<PAGE>
As filed with the Securities and Exchange Commission on May 21, 1996
REGISTRATION NO. 333- 01626
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 3 TO FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NUKO INFORMATION SYSTEMS, INC.
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
NEW YORK 3662 16-0962874
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
NUKO INFORMATION SYSTEMS, INC.
2235 QUME DRIVE
SAN JOSE, CA 95131
(408) 526-0288
(Address and telephone number of principal executive offices and principal place
of business)
--------------------------
PRATAP KESAV KONDAMOORI, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
NUKO INFORMATION SYSTEMS, INC.
2235 QUME DRIVE
SAN JOSE, CA 95131
(408) 526-0288
(Name, address and telephone number of agent for service)
--------------------------
Copies to:
AMY M. GROSSMAN, ESQ.
GROVER T. WICKERSHAM, ESQ.
GROVER T. WICKERSHAM, P.C.
430 CAMBRIDGE AVE., SUITE 100
PALO ALTO, CA 94306
(415) 323-6400
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
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
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 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./ /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box./X/
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE (1) OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock (2)............................ 1,069,000 $2.375 $2,538,875 $876
Common Stock (2)............................ 331,000 $6.50 $2,151,500 $742
Common Stock................................ 5,114,445 $12.875 $65,848,479 $22,706
Common Stock................................ 40,000 $14.437 $577,480 $200
Total................................... 6,554,445 $71,116,334 $24,524(3)
</TABLE>
(1) These figures are estimates made solely for the purpose of calculating the
registration fee pursuant to Rule 457(h).
(2) Issuable upon exercise of stock options granted under the Registrant's 1995
Stock Option Plan.
(3) Of this amount, $24,324 was previously paid to the Commission.
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
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<PAGE>
NUKO INFORMATION SYSTEMS, INC.
CROSS REFERENCE SHEET BETWEEN ITEMS OF FORM SB-2 AND PROSPECTUS
<TABLE>
<C> <S> <C>
1. Front of Registration Statement and Outside
Front Cover of Prospectus................. Facing Page; Outside Front Cover Page
2. Inside Front and Outside Back Cover Page of
Prospectus................................ Inside Front Cover Page; Outside Back Cover
Page
3. Summary Information and Risk Factors....... Prospectus Summary; Risk Factors
4. Use of Proceeds............................ Prospectus Summary; Use of Proceeds
5. Determination of Offering Price............ Outside Front Cover Page; Plan of
Distribution
6. Dilution................................... Not Applicable
7. Selling Security Holders................... Selling Stockholders
8. Plan of Distribution....................... Inside Front Cover Page; Plan of
Distribution
9. Legal Proceedings.......................... Not Applicable
10. Directors, Executive Officers, Promoters
and Control Persons....................... Management
11. Security Ownership of Certain Beneficial
Owners and Management..................... Principal Stockholders
12. Description of Securities.................. Outside Front Cover Page; Capitalization;
Description of Securities
13. Interest of Named Experts and Counsel...... Legal Matters
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
15. Organization Within Last Five Years........ Management -- Certain Transactions
16. Description of Business.................... Prospectus Summary; Business
17. Management's Discussion and Analysis or
Plan of Operation......................... Management's Discussion and Analysis of
Financial Condition and Results of
Operations
18. Description of Property.................... Business -- Properties
19. Certain Relationships and Related
Transactions.............................. Management -- Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters....................... Price Range of Common Stock
21. Executive Compensation..................... Management -- Executive Compensation
22. Changes In and Disagreements with
Accountants on Accounting and Financial
Disclosure................................ Not Applicable
</TABLE>
ii
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 21, 1996
1,400,000 SHARES
NUKO INFORMATION SYSTEMS, INC.
COMMON STOCK
------------------
This Prospectus covers the exercise of up to one million four hundred
thousand incentive and non-qualified stock options ("Options") granted under
NUKO Information Systems, Inc.'s (the "Company") 1995 Stock Option Plan (the
"1995 Option Plan") and the reoffer and resale of 862,832 shares of common
stock, $0.001 par value ("Common Stock") issuable upon exercise of the Options
by affiliates of the Company. Options have been granted from time to time in the
discretion of the Company's Board of Directors or a committee thereof (the
"Administrator") at exercise prices determined by the Administrator.
As of the date hereof, all 1,400,000 shares are subject to issuance upon
exercise of outstanding options at exercise prices ranging from $2.375 to $6.50.
No options currently remain available for future grant under the 1995 Option
Plan.
The Company's Common Stock is currently traded on the over-the-counter
market and quoted on the Electronic Bulletin Board under the symbol "NUKO." On
May 17, 1996, the closing bid price for the Common Stock was $17.25. See "Price
Range of Common Stock."
Concurrently with this offering, the Company is registering on the
registration statement of which this Prospectus is a part but pursuant to a
separate prospectus, 5,154,445 shares of Common Stock for reoffer or resale by
certain selling stockholders of the Company's securities, purchased by the
selling stockholders in various private transactions.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") pursuant to 15(d) thereof,
and, in accordance therewith, files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports and other
information filed by the Company 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 its regional offices located at 7 World Trade
Center, Suite 1300, New York, New York 10048, and at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"), with respect to the securities offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. The Registration Statement, including exhibits
thereto, may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices located
at 7 World Trade Center, 13th Floor, New York, New York 10048 and Northwest
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may be obtained by mail at prescribed rates from the
Public Reference Branch of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.
2
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND
FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THIS PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934.
THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES, INCLUDING THOSE DISCUSSED HEREIN, AND IN THE COMPANY'S ANNUAL
REPORT ON FORM 10-KSB FOR THE FISCAL PERIOD ENDED DECEMBER 31, 1995 AND ITS
QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTER ENDED MARCH 31, 1996, THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. INVESTORS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH
REFLECT MANAGEMENT'S ANALYSIS ONLY AS OF THE DATE HEREOF. THE COMPANY UNDERTAKES
NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY REVISION TO THESE
FORWARD-LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES
AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
THE COMPANY
NUKO Information Systems, Inc. (the "Company") designs and markets codecs,
an important building block in the creation of video and multi-media networks.
Marketed under the trade name Highlander, the Company's "codecs" (i) digitally
encode, (ii) compress, (iii) transmit, (iv) decompress and (v) decode data;
thereby minimizing the time required to transmit video and audio data to remote
locations. Because they comply with the MPEG-1 and MPEG-2 international
standards for data compression, Highlander codecs not only can compress data at
ratios ranging from 1:10 up to 1:200 (depending on content), they also are
compatible with all other equipment that meets MPEG design standards. The
Company's strategy is based on its belief, of which there can be no assurance,
that the MPEG-2 standard will be accepted by the technical community, thereby
promoting a rapid proliferation of multimedia services on public data networks,
such as the Internet, and on fiber networks operated by cable or telephone
providers.
The Company intends to capitalize on the emergent MPEG-2 standard by
marketing its products to carriers (I.E., cable and telephone companies) for use
in public voice, video and data networks, and also to large organizations such
as universities, government agencies and Fortune 1000 corporations for use in
proprietary networks. Typical private network applications include multi-site
locations for large companies and universities that transmit to off-campus
locations. During 1995, Highlander products underwent field trials by potential
customers that included regional Bell operating companies, cable broadcasters,
satellite broadcasters and resellers of inter-exchange and network equipment.
Although the Company believes Highlander test units demonstrated full compliance
during these field trials, there can be no assurance that the Company will
achieve commercial acceptance of its products.
With the exception of high speed digital signal processing chips, most of
the Company's codec chip sets consist of standard electronic components,
including transistors, integrated circuits, resistors, capacitors and circuit
boards, that are manufactured by several suppliers. Since the Company has no
formal contractual relationships with any of its vendors, there is no assurance
that there will not be delays in the manufacture and delivery of products, or
other problems that could result in a need to find alternative manufacturing
facilities. The Company subcontracts its manufacturing to companies certified as
meeting the BellCore and ISO 9000 standards observed by the telecommunications
industry.
The Company was incorporated in the State of New York in 1968 under the name
Yondata Corporation and, in October 1992, changed its name to Growers Express
Corporation. In May 1994, Growers Express Corporation merged with NUKO
Technologies, Inc., a California corporation, and following the merger, Growers
Express changed its name to NUKO Information Systems, Inc., and commenced
operations through NUKO Technologies, Inc., which survived the merger as its
wholly-owned subsidiary. References herein to the "Company" or "NUKO" refer to
NUKO Information Systems, Inc., a New York corporation, and its subsidiary, NUKO
Technologies, Inc. The Company's principal executive offices are located at 2235
Qume Drive, San Jose, California and its telephone number is (408) 526-0288.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered................... 1,400,000 shares issuable upon exercise of Options
granted under the terms of the 1995 Option Plan.
Common Stock Outstanding............... 10,250,918 shares as of May 20, 1996. (1)
Use of Proceeds........................ Proceeds of this offering, if any, will be used for
working capital and general corporate purposes. See
"Use of Proceeds."
OTC Electronic Bulletin Board Symbol... NUKO
All transactions made pursuant to this Prospectus are eligible for Form S-8 and could have
been registered on that form.
</TABLE>
- ------------------------
(1) Does not include (i) 398,400 shares issuable upon exercise of outstanding
warrants; and (ii) 2,800,000 shares issuable upon exercise of options under
the Company's stock option plans. See "Management -- Stock Options."
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
EIGHT MONTHS FISCAL YEAR ENDED APRIL 30,* MARCH 31,
ENDED, DECEMBER ---------------------------- ----------------------------
31, 1995 1995 1994 1996 1995
----------------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues........................ $ 296,330 $ 88,299 $ 346,146 $ 474,413 $ 1,261
Cost of revenues................ 89,296 6,688 72,080 142,321 --
Net loss........................ (1,957,645) (1,743,862) (703,225) (3,064,775) (440,987)
Loss per common share........... $ (0.70) $ (0.81) $ (0.38) $ (0.37) $ (0.18)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995 MARCH 31, 1996
----------------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital............................................................. $ 11,091,081 $ 12,139,566
Total assets................................................................ 13,327,869 15,270,311
Total current liabilities................................................... 1,523,951 2,173,466
Senior notes................................................................ 325,000 325,000
Accumulated deficit......................................................... (4,373,614) (7,438,389)
Total shareholders' equity.................................................. 11,377,232 12,696,439
</TABLE>
- ------------------------
* In December 1995, the Company changed its fiscal year end from April 30 to
December 31.
4
<PAGE>
RISK FACTORS
THE PURCHASE OF THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK, AND THE PURCHASE OF THESE SECURITIES SHOULD BE CONSIDERED ONLY BY PERSONS
WHO CAN AFFORD TO SUSTAIN A TOTAL LOSS OF THEIR INVESTMENT. PROSPECTIVE
PURCHASERS SHOULD CAREFULLY CONSIDER, AMONG OTHER FACTORS, THE FOLLOWING:
HISTORY OF LOSSES. Since its inception, the Company has operated at a loss
because the Company's revenues were insufficient to support the comparatively
substantial expenses incurred by the Company, primarily for research and
development. The Company recorded net losses of $703,225 in fiscal 1994,
$1,743,862 in fiscal 1995 and $1,957,645 for the eight months ended December 31,
1995 and a loss of $3,064,775 for the three months ended March 31, 1996. The
Company expects to incur substantial losses until such time as it achieves
significant revenues from product sales or licensing. There can be no assurance
that the Company will achieve profitable operations in the foreseeable future,
if at all. As of December 31, 1995, the Company has net operating loss
carryforwards of approximately $3,800,000 and $1,900,000 available to offset
future federal and state taxable income, respectively. The utilization of these
losses is contingent upon the Company's ability to generate taxable income in
the future. Management does not believe, based upon available evidence, that it
is more likely than not that the Company will be able to realize the deferred
tax assets.
SHORT OPERATING HISTORY. The Company's operations are subject to all of the
risks inherent in a new business enterprise, including the absence of a
substantial operating history, and expense of new product development. Various
problems, expenses, complications and delays may be encountered in connection
with the development of the Company's products and business. Future growth
beyond present capacity will require significant expenditures for expansion,
marketing, research and development. These expenses must be paid out of future
equity or debt financings or out of generated revenues and Company profits. The
availability of funds from any of these sources cannot be assured.
EARLY STAGE OF PRODUCT DEVELOPMENT. Since early 1994, the Company has been
primarily engaged in research and development of its technologies, product
design and establishment of strategic alliances on which the Company expects to
depend for manufacturing, sales and distribution of its potential products. The
Company has not yet begun to generate significant revenues from the
commercialization of products. The Company has to date sold its initial product
only in limited quantities, primarily for use in development, demonstration and
testing of prototypes. The Company's potential products are based on
technologies that have not been widely used or commercially proven, and there
can be no assurance that the Company will be able successfully to market its
initial products, generate the substantially increased revenues necessary to
sustain full scale commercial production or that the potential products will be
well received when introduced into the marketplace on a full commercial scale.
Moreover, management of the Company has limited experience with the distribution
of technologically-complex products in commercial quantities and there can be no
assurance that the Company will be able to make necessary adaptations to
successfully move from the development stage to full commercial production and
distribution.
COMPETITION. The Company faces strong competition in its efforts to market
its initial products. Most of the Company's potential competitors have been in
business substantially longer and have considerably greater financial, marketing
and technological resources than does the Company. There is no assurance that
the Company will be able to compete successfully with such other companies.
ADDITIONAL CAPITAL REQUIREMENT. Although the Company has raised
approximately $19,800,000 in private offerings as of March 31, 1996, the Company
may require additional capital in the future to finance its business activities.
The timing and amount of such capital requirements cannot be accurately
predicted. Consequently, although the Company believes that the proceeds from
recent private offerings will provide adequate funding for its capital
requirements through fiscal 1996, the Company may be required to raise
additional funds to support its operating plan for fiscal 1997. Additional
future financing may occur through the sale of unregistered Common or
convertible securities in exempt offerings or through the public offering of
registered stock or convertible debt. In any case,
5
<PAGE>
such additional equity or convertible debt financing may result in additional
dilution to investors. There can be no assurance that any additional capital,
funding or revenues can be satisfactorily arranged.
DEPENDENCE ON CUSTOMER CAPITAL SPENDING. The Company's business is directly
impacted by capital spending requirements and funding of the Regional Bell
Operating Companies and long-distance telephone carriers. The capital budgets of
these customers or potential customers is beyond the control of the Company and
can be impacted by numerous factors completely unrelated to the performance,
quality and price of the Company's products. Should the Company's customers or
potential customers suffer budgeting cutbacks affecting their capital purchasing
plans, the Company's results of operations could be adversely affected.
DEPENDENCE ON SUPPLIERS. The Company purchases certain of the chips and
chip sets needed in its initial products from single source suppliers. The
Company is dependent upon such suppliers to deliver parts and components as
needed for the manufacture of the Company's initial products, but there can be
no assurance that such suppliers will continue to be able to serve the Company's
needs. While there are alternative sources of supply for each of the components
outsourced by the Company, the Company would incur delays if required to switch
to another supplier. Any disruption of the Company's relationships with any of
its key single source suppliers or manufacturers or other limitations on the
availability of these products provided by such suppliers could have an adverse
effect on the Company's business and operating results.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS. Neither the Company nor any
of its directors, officers or shareholders own any patent or patent rights
respecting products developed or marketed by the Company or any aspect of the
Company's technology. The Company has not yet adopted a formal intellectual
property protection program, and currently relies on a combination of trade
secret protection, nondisclosure agreements and licensing agreements to
establish and protect its proprietary rights. The Company will endeavor to keep
the results of its research and development program proprietary, but may not be
able to prevent others from using some or all of such information or technology
with or without compensation. The Company's ultimate success will depend to some
extent on its ability to avoid infringement of patent or other proprietary
rights of others. The Company is not aware that it is infringing any such
rights, nor is it aware of proprietary rights of others for which it will be
required to obtain a license in order to market its initial products. However,
there is no assurance that the Company is not infringing proprietary rights of
others or that it will be able to obtain any technology licenses it may require
in the future. See "Business -- Intellectual Property and Proprietary Rights."
POSSIBLE TECHNOLOGICAL ADVANCES. The market for the Company's initial
products is expected to be characterized by rapidly changing technology,
evolving industry standards and frequent new product introductions. The
Company's future success will depend in part upon its ability to successfully
bring to market and then enhance its existing products and to introduce new
products and features to meet changing customer requirements and emerging
industry standards. There can be no assurance that the Company will successfully
complete the development of its initial or future products or that the Company's
initial or future products will achieve market acceptance. Any delay or failure
of these products to achieve market acceptance would adversely affect the
Company's business. In addition, there can be no assurance that products or
technologies developed by others will not render the Company's initial or future
products or technologies non-competitive or obsolete.
DEPENDENCE ON KEY PERSONNEL. The Company will depend to a large extent on
the abilities and continued participation of certain key employees. The loss of
key employees could have a material adverse effect on the Company's business.
The Company anticipates purchasing "key man" insurance on certain key employees,
and is currently negotiating employment agreements with those employees. The
Company believes that, as its activities increase and change in character, it
will be necessary to
6
<PAGE>
retain the services of additional, experienced personnel. Competition for such
personnel is intense and there is no assurance that they will be available when
required, or that the Company will have the ability to attract them.
CONTROL BY OFFICERS AND DIRECTORS. As of April 25, 1996, the officers and
directors of the Company control, directly or indirectly, approximately 40.7% of
the voting power of the Company's voting stock including options and warrants
immediately exercisable or exercisable within 60 days. In addition, such persons
hold, directly or indirectly, options and warrants to purchase an aggregate of
391,089 additional shares of Common Stock that are currently exercisable or will
become exercisable within 60 days from the date of this Prospectus. Although
management does not control a majority of the outstanding stock, it holds a
sufficient amount to make it more difficult for an independent third party to
effect a change in control of the Company than would be the case if the stock
ownership were less concentrated among members of management.
STOCK MARKET VOLATILITY; VOLATILITY OF THE COMPANY'S COMMON STOCK. There
have been periods of extreme volatility in the stock market that, in many cases,
were unrelated to the operating performance of, or announcements concerning, the
issuers of the affected securities. General market price declines or volatility
in the future could adversely affect the price of the Common Stock. There can be
no assurance that the Common Stock will maintain its current market price.
Short-term trading strategies of certain investors can have a significant effect
on the price of specific securities. The price of the Company's Common Stock, in
particular, has been extremely volatile. Due to the sporadic trading and chronic
volatility, the Company does not believe that an established trading market
exists for its Common Stock.
ABSENCE OF DIVIDENDS. The Company does not expect to declare or pay any
cash or stock dividends in the foreseeable future, but instead intends to retain
all earnings, if any, to invest in the Company's operations. The payment of
future dividends is within the discretion of the Board of Directors and will
depend upon the Company's future earnings, if any, its capital requirements,
financial condition and other relevant factors.
