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As filed with the Securities and Exchange Commission on November 24, 1999
Registration No. 333-84125
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
AMENDMENT NO. 1
to
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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TELENETICS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
CALIFORNIA 33-0061894
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
25111 ARCTIC OCEAN
LAKE FOREST, CALIFORNIA 92630
(949) 455-4000
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
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MICHAEL ARMANI, PRESIDENT COPIES TO:
AND CHIEF EXECUTIVE OFFICER LARRY A. CERUTTI, ESQ.
TELENETICS CORPORATION CRISTY LOMENZO PARKER, ESQ.
25111 ARCTIC OCEAN RUTAN & TUCKER, LLP
LAKE FOREST, CALIFORNIA 92630 611 ANTON BLVD., SUITE 1400
(949) 455-4000 COSTA MESA, CALIFORNIA 92626
(Name, Address, Including Zip Code, and (714) 641-3450
Telephone Number, Including
Area Code, of Agent for Service)
------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ___________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of Each Class of Amount To Be Proposed Maximum Offering Proposed Maximum Amount of
Securities Registered(1) Price Per Share(2) Aggregate Offering Price(2) Registration Fee(3)
To Be Registered
=================================================================================================================================
<S> <C> <C> <C> <C>
Common Stock, 2,444,891 shares $1.45 $3,545,092 $985.54
no par value
=================================================================================================================================
</TABLE>
(1) In the event of a stock split, stock dividend, or similar transaction
involving common stock of the Registrant, in order to prevent dilution, the
number of shares registered shall be automatically increased to cover the
additional shares in accordance with Rule 416(a) under the Securities Act.
(2) Estimated solely for the purpose of determining the registration fee.
Calculated pursuant to Rule 457(c), on the basis of the average of the bid
and asked price per share as reported for such securities by the OTC
Electronic Bulletin Board on November 19, 1999.
(3) A registration fee in the amount of $1,254.16 has previously been paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE>
PROSPECTUS
TELENETICS CORPORATION
2,444,891 SHARES OF COMMON STOCK
This Prospectus relates to an offering of up to shares of our company's
common stock, no par value. The offering consists of the periodic sale by
certain persons or entities listed in the "Selling Security Holders" section of
this Prospectus of up to 1,031,593 shares of common stock that may be issued
upon exercise of outstanding warrants that were issued in three private
placement transactions, up to 756,884 shares of common stock that may be issued
upon conversion of shares of our Series A 7.0% Convertible Redeemable Preferred
Stock (the "preferred stock") that were issued in two private placement
transactions, up to 545,820 shares of common stock issued in connection with the
exercise of warrants and options that were issued in four private placement
transactions and 110,594 shares of common stock issued in connection with the
acquisition of certain assets of another company (collectively, the "Shares").
Our common stock trades on the OTC Bulletin Board under the symbol "TLNT." On
November 19, 1999, the average of the bid and asked prices of our common stock
on the OTC Bulletin Board was $1.45 per share.
We will not receive any portion of the proceeds from the sale of the
Shares offered by this Prospectus. The Selling Security Holders will receive all
the net proceeds from the sale of the Shares and pay all selling commissions, if
any, applicable to any sale. We are responsible for payment of all other
expenses incident to the offer and sale of the Shares.
The Selling Security Holders may sell their Shares from time to time
directly to purchasers or through agents, underwriters or dealers. Such sales
may occur in one or more transactions on the OTC Bulletin Board, in negotiated
transactions, in private transactions, or otherwise, or in a combination of
these methods of sale. These sales may occur at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. More information is provided in the section titled "Plan of
Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS.
The information in this Prospectus is not complete and may be changed.
The securities may not be sold until the registration statement filed with the
Securities and Exchange Commission, of which this prospectus is a part, is
declared effective. This Prospectus is not an offer to sell these securities and
it is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
___________________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This Prospectus is dated November __, 1999
<PAGE>
AVAILABLE INFORMATION
We are subject to the informational requirements of the Exchange Act.
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission ("SEC"). Our SEC filings
are available to the public over the Internet at the SEC's website at
HTTP://WWW.SEC.GOV. You may also read and copy any document we file with the SEC
at its public reference facilities at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC's Midwest Regional Offices at 500 West Madison Street,
Chicago, Illinois 60606 and Northeast Regional Office at 7 World Trade Center,
New York, New York 10048. You can also obtain copies of such material at
prescribed rates from the Public Reference Section of the SEC at its principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public
reference facilities.
This Prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information incorporated by reference or
provided in this Prospectus. We have not authorized anyone else to provide you
with different information. The Selling Security Holders will not make an offer
of the Shares in any state where the offer is not permitted. You should not
assume that the information in this Prospectus is accurate as of any date other
than the date on the front of this document.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
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 will file
later with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below:
o Transition Report on Form 10-KSB for the nine months ended
December 31, 1998.
o Quarterly Report on Form 10-QSB for the quarter ended March
31, 1999.
o Quarterly Report on Form 10-QSB for the quarter ended June
30, 1999.
o Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1999.
o Quarterly Report on Form 10-QSB/A No. 1 for the quarter
ended September 30, 1999.
o Current Report on Form 8-K filed with the SEC on January 13,
1999.
o Current Report on Form 8-K filed with the SEC on January 22,
1999.
o Current Report on Form 8-K filed with the SEC on July 15,
1999.
We also incorporate by this reference any future filings we make with
the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.
Documents filed with the SEC after the date of this Prospectus are made a part
of this Prospectus as of the date such documents are filed with the SEC.
Any statement in a document incorporated or deemed to be incorporated
by reference in this Prospectus is deemed to be modified or superseded to the
extent that a statement contained in this Prospectus, or in any other document
we subsequently file with the SEC, modifies or supersedes such statement. If any
statement is so modified or superseded, it does not constitute a part of this
Prospectus, except as so modified or superseded.
You may request a copy of the documents incorporated by reference in
this Prospectus, other than exhibits to such documents, at no cost, by writing
to or telephoning us at the following address:
Telenetics Corporation
Attention: David Stone, Chief Financial Officer
25111 Arctic Ocean
Lake Forest, California 92630
(949) 455-4000
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should consider the following factors carefully before deciding to purchase any
shares of our common stock.
WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT WHICH MAY CONTINUE IN THE
FUTURE AND WHICH MAY ADVERSELY IMPACT OUR BUSINESS AND OUR SHAREHOLDERS
We have incurred net losses in each fiscal year since our inception,
with the exception of the fiscal year ended March 31, 1998, in which we realized
nominal net income of $93,654. For the nine month transition period ended
December 31, 1998, we reported a net loss of $249,306. Our accumulated deficit
through December 31, 1998 was $11,610,638, and as of that date we had a total
shareholders' deficit of $508,256. We realized net income of $3,065 for the nine
month period ended September 30, 1999, as compared to incurring a net loss of
$584,367 for the nine month period ended September 30, 1998. We incurred a net
loss of $268,416 for the three month period ended September 30, 1999, as
compared to a net loss of $305,646 for the three month period ended September
30, 1998. We realized net income of $271,481 for the six month period ended June
30, 1999, incurred a net loss of $128,952 for the three month period ended June
30, 1999, realized net income of $380,260 for the three month period ended
December 31, 1998 and incurred a net loss of $323,920 for the three month period
ended June 30, 1998. Our accumulated deficit through September 30, 1999 was
$11,625,586, and as of that date, we had shareholders' equity of $1,777,801.
These losses may continue in the future, and therefore we cannot assure you that
we will ever maintain profitable operations in the future.
WE MAY NEED AND BE UNABLE TO OBTAIN ADDITIONAL FUNDING ON SATISFACTORY TERMS,
WHICH COULD DILUTE OUR SHAREHOLDERS OR IMPOSE BURDENSOME FINANCIAL RESTRICTIONS
ON OUR BUSINESS
Historically, we have relied upon cash from financing activities to
fund most of the cash requirements of our company's operating and investing
activities. Although we have been able to generate some cash from our operating
activities in the past, we cannot assure you that we will be able to continue to
do so in the future. We do not believe that cash flow from operations and our
revolving line of credit with Celtic Capital Corporation alone will be adequate
to fund all of our operations for the next twelve months. We will require
additional sources of liquidity through debt and/or equity financing. Any future
financing may not be available on a timely basis, in sufficient amounts or on
terms acceptable to us. Any future financing may also dilute existing
shareholders. Any debt financing or other financing of securities senior to
common stock will likely include financial and other covenants that will
restrict our flexibility. At a minimum, we expect these covenants to include
restrictions on our ability to pay dividends on our common stock. Any failure to
comply with these covenants would have a material adverse effect on our
business, prospects, financial condition and results of operations.
