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As Filed with the Securities and Exchange Commission on November 28, 2000.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
DENSE-PAC MICROSYSTEMS, INC.
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California 33-0033759
--------------------- --------------------
(State or other jurisdiction (I.R.S. Employer I.D. Number)
of incorporation or organization)
7321 Lincoln Way
Garden Grove, California 92841
(714) 898-0007
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(Address and telephone number of registrant's principal executive offices)
William M. Stowell
Chief Financial Officer
DENSE-PAC MICROSYSTEMS, INC.
7321 Lincoln Way
Garden Grove, California 92641
(714) 898-0007
------------------------------------------------------------------------
(Name, Address and telephone number of agent for service)
Copy to:
Nicholas J. Yocca, Esq.
Yocca Patch & Yocca LLP
19900 MacArthur Blvd., Suite 650, Irvine, California 92612
Approximate date of commencement of proposed sale to public: As soon as
practicable after the registration statement is declared effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.[ ] .......................................................................
If any of the only securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [x] ..........
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ] ..............................
If this Form is a post-effective amendment filed pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. [ ] .............................................................
If delivery of the report is expected to be made pursuant to Rule 434,
please check the following box. [ ].............................................
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Proposed Proposed
Title of class of Maximum Maximum Amount of
Securities to be Amount to be Offering price Aggregate Registration
Registered Registered Per share (1) Offering price (1) Fee (1)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock 884,167 $3.13 $2,767,443 $730.60
No par value Shares
</TABLE>
(1) Pursuant to Rule 457 (c), estimated solely for the purpose of calculating
the registration fee and based on the last sale price on the Nasdaq Stock
Market on November 24, 2000.
==============================================================================
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.
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884,167 Shares
DENSE-PAC MICROSYSTEMS, INC.
Common Stock
This Prospectus covers 884,167 shares of Common Stock, no par value
(the "Shares"), of Dense-Pac Microsystems, Inc. (the "Company") to be sold by
certain stockholders (the "Selling Stockholders"). See "Selling Stockholders."
The Selling Stockholders may from time to time sell all or a part of the Shares
at prices then prevailing in the market or at negotiated prices. See "Plan of
Distribution." None of the proceeds from the sale of the Shares will be received
by the Company.
The Selling Stockholders acquired the Shares in transactions exempt
from registration under the Securities Act of 1933, as amended (the "Securities
Act"). Consequently, upon any sale of the Shares, a Selling Stockholder, brokers
executing sales on behalf of a Selling Stockholder and dealers to whom the
Shares may be sold may, under certain circumstances, be considered
"underwriters" within the meaning of Section 2(11) of the Securities Act.
The Company's Common Stock is traded on the Nasdaq Stock Market under
the symbol "DPAC." On November 24, 2000, the closing price for the Common Stock
was $3.13 share.
SEE "RISK FACTORS AND CAUTIONARY STATEMENTS" BEGINNING AT PAGE 3
HEREOF FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SHARES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN AS CONTAINED HEREIN IN CONNECTION WITH THE OFFERING
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFERING BY THE SELLING STOCKHOLDERS OF ANY SECURITIES OTHER THAN THOSE TO WHICH
IT RELATES OR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
November 27, 2000
SUMMARY INFORMATION
Dense-Pac Microsystems, Inc. ("Dense-Pac" or the "Company"), a
California Corporation, designs and manufactures proprietary and patented
three-dimensional high-density semiconductor products, ranging from monolithic
semiconductors to patented, high density, three-dimensional
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plastic or ceramic memory products. With plastic memory devices supplied by
customers or raw silicon memory devices purchased from various semiconductor
manufacturers, the Company uses its advanced package design and the latest
process technology to turn such memory devices into high density products. These
high-density products enable the Company's commercial, industrial and military
customers to stack large amounts of memory into small spaces, which in time,
improves the customer's performance and reliability at the system level by
reducing space, cost, weight and power requirements.
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RISK FACTORS
Cautionary Statements
Statements in this Prospectus which are not historical facts, including
all statements about the Company's business strategy or expectations, or
information about new and existing products and technologies or market
characteristics and conditions, are forward-looking statements that involve
risks and uncertainties. These include, but are not limited to, the factors
described below which could cause actual results to differ from those
contemplated by the forward-looking statements.
Product Development and Technological Change
The semiconductor and memory module industries are characterized by rapid
technological change and are highly competitive with respect to timely product
innovation. The Company's memory products are subject to obsolescence or price
erosion because semiconductor manufacturers are continuously introducing chips
with the same or greater memory density as the Company's modules. As a result,
memory products typically have a product life of not more than three to five
years.
The Company's future success depends on its ability to develop new
products and product enhancements to keep up with technological advances and to
meet customer needs. Any failure by the Company to anticipate or respond
adequately to technological developments and customer requirements, or any
significant delays in product development or introduction, could have a material
adverse effect on the Company's financial condition and results of operations.
There can be no assurance that the Company will be successful in its
product development or marketing efforts, or that the Company will have adequate
financial or technical resources for future product development and promotion.