SHARES ELIGIBLE FOR FUTURE SALE. Future sales of Common Stock by existing
shareholders under Rule 144 of the Act or through the exercise of outstanding
registration rights or otherwise could have an adverse effect on the price of
the Common Stock. There will be 9,351,477 shares of Common Stock eligible for
sale in the public market, subject to compliance with Rule 144, from time to
time from May 1996 to February 1998. The possibility that substantial amounts of
Common Stock may be sold in the public market may adversely affect the
prevailing market price for the Common Stock and could impair the Company's
ability to raise additional capital through the sale of equity securities.
BLANK CHECK PREFERRED STOCK; ANTI-TAKEOVER PROVISION. The Company's
Certificate of Incorporation, as amended, authorizes the issuance of up to
5,000,000 shares of Preferred Stock, none of which are outstanding. The Board of
Directors has the authority to fix and determine the relative rights and
preferences of preferred shares, as well as the authority to issue such shares,
without further shareholder approval. As a result, the Board of Directors could
authorize the issuance of a series of Preferred Stock which would grant to
holders preferred right to the assets of the Company upon liquidation, the right
to receive dividends before dividends would be declared to Common shareholders,
and the right to the redemption of such shares, together with a premium, prior
to the redemption of the Common Stock, or such other preferred provisions as the
Board may in its sole discretion deem appropriate. Common shareholders have no
redemption rights or other preferences. In addition, the Board could issue large
blocks of Preferred Stock to fend against unwanted tender offers or hostile
takeovers without further shareholder approval.
7
<PAGE>
DIVIDEND POLICY
The Company has never paid any cash dividends on its capital stock. At
present, the Company intends to retain all of its earnings, if any, for use in
the expansion of its business and does not anticipate paying any cash dividends
in the foreseeable future. Any payment of cash dividends on the Common Stock in
the future will be dependent upon the Company's financial condition, results of
operations, current and anticipated cash requirements, plans for expansion, as
well as other factors that the Board of Directors deems relevant.
USE OF PROCEEDS
As of the date of this Prospectus, all 1,400,000 Options are outstanding out
of a total of 1,400,000 shares initially available for grant under the 1995
Option Plan. Of this amount, 720,418 Options are currently exercisable within 60
days of the date of this Prospectus, with the balance vesting in monthly
installments for three years from the respective dates of grant in May 1995 and
February 1996. Assuming exercise of all outstanding Options, the Company will
receive gross proceeds of $4,690,375. There is no assurance that any Options
will be exercised or that the Company will receive any proceeds. However, the
Company presently intends to apply the net proceeds, if any, for general working
capital purposes.
8
<PAGE>
PRICE RANGE OF COMMON STOCK
Effective September 7, 1992, the Company's shares commenced trading on the
over-the-counter Electronic Bulletin Board under the symbol "GROX." There were
no reported or known trades on the Electronic Bulletin Board from September 7,
1992 until the merger with NUKO Technologies, Inc., on May 27, 1994 (the
"Merger"). After the Merger (and the concurrent name change from Growers Express
Incorporated to NUKO Information Systems, Inc.), trading commenced under the new
OTC symbol of NUKO. Due to the sporadic trading and chronic volatility, the
Company does not believe that an established trading market exists for its
Common Stock. Accordingly, the reported historical prices for the Common Stock
should not be viewed as a reliable indicator of the value of the Company's
stock.
The following table sets forth the range of high and low bid prices of the
Company's Common Stock in the over-the-counter market for the periods indicated.
The table below only includes market activity since the date of the Merger. The
prices presented are bid and ask quotations that represent interdealer prices
and do not include retail mark-ups and mark-downs or any commissions to the
broker dealer. The quoted prices may not reflect prices in actual transactions.
The high and low bid prices are as follows:
<TABLE>
<CAPTION>
COMMON STOCK BID
-------------------------------
FISCAL YEAR ENDED: HIGH LOW
- ------------------------------------------------------------ ---------- -----
<S> <C> <C>
APRIL 30, 1995*
First Quarter (commencing on May 27, 1994)................ $ 4 7/8 $ 2 1/4
Second Quarter............................................ $ 4 3/4 $ 2 1/4
Third Quarter............................................. $ 7 3/4 $ 2 1/4
Fourth Quarter............................................ $ 6 $ 2 1/2
DECEMBER 31, 1995*
First Quarter............................................. $ 5 1/2 $ 2 3/8
Second Quarter............................................ $ 5 3/8 $ 3 1/8
Third Quarter (through December 31, 1995)................. $10 10/16 $ 5
DECEMBER 31, 1996*
First Quarter............................................. $ 10 6 1/2
Second Quarter (through May 20, 1996)..................... $ 19 1/2 $ 7 5/8
</TABLE>
- ------------------------
* In December 1995, the Company changed its fiscal year end from April 30 to
December 31.
On May 17, 1996, the closing bid and ask prices for the Company's Common
Stock were $17.25 and $17.50, respectively.
There were approximately 1,500 shareholders of record of the Company's
Common Stock as of May 20, 1996.
9
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1996. The table should be read in conjunction with the financial statements
and notes thereto appearing elsewhere in this Prospectus. Capitalization on an
"as adjusted" basis is not included because the number of shares which will be
sold upon the exercise of options, if any, under the 1995 Option Plan is
uncertain.
<TABLE>
<S> <C>
Senior Notes.................................................................. $ 325,000
Stockholders' equity:
Common stock, $0.001 par value per share; 20,000,000 shares authorized,
10,250,918 shares issued and outstanding (1)............................... 10,250
Preferred stock, $0.001 par value per share; 5,000,000 shares authorized,
none outstanding........................................................... --
Additional paid-in capital.................................................. 20,124,578
Accumulated deficit......................................................... (7,438,389)
-----------
Total stockholders equity................................................. 12,696,439
-----------
Total capitalization...................................................... $13,021,439
-----------
-----------
</TABLE>
- ------------------------
(1) Does not include (i) up to 2,800,000 shares issuable upon exercise of
options under the Company's option plans and (ii) 398,400 shares issuable
upon exercise of outstanding warrants.
10
<PAGE>
SELECTED FINANCIAL DATA
The following selected consolidated statements of operations data for the
fiscal years ended April 30, 1994 and 1995, the eight months ended December 31,
1995, and the selected consolidated balance sheet data as of December 31, 1995,
are derived from the Company's consolidated financial statements, which have
been audited by Grant Thornton LLP, independent certified public accountants, as
indicated in their report included elsewhere in this Prospectus. The selected
consolidated statement of operations data for the three months ended March 31,
1996 and 1995 and the selected consolidated balance sheet data at March 31,
1996, have been derived from the Company's unaudited financial statements which,
in the opinion of management, reflect all adjustments (consisting solely of
normal recurring adjustments), necessary for a fair presentation of the results
for these periods and as of such date. The selected financial data provided
below for the three months ended March 31, 1996 are not necessarily indicative
of future results of operations or financial performance of the Company. The
following selected financial data should be read in conjunction with the
financial statements and related notes thereto appearing elsewhere in this
Prospectus and Management's Discussion and Analysis of Financial Condition and
Results of Operations.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED APRIL ENDED
EIGHT MONTHS 30,* MARCH 31,
ENDED, DECEMBER --------------------------- ----------------------------
31, 1995 1995 1994 1996 1995
----------------- -------------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues......................... $ 296,330 $ 88,299 $ 346,146 $ 474,413 $ 1,261
Cost of revenues................. 89,296 6,688 72,080 142,321 --
General and administrative
expenses........................ 792,497 913,913 492,882 1,305,480 92,737
Research and development
expenses........................ 1,268,515 803,449 449,366 2,188,047 328,597
Operating loss................... (1,853,978) (1,635,751) (668,182) (3,161,435) (420,073)
Net loss......................... (1,957,645) (1,743,862) (703,225) (3,064,775) (440,987)
Loss per common share............ $ (0.70) $ (0.81) $ (0.38) $ (0.37) $ (0.18)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995 MARCH 31, 1996
----------------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital............................................................. $ 11,091,081 $ 12,139,566
Total assets................................................................ 13,327,869 15,270,311
Total current liabilities................................................... 1,523,951 2,173,466
Senior notes................................................................ 325,000 325,000
Accumulated deficit......................................................... (4,373,614) (7,438,389)
Total shareholders' equity.................................................. 11,377,232 12,696,439
</TABLE>
- ------------------------
* In December 1995, the Company changed its fiscal year end from April 30 to
December 31.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, OF THE COMPANY CONTAINED ELSEWHERE IN
THIS PROSPECTUS.
OVERVIEW
Since inception, the Company has pursued its strategic multi-media
networking direction with open-systems standards-based software products and
video codecs, incurring continuing operating losses and substantial research and
development expenditures. The Company's performance is largely impacted by
Regional Bell Operating Companies and long-distance telephone carriers' capital
spending. The Company has incurred significant operating losses since its shift
in business focus in early fiscal 1994 to the video codec business from the
software consulting and software products business. After a research and
development phase which began in fiscal 1994, the Company's Highlander MPEG-2
video codec equipment completed five successful field trials with Pacific Bell
Corporation in July 1995. Because these trials fulfilled the customers'
specifications for video transmission, the Company believes considerable
progress in the research and development of its initial products has been
achieved. Since the successful completion of the field trials, the Company has
entered into several purchase order agreements, letters of intent and memoranda
of understanding with a number of companies, including telecommunications
carriers, telecommunications equipment suppliers and systems integration
companies. Performance under these agreements has caused expenses to increase as
the Company begins commercial production and positions itself to begin
commercial deployment to its customers. In addition, the Company believes the
private financing it has obtained will enable it to pursue its business
objectives during fiscal 1996, however it may be required to seek additional
funds if demand for the Company's products causes an increase in working capital
requirements, or if unforeseen expenses or problems arise.
RESULTS OF OPERATIONS
FISCAL PERIOD ENDED MARCH 31, 1996 (UNAUDITED) COMPARED TO FISCAL PERIOD
ENDED MARCH 31, 1995 (UNAUDITED)
Net sales for the first quarter of 1996 were $474,413 compared to $1,261 for
the same period in 1995. Sales for the quarter included shipments of the
Company's products which included software, billings for the rental of its
Highlander equipment, software licensing fees and software maintenance charges.
The net loss for the quarter was $3,064,775 or $0.37 per share, compared with
$440,987 or $0.18 per share for the same period in 1995. Net losses reflect the
Company's continued investment in its Highlander product line through research
and development efforts as well as the hiring of additional personnel to enable
the Company to support the market and their customer's requirements.
Cost of revenues for the three months ended March 31, 1996 was $142,321
compared to no separately identifiable cost for the same period in 1995. The
gross margin resulting from the cost of revenues as a percentage of net sales
for the first quarter of 1996 was 70%. This percentage was inflated by the
non-product revenue for the quarter. The change in volume invalidated comparison
with the same period in 1995.
Research and development expenses for the three months ended March 31, 1996
were $2,188,047 compared to $328,597 for the same period in 1995. The increase
in the current year reflects the Company's commitment to invest in the
development and enhancement of its Highlander product line. The substantial
increase in the current quarter as compared to the prior year is a result of
receiving adequate funds thereby enabling the Company to hire a substantial
number of qualified engineers capable of finishing its Highlander product
development efforts.
Selling, general and administrative expenses for the three months ended
March 31, 1996, were $1,305,480 compared to $92,737 for the same period in 1995.
The expenses increased substantially as a result of adding marketing and other
personnel needed as the Company began commercialization.
12
<PAGE>
Other income consists primarily of interest income and interest expense.
Other income for the three month period ended March 31, 1996 was $96,860
compared to an expense of $20,714 for the same period in the prior year. The
increase in interest income in the period ended March 31, 1996 compared to the
same period in 1995 was the result of a higher cash balances available to
invest.
FISCAL PERIOD ENDED DECEMBER 31, 1995 (AN EIGHT-MONTH PERIOD) COMPARED TO
FISCAL YEAR ENDED APRIL 30, 1995 AND TO THE UNAUDITED EIGHT MONTH PERIOD
ENDED DECEMBER 31, 1994
In December 1995, the Company changed its fiscal year end from April 30 to
December 31. Accordingly, financial and certain other information for the fiscal
year ended December 31, 1995 (the "December 1995 Fiscal Period") is reflective
of eight months of operations compared to a full year of operations for the
fiscal year ended April 30, 1995 (the "April 1995 Fiscal Year"). Discussed
below, where the Company believes such information would be informative, are
unaudited results for the eight month period ended December 31, 1994 (the
"December 1994 Unaudited Period") as compared to the audited results for the
December 1995 Fiscal Period.
During the eight months ended December 31, 1995, the Company focused its
efforts on accomplishing two major objectives: (i) "productizing" the Highlander
technology by moving from the prototype (field trial) design stage to a
commercial manufacturing capability, and (ii) developing key alliances for the
sales and distribution of these products. These efforts resulted in minimal
increased revenue and a substantial increase in expenses in the Eight Month
fiscal period ending December 31, 1995 compared to same fiscal period ended
December 31, 1994 and to the twelve month fiscal period ended April 30, 1995.
Revenues for the December 1995 Fiscal Period increased approximately 235% to
$296,330 as compared to $88,299 in the April 1995 Fiscal Period. Total revenues
for the December 1994 Unaudited Period were $100,740. The primary component of
revenues was product sales, net of returns, which totaled $174,690 in the
December 1995 Fiscal Period compared to only $17,600 in the April 1995 Fiscal
Period, an increase of approximately 892%. This increase reflected the
completion of field trials and the commencement of commercialization of the
Company's initial products. In addition, revenues in the December 1995 Fiscal
Period reflect $120,000 of contract development fees, of which there were none
in the April 1995 Fiscal Year. These development fees were the result of the
Company's execution of a Development and OEM Purchase Agreement with Northern
Telecom Limited ("Nortel"), pursuant to which the Company has agreed to develop
customized products for Nortel's use and exclusive distribution. The Company
expects to receive an additional $240,000 from this contract in the first half
of 1996. These sales and contract development fee increases were offset by a
$70,000 decrease in royalties from the April 1995 Fiscal Year to the December
1995 Fiscal Period as a result of the Company's decision to shift its business
focus from its prior software business to its current video codec business.
Although the Company has entered into a source code purchase agreement in March
1996 with Digi International, Inc. for the licensing of the Company's primary
software product, "Message Port," the Company does not anticipate royalty
revenues to constitute a significant portion of total revenues in the near
future. In December 1995, the Company and Southwestern Bell Video Services, Inc.
("Southwestern Bell") entered into a Purchase Agreement under which Southwestern
Bell may execute orders for the Company's MPEG-2 encoder system and associated
software, valued at approximately $3,300,000. However, Southwestern Bell has the
right to terminate any orders placed by it under the agreement, with liability
to the Company, if any, severely restricted by the contract. Accordingly, there
is no assurance that the Southwestern Bell Purchase Agreement will positively
impact revenues.
The Company incurred operating costs and expenses of $2,150,308 in the
December 1995 Fiscal Period compared to $1,724,050 and $1,069,128 for the April
1995 Fiscal Year and the December 1994 Unaudited Period, respectively. The
increase from the 1994 eight month period to the 1995 eight month period
represents over a 100% increase in expenses.
Cost of product sales has increased both in dollar amount and as a
percentage of product sales from the April 1995 Fiscal Year to the December 1995
Fiscal Period. Cost of sales increased from
13
<PAGE>
$6,688 in the April 1994 Fiscal Year to $89,296 in the December 1995 Fiscal
Period. Cost of sales increased, as expected, as the Company moved from field
trials toward commercial production of its products during the December 1995
Fiscal Period.
The largest component of costs and expenses in the December 1995 Fiscal
Period was research and development expenses, which accounted for approximately
59% of costs and expenses during such period and represents an increase of
approximately $750,000 over the amount expended on research and development
during the December 1994 Unaudited Period. The Company incurred research and
development expenses of $803,449 in the April 1995 Fiscal Year as it continued
the development of its Highlander video codec. A principal reason for the
substantial increase was the addition of engineering staff members during the
last several months of the December 1995 Fiscal Period. The Company believes
that a substantial portion of the research and development expense required for
the development of the Highlander video codec has been incurred, but
nevertheless expects to continue to incur substantial ongoing research and
development expenses as it works to enhance existing products and develop new
products incorporating newly-emerging digital audio and video networking
technologies.
The Company incurred selling, general and administrative expenses of
$792,497 and $913,913 in the December 1995 Fiscal Period and the April 1995
Fiscal Year, respectively. The Company has added a significant number of
additional employees to its staff as it has moved into commercial production,
which has had the effect of increasing all categories of selling, general and
administrative expense. The Company expects significant increases in such
expenses in the 1996 fiscal year as it continues to strengthen its management
team through the recent addition of new executive officers, including among
others, a chief financial officer, a chief operating officer, and other
employees.
As a result of the foregoing, the Company's operating loss for the December
1995 Fiscal Period totaled $1,853,978, compared to an operating loss of $968,388
for the December 1994 Unaudited Period and $1,635,751 for the April 1995 Fiscal
Period. The net loss for such periods was $1,957,645 (December 1995 Fiscal
Period), $1,001,633 (December 1994 Unaudited Period) and $1,743,862 (April 1995
Fiscal Year). Although the Company expects revenues to increase in future
periods, management anticipates that due to expected continued significant
increases in all items of costs and expenses, the Company will continue to incur
substantial losses for the foreseeable future. As of December 31, 1995, the
Company had net operating loss carryforwards of approximately $3,800,000 and
$1,900,000 available to offset future federal and state taxable income,
respectively. The utilization of these losses is contingent upon the Company's
ability to generate taxable income in the future. Management does not believe,
based upon available evidence, that it is more likely than not that the Company
will be able to realize the deferred tax assets.
FISCAL YEAR ENDED APRIL 30, 1995 COMPARED TO FISCAL YEAR ENDED APRIL 30,
1994
Revenues for the fiscal year ended April 30, 1995 were $88,299, which is
$257,847 less than the prior year. Revenues were generated from the sales of the
Company's software products, including royalties of approximately 8% paid to the
Company by its software publisher in Japan. Revenues decreased during the period
because of the Company's decision to cease its software consulting and retail
software products sales in the United States in order to divert its management
and engineering resources to the Highlander video codec development. For the
fiscal year ended April 30, 1995, retail software product sales in the United
States dropped to $17,600 from $188,586 a year earlier; however, software
product royalties increased to $70,000 from introduction of the software product
in Japan. The Company's software consulting revenue also dropped to zero as
compared to $157,560 a year earlier as a result of the cessation of all software
consulting activity. No revenues were generated from its Highlander video codec
products during the period due to prolonged digital video field trials with
Pacific Bell and delays in deployment of MPEG digital video compression
technology by the telecommunications industry. General delays in digital video
compression deployment were caused by reasons out of the Company's control,
including high component costs from single-source vendors, delays in
establishing MPEG-2 standards by standards committees and the FCC auctioning of
PCS wireless spectrum which caused telephone companies to divert substantial
capital to the procurement of its
14
<PAGE>
spectrum. The Company believes that these impediments to deployment are no
longer relevant. Currently, various Regional Bell Operating Companies, such as
Bell Atlantic and Nynex, are moving toward two significant deployments of
commercial video services compatible with MPEG-2 standards.
