UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SLS INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 3651 52-2258371
------------------------------- ---------------------------- -------------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
3119 SOUTH SCENIC, SPRINGFIELD, MISSOURI 65807 (417)883-4549
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(Address and telephone number of principal executive offices)
JOHN M. GOTT, 3119 SOUTH SCENIC, SPRINGFIELD MISSOURI 65807 (417)883-4549
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(Name, address, and telephone number of agent for service)
ALFRED V. GRECO, PLLC, 666 FIFTH AVE, STE 1401, NEW YORK, NY 10103 (212)246-6550
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(Name, address, and telephone number for copies of all communications)
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier 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 this Form is a post-effective amendment filed pursuant to Rule 462(d) 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, check
the following box. [X]
CALCULATION OF REGISTRATION FEE
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH DOLLAR MAXIMUM AGGREGATE AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(1) PRICE(1) FEE(1)
------------------- ------------- -------------- ------------ ------------
Common Stock,
$.001 par value $ 1,000,000 $ .25 $ 1,000,000 ------
Warrants ----- ---- ----- ------
Common Stock, $ 2,000,000 $ .50 $ 2,000,000 $ 528.00
$.001 par value(2)
Common Stock, $ 12,000,000 $ 3.00 $12,000,000 $ 3,168.00
$.001 par value(3) ------------
Total $ 3,960.00
============
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(1) Estimated solely for the purpose of determining the amount of the
registration fee.
(2) Registration of 4,000,000 shares reserved for issuance and underlying
the A Warrants each of which is sold with the Common Stock and B
Warrant as part of each Unit, and which A Warrant is exercisable at a
price of $.50 per share.
(3) Registration of 4,000,000 shares reserved for issuance and underlying
the B Warrants each of which is sold with the Common Stock and A
Warrant to form the Unit, and which B Warrant is exercisable at a
price of $3.00 per share.
---------------------
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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ii
CROSS REFERENCE SHEET
(Showing Location In Prospectus of Information Required by Items of Form SB-2)
PART I. INFORMATION REQUIRED IN PROSPECTUS
----------------------------------------------
Item No. Required Item Location or Caption
-------- ---------------------------------- --------------------------
1. Front of Registration Statement Front of Registration
and Outside Front Cover of Statement and outside
Prospectus front cover of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page
Cover Pages of Prospectus of Prospectus and Outside
Front cover Page of
Prospectus
3. Summary Information and Risk Prospectus Summary;
Factors Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Prospectus Summary -
Price Determination of
Offering Price; Risk
Factors
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Litigation
10. Directors, Executive Officers, Management
Promoters and Control Persons
11. Security Ownership of Certain Principal Shareholders
Beneficial Owners and Management
12. Description of Securities Description of Securities
13. Interest of Named Experts Legal Opinions; Experts
14. Disclosure of Commission Position Statement as to
on Indemnification Indemnification
15. Organization Within Last Management; Certain
Five Years Transactions
iii
16. Description of Business Business -
Background
17. Management's Discussion and Business -
Analysis or Plan of Plan of Operation
Operation
18. Description of Property Business -
Property
19. Certain Relationships and Related Certain Transactions
Transactions With Management and
Others
20. Market for Common Stock and Prospectus Summary;
Related Stockholder Matters Market for the Company's
Common Stock
21. Executive Compensation Executive Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagreements Not Applicable
with Accountants on Accounting
and Financial Disclosure
iv
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to change dated August 11, 2000
PROSPECTUS
----------
SLS INTERNATIONAL, INC.
(A Delaware Corporation)
OFFERING OF 4,000,000 UNITS, EACH UNIT CONSISTING OF
ONE SHARE OF COMMON STOCK AND TWO WARRANTS
AT A PRICE OF $.25 PER UNIT
MINIMUM PURCHASE: 1,000 UNITS ($250)
This prospectus relates to an offering by SLS International, Inc. (the
"Company") of 4,000,000 Units, each of which consists of one share of Common
Stock and two Warrants ("A and B Warrants") each Warrant to purchase one share
of Common Stock. The Units are being offered at a Unit Price of $.25 per Unit
(the "Units"). The Company shall have the option to call (redeem) the Warrants
subject to the average closing bid price for the Company's common stock for a
consecutive 10-day period immediately preceding the call being at least equal to
or greater than the exercise price for each warrant. The A and B Warrants are
callable by the Company on 30-days notice at a price of $.001 per Warrant. The
A and B Warrants are detachable from the common stock but shall not be separable
from each other unless and until the A Warrant is exercised. The A Warrant
shall have a 6 month term and shall be immediately exercisable at a price of
$.50 per share. The B Warrant shall have a term of 2-years and shall be
exercisable only after exercise of the A Warrant upon separation from the A
Warrant, at a price of $3.00 per share. The Company is offering the Units on a
"best efforts all or none basis" whereby if all of the Units offered are not
sold during the offering period, then all funds received in connection with the
offering, shall be returned to investors, without interest or deduction of any
kind. Until the offering is completed, all funds shall be placed in escrow with
the Metropolitan Bank, Springfield, MO as escrow agent ("Escrow Agent"), to be
paid over to the Company upon completion of the offering. If the offering is
not completed during the offering period, as the same may be extended for a
period of 30 days, the Escrow Agent shall return all funds to the investors free
of deductions and without interest. Prior to this offering, there has been no
public market for the Company's Warrants or common stock and we cannot assure
investors that a market will develop.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
v
Accordingly, future ability to freely sell the shares or Warrants in the
marketplace cannot be assured. The Company has determined the initial offering
price of the Units and exercise price of the Warrants arbitrarily and such
prices per Unit and share bears no relationship whatsoever to the value of the
Company's assets, earnings, book value or any other criteria.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. THE
PURCHASE THEREOF SHOULD ONLY BE CONSIDERED BY THOSE PERSONS WHO CAN AFFORD A
LOSS OF THEIR ENTIRE INVESTMENT.
Offering Price Proceeds to
to Public Commissions(1) Company(2)(3)
---------------------- -------------- -------------- -------------
Per Unit.............. $ .25 $___________ $ .25
Total................. $ 1,000,000 $___________ $ 1,000,000
---------------------- -------------- -------------- -------------
(1) The Units are to be sold by officers and directors for which services the
officers and directors shall receive no fee, commission or compensation of any
kind.
(2) Before deduction of additional estimated expenses of $100,000 payable by
the Company in connection with the offering. (See "Use of Proceeds")
(3) All proceeds of the Offering shall be placed in Escrow until all of
$1,000,000 in offering proceeds is paid into escrow. The funds shall be
deposited in the Metropolitan Bank, P.O. Box 3840, Springfield, Missouri, which
shall act as Escrow Agent until the Offering is completed. Upon completion of
the Offering, all funds received shall be paid to the Company. This offering
shall terminate on ______, 2000, unless extended by the Company an additional 30
days to _______, 2000 ("Termination Date"). If the Offering is not completed by
the Termination Date, then, the Escrow Agent shall refund all of the proceeds
held in Escrow to investors without interest or deduction of any kind. (See
"Plan of Distribution")
vi
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY ...................................................... 1
The Company........................................................... 1
The Offering.......................................................... 1
Use of Proceeds....................................................... 2
Risk Factors.......................................................... 2
Escrow Agent and Escrow Account....................................... 2
Registrar and Transfer Agent.......................................... 2
Proposed NASD Bulletin Board Market Symbol............................ 3
Outstanding Shares.................................................... 3
Summary Consolidated Financial Data................................... 3
Prospectus Delivery Obligation........................................ 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS............................................................ 5
Results of Operations................................................ 5
Three months ended March 31, 2000 compared to March 31, 1999..... 5
December 31, 1999 compared to December 31, 1998.................. 5
Liquidity and Capital Resources.................................. 6
Uncertainties.................................................... 6
RISK FACTORS............................................................. 6
Risks related to our Business........................................ 6
Risks related to the Offering........................................ 13
FORWARD-LOOKING STATEMENTS............................................... 16
DILUTION................................................................. 16
USE OF PROCEEDS.......................................................... 17
DIVIDEND POLICY.......................................................... 18
BUSINESS................................................................. 18
Background........................................................... 18
The Technology....................................................... 18
The Products......................................................... 19
Future Products...................................................... 20
Manufacturing........................................................ 20
Sales and Marketing.................................................. 20
Competition - No Patented Technology................................. 21
Employees............................................................ 21
Business Strategy.................................................... 21
Property............................................................. 22
vii
MANAGEMENT............................................................... 23
STATEMENT AS TO INDEMNIFICATION.......................................... 23
EXECUTIVE COMPENSATION................................................... 24
PRINCIPAL SHAREHOLDERS................................................... 24
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS.......................... 25
LITIGATION............................................................... 25
PLAN OF DISTRIBUTION..................................................... 26
DESCRIPTION OF SECURITIES................................................ 26
Units................................................................ 26
Common Stock......................................................... 26
Warrants............................................................. 27
STOCK OPTION PLAN........................................................ 27
The Plan............................................................. 28
LEGAL MATTERS............................................................ 29
EXPERTS.................................................................. 29
FURTHER INFORMATION...................................................... 29
viii
PROSPECTUS SUMMARY
------------------
SLS INTERNATIONAL, INC.
This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in our common stock. You should carefully read the
entire prospectus including "Risk Factors" and the consolidated financial
statements before making an investment decision.
THE COMPANY
-----------
The Company is a loudspeaker company which, through its predecessor, has been
engaged in the manufacturing and installation of sound systems for various
customers. The Company evolved from a retail professional musical instrument
and equipment store over twenty-five years ago and progressed into various
markets within the professional sound reinforcement and commercial lighting
industries. The Company's design specialists engage in the manufacturing and
installation of theatrical and professional sound reinforcement systems and
related products. Through the years, the Company (through its predecessor)
has developed an array of product lines to meet the needs of various
professional sound users.
The Company's executive offices are located at 3119 South Scenic, Springfield,
Missouri, 65807, telephone number (417) 883-4549.
THE OFFERING
------------
The Company is offering 4,000,000 Units for sale hereby, on a "best-efforts, all
or none" basis. The Company is offering the Units for sale commencing the date
of the prospectus until __, 2000 (unless extended to ___, 2000 which date shall
be the "Termination Date"). Each Unit consists of one share of common stock and
two Warrants (A Warrants and B Warrants) each to purchase one share of Common
Stock. The Units are offered at a price of $.25 per Unit. The A Warrant is
attached to the B Warrant but both are detachable from the Common Stock. The A
Warrant is exercisable immediately and during a 6-month term at a price of $.50
per share. The B warrant cannot be detached from the A Warrant nor can it be
exercised unless the A Warrant is theretofore exercised. The B Warrant has a 2-
year term and is exercisable at $3 per share provided the A Warrant is exercised
during its term. If the A Unit is not exercised during its term, the A Warrant
and B Warrant shall become worthless and void. If the Units offered are not
sold during the offering period (as the same may be extended), then all the
funds received in connection with the offering shall be returned to investors
without interest or deduction of any kind. Until the offering has been
completed, all subscription proceeds shall be placed in escrow with Metropolitan
Bank, Springfield, MO as Escrow Agent, to be paid over to the Company upon
completion of the offering. All Units offered must be sold if any are to be
sold.
1
If the offering is completed, there can be no assurance that the maximum
offering will be completed. (See "Plan of Distribution")
USE OF PROCEEDS
---------------
The gross proceeds of the offering will be $1,000,000 if the offering is
completed. After deducting estimated fees and expenses associated with the
offering of $100,000 the Company will receive net proceeds of approximately
$900,000. The net proceeds realized from the offering will be utilized for
inventory, marketing and promotion, product research and development and working
capital. See "Use of Proceeds".
