AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 19, 1999
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
(Including Registration of Shares for Resale
under a Form S-3 Prospectus)
UNDER
THE SECURITIES ACT OF 1933
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SMARTDISK CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 65-0733580
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
3506 MERCANTILE AVENUE, NAPLES, FLORIDA 34104
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
SMARTDISK CORPORATION 1999 INCENTIVE COMPENSATION PLAN
SMARTDISK CORPORATION 1999 EMPLOYEE STOCK PURCHASE PLAN
SMARTDISK CORPORATION 1998 EMPLOYEE STOCK OPTION PLAN
SMARTDISK CORPORATION 1998 DIRECTORS AND CONSULTANTS STOCK OPTION PLAN
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(FULL TITLE OF THE PLANS)
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MICHAEL S. BATTAGLIA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SMARTDISK CORPORATION
3506 MERCANTILE AVENUE
NAPLES, FLORIDA 34104
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(NAME AND ADDRESS OF AGENT FOR SERVICE)
(941) 436-2500
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TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE
COPY TO:
MICHAEL G. TAYLOR, ESQ.
GREENBERG TRAURIG, P.A.
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
(305) 579-0500
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED NUMBER OF PROPOSED MAXIMUM PROPOSED
TITLE OF SECURITIES SHARES TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $.001 par value.......... 2,812,000(2) $37.00(3) $104,044,000(3) $28,924.23
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Common Stock, $.001 par value.......... 1,119,250(4) $6.80(5) $7,614,400(5) $2,116.80
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Common Stock, $.001 par value.......... 666,761(6) $0.94(7) $629,493(7) $175.00
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Total.................... 4,598,011 $24.42 $112,287,893 $31,216.03
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<FN>
(1) Pursuant to Rule 416 of the Securities Act of 1933, as amended (the
"Securities Act"), this registration statement shall also cover any
additional shares of common stock which become issuable under our 1999
Incentive Compensation Plan (the "1999 ICP"), 1999 Employee Stock Purchase
Plan (the "1999 ESPP"), 1998 Employee Stock Option Plan (the "1998 ESOP")
or 1998 Directors and Consultants Stock Option Plan (the "1998 DCSOP") by
reason of any stock dividend, stock
<PAGE>
split, recapitalization or other similar transaction effected without the
receipt of consideration which results in an increase in the number of the
outstanding shares of our common stock.
(2) Represents shares of our common stock reserved for issuance upon the
exercise of stock options that may be issued under the 1999 ICP and the
1999 ESPP.
(3) Estimated solely for the purpose of calculating the registration fee which
was computed in accordance with Rule 457(c) of the Securities Act, on the
basis of the average of the high and low prices of our stock as reported on
the Nasdaq National Market on November 15, 1999.
(4) Represents (i) 153,000 shares of our common stock reserved for issuance
upon the exercise of stock options previously granted under the 1999 ICP,
(ii) 821,969 shares of our common stock reserved for issuance upon the
exercise of stock options previously granted under our 1998 ESOP and (iii)
144,281 shares of our common stock reserved for issuance upon the exercise
of stock options previously granted under our 1998 DCSOP.
(5) Estimated solely for the purpose of calculating the registration fee which
was computed in accordance with Rule 457(h) of the Securities Act, on the
basis of the weighted average exercise prices of options to purchase shares
of our common stock previously granted under the 1999 ICP, the 1998 ESOP
and the 1998 DCSOP.
(6) Represents shares of our common stock issued upon the exercise of stock
options granted under the 1998 ESOP and 1998 DCSOP.
(7) Calculated based on the prices actually paid for our shares issued upon the
exercise of options granted under the 1998 ESOP and the 1998 DCSOP.
</FN>
</TABLE>
EXPLANATORY NOTE
SmartDisk Corporation has prepared this registration statement in
accordance with the requirements of Form S-8 under the Securities Act, to
register shares of common stock issuable pursuant to our 1999 Incentive
Compensation Plan, 1999 Employee Stock Purchase Plan, 1998 Employee Stock Option
Plan and 1998 Directors and Consultants Stock Option Plan.
Under cover of this registration statement on Form S-8 is a prospectus
of SmartDisk prepared in accordance with Part I of Form S-3 under the Securities
Act. This prospectus has been prepared pursuant to Instruction C of Form S-8, in
accordance with the requirements of Part I of Form S-3, and may be used for
reofferings and resales on a continuous or delayed basis in the future of up to
an aggregate 666,761 shares of our common stock which have been issued prior to
the filing of this registration statement and are "restricted securities."
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
We will send or give the documents containing the information specified
in Part I of Form S-8 to employees as specified by the Securities and Exchange
Commission Rule 428(b)(1) under the Securities Act. We do not need to file these
documents with the Commission either as a part of the registration statement or
as prospectuses or prospectus supplements under Rule 424 of the Securities Act.
TABLE OF CONTENTS
PAGE
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Our Business...............................................................2
Note Regarding Forward-Looking Statements..................................2
Risk Factors...............................................................2
Use of Proceeds...........................................................13
Selling Stockholders......................................................13
Plan of Distribution......................................................15
Legal Matters.............................................................16
Experts...................................................................16
Where You Can Find More Information.......................................16
<PAGE>
PROSPECTUS
SMARTDISK CORPORATION
666,761 SHARES
COMMON STOCK, PAR VALUE $0.001 PER SHARE
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This prospectus relates to 666,761 shares of the common stock of
SmartDisk Corporation, which may be offered from time to time by the selling
stockholders identified on page 14 of this prospectus for their own accounts.
Each of the selling stockholders named below acquired the shares of common stock
(1) pursuant to our 1998 Employee Stock Option Plan, as our employee, (2)
pursuant to our 1998 Directors and Consultants Stock Option Plan, as our
director or consultant, or (3) is the transferee by gift of a person who
acquired the shares pursuant to one of the methods described in clauses (1) or
(2).
It is anticipated that the selling stockholders will offer shares for
sale at prevailing prices in the Nasdaq National Market on the date of sale or
in negotiated transactions. We will receive no part of the proceeds from sales
made under this prospectus. We are paying the expenses incurred in registering
the shares, but all selling and other expenses incurred by each of the selling
stockholders will be borne by that selling stockholder.
Among the shares of common stock there are shares which are "restricted
securities" under the Securities Act of 1933, as amended (the "Securities Act"),
before their sale under this prospectus. This prospectus has been prepared for
the purpose of registering the shares of common stock under the Securities Act
to allow for future sales by the selling stockholders, on a continuous or
delayed basis, to the public without restriction. Each selling stockholder and
any participating broker or dealer may be deemed to be an "underwriter" within
the meaning of the Securities Act, in which event any profit on the sale of
shares by the selling stockholder and any commissions or discounts received by
those brokers or dealers may be deemed to be underwriting compensation under the
Securities Act.
Our common stock is traded on the Nasdaq National Market under the
symbol "SMDK." On November 18, 1999, the last reported sale price of our common
stock on the Nasdaq National Market was $43.50 per share.
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INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. PLEASE
CAREFULLY CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 1 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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The date of this prospectus is November 19, 1999
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OUR BUSINESS
SmartDisk designs and develops products that enable consumers to easily
share digital data among advanced consumer electronic products, PCs and the
Internet. Consumers are increasingly relying on the transfer of digital
information between electronic devices as an important part of their daily
lifestyles. We believe that our products provide an easy-to-use, cost-effective
and versatile solution for the exchange of digital data. Our patented products,
FlashPath and Smarty, allow consumers to use the familiar 3.5 inch floppy
drive--found on most PCs worldwide --to simplify the exchange of images, music,
voice and other digital data.
We have derived substantially all of our revenues to date from the sale
of our FlashPath product. FlashPath is a solid state electronic device in the
shape of a 3.5 inch floppy diskette. Our current principal FlashPath product is
used primarily to transfer images to PCs from consumer digital cameras using
flash memory cards. Flash memory cards are miniature digital data storage
devices that are designed to work with a range of audio and video product
applications. In digital cameras they serve as the camera's film. Once pictures
have been taken, the flash memory card is removed from the camera and placed
into FlashPath. FlashPath is then inserted into the PC's floppy disk drive and
the images are easily and conveniently transferred to the PC, without the need
to use connecting cables or PC peripheral ports. After transferring the images
to a PC, the consumer is able to edit and transmit the pictures through the
Internet using readily available software.
