As filed with the Securities and Exchange Commission On June 15,1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
__________
DCI Telecommunications, Inc.
(Exact name of registrant as specified in its charter)
Colorado 84-1155-41
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation)
611 Access Road, Stratford, CT 06497
(Address of registrant's executive offices)
Registrant's telephone number, including area code: (203) 380-0910
------------------------
Joseph J. Murphy
President & CEO
611 Access Road
Stratford, CT 06497
(203) 380-0910
(Name, address, including zip code and telephone number,
including area code, of agent for service)
Copy to:
Daniel O. Kennedy, Esq.
Hunton & Williams
NationsBank Plaza
Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
404-888-4007
Approximate date of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
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, check the following box: X
If this Form is filed to register additional securities in
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 made pursuant
to Rule 434 please check the following box: __
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CALCULATION OF REGISTRATION FEE
TITLE OF PROPOSED
EACH CLASS MAXIMUM PROPOSED
OF OFFERING MAXIMUM
SECURITIES PRICE AGGREGATE AMOUNT OF
TO BE AMOUNT TO BE PER OFFERING REGISTRATION
REGISTERED REGISTERED SHARE(1) PRICE FEE
- ----------- ------------ ---------- --------- ------------
Common stock,
par value
$.001 per share 8,403,531 $2.0625 $17,332,282 $5,113
- ------------
(1) Estimated solely for the purpose of computing the
registration fee. This amount was calculated pursuant to
Rule 457(c) on the basis of $2.0625 per share, which was the
average of the bid and asked prices of the Registrant's
Common Stock on June 10, 1998, as reported on the OTC Bulletin Board.
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DCI TELECOMMUNICATIONS, INC.
8,403,531 Shares of Common Stock
PROSPECTUS
The shares offered hereby (the "Registrable Shares") consist
of Eight Million Four Hundred Three Thousand Five Hundred Thirty
One (8,403,531) shares of Common Stock, $.001 par value (the
"Common Stock") of DCI Telecommunications, Inc. (a Colorado
corporation) ("DCI" or the "Company"). Of such amount Two Million
One Hundred Sixty Seven Thousand Eight Hundred Sixteen
(2,167,816) shares of Common Stock are being offered by the
Company for future issuance via Convertible Preferred Stock of
the Company ("Preferred Stock") for certain financing activities
related to both completed and pending acquisitions or exercise of
warrants related to said financing activities, and Six Million
Two Hundred Thirty Five Thousand Seven Hundred Fifteen
(6,235,715) shares of Common Stock are being offered by certain
stockholders of the Company (the "Selling Stockholders"). See
"Selling Stockholders." The shares being registered by the
Company will be issued from time to time on a continuous basis to
certain Selling Stockholders upon conversion of their Preferred
Stock into Common Stock or upon exercise of warrants exercisable
into Common Stock. The Company shall pay its own legal and
accounting fees, all registration and filing fees attributable to
the registration of the Registrable Shares, all legal fees and
filing fees relating to state securities or "blue sky" filings
and all printing fees incurred in connection herewith. DCI will
not receive any of the proceeds from the sale of the Registrable
Shares by the Selling Stockholders.
The Company is not aware of any underwriting arrangements
with respect to the offer and sale by the Selling Stockholders of
the Common Stock. The Company has been advised by the Selling
Stockholders that they or their successors may sell all or a
portion of the shares offered hereby from time to time on the OTC
Bulletin Board, in privately negotiated transactions, or
otherwise, including sales through or directly to a broker or
brokers. Sales will be at prices and terms then prevailing or at
prices related to the then current market prices or at negotiated
prices. In connection with any sales, any broker or dealer
participating in such sales may be deemed to be underwriters
within the meaning of the Securities Act of 1933. See "Plan of
Distribution".
The Common Stock is traded on the OTC Bulletin Board under
the symbol "DCTC". On June 10, 1998, the closing sale price of
the Common Stock, as reported by the OTC Bulletin Board was $2.03
per share. The market for the Common Stock must be considered
limited and there can be no assurance that a meaningful trading
market will develop. Furthermore, prices quoted may not represent
the true value of the Common Stock.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES 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 June 15, 1998
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements
and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the
Commission at 450 Fifth Street N.W. (Room 1024), Judiciary Plaza,
Washington, DC 20549; as well as at the Regional Offices of the
Commission located at Northwestern Atrium Center, 500 West
Madison Street (Suite 1400), Chicago, Illinois 60661; and Seven
World Trade Center (13th Floor), New York, New York 10048.
Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street N.W., Washington,
DC 20549 at prescribed rates. The Commission also maintains a
Website that contains reports, proxy and information statements
and other information statements regarding registrants that file
electronically with the Commission located at
(http://www.sec.gov). The Company files reports, proxy and
information statements and other information electronically with
the Commission.
The Company has filed with the Commission in Washington,
D.C., a Registration Statement on Form S-3 under the Securities
Act of 1933, as amended, (the "Act") with respect to the Common
Stock offered hereby (the "Registration Statement"). This
Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission For
further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration
Statement, including the exhibits and financial statements and
schedules, if any, filed therewith or incorporated therein by
reference. All documents filed by the date of the Company with
the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Prospectus and prior to
the termination of this offering shall be deemed to be
incorporated by reference in this Prospectus and to be a part
hereof from the date of the filing of such documents.
Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and in
each instance, reference is made to the copy of such contract or
other document files as an exhibit to the Registration Statement
or incorporated therein by reference, each statement being
qualified in its entirety by such reference. The Registration
Statement, including the exhibits thereto, may be inspected
without charge at the Commission's principal office in
Washington, DC, and copies of any and all parts thereof may be
obtained from such office after payment of the fees prescribed by
the Commission.
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TABLE OF CONTENTS
Page
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE 1
RISK FACTORS 1
USE OF PROCEEDS 7
DETERMINATION OF OFFERING PRICE 7
SELLING STOCKHOLDERS 8
PLAN OF DISTRIBUTION 9
LEGAL MATTERS 9
EXPERTS 10
MATERIAL CHANGES 10
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's (i) Annual Report on Form 10-KSB for the
fiscal year ended March 31, 1997, as amended, including the
consolidated financial statements of the Company; (ii) Quarterly
Reports on Form 10-QSB, as amended for the quarters ended June
30, 1997, September 30, 1997 and December 31, 1997; (iii) current
report on Form 8-K dated May 14, 1998 and (iv) proxy statement
filed pursuant to Section 14 of the Exchange Act on June 23,
1997, are hereby incorporated by reference herein.
The Company undertakes to provide without charge to each
person to whom a copy of this Prospectus has been delivered, upon
the written or oral request of any such person, a copy of any or
all of the documents incorporated by reference herein, other than
the exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the information that
this Prospectus incorporates. Written or oral requests for such
copies should be directed to: Mr. Craig Murphy at DCI
Telecommunications, Inc., 611 Access Road, Stratford, CT 06497,
telephone number (203) 380-0910.
________________________
No dealer, salesman or other person is authorized to give
any information or to make any representations not contained in
this Prospectus in connection with the offer made hereby, and if
given or made, such information or representations must not be
relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer to sell or a solicitation
of any offer to buy the securities offered hereby to any person
in any state or other jurisdiction in which such offer or
solicitation would be unlawful. The delivery of this Prospectus
at any time does not imply that information contained herein is
correct as of any time subsequent to its date.
