Registration No. 333-__________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------
nSTOR TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 95-2094565
(State of Incorporation) (I.R.S. Employer 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 May 5, 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 May 4 2000, the last reported sales price of the common stock
on the American Stock Exchange was $ 3.00 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 May 5, 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 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;
o historical results are not necessarily indicative of the operating results
for any future period.
<PAGE>
11
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 April 29, 2000, we had 165 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 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.
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, agreed to register the shares
on a Registration Statement on Form S-3 which was subsequently filed on January
28, 2000, 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, agreed to register the shares on a Registration Statement
on Form S-3 which was subsequently filed on January 28, 2000, 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, OEMs and Indirect Sales. Mr. Habuda joins us from Adaptec/
Distributed Processing Technology ("DPT"). Adaptec recently acquired DPT, wher
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 Manager and held a number of management positions since 1991.
Effective March 21, 2000, Mr. Jonathan Ash was appointed as our new Vice
President Marketing. Since 1987, Mr. Ash served in a number of sales and
marketing management positions for Unisys North American Operations. 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, Solutions 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 the following: a change in the borrower
from Andataco, Inc. to nStor Corporation, Inc., both of which are wholly owned
subsidiaries; 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 12, 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 agreed to issue 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 closing price of the stock on the American Stock Exchange on April 24
and 25, 2000.
THE OFFERING
Common stock outstanding as of April 30, 2000..... 31,703,024 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
<PAGE>
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. We also expect to have a net operating loss for the
six months ending June 30, 2000. At December 31, 1999, we had an accumulated
deficit of $58,222,000. 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 $26.0 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 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, 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.
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 the following: a change in the borrower
from Andataco, Inc. to nStor Corporation, Inc., both of which are wholly owned
subsidiaries; 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.
We have a limited history of operating and integrating our acquired businesses
A significant portion of our operating assets have been acquired during
the past 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
<PAGE>
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
(31,703,024 shares as of April 30, 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."
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.
<PAGE>
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 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.
Percentage
of Common
Shares of Shares of Shares of Stock Owned
Selling Common Stock Common Stock Common Stock After the
Stockholder Owned Offered Hereby Retained Offering
______________ ____________ ______________ __________ ___________
Johan Olstenius (1) 507,463 507,463 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 *
- -----------
* 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.(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 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.
<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 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 8 day of May, 2000.
nSTOR TECHNOLOGIES, INC.
/s/ Jack Jaiven
By: ________________________
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 May 8, 2000
- ------------------------------ Directors
H. Irwin Levy
/s/ Larry Hemmerich President, Chief Executive May 8, 2000
- ------------------------------ Officer (Principal Executive
Larry Hemmerich Officer) and Director
/s/ Jack Jaiven Vice President and Treasurer May 8, 2000
- ------------------------------ (Principal Financial and
Jack Jaiven Accounting Officer)
/s/ Roger H. Felberbaum Director May 8, 2000
- ------------------------------
Roger H. Felberbaum
/s/ Michael L. Wise Director May 8, 2000
- ------------------------------
Michael L. Wise
/s/ Bernard R. Green Director May 8, 2000
- ------------------------------
Bernard R. Green
<PAGE>
EXHIBIT INDEX
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
2.2 Form of Subscription Agreement by and among the Registrant and
Fairway Partnership
5.1 Opinion of Akerman, Senterfitt & Eidson, P.A.
23.1 Consent of BDO Seidman, LLP
Exhibit 2.1
SUBSCRIPTION AGREEMENT
This SUBSCRIPTION AGREEMENT, (this "Agreement") is entered into as of
January 19, 2000 between nSTOR TECHNOLOGIES, INC., a Delaware corporation (the
"Company"), and __________________ (the "Investor").
RECITALS
Pursuant to that certain Employment Agreement (the "Employment
Agreement") of even date herewith among nStor Taiwan, Inc., a Florida
corporation and a wholly-owned subsidiary of the Company and the Investor, the
Company desires, upon the terms and conditions set forth in this Agreement and
the Employment Agreement, to issue shares of the Company's common stock, par
value $.05 per shares (the "Common Stock") to the Investor.
TERMS OF AGREEMENT
In consideration of the premises and the mutual covenants contained
herein and in the Employment Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Investor hereby agree as follows:
1. Issuance of Shares. The Company agrees to issue to the Investor, on
the terms and conditions set forth in this Agreement and the
Employment Agreement, _________ shares of Common Stock on the date
hereof.