OUR OPERATING RESULTS IN ONE OR MORE FUTURE PERIODS ARE LIKELY TO FLUCTUATE
SIGNIFICANTLY AND MAY NEGATIVELY IMPACT OUR STOCK PRICE
Our quarterly results have varied significantly in the past and will
likely continue to do so in the future due to a variety of factors, many of
which are beyond our control, including the timing and nature of revenues from
product sales that are recognized during any particular quarter, the impact of
price competition on our average selling prices, the availability and pricing of
components for our products, market acceptance of new product introductions by
us and our competitors, the timing of expenditures in anticipation of future
sales, product returns, the financial health of our customers, the overall state
of the modem and wireless communication and device products industry and
economic conditions generally. The volume and timing of orders received during a
quarter are difficult to forecast. As a result, it is likely that in some future
periods our operating results will be below the expectations of securities
analysts and investors. If this happens, the trading price of our common stock
would likely be materially and adversely affected.
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OUR LACK OF DIVERSIFICATION MAY AFFECT OUR BUSINESS IF DEMAND IS REDUCED
Our business is primarily centered on the sale of modems, which
typically accounts for over 90% of our total revenues. Although our customers
typically standardize the unique or special components that are manufactured for
them by or through us to be incorporated in the customers' end product, in most
cases we do not have long-term contracts with our customers. Accordingly, we are
highly dependent on the successful sales of these types of products. A
significant reduction in sales of these products resulting from changes in the
industry, including the entry of new competitors into the market, from the
introduction of new or improved technology or an unanticipated shift in the
needs of our customers, or for other reasons, would have a material adverse
effect on our business, prospects, financial condition and results of
operations.
WE RELY ON A RELATIVELY LIMITED NUMBER OF CUSTOMERS, AND THE LOSS OF ANY
SIGNIFICANT CUSTOMER COULD MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS AND
FINANCIAL CONDITION
We derive a significant portion of our revenues from a relatively
limited number of customers. We anticipate that our five or six largest
customers will continue to account for the majority of our revenues for the
foreseeable future. The loss of any one or more of these major customers would
likely have a material adverse effect on our business, prospects, financial
condition and results of operations.
OUR BUSINESS COULD SUFFER IF WE ARE UNABLE TO OBTAIN COMPONENTS OF OUR PRODUCTS
FROM OUTSIDE SUPPLIERS
The major components of our products include circuit boards,
microprocessors, chipsets and memory components. Most of these components are
available from multiple sources. However, certain components used in our
products are currently obtained from single or limited sources. Certain modem
chipsets used in our company's data communications products have been in short
supply and are frequently on allocation by semiconductor manufacturers. Similar
to others in the modem industry, we have, from time to time, experienced
difficulty in obtaining certain components. Our company does not have guaranteed
supply arrangements with any of our suppliers, and there can be no assurance
that these suppliers will continue to meet our requirements. Shortages of
components could not only limit our production capacity but also could result in
higher costs due to the higher costs of components in short supply or the need
to utilize higher cost substitute components. An extended interruption in the
supply of any of these components or a reduction in their quality or reliability
would have a material adverse effect on our financial condition and results of
operations. While we believe that with respect to our single source components
we could obtain similar components from other sources, we could be required to
alter product designs to use alternative components. There can be no assurance
that severe shortages of components will not occur in the future that could
increase the cost or delay the shipment of our products and have a material
adverse effect on our financial condition and results of operations. Significant
increases in the prices of these components could also have a material adverse
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effect on our results of operations because we may not be able to adjust product
pricing to reflect the increases in component costs.
WE RELY HEAVILY ON OUR KEY EMPLOYEES, AND THE LOSS OF THEIR SERVICES COULD
MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS
Our success is highly dependent upon the continued services of key
members of our management, including our Chairman of the Board, President and
Chief Executive Officer, Michael A. Armani, and our Chief Financial Officer,
David Stone. The loss of either Mr. Armani or Mr. Stone or one or more other key
members of management could have a material adverse effect on our company. We
have not entered into any employment agreement with Mr. Armani or any other
officer of our company other than a written employment offer with Mr. Stone. We
do not maintain key-man life insurance policies on any member of management.
