<PAGE> 1
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETED AND MAY
CHANGE. THE SELLING SHAREHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT WE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND
IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
Filed Pursuant to Rule 424(b)(3)
Registration Statement Number 333-35752
SUBJECT TO COMPLETION
PROSPECTUS DATED APRIL 27, 2000
PROSPECTUS
1,734,532 SHARES
ELTRAX SYSTEMS, INC.
COMMON STOCK
This prospectus covers the sale of up to 1,734,532 shares of Eltrax Systems,
Inc. common stock by certain stockholders. We will not receive any proceeds from
the sale of the shares by the stockholders.
Our common stock is listed on the Nasdaq National Market System under the symbol
"ELTX." The last reported sale price of the common stock as reported on the
Nasdaq National Market System on April 25, 2000, was $6.00 per share.
The selling stockholders, directly or through agents, brokers or dealers
designated from time to time, may sell the shares of our common stock offered
hereby from time to time on terms to be determined at the time of sale.
See "Plan of Distribution."
We have agreed to bear all expenses of registration of our common stock offered
hereby under federal and state securities laws.
SEE "RISK FACTORS" ON PAGE 4 FOR CERTAIN FACTORS RELATING TO AN
INVESTMENT IN THE SHARES.
----------------------------------
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 , 2000.
<PAGE> 2
NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS DOCUMENT OR INCORPORATED HEREIN BY
REFERENCE THAT ARE NOT STATEMENTS OF HISTORICAL FACTS ARE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE," "INTEND," "WILL" AND
SIMILAR EXPRESSIONS ARE EXAMPLES OF WORDS THAT IDENTIFY FORWARD-LOOKING
STATEMENTS. FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS
REGARDING OUR FUTURE FINANCIAL POSITION, BUSINESS STRATEGY AND EXPECTED COST
SAVINGS. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON OUR CURRENT BELIEFS, AS
WELL AS ASSUMPTIONS WE HAVE MADE BASED UPON INFORMATION CURRENTLY AVAILABLE TO
US.
EACH FORWARD-LOOKING STATEMENT REFLECTS OUR CURRENT VIEW OF FUTURE
EVENTS AND IS SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM ANY RESULTS EXPRESSED OR IMPLIED BY OUR
FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THE RESULTS EXPRESSED OR IMPLIED BY ANY FORWARD-LOOKING
STATEMENTS INCLUDE:
- - GENERAL NATIONAL AND WORLDWIDE ECONOMIC CONDITIONS;
- - OUR ABILITY TO IMPLEMENT OUR BUSINESS PLAN AND MANAGE OUR GROWTH;
- - THE ACCEPTANCE AND INCREASED USE OF THE INTERNET AND INTERNET-BASED
BUSINESS SOLUTIONS;
- - RAPID TECHNOLOGICAL AND REGULATORY CHANGES IN THE INDUSTRY WE SERVE;
- - OUR UNCERTAIN REVENUE GROWTH;
- - THE ABILITY TO IDENTIFY APPROPRIATE BUSINESS TO ACQUIRE AND EFFICIENTLY
INTEGRATE THOSE ACQUIRED BUSINESSES;
- - FOREIGN CURRENCY FLUCTUATIONS AND OTHER UNCERTAINTIES RELATING TO OUR
BUSINESS IN FOREIGN COUNTRIES;
- - COMPETITION; AND
- - OTHER FACTORS DISCLOSED IN THE SECTION ENTITLED RISK FACTORS BELOW AND
IN OUR OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
ALL SUBSEQUENT FORWARD-LOOKING STATEMENTS RELATING TO THE MATTERS DESCRIBED IN
THIS DOCUMENT AND ATTRIBUTABLE TO US OR TO PERSONS ACTING ON OUR BEHALF ARE
EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY SUCH FACTORS. WE HAVE NO OBLIGATION TO
PUBLICLY UPDATE OR REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT NEW
INFORMATION, FUTURE EVENTS, OR OTHERWISE, EXCEPT AS REQUIRED BY APPLICABLE
FEDERAL SECURITIES LAWS, AND WE CAUTION YOU NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that Eltrax
Systems, Inc., a Minnesota corporation, filed with the Securities and Exchange
Commission utilizing a "shelf" registration process. Under this shelf process,
the selling stockholders may, from time to time, sell the common stock described
in this prospectus. We may prepare a prospectus supplement at any time to add,
update or change information contained in this prospectus. Except for those
instances in which a specific date is referenced, the information in this
prospectus is accurate as of April 27, 2000. You should read both this
prospectus and any prospectus supplement together with additional information
described under the heading "Where You Can Find More Information".