RISK FACTORS
------------
An investment in the shares is highly speculative and involves numerous risks.
Such risks include lack of sufficient working capital, a net working capital
deficit, lack of profitable operations in 1998 and 1999 due to a shift in
operating from direct retail sales and installations to manufacturing and
product development, need for additional financing, losses sustained to date,
competition, dependence upon third parties and certain relationships.
Accordingly, prospective investors should carefully review the risk factor
section of the prospectus (See "Risk Factors").
ESCROW AGENT AND ESCROW ACCOUNT
-------------------------------
Metropolitan Bank is acting as the Escrow Agent for the offering (the "Escrow
Agent"). All proceeds of the offering will be deposited in a non-interest
bearing account at the Escrow Agent's branch office located at P.O. Box 3840
Springfield, Missouri. Until the offering is completed, all proceeds will be
held in escrow (the "Escrow") and will not be available for use by the Company.
Upon the completion of the sale of 4,000,000 Units (the "Offering") the proceeds
will be released from Escrow to the Company and the Company will deliver the
Units purchased to subscribers.
The Escrow will be held until the earlier of ________, 2000 or until all of the
Offering proceeds are received. However, the Company, in its complete
discretion, may extend the offering for an additional thirty (30) days
regardless of whether the Offering is completed by said date, which latter date
shall be the "Termination Date". If the Offering of $1,000,000 is not completed
and all Units are not sold by the Termination Date, then all subscriptions will
be returned to subscribers without interest or deduction.
REGISTRAR AND TRANSFER AGENT
----------------------------
The Company has appointed Standard Registrar & Transfer of Salt Lake City, Utah,
as its transfer agent and Warrant agent with respect to its shares of common
stock and the A and B Warrants.
2
Prior to this offering, there has been no public market for the common stock or
any warrants of the Company. There can be no assurance that any such trading
market in these securities will develop thereafter. The Company is not subject
to the reporting requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934 (the "Exchange Act") and is not presently required to file annual or
quarterly reports with the Securities and Exchange Commission.
PROPOSED NASD BULLETIN BOARD MARKET SYMBOL
------------------------------------------
The Company has proposed that its trading symbol be "SLSI" but no assurance can
be given at this time as to the symbol it may ultimately be allocated by the
National Association of Securities Dealers ("NASD") Bulletin Board.
OUTSTANDING SHARES
------------------
The number of shares of common stock to be outstanding upon completion of this
offering is based upon the number of shares outstanding as of ______, 2000.
Without considering or taking into account the Warrants which form part of the
Units, if the Offering is completed, there will be ____ shares outstanding. The
foregoing number of outstanding shares will increase to the extent the A or B
Warrants are exercised.
SUMMARY CONSOLIDATED FINANCIAL DATA
-----------------------------------
BALANCE SHEET
March 31, 2000 December 31, 1999 December 31, 1998
-------------- ----------------- -----------------
Current Assets $ 196,159 $ 269,481 $ 194,954
Net Fixed Assets $ 40,994 $ 41,190 $ 55,199
Total Assets $ 237,153 $ 310,671 $ 250,153
Current Liabilities $ 390,054 $ 403,607 $ 240,709
Total Shareholders
Equity $ 191,833 $ 132,267 $ 51,880
(Deficit) (Deficit) (Deficit)
STATEMENT OF OPERATIONS
March 31, 2000 December 31, 1999 December 31, 1998
-------------- ----------------- -----------------
Revenues $ 51,576 $ 484,187 $ 1,039, 027
Gross Profit $ 15,484 $ 183,509 $ 424,709
Loss from Operations $ (135,680) $ (285,561) $ (199,415)
Other Income (Expense) $ 1,114 $ 40,264 $ (8,308)
Loss before income tax $ (134,566) $ (245,387) $ (207,723)
Benefit from income tax $ --- $ --- $ (14,797)
Net Loss $ (134,566) $ (245,387) $ (192,926)
3
We have a two-year history of losses and may not be profitable in the future.
We have experienced operating losses since 1998 in our operations (after our
change in operating strategy in 1998), and as of March 31, 2000 have an
accumulated deficit of approximately $191,833. We expect to incur further
operating losses in fiscal 2000. If we do not achieve continued revenue growth
sufficient to absorb our recent and planned expenditures, we could experience
additional losses in future periods. These losses or fluctuations that are
operating results could cause the market value of our stock to decline.
We anticipate that in the future, we will make significant investments in
marketing, product development and capital equipment.
We began developing our speaker line utilizing ribbon driver technology during
1994 and in the fourth quarter of 1998, we changed our overall strategy to
pursue the application of ribbon driver technology as our primary focus. Prior
to changing our business strategy, we installed sound systems for various
customers and rented lighting and sound equipment. Our new business focus and
strategy is to concentrate solely on manufacturing a line of ribbon driver
speakers which will necessarily involve the establishment of the nationwide
dealer-network distribution. This new business may not be successful, and we
cannot be sure that our business model and future operating performance will
bring about the results that we are seeking. Our operating results for the
future periods are subject to all of the risks and uncertainties which are
inherent in the establishment of new business enterprises. Our future operating
results will depend upon, among other things: market acceptance of our ribbon
driver technology; our success in establishing and expanding the distribution
network nationwide and internationally; our success in establishing Ribbon
Driver products as a retail product line; our success in attracting a retaining
strategic partner; our success in attracting and retaining motivated and
qualified personnel, particularly in the technical areas; and our development in
the marketing of new products and ribbon driver technology applications.
PROSPECTUS DELIVERY OBLIGATION
------------------------------
Until _____, 2000 all dealers that affect transactions in the securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect to their unsold allotments or
subscriptions.
4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
-----------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO MARCH 31, 1999
For the three-month interim periods ended March 31, decrease in revenue in
2000 from 1999 resulted from the reorganization of operations and the
concentration by management and employees on building a network of distributors
and sales representatives for wholesale sales rather than the actual self
installation of Company products. Management is concentrating its efforts to
begin production of speakers to be sold via that network.
Increase in the administrative costs resulted from trade show and convention
presentations to prospective dealers.
DECEMBER 31, 1999 COMPARED TO DECEMBER 31, 1998
The Company's revenues for 1999 decreased by 53 percent from 1998 as a
result of the Company completing only the installation for speaker systems that
had been preordered. Beginning in 1999, the Company discontinued seeking to
increase the sales which require installation of their systems and began
establishing relationships with dealers that would sell and install the speaker
systems developed by the Company.
The cost of sales decreased in 1999 by 51 percent from 1998 resulting from lower
sales volumes. The gross profit margin (difference between sales revenue and
cost of sales) decreased by 3 percent because of the decline in installations,
which margins are generally higher than product margins.
General and administrative expense decreased by 25% in 1999 from 1998 resulting
from the company reducing overhead costs due to its change in operations. The
major categories of overhead that were reduced were advertising, salaries and
travel and conventions.
Interest expense increased by 17 percent in 1999 from 1998 resulting from more
loans. The Company sold its Holiday Division resulting in a gain of $48,230
which was included in other income. The division had few sales in 1998 and the
Company believes the resources required in management time and overhead costs
would be better utilized in the speaker business.
There were no income tax benefits in 1999 compared to 1998 when the Company
utilized a loss carryback for a refund of previously paid income tax.
5
LIQUIDITY AND CAPITAL RESOURCES
The Company's current liabilities exceeded its current assets by $134,126
at December 31, 1999. This is a consequence of the Company realigning itself in
the wholesale business rather than as an installer/contractor as well as
deleting assets from its rental department. The Company's business expansion
into the wholesale speaker market has required significant capital resources
which have been funded through the private sale and issuance of capital stock
and notes payable. Such private funding through capital investment is expected
to continue in the foreseeable future. Much of the capital required is expected
to be met with the proceeds from the Company's anticipated public offering of
common stock.
The Company's borrowing relationship with lenders is satisfactory, however, the
Company anticipates using some proceeds from this public offering of its common
stock to repay creditors.
UNCERTAINTIES
There is intense competition in the speaker business with other companies
that are much larger and national in scope and have greater financial resources
than the Company. At present, the Company requires additional capital to
continue its growth in the wholesale speaker market. Based on the high ratings
by sound professionals previously given to the Company's products, management
believes its new speakers will be successful due to the superior technology and
the reception at recent conventions. However, there are no assurances that this
will occur.
RISK FACTORS
------------
This offering involves a high degree of risk. You should carefully consider the
risks and uncertainties described below and the other information in this
prospectus before deciding whether to invest in shares of our common stock. Any
of the following risks could cause the trading price of our common stock to
decline.
RISKS RELATED TO OUR BUSINESS
-----------------------------
WE HAVE A TWO YEAR HISTORY OF LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE.
We have experienced significant operating losses since investing in the
development of ribbon driver technology in 1998 and, as of March 31, 2000, have
an accumulated deficit of approximately $191,833. We expect to continue to
incur operating losses in fiscal 2000. If we do not achieve continued revenue
growth sufficient to absorb our recent and planned expenditures, we could
experience additional losses in future periods. These losses or fluctuations in
our operating results could cause the market value of our common stock to
decline.
6
We anticipate that in the future we will make significant investments in our
operations, particularly to support technological developments and sales
activities and, that as a result, operating expenses are expected to continue to
increase. We intend to make such investments on an ongoing basis, primarily
from cash generated from operations and, to the extent necessary, funds
available from this offering, as we develop and introduce new products and
expand into new markets such as international, direct and OEM markets. If net
sales do not increase with capital or other investments, we are likely to
continue to incur net losses and our financial condition could be materially
adversely affected. Since 1998 we have not been profitable due to the shift in
operating focus, and there can be no assurance that we will achieve or sustain
profitability on a quarterly or annual basis. Our new business may not be
successful.
As of March 31, 2000, the Company had current assets (cash and assets readily
capable of liquidating into cash) of $196,159 and current liabilities (amount
presently owing and amounts payable from existing debt within the current year)
of $390,054 resulting in a working capital deficit of $193,895. If the offering
is not promptly completed, if the Company does not otherwise obtain funds from
independent sources and continues operating as strictly a manufacturing Company,
the Company's viability as a business may cease.
OUR FUTURE SUCCESS IS UNCERTAIN BECAUSE RIBBON DRIVER TECHNOLOGY IS NEW TO OUR
BUSINESS.
We began developing the Ribbon Driver base loudspeaker systems during 1994 and
in 1998, we changed our overall strategy to pursue the application of the Ribbon
Driver technology as our primary focus. Prior to changing our business strategy,
we marketed and installed sound systems for various customers and marketed and
rented lighting equipment. Our new business focus and the strategic
manufacturing of lines of Ribbon Driver speakers will involve establishment of a
nationwide dealer network for distribution. In addition, because we have only
recently begun to focus our business on the development and application of the
Ribbon Driver technology, we cannot be sure that our business plan and future
operating performance will yield the results that we seek. Our operating results
for future periods are subject to all of the risks and uncertainties inherent in
the establishment of new business enterprises. Our future operating results will
depend upon, among other factors:
- market acceptance of our Ribbon Driver technology and products;
- the level of product technology and price competition for our Ribbon
Driver products;
- our success in establishing and expanding our distribution channels;
- our success in establishing Ribbon Driver products as a retail product
line;
- our success in attracting and retaining strategic partners;
- our success in attracting and retaining motivated and qualified
personnel, particularly in the technical area; and
7
- our development and marketing of new products and Ribbon Driver
technology applications.
WE MAY NOT ACHIEVE ANTICIPATED REVENUES IF MARKET ACCEPTANCE OF OUR RIBBON
DRIVER TECHNOLOGY IS NOT FORTHCOMING.