We have been developing, with Sony and SanDisk, additional FlashPath
products to support their flash memory cards--the Memory Stick and the
MultiMediaCard. These flash memory cards are expected to have applications in
"smart" cellular phones, digital cameras and camcorders, digital audio players
and video game devices. FlashPath is also capable of transferring digital music
downloaded from the Internet to the Diamond Rio MP3 audio player. We have
started to supply Sony and SanDisk with our Flashpath adapters, and we
anticipate that these will be commercially available through Sony in November or
December 1999 and through SanDisk in the first quarter 2000. In addition to our
product development efforts with Sony and SanDisk, we also have strategic
relationships with a number of key electronics industry players, including
Hitachi, NEC and Toshiba. They actively participate in the development of our
products, provide us with access to leading-edge manufacturing capabilities, and
market and distribute our products globally. We currently outsource our
manufacturing and plan to continue this strategy for the foreseeable future.
We were incorporated in Delaware on March 5, 1997 as "Fintos, Inc." and
changed our name to "SmartDisk Corporation" on September 26, 1997. Our
predecessor, SmartDisk Security Corporation, was incorporated on May 18, 1993.
We commenced significant operations related to our current products in January
1998, and we received our first significant capital contributions in May 1998.
Our executive offices are located at 3506 Mercantile Avenue, Naples, Florida
34104, and our telephone number is (941) 436-2500. We maintain a corporate
website at http://www.smartdisk.com. The contents of our website are not part of
this prospectus.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements, trend analyses and other information contained in this
prospectus regarding markets for our products and trends in net revenues, gross
margin and anticipated expense levels, and any statement that contains the words
"anticipate," "believe," "plan," "estimate," "expect," "should," "intend" and
other similar expressions, constitute forward-looking statements. These
forward-looking statements are subject to business and economic risks, including
those risks identified in "Risk Factors" and elsewhere in this prospectus and
our actual results of operations may differ significantly from those contained
in the forward-looking statements because of those risks. The cautionary
statements made in this prospectus apply to all forward-looking statements
wherever they appear in this prospectus.
RISK FACTORS
BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD BE AWARE OF THE RISKS
DESCRIBED BELOW. YOU SHOULD CAREFULLY CONSIDER THESE RISK FACTORS, TOGETHER WITH
ALL OF THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS, BEFORE YOU DECIDE
WHETHER TO PURCHASE SHARES OF OUR COMMON STOCK.
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WE HAVE INCURRED OPERATING LOSSES AND CANNOT GUARANTEE THAT WE WILL EVER BE
PROFITABLE
Except for the third quarter of 1999, we have incurred operating losses
on a quarterly basis since inception. We had operating losses of $5.6 million
and $1.5 million during 1998 and the first nine months of 1999, respectively. In
addition, as of September 30, 1999, we had an accumulated deficit of $24.2
million. In light of our loss history, we cannot assure you when, if ever,
SmartDisk will be able to achieve or sustain profitability on an annual or
quarterly basis in the future.
WE HAVE A LIMITED OPERATING HISTORY ON WHICH TO BASE AN INVESTMENT DECISION
We were incorporated in March 1997, commenced operations in January
1998, and our predecessor corporation only conducted limited operations.
Further, commercial sales of our primary product, FlashPath, only commenced in
mid-1998. As a result of our limited operating history, we have limited
financial data that can be used in evaluating our business and prospects and in
projecting future operating results.
OUR MANAGEMENT TEAM HAS ONLY RECENTLY BEEN ASSEMBLED AND MAY NOT BE ABLE TO WORK
TOGETHER AS A COHESIVE UNIT
Our Chief Financial Officer, Senior Vice President, Research and
Development, Vice President, Asian Operations, Vice President, Corporate
Development and Legal Affairs, and Vice President, Audio/Video Products all
joined SmartDisk during the last year. There is the possibility that our
management team may not be able to work together as a cohesive unit.
WE WILL NOT BE ABLE TO SELL SUFFICIENT QUANTITIES OF OUR PRODUCTS TO SUSTAIN A
VIABLE BUSINESS IF THE MARKET FOR FLASH MEMORY PRODUCTS DOES NOT DEVELOP OR IF A
COMPETING TECHNOLOGY DISPLACES FLASH MEMORY PRODUCTS
Our current and planned FlashPath products are designed to provide
connectivity between personal computers and digital appliances that use flash
memory cards. The flash memory market is in the early stage of development and
is still evolving. Our current dependence on sales of FlashPath and lack of
product diversification exposes us to a substantial risk of loss in the event
that the flash memory market does not develop or if a competing technology
replaces flash memory cards. If a competing memory storage device replaces or
takes significant market share from the flash memory cards which our products
support, we will not be able to sell our products in quantities sufficient to
grow our business.
WE MAY NOT BE ABLE TO SELL SUFFICIENT QUANTITIES OF OUR PRODUCTS TO SUSTAIN A
VIABLE BUSINESS IF A SINGLE STANDARD FOR FLASH MEMORY CARDS EMERGES
We believe that demand for our flash memory connectivity products is
driven, to a large extent, by the absence of a single standard for flash memory
cards. There are currently four major flash memory cards, none of which has
emerged as the industry standard. Should one of these cards or a new technology
emerge as an industry standard, flash memory card readers could be built in to
PCs, eliminating the need for our current flash memory connectivity products.
A REDUCTION IN THE USE OF THE 3.5 INCH FLOPPY DISK DRIVE BY CONSUMERS WOULD LEAD
TO A REDUCTION IN DEMAND FOR OUR PRODUCTS
Our current products only work in conjunction with the standard 3.5
inch floppy disk drive. While the 3.5 inch floppy disk drive is today found in
most PCs, a number of newer PC models, such as the Apple iMac and the Apple G3
desktop, do not have this device and new industry standards may emerge that
render the 3.5 inch floppy disk drive obsolete. Advances in input devices such
as CD-ROM and removable data storage disk drives, such as Zip drives, may reduce
or eliminate the need for the 3.5 floppy diskette, which will lead to a
corresponding reduction in demand for our products. We would then have to
develop new products that use a different interface between personal computers
and digital appliances. We may not be able to redesign our products to fit the
new
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<PAGE>
interface and demonstrate technological feasibility of those products on a
timely basis, if at all, or in a cost effective manner.
SINCE OUR PRODUCTS ONLY WORK IN CONJUNCTION WITH THE 3.5 INCH FLOPPY DISK DRIVE,
ADVANCES IN FLASH MEMORY CARDS MAY MAKE OUR PRODUCTS LESS COMPETITIVE BECAUSE OF
THE INCREASED TIME NEEDED TO TRANSFER DATA USING THE 3.5 INCH FLOPPY DISK DRIVE
Consumer acceptance of our products will depend upon their ability to
quickly transfer information from flash memory cards to PCs. However, the time
needed to transfer information using a 3.5 inch disk drive increases as more
data is transferred. As more memory is condensed on to flash memory cards, the
time necessary to transfer all of the data from a single card will increase. As
technological advances make it possible and feasible to produce higher density
cards, our ability to create products which quickly transfer all of the stored
information on a single card will be constrained by the inherent limitations of
the 3.5 inch disk drive. In that case, our products would be less attractive to
consumers and our sales would decline.
MOST OF OUR REVENUES ARE DERIVED FROM ONLY ONE PRODUCT AND OUR BUSINESS WILL BE
SERIOUSLY HARMED IF DEMAND FOR THAT PRODUCT DECLINES
To date, substantially all of our revenue has been derived from the
sale of our FlashPath product that stores data on and retrieves data from only
the SmartMedia flash memory card. While our long-term strategy is to derive
revenue from multiple products, we anticipate that the sale of FlashPath for
SmartMedia products will continue to represent the most substantial portion of
our revenues through at least 2000. A decline in the price of or demand for
FlashPath products as a result of competition, technological change, the
introduction of new products by us or others, a failure to adequately manage
product transitions, or for other reasons, would seriously harm our business.
For the year ended December 31, 1998 and the nine months ended September 30,
1999, we derived approximately 89.7% and 96.4%, respectively, of our product
revenues from the sale of FlashPath.