We believe that we have included or incorporated by reference all
information material to investors in this prospectus, but certain details that
may be important for specific investment purposes have not been included. To see
more detail, you should read the exhibits filed with or incorporated by
reference into the registration statement.
-2-
<PAGE> 3
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information
with the SEC. You may read and copy any document we file at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the SEC: 7 World Trade Center, Thirteenth Floor,
New York, NY 10048 and 500 West Madison Street, Suite 1400, Chicago, IL 60661.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the SEC's public reference rooms. Our SEC filings are also available to the
public over the Internet at the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the following documents we filed with the SEC and our
future filings with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 until all of the securities are sold:
1. Our Annual Report on Form 10-K for the year ended December 31,
1999, filed with the Commission on March 27, 2000
(as amended by Form 10-K/A filed April 28, 2000).
2. The description of our common stock contained in our
Registration Statement on Form 8-A (file No. 0-22190).
3. Our Quarterly Report on Form 10-Q for the quarter ended March
31, 2000, filed with the Commission on May 15, 2000.
You may request a copy of these filings at no cost, by writing or calling us at
the following address:
Eltrax Systems, Inc.
400 Galleria Parkway
Suite 300
Atlanta, Georgia 30339
Attn: Corporate Secretary
You should rely only on the information incorporated by reference or provided in
this prospectus and any supplement. We have not authorized anyone else to
provide you with different information.
-3-
<PAGE> 4
THE COMPANY
Eltrax Systems, Inc., a Minnesota corporation, is a global provider of
outsourced information technology ("IT") solutions. We operate through two
separate business units: the Technology Services Group ("TSG") and the
Hospitality Services Group ("HSG"). The TSG provides technology solutions,
customer care services and acts as an application service provider ("ASP"). The
HSG provides enterprise information solutions for the global hospitality
industry. We have previously announced that we are exploring various
alternatives to further our strategy of expanding our penetration of the
network, application and ASP markets. We are currently focusing these efforts on
the valuation and possible disposition of certain non-strategic assets, although
there can be no assurance that any disposition will occur. Our headquarters are
located at 400 Galleria Parkway, Suite 300, Atlanta, GA 30339 and our telephone
number is (770) 612-3500. We maintain a worldwide web address at www.eltrax.com.
TECHNOLOGY SERVICES GROUP
The TSG is a provider of outsourced Internet- and network-based
applications and services to over 3,000 clients. Our clients are typically
small- and medium-sized enterprises with revenue of $50 million to $1 billion
where outsourced IT solutions provide a cost-effective alternative to developing
and maintaining internal technology infrastructures. The TSG is comprised of
three divisions:
- TECHNOLOGY SOLUTIONS. We provide comprehensive solutions, such
as strategic assessment, application and network design,
custom application development and integration, network
management, support and maintenance that enable our clients to
more effectively communicate and manage information.
- CUSTOMER CARE SOLUTIONS. We simplify the technical support
functions of our clients by providing 24x7 help desk support
and training and installation services for the solutions that
we have developed and implemented.
- APPLICATION SERVICE PROVIDER (ASP). We provide our clients
with application outsourcing and remote delivery of
applications that lower total technology-related costs and
infrastructure requirements. Our existing core competencies
within the IT outsourcing marketplace and large customer base
have allowed us to more rapidly introduce our ASP offerings.
OUR SOLUTION AND ITS BENEFITS
We have developed our product and service offerings based on our
propriety Plan, Build, Run(SM) methodology, which offers clients rapid delivery
of comprehensive solutions for the effective deployment of e-business or other
technology-related initiatives. Our solutions provide clients with the following
benefits:
- ABILITY TO FOCUS ON CORE COMPETENCIES. Our solutions allow
small- and medium-sized companies to focus on their core
business competencies by outsourcing all or a portion of their
IT needs. Many of our clients do not have the resources to
maintain internal personnel with the advanced skills required
in today's IT environment.