RISK FACTORS
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE RISK FACTORS
SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION CONTAINED IN
THIS PROSPECTUS, IN EVALUATING AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN
THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THOSE SET FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS.
Limited Operating History; History of Losses
The Company was formed on February 4, 1985 and has had only
a limited operating history upon which investors may base an
evaluation of its performance. As a result of operating expenses,
development and acquisition expenditures, the Company has
incurred significant operating and net losses. Net losses for the
fiscal years ended March 31, 1996 and 1997 were approximately
$740,885 and $146,547 respectively. For the nine month period
ended December 31, 1997, the Company experienced a net operating
loss of $851,237.
The Company is in the early stages of development and faces
intense competition which is characteristic of the long distance
telecommunications, cellular and Internet related services and
products industries in which the Company competes. There can be
no assurance that realization of the Company's business plan will
result in profitability or positive cash flow for the Company in
the future.
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Acquisition Strategy
The Company pursues opportunities to expand through
acquisitions and plans to continue to acquire companies and
assets that complement the products and services offered by the
Company and its subsidiaries, to broaden its customer base and to
improve its operating efficiencies. Acquisitions may result in
potentially dilutive issuances of equity securities, the
incurrence of debt and the amortization of expenses related to
goodwill and other intangible assets, all of which could have a
material adverse effect on the Company. Acquisitions involve
numerous additional risks, especially in the areas of operations,
services, products and personnel of the acquired companies, which
could result in charges to earnings or adversely affect the
Company's operating results. There can be no assurance that
acquisition opportunities will continue to be available, that the
Company will have access to the capital required to finance
potential acquisitions, that the Company will continue to acquire
businesses or that the acquired businesses will be profitable.
Competition
The telecommunications industry is highly competitive,
rapidly evolving and subject to constant technological change.
The Company's success will be highly dependent on anticipating
and responding to the constant changes indicative of the industry
as a whole and by ensuring that it can continue to compete on the
basis of price, service and product offerings. The Company has
extensive competition from numerous industry participants who
provide similar long distance services and prepaid phone card
products. The Company's long distance services in Europe and its
global card based products compete for corporate and consumer
recognition against competitors whose products and services have
achieved significant regional, national and international
consumer loyalty. Many of these products and services are
marketed by companies which are well-established, have
reputations for success in the development and sale of products
and services and have significantly greater financial, marketing,
distribution, personnel and other resources in comparison to the
Company and its subsidiaries, thereby permitting such companies
to implement extensive advertising and promotional campaigns,
both generally and in response to efforts by additional
competitors, to enter into new markets and introduce new products
and services.
Need for Additional Financing for Growth
In order to finance capital expenditures, future
acquisitions and related expenses for growth and system
development, the Company will require additional financing and
investment. The shares of Common Stock registered hereby have
been issued or are issuable in connection with acquisitions and
financing related to the growth and development of the Company.
However, the Company will need to obtain additional financing in
order to continue to penetrate its new and existing markets. If
the Company is unable to secure additional financing, there is no
assurance that the additional funds necessary to complete the
development and expansion of the Company's distribution channels
for its products and for other programs will be available on
satisfactory terms and conditions, if at all. The unavailability
of additional financing may have a material adverse effect on the
financial condition of the Company. To the extent that any
future financing requirements are satisfied through the issuance
of equity securities of the Company, investors may experience
significant dilution in the net tangible book value per share of
Common Stock. The amount and timing of the Company's future
capital requirements will depend upon a number of factors, many
of which are not within the Company's control, including
programming costs, capital costs, marketing expenses, staffing
levels, and competitive conditions. There can be no assurance
that the Company's future capital requirements will be met or
will not increase as a result of future acquisitions, if any.
Failure to obtain any required additional financing could
adversely affect the growth of the Company and ultimately could
have a material adverse effect on the Company.
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Development and Expansion Risk and Possible Inability to Manage Growth
The Company is in the early stages of its operations and its
success will depend, among other things, upon the Company's
ability to access potential markets and acquisition targets and
to achieve a sufficient customer base. In addition the expansion
of the Company's business has involved and is expected to
continue to involve acquisitions, which could divert the
resources and management time of the Company and require
integration with the Company's existing operations. There can be
no assurance that any acquired business will be successfully
integrated into the Company's operations or that any such
business will meet the Company's expectations. There can be no
assurance that the growth experienced by the Company will
continue or that the Company will be able to achieve the growth
contemplated by its business strategy. The Company's growth may
be affected by numerous factors, a number of which are not within
the Company's control, including federal and state regulation of
the telecommunications industry as well as the regulations in
foreign countries in which the Company operates. The experienced
and future growth, has and will continue to place significant
demands on all aspect of the Company's business, including its
administrative, technical and financial personnel and systems.
The Company will be required to respond and manage the changing
business conditions and if unable to do so, the quality of
services, its ability to retain key personnel and its results of
operations could be adversely affected. These factors and others
could adversely affect the expansion of the Company's customer
base and service offerings.
Consumer Preferences and Industry Trends
The telecommunications industry market in which the Company
operates, is characterized by frequent introduction of new
products and services, and is subject to changing consumer
preferences and industry trends, which may adversely affect the
Company's ability to plan for future design, development and
marketing of its products and services. The industry is also
characterized by rapidly changing technology and evolving
industry standards, often resulting in product obsolescence or
short product life cycles. The proliferation of new
telecommunication technologies, including personal communication
services, cellular telephone products and services and prepaid
phone cards employing alternative technologies such as the
Internet, may reduce demand for prepaid phone cards as well as
phone cards employing remote technology.
Risk of Litigation
Litigation in the telecommunication industry has been used
as a competitive tactic both by established companies seeking to
protect their existing positions in the market and by emerging
companies attempting to gain access to the market. In such
litigation, complaints may be filed on a variety of grounds,
including antitrust, breach of contract, trade secret, patent or
copyright infringement, patent or copyright invalidity, and
unfair business practices. If the Company is forced to defend
itself against such claims, whether or not meritorious, the
Company is likely to incur substantial expense and diversion of
management attention, and may encounter market confusion and the
reluctance of licensees and distributors to commit resources to
the Company's products.
Development of Markets
The Company believes that its future growth and success will
require development and expansion of domestic and international
markets for its products. To the extent that the Company is
unable to do so in a timely and effective manner, the Company's
growth if any will be limited and the Company's business,
operating results and financial condition could be materially and
adversely affected. There can be no assurances that the Company
will continue to market its products successfully or that a
larger market for its products will develop. Additionally, the
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development of new markets will require on-going financial
resources for sales and marketing personnel as well as for
advertising and point of sale systems. There can be no assurances
that the Company will have available the required funds for this
development.
To the extent that the Company enters international markets,
such markets are subject to risks inherent in international
business activities, including longer accounts receivable payment
cycles in certain countries, compliance with a variety of foreign
laws and regulations, unexpected changes in regulatory
requirements, overlap of different tax structures, foreign
currency exchange rate fluctuations, import and export
requirements, trade restrictions, change in tariff and freight
rates and regional economic conditions. There can be no
assurance that such factors will not have a material adverse
effect on the company's future international sales and
consequently the Company's business.
