Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
_______________
nSTOR TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2094565
(State of incorporation) (I.R.S. Employer I.D. #)
450 Technology Park, Lake Mary, FL 32746 - (407) 829-3500
(Address and telephone number of registrant's
principal executive offices)
Lawrence F. Steffann
450 Technology Park, Lake Mary, FL 32746 - (407) 829-3500
(Agent's name, address and telephone number)
Copies of communications to:
Donn A. Beloff, Esq
Holland & Knight LLP
One East Broward Boulevard
Ft. Lauderdale, Florida 33301
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this
Registration Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following box.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, other than securities offered
only in connection with dividend or interest reinvestment plans,
check the following box. X
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. ____________________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
____________________
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box
CALCULATION OF REGISTRATION FEE
Title of Securities Amount to be Proposed Proposed Amount of
to be Registered Registered (1) Maximum Maxium Registration
Aggregate Aggregate Fee
Price Offering
Price Share Price
Common Stock,
Par value $.05
per share (2) 50,000 $2.094(5) $104,700 $ 31
Common Stock,
Par value $.05
per share (3) 300,000 $2.094(5) $628,200 $ 185
Common Stock,
Par value $.05
per share (4) 1,666,668 $2.094(5) $3,490,003 $1,030
--------- ---------- ------
Total 2,016,668 $4,222,903 $1,246
========= ========== ======
__________
(1) In the event of a stock split, stock dividend, or similar
transaction involving the Common Stock of the Company, the number
of shares registered hereby shall be automatically increased
pursuant to Rule 416 to cover the additional shares of Common
Stock.
(2) Represents shares issuable upon exercise of outstanding
warrants issued to a consultant of the Company.
(3) Represents shares issuable upon exercise of outstanding
warrants issued in connection with the redemption of a series of
convertible preferred stock.
(4) Represents shares issuable upon exercise of outstanding
warrants issued in connection with the extension of certain
subordinated notes.
(5) Estimated solely for the purpose of calculating the
registration fee under Rule 457 based upon the average of the
high and low prices reported on the consolidated reporting system
for the American Stock Exchange on December 17, 1998 of $2.094.
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, AS AMENDED, OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
PROSPECTUS
2,016,668 SHARES
nSTOR TECHNOLOGIES, INC.
COMMON STOCK
______________________________
This Prospectus relates to an aggregate of up to 2,016,668
shares (the "Shares") of common stock, $.05 par value (the
"Common Stock"), of nStor Technologies, Inc. (the "Company"),
being offered for sale from time to time by the selling
stockholders named in this Prospectus (the "Selling
Stockholders") as follows:
(i) up to 50,000 shares issuable upon the exercise (the
"Consultant Warrant Shares") of warrants issued in connection
with a consulting agreement (the "Consultant Warrants");
(ii) up to 300,000 shares issuable upon the exercise (the
"Redemption Warrant Shares") of warrants issued in connection
with the redemption of a series of convertible preferred stock
(the "Redemption Warrants"); and
(iii) up to 1,666,668 shares issuable upon the exercise (the
"Extension Warrant Shares") of warrants issued in connection with
the extension of certain subordinated notes (the "Extension
Warrants"; the Redemption Warrants and the Extension Warrants are
sometimes collectively referred to as the "Warrants" and the
Redemption Warrant Shares and the Extension Warrant Shares are
sometimes collectively referred to as the "Shares").
If all of the Warrants are exercised, we would receive
$2,256,834.75 See "USE OF PROCEEDS." We are paying all expenses
of registration incurred in connection with this offering, but
all brokerage commissions, discounts and other expenses incurred
by individual Selling Stockholders will be borne by the
individual Selling Stockholders. We will not be entitled to any
of the proceeds from such sales.
The Common Stock is quoted on the American Stock Exchange
under the symbol "NSO". On December 18, 1998, the last reported
sales price of the Common Stock on the American Stock Exchange
was $2.188 per share.
INVESTORS SHOULD CAREFULLY CONSIDER CERTAIN SPECIAL FACTORS
RELATING TO THE COMPANY. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
We may amend or supplement this Prospectus from time to time
by filing amendments or supplements as required. You should read
the entire Prospectus and any amendments or supplements carefully
before you make your investment decision.
Our principal executive offices are located at 450
Technology Park, Lake Mary, Florida 32746. Our telephone number
is (407) 829-3500.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this Prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
___________________________________________________
The date of this Prospectus is December 22, 1998
Table of Contents
Page
WHERE YOU CAN FIND MORE INFORMATION 1
THE COMPANY 2
THE OFFERING 3
RISK FACTORS 4
RECENT DEVELOPMENTS 8
SELLING STOCKHOLDERS 8
USE OF PROCEEDS 9
DESCRIPTION OF SECURITIES 9
PLAN OF DISTRIBUTION 10
LEGAL MATTERS 11
EXPERTS 11
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange
Commission. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference
rooms. Our SEC filings are also available to the public at the
SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the
information we file with them, which means that we can disclose
important information to you by referring you to those documents.
The information incorporated by reference is considered to be
part of this Prospectus, and later information filed with the SEC
will update and supersede this information. We incorporate by
reference the documents listed below and any future filings made
with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934.
1. The Company's Annual Report filed on Form 10-K for the
fiscal year ended December 31, 1997, as amended by a Form 10-K/A
filed on April 30, 1998;
2. The Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1998, June 30, 1998 and September 30,
1998; and
3. The description of the Common Stock contained in the
Company's Registration Statement filed on Form 8-A, as filed with
the SEC on April 16, 1997, pursuant to Section 12(b) of the
Exchange Act.