2. Certain Representations of the Investor.
The Investor hereby represents and warrants to the Company, its
officers and directors, as follows:
(1) The Investor is an individual resident in Taiwan.
(2) The Investor has carefully read and understands this Agreement and has
consulted his own attorney or accountant with respect to the investment
contemplated hereby and its suitability for the Investor.
<PAGE>
(3) The Company has made available to the Investor, or his designated
representative, during the course of this transaction and prior to the issuance
of any of the securities referred to herein, the opportunity to ask questions of
and receive answers from the officers and directors of the Company concerning
the terms and conditions of the offering or otherwise relating to the financial
data and business of the Company, to the extent that the Company or its officers
and directors possess such information or can acquire it without unreasonable
effort or expense. The Company has also made available to the Investor for
inspection, documents, records, books and other written information about the
Company, its business and this investment at the office of the Company at 100
Century Blvd., West Palm Beach, FL 33417.
(4) The Investor understands and represents that: (i) the Investor must bear the
economic risk of this investment until such time as the Common Stock is
registered under the Securities Act of 1933, as amended (the "1933 Act") in
accordance with Section 4 below; (ii) the Investor is acquiring the Common Stock
for investment for his own account and not for the account of any other person;
and (iii) the Investor agrees not to resell or otherwise dispose of all or any
part of the Common Stock, except as permitted by law, including, without
limitation, any and all applicable provisions of this Agreement, the regulations
promulgated under the 1933 Act, and the Company's insider trading policy.
(5) The Investor has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of an investment
in the Common Stock. The Investor is aware that an investment in the Common
Stock is highly speculative and subject to substantial risks. The Investor 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 Investor is such that he is under no present or
contemplated future need to dispose of any of the Common Stock to satisfy any
existing or contemplated undertaking, need or indebtedness.
(6) All of the information that the Investor has set forth or represented in
this Agreement, with respect to his financial position and business and
investment experience is correct and complete as of the date of this Agreement
and, if there should be any material change in such information prior to the
issuance of the Common Stock, the Investor will immediately furnish the revised
or corrected information to the Company.
(7) The Investor agrees that he shall be bound by all of the terms, conditions,
duties and obligations of this Agreement insofar as such matters affect the
Company and/or the Investor.
3. Restricted Stock. The Investor acknowledges that the Common Stock offered
hereunder are being offered pursuant to a private placement exemption under the
1933 Act, and that the Common Stock are deemed "restricted securities" as
defined in the 1933 Act until the Common Stock become registered with the
Securities and Exchange Commission (the "SEC") in accordance with Section 4
below.
4. Registration Statement. The Company shall prepare and file with the SEC as
soon as reasonably practicable, but in no event more than 30 days after the date
hereof, a Registration Statement on Form S-8 relating to the issuance of the
Common Stock. The Company shall advise the Investor of the time when the
Registration Statement has become effective, of any supplement or amendment that
has been filed, of the issuance of any stop order, of the suspension or the
qualification of the shares of Common Stock for offering or sale in any
jurisdiction, or of any request by the SEC for amendment of the Registration
Statement or for additional information.
5. Sales of Common Stock. The Investor shall not, directly or indirectly, offer,
sell, contract to sell, pledge or otherwise dispose of the Common Stock prior to
the date that is 90 days from the date the Registration Statement described
above is declared effective under the 1933 Act. After such date, the Investor
understands and acknowledges that he will be subject to various resale
restrictions and procedures imposed by United States federal securities laws and
regulations and the Company's insider trading policy, and agrees that he will
not offer, sell, contract to sell, pledge or otherwise dispose of the shares of
Common Stock held by him except in compliance with any such laws, regulations
and policy.
6. No Assignment. This Agreement is neither transferable nor assignable
by the Investor without the prior written consent of the Company.
7. General.
(1) This Agreement shall be binding upon the Investor and the Company and their
respective representatives, successors, and permitted assigns.
(2) This Agreement shall be enforced, governed by and construed in accordance
with the laws of the State of Florida applicable to the agreements made and to
be performed entirely within such state, without giving effect to rules
governing the conflict of laws. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
(3) All covenants, agreements, representations and warranties made herein or
otherwise made in writing by any party pursuant hereto shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;
(4) This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other party hereto by telephone line facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
(5) Notices required or permitted to be given hereunder shall be in writing and
shall be deemed to be sufficiently given when personally delivered or when sent
by overnight delivery service if to the Company, at nStor Technologies, Inc.,
100 Century Blvd., West Palm Beach, FL 33417, Attn: H. Irwin Levy, and if to the
Investor, at the address set forth under its name below, or at such other
address as each such party furnishes by notice given in accordance with this
Section 5(e), and shall be effective, upon receipt.