Reliance on Key Distributors
The Company distributes its prepaid phone card products to
end users through a small group of distributors. The Company is
dependent upon the sales and marketing efforts of these
distributors. The Company depends upon large orders from this
small group of distributors. The loss of one or more of the
Company's distributors without replacement could have a material
adverse affect on the Company's business, operating results and
financial condition. The Company's future performance will also
depend, in part, on its ability to market its products to new
customers and on its ability to attract additional distributors
that will be able to market and support the Company's products
effectively, especially in markets in which the Company has not
previously distributed its products. There can be no assurance
that the Company will be successful in such efforts which may
have a material adverse affect on the Company's business.
Dependence Upon Key Personnel
The Company's future operating results depend in significant
part upon the continued service of a relatively small number of
key executive officers, especially Joseph J. Murphy, the
Company's Chairman of the Board, President and Chief Executive
Officer, Larry Shatsoff, Vice President and Chief Operations
Officer and John J. Adams, Vice President and Chief Marketing
Officer. While the key executive officers have employment
agreements with the Company, the loss of the key executive
officers could have a material adverse effect on the business and
financial condition of the Company. The Company's future success
also depends on its continuing ability to attract and retain
other highly skilled and qualified personnel. There is no
assurance that the Company will retain its key executive officers
or that it will be successful in attracting, assimilating or
retaining other highly qualified managerial personnel in the
future and therefore the loss of any one of the key executive
officers could have a material adverse effect on the business and
financial condition of the Company.
Dependence on Contractors for Manufacturing
The Company does not manufacture its card-based products and
is substantially dependent on the ability of its manufacturers to
provide adequate inventories of quality card products on a timely
basis and on favorable terms. The Company's manufacturers also
produce phone cards for certain of the Company's competitors, as
well as other large customers, and there can be no assurance that
such manufacturers will have sufficient production capacity to
satisfy the Company's inventory or scheduling requirements during
any period of sustained demand. Although the Company believes
that its relationship with its manufacturers is satisfactory and
that numerous alternative sources for its cards are currently
available, the loss of the services of such manufacturers or
substantial price increases imposed by such manufacturers, would
have a material adverse effect on the business and financial
condition of the Company. Failure or delay by such manufacturers
in delivering the card products to the Company on favorable terms
could also adversely affect the Company's operating margins and
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the Company's ability to obtain and deliver products and services
to customers on a timely basis enabling the company to be
competitive.
Dependence Upon Telecommunications Providers
The Company does not own a transmission network and is
dependent upon several carriers in the various geographical areas
in which the Company operates to provide telecommunications
services. While the Company does own certain telephone switching
equipment at various locations, it does not own or control the
telephone lines which connect to the switches. The Company's
ability to continue to obtain telecommunication services on
favorable terms from long distance carriers and other suppliers
for its consumers is essential to its future success. The Company
has not experienced significant losses in the past due to service
interruptions from its carriers but there can be no guarantee
that these interruptions will not occur in the future. There is
also no assurance that the Company will be able to obtain long
distance services in the future at favorable prices and a
material increase in the price at which the Company obtains long
distance service could have a material adverse effect on the
Company.
Regulation
Long distance telecommunications services are subject to
regulations within the United States by the Federal
Communications Commission (the "FCC"), state regulatory
authorities and comparable authorities in the various foreign
countries in which the Company operates. Among other things,
these regulatory authorities impose regulations governing the
rates, terms and conditions for interstate, intrastate and
international telecommunications services. Changes in existing
laws and regulations, particularly relaxation of existing
regulations resulting in significantly increased price
competition, may have a significant impact on the Company's
activities and on the Company's operating results. The Company
believes that it is in substantial compliance with all material
laws, rules and regulations governing its operations and has
obtained, or is in the process of obtaining, all licenses,
tariffs and approvals necessary for the conduct of its business
including all licenses needed for its European operations. There
can be no assurance, however, that the Company will be able to
obtain required licenses or approvals in the future or that the
FCC, state or country regulatory authorities will not require the
Company to comply with more stringent regulatory requirements.
Adoption of new statutes and regulations and expansion of the
Company's operations into new geographic markets could require
the Company to alter methods of operation, at significant costs,
or that would otherwise limit the types of services offered by
the Company. There can be no assurances that the Company will be
able to comply with additional applicable laws, regulations and
licensing requirements.
The Telecommunications Act of 1996 mandated the
establishment of Universal Service for the promotion of
nationwide access to telecommunications services in rural,
insular and high cost areas that are reasonably comparable in
price and type to those found in urban areas and the promotion of
access to advanced services for schools, libraries and certain
health care providers. Telecommunications providers of interstate
services that offer service to others for a fee on a non-common
carrier basis, must contribute toward the funding of Universal
Service. Although the Company's competition will fall under the
same mandate, the annual assessment may have a material adverse
effect on the long term financial condition of the Company. In
addition, certain regulations either being considered by the FCC
or under legal challenge may have a material adverse effect on
the Company. It is impossible to predict all effects of
regulatory changes being considered by both the FCC and other
world bodies.
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Reduced Liquidity Attendant to Penny Stock Status
Commission rules impose additional sales practice
requirements on broker-dealers who recommend certain low priced
"penny stocks" to persons other than established customers and
institutional accredited investors. For transactions covered by
these rules, the broker-dealer must make a determination that
based on the purchaser's financial situation, investment
experience and investment objectives, an investment in penny
stocks is suitable for such purchaser and that such purchaser (or
his independent advisor) is capable of evaluating the risks of
transactions in penny stocks. The broker-dealer must also provide
a prospective purchaser of penny stocks with certain disclosure
materials and obtain the purchaser's written consent to the
transaction prior to the sale. Since the Common Stock currently
is deemed to be "penny stock", an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to
the market value of the securities offered hereby. An exemption
from "penny stock" status will be available, however as to the
Common Stock if and when the market price therefor exceeds $5.00
per share, the Company's net tangible assets exceed $2,000,000 or
the Company has average revenue of at least $6,000,000 over the
preceding three years. See "Market for Common Stock and Dividend
Policy". However, there are no assurances that the Company will
be able to meet the requirements of the exemption from "penny
stock" status.
Shares Eligible for Future Sale or Issuance
The Company has 19,512,793 shares of Common Stock
outstanding at June 4, 1998 and 500,000,000 authorized shares of
Common Stock available for issuance, of which 10,000,000 shares
are reserved for issuance pursuant to the Company's employee
stock option plan. The average exercise price per share of the
3,623,559 outstanding employee options granted is $.055 and for
the 3,419,075 outstanding options for shareholders of CardCall
International Holdings, a subsidiary of the Company is $.20 per
share. Of the shares of Common Stock outstanding, 6,885,715
shares will be available for public sale subject to (i) the
limitations of Rule 144 promulgated under the Securities Act.
In addition, existing stockholders of the Company holding
approximately 4,385,715 shares of Common stock, which shares are
included in the 19,512,793, shares referenced above, have been
granted certain "piggyback" registration rights with respect to
such shares of Common Stock. Sales of substantial amounts of the
Common Stock in the public market, or the availability of
substantial amounts of the Common Stock for such sale, could
adversely affect the prevailing market price of the Common Stock.
