<PAGE>
As filed with the Securities and Exchange Commission on
May 18, 1998
Registration No. 333-_________
=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SCAN-GRAPHICS, INC.
(Exact name of Registrant as specified in its charter)
Pennsylvania 95-4091769
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
---------------
649 North Lewis Road, Suite 220
Limerick, Pennsylvania 19468
(610) 495-6701
(Address, Including Zip Code, and Telephone
Number, Including Area Code, of Registrant's
Principal Executive Offices)
LAURENCE L. OSTERWISE
President, Chief Executive Officer
Scan-Graphics, Inc.
649 North Lewis Road, Suite 220
Limerick, Pennsylvania 19468
(610) 495-6701
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent for Service)
Copies to:
ROBERT B. MURPHY, ESQ.
THOMAS L. HANLEY, ESQ.
Schnader Harrison Segal & Lewis LLP
1225 Eye Street, N.W., Suite 600
Washington, D.C. 20005-3914
202-216-4211
----------------
Approximate Date of Proposed Sale to the Public: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are
being offered pursuant to dividend or interest reinvestment
plans, please check the following box. [ ]
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment
plans, check the following box. [X]
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering. [ ]__________
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.[]
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------
Title of each class Proposed Maximum
of securities Amount to be Offering Price
to be registered Registered Per Share*
- ------------------- ------------ ------------------
Common Stock, par 4,966,867 $2.00
value $.001 per
share
- ---------------------------------------------------------------
- -------------------------------------
Proposed maximum Amount of
aggregate Registration
offering price* Fee
- ---------------- ------------
$9,933,734 $2,930.45
- -------------------------------------
* Estimated pursuant to Rule 457(c) solely for the purpose of
calculating the registration fee, based upon the closing price
for such shares of Common Stock on May 13, 1998, as reported on
the NASDAQ SmallCap Market.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE
UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
=================================================================
<PAGE>
PROSPECTUS
SCAN-GRAPHICS, INC.
4,966,867 Shares
Common Stock
----------------
This Prospectus relates to the offer and sale from time to
time by the Selling Shareholders named herein of up to 4,966,867
shares (the "Shares") of common stock, $.001 par value per share
(the "Common Stock") of Scan-Graphics, Inc., a Pennsylvania
corporation (the "Company"). Of the 4,966,867 Shares, (i)
1,500,200 Shares are issuable or have been issued pursuant to the
terms of certain Common Stock purchase warrants ("Warrants"), and
(ii) 3,466,667 Shares are issuable pursuant to the terms of the
Company's Class A Preferred Stock, Series E, par value $1,000 per
share (the "Series E Preferred Stock") issued in connection with
the private offer and sale of 52 units ("Units") by the Company;
each Unit consisted of one share of Series E Preferred Stock and
one Warrant to purchase up to 28,850 shares of Common Stock. See
"Selling Shareholders."
The Company will not receive any proceeds from the sale of
the Shares offered hereby by the Selling Shareholders(other than
the exercise price delivered by each holder of the Warrants upon
exercise of such Warrants). The Company has agreed to pay the
expenses of registration of the Shares, including related legal
and accounting fees and expenses. The Selling Shareholders will
bear all selling expenses, commissions, discounts and similar
expenses in connection with the sale of their Shares.
The Selling Shareholders have not advised the Company of any
specific plans for the distribution of the Shares covered by this
Prospectus. The Shares may be offered and sold from time to time
by the Selling Shareholders in ordinary broker's transactions on
Nasdaq or any national securities exchange on which the Common
Stock may be listed at the time of sale, in the over-the-counter
market, through sales to one or more dealers for the resale of
such Shares as principals, in negotiated transactions, or
otherwise, at fixed prices, at market prices prevailing at the
time of sale, at prices related to such prevailing prices, or at
negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the
Selling Shareholders in connection with such sales of Shares. The
Selling shareholders and the broker-dealers to or through whom
sale of the Shares may be made may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended, and
their commissions or discounts and other compensation may be
regarded as underwriters' compensation. See "Plan of
Distribution."
The Common Stock is traded on the Nasdaq SmallCap Market
under the symbol "SCNG." On May __, 1998, the closing bid
price of the Common Stock was $____.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE __ OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is May ___, 1998
----------------
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN
THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS,
IN CONNECTION WITH THE OFFERING CONTAINED HEREIN, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
SHAREHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF.
<PAGE>
TABLE OF CONTENTS
Page
----
Available Information.........................
Incorporation of Certain
Documents by Reference......................
The Company...................................
Risk Factors..................................
Use of Proceeds...............................
Recent Developments...........................
Selling Shareholders..........................
Plan of Distribution..........................
Legal Matters.................................
Experts.......................................
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934 (the "Exchange Act") and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). These
reports, proxy statements and other information may be inspected
and copied at the Public Reference Room of the Commission's
principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Securities and Exchange
Commission's regional offices at Seven World Trade Center, 13th
Floor, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can also be obtained at prescribed rates from the
Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549. Electronic
filings made through the Electronic Data Gathering Analysis and
Retrieval System are also publicly available through the
Commission's Web Site (http://www.sec.gov). In addition,
such material may also be inspected and copied at the offices of
The Nasdaq Stock Market, Inc., 1735 K Street, N.W., Washington,
D.C. 20006.
