<PAGE> 1
As filed with the Securities and Exchange Commission on August 29, 1996
Registration No. 333-10545
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
NOISE CANCELLATION TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 59-2501025
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
1025 WEST NURSERY ROAD, LINTHICUM, MARYLAND 21090 (410) 636-8700
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
-------------------------
JOHN B. HORTON, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
NOISE CANCELLATION TECHNOLOGIES, INC.
ONE DOCK STREET
STAMFORD, CONNECTICUT 06902
(203) 961-0500, EXTENSION 388
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent For Service)
Copies of all communications and notices to:
WILLIAM P. O'NEILL, ESQ.
CROWELL & MORING
1001 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004-2595
(202) 624-2500
------------------------
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, 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, check the following box. / / __________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SHARES AMOUNT TO BE AGGREGATE PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT (1) PRICE (1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK 20,821,880 SHARES $ 0.71875 $14,965,726 $ 5,160.60
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) promulgated under the Securities Act of 1933,
based on the average of the high and low prices for the Common Stock
on the NASDAQ National Market System on August 16, 1996.
- --------------------------------------------------------------------------------
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.
Pursuant to Rule 429, promulgated under the Securities Act of 1933, as amended,
the Prospectus forming a part of this registration statement also relates to
those shares of registrant's Common Stock initially included in registrant's
registration statements (File Nos. 33-19926, 33-38584, 33-44790, 33-47611,
33-51468, 33-74442 and 33-84694) that remain unsold as of the date hereof.
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED August 29, 1996
PROSPECTUS
28,582,292 SHARES
NOISE CANCELLATION TECHNOLOGIES, INC.
COMMON STOCK
------------
This offering consists of 571,244 shares of Common Stock of Noise
Cancellation Technologies, Inc. (the "Company") which are issuable upon the
exercise of outstanding warrants and options to purchase shares of Common Stock
by persons not deemed "affiliates" of the Company, as that term is defined
under the Securities Act of 1933 (the "Securities Act"). The exercise price
for such options and warrants ranges from $0.75 to $5.36 per share. The
aggregate proceeds, from the exercise of all such warrants or options would be
$820,924 and, if realized, will be added to the Company's working capital.
The expenses payable by the Company in connection with its most recent
registration statement were $16,421. However, there are no material
incremental expenses attributable solely to the issuance and distribution of
the above described shares.
This offering also consists of the resale of 22,314,581 shares of
Common Stock which were issued by the Company in private placements exempt from
registration under the Securities Act and were issued and outstanding on August
23, 1996, as well as the resale of 5,696,467 shares of Common Stock which may
be issued upon the exercise of outstanding warrants and options to purchase
shares of Common Stock to persons who may be deemed "affiliates" of the
Company, as that term is defined under the Securities Act, all of which may be
offered for sale by the Selling Stockholders (see "Selling Stockholders"). The
Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholders.
The Company has been advised by the Selling Stockholders that there
are no underwriting arrangements with respect to the sale of the shares, that
such shares will be sold from time to time in public sales in the
over-the-counter market at then prevailing prices or at prices related to the
then current market price or in private transactions at negotiated prices. The
shares may be sold through purchases by a broker or dealer as principal and
resale by such broker or dealer for its account pursuant to this Prospectus or
in ordinary brokerage transactions and transactions in which the broker
solicits purchasers. In effecting sales, brokers or dealers engaged by the
Selling Stockholders may arrange for other brokers or dealers to participate.
Brokers or dealers will receive commissions or discounts from Selling
Stockholders in amounts to be negotiated immediately prior to the sale. Such
brokers or dealers and any other participating brokers or dealers may be deemed
to be "underwriters" within the meaning of the Securities Act in connection
with such sales. (see "Selling Stockholders").
SEE "RISK FACTORS" ON PAGES 10 THROUGH 18 FOR CERTAIN INFORMATION RELATING TO
THE COMPANY.
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.
The Company's Common Stock is quoted on the NASDAQ National Market
System under the symbol "NCTI". The last sale price reported for such Common
Stock on August 26, 1996, as quoted by NASDAQ, was $0.8750.
THE DATE OF THIS PROSPECTUS IS August 29, 1996
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to certain of the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, NW, Washington, DC 20549 and at the following
regional offices of the Commission: Seven World Trade Center, Suite 1300, New
York, New York 10048 and Suite 1400, Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60611. Copies of such material can also be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, NW, Washington,
DC 20549 at prescribed rates.
The Company has filed with the Commission certain Registration
Statements under the Securities Act with respect to the securities being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statements, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statements.
________________
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION 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 OTHER THAN THE COMMON STOCK TO
WHICH IT RELATES OR A SOLICITATION TO ANY PERSON IN ANY JURISDICTION WHERE SUCH
AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
2
<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the
Commission pursuant to the Exchange Act (File No. 0-18267) and are
incorporated herein by reference and made a part hereof:
(1) the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, (including Amendment No. 1 thereto filed on April 29, 1996,
Amendment No. 2 thereto filed on May 8, 1996, Amendment No. 3 thereto filed on
May 24, 1996, Amendment No. 4 thereto filed on June 11, 1996 and Amendment No.
5 thereto filed on June 13, 1996);
(2) the Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1996 and June 30, 1996; and
(3) the description of capital stock found in Item 1 of the
Company's Registration Statement on Form 8-A filed with the Commission on
January 30, 1990.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of filing of this
Prospectus and prior to the termination of the offering of the Common Stock
covered by this Prospectus are deemed to be incorporated by reference and shall
be a part hereof from their respective dates of filing.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained in this Prospectus or in any other
subsequently filed document which also is incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a
copy of this Prospectus is delivered, upon written or oral request, a copy of
any and all of the information that has been incorporated by reference in this
Prospectus, but not including exhibits to such information unless such exhibits
are specifically incorporated by reference into the information that this
Prospectus incorporates. Requests for copies of such information should be
directed to Krystyna Marushak, Investor Relations, Noise Cancellation
Technologies, Inc., One Dock Street, Stamford, Connecticut 06902, telephone
number (203) 961-0500, extension 391.
3
<PAGE> 5
THE COMPANY
Noise Cancellation Technologies, Inc. ("NCT" or the "Company")
believes it is the industry leader in the design, development, licensing,
production and distribution of electronic systems for Active Wave
Management(TM) including systems that electronically reduce noise and
vibration. The Company's systems are designed for integration into a wide
range of products serving multi-billion dollar markets in the transportation,
manufacturing, commercial, consumer products and communications industries. The
Company began commercial application of its technology, with ten products sold
or currently being sold, including the NoiseBuster(TM) consumer headset, the
ProActive(TM) line of industrial/commercial active noise reduction headsets, an
aviation headset for pilots, an industrial muffler or "silencer" for use with
large vacuums and blowers, quieting headsets for patient use in magnetic
resonance imaging ("MRI") machines, an aircraft cabin quieting system and
quieting systems for heating, ventilation and air conditioning ("HVAC") ducts
("NoiseEater(TM)").
In 1995, the Company introduced industrial headsets and its Adaptive
Speech Filter(TM) ("ASF(TM)"), which the Company believes will have wide
application in the communications and automotive industries.
In keeping with the direction established in late 1994, during 1995
the Company began the active practice of marketing its technology through
licensing to third parties for fees and subsequent royalties. In April 1995,
the Company licensed its aircraft cabin quieting technology exclusively to
Ultra Electronics, Ltd. ("Ultra") for a license fee and future royalties. In
November 1995, the Company concluded negotiations with Walker Manufacturing
Company ("Walker"), a division of Tenneco Automotive, which resulted in the
restructuring of the Walker/NCT joint venture ("WNCT") and the licensing of
certain additional automotive related technology to Walker for a fee and future
royalties.