Further, the authorized and unreserved shares of Common Stock
available for issuance may be issued from time to time upon
authorization of the Board of Directors, without further approval
by the stockholders, unless required by applicable law. The
issuance of additional shares of Common Stock by the Company
could result in the dilution of the voting power of the
outstanding shares of Common Stock or convertible securities
issued by the Company.
Ability to Pay Dividends
The Company has paid only one quarterly dividend on the
Common Stock since its inception, and its ability to pay future
dividends on the Common Stock is dependent on the profitability
of the Company. The majority of future earnings, if any, are
expected to be retained for use in the development and expansion
of the Company's business and there are no assurances that the
Company will ever pay dividends in the future.
Year 2000
The Company has completed a preliminary evaluation of its
information systems to determine their readiness in terms of Year
2000 issues. The Company has determined that it has in place or
will be shortly putting into place those software systems which
have the ability to handle all Year 2000 requirements. The
Company plans to upgrade all of its financial accounting systems
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no later than the end of the current calendar year. Management
does not believe that the cost to modify any other of the
Company's systems to be Year 2000 ready will be material to the
Company's financial condition or results of operations. However,
the Company currently does not have any information concerning
the Year 2000 readiness of its distributors or other third
parties with which the Company conducts business, and in the
event that any of its distributors or other third parties with
which the Company conducts business do not successfully and
timely achieve Year 2000 readiness, the Company's business or
operations could be materially adversely affected.
Stock Price Volatility
The market price of the Company's Common Stock has not risen
substantially since the Company's initial public offering.
Management believes that factors such as quarterly fluctuations
in the financial results of the Company, the overall economy and
the condition of the financial markets could cause the price of
the Common Stock to fluctuate substantially. There can be no
assurances that the stock price will rise materially over current
levels in the future.
Anti-Takeover Provisions
The Executive Committee of the Company's Board of Directors
has authorization to undertake those actions necessary to
discourage other persons from attempting to acquire control of
the Company. This authorization could render more difficult or
discourage an attempt by a third party to obtain control of the
Company. In the event the Company issues a series of Preferred
Stock in the future that has preference over the Common Stock
with respect to the payment of dividends and upon the Company's
liquidation, dissolution or winding up, the rights of the holders
of the Common Stock could be adversely affected.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of
the Registrable Shares by the Selling Shareholders. The Company
however will receive the proceeds from the exercise of warrants
held by the Selling Stockholders. See "Determination of Offering
Price".
DETERMINATION OF OFFERING PRICE
The Company issued warrants to certain holders in August and
September 1997 and April 1998. The exercise prices of the
aforementioned warrants range from $1.56 to $2.928, which are
equal to 110% of the average closing bid price for the Common
Stock of the Company for a five day trading period, applicable to
such warrant. The holders are as follows: FT Trading Unlimited,
Sovereign Partners, L.P., Settendown Capital International, Ltd.,
Corporate Capital Management, LLC, Mr. Lance T. Bury, Dominion
Capital Fund, Augustine Fund, L.P., and Ganesh Asset Management.
See "SELLING STOCKHOLDERS."
The Company sold Convertible Preferred Stock to certain
holders. The conversion prices for the Preferred Stock may not
be greater than $4.00 per common share and is calculated by
averaging the two lowest closing bid prices of the Company's
Common Stock as quoted by Bloomberg for the ten day trading
period ending on the day prior to the date of conversion times
(x) seventy five percent (75%). The holders of the Preferred
Stock have up to two (2) years to convert and cannot convert
prior to July 30, 1998. The Company has the right to redeem (buy
back) convertible preferred shares at any time prior to receiving
a conversion notice by the holders and it is the Company's
present intention to redeem a portion or all of the preferred
shares. The holders are as follows: Sovereign Partners, L.P., FT
Trading Unlimited, Dominion Capital Fund and Augustine Fund, L.P.
See "SELLING STOCKHOLDERS."
7
<PAGE>
Certain of the securities being registered were provided as
consideration to the holder in acquisitions consummated by the
Company. Certain shares of the Company's Common stock were
received by holders at a value of $2.00 per share in April 1998,
equal to the market price of the Company's Common Stock at the
time of the closing of the respective transactions. The holders
receiving the aforementioned shares of the Company's Common Stock
were Mr. Donald Gross, Mr. Steven Gross, Mr. Lansing Freeman, DCP
Holding, LLC, Ms. Lori Gross, Mr. Tibor Vas, The RC&A Group,
Inc., In-Com Source, LLC, and First Prizer Corp. See "SELLING
STOCKHOLDERS."
SELLING STOCKHOLDERS
The following table sets forth for each of the Selling
Stockholders (i) the number of shares of Common Stock
beneficially owned by each of them as of May 11, 1998, (ii) the
number of shares of Common Stock covered by this Prospectus, and
(iii) the number and the percentage of ownership of Common Stock
after the offering assuming all shares of Common Stock covered by
this Prospectus are sold.
Number
Number of Shares of Shares Number
Registering Shares Covered Owned of
Stockholder Beneficially By this After Percentage
Owned Prospectus Offering* of Class*
Donald Gross 1,750,533 1,750,533
Stephen Gross 1,750,533 1,750,533
Lansing Freeman 389,006 389,006
DCP Holdings, LLC 150,000 150,000
Lori Gross 62,500 62,500
Tibor Vas 20,000 20,000
The RC&A Group,Inc. 87,715 87,715
In-Com Source, LLC 87,714 87,714
First Prizer Corp. 87,714 87,714
Totals: 4,385,715 4,385,715
Warrant Number of Shares Number of
Holders/Holders Shares Covered Shares Number of
of Convertible Beneficially By This Owned After Percentage
Preferred Stock Owned Prospectus** Offering** of Class**
Sovereign Partners, 746,667 746,667
L.P.
Dominion Capital 671,666 671,666
Fund, Ltd.
Augustine Fund L.P. 206,667 206,667
Corporate Capital 111,450 111,450
Management, LLC
Ganesh Asset 10,000 10,000
Management
Settendown Capital 71,450 71,450
International, Ltd.
FT Trading 25,000 25,000
Unlimited
Lance T. Bury 7,100 7,100
Totals: 1,850,000 1,850,000
* As the Selling Shareholders may, pursuant to this Prospectus,
offer all or some portion of the Common Stock presently held, no
estimate can be given as to the amount of the Common Stock that
will be held by the Selling Shareholders upon termination of any
such sales.
** The warrant holders and holders of Convertible Preferred Stock
may, pursuant to this Prospectus, offer all or some portion of
the Common Stock each holder will acquire upon exercise of the
8
<PAGE>
warrant or upon conversion of the preferred stock held
respectively by each holder. No estimate can be given as to the
amount of the Common Stock that will be held by the Selling
Stockholders following any such sales.
To the best of the Company's knowledge, none of the Selling
Stockholders has had any material relationship with the Company
or any of its affiliates within the past three years except for
their purchase of the Common Stock offered hereby or Convertible
Preferred Stock which is convertible into Registrable Shares.
