As filed with the Securities and Exchange Commission on April 25, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
OPTELECOM, INC.
(Exact name of Registrant as specified in its charter)
Delaware 52-1010850
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification Number)
9300 Gaither Road
Gaithersburg, Maryland 20877
(301) 840-2121
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Edmund D. Ludwig
President and Chief Executive Officer
Optelecom, Inc.
9300 Gaither Road
Gaithersburg, Maryland 20877
(301) 840-2121
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
David L. Lowans, Esq.
Karp Frosh Lapidus, Wigodsky & Norwind, P.A.
1370 Piccard Drive
Suite 290
Rockville, Maryland 20850
(301) 258-1994
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement. If the only
securities being registered on this Form are being offered pursuant to dividend
or interest reinvestment plans, please check the following box. { } If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. {X} If this Form is filed to
register additional securities for an offering pursuant to Rule 462 (b) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. { } If this Form is a post-effective amendment filed
pursuant to Rule 462 (c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. { } If delivery of the prospectus
is expected to be made pursuant to Rule 434, please check the following box. { }
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Amount Proposed Registration Price Per Aggregate
Class of To Be Maximum Fee (1) Share (1) Offering
Proposed Amount Registered Offering ------- --------- Price (1)
Of Securities to ----------- -------- ---------
Be Registered
- -------------
<S> <C> <C> <C> <C> <C>
Common Stock 500,000 500,000 $693 $5.25 $2,625,000
($.03 par value per share)
- ------------------------------- ------------------------------ ---------------------------------------
</TABLE>
- ----------------------
(1) Estimated pursuant to Rule 457 for the purpose of calculating the
registration fee only; based upon the average of the high and low sales prices
for the Common Stock on April 20, 2000. Registration fee is calculated pursuant
to Rule 457.
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 Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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SUBJECT TO COMPLETION DATED April 20, 2000
PROSPECTUS
OPTELECOM, INC.
500,000 Shares of Common Stock
This Prospectus relates to the registration by Optelecom, Inc. (the
"Company") of 500,000 shares of common stock, $.03 par value per share (the
"Common Stock"), of the Company that the Company is issuing from its treasury in
compliance with the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act").
It is anticipated that the 500,000 shares of Common Stock covered by
this Prospectus ("the Shares") will be sold from time to time by the Company in
transactions (which may include block transactions) in the over-the-counter
market, in negotiated transactions or otherwise at market prices prevailing at
the time of sale, at prices related to such market price, or at prices otherwise
negotiated. The brokers and dealers through which sales of the Shares may be
made may be deemed to be "underwriters" within the meaning of the Securities
Act, and the commissions or discounts and other compensation of such brokers and
dealers may be regarded as underwriters' compensation. The Company will receive
all of the proceeds from the sale of the Shares, less agreed upon commissions to
be paid to the selling brokers and dealers. All expenses of registration (other
than commissions, discounts or fees payable to broker-dealers and underwriters
and the fees of counsel to the Selling Stockholders), estimated at $ 45,693 are
being borne by the Company. See "Plan of Distribution."
The Common Stock is traded on the NASDAQ SmallCap Market under the
symbol OPTC. On April 20, 2000, the closing sale price per share for the Common
Stock was $5.25.
INFORMATION REGARDING THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE
COMMON STOCK IS DISCUSSED UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THERE IS NO UNDERWRITING
AGREEMENT BETWEEN ANY BROKER-DEALER AND THE COMPANY
RELATING TO THE SECURITIES OFFERED IN THIS PROSPECTUS.
The date of this Prospectus is April 20, 2000
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. The prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such State.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Available Information............................................................... 5
Incorporation of Certain Documents by Reference..................................... 6
Forward-Looking Statements.......................................................... 7
Risk Factors........................................................................ 7
The Company......................................................................... 10
The Offering........................................................................ 11
Use of Proceeds..................................................................... 11
Description of Securities........................................................... 12
Plan of Distribution................................................................ 12
Legal Matters....................................................................... 13
Experts............................................................................. 13
Material Changes.................................................................... 13
Disclosure of Commission Position on Indemnification for Securities Act Liability... 13
</TABLE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any
securities offered hereby by anyone in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it is unlawful
to make such offer or solicitation.
