As filed with the Securities and Exchange Commission on October 30, 2000
Registration No. 333-47010
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-3/A
AMENDMENT NO. 1 TO REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-------------------------
FRISBY TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 62-1411534
(State of Incorporation) (I.R.S. Employer Identification Number)
3195 Centre Park Blvd.
Winston-Salem, NC 27107
(336) 784-7754
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-----------------
Greg Frisby
Chief Executive Officer
3195 Centre Park Blvd.
Winston-Salem, NC 27107
(336) 784-7754
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
-----------------
With copies to:
Norman Friedland, Esq.
Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, New York 11501
Telephone (516) 663-6600
Facsimile (516) 663-6641
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plan, 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/
<PAGE>
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. / /
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class of Securities Amount to be Offering Aggregate Registration
Being Registered Registered Price per Offering Fee (2)(3)
(1) Share(2) Price(2)
---------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par
<S> <C> <C> <C> <C> <C> <C>
value issued May 30, 2000... 800,000 $ 3.7825 $3,026,000 $ 798.87
Common Stock, $.001 par
value issued May 30, 2000... 80,000 $ 3.7825 $ 302,600 $ 79.89
Common Stock, $.001 par
value issued October 14, 1999... 40,000 $ 3.7825 $ 151,300 $ 39.94
Common Stock, $.001 par
value underlying warrants
issued May 30, 2000... 800,000 $ 7.00 $5,600,000 $1,478.40
Common Stock, $.001 par
value underlying warrants
issued May 30, 2000... 80,000 $ 6.00 $ 480,000 $ 126.72
Common Stock, $.001 par
value underlying options
issued September 24, 1998... 100,000 $ 3.1875 $ 318,750 $ 84.15
Common Stock, $.001 par
value underlying options
issued July 18, 2000.. 160,000 $ 4.50 $ 720,000 $ 190.08
Common Stock, $.001 par
value underlying options
issued July 27, 2000... 16,000 $ 4.125 $ 66,000 $ 17.43
Warrants issued
May 30, 2000... 800,000 (4) (4) (4)
Warrants issued
May 30, 2000.... 80,000 (4) (4) (4)
---------------------------------------------------------------------------------------------------------------------
Total...................... 2,956,000 $10,664,650 $2,815.48
=====================================================================================================================
<FN>
(1) Represents 2,076,000 shares of common stock being offered by Selling
Security Holders, including shares issuable upon exercise of outstanding options
and warrants to purchase shares of common stock of the Registrant and 880,000
warrants to purchase shares of common stock of the Registrant.
(2) Estimated solely for purpose of calculating the registration fee pursuant to
Rule 457(c) on the basis of the average of the high and low prices per share of
the Common Stock reported on the NASDAQ Small Cap Market on October 9, 2000,
which was $3.7825.
(3) A registration fee in the amount of $103.13 has previously been paid.
(4) The Warrants being registered herein are being registered in the same
registration statement as the shares of common stock to be offered pursuant
thereto, thus no separate registration fee is required under Rule 457(g) of the
Securities Act.
</FN>
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 SECTION 8(a) MAY
DETERMINE.
================================================================================
</TABLE>
ii
<PAGE>
FRISBY TECHNOLOGIES, INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
Between Registration Statement and Form of Prospectus
<TABLE>
<CAPTION>
Item Number and Heading Caption in Prospectus
----------------------- ---------------------
<S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover of Prospectus Outside Front Cover of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus....................... Inside Front and Outside Back Cover Pages of Prospectus
3. Summary Information, Risk Factors,
and Ratio of Earnings to Fixed
Charges..................................... Prospectus Summary; The Company; Risk Factors;
Summary Consolidated Financial Information
4. Use of Proceeds............................ Use of Proceeds
5. Determination of Offering Price......... Outside Front Cover Page of Prospectus
6. Dilution..................................... Not Applicable
7. Selling Security Holders................. Selling Security Holders
8. Plan of Distribution....................... Inside Front Cover; Plan of Distribution
9. Description of Securities to be
Registered.................................. Description of Securities
10. Interests of Named Experts and
Counsel..................................... Legal Matters and Experts
11. Material Changes......................... Recent Developments
12. Incorporation of Certain Information
by Reference............................... Incorporation of Certain Information by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................... Not Applicable
</TABLE>
iii
<PAGE>
P R O S P E C T U S
This Prospectus covers an aggregate of 2,076,000 Shares of Common Stock
and 880,000 warrants to purchase shares of common stock.
FRISBY TECHNOLOGIES, INC.
This Prospectus covers an aggregate of 2,076,000 shares of Common Stock,
$.001 par value and 880,000 warrants to purchase shares of common stock of
Frisby Technologies, Inc. (the "Company"), which when issued and outstanding
will be sold by certain selling security holders (the "Selling Security
Holders").
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 12 OF THIS PROSPECTUS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SECURITY HOLDERS 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 IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
THE DATE OF THIS PROSPECTUS IS OCTOBER 30, 2000.
--------------------------
<PAGE>
The Common Stock is listed on the SmallCap Market of the Nasdaq Stock
Market ("Nasdaq") under the symbol "FRIZ," and on the Boston Stock Exchange
under the symbol "FRZ". On October 9, 2000, the closing bid and asked prices for
the Common Stock as reported on Nasdaq were $3.50 and $4.0625, respectively. See
"Price Range of Common Stock and Certain Market Information," as set forth in
the Form 10-KSB for the fiscal year ended December 31, 1999.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements and
other information filed by the Company with the Commission pursuant to the
informational requirements of the Exchange Act may be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the following Regional Offices of
the Commission: New York Regional Office, 7 World Trade Center, 13th Floor, New
York, New York 10048; and Chicago Regional Office, Everett McKinley Dirkson
Building, 210 South Dearborn Street, Room 1204, Chicago, Illinois 60604. Copies
of such material may be obtained from the public reference section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:
1. The Company's Quarterly Report on Form 10-QSB for the fiscal
quarter ended June 30, 2000;
2. The Company's Quarterly Report on Form 10-QSB for the fiscal
quarter ended March 31, 2000; and
3. The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1999.
<PAGE>
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of this offering shall be deemed to be incorporated by reference in this
Prospectus and shall be part hereof from the date of filing of such document.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any document described above (other than exhibits). Requests
for such copies should be directed to Frisby Technologies, Inc. 3195 Centre Park
Blvd., Winston-Salem, NC 27107. The Company's telephone number is (336)
784-7754.
The following summary is intended to set forth certain pertinent facts and
highlights from material contained in the body of this Prospectus and the
Company's Report on Form 10-KSB for the fiscal year ended December 31, 1999 and
the Forms 10-QSB for the quarters ended June 30, 2000, March 31, 2000, and
September 30, 1999 (the "Forms 10-QSB"), which are incorporated herein by
reference. The summary is qualified in its entirety by reference to the more
detailed information and consolidated financial statements appearing elsewhere
in this Prospectus and Forms 10-KSB and 10-QSB. Each prospective investor is
urged to read this Prospectus and the Form 10-KSB and Forms 10-QSB in their
entirety.
Certain statements in this Prospectus contain forward-looking statements
which involve risks and uncertainties. When used herein, the words "anticipate,"
"believe," "estimate," and "expect" and similar expressions as they relate to
the Company or its management are intended to identify such forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements are subject to numerous risks and uncertainties that
could cause actual results, performance and achievements to differ materially
from those described or implied in the forward-looking statements, and reported
results should not be considered an indication of future performance. Those
potential risks and uncertainties include without limitation; the need for
further development of certain Frisby Technologies' products and markets, the
development of alternative technologies by third parties, the uncertainty of the
future economic environment, and the uncertainty of market acceptance and demand
for the Company's products in the future.