The Company has filed with the Commission a Registration
Statement on Form S-3 with respect to the securities offered by
this Prospectus. This Prospectus does not contain all of the
information set forth or incorporated by reference in the
Registration Statement and the exhibits and schedules to the
Registration Statement, certain portions of which have been
omitted as permitted by the rules and regulations of the
Commission. For further information with respect to the Company
and the securities offered, reference is made to the Registration
Statement and the exhibits and schedules filed as a part of or
incorporated by reference in the Registration Statement. Each
such statement is qualified in all respects by such reference to
such exhibit. The Registration Statement, including exhibits and
schedules thereto, as well as the reports and other information
filed by the Company with the Commission, may be inspected and
obtained as set forth in the preceding paragraph. Statements
contained in this Prospectus concerning the contents of any
document referred to herein are not necessarily complete and in
each instance reference is made to the applicable document filed
with the Commission.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by
the Company with the Commission (File No. 0-15864) are
incorporated by reference in this Prospectus.
(a) The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997.
(b) The Company's Quarterly Report on Form 10-Q for the
three months ended March 31, 1998.
(c) All other reports pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), since the end of the Company's fiscal year ended December
31, 1997.
(d) The description of the Company's Common Stock which is
contained in the Company's Registration Statement on Form 8-B
filed under the Exchange Act, including any amendment or reports
filed for the purpose of updating such description.
All reports and other documents subsequently filed with the
Commission by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities
remaining unsold, shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of the filing of
such reports and documents.
Any statement contained in a document, all or a portion of
which is incorporated by reference herein, shall be deemed to be
modified or superseded for purposes of this Prospectus to the
extent that a statement contained or incorporated by reference
herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus. The
Company will provide without charge to each person to whom this
Prospectus is delivered a copy of any or all of such documents
which are incorporated herein by reference (other than exhibits
to such documents unless such exhibits are specifically
incorporated by reference into the documents that this Prospectus
incorporates). Written requests for copies should be directed to
Michael A. Mulshine, Secretary, Scan-Graphics, Inc., 649 North
Lewis Road, Limerick, PA 19468.
<PAGE>
THE COMPANY
Scan-Graphics, Inc., is a provider of Geographic Information
Systems ("GIS") database management software products and is a
pioneer and leader in scanning and image processing technology,
large document scanners, backfile conversion services, and
imaging software and systems. The Company markets its products
internationally through systems integrators and distributors.
The Company's principal offices are located at 649 North Lewis
Road, Limerick, Pennsylvania 19468, and its telephone number at
that address is (610) 495-3003.
RISK FACTORS
In addition to the other information in this Prospectus, the
following factors should be considered carefully by prospective
investors in evaluating the Company and its business before
purchasing the Shares offered hereby. This Prospectus contains
certain forward-looking statements and information which may be
identified by the use of forward-looking terminology such as
"believes," "expects," "may," "should," or "anticipates" or the
negative thereof or other variations thereon or comparable
terminology or as discussions of strategy. No assurance can be
given that the future results covered by the forward-looking
statements will be achieved or that the events contemplated
thereby will occur or have the effects anticipated. The
following matters constitute cautionary statements identifying
important factors with respect to such forward-looking
statements, including certain risks and uncertainties that could
cause actual results to vary materially from those covered in
such forward-looking statements. In addition, other factors
could cause actual results to vary materially from the
anticipated results covered in such forward-looking statements.
History of Operating Losses. The Company has a history of
losses. Other than for achieving a nominal net operating profit
for the fiscal year ended December 31, 1992, the Company has
incurred net operating losses in 1988 and in each year
thereafter. As of March 31, 1998, the Company had accumulated
losses (deficit) of approximately $23,855,000 and stockholders'
equity of approximately $3,614,000. The Company has taken steps
to attempt to improve its results from operations and financial
condition by acquiring Sedona GeoServices, Inc. ("Sedona") in
July 1995 and Tangent Engineering, Inc. ("Tangent") in December
1995, raising capital through the private placement of its
securities, expanding sales distribution channels for its
products and introducing new products into the market. There
exist uncertainties as to product acceptance and the potential
market for the Company's new products, including those of its
subsidiaries, Sedona and Tangent, and, as a result, there can be
no assurance that the Company will be able to reverse the
operating loss trend or assure future profitability.
Effect of Offering on Market Price of Common Stock. The
number of shares of Common Stock being offered pursuant to this
Prospectus by the Selling Shareholders, including the number of
shares issuable upon exercise of the Warrants and the conversion
of the Series E Preferred Stock, represents approximately 26.9%
of the total Common Stock outstanding as of March 31, 1998.
Subject to certain restrictions on conversion of the Series E
Preferred Stock, the Company anticipates that each Selling
Shareholder will offer its Common Stock at such time and in such
manner as such Selling Shareholder deems appropriate. The
possibility that substantial amounts of Common Stock may be sold
in the public market by the Selling Shareholders or by other
holders of warrants, options or other rights to acquire shares of
Common Stock may adversely affect prevailing market prices for
the Common Stock and could impair the Company's ability to raise
capital through the future sale of its equity securities. See
"Exercise of Warrants, Options, Convertible Notes and Series D &
E Preferred" and "Plan of Distribution."