In 1996, the Company plans to introduce additional products for the
communications marketplace, a silicon micro-machined microphone ("SMM"), which
may be used independently or in conjunction with noise reduction, and
additional industrial headset products. The Company is also refining its
NoiseEater(TM) product for introduction into international markets. The
Company has entered into a joint venture with Applied Acoustic Research, L.L.C.
called OnActive Technologies, L.L.C. which is developing Flat Panel
Transducer(TM) ("FPT(TM)") systems utilizing TopDown Surround Sound(TM)
("TDSS(TM)") for automotive applications.
In late 1995 the Company redefined its corporate mission to be the
worldwide leader in the advancement and commercialization of Active Wave
Management(TM) technology. Active Wave Management(TM) is the electronic and
mechanical manipulation of sound or signal waves to reduce noise, improve
signal-to-noise ratio and/or enhance sound quality. This redefinition is the
result of the development of new technologies, as previously noted, such as
ASF(TM), TDSS(TM), FPT(TM), and the SMM, which creates products that the
Company believes will be utilized in areas beyond noise attenuation and
control. These technologies and products are consistent with the shift of the
Company's focus to technology licensing fees, royalties and products that
represent near term revenue generation. The redefinition of corporate mission
is reflected in the revised business plan which the Company began to implement
during the first quarter of 1996.
As distribution channels are established and as product sales and
market acceptance and awareness of the commercial applications of Active Wave
Management(TM) build, revenues from technology licensing fees, royalties and
product sales are forecasted to fund an increasing share of the Company's
4
<PAGE> 6
requirements. The funding from these sources, if realized, will reduce the
Company's dependence on engineering and development funding.
Active Wave Management(TM) is an evolving industry. The proportion of
the Company's operating revenues, including technology licensing fees, derived
from engineering and development services, is reflective of this fact. From the
Company's inception through June 30, 1996 approximately 21% of its operating
revenues have come from the sale of products and 27% of its operating revenues
have come from licensing of the Company's technology, while approximately 52%
of its operating revenues have come from engineering and development services.
Active noise control offers many advantages over traditional passive
methods of noise control such as conventional mufflers, ear protectors and
acoustical padding. Active noise control systems: (i) generally reduce only
unwanted noise and permit desired sounds such as the human voice, music or
warning tones to pass freely, (ii) are more successful in attenuating low
frequency noise, (iii) contribute to energy savings and provide other economic
benefits in various applications, and (iv) generally are smaller and lighter.
Active Wave Management(TM) is the utilization of active noise
attenuation technology and certain other technologies which results in the
electronic and mechanical manipulation of sound or signal waves to reduce
noise, improve signal-to-noise ratio and/or enhance sound quality.
NCT believes that it has the leading position in Active Wave
Management(TM) technology, holding more patents and intellectual property than
any other firm in the field. The Company also has an exclusive license to
advanced technology for attenuating noise in a large space, such as the
interior of an aircraft or the passenger compartment of an automobile, using
multiple interactive sensors, such as microphones, and actuators, such as
speakers. Additionally the Company has expanded its portfolio by the
acquisition of various patents, including, in particular the purchase in 1994
of the intellectual property of Active Noise Vibration Technologies, Inc.
The Company has entered into a number of strategic supply,
manufacturing and marketing alliances with leading global companies to
commercialize its technology. These strategic alliances historically have
funded a majority of the Company's research and development, and provided the
Company with reliable sources of components, manufacturing expertise and
capacity, as well as extensive marketing and distribution capabilities. In
exchange for this funding, the other party generally received a preference in
the distribution of cash and/or profits or royalties from these alliances until
such time as the support funding, plus an "interest" factor in some instances,
is recovered. NCT has established continuing relationships with Walker
Manufacturing Company ("Walker") (a division of Tennessee Gas Pipeline Company,
a wholly owned subsidiary of Tenneco, Inc.), AB Electrolux ("Electrolux"),
Foster Electric Company, Ltd. ("Foster"), Analog Devices, Inc. ("ADI"), Ultra
Electronics Ltd. ("Ultra"),Harris Corporation ("Harris"), The Charles Stark
Draper Laboratory, Inc. ("Draper"), Coherent Technologies, Inc. ("Coherent"),
Applied Acoustic Research, L.L.C. ("AAR") and Hoover Universal, Inc.
("Hoover") (a wholly owned subsidiary of Johnson Controls, Inc.), among others,
in order to penetrate major markets more rapidly and efficiently, while
minimizing the Company's own capital expenditures. There have been
substantial changes to the terms governing certain of the foregoing
relationships as described below.
In February 1995 the Company purchased from Foster the exclusive right
to manufacture headsets in the Far East. Due to the acquisition by the Company
in 1994 of the sole ownership of Chaplin Patents Holding Co., Inc. ("CPH"),
neither the Company nor Foster believed there was any necessity to continue
their supply joint venture, Foster/NCT Supply Ltd. ("FNS"). The Company and
Foster dissolved FNS.
5
<PAGE> 7
The Company and Foster remain active in the Far East through Foster/NCT
Headsets International, Ltd. ("FNH") and NCT Far East, Inc. ("NCTFE") which
are marketing and distribution alliances between the Company and Foster.
Foster produced six products for NCT in 1995.
In March 1995, the Company and Ultra amended their teaming agreement
and concluded a licensing and royalty agreement for $2.6 million and a future
royalty of 1 1/2% of sales commencing in 1998. Under the agreement, Ultra
acquired the Company's active aircraft quieting business based in Cambridge,
England, leased a portion of the Company's Cambridge facility and employed
certain of the Company's employees.
On November 15, 1995, the Company and Walker executed a series of
related agreements (the "Restructuring Agreements") and concluded previously
noted negotiations with Tenneco Automotive and Walker regarding the Company's
commitment to help fund $4.0 million of product and technology development work
and the transfer of the Company's 50% interest in WNCT to Walker. The
Restructuring Agreements provided for the transfer of the Company's interest in
WNCT to Walker, the elimination of the Company's previously expensed obligation
to fund the remaining $2.4 million of product and technology development work,
the transfer to Walker of certain Company owned tangible assets related to the
business of WNCT, the expansion of certain existing technology licenses and the
Company's performance of certain research and development activities for Walker
at Walker's expense as to future activities.
An important factor for the Company's continuing development is its
ability to recruit and retain key personnel. As of July 18, 1996, the Company
had 75 employees, including 32 engineers and technical staff.
Among its engineering staff and consultants are several scientists and
inventors that the Company believes are preeminent in the active noise and
vibration control field worldwide. Consistent with the Company's revised
strategy to focus on near term product commercialization, technology licensing
fees and royalties, during 1995, the Company significantly reduced its work
force and consolidated substantially all of its corporate functions in
Maryland.
The Company was incorporated in Nevada on May 24, 1983. In April
1985, the Company moved its corporate domicile to Florida and assumed its
present name, and in January 1987, following the assumption of control of the
Company by the present management, it changed its state of incorporation to
Delaware. NCT's executive offices, research and product development facilities
are located at 1025 West Nursery Road, Linthicum, Maryland 21090; telephone
number (410) 636-8700. NCT maintains sales and marketing offices at One Dock
Street, Suite 300, Stamford, Connecticut 06902; telephone number (203)
961-0500. The Company's European operations are conducted through its product
development and marketing facility in Cambridge, England. NCT also maintains a
marketing facility in Tokyo, Japan.