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AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC" or the "Commission"). Such
reports, proxy statements and other information filed by the Company can be
inspected and copied at the regional offices of the SEC at 7 World Trade Center,
13th Floor, New York, New York 10048, and Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60612, and can also be
inspected and copied at, and copies obtained at prescribed rates from, the
Public Reference Room of the SEC at its principal office at Judiciary Square,
450 Fifth Street, NW, Washington, D.C. 20549. Information on the operation of
the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
Such materials can also be accessed electronically through the Commission's web
site (http:/www.sec.gov). The Company's Common Stock is traded on the Nasdaq
SmallCap Market, and reports and other information relating to the Company may
also be inspected at the offices of the Records Department of the Nasdaq Stock
Market, 1735 K Street, NW, Washington, D.C. 20006.
The Company has filed a Registration Statement on Form S-3 with the SEC
under the Securities Act of 1933 as amended, with respect to the securities
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits thereto, certain portions
of which have been omitted as permitted by the rules and regulations of the SEC.
For further information with respect to the Company and the securities offered
hereby, reference is made to the Registration Statement and the exhibits filed
as a part thereof. Statements contained herein concerning any document are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement. Each such
statement is qualified in its entirety by such reference.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated in this Prospectus by reference:
(1) the Company's Annual Report on Form 10-K for the year ended December
31, 1999.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15 (d) of the Exchange Act prior to the termination of the
offering of the shares of Common Stock hereunder shall be deemed to be
incorporated by reference herein. These documents shall be deemed to be modified
or replaced for purposes of this Prospectus and the Registration Statement to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or replaces such statement. Any such statement so modified or replaced
shall not be deemed, except as so modified or replaced, to constitute a part of
this Prospectus or the Registration Statement.
The Company will provide without charge to each person to whom a
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the documents incorporated by reference herein, other than
exhibits to such documents not specifically incorporated by reference. Such
requests should be directed to Optelecom, Inc., 9300 Gaither Road, Gaithersburg,
Maryland 20877, Attention: Thomas F. Driscoll (telephone (301) 840-2121).
- - - - - - - - - - - - - - -
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FORWARD-LOOKING STATEMENTS
This Prospectus, including all documents incorporated herein by
reference, includes "forward-looking statements" within the meaning of the
Private Securities Litigation Act of 1995 (the "Reform Act"). The Reform Act
provides a "safe harbor" for forward-looking statements and to encourage
companies to provide prospective information about their companies, so long as
those statements are identified as forward-looking and are accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those discussed in the statement. The
Company desires to take advantage of the "safe harbor" provisions of the Reform
Act. Except for the historical information contained herein, the matters
discussed in the Prospectus are forward-looking statements which involve risks
and uncertainties. Although the Company believes that the expectations reflected
in such forward-looking statements are based upon reasonable assumptions, it can
give no assurance that its expectations will be achieved. Important factors that
could cause actual results to differ materially from the Company's expectations
are disclosed in conjunction with the forward-looking statements or elsewhere
herein.
RISK FACTORS
In evaluating an investment in the Shares, prospective purchasers
should carefully consider the following factors as well as the other matters
discussed in this Prospectus and the documents incorporated herein by reference.
Fluctuations in Financial Performance
The Company has experienced and may in the future continue to
experience fluctuations in its quarterly and annual operating results. Factors
that may cause the Company's operating results to vary include, among other
things, customer purchasing patterns, changing technology, new product
transitions, delays in new product introductions, shortages of system
components, changes in the mix of products and services sold, the timing of
investments in additional personnel, facilities and research and development. As
a result of the impact of these and other factors, past financial performance
should not be considered to be a reliable indicator of the future performance in
any particular fiscal period. The Company is limited in its ability to reduce
expenses quickly in response to any revenue shortfalls, therefore the Company's
business, financial condition and operating results would be adversely affected
if increased revenues were not achieved. For example, the Communications
Products Division had revenues of $8,468,936 for the twelve months ended
December 31, 1999 compared to $8,742,232 for the same period in 1998, but
operating income of $173,846 in 1999 compared to operating loss of $237,357 for
the same period in 1998. The change in operating profits resulted in part
because the Division lowered its product development expenses, and reduced its
selling and marketing costs as a result of fewer personnel in these departments.