WE MUST DEVELOP NEW PRODUCTS AND INTRODUCE THEM IN A TIMELY MANNER IN ORDER TO
REMAIN COMPETITIVE
We operate in an industry that is subject to evolving industry
standards, rapid technological changes, rapid changes in consumer demands and
the rapid introduction of new, higher performance products which shorten product
life cycles. To be competitive in this demanding market, we must both continue
to refine current products so that they remain competitive, and continually
design, develop and introduce, in a timely manner, new data transfer products
that meet the performance and price demands of OEMs and consumers. These
development activities will require the investment of substantial resources
before revenues are derived from product sales. Any significant delay in
releasing new products would adversely affect our reputation, provide a
competitor a first-to-market opportunity or allow a competitor to achieve
greater market share. The growth of our business will depend on the timely
introduction and sale of our FlashPath products for the SanDisk MultiMediaCard.
We have not yet demonstrated that we will be able to develop this product either
on a timely basis and in a cost-effective manner, or at all. Even if we are able
to do so, we cannot guarantee that this product or the Sony Memory Stick will
achieve market acceptance. Product development is inherently risky because it is
difficult to foresee developments in technology, coordinate our technical
personnel and strategic relationships, and identify and eliminate design flaws.
If we are unable to develop and sell new products, we will not be able to
continue our strategy of maintaining media neutrality, and our target market
will be limited. Further, we may not be able to recoup research and development
expenditures if new products are not widely commercially accepted.
WE MAY NOT BE ABLE TO DEVELOP OR MAINTAIN THE STRATEGIC RELATIONSHIPS NECESSARY
TO PROVIDE US WITH THE INSIGHT WE NEED TO DEVELOP COMMERCIALLY VIABLE PRODUCTS
We may not be able to produce commercially viable products if we are
unable to anticipate market trends and the price, performance and functionality
requirements of flash memory manufacturers. We must continue to collaborate
closely with our customers, flash memory manufacturers and our contract
manufacturers to ensure that critical development projects proceed in a
coordinated manner. This collaboration is also important because our ability to
anticipate trends and plan our product development activities depends to a
significant degree upon our
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<PAGE>
continued access to information derived from the strategic relationships we
currently have with flash memory card manufacturers and consumer product OEMs.
However, collaboration is more difficult because many of these companies are
located overseas. If any of our current relationships deteriorates or is
terminated, or if we are unable to enter into future alliances that provide us
with comparable insight into market trends, we will be hindered in our ability
to produce commercially viable products.
OUR OPERATING RESULTS HAVE FLUCTUATED SIGNIFICANTLY AND MAY FLUCTUATE
SIGNIFICANTLY IN THE FUTURE, WHICH COULD LEAD TO DECREASES IN OUR STOCK PRICE
Our operating results have fluctuated significantly in the past and we
expect that they will continue to fluctuate in the future. If our future
operating results materially fluctuate or are below the expectations of stock
market analysts, our stock price would likely decline. Future fluctuations may
result from a variety of factors including the following:
o The timing and amount of orders we receive from our customers,
which may be tied to seasonal demand for the consumer products
manufactured and sold by these OEMs;
o Cancellations or delays of customer product orders, or the
loss of a significant customer;
o Reductions in consumer demand for our customers' products
generally or for our products in particular;
o The timing and amount of research and development
expenditures;
o The availability of manufacturing capacity necessary to make
our products;
o General business conditions in our markets, particularly
Japan, as well as global economic uncertainty;
o Any new product introductions, or delays in product
introductions, by us or our competitors;
o Increased costs charged by our suppliers or changes in the
delivery of products to us;
o Increased competition or reductions in the average selling
prices that we are able to charge;
o Fluctuations in the value of foreign currencies, particularly
the Japanese yen, against the U.S. dollar; and
o Changes in our product mix as well as possible seasonal demand
for our products.
As a result of these and other factors, we believe that
period-to-period comparisons of our historical results of operations are not a
good predictor of our future performance.
WE MAY FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY AND, THEREFORE, LOSE
OUR COMPETITIVE ADVANTAGE
Our proprietary technology with respect to 3.5 inch floppy disk drive
interfaces is critical to our future growth. We rely in part on patent, trade
secret, trademark and copyright law to protect our intellectual property.
However, the patents issued to us may not be adequate to protect our proprietary
rights, to deter misappropriation or to prevent an unauthorized third party from
copying our technology, designing around the patents we own or otherwise
obtaining and using our products, designs or other information. We have, in
fact, filed a complaint against one of our former patent attorneys for
improperly copying one of our patent applications and filing a patent
application without our consent naming himself as a co-inventor. This matter
recently was settled with no materially adverse consequences to SmartDisk. In
addition, we may not receive trademark protection for our "SmartDisk" name. We
have filed for trademark registration of the name "SmartDisk," but this has not
yet been granted. We are aware of a trademark application for the name
"SmartDisk" that was filed by another company.
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<PAGE>
Our application could be denied and we could be prohibited from using the
"SmartDisk" name. In that event, we would be required to incur costs to
establish new name recognition.
We also claim copyright protection for some proprietary software and
documentation. We attempt to protect our trade secrets and other proprietary
information through agreements with our customers, employees and consultants,
and through other security measures. However, despite our efforts to protect our
intellectual property, unauthorized parties may attempt to copy aspects of our
products or obtain and use information and software that we regard as
proprietary. Those parties may have substantially greater financial resources
than us, and we may not have the resources available to challenge their use of
our proprietary technology. If we fail to adequately protect our intellectual
property, it will be easier for our competitors to sell competing products.
WE MAY FACE COMPETITION FROM INTEL IF IT DECIDES TO UTILIZE ITS COMPETING PATENT
Intel Corporation was issued a patent in 1997 disclosing and claiming
technology substantially similar to that disclosed in one of our key patents.
The Intel patent was filed four years after our effective filing date, and we do
not believe that the Intel patent can be validly applied to any of the
technology disclosed in our patent. However, given the substantial resources
available to Intel, our financial condition could suffer if we engage in a
dispute with Intel. Our business could also be harmed if Intel's patent is
determined to be valid and Intel or any licensee of Intel decides to sue our
customers or develop and commercialize products based on its patent.
INFRINGEMENT CLAIMS BY THIRD PARTIES COULD RESULT IN COSTLY LITIGATION AND
OTHERWISE ADVERSELY IMPACT OUR BUSINESS
From time to time we may receive communications from third parties
asserting that our products infringe, or may infringe, the proprietary rights of
these third parties. These claims of infringement may result in protracted and
costly litigation which could require us to pay substantial damages or have
sales of our products stopped by an injunction. Infringement claims could also
cause product shipment delays, require us to redesign our products or require us
to enter into royalty or licensing agreements, any of which could harm our
business. For example, we received a letter from SanDisk stating that SanDisk
held two patents which might apply to our products. Although we subsequently
obtained a non-exclusive worldwide license for all of SanDisk's intellectual
property rights in connection with multimedia floppy disk interfaces for a
10-year period, if the license terminates or expires, we could face a potential
conflict with SanDisk regarding the scope of those patents. In another instance,
we received communications alleging that our FlashPath products infringed a
third party's patent rights. We also received correspondence alleging that our
SafeBoot product violated another third party's intellectual property rights. We
reviewed the patents and concluded that our products do not infringe upon either
of the third parties' patent rights. While none of these claims has resulted in
litigation, future claims may. In addition, we license a portion of the
intellectual property included in our products from third parties, which may
increase our exposure to infringement actions because we rely upon those third
parties for information about the origin and ownership of the licensed
intellectual property. We may also lose our license rights with respect to the
intellectual property for which infringement is claimed. Further, if our
customers are required to obtain a license on other than commercially reasonable
terms, our business could be jeopardized.
WE MAY HAVE PARTICULAR DIFFICULTY PROTECTING OUR INTELLECTUAL PROPERTY RIGHTS
OVERSEAS
The laws of some foreign countries do not protect proprietary rights to
as great an extent as do the laws of the United States, and many U.S. companies
have encountered substantial infringement problems in some foreign countries.
Because most of our products are sold and most of our business is conducted
overseas, our exposure to intellectual property risks may be higher.