Exercise of Warrants, Options, Convertible Notes and Series
D Preferred. As of March 31, 1998, there were outstanding other
warrants to purchase 7,562,016 shares of Common Stock, of which
warrants to purchase an aggregate of 5,783,803 shares of Common
Stock were immediately exercisable. The outstanding warrants are
exercisable at prices ranging from approximately $0.38 to $5.29
per share. The weighted average exercise price of all
outstanding warrants as of March 31, 1998, was approximately
$3.17 per share. As of such date, there were also outstanding
options to purchase 1,409,860 shares of Common Stock, of which
options to purchase 817,361 shares of Common Stock were
immediately exercisable. All of these options were issued to
officers, directors, employees and contractors of the Company and
are exercisable at prices ranging from approximately $0.47 to
$4.00 per share. The weighted average exercise price of all
options outstanding as of March 31, 1998, was approximately $2.46
per share. As of March 31, 1998, there were also outstanding
1,435 shares of Class A Preferred Stock, Series D (the "Series D
Preferred Stock"), and 1,985 shares of Series E Preferred Stock.
Based on the average closing bid price for the five trading days
ended March 31, 1998, the outstanding shares of Series D
Preferred Stock and Series E Preferred Stock would be convertible
into an aggregate of 1,791,334 shares of Common Stock. While
outstanding warrants and options are exercisable or while
conversions of the Series D Preferred and Series E Preferred
Stock are "in the money", the holders thereof have the
opportunity to profit from a rise in the market price of the
Common Stock. The possibility that substantial amounts of Common
Stock may be sold in the public market by holders of warrants,
options or other rights to acquire shares of Common Stock may
adversely affect prevailing market prices for the Common Stock
and could impair the Company's future ability to raise capital
through the sale of its equity securities. See "- Effect of
Offering on Market Price of Common Stock."
No Assurance of Active Public Market; Possible Volatility of
Stock Price; No Dividends. Prior to the date of this Prospectus,
there has been an active public market for the Company's Common
Stock, but there can be no assurance that an active public market
will be sustained. Additionally, the market price for the
Company's Common Stock has been volatile. The Company has not
paid any cash dividends on its Common Stock and does not
anticipate paying any such dividends in the foreseeable future.
See "- Nasdaq Listing Requirements."
Need for Additional Funding. The Company will not receive
any of the proceeds from the sale of Shares by the Selling
Shareholders. In the event that some or all of the Warrants were
to be exercised, the Company would receive the net proceeds upon
such exercises. See "Use of Proceeds." The Company believes
that additional financing, in the form of the proceeds from the
exercise of currently outstanding warrants and/or other financing
activities, may be required for the Company to conduct its
operations as currently contemplated for a period of at least one
year. The Company also believes it may need to raise substantial
additional funds to support its long-term growth, in which case
the Company may seek additional funding through public or private
sales of its securities, including equity securities. There can
be no assurance, however, that any of the outstanding warrants
will be exercised or that other additional financing will be
available on terms acceptable to the Company, if at all. See
"History of Operating Losses."
Net Operating Loss Carryforwards. As of December 31, 1997
(the latest date for which information is available), the Company
had net operating loss carryforwards ("NOLs") for federal income
tax purposes aggregating approximately $19.5 million. These
NOLs, if unused, will expire between 1999 and 2017. At December
31, 1997, the related deferred tax asset amounts to approximately
$8.1 million and has been entirely offset by a valuation
allowance of $8.1 million. As discussed above in "History of
Operating Losses," the Company has taken steps that it believes
will improve its results of operations, but there exist
uncertainties as to product acceptance and the potential market
for its new products, and, as a result, there can be no assurance
that the Company will be able to reverse the operating loss trend
or assure future profitability. Also, Section 382 of the
Internal Revenue Code of 1986, as amended (the "Code") imposes an
annual limitation on the amount of taxable income that may be
offset by net operating loss carryforwards of a corporation if
the losses giving rise to the net operating loss carryforwards
were incurred before an "ownership change." The use by the
Company of the NOLs to offset future taxable income will be
limited by Section 382 of the Code and may be limited by other
provisions of the Code. The Company believes that this offering
will not trigger an ownership change under Section 382. The
Internal Revenue Service may dispute the amount of the NOLs, may
disagree with the Company's interpretation of how Section 382
applies to limit its use of the NOLs and may contend that
limitations contained in the Code, other than those discussed
above, apply to the Company's NOLs. Therefore, no assurances can
be given with respect to the existence or potential use of the
Company's NOLs.
Nasdaq SmallCap Market Listing Requirements. For continued
inclusion of the Common Stock on the Nasdaq SmallCap Market, the
Company must meet certain listing requirements imposed by Nasdaq.
On August 22, 1997, the Commission approved new listing standards
that had been adopted by Nasdaq which govern the Nasdaq National
Market and the Nasdaq SmallCap Market which took effect on
February 22, 1998 (the "New Listing Requirements"). The Company
had been advised by Nasdaq in December 1997 that the Company may
not be in compliance with the continued listing standards then in
effect. On March 10, 1998, the Nasdaq Listing Qualifications
Panel confirmed that the Company has met all of the listing
requirements.
Dependence on Key Personnel. The Company is dependent upon
the efforts, ability and experience of several key members of its
management for the successful operation and development of its
business. In addition, the Company believes that its future
success will depend in large part upon its ability to attract and
retain technically qualified key personnel who possess
backgrounds in engineering, software development, production and
marketing. There can be no assurance that the Company will be
able to retain key employees. The loss of the services of one or
more key employees could have a material adverse effect on the
Company's business.