You may request a copy of these filings, at no cost, by
writing or telephoning us at the following address:
Lawrence F. Steffann
nStor Technologies, Inc.
450 Technology Park
Lake Mary, Florida 32746
(407) 829-3500
You should rely only on information incorporated by
reference or provided in this Prospectus and any prospectus
supplement. We have not authorized anyone else to provide you
with different information.
From time to time, information we provide or statements made
by our directors, officers or employees may constitute
"forward-looking" statements under the Private Securities
Litigation Reform Act of 1995 and are subject to numerous risks
and uncertainties. Any statements made in this Prospectus,
including any statements incorporated herein by reference, that
are not statements of historical fact are forward-looking
statements (including, but not limited to, statements concerning
the characteristics and growth of our market and customers, our
objectives and plans for future operations and products and our
liquidity and capital resources). Such forward-looking
statements and other forward-looking statements are based on a
number of assumptions and involve a number of risks and
uncertainties, and, accordingly, actual results could differ
materially. Factors that may cause such differences include, but
are not limited to: the continued and future acceptance of our
products; the rate of growth in the industries to which we market
our products; the presence of competitors with greater technical,
marketing and financial resources; our ability to promptly and
effectively respond to technological change to meet evolving
customer needs; capacity and supply constraints or difficulties;
and our ability to successfully expand our operations. For a
further discussion of these and other significant factors to
consider in connection with forward-looking statements, see the
discussion in this Prospectus under the heading "RISK FACTORS."
THE COMPANY
Since 1996, nStor Technologies, Inc. has been designing,
manufacturing, and marketing a full line of cross-platform
storage solutions, including advanced external RAID (Redundant
Array of Independent Disks) subsystems (the "RAID Business"),
data storage products and tape backup solutions. The Company was
incorporated as a Delaware corporation in 1959.
In October 1992, we exchanged substantially all of the
operating assets of our previous business for securities issued
by IMNET Systems, Inc. ("IMNET"). In 1996, we sold our IMNET
securities and in June 1996, through our wholly owned subsidiary,
nStor Corporation, Inc. ("nStor"), acquired the RAID Business
from Seagate Technologies, Inc. In December 1996, nStor acquired
substantially all of the assets and assumed certain liabilities
of Parity Systems, Inc. ("Parity"). The assets acquired from
Parity are used in the design, manufacture and sale of computer
storage subsystems, memory devices and peripheral equipment, and
the integration of storage management solutions, digital media
management, and client/server systems for UNIX and Windows NT
server environments. (UNIX and Windows NT are computer operating
systems.) On April 23, 1998, nStor acquired all of the
outstanding common stock of Borg Adaptive Technologies, Inc.
("Borg"). Borg is the developer of Adaptive RAID, a patented
RAID technology.
On December 1, 1998, we had 71 full-time employees. nStor's
operations are primarily conducted, and its executive offices are
located, at a facility in Lake Mary, Florida 32746 (in the
Orlando area). Its telephone number is (407) 829-3500.
THE OFFERING
Common Stock outstanding as of
December 9, 1998 19,265,426
shares
Shares offered by Selling Stockholders:
Shares issuable upon exercise of Warrants 2,016,668
shares
Risk Factors - The Shares involve a high degree of risk.
Investors should carefully consider the information set forth
under "Risk Factors."
Proceeds to Company if the Warrants
are exercised in full $2,256,834.75
Use of Proceeds - Working capital and general corporate purposes.
See "USE OF PROCEEDS."
Amex trading symbol NSO
RISK FACTORS
In addition to the other information in this Prospectus or
incorporated herein by reference, the following risk factors
should be considered carefully in evaluating the Company and its
business before purchasing the shares offered in this Prospectus.
Recent Losses; Accumulated Deficit; Potential Need for Additional
Financing
We have experienced losses applicable to common stock for the
fiscal year ended December 31, 1997 ($7,886,000) and for each of
the three fiscal quarters ended March 31, 1998 ($2,540,000), June
30, 1998 ($3,496,000) and September 30, 1998 ($2,860,000),
respectively. We also expect to have a loss from operations for
the fiscal quarter ending December 31, 1998. Although we expect
to return to profitability by the second quarter of 1999, there
can be no assurance that we will be able to achieve or maintain
profitability on a quarterly or annual basis or that we will be
able to achieve revenue growth.
In late 1997, we determined that amounts available under our bank
line of credit would not be sufficient to satisfy our cash
requirements and that, as a result, additional debt and/or equity
financing would be necessary. During the period beginning in
late 1997 and ending in October 1998, we have been able to obtain
approximately $11.7 million from private investors, including
$6.7 million from the sale of convertible preferred stock and
$5.0 million from subordinated loans which will mature on
September 5, 2000. Although we believe that, as a result of the
receipt of these additional funds, amounts available from our
line of credit will be sufficient to satisfy our presently
contemplated working capital needs for the foreseeable future,
there can be no assurance that we may not require additional
capital beyond our currently forecasted needs. In addition,
there can be no assurance that any such additional required
capital would be available on terms acceptable to us, if at all,
at such time or times as we might require such funds.
