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As filed with the Securities and Exchange Commission on August 6, 1997
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Registration No.333-______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NUKO INFORMATION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 16-0962874
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
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2391 QUME DRIVE
SAN JOSE, CALIFORNIA 95131
(408) 526-0288
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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Copies to:
PRATAP KESAV KONDAMOORI THOMAS A. EDWARDS, ESQ.
PRESIDENT LATHAM & WATKINS
2391 QUME DRIVE 701 "B" STREET, SUITE 2100
SAN JOSE, CALIFORNIA 95131 SAN DIEGO, CALIFORNIA 92101
(408) 526-0288 (619) 236-1234
(Name, address, including zip code,
and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box.
____
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. X
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ___
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ____
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. ____
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Shares Amount Maximum Maximum Amount of
to be Registered to be Aggregate Aggregate Registration
Registered Price Per Share (1) Offering Price Fee
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value . . . . . . . 157,532 $ 2.6875 $423,367 $ 127
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c), based on an average of the high
and low sales prices reported on The Nasdaq Stock Market's National Market
System on July 31, 1997.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Page 1 of 22
Exhibit Index on Page 20
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PROSPECTUS
NUKO INFORMATION SYSTEMS, INC.
157,532 Shares of Common Stock, Par Value $0.001 Per Share.
This Prospectus relates to 157,532 shares of common stock, par value
$0.001 per share (the "Common Stock"), of NUKO Information Systems, Inc., a
Delaware corporation (the "Company"), which may be offered from time to time by
one stockholder of the Company (such holder being hereinafter described as the
"Selling Stockholder"). The Selling Stockholder acquired the Common Stock
through a private placement pursuant to Rule 506 promulgated under the
Securities Act of 1933, as amended (the "Act"). The Company will not receive
any proceeds from the sale of the shares offered hereby. The Common Stock of
the Company is quoted on The Nasdaq Stock Market's National Market System (the
"Nasdaq National Market") under the symbol "NUKO." The last reported sales
price of the Company's Common Stock on the Nasdaq National Market on July 31
1997, was $2.875 per share.
This presentation is not intended, and should in no way be construed,
to constitute a prediction as to the future market price of the Common Stock.
The Selling Stockholder, directly or through agents, broker-dealers or
underwriters, may sell the Common Stock offered hereby from time to time on
terms to be determined at the time of sale, in transactions on the Nasdaq
National Market, in privately negotiated transactions or otherwise. The
Selling Stockholder and any agents, broker-dealers or underwriters that
participate in the distribution of the Common Stock may be deemed to be
"underwriters" within the meaning of the Act, and any commission received by
them and any profit on the resale of the Common Stock purchased by them may be
deemed to be underwriting discounts or commissions under the Act. See "Use of
Proceeds" and "Plan of Distribution."
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THE SHARES OF COMMON STOCK HEREBY INVOLVE
A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
AT PAGE 7 OF THIS PROSPECTUS.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
All expenses of this offering will be paid by the Company except for
commissions and discounts of any underwriters, brokers, dealers or agents
retained by the Selling Stockholder. Estimated expenses payable by the Company
in connection with this offering are approximately $27,000. The aggregate
proceeds to the Selling Stockholder from the Common Stock will be the purchase
price of the Common Stock sold less the aggregate agents' commissions and
underwriters' discounts, if any. The Company has agreed to indemnify the
Selling Stockholder and certain other persons against certain liabilities,
including liabilities under the Act.
The date of this Prospectus is August 6, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). These materials can
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 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of such material can be obtained
at prescribed rates from the public reference section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Electronic reports, proxy
statements and other information filed through the Commission's Electronic Data
Gathering, Analysis and Retrieval system are publicly available through the
Commission's Web site (http://www.sec.gov). In addition, the Common Stock is
listed on the Nasdaq National Market and similar information concerning the
Company can be inspected and copied at the offices of the National Association
of Securities Dealers, Inc., 1735 "K" Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (including all amendments thereto, the "Registration Statement") with
respect to the securities offered hereby. As permitted by the rules and
regulations of the Commission, this Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information about the Company and the
Securities offered hereby, reference is made to the Registration Statement and
the exhibits thereto, which may be examined without charge at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of which may
be obtained from the Commission upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference and shall be deemed to be a part hereof:
(a) Annual Report on Form 10-K for the fiscal year ended December
31, 1996;
(b) Amendment No. 1 to Annual Report on Form 10-K for the fiscal
year ended December 31, 1996;
(c) Quarterly Report on Form 10-Q for the quarter ended March 31,
1997;
(d) The Company's Current Reports on Form 8-K dated February 14,
1997, March 5, 1997 and July, 25, 1997;
(e) The Company's Proxy Statement for its Annual Meeting of
Stockholders held on May 28, 1997; and
(g) The Company's Registration Statement on Form 8-A registering
the Common Stock under Section 12(g) of the Exchange Act.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any subsequently filed document which also
is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
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A copy of any or all of the documents incorporated herein by reference
(other than exhibits unless such exhibits are specifically incorporated by
reference in any such document) will be provided without charge to any person,
including a beneficial owner, to whom a copy of this Prospectus is delivered,
upon written or oral request. Requests for such copies should be addressed to
the Secretary of the Company, 2391 Qume Drive, San Jose, California 95131
(telephone number: (408) 526-0288).
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THE COMPANY
Certain statements set forth in this Prospectus and incorporated
herein by reference that are not historical fact constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Reference is made in particular to the discussions set forth under
the headings "Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's Annual Report on Form
10-K for the year ended December 31, 1996 and the Company's Quarterly Report on
Form 10-Q for the period ended March 31, 1997. Such forward-looking statements
are based on current expectations and involve known and unknown risks,
uncertainties and other factors, including the factors discussed under the
caption "Risk Factors" below, which may cause the actual results of the Company
to be materially different from historical results or from any projected
results expressed or implied by such forward-looking statements.
The Company designs, markets and sells one-way and two-way video
networking products that form essential building blocks in the development of
broadband (high capacity) video networks. The Company's standards compliant
products allow its customers to compress and decompress digital video and to
transmit signals over many types of networks using different interfaces and
protocols. The Company's digital compression and decompression products are
sold under the trade names Highlander and RAVE and its network solutions are
sold under the trade name Intelligent Broadband Services Network ("IBSN"). The
Company markets its products and network solutions for enterprise-wide private
networks and public networks offered by carriers such as telephone companies,
cable companies, satellite companies and microwave communications companies.
The Company's products are comprised of codes and multiplexors, which
enable video compression and decompression and network interfacing. Such
products enable a user to digitize analog signals and to encode, compress,
transmit, receive, decompress, decode and display multimedia data streams,
allowing the rapid and cost-effective communication of data from the point of
origin to remote locations.
The Company's Highlander products serve the one-way broadcast
television market and markets for corporate broadcasting and remote
surveillance applications. The Company has targeted its RAVE products at
two-way video conferencing, telemedicine, distance learning, remote arraignment
and post-production video editing. The Company sells its Highlander and RAVE
products separately and in combination as part of its IBSN integrated platform.
The Company intends to provide its IBSN customers with Highlander and RAVE
products, other standards compliant products, video network consulting services
and software to integrate the various pieces of the network, creating a turnkey
video network solution.
The Company's principal executive offices are located at 2391 Qume
Drive, San Jose, California 95131, and its telephone number is (408) 526-0288.
The Company was incorporated in 1968 under the laws of the State of New York
under the name Yondata Corporation.
RECENT DEVELOPMENTS
On July 10, 1997, the Company completed a private financing which
resulted in the issuance of 1,318,027 shares of Common Stock for gross proceeds
of approximately $3,333,334. The shares were issued to two institutional
investors in separate transactions that were each conditioned upon the
concurrent closing of the other transaction.
Of the shares issued in these transactions, 297,619 shares were issued
to RGC International Investors, LDC ("RGC"), which purchased the shares at
$2.80 per share. These shares were issued upon exercise of outstanding
warrants, immediately following repricing of the warrants from $18 to $2.80
(equal to 100% of the average closing prices of the Company's Common Stock for
the five trading days preceding the date of exercise). Such warrants were
issued in connection with prior conversions of shares of Series A Convertible
Preferred stock (the "Convertible Preferred"). As of July 10, 1997, a total of
7,000 shares of Convertible Preferred remained outstanding. In connection with
the July financing, the exercise price on all unexercised warrants, whether
issued in connection with
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prior conversions of the Convertible Preferred, or issue upon future
conversions, was reduced from $18 to $15 per share. All of the shares
underlying the Convertible Preferred and the warrants issued and issuable upon
conversion or exercise thereof, as the case may be, including the 297,619
shares issued on July 10, 1997, have been registered for resale. In addition
to the 297,619 shares issued to RGC on July 10, 1997, RGC was issued a new
three-year warrant to purchase 99,207 shares at an exercise price of $2.80.
The remaining 1,020,408 shares of Common Stock were issued to six
institutional trust accounts for which Altamira Management, Ltd., Toronto,
Ontario ("Altamira") acts as agent, which purchased the shares at $2.45 per
share. Altamira was also issued three-year warrants to purchase an additional
204,082 shares of Common Stock at $2.45 per share. Altamira also has the right
to receive $15 warrants equal to 10% of the aggregate number of $15 warrants
issuable to RGC, when additional $15 warrants are issued to RGC.
In connection with the sale of the securities to Altamira, the
placement agent was issued an aggregate of warrants to purchase an aggregate of
102,041 shares of the Company's Common Stock at $2.45 per share and received
cash commissions and a nonaccountable expense allowance aggregating $225,000.
Since May 1997, the Company and certain of its present and former
executive officers have been named as defendants to two class action lawsuits
as follows:
On May 23, 1997, Lillian Levine filed a lawsuit in the United States
District Court for the Northern District of California against the Company and
its former Chief Financial Officer. The action was filed as a class action on
behalf of all persons who purchased the Company's Common Stock from April 24,
1997 through May 20, 1997 or their successors in interest. The plaintiff
alleges that during this period, the defendants disseminated materially false
and misleading press releases and public statements concerning the financial
results for the fiscal quarter ended March 31, 1997. The plaintiff alleges
claims under the federal securities laws and seeks damages for all members of
the class. The Company intends to vigorously defend the action.
