<PAGE>
As filed with the Securities and Exchange Commission on
January 21, 1998
Registration No. 333-31983
=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
POST-EFFECTIVE AMENDMENT NO. 1 TO
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.
Shulman, Rogers, Gandal, Pordy & Ecker, P.A.
11921 Rockville Pike
Rockville, MD 20852
(301) 230-5200
----------------
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. [ ]
----------------
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>
EXPLANATORY NOTE
This Post-Effective Amendment No. 1 to the Registration
Statement on Form S-3 is being filed to reflect certain material
changes in the information included in the Registration Statement
on Form S-3 and the pre-effective Amendment No. 1 thereto filed
on July 24, 1997 and July 31, 1997, respectively. The applicable
filing fee has been previously paid.
<PAGE>
PROSPECTUS
SCAN-GRAPHICS, INC.
5,057,998 Shares
Common Stock
----------------
This Prospectus relates to the offer and sale from time to
time by the Selling Shareholders named herein of up to 5,057,998
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 5,057,998 Shares, (i)
3,622,651 Shares are issuable or have been issued pursuant to the
terms of certain Common Stock purchase warrants ("Warrants"),
(ii) 4,198 Shares are issuable or have been issued pursuant to
the terms of certain convertible notes issued by the Company (the
"1997 Convertible Notes"), and (iii) 1,431,149 Shares are
issuable or have been issued pursuant to the terms of the Class
A, Series D Preferred Stock issued by the Company in exchange for
certain of the 1997 Convertible Notes(the "Series D Preferred").
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 January 13, 1998, the closing bid
price of the Common Stock was $2 9/16.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6 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 January ___, 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, 1996.
(b) The Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997.
(c) The Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997.
(d) The Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997.
(e) 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, 1996.
(f) 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 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 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) 495-6701.
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 November 30, 1997, the Company had accumulated
losses (deficit) of approximately $18,640,000 and stockholders'
equity of approximately $793,000. 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, the conversion of
the 1997 Convertible Notes, and the conversion of the Series D
Preferred, represents approximately 21.9% of the total Common
Stock outstanding as of December 31, 1997. 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 sale of its
equity securities. See "-- Exercise of Warrants, Options,
Convertible Notes and Series D Preferred" and "Plan of
Distribution."
Exercise of Warrants, Options, Convertible Notes and Series
D Preferred. As of December 31, 1997, there were outstanding
warrants to purchase 6,348,337 shares of Common Stock, of which
warrants to purchase an aggregate of 4,688,731 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 December 31, 1997 was approximately
$3.21 per share. As of such date, there were also outstanding
options to purchase 1,642,360 shares of Common Stock, of which
options to purchase 912,361 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 $0.46 to
$4.00 per share. The weighted average exercise price of all
options outstanding as of December 31, 1997 was approximately
$2.57 per share. As of December 31, 1997 there were also
outstanding 3,300 shares of series D Preferred. Based on the
average closing bid price for the five trading days ended
December 31, 1997, the outstanding shares of Series D Preferred
would be convertible into an aggregate of 1,431,146 shares of
Common Stock. See "Recent Developments -- Exchange Offer." While
outstanding warrants and options are exercisable or while
conversions of the Series D Preferred 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
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 approximately 10% of its currently outstanding
warrants and/or other financing activities, will 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, or at all. See "-- History of Operating Losses."
Net Operating Loss Carryforwards. As of December 31, 1996,
the Company had net operating loss carryforwards ("NOLs") for
federal income tax purposes aggregating approximately $11.7
million. These NOLs, if unused, will expire between 1999 and
2009. At December 31, 1996 the related deferred tax asset
amounts to approximately $5.2 million and has been entirely
offset by a valuation allowance of $5.2 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. The Company has been
informed by Nasdaq that the new listing standards with respect to
companies already listed on the Nasdaq SmallCap Market take
effect on February 22, 1998 (the "New Listing Requirements"), and
that until such date, the listing standards in effect prior to
August 22, 1997 (the "Current Listing Requirements") would
continue to apply to the Company. The Company currently believes
that it will meet the new Listing Requirements once they become
effective.