We believe that revenues from our ribbon driver product line will account for a
material portion of our revenues for the foreseeable future. Our future
financial performance will depend on market acceptance of our Ribbon Driver
technology and products. The market for distortion free sound systems is
characterized by ongoing technological developments, frequent new product
announcements and introductions, evolving industry standards and changing
customer requirements. As a result, if our Ribbon Driver technology and product
line do not achieve widespread market acceptance, we may not achieve anticipated
revenues.
Our future financial performance also depends in large part on the existence and
continued growth of market demand for the Ribbon Driver loudspeaker products.
There can be no assurance that the market or demand for Ribbon Driver
loudspeaker products, if any, will develop and continue to grow. Any failure of
this market to develop or grow or our failure to satisfy market needs could have
a material adverse effect on us. In addition, demand for our products is
primarily driven by the underlying market demand for distortion free
loudspeakers, and should this demand diminish, we may not achieve anticipated
revenues.
OUR OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS, AND AN
UNANTICIPATED DECLINE IN REVENUES MAY CAUSE OUR STOCK PRICE TO FALL.
It is likely that in some future quarter or quarters our operating results will
be below the expectations of securities analysts and investors. If a shortfall
in revenues occurs, the market price for our common stock may decline
significantly. The factors that may cause our quarterly operating results to
fall short of expectations include:
- our ability to develop and market our new Ribbon Driver loudspeaker
products in a timely manner;
- the timing of our, and our competitors, new product or technology
introductions and product enhancements;
- market acceptance of our Ribbon Driver loudspeaker products and
technology;
- the size and timing of customer orders;
- difficulties with new Ribbon Driver production implementation or supply
chain;
- seasonality of sales;
- product defects and other product quality problems due to the recent
development of our Ribbon Driver technology;
8
- our ability to attract and retain strategic partners to continue the
advances necessary for Ribbon Driver technology;
- the degree and rate of growth of the markets in which we compete and the
accompanying demand for our loudspeaker products;
- our ability to expand our marketing forces and build the required
infrastructure to meet anticipated growth; and
- our suppliers' ability to perform under their contracts with us.
Many of these factors are beyond our control. For these reasons, you should not
rely on period-to-period comparisons of our financial results to forecast our
future performance.
WE MAY NOT BE ABLE TO ADEQUATELY MANAGE OUR ANTICIPATED GROWTH, WHICH COULD
IMPAIR OUR EFFICIENCY AND NEGATIVELY IMPACT OUR OPERATIONS.
We may not be able to manage our growth effectively, which could impair our
efficiency, reduce the quality of our solutions, impair further growth and harm
our business, financial condition and operating results. If we do not
effectively manage this growth, we may not be able to operate efficiently or
maintain the quality of our products. Either outcome could harm our operating
results. This new strategy is expensive and places a significant strain on our
personnel and other resources. To manage our anticipated expanded operations
effectively, we will need to further improve our operational, financial and
management systems and successfully hire, train, motivate and manage our
employees.
OUR FAILURE TO RESPOND TO RAPID TECHNOLOGICAL CHANGES MAY IMPAIR OUR OPERATING
RESULTS.
The market for the Ribbon Driver product line is new and emerging, and is
characterized by rapid technological advances, changing customer needs and
evolving industry standards. Accordingly, to realize our expectations regarding
our operating results, we depend on our ability to:
- develop, in a timely manner, new products and services that keep pace
with developments in technology;
- meet evolving customer requirements; and
- enhance our current product and service offerings and deliver those
products and services through appropriate distribution channels.
We may not be successful in developing and marketing, on a timely and cost-
effective basis, either enhancements to our Ribbon Driver technology products or
new products which respond to technological advances and satisfy increasingly
sophisticated customer needs. If we fail to introduce new products, our
operating results may suffer. In addition, if new industry standards emerge that
we do not anticipate or adapt to, our products could be rendered obsolete and
our business could be materially harmed. Alternatively, any delay in the
development of technology upon which our products are based could result in our
inability to introduce new products as planned. The success and marketability
of technology developed by others is beyond our control.
9
DEPENDENCE UPON DISTRIBUTORS WITHOUT AN IN-HOUSE SALES FORCE CAN CAUSE ADVERSE
OPERATING RESULTS.
Because our expenses are based on our revenue forecasts, a substantial reduction
or delay in sales of our products to, or unexpected returns from distributors,
or the loss of any significant customer could harm our business. Although our
largest customers may vary from period-to-period and we expect to diversify our
customers in the future, our operating results for any given period may continue
to fluctuate.
There can be no assurance that our distributors will continue their current
relationships with us or that they will not give higher priority to the sale of
other products, which could include products of our competitors. In addition,
effective distributors must devote significant technical, marketing and sales
resources to an often lengthy sales cycle. There can be no assurance that our
current and future distributors will devote sufficient resources to market our
products effectively or that economic or industry conditions will not adversely
affect such distributors. A reduction in sales efforts or a discontinuance of
distribution of our products by our distributors could lead to reduced sales. In
addition, because we intend to sell a significant portion of our products
through distributors, it is difficult for us to monitor end user demand for our
products on a current basis. For example, third-party distributors may place
large initial orders which may not be indicative of long-term end user demand.
Our operating results could also be materially adversely affected by changes in
distributors' inventory strategies, which could occur rapidly and, in many
cases, may not be related to end user demand. New products may require different
marketing, sales and distribution strategies than those for our current
products. There can be no assurance that our distributors will choose or be able
to effectively market these new products or to continue to market our products.
OUR SUCCESS DEPENDS IN PART UPON SALES TO DISTRIBUTORS, WHOSE UNPREDICTABLE
DEMANDS AND REQUIREMENTS MAY SUBJECT US TO POTENTIAL ADVERSE REVENUE
FLUCTUATIONS.
Demand for our products is subject to many risks beyond our control, including,
among others:
- competition faced by our distributors in their particular end markets;
- market acceptance of the Ribbon Driver technology and products by our
OEM customers;
- technical challenges which may or may not be related to the components
supplied by us;
- the technical, sales and marketing and management capabilities of our
distributors' customers; and
- the financial and other resources of our distributors.
10
INTENSE COMPETITION IN THE MARKET UTILIZING COMPRESSION DRIVER PRODUCTS COULD
PREVENT US FROM INCREASING REVENUE AND SUSTAINING PROFITABILITY.
Although the market for our Ribbon Driver loudspeaker products is relatively new
and emerging and we presently have few, if any, direct competitors, we expect
that the markets for our products will become increasingly competitive. The
market for sound enhancement products in general is intensely competitive and
sensitive to new product introductions or enhancements and marketing efforts by
industry participants. We expect to experience increasing levels of competition
in the future. The principal competitive factors affecting the markets for our
product offerings include, corporate and product reputation, innovation with
frequent product enhancement, breadth of integrated product line, product
design, functionality and features, product quality and performance, ease-of-
use, support and price.
Although we believe that our products compete favorably with respect to such
factors, there can be no assurance that we can maintain our competitive position
against current or potential competitors, especially those with greater
financial, marketing, service, support, technical or other competitive
resources.
We currently compete primarily with the internal design efforts of larger and
more established companies that have larger technical staffs, more established
and larger marketing and sales organizations and significantly greater financial
resources than we do. There can be, however, no assurance that such competitors
will not be able to respond more quickly to new or emerging technologies and
changes in customer requirements, devote greater resources to the development,
sale and promotion of their products than we do or develop products that are
superior to our products or that achieve greater market acceptance.
Our future success will depend, in part, upon our ability to increase sales in
our targeted markets. There can be no assurance that we will be able to compete
successfully with our competitors or that the competitive pressures we face will
not have a material adverse effect on us. Our future success will depend in
large part upon our ability to increase our share of our target market and to
sell additional products and product enhancements to existing customers. Future
competition may result in price reductions, reduced margins or decreased sales.
See "Business -- Competition."
IF WE ARE UNABLE TO HIRE ADDITIONAL QUALIFIED PERSONNEL AS NECESSARY OR IF WE
LOSE KEY PERSONNEL, WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR BUSINESS OR
ACHIEVE OUR OBJECTIVES.
We believe our future success will depend in large part upon our ability to
identify, attract and retain highly skilled managerial, engineering, sales and
marketing, finance and operations personnel. Competition for such personnel in
the sound enhancement industry is relatively intense, and we compete for such
personnel against numerous companies, including larger, more established
companies with significantly greater financial resources than us. There can be
no assurance we will be successful in identifying, attracting and retaining such
personnel.
11
Our success also depends to a significant degree upon the continued
contributions of our key management, engineering, sales and marketing, finance
and manufacturing personnel, many of whom would be difficult to replace. In
particular, we believe that our future success depends on John Gott, Chief
Executive Officer, Richard L. Norton, Executive Vice President, and Tom
Harrison, Engineer. We presently do not maintain key person life insurance on
any of our executive officers. We presently do not have employment contracts
covering any of our senior management. The loss of the services of any of our
key personnel, the inability to identify, attract or retain qualified personnel
in the future or delays in hiring required personnel could make it difficult for
us to manage our business and meet key objectives, such as timely product
introductions.
The laws of some foreign countries do not protect or enforce proprietary rights
to the same extent as do the laws of the United States. There can be no
assurance that our competitors will not independently develop technology similar
to existing proprietary rights of others. We expect that sound enhancement
products may be subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products in
different industry segments overlaps. There can be no assurance that third
parties will not assert infringement claims against us in the future or, if
infringement claims are asserted, that such claims will be resolved in our
favor. Any such claims, with or without merit, could be time-consuming, result
in costly litigation, cause product shipment delays or require us to enter into
royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms favorable to us, if at all. In addition,
litigation may be necessary in the future to protect our trade secrets or other
intellectual property rights, or to determine the validity and scope of the
proprietary rights of others.
Such litigation could result in substantial costs and diversion of resources.
See "Business -- Proprietary Rights."
OUR ABILITY TO INCREASE INTERNATIONAL SALES AND MANAGE OUR INTERNATIONAL
OPERATIONS IS SUBJECT TO A NUMBER OF RISKS BEYOND OUR CONTROL.
Additional expansion of our sales in foreign markets in a timely and cost-
effective manner could have a positive material effect on us. However, there can
be no assurance we will be able to maintain or increase international market
demand for our products. Our international business involves a number of risks,
including:
- the impact of possible recessionary environments in foreign economies;
- political and economic instability;
- exchange rate fluctuations;
- customers;
- difficulty in managing distributors or sales representatives;
- increased sales and marketing expense;
12
- operations;
- unexpected changes in regulatory requirements;
- export restrictions and availability of export licenses;
- tariffs and other trade barriers;
- seasonal reduction in business activities;
- complex foreign laws and treaties including employment laws; and
- potentially adverse tax consequences.
Currency exchange fluctuations could have a material adverse effect on our sales
denominated in U.S. currency as a decrease in the value of foreign currencies
relative to the U.S. dollar could make our pricing more expensive than, or non-
competitive with, products priced in local currencies. Additionally, due to the
number of foreign currencies involved in our international sales and the
volatility of foreign currency exchange rates, we cannot predict the effect of
exchange rate fluctuations with respect to such sales on future operating
results. To the extent we implement hedging activities in the future with
respect to foreign currency transactions, there can be no assurance that we will
be successful in such hedging activities.
Moreover, certain of our customer purchase agreements are governed by foreign
laws, which may differ significantly from U.S. laws. Therefore, we may be
limited in our ability to enforce our rights under such agreements and to
collect amounts owed to us should any customer refuse to pay such amounts. In
addition, we are subject to the Foreign Corrupt Practices Act which may place us
at a competitive disadvantage with respect to foreign companies that are not
subject to that act.