BECAUSE MOST OF OUR SALES ARE TO A RELATIVELY SMALL NUMBER OF CUSTOMERS,
PRIMARILY ORIGINAL EQUIPMENT MANUFACTURERS, THE LOSS OF ANY OF OUR KEY CUSTOMERS
WOULD SERIOUSLY HARM OUR BUSINESS
Our business will be seriously harmed if we lose any of our significant
customers, particularly Olympus or FujiFilm, or suffer a substantial reduction
in or cancellation of orders from these customers. Our current strategy is
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<PAGE>
principally based on sales to OEMs, which results and will continue to result in
sales to only a limited number of customers. Our products are sold as
stand-alone products by OEMs and, to a lesser extent, are bundled together and
sold with systems manufactured by third party OEMs. We currently sell to seven
OEMs, sales to which collectively accounted for approximately 81.0% and 77.9% of
our revenues for 1998 and the first nine months of 1999, respectively. More
specifically, Olympus and FujiFilm accounted for approximately 32.0% and 38.0%
of our revenues in fiscal 1998 and our top five customers collectively accounted
for approximately 92.8% of our revenues during that period. In the nine months
ended September 30, 1999, Olympus and FujiFilm accounted for approximately 32.6%
and 30.6% of our revenues and our top five customers collectively accounted for
approximately 84.8% of our revenues during that period. Furthermore, we expect
to continue to depend on sales of our products to relatively few customers,
which will continue to account for a significant portion of our net revenues,
for the foreseeable future.
OUR CUSTOMERS COULD STOP PURCHASING OUR PRODUCTS AT ANY TIME BECAUSE WE DO NOT
HAVE LONG-TERM PURCHASE CONTRACTS WITH THEM
No OEM or other customer is contractually obligated to purchase
products from us. As a result, our customers are free to cancel their orders or
stop ordering our products at any time. In addition, even if we are able to
demonstrate that our products are superior, OEMs may still choose not to bundle
our products with theirs or market and distribute our products on a stand-alone
basis. OEMs may also change their business strategies and manufacturing
practices, which could cause them to purchase fewer of our products, find other
sources for products we currently manufacture or manufacture these products
internally.
OUR ABILITY TO SELL OUR PRODUCTS WILL BE LIMITED IF THE OEMS' PRODUCTS DO NOT
ACHIEVE MARKET ACCEPTANCE OR IF THE OEMS DO NOT ADEQUATELY PROMOTE OUR PRODUCTS
We depend upon our OEM customers to market our products and we do not
have significant experience and resources devoted to independent marketing
efforts. Failure of the OEMs' products to achieve market acceptance, the failure
of the OEMs to bundle our products with theirs, or any other event causing a
decline in our sales to the OEMs could seriously harm our business. Even if
consumers buy OEMs' products, their ultimate decision to buy our products
depends on OEM packaging, distribution and sales efforts, which may not be
sufficient to maintain or increase sales of our products. If we cannot achieve
or maintain a sufficient consumer acceptance rate of our products concurrent
with their purchases of OEM products, our future sales to OEM customers will be
adversely affected.
A NEW OR COMPETING DATA TRANSFER SOLUTION THAT ACHIEVES SIGNIFICANT MARKET SHARE
OR RECEIVES SIGNIFICANT SUPPORT FROM FLASH CARD MANUFACTURERS WOULD JEOPARDIZE
OUR BUSINESS
Our products currently compete with a number of cable and non-cable
interfaces between personal computers and digital appliances, including ports,
USBs, PCMCIA slots and infrared interfaces, all of which are PC peripheral
interfaces. It is possible that one of these competing data transfer solutions,
or another existing or new technology, could achieve a significant market
presence or become supported by a number of significant flash memory card or
digital appliance manufacturers. Regardless of the relative benefits of our
products, if a competing product gains significant market share or significant
support of flash card manufacturers, this product would likely emerge as the
industry standard and thereby achieve a dominant market position that would
jeopardize our survival.
SINCE WE SELL OUR PRODUCTS TO A LIMITED NUMBER OF LARGE CUSTOMERS, WE EXPECT
THOSE CUSTOMERS TO PRESSURE US TO MAKE PRICE CONCESSIONS, WHICH WOULD REDUCE OUR
FUTURE GROSS MARGINS
Our reliance on sales to a limited number of large customers exposes us
to pressure for price concessions. Because of this reliance and because of our
dependence on OEMs as our primary distribution channel, we expect that our OEM
customers may seek price concessions from us, which would reduce our average
selling prices and our gross margins. Since we do not manufacture our own
products, we may be unable to reduce our manufacturing costs in response to
declining average per unit selling prices.
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WE EXPECT TO CONTINUE OUTSOURCING KEY OPERATIONAL FUNCTIONS AND OUR ABILITY TO
DO SO WILL BE IMPAIRED IF WE ARE UNABLE TO MAINTAIN OUR STRATEGIC RELATIONSHIPS
We have formed strategic relationships with a number of significant
industry participants, including FujiFilm, Hitachi, Olympus, Rohm, SanDisk,
Sony, Toshiba, Visa and Yamaichi. We depend upon these corporations to provide
technical assistance and perform key manufacturing, marketing, distribution and
other functions. For example, Yamaichi is currently one of two manufacturers of
our FlashPath products, Toshiba provides technological assistance in the
development of our products, and Olympus and FujiFilm market our products. We
expect that these and similar types of relationships will be critical to our
growth because our business model calls for the continued outsourcing of many
key operational functions and we do not currently have the resources to perform
these functions ourselves.
WE MUST OVERCOME GEOGRAPHIC AND CULTURAL DIFFERENCES IN ORDER TO MAINTAIN OUR
STRATEGIC RELATIONSHIPS
There are inherent difficulties in developing and maintaining
relationships with foreign entities. Language and cultural differences often
impair relationships, and geographical distance, at times, is also an
impediment. We must overcome these difficulties. If any of our current
relationships is impaired, or if we are unable to develop additional strategic
relationships in the future, our product development costs would significantly
increase and our business would be materially and adversely affected.
OUR SALES AND EXPENSES ARE GEOGRAPHICALLY CONCENTRATED IN JAPAN, AND, THEREFORE,
WE COULD SUFFER FROM EXCHANGE RATE FLUCTUATIONS AND ECONOMIC AND POLITICAL
DIFFICULTIES
Approximately 84.0% of our revenues for 1998 were attributable to sales
to Japanese customers, and we expect that sales to Japanese customers will
continue to account for a significant portion of our total revenues for the
foreseeable future. All of our Japanese sales, as well as the related expenses,
are denominated in yen. Fluctuations in exchange rates between the yen and the
U.S. dollar, particularly with respect to Japanese transactions denominated in a
currency other than the yen, could adversely impact our financial results. Some
transactions and accounts of our Japanese subsidiary are U.S. dollar
denominated. Since the Japanese subsidiary's accounting records are kept in yen,
those U.S. dollar denominated transactions are accounted for in yen at the time
of the transaction. U.S. dollar denominated accounts are remeasured at the end
of the accounting period. This remeasurement results in adjustments to income.
In addition, the balance sheet accounts of our Japanese subsidiary are
translated to the U.S. dollar for financial reporting purposes and resulting
adjustments are made to stockholders equity. The value of the yen may
deteriorate against the dollar, which would impair the value of stockholders'
investment in us. Deterioration of the yen against the dollar has occurred in
recent years, resulting in a foreign currency loss of approximately $48,000 and
a foreign currency translation loss adjustment to equity of approximately
$290,000 for 1998. Further, we do not currently hedge against foreign currency
exposure. In the future, we could be required to denominate our product sales in
other currencies, which would make the management of currency fluctuations more
difficult and expose us to greater currency risks.
We are also subject to risks associated with a significant amount of
sales being made to one geographical area. An economic downturn in Asia
generally, and Japan in particular, could lead to a reduced demand for our
products. In recent years, Japan has been subject to political and economic
instability and, while that instability has not yet adversely impacted us, if it
continues, sales of our products in Japan may be adversely affected.
Given our dependence on sales to Japanese customers, we must develop
and maintain alliances in Japan to help with the promotion and distribution of
our products. We may not be able to develop or maintain these alliances.
OUR FOREIGN OEM CUSTOMERS MAY CHOOSE TO WORK WITH A LOCAL COMPETITOR, WHICH
WOULD ADVERSELY IMPACT OUR SALES
Our OEM customers, most of which are based in Japan and to whom most of
our sales are made, may choose to work with, and purchase products from, a local
competitor if one were able to provide a substitute
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product. This may occur because of geographic distance, time differences, or for
other reasons. In that event, we may not be able to find other OEM customers and
our sales could decline.