For the year ended April 30, 1995, cost of product sales decreased by
$65,392 from $72,080 in the prior year due to the cessation of all software
product sales in the United States. The shift in business from software product
sales to Highlander video codecs also contributed to an increase of $354,083 in
research and development expense and increases in selling, general and
administration expense by $421,031.
LIQUIDITY AND CAPITAL RESOURCES
During the eight months ended December 31, 1995, the Company experienced
substantial negative cash flow which was the result of the combination of low
revenues and a significant increase in operating expenses due to the Company's
undertaking to enter the video codec market. At December 31, 1995, the Company
had working capital of $11,091,081, primarily as a result of funding received
from private placements of securities in November and December 1995.
As of March 31, 1996, cash and cash equivalents consisting of investments in
demand deposits and commercial paper, with a maturity of less than 90 days, were
$11,449,908. Short term investments totaling $1,668,634 were invested in
commerical paper with maturities of less than 120 days. The ending balance at
March 1996 totaled $13, 118,542 compared to a balance of $11,255,820 at December
31, 1995.
The increase is related to the final closing of a private placement in
February 1996 resulting in the Company receiving gross proceeds of $4,112,500 in
exchange for 822,500 shares of the Company's common stock. In addition the
Company received $540,000 from the exercise of 300,000 previously issued
warrants.
During the period, cash required for research and development and other
operating activities represents the majority of the Company's cash usage.
Historically, the Company has not been able to rely upon cash flow from
operations to finance its growth.
Based on the current projections of operations, management expects cash and
cash equivalents at March 31, 1996, and cash generated from operations will be
adequate to fund operating requirements and property and equipment purchases in
1996. However, management recognizes the dynamic nature of the
telecommunications industry and the possibility that the Company's product
offerings may achieve better than expected market acceptance which could
increase working capital requirements in 1997. In such event, the Company would
consider appropriate financing alternatives.
OTHER FINANCIAL INFORMATION
The Company's backlog includes sales orders received by the Company that
have a scheduled delivery date prior to March 31, 1997. The aggregate sales
price of orders received and included in backlog was approximately $3,100,000 at
March 31, 1996. The Company believes the orders included in the backlog are firm
orders and will be shipped prior to March 31, 1997. However, some orders may be
canceled by the Customer without penalty where management believes it is in the
Company's best interest to allow such cancellations.
15
<PAGE>
BUSINESS
OVERVIEW
NUKO Information Systems, Inc. (the "Company") designs and markets codecs,
which are key components in the transmission of audio and video data for digital
communication systems. These products are an essential building block in the
development of broadband (high capacity) video and multimedia networks. The
Company's codec technology is used to encode and compress complex,
data-intensive audio and video signals, enabling the transmission of this
information over existing communication lines.
The Company's codecs, sold under the trade name Highlander, allow a user to
digitally encode, compress, transmit, decompress and decode data, enabling the
rapid and cost-effective communication of data from the point of origin to
remote locations. The Company supplies system-level products to carriers, such
as cable and telephone companies. Other potential customers include corporations
and universities for proprietary voice, video and data networks.
TECHNOLOGY BACKGROUND
Electronic signals come in two varieties: analog (also referred to as
"linear") or digital. Analog signals are continuous, wave-based functions
generally reflecting real-world phenomena, such as light, sound and pressure.
(Broadcast television signals are an example of analog transmissions.)
In contrast to the potentially infinite number of states for an analog
signal, digital signals take only one of two forms: "on" or "off." Although
computing devices use this digital information to perform complex mathematical
manipulations with exceptional speed, their input and output is limited to the
digital form factor. Accordingly, the capture of frames from a broadcast
television signal for processing or storage in a computer system requires that
the signal be digitized.
While the availability of data in digital form is potentially more useful
than analog, complex signals, such as video or multimedia contain a
significantly larger volume of data in their digital state. For example, when a
typical 180 minute analog NTSC video (the standard presently used for
conventional television in the United States) is digitized, it requires more
than one million bytes (one gigabyte) of storage for each minute of transmission
time at 30 frames per second. This is more than the entire data storage capacity
available for most desktop computers. Technical advances leading to greater
signal complexity, such as the adoption of a High Definition Television
standard, will serve to exacerbate the problems of data storage and
transmission.
Data compression provides a means for coping with the storage and
transmission of large volumes of digital information. The compression of
digitized video is typically done by using compression/ decompression algorithms
either in software alone, or combined with special-purpose chip sets (the
Company's products use this hardware/software combination). The term "codec" is
used to describe the compression/decompression system, which encodes and
compresses digital signals prior to broadcast and decodes and decompresses them
for viewing or other use after reception. The Company's codecs have the ability
to multiplex (combine) multiple channels of data into a single transmission
signal on a high-capacity line, such as a fiber-optic cable, then uncombine the
signal into multiple channels after reception of the transmission. A channel
refers to a stream of contiguous data, such as a video signal or other audio
sources, which can be simultaneously transmitted in an efficient and compressed
form. The term "multiplexer" refers to a device that interleaves audio and video
stream elements into a single combined audio/video stream. It can also refer to
a device that can interleave multiple audio/video stream elements into a single
audio/video stream that is network compatible.
Since video, voice and data networks are often national or international in
scope, it is critical that communications vendors maintain compatibility between
devices manufactured by different companies. In light of this, the
telecommunications industry has devoted substantial efforts to defining
technical standards through organizations such as the Motion Picture Experts
Group (MPEG) of the International Standards Organization. The MPEG-1 data
compression standard, developed several years ago, provides a compression ratio
of approximately 6:1. By contrast, compliance with the
16
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industry's latest standard, MPEG-2, permits delivery of full-screen video at 30
frames per second with compression ratios ranging from 10:1 up to 200:1,
depending on program material and desired playback quality.
Announced in 1994, this MPEG-2 industry standard allows users to select
varying compression profiles, multiple levels of processing complexity (or
resolution) and different sampling frequencies. Since the MPEG-2 standard can
incorporate a range of compression ratios, end-users can balance storage and
bandwidth against picture quality, based on economic considerations. MPEG-3, the
group's follow-on proposal, has been abandoned as a potential standard by the
industry, leaving MPEG-2 as the de facto standard at least until November 1998,
the current target date for delivery of the MPEG-4 proposal. Intended for a very
narrow bandwidth, MPEG-4 is anticipated to find primary applications in areas
such as speech and video systems, fractal geometry, computer visualization and
artificial intelligence.
The Company designs and produces products which support both the MPEG-1 and
MPEG-2 international standards. Using proprietary algorithms that are compatible
with these industry standards, the Company's Highlander models of video codecs
meet current MPEG-1 and MPEG-2 specifications. The use of proprietary algorithms
is unique to every vendor that implements the MPEG-1 and MPEG-2 based systems.
The Company believes that the creation of these algorithms is of such an
inventive nature as to be a hindering factor, but by no means a bar, to market
entry by potential competitors. The Company's Highlander products can also be
upgraded to a professional-level (MPP) system, delivering the advanced
resolution necessary for high-end video production and storage. The system also
includes the provision for multichannel compression ("multiplexing").
Highlander prototypes underwent evaluation and testing by potential
customers during field trials completed in July 1995. The Company believes
Highlander codec test units have demonstrated both high-quality resolution and
reliability of performance necessary for successful trial completion. In
addition, the Company's multiplexers have demonstrated the capability of
transmitting as many as seven channels (I.E., "video streams") on a single
45Mb/s DS3 network line, enhancing the transmission capacity of the connection
and potentially delivering a significant cost savings for the user. Although the
Company believes that it is one of the first to develop prototypes that support
multiple channels of audio and video streams, there can be no assurance that
production units will be successfully delivered in commercial quantities. The
Company believes that the ability to multiplex multiple data streams on a single
45Mb/s DS-3 network has significant commercial value at this stage of the market
development.
PRODUCTS
The Company develops system-level products for use by carrier service
providers in building voice and data networks. The Company has completed its
design phase and expects to commence low-volume manufacturing during 1996 of the
Highlander family of digital audio/video codecs, utilizing a variety of audio
and video compression formats and network interfaces. The Company's product
offerings described herein are currently undergoing pre-production engineering
with a view towards commencing commercial deliveries in mid-1996. However,
various factors, both within and outside the Company's control could cause the
timing of commercial production and delivery to be delayed and there can be no
assurance that the currently anticipated schedule will be met.
The Company's Highlander products support both analog and digital audio and
video input, converting these data streams in real time into compressed digital
formats specified by MPEG-1 and MPEG-2 standards for transmission over broadband
networks. The Company's codecs are designed to be configured for multiplexing
multiple data channels into a single transmission on a high-capacity line, such
as fiber optic cable. The digital stream can then be decoded at the receiving
end by another Highlander-based system, or by MPEG decoders, such as set-top
cable boxes, from various other manufacturers.
17
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The Highlander codecs support variable bit rates from 3 Mb/s to 15 Mb/s
which can be changed "on the fly," due to real-time dynamic bandwidth
allocation, a software-controlled capability built into the product
architecture. The NUKO digital video enhancement techniques ensure crisp picture
quality, superior to normal off-air cable TV reception. With their back-up and
redundancy capabilities, the Company believes the Highlander codecs offer
reliable, hot-swappable and field-upgradable (via software) versatility and
"future-ready" technology.
The current primary network interface for Highlander products is the
high-speed DS3 connection common among telecommunications carriers. DS3 networks
support up to 45 Mb/s. The flexibility incorporated by the product's
architecture enables the handling of multiple channels of real-time encoding and
decoding across this connection, effectively increasing data capacity or
delivery channel redundancy and fault-tolerance. Transmission bit-rate,
compression mode and resolution per channel can be configured either by the
Company or the customer, and can be reconfigured at any time, even from remote
locations. These and other such features increase the network management
flexibility for a given telecommunications carrier, which can be an important
consideration in product implementation.
Terrestrial transmission over fiber is accomplished in a variety of
networks. The emerging telecommunications networks of high bandwidth and high
speed switching capabilities are based on Asynchronous Transfer Mode (ATM) for
transmission over Synchronous Optical Network (SONET) backbone rings. The
Company is currently developing network interfaces to satisfy these emerging
telecommunications networks; however, there is no assurance that these
additional network interfaces will be successfully developed.
Highlander codecs interoperate with set-top boxes from multiple vendors and
can accommodate add-on modules for video delivery with both commercial and
consumer applications. They support a full range of network interfaces,
including DS1, DS2 and DS3, satellite and wireless. These codecs are compliant
with either in-band control directly through ATM connections or out of band
control via Ethernet-based SNMP interface. All this suggests seamless
integration with virtually any existing system strategy for network application,
configuration and performance management. However, due to rapidly changing
technology, there can be no assurance that the Company's codecs will integrate
with newly-developed interfaces and it will be essential that the Company
continue to keep pace with such changes in order to successfully compete.
The Company's initial products provide one-way point-to-point and
point-to-multi-point communication, as is common in broadcast applications. The
Company is also designing two-way point-to-point and point-to-multipoint
communications systems and the next generation of Highlander products which
support ATM for transmission over SONET backbone rings. If fully developed, of
which there can be no assurances, these two-way systems could be used in
applications such as interactive video conferencing, two-way distance learning,
telemedicine and remote arraignment. (See "-- Research and Development --
Potential Products and Applications.")
INITIAL COMMERCIAL PRODUCTS: THE VF FAMILY. The Company's initial product
offering for the commercial marketplace is the VF-9000 series codecs support the
transmission and reception of broadcast audio and video streams using the
formats specified by MPEG-1 and MPEG-2 standards. The Company believes these
products will offer the user complete systems including up to nine channels of
encoders in a hot-swappable VM chassis, coupled with a multi-channel video
switch and a nine channel ATM Multiplexer, all encapsulated in a stand-alone,
fully powered, harnessed and cabled, and conditioned enclosure for turn-key
deployment.
Broadcast carriers such as the Regional Bell Operating Companies (RBOCs),
cable television companies and satellite broadcast companies are currently
building networks that integrate voice, video and data transmission. Certain of
these carriers are currently conducting trials to evaluate the technical
feasibility of offering additional channels for carrying real-time television
broadcasts or "on-demand" programming from a central video file library. The
Company's Highlander codecs have been used during field trials as part of
prototype systems for encoding real-time channels at off-air and
18
<PAGE>
satellite receive stations and other transmission locations (such as classrooms
for distance learning). For example, Pacific Bell, an RBOC, has conducted field
trials of the Highlander codecs for distance learning applications. Test units
have also been used for converting digital compression streams to analog format
for distribution from a cable facility to residential neighborhoods.
MARKETING, SALES AND CUSTOMERS
Since early 1994, the Company has been engaged in research and development
and testing of product prototypes. Its primary means of marketing has been
through its participation in customer sponsored video networking trials and
relationships it has developed with other vendors with which the Company
partners. As it nears initial production on these products, the Company has been
increasing its efforts to create awareness of its products through the use of
traditional marketing techniques. Its marketing efforts will be focused on
developing a strong image and awareness within specific target customer bases
including RBOCs, service providers, cable companies, satellite broadcast
companies, inter-exchange carriers and telecommunication network equipment
providers. Other potential customers or end-users include large corporations
needing remote communication capabilities and universities seeking to expand the
availability of their course offerings to off-site locations.
The Company is in the process of establishing a direct sales force and an
external distribution network. Currently, it offers products for direct sale to
RBOCs, as well as to carriers through reseller partners, original equipment
manufacturers (OEMs) and system integrators. In the case of OEMs, the Company
designs its technology under a non-recurring engineering charge and sells the
OEM modules to the third party for resale.
The Company intends to respond to existing demand for its products with
existing personnel. However, the diverse nature and regional locations of its
potential customers will require the Company to explore alternatives in
providing a complete product solution for its customers. In response to this
need, the Company will provide post-sales support and maintenance services
through third parties. The Company is negotiating such arrangements with various
distributors. The effectiveness of these distributors can vary greatly and will
be managed to maximize the success of the program.
The Company has generated only limited sales to date and, while it has
engaged in initial marketing efforts, there can be no assurances that its
analysis of the potential markets for its products will be confirmed by actual
experience. As a result of its recent marketing efforts, the Company is actively
responding to inquiries from potential customers and partners in Europe, India
and the United States.
MANUFACTURING
The Company subcontracts the manufacture of its products to other companies
that have BellCore and ISO 9000 certified manufacturing facilities and that
produce chip sets having the high-speed processors needed in video compression.
Digital compression chip-sets typically command higher prices than the
analog-based chip-sets used in conventional analog codecs. The Company believes
that the digital video compression market is currently in an embryonic stage and
that advancements in digital video compression technology will result in smaller
form factors and lower prices for these chip-sets. It believes this will make
possible the design and manufacture of digital compression systems at analog
codec prices, which should result in increased acceptance of digital compression
technology. Recent announcements by other manufacturers of digital compression
chip-sets are expected to accelerate this increased acceptance of the
technology.
The Company has formalized contractual relationships with its most
significant vendors, which the Company believes are of significant size and
scope as to minimize risk from both the manufacturers' process capability as
well as procurement capabilities; however, any possible delays in the
manufacture and delivery of product could result in a need to find alternative
manufacturing resources. Should it be required to find alternative sources of
manufacturing, the Company believes it could do so, but there could be
significant delays in production that could have a necessary adverse impact on
the Company's results of operations. Of the product lines which the Company
offers for sale, certain
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<PAGE>
products are based upon the existing technologies available, which in some cases
are single sourced. Although there is no current shortage for these components,
there is no guarantee of future availability for these parts.
Most of the materials and supplies purchased by the Company are standard
electronic components, including transistors, integrated circuits, resistors,
capacitors and circuit boards manufactured by multiple suppliers. The cabinet
housing for the Company's products is also available from multiple
manufacturers, but is presently manufactured by one of the Company's strategic
alliances. Currently, the Company purchases only one component, its
video-compression RISC processors, from a single qualified source. In the event
of a failure of the current sole source supplier, a material delay in shipments
could result. The Company is seeking to qualify additional video compression
vendors; however, there is no assurance that the Company will be able to locate
additional sources of supply in a timely manner.
RESEARCH AND DEVELOPMENT
The Company believes its success will depend in large part on its ability to
enhance existing products and continue developing new products incorporating
emerging digital audio and video networking technologies.
The Company has devoted a substantial portion of the investment capital it
has received since inception to research and development. During the fiscal
years ended April 30, 1995 and 1994, the Company expended approximately $803,500
and $450,000, respectively, on Company-sponsored research and development. The
Company expended $1,268,515 on Company-sponsored research and development during
the eight month fiscal period ended December 31, 1995. Although the Company did
not engage in any customer-sponsored research and development activities during
the fiscal years ended April 30, 1995 or 1994, in the current fiscal year the
Company is performing research and development under contract of Northern
Telecom, Limited.
The Company is committed to continuing the development of its core
technologies and anticipates that it will devote a significant portion of
revenues to ongoing research and development. The Company is currently
developing the next generation of Highlander products, which are anticipated to
support form factor reduction, ATM and DS3 networks with enhanced network
management capabilities and better integration of features for carrier
companies.
POTENTIAL PRODUCTS AND APPLICATIONS. The Company has targeted its products
for business broadband services such as corporate training, distance learning,
telemedicine and remote arraignment. However, until the products are developed
and demonstrated, there is no assurance that they will be used in these
applications or that these proposed applications will gain market acceptance.
Potential applications for the Company's products include:
TELECOMMUNICATIONS SUPERTRUNKING -- The Company's technology could enable
telephone companies to build SONET/ATM/DS3-based network architectures to
deliver cable television or on-demand video to homes.
CORPORATE VIDEO-CONFERENCING -- The Company believes its codecs are highly
suitable for use in corporate teleconferencing.
DISTANCE LEARNING -- Universities, elementary and high schools, and other
educational institutions are investigating the feasibility of delivering
lectures in real time to students at remote locations. Assuming the use of a
two-way communications system similar to video-conferencing, this would allow
for a desirable level of student-teacher interaction.
TELEMEDICINE -- Patients and physicians may communicate directly at a
distance for diagnostic and consultation purposes. This advancement could reduce
visits to hospitals or at doctors' clinics, resulting in considerable savings in
the cost of healthcare costs.
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<PAGE>
CORPORATE TRAINING -- Application of the Company's codecs in advanced video
systems can enhance the efficiency of the corporate training operation and
deliver significant savings in related costs.
REMOTE ARRAIGNMENT -- The high cost of transporting suspects from jails to
the courthouse may be reduced by using high-resolution video conferencing
solutions that enable people in the courtroom to view prisoners in rooms at the
jail facility.
COMPETITION
The video networking market is characterized by rapid technological change
and intense competition. The Company believes that while there is no dominant
leader in this emerging market, it has several competitors, all of whom have
significantly greater engineering, manufacturing, marketing and financial
resources than the Company. Competitive technologies include those incorporated
in analog compression devices and proprietary compression systems, both of which
are currently available at lower prices. The Company believes its ability to
compete successfully in existing and future markets will depend on elements both
within and outside its control, including, but not limited to, the success and
timing of new product development by the Company and its competitors, product
performance, price, productivity enhancement, distribution and customer support.