On June 24, 1997, Bruce and Carol Wolitarsky filed a lawsuit in the
United States District Court for the Northern District of California against
the Company, its President/Chief Executive Officer/Chairman of the Board and
its former Chief Financial Officer. The action was filed as a class action on
behalf of all persons who purchased the Company's Common Stock from April 24,
1997 through May 20, 1997. The plaintiffs allege that during this period, the
defendants issued incorrect financial and business information about the
Company, its finances, performance and reporting of its revenues and financial
results for its first fiscal quarter of 1997. The plaintiffs allege that this
caused the market price of the Company's Common Stock to be artificially
inflated and caused them and other purchasers to pay too much for their Common
Stock. The plaintiffs allege claims under the federal securities laws and seek
damages for all members of the class. The Company intends to vigorously defend
the action.
On May 6, 1997, the Company issued 157,532 shares of Common Stock to
Internext Compression, Inc. ("Internext" or the "Selling Stockholder") pursuant
to that certain Series B Preferred Stock and Warrant Purchase Agreement dated
as of April 21, 1997 (the "Purchase Agreement"). As consideration for the
issuance of the 157,532 shares of the Company's Common Stock, the Selling
Stockholder issued to the Company 1,600,000 shares of its Series B Preferred
Stock, no par value ("Series B Preferred"), and a Warrant to purchase an
additional 1,600,000 shares of Series B Preferred at an exercise price of
$0.625 per share (the "Warrant"). Pursuant to the Purchase Agreement, the
Company has agreed to make an post-closing adjustment payment to the Selling
Stockholder in the amount of $587,463 payable in cash 30 days after the
effectiveness of the Registration Statement of which this Prospectus is a part.
If the Registration Statement is not declared effective by the SEC within 90
days after the Closing, then the Company shall within 30 days, at its option,
redeem the common stock for $1,000,000 cash or make or arrange an interest-free
loan to the Selling Stockholder of up to $1,000,000 in aggregate principal
amount which would be advanced in increments of up to $250,000 per month until
the Registration Statement, of which this Prospectus is a part, becomes
effective. The loan would become due either 30 days after the effective date
of the Registration Statement or 12 months after the first advance under the
loan, whichever is earlier. The Company and the Selling Stockholder each
granted certain registration rights to the other with respect to the shares
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it issued (or may issue pursuant to the Warrant) to the other. The Shares of
Common Stock issued to the Selling Stockholder are the subject of this
Prospectus. See "SELLING STOCKHOLDER."
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RISK FACTORS
The purchase of the securities offered hereby involves a high degree
of risk and 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 decision to enter the video networking
market, 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, $1,957,645 for
the eight months ended December 31, 1995, and $14,733,030 for the year ended
December 31, 1996 and $3,874,378 for the three months ended March 31, 1997.
The Company's accumulated deficit at March 31, 1997 was $22,981,023. The
Company expects to continue to incur substantial losses in future periods.
There can be no assurance that the Company's products will be widely accepted
in the marketplace or to the extent sales are made, that the volume, pricing
and timing will be sufficient to permit the Company to achieve profitability in
the future. As of December 31, 1996, the Company has net operating loss carry
forwards of approximately $16,000,000 and $4,500,000 available to offset future
federal and state taxable income, respectively, which losses expire at various
dates from 1997 to 2011. 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.
INDISPENSABLE NEED FOR CAPITAL/REPORT OF INDEPENDENT ACCOUNTANTS
REGARDING ABILITY TO CONTINUE AS A GOING CONCERN. Primarily because of the
Company's history of operating losses, there is substantial doubt about the
Company's ability to continue as a going concern unless the Company is able to
obtain additional financing. The Company anticipates that without additional
equity financing it would likely run out of cash to fund its operations during
the fourth fiscal quarter of 1997 and may run out of cash during the third
quarter of 1997. See "-- Additional Capital Requirement." The Company
currently does not have any arrangements to obtain other sources of financing.
If the Company were unable to secure such financing, the Company would at a
minimum be forced to revise its 1997 Operating Plan. The report of independent
accountants on the Company's financial statements included in the Company's
Annual Report on Form 10-K includes an explanatory paragraph to this effect.
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 the 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 financing or out of generated revenues and Company
profits. The availability of funds from any of these sources cannot be
assured.
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 the
Company's wholly owned subsidiary. From 1970 to 1994, the Company had no
operations and no revenues. The Company's management, which had no affiliation
with Growers Express prior to the merger with NUKO Technologies in May 1994,
has almost no knowledge of the Company's activities between its incorporation
in 1968 and the merger, and very few corporate records relating to the period
between 1970 and 1994 are available. As a result, while management believes
that there are no material liabilities related to the predecessor company,
there can be no assurance that there are no potential liabilities relating to
such period or that the Company always has conducted its corporate activities
during this period in accordance with the New York Business Corporations Law.
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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 only recently begun to generate significant revenues from the
commercialization of products. The Company has to date sold its initial
products only in limited quantities, primarily for use in development,
demonstration and testing of prototypes. Certain contracts may relate to new
technologies that may not have been previously deployed on a large-scale
commercial basis. The Company's products are based on technologies that have
not been widely deployed, and there can be no assurance that the Company will
be able successfully to market its initial products to generate the increased
revenues necessary to sustain full scale commercial production or that the
Company's products will be well received when introduced into the marketplace
on a full commercial scale. The Company's products also must interoperate
effectively among a wide variety of different equipment, different protocols
and different transmission speeds. While the Company believes its products
interoperate effectively among the principal configurations of equipment,
protocols and transmission speeds that are currently commercially deployed,
there can be no assurances that the Company's products will continue to
interoperate effectively among other configurations of equipment, protocols and
transmissions which may be developed or utilized in the future. 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 research and development stage to full commercial
production and distribution.
COMPETITION. The segments of the telecommunications industry in which
the Company competes are intensely competitive and are characterized by
declining average selling prices and rapid technological change. The Company
competes with major domestic and international companies, virtually all of
which have substantially greater financial, technical, production and marketing
resources than the Company with which to pursue engineering, manufacturing,
sales, marketing and distribution of their products. For example, in its
compression and networking business, the Company competes with vertically
integrated system suppliers including General Instrument Corporation,
Scientific- Atlanta, Inc. and Philips, as well as more specialized suppliers
including the DMV division of News Corp., C-Cube Microsystems' DiviCom Inc.
subsidiary, and the TV/COM subsidiary of Hyundai. In addition, some of the
Company's customers are actual or potential competitors of the Company,
competing against the Company with its own products. The Company believes that
the principal criteria for competition in its market include cost
competitiveness, flexibility, revenue generation capability, compatibility with
existing networks and upgradeability, as well as customer support. There can be
no assurance that the Company will be able to compete successfully with these
other companies on these factors or otherwise.
ADDITIONAL CAPITAL REQUIREMENT. In July 1997, the Company completed a
private financing which included the sale by the Company of shares of Common
Stock and the exercise by one of the Company's existing investors of
outstanding warrants to purchase Common Stock, which, in the aggregate raised
approximately $3,300,000 (the "July Financing"). See "RECENT DEVELOPMENTS"
The Company believes that its existing cash resources, its renewed line of
credit with Silicon Valley Bank (based on 60% of allowable accounts receivable
up to $6,000,000) and the proceeds of the July Financing, together with cash
generated from operations, if any, may not provide adequate funding for its
capital requirements through the third quarter of 1997. Therefore, the Company
expects it will need additional funds to support its operating plan at sometime
during the second half of 1997. The Company's capital requirements will depend
on many factors, including the progress of its research and development
efforts, its timely receipt of revenue from sales of its products to large
customers, the need to devote resources to manufacturing operations, and the
demand for the Company's products. Additional future financing may occur
through the sale of unregistered Common Stock or convertible securities in
exempt offerings or through the public offering of registered stock or
convertible debt. However, an institutional investor has a right of first
refusal until February 23, 1998 to purchase securities on the same terms
offered by potential investors during such period, unless such financing is by
way of a firm commitment underwriting, the issuance of securities in connection
with a merger, consolidation or sale of assets or the issuance of securities in
connection with a strategic alliance. Such right of first refusal could impair
the Company's ability to obtain needed financing on acceptable terms or could
prevent the Company from obtaining such financing on any terms. There can be
no assurance that new financing will be available when needed by the Company or
that the terms, if available, will be satisfactory to the Company. If adequate
funds are not available, the Company may be required to delay, scale back or
eliminate one
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or more of its research and development or manufacturing programs or to obtain
funds through arrangements that may require the Company to relinquish rights to
certain of its technologies or potential products or other assets that the
Company would not otherwise relinquish. The inability of the Company to raise
needed funds would have a material adverse effect on the Company's business,
financial condition and results of operations.
MANAGEMENT OF GROWTH. During 1996, the Company has begun to
experience significant growth which is expected to continue at a rapid pace for
the foreseeable future. Such growth has placed, and will continue to place,
significant strain on the Company's limited personnel and other resources. The
Company's ability to manage any further growth, should it occur, will require
it to implement and continually expand operational and financial systems,
recruit additional employees and train and manage both current and new
employees. There can be no assurance that the Company will be able to find
qualified personnel to fill needed positions or be able to successfully manage
a broader organization. The failure of the Company to effectively expand or
manage these functions consistent with any growth that may occur could have a
material adverse effect on the Company's business and results of operations.
DEPENDENCE ON CUSTOMER CAPITAL SPENDING REQUIREMENTS AND PURCHASING
TRENDS. The Company's business is directly impacted by capital spending
requirements and funding of the Regional Bell Operating Companies ("RBOCs") and
other major customers in the telecommunications industry. The capital budgets
of these customers or potential customers is beyond the control of the Company
and can be affected 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. In addition, in recent years, the purchasing behavior of
the Company's customers has increasingly been characterized by the use of large
contracts with few suppliers. This trend is expected to intensify and will
contribute to the variability of the Company's results. Such larger purchase
contracts typically involve longer negotiating cycles, require dedication of
substantial amounts of working capital and other resources and, in general,
require investments that may substantially precede recognition of associated
revenues. Moreover, in return for larger, longer-term purchase agreements,
customers often demand more stringent acceptance criteria, which may also cause
revenue recognition delays. For example, if customers ask the Company to price
its products based on estimates of such customers' future requirements, and
such customers fail to take delivery of an amount comparable to the estimated
amount on which the Company bases its prices, the Company may recognize lower
margins on product revenue.
