Registration No. 333-__________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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nSTOR TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 95-2094565
(State of Incorporation) (I.R.S. Employer Identification Number)
100 Century Boulevard, West Palm Beach, FL 33417 - (561) 640-3103
(Address and Telephone Number of Registrant's
Principal Executive Offices)
Jack Jaiven
100 Century Boulevard, West Palm Beach, FL 33417 - (561) 640-3103
(Name, Address and Telephone Number of Agent for Service)
Copies of communications to:
Donn A. Beloff, Esq
Akerman, Senterfitt & Eidson, P.A.
350 East Las Olas Boulevard - 16th Floor
Ft. Lauderdale, Florida 33301
(954) 463-2700
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. __
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. X
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. __ ____________________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. __ ____________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. __
<PAGE> 2
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Offering Aggregate Amount of
Title of Securities Amount to be Price Offering Registration
to be Registered Registered (1) Per Unit Price Fee
- ------------------- -------------- ---------- ------------- ------------
Common stock, par 1,878,462 $2.9375(3) $5,517,982.13 $1,456.75
value $.05 per
share (2)
(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 issued in a private transaction.
(3) 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 January 13, 2000 of $2.9375.
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.
SUBJECT TO COMPLETION
Dated January 19, 2000
<PAGE> 3
PROSPECTUS
1,878,462 SHARES
nSTOR TECHNOLOGIES, INC.
COMMON STOCK
------------------------------
This Prospectus relates to an aggregate of up to 1,878,462 shares of
common stock of nStor Technologies, Inc. being offered for sale from time to
time by the selling stockholders named in this Prospectus.
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 sales
by selling stockholders.
Our common stock is quoted on the American Stock Exchange under the
symbol "NSO". On January 14, 2000, the last reported sales price of the common
stock on the American Stock Exchange was $3.3125 per share.
This investment involves a high degree of risk. 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 100 Century Boulevard,
West Palm Beach, Florida 33417. Our telephone number is (561) 640-3103.
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 _____________, 2000
<PAGE> 4
Table of Contents
Page
WHERE YOU CAN FIND MORE INFORMATION..........................................1
THE COMPANY..................................................................3
THE OFFERING.................................................................4
RISK FACTORS.................................................................5
RECENT DEVELOPMENTS.........................................................12
SELLING STOCKHOLDERS........................................................14
USE OF PROCEEDS.............................................................15
PLAN OF DISTRIBUTION........................................................15
LEGAL MATTERS...............................................................15
EXPERTS ...................................................................15
- i -
<PAGE> 5
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 (the "Exchange
Act").
1. The Company's Annual Report filed on Form 10-K for the fiscal year
ended December 31, 1998, as amended by a Form 10-K/A filed on April 28,
1999.
2. The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, June 30, and September 30, 1999.
3. The Company's Current Reports on Form 8-K filed on June 23, 1999 (as
amended by Form 8-K/A filed on July 2, 1999), November 5, 1999 and
January 14, 2000
4. 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:
Jack Jaiven
nStor Technologies, Inc.
100 Century Boulevard
West Palm Beach, Florida 33417
(561) 640-3103
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:
- our ability to retain our existing customer base;
- 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.
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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."
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THE COMPANY
nStor Technologies, Inc. and our subsidiaries manufacture and supply
high-availability, high-performance information storage and Storage Area
Networking (SAN) solutions, including external RAID (Redundant Array of
Independent Disks) solutions (which we refer to as our "RAID Business"), desktop
storage enclosures and advanced storage management software solutions. We
design, manufacture and sell high-performance, fault-tolerant data storage
solutions that serve the UNIX, Windows NT and Linux platforms. (UNIX, Windows NT
and Linux are computer operating systems.) 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. In 1996, we
sold those securities and in June 1996, through our wholly owned subsidiary,
nStor Corporation, Inc., acquired the RAID Business from Seagate Technologies,
Inc. In December 1996, nStor Corporation, Inc. acquired substantially all of the
assets and assumed certain liabilities of Parity Systems, Inc. The assets
acquired from Parity Systems were 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. On April 23,
1998, nStor Corporation, Inc. acquired all of the outstanding common stock of
Borg Adaptive Technologies, Inc. Borg Adaptive Technologies is the developer of
Adaptive RAID, a patented RAID technology. On January 10, 2000, we sold
substantially all of the assets of Borg Adaptive Technologies, including the
patented Adaptive RAID technology, to QLogic Acquisition Corporation, a
wholly-owned subsidiary of QLogic Corporation, for $7.5 million cash. As part of
the sale, we retained a perpetual license in and to the Adaptive RAID
technology. We expect to report an approximately $6.5 million gain from this
transaction during the first quarter of 2000. We do not anticipate that future
revenues will be materially affected as a result of this transaction.
On June 8, 1999, we acquired 76% of the outstanding common stock of
Andataco, Inc., a Massachusetts corporation, for $5.1 million in 9.5%
subordinated promissory notes due in 2004. On November 2, 1999, we acquired the
remaining outstanding shares of Andataco by merging Andataco with a wholly-owned
subsidiary which we organized for that purpose. In the merger, we issued
approximately 924,000 shares of our common stock, with an aggregate value of
$1,848,000, to the Andataco stockholders in exchange for the remaining shares of
Andataco common stock. Andataco designed, developed, manufactured, marketed and
supported high performance, high availability information storage solutions for
the open system market in the Windows NT and UNIX environments, including Sun
Microsystems, Hewlett-Packard, Silicon Graphics and NT-based computing systems.
On November 30, 1999, we entered into a definitive agreement with OneofUs
Company Limited to acquire substantially all of the assets of OneofUs. The
aggregate purchase price amounted to $2,850,000 consisting of $250,000 cash and
$2,600,000 worth of our common stock to be issued to the principals of OneofUs
pursuant to the terms of their employment agreements, based on the market price
of our stock at the time the transaction is closed. OneofUs is a Taiwan-based,
privately-held designer of high performance Fibre Channel RAID controllers and
storage solutions for open systems and the Storage Area Network market. The
transaction is subject to our completion of a satisfactory due diligence review
of OneofUs' assets and business.