Performance in these areas will, in turn, depend upon the Company's ability to
attract and retain highly qualified technical personnel in a competitive market.
The Company believes that carriers will prefer systems based on open standards
for end-to-end interoperability, such as those contained in products being
developed by the Company. Until these products are demonstrated in the market,
however, there can be no assurance that they will receive widespread acceptance.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
Although the Company believes that several aspects of its technology could
be patented, it has not yet filed any applications for patent protection. There
can be no assurance, even if patents are obtained in the future, that any issued
patents will provide any certainty of successful application, commercial success
or impediments to reverse engineering of the Company's products. Moreover, there
is no assurance that any patents, if issued, will be upheld if the Company seeks
to enforce its rights against an infringer, or that the Company will have
sufficient resources to protect its rights; nor is there any assurance that such
patents, if issued, will provide meaningful protection from competition. In
addition, reverse engineering of the Company's hardware is feasible.
The Company protects its trade secrets and other intellectual property
through agreements with customers and suppliers, proprietary information
agreements with employees and consultants and other security measures. Although
the Company continues to implement protective measures and intends to defend its
intellectual property rights, there is no assurance that these protections will
be adequate or that the Company's competitors will not independently develop
technologies that are equivalent or superior to the Company's technology. There
is also no assurance that any particular aspect of the Company's technology or
products will not be found to infringe the claims of existing patents, although,
to date, the Company has not received any claims that its products infringe on
the proprietary rights of third parties.
GOVERNMENT REGULATION
Although the Company itself is not required to obtain governmental approval
of any of its products, several of the Company's customers are subject to
extensive regulation by the Federal Communications Commission (FCC), Public
Utilities Commission (PUC) and other regulatory agencies. The regulations of
these agencies tend to constantly change, which could severely impact the
Company's business in an unpredictable manner.
EMPLOYEES
As of May 20, 1996, the Company had 51 full-time employees and six
consultants working in various capacities for and on behalf of the Company. Of
this total, six were engaged in administration
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and finance, seven in marketing and sales with the remaining 38 in engineering.
In addition, there are six engineers supporting the Company's efforts through an
associated firm by the name of NUKO Information Systems (India) Private Ltd.
located in Bangalore, India.
PROPERTY
In July 1994, the Company moved its engineering operations and headquarters
to a building located at 2235 Qume Drive, San Jose, California. The subleased
premises consist of approximately 12,000 square feet of usable space. The
sublease calls for an annual base rent of approximately $135,600 and expires in
April 1999. The Company believes additional facilities will be required to meet
the Company's anticipated needs as it expands during the 1996 time frame. The
Company is presently exploring suitable additional or alternative space which
will be available as needed on commercially reasonable terms.
LEGAL PROCEEDINGS
The Company is not currently subject to any legal proceedings which would
have a material adverse effect upon the Company's business, operations or
financial condition. The Company may from time to time become a party to various
legal proceedings arising in the normal course of its business. These actions
could include disputes with vendors or customers and employee or stockholder
related issues.
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<PAGE>
MANAGEMENT
The officers and directors of the Company as of May 20, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- --- -------------------------------------------------
<S> <C> <C>
Pratap Kesav Kondamoori 35 President, Chief Executive Officer and Chairman
of the Board
John Gorman 58 Vice President, Finance and Chief Financial
Officer
Ram Kedlaya (1) 36 Vice President, Strategic Planning, Assistant
Secretary and Director
Anders O. Field, Jr. (1) 65 Director and Assistant Secretary
Marc Dumont (1) 52 Director
Bruce Young 51 Executive Vice President, Chief Operating Officer
John Glass 41 Vice President, Business Development
Chadalavada Rao 43 Vice President, Engineering
Davinder Gulati 48 Vice President, Sales
Neil Mammen 33 Chief Technical Officer
Grover T. Wickersham 47 Corporate Secretary
</TABLE>
- ------------------------
(1) Member of the Compensation Committee.
The bylaws of the Company provide for a board of seven members. The board
currently has three vacancies and while the Company does not presently intend to
fill these vacancies, it will consider candidates for these seats if and when
the feasibility of adding additional management becomes clear. All directors
hold office until the next annual meeting of shareholders or until their
successors have been duly elected and qualified. Officers serve at the
discretion of the Board of Directors.
Mr. Kondamoori has served as the Company's Chief Executive Officer,
President, Chairman of the Board and Chief Financial Officer since May 1994,
when NUKO Technologies, Inc. merged with Growers Express Incorporated. From
October 1992 to the present, he has also served as the President and Chief
Executive Officer of NUKO Technologies, Inc., the Company's subsidiary ("NUKO
Technologies"). From February 1991 through August 1992, Mr. Kondamoori served as
the data and video systems product line manager for NEC America, San Jose,
California. Mr. Kondamoori holds a Bachelor's degree in Engineering from Clemson
University.
Mr. Gorman joined the Company in April 1996 as the Company's Vice President,
Finance and Chief Financial Officer. From March 1992 to April 1996, he has
served as Vice President and Chief Financial Officer of BroadBand Technologies,
Inc., a manufacturer of telecommunications equipment. Prior to March 1992, Mr.
Gorman was Vice President and Corporate Controller of Telco Systems, Inc.,
another manufacturer of telecommunications equipment. Mr. Gorman holds a B.S.
degree from Elizabethtown College and an MBA from Penn State (Shippensburg)
University.
Mr. Kedlaya has served as the Company's Vice President, Business
Development, Assistant Secretary and Director since May 1994. In February 1996,
he became Vice President, Strategic Planning and no longer serves as Vice
President, Business Development. Since October 1992, Mr. Kedlaya has also served
as NUKO Technologies' Vice President of Engineering and Business Development.
Mr. Kedlaya has an M.S. in Materials Science from the University of Florida and
an M.S. in Computer Science from the University of Texas. Prior to October 1992
Mr. Kedlaya worked for GO Corporation on architectures for messaging systems for
pen-based computers.
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<PAGE>
Mr. Field has served as a Director since May 1994 and as a consultant to the
Company since October 1993. Mr. Field has been associated with his Nevada
business consulting firm, the Lowell Corporation, for over five years. As a
consultant has acted as an advisor to start-up companies particularly in
technology-based businesses. Mr. Field holds a B.A. in Economics and an MBA from
Stanford University and is certified in International Economics from the
University of Lund, Sweden.
Mr. Dumont was elected to the Company's Board in November 1995. Since March
1995 Mr. Dumont has acted as an independent international business consultant.
He also serves as chairman of the board and chief executive officer of Manoir
Murisaltien Winery, Meursault, France, positions he has held since October 1995.
Until March 1995 and for more than five years, Mr. Dumont served as President of
(PSA) Peugeot Citroen Group, Geneva, Switzerland. Mr. Dumont serves on the Board
of Directors of a number of companies, including PinterBank Zurich; Banque
Internationale, a Luxembourg corporation; and Irvine Sensors Corporation, Costa
Mesa, California, a developer of semiconductor packaging technology.
Mr. Young has served as the Company's Chief Operating Officer since March
1996. From March 1995 to March 1996, he had been associated with his
Massachusetts business consulting firm, Global Business Consultants, Inc. As a
consultant, he acted as an advisor to businesses in transition, growth and
expansion. Prior to March 1995, Mr. Young served as Senior Vice President and
General Manager of Telco Systems, Fiber Optic Division. Mr. Young holds a B.B.A.
from Nichols College and graduated from the Advanced Management Program of
Harvard University in 1993.
Mr. Glass has served as the Company's Vice President, Business Development
since March 1996 and as a systems engineering consultant to the Company since
October 1995. From 1992 to October 1995, Mr. Glass served as Vice President and
General Manager of Grass Valley Group/Tektronix Video Transport Business Unit.
Prior to 1992, he served as Director of Marketing and Assistant General Manager
of DSC Communications Corporation. Mr. Glass holds a B.A. in Economics from
Washington State University and an MBA from Western New England College.
Mr. Rao has served as the Company's Vice President of Engineering since
March 1996 and as a consultant to the Company for Prototype Codecs since March
1994. Prior to January 1996, and for more than five years, he had served as
Engineering Manager for Sun Microsystems, Inc. Mr. Rao holds a Bachelor of
Technology degree from Regional Engineering College in Warangal, India, a M.S.
in Computer Engineering from Oakland University, and a M.S. in Chemical
Engineering from Ohio University.
Mr. Gulati joined the Company in December 1995 and has served as the
Company's Vice President, Sales since March 1996. From June 1990 to December
1995, he served as Vice President, Business Development of ASA Computers. Mr.
Gulati holds a BEE from Jabalpur Engineering College, University of Jabalpur,
India and an MSIE from San Jose State University.
Mr. Mammen has served as the Company's Chief Technical Officer since March
1996 and has been employed by the Company since September 1994. From September
1992 to September 1995, he served as Systems Engineer Group Manager to C-Cube
Microsystems. From June 1989 to September 1992, Mr. Mammen served as SPARC
Applications Manager and Senior Staff Engineer with LSI Logic. He holds a
Bachelor of Science degree in Electrical Engineering and a Master of Science
Degree in Electrical Engineering from Oregon State University.
Mr. Wickersham has served as the Company's Corporate Secretary since
December 1995 and has been a member of the law firm, Grover Wickersham, P.C.,
Palo Alto, California, for more than five years. This firm serves as securities
counsel to the Company. Mr. Wickersham holds an A.B. from the University of
California at Berkeley, a J.D. from the University of California (Hastings) and
an MBA from Harvard Business School.
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<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of five meetings during the fiscal year
ended December 31, 1995 (an eight month period) and took no action by unanimous
written consent. No director attended fewer than 75% of the meetings of the
Board of Directors or committees of which he was a member during the fiscal year
ended December 31, 1995.
The Compensation Committee of the Board of Directors consists of Messrs.
Kedlaya, Field and Dumont. This Committee makes recommendations to the Board of
Directors as to the salaries of officers, administers the Company's executive
bonus programs and recommends to the Board the award of stock options to key
employees, officers and directors.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the New York Business Corporations Law (the "Corporations
Law"), the Company's Certificate of Incorporation provides that directors will
not be personally liable to the Company for monetary damages arising from a
breach of their fiduciary duty as directors. Under current New York law,
liability is not eliminated for the liability of any director if a judgment or
other final adjudication adverse to him establishes that his acts or omissions
were in bad faith or involved intentional misconduct or a knowing violation of
law or that he personally gained in fact a financial profit or other advantage
to which he was not legally entitled or that his acts violated section 719 of
the Corporations Law. Such provision does not eliminate the liability of any
director for any act or omissions prior to the adoption of the provision.
The Company's Certificate of Incorporation also provides that the Company
must, to the fullest extent permitted by the Corporations Law, indemnify all
persons whom it has the power to indemnify from and against all expenses,
liabilities or other matters. The Company's By-laws further provide that the
Company must indemnify its directors, officers, employees and agents to the
fullest extent permitted by the Corporations Law and provides for the
advancement of expenses incurred by such persons in advance of the final
disposition of any civil or criminal action, suit or proceeding, subject to
repayment if it is ultimately determined that he or she was not entitled to
indemnification. The indemnification and advancement of expenses provided in the
By-laws are expressly deemed to not be exclusive of any other rights to which a
person seeking indemnification or advancement of expenses may otherwise be
entitled. The Company has entered into indemnification agreements between the
Company and its officers and directors.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company for services rendered during the eight month fiscal period
ended December 31, 1995, and the two fiscal years ended April 30, 1995 to the
Company's Chief Executive Officer (the "Named Executive Officer"). No executive
officer of the Company received total annual salary and bonus, or annual salary
and other compensation, exceeding $100,000 in the last full fiscal year or
eight-month fiscal period ended December 31, 1995.
25
<PAGE>
SUMMARY COMPENSATION TABLE*
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION ALL OTHER
NAME PERIOD SALARY (2) COMPENSATION
- ------------------------------------------------------------ --------------------- ------------- -------------
<S> <C> <C> <C>
Pratap Kesav Kondamoori Eight Month $ 66,150 --
Chief Executive Officer, President, Chief Period Ended
Financial Officer and Chairman of the December 31,
Board 1995
Fiscal Year Ended $ 13,250 $ 27,748(3)
April 30, 1995
Fiscal Year Ended $ 1,000 $ 17,471(4)
April 30,1994 (1)
</TABLE>
- ------------------------
* Prescribed columns in the Summary Compensation Table have been omitted if
they are not relevant to the Named Executive Officer.
(1) Prior to May 27, 1994, Growers Express, Incorporated ("Growers Express"),
the predecessor of the Company, was a dormant, non-operating company. On May
27, 1994, Growers Express merged with NUKO Technologies, Inc. and changed
its name to NUKO Information Systems, Inc., which merged entity is
continuing the business and operations of NUKO Technologies, Inc. The
Company believes compensation information pertaining to Growers Express, if
it had access to such information, which it does not, would nevertheless be
immaterial and irrelevant to current operations. Compensation information
for the Named Executive Officer for the 1994 fiscal year reflects
compensation received from the operating subsidiary and its parent prior to
the Merger.
(2) During fiscal 1994 and 1995, due to the Company's cash flow problems, all
executive officers, including Mr. Kondamoori, agreed to defer certain
payments. The salary figure indicated in the above table for the fiscal year
ended April 30, 1995 does not include $22,750 of accrued salary, which was
paid in the eight months ended December 31, 1995.
(3) Represents $27,748 as advances in the fiscal year ended April 30, 1995.
(4) Includes $5,125 paid for consulting fees and $12,346 as advances in fiscal
year 1994.
STOCK OPTIONS
The NUKO Information Systems, Inc. 1995 Stock Option Plan (the "1995 Option
Plan") was adopted by the Board of Directors in May 1995. The Company had not
previously had a stock option plan. The Board of Directors has reserved
1,400,000 shares of Common Stock for issuance under the 1995 Option Plan. The
Board of Directors believes that, in order to attract qualified employees and
consultants to the Company and to provide an incentive to them, it is
appropriate and deemed advisable to grant options to purchase Common Stock to
such employees and consultants pursuant to the 1995 Option Plan.
Options granted under the 1995 Option Plan may be either "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), or nonstatutory stock options at the discretion of the
Board of Directors and as reflected in the terms of the written option
agreement. The Board of Directors, at its discretion, may also grant rights to
purchase Common Stock directly, rather than pursuant to stock options.
The 1995 Option Plan is not a qualified deferred compensation plan under
Section 401(a) of the Code, and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
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<PAGE>
In March 1996, the Board of Directors adopted the NUKO Information Systems,
Inc. 1996 Stock Option Plan (the "1996 Stock Option Plan"), which is identical
to the 1995 Stock Option Plan, and the NUKO Information Systems, Inc. 1996
Director Stock Option Plan (the "1996 Director Stock Option Plan") and initially
reserved 1,300,000 and 100,000 shares of Common Stock, respectively, for
issuance thereunder. The Named Executive Officer is eligible to participate in
each of these plans. As of the date hereof, all 1,400,000 Options have been
granted under the 1995 Stock Option Plan, 1,282,250 Options have been granted
under the 1996 Stock Option Plan and 35,000 Options have been granted under the
1996 Director Stock Option Plan.
The following table sets forth information regarding stock option grants
made during the eight-month fiscal period ended December 31, 1995 to the Named
Executive Officer:
OPTION GRANTS IN THE EIGHT MONTH PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE EXPIRATION
NAME OPTIONS GRANTED DURING THE PERIOD PRICE DATE
- --------------------------------------------- -------------------- ------------------- ----------- ----------------
<S> <C> <C> <C> <C>
Pratap Kesav Kondamoori 43,379(1) 4.1% 2.375 May 25, 2000
Chief Executive Officer, President, Chief
Financial Officer and Chairman of the Board
</TABLE>
- ------------------------
(1) Does not include 13,608 options granted to the spouse of the Named Executive
Officer, an employee of the Company.
No employee of the Company received additional compensation for his services
as a director.
The Company is currently discussing the features to be included in a 401(k)
and/or profit sharing program for the benefit of its directors, officers and
other employees, and the Board of Directors is expecting to adopt one or more
such programs in 1996.
EMPLOYMENT AGREEMENTS. The Company historically has not entered into
employment agreements with any of its executive officers. However, the Company
is currently negotiating employment agreements with certain of its executive
officers, including an agreement with Mr. Kondamoori.
CERTAIN TRANSACTIONS
During the last two years, there were no transactions exceeding $60,000 to
which the Company was a party in which any director or executive officer,
principal shareholder or member of any such person's immediate family had a
direct or indirect material interest except as follows:
Marc Dumont, a member of the Board of Directors, received a commission of
$203,845 in connection with the private placement of Common Stock to various
accredited investors in February 1996.
Anders O. Field, Jr., a member of the Board of Directors, has entered into a
consulting agreement with the Company. Under the terms of this agreement, Mr.
Field receives $6,000 per month to serve as Consultant to the Office of the
President. Mr. Field received less than $60,000 in each of the fiscal years 1994
and 1995. During the eight-month fiscal period ended December 31, 1995, Mr.
Field was paid a total of $88,200 which included fees owed from prior years. He
continues in this capacity in the current fiscal year at the same monthly rate.
At April 30, 1994, Mr. Kondamoori, Mr. Kedlaya and Mr. Field executed
promissory notes to NUKO Technologies, Inc., the predecessor entity to the
Company prior to the merger with Growers Express Corporation, in the amounts of
$95,529, $95,529 and $47,542, respectively. As of the date hereof, the notes,
plus accrued interest, have been paid in full.
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<PAGE>
1995 STOCK OPTION PLAN
The NUKO Information Systems, Inc. 1995 Stock Option Plan (the "1995 Option
Plan") was adopted by the Board of Directors in May 1995. The Company has not
previously had a stock option plan. The Board of Directors has initially
reserved 1,400,000 shares of Common Stock for issuance under the 1995 Option
Plan. The Board of Directors believes that, in order to attract qualified
employees and consultants to the Company and to provide an incentive to them, it
is appropriate and deemed advisable to grant options to purchase Common Stock to
such employees and consultants pursuant to the 1995 Option Plan.
Options granted under the 1995 Option Plan may be either "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), or nonstatutory stock options at the discretion of the
Board of Directors and as reflected in the terms of the written option
agreement. The Board of Directors, at its discretion, may also grant rights to
purchase Common Stock directly, rather than pursuant to stock options.
The 1995 Option Plan is not a qualified deferred compensation plan under
Section 401(a) of the Code, and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
PURPOSE
The purposes of the 1995 Option Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to employees and consultants of the Company and to promote
the success of the Company's business.
ADMINISTRATION
The 1995 Option Plan may be administered by the Board of Directors or by a
committee (or subcommittee in certain instances) of the Board of Directors. If
all members of the Board of Directors or relevant committee do not meet the
definition of "outside directors" under Code Section 162(m), a committee or
subcommittee of the Board consisting of such "outside directors" will have the
exclusive authority to grant stock options and purchase rights and otherwise
administer the 1995 Option Plan with respect to "covered employees" described in
Code Section 162(m) (generally the Company's highest paid executive officers).
