 per share, or 44% of the Warrants' exercise price. To the extent that
other outstanding warrants or stock options are exercised, there will be further
dilution.
CONCENTRATION OF SHARE OWNERSHIP AND VOTING POWER AMONG DIRECTORS AND OFFICERS
Following the issuance of the Shares, the directors and officers of C2i
will control approximately 38% of the voting power and will have a substantial
portion of the votes required to elect all of C2i's directors and, hence, will
be able to control the affairs of C2i. In addition, the directors and officers
of C2i will have a substantial portion of the votes required to amend C2i's
Certificate of Incorporation and By-laws and effect or preclude fundamental
corporate transactions involving C2i, including the acceptance or rejection of
any proposals relating to a merger of C2i or an acquisition of C2i by another
entity, in each case without the approval of any of C2i's other stockholders.
RISK OF SHARES BEING CHARACTERIZED AS PENNY STOCKS; IMPAIRED LIQUIDITY OF THE
SHARES
The SEC has adopted regulations which define a "penny stock" to be any
equity security that has a market price (as therein defined) less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the SEC relating to the penny stock market.
Disclosure is also required to be made about current quotations for the
securities and about commissions payable to both the broker-dealer and the
registered representative. Finally, broker-dealers must send monthly statements
to purchasers of penny stocks disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
9
<PAGE>
The foregoing penny stock restrictions will not apply to the Shares if:
. They continue to be listed on the Nasdaq SmallCap Market;
. Certain price and volume information is publicly available on a
current and continuing basis; and,
. C2i meets certain minimum net tangible assets or average revenue
criteria.
There can be no assurance that C2i's securities will qualify for exemption
from the penny stock restrictions. If the Shares were subject to the rules on
penny stocks, the market liquidity for Shares could be severely adversely
affected.
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS
The Warrants may be redeemed by C2i at a redemption price of $.01 per
Warrant upon not less than 30 days' notice if the last sale price of the common
stock is at least $3.00 per share for 20 consecutive business days ending on the
third day prior to the date on which notice of such redemption is given. If C2i
initiates the process of redeeming the Warrants this could pressure the holders
to:
. Exercise the Warrants and pay the exercise price therefor at a time
when it may be disadvantageous for the holders to do so;
. Sell the Warrants at the then current market price when they might
otherwise wish to hold the Warrants; or
. Accept the redemption price, which, at the time the Warrants are
called for redemption, is likely to be substantially less that the
market value of the Warrants.
Lack of qualification or registration of the shares under all applicable
state securities laws may mean that C2i would be unable to issue securities upon
exercise of the Warrants by some holders, including at the time when the
Warrants are called for redemption.
CURRENT PROSPECTUS AND STATE REGISTRATION REQUIRED TO EXERCISE WARRANTS
Current Warrant holders will only be able to exercise the Warrants if:
. A current prospectus under the Securities Act of 1933, as amended (the
"Securities Act") relating to the securities underlying the Warrants
is then in effect; and
. Such securities are qualified for sale or exempt from qualification
under the applicable securities laws of the states in which the
various holders of Warrants reside.
Although C2i has undertaken to use its best efforts to maintain the
effectiveness of a current prospectus covering the securities underlying the
Warrants, there can be no assurance that C2i will be able to do so. There also
can be no assurance that exemptions from registration or qualification
requirements of those states in which C2i's securities are not currently
registered or qualified will be available at the time a Warrant holder wishes to
exercise his or her Warrant. The value of the Warrants may be greatly reduced if
a current prospectus, covering the securities issuable upon the exercise of the
Warrants, is not kept effective or if such securities are not qualified, or
exempt from qualification, in the states in which the holders of Warrants
reside.
RISK OF ADDITIONAL SHARES SOLD IN THE PUBLIC MARKET
Immediately following the issuance of the Shares, there will be an
aggregate of 4,692,171 shares of common stock outstanding. An aggregate of
approximately 2,843,700 currently outstanding shares, and any shares issued upon
exercise of C2i's other outstanding warrants, were or will be sold by C2i in
reliance on exemptions
10
<PAGE>
from the registration requirements of the Securities Act and are or will be
"restricted" securities within the meaning of Rule 144 under the Securities Act.