Uncertainty of Market Acceptance or Profitability of New Products
The introduction of new products will require the expenditure of funds for
research and development, tooling, manufacturing processes, inventory and
marketing. In order to achieve high volume production, the Company will need to
make substantial investments in inventory and capital equipment or, as currently
contemplated, the Company will need to out-source production to third parties.
The Company has limited marketing capabilities and resources and is dependent
upon internal sales and marketing personnel and a network of independent sales
representatives for the marketing and sale of its products. There can be no
assurance that our products will achieve or maintain market acceptance, result
in increased revenues, or be profitable.
Parts Shortages and Over-Supplies and Dependence on Suppliers
The semiconductor industry is characterized by periodic shortages or
over-supplies of parts which have in the past and may in the future negatively
affect the Company's operations. For example, an over-supply of 16 meg DRAMs in
1996 resulted in significant price declines which required the Company to make
significant inventory reductions in Fiscal Year 1997. The Company is dependent
on a limited number of suppliers for semiconductor devices used in its products,
and it has no long-term supply contracts with any of them. For example, the
Company was not able to market its second-generation Dense-Stack product when it
lost its source of SRAM die.
Due to the cyclical nature of the semiconductor industry and competitive
conditions, the Company may experience difficulties in meeting its supply
requirements in the future. Any
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inability to obtain adequate deliveries of parts, either due to the loss of a
supplier or industry-wide shortages, could delay shipments of the Company's
products, increase its cost of goods sold and have a material adverse effect on
its business, financial condition and results of operations.
Dependence on Defense-Related Business
The Company has historically derived a portion of its revenues from
defense-related contracts. As a result, the Company's business has been impacted
by reductions in the federal defense budget and will continue to be subject to
risks affecting the defense industry, including changes in governmental
appropriations and changes in national defense policies and priorities. The
Company has sought to reduce its dependence on defense-related business by
developing products with commercial applications, although such products
generally have lower margins than defense-related products.
Intellectual Property Rights
The Company's ability to compete effectively is dependent on its
proprietary know-how, technology and patent rights. The Company holds U.S.
patents on certain aspects of its 3-D stacking technology and has applied for
additional patents. There can be no assurance that the Company's patent
applications will be approved, that any issued patents will afford the Company's
products any competitive advantage or will not be challenged or circumvented by
third parties, or that patents issued to others will not adversely affect the
sales, development or commercialization of the Company's present or future
products.
Management of Growth
Successful expansion of the Company's operations will depend on, among
other things, the ability to obtain new customers, to attract and retain skilled
management and other personnel, to secure adequate sources of supply on
commercially reasonable terms and to successfully manage growth. To manage
growth effectively, the Company will have to continue to implement and improve
its operational, financial and management information systems, procedures and
controls. As the Company expands, it may from time to time experience
constraints that will adversely affect its ability to satisfy customer demand in
a timely fashion. Failure to manage growth effectively could adversely affect
the Company's financial condition and results of operations.
Competition
There are memory companies which offer or are in the process of developing
three-dimensional products, including Irvine Sensors, Staktek, Cubic Memory and
Thompson CSF in France. Some of such companies have greater financial,
manufacturing and marketing capabilities than the Company. The Company could
also experience competition from established and emerging computer memory
companies. There can be no assurance that the Company's products will be
competitive with existing or future products, or that the Company will be able
to establish or maintain a profitable price structure for its products.
Product Liability
In the course of its business, the Company may be subject to claims for
product liability for which its insurance coverage is excluded or inadequate.
Variability of Gross Margin
Gross profit as a percentage of sales was 33% for the three-month period
ended August 31,
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2000, as compared to 35% for the three-month period ended August 31, 1999. For
the six-month period ended August 31, 2000 the gross margin was 30% as compared
to 30% for the six-month period ended August 31, 1999. Any change in the gross
margins can typically be attributed to the type of products that the Company was
selling during the comparable quarters as well as the royalty income generated
during the periods. As the Company markets its products both to military and
aerospace, and commercial customers, the product mix that each category of the
customers orders may be different and result in changes in the gross margin. Due
to the various configuration and applications of the Company's product, prices
range from less than $5 for commercial modules to over five thousand dollars for
high-end military specification modules.
The Company expects that its net sales and gross margin may vary
significantly based on these and other factors, including the mix of products
sold and the manufacturing services provided, the channels through which the
Company's products are sold, changes in product selling prices and component
costs, the level of manufacturing efficiencies achieved and pricing by
competitors. The selling prices of the Company's products may decline depending
upon the price changes of DRAM, SRAM and Flash semiconductors, which would have
a material adverse effect on the Company's net sales and could have a material
adverse effect on the Company's business, financial condition and results of
operation. Accordingly, the Company's ability to maintain or increase net sales
will be highly dependent upon its ability to increase unit sales volumes of
existing products and to introduce and sell new products in quantities
sufficient to compensate for the anticipated declines in selling prices.