The Selling Stockholders acquired the Common Stock as part of
acquisitions by the Company or through private placements of
Convertible Preferred Stock to raise funds for acquisitions
and/or capital spending by the Company. The Selling Stockholders'
shares are being registered pursuant to the exercise of demand
registration rights received in connection with the purchase of
such shares.
PLAN OF DISTRIBUTION
The shares may be sold by the Selling Stockholders, or by
pledgees, donees, transferees or other successors-in-interest.
Such sales may be made on the OTC Bulletin Board, in privately
negotiated transactions, or otherwise, at market prices or at
negotiated prices. The shares may be sold by one or more of the
following methods: (a) a block trade in which the broker or
dealer so engaged will attempt to sell the shares as agent but
may position and resell a portion of the block as principal in
order to consummate the transaction; (b) purchase by a broker or
dealer as principal, and the resale by such broker or dealer for
its account pursuant to this Prospectus, including resale to
another broker or dealer; or (c) ordinary brokerage transactions
and transactions in which the broker solicits purchasers. In
effecting sales, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to
participate. Any such brokers or dealers may receive commissions
or discounts from the Selling Stockholders in amounts to be
negotiated immediately prior to the sale. Such brokers or
dealers and any other participating brokers or dealers may be
deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended. Any gain realized by such a broker or
dealer on the sale of shares which it purchases as a principal
may be deemed to be compensation to the broker or dealer in
addition to any commissions paid to the broker by the Selling
Stockholders.
The Company will not receive any portion of the proceeds of
the shares sold by the Selling Stockholders. There is no
assurance that any of the Selling Stockholders will sell any or
all of the shares of Common Stock covered by this Prospectus.
The Selling Stockholders have advised the Company that
during the time they are engaged in distribution of Common Stock
covered by this Prospectus, they will comply with Rules 10b-5 and
10b-6 under the Exchange Act, and pursuant thereto: (i) will not
engage in any stabilization activity in connection with the
Company's securities; (ii) will furnish each broker through which
Common Stock covered by this Prospectus may be offered the number
of Copies of this Prospectus which are required by each broker;
and (iii) will not bid for or purchase any securities of the
Company or attempt to induce any person to purchase any of the
Company's securities other than as permitted under the Exchange
Act. Selling Stockholders who may be an "affiliated purchaser" of
the Company as defined in Rule 10b-6 have been further advised
that pursuant to Exchange Act Release 34-23611 (September 11,
1986), they must coordinate their sales under this Prospectus
with each other and the Company for purposes of Rule 10b-6.
LEGAL MATTERS
The legality of the Common Stock will be passed upon for the
Company by Attorney Mark C. Foster, Denver, Colorado. As of June
10, 1998, Mr. Foster owned, directly or indirectly, no shares of
the Company's Common Stock.
9
<PAGE>
EXPERTS
The consolidated financial statements and the related
financial statement schedules incorporated in this Prospectus by
reference from DCI's Annual Report on Form 10-KSB for the years
ended March 31, 1996 and 1997, have been audited by Schnitzer &
Kondub P.C., independent auditors, as stated in their report,
which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
MATERIAL CHANGES
There have been no material changes in the Company's affairs
since the end of the last fiscal year for which certified
financial statements were included in the latest annual report to
security holders and which have not been described in a report on
Forms 10-QSB or 8-K filed under the Exchange Act.
10
<PAGE>
DCI TELECOMMUNICATIONS, INC.
COMMON STOCK
____________________________________________________
PROSPECTUS
June 15, 1998
11
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
As this is a registration of shares only, the expenses
involved are limited in nature and are as follows:
SEC registration fee $ 5,113
Estimated Legal fees associated with the $10,000
Registration Statement
Estimated Accounting fees associated with the $ 5,000
Registration Statement
Miscellaneous fees and expenses 0
--------
Total $20,113
II-1
<PAGE>
ITEM 15. Indemnification of Directors and Officers.
Except as hereinafter set forth, there is no statute,
charter provision, by-law, contract or other arrangement under
any controlling person, director or officer of the Company is
insured or indemnified in any manner against liability which he
may incur in his capacity as such.
Article X of the Bylaws of the Company contains the
following indemnification provisions:
(a) Any person made a party to any action, suit or
proceeding, by reason of the fact that he, his testator or
intestate representative is or was a director, officer or
employee of the Corporation, or of any Corporation in which he
served as such at the request of the Corporation, shall be
indemnified by the Corporation against the reasonable expenses,
including attorneys' fees, actually and necessarily incurred by
him in connection with the defense of such action, suit or
proceedings, or in connection with any appeal therein, except in
relation to matters as to which it shall be adjudged in such
action, suit or proceeding, or in connection with any appeal
therein that such officer, director or employee is liable for
negligence or misconduct in the performance of his duties.
(b) The foregoing right of indemnification shall not be
deemed exclusive of any other rights to which any officer or
director or employee may be entitled apart from the provisions of
this section.
(c) The amount of indemnity to which any officer or any
director may be entitled shall be fixed by the Board of
Directors, except that in any case where there is no
disinterested majority of the Board available, the amount shall
be fixed by arbitration pursuant to the then existing rules of
the American Arbitration Association.
II-2
<PAGE>
ITEM 16. Exhibits.
Exhibit
No. Description
------- -----------
2.1 Stock Purchase Agreement with Edge Communications, Inc. (2)
4.1 Registration Rights Agreement Dated April 30, 1998 among DCI
Telecommunications, Inc., Corporate Capital Management,
Sovereign Partners, Dominion Capital Fund and Augustine
Fund L.P. (*)
5.1 Opinion Re: Legality (*)
15.1 Letter re: Unaudited Interim Financial Information (1)
23.1 Consent of Independent Accountants (*)
- -----------------------------------
(*) Filed herewith
(1) Incorporated by reference to the Company's Quarterly
Reports on Form 10-QSB, as amended for the quarters ended
June 30, 1997, September 30, 1997 and December 31, 1997.
(2) Incorporated by reference to the Company's Form 8-K filed on
May 14, 1998
II-3
<PAGE>
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 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 such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from the registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(4) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to 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.
(5) 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 liabilities (other than the payment
by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
II-4
<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 duly authorized in the city of
Stratford, State of Connecticut, on June 15, 1998.
DCI Telecommunications, Inc.
/s/ Joseph J. Murphy
___________________
Joseph J. Murphy
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed below by the
following persons on behalf of the registrant in the capacities
and on the dates indicated.
