Registration No. 333-36508
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1 TO
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 Identification Number)
10140 Mesa Rim Road, San Diego, CA 92121 - (858) 453-9191
(Address and Telephone Number of Registrant's
Principal Executive Offices)
Jack Jaiven
100 Century Boulevard, West Palm Beach, FL 33417 - (561) 640-3136
(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>
CALCULATION OF REGISTRATION FEE
________________________________________________________________________________
Proposed Proposed
Maximum Maximum
Title of Securities Amount to be Offering Aggregate Amount of
to be Registered Registered(1) Price Offering Registration
_____________________ _______________ Per Unit(3) Price Fee
___________ ___________ ___________
Common stock, par 1,072,415 $ 2.938 $3,150,755.20 $831.80
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 May 3, 2000 of $2.938.
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.
<PAGE>
SUBJECT TO COMPLETION
Dated June 2, 2000
PROSPECTUS
1,072,415 SHARES
nSTOR TECHNOLOGIES, INC.
COMMON STOCK
------------------------------
This Prospectus relates to an aggregate of up to 1,072,415 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 June 1, 2000, the last reported sales price of the common stock
on the American Stock Exchange was $ 3.0625 per share.
This investment involves a high degree of risk. See "Risk Factors"
beginning on Page 5.
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 10140 Mesa Rim Road, San
Diego, California 92121. Our telephone number is (858) 453-9191.
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 June 2, 2000
<PAGE>
Table of Contents
Page
WHERE YOU CAN FIND MORE INFORMATION...........................................1
THE COMPANY...................................................................2
RECENT DEVELOPMENTS...........................................................2
THE OFFERING..................................................................3
RISK FACTORS..................................................................4
SELLING STOCKHOLDERS.........................................................10
USE OF PROCEEDS..............................................................10
PLAN OF DISTRIBUTION.........................................................10
LEGAL MATTERS................................................................11
EXPERTS..................................................................... 11
<PAGE>
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, 1999 filed on April 14, 2000.
2. The Company's Notification of Late Filing on Form 12b-25 filed on March 31,
2000.
3. The Company's Quarterly Report on Form 10-Q for the period ended March 31,
2000 filed on May 12, 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) 640-3136
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 are based
on current expectations subject to uncertainties and other factors which may
involve known and unknown risks that could cause actual results of operations to
differ materially from those projected or implied. Further, certain
forward-looking statements are based upon assumptions about future events which
may not prove to be accurate. Risks and uncertainties inherent in forward
looking statements include, but are not limited to:
o our future cash flows and ability to obtain sufficient financing;
o timing and volume of sales orders;
o level of gross margins and operating expenses;
o lack of market acceptance of our new product lines;
o price competition;
o conditions in the technology industry and the economy in general;
o legal proceedings;
o material cost fluctuations;
o inventory obsolescence;
o our ability to manage our inventories through procurement and utilization
of component materials; and
o historical results are not necessarily indicative of the operating results
for any future period.
<PAGE>
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
nStor Technologies, Inc. and our subsidiaries design, manufacture and
sell high-availability, high-performance Internet storage and customized Storage
Area Networking (SAN) solutions, including external RAID (Redundant Array of
Independent Disks) solutions (which we refer to as our "RAID Business"), tape
backup products and advanced storage management software solutions for the UNIX,
Windows NT and Linux markets. (UNIX, Windows NT and Linux are computer operating
systems.) We were incorporated as a Delaware corporation in 1959.
On May 31, 2000, we had 158 full-time employees. Our principal sales,
operations and executive headquarters are located at 10140 Mesa Rim Road, San
Diego, California 92121, telephone number (858) 453-9191. Our engineering and
marketing offices are located in Lake Mary, Florida.
RECENT DEVELOPMENTS
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 26, 2000. From
1992 to 1998, 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
Hewlett-Packard's Enterprise Storage Business Unit.
On January 19, 2000, we acquired substantially all of the assets of
OneofUs Company Limited for an aggregate purchase price of $2,850,000,
consisting of $250,000 cash and 776,000 shares of our common stock with an
aggregate value of $2,600,000 (based on the average market price of our stock
during the ten (10) trading days ended January 19, 2000). The shares were issued
to three selling stockholders pursuant to employment agreements and to the
fourth selling stockholder in connection with a confidentiality, noncompetition
and nonsolicitation agreement. We agreed to register the shares on a
Registration Statement on Form S-3. OneofUs was 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.
On January 20, 2000, we entered into a letter agreement with Harris
Ravine, the former Chief Executive Officer of our Andataco subsidiary, relating
to the termination of his employment. Pursuant to the agreement, we issued
80,000 shares of our common stock to Mr. Ravine, registered the shares on a
Registration Statement on Form S-3 and paid Mr. Ravine $10,000 in cash.