WE DEPEND ON A LIMITED NUMBER OF CONTRACT AND OFFSHORE MANUFACTURERS, AND IT MAY
BE DIFFICULT TO FIND REPLACEMENT MANUFACTURERS IF OUR EXISTING RELATIONSHIPS ARE
IMPAIRED
We contract with offshore manufacturers to produce our products and our
dependence on a limited number of contract manufacturers exposes us to a variety
of risks, including shortages of manufacturing capacity, reduced control over
delivery schedules, quality assurance, production yield and costs. Yamaichi and
Mitsumi are the sole manufacturers of our FlashPath products. We do not have
contracts with either Yamaichi or Mitsumi. If Yamaichi or Mitsumi terminates
production or cannot meet our production requirements, we may have to rely on
other contract manufacturing sources or identify and qualify new contract
manufacturers. The lead time required to qualify a new manufacturer could range
from approximately three to six months. Despite efforts to do so, we may not be
able to identify or qualify new contract manufacturers in a timely manner and
these new manufacturers may not allocate sufficient capacity to us in order to
meet our requirements. Any significant delay in our ability to obtain adequate
quantities of our products from our current or alternative contract
manufacturers would cause our sales to decline.
TOSHIBA INTRODUCED US TO ONE OF OUR MANUFACTURERS AND WE MAY NOT BE ABLE TO
RETAIN THE SERVICES OF THE MANUFACTURER IF OUR RELATIONSHIP WITH TOSHIBA IS
IMPAIRED
Yamaichi, one of the manufacturers of our FlashPath products, was
introduced to us by Toshiba, which is one of our major stockholders. If our
relationship with Toshiba is impaired, we may not be able to retain the services
of Yamaichi in manufacturing our products.
OUR DEPENDENCE ON FOREIGN MANUFACTURING AND INTERNATIONAL SALES EXPOSES US TO
DIFFICULTIES OFTEN NOT ENCOUNTERED BY EXCLUSIVELY DOMESTIC COMPANIES
Our products are manufactured overseas and a substantial portion of our
revenues are derived from overseas sales. Approximately 90.0% and 87.0% of our
revenues in 1998 and the first nine months of 1999, respectively, were derived
from customers located outside the United States, primarily in Japan. Our
dependence on foreign manufacturers and international sales poses a number of
risks, including:
o difficulties in monitoring production;
o transportation delays and interruptions;
o unexpected changes in regulatory requirements;
o currency exchange risks;
o tariffs and other trade barriers, including import and export
restrictions;
o difficulties in staffing and managing disparate branch
operations;
o political or economic instability;
o compliance with foreign laws;
o difficulties in protecting intellectual property rights in
foreign countries;
o exchange controls; and
o potential adverse tax consequences, including with respect to
repatriation of earnings.
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We intend to continue manufacturing our products overseas and we
anticipate that international sales will continue to account for a significant
portion of our revenues. Therefore, we expect to be subject to the risks
outlined above for the foreseeable future.
WE HAVE A LIMITED NUMBER OF SUPPLIERS OF KEY COMPONENTS AND OUR ABILITY TO
OBTAIN FINISHED PRODUCTS WILL BE IMPAIRED IF WE ARE UNABLE TO OBTAIN SUFFICIENT
QUANTITIES OF COMPONENTS
Rohm is our sole provider of application specific integrated circuits,
or ASICs, for our FlashPath products and we purchase ASICs for Smarty from Rohm
and Atmel. In our products, the specific function of these integrated circuits
is the conversion of digital and analog data. Our dependence on a limited number
of suppliers and our lack of long-term supply contracts exposes us to several
risks, including a potential inability to obtain an adequate supply of
components, price increases, late deliveries and poor component quality.
Disruption or termination of the supply of components could delay shipments of
our products. The lead time required for orders of some of our components is as
much as six months. In addition, the lead time required to qualify new suppliers
for our components is as much as 12 months. If we are unable to accurately
predict our component needs, or if our component supply is disrupted, we may
miss market opportunities by not being able to meet the demand for our products.
This may damage our relationships with current and prospective customers.
OUR CURRENT AND POTENTIAL COMPETITORS HAVE SIGNIFICANTLY GREATER RESOURCES THAN
WE DO, AND INCREASED COMPETITION COULD HARM SALES OF OUR PRODUCTS
Increased competition is likely to result in price reductions, reduced
operating margins and loss of market share. Many of our current and potential
competitors have significantly greater financial, technical, marketing,
purchasing and other resources than we do. As a result, our competitors may be
able to respond more quickly to new or emerging technologies or standards and to
changes in customer requirements. Our competitors may also be able to devote
greater resources to the development, promotion and sale of products, and may be
able to deliver competitive products at a lower end-user price. Current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products to address the needs of our prospective customers. Therefore, it
is possible that new competitors or alliances among competitors may emerge and
rapidly acquire significant market share.
OUR BUSINESS MAY SUFFER IF WE ARE UNABLE TO MANAGE OUR GROWTH
Failure to effectively manage our growth could impair our ability to
execute our business strategy. Our business has grown substantially in recent
periods, with revenues increasing from approximately $8.9 million in the first
nine months of 1998 to approximately $25.5 million in the first nine months of
1999. The growth of our business has placed a strain on our management,
operations and financial systems. In addition, the number of employees has
increased from 16 at January 1, 1998 to 54 as of September 30, 1999. We expect
to continue to increase the number of employees as our business grows, and may
expand operations to locations other than those in which we currently operate.
Continued growth is likely to place a greater burden on our operating
and financial systems as well as our senior management and other personnel.
Existing and new members of management may not be able to improve existing
systems and controls or implement new systems and controls in response to
anticipated growth. Management of our operations in diverse locations may also
complicate the task of managing our growth.
OUR GROWTH PROSPECTS WILL BE REDUCED IF THE SMART CARD MARKET DOES NOT DEVELOP
SmartDisk's future growth and operating results will depend, in part,
on whether our Smarty family of smart card readers achieves significant sales. A
smart card reader retrieves information from a card that uses a microprocessor
or memory chip for security and data storage purposes. The current primary use
for Smarty is as a smart card token-based security application designed to
provide protection from unauthorized access to digital information. However, the
market for network and electronic commerce security applications is still
emerging and the smart card may not become the industry standard for these
applications. Similarly, the market for other smart
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card applications may not develop, or may develop more slowly than we expect. If
the market for the Smarty family of products fails to develop or develops more
slowly than expected, or if any of the standards supported by us do not achieve
or sustain market acceptance, our growth prospects would be reduced.
WE HAVE INDEMNIFICATION OBLIGATIONS RELATED TO OUR INTELLECTUAL PROPERTY, WHICH
MAY REQUIRE US TO PAY DAMAGES
Our arrangements with SanDisk, Sony and Toshiba require us to indemnify
them for any damages they may suffer if a third party claims that we are
violating their intellectual property rights. While, to date, we have not
received indemnification claims, there may be future claims. Any indemnification
claim may require us to pay substantial damages, which could negatively impact
our financial condition.
OUR PRODUCTS MAY BE RETURNED TO US BY OUR CUSTOMERS IF PROJECTED CONSUMER DEMAND
DOES NOT MATERIALIZE, WHICH WOULD LEAD TO A REDUCTION IN OUR REVENUES
Lack of consumer demand for our products may result in efforts by OEMs
to return products to us. While we are not contractually obligated to accept
returned products, we may determine that it is in our best interest to accept
returns in order to maintain good relations with our customers. Product returns
would reduce our revenues. While we have experienced very limited product
returns to date, returns may increase in the future.
WE COULD BE HELD LIABLE FOR PRODUCT DEFECTS, WHICH COULD REQUIRE US TO PAY
SUBSTANTIAL DAMAGES AND HARM OUR REPUTATION WITH OUR CUSTOMERS
Complex products such as ours frequently contain errors, defects and
bugs when first introduced or as new versions are released. Delivery of products
with production defects or reliability, quality or compatibility problems could
hinder market acceptance of our products, which could damage our reputation and
harm our ability to attract and retain customers. Errors, defects or bugs could
also cause interruption, delays or a cessation of sales to our customers, and
could subject us to warranty claims from our customers. We would have to expend
significant capital and resources to remedy these problems. Errors, defects or
bugs could be discovered in our new products after we begin commercial
production of them, despite testing by us and our suppliers and customers. This
could result in additional development costs, loss of, or delays in, market
acceptance, diversion of technical and other resources from our other
development efforts, claims by our customers or others against us or the loss of
credibility with our current and prospective customers.