In January 1999, the new "Euro" currency was introduced in European countries
that are part of the European Monetary Union, or EMU. During 2002, all EMU
countries are expected to completely replace their national currencies with the
Euro. Because a significant amount of uncertainty exists as to the effect the
Euro will have on the marketplace and because all of the final rules and
regulations have not yet been defined and finalized by the European Commission
regarding the Euro currency, we cannot determine the effect this will have on
our business.
RISKS RELATED TO THE OFFERING
-----------------------------
OUR EXECUTIVE OFFICERS AND DIRECTORS WILL CONTINUE TO HAVE SUBSTANTIAL CONTROL
OVER OUR BUSINESS AFTER THE OFFERING WHICH COULD DELAY OR PREVENT A MERGER OR
OTHER CHANGE IN CONTROL OF US.
Upon completion of this offering, our principal stockholders, executive
officers, directors and affiliated individuals and entities together will
beneficially own approximately 78% of the outstanding shares of common stock.
As a result, these stockholders, acting together, may be able to influence
significantly and possibly control most matters requiring approval by our
stockholders, including approvals of:
13
- amendments to our certificate of incorporation;
- mergers;
- sale of all or substantially all of our assets;
- going private transactions; and
- other fundamental transactions.
In addition, our certificate of incorporation does not provide for cumulative
voting with respect to the election of directors. Consequently, our present
directors, executive officers, principal stockholders and their respective
affiliates may be able to control the election of the members of the board of
directors. Such a concentration of ownership could have an adverse effect on the
price of the common stock, and may have the effect of delaying or preventing a
change in control, including transactions in which stockholders might otherwise
receive a premium for their shares over then current market prices.
FUTURE CHANGES TO PROVISIONS OF OUR CHARTER DOCUMENTS MAY HAVE ANTI-TAKEOVER
EFFECTS THAT COULD DISCOURAGE A CHANGE IN CONTROL AND REDUCE THE MARKET PRICE OF
OUR COMMON STOCK.
Some provisions of our certificate of incorporation and bylaws could make it
more difficult for a third party to acquire us even if a change of control would
be beneficial to our stockholders. These provisions include:
- authorizing the issuance of preferred stock without common stockholder
approval;
- prohibiting cumulative voting in the election of directors; and
- limiting the persons who may call special meetings of stockholders.
See "Description of Capital Stock."
AS OUR COMMON STOCK HAS NOT BEEN PUBLICLY TRADED, OUR STOCK MAY LACK LIQUIDITY
OR MAY BE EXTREMELY VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT OR
ABOVE THE OFFERING PRICE.
Prior to this offering, there has been no public market for our common stock.
The initial public offering price has been determined arbitrarily. You may not
be able to resell your shares at or above the initial public offering price.
Equity markets have recently experienced significant price and volume
fluctuations that are unrelated to the operating performance of individual
companies. These broad market fluctuations may cause the market price of our
common stock to decline regardless of our performance.
14
OUR MANAGEMENT WILL HAVE BROAD DISCRETION TO USE THE PROCEEDS OF THIS OFFERING
AND THEIR USES MAY NOT YIELD A FAVORABLE RETURN.
While we intend to use the net proceeds from this offering principally for
working capital needs and general corporate purposes, including the repayment of
approximately $590,000 of outstanding debt, product and market development,
acquisitions or investments in complementary businesses or products and the
right to use complementary technologies, most of the net proceeds of this
offering have not been allocated for precise or specific uses. Our management
will have broad discretion to spend the proceeds from this offering in ways with
which stockholders may not agree. The failure of our management to use these
funds effectively could result in unfavorable returns. This could have
significant adverse effects on our financial condition and could cause the price
of our common stock to decline. See "Use of Proceeds."
THE PURCHASERS IN THE OFFERING WILL IMMEDIATELY EXPERIENCE SUBSTANTIAL DILUTION
IN NET TANGIBLE BOOK VALUE.
The initial public offering price is substantially higher than the net tangible
book value per share of the outstanding common stock immediately after the
offering. As a result, purchasers of shares will experience immediate and
substantial dilution of approximately $.21 in net tangible book value per share,
or approximately 84% of the initial public offering price of $.25 per share. In
contrast, existing stockholders paid an average price of $.03 per share.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
Upon completion of this offering, we will have 18,166,528 shares of common stock
outstanding. All the shares sold in this offering can be freely traded. Certain
amounts of the remaining 14,166,528 shares of common stock outstanding after
this offering (a total of _____ shares) will become available for sale pursuant
and subject to compliance with Rule 144 promulgated under the Securities Act of
1933, as amended. Such remaining shares will become available at various times
thereafter upon the expiration of one-year from the date of initial acquisition
of the shares. Sales of a substantial number of shares of common stock in the
public market after this offering or after the expiration of the holding periods
could cause the market price of our common stock to decline. See "Shares
Eligible for Future Sale" for a discussion of potential future sales of our
common stock.
15
FORWARD-LOOKING STATEMENTS
--------------------------
This prospectus includes forward-looking statements that involve risks and
uncertainties. These forward-looking statements include statements under the
captions "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business" and elsewhere in this prospectus. You should not rely on these
forward-looking statements which apply only as of the date of this prospectus.
These statements refer to our future plans, objectives, expectations and
intentions. We use words such as "believe," "anticipate," "expect," "will,"
"intend," "estimate" and similar expressions to identify forward-looking
statements. This prospectus also contains forward-looking statements attributed
to third parties relating to their estimates regarding the growth of certain
markets. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this prospectus. Our actual
results could differ materially from those discussed in these forward-looking
statements. Factors that could contribute to these differences include those
discussed in the preceding pages and elsewhere in this prospectus.
DILUTION
--------
Net tangible book value per share represents the amount of our total tangible
assets less total liabilities, divided by the total number of shares of common
stock outstanding. The Company's net tangible book value at March 31, 2000 was
or$(191,833) or $(.01), per share of Common Stock. Dilution per share represents
the difference between the offering price of $.25 per share and the net tangible
book value per share of common stock, as adjusted, immediately after this
offering.
After giving effect to the completion of the Offering and after deducting
commissions (if any) and offering expenses estimated to be $100,000, our pro
forma net tangible book value will be $708,167 or $.04 per share. This
represents an immediate increase in pro forma net tangible book value of $.05
per share to existing stockholders and an immediate dilution of $.21 per share,
or approximately 84% of the offering price, to investors purchasing shares of
common stock in the Offering.
Public Offering Price per share $ .25
Net Tangible Book Value per share before Offering $ (.01)
Increase Per Share attributable to sale of shares hereby $ .01
Pro-Forma Net Tangible Book Value after Offering $ .04
Dilution per share to Public Investors $ .21
The following table gives effect to the recent reorganization and forward stock
split and summarizes as of March 31, 2000, the number of shares purchased as a
percentage of the Company's total outstanding shares, the aggregate amount paid
for such shares, the aggregate amount paid figured as a percentage of the total
amount paid, and the average amount paid per share for such shares (see "Certain
Transactions with Management and Others"). For purposes of this table, the sale
to the public of the shares offered hereby, is assumed to have taken place on
March 31, 2000.
16
Total Paid
Percent of as Percentage Average
Company's Total of Total Amount
Shares Total Amount Amount Paid Per
Shareholders Purchased* Shares* Paid* Received* Share
-------------------- ---------- ---------- ---------- ------------- --------
Present Shareholders 14,271,423 78 % $ 460,833 32 % $ .03
Public 4,000,000 22 % $1,000,000 68 % $ .25
-----
*The foregoing gives no effect or allowance for future possible exercise of the
warrants forming part of the Units.
USE OF PROCEEDS
---------------
The total proceeds to be received by the Company from the sale of 4,000,000
Units shall be $1,000,000. The Units offered hereby shall produce estimated
net proceeds of $900,000. The preceding figure was arrived at after estimated
deductions of $25,000 for accounting, $60,000 for legal fees, $5,000 for
printing, $5,000 for blue-sky fees and expenses, and $5,000 for miscellaneous
expenses. The net proceeds of the Offering are estimated to be utilized, as
follows:
Amount % of Net Proceeds
---------- -----------------
Reduction of Debt $ 457,000 50.78 %
Equipment $ 50,000 5.56 %
Sales, Marketing & Advertising $ 60,000 6.67 %
R & D $ 25,000 2.77 %
Inventory $ 128,000 14.22 %
Working Capital $ 180,000 20.00 %
---------- -----------------
TOTAL NET PROCEEDS $ 900,000 100.00 %
========== =================
The amounts set forth above are estimates developed by management of the Company
for allocation of net proceeds of this Offering based upon the Company's current
plans and prevailing economic and industry conditions. Although the Company does
not currently contemplate material changes in the proposed use of proceeds set
forth above, to the extent that management of the Company finds that adjustments
are required, the amounts shown may be adjusted among the uses indicated above.
The Company's proposed use of proceeds is subject to changes in general,
economic and competitive conditions, timing and management discretion, each of
which may change the amount of proceeds expended for the purposes intended. The
proposed application of proceeds is also subject to changes in market conditions
and the Company's financial condition in general. See "Risk Factors - Risks
Related to the Offering." Changes in general, economic, competitive and market
conditions and the Company's financial condition would include, without
limitation, the occurrence of a national economic slowdown or recession, a
significant change in the industry and the environment in which the Company
operates, and/or regulatory changes in general. While management of the Company
is not currently aware of the existence or pending threat of any of the
foregoing reasons, the Company provides you no assurance that one or more of
such events will not occur. See "Risk Factors - Risks Related to the Offering"
17
While we provide you with no assurance, the Company believes that the net
proceeds of the Offering, together with operating revenues, will be adequate to
satisfy the Company's working capital needs for approximately the next six (6)
month period. The Company anticipates the exercise of the A Warrants for an
additional 2,000,000 for additional working capital. No assurance can be given
that the A warrants shall be exercised or, failing such exercise, that the
Company will be able to raise additional working capital from other private
sources or from lending institutions.
DIVIDEND POLICY
---------------
We have never declared or paid cash dividends on our common stock. We currently
intend to retain all available funds and any future earnings for use in the
operation of our business and do not anticipate paying any cash dividends in the
foreseeable future.
BUSINESS
--------
BACKGROUND
----------
SLS International, Inc. ("the Company") and its predecessor, Sound & Lighting
Specialists, Inc. had been engaged in the business of manufacture and
installation of sound systems for various customers (corporate and individual)
for the past 28 years. It has also engaged to some degree in lighting sales and
equipment rental. Over the past four years, the Company reduced its installation
jobs and completed development of its ribbon driver technology and the Company
is now concentrating solely on manufacturing. The Company intends to establish
a nationwide dealer network to distribute the completed product. (See "Business-
Sales and Marketing"). Towards that end, the Company has entered into agreements
with five sales organizations having aggregate manpower of 15 sales
representatives covering 2/3 of the United States.
THE TECHNOLOGY
--------------
Since 1998, the Company reduced the number of installations of its equipment in
order to concentrate on and develop its Ribbon Driver technology ("RD
Technology") to provide highest quality sound systems. The Company has
developed a speaker line utilizing RD Technology providing virtually distortion
free sound and speakers which are capable of producing exceedingly superior
levels of such sound before feedback. The speaker and sound industry has been
using compression drivers (as opposed to ribbon drivers) for their power, which,
although efficient in their output, (decibels) were vulnerable to distortion.
In the past, ribbon driver technology did not have the power of compression
driver technology and was generally suitable for high quality "hi-fi" home
systems due to an inability of the Ribbon Driver to produce the commercially
required SPL (decibels). However, the Company's recently developed RD
Technology involving magnets and new high temperature plastics (in the element)
the decibel output has now been increased five fold over the prior ribbon driver
systems and with substantial reliability.
