As filed with the Securities and Exchange Commission on October 1, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DATATEC SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 94-2914253
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
20C Commerce Way
Totowa, New Jersey 07512
(973) 890-4800
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(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
Isaac J. Gaon
Chief Executive Officer
Datatec Systems, Inc.
20C Commerce Way
Totowa, New Jersey 07512
(973) 890-4800
(Name, address and telephone number of agent for service of process)
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Copies to:
Robert H. Friedman, Esq.
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
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Approximate date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective.
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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, please check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
<PAGE>
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to be Offering Price Aggregate Offering Amount of
Securities to be Registered Registered Per Share Price Registration Fee
Common Stock, $.001 par value 533,334 $2.56 $1,365,335.00 $379.56
Total............................................................................. $379.56
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended (the
"Securities Act"), based upon the per share average of high and low sales
prices of Common Stock on the Nasdaq Small-Cap Market on September 28,
1999.
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 the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE, AND WE MAY CHANGE IT. OUR
STOCKHOLDERS MAY NOT SELL THESE SHARES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SHARES. IT IS NOT SOLICITING AN OFFER TO BUY THESE SHARES
IN ANY STATE WHERE THEY DO NOT PERMIT THE OFFER OR SALE.
SUBJECT TO COMPLETION, DATED __________, 1999
PROSPECTUS
533,334 SHARES OF COMMON STOCK
DATATEC SYSTEMS, INC.
The selling stockholders listed in this prospectus are offering and
selling up to 533,334 shares of common stock of Datatec Systems, Inc. We will
not receive any of the proceeds from such sale.
Our common stock is listed on the NASDAQ Small-Cap Market under the
symbol "DATC." The last reported bid price for the common stock on September 30,
1999 was $2.44 per share.
The selling stockholders may offer their shares of common stock through
public or private transactions in the over-the-counter markets, on or off the
United States exchanges, at prevailing market prices or at privately negotiated
prices.
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This investment involves risk. See "Risk Factors" beginning at page 2.
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Neither the Securities and Exchange Commission nor any State securities
commission has determined whether this prospectus is truthful or complete. They
have not made, nor will they make, any determination as to whether anyone should
buy these securities. Any representation to the contrary is a criminal offense.
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The date of this prospectus is [ ], 1999.
<PAGE>
RISK FACTORS
The purchase of our common stock involves a high degree of risk. You
should carefully consider the following risk factors and the other information
in this prospectus before deciding to invest in such common stock.
We Have Incurred Operating Losses in Our Business
We have incurred a net loss of approximately $506,000 for the fiscal
year ended April 30, 1999, a net loss of approximately $4.0 million for the
fiscal year ended April 30, 1998, and a net loss of approximately $5.5 million
for the fiscal year ended April 30, 1997. We may not generate sufficient
revenues to meet our expenses or to operate profitably in the future.
Our Liquidity is Limited
As of July 31, 1999 we had cash and cash equivalents of $124,000. In
addition, although our working capital was approximately $2.7 million at July
31, 1999, $2.3 million at April 30, 1999, and $1.0 million at April 30, 1998, we
have a history of limited working capital. At April 30, 1997, we had a working
capital deficiency of approximately $3.0 million. We anticipate, based on
currently proposed plans and assumptions relating to our operations, that our
existing capital resources will be sufficient to satisfy our anticipated cash
requirements for at least 12 months. In the event that our plans change or our
assumptions change or prove to be inaccurate, we will be required to seek
additional financing to finance our working capital requirements. There can be
no assurance that any additional financing, if required, will be available to us
on acceptable terms, if at all. As of July 31, 1999, we had availability of
approximately $500,000 under our existing borrowing agreements.
We Have Risks Resulting From Significant Amounts of Debt
As of July 31, 1999, we had outstanding debt of approximately $13.7
million. Our level of debt and the limitations imposed on us by our existing or
future debt agreements could have important consequences on our business and
future prospects, including the following:
o We may not be able to obtain necessary financing in the future
for working capital, capital expenditures, debt service
requirements or other purposes.
o Our less leveraged competitors could have a competitive
advantage because they have greater flexibility to utilize
their cash flow to improve their operations.
o We could be more vulnerable in the event of a downturn in our
business that would leave us less able to take advantage of
significant business opportunities and to react to changes in
market or industry conditions.