Shares Eligible for Future Sale
Except as provided below, substantially all of the shares of
the Common Stock (19,265,426 shares as of the date of this
Prospectus) are freely tradable without restriction or further
registration under the Securities Act, unless such shares are
held by our "affiliates" as that term is defined in Rule 144.
Approximately 5,939,412 shares of Common Stock are held by
officers and directors and are deemed restricted securities
within the meaning of Rule 144. Restricted securities may be
sold in the public market only if they have been registered under
the Securities Act or if their sales qualify under Rule 144 or
another available exemption from the registration requirements of
the Securities Act. All of the Shares offered for sale in this
Prospectus will be freely tradable if sold using Prospectus. See
"SELLING STOCKHOLDERS."
New Products and Technological Changes
The markets for our products are characterized by rapidly
changing technology, evolving industry standards and relatively
short product life cycles. Our ability to compete successfully
will depend on our ability to enhance our existing products and
introduce new products on a timely and cost-effective basis.
There can be no assurance that we will be successful in
introducing such new products or enhancements. Delays in product
enhancements and developments or the failure of our new products
or enhancements to gain market acceptance would have an adverse
effect on our business and operating results. In addition, there
can be no assurance that new products or technologies developed
by others, or the emergence of new industry standards, will not
render our products or technologies noncompetitive or obsolete.
Despite testing, new products may be affected by quality,
reliability or interoperability problems, which could result in
returns, delays in collecting accounts receivable, unexpected
service or warranty expenses, reduced orders or a decline in our
competitive position.
Competition
The market for our products is highly competitive. Our
competitors may offer systems at lower prices than we offer and
we must compete on the basis of product performance in specific
applications. Some of these competitors have greater financial,
manufacturing and marketing resources than we have.
Our ability to compete successfully depends upon our ability
to continue to develop high performance products that obtain
market acceptance and can be sold at competitive prices.
Although we believe that our products have certain significant
competitive advantages, there can be no assurance that we will be
able to compete successfully in the future or that other
companies may not develop products with better performance and
thus reduce the demand for our products. As more companies enter
the markets in which we sell our products, we may encounter
increased price competition for such products which could
materially and adversely affect our operating results. Our
original equipment manufacturer customers and other manufacturers
could develop their own disk arrays or could integrate
competitive RAID disk arrays into their systems rather than our
products, which could materially and adversely affect our
operating results.
Recent Acquisitions and Unproven Track Record
We have acquired all of our operating assets within the last
two years. The success of our recent business combinations will
depend in large part on our ability to consolidate our
operations, integrate departments, systems and procedures and
obtain business efficiencies, economies of scale and related cost
savings. The significant management challenges presented by such
consolidation and integration may prevent the desired cost
savings. There can be no assurance that we will be able to
successfully consolidate our business operations or achieve
returns that would justify our investment in our acquired
businesses.
Litigation
In June and August 1996, we, two of our directors and nStor
were served with two separate complaints filed in the Supreme
Court of the State of New York, County of Nassau, in which the
plaintiffs claim to have had contractual and proprietary
interests in the prospect of a transaction to purchase certain
net assets acquired by nStor. The plaintiffs seek compensatory
damages, punitive damages, and equitable relief for alleged
interference with the plaintiffs' alleged rights and for alleged
breach of contract. Both cases are in the preliminary stages.
Our counsel believes that we have good defenses to both claims
and that we will not incur any material liability. We are
unaware of any facts that would support any of the plaintiff's
claims and, accordingly, we believe that the claims are without
merit. An unfavorable outcome in such litigation could have an
adverse effect on the Company.
In June 1998, a complaint was filed in the Supreme Court of
the State of New York by AIBC Investment Services Corp. ("the
Plaintiff"), which claims that we, nStor and a former director of
the Company (the "Defendants") breached an agreement wherein the
Plaintiff was allegedly engaged as placement agent in connection
with raising funds for the Defendants. The Plaintiff seeks
damages in the amount of not less than $262,500 plus interest,
warrants to purchase our common stock at a price to be determined
and punitive damages. The case is in the initial stages of
discovery and we believe that the claims are without merit. An
unfavorable outcome in such litigation could have an adverse
effect on the Company.
Customers
We have no long-term purchase commitments from our customers
and customers generally may cancel their orders on 30 days'
notice. Accordingly, there can be no assurance that orders from
existing customers, including our principal customers, will
continue at their historical levels, or that we will be able to
obtain orders from new customers. In addition, there can be no
assurance that existing customers, including our principal
customers, will not develop their own storage solutions
internally and as a result reduce or eliminate purchases. Loss
of one or more of our principal customers, or cancellation or
rescheduling of material orders already placed, could materially
and adversely affect our operating results.
Risks Related to Patents and Proprietary Technology
We currently hold one patent and have one patent pending on
our products. In addition, we rely on a combination of trade
secrets, copyrights and trademarks and employee and third-party
nondisclosure agreements to protect our intellectual property
rights. There can be no assurance that the steps taken to
protect our rights will be adequate to prevent misappropriation
of our technology or to preclude competitors from developing
products with features similar to our products. Furthermore,
there can be no assurance that, in the future, third parties will
not assert infringement claims against us or with respect to our
products for which we have indemnification obligations to certain
of our customers. Asserting our rights or defending against
third-party claims could involve substantial expense, which we
may not be able to afford and which could have a material adverse
effect on our operating results. In the event a third party were
successful in a claim that one of our products infringed the
third party's proprietary rights, we may have to pay substantial
damages or royalties, remove that product from the marketplace or
expend substantial amounts in order to modify the product so that
it no longer infringes such proprietary rights, any of which
could have a material adverse effect on our operating results.