/s/ Joseph J. Murphy /s/ Larry Shatsoff
- -------------------- ------------------
Joseph J. Murphy Larry Shatsoff
President, Chief Vice President,
Executive Officer and Chief Operations Office and
Director Director
/s/ Russell B. Hintz /s/ John Adams
- -------------------- --------------
Russell B. Hintz John Adams
Vice President and Chief Vice President, Chief Marketing
Financial Officer Officer
and Director
/s/ Carter Hills /s/ Lois S. Morris
- ---------------- ------------------
Carter Hills Lois S. Morris
Director President Travel Source Limited
and Director
II-5
<PAGE>
Exhibit 4.1
Registration Rights Agreement Dated April 30, 1998
Among DCI Telecommunications, Inc., Corporate Capital Management,
Sovereign Partners, Dominion Capital Fund and
Augustine Fund L.P.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated the 30th day
of April, 1998, between the entities listed on Schedules A (the
"Purchasers"), issued pursuant to the 8% Convertible Preferred
Stock Series F Subscription Agreement of even date herewith (the
"Subscription Agreement"), CORPORATE CAPITAL MANAGEMENT (the
"Placement Agent" and together with the Purchasers referred to as
the "Subscribers" or "Holders"), 2000 South Plymouth Road, Suite
210, Minnetonka, MN 55305, and DCI TELECOMMUNICATIONS, INC., a
Colorado corporation having its principal place of business at
611 Access Road, Stratford, CT 06497 (the "Company").
WHEREAS, simultaneously with the execution and delivery
of this Agreement, the Purchasers are purchasing from the
Company, pursuant to the Subscription Agreement an aggregate of
three thousand (3,000) shares of Preferred Stock, and the
Purchasers and the placement Agent will be issued Warrants to
purchase an aggregate of One Hundred Thousand (100,000) shares of
Common Stock. The shares of Common Stock of the Company
underlying the Preferred Stock are referred to as the "Conversion
Shares", and the shares of Common Stock of the Company underlying
the Warrants are referred to as the "Warrant Shares" (capitalized
terms defined in the Subscription Agreement and not otherwise
defined herein have the meanings specified in the Subscription
Agreement); and
WHEREAS, the Company desires to grant to the Holders
the registration rights set forth herein.
NOW, THEREFORE, the parties hereto mutually agree as
follows:
Section 1. Registrable Securities. As used herein the
term Registrable Securities means the Conversion Shares, and the
Warrant Shares; provided, however, that with respect to any
particular Registrable Security, such security shall cease to be
a Registrable Security when, as of the date of determination, (i)
it has been effectively registered under the Securities Act of
1933, as amended (the Securities Act) and disposed of
pursuant thereto, (ii) registration under the Securities Act is
no longer required for the immediate public distribution of such
security as a result of the provisions of Rule 144, or (iii) it
has ceased to be outstanding. In the event of any merger,
reorganization, consolidation, recapitalization or other change
in corporate structure affecting the Common Stock, such
adjustment shall be made in the definition of Registrable
Security as is appropriate in order to prevent any dilution or
enlargement of the rights granted pursuant to this Section 1.
Section 2. Restrictions on Transfer. The Holders
acknowledge and understand that prior to the registration of the
Registrable Securities as provided herein, the Securities are
"restricted securities" as defined in Rule 144 promulgated under
the Securities Act. The Holders understand that no disposition
or transfer of the Securities may be made by Holder in the
absence of (i) an opinion of counsel reasonably satisfactory to
the Company that such transfer may be made or (ii) a registration
statement under the Securities Act, and any applicable state
securities laws is then in effect with respect thereto.
Section 3. Registration Rights.
(a) The Company agrees that it will prepare and file
with the Securities and Exchange Commission ("SEC"), within forty
five (45) days after the Closing Date, a registration statement
on Form S-3 (the "Registration Statement"). The Company agrees
III-2
<PAGE>
that it will use its best efforts to cause the Registration
Statement to become effective within ninety (90) days after the
Closing Date. All Registration Statements required to be filed
hereunder shall be prepared and filed at the sole expense of the
Company (except as provided in Section 3(c) hereof), in respect
of all holders of Registrable Securities, so as to permit resale
of the Registrable Securities under the Securities Act, provided,
the Company shall not be obligated to take any action to effect
any such registration, qualification or compliance pursuant to
this Section 3(a) in any jurisdiction in which the Company would
be required to qualify as a dealer in securities, under the
securities or blue sky laws of such jurisdiction.
The number of Registrable Securities to be registered
shall be one hundred fifty (150%) percent of the number of shares
that would be required if all of the Registrable Securities were
converted in accordance with the Certificate of Designation, on a
date which is five (5) business days prior to the filing of the
Registration Statement.
(b) The Company will maintain the Registration
Statement or post-effective amendment filed under this Section 3
hereof current under the Securities Act until the earlier of (i)
the date that all of the Registrable Securities have been sold
pursuant to the Registration Statement, (ii) the date that the
Registrable Securities may be sold under the provisions of Rule
144, or (iii) five (5) years after the effective date of the
Registration Statement.
(c) All fees, disbursements and out-of-pocket expenses
and costs incurred by the Company in connection with the
preparation and filing of the Registration Statement under
Section 3(a) and in complying with applicable securities and Blue
Sky laws (including, without limitation, all attorneys' fees)
shall be borne by the Company. The Holders shall bear the cost
of underwriting discounts and commissions, if any, applicable to
the Registrable Securities being registered and the fees and
expenses of its counsel. The Company shall qualify any of the
securities for sale in such states as such Holders reasonably
designates (but in no event more than ten (10) states) and shall
furnish indemnification in the manner provided in Section 8
hereof. However, the Company shall not be required to qualify in
any state which will require an escrow or other restriction
relating to the Company and/or the sellers. The Company at its
expense will supply the Holders with copies of such Registration
Statement and the prospectus or offering circular included
therein and other related documents in such quantities as may be
reasonably requested by the Holders.
(d) The Company shall not be required by this Section
3 to include Holder's Registrable Securities in the Amended
Registration Statement which is to be filed if, in the opinion of
counsel for both the Holders and the Company (or, should they not
agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holder and
the Company) the proposed offering or other transfer as to which
such registration is requested is exempt from applicable federal
and state securities laws and would result in all purchasers or
transferees obtaining securities which are not restricted
securities, as defined in Rule 144 under the Securities Act.
(e) In the event the Registration Statement to be
filed by the Company pursuant to Section 3(a) above is not filed
by the Company by the forty-fifth (45th) day after the Closing
Date, or if the Registration Statement is not declared effective
by the SEC by the ninetieth (90th) day after the Closing Date
(the "Effective Date"), or the Company has not redeemed all of
the outstanding Registrable Securities or the Company has not
provided a sufficient amount of freely tradable Common Stock of
the Company in a mutually agreeable escrow account which would
allow conversions and/or exercises of all Registrable Securities
into freely tradable Common Stock of the Company, then the
Company will pay, within five (5) calendar days of written demand
by the Holder, in cash or in freely tradable shares of Common
III-3
<PAGE>
Stock (at the applicable Conversion Price, as defined in the
Certificate of Designation for the Preferred Stock), at the
option of the Company, to the Holders on a pro-rata basis by wire
transfer, as liquidated damages for such failure and not as a
penalty, two (2%) percent of the principal amount of the
Securities for the first thirty (30) days late, and three (3%)
percent for every thirty (30) days thereafter until the
Registration Statement has been filed and/or declared effective.
If the Company does not remit the damages to the Holder
as set forth above, the Company will pay to the Holders the
reasonable costs of collection, including attorneys fees, in
addition to the liquidated damages. Such payment shall be made
to the Holders in cash immediately if the registration of the
Securities are not effected; provided, however, that the payment
of such liquidated damages shall not relieve the Company from its
obligations to register the Securities pursuant to this Section.
The registration of the Securities pursuant to this provision
shall not affect or limit Holder's other rights or remedies as
set forth in this Agreement.