The Company's actual results, performance or achievements could differ
materially from the results expressed in or implied by these forward-looking
statements.
THE COMPANY
General
Frisby Technologies, Inc (the "Company" or "Frisby") is a developer and
marketer of innovative branded thermal management products for use in a broad
range of consumer and industrial products. The Company's patented and branded
products - ComforTemp(R) DCC(TM) insulating and cooling materials and
Thermasorb(R) thermal additives - provide thermal regulating benefits in both
hot and cold environments. The Company's current products are used in such
end-products as gloves, boots, athletic footwear, fashion apparel, performance
outerwear and home furnishings. In addition, further applications are currently
being identified with potential licensee/customers in the fields of medical
devices, temperature controlled packaging, and automotive interiors.
The Company believes that its thermal management technology is the first to
combine the two distinct technologies of thermal management - phase change
materials ("PCMs") and microencapsulation to effect meaningful thermal
performance improvements within applications across broad markets. Thermal
management is the process by which the temperature of various materials can be
controlled or manipulated. PCMs are materials that change from liquid to solid
and solid to liquid as they release or absorb heat. Through the selection of
PCMs, the Company has the ability to control the temperature at which the phase
change occurs. Microencapsulation is the enclosing of PCMs inside a microscopic
shell to maintain the integrity of the enclosed materials. Microencapsulation
permits PCMs to be imbedded into a variety of host materials.
Products
The Company's thermal management products consist of a series of thermal
additives, which the Company sells under the brand name of Thermasorb(R), and
host materials containing Thermasorb(R) which are sold under the brand name of
ComforTemp(R) DCC(TM). Thermasorb(R) additives improve the thermal storage
capacity of such host materials as foams, fabric packages, gels, plastics and
rubber. In addition, these products address the expanding need for improved
thermal management capabilities in a wide variety of commercial products. In
response to the requirements of its licensee/customers, the Company has
developed applications of its products in other host materials such as epoxy
resins, gels, paints and composite materials.
Thermasorb(R) additives are a series of thermal management materials
developed using the latest advances in microencapsulation technology.
Thermasorb(R) MicroPCMs are micron-sized particles in the form of a dry
free-flowing powder, consisting of a heat absorbing core material encapsulated
within Minnesota Mining and Manufacturing Company's ("3M") proprietary, durable
shell wall. Thermasorb(R) additives can improve the thermal storage capacity of
a variety of host materials, including liquid, foam, epoxy, composite materials,
plastics and gels. For example, Thermasorb(R) additives incorporated into solid
materials enable those materials to absorb up to ten times more heat than
traditional insulating materials. Thermasorb(R) additives are currently
commercially available in a variety of temperature settings ranging from
43(degree)F to 122(degree)F. The variety of the Company's Thermasorb(R)
additives allows for an engineered solution for a multitude of thermal
requirements.
ComforTemp(R)DCC(TM) products can be fabricated in different ways to have
the ability to retain or exclude heat thereby maintaining a more constant
temperature. ComforTemp(R)DCC(TM) materials recharge naturally depending on the
individual level of physical activity or other external conditions. For cold
weather apparel products, the greatest asset of ComforTemp(R)DCC(TM) is the
ability to retain body heat during periods of activity and to release the heat
back to the individual during periods of inactivity when the body is most in
need of warmth. For hot weather products, ComforTemp(R) DCC(TM) can be used to
facilitate the regulation of body heat generated during activity thereby
providing a cooling effect. By transforming a substance into a
ComforTemp(R)DCC(TM) enhanced material, the natural qualities of the host
material are complimented while producing a substance with thermal management
qualities.
Foams and Fabric Packages
ComforTemp(R)DCC(TM) products are lightweight, breathable materials which
have the added capability of wicking away moisture while maintaining comfort in
extreme hot or cold climates. For cold weather apparel products, the greatest
asset of ComforTemp(R)DCC(TM) is its ability to retain body heat during periods
of activity and to release the heat back to the individual during periods of
inactivity, when the body is most in need of warmth. This process is reversible.
For hot weather products, ComforTemp(R)DCC(TM) can be used to facilitate the
regulation of body heat generated during activity, thereby providing a cooling
effect. ComforTemp(R)DCC(TM) can also be used as a therapeutic or "climate
controlled" wrap for comfort or medical purposes.
ComforTemp(R)DCC(TM) fabric packages are provided by the lamination or some
alternative attachment of ComforTemp(R)DCC(TM) foams to a wide variety of
fabrics. ComforTemp(R)DCC(TM) can be combined with a wide variety of high
performance fabrics using traditional fabrication techniques, such as lamination
and sewing. The choice of fabric is typically made by the Company's
licensee/customers in cooperation with the Company. A typical fabric used with
ComforTemp(R) DCC(TM) in performance winter apparel is polar fleece from mills
such as Malden Mills and Dyersburg. For active sports apparel, many
licensee/customers select fabrics with superior moisture management properties
such as CoolMax(R) from DuPont or fabrics with 2-way and 4-way stretch -like
Lycra(R) from DuPont.
As a service to its licensee/customers, the Company may, from time to time,
create fabric packages for the licensee/customers using one of the Company's
approved laminators or fabricators, for which the Company receives a fee.
Alternatively, the licensee/customers may have this process done by an approved
fabricator.
Other Host Materials
ComforTemp(R)DCC(TM) gels, plastics and rubber compounds have also been
developed. The Company's gels can either be free-flowing and flexible for use as
a cold or warm compress or firm for use in footwear insoles or bike seat covers.
Some of the gels are microwaveable and have been tested to provide prolonged
warming compared to non-ComforTemp(R)DCC(TM) gels. The heated gels are useful
for end products such as temperature sensitive packaging applications and for
medical footwear inserts used by diabetes patients who typically suffer from
cold extremities resulting from poor circulation.
Finished Products
The Company recently purchased substantially all of the assets of Steele &
Associates ("Steele") and acquired Extreme Comfort, Inc. ("Extreme Comfort").
These two transactions enable the Company to sell finished products related to
thermal management. For example, the Steele division of the Company markets and
sells a line of micro-climate cooling vests under the SteeleVest(R) name.
Extreme Comfort markets and sells a variety of electrically operated personal
heating products under the Extreme Comfort(R) brand.
Purchasing
The Company outsources all of its production needs for the core-phase
change materials, Thermasorb(R) MicroPCM, and ComforTemp(R)DCC(TM) materials and
anticipates that it will continue to do so for the foreseeable future.
Currently, all of the Company's Thermasorb(R) additives are contract
manufactured to specifications provided by the Company to 3M. The Company and 3M
have entered into an arrangement that provides firm, fixed pricing for all of
the Company's anticipated microcapsule production requirements pursuant to which
the Company ensures its continuing access to such production capacity at
acceptable terms. This arrangement requires certain minimum volume purchases. In
the future, the Company may seek geographic diversity for its sources of
Thermasorb(R).
The Company currently relies upon three sources of foam in the U.S. and one
in Europe.
The Company monitors its products during each step of the manufacturing
process for quality assurance purposes. Core PCM is tested to ensure that the
quantity of heat the PCM can hold at different temperature levels adheres to the
Company's product specifications. After encapsulation of core PCM, the shell
wall is tested at 3M and validated by Frisby to ensure that the product
satisfies its thermal requirements. The foam and other host products are tested
prior to shipment to the Company's licensee/customers. Until the vendor has met
certain quality assurance requirements, all testing is performed by the
Company's quality assurance employees at the Company's North Carolina facility.