By letter dated November 14, 1997, Nasdaq informed the
Company that it fails to meet one of the Current Listing
Requirements for continued listing on the Nasdaq SmallCap Market,
which requires that the Company maintain capital and surplus of
at least $1 million. The Nasdaq notification letter requested
that the Company demonstrate compliance with the Current Listing
Requirements or, alternatively, submit a definitive plan which
the Company believes would result in its meeting the Current
Listing Requirements. In the event that the Company failed to
comply with the request in a timely and acceptable manner, Nasdaq
would issue a formal notice of deficiency and act to delist the
Common Stock from the Nasdaq SmallCap Market. The Company
submitted a plan of compliance with Nasdaq on December 1, 1997.
Nasdaq responded to the Company's submission by letter dated
December 18, 1997. In that letter, Nasdaq provided the Company
with an extension until January 20, 1998 to demonstrate
compliance. However, Nasdaq has informed the Company that the
Company will be subject to, and must show compliance by that date
with, a more stringent capital and surplus standard than provided
for in Nasdaq's Current Listing Requirements. In addition, the
terms of the extension require that the Company make a public
filing with the Commission and Nasdaq by January 20, 1998. The
public filing must contain a full balance sheet and statement of
operations based on December 31, 1997 fiscal year numbers and
evidence a capital and surplus of at least $2,300,000. As
discussed herein under "Recent Developments -- Exchange Offer,"
the Company has recently completed an exchange with holders of
the 1997 Convertible Notes which involved the issuance of shares
of Series D Preferred in exchange for all of the outstanding 1997
Convertible Notes. The Company believes that the completion of
the Exchange Offer has increased the Company's capital and
surplus above $2,300,000.
If the Company fails to comply with the terms of the
extension, Nasdaq will delist the Common Stock from the Nasdaq
SmallCap Market at the close of the market on January 27, 1998.
The Company has notified Nasdaq that it will appeal Nasdaq's
decision to apply a more stringent capital and surplus standard
than provided for in Nasdaq's Current Listing Requirements and
the requirement that a public filing must be made which contains
a full balance sheet and statement of operations based on
December 31, 1997 fiscal year numbers by January 20, 1998. The
filing of such an appeal effectively stays any delisting
proceedings until the appeal is heard and a determination is
made. The Company is unable to predict the outcome of its appeal.
Delisting of the Common Stock from the Nasdaq SmallCap Market
could have a material adverse effect on the market price of and
trading market for the Common Stock.
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 personnel with 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 $744,000, $582,000 and $783,000, which amounted to
14.7%, 11.7% and 15.5% of its total revenues for the years 1996,
1995 and 1994, respectively. The Company anticipates research
and development expenses of approximately 31% of total revenues
in 1997 and approximately 15% of total revenues in 1998. 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 November and December 1997, warrant
holders associated with the Company's 1996 debenture financing
and others exercised warrants representing 181,357 shares of
Common Stock, resulting in the Company's receipt of approximately
$390,000.
Tangent Imaging Systems. The Company's monochrome scanner
operation has placed fifteen of its new series CF1300 units with
newspapers across the country. Some of these units represent
outright purchases and others have been shipped on an evaluation
basis. This product allows newspapers to move toward a total
electronic pagination by eliminating the need for expensive stat
camera installations. The Company believes that within the next
two to three years many of the newspapers within North America
and throughout the world will purchase a comparable product.
Exchange Offer. In an effort to restructure its balance
sheet and reduce its outstanding indebtedness, the Company
approached holders of outstanding 1997 Convertible Notes and
offered to exchange shares of a newly-created series of Class A
Preferred Stock for such 1997 Convertible Notes. As of December
31, 1997, holders of $3,300,000 in aggregate principal amount of
the 1997 Convertible Notes agreed to exchange those notes for
3,300 shares of Series D Preferred. The Company believes that
the completion of the Exchange Offer will allow it to comply with
the Nasdaq SmallCap Market Current Listing Requirements. See
"Risk Factors -- Nasdaq SmallCap Market Listing Requirements."
Holders of Series D Preferred are entitled to receive a
cumulative dividend of 7% per year computed on the basis of a
stated liquidation value of $10.00 per share before any dividends
may be set apart for or paid on the Company's outstanding Class A
Preferred Stock, Series A, or the Common Stock.