Technological Obsolescence. The Company maintains
continuous research and development programs with the goal of
maintaining its software and scanner products as technically
strong competitive offerings to their respective markets. The
Company has incurred research and development expenses of
approximately $1,327,000, $744,000 and $582,000, which amounted
to 27.5%, 14.7% and 11.7% of its total revenues for the years
1997, 1996 and 1995, respectively. Although the Company intends
to continue its on-going research and development efforts, the
Company's competitors might succeed in developing technologies
and products that are more attractive than any that are being
developed and marketed by the Company or that would otherwise
render the Company's technology and products obsolete or
noncompetitive.
Competition. The GIS, scanning and image processing
industries are highly competitive. The Company competes with a
number of competitors, many of which have substantially greater
financial and marketing resources than the Company. The Company
offers an advanced line of GIS software and large format scanners
and imaging software through a variety of domestic and
international distribution channels. There can be no assurance
that the Company will not encounter competition in the future
which will limit the Company's ability to maintain and increase
its position in the market for its products or otherwise
adversely affect the Company's business. The Company has only
recently begun to compete in the GIS software market and there
can be no assurance that the Company will be able to successfully
compete with its more established competitors.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of
the Shares by the Selling Shareholders. In the event that any or
all of the Warrants held by the Selling Shareholders were to be
exercised, the net proceeds to the Company would be used for
product development, sales and marketing expenses, working
capital and for general corporate purposes. Prior to expenditure,
the net proceeds from the exercise of the Warrants will be
invested in high grade short term interest bearing investments.
RECENT DEVELOPMENTS
Warrant Exercises. In the first four months of 1998 ending
April 30, 1998, warrant holders exercised none of the outstanding
warrants, but options were exercised resulting in the issuance of
50,000 shares of Common Stock and resulting in the Company's
receipt of $50,000.
Sedona GeoServices, Inc. The Company's Sedona GeoServices
(Sedona) unit is in the final stages of development of a new
visualization and query tool code named Jbuffet. This product
provides the means to visualize spatial information contained in
text databases, superimposed on a wide variety of mapping and
image products ranging from satellite imagery to street maps.
Jbuffet allows users to query the database to perform spatial
analysis and ultimately produce maps detailing regions or
specifics of particular interest. Jbuffet is a 100% Java-based,
open architecture product, based on concepts developed in DMTool.
Jbuffet is user friendly and valuable to both the traditional GIS
expert and the emerging GIS user focused on business management
and marketing analysis. The initial release of Jbuffet, in the
early summer of 1998, will focus on enabling Oracle's Spatial
Cartridge and is expected by management of the Company to be
welcomed by a large number of Spatial Cartridge users.
Sedona's strategies in the near term involve exploiting
existing channels of distribution for its geospatial software
products (e.g., application providers for and customers of major
database providers such as Oracle).
The early feedback in this software area (Jbuffet) coupled
with the disappointing evolution of the mapping conversion market
has led the Company to reduce its resources focused on mapping
conversion.
Tangent Imaging Systems. Based on its successes in the
commercial color reprographics and scanning marketplace coupled
with the changing market requirements, the continuing
technological difficulties, and the results of the newspaper
field trials in the monochrome marketplace, the Company has
decided to focus its resources in the faster growth, higher
margin color markets, thereby decreasing its resources devoted to
monochrome development, manufacturing and distribution.
The Technology Resource Centers unit of the Company
continues to extend and expand its business into additional
market areas. In this regard, it has begun to team with Sedona
in the area of mapping conversion.
Other. On March 11, 1998, an action was commenced in the
Court of Common Pleas of Montgomery County, PA, against the
Company by a former employee, seeking damages of $361,000, for
termination of contract, by change of control and for
convenience. This plaintiff asserts that the sum sought
represents the excess of market value over the exercise price of
unvested warrants held by the plaintiff which the plaintiff
asserts should have been vested and thereby available for
exercise and sale. The Company has categorically denied the
plaintiff's claims and will defend its actions if required.
SELLING SHAREHOLDERS
The following table sets forth as of April 30, 1997,
information regarding the beneficial ownership of Common Stock
held by the Selling Shareholders who may resell the Shares
pursuant to this Prospectus as of such date, the number of Shares
registered to permit sales from time to time by such Selling
Shareholders, and the total beneficial ownership of shares of
Common Stock if all such Shares so registered should be sold by
the Selling Shareholders.