Members of the Board of Directors receive no additional compensation for their
services in connection with the administration of the 1995 Option Plan. All
questions of interpretation of the 1995 Option Plan are determined by the Board
of Directors or its committee and its decisions are final and binding upon all
participants.
ELIGIBILITY
The 1995 Option Plan provides that either incentive stock options or
nonstatutory options may be granted to employees (including officers and
directors who are also employees) of the Company or any of its subsidiaries. In
addition, the 1995 Option Plan provides that nonstatutory options may be granted
to consultants (not including directors who are not compensated for their
services or are paid only a director's fee by the Company) of the Company or any
of its subsidiaries. The Board of Directors or its committee selects the
optionees and determines the number of shares to be subject to each option. In
making such determination, certain factors are taken into account, including the
duties and responsibilities of the optionee, the value of the optionee's
services, the optionee's present and potential contribution to the success of
the Company and other relevant factors.
For incentive stock options granted under the 1995 Option Plan, the
aggregate fair market value, determined at the time of grant, of the shares of
Common Stock with respect to which such options are exercisable for the first
time by an optionee during any calendar year (under all such plans of the
Company and its affiliates) may not exceed $100,000.
TERMS OF OPTIONS
Each option is evidenced by a stock option agreement between the Company and
the optionee. Each option is subject to the following additional terms and
conditions:
28
<PAGE>
(a) EXERCISE OF THE OPTION. The Board of Directors or its committee
determines when options may be exercised. An option is exercised by giving
written notice of exercise to the Company specifying the number of full shares
of Common Stock to be purchased and by tendering payment of the purchase price.
The purchase price of the shares purchased upon exercise of an option shall be
paid in consideration of such form as is determined by the Board of Directors or
its committee and specified in the option agreement, and such form of
consideration may vary for each option. Such consideration may include one or
more of the following: (i) cash, (ii) check, (iii) promissory note, (iv) other
shares of the Company's Common Stock that (A) in the case of shares acquired
upon exercise of an option, have been owned by the optionee for more than six
months of the date of surrender or such other period as may be required to avoid
a charge to the Company's earnings and (B) have a fair market value (as defined
in the 1995 Option Plan) on the date of surrender equal to the aggregate
exercise price of the Shares as to which such option will be exercised, (v)
authorization for the Company to retain from the total number of shares as to
which the option is exercised that number of shares having a fair market value
on the date of exercise equal to the exercise price for the total number of
shares as to which the option is exercised, (vi) delivery of a properly executed
exercise notice together with such other documentation as the Board or committee
and the broker, if applicable, will require to effect an exercise of the option
and delivery to the Company of the sale or loan proceeds required to pay the
exercise price and any applicable income or employment taxes, (vii) delivery of
an irrevocable subscription agreement for the shares that irrevocably obligates
the optionee to take and pay for the shares not more than twelve months after
the date of delivery of the subscription agreement, (viii) such other
consideration and method of payment for the issuance of shares to the extent
permitted under applicable laws.
(b) EXERCISE PRICE. The exercise price under the 1995 Option Plan is
determined by the Board of Directors or its committee and, in the case of an
Incentive Stock Option, may not be less than 100 percent of the fair market
value of the Common Stock on the date the option is granted or, in the case of a
Nonstatutory Stock Option (as defined in the 1995 Option Plan), 85 percent of
the fair market value on the date of grant. In the case of an option granted to
an optionee who owns more than ten percent of the voting power of all classes of
stock of the Company or any of its subsidiaries, the exercise price must not be
less than 110 percent of the fair market value on the date of grant.
(c) TERMINATION OF EMPLOYMENT. If the optionee's employment or consulting
relationship terminates for any reason other than disability or death, options
under the 1995 Option Plan may be exercised not later than three months (or such
other period of time not less than thirty days as determined by the Board of
Directors or its committee, with such determination in the case of an incentive
stock option being made at the time of grant of the option and not exceeding
three months) after such termination and may be exercised only to the extent the
option was exercisable on the date of termination. In no event may an option be
exercised by any person after the expiration of its term.
(d) DISABILITY. If an optionee is unable to continue his or her employment
or consulting relationship with the Company as a result of his or her total and
permanent disability, options may be exercised within twelve months of
termination and may be exercised only to the extent the option was exercisable
on the date of termination, but in no event may the option be exercised after
the expiration of its term. If an optionee is unable to continue his or her
employment or consulting relationship with the Company as a result of his or her
disability that does not fall within the definition of total and permanent
disability, as defined in the Code, options may be exercised within six months
of termination and may be exercised only to the extent the option was
exercisable on the date of termination, but in no event may the option be
exercised after the expiration of its term. The foregoing not withstanding, if
an optionees fails to exercise an option which is an incentive stock option
within three months of the date of termination, the option will not qualify for
ISO treatment under the Code.
(e) DEATH. Under the 1995 Option Plan, if an optionee should die while
employed or retained by the Company or during the thirty day period following
termination of the optionee's employment or consulting relationship, options may
be exercised within six months after the date of death to the extent the options
would have been exercisable (i) on the date of death, in the case of an optionee
who
29
<PAGE>
dies while employed or retained by the Company, or (ii) on the date of
termination of employment or consulting relationship, in the case of an optionee
who dies within thirty days after termination of employment or consulting
relationship.
(f) TERMINATION OF OPTIONS. The 1995 Option Plan provides that options
granted under the 1995 Option Plan have the term provided in the option
agreement. In general, these agreements currently provide for a term of ten
years. Incentive stock options granted to an optionee who, immediately before
the grant of such option, owned more than ten percent of the total combined
voting power of all classes of stock of the Company or any of its subsidiaries,
may not in any case have a term of more than five years. No option may be
exercised by any person after its expiration.
(g) OPTION NOT TRANSFERABLE. An option is nontransferable by the optionee
other than by will or the laws of descent and distribution, and is exercisable
only by the optionee during his or her lifetime or, in the event of the
optionee's death, by a person who acquires the right to exercise the option by
bequest or inheritance or by reason of the death.
(h) MERGER OR SALE OF ASSETS. In the event of a proposed merger or sale of
substantially all of the assets of the Company in which the Company is not the
surviving entity, the Board of Directors is obligated to attempt to accomplish a
substitution or assumption of outstanding options. If the successor corporation
does not agree to assume the option or to substitute an equivalent option, the
option shall terminate upon the consummation of the merger or sale of assets.
(i) BUYOUT PROVISIONS. The Board of Directors or its committee may at any
time offer to buy out for a payment in cash or shares of the Company's Common
Stock, an option previously granted, based on such terms and conditions as the
Board or committee, as the case may be, shall establish and communicate to the
optionee at the time that such offer is made.
(j) OTHER PROVISIONS. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the 1995 Option Plan as may be
determined by the Board of Directors or its committee.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event any change, such as a stock split or dividend, is made in the
Company's capitalization that results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, appropriate adjustment shall be made in the exercise price of each
outstanding option, the number of shares subject to each option, the annual
limitation on grants to employees, as well as the number of shares available for
issuance under the 1995 Option Plan. In the event of the proposed dissolution or
liquidation of the Company, each option will terminate unless otherwise provided
by the Board of Directors or its committee.
AMENDMENT AND TERMINATION
The Board of Directors may amend the 1995 Option Plan at any time or from
time to time or may terminate it without approval of the shareholders; provided,
however, that shareholder approval is required for any amendment to the 1995
Option Plan that increases the number of shares that may be issued under the
1995 Option Plan, modifies the standards of eligibility, modifies the limitation
on grants to employees described in the 1995 Option Plan or results in other
changes which would require shareholder approval to qualify options granted
under the 1995 Option Plan as performance-based compensation under Section
162(m) of the Code, or, if and so long as the Company has a class of equity
securities registered under Section 12 of the Exchange Act (which as of the date
hereof, it does not), materially increases the benefits to participants that may
accrue under the 1995 Option Plan. However, no action by the Board of Directors
or shareholders may alter or impair any option previously granted under the 1995
Option Plan. The 1995 Option Plan shall terminate in February 2005, provided
that any options then outstanding under the 1995 Option Plan shall remain
outstanding until they expire by their terms.
30
<PAGE>
FEDERAL INCOME TAX ASPECTS OF THE 1995 OPTION PLAN
Options granted under the 1995 Option Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or nonstatutory options.
If an option granted under the 1995 Option Plan is an incentive stock
option, under Federal tax laws the optionee will recognize no income upon grant
of the incentive stock option and incur no tax liability due to the exercise
unless the optionee is subject to the alternative minimum tax. The Company will
not be allowed a deduction for Federal income tax purposes as a result of the
exercise of an incentive stock option regardless of the applicability of the
alternative minimum tax. Upon the sale or exchange of the shares at least two
years after grant of the option and one year after receipt of the shares by the
optionee, any gain will be treated as long-term capital gain under Federal tax
laws. If these holding periods are not satisfied, the optionee will recognize
ordinary income under Federal tax laws equal to the difference between the
exercise price and the lower of the fair market value of the stock at the date
of the option exercise or the sale price of the stock. A different rule for
measuring ordinary income upon such a premature disposition may apply if the
optionee is also an officer, director, or ten percent shareholder of the
Company. The Company will be entitled to a deduction in the same amount as the
ordinary income recognized by the optionee. Any gain recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income will be characterized under Federal tax laws as long-term capital gain if
the sale occurs more than one year after exercise of the option or as short-term
capital gain if the sale is made earlier. The current Federal tax rate on
long-term capital gains is capped at 28 percent. Capital losses are allowed
under Federal tax laws in full against capital gains plus $3,000 of other
income.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income under Federal tax laws at the time he or she is granted a nonstatutory
option. However, upon its exercise, under Federal tax laws the optionee will
recognize ordinary income for tax purposes measured by the excess of the then
fair market value of the shares over the exercise price. In certain
circumstances, where the shares are subject to a substantial risk of forfeiture
when acquired or where the optionee is an officer, director or ten percent
shareholder of the Company, the date of taxation under Federal tax laws may be
deferred unless the optionee files an election with the Internal Revenue Service
under Section 83(b) of the Code. The income recognized by an optionee who is
also an employee of the Company will be subject to tax withholding by the
Company by payment in cash or out of the current earnings paid to the optionee.
Upon resale of such shares by the optionee, any difference between the sale
price and the optionee's tax basis (exercise price plus the income recognized
upon exercise) will be treated under Federal tax laws as capital gain or loss,
and will qualify for long-term capital gain or loss treatment if the shares have
been held for more than one year.
31
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of May 20, 1996, with
respect to the beneficial ownership of Common Stock by the Named Executive
Officer, each director, each shareholder owning 5% or more of the Common Stock
and by all executive officers and directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
-----------------------------
DIRECTORS AND 5% STOCKHOLDERS NUMBER PERCENT
- ---------------------------------------------------------------- --------------- ------------
<S> <C> <C>
Pratap Kesav Kondamoori ........................................ 1,205,029(2) 11.7
2235 Qume Drive
San Jose, California 95131
Ram Kedlaya .................................................... 1,207,423(3) 11.7
2235 Qume Drive
San Jose, California 95131
Bob K. Pryt .................................................... 1,120,000(7) 10.9
One Sansome Street
San Francisco, California 94104
Anders O. Field, Jr............................................. 466,173(4) 4.5
Marc Dumont..................................................... 33,400(5) (6)
All Executive Officers and Directors as a Group (10 persons).... 4,327,683(8) 40.7
</TABLE>
- ------------------------
(1) Beneficial ownership of directors, officers and 5% or more shareholders
includes both outstanding Common Stock and shares issuable upon exercise of
warrants or options that are currently exercisable or will become
exercisable within 60 days after the date of this table. Except as indicated
in the footnotes to this table and pursuant to applicable community property
laws, the persons named in the table have sole voting and investment power
with respect to all shares of Common Stock beneficially owned by them.
(2) Includes 55,458 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of this
table.
(3) Includes 55,359 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of this
table.
(4) Includes 78,801 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of this
table.
(5) Includes 33,400 shares issuable upon exercise of currently exercisable
Common Stock Purchase Warrants.
(6) Less than 1% ownership percentage.
(7) Includes 50,000 shares issued to Bob K. Pryt, Trustee, BKP Capital
Management, Inc. 401(k) Profit Sharing Plan and Money Purchase Plan, dated
01/01/92, FBO Bob K. Pryt and 1,043,333 shares issued to BKP Partners, L.P.
(8) Includes 391,089 shares issuable upon exercise of warrants or options that
are currently exercisable or will become exercisable within 60 days after
the date of this table.
32
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the Common
Stock held by each of the Selling Stockholders as of May 20, 1996. Material
relationships between certain of the Selling Stockholders and the Company are
set forth in the footnotes to the table. Except as indicted in the footnotes to
this table, the persons named in the table have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws, where applicable. The following information
has been furnished to the Company by the person named:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING FOLLOWING OFFERING
---------------------------- SHARES --------------------------
NUMBER OF PERCENT TO BE NUMBER OF PERCENT
NAME SHARES OWNED SOLD SHARES OWNED
- --------------------------------------------------- --------------- ----------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Pratap Kesav Kondamoori............................ 1,205,029(1) 11.7 126,129 1,078,900 10.5
Ram Kedlaya........................................ 1,207,423(2) 11.7 126,030 1,081,393 10.5
Anders O. Field, Jr................................ 466,173(3) 4.5 198,862 267,311 3.7
John Glass......................................... 26,043(4) * 50,000 0 0
Chadalavada Rao.................................... 54,565(5) * 75,000 15,500 *
Neil Mammen........................................ 58,098(6) * 106,011 50,000 *
Davinder (Paul) Gulati............................. 54,865(7) * 80,800 10,000 *
</TABLE>
- ------------------------
(1) Includes 55,458 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of this
table. Mr. Kondamoori is the Company's President, Chief Executive Officer
and Chairman of the Board.
(2) Includes 55,359 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of this
table. Mr. Kedlaya is a Director and Vice President, Strategic Planning.
(3) Includes 78,801 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of this
table. Mr. Field is a Director of the Company.
(4) Includes 26,043 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of this
table. Mr. Glass is the Company's Vice President, Business Development.
(5) Includes 39,065 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of this
table. Mr. Rao is the Company's Vice President, Engineering.
(6) Includes 58,098 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of this
table. Mr. Mammen is the Company's Chief Technical Officer.
(7) Includes 44,865 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of this
table. Mr. Gulati is the Company's Vice President, Sales.
33
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby will be issued by the Company upon
exercise of Options granted under the Company's 1995 Stock Option Plan. The
Company does not intend to employ the services of any underwriters, dealers or
other agents in connection with these issuances.
Such issued Option Shares may thereafter be sold by the holders thereof from
time to time in brokerage transactions (which may include block transactions) in
the over-the-counter market or, in negotiated transactions, at prices and on
terms prevailing at the time of such sales. The holders of the Option Shares may
effect such transactions by selling their Common Stock directly to purchasers,
through broker-dealers acting as agents for the holders or to broker-dealers
acting as agents for the holders or to broker-dealers who may purchase the
Option Shares as principals and thereafter sell the Common Stock from time to
time in the over-the-counter market, in negotiated transactions or otherwise, or
a combination of such methods. The holders of Option Shares may individually pay
customary brokerage commissions and expenses.
The Company will amend or supplement this Prospectus in the following
circumstances and to the following extent: (i) if the Option Shares are to be
sold at a price other than the prevailing market price, to disclose such price;
(ii) if the Option Shares are to be sold in block, transactions and the
purchaser intends to resell, to disclose the nature and extent of such
arrangements; or (iii) if the compensation to be paid to broker-dealers is other
than usual and customary discounts, concessions or commissions, to disclose the
terms of such broker-dealer compensation. In the above circumstances, no offers
or sales may be made by the holders of Option Shares until an effective
amendment or prospectus supplement is available.
The holders of Option Shares and broker-dealers, if any, acting in
connection with such sales, might be deemed to be "underwriters" within the
meaning of section 2(11) of the Act and any commission received by them and any
profit on the resale of such Option Shares may be deemed to be underwriting
discounts and commissions under the Act. Although the Company will receive the
option exercise price when the holders elect to exercise their Options, the
Company will not receive any part of the proceeds from the resale of the Option
Shares by holders thereof.
34
<PAGE>
DESCRIPTION OF SECURITIES
The Company is authorized to issue up to 20,000,000 shares of Common Stock,
$0.001 par value and up to 5,000,000 shares of Preferred Stock, $0.001 par
value. As of May 20, 1996, 10,250,918 shares of Common Stock and no shares of
Preferred Stock were issued and outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted by shareholders. Because the Company is
subject to the provisions of Section 2115 of the California Corporations Code
(the "nominal foreign corporation statute"), cumulative voting is permitted in
the election of directors upon giving notice by the shareholder as required in
the California Corporations Code. However, no shareholder will be entitled to
cumulate votes unless the name of the candidate or candidates for whom such
votes would be cast has been placed in nomination prior to the voting and any
shareholder has given notice, at the Annual Meeting and prior to the
commencement of voting, of such shareholder's intention to cumulate his votes.
The holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of funds legally available therefor,
subject to the preferences of the holders of Preferred Stock, if any. In the
event of the liquidation, dissolution or winding up of the Company, the holders
of Common Stock are entitled to share ratably in all assets remaining after
payment of all debts and other liabilities, subject to prior distribution rights
of holders of Preferred Stock, if any, then outstanding. Holders of shares of
Common Stock, as such, have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the Common Stock.
The outstanding shares of Common Stock are, and the shares offered by the
Company in this offering will be, when issued and paid for, fully paid and
non-assessable.
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of Preferred
Stock. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized to fix the number of shares of any
series of Preferred Stock and to determine or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any wholly unissued
series of Preferred Stock and, within the limits and restrictions stated in any
resolution or resolutions of the Board of Directors originally fixing the number
of shares constituting any series of Preferred Stock, to increase (but not below
the number of shares of any such series then outstanding) the number of shares
of any such series subsequent to the issue of shares of that series.
Although the Company currently does not have any plans to issue shares of
Preferred Stock or to designate any series of Preferred Stock, there can be no
assurance that the Company will not do so in the future. As a result, the
Company could authorize the issuance of a series of Preferred Stock that would
grant to holders preferred rights to the assets of the Company upon liquidation,
the right to receive dividends before dividends would be declared to common
shareholders and the right to the redemption of such shares, together with a
premium, prior to the redemption of Common Stock. In addition, the Board could
issue large blocks of voting Preferred Stock to fend off unwanted tender offers
or hostile takeovers without further shareholder approval.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is First
Interstate Bank of California, 345 California Street, San Francisco, California
94104.