C2i's officers and directors and its shareholders who beneficially owned five
percent or more of C2i's outstanding common stock prior to the initial public
offering, who now own an aggregate of 2,383,432 shares of common stock, agreed
not to sell any shares of C2i common stock until August 24, 1999 without the
prior written consent of Gilford. Gilford may agree upon request to release for
resale some or all of the shares subject to these lock-up agreements. These and
other restricted securities may be sold in the public market only if registered
or exempt from registration under Rule 144.
In connection with C2i's initial public offering, on February 24, 1998 C2i
issued Gilford and its representatives warrants to purchase up to 100,000 shares
of common stock, and/or 100,000 warrants to purchase a share of common stock at
$7.50 per share, that are exercisable at $8.10 per share and $0.135 per warrant
(subject to adjustment) during the four-year period commencing on February 13,
1999 (the "Gilford Warrants"). C2i also granted Gilford certain registration
rights with respect to all shares purchased upon exercise of the Gilford
Warrants, such that under certain circumstances these shares could be registered
and then sold in the public market. Gilford could instead sell these shares in
the public market under an exemption from registration under Rule 144.
The sale, or availability for sale, of substantial amounts of common stock
in the public market subsequent to the issuance of the Shares could adversely
affect the prevailing market price of the Shares and could impair C2i's ability
to raise additional capital through the sale of its equity securities.
LIMITED TRADING MARKET; NO DIVIDENDS ANTICIPATED ON THE SHARES
C2i common stock is currently traded on the Nasdaq SmallCap Market. To
date, there has been a very limited trading market for the C2i common stock, and
an active public market in C2i common stock may not develop. C2i has never paid
any cash dividends on its common stock. C2i anticipates that in the future,
earnings, if any, will be retained for use in the business or for other
corporate purposes, and it is not anticipated that cash dividends in respect of
the common stock will be paid.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended, including, but not limited to, statements
regarding:
. C2i's limited operating history and experience with Year 2000
solutions;
. C2i's history of operating losses, need for additional financing, and
possible delisting from Nasdaq;
. Intense competition in the market for Year 2000 solutions and C2i's
competitive disadvantages in this market;
. The uncertain and undeveloped nature of the market for Year 2000
solutions;
. Risks related to fluctuations in C2i's operating results;
. The complex sales cycle for Year 2000 solutions;
. C2i's need to develop new products and services;
. C2i's dependence on licenses and third party technology;
. C2i's customer and supplier concentration and uncertain follow on
business;
. C2i's dependence on proprietary technology;
11
<PAGE>
. C2i's dependence on certain key personnel and potential difficulty
managing expanding information technology operations;
. Risks related to C2i not finding adequate alternative facilities;
. Risks associated with potential unspecified acquisitions;
. Risks associated with international expansion;
. Potential liabilities associated with the provision of Year 2000
solutions;
. Potential immediate and substantial dilution of the Shares;
. The concentration of share ownership and voting power among C2i's
directors and officers;
. The risk of the Shares being characterized as penny stocks, which
would impair their liquidity;
. The potential adverse effects of redemption of the Warrants;
. The requirement of a current prospectus and state registration or
exemption therefrom for the Shares prior to exercise of the Warrants;
. The risk of additional shares being sold in the public market; and
. The limited trading market in and lack of anticipated dividends on C2i
common stock.
These statements are subject to risks and uncertainties, including those set
forth under this caption, and actual results could differ materially from those
expressed or implied in these statements. All forward-looking statements
included in this Prospectus are made as of the date hereof, and C2i assumes no
obligation to update any such forward-looking statement or reason why actual
results might differ.
12
<PAGE>
THE WARRANTS
The holder of each of the Warrants is entitled, upon payment of the current
exercise price of $2.00, to purchase one share of common stock. On December 31,
1998, C2i exercised its right to reduce the purchase price to be paid upon
exercise of the Warrants from $7.50 to $2.00. Unless previously redeemed, the
Warrants are exercisable at any time during the four year period commencing on
February 24, 1999, provided that at such time a current prospectus relating to
the underlying common stock is in effect and the underlying shares of common
stock are qualified for sale or exempt from qualification under applicable state
securities laws. The Warrants are subject to redemption, as described below.