THE MARKETS IN WHICH WE COMPETE ARE HIGHLY COMPETITIVE, AND OUR GROWTH PROSPECTS
COULD BE MATERIALLY AND ADVERSELY AFFECTED IF WE ARE UNSUCCESSFUL IN OUR EFFORTS
TO COMPETE
The modem and wireless communication and device products industry is
intensely competitive and characterized by rapid technological advances and
changes in industry standards, resulting in constant pricing pressures. These
changes also result in frequent introductions of new products with added
capabilities and features, and continuous improvements in the relative
functionality and price of modems and other data communications products. If we
were to fail to keep pace with technological advances, our competitive position
and results of operations would be adversely affected.
Although management believes that our products are marketed and sold
primarily within a relatively narrow scope of market segments with only a
handful of known direct competitors, such as CellNet, Itron, eT Communication,
Dataforth (Europe), Teltone, Dymec and Cermeteck, our competitors in the general
modem and data communications products industry include many large, well-known
companies such as Boca Research, Zoom Telephonics, Inc., Diamond Multimedia,
GVC, Global Village, Motorola, Newcom and 3Com Corp. These companies and some of
our other existing competitors have significantly more financial, engineering,
product development, manufacturing and marketing resources than our company.
Although we are not aware of any announcements or published plans of any of
these companies to enter into the industrial automation modem markets, any of
these companies could enter one or more of our markets at any time. The entry
into the industrial automation modem markets by one or more of these companies
would likely have a material adverse effect on our competitive position and
results of operations. In addition, the difficult modem environment during the
past several years may bring on a period of consolidation that has possible
benefits, but also has risks.
Our products compete on the basis of product features, price, quality,
reliability, brand name recognition, product breadth, developed sales channels,
product documentation, product warranties and technical support and service. We
believe that we are competitive in each of these areas. However, there can be no
assurance that competitors will not introduce comparable or superior products
incorporating more advanced technology at lower prices, or that other changes
in market conditions or technology will not adversely affect our ability to
compete successfully in the future.
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BECAUSE WE BELIEVE THAT PROPRIETARY RIGHTS ARE MATERIAL TO OUR SUCCESS,
MISAPPROPRIATION OF THESE RIGHTS OR CLAIMS OF INFRINGEMENT OR LEGAL ACTIONS
RELATED TO INTELLECTUAL PROPERTY COULD ADVERSELY IMPACT OUR FINANCIAL CONDITION
We do not hold any patents. We currently rely on a combination of
contractual rights, copyrights, trademarks and trade secrets to protect our
proprietary rights. Historically, management of our company believed that
because of the rapid pace of technological change in the modem and wireless
communication and device products industry, the legal intellectual property
protection for our company's products is a less significant factor in our
success than the knowledge, abilities and experience of our employees, the
frequency of our product enhancements, the effectiveness of our marketing
activities and the timeliness and quality of our support services. However, we
now believe that several of our current products and some products in
development could benefit from patent protection. Accordingly, we have retained
the services of a patent and trademark law firm to file patent applications for
those products with the U.S. Patent and Trademark Office and have several
patents pending. Although we rely to a great extent on trade secret protection
for much of our technology, there can be no assurance that our means of
protecting our proprietary rights will be adequate or that our competitors or
customers will not independently develop comparable or superior technologies or
obtain unauthorized access to our proprietary technology.
We own, license or have otherwise obtained the right to use certain
technologies incorporated in our products. In addition, we purchase modem
chipsets that incorporate sophisticated modem technology. Although we have not
to date received any infringement claims, we may in the future receive
infringement claims from third parties relating to our products and
technologies. In such event, we intend to investigate the validity of any such
claims and, if we believe the claims have merit, we intend to respond through
licensing or other appropriate actions. Certain of these claims may relate to
technology included in modem chipsets or other components purchased by us from
third party vendors for incorporation into our products. In such event, we would
forward these claims to the appropriate vendor. If we or our component
manufacturers were unable to license or otherwise provide any such necessary
technology on a cost-effective basis, we could be prohibited from marketing
products containing that technology, incur substantial costs in redesigning
products incorporating that technology, or incur substantial costs defending any
legal action taken against us, all of which could have a material adverse effect
on our business, prospects, financial condition and results of operations.