(f) No provision contained herein shall preclude the
Company from selling securities pursuant to any registration
statement in which it is required to include Registrable
Securities pursuant to this Section 3.
Section 4. Cooperation with Company. Holders will
cooperate with the Company in all respects in connection with
this Agreement, including, timely supplying all information
reasonably requested by the Company and executing and returning
all documents reasonably requested in connection with the
registration and sale of the Registrable Securities.
Section 5. Registration Procedures. Whenever the
Company is required by the provisions of this Agreement to effect
the registration of any of the Registrable Securities under the
Securities Act, the Company shall (except as otherwise provided
in this Agreement), as expeditiously as possible:
(a) prepare and file with the Commission such
amendments and supplements to such registration statement and the
Prospectus used in connection therewith as may be necessary to
keep such registration statement effective as per Section 3(b)
herein and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all securities
covered by such registration statement when the Holder or Holders
of such securities shall desire to sell or otherwise dispose of
the same (including prospectus supplements with respect to the
sales of securities from time to time in connection with a
registration statement pursuant to Rule 415 under the Securities
Act);
(b) furnish to each Holder such numbers of copies of a
summary prospectus or other prospectus, including a preliminary
prospectus or any amendment or supplement to any prospectus, in
conformity with the requirements of the Securities Act, and such
other documents, as such Holder may reasonably request in order
to facilitate the public sale or other disposition of the
securities owned by such Holder;
(c) register and qualify the securities covered by
such registration statement under such other securities or blue
sky laws of such jurisdictions as the Holder, shall reasonably
request, and do any and all other acts and things which may be
necessary or advisable to enable each Holder to consummate the
public sale or other disposition in such jurisdiction of the
securities owned by such Holder, except that the Company shall
not for any such purpose be required to qualify to do business as
a foreign corporation in any jurisdiction wherein it is not so
qualified or to file therein any general consent to service of
process;
III-4
<PAGE>
(d) list such securities on the Over-the-Counter
Bulletin Board or any securities exchange on which any securities
of the Company is then listed, if the listing of such securities
is then permitted under the rules of such exchange;
(e) enter into and perform its obligations under an
underwriting agreement, if the offering is an underwritten
offering, in usual and customary form, with the managing
underwriter or underwriters of such underwritten offering;
(f) notify each Holder of Registrable Securities
covered by such registration statement, at any time when a
prospectus relating thereto covered by such registration
statement is required to be delivered under the Securities Act,
of the happening of any event of which it has knowledge as a
result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
Section 6. Assignment. The rights granted to the
Holders under this Agreement may be assigned in connection with,
and subject to, the conditions applicable to the sale of the
Securities, with written consent of the Company, which consent
shall not be unnecessarily withheld. In the event of a transfer
of the rights granted under this Agreement, the Holders agree
that the Company may require that the transferee comply with
reasonable conditions as determined in the discretion of the
Company. This Agreement is binding upon and inures to the
benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
Section 7. Termination of Registration Rights. The
rights granted pursuant to this Agreement shall terminate as to
each Holder (and permitted transferees or assignees ) upon the
occurrence of any of the following:
(a) all of that particular Holder's securities subject
to this Agreement have been registered;
(b) such Holder's securities subject to this Agreement
may be sold without such registration pursuant to Rule 144
promulgated by the SEC pursuant to the Securities Act;
(c) such Holder's securities subject to this Agreement
can be sold pursuant to Rule 144(k).
Section 8. Indemnification.
(a) The Company agrees to indemnify and hold harmless
the Holders and each person, if any, who controls each Holder,
and each officer, director, agent or employee of the Holders
within the meaning of the Securities Act (Distributing Holder)
against any losses, claims, damages or liabilities, joint or
several (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and
investigation and all reasonable attorneys' fees), to which the
Distributing Holders may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement, or any
related preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any
such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or
III-5
<PAGE>
alleged untrue statement or omission or alleged omission made in
the Registration Statement, preliminary prospectus, final
prospectus, offering circular, notification or amendment, or
supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by the Distributing
Holders, specifically for use in the preparation thereof. This
Section shall not inure to the benefit of any Distributing Holder
with respect to any person asserting such loss, claim, damage or
liability who purchased the Registrable Securities which are the
subject thereof if the Distributing Holders failed to send or
give (in violation of the Securities Act or the rules and
regulations promulgated thereunder) a copy of the prospectus
contained in the Registration Statement to such person at or
prior to the written confirmation to such person of the sale of
such Registrable Securities, where the Distributing Holders were
obligated to do so under the Securities Act or the rules and
regulations promulgated hereunder. This indemnity agreement will
be in addition to any liability which the Company may otherwise
have.
(b) Each Distributing Holder agrees that it will
indemnify and hold harmless the Company, and each officer,
director, agent or employee of the Company or person, if any, who
controls the Company within the meaning of the Securities Act,
against any losses, claims, damages or liabilities (which shall,
for all purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all attorneys'
fees) to which the Company or any such officer, director, agent,
employee, or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses claims,
damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration
Statement prepared by the Company, or any related preliminary
prospectus, final prospectus, offering circular, notification or
amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to
the extent that such untrue statement or alleged untrue statement
or omission or alleged omission was made in such Registration
Statement, preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto in
reliance upon, and in conformity with, written information
furnished to the Company by such Distributing Holder,
specifically for use in the preparation thereof. This indemnity
agreement will be in addition to any liability which the
Distributing Holders may otherwise have.
(c) Promptly after receipt by an indemnified party
under this Section of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section, notify
the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any
indemnified party otherwise than as to the particular item as to
which indemnification is then being sought solely pursuant to
this Section. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, assume the
defense thereof, subject to the provisions herein stated and
after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final
conclusion. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall
not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with
counsel reasonably satisfactory to the indemnified party;
provided that the fees and expenses of such counsel shall be at
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the expense of the indemnifying party if (i) the employment of
such counsel has been specifically authorized in writing by the
indemnifying party, or (ii) the named parties to any such action
(including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall
have been advised by such counsel that there may be one or more
legal defenses available to the indemnifying party different from
or in conflict with any legal defenses which may be available to
the indemnified party(in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf
of the indemnified party, it being understood, however, that the
indemnifying party shall, in connection with any one such action
or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable only for the reasonable fees and
expenses of one separate firm of attorneys for the indemnified
party, which firm shall be designated in writing by the
indemnified party). No settlement of any action against an
indemnified party shall be made without the prior written consent
of the indemnified party, which consent shall not be unreasonably
withheld.
Section 9. Contribution. In order to provide for just
and equitable contribution under the Securities Act in any case
in which (i) the Distributing Holder, or the Company, makes a
claim for indemnification, but is judicially determined (by the
entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial
of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express
provisions of this Agreement provide for indemnification in such
case, or (ii) contribution under the Securities Act may be
required on the part of any Distributing Holder, or the Company,
then the Company and the applicable Distributing Holder shall
contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (which shall, for all
purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all reasonable attorneys'
fees), in either such case (after contribution from others) on
the basis of relative fault as well as any other relevant
equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the applicable
Distributing Holder, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and
the Distributing Holder agree that it would not be just and
equitable if contribution pursuant to this Section were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in this Section. The amount paid or
payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof)
referred to above in this Section shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
Section 10. Notices. Any notice pursuant to this
Agreement by the Company or by the Holder shall be in writing and
shall be deemed to have been duly given if delivered by (i) hand,
(ii) by facsimile and followed by mail delivery or (iii) if
mailed by certified mail, return receipt requested, postage
prepaid, addressed as follows:
(a) If to the Holders, to its, his or her address set
forth on Schedule A attached to this Agreement.