Dependence on Suppliers
We depend heavily on our suppliers to provide high quality
materials on a timely basis and at reasonable prices. Although
many of the components for our products are available from
numerous sources at competitive prices, certain of the components
used in our products are presently available from a limited
number of suppliers or from a single supplier. Furthermore,
because of increased industry demand for many of those
components, their manufacturers may, from time to time, not be
able to make delivery of orders on a timely basis. In addition,
manufacturers of components on which we rely may choose, for
numerous reasons, not to continue to make those components, or
the next generation of those components, available to us.
We have no long-term supply contracts. There can be no
assurance that we will be able to obtain, on a timely basis, all
of the components we require. If we cannot obtain essential
components as required, we could be unable to meet demand for our
products, thereby materially adversely affecting our operating
results and allowing competitors to gain market share. In
addition, scarcity of such components could result in cost
increases and adversely affect our operating results.
Possible Volatility of Stock Price
Our Common Stock has experienced in the past, and could
experience in the future, substantial price volatility as a
result of a number of factors, including quarter to quarter
variations in the actual or our anticipated financial results,
announcements by us, our competitors or our customers, government
regulations, and developments in the industry. In addition, the
stock market has experienced extreme price and volume
fluctuations which have affected the market price of many
technology companies in particular and which have at times been
unrelated to the operating performance of the specific companies
whose stock is traded. Broad market fluctuations and general
economic conditions may adversely affect the market price of our
Common Stock.
Future Capital Needs; Uncertainty of Additional Funding
We have expended and will continue to be required to expend
substantial funds to continue research and development, and for
other aspects of our business. Although we believe that we have
access to resources sufficient to fund our operations for at
least the next twelve months, we may need or elect to raise
additional capital. Our capital requirements will depend on many
factors, including the problems, delays, expenses and
complications frequently encountered by technology companies;
the progress of our research, development and product testing
programs; the success of our sales and marketing programs; costs
in filing, prosecuting, defending and enforcing intellectual
property rights; the extent and terms of any collaborative
research, manufacturing, marketing or other arrangements; and
changes in economic, regulatory or competitive conditions or our
planned business. Estimates about the adequacy of funding for
our activities are based on certain assumptions, including the
assumption that research, development and testing relating to our
products under development can be conducted at projected costs
and within projected time frames and that such products can be
successfully marketed.
To satisfy our capital requirements, we may seek to raise
funds in the public or private capital markets. Our ability to
raise additional funds in the public or private markets will be
adversely affected if the results of our ongoing or future
research and development programs are not favorable. We may seek
additional funding through corporate collaborations and other
financing vehicles. There can be no assurance that any such
funding will be available, or if available, that it will be
available on acceptable terms. If adequate funds are not
available, we may be required to curtail our operations
significantly, or we may be required to obtain funds through
arrangements with future collaborative partners or others that
may require us to relinquish rights to some or all of its
technologies or products under development. If we are successful
in obtaining additional financing, the terms of the financing may
have the effect of diluting or adversely affecting the holdings
or the rights of the holders of our Common Stock.
Future Acquisitions
We may pursue acquisitions of complementary technologies,
product lines or businesses. Future acquisitions could result in
dilutive issuances of equity securities and the incurrence of
additional debt and amortization expenses related to goodwill and
intangible assets that could adversely affect our operating
results. In addition, gross margins of acquired products,
necessary product or technology development expenditures and
other factors that may be involved in any such acquired business
could result in dilution to our earnings. Acquisitions also may
involve numerous other risks, including difficulties in the
assimilation of the operations and products of the acquired
business, dependence on new products and processes, the diversion
of management's attention from other business concerns, risks of
entering markets in which we have no or limited direct prior
experience, the potential loss of key employees of the acquired
business and difficulties in attracting additional key employees
necessary to absorb added management responsibilities. No
assurance can be given as to the effect of any future acquisition
on our business or operating results.
Year 2000 Issues
As many computer systems, software programs and other
equipment with embedded chips or processors (collectively,
"Information Systems") use only two digits rather than four to
define the applicable year, they may be unable to process
accurately certain data, during or after the year 2000. As a
result, business and governmental entities are at risk for
possible miscalculations or systems failures causing disruptions
in their business operations. This is commonly known as the Year
2000 ("Y2K") issue. The Y2K issue concerns not only Information
Systems used solely within a company, but also concerns third
parties, such as customers, vendors and creditors, using
Information Systems that may interact with or affect a company's
operations.
We have implemented a Y2K readiness program with the
objective of having all of our significant Information Systems
functioning properly with respect to Y2K before January 1, 2000.
The first component of our readiness program was to identify the
internal Information Systems that are susceptible to system
failures or processing errors as a result of the Y2K issue. This
effort is substantially complete and no issues requiring
remediation or replacement have been identified.
As to the second component of the Y2K readiness program, we
intend to identify our significant customers, vendors and
creditors that are believed, at this time, to be critical to
business operations subsequent to January 1, 2000. We expect to
reasonably ascertain their respective stages of Y2K readiness
through the use of questionnaires, interviews, on-site visits and
other available means. We will take appropriate action based on
those responses, but there can be no assurance that the
Information Systems provided by or utilized by other companies
which affect our operations will be timely converted in such a
way as to allow them to continue normal business operations or
furnish products, services or data to us, without disruption.