THERE ARE RISKS THAT OUR PRODUCTS MAY BE RETURNED BY OUR CUSTOMERS
We are exposed to the risk of product returns from our customers as a
result of returns due to defective products or product components. Returned used
products are tested, repaired and used as warranty replacements. Products
returned to us due to faulty work by our subcontractors are returned to the
subcontractors for credit against future purchase orders. Historically, product
returns have not had a material impact on our operations or financial condition.
While we believe that product returns should not be material in future periods,
it is expected
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that a relatively modest number of returns will continue. However, there can be
no assurance that significant levels of product returns will not occur in the
future, which may have a material adverse effect on our operations.
OUR FAILURE TO MANAGE GROWTH EFFECTIVELY COULD IMPAIR OUR BUSINESS
Our strategy envisions a period of rapid growth that may put a strain
on our administrative and operational resources. While we believe that we have
established a significant infrastructure to support growth, our ability to
effectively manage growth will require us to continue to expand the capabilities
of our operational and management systems and to attract, train, manage and
retain qualified engineers, technicians, salesperson and other personnel. There
can be no assurance that we will be able to do so. If we are unable to
successfully manage our growth, our business, prospects, financial condition and
results of operations could be adversely affected.
OUR STOCK PRICE IS SUBJECT TO SIGNIFICANT VOLATILITY WHICH COULD RESULT IN
LITIGATION AGAINST US
There is currently an extremely limited trading market for our common
stock. After being de-listed from the Nasdaq National Market System in 1991 and
prior to October 16, 1998, our common stock had been quoted only sporadically
from time to time in the over-the-counter market in the "pink sheets," an ad hoc
forum for quotations of securities prices intended to match potential buyers and
sellers, which is not monitored or supervised by any regulatory authority or
agency. On October 16, 1998, our common stock began trading on the OTC
Electronic Bulletin Board under the symbol "TLNT." There can be no assurance
that any regular trading market for our common stock will develop or, if
developed, will be sustained. The trading prices of our common stock could be
subject to wide fluctuations in response to quarter-to-quarter variations in our
operating results, material announcements of technological innovations, price
reductions, significant customer orders or establishment of strategic
partnerships by us or our competitors or providers of alternative products,
general conditions in the modem and data communications industry, or other
events or factors, many of which are beyond our control. In addition, the stock
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market as a whole and individual stocks have experienced extreme price and
volume fluctuations, which have often been unrelated to the performance of the
related corporations. Our operating results in future quarters may be below the
expectations of market makers, securities analysts and investors. In any such
event, the price of our common stock will likely decline, perhaps substantially.
In the past, following periods of volatility in the market price of a company's
securities, securities class action litigation has occurred against the issuing
company. There can be no assurance that such litigation will not occur in the
future with respect to our company. Such litigation could result in substantial
costs and a diversion of management's attention and resources, which could have
a material adverse effect on our business, prospects, financial condition and
results of operations. Any adverse determination in such litigation could also
subject us to substantial liabilities.
OUR FAILURE AND THE FAILURE OF THIRD PARTIES TO BE YEAR 2000 COMPLIANT COULD
NEGATIVELY IMPACT OUR BUSINESS
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of our
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in major system
failure or miscalculations. We have performed a review of our internal systems
to identify and resolve the effect of Year 2000 software issues on the integrity
and reliability of our financial and operational systems.
Based on this review, our management believes that our internal systems
are substantially compliant with Year 2000 issues. In addition, we are also
communicating with our principal service providers to ensure Year 2000 issues
will not have an adverse impact on us. If we, and third parties upon which we
rely, are unable to address this issue in a timely manner, it could result in a
material financial risk to us. In order to assure that this does not occur, we
plan to devote all resources required to resolve any significant Year 2000
issues in a timely manner.