NUMBER OF
COMMON STOCK SHARES OF COMMON STOCK
OWNED PRIOR TO COMMON STOCK OWNED AFTER
NAME THE OFFERING(1) TO BE OFFERED THE OFFERING(2)
- ---- -------------- ------------- ---------------
NUMBER PERCENT
------ -------
Richard Bruce
Rabinowitz 13,132(3) 13,132 0 *
American Friends of
Tiferet Tiberias
Institutions, Inc. 78,850(4) 78,850 0 *
Milwaukee Kollel, Inc. 78,850(4) 78,850 0 *
Wayne Saker 98,205(5) 78,850 19,355 *
Keren MYCB Elias, Inc. 78,850(4) 78,850 0 *
Leonard J. Adams 98,205(5) 78,850 19,355 *
The Jerusalem Fund 106,158(6) 78,850 27,308 *
Herman & Nanni
Bodenheimer 87,234(7) 59,926 27,308 *
Gabriel Bodenheimer 18,924(8) 18,924 0 *
Thomas Meyer 26,296(9) 26,296 0 *
Charles Kushner 394,250(10) 394,250 0 *
Richard Stadtmauer 157,700(11) 157,700 0 *
Murray Kushner 236,550(12) 236,550 0 *
Josh Berkowitz 19,713(13) 19,713 0 *
Michael Kule 7,885(14) 7,885 0 *
Philip Huberfeld 78,850(4) 78,850 0 *
Rita Folger 125,513(15) 78,850 46,663 *
Vavel Corp. 236,550(16) 236,550 0 *
Karfunkel Family
Foundation, Inc. 106,158(6) 78,850 27,308 *
Jules Nordlicht 551,789(17) 236,550 315,239 1.64
ACE Foundation 1,061,580(18) 788,500 273,080 1.42
Harry Adler 78,850(4) 78,850 0 *
Huberfeld/Bodner
Family Foundation 268,090(19) 268,090 0 *
Abraham Elias 59,138(20) 59,138 0 *
Millenco L.P. 1,122,946(21) 788,500 334,446 1.74
Laurence L. Osterwise(22)550,000(23) 550,000 0 *
Andrew E. Trolio(24) 2,589,288(25) 250,000 2,339,288 12.17
Berardi & DeAngelo
Consultants, Inc.(26) 300,000(27) 100,000 200,000 1.04
C&F Global
Enterprises, Inc.(28) 216,874(29) 6,874 210,000 1.09
Osprey Partners(30) 514,583(31) 74,583 440,000 2.29
Michael G. Cunniff(32) 18,000(33) 18,000 0 *
- ---------------------------------------
* Represents beneficial ownership of one percent or less of
the outstanding shares of Common Stock.
(1) Beneficial ownership is determined in accordance with
the rules of the Commission, and includes voting or investment
power with respect to the shares beneficially owned. Unless
otherwise noted, all shares are beneficially owned, and sole
voting and investment power is held by the person named.
(2) Assuming the sale of all Shares listed under "Number of
Shares of Common Stock to be Offered." Also assumes that none
of the Selling Shareholders sell securities which are
beneficially owned by them and are not listed in such column or
purchase or otherwise acquire additional Common Stock or
securities convertible into or exchangeable for Common Stock.
(3) Includes 4,794 shares issuable upon exercise of
outstanding warrants and 8,338 shares issuable upon conversion of
Series E Preferred Stock.
(4) Includes 28,850 shares issuable upon exercise of
outstanding warrants and 50,000 shares issuable upon conversion
of Series E Preferred Stock.
(5) Includes 48,205 shares issuable upon exercise of
outstanding warrants and 50,000 shares issuable upon conversion
of Series E Preferred Stock.
(6) Includes 46,158 shares issuable upon exercise of
outstanding warrants and 50,000 shares issuable upon conversion
of Series E Preferred Stock.
(7) Includes 39,234 shares issuable upon exercise of
outstanding warrants and 38,000 shares issuable upon conversion
of Series E Preferred Stock.
(8) Includes 6,924 shares issuable upon exercise of
outstanding warrants and 12,000 shares issuable upon conversion
of Series E Preferred Stock.
(9) Includes 9,621 shares issuable upon exercise of
outstanding warrants and 16,675 shares issuable upon conversion
of Series E Preferred Stock.
(10) Includes 144,250 shares issuable upon exercise of
outstanding warrants and 250,000 shares issuable upon conversion
of Series E Preferred Stock.
(11) Includes 57,700 shares issuable upon exercise of
outstanding warrants and 100,000 shares issuable upon conversion
of Series E Preferred Stock.
(12) Includes 86,550 shares issuable upon exercise of
outstanding warrants and 150,000 shares issuable upon conversion
of Series E Preferred Stock.
(13) Includes 7,213 shares issuable upon exercise of
outstanding warrants and 12,500 shares issuable upon conversion
of Series E Preferred Stock.
(14) Includes 2,885 shares issuable upon exercise of
outstanding warrants and 5,000 shares issuable upon conversion of
Series E Preferred Stock.
(15) Includes 65,513 shares issuable upon exercise of
outstanding warrants and 50,000 shares issuable upon conversion
of Series E Preferred Stock.
(16) Includes 86,550 shares issuable upon exercise of
outstanding warrants and 50,000 shares issuable upon conversion
of Series E Preferred Stock.
(17) Includes 321,789 shares issuable upon exercise of
outstanding warrants, 150,000 shares issuable upon conversion of
Series E Preferred Stock and 80,000 shares issuable upon
conversion of Series D Preferred Stock.
(18) Includes 461,580 shares issuable upon exercise of
outstanding warrants, 500,000 shares issuable upon conversion of
Series E Preferred Stock and 100,000 shares issuable upon
conversion of Series D Preferred Stock.
(19) Includes 98,090 shares issuable upon exercise of
outstanding warrants, 170,000 shares issuable upon conversion of
Series E Preferred Stock.
(20) Includes 21,638 shares issuable upon exercise of
outstanding warrants and 37,500 shares issuable upon conversion
of Series E Preferred Stock.
(21) Includes 496,196 shares issuable upon exercise of
outstanding warrants, 500,000 shares issuable upon conversion of
Series E Preferred Stock, and 126,750 shares issuable upon Series
D Preferred Stock.
(22) Mr. Osterwise is President, Chief Executive Officer and
a Director of the Company.
(23) Includes 550,000 shares issuable upon exercise of
outstanding warrants.
(24) Mr. Trolio is a Director of the Company.