Declining product selling prices may also materially and adversely affect the
Company's gross margin unless the Company is able to reduce its cost per unit to
offset declines in product selling prices. There can be no assurance that the
Company will be able to increase unit sales volumes, introduce and sell new
products or reduce its cost per unit. The Company also expects that its business
may experience significant seasonality to the extent it sells a material portion
of its products in Europe and to the extent its exposure to the personal
computer market remains significant.
Decline of Demand for Product Due to Downturn of Related Industries
The Company may experience substantial period-to-period fluctuations in
operating results due to factors affecting the semiconductor, computer,
telecommunications and networking industries. From time to time, each of these
industries has experienced downturns, often in connection with, or in
anticipation of, declines in general economic conditions. A decline or
significant shortfall in growth in any one of these industries could have a
material adverse impact on the demand for the Company's products and therefore a
material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that the Company's net sales
and results of operations will not be materially and adversely affected in the
future due to changes in demand from individual customers or cyclical changes in
the semiconductor, computer, telecommunications, networking or other industries
utilizing the Company's products.
Fluctuations in Operating Results
The Company's results of operations and gross margin have been subject to
fluctuations from period to period. The primary factors that have affected and
may in the future affect the Company's results of operations include adverse
changes in the mix of products sold, the inability to procure required
components, and the partial or complete loss of a principal customer or the
reduction in orders from a customer due to, among other things, excess product
inventory accumulation by such customer. Other factors that have affected and
may in the future affect the Company's results of operations include fluctuating
market demand for and declines in the selling prices of the Company's products,
decreases or increases in the costs of the components of the Company's products,
market acceptance of new products and enhanced versions of the Company's
products, the Company's competitors selling products that compete with the
Company's products
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at lower prices or on better terms than the Company's products, delays in the
introduction of new products and enhancements to existing products,
manufacturing inefficiencies associated with the start up of new product
introductions, and the Company's semiconductor customers manufacturing memory
modules, internally or with other third parties, outside of the United States
due to concerns about United States antidumping investigations and laws.
The Company's operating results may also be affected by the timing of new
product announcements and releases by the Company or its competitors, the timing
of significant orders, the ability to produce products in volume, delays,
cancellations or rescheduling of orders due to customer financial difficulties
or other events, inventory obsolescence, including the reduction in value of the
Company's inventories due to price declines, unexpected product returns, the
timing of expenditures in anticipation of increased sales, cyclicality in the
Company's targeted markets, and expenses associated with acquisitions. In
particular, declines in DRAM, SRAM and Flash semiconductor prices could affect
the valuation of the Company's inventory which could result in adverse changes
in the Company's business, financial condition and results of operations.
Sales of the Company's individual products and product lines toward the end
of a product's life cycle are typically characterized by steep declines in
sales, pricing and gross margin, the precise timing of which may be difficult to
predict. The Company has experienced and could continue to experience unexpected
reductions in sales of products as customers anticipate new product purchases.
In addition, to the extent that the Company manufactures products in
anticipation of future demand that does not materialize, or in the event a
customer cancels outstanding orders during a period of either declining product
selling prices or decreasing demand, the Company could experience an
unanticipated decrease in sales of products. These factors could give rise to
charges for obsolete or excess inventory, returns of products by distributors,
or substantial price protection charges or discounts. In the past, the Company
has had to write-down and write-off excess or obsolete inventory. To the extent
that the Company is unsuccessful in managing product transitions, its business,
financial condition and results of operations could be materially and adversely
affected.
The need for continued significant expenditures for capital equipment
purchases, research and development and ongoing customer service and support,
among other factors, will make it difficult for the Company to reduce its
operating expenses in any particular period if the Company's expectations for
net sales for that period are not met. Accordingly, there can be no assurance
that the Company will be able to continue to be profitable. The Company believes
that period-to-period comparisons of the Company's financial results are not
necessarily meaningful and should not be relied upon as indications of future
performance. Due to the foregoing factors, it is likely that in some future
period the Company's operating results will be below the expectations of public
market analysts or investors. In such event, the market price of the Company's
securities would be materially and adversely affected.
International Sales
In fiscal year 2000, approximately 5% of the Company's sales were export
sales, primarily to Western Europe as compared to 12% in fiscal year 1999.
Foreign sales are made in U.S. dollars. The decline was primarily due to a
decrease in memory prices resulting in lower revenue, but also due to the
overall increase in the domestic commercial business of the Company.
International sales may be subject to certain risks, including changes in
regulatory requirements, tariffs and other barriers, timing and availability of
export licenses, political and economic instability, difficulties in accounts
receivable collections, natural disasters, difficulties in staffing and managing
foreign subsidiary and branch operations, difficulties in managing distributors,
difficulties in obtaining governmental approvals for telecommunications and
other products, foreign currency exchange fluctuations, the burden of complying
with a wide variety of complex
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foreign laws and treaties, potentially adverse tax consequences and
uncertainties relative to regional, political and economic circumstances.
Moreover and as a result of currency changes and other factors, certain of the
Company's competitors may have the ability to manufacture competitive products
in Asia at lower costs than the Company.