RELIANCE ON TELCOS. Before purchasing products such as those of the
Company, telephone companies ("telcos") subject such products to lengthy
approval processes, which can take several years or more for complex products
based on new technologies. The Company expects to be required to submit each
successive generation of its products as well as new products to its telco
customers for approval. The length of the approval process will depend upon a
number of factors, including the complexity of the product involved,
development priorities of telcos, telcos' budgets and regulatory issues
affecting telcos. Moreover, the need for regulatory approval from the Federal
Communications Commission (the "FCC") for certain new telco services prior to
their implementation may delay the approval process. Any such delay would have
a material adverse effect on the Company's business, financial condition and
results of operations.
Historically, telcos have been cautious in implementing new
technologies. Telcos' deployment of the Company's compression and networking
technologies may be prevented or delayed by a number of factors, including
telcos' lengthy product approval and purchase processes; cost; regulatory
barriers that may prevent or restrict telcos from providing interactive
multimedia services; the lack of demand for Internet access and other
interactive multimedia services; the lack of sufficient programming content for
interactive multimedia services; the availability of alternative technologies;
and telcos' policies that favor the use of such alternative technologies. In
addition, telcos are generally reluctant to deploy new technologies available
only from a single source, especially when the supplier is as small as the
Company, and often require alternative sources before deploying a new
technology. This reluctance may put the Company at a competitive disadvantage
relative to some of its competitors. Even if telcos adopt policies favoring
full-scale implementation of the Company's compression and networking
technologies, there can be no assurance that sales of the Company's products
will become significant or that the
9
<PAGE> 11
Company will be able successfully to introduce its products on a timely basis
or to sell those products in material quantities. The failure of telcos to
deploy the Company's technologies would have a material adverse effect on the
Company's business, financial condition and results of operations. Even if
demand for the Company's products is high, telcos may have sufficient
bargaining power to demand low prices and other terms and conditions which may
have a material adverse effect on the Company's business, financial condition
and results of operations.
DEPENDENCE ON SUPPLIERS. The Company purchases certain of the chips
and chip sets needed in its 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 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.
PRICING PRESSURES. The markets into which the Company sells or will
sell its products are characterized by extreme price competition, and the
Company expects the average selling prices of its products will decrease over
the life of each product. In order to partially offset declines in the selling
price of its products, the Company will need to reduce the cost of its products
by implementing cost reduction design changes, obtaining cost reductions as and
if volumes increase and successfully managing manufacturing and subcontracting
relationships. Since the Company does not operate its own manufacturing
facilities and must make binding commitments to purchase products, it may not
be able to reduce its costs as rapidly as companies that operate their own
manufacturing facilities. The failure of the Company to design and introduce
lower cost versions of its products in a timely manner or to successfully
manage its manufacturing relationships would have a material adverse effect on
its business and results of operations.
DEPENDENCE ON SUBCONTRACTORS. The Company's reliance on
subcontractors to manufacture and assemble certain products involves
significant risks, including reduced control over delivery schedules, quality
assurance, manufacturing yields and cost, the potential lack of adequate
capacity and potential misappropriation of its intellectual property. Although
the Company has not experienced material disruptions in supply to date, there
can be no assurance that manufacturing or assembly problems will not occur in
the future or that any such disruptions will not have a material adverse effect
upon the Company's results of operations. Further, there can be no assurance
that suppliers who have committed to provide product will do so, or that the
Company will meet all conditions imposed by such suppliers. Failure to obtain
an adequate supply of products on a timely basis would delay product delivery
to the Company's customers, which would have a material adverse effect on the
Company's business and results of operations. In addition, the Company's
business could also be materially and adversely affected if the operations of
any supplier are interrupted for a substantial period of time, or if the
Company is required, as a result of capacity constraints in its industry or
otherwise, to increase the proportion of goods purchased from higher cost
suppliers in order to obtain adequate product volumes. The Company is
currently in litigation with one of its subcontractors; however, the
subcontractor was not a sole source contractor and such litigation has not
impacted the Company's ability to manufacture its products through other
sources.
FLUCTUATIONS IN QUARTERLY RESULTS; LACK OF BACKLOG. The Company has
experienced, and expects to continue to experience, significant fluctuations in
its quarterly results of operations. Factors that have contributed or may
contribute to future fluctuations in the Company's quarterly results of
operations include the size and timing of customer orders and subsequent
shipments, customer order deferrals in anticipation of new products, timing of
product introductions or enhancements by the Company or its competitors, market
acceptance of new products, technological changes in the telecommunications
industry, competitive pricing pressures, accuracy of customer forecasts of
end-user demand, changes in the Company's operating expenses, personnel
changes, changes in the mix of product sales and contract and consulting fees,
quality control of products sold, disruption in sources of supply, regulatory
changes, capital spending, delays of payments by customers and general economic
conditions. The timing and volume of customer orders are difficult to
forecast. The Company does not have a material backlog of orders for its
products.
10
<PAGE> 12
The Company intends to continue to make significant ongoing research
and development expenditures for new products and technologies, which may have
a material adverse effect on the Company's quarterly results of operations.
The Company's expense levels are based in part on expectations of future
revenues and are relatively fixed in the short term. The Company intends to
increase operating expenditures as the Company expands its operations to
develop and market its compression and networking products. Consequently, a
shortfall in quarterly revenues due to a lack of sales of the Company's
products or otherwise would adversely impact the Company's business, financial
condition and results of operations in a given quarter due to the Company's
inability to adjust expenses or inventory to match revenues for that quarter.
In addition, there can be no assurance that, as the Company increases sales of
its products, warranty returns will not become significant or that warranty
returns, if significant, will not have a material adverse effect on the
Company's business, financial condition and results of operations.
GOVERNMENT REGULATION. Although the extensive regulation of telcos by
Federal, state and foreign regulatory agencies, including the FCC and various
state public utility and service commissions, does not directly affect the
Company, the effects of such regulation on the Company's customers may have a
material adverse effect on the Company's business, financial condition and
results of operations. For example, FCC regulatory policies affecting the
availability of telco services, and other terms on which telcos conduct their
business, may impede the Company's penetration of certain markets. Although
the Telecommunications Act of 1996 eliminated or modified many FCC restrictions
on telcos' ability to provide interactive multimedia services, the remaining or
any future restrictions may have a material adverse effect on telcos' demand
for the Company's products. Cable operators, which may become another market
for the Company's products, are also subject to extensive governmental
regulations that may discourage them from deploying the Company's compression
and networking technology. In addition, rates for telecommunications services
are generally governed by tariffs of licensed carriers that are subject to
regulatory approval. These tariffs could have a material adverse effect on the
demand for the Company's products. The imposition of certain tariffs, duties
and other import restrictions on components which the Company intends to obtain
from non-domestic suppliers, the imposition of export restrictions on products
which the Company intends to sell internationally or other changes in laws or
regulations in the United States or elsewhere could also have a material
adverse effect on the Company's business, financial condition and results of
operations.
POTENTIAL PRODUCT LIABILITIES. One or more of the Company's products
may contain undetected component, hardware, software or mechanical defects or
failures when first introduced or may develop defects or failures after
commencement of commercial production or shipments. Any such defects or
failures could cause loss of goodwill, if any, with distributors and with
customers, prevent or delay market acceptance of the Company's products, result
in cancellations or rescheduling of orders or shipments or product recalls or
returns and expose the Company to claims from customers. The Company also
could incur unexpected and significant costs, including product redesign costs
and costs associated with customer support. The Company expects to sell its
products with a limited warranty against defects in materials and workmanship.
If any of the Company's products are found within the warranty period to
contain such defects, the Company could be required to repair or replace the
defective products or refund the purchase price. The occurrence of any such
defect or failure could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company does not
maintain insurance to protect against claims associated with the use of its
products and there can be no assurance that the Company will be able to satisfy
claims that may be asserted against the Company.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS. The Company attempts to
protect its technology through a combination of patents, copyright and trade
secret laws, confidentiality procedures and licensing arrangements. While the
Company currently has no patents, the Company has applied for certain patents
and intends to continue to seek patents on its technology, when appropriate.
There can be no assurance that patents will issue from any of the pending
applications or that any claims allowed from pending patents will be
sufficiently broad to protect the Company's technology. While the Company
intends to protect its intellectual property rights vigorously, there can be no
assurance that any patents issued to the Company will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will provide
competitive advantages to the Company. 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
11
<PAGE> 13
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.
DEPENDENCE ON EMERGING MARKETS. The markets into which the Company is
targeting its products is newly developing. The potential size of the market
opportunities and the timing of their development is uncertain. In addition,
the emergence of markets for certain digital video applications will be
affected by a variety of factors beyond the Company's control. In particular,
certain sectors of the communications market will require the development and
deployment of an extensive and costly communications infrastructure. There can
be no assurance that the communications providers will make the necessary
investment in such infrastructure or that the creation of this infrastructure
will occur in a timely manner. In addition, the deployment of such
infrastructure will be subject to governmental regulatory policies, taxes and
tariffs. The development of such markets could be delayed or otherwise
adversely affected by new governmental regulations or changes in taxes or
tariffs, or by the failure of government agencies to adopt changes to existing
regulations necessary to permit new technologies to enter the market.
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 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.
ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER PROVISIONS. Certain
provisions of the Company's Amended and Restated Certificate of Incorporation
and Bylaws could discourage potential acquisition proposals, could delay or
prevent a change in control of the Company and could make removal of management
more difficult. Such provisions could diminish the opportunities for a
stockholder to participate in tender offers, including tender offers that are
priced above the then current market value of the Common Stock. The provisions
also may inhibit increases in the market price of the Common Stock that could
result from takeover attempts. Additionally, the Board of Directors of the
Company, without further stockholder approval, may issue up to 4,990,000
shares of Convertible Preferred, in one or more series, with such terms as the
Board of Directors may determine, including rights such as voting, dividend and
conversion rights which could adversely affect the voting power and other
rights of the holders of Common Stock. Convertible Preferred may be issued
quickly with terms which delay or prevent the change in control of the Company
or make removal of management more difficult. Also, the issuance of
Convertible Preferred may have the effect of decreasing the market price of the
Common Stock.