If needed remediations and conversions to the Information
Systems are not made on a timely basis by our
materially-significant customers or vendors, we could be affected
by business disruption, operational problems, financial loss,
legal liability to third parties and similar risks, any of which
could have a material adverse effect on our operations, liquidity
or financial condition. Factors which could cause material
differences in results, many of which are outside of our control,
include, but are not limited to, the accuracy of representations
by manufacturers of our Information Systems that their products
are Y2K compliant, the ability of their companies' customers and
vendors to identify and resolve their own Y2K issues, and our
ability to respond to unforeseen Y2K complications.
The total cost of these Y2K compliance activities has not
been and is not anticipated to be material to our business,
results of operations or financial condition. The costs and time
necessary to complete the Y2K modification and testing processes
are based on our best estimates, which were derived utilizing
numerous assumptions of future events including the continued
availability of certain resources, third party modification plans
and other factors. However, there can be no assurance that these
estimates will be achieved and actual results could differ from
the estimates. Our Y2K readiness program is an ongoing process
and the estimates of costs and completion dates for various
components of the Y2K readiness program described above are
subject to change.
Anti-Takeover Provisions
Our Restated Certificate of Incorporation authorizes the
issuance of 1,000,000 shares of preferred stock (the "Preferred
Stock"). Our Board of Directors has the power to issue any or
all of the shares of Preferred Stock, including the authority to
establish one or more classes or series and to fix the powers,
preferences, rights and limitations of such class or series,
without seeking shareholder approval. See "DESCRIPTION OF
SECURITIES - Preferred Stock." Furthermore, as a Delaware
corporation, we are subject to Section 203 of the Delaware
General Corporation Law regarding "business combinations." This
statutory provision and the power to issue Preferred Stock may,
in certain circumstances, deter or discourage takeover attempts
and other changes in control not approved by management and the
Board of Directors. As a result, our shareholders may lose
opportunities to dispose of their shares at the higher prices
generally available in takeover attempts or that may be available
under a merger proposal. In addition, the statutory provision
and the existence of Preferred Stock may have the effect of
permitting our current management to retain its position and
place it in a better position to resist changes that shareholders
may wish to make if they are dissatisfied with the conduct of the
business.
RECENT DEVELOPMENTS
In December 1998, we reached an understanding to supply its
RAID storage enclosure to a major computer server manufacturer.
Deliveries are expected to commence in the first quarter of 1999.
SELLING STOCKHOLDERS
The following table sets forth certain information with regard to the
beneficial ownership of Common Stock by the Selling Stockholders.
Selling Stockholder Shares of Shares of Shares of Precentage
Common Stock Common Stock Common Stock Common Stock
Stock Owned Offered Retained Owned after
Hereby(1) the Offering
Herbert Gimelstob 564,467 416,667 147,800 (2)
Fairway Partnership 333,334 333,334 -0- (2)
Bernard A. Marden 1,326,834 333,334 993,500 5.2
CPR (USA) Inc. 180,000 180,000 -0- (2)
H. Irwin Levy(3) 3,586,433(4) 166,666 3,419,767 17.5
MLL Corp.(5) 166,667 166,667 -0- (2)
Liberty View Fund, LLC 96,600 96,600 -0- (2)
Bernard Green(6) 353,333(7) 83,333 270,000 1.4
Meyer Capital L.P. 142,333 83,333 59,000 (2)
R. Jerry Falkner 50,000 50,000 -0- (2)
JOJO Corp.(5) 41,667 41,667 -0- (2)
N&S Corp.(5) 41,667 41,667 -0- (2)
Liberty View Plus Fund 23,400 23,400 -0- (2)
____________
(1) Represents shares issuable upon the exercise of currently
exercisable warrents.
(2) Less than 1%.
(3) Mr. Levy is the Chairman of the Board of Directors of the
Company.
(4) Includes 100,000 shares issuable upon the exercise of
options and 145,000 shares issuable upon the exercise of
warrants, all of which are currently exercisable.
(5) Corporations controlled by Mr. Levy or members of Mr. Levy's
family.
(6) Mr. Green is a director of the Company.
(7) Includes 20,000 shares owned by Mr. Green's wife and 10,000
shares owned by a trust of which Mr. Green's wife is a trustee.
Mr. Green disclaims beneficial ownership of those shares.
USE OF PROCEEDS
If all of the Warrants are exercised, we will receive
proceeds in the amount of $2,256,834.75. Such proceeds will be
used for general corporate purposes. We will not receive any
proceeds from the sale of the Shares by the Selling Stockholders.
DESCRIPTION OF SECURITIES
The following description of our capital stock is not
complete and is subject in all respects to the Delaware General
Corporation Law and to the provisions of our Restated Certificate
of Incorporation, as amended (the "Charter"), and Bylaws.
Our authorized capital stock consists of 40,000,000 shares
of Common Stock having a par value of $.05 per share and
1,000,000 shares of Preferred Stock having a par value of $.01
per share.
Preferred Stock
The Board of Directors is permitted to issue shares of
Preferred Stock in one or more series and to fix the relative
rights, preferences and limitations of each series. Among such
rights, preferences and limitations are dividend rates,
provisions of redemption, rights upon liquidation, conversion
privileges and voting powers. Should the Board of Directors
elect to exercise this authority, the rights and privileges of
holders of shares of Common Stock could be made subject to the
rights and privileges of any such series of Preferred Stock. The
issuance of Preferred Stock could have the effect of making it
more difficult for a third party to acquire, or discouraging a
third party from acquiring, a majority of our outstanding voting
stock.