Total revenues increased to $16,333,749 for the twelve months ended December 31,
1998 compared to $12,271,057 for the same period in 1997. The increase was
attributable in large part to the acquisition of Paragon Audio Visual Limited
("Paragon") in December, 1997; Paragon's revenues of $6,041,787 were included
with those of the Company for the twelve months ended December 31, 1998 but not
for the same period in 1997. The Company incurred a net loss of $2,811,344 for
the twelve months ended December 31,1998 compared to net income of $948,729 for
the same period in 1997. The major factors contributing to the loss in 1998
included acquisition related expenses of Paragon of $2,200,000 (write-down of
employment contracts of $1.4 million, amortization expense of goodwill and
intangibles in the amount of $465,000 and interest expense of $335,000), an
increase of inventory and accounts receivables reserves of $543,000, employee
termination related charges of $620,000 and a change in product mix as revenues
shifted from the government contract for the laser illuminator (Glint) to
Paragon. The Company has taken significant steps to reduce its expenses, but
there can be no assurance that the Company will return to profitability in any
future period.
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Nature of Operations and Business Conditions
The Company has the ability, provided there are sufficient accounts
receivable and inventory, to borrow up to $1,700,000 under its existing bank
line-of-credit. During 1999, the Company experienced negative cash flows from
operations and, as of December 31, 1999, the Company had borrowed the maximum
amount available under its revolving line-of-credit agreement. In September
1999, the Company negotiated and received a six-month deferral on principal
payments due under a long term promissory note agreement in consideration for
continued interest payments and increased principal payments over the remaining
term of the note. The Company was not in compliance as of December 31, 1999 with
certain ratio requirements of its line-of credit agreement, which requirements
were subsequently waived by the bank. These conditions resulted primarily from a
high operating cost structure, particularly at the Paragon subsidiary, expenses
incurred in resolving ongoing litigation associated with the Paragon
acquisition, a decline in revenue at the Paragon subsidiary related to a
reluctance by European customers to make new equipment purchases due to Year
2000 issues, and extended payment terms provided to certain customers making
major purchases.
During 1999, the Company implemented significant cost cutting measures
and it settled its Paragon litigation. Subsequent to December 31, 1999, cash has
been collected from the customers who made the major purchases, the Company has
received approximately $1,000,000 from the exercise of stock options, the
Company has paid approximately $500,000 under the line-of-credit agreement, and
the Company has commenced making principal payments under the promissory note
agreement. On April 20, 2000, the Company had $500,000 available under its
existing line-of-credit and the Company currently anticipates that the
line-of-credit agreement will be renewed for a least a year when it expires in
May 2000. The Company is continuing its cost containment measures and management
currently believes that the Company will have sufficient liquidity from its
operations and line-of credit agreement to meet its current obligations. Should
the bank not extend the line of credit agreement or if the Company continues to
experience negative cash flows from operations, the Company may be required to
seek new sources of financing, including using a larger than anticipated portion
of the proceeds of the sale of the Shares, to meet its current obligations.
Continued negative cash flows or the inability to obtain alternative financing
could have a material adverse affect on the Company's operations.
Dependence On Major Customers
Historically, a relatively small number of customers have accounted for
a significant portion of the Company's revenues in any particular period. For
the twelve months ended December 31, 1999 approximately 22% of the Company's
revenues were accounted for by sales to the U.S. Government and two commercial
customers. The Glint contract with the government was discontinued in January
2000. This contract contributed revenues of $693,000 in 1999. The Company
anticipates that sales of its products to relatively few customers will diminish
in magnitude over the next few years. In the event of a reduction, delay or
cancellation of orders from one or more significant customers or if one or more
significant customers select products from one of the Company's competitors for
inclusion in future product generations, the Company's business, financial
condition and operating results could be materially and adversely affected.