18
The frequency response of the ribbon driver is smooth and can produce superior
musical detail than the compression driver. Since the production lines of the
Company's competing manufacturers are almost universally tooled for compression
driver equipment, Management believes there is a significant window of
opportunity to establish a niche, sophisticated expensive market for its speaker
line. The Company's speakers already use the RD Technology. Most of its
competitors use compression drivers due to the expense required for re-tooling
in order to convert.
THE PRODUCTS
------------
The Company has three sound system product lines: (a) the Professional
Contractor Speaker System Line (more expensive); (b) the Universal Soldier
Speaker System line (less expensive); and (c) The Home Theater Speaker System
Line.
The Professional Contractor Speaker System line consists of 18 different models
of speaker systems, each model consisting of a speaker cabinet and components
(woofers and ribbon drivers). This line, the cabinets of which are generally
manufactured by the Company, is usually sold to large contractors and
installed for churches, theaters, school auditoriums, casinos, night clubs and
touring production companies. The Company has now commenced manufacturing its
own ribbons (at significant cost savings to enhance competitive status) but the
woofers are still manufactured by non-affiliated manufacturers which manufacture
to the Company's specifications.
The Universal Soldier Speaker System consists of lower cost speakers designed to
be sold by music stores for orchestras, disc jockeys and the less expensive
commercial market. There are 8 models of different size, with lesser expensive
components and varying outputs of sound (decibels) which are not equal to the
quality and sound output of the Professional Contractors Speaker System Line.
The Company has recently completed a new line of loudspeakers for the Home
Theater market. Management believes that the home theater market presents a
substantial business opportunity due to positive responses at recent trade
shows. Management intends to direct a substantial effort to capture an
appropriate market share. The Company's Home Theater Loudspeaker System consists
of 4 models which utilize the smallest model of the Company's Professional
Contractor Loudspeaker System as their basis. The Company manufactures the
cabinetry, and soon the ribbons for this system, which are designed for board
room and home. The home theater market is a new and growing market which
requires equipment utilizing "surround-sound" amplification technology.
Virtually all current movies are now produced in "surround-sound" which
encompasses 5 channels of sound plus a sub-woofer system. Management believes it
will be able to compete effectively in this new area based upon the quality of
the product and cost-effectiveness. (See "Competition").
19
FUTURE PRODUCTS
---------------
The Company is currently re-packaging certain models of its Professional
Contractor Sound Systems for the cinema and movie theater market which has been
generally considered a large market in the loudspeaker industry. Management
believes the RD Technology offers an opportunity due to the advantage of hi-
fidelity, low distortion sound, competitive price and accurate speech
reproduction presently not available under today's compression driver
technology. In effect, since the speakers are usually not displayed to or in
view of the public in a typical movie house, the Company has been able to re-
package the models with less costly cabinetry and other components and thereby
provide the Company's representatives with a cost advantage in marketing. A
total of 10 models have been repackaged for this line. (See " Sales &
Marketing").
MANUFACTURING
-------------
The Company generally manufactures its own cabinets for its product lines, and
on occasion contracts certain models for manufacture by established local and
other woodcrafters who construct the cabinetry to the Company's specifications.
The ribbon drivers have in the past been purchased by the Company from two non-
affiliated manufacturers in Canada and Holland. The Company is presently in the
process of tooling for production of its own ribbon driver at a meaningful
reduction in cost to us. The Company's sources of supply of component sub-parts
are competitively priced and there is a sufficient number of other sources
available to the Company should the need arise for additional components or if
there occurs a termination of existing relationships with current suppliers.
The Company presently obtains most of its woofers from a non-affiliated Canadian
Company which produces them according to the Company's specifications.
SALES AND MARKETING
-------------------
As a result of the recent reorganization of the Company whereby it no longer
engages in installation but is solely involved with manufacturing and sale of
its product lines, the Company is in the process of establishing a network of
distributors to cover the territorial United States. As of the date of this
Prospectus, the Company has engaged 5 sales organizations with an aggregate
total of 15 sales representatives which cover two-thirds of the United States in
their representation. Management expects to establish additional sales
organizations within 6 months from the date of this Prospectus. The Company
trains the representatives of each organization so that customer questions and
concerns may be more easily dealt with. The Company is always available to
respond to inquiries of customers and potential customers on the manufacturing
level if and when required.
Although the Company is small in comparison to the industry leaders, it is
seeking the smaller niche market consisting of commercial and residential
customers more interested in a greater perfection in sound than in a brand name.
20
COMPETITION - NO PATENTED TECHNOLOGY
------------------------------------
The Company's main competitors are JBL, EAW, Meyer Sound, Turbosound, and
Renkus-Heinz, all of which have substantially greater assets and financial
resources than the Company. Except for Meyer Sound and Renkus-Heinz, the above
competitors compete in both the higher priced, more sophisticated line of
loudspeaker systems (Professional Contractor Speaker Systems) and lower priced,
less sophisticated line of loudspeaker systems (Universal Soldier Speaker
Systems). Meyer Sound and Renkus-Heinz are engaged only in the more expensive
speaker systems. All of the above competitors utilize the compression driver
technology in their sound systems. However, although the Company's ribbon
driver products are relatively new, the Company does not have a patent and the
nature of the market for sound enhancement products is highly competitive and
sensitive to new product introductions. As a result, the Company believes it
may experience increasing competition in the future. Future competitive factors
include corporate and product reputation, innovation with frequent product
enhancement, expansion of integrated product line, product design, functionality
and features, product quality, performance, ease-of-use, support and price.
Although we believe that our products compete favorably with respect to such
factors, there can be no assurance that we can maintain our competitive position
against current or potential competitors, especially those with greater
financial, marketing, service, support, technical or other competitive
resources.
Our future success will depend, in part, upon our ability to increase sales in
our targeted markets. There can be no assurance that we will be able to compete
successfully with our competitors or that the competitive pressures we face will
not have a material adverse effect on us. Our future success will depend in
large part upon our ability to increase our share of our target market and to
sell additional products and product enhancements to existing customers.
However, future competition may result in price reductions, reduced margins or
decreased sales.
EMPLOYEES
---------
The Company has a total of seven employees of which two are executive, one
administrative and four are technical. As the need has arisen in the past, the
Company has employed temporary and part-time employees to complete production
and fill orders. There is presently no labor union contract between the Company
and any Union and the Company does not anticipate unionization of its personnel
in the foreseeable future.
BUSINESS STRATEGY
-----------------
Experience has shown management that by maintaining consistent contact with
distributors, customers and others in the industry and continued marketing
through conventions and trade magazines, additional business will result.
Management believes, although it is not able to give assurance, that the
distributor/sales representative network will immediately generate revenue and
21
is expected to be the primary source of business in the year 2000. In addition,
the sales representatives will enable the Company to monitor the effectiveness
of the marketing program. Management believes that the Company's ability to
manufacture the commercial ribbon drivers at less cost (than those incurred in
the manufacture of the compression drivers) and at 1/8 the cost of the ribbon
drivers purchased to develop the market acceptance. The foregoing and the
resulting lack of distortion of sound in the Company's speaker systems creates a
competitive advantage for the Company to establish its place in the commercial
professional loudspeaker market segment that seeks quality of sound at
competitive prices.
The initial concentration shall be in the growing market area of church
construction and cinema theater construction. The larger speakers currently
manufactured by the Company utilizing the RD Technology have been specifically
designed for utilization in the church and cinema market segments.
The Company will continue advertising in trade journals and attending industry
conventions to maintain its image as a key company in the industry in the U.S.
and internationally. The sales through the dealer network with the new less
costly ribbon driver are expected to allow larger margin of profits as well as
enhance competitiveness. However, although management is confident, it cannot
assure or predict profits from distributor sales or any other business activity.
At the appropriate time in the Company's development of its market segment (when
inventory levels are satisfactory and sales are meeting management's
projections), management intends to investigate possible strategic alliances
with key industry participants to strengthen the Company's image, product
components and distribution pattern. However, there is presently no
relationship with any potential industry candidate under negotiation and
management is unable to give any assurances that a future alliance candidate
opportunity will present itself, or, if presented, will result in an alliance.
If an alliance is developed, we are not able to assure that such alliance will
positively effect the Company's operations and profits.
PROPERTY
--------
The company does not own any real property. It presently leases 12,000 square
feet of office and factory space at its current address from a non-affiliated
landlord. The lease is due to expire on August 31, 2001, but the Company has
an option to renew. The Company has been leasing on a month-to-month basis
with the landlord for the past six years. The monthly rental is presently
$2,650. The Company utilizes approximately 1,000 square feet of space for
office and administrative facilities. The balance of space is divided into
3,000 square feet for inventory space and 8,000 square feet for factory space.
Management believes its current manufacturing space is sufficient for its
projected operations. However, although the Company has no plans to relocate
its facility, should the occasion arise to do so, there is ample factory and
office space available at other locations in the region at similar or
competitive rates.
22
MANAGEMENT
----------
The following table sets forth the names, ages and offices of the Company's
executive officers and directors:
Name Age Office
------------------ --- -----------------------------
John M. Gott 50 President, CEO, CFO, Director
Richard L. Norton 43 VP/Production, Director
*Robert Cooper resigned his position as Treasurer, CFO and director on July 24,
2000 to assume a teaching position at Northwest Missouri State University.
John M. Gott, President of the Company, has assumed Mr. Cooper's position as
Treasurer.
---
JOHN M. GOTT, the company's Chief Executive Officer, Founder and Director,
founded the company and left the company's predecessor, Sound and Lighting
Specialists, in 1994, and has acted as President since its inception. In that
capacity he spearheaded the company's growth with respect to the sale and
installation of sound and lighting systems across the world, including Carnegie
Hall and Disney World in Tokyo. In 1989 Mr. Gott was selected as Exporter of
the Year for the State of Missouri. He has been the primary salesman for the
Company, as well as the designer and marketer of most of the Company's products.
After two and a half years of College at SMSU wherein he studied business and
music, he commenced proprietorship as the owner of a retail music store which
was the predecessor to Sound and Lighting Specialists, Inc., the Company's
predecessor. Mr. Gott is single and is the father of two children.
RICHARD L. NORTON, originally joined the predecessor company in 1986 as an
employee and then acceded to the position of Production Manager of the Company
as it expanded. Mr. Norton was co-founder of the Company in 1994, and has
served as production manager and installer of Sound and Lighting Systems to
date. Mr. Norton is now the Company's vice-president in charge of production.
He attended Drury College and received his bachelors degree in 1988, with a BS
in business administration. He is a writer and has edited material for five
books concerning the Civil War. He is married and the father of four children.
THOMAS HARRISON, has been with the Company since 1994 as the Chief Engineer. He
has a strong background in the sound business and has developed systems for
others prior to coming with SLS and has over twenty years experience in the
industry. He is responsible for new technology and product development.
STATEMENT AS TO INDEMNIFICATION
-------------------------------
Section 145 of the Delaware General Corporation Law provides for indemnification
of our officers, directors, employees and agents. Complete disclosure of this
statute is provided in Part II hereof.
23
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling us pursuant to the
provisions in the Company's By-Laws, we have been informed that in the opinion
of the Commission such indemnification is against public policy as expressed in
the Securities Act and is therefore, unenforceable.
EXECUTIVE COMPENSATION
----------------------
The following summarizes for the fiscal years indicated, the principal
components of compensation for the Company's Executive Officers:
ANNUAL COMPENSATION
-------------------
Other Annual
Name & Principal or Medical
Position Year Salary Bonus Compensation Options Payments Awards
----------------- ---- -------- ----- ------------ ------- -------- ------
John M. Gott 1999 $ 49,470 -- $ 1,602 -- -- --
President
Richard L. Norton 1999 $ 39,322 -- $ 5,073 -- -- --
Vice President
---
Each of the directors is also an executive officer and is compensated as such.