6
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL DATA
The following should be read in conjunction with the consolidated
financial statements of the Company and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
incorporated by reference into this Prospectus. Operating results for the
six month period ended June 30, 1996, are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA:
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1991 1992 1993 1994 1995
-------- ---------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
REVENUES
Technology licensing fees and other $1,742 $62 $60 $452 $6,580
Product Sales 610 740 1,728 2,337 1,589
Engineering and development services 3,513 3,779 3,598 4,335 2,297
-------- ------------ ------------ --------- -------
Total revenues $5,865 $4,581 $5,386 $7,124 $10,466
-------- ------------ ------------ --------- -------
COSTS AND EXPENSES:
Cost of sales $312 $608 $1,309 $4,073 $1,579
Cost of engineering and development services 2,705 2,748 2,803 4,193 2,340
Selling, general and administrative 3,148 5,150 7,231 9,281 5,416
Research and development 1,445 4,214 7,963 9,522 4,776
Interest (income) expense, net 94 (169) (311) (580) (49)
Compensation expense-removal of
vesting condition --- 7,442 --- --- ---
Equity in net (income) loss of
unconsolidated affiliates --- 117 3,582(2) 1,824 (80)
Other (income) expense, net 54 89 --- 718 552
-------- ------------ ------------ --------- -------
Total costs and expenses $7,758 $20,199 $22,577 $29,031 $14,534
-------- ------------ ------------ --------- -------
Loss before income taxes $(1,893) $(15,618) $(17,191) $(21,907) $(4,068)
Income taxes 100 --- --- --- ---
-------- ----------- ------------ --------- --------
Net loss $(1,993) $(15,618)(1) $(17,191)(2) $(21,907) $(4,068)
======== =========== ============ ========= ========
Weighted average number of common
shares outstanding(3) 52,694 61,712 70,416 82,906 87,921
======== ============ ============ ========= ========
Net loss per share $(0.04) $(0.25)(1) $(0.24)(2) $(0.26) $(0.05)
======== ============ ============ ========= ========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
-----------------------
1995 1996
----- ------------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
REVENUES
Technology licensing fees and other $3,225 $1,068
Product Sales 688 692
Engineering and development services 1,447 224
-------- ------------
Total revenues $ 5,360 $1,984
-------- ------------
COSTS AND EXPENSES:
Cost of sales $ 595 $574
Cost of engineering and development services 1,567 168
Selling, general and administrative 3,318 2,325
Research and development 2,365 2,761
Interest (income) expense, net (15) 24
Compensation expense-removal of
vesting condition --- ---
Equity in net (income) loss of
unconsolidated affiliates --- 80
Other (income) expense, net --- ---
-------- ------------
Total costs and expenses $ 7,830 $5,932
-------- ------------
Loss before income taxes $(2,470) $(3,948)
Income taxes --- ---
-------- ------------
Net loss $(2,470) $(3,948)
======== ============
Weighted average number of common
shares outstanding(3) 86,215 94,468
======== ============
Net loss per share $(0.03) $(0.04)
======== ============
</TABLE>
7
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<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------- JUNE 30,
1991 1992 1993 1994 1995 1996
------- ------- ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets $5,484 $15,771 $29,541 $12,371 $9,583 $7,638
Total liabilities 1,457 2,069 6,301 6,903 2,699 3,610
Long-term debt 3 --- --- --- 105 75
Accumulated deficit (14,065) (29,682) (46,873) (68,780) (72,848) (76,796)
Stockholders equity(4) 4,027 13,702 23,239 5,468 6,884 4,028
Working capital (deficiency) 1,971 11,038 19,990 923 1,734 (588)
</TABLE>
(1) Includes a one-time non-cash charge of $7,441,875 or $.12 per share
for the year ended December 31, 1992, related to the removal of the
vesting conditions to certain warrants. This charge removed any
potential future charge to earnings related to such warrants.
(2) In connection with the sale of Common Stock to Tenneco Automotive in
December 1993, the Company recognized its share of cumulative losses
not previously recorded with respect to its joint venture with Walker
amounting to $3,581,682.
(3) Does not include shares issuable upon the exercise of outstanding
stock options, warrants and, where applicable in 1991, outstanding
shares of Series A and Series B Convertible Preferred Stock, since
their effect would be antidilutive.
(4) The Company has never declared nor paid cash dividends on its Common
Stock.
8
<PAGE> 10
THE OFFERING
This offering consists of 571,244 shares of Common Stock of the
Company which are issuable upon the exercise of outstanding warrants and
options to purchase shares of Common Stock by persons not deemed "affiliates"
of the Company, as that term is defined under the Securities Act. The exercise
price for such options and warrants ranges from $0.75 to $5.36 per share. The
aggregate proceeds, from the exercise of all such warrants or options would be
$820,924 and, if realized, will be added to the Company's working capital.
The expenses payable by the Company in connection with its most recent
registration statement were $16,421. However, there are no material
incremental expenses attributable solely to the issuance and distribution of
the above described shares.
This offering also consists of the resale of 22,314,581 shares of
Common Stock which were issued by the Company in private placements exempt from
registration under the Securities Act and were issued and outstanding on August
23, 1996, as well as the resale of 5,696,467 shares of Common Stock which may
be issued upon the exercise of outstanding warrants and options to purchase
shares of Common Stock to persons who may be deemed "affiliates" of the
Company, as that term is defined under the Securities Act, all of which may be
offered for sale by the Selling Stockholders (see "Selling Stockholders"). The
Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholders.
9
<PAGE> 11
RISK FACTORS
The shares of Common Stock offered hereby represent a speculative
investment and entail elements of risk. The following factors, in addition to
the other information included or incorporated by reference herein, should be
carefully considered before any decision is made to purchase any of the shares
of Common Stock offered hereby.
CURRENT FINANCIAL CONDITION; CASH POSITION; INADEQUACY OF CURRENTLY
AVAILABLE FUNDS TO SUSTAIN COMPANY; LIMITATION ON ABILITY TO SELL ADDITIONAL
COMMON STOCK. Cash, cash equivalents and short-term investments amounted to
$0.9 million at June 30, 1996, decreasing from $1.8 million at December 31,
1995. On April 10, 1996, the Company sold 1,000,000 shares, in the aggregate,
of its Common Stock in a private placement with three institutional investors
(the "April 1996 Private Placement"). Contemporaneously, the Company sold
secured convertible term notes in the aggregate principal amount of $1,200,000
to those institutional investors and granted them each an option to purchase an
aggregate of $3,450,000 of additional shares of the Company's Common Stock.
The per share conversion price under the notes and the exercise price under the
options were equal to the price received by the Company for the sale of such
1,000,000 shares subject to certain adjustments. On August 13, 1996 the three
institutional investors exercised their options and converted their secured
convertible term notes. On August 29, 1996, the Company sold 1,753,968 shares
of its Common Stock in a private placement with a Canadian institutional
investor (the "August 1996 Private Placement"). The cash raised from the April
1996 Private Placement and the August 1996 Private Placement, the exercise
of warrants and options including the options granted to the three
institutional investors in the April 1996 Private Placement, the funding
derived from forecasted technology licensing fees and royalties, and product
sales and engineering and development revenue income, the operating cost
savings from the reduction in employees and reduced capital expenditures should
be sufficient to sustain the Company's anticipated future level of operations
into 1997. However, the current available funds are not sufficient to sustain
the Company for the next twelve months. The period during 1997 through which
the Company can be sustained is dependent upon the level of realization of
funding from technology license fees and royalties and product sales and
engineering and development revenue and the achievement of the operating cost
savings from the events described above, all of which are presently uncertain.
Success in generating technology licensing fees, royalties and product
sales are significant and critical to the Company's ability to overcome its
present financial difficulties. In January 1996, the Company adopted a plan
that management believes should generate sufficient funds for the Company to
continue its operations into 1997. The Company cannot predict whether it will
be successful in obtaining market acceptance of its new products or in
completing its current negotiations with respect to licenses and royalty
revenues. If, during the course of 1996, management of the Company determines
that it will be unable to meet or exceed the plan referred to above, the
Company will consider fund raising alternatives.