Redemption. Commencing February 24, 1999, the Warrants are subject to
redemption by C2i, on not less than 30 days written notice, at a price of $.01
per Warrant, if the closing bid price of the common stock is at least $3.00 per
share for any 20 consecutive business days ending on the third day prior to the
date on which the notice of redemption is given. Holders of Warrants will
automatically forfeit their rights to purchase the shares of common stock
issuable upon exercise of such Warrants unless the Warrants are exercised before
5:00 p.m., New York City time on the business day immediately prior to the date
set for redemption. All of the outstanding Warrants must be redeemed if any
Warrants are redeemed.
General. The Warrants may be exercised upon surrender of the
certificate(s) therefor on or prior to the earlier of their expiration or the
redemption date (as explained above) at the offices of C2i's warrant agent
(American Stock Transfer & Trust Company) with the form of "Election to
Purchase" on the reverse side of the certificate(s) filled out and executed as
indicated, accompanied by payment (in the form of certified or cashier's check
payable to the order of C2i) of the full exercise price for the number of
Warrants being exercised.
The Warrants contain provisions that protect the holders thereof against
dilution by adjustment of the exercise price in certain events, such as stock
dividends, stock splits, mergers, sale of substantially all of C2i's assets, and
for other extraordinary events in order to enable the holders of the Warrants to
obtain the same or equivalent rights which they would have obtained if the
Warrants had been exercised prior to the event.
C2i is not required to issue fractional shares of common stock, and in lieu
thereof will make a cash payment based upon the current market value of such
fractional shares. The holder of a Warrant will not possess any rights as a
stockholder of C2i unless and until he exercises the Warrant.
13
<PAGE>
USE OF PROCEEDS
Assuming that all Warrants are exercised, the net proceeds to C2i from the
sale of the 1,150,000 Shares offered hereby are estimated to be approximately
$2,108,000 after deducting solicitation agent fees and estimated offering
expenses payable by C2i. C2i expects that net proceeds will be utilized for
sales and marketing, working capital and other general corporate purposes.
A portion of the proceeds may also be used to acquire or invest in
complementary businesses or products or to obtain the right to use complementary
technologies. While from time to time C2i may evaluate potential acquisitions
of such businesses, products or technologies, there are no present
understandings, commitments or agreements with respect to any acquisition of
other businesses, products or technologies.
Pending utilization, the net proceeds of the offering will be invested in
short-term, investment-grade, interest-bearing investments.
PLAN OF DISTRIBUTION
The Warrants were issued on February 27, 1998, as part of C2i's initial
public offering. Each of the Warrants entitles the holder to purchase one share
of common stock at an exercise price of $2.00 (subject to adjustment) during the
four-year period commencing February 24, 1999. C2i has agreed, to pay to
Gilford a fee of 4% of the exercise price of the Warrants for any exercise of
the Warrants resulting from a solicitation by Gilford, a portion of which may be
reallowed to any dealer who is a member of the NASD who solicited the exercise
(which may also be Gilford) for each Warrant exercise, if:
. The market price of the common stock of C2i at the time of exercise is
higher than the exercise price of the Warrants; and,
. The exercise of the Warrants is solicited by a member of the National
Association of Securities Dealers, Inc. as designated in writing on the
subscription form on the back of the Warrant Certificate, and,
. The Warrants are not held in any discretionary account; and,
. Disclosure of compensation arrangements was made both at the time of
C2i's initial public offering and in documents provided to holders of
the Warrants at the time of the exercise; and,
. The solicitation of exercise of the Warrants was not in violation of
Regulation M promulgated under the 1934 Act.
C2i has agreed not to solicit Warrant exercises other than through Gilford.
C2i has agreed to indemnify Gilford against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments that Gilford
may be required to make in respect thereof.