In addition, shares of Series D Preferred are convertible at
the option of the holder into shares of the Company's Common
Stock. The conversion rate at which the shares may be converted
into shares of Common Stock is equal to the lesser of $7.00 or
the Adjusted Market Price of the Common Stock. If the average
closing bid price for the Common Stock for the five trading days
immediately preceding the date of conversion is less than $4.00
per share, the "Adjusted Market Price" is equal to the average
closing bid price less a 10% conversion discount ("Conversion
Discount"). If the average closing bid price for the Common
Stock for the five trading days immediately preceding the date of
conversion is greater than $4.00 but less than $7.00 per share,
the "Adjusted Market Price" is equal to the average closing bid
price less the Conversion Discount adjusted by an increase of 1%
for each $.20 increase in the average closing bid price over
$4.00 per share. The terms of the Series D Preferred restrict
the amount that may be converted into Common Stock in any month
to 10% of the original 1997 Convertible Note amount, except that
this restriction will not apply in the event that (i) the
conversion price is greater than $7.00 per share, or (ii) Mr.
Osterwise ceases to be the Company's Chief Executive Officer.
SELLING SHAREHOLDERS
The following table sets forth, as of December 31,
1997, certain information regarding the beneficial ownership of
Common Stock held by the Selling Shareholders who may resell
Shares pursuant to this Prospectus. The table may not reflect
any transactions in the Common Stock by the persons listed below
subsequent to December 31, 1997, including pursuant to exercises
of warrants or options or conversions of 1997 Convertible Notes.
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
------ -------
Stephen J. Harmelin(3) 10,000(4) 10,000 0 *
Joseph Jacovini(5) 15,000(6) 15,000 0 *
Dilworth, Paxson, Kalish
& Kaufmann, LLP (7) 12,500(8) 12,500 0 *
Denis P. Kelly(9) 17,500(10) 7,500 10,000 *
Ronald B. MacIntyre 12,500(11) 12,500 0 *
Richard L. Rex(12) 51,000(13) 51,000 0 *
William C. Hubbard(14) 259,000(15) 50,000 209,000 1.31
Berardi & DeAngelo
Consultants, Inc.(16) 300,000(17) 200,000 100,000 *
Mueller Trading, LP 1,935(18) 1,233 702 *
Ruthy Halima 1,935(18) 1,118 817 *
Wolowitz Pension Fund 5,806(19) 3,669 2,317 *
Moshe Mueller 1,935(18) 1,257 678 *
Clifton Management &
Trading, Inc. 1,935(18) 1,223 712 *
Samuel Shapiro 1,935(18) 1,077 858 *
OHR Somayach Tanenbaum
Education Center 9,677(20) 5,068 4,609 *
Mirrer Yeshiva
Central Institute 9,677(20) 6,114 3,563 *
Rita Folger 67,021(21) 60,248 6,773 *
Seth Antine 3,871(22) 2,446 1,425 *
Mark Nordlicht 239,449(23) 202,777 36,672 *
Jules Nordlicht 443,406(24) 409,539 33,867 *
Chesed Avraham 82,039(25) 68,492 13,547 *
Mark Fisher 19,355(26) 12,113 7,242 *
Leonard J. Adams 19,355(26) 12,560 6,795 *
Wayne Saker 19,355(26) 12,560 6,795 *
Israel Trading Fund, Ltd.58,065(27) 27,404 30,661 *
Yeshiva Beth Mikroh 19,355(26) 12,582 6,773 *
Reuven Dessler 19,355(26) 12,346 7,009 *
The NAIS Corp. 1,935(18) 1,223 712 *
American Stock Transfer
& Trust Company 38,710(28) 24,225 14,485 *
Millenco L.P. 571,988(29) 571,988 0 *
Ace Foundation 433,288(30) 433,288 0 *
Saleslink LTD 259,973(31) 259,973 0 *
The Jerusalem Fund 43,329(32) 43,329 0 *
Karfunkel Family
Foundation 47,666(33) 47,666 0 *
Jack Rudman 43,329(32) 43,329 0 *
Moses Elias 43,329(32) 43,329 0 *
Mr. and Mrs. Moshe
Lehrfield 47,666(33) 47,666 0 *
Jeremy Fineberg 47,666(33) 47,666 0 *
Andreas Typaldos 47,666(33) 47,666 0 *
S. Sandor Brull 47,666(33) 47,666 0 *
Bodenhimer Foundation 43,329(32) 43,329 0 *
Abraham Ziskind 43,329(32) 43,329 0 *
Broad Capital
Associates 2,100,000(34) 2,100,000 0 *
- ---------------
* Represents beneficial ownership of less than 1% 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) Mr. Harmelin has provided certain business development
consulting services to the Company.