LEGAL MATTERS
The validity of the Securities offered hereunder will be passed upon for the
Company by the law firm of Grover Wickersham, P.C., 430 Cambridge Avenue, Suite
100, Palo Alto, California 94306. Grover Wickersham, a member of this firm, has
options to purchase 25,000 shares of the Company's Common Stock at an exercise
price of $2.375, which options expire on May 25, 2000 and options to purchase
25,000 shares at an exercise price of $6.875, which expire on March 9, 2001.
35
<PAGE>
EXPERTS
The consolidated financial statements of the Company as of December 31,
1995, and for the eight months ended December 31, 1995, and for each of the two
years in the period ended April 30, 1995, have been included herein in reliance
on the report of Grant Thornton LLP, independent certified public accountants,
appearing elsewhere herein, given on the authority of said firm as experts in
auditing and accounting.
36
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
NUKO Information Systems, Inc.
We have audited the accompanying consolidated balance sheet of NUKO
Information Systems, Inc. and Subsidiary as of December 31, 1995, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the eight months ended December 31, 1995 and for each of the
two years in the period ended April 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of NUKO
Information Systems, Inc. and Subsidiary as of December 31, 1995, the
consolidated results of their operations and their consolidated cash flows for
the eight months ended December 31, 1995 and for each of the two years in the
period ended April 30, 1995, in conformity with generally accepted accounting
principles.
Grant Thornton LLP
San Jose, California
February 14, 1996
F-1
<PAGE>
NUKO INFORMATION SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash and cash equivalents................................................... $11,255,820
Accounts receivable......................................................... 120,000
Receivables from officers................................................... 27,931
Share subscriptions receivable, including interest of $30,567............... 341,967
Inventories................................................................. 758,552
Prepaid expenses............................................................ 110,762
-----------
Total current assets.................................................... 12,615,032
PROPERTY AND EQUIPMENT -- AT COST
Leased assets............................................................... 211,417
Computer hardware and software.............................................. 312,059
Office furniture and other equipment........................................ 23,203
Leasehold improvements...................................................... 11,033
-----------
557,712
Less accumulated depreciation and amortization.......................... (98,215)
-----------
459,497
OTHER ASSETS.................................................................. 253,340
-----------
$13,327,869
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................................................ $ 1,319,959
Accrued liabilities......................................................... 108,719
Lease obligations........................................................... 95,273
-----------
Total current liabilities............................................... 1,523,951
SENIOR NOTES.................................................................. 325,000
CAPITAL LEASE OBLIGATIONS..................................................... 101,686
COMMITMENTS AND CONTINGENCIES................................................. --
STOCKHOLDERS' EQUITY
Preferred stock -- $.001 par value; 5,000,000 shares authorized; none issued
and outstanding............................................................ --
Common stock -- $.001 par value; 20,000,000 shares authorized; 9,128,418
issued and outstanding..................................................... 9,128
Additional paid-in capital.................................................. 15,741,718
Accumulated deficit......................................................... (4,373,614)
-----------
Total stockholders' equity.............................................. 11,377,232
-----------
$13,327,869
-----------
-----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-2
<PAGE>
NUKO INFORMATION SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED APRIL 30,
DECEMBER 31, ---------------------------
1995 1995 1994
-------------- -------------- -----------
<S> <C> <C> <C>
Revenues
Product sales, net of returns..................................... $ 174,690 $ 17,600 $ 188,586
Contract development fees......................................... 120,000 -- --
Consulting revenues............................................... -- -- 157,560
Royalties......................................................... -- 70,000 --
Other revenues.................................................... 1,640 699 --
-------------- -------------- -----------
296,330 88,299 346,146
Costs and expenses
Cost of product sales............................................. 89,296 6,688 72,080
Research and development expenses................................. 1,268,515 803,449 449,366
Selling, general and administrative expenses...................... 792,497 913,913 492,882
-------------- -------------- -----------
2,150,308 1,724,050 1,014,328
-------------- -------------- -----------
Operating loss................................................ (1,853,978) (1,635,751) (668,182)
Other income (expense)
Interest expense.................................................. (84,467) (65,780) (3,542)
Interest income................................................... 38,556 -- --
Equity in losses of unconsolidated affiliate...................... (82,259) (48,346) (45,565)
Other, net........................................................ 25,303 6,815 --
-------------- -------------- -----------
(102,867) (107,311) (49,107)
-------------- -------------- -----------
Loss before income taxes...................................... (1,956,845) (1,743,062) (717,289)
Income tax (expense) benefit........................................ (800) (800) 14,064
-------------- -------------- -----------
NET LOSS...................................................... $ (1,957,645) $ (1,743,862) $ (703,225)
-------------- -------------- -----------
-------------- -------------- -----------
Loss per common share............................................... $ (0.70) $ (0.81) $ (0.38)
-------------- -------------- -----------
-------------- -------------- -----------
Weighted average common shares outstanding.......................... 2,782,381 2,158,141 1,874,666
-------------- -------------- -----------
-------------- -------------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
NUKO INFORMATION SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
TWO YEARS ENDED APRIL 30, 1995 AND EIGHT MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
ADDITIONAL SHARE
COMMON COMMON PAID-IN SUBSCRIPTIONS ACCUMULATED
SHARES STOCK CAPITAL RECEIVABLE DEFICIT TOTAL
----------- ----------- -------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, May 1, 1993........ 1,895,541 $ 1,895 $ 16,261 $ -- $ 31,118 $ 49,274
Sales of common stock..... 67,911 68 48,808 -- -- 48,876
Stock options exercised... 46,040 46 5,954 -- -- 6,000
Shares issued for
services................. 28,775 29 9,846 -- -- 9,875
Share subscriptions....... 3,014,347 3,014 308,386 (311,400) -- --
Shares retired for note... (303,173) (303) (65,547) -- -- (65,850)
Net loss.................. -- -- -- -- (703,225) (703,225)
----------- ----------- -------------- ------------ -------------- --------------
Balance, April 30, 1994..... 4,749,441 4,749 323,708 (311,400) (672,107) (655,050)
Sales of common stock..... 684,500 685 723,315 -- -- 724,000
Shares issued for
services................. 69,795 69 28,318 -- -- 28,387
Conversion of debt to
equity................... 37,737 38 54,962 -- -- 55,000
Net loss.................. -- -- -- -- (1,743,862) (1,743,862)
----------- ----------- -------------- ------------ -------------- --------------
Balance, April 30, 1995..... 5,541,473 5,541 1,130,303 (311,400) (2,415,969) (1,591,525)
Sales of common stock, net
of offering costs of
$119,693................. 3,049,833 3,050 13,403,757 -- -- 13,406,807
Shares issued for
services................. 70,000 70 174,930 -- -- 175,000
Conversion of debt and
accrued interest to
equity, net of
unamortized debt issuance
costs of $47,250......... 467,112 467 1,032,728 -- -- 1,033,195
Interest on share
subscriptions............ -- -- -- (30,567) -- (30,567)
Reclassifications......... -- -- -- 341,967 -- 341,967
Net loss.................. -- -- -- -- (1,957,645) (1,957,645)
----------- ----------- -------------- ------------ -------------- --------------
Balance, December 31,
1995....................... 9,128,418 $ 9,128 $ 15,741,718 $ -- $ (4,373,614) $ 11,377,232
----------- ----------- -------------- ------------ -------------- --------------
----------- ----------- -------------- ------------ -------------- --------------
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
NUKO INFORMATION SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED APRIL 30,
DECEMBER 31, ----------------------------
1995 1995 1994
-------------- -------------- ------------
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net loss.......................................................... $ (1,957,645) $ (1,743,862) $ (703,225)
Adjustments to reconcile net loss to net cash used in operating
activities:
Shares issued for services...................................... 175,000 28,387 9,875
Interest converted to equity.................................... 30,445 -- --
Loss on disposals of fixed assets............................... -- -- 1,438
Depreciation and amortization................................... 73,216 23,460 18,116
Changes in assets and liabilities:
Receivables................................................... (122,182) 1,680 (8,474)
Interest on stock subscriptions............................... (30,567) -- --
Inventories................................................... (754,330) -- (4,222)
Prepaid expenses.............................................. (103,302) (7,460) --
Other assets.................................................. (9,449) (10,164) --
Accounts payable.............................................. 479,684 261,338 401,516
Accrued liabilities........................................... (461,007) 488,977 41,821
-------------- -------------- ------------
Net cash used in operating activities....................... (2,680,137) (957,644) (243,155)
Cash flows from investing activities:
Purchases of property and equipment............................... (451,264) (50,234) (15,301)
Cash flows from financing activities:
Debt issuance costs............................................... (55,500) -- --
Proceeds from issuance of senior notes............................ -- 325,000 --
Proceeds from borrowings.......................................... 1,050,000 25,000 180,000
Payments on capital lease obligations............................. (14,458) -- --
Repayments of borrowings.......................................... -- (65,850) --
Proceeds from issuance of common stock............................ 13,406,807 724,000 54,876
-------------- -------------- ------------
Net cash provided by financing activities....................... 14,386,849 1,008,150 234,876
-------------- -------------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 11,255,448 272 (23,580)
Cash and cash equivalents at beginning of year...................... 372 100 23,680
-------------- -------------- ------------
Cash and cash equivalents at end of year............................ $ 11,255,820 $ 372 $ 100
-------------- -------------- ------------
-------------- -------------- ------------
Supplemental disclosures of cash flow information:
Cash paid during the year for
Interest........................................................ $ 76,143 $ 45,319 $ 3,606
Income taxes.................................................... -- -- --
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
NUKO INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, APRIL 30, 1995 AND APRIL 30, 1994
NOTE A -- PRESENTATION AND OPERATIONS
On May 27, 1994, Growers Express Incorporated ("Growers") acquired all of
the outstanding common stock of NUKO Technologies, Inc. (the "Merger"). For
accounting purposes the acquisition has been treated as a recapitalization of
NUKO Technologies, Inc. with NUKO Technologies, Inc. as the acquirer (a reverse
acquisition). Prior to May 27, 1994, the historical financial statements
presented are those of NUKO Technologies, Inc. Concurrent with the Merger,
Growers changed its name to NUKO Information Systems, Inc. Subsequent to the
Merger, the consolidated financial statements include the accounts of NUKO
Information Systems, Inc. and its wholly-owned subsidiary NUKO Technologies,
Inc. (collectively the "Company").
The Company designs, manufactures and services multimedia video hardware and
software products (the "Highlander") primarily to telephone service providers
located throughout the world. The Company has also developed and sold other
software products; however, as of December 31, 1995, the Company is focusing its
efforts on multimedia applications.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
All significant intercompany accounts and transactions have been eliminated.
The investment in unconsolidated affiliate is accounted for under the equity
method of accounting.
REVENUE RECOGNITION
Generally, the Company recognizes revenue when products are shipped.
Deferred revenue results from prepayment of software licensing fees and revenue
is recognized in accordance with Statement of Position 91-1. Revenue resulting
from specific contractual terms, including certain product development
agreements, is recognized in accordance with the terms of the related contract.
SOFTWARE DEVELOPMENT COSTS
Software development costs are capitalized once technological feasibility
has been established and all research and development activities for other
components of the product have been completed. There were no software
development costs capitalized at December 31, 1995.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations as incurred.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
PROPERTY AND EQUIPMENT
Depreciation is provided by using straight-line and accelerated methods.
Leasehold improvements are amortized over the shorter of the lease term or the
useful life of the asset. Other property and equipment are generally depreciated
over the following useful lives:
<TABLE>
<S> <C>
Computer hardware and software........... 5 years
Office furniture and other equipment..... 5 to 7 years
</TABLE>
OTHER ASSETS
Debt issuance costs and organization costs are being amortized over three
and five years, respectively.
F-6
<PAGE>
NUKO INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, APRIL 30, 1995 AND APRIL 30, 1994
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The Company maintains
its cash balances, which at times may exceed federally insured limits, in
primarily two financial institutions. The Company has not experienced any losses
in such accounts and believes it is not exposed to any significant credit risk
on cash and cash equivalents.
INCOME TAXES
The Company provides a deferred tax expense or benefit equal to the net
change in the deferred tax asset or liability during the period. Deferred income
taxes represent tax credit carryforwards and future net tax effects resulting
from temporary differences between financial statement and tax bases of assets
and liabilities using enacted tax rates in effect for the period in which the
differences are expected to reverse. Deferred tax assets are recognized for
future deductible temporary differences and tax loss and credit carryforwards if
their realization is "more likely than not." The principal types of temporary
differences between assets and liabilities for financial statement and tax
return purposes are certain accrued liabilities and tax loss carryforwards.
USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as revenues and expenses during the reporting period. Actual results could
differ from those estimates.
LOSS PER SHARE
Loss per common share is calculated by dividing net loss by the weighted
average number of common shares, and common share equivalents when dilutive,
outstanding during the year.
NOTE C -- CONTRACT DEVELOPMENT
The Company has entered into a development agreement whereby the Company is
developing certain products to be purchased by the customer. Under the terms of
the agreement, the Company will receive non-refundable payments totaling
$360,000, payable in installments upon achieving certain milestones identified
in the agreement. As of December 31, 1995, the Company had achieved the first
milestone and recorded revenue amounting to $120,000. All costs associated with
this contract are reported as research and development.
NOTE D -- OTHER ASSETS
Other assets consist of the following at December 31, 1995:
<TABLE>
<S> <C>
Debt issuance costs...................................................... $ 83,000
Organization costs....................................................... 3,398
---------
86,398
---------
Accumulated amortization................................................. (74,091)
---------
12,307
---------
Deposits................................................................. 241,033
---------
$ 253,340
---------
---------
</TABLE>
F-7
<PAGE>
NUKO INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, APRIL 30, 1995 AND APRIL 30, 1994
NOTE E -- ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31, 1995:
<TABLE>
<S> <C>
Payroll and related accruals............................................. $ 14,669
Income taxes............................................................. 8,463
Interest................................................................. 28,785
Debt issuance costs payable.............................................. 27,500
Customer returns......................................................... 16,162
Other.................................................................... 13,140
---------
$ 108,719
---------
---------
</TABLE>
NOTE F -- INCOME TAXES
Income tax benefit (expense) consists of the following:
<TABLE>
<CAPTION>
EIGHT MONTHS YEAR ENDED APRIL 30,
ENDED
DECEMBER 31, --------------------
1995 1995 1994
------------- --------- ---------
<S> <C> <C> <C>
Current
Federal........................................................... $ -- $ -- $ 14,997
State............................................................. (800) (800) (800)
------ --------- ---------
(800) (800) 14,197
Deferred
Federal........................................................... -- -- --
State............................................................. -- -- (133)
------ --------- ---------
$ (800) $ (800) $ 14,064
------ --------- ---------
------ --------- ---------
</TABLE>
Deferred tax assets consist of the following at December 31, 1995:
<TABLE>
<S> <C>
Assets
Accrued liabilities.................................................. $ 13,000
Tax loss carryforwards............................................... 1,471,000
-----------
Total deferred tax assets.......................................... 1,484,000
-----------
Valuation allowance.................................................... (1,484,000)
-----------
Net deferred tax asset............................................. $ --
-----------
-----------
</TABLE>
As of December 31, 1995, management does not believe, based upon available
evidence, that it is more likely than not that the Company will be able to
realize the net deferred tax assets. The valuation allowance increased by
$598,000, $637,000 and $250,000 for the periods ended December 31, 1995, April
30, 1995 and April 30, 1994, respectively. The Company has available tax loss
carryforwards of $3,800,000 and $1,900,000 available to offset future federal
and state taxable income, respectively. These losses expire at various dates
from 1997 to 2011.
F-8
<PAGE>
NUKO INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, APRIL 30, 1995 AND APRIL 30, 1994
NOTE F -- INCOME TAXES (CONTINUED)
The reconciliation of the income tax benefit (expense) at the federal
statutory income tax rate to the Company's income taxes is as follows:
<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED APRIL 30,
DECEMBER 31, --------------------------
1995 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
Expected tax benefit (at 34%)................................ $ 665,000 $ 593,000 $ 243,878
Operating losses not utilized................................ (665,000) (593,000) (228,881)
State taxes.................................................. (800) (800) (933)
------------- ------------ ------------
$ (800) $ (800) $ 14,064
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
NOTE G -- LONG-TERM DEBT
The Company has issued $325,000 of senior notes (the "Senior Notes") due
June 30, 1997. The Senior Notes are collateralized by substantially all of the
assets of the Company. Annual interest at 10% is due in January and June each
year. The Senior Notes must be prepaid upon the closing of a public offering of
the Company's registered common shares which results in gross proceeds in excess
of $5,000,000. The Senior Notes may otherwise be prepaid only with the consent
of the holders. Attached to each Senior Note were 10,000 "A" Warrants and 10,000
"B" Warrants to purchase common shares of the Company as described in Note I.
NOTE H -- CAPITALIZED LEASES
In October 1995, the Company acquired assets under capital leases. Future
minimum lease payments for the years ending December 31, are as follows:
<TABLE>
<S> <C>
1996..................................................................... $ 120,000
1997..................................................................... 110,000
---------
230,000
Less amount representing interest........................................ (33,041)
Total capital lease obligation........................................... 196,959
Less current portion..................................................... (95,273)
---------
$ 101,686
---------
---------
</TABLE>
The cost basis of the assets held under capital lease is $211,417. At
December 31, 1995, accumulated amortization for these assets amounted to
$15,661.
NOTE I -- STOCKHOLDERS' EQUITY
SHARES FOR SERVICES
In October 1995, the Company issued 20,000 shares of the Company's stock to
a marketing consultant upon the issuance of a purchase order by a customer of
the Company. Additionally, in October 1995, the Company issued 50,000 shares of
its common stock in exchange for engineering consulting services performed under
several previously negotiated contracts. The Company recognized $175,000 of
expense upon issuing these shares.
In the year ended April 30, 1995, the Company issued 69,795 common shares in
exchange for various administrative and engineering services. The Company
recognized $28,387 of expense in connection with this issuance. In the year
ended April 30, 1994, $9,875 was recognized as expense upon the issuance of
28,775 common shares for services.
F-9
<PAGE>
NUKO INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, APRIL 30, 1995 AND APRIL 30, 1994
STOCK WARRANTS
Each Senior Note includes 10,000 "A" Warrants and 10,000 "B" Warrants to
purchase common shares of the Company. Warrants may be exercised at any time by
the holders at $2.50 per share for "A" Warrants and $10.00 per share for "B"
Warrants. The "A" Warrants expire at the earlier of a public offering of the
Company's registered common shares in which a minimum of $5,000,000 is raised or
June 30, 1997. The "B" Warrants expire on June 30, 1999. There were 130,000 "A"
Warrants and 130,000 "B" Warrants issued in connection with the sale of the
Senior Notes, the value of which was considered immaterial. At December 31,
1995, all "A" and "B" warrants remain outstanding.
SHARE SUBSCRIPTIONS
Prior to the Merger, certain employees, shareholders and consultants
subscribed to purchase shares in NUKO Technologies, Inc. The subscription price
was determined based on an independent valuation of NUKO Technologies, Inc. at
the subscription date. The subscriptions bear interest at the applicable federal
rate. In February 1996, all amounts including interest due under the
subscriptions were paid.