There can be no assurance that the Company's current customers will continue to
place orders with the Company, that orders by existing customers will continue
at current or historical levels or that the Company will be able to obtain
orders from new customers. The loss of one or more of the Company's current
significant customers could materially and adversely affect the Company's
business, financial condition and operating results.
Risk of Government Audit
Government contracts are subject to audits, and contract payments in
excess of allowable costs are subject to adjustment and repayment. Audits have
been completed through 1996. Based on its interpretation of contracting
regulations and past experience, the Company believes that cost disallowances,
if any, on government contracts will not be material, but there can be no
assurance in that regard.
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Technological Change
The Company's communication products are sold in markets that are
subject to rapid technological change. The Company's future success will depend
in part upon its ability to enhance its current products and to develop and
introduce new products that keep pace with technological developments and
emerging industry standards and that address the increasingly sophisticated
needs of its customers. There can be no assurance that the Company will be
successful in developing and marketing such products or producing enhancements
that meet these changing demands, that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of these products or that its new products and
product enhancements will adequately meet the demands of the marketplace and
achieve market acceptance. The Company's inability to develop and introduce new
products or product enhancements in a timely manner, or its failure to achieve
market acceptance of a new product could have a material adverse effect on the
Company.
Competition
The Company faces intense and increasing competition from a large
number of competitors, some of which are larger than the Company and have larger
product development, research and sales staffs. To enhance the technological
innovation of its products, the Company has recently increased the size of its
engineering and development staff. There can be no assurance, however, that the
Company's competitors will not develop products that are more effective than the
Company's or that would render the Company's products obsolete or
non-competitive. Furthermore, the Company's ability to expand commercial sales
of its products is dependent in part upon its becoming more competitive with
respect to manufacturing efficiency and marketing capabilities. The Company has
recently increased its investment in manufacturing capabilities and the size of
its sales and production staffs for communication products. There can be no
assurance, however, that these additions will provide the efficiencies and
experience necessary for an expansion of sales.
Paragon Operations
Paragon Audio Visual Ltd. ("Paragon") was acquired in December 1997.
The integration did not go smoothly and a great amount of time and resources
were expended in 1998 and 1999 to fully integrate Paragon within Optelecom.
Paragon suffered losses in 1999 and 1998 of $743,317 and $3,000,718
respectively. At the end of 1998, the Chairman of Paragon was terminated, and in
March of 1999 the remaining Paragon Directors were also terminated. In the
fourth quarter of 1999, Paragon recorded costs of $150,000 associated with
settling legal actions with the former directors. A new management team was put
into place in the second quarter of 1999 and they made significant reductions in
expenses including the closing of the New York City office, termination of
employees, the elimination of most company vehicles and the elimination of
non-essential travel and entertainment costs. Paragon expects to return to
profitability in 2000 by increasing its revenue while maintaining its current
cost structure. However, there can be no assurance that profitability will, in
fact, be achieved.
International Markets
With the acquisition of Paragon, the Company expects to expand its
presence in international markets and may in the future derive an even more
significant portion of its revenues from these markets. The Company's current
and future international business activities are subject to a variety of
potential risks, including political, regulatory and trade and economic policy
risks. The Company will also be subject to the risk attendant to translations in
foreign currencies. These factors could have a material adverse effect on the
Company.
Future Capital Needs; Uncertainty Of Additional Funding
The Company believes that its existing capital resources, the proceeds
from the sale of the Shares and future operating cash flows will generate the
funds needed for its long-term cash requirements. If the Company's growth rate
should exceed expectations, if the Company should be unable to sell the Shares
at prices sufficient to meet the needs of the Company, or if the Company should
fail to generate the anticipated
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operating cash flows, the Company may be required to seek additional funding. In
those circumstances, the Company would consider public or private debt or equity
financing. There can be no assurance that that the Company will be able to sell
the Shares or that additional financing will be available in a timely manner or
on acceptable terms. If issuing equity securities raises additional funds other
than the proceeds of this Offering, further dilution to existing stockholders
may result. If adequate funds are not available when needed, the Company may be
required to delay, scale back or eliminate its product research and development
and overhead costs. Our access to funds could be negatively impacted by the
volatility of the price of our common stock.