We have three series of Preferred Stock. The Series A
Preferred Stock accrues dividends at 8% per annum, payable
quarterly, is convertible into shares of the Common Stock based
on a fixed conversion price of $0.60 per share, commencing July
7, 1999, and has an automatic conversion feature in which each
share not converted as of July 7, 2000 shall automatically
convert into shares of the Common Stock. There are 1,666.67
shares of Series A Preferred Stock issued and outstanding as of
the date of this Prospectus.
The Series C Preferred Stock accrues dividends at 8% per
annum, payable quarterly, is convertible into shares of the
Common Stock based on a fixed conversion price of $1.00 per
share, commencing July 7, 1999, and has an automatic conversion
feature in which each share not converted as of July 7, 2000
shall automatically convert into the Common Stock. There are
3,000 shares of Series C Preferred Stock issued and outstanding
as of the date of this Prospectus.
The Series D Preferred Stock accrues dividends at 8% per
annum, payable quarterly, is convertible into shares of the
Common Stock based on a fixed conversion price of $1.00 per
share, commencing April 27, 1999, and has an automatic conversion
feature in which any shares not converted into the Common Stock
as of October 28, 2001 shall automatically be so converted.
There are 2,700 shares of Series D Preferred Stock issued and
outstanding as of the date of this Prospectus.
Warrants
On September 5, 1996, we issued the Consultant Warrants to a
financial consultant. The Consultant Warrants are exercisable at
$1.22 per share and expire on August 31, 2001.
As of September 30, 1998, we had an outstanding loan balance
to Mr. H. Irwin Levy, Chairman of our Board of Directors, and to
corporations controlled by Mr. Levy or members of Mr. Levy's
family, in the amount of $1,250,000 (collectively, the "Director
Loan"). In March 1998, three private investors loaned us an
aggregate of $3,000,000 (the "Subordinated Loans") (together with
the $1,250,000 Director Loan and the $750,000 of loans sold by
Mr. Levy, hereinafter referred to as the "Subordinated Loans").
The Subordinated Loans bear interest at 10% per annum, payable
monthly, mature on September 5, 2000, as extended, and are
collateralized by substantially all of our assets.
In connection with the Subordinated Loans, warrants were
issued to purchase an aggregate of 1,666,668 shares of our Common
Stock (including 666,666 to Mr. Levy of which 250,000 warrants
were subsequently transferred to unrelated private investors in
connection with Mr. Levy's sale of participation interests) at an
exercise price of $1.50 per share, exercisable on the date of
grant and expiring on March 5, 2001. Effective September 22,
1998, the maturity date for the Subordinated Loans was extended
for one year from September 5, 1999 to September 5, 2000. As
consideration for the extension, we replaced the previously
issued warrants with the Extension Warrants under identical terms
but with exercise prices as follows: (i) warrants to purchase
750,001 shares exercisable at $1.00 per share and (ii) warrants
to purchase 916,667 shares exercisable at $1.25 per share.
On October 30, 1998, we redeemed $2.3 million of Series B
Preferred Stock held by unrelated private investors for (i)
approximately $2,500,000 in cash (including a 5% premium of
$115,000 and accrued dividends of $102,000) and (ii) the issuance
of the Redemption Warrants to purchase 300,000 shares of the
Common Stock, exercisable upon issuance at $1.00 per share and
expiring in October 2001.
The number of shares of common stock purchasable upon the
exercise of the Warrants is subject to adjustment in the event
that we subdivide our outstanding shares of Common Stock into a
greater number of shares (including a stock split effected as a
stock dividend) or combines its outstanding shares of Common
Stock into a lesser number of shares. In addition, in the event
of a capital reorganization or reclassification of the capital
stock of the Company, or our consolidation or merger with another
corporation, or sale of all or substantially all of our assets,
then the holders of the Warrants have the right to purchase, in
lieu of Common Stock, such securities or assets as may be issued
with respect to or in exchange for a number of outstanding shares
of Common Stock equal to the number of shares of Common Stock
which could be purchased upon the exercise of the Warrants
immediately prior to any such transaction.
PLAN OF DISTRIBUTION
Shares
We will issue Shares, from time to time, upon the exercise
of the Warrants by the holders thereof. We will receive from
such holders the exercise price of the Warrants upon such
exercise. See "DESCRIPTION OF SECURITIES - Warrants."
We are registering this offering of Shares on behalf of the
Selling Stockholders, and we will pay all costs, expenses and
fees related to such registration, including all registration and
filing fees, printing expenses, fees and disbursements of our
counsel, blue sky fees and expenses and the expenses of any
special audits or "cold comfort" letters. The Selling
Stockholders will pay all selling expenses, including all
underwriting discounts and selling commissions, all fees and
disbursements of their counsel and all "road show" and other
marketing expenses we incur or any marketing expenses incurred by
underwriters which are not otherwise paid by such underwriters.
The Selling Shareholders may sell their shares from time to
time in one or more transactions on AMEX or in private,
negotiated transactions. The Selling Stockholders will determine
the prices at which they sell those shares. Such transactions
may or may not involve brokers or dealers.
If the Selling Stockholders use a broker-dealer to complete
their sale of the Shares, such broker-dealer may receive
compensation in the form of discounts, concessions or commissions
from the Selling Stockholders or from you, as purchaser (which
compensation might exceed customary commission).