For qualified, certified vendors, testing may be performed by third party
representatives at the manufacturing site.
The Company historically has not had material losses of inventory and has
not experienced material losses due to cost and market fluctuations,
overstocking or technology. The Company maintains certain minimal inventory
requirements at every level of the manufacturing process (e.g. raw materials,
intermediary materials and finished goods). This inventory is needed to satisfy
scheduled customer orders as well as underanticipated requests and other
potential sales opportunities.
Sales and Marketing
Currently, the Company's strategy is based on (i) establishing
relationships with world class market leaders for new product applications and
launches, (ii) establishing ComforTemp(R)DCC(TM) as the recognized brand for
dynamic climate control products, similar to GoreTex(R) (for waterproofing) and
Thinsulate(TM) (for thermal insulation), and (iii) expanding through strategic
industry alliances, joint ventures and cross-licensing of complementary
products:
o Establishing relationships with market leaders for new product applications
and launches:
-- High-profile licensee/customers establish credibility for Frisby
brands
-- Increase penetration with existing licensee/customers
-- Revenue model includes significant product sales with increasing
annual minimum purchase requirements
-- Close collaboration with the Company's suppliers, licensee/customers
and their customers that have requested expanded use of the Company's
products
o Establishing ComforTemp(R)DCC(TM) as the recognized brand for dynamic climate
control products:
-- Similar to "Gore-Tex" or "Thinsulate" Co-Branding Models
-- The Company's brands benefit significantly from national promotional
campaigns of licensee/customers
-- Cooperative advertising leverages the Company's promotional spending
and accelerates brand recognition with consumers
-- Cost effective use of the Internet and Quality Value Channel ("QVC")
(where the Company's products are featured) help communicate brand and
performance features to broad consumer base
o Expanding through strategic industry alliances, joint ventures and
cross-licensing of complementary products:
-- Global sales alliances will dramatically increase the number of "feet
on the street" selling for Company products
-- Development alliances will help expand product offerings, reduce
competition and accelerate time to market
-- Short-term exclusive licenses with market leaders are designed to
stimulate industry interest and target consumer support
The Company seeks to enter into agreements with companies that have very
strong brand names, excellent reputations for quality and performance and
extensive and established sales and distribution networks. A typical license
agreement with a licensee/customer: (i) identifies a defined end-use product
area in which to develop and commercialize products; (ii) requires the strategic
partner to purchase all of its requirements for ComforTemp(R)DCC(TM) materials
from the Company; (iii) establishes minimum annual purchases of such materials;
(iv) grants to the strategic partner a license, which may or may not be
exclusive, to use the Company's name and trademarks in conjunction with the
products produced; and (v) establishes a high level of quality control to ensure
each end product meets the Company's performance and quality standards.
The Company's strategic partners are also required to co-brand the
Company's products by including the Company's trademarks in all their marketing
materials, point of sale displays, and sales promotion efforts for end-use
products incorporating the Company's products. If necessary, the Company grants
exclusivity for a limited period of time in order to establish relationships
with market share leaders committed to pioneering the commercialization of
certain specific end-use products to create demand for the Company's products,
typically in a new field of use.
The Company does a significant amount of business with a limited number of
licensee/customers. Total revenues from the top two licensee/customers during
each period comprised approximately 26% (14% and 12%) and approximately 53% (35%
and 18%) of the Company's total revenues for the years ended December 31, 1999
and 1998, respectively. It is anticipated that this concentration will decline
significantly with expanded revenues.
Advertising
In addition to the coordinated efforts with licensee/customers, the Company
uses a variety of communication tools in order to build brand name recognition
of its Thermasorb(R) and ComforTemp(R)DCC(TM) products and trademarks. These
include use of advertising in trade and consumer media, public relations
professionals, direct mail, in-store displays and the Internet. Total expenses
related to communication in 1999 and 1998 were $1,470,000 and $1,360,000,
respectively. The Company has recently updated its Internet sites on the World
Wide Web at www.frisby.com and www.comfortemp.com. These web sites provide
information which end-users of the Company's products may use in conjunction
with their own web sites. The Company has recently created the (multi-lingual)
www.steele.com web site, the Company's first effort in e-commerce, where
complete cooling garments are offered directly to the consumer. The Company is
also generating sales with the web site www.extremecomfort.com. The sites
promote the Company's products and brands as well as its licensees' products.
The Company also attends and exhibits its products at numerous tradeshows during
the year.
Research and Development
Beginning in 1997, the product development focus shifted more towards
commercialization of its product and related applications and away from
government funded projects. The Company currently maintains several employees
devoted to new applications and improvements to the Company's core technology.
This effort is supplemented by existing and potential suppliers and
licensee/customers of the Company's products who are developing new materials
and processes within the field of their respective licenses, i.e., gels, foams,
etc. The Company's license agreements provide it with at least joint ownership
of any new intellectual property developed by its licensee/customers
Patents/Intellectual Property
The Company signed an exclusive license agreement in 1995 with Triangle
Research and Development Corporation ("TRDC") which holds innovative proprietary
technology in microencapsulated and thermal management technologies and with
which the Company had an existing agreement since 1991. The license gives the
Company the exclusive worldwide right to develop and commercialize this
technology with respect to certain applications in exchange for certain royalty
payments. In order to expand its rights in the TRDC technology, in January 1998,
the Company entered into an agreement with Outlast Technologies, Inc.
("Outlast") which expands the rights of the Company to include certain
combinations of the Company's products with fibers and fabrics. In September
1998, the Company entered into an agreement with TRDC that reduced the Company's
royalty rates. Additionally, the Company has been assigned TRDC's right to their
original license agreement for fabrics with Outlast. This assignment will result
in the Company receiving royalty income from Outlast subject to certain
obligations to TRDC.
The following table sets forth information regarding the patents currently
owned by or licensed to the Company.(1)
<TABLE>
<CAPTION>
Patent Expiration
Date of Patent Patent Number Description Industry (year)
-------------- ------------- ----------- -------- ------
<S> <C> <C> <C> <C>
2/28/89 4,807,696 Thermal Energy Storage Automotive, 2006
Apparatus Using Encapsulated Aerospace,
PCMs. Electronics
3/27/90 4,911,232 Heat Transfer Using MicroPCM Automotive 2007
Slurries Computers, Electronics
4/16/91 5,007,478 MicroPCM Slurry Heat Sink Computers, Electronics 2008
8/25/92 5,141,079 Cutting/Cooling Fluid All Industries 2009
9/15/92 5,146,625 Cooling Vest All Industries 2009
7/6/93 5,224,356 Thermal Energy Absorbing and Electronics 2010
Conducting Potting Materials
3/1/94 5,290,904 Thermally Enhanced Heat Shields Protective Apparel 2011
4/19/94 Des 346,063 Boot Warmer Footwear 2011
4/26/94 5,305,471 Insulated Cooling Vest All Industries 2011
11/22/94 5,366,801 Coated Fabric With Reversible Protective Apparel 2011
Enhanced Properties
5/16/95 5,415,222 Microclimate Cooling Garments Protective Apparel 2012
1/16/96 5,484,448 Garment and Method for Cooling All Industries 2013
Body Temperature
3/19/96 5,499,460 Moldable Foam Insole with Footwear 2013
Reversible Enhanced Thermal
Storage
3/21/96 5,623,772 Foot-Warming System for a Boot Footwear 2013
6/10/97 5,637,389 Thermally Enhanced Foam All Industries 2012
Insulation
9/8/98 5,804,297 Thermal Insulating Coating All Industries 2011
Using MicroPCMs
1/14/98 0611330* Coated Fabric With Reversible All Industries 2013
Enhanced Properties
9/1/99 0630195# Moldable Foam Insole With Footwear 2013
Reversible Enhanced Thermal
Storage
</TABLE>
# European Patent granted with respect to the invention covered by United States
Patent No. 5,499,460
* European Patent granted with respect to the invention covered by United States
Patent No. 5,366,801
(1) List only includes patents related to thermal management technologies. Other
patents not related to non-core business were acquired as a part of the Extreme
Comfort acquisition.