Need To Attract And Retain Key Employees
The Company is substantially dependent on the business and technical
expertise of its senior management and on its ability to attract and retain key
management and technical employees. The loss of members of senior management or
of other key employees or the Company's inability to attract and retain other
employees with necessary business or technical skills in the future would have a
material adverse effect on the Company's business.
Shareholders Rights Plan
On June 15, 1998 the Company adopted a shareholders rights plan that
provides for a dividend distribution of one right for each outstanding share of
common stock. In the event that, following the Distribution Date (as defined) a
person is or becomes the beneficial owner of 10% or more of the then outstanding
shares of Common Stock, each Right Holder may purchase three (3) shares of
Common Stock at a price per share equal to 50% of the then current market price
of the Common Stock. As of December 31, 1998, the Company has reserved 5,400,000
shares of authorized but unissued common stock for issuance under the
shareholders rights plan.
Price Volatility In Public Market
The Company's Common Stock currently trades on the NASDAQ SmallCap
Market. The securities markets have from time-to-time experienced significant
price and volume fluctuations that may be unrelated to the operating performance
of the Company. In addition, the market prices of the common stock of many
publicly traded technology companies have in the past been, and can in the
future be expected to be, especially volatile. Announcements of technological
innovations or new products of the Company or its competitors, developments or
disputes concerning proprietary rights, publicity regarding products under
development by the Company or its competitors, regulatory developments in both
the United States and foreign countries, changes in financial estimates and
recommendations by security analysts, economic and other external factors, as
well as period-to-period fluctuations in the Company's operating and product
development results, may have a significant impact on the market price of the
Company's Common Stock.
THE COMPANY
General
The Company was incorporated under the laws of Delaware in 1972. Its
business consists primarily of the development, manufacture, and sale of fiber
optic communications products and laser systems for commercial and military
customers and, through its subsidiary, the Company provides multi-media
integrated products for sending data to the desktop over copper wire. The
Company's principal executive offices are located at 9300 Gaither Road,
Gaithersburg, Maryland 20877. Its telephone number is (301) 840-2121.
The fiber optic communication business can be divided generally into
two operating divisions: the optical fiber/cable portion which supplies the
media for transporting optical signals, and the transmission equipment portion
which generates and receives the signals. The Company provides the equipment
that interfaces electrical signals to optical signals at the transmitter end of
a fiber optic communication link and provides complementary equipment that
converts optical signals to electrical form at the receiving end of the
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communications link. The Company sells its products to users of these
communication systems or to system integrators that install the Company's
equipment in large communication networks. The Company and its Paragon
subsidiary provide equipment specifically designed for transmission over both
copper wire and optical fiber media of various combinations of voice, data and
video for a range of applications. The Company also addresses U.S. Government
defense-related markets for specialized and proprietary applications of fiber
optic and laser system technology.
Operating Segments
The Company is organized into three operating segments: the
Communications Products Division ("CPD"), which develops, manufactures and sells
optical fiber-based data communication equipment to the commercial marketplace;
the Government Products Division ("GPD"), which is primarily focused on
electro-optic technology development for the U.S. government-related defense
business; and Paragon Audio Visual Ltd. ("Paragon") which designs and markets
electronic communication products and systems utilizing copper cabling as the
primary transmission medium.
CPD addresses business opportunities in the worldwide commercial
communication equipment marketplace, and specializes in optical fiber
technology. Currently, the majority of its revenues are provided from several
niche market areas including original equipment manufacturer equipment for
process control, video signal transmission equipment for financial brokerage
desks, and communications systems for highway traffic monitoring and advanced
air traffic control video monitor displays.