We have agreed to indemnify the Selling Stockholders, and
the Selling Stockholders have agreed to indemnify us, against
certain liabilities arising under the Securities Act of 1933.
The Selling Stockholders may indemnify any agent, dealer or
broker-dealer that participates in sales of Shares against
similar liabilities.
LEGAL MATTERS
The validity of the issuance of the shares being offered
hereby will be passed upon for us by Holland & Knight LLP, One
East Broward Boulevard, Ft. Lauderdale, Florida 33301.
EXPERTS
The financial statements incorporated by reference in this
Prospectus have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods
set forth in their report incorporated herein by reference, and
are incorporated herein in reliance upon such report given upon
the authority of said firm as experts in auditing and accounting.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC registration fee $ 1,246
Amex listing fee 17,500
Legal fees and expenses 10,000
Accountants' fees 5,000
Miscellaneous 2,500
-----------
Total $ 36,246
===========
Item 15. Indemnification of Directors and Officers.
The Company, a Delaware corporation, has included in its
Certificate of Incorporation and Bylaws provisions to (i)
eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty, provided
that such provision does not eliminate liability for breaches of
the duty of loyalty, acts or omissions not in good faith or which
involves intentional misconduct or a knowing violation of law,
violations under Section 174 of the Delaware General Corporation
Law or for any transaction from which the director derived an
improper personal benefit and (ii) indemnify its directors and
officers to the fullest extent permitted by the Delaware
corporation law. The Company believes that these provisions are
necessary to attract and retain qualified persons as directors
and officers.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the Company, the Company has been informed that in
the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable.
Item 16. Exhibits.
The exhibits filed as part of this Registration Statement
are as follows:
Exhibit
Number Description
3.1 Restated Certificate of Incorporation, as amended, of the
Registrant (incorporated by reference to the Registrant's Form
10-Q for the fiscal quarter ended September 30, 1998)
3.4 Restated Bylaws of the Registrant (incorporated by reference
to the Registrant's Form 10-K for the fiscal year ended December
31, 1997)
4.1 Consultant Warrant dated September 5, 1996.
4.2 Form of Warrant dated September 22, 1998 issued in
connection with extending certain subordinated notes
(incorporated by reference to the Registrant's Form 10-Q for the
fiscal quarter ended September 30, 1998)
4.3 Form of Warrant dated October 28, 1998 issued in connection
with the redemption of Series B Convertible Preferred Stock
between Registrant and (i) CPR (USA), Inc., (ii) LibertyView Fund
and (iii) LibertyView Plus Fund (incorporated by reference to the
Registrant's Form 10-Q for the fiscal quarter ended September 30,
1998)
5.1 Opinion of Holland & Knight LLP
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Holland & Knight LLP (included in opinion filed
as Exhibit 5.1)
24.1 Power of Attorney
Item 17. Undertakings
(a) 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 of 1933, as amended;
(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 paragraphs (a)(1)(i) and
(a)(1)(ii) of this section do not apply if the information
required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or
furnished to the Commission by the Registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended, that are incorporated by reference in the Registration
Statement.
2. That, for the purpose of determining any liability
under the Securities Act of 1933, as amended, 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.
4. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, as amended, each filing of the Registrant's Annual Report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934, as amended, 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.
5. Insofar as indemnification for liabilities arising
under the Securities Act of 1933, as amended (the "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 Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant, nStor Technologies, Inc., 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 West Palm
Beach, State of Florida, on the 18th day of December, 1998.
nSTOR TECHNOLOGIES, INC.
By: /s/ Mark F. Levy
Mark F. Levy, Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Mark F. Levy and
Lawrence F. Steffann and each of them, his true and lawful
attorney-in-fact and agents, with full power of substitution and
resubstitution for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and to
file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each
of said attorneys-in-fact or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in their capacities set forth below.
Signature Title Date
/s/ H. Irwin Levy
H. Irwin Levy Chairman of the Board December 18, 1998
/s/ Lawrence F. Steffann
Lawrence F. Steffann President (Principal
Executive Officer)
and Director December 18, 1998
/s/ Larry J. Calise
Larry J. Calise Chief Financial Officer
and Vice President
(Principal Financial and
Accounting Officer) December 14, 1998
/s/ Mark F. Levy
Mark F. Levy Vice President and
Director December 18, 1998
/s/ Michael L. Wise
Michael L. Wise Director December 17, 1998
/s/ Bernard R. Green
Bernard R. Green Director December 13, 1998
EXHIBIT INDEX
Exhibit
Number Description
4.1 Consultant Warrant
5.1 Opinion of Holland & Knight LLP
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Holland & Knight LLP (included in
opinion filed as Exhibit 5.1)
24.1 Powers of Attorney (included on signature page to
Registration Statement)
EXHIBIT 4.1
OPTION CERTIFICATE
IMGE, Inc., a Delaware corporation, having its principal place of
business at 100 Century Boulevard, West Palm Beach, Florida 33417
("Company") hereby grants to R. Jerry Falkner, residing at 214
Sixth Street, #12, Crested Butte, Colorado 81224 ("Optionee"),
the option to purchase fifty thousand (50,000) shares of the
Company's $0.05 par value common stock ("Option"), at the
exercise price of one dollar and twenty-two cents ($1.22) per
share. The Option shall be exercisable at any time prior to
August 31, 2001, at 12.01 A.M. at which time the Option shall
expire ("Expiration"). Without cause, and in its sole
discretion, Company may reduce the number of shares which are the
subject of the Option by an amount not to exceed twenty-five
thousand (25,000) shares, provided that between February 18,
1997, and March 1, 1997, Company cancels the Contract between
itself and R.J. Falkner & Company, Inc. ("Falkner Co."), a
Florida corporation, dated August 30, 1996 ("Contract"). This
Option Certificate is issued pursuant to, and in consideration
of, the Contract. If for any reason not caused solely by
Company, Optionee or Falkner Co. fails to perform the services
required by the Contract, Company may reduce the number of shares
which are the subject of the Option by an amount not to exceed
four thousand one hundred sixty-six (4,166) multiplied by the
number of whole and partial months between the date of said
failure and September, 1997 (excluding September, and including
the month in which failure occurs). To exercise the Option,
Optionee must deliver to Company, prior to Expiration, an
unconditional notice of exercise signed by Optionee, a good
check, payable solely to the Company, in the full amount of the
exercise price for all shares being purchased ("Shares"), the
original of this certificate, and a fully executed I.R.S.