- ACCESS TO COMPREHENSIVE IT FUNCTIONS. We provide services
across the entire IT spectrum from consulting to
implementation to maintenance. We believe the option of a
single-source for IT outsourcing is especially appealing to
our clients who often lack the time and resources to
coordinate a multi-party effort. Additionally, we provide our
clients access to specific, high-level IT expertise which
would normally be handled by an IT generalist.
- ENHANCED RELIABILITY FOR KEY BUSINESS APPLICATIONS. Many of
our clients choose to outsource their key business
applications. Any service interruption involving key
applications such as e-mail, hosting, customer care and
network administration can be operationally debilitating and
costly. Our solutions offer a guaranteed level of performance,
which provides clients with the reliability they require from
their key business applications.
OUR MARKET OPPORTUNITY
We believe we are positioned to take advantage of a number of key
trends in today's IT marketplace, including the emergence of the ASP market,
continued growth of network services management and increased emphasis by
organizations on customer care. Dataquest estimates that the ASP market will
grow to $22.7 billion in 2003, representing a compound annual growth rate (CAGR)
of 90.7%. The U.S. network services market is estimated by the GartnerGroup to
grow to $70.6 billion by 2003. In addition, IDC estimates that the global market
for outsourcing of customer relationship management services, of which customer
care outsourcing is a subset, will grow at a CAGR of 18.6% from $24.8 billion in
1998 to $58.3 billion in 2003.
OUR STRATEGY
Based on these current trends, we intend to focus most of our product
development and marketing skills on promoting and growing the TSG, especially
the ASP division. Our objective is to become the leading provider of outsourced
Internet- and network-based solutions to small- and medium-sized businesses. Our
strategy for achieving this objective is as follows:
- EXPAND SERVICE OFFERINGS. As a total solution provider of
outsourced IT services for small- to medium-sized clients, we
intend to continue to expand our service offerings within all
segments of the TSG to capture a larger percentage of our
clients' IT budgets.
- OFFER NEW ASP PRODUCTS. We intend to continue to align
ourselves with other types of application developers and also
to continue to develop proprietary applications where
applicable.
- MARKET OUR ASP PRODUCTS TO OUR EXISTING CLIENT BASE. We intend
to continue to target our large, existing client base for
additional ASP revenue opportunities.
- EXPAND STRATEGIC ALLIANCES. We intend to expand strategic
relationships with various manufacturers of networking
hardware, software developers and vertical industry
specialists in order to broaden our client base.
- FOCUS ON VERTICAL MARKETS. We intend to focus on specific
vertical markets, including, but not limited to: (i)
communications; (ii) retail; (iii) education; (iv)
manufacturing; and (v) healthcare. These are vertical markets
in which we have significant prior experience deploying IT
solutions.
HOSPITALITY SERVICES GROUP
The HSG designs, manufactures, markets and services enterprise
information products and services for the global hospitality industry. These
products and services consist of application-specific software and hardware
systems, supplemented by training, installation, maintenance and call center
support services. The HSG concentrates on three major areas: restaurant
solutions, lodging solutions and energy management solutions. In addition to our
software enterprise products and services and hardware products, we offer a wide
variety of support services and products for our hotel and restaurant
information systems. In addition, we offer training, installation, call center
support and maintenance contracts for all hospitality products.
RISK FACTORS
You should carefully consider the following risk factors as well as other
information included in this document. If any of the following risks or
uncertainties actually occur, our business, financial condition and results of
operations could be materially adversely affected. In that event, the trading
price of our common stock could decline.
OUR FUTURE RESULTS OF OPERATIONS ARE UNCERTAIN BECAUSE WE ARE SIGNIFICANTLY
REFOCUSING OUR BUSINESS.
We believe that the technology services and ASP markets will grow
significantly over the next five years. As a result, we intend to refocus our
business efforts to devote most of our energy and resources to promote and grow
the TSG, especially its ASP division. Additionally we recently engaged a
financial advisor to review our current business strategy and assist us in
exploring various financing and restructuring alternatives to maximize
shareholder value. As part of that review and business strategy development, we
are currently exploring the possibility of disposing of certain non-strategic
assets. Although we can not assure you that we will be able to implement our new
business strategy, if we do implement this strategy, our historical results of
operations, which are the result of our old business strategy, may not give you
an accurate indication of how we will perform in the future.