(25) Includes 350,000 shares issuable upon exercise of
outstanding warrants, and 329,000 shares issuable upon exercise
of outstanding stock options.
(26) Berardi & DeAngelo Consultants, Inc. provides certain
business development consulting services to the Company.
(27) Includes 300,000 shares issuable upon exercise of
outstanding warrants.
(28) C&F Global Enterprises, Inc. provides certain
consulting services to the Company.
(29) Includes 216,874 shares issuable upon exercise of
outstanding warrants.
(30) Osprey Partners provides certain management consulting
services to the Company.
(31) Includes 514,583 shares issuable upon exercise of
outstanding warrants.
(32) Mr. Cunniff provides certain management consulting
services to the Company.
(33) Includes 18,000 shares issuable upon exercise of
outstanding warrants.
PLAN OF DISTRIBUTION
The Shares owned or to be acquired by the Selling
Shareholders upon exercise of Warrants or the conversion of the
Series E Preferred may be sold from time to time by the Selling
Shareholders, or by pledgees, donees, transferees or other
successors in interest. There is no assurance that any Selling
Shareholder will sell any or all of the Shares offered by such
Selling Shareholder.
The Shares may be offered and sold from time to time by the
Selling Shareholders in ordinary broker's transactions on Nasdaq
or any national securities exchange on which the Common Stock may
be listed at the time of sale, in the over-the-counter market,
through sales to one or more dealers for the resale of such
Shares as principals, in negotiated transactions, or otherwise,
at fixed prices, at market prices prevailing at the time of sale,
at prices related to such prevailing prices, or at negotiated
prices. Broker-dealers who acquire Shares as principals may
thereafter resell such Shares from time to time in transactions
which may involve cross and block transactions and which may
involve sales to and through other broker-dealers. Usual and
customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Shareholders in connection
with such sales of Shares. In addition, any Shares covered by
this Prospectus which qualify for sale under Rule 144 under the
Securities Act may be sold pursuant to Rule 144 rather than
pursuant to this Prospectus.
The Selling Shareholders and the broker-dealers to or
through whom sale of the Shares may be made may be deemed to be
"underwriters" within the meaning of the Securities Act, and
their commissions or discounts and other compensation received in
connection with such sales may be regarded as underwriters'
compensation.
The Selling Shareholders have not advised the Company of any
specific plans for the distribution of the Shares covered by this
Prospectus. Upon the Company's being notified by the Selling
Shareholders that any material arrangement has been entered into
with a broker-dealer or underwriter for the sale of a material
portion of the Shares covered by this Prospectus, a Prospectus
supplement or post-effective amendment to the Registration
Statement will be filed setting forth the name of the
participating broker-dealer(s) or underwriters, the number of
Shares involved, the price or prices at which such Shares were
sold by the Selling Shareholders, the commissions paid or
discounts or concessions allowed by the Selling Shareholders to
such broker-dealers or underwriters, and other material
information.
The Company has advised the Selling Shareholders that the
anti-manipulation rules promulgated under the Exchange Act,
including Regulation M, may apply to sales of the Shares offered
hereby by the Selling Shareholders.
The Company has agreed to bear all costs relating to the
registration of the Shares. Any commissions or other fees
payable to broker-dealers in connection with any sale of the
Shares will be borne by the Selling Shareholders or other party
selling such Shares.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby
(those shares underlying the Series E Preferred) will be passed
upon for the Company by Schnader Harrison Segal & Lewis LLP.
EXPERTS
The financial statements and schedule 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 its 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>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution*
SEC Registration fee....................$ 2,930
Printing fees........................... 1,000
Accounting fees......................... 9,000
Legal fees.............................. 12,000
Miscellaneous........................... 1,000
Total.................................$ 25,930
=====
_____________________
* Estimated, except for SEC Registration fee. No portion of
these expenses will be borne by the Selling Shareholders.
Item 15. Indemnification of Directors and Officers.
The Pennsylvania Business Corporation Law of 1988, as
amended (the "BCL"),permits a corporation to indemnify its
directors and officers against expenses(including attorney's
fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by them in connection with any pending,
threatened or completed action or proceeding, and permits such
indemnification against expenses (including attorney's fees)
incurred by them in connection with any pending, threatened or
completed derivative action, if the director or officer has acted
in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the corporation and,
with respect to any criminal proceeding, had no reasonable cause
to believe his or her conduct was unlawful. Pennsylvania law
requires that a corporation indemnify its directors and officers
against expenses (including attorney's fees) actually and
reasonably incurred by them in connection with any action
or proceeding, including derivative actions, to the extent that
such person has been successful on the merits or otherwise in
defense of the action or in defense of any claim, issue or matter
therein. Furthermore, Pennsylvania law provides that expenses
incurred in defending any action or proceeding may be paid by the
corporation in advance of the final disposition upon receipt of
an undertaking by or on behalf of the director or officer to
repay the amount if it is ultimately determined that the director
or officer is not entitled to be indemnified by the corporation.
In Pennsylvania, the statutory provisions for
indemnification and advancement of expenses are non-exclusive
with respect to any other rights, such as contractual rights or
under a by-law or vote of shareholders or disinterested
directors, to which a person seeking indemnification or
advancement of expenses may be entitled. Such contractual or
other rights may, for example, under Pennsylvania law, provide
for indemnification against judgments, fines and amounts paid in
settlement incurred by the indemnified person in connection with
derivative actions. Pennsylvania law permits such derivative
action indemnification in any case except where the act or
failure to act giving rise to the claim for indemnification is
determined by a court to have constituted willful misconduct or
recklessness.