On January 26, 2000, we entered into a termination agreement with
Lawrence F. Steffann, our former President, relating to the termination of his
employment. Pursuant to the agreement, we issued 43,479 shares of our common
stock to Mr. Steffann, registered the shares on a Registration Statement on Form
S-3 and paid Mr. Steffann approximately $27,000 in cash.
On February 1, 2000, Mark F. Levy resigned as a director of the Company
and was replaced by Roger H. Felberbaum. Mr. Felberbaum is Senior Managing
Director at ING Baring and has served in this position since September 1997.
Previously, Mr. Felberbaum was Senior Managing Director of Furman Selz from
October 1983 until September 1997.
Effective March 7, 2000, the employment of Mr. David Sykes, the former
Vice President Marketing and Sales of one of our operating subsidiaries, was
terminated.
Effective March 13, 2000, Mr. James Habuda was appointed as our new
Vice President, OEM and Indirect Sales. Mr. Habuda joins us from Adaptec/
Distributed Processing Technology ("DPT"). Adaptec recently acquired DPT, where
Mr. Habuda was Vice President OEM Sales from September 1988 until March 2000.
<PAGE>
Effective March 13, 2000, Mr. Thomas Wrightson was appointed as our
new Vice President, Manufacturing and Services. Mr. Wrightson joins us from
Storage Technology Corporation where he was Director of Support Services
Development and Management where he held a number of management positions since
1991.
Effective March 21, 2000, Mr. Jonathan Ash was appointed as our new Vice
President, Marketing. Since 1979, Mr. Ash served in a number of sales and
marketing management positions for Unisys Corporation, including executive
positions in Europe. Most recently, he served as Director of Storage Marketing
and was responsible for all storage marketing in North America and for managing
new product rollouts.
On April 10, 2000, Mr. David Tweed was appointed as our new Vice
President, Solution Sales. Mr. Tweed has more than 20 years of sales and sales
management experience with computer storage companies and was most recently,
from January 1999 until January 2000, Director of Western Area Solution Sales
for Data General's Clariion business unit. Mr. Tweed was Western Regional Sales
Manger for Sentryl Software from March 1998 until March 1999 and Western
Regional Sales Manager for Zitel from January 1997 until January 1998. Mr. Tweed
was Southwest Sales Manager for EMC from January 1994 until November 1996.
At February 29, 2000 and March 31,2000, we were not in compliance
with the minimum tangible net worth covenant of our principal credit facility.
Effective March 29, 2000, the lender agreed to waive the default for both
periods. Effective April 14, 2000, we agreed with the lender to amend certain
terms of the credit facility including an increase in the interest rate to
prime plus 1.5% and new minimum net worth and net income covenants on a
consolidated basis. All other significant provisions of the credit facility
remain the same.
Effective April 12, 2000, H. Irwin Levy, the Chairman of the Board and
one of our principal stockholders, agreed to commit to a $2 million revolving
line of credit facility for us. Borrowings under that credit facility will bear
interest at 10% per annum. The credit facility will expire on the earlier of
April 30, 2001 or the date on which we execute our amended credit facility with
our principal lender, for which we have received a commitment letter.
On April 26, 2000, we issued 296,296 shares of our common stock to a
selling stockholder in consideration for the cancellation of a promissory note
in the principal amount of $1,000,000 issued by us to such selling
stockholder which was scheduled to mature on September 5, 2001. The number of
shares issued was based on the principal amount of the promissory note and the
average of the closing prices of our common stock on the American Stock Exchange
on April 24 and 25, 2000.
We and Wishmasters Limited signed a common stock purchase agreement
dated May 4, 2000 for the future issuance and purchase of our common stock.
The transaction closed on May 9, 2000. The stock purchase agreement establishes
what is sometimes termed an equity line of credit or an equity draw down
facility. In general, the draw down facility operates like this: the investor,
Wishmasters, committed up to $15 million to purchase our common stock over a
twelve month period. Once during each draw down pricing period, we may request a
draw of up to $5,000,000 of that money, subject to a formula based on average
stock price and average trading volume, setting the maximum amount of any
request for any given draw. The amount of money that Wishmasters will provide
to us and the number of shares we will issue to Wishmasters in return for that
money is settled on a weekly basis during a 22 day trading period following the
draw down request based on the formula in the stock purchase agreement.
