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As filed with the Securities and Exchange Commission on October 6, 1997
Registration No. 333-37245
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
IMAGING TECHNOLOGIES CORPORATION
--------------------------------
(Exact name of issuer as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation or organization)
33-0021693
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(IRS Employer Identification Number)
11031 VIA FRONTERA, SAN DIEGO, CALIFORNIA 92127
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619-613-1300
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(Address including zip code, and telephone number,including area code,
of registrant's principal executive offices)
EDWARD W. SAVARESE C/O IMAGING TECHNOLOGIES CORPORATION
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11031 VIA FRONTERA, SAN DIEGO, CALIFORNIA 92127
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619-613-1300
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(Name, address including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to public: AS SOON AS
PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this Form are to 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 of the Securities Act of 1933,
other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box: /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) of 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(b) of 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 delivery of this prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
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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 OCTOBER 16, 1997
PROSPECTUS
[LOGO]
IMAGING TECHNOLOGIES CORPORATION
3,000,000 SHARES OF COMMON STOCK
This Prospectus relates to the offer and sale by certain persons listed
herein under "Selling Stockholders" (collectively, the "Selling Stockholders")
of (i) a maximum of 3,000,000 shares (collectively, the "Shares") of Common
Stock, par value $0.005 per share (the "Common Stock"), of Imaging Technology
Corporation. (the "Company") consisting of shares of Common Stock to be issued
from time to time to the Selling Stockholders upon conversion of the Company's
Series C Redeemable Convertible Preferred Stock (the "Preferred Stock") and
shares of Common Stock to be issued upon exercise of warrants to purchase an
aggregate of 200,000 shares of Common Stock (the "Warrants") and (ii) in
accordance with Rule 416 under the Securities Act of 1933, as amended (the
"Securities Act"), such presently indeterminate number of additional Shares as
may be issuable upon conversion or exercise of the Preferred Stock or Warrants,
based upon fluctuations in the conversion or exercise price of the Preferred
Stock or Warrants, respectively. All of the Shares may be offered by the Selling
Stockholders or by pledgees, donees, transferees or other successors in interest
that receive such shares as a gift, partnership distribution or other non-sale
related transfer. The Preferred Stock and Warrants and the Common Stock issuable
upon conversion or exercise thereof have been and will be issued in transactions
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) or other applicable sections thereof. See "General," "Selling
Stockholders" and "Plan of Distribution." The Shares are being registered by the
Company pursuant to registration rights granted to the Selling Stockholders.
The Selling Stockholders have not advised the Company of any specific plans
for the distribution of the Shares covered by this Prospectus. It is
anticipated, however, that the Shares will be offered and sold by the Selling
Stockholders from time to time in transactions on The Nasdaq SmallCap Market, in
privately negotiated transactions, or by a combination of such methods of sale,
at such fixed prices as may be negotiated from time to time, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell as principal or
both (which compensation to a particular broker-dealer might be in excess of
customary commissions). See "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders. The Company has agreed to bear certain
expenses in connection with the registration and sale of the Shares being
offered by the Selling Stockholders. The Company has agreed to indemnify the
Selling Stockholders against certain liabilities, including liabilities under
the Securities Act.
The Common Stock of the Company is traded on The Nasdaq SmallCap Market
tier of The Nasdaq Stock Market under the symbol "ITEC." On October 1, 1997, the
last sale price for the Common Stock as quoted on The Nasdaq SmallCap Market was
$6.50 per share.
The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. See "Plan of Distribution" herein for a description of
agreements by the Company to indemnify the Selling Stockholders against certain
liabilities.
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AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY
INVOLVES A HIGH DEGREEE OF RISK.
SEE "RISK FACTORS."
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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 DATE OF THIS PROSPECTUS IS __________, 1997
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THE COMPANY
Imaging Technologies Corporation, formerly Personal Computer Products,
Inc., was incorporated under the laws of California in March 1982 and
reincorporated under the laws of Delaware in May 1983. Imaging Technologies
Corporation ("ITEC" or the "Company") operates from three wholly-owned
subsidiaries, PCPI Technologies ("PCPI"), Prima, Inc. which is doing business as
Prima International ("Prima") and NewGen Imaging Systems, Inc. ("NewGen").
Through these subsidiaries the Company (1) develops and licenses laser printer
technology; (2) manufactures, markets and distributes laser printer controllers
and accessories; (3) markets and distributes internationally a variety of
personal computer accessory products; and (4) markets and distributes high
resolution imaging and color digital proofing products.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files periodic reports and
other information with the Securities and Exchange Commission (the "SEC"). Such
reports, proxy statements, and other information concerning the Company may be
inspected and copies may be obtained at prescribed rates at the offices of the
SEC, Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549, as well as
at the following regional offices: 7 World Trade Center, Suite 1300, New York,
New York 10048; 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036. The SEC
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically. The Company has filed with the
SEC a Registration Statement under the Securities Act of 1933, as amended, with
respect to the securities offered pursuant to this Prospectus. For further
information, reference is made to the Registration Statement and the exhibits
thereto, which are available for inspection at no fee at the public reference
section of the SEC at its principal office at Judiciary Plaza, 450 Fifth Street,
NW, Washington, D.C. 20549.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus is delivered, upon written or oral request to
Corporate Secretary, Imaging Technologies Corporation, 11031 Via Frontera, San
Diego, California 92127, phone 619-613-1300, copies of any and all of the
information that has been incorporated by reference into this Prospectus, other
than exhibits to such information unless such exhibits are specifically
incorporated by reference therein. The information relating to the Company
contained in this Prospectus does not purport to be comprehensive and should be
read together with the information contained in the documents or portions of
documents incorporated by reference into this Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following reports and documents filed by the Company with the
Commission pursuant to the Exchange Act are incorporated into this Prospectus by
reference as of their respective dates:
1. Annual Report on Form 10-KSB for the fiscal year ended June 30, 1997,
dated September 29, 1997.
2. All other reports filed by the Registrant pursuant to Sections 13(a)
or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
since the end of the fiscal year covered by the Annual Report on Form
10-KSB.
3. The Registrant's Form 8-A filed on July 6, 1984 pursuant to Section
12 of the Exchange Act, in which there is described the terms, rights
and provisions applicable to the Registrant's outstanding Common
Stock.
All reports and other documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Common Stock
pursuant to this Prospectus (this "Offering") shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such reports and documents. Any statement contained herein or in a report or
document incorporated or deemed to be incorporated herein by reference shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed report or
document that is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
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The making of a modifying or superseding statement shall not be deemed an
admission for any purpose that the modified or superseded statement, when made,
constituted a misrepresentation, an untrue statement of a material fact or an
omission to state a material fact that is required to be stated or that is
necessary to make a statement not misleading in light of the circumstances in
which it was made.