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<PAGE>
Our Operating Results May Fluctuate
Our quarterly operating results have varied in the past, and may vary
significantly in the future, depending on factors that include the following:
o market acceptance of new or enhanced versions of our services;
o changes in our customer mix and changes in the level of our
operating expenses;
o the gain or loss of significant customers; and
o personnel changes and economic conditions in general and in
the information technology industry in particular.
Any unfavorable change in these or other factors could have a material adverse
effect on our operating results for a particular quarter. Changes in such
factors also makes the prediction of revenue and results of operations on a
quarterly basis difficult, and performance forecasts derived from such
predictions unreliable.
We have also experienced large fluctuations in sales from
quarter-to-quarter due to substantial sales to customers in the retailing
industry. Typically, these customers delay improvements and enhancements during
the fourth quarter of the calendar year to avoid costly interruptions during the
holiday sales season. In addition, a substantial portion of our operating
expenses are related to personnel, facilities, inventory, equipment and
marketing programs. The level of spending for such expenses cannot be adjusted
quickly and is therefore fixed in the short term. The level of these expenses is
based, in significant part, on our expectations of future revenue on a quarterly
basis. If actual revenue levels on a quarterly basis are below management's
expectations, results of operations are likely to be adversely affected because
only a small amount of our expenses varies with our revenue in the short term.
We Face Certain Risks Associated with Large Projects
Due to the nature and size of implementation projects that we are now
pursuing, there is a longer lead time between the initiation of prospective
business and the consummation of a transaction, if any. As such, there are
likely to be substantial fluctuations in sales volume from month-to-month and
quarter-to-quarter. The fluctuations in our operating results increases our risk
of failure, especially given our present level of working capital. As a result,
if we experience lower than expected sales volume for an extended period of
time, it may have a material adverse effect on our business, financial condition
and results of operations.
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<PAGE>
Our Business Is Very Competitive and Increased Competition Could Have a
Significant Impact On Our Earnings
We compete with a number of other companies involved in the design,
configuration, installation, integration, deployment and servicing of computer
networking technologies. The market for such services is highly fragmented,
intensely competitive and rapidly changing. Some of our competitors have
significantly greater resources and better brand-name recognition than us. In
addition, there are relatively low barriers to entry in these markets and new
competition may arise either from expansion by established companies or from new
emerging companies. Increased competition may result in pressure for price
reductions and related reductions in gross margins and market share. In addition
to direct competition, we face indirect competition from our existing and
potential future customers, many of which internally design, integrate and
deploy their own technologies for their particular needs, and therefore may be
reluctant to use services offered by independent providers such as us. We may
not be able to successfully compete against current and future competitors.
The following are the competitive factors that we believe will be
significant on our ability to compete successfully:
o To achieve our goal of larger market share, we must continue
to enhance our existing services, introduce new service
offerings, recruit and train additional deployment and
engineering staff, and recruit and train sales and marketing
professionals.
o We believe that our ability to increase profit margins depends
upon a number of factors both within and beyond our control,
including performance, price, quality and breadth of services.
o We believe that our ability to successfully educate
prospective customers as to the advantages of our services is
vital to the recruitment of companies who internally design,
integrate and deploy their own technologies for their
particular needs.
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<PAGE>
We Depend on Strategic Alliances and Indirect Customers
A major part of our growth strategy is to market our services in part
through indirect customers and strategic alliances with systems manufacturers,
systems integrators, independent software developers/distributors, and
telecommunications carriers, that utilize our services to provide joint
solutions to customers. For example, we have entered into a non-exclusive
agreement with Cisco Systems, Inc., pursuant to which we have agreed to provide
implementation services to customers of Cisco. Cisco may terminate its agreement
with us at any time, with or without cause. Termination of the Cisco agreement,
or any similar agreement, may have a material adverse effect on our business,
financial condition and results of operations. Because we utilize and will
continue to utilize indirect customers and strategic alliances as a significant
distribution channel, we are subject to the risk that our indirect customers or
strategic partners will discontinue or decrease their use of our services for
reasons unrelated to the quality or price of, or demand for, our services. We
are also subject to the risk that the demand for products and services sold by
our indirect customers or strategic partners will decline, which could have a
material adverse effect on our business, financial condition and results of
operations.