Wishmasters receives a 7% discount to the market price for the 22 day period
and we receive the settled amount of the draw down less a 4% placement fee
payable to the placement agent, Ladenburg Thalmann & Co. Inc., which introduced
Wishmasters to us. Ladenburg Thalmann is not obligated to purchase any of our
shares.
<PAGE>
THE OFFERING
Common stock outstanding as of May 31, 2000..... 31,748,774 shares
Shares offered by selling stockholders ............ 1,072,415 shares
Risk Factors ...................... The shares involve a high degree of risk.
Investors should carefully consider the
information set forth under "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
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 our 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 December 31, 1999
($18,704,000), respectively. For the quarter ended March 31, 2000, we
experienced a loss of $2,925,000, excluding a $5,575,000 non-recurring gain on
the sale of certain assets. We also expect to have a net loss for the second
quarter ending June 30, 2000. At March 31, 2000, we had an accumulated deficit
of $55,783,000. 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 March 31, 2000, we were able to
obtain approximately $26.3 million from private investors through the sale of
convertible preferred stock and common stock, the issuance of subordinated and
other notes and the exercise of warrants and options to purchase shares of
common stock. On January 10, 2000, we sold substantially all of the assets of
our wholly-owned subsidiary, Borg Adaptive Technologies, for $7.0 million
cash, net of approximately $500,000 of transaction costs. Of this amount,
approximately $1.6 million was used to repay short term borrowings from H.
Irwin Levy. Although we believe that amounts expected to be available from
our bank line of credit and our equity 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.
At February 29, 2000 and March 31, 2000, we were not in compliance with
the minimum tangible net worth covenant of our principal credit facility.
Effective March 29, 2000, the lender agreed to waive the default for both
periods. Effective April 14, 2000, we agreed with the lender to amend certain
terms of the credit facility including an increase in the interest rate to
prime plus 1.5% and new minimum net worth and net income covenants on a
consolidated basis. All other significant provisions of the credit facility
remain the same.
<PAGE>
We have a limited history of operating and integrating our acquired businesses
and most of our senior management team have recently joined us and have not
worked together in the past
A significant portion of our operating assets have been acquired during
the past year and most of our top executives joined us since the beginning of
this year. 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 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
(31,748,774 shares as of May 31, 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 16,259,252 shares of common stock (including 5,588,666 shares
issuable on the exercise of outstanding options and warrants or the conversion
of outstanding preferred stock) are held by affiliates 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."
The sale of stock pursuant to the equity line of credit may substantially
dilute the interests of other security holders
The shares issuable to Wishmasters pursuant to the equity line of
credit will be issued at a 7% discount to the average daily price of our
common stock. Accordingly, the shares of common stock then outstanding will
be diluted. Depending on the price per share of our common stock during the
twelve month period of the equity line of credit, we may need to register
additional shares for resale to access the full amount of financing available,
which could have a further dilutive effect on the value of our common stock.
<PAGE>
The sale of material amounts of our common stock could reduce the price of
our common stock and encourage short sales
As we sell shares of our common stock to Wishmasters pursuant to the
equity line of credit and then Wishmasters sells the common stock, our common
stock price may decrease due to the additional shares in the market. As the
price of our common stock decreases, and if we decide to draw down on the
equity line of credit, we will be required to issue more shares of our common
stock for any given dollar amount invested by Wishmasters, subject to a
designated minimum put price specified by us. This may encourage short
sales, which could place further downward pressure on the price of our common
stock.
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.
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,
including its Clariion division, StorageTek, Network Appliance, Inc., LSI Logic
Corporation, Ciprico Inc., MTI Technologies, Inc. and Procom Technology Inc. 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.
<PAGE>
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 our financial condition
In June and August 1996, we and two of our then 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 our
financial condition.
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.
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.
Lengthy sales cycles - we depend on large orders and upon sales which may have
lengthy cycles
<PAGE>
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:
o time needed for technical evaluations by customers;
o customers budget restrictions and changes to budgets during the course
of a sales cycle;
o customer internal review and testing procedures; and
o 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 various patents on our products. In addition, we rely
on a combination of trade secrets, copyrights, trademarks, domain names 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 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 integrating these parts into our solutions
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 Clariion's Disk Storage product line. Data General, the
parent of Clariion, 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 could have a material impact
on our revenues and customer base. The percentage of our revenues attributable
to the sale of Clariion's product line in 1999 was 17.1%.
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. Sales to two customers, Silicon Graphics, Inc. (SGI) and Intel,
accounted for 15.1% and 11%, respectively, of our 1999 revenues.