RISK FACTORS
An investment in the Common Stock involves a high degree of risk and may
not be appropriate for investors who cannot afford to lose their entire
investment. Prospective investors should be fully aware of the risk factors set
forth herein. This Prospectus contains or incorporates statements that
constitute forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, which reflect the Company's current judgment on those
issues. Those statements appear in a number of places in this Prospectus and in
the documents incorporated by reference and may include statements regarding,
among other matters, the Company's growth opportunities and other factors
affecting the Company's financial condition or results of operations. Because
such statements apply to future events, they are subject to risks and
uncertainties that could cause the actual results to differ materially.
Important factors that could cause actual results to differ materially include,
but are not limited to: business conditions and growth in the electronics
industry and general economy - both domestic and international; lower than
expected customer orders; competitive factors, including pricing pressures,
technological developments and products offered by competitors; availability of
components; technological difficulties and resource constraints encountered in
developing new products; and the timely flow of competitive new products and
market acceptance of those products. Actual results may differ materially from
these statements as a result of risk factors inherent in the Company's business,
industry, customer base, or other factors. Risk factors which are applicable to
the Company are more fully described below.
Users of this Prospectus are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date thereof. The Company
undertakes no obligation to publicly release updates or revisions to these
statements.
COMPETITION
The Company's results may be adversely affected by the actions of existing
or future competitors. The market for personal computer products, generally, and
laser printers and accessories, in particular, is highly competitive. The market
for laser printers is dominated by Hewlett Packard Company with approximately
50% of the worldwide market and by large Japanese manufacturers. These companies
are expected to continue to hold most of the worldwide market for laser printers
for several years to come.
The market for Adobe-Registered Trademark- PostScript-Registered Trademark-
based controllers is estimated to encompass 20% of the worldwide printer market.
In addition to Adobe Systems Incorporated, there are other companies that
compete with PCPI to provide customers with controllers featuring Adobe
PostScript. The Company's chief competition in this regard is Peerless, Inc.,
that has been an Adobe Co-developer longer than PCPI. Several other companies
provide PostScript compatible controllers with emulations of Adobe PostScript,
creating additional competition for low-priced printer controllers. While the
technology represented by many of the Company's products is complex, and
requires substantial knowledge to produce and market, the barriers to entry are
not such that they would prevent other companies from competing with the
Company. For the Company to compete effectively, it must aggressively pursue its
Adobe co-developer status with customers who wish to include PostScript as part
of their printing/imaging solution to end-users and it must continue to
introduce new and enhanced products at competitive prices. In the event that it
is unable to do so, the Company will be materially and adversely affected.
There can be no assurance the Company will be able to compete successfully
in the future with existing or future competitors. New entrants, new technology
and new marketing techniques may cause customer confusion, thereby lengthening
the sales cycle process for the Company. Increased competition may also lead to
downward pricing pressure on the Company's products.
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DEPENDENCE ON ADOBE RELATIONSHIP
The Company's relationship with Adobe Systems Incorporated as an authorized
co-developer to implement the inclusion of Adobe's PostScript language on
printer controllers and in software products is an integral part of its business
strategy. There can be no assurance that this relationship will be successful or
that it will remain in force for some time to come. Loss of the Adobe
relationship could have a substantial negative effect on future revenues.
NEW PRODUCTS AND TECHNOLOGICAL CHANGE
The Company's future operating results may be adversely affected by certain
factors and trends of its market which are beyond its control. The market for
the Company's products is characterized by rapidly changing technology, evolving
industry standards, and changing consumer preferences. Accordingly, the Company
believes that its future success will depend, in part, upon its ability to
continue to produce and/or acquire products that support existing and new laser
printer formats and technologies, including the latest iterations of Adobe
PostScript. In order to do so, the Company must make a significant investment in
research and development, engineering, and marketing to develop new products and
maintain a high profile in industry trade and special-interest publications.
The Company expends significant resources for controller development under
contracts with OEM customers and typically is completed over several quarters.
As noted below under Dependence Upon Suppliers, the Company relies on outside
third parties for certain integral components of the controller development,
which if delayed could jeopardize the development schedule. In addition, due to
the complexities of the development process various internal factors could also
contribute to schedule delays. There can be no assurance that these delays, if
any, during the course of the development will not result in the customers
cancellation of the project.
There can be no assurance that such new products can be developed or will
be available to the Company or available on terms favorable to the Company.
Furthermore, there is no assurance that products, once produced or obtained by
the Company, will be desirable to end-users or attract the necessary attention
by industry publications to promote the products to users. While the Company
believes that its products will continue to be viable for some time to come,
there can be no assurance that future technological developments will not render
current technologies less desirable or obsolete. Also, technological changes or
advances by major laser printer manufacturers could adversely affect the Company
and the market for its products.
INTELLECTUAL PROPERTY
The Company does not hold any patents and relies upon copyrights,
trademarks, and trade secret laws to establish proprietary rights to its
products. There is no assurance that such protection would be adequate in
protecting such rights should they be challenged by others and, therefore, a
risk exists that competitors may potentially imitate and/or duplicate the
Company's products at competitive prices.
There has been substantial litigation regarding patent and other
intellectual property rights in the software industry. As is typical in the
software industry, the Company has received from time to time notices from third
parties alleging infringement claims. Although there are currently no pending
lawsuits against the Company regarding any possible infringement claims, there
can be no assurance infringement claims will not be asserted in the future or
that such assertions will not materially adversely affect the Company's
business, financial condition and results of operations. If any such claims are
asserted against the Company, the Company may need to seek to obtain a license
under the third party's intellectual property rights. There can be no assurance
a license will be available on reasonable terms or at all. Failure to obtain a
necessary license on commercially reasonable terms would materially adversely
affect the Company's business, financial condition and results of operations.
The Company could decide, in the alternative, to resort to litigation to
challenge such claims. Such litigation could be expensive and time consuming and
could materially adversely affect the Company's business, financial condition
and results of operations.
DEPENDENCE UPON SUPPLIERS
At present, many of the Company's products use technology licensed from
outside suppliers. The Company relies heavily on Adobe Systems Incorporated for
upgrades and support of the PostScript language. In the
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case of its font products, the Company licenses such fonts from outside
suppliers, including Adobe, who also own the intellectual property rights to
such fonts. The reliance on third-party suppliers involves risk, including
limited control over potential hardware and software incompatibilities with the
Company's products. Furthermore, there can be no assurance that all of the
suppliers of products marketed by the Company will continue to license their
products to the Company indefinitely, or that these suppliers will not license
to other companies simultaneously.
KEY PERSONNEL
The success of the Company is dependent, in large part, on Edward W.
Savarese and other key management and technical personnel. The loss of one or
more of these persons could adversely affect the Company's business. The Company
believes that its future success will depend in large part upon its continued
ability to attract, retain, and motivate highly skilled technical and management
employees and consultants who are in great demand. The need to hire additional
qualified technical personnel to perform the business contemplated is another
important challenge. There can be no assurance that the Company will be able to
do so.