SHARE CANCELLATIONS
In June 1995, the Company settled a dispute with certain former shareholders
of Growers. Under the terms of the settlement agreement, 191,334 common shares
of Company stock were returned to the Company. Additionally, $111,000 of debt
issuance costs payable to these shareholders were forgiven. The effects of this
settlement have been recorded as of the Merger date.
CONVERTIBLE NOTES
In June 1995, the Company received $550,000 from the issuance of 8%
convertible notes. These notes and all accrued interest were converted into
286,112 common shares of the Company in December 1995. In connection with the
notes, warrants have been granted to purchase 333,400 common shares of the
Company at prices ranging from $1.80 to $2.30 per common share. These warrants
have an expiration date of July 27, 2000.
Additionally, in October 1995, the Company issued $500,000 in 8% convertible
notes payable. These notes and all accrued interest were converted into 181,000
shares of common stock in December 1995.
NOTE J -- COMMITMENTS AND CONTINGENCIES
The Company leases its office facilities under a sublease which expires in
April 1999. Under terms of the lease, the Company is obligated to pay property
taxes, insurance and maintenance. The Company also leases equipment used in its
operations. Rent expense was approximately $98,837, $119,984, and $22,722 for
the periods ended December 31, 1995, April 30, 1995 and April 30, 1994,
respectively.
Non-cancelable commitments under operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -------------------------------------------------------------------------------------------
<S> <C>
1997..................................................................................... $ 135,600
1998..................................................................................... 135,600
1999..................................................................................... 45,200
-----------
$ 316,400
-----------
-----------
</TABLE>
F-10
<PAGE>
NUKO INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, APRIL 30, 1995 AND APRIL 30, 1994
NOTE K -- UNCONSOLIDATED AFFILIATE
The Company owns 48% of NUKO Information Systems (India) Private Limited
("NUKO India"). NUKO India performs certain development on behalf of the
Company. During the periods ended December 31, 1995, April 30, 1995 and April
30, 1994, the Company advanced $82,259, $48,346 and $45,565, respectively, to
NUKO India. The carrying value of the Company's investment in NUKO India is zero
at December 31, 1995.
NOTE L -- STOCK OPTION PLANS
The Company has a stock option plan which is, and will continue to be
accounted for under APB Opinion 25 and related Interpretations. The plan allows
the Company to grant options to employees, consultants and others for up to
1,400,000 shares of common stock. Options, which have a term of five years when
issued, were granted in May 1995 and vest ratably over three years. The exercise
price of each option equaled the fair value of the Company's stock on the date
of grant. Accordingly, no compensation cost was recognized. The disclosure
requirements of Statement of Financial Accounting Standards ("SFAS") No. 123,
Accounting for Stock-Based Compensation, are required for fiscal years beginning
after December 15, 1995. The pro forma effect of the initial application of SFAS
123 has not been determined by the Company.
A summary of the status of the Company's stock option plan as of December
31, 1995, and changes during the period then ended is presented below.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
----------- -----------
<S> <C> <C>
Outstanding at May 1, 1995...................................................... -- $ --
Granted....................................................................... 1,069,000 2.375
Exercised..................................................................... -- --
Forfeited..................................................................... -- --
----------- -----------
Outstanding at December 31, 1995................................................ 1,069,000 $ 2.375
----------- -----------
----------- -----------
Options exercisable at December 31, 1995........................................ 482,000 $ 2.375
----------- -----------
----------- -----------
</TABLE>
NOTE M -- DEPENDENCE ON SUPPLIERS
The Company purchases certain of the chips and chip-sets needed in its
products from single source suppliers. The Company uses five such single source
suppliers. The Company is dependent upon such suppliers to deliver parts and
components as needed for the manufacture of the Company's products, but there
can be no assurance that such suppliers will continue to be able to serve the
Company's needs. While there are alternative sources of supply for each of the
components outsourced by the Company, the Company could incur delays if required
to switch to another supplier. Any disruption of the Company's relationships
with any of its key single source suppliers or manufacturers or other
limitations on the availability of these products provided by such suppliers
could have an adverse effect on the Company's business and operating results.
NOTE N -- SUBSEQUENT EVENTS
In connection with a private placement of the Company's common shares,
subsequent to December 31, 1995, the Company issued 822,500 common shares for
gross proceeds of $4,112,500.
Additionally, in February 1996, options were granted to two directors of the
Company allowing these directors to purchase up to 331,000 common shares at
$6.50 per share.
F-11
<PAGE>
NUKO INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, APRIL 30, 1995 AND APRIL 30, 1994
NOTE O -- CHANGE IN FISCAL YEAR END
In December 1995, the Company changed its fiscal year end to December 31. In
accordance with Rule 13a-10 of the Securities Exchange Act of 1934, the
following table provides unaudited information with respect to the eight months
ended December 31, 1994.
<TABLE>
<CAPTION>
(UNAUDITED)
<S> <C>
Revenues................................................................................ $ 100,740
Costs and expenses...................................................................... (1,069,128)
--------------
Operating loss.......................................................................... (968,388)
Other expense, net...................................................................... (32,712)
Income taxes............................................................................ (533)
--------------
Net loss................................................................................ $ (1,001,633)
--------------
--------------
Loss per share.......................................................................... $ (0.50)
--------------
--------------
</TABLE>
F-12
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR
MADE MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OFFERED BY THIS PROSPECTUS OR AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SHARES IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THERE HAVE BEEN NO CHANGES IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THIS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Additional Information......................... 2
Prospectus Summary............................. 3
Risk Factors................................... 5
Dividend Policy................................ 8
Use of Proceeds................................ 8
Price Range of Common Stock.................... 9
Capitalization................................. 10
Selected Financial Data........................ 11
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 12
Business....................................... 16
Management..................................... 23
1995 Stock Option Plan......................... 28
Principal Shareholders......................... 32
Selling Stockholders........................... 33
Plan of Distribution........................... 34
Description of Securities...................... 35
Legal Matters.................................. 35
Experts........................................ 36
Financial Statements........................... F-1
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
1,400,000 SHARES
NUKO INFORMATION SYSTEMS, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
, 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[ALTERNATE]
Subject to completion, dated May 21, 1996
5,154,445 SHARES
NUKO INFORMATION SYSTEMS, INC.
COMMON STOCK
------------------
This Prospectus covers 5,154,445 shares (the "Shares") of the Common Stock,
par value $0.001 per share (the "Common Stock") of NUKO Information Systems,
Inc. (the "Company") for reoffer or resale by certain selling stockholders of
the Company's securities (the "Selling Stockholders") purchased by the Selling
Stockholders in various private transactions. See "Selling Stockholders."
Concurrently with this offering, the Company is registering on the
registration statement of which this Prospectus is a part but pursuant to a
separate prospectus, up to 1,400,000 incentive and non-qualified stock options
("Options") and the reoffer and resale of 862,832 shares of Common Stock
issuable upon exercise of the Options by affiliates of the Company.
The Shares may be offered by the Selling Stockholders in brokerage
transactions (which may include block transactions), in the over-the-counter
market or negotiated transactions at prices and terms prevailing at the times of
such sales, at prices related to such market prices or at negotiated prices.
Such shares may be sold directly to purchasers, through broker-dealers acting as
agents for the Selling Stockholders or to broker-dealers who may purchase the
Selling Stockholders' Shares as principals and thereafter sell the Shares from
time to time in the over-the-counter market, in negotiated transactions or
otherwise, or by a combination of these methods. Broker-dealers who effect these
transactions may receive compensation in the form of discounts or commissions
from the Selling Stockholders or from the purchasers of the Shares for whom the
broker-dealers may act as an agent or to whom them may sell as a principal, or
both. See "Plan of Distribution."
The Company will not receive any part of the proceeds from the resale of the
Shares by the Selling Stockholders. The Selling Stockholders and broker-dealers,
if any, acting in connection with such sales, might be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act and any
commission received by them and any profit on the resale of such securities
might be deemed to be underwriting discounts and commissions under the
Securities Act.
The Company's Common Stock is currently traded on the over-the-counter
market and quoted on The Electronic Bulletin Board under the symbol "NUKO." On
May 17, 1996, the closing bid price of the Common Stock was $17.25 per share.
See "Price Range of Common Stock."
------------------------
The securities offered hereby are speculative, involve a high degree of risk
and should not be purchased by any investors who cannot afford the loss of their
entire investment. See "Risk Factors."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Selling
Stockholders.......................... 5,154,445 Shares.
Common Stock Outstanding............... 10,250,918 shares as of May 20, 1996.(1)
Use of Proceeds........................ The Company will receive no proceeds from the sale
of the Shares offered by the Selling Stockholders.
OTC Electronic Bulletin Board Symbol... NUKO
</TABLE>
- ------------------------
(1) Does not include (i) 398,400 shares issuable upon exercise of outstanding
warrants; and (ii) 2,800,000 shares issuable upon exercise of options under
the Company's stock option plans. See "Management -- Stock Options."
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
EIGHT MONTHS FISCAL YEAR ENDED APRIL 30,* MARCH 31,
ENDED, DECEMBER ---------------------------- ----------------------------
31, 1995 1995 1994 1996 1995
----------------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues........................ $ 296,330 $ 88,299 $ 346,146 $ 474,413 $ 1,261
Cost of revenues................ 89,296 6,688 72,080 142,321 --
Net loss........................ (1,957,645) (1,743,862) (703,225) (3,064,775) (440,987)
Loss per common share........... $ (0.70) $ (0.81) $ (0.38) $ (0.37) $ (0.18)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995 MARCH 31, 1996
----------------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital............................................................. $ 11,091,081 $ 12,139,566
Total assets................................................................ 13,327,869 15,270,311
Total current liabilities................................................... 1,523,951 2,173,466
Senior notes................................................................ 325,000 325,000
Accumulated deficit......................................................... (4,373,614) (7,438,389)
Total shareholders' equity.................................................. 11,377,232 12,696,439
</TABLE>
- ------------------------
* In December 1995, the Company changed its fiscal year end from April 30 to
December 31.
<PAGE>
DIVIDEND POLICY
The Company has never paid any cash dividends on its capital stock. At
present, the Company intends to retain all of its earnings for use in the
expansion of its business and does not anticipate paying any cash dividends in
the foreseeable future. Any payment of cash dividends on the Common Stock in the
future will be dependent upon the Company's financial condition, results of
operations, current and anticipated cash requirements, plans for expansion, as
well as other factors that the Board of Directors deems relevant.
USE OF PROCEEDS
The Company will receive no part of the proceeds of any sales or
transactions made by the Selling Stockholders and/or their respective pledgees,
donees, transferees or other successors in interest hereunder. The Company will
pay substantially all of the expenses incident to the offering of the Shares,
other than any discounts, concessions or commissions payable to any
underwriters, dealers or agents, which expenses will be borne by the respective
Selling Stockholders.
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the Common
Stock held by each of the Selling Stockholders as of May 20, 1996. Material
relationships between certain of the Selling Stockholders and the Company are
set forth in the footnotes to the table. Except as indicted in the footnotes to
this table, the persons named in the table have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws, where applicable. The following information
has been furnished to the Company by the person named:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING FOLLOWING OFFERING
------------------------ SHARES ------------------------
NUMBER OF PERCENT TO BE NUMBER OF PERCENT
NAME SHARES OWNED SOLD SHARES OWNED
- ----------------------------------------------------------- ----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Bob K. Pryt (1)............................................ 1,120,000 10.9 26,667 0 0
Bob K. Pryt, Trustee, BKP Capital
Management, Inc. 401(k) Profit Sharing
Plan and Money Purchase Plan, dated
01/01/92, FBO Bob K. Pryt (2)............................ 50,000 * 50,000 0 0
Common Sense Partners, L.P................................. 12,500 * 12,500 0 0
BKP Partners, L.P. (2)..................................... 1,043,333 10.2 1,043,333 0 0
Peter A. Bessette IRA Rollover............................. 13,333 * 13,333 0 0
Michael Klein.............................................. 50,000 ** 50,000 0 0
Dana M. Galante............................................ 10,000 * 10,000 0 0
B-Squared Partners, L.P.................................... 15,000 * 15,000 0 0
Peninsula Fund, L.P........................................ 22,500 * 22,500 0 0
Gary J. Shemano............................................ 13,333 * 13,333 0 0
Continental Arbitrage Company.............................. 50,000 * 50,000 0 0
Stuart Zimmerman........................................... 26,667 * 26,667 0 0
Pequot International Fund, Inc............................. 382,100 3.7 382,100 0 0
Pequot Partners Fund, L.P.................................. 417,900 4.1 417,900 0 0
Nob Hill Capital Partners, L.P............................. 100,000 * 100,000 0 0
Irvine Capital Partners, L.P............................... 25,000 * 25,000 0 0
Willow Creek Capital Partners, L.P......................... 15,000 * 15,000 0 0
First Trust & Co. F/B/O Ralph E. Blair FTC IRA Rollover.... 10,000 * 10,000 0 0
Robert A. Naify............................................ 65,000 * 65,000 0 0
Marshall Naify............................................. 65,000 * 65,000 0 0
Prism Partners I........................................... 300,000 2.9 300,000 0 0
Alan Baer.................................................. 30,000 * 30,000 0 0
Richard S. Crawford........................................ 50,000 * 50,000 0 0
Salah M. Hassanein......................................... 20,000 * 20,000 0 0
Earl G. Kershner........................................... 5,500 * 1,500 4,000 *
OSO Partners............................................... 200,000 1.9 200,000 0 0
Larry L. Pierce............................................ 1,000 * 1,000 0 0
Sausalito Equity Interests, Inc............................ 2,000 * 2,000 0 0
Xavier Roland.............................................. 40,000 * 40,000 0 0
Serge and Noelle Dubois.................................... 40,000 * 40,000 0 0
Banque de Gestion Edmond de Rothschild Luxembourg SA....... 16,400 * 16,400 0 0
Banque Privee Edmond de Rothschild SA, Luxembourg Branch... 133,600 1.3 133,600 0 0
Banque Financiere de la Cite............................... 65,000 * 65,000 0 0
Paul Dutrieux.............................................. 100,500 * 100,500 0 0
Rauche & Co. (Custodian for Terivian Enterprises).......... 50,000 * 50,000 0 0
Brian Fudge................................................ 3,000 * 3,000 0 0
Claude Eyraud.............................................. 10,000 * 10,000 0 0
Credit Suisse London Nominees Ltd.......................... 232,000 2.3 232,000 0 0
Union Bancaire Privee...................................... 10,000 * 10,000 0 0
Robinson & Co. (Bank of Bermuda)........................... 20,000 * 20,000 0 0
Sanctus Spiritus Antilles, NV.............................. 20,000 * 20,000 0 0
Lawrence R. and Lori R. Turel.............................. 10,000 * 10,000 0 0
Legong Investments, NV..................................... 60,000 * 60,000 0 0
John F. Knutson Trust dated January 30, 1987............... 5,000 * 5,000 0 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING FOLLOWING OFFERING
------------------------ SHARES ------------------------
NUMBER OF PERCENT TO BE NUMBER OF PERCENT
NAME SHARES OWNED SOLD SHARES OWNED
- ----------------------------------------------------------- ----------- ----------- --------- ----------- -----------
Thomas R. and Sylvia C. Tuttle............................. 2,000 * 2,000 0 0
<S> <C> <C> <C> <C> <C>
A. Lawrence Groo........................................... 5,000 * 5,000 0 0
Pratap Kesav Kondamoori (3)................................ 1,205,029 11.7 100,000 1,105,029 10.7
Anders O. Field, Jr. (4)................................... 466,173 4.5 100,000 366,173 3.6
H.R. (Ram) Kedlaya (5)..................................... 1,207,423 11.7 100,000 1,107,423 10.7
Timothy C. McGuire (6)..................................... 230,204 2.0 100,000 130,204 1.3
Richard McGuire............................................ 2,000 * 2,000 0 0
William McGuire............................................ 2,000 * 2,000 0 0
Monica Palmer.............................................. 3,500 * 3,500 0 0
Doris Corrado.............................................. 1,500 * 1,500 0 0
John and Natalie McGuire................................... 2,000 * 2,000 0 0
Jonnie McGuire............................................. 2,000 * 2,000 0 0
Nutley Investments, S.A.................................... 220,051 2.1 130,051 90,000 *
PIRCO, S.A................................................. 247,061 2.4 156,061 91,000 *
Alidad Farmanfarma......................................... 330,250 3.2 300,000 30,250 *
Oxcal Venture Fund, L.P.................................... 25,000 * 25,000 0 0
Willcocks Investments Limited.............................. 250,000 2.4 250,000 0 0
---------
TOTAL.................................................. 5,154,445
---------
---------
</TABLE>
- ------------------------
* Less than 1%.
(1) Includes 50,000 shares issued to Bob K. Pryt, Trustee, BKP Capital
Management, Inc. 401(k) Profit Sharing Plan and Money Purchase Plan, dated
01/01/92, FBO Bob K. Pryt and 1,043,333 shares issued to BKP Partners, L.P.
(2) The beneficial owner is Bob K. Pryt.
(3) Includes 55,458 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of
this table. Mr. Kondamoori serves as the Company's President, Chief
Executive Officer and Chairman of the Board.
(4) Includes 78,801 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of
this table. Mr. Field is a Director and consultant of the Company.
(5) Includes 55,359 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of
this table. Mr. Kedlaya serves as the Company's Vice President, Business
Development, Assistant Secretary and Director.
(6) Includes 44,877 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days of the date of this
table. Mr. McGuire is a consultant to the Company.
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1996. The table should be read in conjunction with the financial statements
and notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<S> <C>
Senior Notes.................................................................. $ 325,000
Stockholders' equity:
Common stock, $0.001 par value per share; 20,000,000 shares authorized,
10,250,918 shares issued and outstanding (1)............................... 10,250
Preferred stock, $0.001 par value per share; 5,000,000 shares authorized,
none outstanding........................................................... --
Additional paid-in capital.................................................. 20,124,578
Accumulated deficit......................................................... (7,438,389)
-----------
Total stockholders equity................................................. 12,696,439
-----------
Total capitalization...................................................... $13,021,439
-----------
-----------
</TABLE>
- ------------------------
(1) Does not include (i) up to 2,800,000 shares issuable upon exercise of
options under the Company's option plans and (ii) 398,400 shares issuable
upon exercise of outstanding warrants.
<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders may sell all or a portion of the Common Stock
offered hereby from time to time in brokerage transactions (which may include
block transactions) in the over-the-counter market or, in negotiated
transactions, at prices and on terms prevailing at the times of such sales. The
Selling Stockholders may effect such transactions by selling their Common Stock
directly to purchasers, through broker-dealers acting as agents for the Selling
Stockholders or to broker-dealers who may purchase the Selling Stockholders'
Common Stock as principals and thereafter sell the Common Stock from time to
time in the over-the-counter market, in negotiated transactions or otherwise, or
a combination of such methods. The Selling Stockholders may individually pay
customary brokerage commissions and expenses.