BECAUSE WE ARE SUBJECT TO THE "PENNY STOCK" RULES, THE LEVEL OF TRADING ACTIVITY
IN OUR STOCK MAY BE REDUCED
Broker-dealer practices in connection with transactions in "penny
stocks" are regulated by certain penny stock rules adopted by the SEC. Penny
stocks, like shares of our common stock, generally are equity securities with a
price of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on Nasdaq). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and, if the broker-dealer is the sole
market maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
broker-dealers who sell these securities to persons other than established
customers and "accredited investors" must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
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purchaser's written agreement to the transaction. Consequently, these
requirements may have the effect of reducing the level of trading activity, if
any, in the secondary market for a security subject to the penny stock rules,
and investors in our common stock may find it difficult to sell their shares.
FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN, AND THEREFORE ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY FORWARD-LOOKING
STATEMENTS
Some statements contained in this Prospectus are forward-looking
statements. These forward-looking statements include, but are not limited to,
statements about our industry, plans, objectives, expectations, intentions and
assumptions and other statements contained in this Prospectus that are not
historical facts. When used in this Prospectus, the words "expect,"
"anticipate," "intend," "plan," "believe," "seek," "estimate" and similar
expressions are generally intended to identify forward-looking statements.
Because these forward-looking statements involve risks and uncertainties,
including those described in this "Risk Factors" section, actual results may
differ materially from those expressed or implied by these forward-looking
statements.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Shares by the
Selling Security Holders. In the event that warrants to purchase common stock
are exercised, we may receive proceeds from such exercise. We intend to use the
proceeds received from the exercise of the warrants, if any, for general
corporate purposes.
RESALES OF SHARES COVERED BY THIS PROSPECTUS
This Prospectus covers the resale by the Selling Security Holders of an
aggregate of up to 1,031,593 shares of common stock that may be issued upon
exercise of outstanding warrants that were issued in three separate private
placement transactions not involving a public offering, up to 756,884 shares of
common stock that may be issued upon conversion of our preferred stock that were
issued in two private placement transactions not involving a public offering, up
to 545,820 shares of common stock that were issued in connection with the
exercise of warrants and options that were issued in four private placement
transactions not involving a public offering and up to 110,594 shares of common
stock issued in a private placement transaction not involving a public offering
in connection with the acquisition of certain assets of Sierra Digital
Communications, Inc. This Prospectus does not cover the sale or other transfer
of warrants or options or the issuance of shares of common stock to holders of
warrants or options upon exercise or to holders of preferred stock upon
conversion. If a Selling Security Holder transfers such holder's warrants or
options or preferred stock prior to exercise or conversion, as the case may be,
the transferee of the warrants, options or preferred stock may not sell the
shares of common stock issuable upon exercise of the warrants or options or
conversion of the preferred stock pursuant to this Prospectus unless this
Prospectus is appropriately amended or supplemented by us.
10
<PAGE>
All of the warrants and preferred stock contain anti-dilution and
adjustment provisions providing for the adjustment of the underlying shares
and/or the exercise or conversion price upon the occurrence of certain events,
including recapitalizations, reclassifications, share dividends, share splits or
combinations, mergers or acquisitions or similar transactions. In the event of
the liquidation, dissolution or winding up of our company, holders of the
warrants will not be entitled to receive any of our assets available for
distribution to the holders of common stock, while holders of our preferred
stock will receive assets available for distribution prior to the holders of
common stock.
In the event of any reclassification, capital reorganization or other
similar change of our outstanding common stock, any consolidation or merger
involving our company (other than a consolidation or merger which does not
result in any reclassification, capital reorganization or other similar change
in the outstanding common stock) or a sale or conveyance to another corporation
of all or substantially all of the property of our company, each of the warrants
and shares of preferred stock will thereupon become exercisable or convertible,
as the case may be, for the kind and number of shares of stock or other
securities, assets or cash to which a holder of the number of shares of common
stock issuable (at the time of such reclassification, reorganization,
consolidation, merger or sale) upon exercise of such warrant or upon conversion
of such preferred stock, as the case may be, would have been entitled upon such
reclassification, reorganization, consolidation, merger or sale. However, this
Prospectus covers only our common stock, and any other securities received upon
exercise of the warrants or upon conversion of the preferred stock are not
covered hereby.