We Depend on Certain Significant Customers
During each of the past two fiscal years and through three quarters of
this past fiscal year, sales of our services to a limited number of customers
have accounted for a substantial percentage of our total net sales. Our 15
largest customers accounted for approximately 52% of our total net sales for the
year ended April 30, 1998, approximately 57% of our total net sales for the year
ended April 30, 1999 and approximately 71% of our total net sales for the three
months ended July 31, 1999. This concentration of customers can cause our net
sales and earnings to fluctuate from quarter-to-quarter, based on the
requirements of our customers and the timing of delivery of services. Although
we believe we have good relationships with our largest customers and have in the
past received a substantial portion of our revenues from repeat business with
established customers, none of our major customers have any obligation to
purchase additional services. Therefore, we can not assure you that any of our
major customers will continue to purchase new services in amounts similar to
previous years. Although the particular customers are likely to change from
period to period, we believe that large orders from a limited number of
customers will continue to account for a substantial portion of our revenues in
any fiscal period. In any period, the unexpected loss of or decline in net sales
from a major customer, or the failure to generate significant revenues from
other customers, could have a material adverse effect on our business, financial
condition and results of operations.
Backlog is an Unreliable Measure of Future Sales
Backlog for our services as of July 31, 1999 totaled approximately
$55.5 million. Backlog consists of purchase orders, written agreements and other
oral agreements with customers for which a customer has scheduled the provision
of services within the next 12 months. Orders included in backlog may be
canceled or rescheduled by customers without penalty. A variety of conditions,
both specific to the individual customer and generally affecting the customer's
industry, may cause
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<PAGE>
customers to cancel, reduce or delay orders that were previously made or
anticipated. We cannot assure the timely replacement of canceled, delayed or
reduced orders. Significant or numerous cancellations, reductions or delays in
orders by a customer or group of customers could materially adversely affect our
business, financial condition and results of operations. Backlog should not be
relied upon as indicative of our revenues for any future period.
We Face Risks of Expansion
Recently, we have expanded our operations through several acquisitions,
which has placed significant demands on our administrative, operational and
financial personnel and systems. Additional expansion may further strain our
management, financial and other resources. Our systems, procedures, controls and
existing space may not be adequate to support expansion of our operations. Our
future operating results will substantially depend on the ability of our
officers and key employees to manage changing business conditions and to
implement and improve our operational and financial control and our reporting
systems. If we are unable to respond to and manage changing business conditions,
the quality of our services, our ability to retain key personnel and the results
of our operations could be materially adversely affected.
We are Dependent on Certain Key Personnel
Our success depends in large part upon the abilities of our senior
management, including, Isaac Gaon, our Chairman of the Board and Chief Executive
Officer and Christopher Carey, our President. The loss of the services of any of
these members of senior management could have a material adverse effect on our
business. We have employment agreements with Messrs. Gaon and Carey each of
which expire on April 30, 2000. Each of these employment agreements may be
terminated by us for cause or by the employee for good reason. Our future
success and growth also depends on our ability to continue to attract, motivate
and retain highly qualified employees, including those with the technical,
managerial, sales and marketing expertise necessary to operate our business.
Competition for personnel in the configuration, integration and deployment
services industry is intense, and we cannot assure you that we will be
successful in attracting and retaining such personnel. Departures and additions
of key personnel may be disruptive to our business and could have a material
adverse effect on our business, financial condition and results of operations.
We Depend Upon Unionized Labor
A substantial portion of our deployment force is employed under
contracts with the International Brotherhood of Electrical Workers and the
International Brotherhood of Electrical Workers Local 1430 (collectively, the
"IBEW"). Our union employees are responsible for the deployment of our services.
Any work stoppages or other labor disturbances could have a material adverse
effect on our business, financial condition and results of operations.
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<PAGE>
Our Products and Services Have Limited Proprietary Protection
Most of our intellectual property consists of proprietary or
confidential information that is not subject to patent protection. Existing
trade secret laws offer only limited protection. The steps that we have taken to
protect these proprietary rights may not be adequate to deter misappropriation.
Although we do not believe that we are infringing the intellectual
property rights of others, there can be no assurance that such claims will not
be asserted. Any such litigation could be costly and divert management's
attention, either of which could have a material adverse effect on our business,
financial condition and results of operations. Adverse determinations in such
litigation could result in the loss of our proprietary rights, subject us to
significant liabilities, require us to seek licenses from third parties or
prevent us from selling our services, any one of which would have a material
adverse effect on our business, financial conditions and results of operations.
Our Common Stock Prices Are Volatile
The market price of our common stock is very volatile, with per share
closing bids ranging from a low of approximately $2.03 to a high of
approximately $6.06 over the period from May 1, 1998 to July 31, 1999.