(b) If to the Company, at the address set forth
herein, or to such other address as any such party may designate
by notice to the other party. Notices shall be deemed given at
the time they are delivered personally or five (5) days after
they are mailed in the manner set forth above. If notice is
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<PAGE>
delivered by facsimile to the Company and followed by mail,
delivery shall be deemed given two (2) days after such facsimile
is sent.
Section 11. "Piggy-Back" Registration. The Holders
shall have the right to include all of the Registrable Securities
as part of any registration of securities filed by the Company
(other than the registration statement on Form S-1 filed by the
Company with the Securities and Exchange Commission which is
currently being reviewed by the Securities and Exchange
Commission, and in connection with a transaction contemplated by
Rule 145(a) promulgated under the Act or pursuant to Form S-8)
and must be notified in writing of such filing; provided,
however, that the Holders agree they shall not have any piggy-
back registration rights pursuant to this Section if the
Registrable Securities may be sold in the United States pursuant
to the provisions of Rule 144. The Holders shall have five (5)
business days to notify the Company in writing as to whether the
Company is to include the Holder(s) or not include the Holder(s)
as part of the registration; provided, however, that if any
registration pursuant to this Section shall be underwritten, in
whole or in part, the Company may require that the Registrable
Securities requested for inclusion pursuant to this Section be
included in the underwriting on the same terms and conditions as
the securities otherwise being sold through the underwriters. If
in the good faith judgment of the underwriter of such offering,
evidenced in writing, only a limited number of Registrable
Securities should be included in such offering, or no such shares
should be included, the Holder(s), and all other selling
stockholders, shall be limited to registering such proportion of
their respective shares as shall equal the proportion that the
number of shares of selling stockholders permitted to be
registered by the underwriter in such offering bears to the total
number of all shares then held by all selling stockholders
desiring to participate in such offering. Those Registrable
Securities which are excluded from an underwritten offering
pursuant to the foregoing provisions of this Section (and all
other Registrable Securities held by the selling stockholders)
shall be withheld from the market by the holders thereof for a
period, not to exceed ninety (90) days, which the underwriter may
reasonably determine is necessary in order to effect such
underwritten offering. The Company shall have the right to
terminate or withdraw any registration initiated by it under this
Section prior to the effectiveness of such registration whether
or not any Holder elected to include securities in such
registration. All registration expenses incurred by the Company
in complying with this Section shall be paid by the Company,
exclusive of underwriting discounts, commissions and legal fees
and expenses for counsel to the Holders.
Section 12. Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
Section 13. Headings. The headings in this Agreement
are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
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<PAGE>
Section 14. Governing Law, Venue. This Agreement will
be construed and enforced in accordance with and governed by the
laws of the State of New York, except for matters arising under
the Securities Act, without reference to principles of conflicts
of law. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the State of
New York or the state courts of the State of New York in
connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens,
to the bringing of any such proceeding in such jurisdictions.
Each party hereby agrees that if another party to this Agreement
obtains a judgment against it in such a proceeding, the party
which obtained such judgment may enforce same by summary judgment
in the courts of any state or country having jurisdiction over
the party against whom such judgment was obtained, and each party
hereby waives any defenses available to it under local law and
agrees to the enforcement of such a judgment. Each party to this
Agreement irrevocably consents to the service of process in any
such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set
forth herein. Nothing herein shall affect the right of any party
to serve process in any other manner permitted by law.
Section 15. Severability/Defined Terms. If any
provision of this Agreement shall for any reason be held invalid
or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof and this Agreement shall be
construed as if such invalid or unenforceable provision had never
been contained herein. Terms not otherwise defined herein shall
be defined in accordance with the Subscription Agreement.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed, on the day and
year first above written.
Attest: DCI TELECOMMUNICATIONS, INC.
By:______________________ By:_________________________
Name: Name: Joseph J. Murphy
Title: Title: President
SOVEREIGN PARTNERS, LP
By:_________________________
Name: Mark Valentine
Title: Agent
DOMINION CAPITAL FUND, LTD.
By:__________________________
Name: Mark Valentine
Title: Agent
AUGUSTINE FUND LP
By:__________________________
Name: Tom F. Duszynski
Title: Chief Operating Officer
CORPORATE CAPITAL MANAGEMENT
By_________________________________
Name: Mark Savage
Title: President
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<PAGE>
EXHIBIT 5.1
OPINIONS RE LEGALITY
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<PAGE>
Mark C. Foster
Attorney At Law
1601 Arapahoe Street
Suite 1200
Denver, Colorado 80202
June 15, 1998
DCI Telecommunications, Inc.
611 Access Road
Stratford, CT 06497
Re: DCI Telecommunications, Inc.
Registration Statement on Form S-3
Gentlemen:
I have acted as special counsel for DCI Telecommunications, Inc.,
a Colorado corporation (the "Company"), in connection with the
filing of a Registration Statement on Form S-3 (the "Registration
Statement"), under the Securities Act of 1933, as amended (the
"Act"), with respect to the proposed registration by the Company
of 8,403,531 shares of its Common Stock, par value $.001 per
share (the "Common Stock").
I have reviewed originals or copies, certified or otherwise
identified to my satisfaction, of the Certificate of
Incorporation and By-Laws of the Company, each as amended, and
such other documents, corporate records, certificates of public
officials and instruments as I have considered necessary or
advisable for the purpose of this opinion. I have assumed the
authenticity of all documents submitted to me as originals and
the conformity to original documents of all documents submitted
to me as copies. I have not independently verified such
information and assumptions.
I am a member of the Bar of the State of Colorado and I express
no opinion as to the law of any jurisdiction.
Subject to the foregoing and based on such examination and
review, I am of the opinion that:
1. The Company is a corporation organized and existing in
good standing under the laws of the State of Colorado; and
2. The 8,403,531 shares of Common Stock proposed to be
offered by the Company, when issued and delivered, will be duly
authorized, validly issued, fully paid and non-assessable.
I hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the reference to me contained
under the heading "Legal Matters" in the Prospectus forming a
part of the Registration Statement. In giving the foregoing
consent, I do not thereby admit that I am in the category of
persons whose consent is required under Section 7 of the Act, or
the rules and regulations of the Securities and Exchange
Commission thereunder.
Very Truly Yours,
Mark C. Foster
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of DCI Telecommunications, Inc.
We hereby consent to the inclusion in this Registration Statement
on Form S-3 (No. 333-31579) of our report dated June 4, 1997
appearing on page F-1 of DCI Telecommunication's Annual Report on
Form 10-KSB and as amended by Form 10-KSB/A for the year ended
March 31, 1997 (except for Note 1 which is dated December 18,
1997). We also consent to the references to our firm in the
Registration Statement.
Schnitzer & Kondub, P.C.
Schnitzer & Kondub, P.C.
Eastchester, New York
June 15, 1998