NEED FOR ADDITIONAL FINANCING
There can be no assurance that the Company's working capital or the
proceeds of this offering will be adequate for the Company's long-term future
capital needs. Other methods of financing these capital needs, including funding
by public and private sales of debt or equity securities, will be considered by
the Company from time to time, although such alternatives may not be available
to it or, if utilized, may have a dilutive effect on the ownership interests of
the stockholders. No additional sources of future financing are presently
committed to the Company and, as a result, it should not be assumed that such
financing will be available at such times and in such amounts as are necessary
in the future to assure the Company's ability to accomplish its operating
objectives.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
The Company has historically experienced fluctuations in its operating
results due to its dependence on revenues from licensing and royalties from a
small number of customers. Future operating results may vary from period to
period depending on such factors as the timing of projects, customer product
plans, increased competition, and changes in product demand and economic
conditions.
The Company is currently dependent upon a limited number of customers that
are either contracting for the Company's engineering services or have licensed
its technologies. Accordingly, the loss of any individual customer or supplier,
entrance of new competitors into specific markets, or decline in business
conditions in particular markets would have a severe impact on the company's
operating results.
While the Company has entered into some contracts with OEM customers for
controller development, there can be no assurance that additional contracts will
be obtained for the development of such controllers, or that the existing
contracts will be completed, or that products will be shipped by the customer
which may result in the generation of future royalty and license revenues or
that these products, once generating royalties, will continue to do so.
Variable financial results could adversely affect the price of the Common
Stock and limit the Company's ability to attract additional financing and expand
its operations.
ABSENCE OF DIVIDENDS; DIVIDENDS IN ARREARS
The Company has not paid any cash dividends and does not anticipate paying
any dividends in the foreseeable future. Earnings, if any, will be retained to
fund development and expansion. There is no assurance that the Company will pay
cash dividends at any time. The Company's 5% Convertible Preferred Stock carry
cumulative dividends, which are currently in arrears, as more fully described in
the Company's Form 10-KSB filings with the Securities and Exchange Commission.
As of October 1, 1997 the dividends in arrears were approximately $476,000.
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PREFERRED STOCK DISTRIBUTION PREFERENCE
In the event of any involuntary or voluntary liquidation, dissolution, or
winding up of the affairs of the Company, the 5% convertible preferred
stockholders shall be entitled to receive $1,000 per share, together with
accrued dividends, to the date of distribution or payment, whether or not earned
or declared, and the Series C Redeemable Convertible Preferred stockholders
shall be entitled to receive $10,000 per share, prior to any distribution to
Common stockholders.
POSSIBLE VOLATILITY IN TRADING PRICE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq SmallCap Market System
under the symbol ITEC. In the past year, the trading price of the Company's
Common Stock has experienced substantial volatility. There can be no assurance
that such volatility in the trading price of the Company's Common Stock will not
continue in the future, nor can there be any assurance that the Company will
continue to be listed on the Nasdaq SmallCap Market System under its current
exemption.
FUTURE SALES OF COMMON STOCK AND PREFERRED STOCK: POTENTIAL DILUTION
There can be no assurance that the Company will not issue additional shares
of Common and/or Preferred Stock, which would have a dilutive effect on current
stockholders and investors in this offering. The Company is currently authorized
to issue 100,000,000 shares of Common Stock and 10,000 shares of its Preferred
Stock.
Sales of substantial amounts of Common Stock in the public market could
adversely affect prevailing market prices. A substantial number of shares of
Common Stock (including the shares of Common Stock offered hereby) are issuable
by the Company upon the conversion of the Series C Shares and the exercise of
the Warrants, which would result in substantial dilution to a stockholder's
percentage ownership interest in the Company and could adversely affect the
market price of the Common Stock. Under the applicable conversion formulas of
the Series C Shares (i) the number of shares of Common Stock issuable upon
conversion is generally inversely proportional to the market price of the Common
Stock at the time of conversion (i.e., the number of shares issuable increases
as the market price of the Common Stock decreases); and (ii) a minimum of
555,556 shares are issuable upon conversion of the Series C Shares (based on a
conversion price, subject to adjustment, of $9.00). In addition, the number of
shares issuable upon conversion of the Series C Shares and the exercise of the
Warrants is subject to adjustment upon the occurrence of certain dilutive
events. This Registration Statement, upon being declared effective, will
register for public resale an additional 3,000,000 shares of Common Stock
issuable upon conversion of the Series C Shares. The Company may be obligated to
register additional shares of Common Stock for resale upon conversion of the
Series C Shares depending on, among other factors, the future market price of
the Common Stock.
USE OF ESTIMATES
Management uses estimates in preparing the consolidated financial
statements, in conformity with generally accepted accounting principles.
Significant estimates include collectibility of accounts receivable,
profitability on long-term contracts, as well as recoverability of capitalized
software costs and other intangible assets and long-term fixed assets and
residual values. The Company regularly assesses these estimates and, while
actual results may differ from these estimates, management believes that
material changes will not occur in the near term.
GENERAL
On August 21, 1997, Imaging Technology Corporation (the "Company'") closed
a private placement of its newly designated Series C Redeemable Convertible
Preferred Stock ("Series C Shares") in reliance upon the exemption from
securities registration afforded by Rule 506 of Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 Act").
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INITIAL CLOSING
Under the terms of the Placement, in consideration of $5,000,000 the
Company issued an aggregate of 500 Series C Shares and four year warrants to
purchase up to 200,000 shares of the Company's common stock at an exercise price
equal to 125% of the Closing Market Price or $7.50 per share ("Initial Closing).