GPD is composed of two operating groups, Electro/Optics (E/O)
Technology, and Laser Illuminator Technology. The E/O Technology group provides
technology development and engineering services to the U.S. Government and its
prime contractors. The Laser Illuminator Technology group previously derived its
revenues entirely from the U.S. Government and its agencies in support of the
U.S. Air Force's C-130 Gunship laser illuminator system which contract was
discontinued at the end of 1999 with the completion of the work under the
contract.
Paragon, which the Company acquired in 1997, was organized in 1994 and
designs and markets electronic products and systems for multi-media applications
utilizing unshielded twisted-pair copper of "structured cabling" for in-house
computer data networking applications. Such products include baluns (balanced to
unbalanced) devices that match the different impedance of traditional coaxial
and data networking cables. The use of active baluns with higher-grade cables
and high performance integrated circuit devices facilitates the transmission of
high-resolution video, voice and data signals without noticeable signal
degradation. Paragon has been very active in supporting networking applications
for marketing data information and business television services pertaining to
financial markets.
THE OFFERING
By this Prospectus, the Company is offering the Shares. The Company
will receive all proceeds from the sale of securities offered hereby, less
brokers' and dealers' commissions. See "Plan of Distribution."
USE OF PROCEEDS
The Company intends to use the proceeds from this Offering to retire
long-term debt of the Company, to provide working capital for the operations of
the Company (to the extent funds provided from the Company's operations are in
adequate for this purpose), to provide additional sales and marketing resources
in support of new and existing products and to fund continuing research and
development needs of the Company. It is anticipated that between fifty percent
(50%) and sixty percent (60%) of the proceeds will be used to retire long-term
debt of the Company but there can be no assurance that this will actually occur.
The long-term debt of the Company which will be retired currently bears an
annual interest rate of 9.75 percent and matures in August 2002.
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DESCRIPTION OF SECURITIES
The following statements with respect to the Company's securities are
subject to, and qualified in their entirety by reference to, the detailed
provisions of the Company's Certificate of Incorporation and Bylaws.
The Company is authorized to issue up to 15,000,000 shares of Common
Stock, $.03 par value, of which 2,131,404 shares were outstanding at April 20,
2000.
All holders of Common Stock are entitled to one vote per share on any
matter coming before the stockholders for a vote, unless the matter is one upon
which by express provision of law, a different vote is required. The Common
Stock does not have cumulative voting rights, which means, in effect, that
holders of more than 50% of the shares can generally elect all the directors.
Each holder of Common Stock is entitled to receive ratably such
dividends on the Common Stock, if any, as may be declared by the Board of
Directors out of funds legally available therefor and, in the event of the
liquidation, dissolution or winding-up of the Company, is entitled to share
ratably in all assets of the Company remaining after payment of liabilities.
Holders of Common Stock have no conversion, preemptive or other rights to
subscribe for additional shares, and there are no redemption rights or sinking
fund provisions with respect to the Common Stock. The outstanding shares of
Common Stock are validly issued, fully paid and nonassessable.
The Company has never paid any cash dividends on the Common Stock and
does not anticipate paying any such dividends in the foreseeable future.
Pursuant to the Company's Certificate of Incorporation and under
Delaware law, directors of the Company are not liable for monetary damages for
breach of their fiduciary duty as directors except (i) for a breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions by the director not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for a willful or negligent
declaration of an unlawful dividend, stock purchase or redemption or (iv) for
transactions from which the director derived an improper personal benefit.
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer and Trust Company, Inc., 40 Wall Street, New York, New York 10005.
PLAN OF DISTRIBUTION
The Shares registered hereby may be sold from time to time by the
Company as the Company deems necessary to meet its capital needs, or by
pledgees, donees, transferees or other successors in interest, in one or more
transactions in the over-the-counter market, in negotiated transactions or
otherwise at market prices prevailing at the time of sale, at prices related to
such market prices or at prices otherwise negotiated.