The Company intends to pay future outside directors who are not officers
reasonable and customary fees for their services as directors and for
attendance, in person or by telephone, at each meeting of the Board of
Directors, but not for any committee meetings. There is presently no audit,
financing or nominating committee of the Company.
PRINCIPAL SHAREHOLDERS
----------------------
The following table sets forth certain information as of March 31, 2000 with
respect to the beneficial ownership of the Company's common stock by all persons
known by the Company to be beneficial owners of more than 5% of its outstanding
shares of its common stock, by directors who own common stock and all officers
and directors as a group:
# of common Percent ownership Percent ownership
shares prior to sales of after sale of
Name & Address owned Units by Company* Units by Company*
------------------------- ----------- ----------------- -----------------
John M. Gott 7,160,192 50.17 % 39.19 %
1020 S. Pickwick
Springfield, MO 65804
Richard L. Norton 3,420,544 23.97 % 18.72 %
818 N. Forest
Springfield, MO 65802
24
Robert Cooper 1,044,992 7.32 % 5.72 %
953 South Farm Rd., #197
Springfield, MO 65802
Officers and Directors
as a Group (2 persons) 10,580,736 74.14 % 57.91 %
---
*Based upon a total of 14,271,423 shares outstanding prior to this offering.
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
-----------------------------------------------
During the fiscal year 1999, Tom Hornbuckle, an owner of 960,000 shares of the
Company exchanged such shares for certain assets of the Company consisting of
the Holiday Delights division, valued at $11,800. Such division was engaged in
the business of Christmas lighting displays. The shares re-purchased by the
Company have been retired.
During 1999, receivables of the Company due from John Gott and Richard Norton,
officers and directors of the Company, of a total of approximately $80,000, was
paid by them through an assignment of certain equipment rental fees. The
assigned fees had been due them individually for equipment owned by them and
leased to non-affiliated third parties. The Company also received a commission
from Messrs. Gott and Norton for handling the rentals and income over a period
of two years on their behalf. As of March 31, 2000, John Gott owed the Company
a total of $3,700 and the Company owed Richard Norton a total of $12,500, to be
repaid to him out of the proceeds of the offering.
During 1998, the Company sold a loudspeaker system at a price of $62,000,
payable over time, to a nightclub, of which John Gott was a 20% shareholder.
The nightclub failed to pay $43,000 of the amount due to the Company and the
Company reclaimed the equipment, which it later sold for a price in excess of
$43,000.
In July, 2000, the Company was reorganized and changed its state of
incorporation from Missouri to Delaware. Thereafter, the Company's Board of
Directors declared a 12,800 to one, forward stock split, wherein for each
outstanding share of the Company, the Company issued an additional 12,800
shares. As a result, the total outstanding shares of the Company, as
reorganized, became 14,340,480 shares of common stock. At such time, the
Company also retired the 960,000 shares previously held in the treasury. At
all times herein, regardless of whether the reference is made to the Company's
shares of common stock at a time prior to the reorganization date of August
10, 2000, all such references to shares are references to the outstanding
shares of the Company as reorganized.
LITIGATION
----------
As of the date of this prospectus, the Company is not involved in any material
litigation nor has any material litigation been threatened against the Company.
25
PLAN OF DISTRIBUTION
--------------------
Upon effectiveness of this Prospectus, the Company, through its officers, shall
offer the Units each consisting of one share of common stock and two Warrants (A
and B warrants) on a best efforts, all-or-none basis. All subscription checks
shall be made to the order of Metropolitan National Bank FBO SLS International
and all proceeds received from investors shall be placed in escrow with
Metropolitan National Bank in Springfield, Missouri ("Escrow Agent"), until the
Offering is completed. Upon completion of the offering, a first closing shall
be held to distribute the net proceeds (See "Use of Proceeds"). If the Offering
is not completed by ______, 2000 (unless extended for an additional 30 days),
the offering shall be terminated (except to permit the clearance of checks over
the succeeding 10-day period) and all proceeds shall then be returned to
investors by the Escrow Agent, without interest or deduction of any kind.
No officers or directors shall receive any commissions or compensation for their
sale of the Company's shares pursuant to the terms hereof. The Company does not
anticipate utilizing any registered securities broker-dealers in connection with
any sales of the Company's shares.
DESCRIPTION OF SECURITIES
-------------------------
UNITS
-----
Each unit shall consist of one share of Common Stock and two Warrants (one A
Warrant and one B Warrant) each to purchase one share of Common Stock at a Unit
price of $.25 per Unit (See "Warrants").
COMMON STOCK
------------
As of March 31, 2000 authorized capital stock of the Company consists of 30,000
shares of common stock, par value $.001 per share. Giving effect to the
subsequent reorganization of the Company into Delaware and the forward stock
split of August 10, 2000, there are outstanding a total of 14,166,528 shares of
common stock of a total of 75,000,000 shares authorized. The holders of shares
of common stock: (1) have equal ratable rights to dividends on funds legally
available therefor, when, as and if declared by the Board of Directors of the
Company; (ii) are entitled to share ratably in all of the assets of the Company
available for distribution to holders of common stock upon liquidation,
dissolution or winding up of the affairs of the Company; (iii) do not have
preemptive, subscription or conversion rights and there are no redemption or
sinking fund provisions applicable thereto; and (iv) are entitled to one non-
cumulative vote per share on all matters which stock holders may vote on at all
meetings of stockholders. All shares of common stock now outstanding are fully
paid for and non-assessable; and all the shares are common stock which are the
subject of this offering, when issued, will have been fully paid for and are
non-assessable.
26
The holders of shares of Common Stock of the Company do not have voting rights,
which means that the holders of more than 50% of such outstanding shares, voting
for the election of directors, can elect all of the directors to be elected, if
they so choose. In such event, the holders of the remaining shares will not be
able to elect any of the Company's directors. Assuming sales by the Company of
4,000,000 shares, the present management of the Company will own approximately
64% and will have effective control of the Company.
WARRANTS
--------
The Company has authorized the issuance and sale (as part of the Units offered
hereunder) of A Warrants and B Warrants, each to purchase one share of common
stock. Provided the average closing price for the common stock is at least
equal to the exercise price of the A Warrants for a period of ten days, The A
and B Warrants shall be redeemable by the Company. The A Warrant has a term of
6 months and is exercisable at a price of $.50 per share and the B Warrant shall
have a term of 2 years and shall be exercisable at a price of $3.00 per share.
The A Warrant and B Warrant forming part of the Unit are not separable until the
A Warrant is exercised. If the A Warrant is not exercised or is redeemed by the
Company prior to exercise, the A Warrant (and the attached B Warrant) shall
become worthless and void. The A Warrants and B Warrants are immediately
detachable from the Common Stock (but are not separable from each other until
the A Warrant is exercised) and the A Warrants are immediately exercisable
during the 6-month term, at the end of which, if not exercised, or if the A
Warrant is redeemed by the Company, the A Warrants (and the B Warrants) shall be
void and of no effect. Subject to the average closing market price for the
Company's common stock being at least equal to the exercise price, both A
Warrants and B Warrants are redeemable by the Company at a price of $.001 per
Warrant, at the end of a 30-day period following the Warrantholder's receipt of
notice of the Company's election to redeem. The Warrants shall be exercisable
during such 30-day period. Neither the A or B Warrant shall have any anti-
dilution rights and no adjustment shall be made upon the exercise price of each
Warrant.
Only owners of common stock have equity in the Company. Each Warrant holder
shall own no equity in the Company by virtue of his ownership of the Warrant
(and may not vote as a stockholder) unless and until the Warrant is exercised
and the Company receives the cash consideration for the purchase of the Common
Stock. The Company shall reserve such number of shares of common stock as shall
equal the number of Warrants issued for future issuance upon exercise of the
Warrants. The shares underlying the Warrants have also been registered with the
Securities and Exchange Commission, and when issued upon exercise, shall not
constitute restricted securities as such terms are defined under the Securities
Act of 1933, as amended.
STOCK OPTION PLAN
-----------------
Subject to the reorganization of the Company, the Company's Board of Directors
approved the SLS INTERNATIONAL, INC. 2000 Stock Purchase and Option Plan (the
"Plan") and the plan was approved by stockholders.
27
The Board of Directors of the Company shall administer the Plan.
The plan affords key employees, officers, and consultants, who are responsible
for the continued growth of the Company, an opportunity to acquire a proprietary
interest in the Company, and, thus, to create in such individuals a greater
incentive and concern for the welfare of the Company and its subsidiaries. The
Company, by means of this 2000 Stock Purchase and Option Plan, seeks to retain
the services of persons now holding key positions and to secure the services of
persons capable of filling such positions.
THE PLAN
--------
Up to 2,000,000 shares of common stock have been reserved by the Company for
issuance upon exercise of options that may be issued from time to time under the
Plan. The shares are subject to adjustment in the event of stock dividends,
splits and other events that affect the number of shares of common stock
outstanding. Stock subject to purchase under the plan will be shares of common
stock that have been authorized but unissued, or have been previously issued and
reacquired by the Company, or both.
Maximum Purchase. The options offered in the plan are a matter of separate
inducement and are in addition to any salary or other compensation for the
services of any key employee or consultant. The options granted under the plan
are intended to be either Incentive Stock Options ("ISO") or Non- Qualified
Stock Options ("NQSO"). The aggregate fair market value of shares subject to an
ISO to a participant's stock purchases in any calendar year shall not exceed one
hundred thousand dollars ($100,000.00).
Option. Participants will receive options as granted from time to time by the
Board of Directors. The option will state the number of shares and price of
common stock to be purchased upon exercise of the options by the option holder
("optionee").
Exercise Price. The purchase price per share purchasable under an option will
be determined by the Board of Directors, or if it so appoints an Administrator,
provided, however, that such purchase price shall not be less than 90% of the
fair market value of a share on the date of grant of such option, provided
further, any option granted to a participant who, at the time such option is
granted, is an officer or director of the Company, the purchase price shall not
be less than 100% of the fair market value of a share on the date of grant of
such option, provided further, however, that in the case of an ISO granted to a
participant who, at the time such option is granted, is deemed to be a 10%
Shareholder, the purchase price for each share will be such amount as the
Administrator in its best judgment shall determine to be not less than 110% of
the fair market value per share at the date the ISO is granted.
Term of Option. The term of each option shall be fixed by the Administrator
which in any event will not exceed a term of 10 years from the date of the
grant, provided, however, that the term of any ISO granted to any 10%
Shareholder will not be exercisable after the expiration of 5 years from the
date such ISO was granted.
28
Termination of Employment. The Administrator will determine the effects of a
participant's retirement, death, disability, leave of absence or any other
termination of employment during the Term of any option.
Amendments. The Board may amend, alter, suspend, discontinue or terminate the
plan; provided, however, that, notwithstanding any other provision of the plan
or any option, without approval of the stockholders of the Company, no such
amendment, alteration, suspension, discontinuation or termination will be made
that, absent such approval, (1) would cause Rule 16b-3 to become unavailable
with respect to the Plan, (2) would violate the rules or regulations of any
national securities exchange on which the shares of the Company are traded or
the rules or regulations of the NASD that are applicable to the Company, or (3)
would cause the Company to be unable, under the Code, to grant ISOs under the
plan.
LEGAL MATTERS
-------------
Legal matters in connection with this offering will be passed upon for the
Company by Alfred V Greco PLLC, 666 Fifth Avenue, New York, NY 10103. Mr.
Greco, the principal of Alfred V. Greco, PLLC, is the owner of 104,895 shares
of the Company.