The Company has registered the trademarks, Thermasorb(R) and ComforTemp(R),
with the United States Patent and Trademark Office (the "PTO") and has applied
for registration of the trademark, Comfort in the Extreme(TM), which application
has been allowed by the PTO. Effective March 9, 1998, the Company received a
registered Canadian trademark for ComforTemp(R). A trademark application has
also been submitted for ComforTemp(R) in the European Community, as well as in
most industrialized nations of the world including, among others, Japan, China,
Russia and Korea.
The Company and its partners have several patents pending and also intend
to file for additional patents related to its technologies and products.
In addition to its licenses and trademarks, the Company is developing
considerable proprietary technology and trade secrets with respect to the
selection of the raw material(s) to be used for the capsules' core materials,
shell wall materials and the composition of the capsule which the Company
believes accords it a considerable competitive advantage. The Company believes
that significant barriers have been created for potential competitors by
securing licenses under patents which grant and protect its rights to a wide
variety of applications, spanning a broad spectrum of industries and end-use
products. In order to further protect its proprietary trade secrets and
know-how, the Company generally requires any person having access to such
confidential information to execute an agreement whereby such person agrees to
keep such information confidential.
Competition
The Company's Thermasorb(R) additives and ComforTemp(R)DCC(TM) foams
compete with a wide variety of natural and synthetic insulating products,
including other applications of MicroPCMs and bulk PCMs, open and closed cell
foams, synthetic insulators (e.g., Thinsulate(R)), fleece, wool and down. The
Company believes that its ComforTemp(R)DCC(TM) foams offer significant benefits
over natural and synthetic insulation materials and foams not containing
MicroPCMs because of (i) the ability of the ComforTemp(R)DCC(TM) foam to absorb
heat and release it when cooling occurs; (ii) its lightweight, low bulk
characteristics; (iii) its durability; (iv) its rechargeability; (v) its ability
to be customized to a particular temperature within a wide range of temperatures
in a wide variety of applications; (vi) its minimal maintenance requirements;
and (vii) its ability to be combined with other available heat management
materials. The Company's products also have the capacity to function reversibly.
Depending on the placement of the ComforTemp(R)DCC(TM) foam, it may be
engineered to absorb, reject or regulate heat.
The Company competes directly with Outlast in certain applications. The
license granted to Outlast by TRDC permits it to market applications of fibers
and fabrics with reversible enhanced thermal storage properties ("MicroPCM
Fibers and Fabrics"). The Company believes that the principal area of
competition with Outlast involves applications where MicroPCM Fibers or Fabrics
less than 2mm thick may be used instead of combinations that include the
Company's ComforTemp(R)DCC(TM) foam. The Company believes that products
incorporating its ComforTemp(R)DCC(TM) foam will offer significant advantages
over such fabric applications because fabrics will not have the sufficient mass
of MicroPCMs to provide a significant thermal management solution.
The Company competes with other companies, such as Phase Change
Laboratories, Inc., that utilize bulk PCMs primarily for heat retention
products. The Company believes Thermasorb(R) additives and ComforTemp(R)DCC(TM)
foams offer superior performance characteristics compared to its competitors'
products because microencapsulation obviates the need for containment of the PCM
in a sealed bag or other packaging which may tear or leak resulting in
contamination of the end product.
The Company's products also compete with active mechanical and solid
cooling alternatives (e.g., fans, conductive heat sinks) currently utilized for
selected electronics and computer cooling applications and certain medical
products. For these applications, Thermasorb(R) will compete within a fragmented
product market comprised of specialty firms, including Aavid Thermal
Technologies, Inc. and various smaller companies, including Advanced Ceramics
Corporation, Thermacore, Inc., Chipcoolers, Inc. and Marlow Industries, Inc. The
Company believes that Thermasorb(R) would be an effective means to enhance the
performance of thermal solutions being provided by these and other firms,
resulting in a fertile area for strategic partnerships within this segment of
the industry.
Employees
As of December 31, 1999, the Company employed approximately 32 full-time
employees of which 5 were management personnel, 15 were sales personnel, 5 were
product development personnel, 4 were administrative personnel, and 3 were
inventory purchasing, quality assurance and warehouse personnel.
Frisby was organized in 1989 and reincorporated under the laws of the State
of Delaware in March 1998. The Company's executive offices are located at 3195
Centre Park Blvd., Winston-Salem, NC 27107 and its telephone number is (336)
784-7754.
RECENT EVENTS
Private Placement Offering Completed.
On May 30, 2000 the Company completed a private offering ("May Private
Offering") pursuant to Regulation D promulgated under the Securities Act of 1933
(the "Act") wherein the Company raised $4,000,000 in gross proceeds through the
sale of 800,000 Units, each Unit comprised of (i) one share of Common Stock and
(ii) one warrant to purchase a share of Common Stock ("Unit Warrants"). The Unit
purchase price was $5.00 per Unit. A total of 800,000 shares of Common Stock and
Unit Warrants to purchase 800,000 shares of Common Stock were issued in
connection with the May Private Offering. The Company received net proceeds from
the May Private Offering of approximately $3,700,000. Substantially all of the
proceeds have been and will be used for the purpose of developing and marketing
the Company's ComforTemp(R) product, funding the Company's participation in a
European joint venture, Schoeller Frisby Technologies GmbH, and for working
capital. The Unit Warrants issued in the May Private Offering are exercisable at
$7.00 per share and may be exercised during a five year period ending May 30,
2005. In connection with the May Private Offering, the Company agreed to use its
best effort to file a registration statement with the Securities and Exchange
Commission to effect the registration for sale under the Act of the shares of
Common Stock and shares underlying the Unit Warrants sold in the May Private
Offering.
In connection with the May Private Offering, the Company issued to Janney
Montgomery Scott, LLP ("JMS") and its designees, for services JMS provided as
placement agent, warrants (the "Placement Agent Warrants") to purchase 80,000
shares of Common Stock. The Unit Warrants issued to JMS are exercisable at $6.00
per share and may be exercised during a five year period ending May 30, 2005.
The Warrants issued to JMS contain certain anti-dilution provisions.
Acquisition of Extreme Comfort.
The Company acquired on October 14, 1999, all of the capital stock of
Extreme Comfort, Inc. ("EC"), an Oregon corporation with its principal place of
business in Eugene, Oregon.
Pursuant to the terms of the Purchase Agreement, dated October 14, 1999,
the Company acquired all of the capital stock of EC in exchange for 40,000
shares of common stock of the Company, for an aggregate purchase price of
$210,000.
Joint Venture with Schoeller Textil AG.