C2i has agreed, until February 13, 2003, to recommend and use its best
efforts to elect a designee of Gilford, at the option of Gilford, either as a
director or as a non-voting advisor to its Board of Directors. If Gilford's
designee is elected, the designee will receive the same compensation paid to
other non-management directors of C2i for board attendance, and will be entitled
to receive reimbursement for reasonable costs incurred in attending such
meetings. To the extent permitted by law, C2i will indemnify Gilford and its
designee for the actions of such designee as a director of C2i, and if C2i
maintains a liability insurance policy affording coverage for the acts of its
officers and directors, it will include Gilford and its designee as an insured
under such policy. Gilford has not exercised its right to designate a member of
the Board of Directors of C2i and has advised C2i that it does not intend to
exercise its right in the near future.
Regulation M promulgated under the 1934 Act may prohibit Gilford from
engaging in any market making activities with regard to C2i's securities for the
period from five business days (or such other applicable period as Regulation M
may provide) prior to any solicitation by Gilford of the exercise of the
Warrants until the later of the
14
<PAGE>
termination of such solicitation activity or the termination (by waiver or
otherwise) of any right that Gilford may have to receive a fee for the exercise
of Warrants following such solicitation. As a result, Gilford may be unable to
provide a market for C2i's securities during certain periods while the Warrants
are exercisable.
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon by Gray Cary
Ware & Freidenrich LLP, San Diego, California.
EXPERTS
The financial statements of C2i Solutions, Inc. appearing in C2i Solutions,
Inc.'s Annual Report (Form 10-KSB) for the year ended December 31, 1997, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
C2i is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports, proxy statements and other information with the SEC. A copy of the
Registration Statement and the reports, proxy statements and other information
filed by C2i with the SEC may be inspected and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549 and at the SEC's regional offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and at Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of these documents can also be obtained at
prescribed rates from the Public Reference Section of the SEC at its principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. You may also obtain
information on the operation of the Public Reference Room by calling 1-800-SEC-
0330. C2i's common stock is traded on The Nasdaq SmallCap Market. Reports,
proxy statements and other information concerning C2i may be inspected at the
offices of the National Association of Securities Dealers, Inc., Market Listing
Section, 1735 K Street, N.W., Washington, D.C. 20006. The SEC also maintains a
Web site that contains reports, proxy statements and other information filed
electronically with the SEC. The address of this web site is
http://www.sec.gov.
15
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained or incorporated by
reference in this prospectus in connection with the offering described herein,
and, if given or made, such information or representation must not be relied
upon as having been authorized by C2i. This prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any securities other than
the registered securities to which it relates, or an offer to sell, or a
solicitation of an offer to buy, in any jurisdiction in which it is unlawful to
make such offer or solicitation. Neither the delivery of this prospectus nor any
sale made hereunder shall, under any circumstances, create an implication that
there has been no change in the affairs of C2i since the date hereof or that the
information contained herein is correct as of any time subsequent to the date
hereof.
SUMMARY TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Incorporation of Certain
Documents by Reference................................................. 2
Prospectus Summary....................................................... 3
Risk Factors............................................................. 4
The Warrants............................................................. 13
Use of Proceeds.......................................................... 14
Plan of Distribution..................................................... 14
Legal Matters............................................................ 15
Experts.................................................................. 15
Available Information.................................................... 15
</TABLE>
1,150,000 SHARES
COMMON STOCK
----------
PROSPECTUS
----------
February ___, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than solicitation fees
payable to Gilford, payable by C2i in connection with the sale of the Shares
upon exercise of the Warrants. All amounts shown are estimates.