-4-
<PAGE> 5
WE MAY BE UNABLE TO MEET OUR FUTURE WORKING CAPITAL REQUIREMENTS.
Our business strategy calls for rapid growth, particularly in the TSG
and in our ASP business. This growth will require investment in personnel and
infrastructure, which in turn will require additional financing. Additional
financing may not be available to us on favorable terms or at all. If adequate
funds are not available on acceptable terms, we may not be able to continue to
expand our business operations. This in turn could harm our business, results of
operations and financial condition. In addition, if we raise additional funds
through the issuance of equity or convertible debt securities, the percentage of
ownership of our existing stockholders will be reduced and any new securities
could have rights, preferences and privileges senior to those of our common
stock. Furthermore, if we raise capital or acquire businesses by incurring
indebtedness, we will become subject to the risks associated with indebtedness
including interest rate fluctuations and any financial or other covenants that
our lender may require.
WE HAVE A HISTORY OF LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE.
We have a history of net losses, including a net loss of $9.8 million
for the 1999 fiscal year and a net loss of $6.5 million for the 1998 fiscal
year. Further, developing our new business strategy and expanding our services
will require significant additional capital and other expenditures. Accordingly,
we may continue to generate net losses in the future, and we may never become
profitable.
OUR SUCCESS DEPENDS ON THE ACCEPTANCE AND INCREASED USE OF BOTH INTERNET-BASED
BUSINESS SOFTWARE SOLUTIONS AND OUR NEW PRODUCTS AND SERVICES, AND WE CANNOT BE
SURE THAT THIS WILL HAPPEN.
Our new business model depends in large part on the adoption of
Internet-based business software solutions by our target market of middle market
commercial users. Our business could suffer dramatically if Internet-based
software solutions are not accepted or are not perceived to be effective. The
market for Internet services, private network management solutions and widely
distributed Internet-enabled packaged application software has only recently
begun to develop, and we believe many of our potential customers are not aware
of the benefit of the outsourced solutions we provide.
The growth of Internet-based business software solutions could also be limited
by:
- - concerns over transaction security and user privacy;
- - inadequate network infrastructure for the Internet; and
- - inconsistent performance of the Internet.
We cannot be certain that commercial customers will accept and employ
Internet-based software solutions or that this market will grow at the rate we
expect. If this market does not grow or grows more slowly than our predictions
our financial condition and results of operations would be adversely affected.
Additionally, many of our products and services are based on new or
improved technologies that have not previously been available. We will have to
overcome the difficulties inherent in the introduction of new or improved
technologies to the market, including our ability to demonstrate to customers
the technical capabilities and the value of these new technologies, and there is
no assurance that we can do so successfully. Lack of market acceptance of our
products and services would adversely affect our business.
WE MAY NOT BE ABLE TO DELIVER OUR SERVICES IF THIRD PARTIES DO NOT PROVIDE US
WITH KEY COMPONENTS OF OUR INFRASTRUCTURE.
We depend on other companies such as software vendors and equipment
manufacturers to supply us with key components of the computer and
telecommunications equipment and the telecommunications services that we use to
provide our application hosting services. A disruption in our ability to provide
hosting services could prevent us from maintaining the required standards of
service, which would cause us to incur contractual penalties, and would harm our
business. Additionally, if any of our significant software vendors stop making
their products available to us or choose to compete against us, our business
would be harmed. Moreover, our success depends upon the continued popularity of
the product
-5-
<PAGE> 6
offerings of these vendors and on our ability to establish relationships with
new vendors in the future. If we are unable to obtain packaged applications from
these or comparable vendors or if our vendors choose to compete with us or the
popularity of their products declines, our ability to customize, implement or
host packaged software applications may be adversely affected.
IF WE ARE UNABLE TO EFFICIENTLY INTEGRATE AND OPERATE RECENT ACQUISITIONS, OUR
BUSINESS WOULD BE HARMED.