On April 11, 2000 the Company and Schoeller Textil AG, one of the world's
most recognized and innovative suppliers of high performance fabrics today
announced the formation of Schoeller Frisby Technologies GmbH. This
Switzerland-based joint venture will be the exclusive marketer, seller and
distributor of ComforTemp(R) brand foams and fabrics and
schoeller(R)-ComforTemp(R) brand textiles to all markets within Europe and to
the US-based fashion industry.
The venture expands upon the license agreement between the two companies
that was announced in December 1998. Schoeller has established a strong base of
over 50 customers for ComforTemp(R)-based products in the sports, fashion and
performance apparel industries, including Andrew Marc, BMW, Bogner, Gucci, K-2,
Pierre Cardin, Polo Ralph Lauren, Puma, and Reusch. The joint venture will now
be the exclusive provider of ComforTemp(R) and schoeller(R)-ComforTemp(R)
fabrics to all of these existing apparel customers. The venture is also expected
to result in several important strategic and operational synergies:
-- Accelerated development of business opportunities within new European
industrial, commercial and consumer markets.
-- The broadening of the ComforTemp(R) and schoeller(R)-ComforTeemp(R) product
ranges by combining the companies' marketing resources and technical
expertise in the areas of textile design and thermal management to develop
new products.
-- An efficient, focused, and coordinated marketing and communications
campaign and sales strategy in Europe.
Frisby will include the venture's financial results with Frisby's
consolidated financial statements. The effective date of the venture is January
1, 2000. The Chairman and CEO of the venture is Hans-Jurgen Huebner, president
of Schoeller Textil, AG.
Schoeller Frisby Technologies GmbH will also act as a non-exclusive agent
of Frisby and Schoeller to market, distribute and sell certain products to
manufacturers of end-use products for Asia, excluding Japan.
Schoeller Textil, AG, located in Sevelen, Switzerand is a 130-year-old
company that supplies innovative fabrics and technologies to a worldwide
customer base for sports, fashion, industrial health and safety and industrial
design.
<PAGE>
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Securities Offered ........................ 2,076,000 shares of Common
Stock and 880,000 warrants
to purchase shares of Common
Stock solely by the Selling
Security Holders
Common Stock Outstanding
After the Offering (1) ........... 6,580,488
Risk Factors .............................. This Offering involves a
high degree of risk.
See "Risk Factors."
Use of Proceeds ........................... The Company will receive no
proceeds from the sale of the
Common Stock registered
hereunder by the Selling
Security Holder.
Nasdaq Symbol ............................. FRIZ
Boston Stock Exchange Symbol............... FRZ
---------------------
<FN>
(1) Does not include (i) 1,250,000 shares of Common Stock reserved for issuance
under the Company's Incentive Stock Option Plan, of which 750,000 shares have
been reserved for currently outstanding options, or ii) 200,000 shares of Common
Stock reserved for issuance under the Company's Employee Stock Purchase Plan of
which 7,250 shares have been issued.
</FN>
</TABLE>
<PAGE>
RISK FACTORS
The Securities offered hereby are speculative and involve a high degree of
risk. The purchase of these Securities is suitable only for persons who can
afford the risk of the loss of their entire investment. Prospective investors
should carefully consider, among other things, the following risk factors before
making an investment decision:
Losses and Possible Additional Financing
For the years ended December 31, 1998 and 1999. The Company had net losses
of $3,919,000, and $5,628,000, respectively. At December 31, 1999, the Company
had working capital of $1,957,000 and an accumulated deficit of $10,615,000. The
Company anticipates that it will continue to sustain losses through fiscal 2000
and utilize cash resources principally to pay for the Company's product
development efforts, its acquisition of intellectual properties, and its
anticipated selling, marketing and general administrative expenses.
No assurance can be given that the Company will become profitable. In the
event that the Company's plans change or its assumptions prove to be inaccurate
(due to unanticipated expenses, difficulties, delays or otherwise), the Company
could be required to seek additional financing. The Company has no commitments
for any future funding, and there can be no assurance that the Company will be
able to obtain additional capital in the future or that the terms of such
funding, if available, will be satisfactory to the Company. Additional equity
financing by the Company may result in substantial dilution to the Company's
stockholders, including purchasers of the Common Stock.
Company's Growth Strategy Dependent Upon Broad Market Acceptance
The Company's strategy is to achieve and capitalize upon brand recognition
of its thermal management technologies in high visibility markets. The Company's
strategy assumes that its licensee/customers will regard the use of the
Company's thermal management technologies in their products as providing
enhanced value. Additionally, the Company's strategy is based upon certain
assumptions regarding: the size of the thermal management products market (for
consumer products and industrial products); the Company's anticipated share of
these markets; the time factors involved in concluding satisfactory license
agreements with licensee/customers; the timing of introductions of products
featuring the Company's thermal products; the price at which the Company
believes it will be able to sell its products; and consumer/customer demand for,
and acceptance of the Company's products. To date, the Company's products have
only been sold in the consumer marketplace, not in the industrial marketplace.
No assurance can be given that the Company will achieve and/or maintain market
acceptance in the industrial marketplace. The Company's targeted strategic
partner base may not change the established thermal management technologies
incorporated in their products and may not make the necessary investment to
purchase the Company's products. Additionally, any revenues or profits which may
be derived by the Company from its licensing and joint venture agreements will
be substantially dependent upon the willingness and ability of the Company's
licensee/customers and joint venture partners to devote their financial
resources and manufacturing and marketing capabilities to commercialize products
based on the Company's technologies.
Dependence Upon Intellectual Property; Technological Obsolescence
The Company's business is dependent on the continued validity of the
patents that it licenses and the effectiveness of its licenses to such patents.
There can be no assurance that any steps taken by the Company to protect its
intellectual property will be adequate to prevent misappropriation, that any
patents or copyrights issued to the Company or its licensors will not be
invalidated, circumvented or challenged, or that the rights granted thereunder
will provide a competitive advantage. Claims alleging the invalidity of the
Company's patents, even if unfounded, may have a material adverse effect on the
commercialization of products or technologies based on such rights. The Company
also relies on unpatented proprietary technology, and there can be no assurance
that others may not independently develop the same or similar technology or
otherwise obtain access to the Company's proprietary technology. In addition,
laws of certain countries in which the Company's products are, or may be
developed, manufactured or sold, may not provide the Company's products and
intellectual property rights with the same degree of protection as the laws of
the United States. Furthermore, there can be no assurance that others will not
independently develop technologies similar or superior to the Company's
technology and obtain patents, trademarks or copyrights thereon. In such event,
the Company may not be able to license such technologies on reasonable terms, or
at all. Although the Company believes that its products and technology do not
infringe upon proprietary rights of others, there can be no assurance that third
parties will not assert infringement claims in the future. Moreover, litigation
may be necessary to enforce the Company's rights under licensed patents,
copyrights and other intellectual property rights, to protect the Company's
trade secrets, to determine the validity and scope of the proprietary rights of
others or to defend against claims of infringement or invalidity. Such
litigation, regardless of the outcome, could result in substantial cost and
diversion of resources and could have a material adverse effect on the Company's
business, financial condition and results of operations.
In addition to patent protection, the Company seeks to protect its
proprietary information through confidentiality and non-competition agreements
with its employees, directors, licensee/customers, strategic partners,
consultants, advisors and collaborators. There can be no assurance that such
agreements will not be breached, that the Company will have adequate remedies
for any such breach or that the Company's proprietary information will not
otherwise become known to, or be independently developed by, the Company's
competitors.