The Company is also subject to the risks associated with the imposition of
legislation and regulations relating to the import or export of high technology
products. The Company cannot predict whether quotas, duties, taxes or other
charges or restrictions upon the importation or exportation of the Company's
products will be implemented by the United States or other countries. Because
sales of the Company's products have been denominated to date in United States
dollars, increases in the value of the United States dollar could increase the
price of the Company's products so that they become relatively more expensive to
customers in the local currency of a particular country, leading to a reduction
in sales and profitability in that country. Future international activity may
result in increased foreign currency denominated sales. Gains and losses on the
conversion to United States dollars of accounts receivable, accounts payable and
other monetary assets and liabilities arising from international operations may
contribute to fluctuations in the Company's results of operations. Some of the
Company's customer's purchase orders and agreements are governed by foreign
laws, which may differ significantly from United States laws. Therefore, the
Company may be limited in its ability to enforce its rights under such
agreements and to collect damages, if awarded. There can be no assurance that
any of these factors will not have a material adverse effect on the Company's
business, financial condition and results of operations.
Substantial Influence of Existing Shareholders
Euroventures I and Euroventures II would beneficially own approximately 18%
of our common stock following the completion of this offering. As a result, they
would have the ability to exert significant influence, or possibly have the
controlling influence, on all matters requiring approval by our shareholders,
including the election and removal of directors, approval of significant
corporate transactions and the decision of whether a change in control will
occur.
Claims And Litigation
On September 23, 1998, the Company was served with a complaint from Simple
Technology, Inc., filed in U.S. District Court for the Central District of
California, Santa Ana Division for an undetermined amount, alleging that the
Company's stacking technology infringes on a Simple Technology patent. The
Company intends to vigorously defend itself against such charges. On October 23,
1988, the Company filed a cross-complaint in the U.S. District Court for the
Central District of California, Santa Ana Division for patent infringement
against Simple Technology. The suit alleges that the Simple Technology committed
infringement which has benefited Simple Technology and unlawfully interfered
with the Company's sales efforts. In April, 1999, the Company filed two motions
for summary judgment, one relating to non-infringement of the Simple Technology
patent and the second summary motion relating to previous public stacking art,
which are alleged to invalidate the claims in the Simple Technology patent. The
potential loss in the event of an unfavorable outcome is undetermined at this
time.
On April 11, 2000, the Company filed suit, in Superior Court for the State
of California, Orange County, against Simple Technology and its Chief Operating
Officer. The complaint alleges trade secret misappropriation, unfair competition
and intentional and negligent interference with prospective business advantages.
The Company believes that on or before September 1997, Simple Technology and its
officer obtained the Company's proprietary technology concerning the Company's
products without authorization or consent from the Company. The complaint
alleges that Simple Technology then used the above proprietary technology to
manufacture a product
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substantially identical to the Company's proprietary rail M-Densus product and
interfered with the Company's business. The Company is seeking general damages,
monetary losses, attorneys' fees and punitive and exemplary damages. The Company
intends to aggressively pursue this action.
Litigation is expensive and demands time and attention of management,
whether ultimately successful or not. Litigation often involves complex issues
of procedure and substance, making outcome uncertain. Establishing proprietary
rights in a competitive technological environment may be difficult and may
require litigation, and also result in attendant costs incurred, or may be
unsuccessful. Parties in litigations with us may have greater economic resources
than the Company has which is an advantage for such parties in that they could
more easily bear lengthy or extended proceedings, including appeals.
Limited Experience in Acquisition
While we have no agreements or negotiations currently underway, we intend
to pursue selective acquisitions to complement our internal growth. If we make
any future acquisitions, we could issue stock that would dilute our
shareholders' percentage ownership, incur substantial debt or assume contingent
liabilities. We have limited experience in acquiring other businesses, product
lines and technologies. In addition, the attention of our small management team
may be diverted from our core business if we undertake an acquisition. Potential
acquisitions also involve numerous risks, including, among others:
- Problems assimilating the purchased operations, technologies or products;
- Costs associated with the acquisition;
- Adverse effects on existing business relationships with suppliers and
customers;
- Risks associated with entering markets in which we have no or limited
prior experience;
- Potential loss of key employees of purchased organizations; and
- Potential litigation arising from the acquired company's
operations before the acquisition.
Our inability to overcome problems encountered in connection with
such acquisitions could divert the attention of management, utilize scarce
corporate resources and harm our business. In addition, we are unable to predict
whether or when any prospective acquisition candidate will become available or
the likelihood that any acquisition will be completed.
Cyclical Nature of Semiconductor Industry
The semiconductor industry, including the memory markets in which we
compete, is highly cyclical and is characterized by constant and rapid
technological change, rapid product obsolescence and price erosion, evolving
standards, short product life cycles and wide fluctuations in product supply and
demand. The industry has experienced significant downturns, often connected
with, or in anticipation of, maturing product cycles of both semiconductor
companies' and their customers' products and declines in general economic
conditions. These downturns have been characterized by diminished product
demand, production overcapacity, high inventory levels and accelerated erosion
of average selling prices. Any future downturns could have a material adverse
effect on our business and operating results. Furthermore, any upturn in the
semiconductor industry could result in increased demand for, and possible
shortages of,
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components we use to manufacture and assemble our ICs. Such shortages could have
a material adverse effect on our business and operating results.