(6) Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.
(7) This Agreement constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
(8) All pronouns and any variations thereof refer to the masculine, feminine or
neuter, singular or plural, as the context may require.
(9) The headings in the Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
January 19, 2000.
nSTOR TECHNOLOGIES, INC. INVESTOR
By:__________________________ _______________________________________
Larry Hemmerich Name:______________________________
President Address:_______________________________
Telephone:______________________________
Facsimile:______________________________
Exhibit 2.2
SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement") is entered into as of the
26th day of April, 2000 by and between nStor Technologies, Inc., a Delaware
corporation ("nStor") and Fairway Partnership ("Noteholder").
WHEREAS, nStor is the issuer of a certain promissory note issued to the
Noteholder in the amount of $1,000,000 (the "Note");
WHEREAS, nStor and the Noteholder desire that the Note should be
canceled without payment of principal or accrued interest in accordance with
their terms in exchange for the issuance by nStor to the Noteholder of the
aggregate number of 296,296 shares of its common stock, par value $.05 per
share ("nStor Common Stock");
NOW THEREFORE, the parties hereto agree as follows:
1. Exchange of Notes for Stock
a. In lieu of cash, nStor agrees to pay the Noteholder the principal amount
of the Note in shares of nStor Common Stock based on a stock price of $3.38
per share, which represents an average of the closing market price of one
share of nStor Common Stock on the American Stock Exchange for the two (2)
days preceding the date hereof.
b. nStor will file a Registration Statement on Form S-3 (the "Registration
Statement") covering the shares of nStor Common Stock issued to the Noteholder
pursuant to Section 1(a) above (the "Stock") as soon as practicable after the
date hereof. nStor shall notify the Noteholder immediately upon the
effectiveness of the Registration Statement, at which time the Noteholder
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").
2. Representations of nStor. nStor hereby represents and warrants to
the Noteholder the following:
<PAGE>
a. nStor is a corporation validly existing under the laws of the State
of Delaware.
b. The Stock, when delivered to the Noteholder in accordance with the
terms hereof, will be duly authorized, validly issued, fully paid,
and nonassessable.
3. Representations of the Noteholder. The Noteholder hereby represents
and warrants to nStor the following:
a. The Noteholder is the sole lawful holder of its Note, possesses all
right, title and interest therein, has the requisite legal capacity and
authority to transfer its Note, and has not transferred, pledged, or
hypothecated its Note or any interest therein to any third party.
b. The Noteholder understands and represents that (i) 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 it is subsequently
registered under the Securities Act and the pertinent state securities laws or
unless an exemption from such registration is available; and (ii) it is
purchasing the Stock for investment for 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 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 its investment. The
financial condition of the Noteholder is such that it 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 the Noteholder, or its 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 the Noteholder for inspection, documents, records, books and other
written information about nStor, its business and this investment at nStor's
principal executive offices at 100 Century Blvd., West Palm Beach, FL 33417 and
10140 Mesa Rim Road, San Diego, CA 92121.
4. Restricted Stock and Legend. The Noteholder acknowledges 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>
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 Noteholder agrees 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>
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.
/s/ Jack Jaiven
By:__________________________
Jack Jaiven
Vice President and Treasurer
NOTEHOLDER:
/s/ Shirley Fiterman
By:_________________________
Shirley Fiterman, Trustee,
Valerie Herschman Revocable Trust,
General Partner of Fairway
Partnership
EXHIBIT 5.1
AKERMAN, SENTERFITT & EIDSON, P.A.
350 East Las Olas Boulevard
16th Floor
Fort Lauderdale, Florida 33301
May 5, 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 intend to offer and sell in a public offering, from time to time,
an aggregate of 776,119 shares of the common stock, $.05 par value per share
(the "Shares"), of nStor Technologies, Inc. (the "Company") issued to such
shareholders in connection with the Company's acquisition of OneofUs Company
Limited and 296,296 Shares issued to a shareholder in cancellation of a
promissory note.
We have reviewed copies of the Restated Certificate of Incorporation, as
amended, and Restated 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,
/s/ Akerman, Senterfitt & Eidson, P.A.
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 on Form S-3 of our report
dated February 21, 2000, except as to the last two paragraphs of Note 14, which
are as of April 14, 2000, relating to the consolidated financial statements of
nStor Technologies, Inc. and subsidiaries appearing in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999.
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
May 8, 2000