OUR EXECUTIVE OFFICERS AND KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS, AND THESE
OFFICERS AND PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE
We depend upon the continuing contributions of our key management,
sales and product development personnel. The loss of any of those personnel
could seriously harm us. Although some of our officers are subject to employment
agreements, we cannot be sure that we will retain their services. In addition,
we have not obtained key-person life insurance on any of our executive officers
or key employees.
OUR LOCATION IN NAPLES, FLORIDA MAKES IT MORE DIFFICULT TO HIRE QUALIFIED
TECHNICAL PERSONNEL
Our technology is specialized and complex, requiring us to recruit and
train qualified technical personnel. However, there are many employers competing
to hire qualified technical personnel and we may have difficulty attracting and
retaining qualified technical personnel. Our recruiting efforts are further
hindered by the lack of a readily available pool of candidates in Naples,
Florida, where we are headquartered. The inability to attract and retain
qualified personnel could make it more difficult to develop our products and
execute our business strategy.
WE ARE CONTROLLED BY A PRINCIPAL STOCKHOLDER WHO MAY PREVENT OR DELAY A CHANGE
OF CONTROL AND WHOSE INTERESTS MAY BE DIFFERENT FROM THOSE OF OUR OTHER
STOCKHOLDERS
Addison Fischer, the Chairman of our board of directors, beneficially
owns approximately 51.3% of SmartDisk. Accordingly, Mr. Fischer is able to
control SmartDisk, subject to his fiduciary duty as a director under
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Delaware law. The interests of Mr. Fischer may not always coincide with our
interests or the interests of other stockholders, and he could cause us to enter
into transactions or agreements which we would not otherwise consider absent his
influence.
The purchasers of common stock in this offering will not have
sufficient voting power to elect any members of our board of directors. As a
result, Mr. Fischer will be able to exercise control over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions, which could have the effect of delaying or
preventing a change of control of SmartDisk.
OUR BUSINESS COULD BE AFFECTED BY YEAR 2000 ISSUES
The "Year 2000 Issue" refers generally to the problems that some
software may have in determining the correct century of the year. Many existing
electronic systems, including computer systems, use only the last two digits to
refer to a year. Therefore, these systems may recognize a date using "00" as
1900 rather than the year 2000. If not corrected, these electronic systems could
fail or create erroneous results when addressing dates on and after January 1,
2000. The Year 2000 Issue could adversely impact our business.
WE HAVE ANTITAKEOVER DEFENSES THAT COULD DELAY OR PREVENT AN ACQUISITION OF OUR
COMPANY
Some provisions of our certificate of incorporation and bylaws and the
provisions of Delaware law could have the effect of delaying, deferring or
preventing an acquisition of SmartDisk. For example, we have a staggered board
of directors, the members of which may only be removed for cause, authorized but
unissued shares of preferred stock which could be used to fend off a takeover
attempt, our stockholders may not take actions by written consent and our
stockholders are limited in their ability to make proposals at stockholder
meetings.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL WHICH MIGHT NOT BE AVAILABLE OR WHICH,
IF AVAILABLE, MIGHT ONLY BE AVAILABLE ON TERMS ADVERSE TO PERSONS BUYING SHARES
IN THIS OFFERING
We expect the net proceeds from this offering, our current cash and
cash equivalents and cash from commercial borrowing availability under credit
facilities will meet our working capital and capital expenditure needs for at
least one year. After that, we may need to raise additional funds, and we cannot
be certain that we will be able to obtain additional financing on favorable
terms, if at all. We may also require additional capital for the acquisition of
businesses, products and technologies that are complementary to ours. Further,
if we issue equity securities, the ownership percentage of our stockholders
would be reduced, and the new equity securities may have rights, preferences or
privileges senior to those of existing holders of our common stock. If we cannot
raise needed funds on acceptable terms, we may not be able to develop or enhance
our products, take advantage of future opportunities or respond to competitive
pressures or unanticipated requirements, which could seriously harm our
business, operating results and financial condition.
OUR STOCK MAY BE VOLATILE, WHICH MIGHT MAKE IT HARD FOR INVESTORS TO SELL THEIR
SHARES AT A PREDICTABLE PRICE, OR AT ALL
Our common stock has only been trading on a public market since October
6, 1999. The trading price has been, and is likely to continue to be, highly
volatile. The market price of our common stock is likely to fluctuate
significantly in response to the following factors, some of which are beyond our
control:
o Variations in our quarterly operating results;
o Changes in financial estimates of our revenues and operating
results by securities analysts;
o Announcements by us or our competitors of significant
contracts, acquisitions, strategic partnerships, joint
ventures or capital commitments;
o Loss of or decrease in sales to a major customer or failure to
complete significant transactions;
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o Additions or departures of key personnel;
o Future sales of our common stock, including sales which dilute
existing investors;
o Stock market price and volume fluctuations attributable to
inconsistent trading volume levels of our stock;
o General stock market conditions;
o Commencement of or involvement in litigation; and
o Announcements by us or our competitors of key innovations or
product introductions.
WE COULD BE SUBJECT TO CLASS ACTION LITIGATION DUE TO STOCK PRICE VOLATILITY,
WHICH, IF IT OCCURS, WILL DISTRACT MANAGEMENT, RESULT IN SUBSTANTIAL COSTS AND
HARM OUR BUSINESS
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market price of their
securities. We may be the target of similar litigation in the future. Securities
litigation could result in substantial costs and divert management's attention
and resources, which could cause serious harm to our business.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE
We currently have approximately 16.0 million shares of common stock
outstanding. Of these shares, approximately 3.5 million are freely tradable
without restriction under the Securities Act except for any shares held by
"affiliates" of SmartDisk as that term is defined in Rule 144 of the Securities
Act. As of September 30, 1999, approximately 12 million shares of common stock
held by existing stockholders were "restricted shares" as that term is defined
in Rule 144, and these shares will be available for sale in the public market
commencing approximately 135 days after the date of this prospectus, or earlier
if the underwriters release their lock-up restrictions.
As of September 30, 1999, there were options to purchase 1,086,750
shares of our common stock outstanding. Should the holders of these options
exercise their options, there will be additional shares eligible for sale
approximately 135 days after the date of this prospectus. Three of our principal
stockholders have the right to require us to file a registration statement to
enable them to sell their shares. These and one other stockholder also have the
right to require us to include their shares in subsequently filed registration
statements. If our stockholders sell substantial amounts of the common stock,
including shares issued upon the exercise of outstanding options, in the public
market, the market price of our common stock could fall.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of
common stock by the selling stockholders.
SELLING STOCKHOLDERS
The following table sets forth information with respect to the selling
stockholders and the shares of our common stock that they may offer and sell
under this prospectus. Each of the selling stockholders named below acquired the
shares of our common stock (1) pursuant to our 1998 Employee Stock Option Plan
as our employee, (2) pursuant to our 1998 Directors and Consultants Stock Option
Plan as our director or consultant, or (3) is the transferee by gift of a person
who acquired the shares pursuant to one of the methods described in clauses (1)
or (2).
The following table sets forth with respect to each selling
stockholder, based upon information available to us as of November 19, 1999, the
number of shares of common stock owned, the number of shares of common stock
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registered by this prospectus and the number and percent of outstanding shares
of common stock that will be owned after the sale of the registered shares of
common stock assuming the sale of all of the registered shares of common stock.
We calculated beneficial ownership according to Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as of November 19, 1999.
Because the selling stockholders may sell all or some portion of the
shares of common stock beneficially owned by them, only an estimate (assuming
the selling stockholder sells all of the shares offered hereby) can be given as
to the number of shares of common stock that will be beneficially owned by the
selling stockholders after this offering. In addition, the selling stockholders
may have sold, transferred or otherwise disposed of, or may sell, transfer or
otherwise dispose of, at any time or from time to time since the dates on which
they provided the information regarding the shares of common stock beneficially
owned by them in transactions exempt from the registration requirements of the
Securities Act.