EXPERTS
-------
The audited financial statements of the Company as of December 30, 1999 and 1998
and for each of the three years in the period ended December 31, 1999 appearing
in this prospectus and in the registration statement of which this prospectus
forms a part, have been audited by Weaver & Martin, LLC, independent public
accountants. Their report, which appears elsewhere herein, insofar as the
Company is concerned, includes an explanatory paragraph as to the ability of the
Company to continue as a going concern. The financial statements are included
in reliance upon such report and upon the authority of such firm as an expert in
auditing and accounting.
FURTHER INFORMATION
-------------------
The Company has filed with the Washington, DC office of the Securities &
Exchange Commission (the "SEC") a registration statement on Form SB-2 under the
Securities Act of 1933, as amended, with respect to the securities offered
hereby. For further information with respect to the Company and the securities
offered, reference is made to the registration statement and to the financial
statements filed as a part thereof. Statements contained in this prospectus as
to the contents of any contract or other documents are not necessarily complete
and in each instance, reference is made to the copy of such contractor document
that has been filed as an exhibit to the registration statement. Each statement
is qualified in all respects by such reference. The registration statement,
including exhibits thereto, may be inspected without charge at the SEC's
principal offices at 450 Fifth Street, N.W. Washington, DC 20459. Copies of the
registration statement or any part thereof may be obtained from the SEC's
principal office in Washington, DC upon payment of the fees prescribed by the
Commission.
29
(LOGO) (LETTERHEAD)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
STOCKHOLDERS AND DIRECTORS
SLS INTERNATIONAL, INC. (formerly known as Sound and Lighting Specialist, Inc.)
We have audited the accompanying balance sheet of SLS International, Inc.
(formerly known as Sound and Lighting Specialist, Inc.) as of December 31,
1999, and the related statements of operations, stockholders' equity (deficit),
and cash flows for each of the years in the two year period ended December 31,
1999. These financial statements are the responsibility of the management of
the Company. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SLS International, Inc.
(formerly known as Sound and Lighting Specialist, Inc.) as of December 31,
1999 and the results of their operations and their cash flows for each of the
years in the two year period ended December 31, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and is dependent upon the continued sale of its securities or obtaining debt
financing for funds to meet its cash requirements. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans with regard to these matters are also described in Note 2.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
WEAVER & MARTIN, LLC
/s/ Weaver & Martin LLC
Kansas City, Missouri Certified Public Accountants & Consultants
January 31, 2000, except as 801 West 47th St., Suite 208
to Note 11, which is dated Kansas City, Missouri 64112
as of July 25, 2000 Phone: (816) 756-5525
Fax: (816) 756-2252
30
SLS INTERNATIONAL, INC.
(Formerly known as Sound and Lighting Specialist, Inc.)
TABLE OF CONTENTS
DECEMBER 31, 1999
-----------------
PAGE
------
INDEPENDENT AUDITOR'S REPORT......................................... 30
BALANCE SHEET........................................................ 32
STATEMENT OF OPERATIONS.............................................. 34
STATEMENT OF CASH FLOWS.............................................. 35
STATEMENT OF SHAREHOLDERS' DEFICIT................................... 37
NOTES TO FINANCIAL STATEMENTS........................................ 38
31
SLS INTERNATIONAL, INC.
(Formerly known as Sound and Lighting Specialist, Inc.)
BALANCE SHEET
ASSETS
------
MARCH 31, 2000 DECEMBER 31, 1999
------------------ -----------------
(UNAUDITED)
Current Assets:
Cash $ 1,136 $ 117,647
Accounts Receivable 46,374 50,367
Due from Shareholder 3,681 3,681
Inventory 123,918 77,469
Refundable Income Taxes 14,797 14,797
Prepaid Expenses and
Other Current Assets 6,253 5,520
------------------ -----------------
Total Current Assets 196,159 269,481
------------------ -----------------
Fixed Assets:
Vehicles 47,376 47,376
Equipment 29,847 26,623
------------------ -----------------
77,223 73,999
Less Accumulated Depreciation 36,229 32,809
------------------ -----------------
Net Fixed Assets 40,994 41,190
------------------ -----------------
Total Assets $ 237,153 $ 310,671
================== =================
SEE NOTES TO FINANCIAL STATEMENTS
32
SLS INTERNATIONAL, INC.
(Formerly known as Sound and Lighting Specialist, Inc.)
BALANCE SHEET
(CONTINUED)
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
---------------------------------------
MARCH 31, 2000 DECEMBER 31, 1999
------------------ -----------------
(UNAUDITED)
Current Liabilities:
Current Maturities of
Long Term Debt $ 22,000 $ 22,000
Notes Payable 98,575 99,966
Accounts Payable 184,168 197,056
Due to Shareholders 12,476 14,280
Accrued Liabilities 72,835 70,305
------------------ -----------------
Total Current Liabilities 390,054 403,607
------------------ -----------------
Long Term Debt, Less Current Maturities 38,932 39,331
------------------ -----------------
Shareholders' (Deficit):
Common Stock $1, Par; 30,000 shares
authorized; 1,164 shares issued
March 31, 2000 (unaudited) and
1,123 shares issued in 1999 1,164 1,123
Contributed Capital 426,336 351,377
Retained (Deficit) (559,333) (424,767)
------------------ -----------------
(131,833) (72,267)
Less Treasury Stock at Cost
(75 Shares) 60,000 60,000
------------------ -----------------
Total Shareholders' (Deficit) (191,833) (132,267)
------------------ -----------------
Total Liabilities and
Shareholders' (Deficit) $ 237,153 $ 310,671
================== =================
SEE NOTES TO FINANCIAL STATEMENTS
33
SLS INTERNATIONAL, INC.
(Formerly known as Sound and Lighting Specialist, Inc.)
STATEMENT OF OPERATIONS
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
------------------------- ------------------------
2000 1999 1999 1998
(UNAUDITED)
Revenue $ 51,576 $ 90,167 $ 484,187 $ 1,039,027
Cost of Sales 36,091 59,882 300,678 614,318
------------ ------------ ----------- ------------
Gross Profit 15,484 30,284 183,509 424,709
General and Administrative
Expenses 151,165 128,250 469,160 624,124
------------ ------------ ----------- ------------
Loss from Operations (135,680) (97,966) (285,651) (199,415)
Other Income (Expense):
Interest Expense (450) (870) (10,250) (8,746)
Gain on Sale of
Holiday Division -- -- 48,230 --
Interest and
Miscellaneous, Net 1,564 -- 2,284 438
------------ ------------ ----------- ------------
1,114 (870) 40,264 (8,308)
------------ ------------ ----------- ------------
Loss before Income Tax (134,566) (98,836) (245,387) (207,723)
Benefit from Income Tax -- -- -- (14,797)
------------ ------------ ----------- ------------
Net Loss $ (134,566) $ (98,836) $ (245,387) $ (192,926)
============ ============ =========== ============
Basic and Diluted
Earnings Per Share $ (117.63) $ (98.84) $ (238.01) $ (212.88)
============ ============ =========== ============
Weighted Average Shares
Outstanding 1,144 1,000 1,031 906
============ ============ =========== ============
SEE NOTES TO FINANCIAL STATEMENTS
34
SLS INTERNATIONAL, INC.
(Formerly known as Sound and Lighting Specialist, Inc.)
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
----------------------- -----------------------
2000 1999 1999 1998
(UNAUDITED)
Operating Activities:
Net Loss $ (134,566) $ (98,836) $ (245,387) $ (192,926)
Adjustments to Reconcile
Net Income to Cash
Flows from Operating
Activities:
Depreciation and
Amortization 3,420 4,060 14,728 10,016
Change in Assets and
Liabilities:
Accounts Receivable 3,993 (9,907) (59) (4,296)
Due from Shareholder -- -- 9,590 68,996
Inventory (46,449) (76,517) 20,862 (69,708)
Refundable Income Taxes -- -- -- (14,797)
Prepaid Expenses and
Other Current Assets (733) -- (3,632) (967)
Accounts Payable (12,888) 165,103 (7,559) 92,346
Due to Shareholders (1,804) -- 14,280 --
Accrued Liabilities 2,530 1,017 50,212 (7,267)
----------- ----------- ----------- -----------
Cash Used in Operating
Activities (186,497) (15,081) (146,965) (118,603)
----------- ----------- ----------- -----------
Investing Activities:
Additions to Vehicles and
Equipment (3,224) -- (719) (46,399)
----------- ----------- ----------- -----------
Cash Used in Investing
Activities (3,224) -- (719) (46,399)
----------- ----------- ----------- -----------
SEE NOTES TO FINANCIAL STATEMENTS
35
SLS INTERNATIONAL, INC.
(Formerly known as Sound and Lighting Specialist, Inc.)
STATEMENT OF CASH FLOWS
(CONTINUED)
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
----------------------- -----------------------
2000 1999 1999 1998
(UNAUDITED)
Financing Activities:
Notes Payable Borrowing (1,391) -- 99,966 --
Common Stock Acquired for
Holiday Division -- -- (60,000) --
Sale of Common Stock 75,000 -- 225,000 102,500
Borrowing of Long-Term Debt -- -- -- 77,324
Repayments of Long-Term Debt (399) (757) (15,993) --
----------- ----------- ----------- -----------
Cash Provided by
(Used in) in Financing
Activities 73,210 (757) 248,973 179,824
----------- ----------- ----------- -----------
Increase(Decrease) in Cash (116,511) (15,838) 101,289 14,822
Cash, Beginning of Period 117,647 16,358 16,358 1,536
----------- ----------- ----------- -----------
Cash, End of Period $ 1,136 $ 521 $ 117,647 $ 16,358
=========== =========== =========== ===========
Supplemental Cash Flow
Information:
Interest Paid $ 450 $ 870 $ 10,250 $ 8,746
Income Taxes Paid -- -- -- 10,500
SEE NOTES TO FINANCIAL STATEMENTS
36
SLS INTERNATIONAL, INC.
(Formerly known as Sound and Lighting Specialist, Inc.)
STATEMENT OF SHAREHOLDERS' DEFICIT
Common Contributed Retained Treasury Total
Stock Capital Deficit Stock Equity
------- ----------- ---------- --------- ----------
Balance, January 1, 1998 $ 875 $ 24,125 $ 13,546 $ -- $ 38,546
Net Loss for the Year -- -- (192,926) -- (192,926)
Sales of Common Stock 125 102,375 -- -- 102,500
------- ----------- ---------- --------- ----------
Balance, December 31, 1998 $1,000 $ 126,500 $(179,380) $ -- $ (51,880)
Net Loss for the Year -- -- (245,387) -- (245,387)
Purchase of Treasury Stock -- -- -- (60,000) (60,000)
Sales of Common Stock 123 224,877 -- -- 225,000
------- ----------- ---------- --------- ----------
Balance, December 31, 1999 $1,123 $ 351,377 $(424,767) $(60,000) $(132,267)
The following information
for the Quarter Ended
March 31, 2000 is
Unaudited
Sales of Common Stock 41 74,959 -- -- 75,000
Net Loss for the Quarter -- -- (134,566) -- (134,566)
------- ----------- ---------- --------- ----------
Balance, March 31, 2000 $1,164 $ 426,336 $(559,333) $(60,000) $(191,833)
======= =========== ========== ========= ==========
SEE NOTES TO FINANCIAL STATEMENTS
37
SLS INTERNATIONAL, INC.
(Formerly known as Sound and Lighting Specialist, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------
NATURE OF OPERATIONS
Prior to June, 1999, the Company's one business segment was designing, selling
and installing sound and lighting systems in churches, schools, theatres, and
clubs and developing a proprietary loudspeaker line called SLS Loudspeakers.