During the last few years, we have merged with or acquired numerous
companies. The rapid growth associated with these acquisitions and the
difficulties we have experienced in integrating these businesses has placed, and
will continue to place, a significant strain on our systems, controls and
managerial resources. Our management has expended, and expects to continue to
expend, significant time and effort in integrating the operations of the
businesses we acquire and in expanding our systems and controls to these
acquired businesses. If we do not accomplish these tasks, our results of
operations and financial condition may be materially and adversely affected.
OUR GROWTH COULD BE LIMITED IF WE ARE UNABLE TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL.
We believe that our success depends largely on our ability to attract
and retain highly skilled and qualified technical, managerial and marketing
personnel. Competition for this personnel in the information technology services
industry is intense. The inability to hire or retain qualified personnel could
hinder our ability to implement our business strategy and harm our business.
THE MARKETS WE SERVE ARE HIGHLY COMPETITIVE AND MANY OF OUR COMPETITORS HAVE
MUCH GREATER RESOURCES.
Competition in the information technology services industry is intense
and is expected to increase. Many of our competitors have substantially greater
financial, technical and marketing resources, larger customer bases, longer
operating histories, greater name recognition and more established relationships
in the industry than we do. Additionally, there are relatively few barriers to
entry in our business that would prevent new competitors from entering our
industry. We may not be able to compete effectively and, if we do not, our
financial condition and results of operations may be materially and adversely
affected.
OUR SUCCESS DEPENDS ON OUR ABILITY TO KEEP UP WITH RAPID TECHNOLOGICAL
DEVELOPMENTS AND EVOLVING INDUSTRY STANDARDS.
The Internet is characterized by rapidly changing technology, evolving
industry standards, and frequent new service and product announcements,
introductions and enhancements. Our future success will depend on our ability to
adapt our services to rapidly changing technologies and evolving industry
standards, to continually improve the performance, features and reliability of
our services and to insure the continued compatibility of our services with
products, services and architectures offered by various vendors or any
prevailing standard. If we do not keep up with those changes, our business may
suffer.
INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AGAINST US, EVEN WITHOUT MERIT, COULD
REQUIRE US TO ENTER INTO COSTLY LICENSES OR DEPRIVE US OF TECHNOLOGY WE REQUIRE.
Our industry is technology intensive. As the number of software
products in our target markets increases and the functionality of these products
further overlap, third parties may claim that the technology we develop or
license infringes their proprietary rights. Any infringement claims, even
without merit, could require us to enter into costly royalty or licensing
agreements to avoid service implementation delays. If successful, a claim of
product infringement could deprive us of the technology we require altogether.
Any of these outcomes could harm our business.
FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS.
Our success depends in part upon the protection of our proprietary
application software and hardware products. We have taken steps that we believe
are adequate to establish, protect and enforce our intellectual property rights.
However, we cannot assure you that these efforts to safeguard and maintain our
proprietary rights will be successful.
-6-
<PAGE> 7
Furthermore, the laws of many foreign countries in which we do business
do not protect intellectual property rights to the same extent or in the same
manner as do the laws of the United States. Although we have implemented and
will continue to implement protective measures in those countries, these efforts
may also not be successful. Additionally, even if our U.S. and international
efforts are successful, our competitors may independently develop non-infringing
technologies that are substantially similar or superior to our technologies.
WE DERIVE A SIGNIFICANT PORTION OF OUR REVENUE FROM INTERNATIONAL OPERATIONS.
Our international operations represented approximately 18.5% of our
total revenue for the year ended December 31, 1999. The largest portion of this
international revenue is generated in the Pacific Rim Region, which represented
approximately 7.4% of our total revenue for the year ended December 31, 1999.
Ongoing business in international markets subjects us to a wide variety of
risks, including:
- - unexpected changes in legal and regulatory requirements;
- - new tariffs or other barriers to certain international markets;
- - difficulties in staffing and managing foreign operations;
- - regional economic factors including recessions, hyperinflation or other
adverse economic developments;
- - longer payment cycles and greater difficulty in collecting accounts
receivable;
- - the possibility of expropriation;
- - limitations on the repatriation of investment income, capital stock and
other assets;
- - unstable political environments;
- - potentially adverse tax consequences; and
- - gains and losses on foreign currency conversion.