There can be no assurance that the registered or unregistered trademarks of
the Company do not infringe upon the rights of third parties or that third
parties will not assert claims of infringement. The cost to defend such claims
or the requirement to change any trademark (which would result in the loss of
any goodwill associated with that trademark) could entail significant expense
and have a material adverse effect on the Company's business, financial
condition and results of operations.
The thermal management products industry is characterized by rapid
technological change and frequent introduction of new products and product
enhancements which result in relatively short product life cycles and rapid
product obsolescence. There can be no assurance that the Company will be able to
identify and offer thermal management products necessary to remain competitive
and avoid losses related to obsolete inventory or related drastic price
reductions.
Dependence on a Limited Number of Vendors
The Company relies upon three sources of foam in the United States and one
in Europe, and expects to have at least one supplier in Asia. During 1999, the
Company's primary U.S. foam producer was unable to produce certain
ComforTemp(R)DCC(TM) foams at the price contracted. As a result, the Company has
been purchasing this foam from the producer at cost. The Company believes that
the inadequacies of this foam supplier in the United States have limited or
reduced its revenues and margins during fiscal year 1999. As a result of
management's efforts, the Company has recently contracted with new suppliers
that utilize more efficient techniques and manufacturing processes, which reduce
waste and improve quality.
Currently, all of the Company's Thermasorb(R) additives are contract
manufactured to specifications provided by the Company to 3M. The Company and 3M
have entered into an arrangement that provides firm, fixed pricing for all of
the Company's anticipated microcapsule production requirements pursuant to which
the Company ensures its continuing access to such production capacity at
acceptable terms. This arrangement requires certain minimum volume purchases. In
the future, the Company may seek geographic diversity for its sources of
Thermasorb(R).
To date, the Company has not experienced significant difficulty in
connection with the delivery of Thermasorb(R) additives. If for any reason the
Company is unable or unwilling to establish long-term supply contracts with such
suppliers or if any of its suppliers are unable to meet the Company's
requirements, the Company could experience cost increases, a deterioration of
services from its suppliers, or interruptions, delays or a reduction that may
cause the Company to fail to meet delivery schedules to its licensee/customers
which in turn may have a material adverse effect on the Company's business.
The Company has two principal suppliers in the United States of the core,
unencapsulated PCMs required for the manufacture of Thermasorb(R) additives
which are able to supply PCMs in sufficient quantities and at competitive
prices. Any unanticipated interruption of supply would have, at a minimum, a
short-term material adverse effect on the Company. Any significant price
increases in the Company's core materials may have a material adverse effect on
the Company.
Product Liability Exposure and Availability of Insurance
The development, testing, manufacturing, marketing and sale of the
Company's products involve risks of allegations of product liability. While no
product liability claims have been made against the Company to date, if such
claims were made and adverse judgments obtained, whether directly against the
Company or against one of the Company's strategic partners in connection with an
end-use product incorporating the Company's products, such claims could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company presently maintains product liability
insurance in the amount of $1,000,000 per claim with an annual aggregate limit
of $2,000,000. In addition, the Company presently maintains umbrella product
liability insurance coverage in the amount of $9,000,000 per claim with an
annual aggregate limit of $9,000,000. There can be no assurance that such
coverage is, or any new coverage will be, adequate or will continue to be
available at an acceptable cost, if at all. A product liability claim, product
recall or other claim with respect to uninsured liabilities or in excess of
insurance coverage could have a material adverse effect on the Company's
business, operating results and financial condition. The Company may seek to
increase its insurance coverage in the future, although there can be no
assurance that such increased coverage will be available from insurers or, if
available, at terms acceptable to the Company.
USE OF PROCEEDS
The primary purpose of this Prospectus is to register: (a) 550,000 shares
of our common stock that were issued to MUSI Investments, S.A. ("MUSI"), 550,000
warrants and 550,000 shares of our common stock that may be issuable upon the
exercise of warrants issued to MUSI under a purchase agreement dated May 30,
2000 by and among the Company and MUSI, Ms. Jean S. Moore ("Moore"), AllFirst
Company Custodian For Hogan & Hartson Partners Retirement Plan for the benefit
of Moore ("AllFirst") and Schoeller Textil AG ("Schoeller") (the "May 2000
Purchase Agreement") and the related warrant agreement dated May 30, 2000
between the Company and MUSI; (b) 180,000 shares of our common stock that were
issued to AllFirst, 180,000 warrants and 180,000 shares of our common stock that
may be issuable upon the exercise of those warrants issued to AllFirst under the
May 2000 Purchase Agreement and the related warrant agreement dated May 30, 2000
between the Company and AllFirst; (c) 20,000 shares of our common stock that
were issued to Moore, 20,000 warrants and 20,000 shares of our common stock that
may be issuable upon the exercise of those warrants issued to AllFirst under the
May 2000 Purchase Agreement and the related warrant agreement dated May 30, 2000
between the Company and AllFirst; (d) 50,000 shares of our common stock that
were issued to Schoeller 50,000 warrants and 50,000 shares of our common stock
that may be issuable upon the exercise of those warrants issued to Schoeller,
under the May 2000 Purchase Agreement and the related warrant agreement dated
May 30, 2000 between the Company and Schoeller; (e) 80,000 shares of our common
stock that were issued to JMS and 80,000 shares of common stock that may be
issuable upon the exercise of warrants issued to JMS under an agency agreement
dated December 15, 1999, as amended May 1, 2000 between the Company and JMS; (f)
40,000 shares of our common stock issued to EC under a purchase agreement dated
October 14, 1999 between the Company and EC; (g) 160,000 shares of our common
stock that may be issuable to Favre Enterprises, Inc. under an endorsement and
representation agreement dated July 18, 2000 between the Company and Favre
Enterprises, Inc.; (h) 16,000 shares of our common stock that may be issuable to
Maximum Marketing, Inc. under an endorsement and representation agreement dated
July 27, 2000 between the Company and Maximum Marketing, Inc.; and (i) 100,000
shares of our common stock that may be issuable upon the exercise of options
issued to TRDC under a license agreement dated September 24, 1998 between the
Company and TRDC. The Company will not receive any of the proceeds from the sale
of any of the shares, options or warrants discussed above.
<PAGE>
SELLING SECURITY HOLDERS
The table below sets forth, with respect to each Selling Security Holder
and based upon the information available to us as of October 11, 2000, the
number of shares beneficially owned (including options and warrants) by each
Selling Security Holder and the number of shares of our common stock that may be
sold pursuant to this Prospectus. The Selling Security Holders named below may
resell all, a portion or none of the relevant shares at any time. We cannot
assure you that any of the Selling Security Holders will sell any or all of the
shares of common stock to which this Prospectus relates.
<TABLE>
<CAPTION>
Name of Registered Shares Not
Security Holder Shares Presently Owned(1) Being Registered
------------------- ---------------------- ----------------
Shares Being
Number Percent Registered Number Percentage
------ ------- ------------- ------ ----------
<S> <C> <C> <C> <C> <C>
Triangle Research and
Development Corporation 100,000 1.15% 100,000 0 0
MUSI Investments, S.A. 1,100,000 12.71% 1,100,000 0 0
AllFirst Company Custodian
For Hogan & Hartson Partners
Retirement Plan for the
Benefit of Jean S. Moore 360,000 4.16% 360,000 0 0
Jean S. Moore 40,000 * 40,000 0 0
Schoeller Textil AG 100,000 1.15% 100,000 0 0
Janney Montgomery Scott, LLC 160,000 1.84% 160,000 0 0
Extreme Comfort, Inc. 40,000 * 40,000 0 0
Favre Enterprises, Inc. 160,000 1.84% 160,000 0 0
Maximum Marketing, Inc.
on behalf of Tiki Barber 16,000 * 16,000 0 0
<FN>
(1) For the purposes of this section only, all options and warrants shall be
deemed exercised and the shares underlying such options and warrants shall
be deemed issued and outstanding.