Announcements by us or by our competitors of technological or other innovations
for new commercial products or services developments concerning propriety rights
or governmental regulations, changes in financial estimates by securities
analysts, or general conditions in the economy or the market for our services,
some of which may be unrelated to our performance and beyond our control, may
have a significant effect on our business and on the market price of our
securities. Sales of a substantial number of shares by existing security holders
could also have an adverse effect on the market price of our securities. The
stocks of many technology companies have experienced extreme price and volume
fluctuations unrelated to the operating performance of those companies.
We Could Be Adversely Affected If Year 2000 Problems Are Significant
As with many companies, we are dependent upon complex computer systems
for many phases of our operations, including sales and distribution. Many
existing computer programs use only two digits to identify a year in the date
field. These programs were designed and developed without considering the impact
of the upcoming change in the century. If not corrected, many computer
applications could fail or create erroneous results by or at the year 2000 (that
is, read the year 2000 as "1900"). We have commenced a program intended to
timely identify, mitigate and/or pursue our compliance and the compliance of our
suppliers, creditors and financial service organizations. In addition, we are
developing and evaluating contingency plans intending to mitigate the possible
disruption in our business operations that may result from the year 2000 issue.
Contingency plans may include increasing inventories of critical supplies prior
to December 31, 1999 and securing alternate sources of supply. It is not
possible, at present to quantify the overall cost of this work, or the financial
effect of the year 2000 issue on us if it is not timely resolved. Although we
presently believe that the cost of addressing this issue will not have a
material effect on our current financial position, we cannot assure this.
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<PAGE>
Our Ability to Issue Preferred Stock Could Hurt Holders of Common Stock
Our Certificate of Incorporation authorizes the issuance of a maximum
of 4,000,000 shares of preferred stock. There are currently issued and
outstanding 120 Series E Preferred Shares. The holders of the Series E Preferred
Shares are not entitled to receive dividends but are entitled to a preferential
distribution on liquidation of the Company. In addition, we may be required to
redeem the Series E Preferred Shares under certain circumstances. The Series E
Preferred Shares are convertible into Common Stock in accordance with the
Certificate of Designation. Except as required under Delaware law, holders of
the Series E Preferred Shares are not entitled to vote on any matter submitted
to the stockholders, provided, however, that the affirmative vote of not less
two-thirds of the holders of the outstanding Series E Preferred Shares, is
required as to any change to the Certificate of Designations or our Certificate
of Incorporation which would amend, change or repeal any of the powers,
designations, preferences or rights given to the Series E Preferred Shares. If
additional shares of preferred stock are issued in the future, the terms of a
series of preferred stock may be set by our board of directors without approval
by our stockholders. Such terms could include, among others, preferences as to
dividends, distributions on liquidation and enhanced voting rights. The rights
of the holders of our common stock will be subject to, and may be adversely
affected by, the rights of the holders of any preferred stock that may be issued
in the future. The ability of our board of directors to issue preferred stock
could have the effect of delaying, deferring or preventing a change of control
or the removal of existing management. As a result, it could prevent our
stockholders from being paid a premium over the market value for their shares of
common stock.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York or
Chicago, Illinois. You may obtain further information on the operation of the
public reference rooms by calling the SEC at 1-800-SEC-0330. Our SEC filings are
also available to the public over the Internet at the SEC's website at
http://www.sec.gov. You may also request copies of such documents, upon payment
of a duplicating fee, by writing to the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Reports and other information regarding our NASDAQ
listing may be inspected at the offices of NASDAQ at 1735 K Street, N.W.,
Washington, D.C. 20006 or over the Internet at NASDAQ's website at
http://www.nasdaq.com.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Datatec Systems, Inc. has filed with the Securities and Exchange
Commission, a registration statement on Form S-3 under the Securities Act of
1933, covering the securities offered by this prospectus. This prospectus does
not contain all of the information that you can find in our registration
statement and the exhibits to the registration statement.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Section
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934.
(a) Our Annual Report on Form 10-K, for the year ended April 30,
1999; and
(b) Our Quarterly Report on Form 10-Q, for the quarter ended July
31, 1999; and
(c) The description of our common stock contained in our
registration statement on Form 8-A filed May 2, 1996,
including any amendments or reports filed for the purpose of
updating such descriptions.