<TABLE>
<CAPTION>
Item Company Expense
---- ---------------
<S> <C>
Blue Sky Qualification fees and expenses........ $ 15,000
Printing and engraving expenses................. $ 20,000
Legal fees and expenses......................... $ 40,000
Accounting fees and expenses.................... $ 10,000
Transfer Agent and Registrar fees............... $ 5,000
Miscellaneous................................... $ 10,000
--------
Total...................................... $100,000
========
</TABLE>
__________________
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits indemnification
of officers, directors, and other corporate agents under certain circumstances
and subject to certain limitations. The Registrant's Certificate of
Incorporation and By-Laws provide that the Registrant shall indemnify its
directors, officers, employees and agents to the full extent permitted by
Delaware General Corporation Law, including in circumstances in which
indemnification is otherwise discretionary under Delaware law. In addition, the
Registrant has entered into separate indemnification agreements with its
directors and officers which require the Registrant, among other things, to
indemnify them against certain liabilities which may arise by reason of their
status or service (other than liabilities arising from willful misconduct of a
culpable nature) and to maintain directors' and officers' liability insurance,
if available on reasonable terms.
These indemnification provisions and the indemnification agreement entered
into between the Registrant and its officers and directors may be sufficiently
broad to permit indemnification of the Registrant's officers and directors for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act, or otherwise.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement
1.2* Form of Representative Warrant
3.1* Certificate of Incorporation (previously filed as an exhibit to
C2i's Quarterly Report on Form 10-QSB filed on May 15, 1998).
3.2* Bylaws
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
4.1* Form of Warrant Agreement between C2i and the Warrant Agent,
including the form of Warrants
5.1* Opinion and Consent of Gray Cary Ware & Freidenrich LLP
10.1* Form of Indemnity Agreement for officers and directors
10.2* Form of Proposed Stock Option Plan and Agreements thereunder
10.3* Amendment to the C2i Solutions, Inc. 1997 Stock Option Plan
10.4* Form of Bridge Note and accompanying Bridge Warrant
10.5* Employment Agreement dated June 1, 1997 between C2i and John
Anthony Whalen, Jr.
10.6* Letter Agreement dated August 4, 1997 between C2i, David Tendler
and Hal Beretz
10.7* Letter Agreement dated August 20, 1997 between C2i and Kim P. Goh
10.8* Letter Agreement dated November 3, 1997 between C2i and Kim P.
Goh
10.9* Sublease Agreement dated December 16, 1997 between C2i and Road
Runner Sports, Inc. (previously filed as an exhibit to C2i's
Annual Report on Form 10-KSB for the year ended December 31,
1997.)
10.10* Master Services Agreement dated January 16, 1998 by and between
C2i and United Guaranty Corporation (previously filed as an
exhibit to C2i's Annual Report on Form 10-KSB for the year ended
December 31, 1997.)
10.11* Letter Agreement dated May 1998 by and between C2i and Henry J.
Frigon (previously filed as an exhibit to C2i's Quarterly Report
on Form 10-QSB filed on November 13, 1998.)
10.12* Amendment to Employment Agreement dated July 14, 1998 by and
between C2i and Diane E. Hessler (previously filed as an exhibit
to C2i's Quarterly Report on Form 10-QSB filed on November 13,
1998.)
10.13 Letter Agreement dated December, 1998 by and between C2i and
James A. Lonergan
10.14 Letter Agreement dated December, 1998 by and between C2i and
William J. Kaffer
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Gray Cary Ware & Freidenrich LLP (included in Exhibit
5.1)
27.1* Financial Data Schedule
</TABLE>
-----------------
*Previously filed.
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 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement.
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 SEC 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;
<PAGE>
(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) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed 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, 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. 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 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.
C. 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.
D. Insofar as indemnification for liabilities arising under the
Securities Act 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
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.
E. The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
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.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form S-3 and has duly caused this Post-Effective
Amendment on Form S-3 to Form SB-2 to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of San Diego, State of
California, on February 16, 1999.
C2i SOLUTIONS, INC.
By: /s/ JOHN ANTHONY WHALEN, JR.
-----------------------------
John Anthony Whalen, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
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.
<TABLE>
<CAPTION>
Signature Title Date
--------------------------------------------------- -------------------------------------- ------------------------------
<S> <C> <C>
CHIEF EXECUTIVE OFFICER AND DIRECTOR FEBRUARY 16, 1999
/s/ JOHN ANTHONY WHALEN, JR. (PRINCIPAL EXECUTIVE OFFICER)
---------------------------------------------------
John Anthony Whalen, Jr.