</FN>
</TABLE>
*Indicates less than a one (1%) percent ownership interest in the Company.
DESCRIPTION OF SECURITIES
TRANSFER AGENT
The transfer agent and registrar of the Company's Common Stock is American
Stock Transfer and Trust Co., 40 Wall Street, New York, New York 10005.
The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock $.001 par value per share and 1,000,000 shares of preferred stock,
$.001 par value per share.
Common Stock
Holders of the Common Stock do not have subscription, redemption,
conversion or preemptive rights. The shares of Common Stock sold by the Company
in this Offering will be, when issued and paid for, fully paid and
non-assessable. Each share of Common Stock is entitled to participate pro rata
in distribution upon liquidation and to one vote on all matters submitted to a
vote of stockholders. The holders of Common Stock may receive cash dividends as
declared by the Board of Directors out of funds legally available therefor.
Holders of the Common Stock are entitled to elect all directors. At each annual
meeting of the stockholders all of the directors will be elected. The holders of
the Common Stock do not have cumulative voting rights, which means that the
holders of more than half of the shares voting for the election of a class of
directors can elect all of the directors of such class and in such event the
holders of the remaining shares will not be able to elect any of such directors.
Preferred Stock
The Board of Directors has the authority to cause the Company to issue
without any further vote or action by the stockholders, up to 1,000,000 shares
of Preferred Stock, in one or more series, and to designate the number of shares
constituting any series, and to fix the rights, preferences, and restrictions
thereof, including dividend rights, voting rights, rights and terms of
redemption, redemption price or prices and liquidation preferences of such
series. The issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company without further
action by the stockholders. The issuance of Preferred Stock with voting and
conversion rights may adversely affect the voting power of the holders of Common
Stock, including the loss of voting control.
Options and Warrants
As of September 28, 2000, we had 2,200,000 options and warrants outstanding
to purchase Common Stock. These options and warrants have exercise prices
ranging from $3.00 - $11.65 per share and have terms ranging from 5 to 10 years.
PLAN OF DISTRIBUTION
The sale of Shares by the Selling Security Holder may be effected from time
to time in private transactions or in the over-the-counter market at prices
related to the prevailing prices of the Shares on the NASDAQ Small Cap Market at
the time of the sale or at negotiated prices. The Selling Security Holder may
effect such transactions by selling to or through one or more broker-dealers at
their customary commission rates, and such broker-dealers may, in certain cases,
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Security Holder. The Selling Security Holder and
any broker-dealers that participate in the distribution may under certain
circumstances be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by such broker-dealers and any
profits realized on the resale of Shares by them may be deemed to be
underwriting discounts and commissions under the Securities Act. In addition, we
have agreed to indemnify certain of the Selling Security Holder with respect to
the Shares of Common Stock offered hereby against certain liabilities, including
certain liabilities under the Securities Act.
To the extent required under the Securities Act, a supplemental Prospectus
will be filed, disclosing (a) the name of any such broker-dealers, (b) the
number of shares involved, (c) the price at which such shares are to be sold,(d)
the commissions paid or discounts or concessions allowed to such broker-dealers,
where applicable, (e) that such broker-dealers did not conduct any investigation
to verify the information set out or incorporated by reference in this
Prospectus, as supplemented, and (f) other facts material to the transaction.
Each Selling Security Holder may be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M, which provisions may limit the timing of purchases of
any of the securities by the Selling Security Holder.
There is no assurance that any of the Selling Security Holder will sell any
of the Shares.
We have agreed to pay certain costs and expenses incurred in connection
with the registration of the Shares offered hereby, except that the Registering
Stockholders shall be responsible for all of their selling commissions, transfer
taxes and related charges in connection with the offer and sale of such Shares.
We propose to keep the registration statement relating to the offering and
sale by the Selling Security Holder of the Shares continuously effective until
such date as such Shares may be resold without registration under the provisions
of the Securities Act, under Rule 144 thereof or otherwise, but we may, at such
time as it determines, file an amendment to remove any unsold Shares.
REPORTS TO STOCKHOLDERS
The Company distributes annual reports to its stockholders, including
consolidated financial statements examined and reported on by independent
auditors, and will provide such other reports as management may deem necessary
or appropriate to keep stockholders informed of the Company's operations.
LEGAL MATTERS
On January 21, 2000, Outlast issued a notice of default to the Company
pursuant to the Outlast License Agreement dated January 1998. The Company has
denied breaching the agreement and on April 25, 2000 the Company filed a demand
for arbitration against Outlast with the American Arbitration Association
seeking legal redress from Outlast for wrongful attempts to terminate the
License, breach of contract amount other claims.
On May 31, Outlast initiated a lawsuit in District Court for patent
infringement against the Company based upon the same matters that were presented
to the AAA. On July 10, 2000, Frisby filed a motion in District Court to dismiss
the lawsuit, or alternatively, to stay the suit pending the conclusion of the
arbitration proceeding. On August 28, 2000 the Court approved the motion to stay
pending arbitration.
The arbitration panel is presently being selected. A hearing date has not
been set.
The legality of the offering of the Shares will be passed upon for the
Company by Ruskin, Moscou, Evans & Faltischek, 170 Old Country Road, Mineola,
New York, 11501.
EXPERTS
The consolidated financial statements of Frisby Technologies, Inc.
appearing incorporated by reference in Frisby Technologies, Inc.'s Annual Report
(Form 10-K) for the year ended December 31, 1999, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement under the Act with the
Securities and Exchange Commission (the "Commission"), with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement. For further information
with respect to the Company and such securities, reference is made to the
Registration Statement and to the exhibits and schedules filed therewith. Each
statement made in this Prospectus referring to a document filed as an exhibit to
the Registration Statement is qualified by reference to the exhibit for a
complete statement of its terms and conditions. The Registration Statement,
including exhibits thereto, may be inspected without charge to anyone at the
office of the Commission, and copies of all or any part thereof may be obtained
from the Commission's principal office in Washington, D.C. upon payment of the
Commission's charge for copying.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<CAPTION>
Amount
------
<S> <C>
Securities and Exchange Commission
Registration Fee........................................... $ 2,815.48
Printing and Engraving Expenses*............................. $ 5,000.00
Accounting Fees and Expenses*................................ $ 12,000.00
Legal Fees and Expenses*..................................... $ 15,000.00
Blue Sky Fees and Expenses..................................
Transfer Agent and Registrar Fees...........................
Miscellaneous Fees and Expenses*............................. $ 3,000.00
-------------
Total....................... $ 37,815.48
==============
</TABLE>
* Estimated for filing purposes.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The General Corporation Law of Delaware provides generally that a
corporation may indemnify any person who was or is a party to or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative in nature
to procure a judgment in its favor, by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) and, in a proceeding not by or in
the right of the corporation, judgments, fines and amounts paid in settlement,
actually and reasonably incurred by him in connection with such suit or
proceeding, if he acted in good faith and in a manner believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reason to believe his conduct was
unlawful. Delaware law further provides that a corporation will not indemnify
any person against expenses incurred in connection with an action by or in the
right of the corporation if such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine that, despite the adjudication of liability but in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for the expenses which such court shall deem proper.