You may request a copy of these filings, at no cost, by writing or
telephoning us at Datatec Systems, Inc., 20C Commerce Way, Totowa, New Jersey
07512, Attention: Chief Financial Officer, telephone (973) 890-4800.
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<PAGE>
ABOUT DATATEC SYSTEMS
Datatec Systems, Inc. and its subsidiaries are in the business of
providing rapid and accurate technology deployment services and licensing
software tools to support enterprises in the delivery of complex information
technology.
Our deployment services include the following:
o Configuration- the process of "customizing" network devices
such as routers, switches, servers, workstations to meet the
specific needs of the user;
o Integration- the process of ensuring that devices installed on
a network are compatible with the topology of the network and
all legacy systems; and
o Installation- the physical process of installing technology on
networks.
In order to provide high quality, consistent, rapid and cost effective
results, we have developed an implementation model consisting of:
o The utilization of a web-based software tool called
e-Deploy.com, which includes the Integrator's Workbench
Product Series, that provides pricing, assessment, design and
project management automation and enhances the speed and
accuracy of the deployment process;
o The employment of a field deployment team throughout the
United States and Canada that is capable of delivering complex
technologies, which include computing platform, cabling, and
infrastructure;
o The application of five staging and configuration centers, to
conduct numerous installation activities including receipt and
tracking of project components, assembly, testing,
verification, documentation and configuration and integration
of hardware and software components. By conducting these
activities at our staging centers, and utilizing, where
applicable, the Integrator's Workbench software tools, we are
able to prepare and roll-out project components so that they
arrive at a customer site in a "plug and play" state.
Our marketing efforts are focused towards organizations that require
more complex solutions from a technical, geographic dispersion, or time
sensitive point of view. We believe that these more complex, multi-site
deployments have significantly less competitive pressures, and generate higher
proposal close rates and gross margins than deployments with less complexity
and/or geographic dispersion. Our services are marketed directly through our
sales force and indirectly through systems manufacturers, systems integrators,
independent software vendors and telecommunications carriers. We operate out of
19 offices and have a field deployment team of approximately 390 people. Our
deployment capabilities permit us to conduct multiple simultaneous large-scale
deployments for
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Fortune 2000 end-user customers and technology providers across the United
States and Canada and allow technology providers to enhance the "absorption" of
their products in the marketplace onto increasingly complex networks and
information technology environments. We expect to generate increasing revenues
from licensing our e-Deploy.com web-based software tool through our subsidiary
called e-Deploy.com, Inc. during the fiscal year ending April 30, 2000.
Our executive offices are located at 20C Commerce Way, Totowa, New
Jersey 07512 and our telephone number is (973) 890-4800.
USE OF PROCEEDS
The shares of common stock offered hereby are being registered for the
account of selling stockholders. All net proceeds from the sale of the common
stock will go to the stockholders who offer and sell their shares. Accordingly,
we will not receive any part of the proceeds from such sales.
SELLING STOCKHOLDERS
The selling stockholders have informed us that the name, address,
maximum number of shares of common stock to be sold and total number of shares
of common stock which each selling stockholder owns are as set forth in the
following table. The selling stockholders may sell all or part of their shares
of common stock registered pursuant to this prospectus.
<TABLE>
<CAPTION>
Number of
Shares of Maximum
Common Stock Number of
Beneficially Shares to be Shares Beneficially
Owned Prior to Offered for Owned After
Name and Address(1) Offering(2) Resale Offering(3)
- ------------------------------ ------------------ ---------------- ---------------------
Number Percent
------ -------
<S> <C> <C> <C> <C>
The Fernleigh Foundation 66,000 40,000 26,000 *
The Clark Foundation 449,000 250,000 199,000 *
The Scriven Foundation 131,000 60,000 71,000 *
The Mary Imogene Bassett
Hospital 24,000 12,000 12,000 *
The Mary Imogene Bassett
Hospital - SCC Research Fund 37,800 19,000 18,800 *
The Farmers' Museum, Inc. 75,000 30,000 45,000 *
Trust for Martin Peretz, 1976 9,500 5,000 4,500 *
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Number of
Shares of Maximum
Common Stock Number of
Beneficially Shares to be Shares Beneficially
Owned Prior to Offered for Owned After
Name and Address(1) Offering(2) Resale Offering(3)
- ------------------------------ ------------------ ---------------- ---------------------
Number Percent
------ -------
<S> <C> <C> <C> <C>
Trust for Anne L. Peretz, 1944 45,000 20,000 25,000 *
Edmund S. Twining III 28,000 14,000 14,000 *
Trust for Dorothy Potter Boardman 34,000 15,000 19,000 *
Jane F. Clark 160,434 68,334 92,100 *
</TABLE>
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* Less than one percent.