As a condition to the sale of Common Stock and secured convertible
term notes to three institutional investors in the April 1996 Private Placement
the Company agreed not to seek any additional equity financing (including debt
financing with an equity component) without such investors' consent prior to
October 8, 1996, and granted the three institutional investors a right of first
refusal with respect to any such additional financing until April 10, 1997. The
Company's ability to raise additional capital through sales of Common Stock
will be severely limited until the termination of these restrictions on
further equity financing. The Company will monitor its performance against the
plan on a monthly basis and, if necessary, reduce its level of operations
accordingly. The Company believes that the plan discussed above constitutes a
viable plan for the continuation of the Company's business into 1997.
There can be no assurance that additional funding will be provided by
technology license fees, royalties and product sales and engineering and
development revenue. In that event, the Company would have to further and
substantially cut back its level of operations in order to conserve cash.
These reductions could have an adverse effect on the Company's relations with
its strategic partners and customers. Uncertainty exists with respect to the
adequacy of current funds to support the Company's activities until positive
cash flow from operations can be achieved, and with respect to the availability
of financing from other sources to fund any cash deficiencies.
The Company expects to continue as a going concern, which contemplates
continuity of operations, realization of assets and satisfaction of liabilities
in the ordinary course of business and its
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financial statements have been prepared on that basis. This going concern
basis is dependent upon, among other things, the achievement of future
profitable operations and the ability to generate sufficient cash from
operations, public and private financings and other funding sources to meet its
obligations. The uncertainties described in the preceding paragraph raise
substantial doubt at June 30, 1996, about the Company's ability to continue as
a going concern. The Company's financial statements do not include any
adjustments relating to the recoverability of the carrying value of recorded
assets or the amount of liabilities that might result from the outcome of these
uncertainties.
The Company has never declared nor paid dividends on its common stock
and has no present intention to do so.
GOING CONCERN EMPHASIS PARAGRAPH IN ACCOUNTANTS' OPINION. On March 8,
1996, Richard A. Eisner & Company, LLP issued its report on the Company's
consolidated financial statements as of and for the year ended December 31,
1995. With respect to Note 15 to those financial statements, such report was
dated April 10, 1996. The report of Richard A. Eisner & Company, LLP contains
a paragraph which emphasizes certain factors which are described in Note 1 to
the financial statements covered by the report. This paragraph notes that
such factors raise substantial doubt as to the Company's ability to continue
as a going concern. See "Experts-Report of Independent Auditors" below.
Prospective investors are urged to read carefully the report of Richard A.
Eisner & Company, LLP as well as the consolidated financial statements of the
Company and the notes thereto, which are incorporated herein by reference to
Amendment No. 5 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, filed on June 13, 1996.
HISTORY OF OPERATING LOSSES AND ACCUMULATED DEFICIT. The Company
incurred a net loss of $4.1 million for the year ended December 31, 1995, and
an additional net loss of $3.9 million for the six months ended June 30,
1996. The Company's accumulated deficit at June 30, 1996 was $76.8 million,
attributable in substantial part to the costs of developing its proprietary
technology. To achieve profitability, NCT must, independently and with
strategic allies, successfully develop, manufacture, introduce and market its
products in commercial quantities and receive fees and royalties from licensing
its proprietary technology.
LIMITED REVENUES. Although the Company has engaged in marketing
activities with regard to the sale or licensing of electronic systems for
Active Wave Management(TM) including systems that electronically reduce noise
and vibration based upon prototypes of such systems, its operating revenues
from inception through June 30, 1996, have been limited, aggregating
$8.4 million from the sale of such systems, $10.7 million from the
licensing of technology relating to such systems and $20.6 million from the
performance of engineering and development services, respectively. Although
the Company has begun commercial sales of active noise attenuation and other
products in a limited number of applications, significant further development
will be necessary before many of the Company's potential products will achieve
expected commercial end-use applications.
MATERIAL DEPENDENCE UPON CERTAIN PATENT RIGHTS; UNCERTAIN PROPRIETARY
PROTECTION. No assurance can be given as to the range or degree of protection
any patent issued to, or licensed by, the Company will afford or that such
patents or licenses will provide protection that has commercial significance or
will provide competitive advantages for the Company's products. No assurance
can be given that the Company's owned or licensed patents will afford
protection against competitors with similar technology, or that others will not
obtain patents claiming aspects similar to those covered by the Company's owned
or licensed patents or patent applications. No assurance exists that the
Company's owned or licensed patents will not be challenged by third parties,
invalidated, rendered unenforceable or designed around. Furthermore, there can
be no assurance that any pending patent applications or
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applications filed in the future will result in the issuance of a patent.
The invalidation or expiration of patents owned or licensed by the Company and
believed by the Company to be commercially significant could permit increased
competition, with potential adverse effects on the Company and its business
prospects. Although the Company intends to file for extensions to certain
patents, the Company can make no assurances that the U.S. or foreign government
patent authorities will grant such extensions.
The Company has conducted only limited patent searches and no
assurances can be given that patents do not exist or will not be issued in the
future that would have an adverse effect on the Company's ability to market its
products or maintain its competitive position with respect to its products.
Substantial resources may be required to obtain and defend patent rights to
protect present and future technology of the Company.
There has been a claim challenging the use of one of the Company's
trademarks and an interference proceeding has been initiated with respect to
one of the Company's patent applications. There has also been an inquiry
regarding the product design configuration of one of the Company's products as
it relates to a patent held by another company. The Company believes that such
claims and inquiry are without merit and intends to oppose them vigorously.
Moreover, if such inquiry proves to have any merit, the Company believes it
could, without significant cost, modify its product design configuration so as
to avoid infringement. The Company does not believe that any damages or costs
it may incur as a result of such claims or inquiry would have a material
adverse effect on the financial condition of the Company.
The Company's policy is to enter into confidentiality agreements with
all of its executive officers, key technical personnel and advisors, but no
assurances can be made that Company know-how, inventions and other secret or
unprotected intellectual property will not be disclosed to third parties by
such persons.
RAPID TECHNOLOGICAL CHANGE. Active Wave Management(TM) is an evolving
industry, characterized by rapid technological change. The Company intends to
engage continually in research and development activities, including the
improvement of current products and development of new products. There can be
no assurance, however, that active noise and vibration attenuation or other
applications of Active Wave Management(TM) will be accepted by the commercial
marketplace, that the introduction of new products or the development of new
technologies by others will not render the Company's products obsolete or
unmarketable, or that the Company will be able to hire and retain adequate
research personnel or be able to finance research activities in this regard.
RELIANCE UPON STRATEGIC ALLIANCES; COMMERCIAL ACCEPTANCE OF
END-PRODUCTS. The Company and certain of its wholly owned subsidiaries have
entered into agreements to establish strategic alliances related to the design,
development, manufacture, marketing and distribution of its electronic systems
and products containing such systems. These agreements generally provide that
the Company license its technology and contribute a nominal amount of initial
capital and that the other party provide substantially all of the funding to
support the alliance. In exchange for this funding, the other party generally
receives a preference in the distribution of cash and/or profits or royalties
from these alliances until such time as the support funding, plus an "interest"
factor in some instances, is recovered. At June 30, 1996, there were no
preferred distributions due to joint venture partners from future profits of
the joint ventures.