"PUT" CLOSING
Provided that the following conditions have been satisfied, the Company may
call for a second round of financing for an additional 500 Series C Shares and
warrants to purchase up to 200,000 shares in consideration of $5,000,000 ("Put
Preferred Shares"): (i) the Company's stockholders shall have approved the
issuance of the Securities (as defined) on or prior to the Notice Date; (ii) the
Company's revenues for the period beginning and including April 1, 1997 and
ending and including September 30, 1997 are at least $12,000,000; (iii) during
the period beginning 45 days prior to the Notice Date and ending on and
including the Closing Date, a Registration Statement has been effective and
available for the sale of no less than 125% of the sum of (A) the number of
Conversion Shares then issuable upon the conversion of all outstanding Preferred
Shares and the Put Preferred Shares to be issued by the Company, (B) the number
of Warrant Shares then issuable upon exercise of all outstanding Warrants and
the Warrants to be issued in connection with the Put Preferred Shares and (C)
the number of Conversion Shares and Warrant Shares that are then held by the
Buyers, (iv) during the period beginning 45 days prior to the Notice Date and
ending on and including the Put Closing Date, the Common Stock is designated for
quotation on the Nasdaq National Market or a national securities exchange and is
not suspended from trading; (v) no event constituting a Major Business Event (as
defined below), including an agreement to consummate a Major Business Event, or
a Triggering Event, as defined below, shall have occurred from the period
beginning on the Initial Issuance Date and ending on and including the Put
Closing Date; (vi) on each trading day during the period beginning 20 days prior
to the Notice Date and ending on and including the Put Closing Date, the Market
Price of the Common Stock is not less than $6.00 per share (subject to
adjustment as a result of any stock split, stock dividend, recapitalization,
reverse stock split, consolidation, exchange or similar event); (vii) during the
period beginning 20 days prior to the Notice Date and ending on and including
the Put Closing Date, the Average Daily Trading Dollar Volume (as defined) is
not less than $250,000; (viii) during the period beginning on the Initial
Issuance Date and ending on and including the Put Closing Date, the Company
shall have delivered Conversion Shares upon conversion of the Preferred Shares
and Warrant Shares upon exercise of the Warrants to the Buyers on a timely
basis; and (ix) the Company shall not have previously delivered a Put Share
Notice. A "Major Business Event" means (x) consolidation, merger or other
business combination of the Company with another entity (other than pursuant to
a migratory merger effected solely for the purpose of changing the Company's
jurisdiction of incorporation, (y) the sale or transfer of all or substantially
all of the Company's assets or (z) a purchase, tender or exchange offer made to
and accepted by the holders of more than 10% of the outstanding shares of Common
Stock.
ADDITIONAL CLOSING
During the period beginning on and including January 1, 1998 and ending on
January 1, 2002, if the Market Price of the Common Stock is greater than $7.50
per share (subject to adjustment as a result of any stock split, stock dividend,
recapitalization, reverse stock split, consolidation, exchange or similar event)
purchasers of the Series C Shares are entitled to purchase up to 40% of the
number of Series C Shares, along with the related warrants, held by each
investor on December 31, 1997.
MANDATORY CONVERSION
If any Preferred Shares remain outstanding five years after the applicable
Issuance Date then all such Preferred Shares shall be converted as of such date.
CONVERSION OF PREFERRED SHARES
The Series C Shares have the right, at such holder's option, to convert the
Preferred Shares into shares of the Company's common stock, $.005 par value per
share (the "Common Stock"), on the following terms and conditions:
(a) CONVERSION RIGHT. At any time or times on or after the date
which is 46 days after the Issuance Date (as defined below), any holder of
Preferred Shares shall be entitled to convert any whole number of Preferred
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Shares into fully paid and nonassessable shares (rounded to the nearest
whole share) of Common Stock, at the Conversion Rate (as defined below);
provided, however, that in no event shall any holder be entitled to convert
Preferred Shares in excess of that number of Preferred Shares which, upon
giving effect to such conversion, would cause the aggregate number of
shares of Common Stock beneficially owned by the holder and its affiliates
to exceed 4.9% of the outstanding shares of the Common Stock following such
conversion. For purposes of this paragraph, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act
of 1934, as amended. The holder may waive the foregoing limitations by
written notice to the Company upon not less than 61 days prior notice (with
such waiver taking effect only upon the expiration of such 61 day notice
period).
(b) CONVERSION RATE. The number of shares of Common Stock issuable
upon conversion of each of the Preferred Shares shall be determined
according to the following formula (the "Conversion Rate"):
(.06)(N/365)(10,000) + 10,000
-----------------------------
Conversion Price
The following terms shall have the following meanings:
(i) "Conversion Price" means, as of any Conversion Date (as
defined below) or other date of determination, the lower of the Fixed Conversion
Price and the Floating Conversion Price, each in effect as of such date and
subject to adjustment as provided herein;
(ii) "Fixed Conversion Price" means 150% of the Market Price on the
date of issuance of the applicable Preferred Shares, subject to adjustment as
provided herein, with the Fixed Conversion Price being $9.00 per share on the
initial closing date;
(iii) "Floating Conversion Price" means, as of any date of
determination, the amount obtained by multiplying the Conversion Percentage in
effect as of such date by the Market Price as of such date;
(iv) "Conversion Percentage" means (A) 100% for the period
beginning on the Issuance Date and ending on and including the date which is 90
days after the Issuance Date, (B) 95% for the period beginning on and including
the date which is 91 days after the Issuance Date and ending on and including
the date which is 180 days after the Issuance Date and (C) 90% for the period
beginning on and including the date which is 181 days after the Issuance Date
and ending on and including the date which is five years after the Issuance
Date, subject in each case to adjustment as provided herein;
(v) "Market Price" means, with respect to any security for any
date, the lowest Closing Bid Price (as defined below) for such security during
the seven consecutive trading days immediately preceding such date;
(vi) "Closing Bid Price" means, for any security as of any date,
the last closing bid price for such security on The Nasdaq SmallCap Market as
reported by Bloomberg Financial Markets ("Bloomberg"), or, if The Nasdaq
SmallCap Market is not the principal trading market for such security, the last
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg,
or if the foregoing do not apply, the last closing bid price of such security in
the over-the-counter market on the electronic bulletin board for such security
as reported by Bloomberg, or, if no closing bid price is reported for such
security by Bloomberg, the last closing trade price of such security as reported
by Bloomberg, or, if no last closing trade price is reported for such security
by Bloomberg, the average of the bid prices of any market makers for such
security as reported in the "pink sheets" by the National Quotation Bureau, Inc.
If the Closing Bid Price cannot be calculated for such security on such date on
any of the foregoing bases, the Closing Bid Price of such security on such date
shall be the fair market value as mutually determined by the Company and the
holders of Preferred Shares;
(vii) "N" means the number of days from, but excluding, the Issuance
Date through and including the Conversion Date for the Preferred Shares for
which conversion is being elected; and
(viii) "Issuance Date" means, with respect to each Preferred Share,
the date of issuance of the applicable Preferred Share.