For the life of the warrants and for the period a shareholder holds
shares of our preferred stock, the holders thereof have the opportunity to
profit from a rise in the market price of our common stock without assuming the
risk of ownership of the shares of common stock issuable upon the exercise of
the warrants or conversion of the preferred stock. The holders of the warrants
may be expected to exercise at times when the exercise price is less than the
market price for our common stock, with resulting dilution in the interests of
our shareholders. Similarly, the holders of preferred stock may be expected to
voluntarily convert their shares of preferred stock for common stock when the
conversion price is less than the market price for our common stock. Further,
the terms on which we could obtain additional capital during the life of the
warrants and the period during which the preferred stock remains outstanding may
be adversely affected.
11
<PAGE>
SELLING SECURITY HOLDERS
The following table sets forth certain information as of November 22,
1999, with respect to each Selling Security Holder for whom we are registering
Shares for resale to the public. We will not receive any of the proceeds from
the sale of the Shares by the Selling Security Holders.
<TABLE>
<CAPTION>
SHARES OF COMMON SHARES OF COMMON SHARES OF COMMON
NAME OF STOCK BENEFICIALLY STOCK BEING STOCK BENEFICIALLY
SELLING OWNED PRIOR TO OFFERED PURSUANT OWNED AFTER
SECURITY HOLDER THIS OFFERING(1) TO THIS PROSPECTUS OFFERING(2)
------------------ ------------------ ------------------ ------------------
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Shala Shashani (3) 2,017,477 20.31% 50,000 (4) 1,967,477 19.81%
Dolphin Offshore
Partners, L.P. (5) 800,000 7.46% 800,000 (6) - -
Harvey Bibicoff (7) 623,478 6.12% 522,858 (8) 100,620 1.01%
George Levy (9) 390,302 3.89% 182,500(10) 207,802 2.09%
Carl Shaifer (11) 316,691 3.19% 5,800(12) 310,891 3.13%
Peter K. Nitz 135,642 1.35% 97,142 (6) 38,500 *
Taglich Brothers,
D'Amadeo, Wagner &
Company, Inc. (13) 114,286 1.14% 114,286 (6) - -
Jerry D. Moen 104,571 1.05% 63,571(14) 41,000 *
Sandra K. Nitz 59,572 * 38,572 (6) 21,000 *
T. Brent Henderson 58,207 * 58,207 (4) - -
Dennis and Barbara Stead 57,701 * 10,000(12) 47,701 *
Shadow Capital LLC 57,142 * 57,142 (6) - -
Danny G. Snow 54,292 * 26,071(15) 28,221 *
Michael Associates 50,285 * 50,285(16) - -
Michael N. Taglich (17) 42,539 * 42,539 (6) - -
Robert F. Taglich (17) 42,537 * 42,537 (6) - -
Terri MacInnis (7) 40,000 * 40,000 (4) - -
Drew Lance 33,313 * 33,313 (4) - -
Craig Cohen (18) 30,000 * 30,000 (4) - -
Vincent P. Pipia (18) 30,000 * 30,000 (4) - -
Delbert M. Robben (19) 34,391 * 26,071(15) 8,320 *
Lesly Pompy 20,000 * 20,000(12) - *
Stanford C. Stoddard 20,000 * 10,000(12) 10,000 *
David E. Landau 16,000 * 10,000(12) 6,000 *
Douglas E. Hailey (17) 15,456 * 15,456(12) - -
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
SHARES OF COMMON SHARES OF COMMON SHARES OF COMMON
NAME OF STOCK BENEFICIALLY STOCK BEING STOCK BENEFICIALLY
SELLING OWNED PRIOR TO OFFERED PURSUANT OWNED AFTER
SECURITY HOLDER THIS OFFERING(1) TO THIS PROSPECTUS OFFERING(2)
------------------ ------------------ ------------------ ------------------
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Hal Tenney 15,142 * 15,142 (4) - -
Joseph G. D'Amadeo (17) 13,967 * 13,967(12) - -
Linda M. Berglas 10,000 * 10,000(12) - -
Dan Charny 10,000 * 10,000 (4) - -
Perry Sendukas 10,000 * 10,000(12) - -
Robert McLean 3,932 * 3,932 (4) - -
William G. Ryon (17) 2,500 * 2,500(12) - -
Richard C. Oh (17) 2,000 * 2,000(12) - -
Vincent M. Palmieri (17) 1,000 * 1,000(12) - -
</TABLE>
- ---------------
* Less than 1%.