In June, 1999, the Company ceased marketing, selling, and installing sound and
lighting systems directly and began focusing all efforts towards being a
loudspeaker manufacturer only and selling to dealers and contractors.
The sales and receivables are concentrated in the entertainment industry. The
Company is not dependent on any major customer or supplier.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Inventory consists of raw materials and parts.
It is a Company policy to maintain a product display at some customer business
locations. The costs of the samples are not included in assets of the Company.
VEHICLES AND EQUIPMENT
Vehicles and equipment are stated at cost. Provisions for depreciation are
computed using the straight-line method over the estimated useful life of 5
years.
CONCENTRATION OF CREDIT RISK
The Company's revenues are derived principally from uncollateralized sales to
customers in the same industry; therefore customers may be similarly affected
by changes in economic and other conditions within the industry. There has
not been any significant credit losses on such sales.
RESEARCH AND DEVELOPMENT
Research and development are charged to operations when incurred and included
in operating expenses.
38
SLS INTERNATIONAL, INC.
(Formerly known as Sound and Lighting Specialist, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
--------------------------------------------------
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and notes. Actual
results could differ from those estimates, but management does not believe such
differences will materially affect the Company's financial position, results of
operations, or cash flows.
CASH EQUIVALENTS
The Company's cash equivalents consist principally of any financial instrument
with maturities of generally three months or less and cash investments with
high quality financial institutions. The investment policy limits the amount
of credit exposure to any one financial institution.
NOTE 2. GOING CONCERN MATTERS
------------------------------
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements during the years ended December 31, 1999 and 1998, the Company
incurred losses of $245,387 and $192,976, respectively. These factors, among
other, may indicate that the Company will be unable to continue as a going
concern for a reasonable period of time.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. The Company's
continuation as a going concern is dependent upon its ability to generate
sufficient cash flow to meet its obligations on a timely basis, to obtain
additional financing or refinancing as may be required, and ultimately
pursuing additional equity financing that can help it develop the new markets
for its loudspeaker technology.
NOTE 3. NOTES PAYABLE
----------------------
Notes payable are unsecured notes with 7% interest due January, 2000.
39
SLS INTERNATIONAL, INC.
(Formerly known as Sound and Lighting Specialist, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 4. LONG-TERM DEBT
-----------------------
Long-term debt consists of the following at December 31, 1999 and 1998:
Equipment note, payments in monthly installments
of $1,751 beginning May 1999, continuing for 35
months. The final payment is due April 2002 and
will include all unpaid principal. Interest is
prime plus 1.5% (currently 10%). $ 44,127 $ 54,774
Vehicle note, payments in monthly installments of
$518 beginning June 1999, ending April 2003.
Interest at 8.75%. 17,204 22,550
-------- --------
61,331 77,324
Less current portion. 22,000 16,000
-------- --------
$ 39,331 $ 61,324
======== ========
The aggregate principal amount of long-term debt maturing in the next four
years after December 31, 1999 are approximately $22,000; $24,400; $13,200;
and $1,731.
NOTE 5. LEASES
---------------
Rent expense for operating leases was approximately $28,200 and $24,600 for
the years ended December 31, 1999 and 1998. The lease is a month to month
lease.
NOTE 6. INCOME TAXES
---------------------
The Company doesn't have an income tax provision in 1999 because of a loss.
The refundable income tax in 1998 relates to the utilization of loss carry
backs for federal and state purposes of approximately $70,000. The Company
has loss carry forwards of approximately $350,000 expiring in 2011 to 2013.
The addition to deferred tax asset for the operating loss of $90,000 and
$50,200 in 1999 and 1998, respectively, differs from applying the statutory
rate because of items not deductible for income tax purposes and state income
tax benefits.
40
SLS INTERNATIONAL, INC.
(Formerly known as Sound and Lighting Specialist, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 6. INCOME TAXES CONTINUED
-------------------------------
The deferred tax asset is comprised of the following:
1999 1998
---------- ----------
Net operating loss $ 140,000 $ 50,200
Valuation allowance (140,000) (50,200)
---------- ----------
-- --
========== ==========
NOTE 7. RELATED PARTY TRANSACTIONS
-----------------------------------
The Company rents equipment owned by shareholders for a rental fee. In 1999
and 1998, the Company collected $19,567 and $68,995 in rental for the
shareholders. Revenues from the fee totaled approximately $2,100 and $7,700
for the year ended December 31, 1999 and 1998.
The Company sold some loudspeakers to an entity partially owned by a
shareholder in 1998. At December 31, 1998, the entity owed the Company
$43,127. In fiscal 1999, the equipment was returned to the Company in lieu
of payment of the receivable.
Amounts owed by shareholders to the Company are charged nominal interest.
The Company owes a shareholder $14,280 at December 31, 1999 for rentals
collected by the Company.
NOTE 8. MAJOR CUSTOMERS AND SUPPLIERS
--------------------------------------
In 1999 the Company received approximately 50% of its revenue from three
customers. The Company purchased approximately 25% of the cost of sales
from two vendors.
NOTE 9. SALE OF HOLIDAY DIVISION
---------------------------------
In February 1999 the Company sold its Holiday Division to a shareholder in
exchange for 75 shares of the Company's stock. The value assigned to the
sale ($60,000) equaled the amount paid by the shareholder for the 75 shares
of the Company in 1998. The only assets sold was inventory of approximately
$11,800.
41
SLS INTERNATIONAL, INC.
(Formerly known as Sound and Lighting Specialist, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 9. SALE OF HOLIDAY DIVISION CONTINUED
-------------------------------------------
Results of operations from the Holiday Division for the years ended December
31, 1999 and 1998 were as follows:
1999 1998
---------- ----------
Revenues $ -- $ 81,808
Gross Profit -- 46,673
NOTE 10. SALES OF COMMON STOCK
-------------------------------
The Company sold 125 shares of common stock to two employees in 1998 for
$102,500 and 123 shares of common stock in 1999 for $225,000.
NOTE 11. SUBSEQUENT EVENTS
---------------------------
On July 25, 2000, the company was merged with and into SLS International, Inc.
a Delaware Corporation. The Company sold 72 shares of common stock in fiscal
2000 for $108,300.
NOTE 12. UNAUDITED FINANCIAL STATEMENTS
----------------------------------------
The financial statements for the three months ended March 31, 2000 and 1999
are unaudited; however, in the opinion of management, such statements include
all adjustments (consisting solely of normal recurring adjustments) necessary
to a fair presentation of the financial position, results of operations and
changes in financial position of the Company. The results of operations for
the three months ended March 31, 2000 are not necessarily indicative of the
results to be obtained for the full fiscal year.
42
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
-------------------------------------------------
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
-----------------------------------------------------
Reference is made to Section 145 of the Delaware General Corporation law which
provides for indemnification of directors and officers of a corporation and
other specified persons, subject to the specific requirements therein contained.
In general, these sections provide that persons who are officers or directors of
the corporation may be indemnified by the corporation for acts performed in
their capacities as such.
Further reference is made to sections 102 and 145 of the Delaware General
Corporation Law which provide for elimination of directors liability in certain
instances, and indemnification of directors and officers of a corporation and
other specified persons, subject to the specific requirements therein contained.
In general, section 102 allows an authorizing provision in the Certificate of
Incorporation which would, subject to certain limitations, eliminate or limit a
directors liability for monetary damages for breaches of his or her fiduciary
duty. However, such an enabling provision could not limit or eliminate a
directors liability for (a) breaches of the duty of loyalty to the corporation
or its stockholders; (b) acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law; (c) the payment of unlawful
dividends or unlawful stock repurchases or redemptions; or (d) transactions in
which the director received an improper personal benefit. There is currently
such an enabling provision in the company's Certificate of Incorporation.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the company 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, unless in the opinion of its counsel that the matter has been
settled by controlling precedent, the company will submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
43
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
-------------------------------------------------------
Securities and Exchange Commission Registration Fee $ 3,960*
Accountants Fee $ 25,000*
Legal Fees $ 60,000*
Blue sky Fees and Expenses $ 3,540*
Printing and Engraving Expenses $ 5,000*
Transfer Agents and Registrars Fee $ 1,500*
Miscellaneous $ 1,000*
---------
TOTAL $ 100,000*
=========
----
*Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
--------------------------------------------------
In July, 2000, shareholders of the Company's predecessor (Sound and Lighting
Specialists, Inc.) exchanged their shares for shares of the Company as part of a
reorganization whereby the Company effectively changed from a Missouri
corporation to a Delaware corporation. In connection with the merger and upon
its consummation, the board of directors, with the consent of the shareholders,
among other things, amended the certificate of incorporation to increase the
authorized common stock from 30,000 shares having a par value of $1.00 to
75,000,000 shares having a par value of $.001, and declared a forward 12,800 to
one stock split. The following sales of securities gives effect to the
aforementioned forward stock split.
In July, 1998, Robert L. Cooper and Tom Hornbuckle purchased an aggregate of
1,500,000 shares for an aggregate of $100,000 or $.0667 per share.
During the period of December 1999 through January 2000 the Company privately
sold an aggregate of 2,098,688 shares to 5 private accredited investors who paid
an aggregate of $300,112 or $.143 per share.
In June, 2000, Messrs. Gott and Norton, founders of the Company, transferred to
Messrs. Bob Cooper (former CFO) and Tom Harrison (Chief Engineer) for no
additional cash consideration, an aggregate of 612,224 of their shares. The
transfer was made in recognition of their key status and as a good will gesture
on the part of the founders. In July, 2000, the Company sold 104,895 shares to
Alfred V. Greco, at par value.
The Company relied on the exemption contained under 4(2) promulgated under the
Securities Act of 1933, as amended with respect to the aforementioned sales of
securities.
44
ITEM 27. EXHIBITS
------------------
(1) N/A
(2) Plan of reorganization
(3)(i) Articles of Incorporation
(3)(ii) Amendment and Restatement of Certificate of Incorporation
(3)(iii) By-Laws
(4)(i) Specimen Certificate of Common Stock
(4)(ii) Form of A Warrant
(4)(iii) Form of B Warrant
(5) Opinion re: Legality (to be filed by amendment)
(6) N/A
(7) N/A
(8) N/A
(9) N/A
(10) Lease between Sound and Lighting Specialists, Inc.
(11) N/A
(12) N/A
(13) N/A
(14) N/A
(15) Unaudited interim financial information is provided elsewhere in the
registration statement.
(16) N/A
(17) N/A
(18) N/A
(19) N/A
(20) N/A
(21) N/A
(22) N/A
(23) Consent of experts and counsel*
(24) N/A
(25) N/A
(26) N/A
(27) N/A
(28) N/A
(29) N/A
(99)(i) 2000 Stock Purchase and Option Plan
(99)(ii) Form of Option
(99)(iii) Form of Escrow Agreement
-----
*Consent of counsel shall be filed as part of its opinion to be filed by
Amendment
45
ITEM 28. UNDERTAKINGS.
-----------------------
Insofar as indemnification for liabilities under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To file during any period in which offers or sales are being made,
a post-effective amendment to this registration statement; To include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration; and to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(4) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
46
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Amendment to Registration Statement on Form SB-2 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Springfield, State of Missouri on August ____, 2000.
SLS INTERNATIONAL, INC.
By /s/ John M. Gott
--------------------
John M. Gott, CEO
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form SB-2 has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
--------------------- -------------------------- --------------
/s/ John M. Gott President, Chief Executive August 7, 2000
----------------- Officer, Chief Financial
John M. Gott Officer, Director
/s/ Richard L. Norton Vice President, Principal August 7, 2000
--------------------- Operating Officer, Director
Richard L. Norton
47