9
<PAGE>
Should a registration statement covering the resale of the shares of Common
Stock issuable upon conversion or exercise of the Preferred Shares and the
Warrants not be (i) filed within 45 days of the first Issuance Date of any
Preferred Shares (the "Scheduled Filing Date"), (ii) declared effective by the
SEC on or before 150 days after the first Issuance Date for any Preferred Shares
(the "Scheduled Effective Date"), or (iii) if after the Registration Statement
has been declared effective by the SEC, sales cannot be made pursuant to the
Registration Statement (whether because of a failure to keep the Registration
Statement effective, to disclose such information as is necessary for sales to
be made pursuant to the Registration Statement, to register sufficient shares of
Common Stock or otherwise), then, as partial relief for the damages to any
holder by reason of any such delay in or reduction of its ability to sell the
underlying shares of Common Stock (i) the Conversion Percentage in effect at
such time shall be reduced by a number of percentage points equal to the product
of (I) .06 and (II) the sum of (x) the number of days after the Scheduled Filing
Date that the relevant Registration Statement is filed with the SEC, (y) the
number of days after the Scheduled Effective Date and prior to the date that the
relevant Registration Statement is declared effective by the SEC (without
double-counting any number of days after the Scheduled Filing Date that the
relevant Registration Statement is filed, if applicable) and (z) the number of
days that sales cannot be made pursuant to the Registration Statement after the
Registration Statement has been declared effective and (ii) the Fixed Conversion
Price in effect at such time shall be reduced by an amount equal to the product
of (I) the Fixed Conversion Price in effect as of the Issuance Date and
(II) .0006 multiplied by (III) the sum of (x) the number of days after the
Scheduled Filing Date that the relevant Registration Statement is filed with the
SEC, (y) the number of days after the Scheduled Effective Date and prior to the
date that the relevant Registration Statement is declared effective by the SEC
(without double-counting any number of days after the Scheduled Filing Date that
the relevant Registration Statement is filed, if applicable) and (z) the number
of days that sales cannot be made pursuant to the Registration Statement after
the Registration Statement has been declared effective.
CONVERSION AT THE OPTION OF THE COMPANY
At any time or times on or after the Issuance Date, the Company shall have
the right, in its sole discretion, to require that any or all of the outstanding
Preferred Shares be converted at the Conversion Rate; provided that the
Conditions to Conversion at the Option of the Company (as set forth below) are
satisfied. The Company shall exercise its right to Conversion at Company's
Election by providing each holder of Preferred Shares written notice ("Notice of
Conversion at Company's Election") at least 30 days prior to the date selected
by the Company for conversion ("Company's Election Conversion Date"). If the
Company elects to require conversion of some, but not all, of the Preferred
Shares, the Company shall convert an amount from each holder of Preferred Shares
equal to such holder's pro rata amount (based on the number of Preferred Shares
held by such holder relative to the number of Preferred Shares outstanding on
Company's Election Conversion Date) of all Preferred Shares the Company is
requiring to be converted. The Notice of Conversion at Company's Election shall
indicate (x) the number of Preferred Shares the Company has selected for
conversion, (y) the Company's Election Conversion Date, which date shall be not
less than 30 or more than 40 days after each holder's receipt of such notice,
and (z) each holder's pro rata share of outstanding Preferred Shares. All
Preferred Shares selected for conversion in accordance with this provision shall
be converted as of the Company's Election Conversion Date as if the holders of
such Preferred Shares selected by the Company to be converted had given the
Conversion Notice on the Company's Election Conversion Date. All holders of
Preferred Shares shall thereupon and within two business days after the
Company's Election Conversion Date surrender all Preferred Stock Certificates
selected for conversion, duly endorsed for cancellation, to the Company or the
Transfer Agent. "Conditions to Conversion at the Company's Election" means the
following conditions: (i) on each day during the 20 consecutive trading days
immediately preceding the date of the Company's Notice of Conversion at the
Company's Election, the last reported sale price (as reported by Bloomberg) of
the Common Stock is at least 200% of the last reported sale price (as reported
by Bloomberg) as of the applicable Issuance Date of the Preferred Shares being
converted; (ii) on each day during the period beginning on the date of the
Notice of Conversion at the Company's Election and ending on and including the
Company's Election Conversion Date, the last reported sale price (as reported by
Bloomberg) of the Common Stock is at least 170% of the last reported sale price
(as reported by Bloomberg) as of the applicable Issuance Date of the Preferred
Shares being converted; (iii) the Company shall not have previously given Notice
of Conversion at Company's Election; (iv) the Company's stockholders shall have
approved the issuance of the Securities (as defined below) on or prior to the
date of the Company's Notice of Conversion at Company's Election; (v) on each
day during the period beginning 20 days prior to the Notice of Conversion at the
Company's Election and ending on and including the Company's Election Conversion
Date, the Registration Statement shall be effective and available for the sale
of no
10
<PAGE>
less than 125% of the sum of (A) the number of Conversion Shares then issuable
upon the conversion of all outstanding Preferred Shares, including the
Conversion Shares to be issued pursuant to this Conversion at the Company's
Election, (B) the number of Warrant Shares (as defined in the Securities
Purchase Agreement) then issuable upon exercise of all outstanding Warrants and
(C) the number of Conversion Shares and Warrant Shares that are then held by the
holders of the Preferred Shares, (vi) on each day during the period beginning 20
days prior to the date of the Company's Notice of Conversion at Company's
Election and ending on and including the Company's Election Conversion Date, the
Common Stock is designated for quotation on The Nasdaq SmallCap Market or the
Nasdaq National Market or a national securities exchange and is not suspended
from trading; (vii) during the period beginning 20 days prior to the date of the
Company's Notice of Conversion at Company's Election and ending on and including
the Company's Election Conversion Date, the Average Daily Trading Dollar Volume
(as defined below) is not less than $250,000; (viii) during the period beginning
on the Initial Issuance Date and ending on and including the Company's Election
Conversion Date, the Company shall have delivered Conversion Shares upon
conversion of the Preferred Shares and Warrant Shares upon exercise of the
Warrants to the Buyers on a timely basis; and (ix) the Company otherwise has
satisfied its obligations and is not in default under the Securities Purchase
Agreement.
CONVERSION RESTRICTIONS
Other than a mandatory conversion or a conversion at the option of the
Company, the right of a holder of Preferred Shares to convert Preferred Shares
shall be limited as set forth below. Without the prior consent of the Company,
a holder of Preferred Shares shall not be entitled convert an aggregate number
of Preferred Shares from the Issuance Date of such Preferred Shares through the
date of this determination in excess of the number of Preferred Shares which
when divided by the number of Preferred Shares purchased by such holder on such
Issuance Date would exceed (i) 0.20 for the period beginning on the date which
is 46 days after the Issuance Date and ending on and including the date which is
90 days after the Issuance Date, (ii) 0.40 for the period beginning on and
including the date which is 91 days after the Issuance Date and ending on and
including the date which is 135 days after the Issuance Date, (iii) 0.60 for the
period beginning on the date which is 136 days after the Issuance Date and
ending on and including the date which is 180 days after the Issuance Date,
(iv) 0.80 for the period beginning on and including the date which is 181 days
after the Issuance Date and ending on and including the date which is 225 days
after the Issuance Date and (v) 1.00 for the period beginning on and including
the date which is 226 days after the Issuance Date and ending on and including
the date which is five years after the Issuance Date. Notwithstanding the
foregoing, the conversion restriction set forth shall not apply (x) if there
shall have occurred a Material Adverse Change, (y) with respect to any
conversion of Preferred Shares at a Conversion Price which is equal to the Fixed
Conversion Price then in effect or (z) the Company has delivered a Put Notice.