The Company conducts its marketing efforts primarily by identifying
specific market segments for active noise and vibration attenuation and other
Active Wave Management (TM) products and,
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thereafter, seeking to establish strategic alliances with major domestic and
international business concerns to support product development, and to
manufacture and distribute products for such market segments. The Company's
ability to enter into new markets is materially dependent upon determinations
by such concerns that the Company's products are suitable for use in their
respective end-products, and on the ability and willingness of those concerns
to market such products successfully. During 1995 and the first quarter of
1996, active headset product sales did not increase at the rate previously
anticipated and orders for active vehicular mufflers, kitchen exhaust and HVAC
fan quieting systems and industrial headsets were not received at volumes or
within time frames that had been anticipated by the Company.
The Company arranges for the supply of actuators, integrated circuits
and other electronic components for its active control systems through
alliances with manufacturers the Company believes will serve as dependable
sources of supply. The Company makes no assurances that these concerns will
meet the Company's and its customers' needs for quality components in
sufficient quantities at commercially reasonable prices.
CUMULATIVE LOSSES IN JOINT VENTURES. When the Company's share of
cumulative losses in a strategic alliance exceeds its investment and the
Company has no obligation to fund such additional losses, the Company suspends
applying the equity method of accounting for its investment in such alliance.
The aggregate amount of losses in the Company's strategic alliances in excess
of the Company's investments which has not been recorded was zero at June 30,
1996. The Company will not be able to record any equity in income with respect
to an entity until its share of future profits is sufficient to recover any
cumulative losses that have not previously been recorded.
DEPENDENCE UPON EXECUTIVE OFFICERS AND OTHER KEY PERSONNEL. The
Company's operations are, and for the proximate future will be, materially
dependent upon the efforts of its executive officers and key technical
employees, all of whom serve the Company on a full-time basis but none of whom
are contractually obligated to remain in the Company's employ for any material
term. Moreover, the Company's growth and expansion into new product
applications could require additional expertise in areas such as manufacturing,
marketing and distribution, which would place increased demands on the
Company's resources and would require the addition of new personnel and the
development of additional expertise by existing personnel. Certain academic
consultants serve the Company on a part-time basis, and could terminate their
relationship with the Company at any time.
Certain employees and consultants of the Company have been approached
by the Company's competitors, and no assurances can be given that the
competition will not successfully recruit such personnel. The loss of key
personnel or the failure to recruit necessary additional personnel could impede
the achievement of the Company's development, commercialization and marketing
objectives.
AGREEMENTS WITH RELATED PARTIES; COMMISSIONS AND EXCLUSIVE
DISTRIBUTORSHIPS. In 1993 the Company entered into four agreements with
QuietPower Systems, Inc. ("QPS") (formerly Active Acoustical Solutions, Inc.)
and in 1994 entered into a fifth agreement with QPS. QPS is 33% owned by
Environmental Research Information, Inc. ("ERI") and 2% owned by Jay M. Haft,
Co-Chairman and Chief Executive Officer of the Company. Michael J. Parrella,
President of the Company owns approximately 12% of the outstanding capital of
ERI and Mr. Haft shares investment control over an additional 24% of the
outstanding capital of ERI. Under these agreements, QPS is given rights to
market certain of the Company's products and technologies to electric and/or
natural gas utilities and for use in or with feeder bowls. In one of these
agreements, QPS's rights are on an exclusive basis so long as QPS meets certain
performance criteria relating to marketing efforts and sales performance.
Under one of these agreements, QPS is entitled to receive a sales commission
equal to 129% of QPS's marketing
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expenses attributable to the marketing of the products in question, which
expenses are to be deemed to be the lesser of QPS's actual expenses or 35% of
the revenues received by the Company from the sale of such products.
Commissions and fees payable under all of the other agreements are in
accordance with the Company's standard terms and conditions and do not exceed
6%. As of the date of this Prospectus, the Company has not been required to
pay any commissions to QPS under these agreements.
In March 1995, the Company entered into a Master Agreement with QSI
under which QSI was granted an exclusive worldwide license under certain NCT
patents and technical information to market, sell and distribute transformer
quieting products, turbine quieting products and certain other products in the
utility industry. Under the Master Agreement, QSI is to fund development of
the products by the Company and the Company is to manufacture the products.
However, QSI may obtain the right to manufacture the products under certain
circumstances including NCT's failure to develop the products or the failure of
the parties to agree on certain development matters. In consideration of the
rights granted under the Master Agreement, QSI is to pay the Company a royalty
of 6% of the gross revenues received from the sale of the products and 50% of
the gross revenues received from sublicensing the rights granted to QSI under
the Master Agreement after QSI has recouped 150% of the costs incurred by QSI
in the development of the products in question. The Company is obligated to
pay similar royalties to QSI on its sale of the products and the licensing of
rights covered under the Master Agreement outside the utility industry and from
sales and licensing within the utility industry in the Far East. In addition
to the foregoing royalties, QSI is to pay an exclusivity fee to the Company of
$750,000; $250,000 of which QSI paid to the Company in June 1994. The balance
is payable in equal monthly installments of $16,667 beginning in April 1995.
QSI's exclusive rights become non-exclusive with respect to all products if it
fails to pay any installment of the exclusivity fee when due and QSI loses such
rights with respect to any given product in the event it fails to make any
development funding payment applicable to that product. The Master Agreement
supersedes all other agreements relating to the products covered under the
Master Agreement, including those agreements between the Company and QSI
described above.
Immediately following the execution to the Master Agreement, the
Company and QSI entered into a letter agreement providing for the termination
of the Master Agreement at the Company's election if QSI did not pay
approximately $500,000 in payables then owed to the Company by May 15, 1995.
In April 1995, the Company and QSI entered into another letter
agreement under which QSI agreed to forfeit and surrender the five year warrant
to purchase 750,000 shares of the Company's Common Stock issued to QSI under
the first Marketing Agreement described above. In addition, the $500,000
balance of the exclusivity fee provided for under the Master Agreement was
reduced to $250,000 to be paid in 30 monthly installments of $8,333 each and
the payment of the indebtedness to be paid under the letter agreement described
in the proceeding paragraph was revised to be the earlier of May 15, 1996, or
the date of closing of a financing of QSI in an amount exceeding $1.5 million,
whichever first occurs. Such indebtedness was to be evidenced by a promissory
note, non-payment of which would constitute an event of termination under the
Master Agreement.
In May 1996, the Company and QSI entered into a third letter agreement
which revised the payment schedules for QSI's payment to the Company of the
balance of the exclusivity fee and the outstanding indebtedness for other
amounts owed the Company. Under this letter agreement, if QSI does not pay the
full amount of arrearages in the payment of the exclusivity fee by June 15,
1996 or defaults in the timely payment of any installment of the other
indebtedness, the Master Agreement and all rights granted to QSI thereunder
terminate. The letter agreement also amends certain provisions concerning
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royalties and administrative matters which should not materially adversely
effect the Company's economic rights under the Master Agreement. As of the
date of this Prospectus, QSI has paid the full amount of such exclusivity fee
arrearages and has not defaulted in the timely payment of any amounts that have
become due and payable under the other indebtedness.
The Company believes that the terms of its agreements with QSI are
comparable to those that it could have negotiated with other persons or
entities.