On December 16, 1999, we agreed to issue 1,878,462 shares of our common
stock to the selling stockholders in consideration for the cancellation of
certain subordinated promissory notes in the aggregate principal amount of
$5,550,000 issued by us to the selling stockholders which mature on September 5,
2001. The number of shares issued was based on the principal amount of the
promissory notes and the closing price of the stock on the American Stock
Exchange on December 16, 1999. In addition, we have agreed to pay the selling
stockholders the difference between the principal amount of their promissory
notes and the sum of (i) the proceeds from any sales of the stock within twenty
(20) days from the date of the effectiveness of this registration statement or
some later date agreed to by the parties and (ii) the value of any stock which
is not sold during that 20-day period based on the closing price of the stock on
the American Stock Exchange on the last day of the 20-day period. The terms of
the exchange are set forth in a Subscription Agreement between us and the
selling stockholders a form of which is attached as Exhibit A.
On January 1, 2000, we had 190 full-time employees. Our operations are
primarily conducted in Lake Mary, Florida (in the Orlando area) and San Diego,
California, and our executive offices are located at 100 Century Boulevard, West
Palm Beach, Florida 33417. Our telephone number is (561) 640-3103.
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<PAGE> 8
THE OFFERING
Common stock outstanding
as of January 5, 2000 26,717,824 shares
Shares offered by selling
stockholders: 1,878,462 shares
Risk Factors The shares involve a high degree of risk.
Investors should carefully consider the
information set forthunder "RISK FACTORS."
Use of Proceeds We will not receive any proceeds from the
sale of the shares by the selling
stockholders.
Amex trading symbol NSO
- -------------------
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<PAGE> 9
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.
We have experienced recent losses and may require additional financing to
satisfy our working capital needs
We have experienced net losses for the fiscal years ended December 31,
1997 ($7,886,000), December 31, 1998 ($10,407,000) and for the nine months ended
September 30, 1999 ($8,462,000), respectively. We also expect to have a net loss
for the fourth quarter ending December 31, 1999. At September 30, 1999, we had
an accumulated deficit of $47,684,000 and we expect to have an accumulated
deficit as of December 31, 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 on December 31, 1999, we were able to
obtain approximately $24.8 million from private investors through the sale of
convertible preferred stock, the issuance of subordinated and other loans, the
exercise of warrants and options to purchase shares of common stock and the
private sale of stock. On January 10, 2000, we sold substantially all of the
assets of Borg Adaptive Technologies, a wholly-owned subsidiary of nStor
Corporation, for $7.5 million cash. Although we believe that, as a result of the
receipt of these funds, amounts available from our line of credit will be
sufficient to satisfy our presently contemplated working capital needs for the
foreseeable future, we may require additional capital beyond our currently
forecasted needs. In addition, any additional required capital may not be
available on terms acceptable to us, if at all, at such time or times as we
might require.
We have, from time to time, been unable to comply with the financial covenants
of our bank lines of credit
From time to time, we have been unable to comply with certain of the
financial covenants of our bank lines of credit and have requested that our
lenders forbear from exercising the remedies available to them under such
circumstances. In each such case, our banks agreed with our request. In the
event that such events occur in the future and we are unsuccessful in our
negotiations with our lenders, we would be required to seek other sources of
capital to satisfy our obligations under our lines of credit.
We have a limited history of operating and integrating our acquired businesses
We have acquired all of our operating assets within the last three and
one half 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. We may not
be able to successfully consolidate our business operations or achieve returns
that would justify our investment in our acquired businesses. This consolidation
process will require substantial time and attention on the part of our
management. We may not be able to successfully integrate the operations of these
companies. If we are unable to integrate or successfully manage the companies we
have acquired, our business, financial condition and results of operations could
be materially and adversely affected.
We have experienced fluctuations in operating results
We have recently experienced significant period-to-period fluctuations
in our operating results. These fluctuations are due to product design,
development, manufacturing and marketing expenditures. If significant variations
were to occur between forecasts and actual orders with respect to our products,
we may not be able to reduce our expenses proportionately and operating results
could be adversely affected. Our revenues in any quarter are dependent on the
timing of product shipments as well as the status of competing product
introductions. Like
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<PAGE> 10
many other high technology companies, a disproportionately large percentage of
quarterly sales often occur in the closing weeks of each quarter. Any
forward-looking statements about operating results made by members of our
management will be based on assumptions about the likelihood of closing
anticipated sales and other factors management considers reasonable based in
part on knowledge of performance in prior periods. The failure to consummate any
of those sales may have a disproportionately negative impact on our operating
results, given our relatively high fixed costs, and may thus prevent
management's projections from being realized.
We may be unable to attract and retain qualified employees
Our ability to provide high-quality products on a timely basis requires
that we employ an adequate number of skilled engineers and technicians.
Accordingly, our ability to increase our productivity and profitability will be
limited by our ability to attract and retain skilled personnel. We, like many of
our competitors, are currently experiencing shortages of qualified personnel. We
may not be able to maintain an adequate skilled labor force necessary to operate
efficiently and to support our growth strategy and our labor expenses may
increase as a result of a shortage in the supply of skilled personnel.
Shares eligible for future sale by our current stockholders may adversely affect
our stock price
If our current stockholders sell substantial amounts of our common
stock, including shares issued upon the exercise of outstanding options and
warrants or the conversion of outstanding preferred stock, in the public market
following this offering, then the market price of our common stock could fall.
Restrictions under the securities laws and certain lock-up agreements limit the
number of shares of common stock available for sale in the public market. Except
as provided below, substantially all of the shares of the common stock
(26,717,824 shares as of January 5, 2000) 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 under the
Securities Act. Approximately 21,263,782 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 this Prospectus. See "SELLING STOCKHOLDERS."
Rapid technological and customer preference changes - we may be unable to keep
pace with the rapid changes in our industry
The open systems data storage market in which we operate is
characterized by rapid technological change, frequent new product introductions
and evolving industry standards. Customer preferences in that market are
difficult to predict and changes in those preferences could render our current
or future products unmarketable. The introduction of products embodying new
technologies by our competitors and the emergence of new industry standards
could render existing products as well as new products being introduced obsolete
and unmarketable. For example, if customers were to turn away from open systems
computing, our revenues would decline dramatically.