A "Material Adverse Change" means any change, event, result or happening
involving, directly or indirectly, the Company or any of its subsidiaries
resulting in a material adverse effect on the business, prospects, financial
condition or results or operations of the Company and its subsidiaries, taken as
a whole, including, without limitation, an event constituting a Major Business
Event or a Triggering Event shall have occurred.
REDEMPTION
On the date which is two years after the Issuance Date, but only on such
date, the Company shall have the right, in its sole discretion, to redeem from
time to time, any or all of the Preferred Shares at the Redemption Price at the
Company's Election (as defined below). If the Company elects to redeem some, but
not all, of the Preferred Shares, the Company shall redeem an amount from each
holder of Preferred Shares equal to such holder's pro-rata amount (based on the
number of Preferred Shares held by such holder relative to the number of
Preferred Shares outstanding) of all Preferred Shares being redeemed. The
redemption price shall be an amount per Preferred Share equal to the product of
(i) 1.1 multiplied by (ii) the sum of (A) (.06)(P/365)(10,000) plus (B) 10,000;
where "P" means the number of days from, but excluding, the Issuance Date
through and including the date of redemption.
11
<PAGE>
Simultaneous with the occurrence of a Major Transaction (as defined below),
each holder of Preferred Shares shall have the right, at such holder's option,
to require the Company to redeem all or a portion of such holder's Preferred
Shares at a price per Preferred Share equal to greater of (i) Liquidation Value
(as defined below) and (ii) the product of (A) the Conversion Rate at such time
and (B) the Closing Bid Price on the date of the public announcement of such
Major Transaction or the next date on which the exchange or market on which the
Common Stock is traded is open if such public announcement is made (X) after
12:00 p.m., Central Time, time on such date or (Y) on a date on which the
exchange or market on which the Common Stock is traded is closed ("Major
Transaction Redemption Price").
After a Triggering Event (as defined below), each holder of Preferred
Shares shall have the right, at such holder's option, to require the Company to
redeem all or a portion of such holder's Preferred Shares at a price per
Preferred Share equal to the greater of (i) $12,500 and (ii) the product of
(A) the Conversion Rate at such time and (B) the Closing Bid Price calculated as
of the date immediately preceding such Triggering Event on which the exchange or
market on which the Common Stock is traded is open ("Triggering Event Redemption
Price" and, collectively with "Major Transaction Redemption Price," the
"Redemption Price"); provided, however, that in the case of Triggering Event
described below, the Triggering Event Redemption Price shall equal the greater
of (i) the Liquidation Value and (ii) the product of (A) the Conversion Rate at
such time and (B) the Closing Bid Price calculated as of the date immediately
preceding such Triggering Event on which the exchange or market on which the
Common Stock is traded is open. The Company hereby warrants and agrees that the
Fixed Conversion Price for any Preferred Shares that are not redeemed after the
occurrence of a Triggering Event described below shall be reset to equal the
lesser of (x) 150% of the Market Price on the date of issuance of the applicable
Preferred Shares, subject to adjustment, and (y) 150% of the Market Price on the
date immediately following such Triggering Event on which the exchange or market
on which the Common Stock is traded is open.
A "Major Transaction" shall be deemed to have occurred at such time as any
of the following events: (ix) the consolidation, merger or other business
combination of the Company with or into another Person (other than pursuant to a
migratory merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company) pursuant to which either (x) the continuing or
surviving entity is not a public company or (y) the stockholders of the Company
existing at the time of such consolidation, merger or other business combination
cannot elect a majority of the directors of the continuing or surviving entity
immediately following such consolidation, merger or business combination; (xii)
the sale or transfer of all or substantially all of the Company's assets
pursuant to which either (x) the purchasing entity is not a public company or
(y) the stockholders of the Company existing at the time of such sale cannot
elect a majority of the directors of the purchasing entity immediately following
such sale; or (xi) a purchase, tender or exchange offer made to and accepted by
the holders of more than 10% of the outstanding shares of Common Stock which
requires or receives the consent of the Company's Board of Directors.
A "Triggering Event" shall be deemed to have occurred at such time as any
of the following events: (xii) the failure of the Registration Statement to be
declared effective by the SEC on or prior to the date that is 240 days after the
Initial Issuance Date; (ixiii) while the Registration Statement is required to
be maintained effective the effectiveness of the Registration Statement lapses
for any reason (including, without limitation, the issuance of a stop order) or
is unavailable to the holder of the Preferred Shares for sale of the Registrable
Securities and such lapse or unavailability continues for a period of ten
consecutive trading days, provided that the cause of such lapse or
unavailability is not due to factors solely within the control of such holder of
Preferred Shares; (xiv) the failure of the Common Stock to be listed on the
Nasdaq National Market, The Nasdaq SmallCap Market, The New York Stock Exchange,
Inc. or The American Stock Exchange, Inc. for a period of seven consecutive days
(provided that such failure shall not constitute a Triggering Event if the
Company delists the Common Stock at the election of the holders of Preferred
Shares; or (ivxv) the Company's notice to any holder of Preferred Shares,
including by way of public announcement, at any time, of its intention not to
comply with proper requests for conversion of any Preferred Shares into shares
of Common Stock.
USE OF PROCEEDS
Since this Prospectus relates to the offering of Common Stock by the
holders of the Series C shares, the Company will not receive any of the proceeds
from the sale of the Common Stock offered hereby. However, upon the exercise of
the Warrants, except in the case of a "cashless exercise," the Company will
receive an amount equal
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<PAGE>
to the product of the exercise price of the warrant and the number of Warrants
being exercised, as more fully described herein.
SELLING STOCKHOLDERS
The following table sets forth certain information, as of the date hereof,
with respect to the number of shares of Common Stock beneficially owned by each
of the Selling Stockholders and as adjusted to give effect to the sale of the
Shares offered hereby. The Shares are being registered to permit public
secondary trading of the Shares, and the Selling Stockholders may offer the
Shares for resale from time to time. See "Plan of Distribution."
This Prospectus covers the resale by the Selling Stockholders of up to
3,000,000 Shares, plus, in accordance with Rule 416 under the Securities Act,
such presently indeterminate number of additional Shares as may be issuable upon
conversion of the Series C Shares or exercise of Warrants, based upon
fluctuations in the conversion price of the Series C Shares. See "General."
The Company has agreed to register a specified number of Shares for resale
by the Selling Stockholders. The number of Shares shown in the following table
as being offered by the Selling Stockholders does not include such presently
indeterminate number of shares of Common Stock as may be issuable upon
conversion of the Series C Shares or exercise of Warrants pursuant to the
provisions thereof regarding determination of the applicable conversion price
but which shares are, in accordance with Rule 416 under the Securities Act,
included in the Registration Statement of which this Prospectus forms as part.