<PAGE>
During the second quarter of 1999, we entered into an original equipment
manufacturer, or OEM, agreement to supply high-performance RAID storage
enclosures to SGI, a major server manufacturer. 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. In the third quarter of 1999, SGI
decided to phase out their Windows NT product to which our storage systems were
attached. As a direct result, actual shipments to SGI subsequent to October 1999
have been minimal and are not expected to increase in the near future.
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:
o quarter to quarter variations in the actual or our anticipated financial
results;
o announcements by us, our competitors or our customers;
o government regulations; and
o 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:
o the problems, delays, expenses and complications frequently
encountered by technology companies;
o the progress of our research, development and product testing
programs;
o the success of our sales and marketing programs;
o costs in filing, prosecuting, defending and enforcing intellectual
property rights;
o the extent and terms of any collaborative research, manufacturing,
marketing or other arrangements; and
o 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.
<PAGE>
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:
o difficulties in the assimilation of the operations and products of the
acquired business;
o dependence on new products and processes;
o the diversion of management's attention from other business concerns;
o risks of entering markets in which we have no or limited direct prior
experience; and
o 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.
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.
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.
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information with regard to the
beneficial ownership of common stock by the selling stockholders.
<TABLE>
<CAPTION>
Percenatge Percentage
of Common of Common
Shares of Stock Owned Shares of Shares of Stock Owned
Selling Common Stock Before the Common Stock Common Stock After the
Stockholder Owned Offering Offered Hereby Retained Offering
______________ ____________ ____________ ______________ __________ ___________
<S> <C> <C> <C> <C> <C>
Johan Olstenius (1) 507,463 1.6% 507,463 0 *
Stuart Campbell (2) 149,254 * 149,254 0 *
Fahim Ahmed (3) 59,701 * 59,701 0 *
Li-Chen Liu (4) 59,701 * 59,701 0 *
Fairway Partnership (5) 296,296 * 296,296 0 *
</TABLE>
-----------
* Less than 1%
(1) Represents shares issued to Mr. Olstenius in connection with his employment
agreement.
(2) Represents shares issued to Mr. Campbell in connection with his employment
agreement.
(3) Represents shares issued to Mr. Ahmed in connection with his employment
agreement.
(4) Represents shares issued to Ms. Liu in connection with her confidentiality,
noncompetition and nonsolicitation agreement.
(5) Represents shares issued to Fairway in exchange for the cancellation of a
promissory note issued to Fairway in the aggregate principal amount of
$1,000,000.
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.
<PAGE>
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.
<PAGE>
II-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC registration fee .............................. $ 1,008.60
Amex listing fee .................................. 17,500.00
Legal fees and expenses ........................... 10,000.00
Accountants' fees ................................. 5,000.00
Miscellaneous ..................................... 3,000.00
Total $ 36,508.60
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 Johan
Olstenius, Stuart Campbell, Fahim Ahmed and Li-Chen Liu(1)
2.2 Form of Subscription Agreement by and among the Registrant and Fairway
Partnership(1)
4.1 Restated Certificate of Incorporation of the Registrant, as amended(2)
4.2 Restated Bylaws of the Registrant(3)
5.1 Opinion of Akerman, Senterfitt & Eidson, P.A.(4)
23.1 Consent of BDO Seidman, LLP(4)
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)
_______
(1) Previously filed with the Registration Statement on Form S-3 filed on May 8,
2000.
(2) Incorporated by reference to the Registrant's Form S-3, File No. 333-94935,
filed on January 13, 2000.
(3) Incorporated by reference to the Registrant's Form 10-K for the fiscal year
ended October 31, 1996.
(4) Filed herewith.
<PAGE>
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>
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 Amendment No. 1 to 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 2nd day of June, 2000.
nSTOR TECHNOLOGIES, INC.
/s/ Jack Jaiven
By: ________________________
Jack Jaiven, Vice President
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to Registration Statement has been signed below by the following
persons in their capacities set forth below.
Signature Title Date
__________________________ __________________________ ______________
* Chairman of the Board of June _, 2000
------------------------------ Directors
H. Irwin Levy
* President, Chief Executive June _, 2000
------------------------------ Officer (Principal Executive
Larry Hemmerich Officer) and Director
/s/ Jack Jaiven Vice President and Treasurer June 2, 2000
------------------------------ (Principal Financial and
Jack Jaiven Accounting Officer)
* Director June _, 2000
------------------------------
Roger H. Felberbaum
* Director June _, 2000
------------------------------
Michael L. Wise
* Director June _, 2000
------------------------------
Bernard R. Green
*/s/ Jack Jaiven
------------------------------
Jack Jaiven
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
5.1 Opinion of Akerman, Senterfitt & Eidson, P.A.
23.1 Consent of BDO Seidman, LLP