Product Returns And Order Cancellation
To the extent we manufacture products in anticipation of future demand that
does not materialize, or in the event a customer cancels outstanding orders, we
could experience an unanticipated increase in our inventory. A lack of consumer
demand for our products may also cause increased product returns. A majority of
our sales through aftermarket channels include limited rights to return unsold
inventory. In addition, while we may not be contractually obligated to accept
returned products, we may determine that it is in our best interest to accept
returns in order to maintain good relations with our customers. Product returns
would increase our inventory and reduce our revenues. We have had to write-down
inventory in the past for reasons such as obsolescence, excess quantities and
declines in market value below our costs.
We have no long-term volume commitments from our customers except those
subject to cancellation by the customer. Sales of our products are made through
individual purchase orders and, in certain cases, are made under master
agreements governing the terms and conditions of the relationships. Customers
may change, cancel or delay orders with limited or no penalties. We have
experienced cancellations of orders and fluctuations in order levels from
period-to-period and we expect to continue to experience similar cancellations
and fluctuations in the future which could result in fluctuations in our
revenues.
Additional Capital Funding to Impair Value of Investment
If we expand more rapidly than currently anticipated or if our working
capital needs exceed our current expectations, we may need to raise additional
capital through public or private equity offerings or debt financings. Our
future capital requirements depend on many factors including our research,
development, sales and marketing activities. We do not know whether additional
financing will be available when needed, or will be available on terms favorable
to us. If we cannot raise needed funds on acceptable terms, we may not be able
to develop or enhance our products, take advantage of future opportunities or
respond to competitive pressures or unanticipated requirements. To the extent we
raise additional capital by issuing equity securities, our shareholders may
experience substantial dilution and the new equity securities may have greater
rights, preferences or privileges than our existing common stock.
Geographic Concentration of Operation
All of our manufacturing operations are located in our facility in garden
Grove, California. Due to this geographic concentration, a disruption of our
manufacturing operations, resulting from sustained process abnormalities, human
error, government intervention or natural disasters such as earthquakes, fires
or floods could cause us to cease or limit our manufacturing operations and
consequently harm our business, financial condition and results of operations.
Compliance with Environmental Laws and Regulations
We are subject to a variety of environmental laws and regulations
governing, among other things, air emissions, waste water discharge, waste
storage, treatment and disposal, and remediation of releases of hazardous
materials. Our failure to comply with present and future requirements could harm
our ability to continue manufacturing our products. Such requirements could
require us to acquire costly equipment or to incur other significant expenses to
comply with environmental regulations. The imposition of additional or more
stringent environmental requirements, the results of future testing at our
facilities, or a determination that we are
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potentially responsible for remediation at other sites where problems are not
presently known to us, could result in expenses in excess of amounts currently
estimated to be required for such matters.
Stock Price Volatility
The stock market in general, and the market for shares of technology
companies in particular, has experienced extreme price fluctuations. These price
fluctuations are often unrelated to the operating performance of the affected
companies. Many technology companies, including the Company, have experienced
dramatic volatility in the market prices of their common stock. If our future
operating results are below the expectations of stock market analysts and
investors, our stock price may decline. We cannot be certain that the market
price of our common stock will remain stable in the future. Our stock price may
undergo fluctuations that are material, adverse and unrelated to our
performance.
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USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of
Shares by the Selling Stockholder.
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SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
Shares of Common Stock of the Company owned by each Selling Stockholder and the
Shares to be offered pursuant to this Report.
<TABLE>
<CAPTION>
Name of Selling Number of Shares Number of Shares Number of
Stockholder Owned Before to be Offered Shares owned
the Offering After Offering
---------------------- ------------------------ ----------------------- ------------------
<S> <C> <C> <C>
Danny M. Beadle (1) 884,167 (2) 884,167 (2) 0
</TABLE>
(1) Danny M. Beadle has been on the Board of Advisors of the Company, which is
an informal body that provides advice in the areas of technology, business
management, industry conditions, etc. He has been paid an aggregate of $ 10,000
by the Company as advisory board fees or consulting fees. He has not been active
as a member for the last two months. It is not currently certain whether he may
continue to serve as a member of the Board of Advisors.
(2) In connection with the Share Exchange Agreement executed on October 26, 2000
among the Company Productivity Enhancement Products, Inc. and the Stockholder
(Danny M. Beadle), the Company issued 884,167 shares of Common Stock in exchange
for 2,683,091 shares of Productivity Enhancement Products, Inc. Common Stock
received from Danny M. Beadle. The Share Exchange Agreement was entered into
among the parties as part of a unified plan of, among other things, a redemption
by PEP of a portion of its outstanding stock from its Stockholder and finally
the transfer of PEP stock by the Stockholder to the Registrant in exchange for
shares of the Registrant's Common Stock.