The Shares covered by this Prospectus may be offered from time to time by
the Selling Stockholders named below:
<TABLE>
<CAPTION>
OWNERSHIP
AFTER OFFERING
--------------
NUMBER OF NUMBER OF
SHARES OWNED SHARES BEING NUMBER
NAME OF SELLING SHAREHOLDER PRIOR TO OFFERING (1)(2) OFFERED (3) OF SHARES PERCENT
--------------------------- ------------------------ ------------- --------- -------
<S> <C> <C> <C> <C>
Themis Partners, L.P. 60,308 60,308 0 0%
Heracles Fund 60,308 60,308 0 0%
Samyang Merchant Bank 80,410 80,410 0 0%
Olympus Securities, Ltd. (4) 201,026 201,026 0 0%
Nelson Partners(4) 201,026 201,026 0 0%
Leonardo, L.P. 201,026 201,026 0 0%
GAM Arbitrage Investments, Inc. 20,103 20,103 0 0%
AG Super Fund International Partners, L.P. 20,103 20,103 0 0%
Raphael, L.P. 60,308 60,308 0 0%
Ramius Fund, Ltd. 80,410 80,410 0 0%
Hick Investments, Ltd. 20,103 20,103 0 0%
--------- ---------
1,005,131 1,005,131
--------- ---------
--------- ---------
</TABLE>
(1) Except as indicated by footnote, the persons named in the table above
have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them. Beneficial ownership
is determined in accordance with the rules of the Securities Exchange
Commission and generally includes voting or investment power with
respect to securities. Shares of Common Stock subject to warrants and
convertible preferred stock currently exercisable or convertible, or
exercisable or convertible within 60 days, are deemed outstanding,
including for purposes of computing the percentage of the person
holding such option, but not for purposes of computing the percentage
of any other holder.
(2) Beneficial ownership is shown as of October 3, 1997. Beneficial
ownership is based upon conversion of all of the Series C Shares at
$6.25 per share of Common Stock (which price is 100% of the average of
the lowest closing bid prices of the Common Stock during the seven
trading days immediately preceding October 3, 1997) and the exercise
of the Warrants. If all shares of Series C Shares held by such Selling
Shareholder had been converted on October 3, 1997, (assuming
conversion of all
13
<PAGE>
of the Series C Shares at $6.25 per share of Common Stock) the Company
would have been obligated to issue 1,005,131 shares of Common Stock in
respect thereto. The actual number of shares of Common Stock issued or
issuable upon the conversion of the Series C Shares is subject to
adjustment and could be materially less or more than such estimated
amount depending upon factors which cannot be predicted by the Company
at this time, including, among others, the future market price of the
Common Stock and anti-dilution adjustments. Pursuant to the terms of
the Series C Shares, the Series C Shares are convertible by the
holders thereof only to the extent that the number of shares of Common
Stock thereby issuable, together with the number of shares of Common
Stock then held by such holder and its affiliates (not including
shares underlying unconverted shares of Series C Shares) would not
exceed 4.9% of the then outstanding Common Stock as determined in
accordance with Section 13(d) of the Securities Act of 1934, as
amended, except pursuant to 61 days prior written notice. Accordingly,
the number of shares of Common Stock set forth for such Selling
Shareholder may exceed the actual number of shares of Common Stock
that such Selling Shareholder could own beneficially at any given time
through its ownership of the Series C Shares. See "Risk Factors -
Future Sales of Common Stock and Preferred Stock.
(3) This Prospectus also covers the resale of such presently indeterminate
number of additional shares as may be issuable upon conversion of the
Series C Shares or exercise of the Warrants, based upon fluctuations
in the conversion or exercise price of the Series C Shares or
Warrants, respectively.
(4) Citadel Limited Partnership is the managing general partner of Nelson
Partners ("Nelson") and the trading manager of Olympus Securities,
Ltd. ("Olympus") and consequently has voting control and investment
discretion over securities held by both Nelson and Olympus. The
ownership information for Nelson does not include the shares owned by
Olympus and the ownership information for Olympus does not include the
shares owned by Nelson.
PLAN OF DISTRIBUTION
The Company will receive no proceeds from this offering. The Shares offered
hereby may be sold by the Selling Stockholders or by pledgees, donees,
transferees or other successors in interest that receive such shares as a gift,
partnership distribution or other non-sale related transfer. The Shares may be
sold from time to time in transactions in the over-the-counter market, in
negotiated transactions, or a combination of such methods of sale, at fixed
prices which may be changed, at market prices prevailing at the time of sale, at
prices related to prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the Shares to or through
broker-dealers, including block trades in which brokers or dealers will attempt
to sell the Shares as agent but may position and resell the block as principal
to facilitate the transaction, or in one or more underwritten offerings on a
firm commitment or best effort basis. Sales of Selling Stockholders' Shares may
also be made pursuant to Rule 144 under the Securities Act, where applicable.
To the extent required under the Securities Act, the aggregate amount of
Selling Stockholders' Shares being offered and the terms of the offering, the
names of any such agents, brokers, dealers or underwriters and any applicable
commission with respect to a particular offer will be set forth in an
accompanying Prospectus supplement. Any underwriters, dealers, brokers or agents
participating in the distribution of the Shares may receive compensation in the
form of underwriting discounts, concessions, commissions or fees from a Selling
Stockholder and/or purchasers of Selling Stockholders' Shares, for whom they may
act (which compensation as to a particular broker-dealer might be in excess of
customary commissions).
From time to time, one or more of the Selling Stockholders may pledge,
hypothecate or grant a security interest in some or all of the Shares owned by
them, and the pledgees, secured parties or persons to whom such securities have
been hypothecated shall, upon foreclosure in the event of default, be deemed to
be Selling Stockholders hereunder. In addition, a Selling Stockholder may, from
time to time, sell short the Common Stock of the Company, and in such instances,
this Prospectus may be delivered in connection with such short sales and the
Shares offered hereby may be used to cover such short sales.
From time to time one or more of the Selling Stockholders may transfer,
pledge, donate or assign such Selling Stockholders' Shares to lenders or others
and each of such persons will be deemed to be a "Selling Stockholder" for
purposes of this Prospectus. The number of Selling Stockholders' Shares
beneficially owned by those Selling Stockholders who so transfer, pledge, donate
or assign Selling Stockholders' Shares will decrease as and when they take such
actions. The plan of distribution for Selling Stockholders' Shares sold
hereunder will
14
<PAGE>
otherwise remain unchanged, except that the transferees, pledgees, donees or
other successors will be Selling Stockholders hereunder.