The provisions of Article VII of the Company's By-laws
require or authorize indemnification of officers and directors in
all situations in which it is not expressly prohibited by law. At
the present time, the limitations on indemnification would be
dictated by the BCL and related legislation, which prohibit
indemnification where the conduct is determined by a court to
constitute willful misconduct or recklessness. Subject to these
statutory limitations, the By-laws specifically authorize
indemnification against both judgments and amounts paid in
settlement of derivative suits. These provisions also
authorize indemnification for negligence or gross negligence and
for punitive damages and certain liabilities incurred under the
federal securities laws. The By-laws also prohibit
indemnification attributable to receipt from the Company of a
personal benefit to which the recipient is not legally entitled.
Under the indemnification provisions of the By-laws a person
who has incurred an indemnifiable expense or liability would have
a right to be indemnified, and that right would be enforceable
against the Company as long as indemnification is not prohibited
by law. To the extent indemnification is permitted only for a
portion of a liability, the By-laws also require the Company to
indemnify such portion.
Section 7.03 of the By-laws provides that the financial
ability of a person to be indemnified to repay an advance of
indemnifiable expenses is not a prerequisite to the making of the
advance.
Section 7.06 of the By-laws provides that any dispute
concerning a person's right to indemnification or advancement of
expenses thereunder will be resolved only by arbitration by three
persons, each of whom is required to have been a director or
executive officer of a corporation whose shares, during at least
one year of such service, were listed on the New York Stock
Exchange or the American Stock Exchange or were quoted on the
NASDAQ system. The Company also is obligated to pay the expenses
(including attorney's fees) incurred by any person who is
successful in the arbitration. The arbitration provisions
effectively waive the Company's right to have a court determine
the unavailability of indemnification in cases involving willful
misconduct or recklessness.
Section 7.07 of the By-laws provides that in circumstances
in which indemnification is held to be unavailable, the Company
must contribute to the liabilities to which a director or officer
may be subject in such proportion as is appropriate to reflect
the intent of the indemnification provisions of the By-laws.
Since the foregoing provisions purport to provide partial relief
to directors and officers in circumstances in which the law or
public policy is construed to prohibit indemnification,
substantial uncertainties exist as to the enforceability of the
provisions in such circumstances.
Section 7.10 of the By-laws also contains provisions stating
that the indemnification rights thereunder are not exclusive of
any other rights to which the person may be entitled under any
statute, agreement, vote of shareholders or disinterested
directors or other arrangement.
All future directors and officers of the Company
automatically would be entitled to the protections of the
indemnification provisions of the By-laws at the time they assume
office.
Pennsylvania law permits a corporation to purchase and
maintain insurance on behalf of any director or officer of the
corporation against any liability asserted against the director
or officer and incurred in such capacity, whether or not the
corporation would have the power to indemnify the director or
officer against such liability. The directors and officers
of the Company are currently covered as insureds under a
directors' and officers' liability insurance policy.
Item 16. Exhibits.
Number Description
4.1 Form of Private Placement Purchase Agreement.
(Incorporated by reference to Exhibit 4.5 to
the Company's Registration Statement on Form
S-3, File No. 333-3719).
4.2 Form of Private Placement Purchase Agreement
for Units consisting of Convertible Notes and
Warrants. (Incorporated by reference to
Exhibit 4.4 to the Company's Registration
Statement on Form S-3, File No. 333-31983.)
4.3 Warrant to purchase 2,100,000 shares of Common
Stock dated April 8, 1997, issued to Broad
Capital Associates, Inc.(Incorporated by
reference to Exhibit 4.5 to the Company's
Registration Statement on Form S-3, File No.
333-31983.)
4.4 Certificate of Designation of the Class A
Preferred Stock, Series E, par value $1,000 per
share. (Incorporated by reference from Exhibit
4.0 to the Company's Quarterly Report on Form
10-Q for the three months ended March 31, 1998
filed with the Commission on May 15, 1998.)
4.3 Form of Warrant to purchase shares of Common
Stock.(Incorporated by reference from Exhibit
4.0 to the Company's Quarterly Report on Form
10-Q for the three months ended March 31, 1998
filed with the Commission on May 15, 1998.)
5.1* Opinion of Schnader Harrison Segal & Lewis LLP
23.1* Consent of BDO Seidman, LLP.
23.2* Consent of Schnader Harrison Segal & Lewis LLP
(included in Exhibit 5.1).
24.1* Power of Attorney (contained on signature
page).
- ---------------
* Filed herewith
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration
Statement:
(i) to include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of this 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 this Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in this
Registration Statement or any material change to such information
in the Registration Statement;
Provided, however, that the undertakings set forth in paragraphs
(i) and (ii) above do not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d)of the Exchange Act that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered herein, 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 hereby which
remain unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for the
purpose of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
the City of Limerick, Commonwealth of Pennsylvania, on May 13,
1998.
SCAN-GRAPHICS, INC.