Our success depends upon our ability to address the increasingly
sophisticated needs of customers, to enhance existing products and to develop
and introduce, on a timely basis, new competitive products (including new
software and hardware and enhancements to existing software and hardware) that
keep pace with technological developments and emerging industry standards. If we
cannot successfully identify, manage, develop, manufacture or market product
enhancements or new products, our business will be materially and adversely
affected.
<PAGE> 11
Intense Competition - the computer storage market is highly competitive
The storage system market is intensely competitive. We compete with
traditional suppliers of computer systems such as Hewlett-Packard, Sun
Microsystems, IBM, SGI, Compaq Corporation, Hitachi, Digital Equipment
Corporation, and Dell Computer Corp., which market storage systems as well as
other computer products, and which seem to have become more focused on storage
recently. For example, Data General was recently acquired by EMC Corporation.
EMC is the largest independent seller of data storage systems and software. We
also compete against independent storage system suppliers to the high-end market
including, but not limited to, Box Hill Systems, Artecon Inc., EMC Corporation,
StorageTek, Network Appliance, Inc., LSI Logic Corporation, Ciprico Inc., MTI
Technologies, Inc., Procom Technology Inc., the Clariion division of Data
General and Storage Computer Corp. In providing tape backup, we compete with
value-added suppliers of tape-based storage systems such as Datalink
Corporation, MTI Technologies, Inc., Dallas Digital, Cranel, Inc. and others.
Many of these competitors are significantly larger than us, and have
significantly greater financial, technical, marketing, purchasing and other
resources than us, and as a result may be able to respond more aggressively to
new or emerging technologies and changes in customer requirements, or devote
greater resources to the development, promotion and sale of products than us, or
to deliver competitive products at a lower end-user price.
Increased competition is likely to result in price reductions, reduced
operating margins and loss of market shares, any of which could have a material
adverse effect on our business, operating results or financial condition. In
fact, competitive pricing pressures have had, and may continue to have an
adverse effect on our revenues and earnings.
If we are unable to develop and market products to compete with the
products of competitors, our business will be materially adversely affected. In
addition, if major customers who are also competitors cease purchasing our
products so that they can concentrate on sales of their own products, our
business could be adversely affected.
We are a party to litigation which could adversely affect the Company
In June and August 1996, we and two of our directors 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 us. The plaintiffs seek compensatory damages, punitive
damages, and equitable relief for alleged interference with the plaintiffs'
alleged rights and for alleged breach of contract. 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 plaintiffs'
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.
Lack of long term contracts - delays or cancellations of customer orders could
materially adversely affect our operating results
We generally do not enter into long-term purchase commitments with our
customers and customers generally have certain rights to extend or to delay the
shipment of their orders, as well as the right to return products and cancel
orders under some circumstances. The cancellation or rescheduling of orders
placed by our customers or the return of products shipped to them, could
materially and adversely affect our business.
Product Defects - our business will materially suffer if we encounter
significant product defects
Storage system products like those offered by us may contain undetected
software errors or failures when first introduced or as new versions are
released. We cannot be certain that, despite testing, errors will not be found
in new products after commencement of commercial shipments.
Our standard warranties provide that if a system does not function to
published specifications we will repair or replace the defective component
without charge. Significant warranty costs could have a material adverse effect
on our business.
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Availability of competing products - Sales of competing products by distributors
and Vars could materially adversely affect our sales
In the United States, we sell our products both through a direct sales
force and through value-added resellers (VARs). Our distributors and VARs may
also carry competing product lines, and could reduce or discontinue sales of our
products, which could have a material adverse effect on our operating results.
In addition, existing end-user customers will not purchase their storage
equipment from the manufacturer that provides their network computing systems
and, as a result, reduce or eliminate purchases from us.
Lengthy sales cycles - We depend on large orders and upon sales which may have
lengthy cycles
Customer orders can range in value from a few thousand dollars to over
a million dollars. The length of time between initial contact with a potential
customer and sale of a product, or "sales cycle", also can vary greatly and can
be as long as three to twenty-four months. This is particularly true for the
sale and installation of complex, turnkey solutions, which often are sold
directly to end users. Our revenue is likely to be affected by the timing of
larger orders, which makes it difficult for us to predict such revenue. Revenue
for a quarter could be reduced if large orders forecasted for a certain quarter
are delayed or are not realized. The factors that could delay or defer an order
include:
- time needed for technical evaluations by customers;
- customers budget restrictions and changes to budgets during the
course of a sales cycle;
- customer internal review and testing procedures; and
- engineering work needed to integrate a storage solution
with a customer's system.
We may not be able to successfully protect our patents and other intellectual
property rights, and may be subject to claims of infringement by others
We currently hold one patent and have four (4) patents 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. The steps taken to protect our rights may not be
adequate to prevent misappropriation of our technology or to preclude
competitors from developing products with features similar to our products.
Furthermore, in the future, third parties may 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.
Sole source and key suppliers -- The loss of one or more suppliers could
adversely affect our ability to obtain key components for products.
We rely on other companies to supply certain key components of our
products. Our products are typically designed to operate with unique components
that are available from a single source. For example, certain of our products
are dependent upon controllers designed by one of our suppliers. Although we can
use other suppliers, the delay in receiving the product from these other
suppliers will increase product costs. Other components, while not dependent on
one source, may, from time to time, be in short supply or unavailable for a
period of time while alternative sources can be identified. Modification to the
particular products, requalification of the products with applicable regulatory
agencies, and additional testing to assure software and hardware is compatible
can result in lost or deferred revenue as well as higher product costs.
In addition, we often resell subsystems, software and services from others.
This leaves us vulnerable to inadequate supply, uneven allocation in times of
shortage, delays in order fulfillment, and contract terminations. For example,
we have resold Data General's Clariion Disk Storage product line. Data General
was recently acquired by EMC, a significant acquisition in this industry. EMC
may not continue to use indirect selling channels, or we may not be selected by
EMC, assuming EMC chooses to continue the Clariion selling model. The loss of
our relationship with Clariion would have a material impact on our revenues and
customer base. The percentage of Andataco's revenues attributable to Clariion in
fiscal year 1998 and the nine months ended September 30, 1999 was 27.9% and
33.6%, respectively.