DEPENDENCE ON KEY PERSONNEL; SEARCH FOR CHIEF FINANCIAL OFFICER. The
ability of the Company to build and maintain its competitive technological
position will depend, in large part, on continued service of its key technical
and management personnel and on its ability to attract and retain
highly-skilled technical, marketing and management personnel. Competition for
such personnel is intense and there is no assurance that qualified people will
be available when required. The Company does not currently have employment
agreements with any of its key employees. The Company does not have, and is
not contemplating securing, key man life insurance on any of its executive
officers or other key personnel. There can be no assurance that any of these
individuals or any other key employee will not voluntarily terminate his or her
employment with the Company. The loss of certain key employees, particularly
the Company's President and Chief Executive Officer, Pratap Kesav Kondamoori,
would have a material adverse effect on the business of the Company.
12
<PAGE> 14
On May 21, 1997, John H. Gorman, the Company's Chief Financial
Officer, Vice President--Finance, Treasurer and Secretary, left the Company.
The Company has appointed Thomas A. Spanier, a financial and management
consultant, as interim chief financial officer to serve until the Company
locates a permanent chief financial officer. There can be no assurance that
the Company will be successful in its search for a permanent chief financial
officer with the requisite qualifications and experience. The Company's
failure to locate and hire a permanent chief financial officer could have a
material adverse effect on the Company.
CONTROL BY OFFICERS AND DIRECTORS. As of July 22, 1997, the officers
and directors of the Company control, directly or indirectly, approximately 27%
of the voting power of the Company's voting stock, including options and
warrants immediately exercisable or exercisable within 60 days of such date.
Although management does not control a majority of the outstanding voting
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. During the
period from January 1, 1997 through July 22, 1997, the Company's Common Stock
has moved from a high of 13-1/2 and a low of 2-3/16.
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.
CONVERTIBLE SECURITIES, WARRANTS AND OPTIONS; POTENTIAL DILUTION AND
ADVERSE IMPACT ON ADDITIONAL FINANCING. As of July 22, 1997, the Company had
outstanding options and warrants to purchase an aggregate of 4,247,126 shares
of Common Stock at a weighted average exercise price of $5.41 per share. The
Company also is obligated to issue additional Warrants to acquire 1,544,445
shares of Common Stock and 3,544,445 shares of Common Stock upon conversion of
the Convertible Preferred based on a conversion price of the Convertible
Preferred at the time of such conversion of $2.02 (representing a 15% discount
from $2.375, a recent closing price). Pursuant to the terms of the Convertible
Preferred, the minimum number of shares available for resale is 937,500
(including shares underlying Warrants), based on a fixed maximum conversion
price of $16.00 per share. Subject to such minimum number, the exact number of
shares of Common Stock issuable upon conversion of Convertible Preferred and
exercise of Warrants issued pursuant to such conversion cannot be estimated
with certainty because such issuances of Common Stock will vary inversely with
the market price of the Common Stock at the time of such conversion. The
number of warrants and shares of Common Stock issuable upon conversion of the
Convertible Preferred is also subject to various adjustments to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
Under the terms of the Convertible Preferred and the Warrants, the maximum
number of shares currently issuable upon conversion of the Convertible
Preferred and upon exercise of "in the money" Warrants issuable upon such
conversion is 2,092,331 (19.99% of the number of shares of the Company's Common
Stock outstanding on December 16, 1996). If the Investor wishes to convert
shares of Convertible Preferred or to exercise in the money warrants for more
than 2,092,331 shares of Common Stock and the Company has not received an
affirmative vote of its stockholders approving such issuance, then the Company
must redeem the outstanding shares of Convertible Preferred, at a premium, for
cash or for a six month note bearing interest at 12% per annum. To the extent
that such options and warrants are exercised or shares of Convertible Preferred
are converted (and the Warrants issuable upon such conversion are exercised),
substantial dilution of the interests of the Company's stockholders is likely
to result and the market price of the Common Stock may be materially adversely
affected. In the case of the Convertible Preferred, such dilution will be
greater if the future market price of the Common Stock decreases. For the life
of such warrants, options and convertible securities the holders will
13
<PAGE> 15
have the opportunity to profit from a rise in the price of the underlying
securities. The existence of such warrants, options and convertible securities
has in the past, and is likely in the future, to affect materially and
adversely the terms on which the Company can obtain additional financing, and
the holders of warrants and options can be expected to exercise them at a time
when the Company would otherwise, in all likelihood, be able to obtain
additional capital by an offering of its unissued capital stock on terms more
favorable to the Company than those provided by such warrants, options and
convertible securities.
SHARES ELIGIBLE FOR FUTURE SALE. Future sales of Common Stock by
existing stockholders under Rule 144 of the Act, pursuant to an effective
registration statement or otherwise, could have an adverse effect on the price
of the Common Stock. As of July 22, 1997, there were more than 9,350,000
shares of Common Stock eligible for sale in the public market, subject to
compliance with Rule 144. In addition, the Company intends to register up to
2,700,000 shares for issuance under its 1996 Stock Option Plan and 1996
Director Stock Option Plan and 1,400,000 shares under its 1995 Stock Option
Plan. 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.
USE OF PROCEEDS
The proceeds from the sale of the shares of Common Stock offered
hereby are solely for the account of the Selling Stockholder. Accordingly, the
Company will receive none of the proceeds from the sale thereof.
SELLING STOCKHOLDER
The Selling Stockholder has not had a material relationship with the
Company within the past three years other than as a result of its ownership of
shares of Common Stock of the Company, and the Company's ownership of 1,600,000
shares of Series B Preferred Stock of the Selling Stockholders and a Warrant to
purchase another 1,600,000 shares of Series B Preferred Stock of the Selling
Stockholder.
The following table sets forth the name of the Selling Stockholder,
the number of shares of Common Stock owned by the Selling Stockholder as of
August 6, 1997, and the number of shares which may be offered for resale
pursuant to this Prospectus.
The information included below is based upon information provided by
the Selling Stockholder. Because the Selling Stockholder may offer all, some
or none of its Common Stock, no definitive estimate as to the number of shares
thereof that will be held by the Selling Stockholder after such offering can be
provided and the following table has been prepared on the assumption that all
shares of Common Stock offered under this Prospectus will be sold to parties
unaffiliated with the Selling Stockholder.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES OF COMMON SHARES OWNED AFTER
NAME OWNED PRIOR TO OFFERING(1) STOCK BEING OFFERED OFFERING (2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Internext Compression, Inc. 157,532 157,532 0
</TABLE>
(1) The Selling Stockholder has sole voting and sole investment power with
respect to all shares owned.
(2) Assumes the sale of all shares offered hereby to persons who are not
affiliates of the Selling Stockholder.
PLAN OF DISTRIBUTION
The Company is registering the shares of Common Stock offered by
Selling Stockholder hereunder pursuant to contractual registration rights
contained in the Purchase Agreement. Such registration rights require the
Company to file a registration statement on an appropriate form with the
Securities and Exchange Commission (the
14
<PAGE> 16
"Commission") with respect to the offering and sale or other disposition of the
Common Stock owned by the Selling Stockholder.
The shares of Common Stock offered hereunder may be sold from time to
time by the Selling Stockholder, or by pledgees, donees, transferees or other
successors in interest. Such sales may be made on the Nasdaq National Market
or in the over-the-counter market or otherwise at prices and on terms then
prevailing or related to the then current market price, or in negotiated
transactions. The shares of Common Stock may be sold to or through one or more
broker-dealers acting as agent or principal in underwritten offerings, block
trades, agency placements, exchange distributions, brokerage transactions,
privately negotiated transactions, short sales or otherwise, or in any
combination of transactions.
In connection with any transaction involving the Common Stock,
broker-dealers or others may receive from the Selling Stockholder, and may in
turn pay to other broker-dealers or others, compensation in the form of
commissions, discounts or concessions in amounts to be negotiated at the time.
Broker-dealers and any other persons participating in a distribution of the
Common Stock may be deemed to be "underwriters" within the meaning of the Act
in connection with such distribution, and any such commissions, discounts or
concessions may be deemed to be underwriting documents or commissions under the
Act.
Any or all of the sales or other transactions involving the Common
Stock described above, whether effected by the Selling Stockholder, any broker
dealer or others, may be made pursuant to this Prospectus. In addition, any
shares of Common Stock that qualify for sale pursuant to Rule 144 under the Act
may be sold under Rule 144 rather than pursuant to this Prospectus.
To comply with the securities laws of certain states, if applicable,
the Common Stock may be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, shares of Common Stock may not be
sold unless they have been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with under applicable state securities laws.
The Company and the Selling Stockholder have agreed, and hereafter may
further agree, to indemnify each other and certain persons, including
broker-dealers or others, against certain liabilities in connection with any
offering of the Common Stock, including liabilities arising under the Act.
EXPERTS
The consolidated balance sheet as of December 31, 1996 and the
consolidated statements of operations, shareholders' equity (deficit) and cash
flows for the year then ended, incorporated by reference in this Prospectus,
have been incorporated by reference in this Prospectus in reliance on the
report, which includes an explanatory paragraph relating to the Company's
ability to continue as a going concern, of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting an auditing.
The consolidated balance sheet as of December 31, 1995 and the
consolidated statements of operations, shareholders' equity (deficit) and cash
flows for the eight months ended December 31, 1995 and the year ended April 30,
1995, incorporated by reference in this Prospectus, have been incorporated by
reference herein in reliance on the report of Grant Thornton LLP, independent
certified public accountants, given on the authority of that firm as experts in
accounting and auditing.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon
for the Company by Latham & Watkins, San Diego, California.
15
<PAGE> 17
================================================================================
No dealer, salesperson or other individual has been authorized to give
any information or make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer by the Company to sell, or a solicitation of an offer
to buy, the securities offered hereby in any jurisdiction where, or to any
person to whom, it is unlawful to make an offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that there has been any change in the
affairs of the Company since the date hereof or that the information contained
herein is correct or complete as of any time subsequent to the date hereof.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain
Documents by Reference . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 14
Selling Stockholder . . . . . . . . . . . . . . . . . . . . . . . 14
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . 14
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
157,532 SHARES OF COMMON STOCK
NUKO INFORMATION
SYSTEMS, INC.