COMPETITION. The Company is aware of a number of direct competitors
in the field of active noise and vibration attenuation. Indirect competition
also exists in the field of passive sound and vibration attenuation. The
primary bases of competition for each product or potential product of the
Company are the cost of an active system and its system performance measured by
the level of noise or vibration attenuation compared to the cost and
performance of an alternative active or passive solution for the problem in
question. At the present time passive solutions generally are less expensive
than active solutions, although passive solutions do not provide as great a
level of sound attenuation at the more harmful lower frequencies. The
Company's principal known competitors in active control systems are Andrea
Electronics Corporation, Bose Corporation, Digisonix (a division of Nelson
Industries, Inc.), Hitachi, Ltd., Group Lotus PLC and Lotus Cars Limited, Lord
Corporation, Matsushita Electric Industrial Co., Ltd., Sennheiser Electronic
Corp., Sony Corporation, Toshiba Corp., Koss Corporation and Recoton, Inc.
among others. To the Company's knowledge, each of such entities is pursuing
its own technology in active control systems, either on its own or in
collaboration with others, and has recently commenced attempts to exploit
commercially such technology. The Company also believes that a number of
other large companies, such as the major domestic and foreign automobile and
appliance manufacturers, and aircraft parts suppliers and manufacturers, have
research and development efforts underway in active noise and vibration
control. Many of these companies, as well as the Company's potential
competitors in the passive sound attenuation field and other entities that
could enter the active noise and vibration attenuation field as the industry
develops, are well established and have substantially greater management,
technical, financial, marketing and product development resources than the
Company. In addition, the Company is aware that Andrea Electronics Corporation
is proceeding with the commercialization of in-wire noise cancellation with one
or more major providers of telephone services. The Company also believes that
a number of major telecommunications and other electronics companies such as
AT&T Corporation, Texas Instruments Inc. and Motorola Inc. are or may be
developing in wire noise cancellation and electronic speech filtering
technologies similar to those being developed and commercialized by the
Company. The Company is unable to determine at the present time what impact
such efforts might have on the Company's ability to successfully commercialize
its in-wire technology for use in telephones and other communications
applications.
POSSIBLE NEED FOR ADDITIONAL FINANCING. Historically, the Company
financed its operations through public and private placements of equity and
through the exercise of options and warrants granted to directors, employees
and others, as well as with license fees and research and development funding
from its strategic allies. The cash raised from the April 1996 Private
Placement and the August 1996 Private Placement, the exercise of warrants and
options including the options granted to the three institutional investors in
the April 1996 Private Placement, the funding derived from forecasted technology
license fees, royalties and product sales and engineering and development
revenue, the operating cost savings from the reduction in employees and reduced
capital expenditures should be sufficient to sustain the Company's anticipated
future level of operations into 1997. However, the current available funds are
not sufficient to sustain the Company for the next twelve months. The period
during 1997 through which the Company can be sustained is dependent upon the
level of realization of funding from license fees, royalties and product sales
and engineering and development income and the achievement of the operating
cost savings from the events described above, all of which are presently
uncertain.
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Success in generating technology licensing fees, royalties and
product sales are significant and critical to the Company's ability to overcome
its present financial difficulties. In January 1996, the Company adopted a
plan that management believes should generate sufficient funds for the Company
to continue its operations into 1997. The Company cannot predict whether it
will be successful in obtaining market acceptance of its new products or in
completing its current negotiations with respect to licenses and royalty
revenues. If, during the course of 1996, management of the Company determines
that it will be unable to meet or exceed the plan referred to above, the
Company will consider fund raising alternatives. The Company's ability to
raise additional capital through sales of common stock will be severely limited
until the termination of the one year restriction on further equity financing
undertaken by the Company in connection with the sale of common stock and
convertible term notes to three institutional investors in the April 1996
Private Placement. The Company will monitor its performance against the plan
on a monthly basis and, if necessary, reduce its level of operations
accordingly. The Company believes that the plan discussed above constitutes a
viable plan for the continuation of the Company's business into 1997.
There can be no assurance that additional funding will be provided by
technology license fees, royalties and product sales and engineering and
development revenue. In that event, the Company would have to further and
substantially cut back its level of operations in order to conserve cash.
These reductions could have an adverse effect on the Company's relations with
its strategic partners and customers. Uncertainty exists with respect to the
adequacy of current funds to support the Company's activities until positive
cash flow from operations can be achieved, and with respect to the availability
of financing from other sources to fund any cash deficiencies.
POSSIBLE PUBLIC SALES OF COMMON STOCK. On October 6, 1992, the
Company adopted a stock option plan (the "1992 Plan") covering 6,000,000 shares
of the Company's Common Stock and providing for the grant of options to
purchase Common Stock of the Company and awards of restricted common stock to
employees, officers and directors of the Company. The 1992 Plan was approved by
the stockholders at the 1993 Annual Meeting of Stockholders following which
said 6,000,000 shares were registered under the Securities Act. An amendment
to the 1992 Plan adopted by the Option Committee on November 8, 1995, and
approved by the stockholders at the 1996 Annual Meeting of Stockholders (the
"1996 Annual Meeting"), increased the number of shares of Common Stock covered
by the 1992 Plan to 10,000,000 shares and added active consultants to the
Company as persons who are eligible to participate under the 1992 Plan. The
Company has reserved 10,000,000 shares of Common Stock for issuance upon the
exercise of options granted under the 1992 Plan and for issuance upon the grant
of restricted stock awards under the 1992 Plan. 6,000,000 of such shares are
registered under the Securities Act, and the Company also intends to register
the
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additional 4,000,000 shares covered by the 1992 Plan under an amendment to the
1992 Plan approved at the 1996 Annual Meeting. As of July 18, 1996, the
Company has granted options to purchase 5,631,043 shares of Common Stock which
are currently exercisable and 65,000 shares of restricted stock under the 1992
Plan.
On November 15, 1994, the Company adopted and on May 8, 1995 and
November 8, 1995 amended the Noise Cancellation Technologies, Inc. Option Plan
for Certain Directors (the "Directors Plan"), pursuant to which options to
purchase in the aggregate 821,000 shares of Common Stock were granted to two
directors of the Company. The Directors Plan was approved by the stockholders
at the Company's 1995 Annual Meeting of Stockholders as to options to purchase
in the aggregate 725,000 shares of Common Stock. An amendment to the Directors
Plan adopted by the Board of Directors on November 8, 1995, and approved by the
stockholders at the 1996 Annual Meeting, increased the number of shares of
Common Stock covered by the Plan to 821,000 shares and made certain minor
changes concerning the Plan's administration. The Company has reserved 821,000
shares of Common Stock for issuance upon the exercise of the options granted
under the Directors Plan and intends to register such 821,000 shares under the
Securities Act. As of July 18, 1996, the Company has granted options to
purchase 821,000 shares of Common Stock which are currently exercisable under
the Directors Plan.
In the April 1996 Private Placement, the Company sold 1,000,000
shares, in the aggregate, of its Common Stock to three institutional investors.
Contemporaneously, the Company sold secured convertible term notes in the
aggregate principal amount of $1,200,000 to those institutional investors and
granted them each an option to purchase an aggregate of $3,450,000 of
additional shares of the Company's Common Stock. The per share conversion price
under the notes and the exercise price under the options are equal to the price
received by the Company for the sale of such 1,000,000 shares subject to
certain adjustments. On August 13, 1996, the Company issued 13,403,130 shares,
in the aggregate, of its Common Stock in connection with the three
institutional investors' exercise of their options and conversion of their
secured convertible term notes and on August 22, 1996, the Company issued
350,000 shares of its Common Stock to a financial consultant in partial
consideration for services rendered in connection with the April 1996 Private
Placement. In conjunction with the April 1996 Private Placement, the Company
also agreed to file a registration statement with the Commission
covering the applicable shares and to use its best efforts to have such
registration statement declared effective by the Commission as soon as
practicable. The Company also has reserved up to 1,596,870 shares of Common
Stock for issuance in payment of amounts payable by the Company to said
investors in the event such registration statement does not become effective
on a timely basis. The Company intends to register all of such shares under
the Securities Act.
As of August 23, 1996, the Company has reserved 6,006,710 shares of
Common Stock for issuance upon the exercise of warrants and options granted
outside the 1992 Plan, the Directors Plan and the April 1996 Private Placement
all of which the Company plans to register under the Securities Act to the
extent they are not now so registered.