A Selling Stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the Common
Stock in the course of hedging the positions they assume with such Selling
Stockholder, including, without limitation, in connection with distributions of
the Common Stock by such broker-dealers. A Selling Stockholder may also enter
into option or other transactions with broker-dealers that involve the delivery
of the Common Stock to the broker-dealers, who may then resell or otherwise
transfer such Common Stock. A Selling Stockholder may also loan or pledge the
Common Stock to a broker-dealer and the broker-dealer may sell the Common Stock
so loaned or upon a default may sell or otherwise transfer the pledged Common
Stock.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit on the resale of the Shares purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares may not bid for or purchase shares of
Common Stock during a period which commences one business day (5 business days,
if the Company's public float is less than $25 million or its average daily
trading volume is less than $100,000) prior to such person's participation in
the distribution, subject to exceptions for certain passive market making
activities. In addition and without limiting the foregoing, each Selling
Stockholder will be subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder, including, without limitation, Regulation M
which provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by such Selling Stockholder.
The Series C Shares and Warrants were originally issued to the Selling
Stockholders pursuant to an exemption from the registration requirements of the
Securities Act provided by Section 4(2) or other applicable provisions thereof.
The Company agreed to register the Shares under the Securities Act and to
indemnify and hold the Selling Stockholders harmless against certain liabilities
under the Securities Act that could arise in connection with the sale by the
Selling Stockholders of the Shares. The Company has agreed to pay all reasonable
fees and expenses incident to the filing of this Registration Statement.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of Common
Stock offered hereby will be passed upon for the Company by Carmine J. Bua,
Esq., San Diego, California.
EXPERTS
The consolidated financial statements of Imaging Technologies Corporation
incorporated by reference in this prospectus and elsewhere in the registration
statement have been audited by Boros & Farrington APC, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
15
<PAGE>
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY 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 AN OFFER IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME
AFTER THE DATE HEREOF.
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TABLE OF CONTENTS
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PAGE
----
The Company. . . . . . . . . . 3
Available Information. . . . . 3
Risk Factors . . . . . . . . . 4
General. . . . . . . . . . . . 7
Use of Proceeds. . . . . . . . 12
Legal Matters. . . . . . . . . 15
Experts. . . . . . . . . . . . 15
- --------------------------------------
- -------------------------------------------------------------------------------
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[LOGO]
IMAGING TECHNOLOGIES CORPORATION
3,000,000
SHARES OF COMMON STOCK
PROSPECTUS
___________ __, 1997
16
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses expected to be incurred by
the Registrant in connection with the sale and distribution of the securities
being registered hereby. All amounts are estimated except the Securities and
Exchange Commission registration fee.
SEC registration fee $5,910.00
Accounting fees and expenses 10,000.00
Legal fees and expenses 50,000.00
Miscellaneous fees and expenses 9,090.00
--------
$75,000.00
----------
----------
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law permits indemnification
of officers and directors of the Registrant under certain conditions and subject
to certain limitations. Section 145 of the Delaware General Corporation Law also
provides that a corporation has the power to purchase and maintain insurance on
behalf of its officers and directors against any liability asserted against such
person and incurred by him or her in such capacity, or arising out of his or her
status as such, whether or not the corporation would have the power to indemnify
him or her against such liability under the provisions of Section 145 of the
Delaware General Corporation Law.
Article X of the Bylaws of the Registrant provides that the Registrant
shall indemnify its officers, directors and employees. The rights to indemnity
thereunder continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors, and
administrators of the person. In addition, expenses incurred by a director or
officer in defending any action, suit or proceeding by reason of the fact that
he or she is or was a director or officer of the Registrant shall be paid by the
Registrant unless such officer, director or employee is adjudged liable for
negligence or misconduct in the performance of his or her duties.
Article Fourth of the Registrant's Certificate of Incorporation provides
that the Registrant shall indemnify all persons whom it may indemnify pursuant
to Section 145 of the Delaware General Corporation Law to the full extent
permitted by such Section 145.
ITEM 16. EXHIBITS
4a Amended Certificate of Designation of Imaging Technologies
Corporation with respect to the 5% Convertible Preferred Stock.
(Incorporated by reference to Exhibit 4(d) to 1987 Form 10-K.)
4b Amended Certificate of Designation of Imaging Technologies
Corporation with respect to the Series C Redeemable Convertible
Preferred Stock (Incorporated by reference to Exhibit 4b to Form
S-3 Registration Statement No. 333-37245)
5.1 Opinion of Carmine J. Bua, Esq. (Incorporated by reference to
Exhibit 5.1 to Form S-3 Registration Statement No. 333-37245)
23.1 Consent of Independent Public Accountants. (Incorporated by
reference to Exhibit 23.1 to Form S-3 Registration Statement No.
333-37245)
23.2 Consent of Carmine J. Bua, Esq. (included in Exhibit 5.1).
(Incorporated by reference to Exhibit 23.2 to Form S-3 Registration
Statement No. 333-37245)
17
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act; (ii) to reflect
in the prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement; provided, however, that (i) and (ii)
do not apply if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by (i) and
(ii) is contained in periodic reports filed with or furnished to the Commission
by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the 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.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
18
<PAGE>
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 San Diego, State of California, on October 16, 1997.
IMAGING TECHNOLOGIES CORPORATION
By /s/ Edward W. Savarese
-----------------------------
Edward W. Savarese
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Edward W. Savarese Vice Chairman and Chief Executive Officer October 16, 1997
- ----------------------
(Edward W. Savarese) (Principal Executive Officer)
/s/ Brian Bonar President, Chief Operating Officer and October 16, 1997
- ----------------------
(Brian Bonar) Director
/s/ Ralph R. Barry Vice President, Chief Financial Officer, October 16, 1997
- ----------------------
(Ralph R. Barry) Secretary and Treasurer,
(Principal Financial Officer)
/s/ Harry J. Saal Chairman October 16, 1997
- ----------------------
(Harry J. Saal)
/s/ Irwin Roth Director October 16, 1997
- ----------------------
(Irwin Roth)
/s/ Frank Kavanaugh Director October 16, 1997
- ----------------------
(Frank Kavanaugh)
/s/ A.L. Dubrow Director October 16, 1997
- ----------------------
(A.L. Dubrow)
</TABLE>
19
<PAGE>
EXHIBIT INDEX
Exhibit
Number Document Description
- ------ --------------------
4a Amended Certificate of Designation of Imaging Technologies Corporation
with respect to the 5% Convertible Preferred Stock. (Incorporated by
reference to Exhibit 4(d) to 1987 Form 10-K.)
4b Amended Certificate of Designation of Imaging Technologies Corporation
with respect to the Series C Redeemable Convertible Preferred Stock
(Incorporated by reference to Exhibit 4b to Form S-3 Registration
Statement No. 333-37245)
5.1 Opinion of Carmine J. Bua, Esq. (Incorporated by reference to Exhibit
5.1 to Form S-3 Registration Statement No. 333-37245)
23.1 Consent of Independent Public Accountants. (Incorporated by reference
to Exhibit 23.1 to Form S-3 Registration Statement No. 333-37245)
23.2 Consent of Carmine J. Bua, Esq. (included in Exhibit 5.1).
(Incorporated by reference to Exhibit 23.2 to Form S-3 Registration
Statement No. 333-37245)
20