CHIEF FINANCIAL OFFICER (PRINCIPAL FEBRUARY 16, 1999
/s/ DIANE E. HESSLER FINANCIAL AND ACCOUNTING OFFICER)
---------------------------------------------------
Diane E. Hessler
/s/ HAL H. BERETZ DIRECTOR FEBRUARY 16, 1999
---------------------------------------------------
Hal H. Beretz
/s/ KIM P. GOH DIRECTOR FEBRUARY 16, 1999
---------------------------------------------------
Kim P. Goh
/s/ WILLIAM J. KAFFER DIRECTOR FEBRUARY 16, 1999
---------------------------------------------------
William J. Kaffer
/s/ JAMES A. LONERGAN DIRECTOR FEBRUARY 16, 1999
---------------------------------------------------
James A. Lonergan
/s/ DAVID TENDLER DIRECTOR FEBRUARY 16, 1999
---------------------------------------------------
David Tendler
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------ -----------------------
<S> <C>
1.1* Form of Underwriting Agreement
1.2* Form of Representative Warrant
3.1* Certificate of Incorporation (previously filed as an exhibit to
C2i's Quarterly Report on Form 10-QSB filed on May 15, 1998).
3.2* Bylaws
4.1* Form of Warrant Agreement between C2i and the Warrant Agent,
including the form of Warrants
5.1* Opinion and Consent of Gray Cary Ware & Freidenrich LLP
10.1* Form of Indemnity Agreement for officers and directors
10.2* Form of Proposed Stock Option Plan and Agreements thereunder
10.3* Amendment to the C2i Solutions, Inc. 1997 Stock Option Plan
10.4* Form of Bridge Note and accompanying Bridge Warrant
10.5* Employment Agreement dated June 1, 1997 between C2i and John
Anthony Whalen, Jr.
10.6* Letter Agreement dated August 4, 1997 between C2i, David Tendler
and Hal Beretz
10.7* Letter Agreement dated August 20, 1997 between C2i and Kim P. Goh
10.8* Letter Agreement dated November 3, 1997 between C2i and Kim P. Goh
10.9* Sublease Agreement dated December 16, 1997 between C2i and Road
Runner Sports, Inc. (previously filed as an exhibit to C2i's
Annual Report on Form 10-KSB for the year ended December 31,
1997.)
10.10* Master Services Agreement dated January 16, 1998 by and between
C2i and United Guaranty Corporation (previously filed as an
exhibit to C2i's Annual Report on Form 10-KSB for the year ended
December 31, 1997.)
10.11* Letter Agreement dated May 1998 by and between C2i and Henry J.
Frigon (previously filed as an exhibit to C2i's Quarterly Report
on Form 10-QSB filed on November 13, 1998.)
10.12* Amendment to Employment Agreement dated July 14, 1998 by and
between C2i and Diane E. Hessler (previously filed as an exhibit
to C2i's Quarterly Report on Form 10-QSB filed on November 13,
1998.)
10.13 Letter Agreement dated December, 1998 by and between C2i and James
A. Lonergan
10.14 Letter Agreement dated December, 1998 by and between C2i and
William J. Kaffer
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Gray Cary Ware & Freidenrich LLP (included in Exhibit
5.1)
27.1* Financial Data Schedule
</TABLE>
____________________
*Previously filed.
<PAGE>
EXHIBIT 10.13
LETTER AGREEMENT DATED DECEMBER 1998 BY AND BETWEEN
THE COMPANY AND JAMES A. LONERGAN
December 10, 1998
Mr. James A. Lonergan
5321 Linda Way
La Jolla, CA 92037
Dear Jim:
We are pleased to offer you the position of Member of the Board of Directors of
C2i Solutions, Inc. ("C2i"). Your service as a Member of the Board of Directors
has been approved by the other directors. You will perform directors' functions
including introductions, strategic planning, assistance with new business
development and would be available for advice and consultation.
The following offer references the incentives you will be entitled to as a Board
Member.
1. An option to purchase eighty-seven thousand five hundred (87,500)
shares of common stock with an exercise price equal to the market value
per share, on the date of grant, and vesting monthly in 1/48th monthly
increments, over four years, with vesting commencing on your initial
appointment to the Board (December 10, 1998).