(1) Unless stated otherwise, the address for each, of the selling
stockholders is c/o the Clark Estates, Inc., One Rockefeller Plaza,
Suite 3100, New York, New York 10020.
(2) The calculation of shares of common stock beneficially owned was
determined in accordance with Rule 13d-3 of the Exchange Act.
(3) Assumes that all common stock offered by the selling stockholders is
sold.
Our registration of the shares included in this prospectus does not
necessarily mean that the selling stockholders will opt to sell any of the
shares offered hereby. The shares covered by this prospectus may be sold from
time to time by the selling stockholders so long as this prospectus remains in
effect; provided, however, that the selling stockholders are first required to
contact us to confirm that this prospectus is in effect.
TRANSFER AGENT
The transfer agent and registrar for our common stock is Continental
Stock Transfer & Trust Company, New York, New York.
PLAN OF DISTRIBUTION
This offering is self-underwritten; neither we nor the selling
stockholders have employed an underwriter for the sale of common stock by the
selling stockholders. The selling stockholders will bear all expenses associated
with the sale of the common stock. The securities covered by this prospectus may
be sold by or for the account of the selling stockholders or by their pledgees,
donees, transferees or other successors in interest (collectively, the "selling
stockholders") using this prospectus or under Rule 144 of the Securities Act.
The selling stockholders may from time to time, sell all or a portion
of the shares in privately negotiated transactions or otherwise, at fixed prices
that may be changed, at market prices prevailing
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<PAGE>
at the time of sale, at prices related to such market prices or at negotiated
prices. The selling stockholders may offer their shares of common stock at
various times in one or more of the following transactions:
o on any stock exchange on which the shares of common stock may
be listed at the time of sale;
o in negotiated transactions;
o in the over-the-counter market; or
o in a combination of any of the above transactions.
If applicable law requires, we will add a supplement to this prospectus
to disclose the specific shares to be sold, the names of the selling
stockholders, the public offering prices of the shares to be sold, the names of
any agent, dealer or underwriter employed by the selling stockholders in
connection with such sale, and any applicable commission or discount with
respect to a particular offer.
In effecting sales, brokers and dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate in the
sales. Brokers or dealers may receive commissions or discounts from the selling
stockholders or, if the broker-dealer acts as agent for the purchaser of such
shares, from the purchaser in amounts to be negotiated, which are not expected
to exceed those customary in the types of transactions involved. Broker-dealers
may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per share, and to the extent the broker-dealer is
unable to do so acting as agent for a selling stockholder, to purchase as
principal any unsold shares at the price required to fulfill the broker-dealer
commitment to the selling stockholders. Broker-dealers who acquire shares as
principal may then resell those shares from time to time in transactions
o in the over-the counter market or otherwise;
o at prices and on terms then prevailing at the time of sale;
o at prices then related to the then-current market price; or
o in negotiated transactions.
The selling stockholders and any broker-dealers that act in connection
with the sale of the common stock hereunder might be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act; any commissions
received by them and any profit on the resale of shares as principal might be
deemed to be underwriting discounts and commissions under the Securities Act.
Any such commissions, as well as other expenses incurred by the selling
stockholders and applicable transfer taxes, are payable by the selling
stockholders.
We have not registered or qualified offers and sales of shares of the
common stock under the laws of any country, other than the United States. To
comply with certain states' securities laws, if applicable, the selling
stockholders will offer and sell their shares of common stock in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the
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<PAGE>
selling stockholders may not offer or sell shares of common stock unless we have
registered or qualified such shares for sale in such states or we have complied
with an available exemption from registration or qualification.
Any broker-dealer acquiring common stock offered hereby may sell such
securities either directly for itself or as an agent, in its normal
market-making activities, through or to other brokers or to its customers. Any
such sales may be at prices then prevailing on NASDAQ, at prices related to such
prevailing market prices or at negotiated prices to its customers or a
combination of such methods. The selling stockholders will be subject to
applicable provisions of Regulation M under the Exchange Act, which may limit
the timing of the purchases and sales of shares of common stock by the selling
stockholders.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for
us by Olshan Grundman Frome Rosenzweig & Wolosky LLP, New York, New York.