-------------------
P R O S P E C T U S
-------------------
________________, 1997
================================================================================
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is an itemized statement of expenses to be incurred in
connection with this Registration Statement. All such expenses will be paid by
the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee . . . . . . . . . . . . . . . . . $ 127
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Public accountants' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
Company legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Miscellaneous expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,873
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,000
=======
</TABLE>
All of the above items except the registration fee are estimates.
Item 15. Indemnification of Directors and Officers.
Under Section 145 of the Delaware General Corporation Law, the Company
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Act.
The Company's Amended and Restated Certificate of Incorporation and
Bylaws provide that the Company will indemnify its directors and officers to
the fullest extent permitted by Delaware law. Delaware law permits, but does
not require, a corporation to indemnify officers, directors, employees or
agents and expressly provides that the indemnification provided for under
Delaware law shall not be deemed exclusive of any indemnification right under
any bylaw, vote of stockholders or disinterested directors, or otherwise.
Delaware law permits indemnification against expenses and certain other
liabilities arising out of legal actions brought or threatened against such
persons for their conduct on behalf of the Company, provided that each such
person acted in good faith and in a manner that he or she reasonably believed
was in or not opposed to the Company's best interests and in the case of a
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. Delaware law does not allow indemnification of directors in the case
of an action by or in the right of the Company (including stockholder
derivative suits) unless the directors successfully defend the action or
indemnification is ordered by the court.
The Company intends has entered into indemnification agreements with
certain officers and directors to effectuate these indemnity provisions
following effectiveness of the reincorporation merger.
Item 16. Exhibits.
3.1 Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K filed March 5, 1997).
3.2 Certificate of Designation containing the designations,
preferences and rights of the Company's Series A Convertible
Preferred (incorporated by reference to Exhibit 3.2 to the
Company's Current Report on Form 8-K filed March 5, 1997).
3.3 Bylaws of the Company (incorporated by reference to Exhibit
3.3 to the Company's Current Report on Form 10-K filed with
the Commission on March 31, 1997).
4.1 Series B Preferred Stock and Warrant Purchase Agreement dated
as of April 21, 1997 by and between the Company and Internext
Compression, Inc.
II-1
<PAGE> 19
5.1 Opinion of Latham & Watkins.
23.1 Consent of Latham & Watkins (included in Exhibit 5.1 hereto).
23.2 Consent of Grant Thornton LLP.
23.3 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney (included on signature page hereto).
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that the undertakings set forth in paragraphs
(1)(i) and (1)(ii) above do not apply if the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the Registrant
pursuant to Section 13 or 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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<PAGE> 20
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
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<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Act, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Jose, State of
California, on the 6 day of August, 1997.
NUKO INFORMATION SYSTEMS, INC.
By:/S/ PRATAP KESAV KONDAMOORI
-----------------------------------------------
Pratap Kesav Kondamoori
Chairman, President and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated. Each person whose signature appears below hereby authorizes
Pratap Kesav Kondamoori with full power of substitution and resubstiution, as
his true and lawful attorneys-in-fact, for him in any and all capacities, to
sign any amendments (including post-effective amendments or supplements) to
this Registration Statement and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Commission.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/ PRATAP KESAV KONDAMOORI August 6, 1997
-------------------------------------
Pratap Kesav Kondamoori Chairman, President and Chief Executive
Officer (Principal Executive Officer)
/S/ THOMAS A. SPANIER August 6, 1997
--------------------------------------
Thomas A. Spanier Chief Financial Officer (Principal
Financial and Accounting Officer)
/S/ H.R. KEDLAYA August 6, 1997
--------------------------------------
H.R. Kedlaya Vice President, Strategic Planning,
Assistant Secretary and Director
/S/ ANDERS O. FIELD, JR. August 6, 1997
--------------------------------------
Anders O. Field, Jr. Director
/S/ MARC DUMONT August 6, 1997
--------------------------------------
Marc Dumont Director
/S/ ROBERT C. MARSHALL August 6, 1997
--------------------------------------
Robert C. Marshall Director
</TABLE>
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<PAGE> 22
EXHIBIT INDEX
The following exhibits are filed as part of this Registration Statement
on Form S-3 or are incorporated herein by reference.
<TABLE>
<S> <C> <C>
Exhibit No. Description Page
- ----------- ----------- ----
3.1 Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K filed March 5, 1997).
3.2 Certificate of Designation containing the designations,
preferences and rights of the Company's Series A Convertible
Stock (incorporated by reference to Exhibit 3.2 to the
Company's Current Report on Form 8-K filed March 5, 1997).
3.3 Bylaws of the Company (incorporated by reference to Exhibit
3.3 to the Company's Current Report on Form 10-K filed with
the Commission on March 31, 1997).
4.1 Series B Preferred Stock and Warrant Purchase Agreement
dated as of April 21, 1997 by and between the Company and
Internext Compression, Inc.
5.1 Opinion of Latham & Watkins
23.1 Consent of Latham & Watkins (included in Exhibit 5.1
hereto).
23.2 Consent of Grant Thornton LLP.
23.3 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney (included on signature page hereto).
</TABLE>
<PAGE> 1
EXHIBIT 4.1
SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
This SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this
"Agreement") is made and entered into as of April 21, 1997 by and between
INTERNEXT Compression, Inc., a California corporation (the "Company"), and NUKO
Information Systems, Inc., a Delaware corporation (the "Investor").
W I T N E S S E T H:
WHEREAS, the Company desires to sell to the Investor, and the Investor
desires to purchase from the Company, shares of the Company's Series B
Preferred Stock and a Warrant to purchase additional shares of the Company's
Series B Preferred Stock on the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. AGREEMENT TO PURCHASE AND SELL STOCK. The Company agrees to
sell to the Investor at the Closing, and the Investor agrees to purchase from
the Company at the Closing, (i) 1,600,000 shares of Series B Stock ("Purchased
Shares") at a price of $0.625 per share payable by the Investor issuing to the
Company the number of shares of the Investor Common Stock specified in Section
2 below and (ii) a warrant to purchase 1,600,000 shares of Series B Stock of
the Company (the "Warrant Shares") in substantially the form of Exhibit A
attached hereto (the "Warrant"). The shares of Company Common Stock issuable
upon the conversion of the Purchased Shares and the Warrant Shares will be
collectively hereinafter referred to as the "Conversion Shares."
2. CLOSING. The purchase and sale of the Purchased Shares and
the Warrant will take place at the offices of Fenwick & West, Two Palo Alto
Square, Suite 800, Palo Alto, California, at 10:00 a.m. Pacific Time, on April
21, 1997, or at such other time and place on which the Company and the Investor
mutually agree (which time and place are referred to in this Agreement as the
"Closing"). At the Closing, the Company will deliver to the Investor a
certificate representing the Purchased Shares and the NUKO Warrant, against
delivery to the Company by the Investor of (i) a certificate representing that
number of shares of the Investor Common Stock determined by dividing $1,000,000
by the average closing price of the Investor Common Stock as reported in the
Wall Street Journal over the fifteen (15) trading day period ending on and
including the second business day prior to the Closing (the "Investor Stock").
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Investor that the statements in the
following paragraphs of this Section 3 are true and correct:
3.1 Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite corporate power
and authority to carry on its business as now conducted and as proposed to be
conducted and to enter into and perform this Agreement and
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<PAGE> 2
to carry out the transactions contemplated by this Agreement. The Company has
furnished to counsel to the Investor true and complete copies of its Restated
Articles of Incorporation (the "Restated Articles") and Bylaws, each as amended
to date and presently in effect. The Board of Directors of the Company
consists of four or fewer members as of the date hereof and shall consist of
five or fewer members upon the appointment of Bob Kondamoori to the Board
pursuant to the Voting Agreement attached hereto as Exhibit C.
3.2 Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity.
3.3 Authorization. All corporate action on the part of
the Company, its officers, directors and shareholders, necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Company hereunder and the issuance and delivery of the
Purchased Shares, the Warrant, the Warrant Shares and the Conversion Shares has
been taken or will be taken prior to the Closing, and this Agreement has been
duly executed and delivered by the Company and constitutes a valid and legally
binding obligation of the Company, enforceable in accordance with its terms,
except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting
the enforcement of creditors' rights generally and (ii) the effect of rules of
law governing the availability of equitable remedies.
3.4 Valid Issuance of Stock.
(a) The Purchased Shares and Warrant Shares have
been reserved for issuance and, when issued, sold and delivered in accordance
with the terms of this Agreement for the consideration provided for herein or
upon exercise of the Warrant in accordance with the terms thereof, will be duly
and validly issued, fully paid and nonassessable. The Conversion Shares have
been duly and validly reserved for issuance and, upon issuance in accordance
with the terms of the Restated Articles, will be duly and validly issued, fully
paid and nonassessable.
(b) Based in part on the representations made by
the Investor in Section 5 hereof, the Purchased Shares, the Warrant Shares,
when issued in accordance with the terms of the Warrant, and (assuming no
change in applicable law and no unlawful distribution of Purchased Shares by
the Investor or other parties) the Conversion Shares, when issued in accordance
with the terms of the Restated Articles, will be issued in full compliance with
the registration and prospectus delivery requirements of the U.S. Securities
Act of 1933, as amended (the "1933 Act") and the registration and qualification
requirements of the securities laws of the State of California (provided that,
with respect to the Conversion Shares, no commission or other remuneration is
paid or given, directly or indirectly, for soliciting the issuance of
Conversion Shares upon the conversion of the Purchased Shares or Warrant Shares
and no additional consideration is paid for the Conversion Shares other than
surrender of the applicable Purchased Shares or Warrant Shares upon conversion
thereof in accordance with the Restated Articles).
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<PAGE> 3
3.5 Capitalization. Immediately prior to the Closing the
capitalization of the Company will consist of the following:
(a) Preferred Stock. A total of 5,000,000
authorized shares of preferred stock, no par value per share (the "Preferred
Stock"), consisting of 1,600,000 shares designated as Series A Preferred Stock,
all of which will be issued and outstanding on the date of the Closing, and
3,200,000 shares designated as Series B Stock, none of which are issued and
outstanding. The rights, preferences and privileges of the Series A Preferred
Stock and Series B Stock will be as stated in the Restated Articles and as
provided by law.