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Concentrated customer base -- An economic downturn of major customers or
geographical area in which we concentrate could materially adversely affect
revenues
We operate predominantly in one business segment, information storage
solutions, including external RAID subsystems. A large percentage of our revenue
comes from the sale of products to a small number of significant clients within
such industries and to customers based in the eastern region of the United
States. During 1998, we had sales to two customers, Discreet Logic (a Canadian
customer) and Intergraph Corp., which accounted for 27% and 13%, respectively,
of net sales for 1998.
During the second quarter, we entered into an original equipment
manufacturer, or OEM, agreement to supply high-performance RAID storage
enclosures to Silicon Graphics, Inc. (SGI), a major server manufacturer. We
began shipping products under SGI's initial purchase order in May 1999. The
initial term of the arrangement was expected to be for three years. Between May
and October 1999, sales to SGI totaled approximately $6,000,000, representing
18% of our sales for the ten-month period ended October 31, 1999. In the third
quarter, SGI decided to phase out their Windows NT product to which our storage
systems are attached. As a direct result, actual shipments to SGI in the third
and fourth quarters were significantly below forecasts and, based on current
business conditions, future sales to SGI are expected to be minimal.
An economic downturn in any industry or geographical area targeted by
us, or the loss of one or more customers, particularly a significant customer,
could result in a material decrease in revenues, thereby adversely affecting our
operating results.
Narrow market -- a decline in market acceptance of Unix Systems, Windows NT or
changes in Sun Microsystems products or policies could materially adversely
affect our business.
Substantially all of our revenues to date have been concentrated in the
UNIX and Windows NT marketplace. A large portion of our revenues are associated
with versions of UNIX and Windows NT manufactured by Sun Microsystems, Inc. If
Sun Microsystems were to change its policy of supporting open systems computing
environments and if our products were thereby rendered incompatible with Sun
Microsystems' products, our business, financial position and results of
operations could be materially and adversely affected.
The price of our common stock has been, and may continue to be, volatile
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.
We may not have access to sufficient funding to support our operations
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;
9
<PAGE> 14
- 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. Such funding may not be available, or if available, it may not 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 our 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 could adversely affect our stock price or disrupt our
operations
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; and
- 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.
The Year 2000 issue could disrupt our business
Many computer systems, software programs and other equipment with
embedded chips or processors use only two digits rather than four to define the
applicable year. As a result, 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 or 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.
10
<PAGE> 15
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.
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 significant issues requiring remediation or
replacement have been identified.
As to the second component of the Y2K readiness program, we have
identified our significant customers, vendors and creditors that are believed,
at this time, to be critical to business operations subsequent to January 1,
2000. Through the use of questionnaires, interviews and other available means,
we have ascertained that we have no significant exposure to Y2K problems at this
time. However the representations made to us by third parties may not be
accurate or complete and there is a possibility that normal business operations
could be disrupted.
The third component of our Y2K readiness program was the evaluation of
our existing products', and planned future products', Y2K functionality. All of
the date dependent software which we have developed has been validated as being
Y2K compliant using commercially acceptable methods, including: expanding year
fields to four digits; windowing; and date encoding techniques. Our other
products have been verified as Y2K compliant based on the absence of date
dependencies in hardware, software and firmware code.
The total cost of these Y2K compliance activities is not expected to
exceed $50,000. 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, these estimates may not 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.
In mid-1997 Andataco, a wholly-owned subsidiary, formed an internal
task force to evaluate those areas that may be affected by the Y2K problem and
devised a plan to become Y2K compliant in a timely manner. The plan focuses on
three major areas: mission critical business transaction systems; the products
Andataco sells; and issues associated with business partners, including
suppliers, customers and bankers. Andataco has completed its plan and
anticipates no Y2K-related problems. Andataco still has to upgrade or replace
certain non-Y2K compliant personal computer (PC) systems used by individuals for
e-mail and personal productivity. All systems, including PCS, that are used for
central business applications have been verified to be Y2K compliant. Because of
the many uncertainties associated with Y2K compliance issues, and because
Andataco's assessment is necessarily based on information from third-party
vendors and suppliers, there is a possibility that Andataco's normal business
operations could be disrupted.
As of the date of this Prospectus, we have not experienced any material
disruption in our business or operations as a result of Y2K issues, however,
there is no assurance that we will not experience disruptions in the future.
11
<PAGE> 16
RECENT DEVELOPMENTS
In March 1999, we entered into an OEM agreement to supply
high-performance RAID storage enclosures to SGI, a major server manufacturer. We
began shipping products under SGI's initial purchase order in May 1999. The
initial term of the arrangement was expected to be for three years. Between May
and October 1999, sales to SGI totaled approximately $6,000,000, representing
18% of our sales for the ten-month period ended October 31, 1999. In the third
quarter, SGI decided to phase out their Windows NT product to which our storage
systems are attached. As a direct result, actual shipments to SGI in the third
and fourth quarters were significantly below forecasts and, based on current
business conditions, future sales to SGI are expected to be minimal.
On June 8, 1999, we purchased 18,021,281 shares of the common stock of
Andataco, representing approximately 76% of the total issued and outstanding
capital stock of Andataco, from the Sykes Family Trust and the Sykes Children's
Trust of 1993 for $5.1 million. The purchase price was paid in the form of two,
9.5% subordinated promissory notes. The principal balance of the notes is due on
June 17, 2004 and interest is payable monthly.
As part of the acquisition of Andataco, we also acquired from W. David
Sykes, the President of Andataco, a promissory note in the original principal
amount of $5,196,000 payable by Andataco to Sykes. The purchase price for the
promissory note was: $500,000 in cash, $150,000 of which had been paid prior to
the closing; 4,654 shares of our newly issued Series F convertible preferred
stock which are convertible into an aggregate of 1,551,333 shares of our common
stock based on a conversion price of $3.00 per share; and three-year warrants to
purchase an additional 155,133 shares of our common stock for $3.30 per share.