At August 23, 1996, the weighted average exercise price for all
currently exercisable and outstanding warrants and options was $0.7842.
On November 14, 1995, the Company sold 4,800,000 shares of Common
Stock and on August 29, 1996, the Company sold 1,753,968 shares of Common Stock
in two private placements to a Canadian institutional investor pursuant to
Regulation S under the Securities Act. The Company also issued 87,698 shares
of its Common Stock to a financial consultant in consideration for services
rendered in connection with the August 29, 1996 Private Placement.
The possibility of the sale of the shares of Common Stock described in
the preceding six paragraphs, all of which the Company plans to register under
the Securities Act to the extent they are not now so registered or exempt from
the registration requirements of the Securities Act, may adversely
affect the market price of the Company's Common Stock.
NASDAQ/NMS LISTING REQUIREMENTS; DISCLOSURE RELATING TO LOW-PRICED
STOCKS. The Company's Common Stock currently is quoted on the National
Association of Securities Dealers, Inc. Automated Quotation National Market
System ("NASDAQ/NMS"). The NASDAQ/NMS has adopted quantitative maintenance
criteria for continued listing by the NASDAQ/NMS under which a company is
required, among other things, to maintain net tangible assets of at least (i)
$2,000,000 if it has sustained losses from continuing operations and/or net
losses in two of its three most recent fiscal years or (ii) $4,000,000 if it
has sustained losses from continuing operations and/or net losses in three of
its four most recent fiscal years. Failure of the Company to continue to meet
the maintenance requirements could result in the Common Stock losing its
NASDAQ/NMS designation. The NASDAQ/NMS provides brokers and others with
immediate access to the best bid and asked prices and other information about
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the Common Stock during each trading day. If the Company were to lose its
NASDAQ/NMS designation, real-time price information for the Common Stock might
cease to be available. As a result, a stockholder might find it more difficult
to dispose of, or to obtain accurate quotations as to the price of, the Common
Stock. In addition, if the Company were to lose the NASDAQ/NMS designation,
the Common Stock might no longer qualify as a "margin security" as defined by
the Federal Reserve Board.
If the Company were to lose its NASDAQ/NMS designation and, at any
time following the loss of such designation, did not have either (i) net
tangible assets in excess of $2,000,000 or (ii) average revenue of at least
$6,000,000 for the last three years, the Common Stock could become subject to
the Commission's "penny stock" rules. The penny stock rules impose additional
sales practice requirements on broker-dealers who sell securities designated as
penny stocks to persons other than established customers and certain types of
accredited investors. For transactions covered by the penny stock rules, the
broker-dealer must make a special suitability determination for the purchaser
and must have received the purchaser's written consent to the transaction prior
to the sale. The rules require the delivery, prior to the transaction, of a
disclosure schedule prepared by the Commission relating to the penny stock
market. The rules also require disclosure by the broker-dealer of commissions
payable to both the broker-dealer and the registered representative and current
quotations for the securities. If the broker-dealer is the sole market-maker
for the penny stock, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market. Finally, monthly statements
must be sent disclosing recent price information for the penny stock held in
the customer's account and information on the limited market in penny stocks.
The additional burdens imposed upon broker-dealers by the penny stock rules may
discourage broker-dealers from effecting transactions in penny stocks. Thus,
if the Common Stock were to fall within the definition of a penny stock, the
liquidity of the Common Stock could be reduced and there could be a material
effect on the trading market for the Common Stock.
POSSIBLE VOLATILITY OF COMMON STOCK. The market prices for securities
of emerging and high-technology companies have historically been highly
volatile. Future announcements concerning the Company or its competitors could
have a significant impact on the market price of the Common Stock.
BLANK CHECK PREFERRED STOCK. The Board of Directors has total
discretion in the issuance and the determination of the rights and privileges
of any shares of Preferred Stock which might be issued in the future, which
rights and privileges may be detrimental to the holders of the Common Stock.
The Company is authorized to issue 10,000,000 shares of Preferred Stock none of
which has been designated to date. The issuance of Preferred Stock in the
future could discourage or impede a tender offer, proxy contest or other
similar transaction involving a potential change in control of the Company,
which transaction might be viewed favorably by other shareholders.
18
<PAGE> 20
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
Selling Stockholders. The shares set forth therein have been included in the
Registration Statements of which this Prospectus forms a part pursuant to
registration commitments afforded to the Selling Stockholders by contractual
obligations. The Company will not receive any proceeds from the sale of the
shares by the Selling Stockholders.
19
<PAGE> 21
<TABLE>
<CAPTION>
Beneficial Ownership Number Of Beneficial Ownership
Relationship Of Shares Of Shares Of Of Shares Of Common
With Common Stock Common Stock Stock After Giving
Name of Selling Stockholder The Company At August 23, 1996 Offered For Sale(1) Effect To Proposed Sale
--------------------------- ----------- -------------------- ------------------- -----------------------
<S> <C> <C> <C> <C>
Jeffrey N. Denenberg (2) 278,846 174,000 104,846
Michael Dickerson 1,737,698 250,000 1,487,698
The Charles Stark Draper Laboratory,
Inc. 25,000 25,000 0
Graham Eatwell (2) 212,950 75,000 137,950
Foster Electric Company, Ltd. 740,055 740,055 0
William W. Gerecke (2) 47,150 35,000 12,150
Jay M. Haft Chairman Of The Board 1,207,000 468,500 738,500
And Director
Cy E. Hammond Vice President And 269,718 25,000 244,718
Controller
John B. Horton Senior Vice President, 519,417 30,000 489,417
General Counsel And
Secretary
Willis J. Hulings, III (2) 415,000 250,000 165,000
Kingdon Associates, L.P.(3) 2,160,470 2,160,470 0
Kingdon Partners, L.P.(3) 3,600,782 3,600,782 0
M. Kingdon Offshore NV(3) 8,641,878 8,641,878 0
Irene Lebovics Senior Vice President 1,288,067 996,767 291,300
John L. Lesher (2) 105,000 20,000 85,000
William A. Marquard (2) 50,000 50,000 0
John J. McCloy Director 3,651,591 3,651,591 0
Majorie Oolie (4) 200,000 200,000 0
Sam Oolie Director 645,000 630,000 15,000
Oolie Enterprises (4) 21,280 21,280 0
Oolie Family Support Foundation (4) 58,914 58,914 0
Michael J. Parrella President And Director 2,749,789 1,575,289 1,174,500
Carole Salkind 4,000,000 4,000,000 0
Rolf Towe 150,000 150,000 0
Luc Verschueren (2) 25,000 25,000 0
Eldon W. Ziegler, Jr. (2) 176,772 156,522 20,250
--------------------------------------------------------------
32,977,377 28,011,048 4,966,329
==============================================================
</TABLE>
- -----------------------------
(1) Includes shares issuable upon exercise of non-contingent, currently
outstanding options and warrants.
(2) Represents a person who was either an officer or a director of the
Company within three years of the date hereof or an affiliate thereof.
(3) Kingdon Capital Management Corp. ("KCMC") is a general partner of
Kingdon Associates, L.P. and Kingdon Partners, L.P. and provides
management services to M. Kingdon Offshore NV (collectively, the
"Kingdon Funds"). As a result of such relationships, KCMC may be
deemed to beneficially own the shares offered for sale by the Kingdon
Funds.
(4) An affiliate of Sam Oolie, a director of the Company.