(b) Common Stock. A total of 40,000,000
authorized shares of common stock, no par value per share (the "Common Stock"),
of which 4,000,000 shares will be issued and outstanding.
(c) Options, Warrants, Reserved Shares. Except
for: (i) the conversion privileges of the Series A Preferred Stock; (ii) the
conversion privileges of the Series B Stock; (iii) the Warrant; (iv) the Series
A Preferred Stock Purchase Agreement between the Company and Empire Capital
Management ("Empire"); (v) the Empire Investor's Rights Agreement; and (vi) the
2,800,000 shares of Common Stock reserved for issuance pursuant to Company
stock option plans or arrangements approved by the Company's Board of
Directors, there are not outstanding any options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or acquisition
from the Company of any shares of its capital stock or any securities
convertible into or ultimately exchangeable or exercisable for any shares of
the Company's capital stock. Apart from the exceptions noted in this Section
3.2(c), no shares of the Company's outstanding capital stock, or other stock
issuable by the Company, are subject to any rights of first refusal or other
rights to purchase such stock (whether in favor of the Company or any other
person or entity) pursuant to any agreement or commitment of the Company.
3.6 Governmental Consents. No consent, approval, order
or authorization of, or registration, qualification, designation, declaration
or filing with, any federal, state or local governmental authority on the part
of the Company is required in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated by this
Agreement, except for the filing pursuant to Section 25102(f) of the California
Corporate Securities Law of 1968, as amended, and the regulations thereunder,
which filing will be effected in accordance with such section.
3.7 Litigation. There is no action, suit, proceeding,
government inquiry or investigation pending or currently threatened against the
Company that questions the validity of this Agreement or the right of the
Company to enter into it, or to consummate the transactions contemplated
hereby, or that might result, either individually or in the aggregate, in any
material adverse changes in the assets, condition, affairs or prospects of the
Company, financially or otherwise, or any change in the current equity
ownership of the Company, nor is the Company aware that there is any basis for
the foregoing. There is no litigation pending, or, to the best of the
Company's knowledge, any basis therefor or threat thereof, against the
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<PAGE> 4
Company by reason of the past employment relationships of Govind Kizhepat
("Kizhepat") or Greg Maturi ("Maturi"), the proposed activities of the Company,
or negotiations by the Company with possible investors in the Company. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
3.8 Intellectual Property. To the best of the Company's
knowledge, the business conducted or proposed by the Company does not and will
not cause the Company to infringe or violate any of the patents, trademarks,
service marks, trade names, copyrights, licenses, trade secrets or other
intellectual property rights of any other person or entity and the Company has
not received any communications alleging such infringement or violation. To
the best of the Company's knowledge, none of Kizhepat, Maturi or any other
employee is obligated under any contract (including any license, covenant or
commitment of any nature), or subject to any judgment, decree or order of any
court or administrative agency, that would conflict or interfere with (i) the
performance of Kizhepat's, Maturi's or such employee's duties as an officer,
employee or director of the Company, (ii) the use of Kizhepat's, Maturi's or
such employee's best efforts to promote the interests of the Company or (iii)
the Company's business as conducted or proposed to be conducted. To the best
of the Company's knowledge, no other person or entity (including without
limitation any prior employer of Kizhepat, Maturi or of any other employee of
the Company) has any right to or interest in any inventions, improvements,
discoveries or other confidential information utilized by the Company in its
business.
3.9 Compliance with Other Instruments. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, a default under the Restated Articles or the Bylaws or any mortgage,
instrument, judgment, order, writ, decree or contract to which the Company is
party or by which it is bound. To the best of the Company's knowledge, neither
Kizhepat nor Maturi nor any other employee of the Company is in violation of
any term of any contract or covenant (either with the Company or with another
entity) relating to employment, patents, proprietary information disclosure,
non-competition or non-solicitation.
3.10 Affiliate Transactions. Except for a promissory note
in the amount of $500 issued to Govind Kizhepat on August 9, 1996, there are no
agreements, understandings or proposed transactions between the Company and any
of its shareholders, officers, directors, affiliates or any affiliate or
associates thereof (as such terms are defined in the rules and regulations
under the Securities Act of 1933, as amended).
3.11 Registration Rights. Except as provided in the
Internext Investor's Rights Agreement between the Company and the Investor and
the Investor's Rights Agreement between the Company and Empire Capital, the
Company has not granted or agreed to grant any registration rights, including
piggyback rights, to any person or entity.
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<PAGE> 5
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor
hereby represents and warrants to the Company that the statements in the
following paragraphs of this Section 4 are true and correct:
4.1 Organization, Good Standing and Qualification. The
Investor is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to carry on its business as now conducted and as proposed to be
conducted and to enter into and perform this Agreement and to carry out the
transactions contemplated by this Agreement.
4.2 Authorization. All corporate action on the part of
the Investor, its officers, directors and stockholders, necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Investor hereunder and the authorization, issuance and
delivery of the Investor Stock has been taken or will be taken prior to the
Closing, and this Agreement has been duly executed and delivered by the
Investor and constitutes a valid and legally binding obligation of the
Investor, enforceable in accordance with its terms, except as may be limited by
(i) applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the effect of rules of law governing the availability of
equitable remedies.
4.3 Valid Issuance of Stock.
(a) The Investor Stock, when issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
provided for herein, will be duly and validly issued, fully paid and
nonassessable.
(b) Based in part on the representations made by
the Company in Section 5 hereof, the Investor Stock will be issued in full
compliance with the registration and prospectus delivery requirements of the
U.S. Securities Act of 1933, as amended (the "1933 Act") and the registration
and qualification requirements of the securities laws of the State of
California.
5. MUTUAL REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS.
For the purposes of this Section 5, each of the Investor and the Company are
referred to as a "Party," and collectively, the "Parties." With respect to the
Purchased Shares and the Warrant, the Investor hereby represents and warrants
to, and agrees with, the Company, and with respect to the Investor Stock, the
Company hereby represents and warrants to, and agrees with, the Investor, as
follows:
5.1 Purchase for Own Account. The Purchased Shares and
the Warrant or the Investor Stock, as the case may be, to be purchased by such
Party hereunder will be acquired for investment for such Party's own account,
not as a nominee or agent, and not with a view to the public resale or
distribution thereof within the meaning of the 1933 Act, and such Party has no
present intention of selling, granting any participation in, or otherwise
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<PAGE> 6
distributing the same. If not an individual, such Party also represents that
such Party has not been formed for the specific purpose of acquiring Purchased
Shares and the Warrant or the Investor Stock, as the case may be.
5.2 Disclosure of Information. Such Party has received
or has had full access to all the information it considers necessary or
appropriate to make an informed investment decision with respect to the
Purchased Shares or the Investor Stock to be purchased by such the Investor
under this Agreement. Such Party further has had an opportunity to ask
questions and receive answers from the Company or the Investor, as the case may
be, regarding the terms and conditions of the offering of the Purchased Shares
or the Common Stock and to obtain additional information (to the extent the
Company or the Investor possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify any information furnished
to such Party or to which such Party had access. The foregoing, however, does
not in any way limit or modify the representations and warranties made by such
Party in Sections 3, 4 or 5, as the case may be.
5.3 Investment Experience. Such Party understands that
the purchase of the Purchased Shares or the Investor Stock involves substantial
risk. Such Party: (i) has experience as an investor in securities of
companies in the development stage and acknowledges that such Party is able to
fend for itself, can bear the economic risk of such Party's investment in the
Purchased Shares and has such knowledge and experience in financial or business
matters that such Party is capable of evaluating the merits and risks of this
investment in the Purchased Shares or the Investor Stock and protecting its own
interests in connection with this investment and/or (ii) has a preexisting
personal or business relationship with the Company or the Investor, as the case
may be, and certain of its officers, directors or controlling persons of a
nature and duration that enables such Party to be aware of the character,
business acumen and financial circumstances of such persons.
5.4 Accredited the Investor Status. Such Party is an
"accredited investor" within the meaning of Regulation D promulgated under the
1933 Act.
5.5 Restricted Securities. Such Party understands that
the Purchased Shares or the Investor Stock are characterized as "restricted
securities" under the 1933 Act inasmuch as they are being acquired from the
Company or the Investor, as the case may be, in a transaction not involving a
public offering and that under the 1933 Act and applicable regulations
thereunder such securities may be resold without registration under the 1933
Act only in certain limited circumstances. In this connection, such Party
represents that such Party is familiar with Rule 144 of the U.S. Securities and
Exchange Commission, as presently in effect, and understands the resale
limitations imposed thereby and by the 1933 Act. Such Party understands that
the Company or the Investor, as the case may be, is under no obligation to
register any of the securities sold hereunder except as provided in the
Internext Investor's Rights Agreement or Section 8 hereof, as the case may be.
The Investor understands that no public market now exists for any of the
Purchased Shares, the Warrant Shares or the Conversion Shares and that it is
uncertain whether a public market will ever exist for the Purchased Shares, the
Warrant Shares or the Conversion Shares.
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<PAGE> 7
5.6 Further Limitations on Disposition. Without in any
way limiting the representations set forth above, such Party further agrees not
to make any disposition of all or any portion of the Purchased Shares, the
Conversion Shares, the Warrant Shares or the Investor Stock unless and until:
(a) there is then in effect a registration
statement under the 1933 Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or
(b) (i) such Party shall have notified the
Company or the Investor, as the case may be, of the proposed disposition and
shall have furnished the Company or the Investor, as the case may be, with a
statement of the circumstances surrounding the proposed disposition, and (ii)
such Party shall have furnished the Company or the Investor, as the case may
be, at the expense of such Party or its transferee, with an opinion of counsel,
reasonably satisfactory to the Company or the Investor, as the case may be,
that such disposition will not require registration of such securities under
the 1933 Act.