On July 16, 1999, as a result of a default by Andataco under the
minimum tangible net worth covenant of its principal loan agreement, we
purchased an additional 1,612,903 shares of Andataco common stock in exchange
for a working capital investment of $500,000.
On November 2, 1999, we acquired the remaining shares of Andataco
common stock by merging Andataco with a wholly owned subsidiary which we
organized for that purpose. In the merger, we issued approximately 924,000
shares of our common stock, with an aggregate value of $1,848,000, to the
Andataco stockholders in exchange for the remaining shares of Andataco common
stock
On November 30, 1999, we entered into a definitive agreement with
OneofUs Company Limited to acquire substantially all of the assets of OneofUs
for $2,850,000 consisting of $250,000 cash and $2,600,000 worth of our common
stock based on the market price of our stock at the time the transaction is
closed. OneofUs is a Taiwan-based, privately-held designer of high performance
Fibre Channel RAID controllers and storage solutions for open systems and the
Storage Area Network market. The transaction is subject to our satisfactory
completion of a due diligence review on OneofUs' assets and business.
On January 10, 2000, we sold substantially all of the assets of Borg
Adaptive Technologies, including the patented Adaptive RAID technology, to
QLogic Acquisition Corporation, a wholly-owned subsidiary of QLogic Corporation,
for $7.5 million cash. As part of the sale, we retained a perpetual license in
and to the Adaptive RAID technology.
On December 16, 1999, we agreed to issue 1,878,462 shares of our common
stock to the selling stockholders in consideration for the cancellation of
certain subordinated promissory notes in the aggregate principal amount of
$5,550,000 issued by us to the selling stockholders which mature on September 5,
2001. The number of shares issued was based on the principal amount of the
promissory notes and the closing price of the stock on the American Stock
Exchange on December 16, 1999. In addition, we have agreed to pay the selling
stockholders the difference between the principal amount of their promissory
notes and the sum of (i) the proceeds from any sales of the stock within twenty
(20) days from the date of the effectiveness of this registration statement or
some later date agreed to by the parties and (ii) the value of any stock which
is not sold during that 20-day period based on the closing price of the stock on
the American Stock Exchange on the last day of the 20-day period. The terms of
the exchange are set forth in a Subscription Agreement between us and the
selling stockholders a form of which is attached as Exhibit A.
12
<PAGE> 17
Effective January 17, 2000, Mr. Larry Hemmerich was appointed as our
new President and Chief Executive Officer and as a director. He replaces
Lawrence F. Steffann who resigned as President and director effective January
14, 2000. From 1992 to 1997, Mr. Hemmerich served as Executive Vice President of
Data General and was responsible for the development and management of Data
General's Clariion computer storage division. Most recently, Mr. Hemmerich
served as General Manager of the Software and SAN Management Operation of
HewlettPackard's Enterprise Storage Business Unit.
13
<PAGE> 18
SELLING STOCKHOLDERS
The following table sets forth certain information with regard to the
beneficial ownership of common stock by the selling stockholders.
Percentage of
Shares of Shares of Shares of Common Stock
Common Stock Common Stock Common Stock Owned After
Selling Stockholder Owned Offered Hereby Retained the Offering
- ------------------- ------------ -------------- ------------ -------------
H. Irwin Levy(1) 7,342,664(2) 169,231(3) 7,173,433 23.56%
MLL Corp. 335,897 169,231(4) 166,666 *
JOJO Corp.(5) 83,975 42,308(6) 41,667 *
N&S Corp.(7) 83,975 42,308(8) 41,667 *
Bernard Marden 4,379,487 338,462(9) 4,041,025 14.26%
Bernard Green(10) 400,948 84,615(11) 316,333 1.18%
Maurice Halperin 3,192,444 203,077(12) 2,989,367 10.21%
Herbert Gimelstob 2,609,487 626,154(13) 1,983,333 7.01%
Patricia Auld 605,288 101,538(14) 503,750 1.88%
James P. Marden 560,788 101,538(15) 459,250 1.71%
- -----------
* Less than 1%
(1) Mr. Levy is the Chairman of our Board of Directors.
(2) This amount does not include shares owned by MLL Corp., of which Mr.
Levy is the principal stockholder. The shares held by MLL Corp. are
separately reported.
(3) Represents shares issued to Mr. Levy in exchange for the cancellation
of a subordinated promissory note issued by the Company to Mr. Levy in
the aggregate principal amount of $500,000.
(4) Represents shares issued to MLL Corp. in exchange for the cancellation
of a subordinated promissory note issued by the Company to MLL Corp. in
the aggregate principal amount of $500,000.
(5) The principal stockholders of JOJO Corp. are the grandchildren of Irwin
Levy and the children of Mark Levy, a director and former Vice
President of the Company. Mr. Mark Levy is also an officer and director
of JOJO Corp.
(6) Represents shares issued to JOJO Corp. in exchange for the cancellation
of a subordinated promissory note issued by the Company to JOJO Corp.
in the aggregate principal amount of $125,000.
(7) Two of Mr. Irwin Levy's grandchildren are the principal stockholders
of N&S Corp.
(8) Represents shares issued to N&S Corp. in exchange for the cancellation
of a subordinated promissory note issued by the Company to N&S Corp. in
the aggregate principal amount of $125,000.
(9) Represents shares issued to Mr. Marden in exchange for the cancellation
of a subordinated promissory note issued by the Company to Mr. Marden
in the aggregate principal amount of $1,000,000.
(10) Mr. Green is a director of the Company.
(11) Represents shares issued to Mr. Green in exchange for the cancellation
of a subordinated promissory note issued by the Company to Mr. Green in
the aggregate principal amount of $250,000.
14
<PAGE> 19
(12) Represents shares issued to Mr. Halperin in exchange for the
cancellation of a subordinated promissory note issued by the Company to
Mr. Halperin in the aggregate principal amount of $600,000.
(13) Represents shares issued to Mr. Gimelstob in exchange for the
cancellation of two (2) subordinated promissory notes issued by the
Company to Mr. Gimelstob in the aggregate principal amount of
$1,850,000.
(14) Represents shares issued to Ms. Auld in exchange for the cancellation
of a subordinated promissory note issued by the Company to Ms. Auld in
the aggregate principal amount of $300,000.