<TABLE>
<CAPTION>
NUMBER OF SHARES OWNED
AFTER THE OFFERING
NUMBER OF SHARES NUMBER OF SHARES --------------------------
NAME BENEFICIALLY OWNED REGISTERED NUMBER PERCENT
- ---------------------------------------- ------------------ ---------------- ------ -------
<S> <C> <C> <C> <C>
Michael S. Battaglia 410,136 410,136 0 *
Quresh Sachee(1) 50,000 30,000 20,000 *
Jon I. Kaplan 40,000 40,000 0 *
John W. Wynkoop 35,000 35,000 0 *
Toshio Yajima 33,500 21,000 12,500 *
D. James Bidzos(2) 28,900 18,750 10,150 *
TZMM Investment Fund 22,250 22,250 0 *
Paul Pieske 10,000 10,000 0 *
Randall J. Martin 10,000 10,000 0 *
Tom Delany 10,000 10,000 0 *
William Campbell 10,000 10,000 0 *
Michael C. Battaglia 8,000 8,000 0 *
Lisa J. Owen 8,000 8,000 0 *
David J. Craig 5,000 5,000 0 *
Eddie J. Vigil 5,000 5,000 0 *
David Stone 5,000 5,000 0 *
Haruyoshi Maruyama 3,125 3,125 0 *
Benoit Legris 2,500 2,500 0 *
Larry Larimer 2,500 2,500 0 *
Mark Chamberlain 2,500 2,500 0 *
Michael A. Bidzos 1,250 1,250 0 *
Michael P. Bidzos 1,250 1,250 0 *
Peter & Barbara Bidzos as custodian
under Uniform Gift to Minors Act
for Jeffrey A. Bidzos 1,250 1,250 0 *
Sarah A. Canfield 1,250 1,250 0 *
Tsuneichi Kunai 1,250 1,250 0 *
The Joy E. Tomlinson 1996 Trust 750 750 0 *
The Tucker Tomlinson 1996 Trust 750 750 0 *
Andrea Kennison 250 250 0 *
<FN>
- ----------
* Less than one percent
(1) Includes 20,000 shares subject to options either currently exercisable or
exercisable by Mr. Sachee within 60 days of September 30, 1999.
(2) Excludes shares held by Phoenix House Investments, L.L.C., in which Mr.
Bidzos owns a 2.5% ownership interest. Mr. Bidzos disclaims beneficial
ownership of the shares held by Phoenix House.
</FN>
</TABLE>
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PLAN OF DISTRIBUTION
WHO MAY SELL AND APPLICABLE RESTRICTIONS. The selling stockholders will
be offering and selling all shares offered and sold under this prospectus.
Alternatively, the selling stockholders may from time to time offer the shares
through brokers, dealers or agents that may receive compensation in the form of
discounts, commissions or concessions from the selling stockholders and/or the
purchasers of the shares for whom they may act as agent. In effecting sales,
broker-dealers that are engaged by the selling stockholders may arrange for
other broker-dealers to participate. The selling stockholders and any brokers,
dealers or agents who participate in the distribution of the shares may be
deemed to be underwriters within the meaning of Section 2(11) of the Securities
Act. Any profits on the sale of the shares by them and any discounts,
commissions or concessions received by any broker, dealer or agent might be
deemed to be underwriting discounts and commissions under the Securities Act. To
the extent the selling stockholders may be deemed to be underwriters, the
selling stockholders may be subject to certain statutory liabilities, including,
but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5
under the Exchange Act.
MANNER OF SALES. The selling stockholders will act independently of us
in making decisions with respect to the timing, manner and size of each sale.
Sales may be made over the Nasdaq National Market or other over-the-counter
markets. The shares may be sold at then prevailing market prices, at prices
related to prevailing market prices or at negotiated prices. Selling
stockholders may also resell all or a portion of the shares in open market
transactions in reliance upon Rule 144 under the Securities Act, provided they
meet the criteria and conform to the requirements of this rule. The selling
stockholders may decide not to sell any of the shares offered under this
prospectus, and selling stockholders may transfer, devise or gift these shares
by other means.
PROSPECTUS DELIVERY. Because selling stockholders may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act, they
will be subject to the prospectus delivery requirements of the Securities Act.
At any time a particular offer of the shares is made, a revised prospectus or
prospectus supplement, if required, will be distributed which will set forth:
o the name of the selling stockholder and of any participating
underwriters, broker-dealers or agents;
o the aggregate amount and type of shares being offered;
o the price at which the shares were sold and other material
terms of the offering;
o any discounts, commissions, concessions and other items
constituting compensation from the selling stockholders and
any discounts, commissions or concessions allowed or paid to
dealers; and
o that any participating broker-dealers did not conduct any
investigation to verify the information set out or
incorporated in this prospectus by reference.
The prospectus supplement or a post-effective amendment will be filed
with the Commission to reflect the disclosure of additional information with
respect to the distribution of the shares. In addition, if we receive notice
from a selling stockholder that a donee or pledgee intends to sell more than 500
shares, a supplement to this prospectus will be filed.
EXPENSES ASSOCIATED WITH REGISTRATION. We have agreed to pay the
expenses of registering the shares under the Securities Act, including
registration and filing fees, printing and duplication expenses, administrative
expenses and legal and accounting fees. Each selling stockholder will pay its
own brokerage and legal fees, if any.
SUSPENSION OF THIS OFFERING. We may suspend the use of this prospectus
if we learn of any event that causes this prospectus to include an untrue
statement of a material effect or to omit to state a material fact required to
be stated in the prospectus or necessary to make the statements in the
prospectus not misleading in the light of the
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circumstances then existing. If this type of event occurs, a prospectus
supplement or post-effective amendment, if required, will be distributed to each
selling stockholder.
LEGAL MATTERS
The validity of the common stock being offered hereby will be passed
upon for us by Greenberg Traurig, P.A., Miami, Florida.
EXPERTS
Ernst & Young LLP, independent certified public accountants, have
audited our consolidated financial statements at December 31, 1997 and 1998, and
June 30, 1999 and for each of the three years in the period ended December 31,
1998 and the six months ended June 30, 1999, included in our registration
statement on Form S-1 (Registration No. 333-82793), as amended, as set forth in
their report, which is incorporated by reference in this prospectus and
elsewhere in this registration statement. Our financial statements are
incorporated by reference in reliance on Ernst & Young LLP's report given on
their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Commission a Registration Statement on Form S-8
(including a Form S-3 Prospectus) under the Securities Act with respect to the
shares of common stock offered by this prospectus. A copy of any document
incorporated by reference in the registration statement (not including exhibits
to the information that is incorporated by reference unless such exhibits are
specifically incorporated by reference into the information that the
registration statement incorporates) will be provided by us without charge to
any person (including any beneficial owner) to whom this prospectus has been
delivered upon the oral or written request of such person. Such requests should
be directed to SmartDisk Corporation, 3506 Mercantile Avenue, Naples, Florida
34104. Our telephone number is (941) 436-2500.
We are also subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and are required to file
annual and quarterly reports, proxy statements and other information with the
Commission. You can inspect and copy reports and other information filed by us
with the Commission at the Commission's Public Reference Room 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 the Commission at
1-800-SEC-0300. The Commission also maintains an Internet site at
http:\\www.sec.gov that contains reports, proxy and information statements
regarding issuers, including us, that file electronically with the Commission.
You should only rely on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. The common stock is not being
offered in any state where the offer is not permitted. You should not assume
that the information in this prospectus or any supplement is accurate as of any
date other than the date on the front of this prospectus.
The following documents which we filed with the Commission are
incorporated by reference into this prospectus:
(a) Our Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1999, filed pursuant to Section 13 of the Exchange
Act.
(b) The description of Common Stock contained in our
Registration Statement on form 8-A (File No. 000-27257) filed with the
Commission on September 3, 1999 pursuant to Section 12 of the Exchange
Act, including any subsequent amendment or report filed for the purpose
of amending such description.
-16-
<PAGE>
(c) Our prospectus filed with the Commission under Rule 424(b)
under the Securities Act, in connection with Registration Statement No.
333-82793 filed with the Commission on July 14, 1999, as amended by
filings on September 3, 1999, September 27, 1999 and October 4, 1999.
In addition, all documents which we file pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date of this prospectus and
prior to the termination of this offering, shall be deemed to be incorporated by
reference herein and to be a part of this prospectus from the date of the filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus, or in any other subsequently filed document which
also is or is deemed to be incorporated by reference in this prospectus,
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.
-17-
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
SmartDisk hereby incorporates by reference into this Registration
Statement the following documents or portions thereof as indicated:
(a) our Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1999;
(b) all other reports filed by us pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") since October 6, 1999; and
(c) the description of our Common Stock filed as a part of our
Registration Statement, as amended, on Form S-1 under the
Securities Act of 1933 (Registration No. 333-82793).