LEGAL MATTERS
Matters relating to the legality of 21,936,935 shares of Common
Stock being offered by this Prospectus have been passed upon for the Company by
John B. Horton, Esquire, Senior Vice President and General Counsel of the
Company. As of August 23, 1996, Mr. Horton owned 30,000 shares of Common Stock,
including 20,000 shares subject to acquisition upon the exercise of currently
exercisable warrants, 30,000 shares of which are being offered by this
Prospectus. In addition, Mr. Horton owns 489,417 shares subject to acquisition
upon the exercise of currently exercisable options granted to him under the
1992 Plan none of which are being offered by this Prospectus. Matters relating
to the legality of the remaining 6,645,357 shares of Common Stock offered by
this Prospectus have been passed upon for the Company by Parker Duryee Rosoff &
Haft, a professional corporation, New York, New York. Jay M. Haft, a former
member of and presently of counsel to Parker Duryee Rosoff & Haft, is Chief
Executive Officer, Co-Chairman and a director of the Company and is the
beneficial owner of 1,207,000 shares of Common Stock, including 1,207,000
shares subject to acquisition upon the exercise of currently exercisable
warrants and options, 468,500 shares of which are being offered by this
Prospectus.
20
<PAGE> 22
EXPERTS
The consolidated financial statements of the Company at and for the
year ended December 31, 1994 and 1995 the related financial statement schedules
incorporated into this Registration Statement by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, as
amended by Amendment Nos. 1, 2, 3, 4 and 5 thereto on the Company's five Form
10K/A's filed respectively on April 29, 1996, May 8, 1996, May 24, 1996, June
11, 1996 and June 13, 1996 have been audited by Richard A. Eisner & Company,
LLP, Independent Certified Public Accountants, as set forth in their reports
included therein (which contains an explainatory paragraph relating to the
Company's ability to continue as a going concern) and have been so incorporated
in reliance upon such reports given upon the authority of such firm as experts
in auditing and accounting.
The consolidated financial statements of the Company at and for the
year ended December 31, 1993 and the related financial statement schedules
incorporated into this Registration Statement by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, as
amended by Amendment Nos. 1, 2, 3, 4 and 5 thereto on the Company's five Form
10K/A's filed respectively on April 29, 1996, May 8, 1996, May 24, 1996, June
11, 1996 and June 13, 1996, have been audited by Coopers and Lybrand L.L.P.,
Independent Accountants, as set forth in their reports included therein and
have been so incorporated in reliance upon such reports given upon the
authority of such firm as experts in auditing and accounting. The report of
Coopers & Lybrand, L.L.P. contains a paragraph which emphasizes certain
uncertainties arising subsequent to the date of their original report which are
disclosed in the Company's Form 10-K for the year ended December 31, 1995
incorporated by reference herein and in "Risk Factors" included elsewhere in
this registration statement.
21
<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses payable by the
registrant with respect to the offering described in this Registration
Statement:
Securities and Exchange Commission registration fee $ 5,251
Legal fees and expenses 1,000*
Accounting fees and expenses 15,000*
Miscellaneous expenses 500*
------
Total $21,751*
======
- -----------
* Estimated
22
<PAGE> 24
ITEM 16. EXHIBITS (LISTED ACCORDING TO THE NUMBER ASSIGNED IN THE
TABLE IN ITEM 601 OF REGULATION S-K)
The following exhibits are included as a part of this
Registration Statement:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
5 Opinion of John B. Horton, Esquire, Senior Vice President and General
Counsel of the registrant, as to the legality of the Common Stock to
which this Registration Statement relates.*
23(a) Consent of Richard A. Eisner & Company, LLP.
23(b) Consent of Coopers & Lybrand L.L.P.
23(c) Consent of John B. Horton, Esquire (contained in Exhibit 5).
24 Powers of Attorney.*
</TABLE>
- ---------------
* Previously filed
23
<PAGE> 25
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
Amendment No. 1 to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Linthicum, Maryland, on this 29 day
of August, 1996.
NOISE CANCELLATION TECHNOLOGIES, INC.
By:/s/ MICHAEL J. PARRELLA
------------------------------
Michael J. Parrella, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY DATE
---------- -------- ----
<S> <C> <C>
/s/ MICHAEL J. PARRELLA
- ----------------------- President (Principal Executive Officer) August 29, 1996
Michael J. Parrella and Director ---------------
/s/ STEPHEN J. FOGARTY
- ----------------------- Senior Vice President and August 29, 1996
Stephen J. Fogarty Chief Financial Officer ---------------
(Principal Financial and
Accounting Officer)
/s/ JAY M. HAFT*
- ----------------------- Chairman of the Board of Directors August 29, 1996
Jay M. Haft and Director ---------------
/s/ JOHN J. MCCLOY II*
- ----------------------- Director August 29, 1996
John J. McCloy II ---------------
</TABLE>
24
<PAGE> 26
<TABLE>
<CAPTION>
SIGNATURES CAPACITY DATE
---------- -------- ----
<S> <C> <C>
/s/ ALASTAIR KEITH*
- -------------------- Director August 29, 1996
Alastair Keith -------------
/s/ SAMUEL A. OOLIE*
- -------------------- Director August 29, 1996
Samuel A. Oolie -------------
</TABLE>
*By /s/ Stephen J. Fogarty
------------------------
(Stephen J. Fogarty
Attorney-in-Fact)
25
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit No. Description Page Number
----------- ----------- -----------
<S> <C>
5 Opinion of John B. Horton, Esquire,
Senior Vice President and General Counsel
of the registrant, as to the legality of the
Common Stock to which this Registration
Statement relates.*
23(a) Consent of Richard A. Eisner & Company, LLP.
23(B) Consent of Coopers & Lybrand L.L.P.
23(c) Consent of John B. Horton, Esquire (contained
in Exhibit 5).
24 Powers of Attorney*
</TABLE>
- ----------
* Previously filed
26
<PAGE> 1
Exhibit 23(a)
CONSENT OF INDEPENDENT AUDITORS
Richard A. Eisner & Company, LLP
New York, New York
August 27, 1996
We consent to the incorporation by reference in amendment No. 1 to
the Registration Statement No. 333-10545 on Form S-3 of our report dated
March 8, 1996 (with respect to Note 15, April 10, 1996), on the consolidated
financial statements and schedule of Noise Cancellation Technologies,
Inc. (the "Company") as at December 31, 1995 and December 31, 1994 and for the
years then ended, included in the Company's Annual Report on Form 10-K
(including Amendment Nos. 1, 2, 3, 4 and 5 thereto) for the year ended December
31, 1995, and to the reference to us under the caption "Experts" included in
the Prospectus.
Richard A. Eisner & Company, LLP
/s/ RICHARD A. EISNER & COMPANY, LLP
New York, New York
August 27, 1996
27
<PAGE> 1
Exhibit 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Stamford, Connecticut
August 27, 1996
We consent to the incorporation by reference in amendment No. 1 to the
Registration Statement of Noise Cancellation Technologies, Inc. (the "Company")
on Form S-3 (Reg No 333-10545) of our report dated March 24, 1994, except as to
the third paragraph of such report for which the date is December 19, 1994,
which includes an explanatory paragraph which emphasizes certain uncertainties
(unaudited) arising subsequent to the date of our report that indicates that at
the date thereof the Company may be unable to continue as a going concern
through 1995, on our audit of the financial statements and the financial
statement schedules of the Company as of December 31, 1993 and for the
year then ended, which report is included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, as amended by
Amendment Nos. 1, 2, 3, 4, and 5 thereto on the Company's five Form 10-K/A's
filed respectively on April 29, 1996, May 8, 1996, May 24, 1996, June 11,
1996, and June 13, 1996.
Such report contains a paragraph which emphasizes certain uncertainties
(unaudited) arising subsequent to the date of our original report that indicate
that at December 19, 1994 the Company may be unable to continue as a going
concern through 1995.
We also consent to the reference to our firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
-----------------------------
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
August 27, 1996
28