Fifteen percent (15%) of the Company's shares issued at the closing
were deposited by the Stockholder with the Secretary of the Registrant to secure
indemnification obligations of PEP and the Stockholder. Such indemnification
shares are deemed to be pledged by the Stockholder to the Secretary of the
Company or any successor thereto pursuant to the Share Exchange Agreement for a
period ending on the earlier of June 30, 2001 or 30 days after the Registrant
files with the Securities and Exchange Commission or publishes its fiscal year
2001 audited consolidated financial statements.
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PLAN OF DISTRIBUTION
The distribution of the Shares of Common Stock offered hereby may be
effected from time to time in one or more transactions. Any of the shares of
Common Stock offered hereby may be offered for sale, from time to time, by the
Company or the Selling Stockholders, or by permitted transferees or successors
of the Selling Stockholders, on the NASDAQ over-the-counter market, or
otherwise, or a combination of these methods, at prices and on terms then
obtainable, at fixed prices, at prices then prevailing at the time of sale, at
prices related to such prevailing prices, or in negotiated transactions at
negotiated prices, or otherwise. The shares of Common Stock offered hereby may
be sold by one or more of the following: (i) through underwriters, or through
underwriting syndicates; (ii) through one or more dealers or agents (which may
include one or more underwriters) including, but not limited to: (a) block
trades in which the broker or dealer so engaged will attempt to sell the shares
of Common Stock as agent, but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus; )c) ordinary brokerage transactions; and (d) transactions in which
the broker solicits purchasers; or (iii) directly to one or more purchasers. The
names of any underwriters or agents involved in the sale of Shares will be set
forth in a Prospectus Supplement. Concurrently with sales under this Prospectus,
the Company may effect other sales of Common Stock or securities in private or
exempt transactions and Selling Stockholders may effect other sales of Common
Stock under Rule 144 or in private or exempt resale transactions.
Underwriters or agents may sell the Shares to or through dealers, and
such dealers may receive compensation in the form of discounts or concessions
allowed or re-allowed to dealers from the underwriters. Underwriters, dealers,
brokers or other agents engaged by the respective seller may arrange for other
such persons to participate. Any fixed initial public offering price and any
discounts and concessions to dealers may be changed from time to time.
Underwriters, dealers and agents who participate in the distribution of the
shares may be deemed to be underwriters within the meaning of the Securities
Act, and any discounts or commissions received by them from the Company or any
profit on the resale of shares by them may be deemed to be underwriting
discounts and commissions thereunder. The proposed amounts of shares, if any, to
be purchased by underwriters and the compensation, if any, of underwriters or
agents will be set forth in a Prospectus Supplement. All underwriters',
dealers', brokers' or agents, commissions concessions or discounts will be paid
by the respective seller. Underwriters and agents who participate in the
distribution of the shares may make a market in the Shares, but will not be
obligated to do so and may discontinue market making activities at any time
without notice. Underwriters, dealers and agents who participate in the
distribution of the shares may be entitled, under agreements entered into with
the Company, to indemnification against certain liabilities, including
liabilities under the Securities Act, or to contribution for payments which such
underwriters, dealers or agents may be required to make in respect thereof.
Underwriters and agents may engage in transactions with, or perform services
for, the Company in the ordinary course of business.
From time to time during the effectiveness of the Registration
Statement of which this Prospectus is a part, the Company or one or more of the
Selling Stockholders may purchase securities of the Company in transactions
effected in accordance with Regulation M under the Exchange Act or as otherwise
may be legally permitted.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 40, 000,000 shares of Common Stock,
without par value per share, of which 20,897,314 shares were issued and
outstanding at Novermber 22, 2000, and 8,000,000 shares of Preferred Stock,
without par value per share, of which all have been
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designated "Series A Preferred Stock", none of which were outstanding at October
25, 2000.
COMMON STOCK
Each stockholder is entitled to one vote for each share of Common Stock
held of record on all matters to be voted on by stockholders, and stockholders
are not entitled to cumulate votes for the election of directors. Stockholders
have no preemptive rights or other subscription rights. There are no conversion
rights or redemption rights with respect to shares of Common Stock. All
outstanding shares of Common Stock are, and those offered hereby will be, when
issued, validly issued, fully paid and nonassessable. Holders of Common Stock
are entitled to such dividends as may be declared by the Board of Directors out
of funds legally available therefore. On liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to receive pro rata the
net assets of the Company remaining after the payment of debts, expenses and the
liquidation preference of any outstanding shares of Preferred Stock. The
Company's Common Stock is traded on the NASDAQ Stock Market under the symbol
"DPAC".
PREFERRED STOCK
The Company's Board of Directors, pursuant to the Certificate of
Incorporation, as amended, is authorized to issue the Preferred Stock in one or
more series and to fix the voting rights, liquidation preferences, dividend
rights, conversion rights, redemption rights and terms, including sinking fund
provisions, and certain other rights and preferences of the Preferred Stock. The
Board of Directors, without stockholder approval, can therefore, issue Preferred
Stock with voting, conversion and other rights that could adversely affect the
voting power and other rights of, and amounts payable with respect to, the
Common Stock. This may be deemed to have a potential anti-take-over effect
because the issuance of Preferred Stock in accordance with such provision may
delay, defer or prevent a change of control regarding us and could adversely
affect the price of our Common Stock.