LEGAL UNCERTAINTIES AND GOVERNMENT REGULATION COULD ADD ADDITIONAL COSTS TO
DOING BUSINESS ON THE INTERNET AND COULD LIMIT OUR CLIENTS' USE OF THE INTERNET.
The laws governing the Internet remain largely unsettled. It may take
years to determine whether and how existing laws, such as those governing
intellectual property, privacy, libel, taxation and the need to qualify to do
business in a particular state, apply to the Internet. This legal uncertainty
could slow the growth in Internet use and decrease the acceptance of the
Internet as a commercial medium, which could harm our business.
In response to this legal uncertainty and the growing use of the
Internet, laws and regulations directly applicable to communications or commerce
over the Internet are becoming more prevalent. The adoption or modification of
laws or regulations relating to the Internet and Internet-based businesses could
harm our business.
OUR REVENUES HAVE HISTORICALLY DEPENDED HEAVILY UPON THE HOSPITALITY AND TOURISM
INDUSTRY AND WILL CONTINUE TO DO SO IF WE ARE UNSUCCESSFUL IN IMPLEMENTING OUR
BUSINESS PLAN.
Our historic results of operations depended upon demand for our
products and services in the hospitality and tourism industry. Although our new
business model focuses on the TSG, so long as we operate the HSG, we will
continue to rely heavily on those industries for our revenue and any decline in
capital spending by the hospitality and tourism industry, in general, or by our
key customers in those industries, in particular, could have a material adverse
effect on our business, operating results and financial condition.
-7-
<PAGE> 8
OUR STOCK PRICE HAS BEEN VOLATILE.
The stock market in general, and the market for technology and
Internet-related companies in particular, has recently experienced extreme
volatility that has often been unrelated to the operating performance of
particular companies. During the year ended December 31, 1999, the per share
sales price of our common stock on the Nasdaq National Market System has
fluctuated from a low of $3.125 to a high of $9.50. We believe that the
volatility of our stock price does not necessarily relate to our performance and
is broadly consistent with volatility experienced in our industry. Prices for
our common stock are determined in the marketplace and may be influenced by many
factors including factors that are beyond our control, such as prevailing market
conditions, changes in earnings estimates by industry research analysts, and
general economic, industry and market conditions. In addition, in order to
respond to competitive developments, we may from time to time make pricing,
service or marketing decisions that could harm our business. Also, our operating
results in one or more future quarters may fall below the expectations of
securities analysts and investors. In either case, the trading price of our
common stock would likely decline.
WE HAVE NOT PAID ANY DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY ANY
DIVIDENDS IN THE FORESEEABLE FUTURE.
We have never paid dividends on our common stock and do not anticipate
paying cash dividends in the foreseeable future. We intend to retain any
earnings to finance the development of our business and, consequently, may never
pay cash dividends. Our bank line of credit prohibits the payment of dividends.
SELLING STOCKHOLDERS
The selling stockholders may use this prospectus for the resale of
shares of our common stock being registered hereunder, although no selling
stockholder is obligated to sell any such shares. Of the 1,734,532 shares of
common stock offered by this prospectus, 1,194,532 shares were issued to selling
stockholders in a private placement on March 31, 2000 and 540,000 shares are
issuable upon exercise of certain warrants. The selling stockholders who hold
warrants are not required to exercise the warrants. None of the selling
stockholders is an affiliate of Eltrax.
The following table sets forth certain information regarding the
selling stockholders and the shares of common stock beneficially owned by each
of them. All information contained in the table is as of April 25, 2000. We are
not able to estimate the amount of shares that will be held by the selling
stockholders after the completion of this offering because those selling
stockholders may offer all or some of the shares and because there currently are
no agreements, arrangements or understandings with respect to the sale of any of
their shares. The following table assumes that all of the shares being
registered will be sold.