Certain members of Olshan Grundman Frome Rosenzweig & Wolosky LLP, hold shares
of Common Stock. Mr. Robert Friedman, a director of Datatec Systems, Inc. and a
member of such firm also holds options to purchase additional shares of Common
Stock.
EXPERTS
The consolidated financial statements as of April 30, 1999 incorporated
by reference in this prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
-14-
<PAGE>
================================================================================
We have not authorized any person to make a statement that differs from what is
in this prospectus. If any person does make a statement that differs from what
is in this prospectus, you should not rely on it. This prospectus is not an
offer to sell, nor is it seeking an offer to buy, these securities in any state
in which the offer or sale is not permitted. The information in this prospectus
is complete and accurate as of its date, but the information may change after
that date.
TABLE OF CONTENTS
Page
----
Risk Factors................................................................ 2
Where You Can Find More Information......................................... 9
Incorporation of Certain Documents
By Reference.............................................................. 9
About Datatec Systems....................................................... 10
Use of Proceeds............................................................. 11
Selling Stockholders........................................................ 11
Transfer Agent.............................................................. 12
Plan of Distribution........................................................ 12
Legal Matters............................................................... 14
Experts..................................................................... 14
----------
================================================================================
================================================================================
DATATEC SYSTEMS, INC.
533,334 Shares of Common Stock
----------
PROSPECTUS
----------
[ ], 1999
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
-------- --------------------------------------------
The following table sets forth the various expenses which will
be paid by us in connection with the securities being registered. With
the exception of the SEC registration fee, all amounts shown are
estimates.
SEC registration fee.......................................... $ 379.56
Nasdaq listing expenses....................................... 2,000.00
Legal fees and expenses (including Blue Sky).................. 4,000.00
Accounting Fees and Expenses.................................. 1,000.00
Miscellaneous................................................. 620.44
------
Total................................................ $8,000.00
========
ITEM 15. Indemnification of Directors and Officers.
- -------- ------------------------------------------
The Certificate of Incorporation and the By-laws of the Registrant
provides that the Registrant shall indemnify to the extent permitted by Delaware
law any person whom it may indemnify thereunder, including directors, officers,
employees and agents of the Registrant. Such indemnification (other than an
order by a court) shall be made by the Registrant only upon a determination that
indemnification is proper in the circumstances because the individual met the
applicable standard of conduct. Advances for such indemnification may be made
pending such determination. In addition, the Registrant's Certificate of
Incorporation eliminates, to the extent permitted by Delaware law, personal
liability of directors to the Registrant and its stockholders for monetary
damages for breach of fiduciary duty as directors.
The Registrant's authority to indemnify its directors and officers is
governed by the provisions of Section 145 of the Delaware General Corporation
Law, as follows:
(a) A corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than action by or in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a
II-1
<PAGE>
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that the person's
conduct was unlawful.
(b) A corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact
that he is or was director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsections (a) and
(b) of this section, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in
connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that
indemnification of the present or former director, officer, employee or
agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made, with respect to a person who
is a director or officer at the time of such determination (1) by a
majority vote of the directors who are not parties to such action, suit
or proceeding, even though less than a quorum, or (2) by a committee of
such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written
opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending a civil or criminal action, suit or proceeding may be paid
by the corporation in advance of the final disposition or such action,
suit or proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the
corporation as authorized in this section. Such
II-2
<PAGE>
expenses incurred by former directors and officers and other employees
and agents may be so paid upon such terms and conditions, if any, as
the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by, agreement, vote
of stockholders or disinterested directors or otherwise, both as to
action in such person's official capacity and as to action in another
capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred by such
person in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify such
person against such liability under this section.
(h) For purposes of this section, references to the "corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had the power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in
the same position under this section with respect to the resulting or
surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans, references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit
plan, and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee, or agent
with respect to any employee benefit plan, its participants or
beneficiaries, and a person who acted in good faith and in a manner
such person reasonably believed to be in the interest of the
participants and beneficiaries of any employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or
indemnification brought under this section, or under any bylaw,
agreement, vote of stockholders or disinterested directors, or
otherwise. The
II-3
<PAGE>
Court of Chancery may summarily determine a corporation's obligation to
advance expenses (including attorneys' fees).