The Company may sell some or all of the Shares in transactions
involving broker-dealers, who may act as agent or acquire the Shares as
principal. At present it is anticipated that the Company will use Branch Cabell,
919 E. Main Street, 17th Floor, PO Box 2278, Richmond, Virginia 23218 and to
sell the Shares. Any broker-dealer participating in such transactions as agent
may receive commissions from the Company (and, if the broker-dealer acts as
agent for the purchaser of such Shares, from such purchaser). Broker-dealers may
agree with the Company to sell a specified number of Shares at a stipulated
price per Share and, to the extent such broker-dealers are unable to do so
acting as agents for the Company, to purchase as principals any unsold Shares at
the price required to fulfill the respective broker-dealer's commitment to the
Company. Broker-dealers who acquire Shares as principals may thereafter resell
such Shares from time to time in transactions (which may involve cross and block
transactions and which may involve sales to and through other broker-
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dealers, including transactions of the nature described above) in the
over-the-counter market, in negotiated transactions and otherwise, at market
prices prevailing at the time of sale, at prices related to such market prices
or at negotiated prices, and in connection with such resales may pay to or
receive from the purchasers of such Shares commissions. The Company also may
sell some or all of the Shares directly to purchasers without the assistance of
any broker-dealer. At the time a particular offer of the Shares is made, if
required, a supplement to the Prospectus will be distributed, or a
post-effective amendment to the registration statement will be filed, which will
set forth the number of shares of Common Stock being offered and the terms of
the offering, including the purchase price, public offering price, name or names
of any agents, dealers or underwriters, any discounts, commissions and other
items constituting compensation from the Company and any discounts, commissions
or concessions allowed or reallowed or paid to dealers.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Shares may be limited in its ability to
engage in market activities with respect to shares of Common Stock.
The Company will bear all fees and expenses incurred in connection with
the registration of the Shares, estimated at $ 45,693. The Company will maintain
the effectiveness of the Registration Statement with respect to the Shares for
so long as, in its sole opinion, it deems necessary to accomplish the purposes
of the Company.
LEGAL MATTERS
The legality of issuance of the shares of Common Stock offered hereby
has been passed upon for the Company by Karp Frosh Lapidus, Wigodsky & Norwind,
P.A., Rockville, Maryland.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this Prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 have been audited by Deloitte &
Touche, LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
MATERIAL CHANGES
Information on any material changes in the financial statements and
operating results of the Company are contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 and any subsequent quarterly
filings with the SEC.
DISCLOSURE OF COMMISSION POSITION ON INDEMNFICATION
FOR SECURITIES ACT LIABILITY
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 By-Laws of the Company or under Delaware law, 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 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, the Company 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
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indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred in connection with the
issuance and distribution of the Common Stock that is the subject of this
Registration Statement, other than underwriting discounts and commissions
payable to the brokers and dealers who will sell the Shares on behalf of the
Company. All such expenses are to be borne by the Company. All the amounts shown
are estimates except for the SEC registration fee.
SEC Registration Fee..............................................$ 693
Blue Sky Filing Fees and Expenses................................. 4,000
Printing Costs.................................................... 5,000
Legal Fees and Expenses........................................... 25,000
Accounting Fees and Expenses...................................... 10,000
Miscellaneous..................................................... 1,000
-------
TOTAL.............................................................$ 45,693
Item 15. Indemnification of Directors and Officers.
Delaware General Corporation Law, Section 102(b) (7), enables a
Corporation in its certificate of incorporation to eliminate or limit personal
liability of members of its Board of Directors for monetary damages for breach
of a director's fiduciary duty of care. The elimination or limitation does not
apply where there has been a breach of the duty of loyalty, failure to act in
good faith, engaging in intentional misconduct or knowingly violating a law,
paying a dividend or approving a stock repurchase which was deemed illegal or
obtaining an improper personal benefit. The Company's Certificate of
Incorporation provides in effect for the elimination of the liability of
directors to the extent permitted by Delaware Law.
Delaware General Corporation Law, Section 145, permits a corporation
organized under Delaware law to indemnify directors and officers with respect to
any matter in which the director or officer acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, he had no
reasonable cause to believe his conduct was unlawful. The Bylaws of the Company
entitle directors and officers of the Company to indemnification to the extent
permitted by Delaware law.