By:/s/ Laurence L. Osterwise
-------------------------
Laurence L. Osterwise,
President, Chief
Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and
appoints Laurence L. Osterwise and Michael A. Mulshine and each
of them, as his lawful attorney-in-fact and agent, each with full
power of substitution and resubstitution for him and in his name,
place and stead in any and all capacities to execute in the name
of each such person who is then an officer or director of the
registrant 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 attorney-in-fact and agent full power and authority to
do and perform each and every act and thing required or necessary
to be done in and about the premises as fully as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, 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 by the following
persons in the capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/ R. Barry Borden Chairman of May 13, 1998
- ------------------------- the Board of
R. Barry Borden Directors
/s/ Laurence L. Osterwise President, Chief May 13, 1998
- ------------------------- Executive Officer
Laurence L. Osterwise and Director
(Principal Executive Officer)
/s/ William K. Williams Vice President May 15, 1998
- ------------------------- and Chief Fin-
ancial Officer
(Principal Financial and Accounting Officer)
/s/ Andrew E. Trolio Director May 14, 1998
- -------------------------
Andrew E. Trolio
/s/ Michael A. Mulshine Director and May 13, 1998
- ------------------------- Secretary
Michael A. Mulshine
/s/ David S. Hirsch Director May 13, 1998
- -------------------------
David S. Hirsch
/s/ James C. Sargent Director May 13, 1998
- -------------------------
James C. Sargent
/s/ Jack A. Pellicci Director May 14, 1998
- -------------------------
Jack A. Pellicci
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- ----
4.1 Form of Private Placement Purchase Agreement.
(Incorporated by reference to Exhibit 4.5 to
the Company's Registration Statement on Form
S-3, File No. 333-3719).
4.2 Form of Private Placement Purchase Agreement
for Units consisting of Convertible Notes and
Warrants. (Incorporated by reference to
Exhibit 4.4 to the Company's Registration
Statement on Form S-3, File No. 333-31983.)
4.3 Warrant to purchase 2,100,000 shares of Common
Stock dated April 8, 1997, issued to Broad
Capital Associates, Inc.(Incorporated by
reference to Exhibit 4.5 to the Company's
Registration Statement on Form S-3, File No.
333-31983.)
4.4 Certificate of Designation of the Series A Preferred
Stock, Series E, par value $1,000 per share.
(Incorporated by reference from Exhibit 4.0 to the
Company's Quarterly Report on Form 10-Q for the
three months ended March 31, 1998 filed with the
Commission on May 15, 1998.)
4.3 Form of Warrant to purchase shares of Common
Stock. (Incorporated by reference from Exhibit
4.0 to the Company's Quarterly Report on Form
10-Q for the three months ended March 31, 1998
filed with the Commission on May 15, 1998.)
5.1* Opinion of Schnader Harrison Segal & Lewis LLP
23.1* Consent of BDO Seidman, LLP.
23.2* Consent of Schnader Harrison Segal & Lewis LLP
(included in Exhibit 5.1).
24.1* Power of Attorney (contained on signature
page).
- ---------------
* Filed herewith
<PAGE>
EXHIBIT 5.1
LAW FIRM
SCHNADER HARRISON SEGAL & LEWIS LLP
1225 EYE STREET, N.W., SUITE 600
WASHINGTON, D.C. 20005-3914
202-216-4300
TELECOPIER 202-775-8741
May 18, 1998
Scan-Graphics, Inc.
649 North Lewis Road, Suite 220
Limerick, Pennsylvania 19468
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We are acting as counsel to Scan-Graphics, Inc., a
Pennsylvania corporation (the "Company"), in connection with the
registration of shares of the Company's Common Stock, par value
$.001 per share (the "Shares"),pursuant to a Registration
Statement on Form S-3(the "Registration Statement"), filed with
the Securities and Exchange Commission under the Securities Act
of 1933, as amended. Such Shares will be sold from time to time
by the shareholders named in the Registration Statement (the
"Selling Shareholders").
As counsel for the Company, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of
such documents, corporate records, certificates of public
officials and other instruments as we have deemed necessary for
the purposes of rendering this opinion. In our examination, we
have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals and the conformity
with the originals of all documents submitted to us as copies.
As to various questions of fact material to such opinion, we have
relied, to the extent we deemed appropriate, upon
representations, statements and certificates of officers and
representatives of the Company and others.
Based upon the foregoing, we are of the opinion that the
Shares to be registered for sale by the Selling Shareholders have
been duly authorized by the Company, and when issued,delivered
and paid for in accordance with the terms of the Class A
Preferred Stock, Series E referred to in the Registration
Statement, will be, validly issued, fully paid and nonassessable.
Our opinion is expressly limited to the Shares that may be issued
to the Selling Shareholders in connection with conversions of
Class A Preferred Stock, Series E.
We consent to the use of this opinion as an exhibit to the
Registration Statement, and we consent to the use of our name
under the caption "Legal Maters" in the Prospectus forming a part
of the Registration Statement.
Very truly yours,
/s/ SCHNADER HARRISON SEGAL
& LEWIS LLP
<PAGE>
EXHIBIT 23.1
Consent of Independent Certified Public Accountants
Scan-Graphics, Inc.
Limerick, Pennsylvania
We hereby consent to the incorporation by reference and inclusion
in the Prospectus constituting a part of the Registration
Statement on Form S-3 of our report dated March 13, 1998, except
for Note 14 which is dated March 27, 1998, relating to the
consolidated financial statements and schedule of Scan-Graphics,
Inc. and Subsidiaries as of December 31, 1996 and 1997, and for
each of the years in the three-year period ended December 31,
1997.
We also consent to the reference to us under the caption
"Experts" in the Prospectus
BDO SEIDMAN, LLP
Philadelphia, Pennsylvania
May 15, 1998