The Company will amend or supplement this Prospectus in the following
circumstances and to the following extent: (i) if the securities are to be sold
at a price other than the prevailing market price, to disclose such price; (ii)
if the securities are to be sold in block, transactions and the purchaser
intends to resell, to disclose the nature and extent of such arrangements; or
(iii) if the compensation to be paid to broker-deals is other than usual and
customary discounts, concessions or commissions, to disclose the terms of such
broker-dealer compensation. In the above circumstances, no offers or sales may
be made by the Selling Stockholders until an effective amendment or prospectus
supplement is available.
The Selling Stockholders and broker-dealers, if any, acting in connection
with such sales, might be deemed to be "underwriters" within the meaning of
section 2(11) of the Act and any commission received by them and any profit on
the resale of such securities may be deemed to be underwriting discounts and
commissions under the Act. The Company will not receive any part of the proceeds
from the sale of the Shares by the Selling Stockholders.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR
MADE MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OFFERED BY THIS PROSPECTUS OR AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SHARES IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THERE HAVE BEEN NO CHANGES IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THIS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Additional Information......................... 2
Prospectus Summary............................. 3
Risk Factors................................... 5
Dividend Policy................................ 8
Use of Proceeds................................ 8
Price Range of Common Stock.................... 9
Capitalization................................. 10
Selected Financial Data........................ 11
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 12
Business....................................... 16
Management..................................... 23
Principal Shareholders......................... 32
Selling Stockholders........................... 33
Plan of Distribution........................... 34
Description of Securities...................... 35
Legal Matters.................................. 35
Experts........................................ 36
Financial Statements........................... F-1
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
5,154,445 SHARES
NUKO INFORMATION SYSTEMS, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
]The New York Business Corporations Law (the "Corporations Law"), permits a
corporation, through a provision in its certificate of incorporation, to
eliminate the personal liability of a director to the Company for monetary
damages in an action brought by or in the right of the Company for breach of a
director's duties to the Company and its shareholders. Under current New York
law, liability is not eliminated for the liability of any director if a judgment
or other final adjudication adverse to him establishes that his acts or
omissions were in bad faith or involved intentional misconduct or a knowing
violation of law or that he personally gained in fact a financial profit or
other advantage to which he was not legally entitled or that his acts violated
section 719 of the Corporations Law. Such provision does not eliminate the
liability of any director for any act or omissions prior to the adoption of the
provision.
The Corporations Law provides a detailed statutory framework covering
indemnification of any officer or director of the corporation who is made or
threatened to be made a party to any legal proceeding by reason of his or her
service on behalf of the corporation. Such law provides that indemnification
against expenses actually and reasonably incurred in connection with any such
proceeding shall be made to any such person who has been successful "on the
merits or otherwise" in the defense of any such proceeding. The law provides
that a corporation may indemnify directors and officers against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in a third party proceeding against such person by reason of his or her service
on behalf of the corporation, provided the person acted in good faith, in a
manner he or she reasonably believed to be in the best interests of the
corporation and had no reasonable cause to believe that his or her conduct was
unlawful. This determination may be made by a majority vote of a disinterested
quorum of the directors, independent legal counsel (if a quorum of independent
directors is not obtainable), a majority vote of a quorum of the shareholders
(excluding shares owned by the indemnified party), or the court handling the
action. The law further provides that in derivative suits, the corporation may
indemnify such person against expenses incurred in such a proceeding, provided
such person acted in good faith and in a manner he or she reasonably believed to
be in the best interests of the corporation and its shareholders.
Indemnification is not available in derivative actions (i) for amounts paid or
expenses incurred in connection with a matter that is settled or otherwise
disposed of without court approval or (ii) with respect to matters for which the
officer or director shall have been adjudged to be liable to the corporation,
unless the court shall determine that such person is entitled to
indemnification.
The law permits the advancing of expenses incurred in defending any
proceeding against a corporate agent by reason of his or her service on behalf
of the corporation upon the giving of a promise to repay any such sums in the
event it is later determined that such person is not entitled to be indemnified.
The Corporation law further provides that the indemnification provided by the
statute is not exclusive of other rights to which those seeking indemnification
may be entitled, by law, agreement or otherwise, to the extent additional rights
are authorized in the corporation's Certificate of Incorporation. Finally, the
law further permits the corporation to procure insurance on behalf of its
directors, officers and agents against any liability incurred by any such
individual.
II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses payable by the Registrant in connection with the issuance and
distribution of the securities being registered are estimated to be as follows:
<TABLE>
<CAPTION>
SEC registration fee............................................................. $ 24,524
<S> <C>
Accounting fees and expenses..................................................... 50,000*
Legal fees and expenses.......................................................... 150,000*
Blue sky legal fees and expenses................................................. 1,000*
Printing and engraving expenses.................................................. 3,000*
Transfer agent fees and expenses................................................. 2,000*
Miscellaneous expenses........................................................... 5,000*
----------
Total...................................................................... $ 236,524*
----------
----------
</TABLE>
- --------------------------
* Estimated expenses
ITEM 26.RECENT SALES OF UNREGISTERED SECURITIES
The Registrant sold and issued the following unregistered securities during
the past three years:
1. From June 1994 to November 1995, the Registrant sold an aggregate of
774,032 shares of Common Stock for aggregate gross proceeds of $911,388. The
shares were issued to the following accredited investors pursuant to an
exemption provided by Section 4(2) of the Act and Regulation D promulgated
thereunder:
<TABLE>
<CAPTION>
NO. OF
SHARES AMOUNT
NAME OF INVESTOR PURCHASED INVESTED
- ------------------------------------------------------------------------ ------------ -----------
<S> <C> <C>
Barbara Young 75,000 $ 75,000
David Smith 50,000 50,000
Maimon Leavitt 37,500 50,000
Harold Ellison 3,000 3,000
Myron Goodstein 11,000 11,000
LMC Investments 11,000 11,000
Elliot Smith 15,000 15,000
Peter Markle 25,000 25,000
David and Katherine Phillips 12,500 12,500
Frog Hollow Partners 10,000 10,000
E.T. Packaging, Inc. 32,500 32,500
David Weinstein 25,000 25,000
John Eufinger 50,000 100,000
Mark Levine 10,000 20,000
David and Karla Burnett 60,000 120,000
Merrill Ganson 4,000 8,000
Tim Phillips 10,000 20,000
Tom Dipuma 10,000 20,000
Martin Goldman 8,000 16,000
David Beardsley 15,700 31,400
Beardsley Family Trust 6,800 13,600
Robert Walden 2,500 5,000
Pentagon Systems, Inc. 22,250 44,456
Earl Kershner Family Trust 2,000 4,000
Richard and Evelyn St. Clair 32,737 31,932
Icube Information Int'l 1,308 3,597
Linus Chung 1,237 3,403
David Smith 200,000 50,000
Malcolm Powell 30,000 100,000
</TABLE>
II-2
<PAGE>
2. In October 1995, the Registrant issued a total of 70,000 shares of
Common Stock having an aggregate value of $175,000 to the following individuals:
20,000 shares to Stanley Sitko; 25,000 shares to Kishore Kumar; 15,500 shares to
Chadalavada Rao and 9,500 shares to N. S. Rao. The shares were issued in
exchange for services rendered pursuant to an exemption provided by Section 4(2)
of the Act.
3. On November 22, 1995, the Registrant sold an aggregate of 1,333,333
shares of Common Stock for aggregate gross proceeds of $5,000,000. The shares
were issued to the following accredited investors pursuant to an exemption
provided by Section 4(2) of the Act and Regulation D promulgated thereunder:
<TABLE>
<CAPTION>
NO. OF
SHARES AMOUNT
NAME OF INVESTOR PURCHASED INVESTED
- ---------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Bob K. Pryt 26,667 $ 100,000
Bob K. Pryt, Trustee, BKP Capital Management, Inc. 401(k) Profit
Sharing Plan and Money Purchase Plan, dated 01/01/92, FBO Bob K. Pryt 50,000 187,500
Common Sense Partners, L.P. 12,500 46,875
BKP Partners, L.P. 1,043,333 3,912,500
Peter A. Bessette IRA Rollover 13,333 50,000
Michael Klein 50,000 187,500
Dana M. Galante 10,000 37,500
B-Squared Partners, L.P. 15,000 56,250
Peninsula Fund, L.P. 22,500 84,375
Gary J. Shemano 13,333 50,000
Continental Arbitrage Company 50,000 187,500
Stuart Zimmerman 26,667 100,000
</TABLE>
4. On December 29, 1995, the Registrant sold an aggregate of 1,684,500
shares of Common Stock for aggregate gross proceeds of $8,422,500. The shares
were issued to the following accredited investors pursuant to an exemption
provided by Section 4(2) of the Act and Regulation D promulgated thereunder:
<TABLE>
<CAPTION>
NO. OF
SHARES AMOUNT
NAME OF INVESTOR PURCHASED INVESTED
- ---------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Pequot International Fund, Inc. 382,100 $ 1,910,500
Pequot Partners Fund, L.P. 417,900 2,089,500
Nob Hill Capital Partners, L.P. 100,000 500,000
Irvine Capital Partners, L.P. 25,000 125,000
Willow Creek Capital Partners, L.P. 15,000 75,000
First Trust & Co. F/B/O Ralph E. Blair FTC IRA Rollover 10,000 50,000
Robert A. Naify 65,000 325,000
Marshall Naify 65,000 325,000
Prism Partners I 300,000 1,500,000
Alan Baer 30,000 150,000
Richard S. Crawford 50,000 250,000
Salah M. Hassanein 20,000 100,000
Earl G. Kershner 1,500 7,500
OSO Partners 200,000 1,000,000
Larry L. Pierce 1,000 5,000
Sausalito Equity Interests, Inc. 2,000 10,000
</TABLE>
II-3
<PAGE>
5. On February 12, 1996, the Registrant sold an aggregate of 822,500 shares
of Common Stock for aggregate gross proceeds of $4,112,500. The shares were
issued to the following accredited investors pursuant to an exemption provided
by Section 4(2) of the Act and Regulation D promulgated thereunder:
<TABLE>
<CAPTION>
NO. OF
SHARES AMOUNT
NAME OF INVESTOR PURCHASED INVESTED
- ---------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Xavier Roland 40,000 $ 200,000
Serge and Noelle Dubois 40,000 200,000
Banque de Gestion Edmond de Rothschild Luxembourg SA 16,400 82,000
Banque Privee Edmond de Rothschild SA, Luxembourg Branch 133,600 668,000
Banque Financiere de la Cite 65,000 325,000
Paul Dutrieux 100,500 502,500
Rauche & Co. (Custodian for Terivian Enterprises) 50,000 250,000
Brian Fudge 3,000 15,000
Claude Eyraud 10,000 50,000
Credit Suisse London Nominees Ltd 232,000 1,160,000
Union Bancaire Privee 10,000 50,000
Robinson & Co. (Bank of Bermuda) 20,000 100,000
Sanctus Spiritus Antilles, NV 20,000 100,000
Lawrence R. and Lori R. Turel 10,000 50,000
Legong Investments, NV 60,000 300,000
John F. Knutson Trust dated January 30, 1987 5,000 25,000
Thomas R. and Sylvia C. Tuttle 2,000 10,000
A. Lawrence Groo 5,000 25,000
</TABLE>
Offers and sales were made in each of the private offerings referred to in
paragraphs 1, 2, 3 and 4, above, in reliance upon the exemption provided by
Section 4(2) of the Act and/or regulations promulgated thereunder. Each investor
was furnished with information on the offering and the Registrant and each had
the opportunity to verify the information supplied. Additionally, the Registrant
obtained a representation from each investor of such investor's intent to
acquire the securities for the purpose of investment only, and not with a view
toward the subsequent distribution thereof. The securities bear appropriate
restrictive legends.
All of the foregoing offers and sales were made to individuals or entities
that had access to information enabling them to evaluate the merits of the
investment by virtue of their relationship to the Company or their economic
bargaining power. The share certificates representing all shares issued in
non-public offerings were stamped with a legend restricting transfers of the
Common Stock represented thereby, and the Registrant issued stop transfer
instructions to its transfer agent.
6. From time to time during the past two years, the Company has granted
options and issued warrants to officers, directors, employees and consultants of
the Company. These grants have been made at exercise prices ranging from $1.80
to $8.50. At January 31, 1996 no options or warrants have been exercised.
7. In June 1995, the Company received $550,000 from the issuance of 8%
convertible notes payable to PIRCO, S.A. ("PIRCO") and to Nutley Investments,
S.A. ("Nutley"), both of whom are non-U.S. Persons. The notes, plus accrued
interest, were converted into 286,112 common shares of the Company at December
31, 1995. In connection with the notes, warrants were granted to purchase
333,400 common shares of the Company at prices ranging from $1.80 to $2.30 per
common share. These warrants have an expiration date of July 27, 2000. At April
15, 1996, 33,400 warrants remain outstanding. In addition, in October 1995, the
Company issued two $250,000 convertible notes to
II-4
<PAGE>
PIRCO and Nutley, which were converted into 91,000 and 90,000 shares of the
Company's Common Stock, respectively. As these securities were issued to
non-U.S. Persons, the registration provisions of the Act do not apply.
8. The Company has issued $325,000 of senior notes (the "Senior Notes") due
June 30, 1997 to the following investors in reliance upon the exemption provided
by Section 4(2) of the Act:
- Maimon Leavitt & Peggy B Leavitt Intervivos Trust
- Eugene B. Davis & Charlotte C. Davis TTEES, F.O.B. Davis Family
Trust, U/A/D 3/16/90
- Mark C. Branigan
- Lenny Taragon
- Maurice Rapkin, Ph.D.
- Thelma Rotonde
- Seymour Bird
- Vijay Sajja
- Norman & Helga Zheutlin
- Loren Davis
- Fred Schepisi
Each Senior Note issued in 1994 included 10,000 "A" Warrants and 10,000 "B"
Warrants to purchase common shares of the Company. Warrants may be exercised at
any time by the holders at $2.50 per share for "A" Warrants and $10.00 per share
for "B" Warrants. The "A" Warrants expire at the earlier of a the closing of a
public offering of the Company's stock in which a minimum of $5,000,000 is
raised or June 30, 1997. The "B" Warrants expire on June 30, 1999. There were
130,000 "A" Warrants and 130,000 "B" Warrants issued in connection with the sale
of the Senior Notes. At April 15, 1996, all "A" and "B" Warrants remain
outstanding.
II-5
<PAGE>
ITEM 27. EXHIBITS
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2.1(1) Agreement and Plan of Reorganization, effective May 27, 1994 between Growers Express
Incorporated and NUKO Technologies, Inc.
3.1(2) Restated Certificate of Incorporation of the Registrant
3.2(1) Bylaws of the Registrant
4.1(1) Form of 10% senior notes due June 30, 1997
4.2(1) Form of specimen Common Stock certificate
4.3(1) Common Stock Purchase Warrants issued to Alidada Farmanfarma
4.4(1) Common Stock Purchase Warrants issued to Marc Dumont
4.5(1) Form of "A" Common Stock Purchase Warrants issued in connection with the senior notes
(Exhibit 4.1, above)
4.6(1) Form of "B" Common Stock Purchase Warrants issued in connection with the senior notes
(Exhibit 4.1, above)
5.1(3) Opinion of Grover T. Wickersham, P.C. as to the legality of the securities being
registered
10.1(1) Registration Rights Agreement among the Registrant, PIRCO Investment, S.A. and Nutley
Investments, S.A. dated as of July 27, 1995.
10.2(1) Consulting Agreement between the Registrant and Alidada Farmanfarma, dated as of July
27, 1995
10.3(1) Sub-lease Agreement effective as of July 1994
10.4(1) 1995 Stock Option Plan (4)
10.5(2) Development and OEM Purchase Agreement between the Registrant and Northern Telecom,
Inc., dated as of December 12, 1995
10.6(2) Agreement between the Registrant and Southwestern Bell Video Services, Inc., dated
December 12, 1995
10.7(2)(4) Form of Indemnification Agreement
10.8(5) Source Code Purchase Agreement between Registrant and Digi International, Inc., dated
March 26, 1996
10.9(2)(4) 1996 Stock Option Plan
10.10(4)(6) 1996 Director Stock Option Plan
11.1(1)(2)(6) Statement regarding Computation of per share loss
11.2(2) Statement regarding Computation of per share loss for the eight months ended December
31, 1995
24.1 Consent of Grant Thornton LLP, independent certified public accountants (see Page II-11
of the Registration Statement.)
24.2(3) Consent of Grover T. Wickersham, P.C. (contained in their opinion; see Exhibit 5.1)
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- --------------------------
(1) Incorporated by reference from Registrant's Annual Report on Form 10-KSB for
the fiscal year ended April 30, 1995.
(2) Incorporated by reference from Registrant's Registration Statement on Form
SB-2 filed February 26, 1996, with amendments thereto.
(3) To be filed by amendment.
(4) Managerial contract or compensatory plan or arrangement in which the
Company's directors or officers participate.
(5) Incorporated by reference from Registrant's Annual Report on Form 10-KSB for
the fiscal period ended December 31, 1995.
(6) Incorporated by reference from Registrant's Quarterly Report on Form 10-QSB
for the three months ended March 31, 1996.
II-6
<PAGE>
ITEM 28. UNDERTAKINGS
(a) The Registrant hereby undertakes:
(1) To file during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) 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-7
<PAGE>
SIGNATURES
In accordance with 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 of filing on Form SB-2 and authorized this Amendment No. 3
to Registration Statement to be signed on its behalf by the undersigned, in the
City of San Jose, State of California, on May 20, 1996.
NUKO INFORMATION SYSTEMS, INC.
By: /s/ PRATAP KESAV KONDAMOORI
-----------------------------------
Pratap Kesav Kondamoori
CHIEF EXECUTIVE OFFICER
In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 3 to the Registration Statement has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
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SIGNATURE TITLE DATE
- ------------------------------------------------ --------------------------------------------- ----------------
/s/ PRATAP KESAV KONDAMOORI
-------------------------------------- President, Chief Executive Officer and May 20, 1996
Pratap Kesav Kondamoori Chairman of the Board
/s/ JOHN GORMAN Vice President, Finance and Chief Financial
-------------------------------------- Officer (PRINCIPAL FINANCIAL AND ACCOUNTING May 20, 1996
John Gorman OFFICER)
/s/ H.R. (RAM) KEDLAYA
-------------------------------------- Vice President & Director May 20, 1996
H. R. (Ram) Kedlaya
/s/ MARC DUMONT
-------------------------------------- Director May 20, 1996
Marc Dumont
/s/ ANDERS O. FIELD, JR.
-------------------------------------- Director May 20, 1996
Anders O. Field, Jr.
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II-8
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 14, 1996, accompanying the
consolidated financial statements of NUKO Information Systems, Inc. contained in
this Registration Statement and Prospectus. We consent to the use of the
aforementioned report in this Registration Statement and Prospectus, and to the
use of our name as it appears under the caption "Experts" and "Selected
Financial Data."
Grant Thornton LLP
San Jose, California
May 20, 1996
II-9