Directors and officers are also insured against certain liabilities
under a directors and officers' liability insurance policy maintained by the
Company.
Item 16. Exhibits.
The following exhibits are filed herewith or incorporated herein by reference:
Exhibit
Number Exhibit
5 Opinion of Karp Frosh Lapidus, Wigodsky & Norwind, P.A. as to
the legality of the registered securities.
5 Consent of Karp Frosh Lapidus, Wigodsky & Norwind, P.A.
(contained in opinion filed as Exhibit 5).
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23 Consent of Deloitte & Touche, LLP, as independent public
accountants for the Company.
Item 17. Undertaking.
The undersigned registrant hereby undertakes:
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any material
information with respect to the plan of distribution not previously disclosed in
this Registration Statement or any material change to such information in the
Registration Statement.
For the purpose of determining any liability under the Securities Act
of 1933, that 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.
To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the end of the
offering.
That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15 (d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Gaithersburg, State of Maryland, on April 25, 2000.
OPTELECOM, INC.
By: ______________________
Edmund D. Ludwig
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
________________ Director, President and April 25, 2000
Edmund D. Ludwig Chief Executive Officer
________________ Director April 25, 2000
Clyde A. Heintzelman
________________ Director April 25, 2000
Richard C. Kreter
________________ Director April 25, 2000
David R. Lipinski
________________ Director April 25, 2000
Carl C. Rubbo, Jr.
________________ Director April 25, 2000
Pradeep K. Wahi
________________ Vice President of Finance April 25, 2000
Thomas F. Driscoll (Principal Financial
Officer and Principal
Accounting Officer)
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
5 Opinion of Karp Frosh Lapidus, Wigodsky & Norwind,
P.A. as to the legality of the registered securities.
23 Consent of Deloitte & Touche, LLP, as independent
public accountants for the Company.
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Exhibit 5
April 25, 2000
Board of Directors
Optelecom, Inc.
9300 Gaither Road
Gaithersburg, Maryland 20877
Gentlemen:
This firm represented Optelecom, Inc., a Delaware corporation (the
"Company"), in connection with the preparation and filing of the Company's
Registration Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"), in which the Company is
registering 500,000 shares of its Common Stock, $.03 par value, for sale by the
Company (the "Shares").
We are familiar with the Certificate of Incorporation and Bylaws, as
amended, of the Company as they applied to, and with the corporate proceedings
taken by the Company in connection with, the proposed issuance of the Shares. In
connection with this opinion, we have examined and relied upon the originals or
copies of such agreements, memoranda, certificates, records and other documents
("Documents") as in our judgment are necessary to enable us to render the
opinion expressed below. We have assumed, without investigation, the
authenticity of all Documents submitted to us as originals or copies, the
genuineness of all signatures, the conformity to original documents of all
copies, the legal capacity of each individual who has executed Documents and the
due authorization, execution and delivery of Documents by each party thereto
other than the Company. As to factual matters, we have relied upon and assumed,
without independent investigation, the completeness and accuracy of certificates
of public officials and of officers of the Company. Nothing has come to our
attention, however, that would cause us to believe that the information
contained in such certificates is not true and correct in all material respects.
Based upon a review of such documents and consideration of such matters
of law and fact as we deem appropriate, we are of the opinion that the Shares,
when issued, will be legally issued by the Company and, when sold, will be fully
paid and nonassessable.
This opinion is provided solely for the benefit of the addressee hereof
and is not to be relied upon by any other person. We hereby consent to the use
of this opinion and to the reference to our firm in the Registration Statement
and any amendments thereto.
Very truly yours,
Karp Frosh, Lapidus, Wigodsky
& Norwind, P.A.
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Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Optelecom, Inc. on Form S-3 of our report dated March 7, 2000 (March 28, 2000 as
to Note 2), appearing in the Annual Report on Form 10-K of Optelecom, Inc. for
the year ended December 31, 1999 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
McLean, VA
April 25, 2000
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