(4) Includes 10,000 shares issuable upon exercise of outstanding
warrants.
(5) Mr. Jacovini has provided certain business development
consulting services to the Company.
(6) Includes 15,000 shares issuable upon exercise of outstanding
warrants.
(7) Dilworth, Paxson, Kalish & Kaufmann has provided certain
business development consulting services to the Company.
(8) Includes 12,500 shares issuable upon exercise of outstanding
warrants.
(9) Mr. Kelly is the former Director of Finance of the Company.
(10) Includes 7,500 shares issuable upon exercise of outstanding
warrants.
(11) Includes 12,500 shares issuable upon exercise of outstanding
warrants.
(12) Mr. Rex is Senior Vice President of Tangent Imaging Systems,
a division of the Company.
(13) Includes 51,000 shares issuable upon exercise of outstanding
warrants.
(14) Mr. Hubbard is Executive Vice President of the Company.
(15) Includes 131,000 shares issuable upon exercise of
outstanding warrants and 10,000 shares issuable upon the exercise
of outstanding stock options.
(16) Berardi & DeAngelo Consultants, Inc. provide certain
business development consulting services to the Company.
(17) Includes 300,000 shares issuable upon exercise of
outstanding warrants.
(18) Includes 1,935 shares issuable upon exercise of outstanding
warrants.
(19) Includes 5,806 shares issuable upon exercise of outstanding
warrants.
(20) Includes 9,677 shares issuable upon exercise of outstanding
warrants.
(21) Includes 36,663 shares issuable upon exercise of outstanding
warrants, and 30,358 shares issuable upon conversion of Series D
Preferred stock.
(22) Includes 3,871 shares issuable upon exercise of outstanding
warrants.
(23) Includes 131,168 shares issuable upon exercise of
outstanding warrants, and 104,083 shares issuable upon conversion
of Series D Preferred stock.
(24) Includes 235,239 shares issuable upon exercise of
outstanding warrants, and 208,167 shares issuable upon conversion
of Series D Preferred stock.
(25) Includes 56,018 shares issuable upon exercise of outstanding
warrants, and 26,021 shares issuable upon conversion of Series D
Preferred stock.
(26) Includes 19,355 shares issuable upon exercise of outstanding
warrants.
(27) Includes 58,065 shares issuable upon exercise of outstanding
warrants.
(28) Includes 38,710 shares issuable upon exercise of outstanding
warrants.
(29) Includes 207,696 shares issuable upon exercise of
outstanding warrants, and 364,292 shares issuable upon conversion
of Series D Preferred stock.
(30) Includes 173,080 shares issuable upon exercise of
outstanding warrants, and 260,208 shares issuable upon conversion
of Series D Preferred stock.
(31) Includes 103,848 shares issuable upon exercise of
outstanding warrants, and 156,125 shares issuable upon conversion
of Series D Preferred stock.
(32) Includes 17,308 shares issuable upon exercise of outstanding
warrants, and 26,021 shares issuable upon conversion of Series D
Preferred stock.
(33) Includes 17,308 shares issuable upon exercise of outstanding
warrants, and 30,358 shares issuable upon conversion of Series D
Preferred stock.
(34) Includes 2,100,000 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
1997 Convertible Notes and/or Series D 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 Warrants and the 1997 Convertible
Notes) will be passed upon for the Company by Dilworth, Paxson,
Kalish & Kaufmann LLP.
The validity of the shares of Common Stock offered hereby
(those shares underlying the Series D Preferred) will be passed
upon for the Company by Shulman, Rogers, Gandal, Pordy & Ecker,
P.A., Rockville, Maryland.
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....................$ 5,280
Printing fees........................... 1,500
Accounting fees......................... 2,000
Legal fees.............................. 15,000
Miscellaneous........................... 2,000
Total................................$25,780
=====
* 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 Articles of Incorporation. (Incorporated by
reference to Exhibit 3.1 to the Company's
Current Report on Form 8-K dated June 15,1992).
4.2 By-laws. (Incorporated by reference to Exhibit
3.2 to the Company's Current Report on Form
8-K, dated June 15, 1992).