(15) Represents shares issued to Mr. Marden in exchange for the cancellation
of a subordinated promissory note issued by the Company to Mr. Marden
in the aggregate principal amount of $300,000.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the
selling stockholders.
PLAN OF DISTRIBUTION
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 stockholders 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 commissions).
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 Akerman, Senterfitt & Eidson, P.A., Ft. Lauderdale,
Florida 33301.
EXPERTS
Our annual consolidated 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.
15
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC registration fee $ 1,673.71
Amex listing fee 17,500.00
Legal fees and expenses 15,000.00
Accountants' fees 10,000.00
Miscellaneous 3,000.00
------------
Total $ 47,173.71
============
Item 15. Indemnification of Directors and Officers.
The Company, a Delaware corporation, has included in its Restated
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 of 1933, as amended, 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
2.1 Form of Subscription Agreement by and among the Registrant and the selling
stockholders(1)
3.1 Restated Certificate of Incorporation of the Registrant, as amended(1)
3.2 Restated Bylaws of the Registrant(2)
5.1 Opinion of Akerman, Senterfitt & Eidson, P.A.(1)
23.1 Consent of BDO Seidman, LLP(1)
23.3 Consent of Akerman, Senterfitt & Eidson, P.A.(included in opinion filed as
Exhibit 5.1)
24.1 Power of Attorney (included on signature page to this Registration
Statement)
- ------------
(1) Filed herewith.
(2) Incorporated by reference to the Registrant's Form 10-K for the fiscal year
ended October 31, 1996.
II-1
<PAGE> 21
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.
<PAGE> 22
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 on Form S-3 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 January, 2000.
nSTOR TECHNOLOGIES, INC.
By: /s/ Jack Jaiven
___________________________
Jack Jaiven, Vice President
and Treasurer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints H. Irwin Levy and Jack Jaiven 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 said attorneys-in-fact or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
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 Chairman of the Board of Directors January 18, 2000
____________________
H. Irwin Levy
/s/ Larry Hemmerich President, Chief Executive Officer January 18, 2000
____________________ (Principal Executive Officer) and
Larry Hemmerich Director
/s/ Jack Jaiven Vice President and Treasurer January 18, 2000
____________________ (Principal Financial and Accounting
Jack Jaiven Officer)
/s/ Mark F. Levy Director January 18, 2000
____________________
Mark F. Levy
/s/ Michael L. Wise Director January 18, 2000
____________________
Michael L. Wise
/s/ Bernard R. Green Director January 18, 2000
____________________
Bernard R. Green
<PAGE> 23
EXHIBIT INDEX
Exhibit
Number Description
2.1 Form of Subscription Agreement by and among the Registrant and
the selling stockholders
3.1 Restated Certificate of Incorporation of the Registrant,
as amended
5.1 Opinion of Akerman, Senterfitt & Eidson, P.A.
23.1 Consent of BDO Seidman, LLP
EXHIBIT 2.1
SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement") is entered into as of the
16th day of December, 1999 by and between nStor Technologies, Inc., a Delaware
corporation ("nStor") and the persons listed on the signature page hereto (each
a "Noteholder" and collectively, the "Noteholders").
WHEREAS, nStor is the issuer of certain promissory notes issued to the
Noteholders on the days and in the amounts set forth on Schedule I hereto (the
"Notes");
WHEREAS, nStor and the Noteholders desire that the Notes should be
canceled without payment of principal or accrued interest in accordance with
their terms in exchange for the issuance by nStor to the Noteholders of the
aggregate number of shares of its common stock, par value $.05 per share ("nStor
Common Stock") set forth on Schedule I;
NOW THEREFORE, the parties hereto agree as follows:
1. Exchange of Notes for Stock
a. In lieu of cash, nStor agrees to pay the Noteholders the
principal amount of the Note in shares of nStor Common Stock based on a stock
price of $2.9545 per share, which is approximately 5% greater than the closing
price of one share of nStor Common Stock on the American Stock Exchange on the
date hereof.
b. nStor will file a Registration Statement or Form S-3 (the
"Registration Statement") covering the shares of nStor Common Stock issued to
the Noteholders pursuant to Section 1(a) above (the "Stock") as soon as
practicable after the date hereof. nStor shall notify the Noteholders
immediately upon the effectiveness of the Registration Statement, and the
Noteholders shall have the right to sell all or any part of the Stock subject to
any rules or regulations under the Securities Act of 1933, as amended (the
"Securities Act").
c. nStor will guarantee the Noteholders against loss with the
guarantee expiring at the close of business on the 20th day of trading after the
effective date of the Registration Statement or some later date as agreed to by
the parties. To compute the amount due under the guarantee, the value of any
Stock not sold will be based upon the closing price of one share of nStor Common
Stock on the 20th trading day after the effective date of the Registration
Statement or some later date as agreed to by the parties. nStor will be indebted
to the Noteholders for an amount equal to the original principal amount of the
Note, less the net proceeds received from the sale of any of the Stock plus the
value of any Stock not sold, at the close of business on the 20th trading day
after the effective date of the Registration Statement or some later date as
agreed to by the parties. The amount due under the guarantee, if any, will be
paid in cash or a subordinated promissory note, at nStor's sole discretion, and
if paid in a subordinated promissory note, the new note will have the same
interest rate and due date as the original Note.
2. Representations of nStor. nStor hereby represents and warrants to
the Noteholders the following:
<PAGE> 2
a. nStor is a corporation validly existing under the laws of
the State of Delaware.
b. The Stock, when delivered to the Noteholders in accordance
with the terms hereof, will be duly authorized, validly issued, fully paid, and
nonassessable.
3. Representations of the Noteholders. Each Noteholder hereby
represents and warrants to nStor the following:
a. Each Noteholder is the sole lawful holder of his or its
Note, possesses all right, title and interest therein, has the requisite legal
capacity and authority to transfer his or its Note, and has not transferred,
pledged, or hypothecated his or its Note or any interest therein to any third
party.
b. Each Noteholder understands and represents that (i) he or
it must bear the economic risk of this investment for an indefinite period of
time because the Stock has not been registered under the Securities Act, or
under any state securities laws and, therefore, cannot be resold unless its is
subsequently registered under the Securities Act and the pertinent state
securities laws or unless an exemption from such registration is available; and
(ii) he or it is purchasing the Stock for investment for his or its own account
and not for the account of any other person, and not with any present view
toward resale or other "distribution" thereof within that meaning of the
Securities Act.
c. The Noteholder has such knowledge and experience in
financial and business matters that he or it is capable of evaluating the merits
and risks of an investment in the Stock. The Noteholder is aware that an
investment in the Stock is highly speculative and subject to substantial risks.