REGISTRATION RIGHTS
Pursuant to and in connection with the Share Exchange Agreement, the
Company has granted registration rights to Danny M. Beadle ("Dan") with respect
to the aggregate 884,167 shares of Common Stock. Dan has the right in the event
of a future registration by the Company of its capital stock to include his
shares in such registration under certain conditions. The Company will pay all
expenses associated with this registration and such future registrations, if
any, other than underwriting discounts and sales commissions, and registration
and "blue sky" filing fees attributable to the shares sold by Dan and fees and
costs of attorneys engaged by Dan.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar of the Company's Common Stock is U.S.
Stock Transfer Corporation, 1745 Gardena Avenue, Glendale, CA 91204.
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LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Yocca Patch & Yocca, LLP, Irvine, California. All
attorneys who are members of, employed by or of counsel with Yocca Patch &
Yocca, participating in such matter on behalf of such firm beneficially owned as
of November 22, 2000, no shares of Common Stock of the Company.
EXPERTS
The consolidated financial statements of Dense-Pac as of February 29,
2000 and February 28, 1999 and for each of the two years in the period ended
February 29, 2000, incorporated in this prospectus by reference from Dense-Pac's
Annual Report on Form 10-KSB for the fiscal year ended February 29, 2000 have
been audited by Deloitte & Touche LLP, 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.
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MATERIAL CHANGES
The Company acquired on October 26, 2000 Productivity Enhancement
Products, Inc., a California corporation, which is a leading system-level
engineering development and manufacturing outsourcing firm with revenue for the
six-month period ended June 30, 2000, of approximately $3.5 million . It is
expected that PEP systems design capabilities will strengthen the Company's
ability to respond to customers' packaging technology, especially in the
communications industry. The Form 8-K Current Report filed on November 13, 2000
reports the acquisition of PEP, and is incorporated herein by reference. Within
60 days thereafter, financial information concerning the acquired company is
required to be filed with the SEC.
Even though the acquisition of PEP is expected to strengthen and
diversify the Company's relationships with system manufacturers and revenue
base, there are a number of challenges to be overcome for the Company to create
and maintain a competitive edge technologically. Also, market conditions have
become more challenging recently, and demand has been materially adversely
affected. Certain computer OEM's and others have announced expected downturns in
demand. See "RISK FACTORS" cautionary statements beginning at page 3 hereof for
certain information that should be considered by prospective purchasers of the
Shares.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The documents listed below have been filed by the Company with the
Commission under the Exchange Act and are incorporated herein by reference:
a. The Company's Annual Report on Form 10-KSB for the year ended February
29, 2000, filed May 30, 2000;
b. Proxy Statement filed pursuant to Section 14 of the Exchange Act in
connection with the Company's 2000 Annual Meeting of Stockholders,
filed June 26, 2000;
c. Quarterly Report on Form QSB for the period ended May 31, 2000, filed
July 12, 2000;
d. Quarterly Report on Form QSB for the period ended August 31, 2000,
filed October 6, 2000;
e. Quarterly Report on Form QSB/A for the period ended August 31, 2000,
filed October 11, 2000; and
f. The Company's Current Report on Form 8-K filed on November 13, 2000
reporting under Item 2 Acquisition of Productivity Enhancement
Products, Inc.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Report and prior to
the termination of the offering of the Shares shall be deemed to be incorporated
by reference in this Report and to be a part thereof from the date of filing of
such documents.
Any Statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Report to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is deemed to be
incorporated herein by reference, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Report.
The public may read and copy any materials that the Company files with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. SEC maintains an
Internet site that contains Report, proxy and information statements, and other
information regarding issuers that file electronically with the SEC, the web
address of which is http://www.sec.gov.
The Company will provide without charge to each person (including any
beneficial owner) to whom a copy of this Report is delivered, upon the written
or oral request of any such person, a copy of any or all the foregoing documents
incorporated herein by reference (other than exhibits to such documents).
Written or telephone requests should be directed to: William M. Stowell,
Secretary, Dense-Pac Microsystems, Inc., 7321 Lincoln Way, Garden Grove,
California 92641, telephone: (714) 898-0007.