<TABLE>
<CAPTION>
- -------------------------------------- ----------------------- --------------------- --------------------------------
Shares Beneficially
Shares of Common Owned After
Stock Beneficially Number of Shares Completion of
Owned Prior to the the Offering (2)(3)
Selling Stockholder Offering (1) Being Offered Number Percent
------------ ------------- ------ -------
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
<S> <C> <C> <C> <C>
Taylor Koonce 67,500 37,500(4) 30,000 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Doug Roberson 196,175 106,250(4) 89,925 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Walt Lovett 483,250 106,250(4) 377,000 1.50
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Tim Amidon 50,000 50,000(4) 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Morgan and Cynthia Webb Payne 361,767 168,000(4) 193,767 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
</TABLE>
-8-
<PAGE> 9
<TABLE>
<CAPTION>
Shares Beneficially
Owned After
Shares of Common Completion of
Stock Beneficially Number of the Offering (2)(3)
Owned Prior to the Shares ----------------------
Selling Stockholder Offering (1) Being Offered Number Percent
------------ ------------- ------ -------
<S> <C> <C> <C> <C>
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Webbmont Holdings, L.P. 1,139,750 72,000(4) 1,067,750 4.25
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Frontier Performance Partnership L.P. 77,200 38,600 38,600 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Boston Small Cap Investment Fund 40,100 18,900 21,200 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Frontier Partners Fund, L.P. 4,800 1,800 3,000 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Frontier Partners Fund II, L.P. 68,900 34,700 34,200 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Hathaway Partners Investment L.P. 25,000 25,000 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Irvine Capital Partners, LP 25,000 25,000 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Manulife Global International Growth 3,000 3,000 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
NAL Foreign Equity 3,700 3,700 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
MIL Par Closed Fund 95,100 95,100 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
MIL Par Fund Ancillary 31,500 31,500 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
MIL Non Par Fund 7,900 7,900 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
MIL Shareholders Fund 15,400 15,400 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
MIL North American Equity Fund 60,900 60,900 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Manulife Reinsurance 21,100 21,100 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
NAL Staff Pension Fund 3,700 3,700 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Canadian Staff Pension Plan For
Manulife 7,800 7,800 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Manulife Cabot Global Equity 4,900 4,900 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Oppenheimer Enterprise Fund 425,532 425,532 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Pioneer Capital Management 60,000 60,000 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
RS MicroCap Growth Fund 90,000 20,000 70,000 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Sain Holdings Account Acc.
Transitional 30,000 30,000 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Sagitta Americas Mid Cap Growth Fund 20,000 20,000 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
Shares Beneficially
Owned After
Shares of Common Completion of
Stock Beneficially Number of the Offering (2)(3)
Owned Prior to the Shares -----------------------
Selling Stockholder Offering (1) Being Offered Number Percent
------------ ------------- ------ -------
<S> <C> <C> <C> <C>
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Tennessee Consolidated Retirement
System 100,000 100,000 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Arbuthnot Sipp A/C S.E. Sanbar 20,000 20,000 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Highpeak Limited 15,000 15,000 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Concentric Holdings Ltd. 5,000 5,000 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
Leila Williams Garden City Royalty
Trust 100,000 100,000 0 *
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
TOTAL 3,659,974 1,734,532 1,925,442
- -------------------------------------- ----------------------- --------------------- ------------------- ------------
</TABLE>
* Less than 1% of the outstanding shares of common stock.
(1) The number set forth in this column is the number of shares of common
stock held by each such selling stockholder and/or the number of shares of
common stock that would be received upon an exercise of warrants held by
each such selling stockholder that are exercisable within 60 days of the
date of this prospectus.
(2) Assumes that all shares of common stock being offered and registered
hereunder are sold, although no selling stockholder is obligated to sell
any such shares.
(3) Based upon 25,135,399 shares of common stock outstanding as of April 14,
2000.
(4) Shares of common stock issuable upon exercise of warrants.
This prospectus also covers any additional shares of common stock that become
issuable in connection with the shares being registered by reason of any stock
dividend, stock split, recapitalization or other similar transaction effected
without receipt of consideration which results in an increase in the number of
our outstanding shares of common stock.
USE OF PROCEEDS
We will not receive any of the proceeds of any sale by the selling
stockholders.
PLAN OF DISTRIBUTION
We are registering the shares on behalf of the selling stockholders,
their pledgees, donees, transferees or other successors in interest
(collectively with the selling stockholders, the "Sellers") who receive shares
of common stock from a selling stockholder after the date of this prospectus.