The Noteholder is capable of bearing the high degree of economic risk and
burdens of this investment, including the possibility of a complete loss of his
investment. The financial condition of the Noteholder is such that he is under
no present or contemplated future need to dispose of any of the Stock to satisfy
any existing or contemplated undertaking, need or indebtedness.
d. nStor has made available to each Noteholder, or his
designated representative, during the course of this transaction and prior to
the issuance of any of the Stock, the opportunity to ask questions of and
receive answers from the officers and directors of nStor concerning the terms
and conditions of the offering or otherwise relating to the financial data and
business of nStor, to the extent that nStor or its officers and directors
possess such information or can acquire it without unreasonable effort or
expense. nStor has also made available to each Noteholder for inspection,
documents, records, books and other written information about nStor, its
business and this investment at nStor's principal executive office at 100
Century Blvd., West Palm Beach, FL 33417.
4. Restricted Stock and Legend. The Noteholders acknowledge that the
Stock offered hereunder are being offered pursuant to a private placement
exemption under the Securities Act, and that the Stock is deemed "restricted
securities" as defined in the Securities Act. Until the securities offered
hereunder become registered with the Securities and Exchange Commission (the
"Commission"), each certificate representing the Stock shall bear a legend in
substantially the following form:
<PAGE> 3
THE SHARE(S) REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE
SECURITIES LAWS, AND THE CORPORATION HAS RELIED UPON AN EXEMPTION TO THE
REGISTRATION REQUIREMENT UNDER THE ACT FOR THE SALE OF THE SHARE(S)
REPRESENTED BY THIS CERTIFICATE TO ITS HOLDER. THEREFORE, THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED STOCK AND MAY NOT BE SOLD OR
TRANSFERRED TO ANY THIRD PARTY WITHOUT EITHER BEING REGISTERED UNDER THE
ACT OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS
NOT REQUIRED UNDER THE ACT.
5. Resales. The Noteholders agree not to resell or otherwise dispose of
all or any part of the Stock, except as permitted by law, including, without
limitation, any and all applicable provisions of this Agreement and any
regulations under the Securities Act.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective officers thereunto duly authorized as of the day and year
first above written.
nSTOR TECHNOLOGIES, INC.
By:
Jack Jaiven
Vice President and Treasurer
NOTEHOLDERS:
H. Irwin Levy
MLL CORP.
By: ____________________________
Name: __________________________
Title: _________________________
JOJO CORP.
By: ____________________________
Name: __________________________
Title: _________________________
N&S CORP.
By: ____________________________
Name: __________________________
Title: _________________________
----------------------------------
Herbert Gimelstob
<PAGE> 5
----------------------------------
Bernard Green
----------------------------------
Bernard Marden
----------------------------------
Patricia Auld
----------------------------------
James P. Marden
----------------------------------
Maurice Halperin
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
nSTOR TECHNOLOGIES, INC.
The undersigned hereby certifies that the following Restated
Certificate of Incorporation of nStor Technologies, Inc. (the"Corporation") was
duly adopted in accordance with Section 245 of the Delaware General Corporation
Law. This Restated Certificate of Incorporation restates and integrates but does
not further amend the Certificate of Incorporation. The original Certificate of
Incorporation (previously filed under the name of Pacific Coast Properties,
Inc.) was filed with the Secretary of State of Delaware on November 23, 1959, a
subsequent Restated Certificate of Incorporation (previously filed under the
name of Communications &Cable Inc.), as amended, was filed in Delaware on July
21, 1987, and a subsequent Restated Certificate of Incorporation was filed in
Delaware on June 22, 1998.
ARTICLE FIRST: The name of the Corporation is nSTOR TECHNOLOGIES, INC.
ARTICLE SECOND: The address of the Corporation's registered office in
the State of Delaware is 15 E. North Street, City of Dover, Delaware 19901,
County of Kent. The name of its registered agent at such address is United
Corporate Services, Inc.
ARTICLE THIRD: The nature of the business or purposes to be conducted
or promoted by the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE FOURTH: (a) The total number of shares which the Corporation is
authorized to issue is forty-one million (41,000,000). The Corporation is
authorized to issue two classes of shares to be designated, respectively,
"Preferred Stock" and "Common Stock." The number of shares of Preferred Stock
authorized to be issued is one million (1,000,000) and the number of shares of
Common Stock authorized to be issued is forty million (40,000,000). The
Preferred Stock shall have a par value of $.01 per share and the Common Stock
shall have a par value of $.05 per share. The aggregate par value of all shares
of Preferred Stock is $10,000 and the aggregate par value of all shares of
Common Stock is $2,000,000.
(b) The shares of Preferred Stock may be issued from time to
time in one or more series. The Board of Directors is authorized, subject to
limitations prescribed by law and the provisions of this Article Fourth, to
provide for the issuance of the shares of Preferred Stock in series, and by
filing a certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and the rights of the
shares of each such series and the qualifications, limitations or restrictions
thereof.
(c) The authority of the Board with respect to each series
shall include, but not be limited to, determination of the following:
(i) The number of shares constituting that series and
the distinctive designation of the series;
<PAGE> 2
(ii) The dividend rate on the shares of that series,
whether dividends shall be
cumulative, and, if so, from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares of that series;
(iii) Whether that series shall have voting rights,
in addition to any voting rights
provided by law, and, if so, the terms of such voting rights and whether the
series shall have the right to vote cumulatively;
(iv) Whether that series shall have conversion
privileges, and, if so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events as the Board of
Directors shall determine;
(v) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(vi) Whether that series shall have a sinking fund
for the redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
(vii) The rights of the shares of that series in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series; and
(viii) Any other relative or participating rights,
preferences and limitations of that series.