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DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
The California General Corporation Law permits the indemnification
of officers, directors, employees and agents of the Company. The Company's
Bylaws and Indemnification Agreements between the Company and its Officers and
Directors require the Company to indemnify such persons to the full extent
permitted by law. Each person will generally be indemnified in any proceeding if
he acted in good faith and in a manner which he reasonably believed to be in the
best interests of the Company, and in the case of a criminal proceeding, had no
reasonable cause to believe his conduct was unlawful. Indemnification would
cover expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement. In addition, the Company's Articles of Incorporation provide that
directors shall not be personally liable to the Company or its stockholders for
monetary damages for breach of their fiduciary duty, provided, however, that a
director's liability will not be limited in the case of (i) acts or omissions
that show a reckless disregard for the director's duty to the Company or its
stockholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing his duties, or a risk of
serious injury to the Company or its stockholders, (ii) for acts or omission
that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the Company or its stockholder, (iii) any
transaction from which the director derived an improper personal benefit, (iv)
acts or omissions that the director believed to be contrary to the best
interests of the Company, that involved an absence of good faith or that
involved intentional misconduct or a knowing and culpable violation of law, (v)
transactions in which the director has a material financial interest or involve
interrelated directors, and (vi) distributions, loans or guaranties in violation
of California law.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is
therefore unenforceable.
Pursuant to a Registration Rights Agreement with Danny M. Beadle (a
Selling Stockholder) the Company has agreed to indemnify Dan and his
representatives or successors, from various liabilities under the Securities Act
of 1933.
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PART II
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All of the following expenses will be paid by the Registrant
<TABLE>
<CAPTION>
<S> <C>
* Registration Fee $ 731
* "Blue Sky" Fees $ 2,000
* Legal fees and expenses $ 20,000
* Accounting fees and expenses $ 10,000
* Duplication and miscellaneous $ 2,000
---------------
$ 34,731
===============
</TABLE>
* Estimated
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The California General Corporation Law permits the indemnification
of officers, directors, employees and agents of the Company. The Company's
Bylaws and Indemnification Agreements between the Company and its Officers and
Directors require the Company to indemnify such persons to the full extent
permitted by law. Each person will generally be indemnified in any proceeding if
he acted in good faith and in a manner which he reasonably believed to be in the
best interests of the Company, and in the case of a criminal proceeding, had no
reasonable cause to believe his conduct was unlawful. Indemnification would
cover expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement. In addition, the Company's Articles of Incorporation provide that
directors shall not be personally liable to the Company or its stockholders for
monetary damages for breach of their fiduciary duty, provided, however, that a
director's liability will not be limited in the case of (i) acts or omissions
that show a reckless disregard for the director's duty to the Company or its
stockholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing his duties, or a risk of
serious injury to the Company or its stockholders, (ii) for acts or omission
that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the Company or its stockholder, (iii) any
transaction from which the director derived an improper personal benefit, (iv)
acts or omissions that the director believed to be contrary to the best
interests of the Company, that involved an absence of good faith or that
involved intentional misconduct or a knowing and culpable violation of law, (v)
transactions in which the director has a material financial interest or involve
interrelated directors, and (vi) distributions, loans or guaranties in violation
of California law.
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EXHIBITS
DENSE-PAC MICROSYSTEMS, INC.
FORM S-3 REGISTRATION STATEMENT
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
2.1 Share Exchange Agreement dated October 26, 2000 among the
Registrant, PEP and the Stockholder.*
2.2 Registration Rights Agreement dated October 26, 2000 between
the Registrant and the Stockholder.*
2.3 Non-Compete Agreement dated October 26, 2000 among the
Registrant, PEP and the Stockholder.*
5.1 Opinion of Yocca Patch & Yocca, LLP.
23.1 Consent of Yocca Patch & Yocca, LLP (included in Exhibit
5.1).
23.2 Consent of Deloitte & Touche, LLP.
24.1 Power of Attorney.
99.1 News Release concerning acquisition of PEP.*
</TABLE>
* Incorporated by reference to the Registrant's current report on Form 8-K
dated October 26, 2000
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UNDERTAKINGS
(a) The Company hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any report required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the report any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(2)(ii) do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic Reports filed by the Company
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered 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.
(b) 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 (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 herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provision, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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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 Garden Grove, State of California.
Date: November 27, 2000 DENSE-PAC MICROSYSTEMS, INC.
/s/ Ted Bruce
By: ----------------------------
Ted Bruce
Chief Executive Officer
President & Director
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In accordance with the Securities Exchange Act of 1933, this
registration statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
/s/ Richard J. Dadamo
Date: November 27, 2000 --------------------------------------------------
Richard J. Dadamo
Chairman of the Board
/s/ Ted Bruce
Date: November 27, 2000 --------------------------------------------------
Ted Bruce
Chief Executive Officer, President, Director
(Principal Executive Officer)
/s/ William M. Stowell
Date: November 27, 2000 --------------------------------------------------
William M. Stowell
Vice President - Finance
Chief Financial Officer & Secretary
(Principal Financial and Accounting Officer)
/s/ Roger G. Claes
Date: November 27, 2000 --------------------------------------------------
Roger G. Claes, Director
/s/ Samuel W. Tishler
Date: November 27, 2000 --------------------------------------------------
Samuel W. Tishler, Director
/s/ Gordon M. Watson
Date: November 27, 2000 --------------------------------------------------
Gordon M. Watson, Director
/s/ Richard H. Wheaton
Date: November 27, 2000 --------------------------------------------------
Richard H. Wheaton, Director
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