Substitute Form W-9 (or its then equivalent). The Option may be
exercised in whole or in part, provided that a partial exercise
shall be in a quantity evenly divisible by 100. The Shares
certificate shall be issued promptly following clearance of the
above-referenced check ("Certificate"). Issuance of Shares to
Optionee shall not be registered under the provisions of the
Securities Act of 1933 or under any state Blue Sky law
("Applicable Laws"), and transfer of the Shares by Optionee
therefore shall be restricted within the meaning of the
Applicable Laws. Optionee, by acceptance of this certificate,
represents and warrants to Company that he is a sophisticated
investor, and that if he exercises the Option he will do so for
investment purposes only, and not with a view to distribution of
the Shares. The Certificate shall be legended accordingly, and
the Company's stock transfer records shall be so annotated. The
Option is "non-qualified" within the meaning of the Internal
Revenue Code. At the time of exercise of the Option the number
of Shares and the exercise price per Share shall be adjusted to
prevent dilution due to, and to reflect proportionately the
effect of, any stock split, stock dividend, or corporate
reorganization of Company. The Option may not be assigned by
Optionee. Notice hereunder shall be in writing, and it shall be
mailed (certified mail, return receipt requested), addressed as
above-stated, or to such other address as may be established by
notice. This certificate constitutes the entire Option
certificate, and it may not be amended, except by a writing
signed by Company. This certificate shall be governed by the law
of the State of Delaware.
Date of issuance: September 5, 1996
IMGE, INC.
/s/ Mark F. Levy
By:______________________________
President: Mark F. Levy
The Option hereby is exercised unconditionally, in the amount of
_______ shares.
Date:______________________
________________________________
R. Jerry Falkner
EXHIBIT 5.1
HOLLAND & KNIGHT LLP
One East Broward Boulevard
Fort Lauderdale, Florida 33301
December 22, 1998
nStor Technologies, Inc.
450 Technology Park
Lake Mary, Florida 32746
Re: Registration Statement on Form S-3
Gentlemen:
You have requested our opinion in connection with the
above-referenced registration statement, (the "Registration
Statement"), under which certain shareholders (the "Selling
Shareholders") intend to offer and sell in a public offering,
from time to time, an aggregate of 2,016,668 shares of the Common
Stock, $.05 par value per share (the "Shares"), of Nstor
Technologies, Inc. (the "Company"), consisting of: (i) 50,000
Shares issuable upon the exercise of warrants (the "Consultant
Warrants") issued in connection with a consulting agreement (the
"Consultant Shares); (ii) 300,000 Shares issuable upon the
exercise of warrants (the "Redemption Warrants") issued in
connection with the redemption of a series of the Company's
preferred stock (the "Redemption Shares); and (iii) 1,666,668
Shares issuable upon the exercise of warrants (the "Extension
Warrants") issued in connection with an extension of certain
subordinated notes of the Company (the "Extension Shares").
We have reviewed copies of the Articles of Incorporation and
Bylaws of the Company, and have examined such corporate documents
and records and other certificates, and have made such
investigations of law, as we have deemed necessary in order to
render the opinion hereinafter set forth.
Based upon and subject to the foregoing, we render the
following opinions:
The Consultant Shares, the Redemption Shares and the
Extension Shares are duly authorized, and, when issued in
accordance with the terms of the Consultant Warrants, the
Redemption Warrants and the Extension Warrants, respectively,
against payment of the exercise price therefor (as applicable),
will be, assuming no change in the applicable law or pertinent
facts, validly issued, fully paid and nonassessable.
We hereby consent to the reference to our firm under the
caption "Legal Matters" in the Registration Statement and to the
use of this opinion as an exhibit to the Registration Statement.
In giving this consent, we do not hereby admit that we come
within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
Holland & Knight LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
nStor Technologies, Inc.
West Palm Beach, Florida
We hereby consent to the incorporation by reference in the
Prospectus constituting a part of this Registration Statement of
our report dated February 20, 1998 (except as to Notes 6 and 14,
which are as of April 14, 1998) relating to the consolidated
financial statements of nStor Technologies, Inc. and
subsidiaries appearing in the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
We also consent to the reference to us under the caption
"Experts" in the Prospectus.
BDO Seidman, LLP
Orlando, Florida
December 22, 1998