Notwithstanding the provisions of paragraphs (a) and (b) above, no
such registration statement or opinion of counsel shall be required: (i) for
any transfer of any Purchased Shares, Warrant Shares or Conversion Shares or
the Investor Stock in compliance with SEC Rule 144, or (ii) for any transfer of
Purchased Shares, Warrant Shares or Conversion Shares or the Investor Stock by
a Party that is a partnership or a corporation to (A) a partner of such
partnership or shareholder of such corporation, (B) a retired partner of such
partnership who retires after the date hereof, (C) the estate of any such
partner or shareholder, or (iii) for the transfer by gift, will or intestate
succession by any Party to his or her spouse or lineal descendants or ancestors
or any trust for any of the foregoing; provided that in each of the foregoing
cases the transferee agrees in writing to be subject to the terms of this
Section 5 (other than Section 5.4) to the same extent as if the transferee were
an original Party hereunder.
5.7 Legends. It is understood that the certificates
evidencing the Purchased Shares, the Conversion Shares, the Warrant Shares and
the Investor Stock will bear the legends set forth below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE INVESTORS SHOULD BE AWARE
THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY
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<PAGE> 8
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
(b) Any legend required by the laws of the State
of California, including any legend required by the California Department of
Corporations and Sections 417 and 418 if the California Corporations Code or
any other state securities laws, including, with respect to the Purchased
Shares, a legend substantially in the form of the following:
THE SHARES EVIDENCED BY THIS CERTIFICATE: (1) ARE CONVERTIBLE INTO
SHARES OF COMMON STOCK OF THE COMPANY AT THE OPTION OF THE HOLDER AT ANY TIME
PRIOR TO AUTOMATIC CONVERSION THEREOF; (2) AUTOMATICALLY CONVERT INTO COMMON
STOCK OF THE COMPANY IN THE EVENT OF A PUBLIC OFFERING MEETING CERTAIN
REQUIREMENTS OR UPON CERTAIN CONSENTS OF THE HOLDERS OF THE COMPANY'S PREFERRED
STOCK ALL PURSUANT TO AND UPON THE TERMS AND CONDITIONS SPECIFIED IN THE
COMPANY'S ARTICLES OF INCORPORATION. A COPY OF SUCH ARTICLES OF INCORPORATION
MAY BE OBTAINED, WITHOUT CHARGE, AT THE COMPANY'S PRINCIPAL OFFICE.
The legend set forth in (a) above shall be removed by the Company from
any certificate evidencing Purchase Shares, Warrant Shares or Conversion Shares
upon delivery to the Company of an opinion by counsel, reasonably satisfactory
to the Company, that a registration statement under the 1933 Act is at that
time in effect with respect to the legended security or that such security can
be freely transferred in a public sale without such a registration statement
being in effect and that such transfer will not jeopardize the exemption or
exemptions from registration pursuant to which the Company issued the Purchased
Shares, Warrant Shares or Conversion Shares.
In addition, the legend set forth in (a) above shall be removed by the
Investor from any certificate evidencing Investor Stock upon delivery to the
Investor of an opinion by counsel, reasonably satisfactory to the Investor,
that a registration statement under the 1933 Act is at that time in effect with
respect to the legended security or that such security can be freely
transferred in a public sale without such a registration statement being in
effect and that such transfer will not jeopardize the exemption or exemptions
from registration pursuant to which the Investor issued the Investor Stock.
6. CONDITIONS TO THE INVESTORS' OBLIGATIONS AT CLOSING. The
obligations of the Investor under Section 2 of this Agreement are subject to
the fulfillment or waiver, on or before the Closing, of each of the following
conditions:
6.1 Representations and Warranties True. The
representations and warranties of the Company contained in Sections 3 and 5
shall be true and correct on and as of the Closing with the same effect as
though such representations and warranties had been made on and as of the date
of the Closing.
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<PAGE> 9
6.2 Restated Articles Effective. The Restated Articles
shall have been duly adopted by the Company by all necessary corporate action
of its Board of Directors and shareholders and duly filed with and accepted by
the Secretary of the State of California.
6.3 Certificates and Documents. The Company shall have
delivered to counsel to the Investor:
(a) The Restated Articles of Incorporation of the
Company, as amended and in effect prior to the Closing Date, certified by the
Secretary of State of California;
(b) Certificates, as of the most recent
practicable dates, as to the corporate good standing of the Company issued by
the Secretary of State of California;
(c) Bylaws of the Company, certified by its
Secretary or Assistant Secretary as of the Closing Date; and
(d) Resolutions of the Board of Directors of the
Company, authorizing and approving all matters in connection with this
Agreement and the transactions contemplated hereby and reserving appropriate
numbers of shares of capital stock, certified by the Secretary or Assistant
Secretary of the Company as of the Closing Date.
6.4 Board of Directors. Bob Kondamoori shall have been
appointed to the Board of Directors.
6.5 Internext Investor's Rights Agreement. The Company
shall have executed and delivered the Internext Investor's Rights Agreement in
the form attached hereto as Exhibit B.
6.6 NUKO Voting Agreement. The Company, Govind Kizhepat
and Greg Maturi each shall have executed the NUKO Voting Agreement in the form
attached hereto as Exhibit C.
6.7 Internext Supply Agreement. The Company shall have
executed the Internext Supply Agreement in the form attached hereto as Exhibit
D.
6.8 Shares Tendered. The Company shall have tendered
executed certificates for the Purchased Shares.
6.9 Warrant. The Company shall have executed and
delivered to the Investor the Warrant.
6.10 Securities Exemptions. The offer and sale of the
Purchased Shares and the Warrant to the Investor and of the Investor Stock to
the Company pursuant to this Agreement shall be exempt from the registration
requirements of the 1933 Act, the
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qualifications requirement of the California Corporate Securities Law of 1968
(the "Law") and the registration and/or qualification requirements of all other
applicable state securities laws.
7. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company to the Investor under this Agreement are subject to
the fulfillment or waiver on or before the Closing of each of the following
conditions by the Investor:
7.1 Representations and Warranties. The representations
and warranties of the Investor contained in Sections 4 and 5 shall be true and
correct on the date of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
7.2 Payment of Consideration. The Investor shall have
delivered to the Company the Investor Stock in accordance with the provisions
of Section 2.
7.3 Restated Articles Effective. The Restated Articles
shall have been duly adopted by the Company by all necessary corporate action
of its Board of Directors and shareholders, and duly filed with and accepted by
the Secretary of the State of California.
7.4 Board of Directors. Bob Kondamoori shall have been
appointed to the Board of Directors.
7.5 Internext Investor's Rights Agreement. The Investor
shall have executed and delivered the Internext Investor's Rights Agreement in
the form attached hereto as Exhibit B.
7.6 NUKO Voting Agreement. The Investor, Govind Kizhepat
and Greg Maturi each shall have executed the NUKO Voting Agreement in the form
attached hereto as Exhibit C.
7.7 Internext Supply Agreement. The Investor shall
have executed the Internext Supply Agreement in the form attached hereto as
Exhibit D.
7.8 Minimum Shares Purchased. A minimum of 1,600,000
shares of Series B Stock shall be purchased by the Investor at the Closing
under this Agreement for a minimum aggregate purchase price of $1,000,000
payable in the Investor Stock.
7.9 Securities Exemptions. The offer and sale of the
Purchased Shares and the Warrant to the Investor and of the Investor Stock to
the Company pursuant to this Agreement shall be exempt from the registration
requirements of the 1933 Act, the qualifications requirements of the Law and
the registration and/or qualification requirements of all other applicable
state securities laws.
8. Additional Provisions Regarding Investor Stock.
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8.1 Registration of the Investor Shares. The Investor
shall as promptly as practicable after the Closing file with the Securities and
Exchange Commission (the "Commission") a registration statement on any
appropriate form under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the offering and sale or other disposition of the shares
of Investor Stock to be issued to the Company (the "Registration Statement").
The Investor agrees to cause the Registration Statement to become effective
within ninety (90) days after the Closing. The Company agrees to cooperate
with and provide assistance to the Investor, as the Investor may reasonably
request, in connection with any registration and sale of the shares of Investor
Stock.
(a) The Investor agrees that it will (i) prepare
and file with the Commission any amendments or supplements to the Registration
Statement or prospectus which may be necessary to keep the Registration
Statement effective and to comply with the provisions of the Securities Act
with respect to the offer of the shares of Investor Stock covered by the
Registration Statement for a period of four months from the effective date of
the Registration Statement; (ii) prepare and promptly file with the Commission
and promptly notify the Company of the filing of such amendment or supplement
to the Registration Statement or prospectus as may be necessary to correct any
statement therein or omission therefrom if, at any time when a prospectus
relating to the shares of Investor Stock is required to be delivered under the
Securities Act, any event with respect to the Investor shall have occurred as a
result of which any prospectus would include an untrue statement of material
fact or omit to state any material fact necessary to make the statements
therein not misleading; (iii) in case the Company is required to deliver a
prospectus, prepare promptly such amendment or amendments to the Registration
Statement and such prospectus or prospectuses as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Securities Act;
(iv) advise the Company promptly after the Investor receives notice or obtains
knowledge of the issuance of any stop order by the Commission suspending the
effectiveness of the Registration Statement or amendment thereto or of the
initiation or threatening of any proceedings for that purpose, and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued; (v) use its best efforts to
qualify such shares of Investor Stock for sale under the securities or "blue
sky" laws of such states within the United States as the Company may reasonably
designate, except that the Investor shall not be required in connection
therewith or as a condition thereto to qualify to do business in any such state
or to take any action which would subject it to general service of process in
any such jurisdiction where it is not then so subject; and (vi) furnish to the
Company, as soon as available, copies of any the Registration Statement and
each preliminary and final prospectus, or supplement or amendment required to
be prepared with respect thereto, all in such quantities as they may from time
to time reasonably request.
(b) The Company agrees that, upon receipt of any
notice from the Investor of the happening of any event of the kind described in
clause (a)(ii) of this Section 9, they will forthwith discontinue the
disposition of the shares of Investor Stock until they have received copies of
the supplemented or amended prospectus contemplated by clause (a)(ii), or until
the Company is advised in writing by the Investor that the use of the
prospectus may be resumed, and have received copies of any additional or
supplemental filings that are
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incorporated by reference in the prospectus, and, if so directed by the
Investor, the Company will deliver to the Investor all copies, other than
permanent file copies, then in the Company's possession of the prospectus
covering the shares of Investor Stock current at the time of receipt of such
notice.