II-1
<PAGE>
The By-Laws of the Company provide for indemnification of officers and
directors of the Company to the greatest extent permitted by Delaware law for
any and all fees, costs and expenses incurred in connection with any action or
proceeding, civil or criminal, commenced or threatened, arising out of services
by or on behalf of the Company, providing such officer's or director's acts were
not committed in bad faith. The By-Laws also provide for advancing funds to pay
for anticipated costs and authorizes the Board to enter into an indemnification
agreement with each officer or director.
In accordance with Delaware law, the Company's Certificate of Incorporation
contains provisions eliminating the personal liability of directors, except for
breach of a director's fiduciary duty of loyalty to the Company or to its
stockholders, acts or omission not in good faith or which involve intentional
misconduct or a knowing violation of the law, and in respect of any transaction
in which a director receives an improper personal benefit. These provisions only
pertain to breaches of duty by directors as such, and not in any other corporate
capacity, e.g., as an officer. As a result of the inclusion of such provisions,
neither the Company nor stockholders may be able to recover monetary damages
against directors for actions taken by them which are ultimately found to have
constituted negligence or gross negligence, or which are ultimately found to
have been in violation of their fiduciary duties, although it may be possible to
obtain injunctive or equitable relief with respect to such actions. If equitable
remedies are found not to be available to stockholders in any particular case,
stockholders may not have an effective remedy against the challenged conduct.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and therefore is
unenforceable.
ITEM 16. EXHIBITS
Exhibit No. Description
----------- -----------
(a) The following exhibits are hereby incorporated by reference from the
corresponding exhibits filed under the Company's Form SB-2 under Registration
No. 333-45121:
3.2 By-Laws
4.1 Form of Common Stock Certificate
4.2 Form of Representative's Option
10.2 Stock Option Plan
10.3 Amended Employment Agreement dated as of December 8, 1997 between the
Company and Gregory S. Frisby
10.4 Employment Agreement dated December 6, 1997 between the Company and Douglas
J. McCrosson
10.5 Shareholder Agreement dated December 10, 1997 between the Company, Gregory
S. Frisby and Jeffry D. Frisby
10.7.1 License Agreement dated May 1, 1995 between the Company and Triangle
Research and Development Corp. ("TRDC")
10.7.2 Assignment of License Agreement effective January 3, 1997 from TRDC to
Delta Thermal Systems, Inc.
10.8 License Agreement effective January 1, 1998 between the Company and Outlast
Technologies, Inc.
10.10 License Agreement dated January 23, 1997 between the Company and Wells
Lamont Division, Marmon Holdings, Inc.
10.11 License Agreement dated February 1, 1997 between the Company and Cove Shoe
Company, Inc.
10.13 License Agreement dated February 10, 1997 between the Company and Genfoot,
Inc. and Genfoot America, Inc.
10.16 Arrangement dated January 21, 1998 between the Company and Minnesota
Mining & Manufacturing, Inc.
10.20 Memorandum of Understanding dated December 11, 1997 between the Company
and Foamex International, Inc.
10.21 Memorandum of Understanding dated January 15, 1998 between the Company and
LaCrosse Footwear, Inc.
(b) The following exhibits are hereby incorporated by reference from the
corresponding exhibits filed with the Company's Form 10-QSB for the fiscal
quarter ended March 31, 1998.
3.1 Amended and Restated Certificate of Incorporation
10.1 Amended MUSI Stockholder Agreement
(c) The following exhibit is hereby incorporated by reference from the
corresponding exhibits filed with the Company's Form 10-QSB for the fiscal
quarter ended June 30, 1998:
10.25 Consulting Agreement dated April 13, 1998 between the Company and GGC,
Inc.
(d) The following exhibit is incorporated by reference from the
corresponding exhibits filed with the Company's Form 10-KSB for the fiscal year
ended December 31, 1998:
10.7.1.1 Amendment to License Agreement between the Company and TRDC
(e) The following exhibits are hereby incorporated by reference from the
exhibits filed with the Company's Form 10-KSB for the Fiscal Year ended December
31, 1999;
10.27 Loan Agreement dated February 29, 2000 by and between the Company and Bank
of America, N.A.
10.28 Lease Agreement dated January 14, 2000 by and between the Company and
Visible Goth, LLC
(f) Exhibits
3.1 Second Amended and Restated Certificate of Incorporation
5.1 Opinion of Ruskin, Moscou, Evans & Faltischek, P.C. with respect to the
legality of the securities being registered
10.1.1 Second Amended and Restated Stockholder's Agreement by and among the
Company, Jeffrey D. Frisby, Gregory S. Frisby and MUSI
10.3.1 Amendment to the Employment Agreement dated as of June 1, 2000, between
the Company and Gregory S. Frisby
10.29 Purchase Agreement dated May 30, 2000 by and among the Company and MUSI,
Ms. Jean S. Moore, AllFirst Company Custodian for Hogan & Hartson Partners
Retirement Plan for the Benefit of Ms. Jean S. Moore, and Schoeller Textil AG
10.30 Registration Rights Agreement dated May 30, 2000 by and among the Company
and MUSI, Ms. Jean S. Moore, AllFirst Company Custodian for Hogan & Hartson
Partners Retirement Plan for the Benefit of Ms. Jean S. Moore, and Schoeller
Textil AG
10.31 Warrant Agreement dated May 30, 2000 by and among the Company and MUSI,
Ms. Jean S. Moore, AllFirst Company Custodian for Hogan & Hartson Partners
Retirement Plan for the Benefit of Ms. Jean S. Moore, and Schoeller Textil AG
10.32 Stock Purchase Agreement dated October 14, 1999 by and between the Company
and Extreme Comfort, Inc.
10.33 Endorsement and Representation Agreement dated July 18, 2000 by and
between the Company and Favre Enterprises, Inc.
10.34 Endorsement and Representation Agreement dated July 27, 2000 by and
between the Company and Maximum Marketing, Inc. on behalf of Tiki Barber.
10.35 Form of Non-Qualified Stock Option Agreement by and between the Company
and Favre Enterprises, Inc. and the Company and Maximum Marketing, Inc.
23.1 Consent of Independent Auditors
23.2 Comment of Ruskin, Moscou, Evans & Faltischek, P.C. (Contained in
Exhibit 5.1)
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
A. (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 thereto) 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;
(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.
(4) (i) For the purpose of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in the 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.
(ii) For the purpose of determining any liability
under the Securities Act of 1933, 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.
(5) For purposes of determining any liability under the
Securities Act of 1933, each filing of the Company's annual report pursuant to
Section 13(a) or Section 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
II-6
<PAGE>
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.
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.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3/A and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Winston-Salem, State of North Carolina, on the 27th
day of October, 2000.
Frisby Technologies, Inc.
By: /s/ Gregory S. Frisby
---------------------
Gregory S. Frisby
Chief Executive Officer
Dated: October 30, 2000
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dated indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gregory S. Frisby Chairman of the Board of Directors; CEO October 30, 2000
---------------------------
Gregory S. Frisby
/s/ Duncan R. Russell President; Director October 30, 2000
---------------------------
Duncan S. Russell
/s/ Jeffry D. Frisby Director October 30, 2000
---------------------------
Jeffry D. Frisby
/s/ Pietro A. Motta Director October 30, 2000
---------------------------
Pietro A. Motta
Director October 30, 2000
---------------------------
Domenico DeSole
Director October 30, 2000
---------------------------
Robert C. Grayson
</TABLE>