In addition, all documents subsequently filed by us pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities offered hereby
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated herein by reference and to be a part hereof from
the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
SmartDisk has authority under Section 145 of the Delaware General
Corporation Law to indemnify our directors and officers to the extent provided
in such statute. Section 145 of the Delaware General Corporation Law provides
that a corporation may indemnify officers and directors, subject to certain
conditions and limitations, against certain liabilities and expenses in
connection with claims against them in their capacity as officers and directors,
if such person acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the corporation, and with
respect to criminal proceedings if he or she had no reasonable cause to believe
his conduct was unlawful.
Our Certificate of Incorporation, as amended, provides that we may
indemnify our executive officers and directors to the fullest extent permitted
by law, including under certain circumstances against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement incurred by
such persons in connection with an action, suit, or proceeding to which he or
she has been or is threatened to be made a party by reason of the fact that he
or she is or was our director or officer. We have also entered or will enter
into an agreement with each of our directors and some of our officers wherein we
have agreed or will agree to indemnify each of them to the fullest extent
permitted by law.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The securities that are to be reoffered or resold pursuant to this
registration statement were issued by us pursuant to our 1998 Employee Stock
Option Plan or our 1998 Directors and Consultants Stock Option Plan in
transactions that were exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereto and or Rule 701 thereunder.
II-1
<PAGE>
ITEM 8. EXHIBITS
See "Exhibit Index" on page II-4 below.
ITEM 9. 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, as amended (the "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;
(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) shall 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 Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under
the Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering 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 Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act 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) Insofar as indemnification for liabilities arising under the 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 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-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Naples, State of Florida on November 19, 1999.
SMARTDISK CORPORATION
By: /s/ MICHAEL S. BATTAGLIA
-------------------------------------
Michael S. Battaglia
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Michael S. Battaglia and Daniel E.
Reed, and each of them, his true and lawful attorney-in-fact, acting alone, with
full powers of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any or all amendments, including
any post-effective amendments, to this registration statement, and to file the
same, with exhibits thereto, and other documents to be filed in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorney-in-fact or his substitute, acting alone, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Act, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------ ----------------------------------------- ---------------------------
<S> <C> <C>
/s/ ADDISON M. FISCHER Chairman of the Board and Director November 19, 1999
- ------------------------------------
Addison M. Fischer
/s/ MICHAEL S. BATTAGLIA President and Chief Executive Officer and November 19, 1999
- ------------------------------------ Director
Michael S. Battaglia
/s/ MICHAEL R. MATTINGLY Chief Financial Officer (Principal November 19, 1999
- ------------------------------------ Financial and Accounting Officer)
Michael R. Mattingly
/s/ D. JAMES BIDZOS Director November 19, 1999
- ------------------------------------
D. James Bidzos
/s/ ANTHONY A. IBARGUEN Director November 19, 1999
- ------------------------------------
Anthony A. Ibarguen
Director November 19, 1999
- ------------------------------------
Shigeki Morita
/s/ TIMOTHY TOMLINSON Director November 19, 1999
- ------------------------------------
Timothy Tomlinson
/s/ JOSEPH M. TUCCI Director November 19, 1999
- ------------------------------------
Joseph M. Tucci
/s/ HATIM TYABJI Director November 19, 1999
- ------------------------------------
Hatim Tyabji
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- --------- ----------------------------------------------------------------
4.1 -- Certificate of Incorporation of Registrant is incorporated by
reference to Exhibit 3.1 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-82793) filed on July
14, 1999.*
4.2 -- Certificate of Correction of Restated Certificate of
Incorporation is incorporated by reference to Exhibit 3.3 to the
Registrant's Registration Statement on Form S-1 (Registration
No. 333-82793) Amendment No. 3 filed on October 4, 1999.*
4.3 -- Registrant's 1999 Incentive Compensation Plan is incorporated by
reference to Exhibit 10.3 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-82793) Amendment No.
1 filed on September 3, 1999.*
4.4 -- Registrant's 1999 Employee Stock Purchase Plan is incorporated
by reference to Exhibit 10.4 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-82793) Amendment No.
1 filed on September 3, 1999.*
4.5 -- Registrant's 1998 Employee Stock Option Plan is incorporated by
reference to Exhibit 10.1 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-82793) filed on July
14, 1999.*
4.6 -- Registrant's 1998 Directors and Consultants Stock Option Plan is
incorporated by reference to Exhibit 10.2 to the Registrant's
Registration Statement on Form S-1 (Registration No. 333-82793)
filed on July 14, 1999.*
5.1 -- Opinion of Greenberg Traurig, P.A.**
23.1 -- Consent of Ernst & Young LLP**
23.2 -- Consent of Greenberg Traurig, P.A. (contained in its opinion
filed as Exhibit 5.1 hereto)
24.1 -- Power of Attorney is included in the Signatures section of this
Registration Statement.
- ----------------------
* Previously filed.
** Filed herewith.
II-4
EXHIBIT 5.1
GREENBERG TRAURIG, P.A.
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
November 19, 1999
SmartDisk Corporation
3506 Mercantile Avenue
Naples, Florida 34104
Re: Registration Statement on Form S-8 (including registration
of shares for resale under a Form S-3 prospectus)
Ladies and Gentlemen:
We have acted as counsel to SmartDisk Corporation in connection with a
registration statement on Form S-8 (including registration of shares for resale
under a Form S-3 prospectus) to be filed with the Securities and Exchange
Commission on the date hereof (the "Registration Statement") under the
Securities Act of 1933, as amended. The Registration Statement relates to the
offering and sale by the Company of up to 3,961,250 shares of the Company's
Common Stock, par value $0.001 per share (the "Common Stock"), pursuant to stock
options ("Options") granted or to be granted under the Company's 1998 Employee
Stock Option Plan, 1998 Directors and Consultants Stock Option Plan, 1999
Incentive Compensation Plan and 1999 Employee Stock Purchase Plan (collectively,
the "Plans") and 666,761 shares of Common Stock which have been issued by the
Company pursuant to the exercise of options granted under the Plans.
In connection with the Registration Statement, we have examined and
relied upon the original or a copy, certified to our satisfaction, of (i) the
Certificate of Incorporation and Bylaws of the Company, each as amended to date;
(ii) records of corporate proceedings of the Company, authorizing the Plans, any
amendments thereto, and the preparation of the Registration Statement and
related matters; (iii) the Registration Statement and exhibits thereto; and (iv)
such other documents and instruments as we have deemed necessary for the
expression of the opinions herein contained. In making the foregoing
examinations, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals, and the conformity
to original documents of all documents submitted to us as certified or
photostatic copies. As to various questions of fact material to this opinion, we
have relied, to the extent we deem reasonably appropriate, upon representations
or certificates of officers or directors of the Company and upon documents,
records and instruments furnished to us by the Company, without independently
checking or verifying the accuracy of such documents, records and instruments.
<PAGE>
Based upon the foregoing examination, we are of the opinion that, (i)
assuming that the Company maintains an adequate number of authorized and
unissued shares of Common Stock available for issuance to those persons who
exercise Options granted under the Plans and assuming that the consideration for
shares of Common Stock issued pursuant to such Options is actually received by
the Company as provided in the Plans, the shares of Common Stock issued pursuant
to the exercise of Options granted under and in accordance with the terms of the
Plans will be duly and validly issued, fully paid and nonassessable, and (ii)
the Common Stock which has been issued pursuant to the exercise of options
granted under the Plans is duly and validly issued, fully paid and
nonassessable.
This opinion is rendered only to you and is solely for your benefit in
connection with the transactions covered hereby. This opinion may not be relied
upon by you for any other purpose, or furnished to, quoted to or relied upon by
any other person, firm or corporation for any purpose, without our prior written
consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not admit that we come
within the category of persons whose consent is required by Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Greenberg Traurig, P.A.
GREENBERG TRAURIG, P.A.
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-8) and related Prospectus pertaining to the
SmartDisk Corporation 1999 Incentive Compensation Plan, 1999 Employee Stock
Purchase Plan, 1998 Employee Stock Option Plan and 1998 Directors and
Consultants Stock Option Plan, and to the incorporation by reference therein of
our report dated August 11, 1999, with respect to the consolidated financial
statements of SmartDisk Corporation included in its Registration Statement on
Form S-1 (No. 333-82793) and related Prospectus, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
Miami, Florida
November 19, 1999