(d) The number of authorized shares of Preferred Stock may be
increased or decreased by the affirmative vote of the holders of a majority of
the stock of the Corporation that is entitled to vote without a class vote of
the Preferred Stock or any class or series thereof, except as may otherwise be
provided in the resolution or resolutions affixing the voting rights of such
class or series.
(e) Attached hereto as Exhibits 1, 2 and 3 are copies of the
Certificates of Designation of the Series A, Series C and Series D Convertible
Preferred Stock filed with the Secretary of State on September 30, 1998,
September 30, 1998 and October 29, 1998, respectively, which Certificates
created separate series of Preferred Stock and each of which sets forth the
rights and preferences of each series.
ARTICLE FIFTH: The Corporation shall have perpetual existence.
ARTICLE SIXTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
alter, amend or repeal the bylaws of the Corporation, except to the extent that
the bylaws or this Certificate of Incorporation otherwise provide.
<PAGE> 3
ARTICLE SEVENTH: The number of directors of the Corporation shall be
fixed and may be altered from time to time in the manner provided in the bylaws
of the Corporation, and vacancies in the Board of Directors and newly created
directorships resulting from any increase in the authorized number of directors
may be filled, and directors may be removed, as provided in the bylaws.
ARTICLE EIGHTH: At all elections of directors of the Corporation, each
holder of Common Stock shall be entitled to as many votes as shall equal the
number of votes which (except for such provision as to cumulative voting) he
would be entitled to cast for the election of directors with respect to his
shares of Common Stock multiplied by the number of directors to be elected by
him, and he may cast all of such votes for a single director or may distribute
them among the number to be voted for, or for any two or more of them as he may
see fit.
ARTICLE NINTH: Meetings of stockholders may be held within or without
the State of Delaware, as the bylaws may provide. The books of the Corporation
may be kept (subject to any provision contained in the statutes) outside the
State of Delaware at such place or places as may be designated from time to time
by the Board of Directors or in the bylaws of the Corporation.
ARTICLE TENTH: To the fullest extent permitted by the Delaware General
Corporation Law, as the same exists or as may hereafter be amended, a director
of the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Neither any amendment nor repeal of this Article Tenth, nor the adoption of any
provision of this Certificate of Incorporation inconsistent with this Article
Tenth, shall eliminate or reduce the effect of this Article Tenth in respect of
any matter occurring, or any cause of action, suit or claim that, but for this
Article Tenth, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
ARTICLE ELEVENTH: The election of directors need not be by written
ballot unless a stockholder demands election by written ballot at a meeting of
stockholders before the voting begins.
ARTICLE TWELFTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of November, 1998.
nSTOR TECHNOLOGIES, INC.
By: /s/ Mark F. Levy
____________________________
Mark F. Levy, Vice President
<PAGE> 4
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
nSTOR TECHNOLOGIES, INC.
a Delaware Corporation
Pursuant to Section 242 of the Delaware General Corporation Law, the
Restated Certificate of Incorporation of nSTOR TECHNOLOGIES, INC., a Delaware
corporation (the "Corporation") is hereby amended as follows:
1. Subsection (a) of Article Fourth of the Restated Certificate of Incorporation
of the Corporation is hereby amended and restated in its entirety to read as
follows:
"(a) The total number of shares which the Corporation is authorized to
issue is seventy-one million. The Corporation is authorized to issue two classes
of shares to be designated, respectively, "Preferred Stock" and "Common Stock."
The number of shares of Preferred Stock authorized to be issued is one million
(1,000,000) and the number of shares of Common Stock authorized to be issued is
seventy five million (75,000,000). The Preferred Stock shall have a par value of
$.01 per share and the Common Stock shall have a par value of $.05 per share.
The aggregate value of all shares of Preferred Stock is $10,000 and the
aggregate par value of all shares of Common Stock is $3,500,000."
2. Article Eighth of the Restates Certificate of Incorporation of the
Corporation is hereby amended and restated in its entirety to read as follows:
"ARTICLE EIGHTH: No holder of any class of stock of the
Corporation shall be entitled to cumulative votes in connection with any
election of directors of the Corporation."
Except as set forth above, the Restated Certificate of Incorporation of
the Corporation shall remain unchanged.
The foregoing amendment to the Restated Certificate of Incorporation of
the Corporation was duly proposed, adopted and approved by the members of the
Board of Directors of the Corporation on August 27, 1999 and by a majority of
the Stockholders of the Corporation on November 1, 1999, pursuant to the
Delaware General Corporation Law. The number of votes cast in favor of the
foregoing amendment by the Stockholders was sufficient for approval of the
amendment.
This amendment shall be effective at the time of filing of this
Certificate of Amendment.
<PAGE> 5
IN WITNESS WHEREOF, the undersigned officer of the Corporation has
executed this Certificate of Amendment on December 28, 1999.
nSTOR TECHNOLOGIES, INC.
By: /s/ H. Irwin Levy
_____________________
Name: H. Irwin Levy
Title: Chairman of the Board and Chief Executive
Officer
EXHIBIT 5.1
AKERMAN, SENTERFITT & EIDSON, P.A.
350 East Las Olas Boulevard
16th Floor
Fort Lauderdale, Florida 33301
January 18, 2000
nStor Technologies, Inc.
100 Century Boulevard
West Palm Beach, Florida 33417
Re: Registration Statement on Form S-3 (File No. 333- )
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 1,878,462 shares of the common
stock, $.05 par value per share (the "Shares"), of nStor Technologies, Inc. (the
"Company") issued to the Selling Stockholders in exchange for the cancellation
of certain promissory notes issued by the Company in favor of the Selling
Shareholders.
We have reviewed copies of the Restated Certificate of Incorporation, as
amended, 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, it is our opinion that the Shares are
duly authorized, 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,
Akerman, Senterfitt & Eidson, P.A.
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 March 5,
1999 (except for Note 15, which is as of April 15, 1999) relating to the
consolidated financial statements of nStor Technologies, Inc. and subsidiaries
appearing in the Company's Annual Report on Form 10-K and 10-K/A for the year
ended December 31, 1998.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Costa Mesa, California
January 18, 2000