The Sellers, directly or through brokers, dealers, underwriters, agents or
market makers, may sell some or all of the shares. Any broker, dealer,
underwriter, agent or market maker participating in a transaction involving the
shares may receive a commission from the Sellers. Usual and customary
commissions may be paid by the Sellers. The broker, dealer, underwriter or
market maker may agree to sell a specified number of the shares at a stipulated
price per share and, to the extent that such person is unable to do so acting as
an agent for the Sellers, to purchase as principal any of the shares remaining
unsold at a price per share required to fulfill the person's commitment to the
Sellers.
A broker, dealer, underwriter or market maker who acquires the shares
from the Sellers as a principal for its own account may thereafter resell such
shares from time to time in transactions (which may involve block or cross
transactions and which may also involve sales to or through another broker,
dealer, underwriter, agent or market maker, including transactions of the nature
described above) on the Nasdaq National Market, in negotiated transactions or
otherwise, at market prices prevailing at the time of the sale, or at negotiated
prices. In connection with such resales, the broker, dealer, underwriter, agent
or market maker may pay commissions to or receive commissions from the
purchasers of the shares.
-10-
<PAGE> 11
The Sellers also may sell some or all of the shares directly to purchasers
without the assistance of a broker, dealer, underwriter, agent or market maker
and without the payment of any commissions.
Other than any commissions or discounts paid or allowed by the Sellers
to underwriters, dealers, brokers or agents, all expenses incurred in connection
with this offering are being borne by us.
Pursuant to the registration rights granted to the selling
stockholders, we have agreed to indemnify the selling stockholders and any
person who controls a selling stockholder against certain liabilities and
expenses arising out of or based upon the information set forth or incorporated
by reference in this prospectus, and the registration statement of which this
prospectus is a part, including liabilities under the Securities Act. Any
commissions paid or any discounts or concessions allowed to any broker, dealer,
underwriter, agent or market maker and, if any such broker, dealer, underwriter,
agent or market maker purchases any of the shares as principal, any profits
received on the resale of such shares, may be deemed to be underwriting
commissions or discounts under the Securities Act.
LEGAL MATTERS
The legality of the common stock offered hereby will be passed upon by
Jaffe, Raitt, Heuer & Weiss, Professional Corporation, Detroit, Michigan. As of
April 27, 2000, certain shareholders of Jaffe, Raitt, Heuer & Weiss, P.C.
beneficially owned approximately 90,250 shares of our common stock.
EXPERTS
The financial statements incorporated in this registration statement by
reference to our Annual Report on Form 10-K for the year ended December 31, 1999
have been incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
auditing and accounting. The audited consolidated balance sheet of Sulcus
Hospitality Technologies Corp. as of December 31, 1998 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended December 31, 1998 (not presented
separately in our financial statements) have been incorporated in reliance on
the report of Crowe Chizek and Company, LLP, independent accountants, given on
the authority of that firm as experts in auditing and accounting.
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<PAGE> 12
================================================================================
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations not contained or incorporated by
reference in this prospectus in connection with any offering to be made by the
prospectus. If given or made, such information or representations must not be
relied upon as having been authorized by Eltrax. This prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the
Securities, in any jurisdiction where, or to any person to whom, it is unlawful
to make such offer or solicitation. Neither the delivery of this prospectus nor
any offer or sale made hereunder shall, under any circumstance, create an
implication that there has been no change in the facts set forth in this
prospectus or in the affairs of Eltrax since the date hereof.
TABLE OF CONTENTS
PROSPECTUS
Page
ABOUT THIS
PROSPECTUS....................................2
WHERE YOU CAN FIND
MORE INFORMATION..............................3
THE COMPANY.......................................4
RISK FACTORS......................................4
SELLING STOCKHOLDERS..............................8
USE OF PROCEEDS...................................10
PLAN OF DISTRIBUTION..............................10
LEGAL MATTERS.....................................11
EXPERTS...........................................11
================================================================================
================================================================================
1,734,532 SHARES
ELTRAX SYSTEMS, INC.
COMMON STOCK
--------------
PROSPECTUS
--------------
================================================================================
, 2000
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