2. A referral fee of four and one-half percent (4.5%) for sales that are
consummated without an "RFP" process, for which you provided the sales
lead to C2i.
3. A referral fee of two percent (2%) for all sales that result from an
"RFP" process, for which you provided the sales lead to C2i.
4. Reimbursement of actual costs of air fare, lodging and meals for all
Advisors' and Board of Directors' meetings attended in person, in
accordance with C2i's standard policies.
The options will expire upon the earlier of ten (10) years from the date of
grant, or ninety (90) days following the conclusion of your service as a
director. All referral fees are payable quarterly after receipt of payment by
C2i from the customer.
If this offer is acceptable, please indicate your approval by signing below, and
returning this document in person, by mail or FAX at 619-812-5820.
<PAGE>
December 10, 1998
James A. Lonergan
Page 2
I look forward to a long and mutually beneficial relationship. Your willingness
to join us is greatly appreciated.
Sincerely,
C2i Solutions, Inc. Accepted and Approved:
/S/ JOHN ANTHONY WHALEN, JR. /S/ JAMES A. LONERGAN
- ---------------------------- ---------------------
John Anthony Whalen, Jr. James A. Lonergan
President & CEO
December 16, 1998
-----------------
Date
<PAGE>
EXHIBIT 10.14
LETTER AGREEMENT DATED DECEMBER 1998 BY AND BETWEEN
THE COMPANY AND WILLIAM J. KAFFER
December 10, 1998
Mr. William J. Kaffer
23300 De Anza Road
Temecula, CA 92590
Dear Bill:
We are pleased to offer you the position of Member of the Board of Directors of
C2i Solutions, Inc. ("C2i"). Your service as a Member of the Board of Directors
has been approved by the other directors. You will perform directors' functions
including introductions, strategic planning, assistance with new business
development and would be available for advice and consultation.
The following offer references the incentives you will be entitled to as a Board
Member.
1. An option to purchase eighty-seven thousand five hundred (87,500)
shares of common stock with an exercise price equal to the market value
per share, on the date of grant, and vesting monthly in 1/48th monthly
increments, over four years, with vesting commencing on your initial
appointment to the Board (December 10, 1998).
2. A referral fee of four and one-half percent (4.5%) for sales that are
consummated without an "RFP" process, for which you provided the sales
lead to C2i.
3. A referral fee of two percent (2%) for all sales that result from an
"RFP" process, for which you provided the sales lead to C2i.
4. Reimbursement of actual costs of air fare, lodging and meals for all
Advisors' and Board of Directors' meetings attended in person, in
accordance with C2i's standard policies.
The options will expire upon the earlier of ten (10) years from the date of
grant, or ninety (90) days following the conclusion of your service as a
director. All referral fees are payable quarterly after receipt of payment by
C2i from the customer.
If this offer is acceptable, please indicate your approval by signing below, and
returning this document in person, by mail or FAX at 619-812-5820.
<PAGE>
December 10, 1998
William J. Kaffer
Page 2
I look forward to a long and mutually beneficial relationship. Your willingness
to join us is greatly appreciated.
Sincerely,
C2i Solutions, Inc. Accepted and Approved:
By: /S/ JOHN ANTHONY WHALEN, JR. By: /S/ WILLIAM J. KAFFER
-------------------------------- ------------------------------
John Anthony Whalen, Jr. William J. Kaffer
President & CEO
December 13, 1998
-----------------
Date
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Post-Effective Amendment No. 1 on Form S-3 to Form SB-2
No. 333-39425) and related Prospectus of C2i Solutions, Inc. for the
registration of 1,150,000 shares of its common stock and to the incorporation by
reference therein of our report dated February 27, 1998 (expect for the last
paragraph of Note 3 and the fourth paragraph of Note 7, as to which the date is
March 17, 1998), with respect to the financial statements of C2i Solutions, Inc.
included in its Annual Report on Form 10-KSB for the year ended December 31,
1997, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
San Diego, California
February 12, 1999