The Registrant has entered into Indemnification Agreements with each of
its directors and officers whereby it has agreed to indemnify each director and
officer from and against any and all expenses, losses, claims, damages and
liability incurred by such director or officer for or as a result of action
taken or not taken while such director was acting in his capacity as a director,
officer, employee or agent of the Registrant.
II-4
<PAGE>
Item 16. Exhibits
- -------- --------
Exhibit No.
-----------
4 Specimen Certificate of the Registrant's Common Stock (incorporated
by reference to the Registrant's registration statement on Form S-8,
filed with the Commission on March 26, 1998).
5 Opinion of Olshan Grundman Frome Rosenzweig & Wolosky LLP with
respect to legality of the Common Stock.
23.1 Consent of Olshan Grundman Frome Rosenzweig & Wolosky LLP, included
in Exhibit No. 5.
23.2 Consent of Arthur Andersen LLP, independent public accountants.
24.1 Power of Attorney, included on the signature page to this
Registration Statement.
Item 17. Undertakings.
- -------- -------------
(a) 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 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of an action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) 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 to include
any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-5
<PAGE>
(4) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to
be part of this Registration Statement as of the time it was declared effective.
(c) The undersigned Registrant hereby undertakes that, for purposes 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
Securities Exchange Act of 1934 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.
II-6
<PAGE>
SIGNATURES
Pursuant to 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 Totowa, State of New Jersey on the 1st day of October
1999.
DATATEC SYSTEMS, INC.
By: /s/ Isaac J. Gaon
-----------------------
Isaac J. Gaon
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints ISAAC J. GAON and JAMES M. CACI, his true
and lawful attorney-in-fact, each acting alone, with full power of substitution
and resubstitution for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments, including post-effective amendments,
to this registration statement, and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorneys-in-fact or
their substitutes, each acting along, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Christopher Carey
- --------------------------- President and Director October 1, 1999
Christopher Carey
/s/ Isaac J. Gaon
- --------------------------- Chairman of the Board and Chief October 1, 1999
Isaac J. Gaon Executive Officer (principal
executive officer)
/s/ Thomas Berry
- --------------------------- Director October 1, 1999
Thomas Berry
- --------------------------- Director October ___, 1999
Frank Brosens
/s/ Robert H. Friedman
- --------------------------- Director October 1, 1999
Robert H. Friedman
- --------------------------- Director October ___, 1999
David Milch
/s/ James M. Caci
- --------------------------- Chief Financial Officer
James M. Caci (principal financial and October 1, 1999
accounting officer)
II-7
[Olshan Grundman Frome Rosenzweig & Wolosky LLP]
October 1, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Datatec Systems, Inc.-
Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-3
dated the date hereof (the "Registration Statement"), filed with the Securities
and Exchange Commission by Datatec Systems, Inc., a Delaware corporation (the
"Company"). The Registration Statement relates to an aggregate of 533,334 shares
(the "Shares") of common stock, par value $.001 per share (the "Common Stock"),
which were previously issued by the Company to the selling stockholders named in
the Registration Statement.
We advise you that we have examined, among other things,
originals or copies certified or otherwise identified to our satisfaction of the
Certificate of Incorporation and By-laws of the Company, minutes of meetings of
the Board of Directors and stockholders of the Company and such other documents,
instruments and certificates of officers and representatives of the Company and
public officials, and we have made such examination of the law, as we have
deemed appropriate as the basis for the opinion hereinafter expressed. In making
such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to original documents of documents submitted to us as certified or photostatic
copies.
Based upon the foregoing, we are of the opinion that the
Shares have been duly authorized and are validly issued, fully paid and
non-assessable.
<PAGE>
Securities and Exchange Commission
October 1, 1999
Page -2-
We hereby consent to use of this opinion in the Registration
Statement and Prospectus, and to the use of our name in the Prospectus under the
caption "Legal Matters".
We advise you that Robert Friedman, a member of this firm is a
director, stockholder and optionholder of the Company. Other members of this
firm are also stockholders and optionholders of the Company.
Very truly yours,
/s/ Olshan Grundman Frome Rosenzweig & Wolosky LLP
OLSHAN GRUNDMAN FROME
ROSENZWEIG & WOLOSKY LLP
ARTHUR ANDERSEN LLP
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
To Datatec Systems, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated August 9, 1999,
included in Datatec Systems, Inc. Form 10-K for the year ended April 30, 1999
and to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
-----------------------
Arthur Andersen LLP
Roseland, New Jersey
September 27, 1999