(c) If the Investor takes any action to permit a
public offering or sale or other distribution of such shares of Investor Stock,
the Company shall furnish information to the Investor concerning the Company's
holdings of securities of the Investor and the proposed method of sale or other
disposition of the shares of Investor Stock and such other information and
undertakings as shall be required in connection with the preparation and filing
of any Registration Statement and any amendments thereto covering all or part
of the shares of Investor Stock in order to assist the Investor in complying
with the Securities Act and the Exchange Act. The Company further agrees to
enter into such undertakings and take such other action relating to the conduct
of the proposed offering which the Investor may reasonably request as being
necessary to assist the Investor in complying with the federal and state
securities laws and the rules or other requirements of the National Association
of Securities Dealers, Inc. ("NASD") or otherwise to effectuate the offering.
(d) The Investor shall pay all expenses incurred
in connection with the first registration requested pursuant to this Section
8.1 (excluding underwriters' or brokers' discounts and commissions), including
without limitation all filing, registration and qualification, printers' and
accounting fees and the reasonable fees and disbursements of one counsel for
the Company and counsel for the Investor.
(e) Through the date which is two years after the
Closing, provided that the Investor has any securities registered under Section
12 of the Exchange Act, the Investor will file the reports required to be filed
by it under the Exchange Act and the rules and regulations adopted by the
Commission thereunder (or, if the Investor is not required to file such
reports, will upon the request of the Company, make publicly available, at the
Investor's own cost and expense, other information for a period of up to four
months) and will take such further action as the Company may reasonably
request, all to the extent required from time to time to enable the Company to
sell the shares of Investor Stock without registration under the Securities Act
within the limitation of the exemptions provided by (i) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the Commission.
8.2 Calculation of Value. On the day prior to the filing
of the Registration Statement (the "Calculation Date"), the Company and the
Investor shall calculate the value of the Investor Stock by multiplying the
number of shares of Investor Stock issued to the Company by the Average Closing
Price. The "Average Closing Price" shall mean average of the closing sales
prices for the Investor's Common Stock as reported in the Wall Street Journal
for the ten (10) trading days prior to the Calculation Date. The Company
agrees that it will not sell more than ten percent (10%) of the Investor Stock
on any one trading day during the ten (10) trading days beginning on the
effective date of
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the Registration Statement in the event that Section 8.3(a) applies or during
the five (5) trading days beginning on the effective date of the Registration
Statement in the event that Section 8.3(b) applies. "Trading day" shall mean
any day on which the Investor's Common Stock is traded for any period on the
Nasdaq Stock Market's National Market System, or on the principal securities
exchange or other securities market on which the Investor's Common Stock is
then being traded.
8.3 Post-Closing Adjustment. (a) If the value of the
Investor Stock as calculated in accordance with Section 8.2 above (the "Value")
is less than $1,000,000, the Investor shall pay to the Company within thirty
(30) days after the effective date of the Registration Statement an amount in
cash equal to the amount by which $1,000,000 exceeds the Value; (b) if the
Value is greater than $1,000,000, the Company shall pay to the Investor within
thirty (30) days after the effective date of the Registration Statement an
amount in cash equal to the amount by which the Value exceeds $1,000,000.
8.4 Cash Alternative. The Investor, at its sole option,
may at any time prior to the effective date of the Registration Statement
redeem all of the shares of Investor Stock and terminate its obligations to
register such shares by paying to the Company $1,000,000 in cash.
8.5 Failure to Achieve Effectiveness. If the
Registration Statement is not declared effective by the SEC within ninety (90)
days after the Closing (other than by reason of any act or failure to act by
the Company), then NUKO shall within thirty (30) days at its sole option (i)
redeem the Investor Stock for $1,000,000 in cash; or (ii) make or arrange an
interest-free loan to Internext of up to $1,000,000 in aggregate principal
amount the ("Loan"), which shall be advanced in increments of up to $250,000
per month until such time as the Registration Statement becomes effective. The
Loan will be due and payable upon the sooner of (i) thirty (30) days after the
effective date of the Registration Statement or (ii) twelve (12) months after
the first advance under the loan.
9. MISCELLANEOUS.
9.1 Survival of Warranties. The representations,
warranties and covenants of the Company and the Investor contained in or made
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing and shall in no way be affected by any investigation
of the subject matter thereof made by or on behalf of the Investor or the
Company, as the case may be.
9.2 Successors and Assigns. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
9.3 Governing Law. This Agreement shall be governed by
and construed under the internal laws of the State of California as applied to
agreements among California residents entered into and to be performed entirely
within California, without reference to principles of conflict of laws or
choice of law.
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9.4 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9.5 Headings. The headings and captions used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. All references in this Agreement to
sections, paragraphs, exhibits and schedules shall, unless otherwise provided,
refer to sections and paragraphs hereof and exhibits and schedules attached
hereto, all of which exhibits and schedules are incorporated herein by this
reference.
9.6 Notices. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given upon personal delivery to the party to be notified
or upon deposit with the United States Post Office, by registered or certified
mail, postage prepaid and addressed to the party to be notified at the address
indicated for such party at the address specified on the signature page, or at
such other address as any party or the Company may designate by giving ten (10)
days advance written notice to all other parties.
9.7 No Finder's Fees. Each party represents that it
neither is nor will be obligated for any finder's or broker's fee or commission
in connection with this transaction. The Investor agrees to indemnify and to
hold harmless the Company from any liability for any commission or compensation
in the nature of a finders' or broker's fee (and any asserted liability) for
which the Investor or any of its officers, partners, employees, or
representatives is responsible. The Company agrees to indemnify and hold
harmless the Investor from any liability for any commission or compensation in
the nature of a finder's or broker's fee (and any asserted liability) for which
the Company or any of its officers, employees or representatives is
responsible.
9.8 Amendments and Waivers. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investor.
Any amendment or waiver effected in accordance with this Section shall be
binding upon each holder of any Purchased Shares and/or Conversion Shares
and/or Warrant Shares and/or the Warrant at the time outstanding, each future
holder of such securities, and the Company.
9.9 Expenses. The Company and the Investor shall pay
their own fees and expenses incurred in entering into this Agreement. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorneys'
fees, costs and necessary disbursements in addition to any other relief to
which such party may be entitled.
9.10 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision(s)
shall be excluded from this Agreement
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and the balance of the Agreement shall be interpreted as if such provision(s)
were so excluded and shall be enforceable in accordance with its terms.
9.11 Entire Agreement. This Agreement, together with all
exhibits and schedules hereto, constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior negotiations, correspondence, agreements,
understandings duties or obligations between the parties with respect to the
subject matter hereof.
9.12 Further Assurances. From and after the date of this
Agreement, upon the request of the Investor or the Company, the Company and the
Investor shall execute and deliver such instruments, documents or other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE COMPANY: THE INVESTOR:
- ------------ -------------
INTERNEXT Compression, Inc., NUKO Information Systems, Inc.,
a California corporation a Delaware corporation
By: /s/ Govind Kizhepat By: /s/ Pratap Kesav Kondamoori
Name: Govind Kizhepat Name: Pratap Kesav Kondamoori
Title: President and CEO Title: President and CEO
Address for Notice: Address for Notice:
3375 Scott Blvd., Suite 137 2391 Qume Drive
Santa Clara, CA 95054 San Jose, California 95131
Attn.: Govind Kizhepat Attn: Pratap Kesav Kondamoori
[SIGNATURE PAGE TO SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT]
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EXHIBIT 5.1
August 6, 1997
Nuko Information Systems, Inc.
2391 Qume Drive
San Jose, California 95131
Re: Registration Statement on Form S-3;
157,532 Shares of Common Stock, Par Value $0.001 Per Share
Ladies and Gentlemen:
In connection with the registration by NUKO Information
Systems, Inc., a Delaware corporation (the "Company"), of 157,532 shares of
common stock of the Company, par value $0.001 per share (the "Shares"), under
the Securities Act of 1933, as amended (the "Act"), on Form S-3 filed with the
Securities and Exchange Commission (the "Commission") on August 6, 1997, ( the
"Registration Statement"), you have requested our opinion with respect to the
matters set forth below.
In our capacity as your counsel in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the authorization, issuance and sale of
the Shares. In addition, we have made such legal and factual examinations and
inquiries, including an examination of originals or copies certified or
otherwise identified to our satisfaction of such documents, corporate records
and instruments, as we have deemed necessary or appropriate for purposes of
this opinion.
In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity to authentic original documents of all documents submitted to us
as copies.
<PAGE> 2
August 6, 1997
Page 2
We are opining herein as to the effect on the subject
transaction only of the General Corporation Laws of the State of Delaware, and
we express no opinion with respect to the applicability thereto, or the effect
thereon, of the laws of any other jurisdiction or as to any matters of
municipal law or the laws of any other local agencies within the state.
Subject to the foregoing, it is our opinion that the Shares
have been duly authorized, and, upon issuance, delivery and payment therefor in
the manner contemplated by the Registration Statement, will be validly issued,
fully paid and nonassessable.
We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm contained under the
heading "Legal Matters."
Very truly yours,
LATHAM & WATKINS
<PAGE> 1
EXHIBIT 23.2
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. and
subsidiary as of December 31, 1995 and the eight months ended December 31, 1995
and for the year ended April 30, 1995 appearing in the Company's Annual Report
on Form 10-K for the period ended December 31, 1996 which are incorporated by
reference in this Registration Statement. We consent to the use of the
incorporation by reference in the Registration Statement and Prospectus of the
aforementioned report and to the use of our name as it appears under the caption
"Experts."
Grant Thornton LLP
San Jose, California
August 6, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement for 157,532 shares of common stock, $0.001 par value, of NUKO
Information Systems, Inc. and subsidiary on Form S-3 of our report, which
includes an explanatory paragraph relating to the Company's ability to continue
as a going concern, dated March 21, 1997, on our audit of the consolidated
financial statements and financial statement schedule of NUKO Information
Systems, Inc. and subsidiary as of December 31, 1996 and for the year then
ended, which report is included in Form 10-K for the fiscal year ended December
31, 1996. We also consent to the reference to our firm under the caption
"Experts."
Coopers & Lybrand L.L.P.
San Jose, California
August 6, 1997