4.3 Form of Private Placement Purchase Agreement
for Warrants. (Incorporated by reference to
Exhibit 4.5 to the Company's Registration
Statement on Form S-3, File No. 333-3719).
4.4** Form of Private Placement Purchase Agreement
for Units consisting of Convertible Notes and
Warrants.
4.5** Warrant to purchase 2,100,000 shares of Common
Stock dated April 8, 1997, issued to Broad
Capital Associates, Inc.
5.1** Opinion of Dilworth, Paxson, Kalish
& Kaufmann LLP.
5.2* Opinion of Shulman, Rogers, Gandal, Pordy &
Ecker, P.A.
23.1* Consent of BDO Seidman, LLP.
23.2** Consent of Dilworth, Paxson, Kalish
& Kaufmann LLP (included in Exhibit 5.2).
23.3* Consent of Shulman, Rogers, Gandal, Pordy &
Ecker, P.A. (included in Exhibit 5.3).
24.1* Power of Attorney (contained on signature
page).
- ---------------
* Filed herewith
** Previously Filed
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 January
20, 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 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/ Andrew E. Trolio Chairman of January 14, 1998
- ------------------------- the Board of
Andrew E. Trolio Directors
/s/ Laurence L. Osterwise President, Chief January 19, 1998
- ------------------------- Executive Officer
Laurence L. Osterwise and Director
(Principal Executive,
Financial and
Accounting Officer)
/s/ Michael A. Mulshine Director and January 19, 1998
- ------------------------- Secretary
Michael A. Mulshine
Director January __, 1998
- -------------------------
David S. Hirsch
/s/ James C. Sargent Director January 16, 1998
- -------------------------
James C. Sargent
/s/ R. Barry Borden Director January 19, 1998
- -------------------------
R. Barry Borden
Director January __, 1998
- -------------------------
Jack A. Pellicci
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- ----
4.1 Articles of Incorporation. (Incorporated by
reference to Exhibit 3.1 to the Company's
Current Report on Form 8-K dated June 15,1992).
4.2 By-laws. (Incorporated by reference to Exhibit
3.2 to the Company's Current Report on Form
8-K, dated June 15, 1992).
4.3 Form of Private Placement Purchase Agreement
for Warrants. (Incorporated by reference to
Exhibit 4.5 to the Company's Registration
Statement on Form S-3, File No. 333-3719).
4.4** Form of Private Placement Purchase Agreement
for Units consisting of Convertible Notes and
Warrants.
4.5** Warrant to purchase 2,100,000 shares of Common
Stock dated April 8, 1997, issued to Broad
Capital Associates, Inc.
5.1** Opinion of Dilworth, Paxson, Kalish
& Kaufmann LLP.
5.2* Opinion of Shulman, Rogers, Gandal, Pordy &
Ecker, P.A.
23.1* Consent of BDO Seidman, LLP.
23.2** Consent of Dilworth, Paxson, Kalish
& Kaufmann LLP (included in Exhibit 5.2).
23.3* Consent of Shulman, Rogers, Gandal, Pordy &
Ecker, P.A. (included in Exhibit 5.3).
24.1* Power of Attorney (contained on signature
page).
- ---------------
* Filed herewith
** Previously Filed
<PAGE>
Exhibit 5.2
LAW FIRM
SHULMAN, ROGERS, GANDAL, PORDY & ECKER, P.A.
11921 ROCKVILLE PIKE, THIRD FLOOR
ROCKVILLE, MD 20852-2743
(301)230-5200
TELECOPIER (301)230-2891
TDD (301)230-6570
January 20, 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, Series
D Convertible Preferred Stock 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, Series D Convertible Preferred Stock.
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/ SHULMAN, ROGERS, GANDAL
PORDY AND ECKER, P.A.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Scan-Graphics, Inc.
Limerick, Pennsylvania
We hereby consent to the incorporation by reference in the
Prospectus constituting a part of this Registration Statement of
our report dated February 27, 1997, relating to the consolidated
financial statements and schedule of Scan-Graphics, Inc.
appearing in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
We also consent to the reference to us under the caption
"Experts" in the Prospectus.
/s/ BDO Seidman, LLP
--------------------
BDO SEIDMAN, LLP
Philadelphia, Pennsylvania
January 20, 1998