(1) Based on an aggregate of 9,923,579 shares of common stock issued and
outstanding as of November 22, 1999. Beneficial ownership is determined
in accordance with the rules of the SEC and generally includes voting
or investment power with respect to securities. Except as otherwise
indicated by footnote and subject to applicable community property
laws, the persons named in the table above have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them. All information with respect to beneficial
ownership is based on filings made by the respective beneficial owners
with the SEC or information provided to our company by such beneficial
owners.
(2) Assumes that all of the shares are sold pursuant to this Prospectus.
(3) Ms. Shashani is the Secretary and a director of our company. Shares of
common stock beneficially owned prior to this offering include 400,000
shares held of record by Ms. Shashani's son and daughter.
(4) Entire amount represents shares of common stock.
(5) Peter E. Salas, general partner of Dolphin Offshore Partners, L.P., has
sole voting and dispositive power over the securities owned.
13
<PAGE>
(6) Entire amount represents shares of common stock issuable upon exercise
of warrants and conversion of preferred stock.
(7) Individual is an employee or principal of Bibicoff & Associates, Inc.,
our company's prior investor relations and fund raising consultant.
(8) Represents (i) 260,000 shares of common stock, (ii) 191,429 shares of
common stock issuable upon exercise of warrants and (iii) 71,429 shares
of common stock issuable upon conversion of preferred stock.
(9) Mr. Levy is a director of our company. Shares of common stock
beneficially owned prior to this offering include 10,000 shares of
common stock held of record by Mr. Levy's spouse.
(10) Represents (i) 70,000 shares of common stock, (ii) 52,500 shares of
common stock issuable upon exercise of warrants and (iii) 60,000 shares
of common stock issuable upon conversion of preferred stock.
(11) Mr. Shaifer acts as an advisor to the board of directors of our company
and is a former director of our company. Shares of common stock
beneficially owned prior to this offering include 217,967 shares of
common stock held of record by Mr. Shaifer's spouse.
(12) Entire amount represents shares of common stock issuable upon exercise
of warrants.
(13) Taglich Brothers, D'Amadeo, Wagner & Company, Inc. is an NASD
registered broker-dealer that acted as placement agent for our company
in connection with our company's private placement of preferred stock
in April 1999.
(14) Represents (i) 20,000 shares of common stock, (ii) 15,000 shares of
common stock issuable upon exercise of warrants and (iii) 28,571 shares
of common stock issuable upon conversion of preferred stock.
(15) Represents (i) 10,000 shares of common stock, (ii) 7,500 shares of
common stock issuable upon exercise of warrants and (iii) 8,571 shares
of common stock issuable upon conversion of preferred stock.
(16) Represents (i) 15,820 shares of common stock, (ii) 11,865 shares of
common stock issuable upon exercise of warrants and (iii) 22,600 shares
of common stock issuable upon conversion of preferred stock.
(17) The individual is or was an employee, officer or principal of Taglich
Brothers, D'Amadeo, Wagner & Company, Inc.
(18) Messrs. Pipia and Cohen are strategic planning consultants to our
company. Mr. Pipia is a registered representative of H.D. Brous & Co.,
which is a member of NYSE, NASD and SIPC.
(19) Shares of common stock beneficially owned prior to this offering
include 240 shares held of record by Mr. Robben's spouse.
14
<PAGE>
We will prepare and file such amendments and supplements to the
Registration Statement as may be necessary in accordance with the rules and
regulations of the Securities Act of 1933, as amended (the "Securities Act") to
keep it effective until the earlier to occur of (i) the date as of which all
Shares may be resold in a public transaction without volume limitations or other
material restrictions without registration under the Securities Act, including
without limitation, pursuant to Rule 144 under the Securities Act or (ii) the
date as of which all Shares offered hereby have been resold. We have agreed to
pay the expenses, other than broker discounts and commissions, if any, in
connection with this Prospectus.
PLAN OF DISTRIBUTION
We have no specific information concerning whether or when any offers
or sales of Shares covered by this Prospectus will be made, or if made, what the
price, terms or conditions of any such offers or sales will be. Based on
information available to us, it is our understanding that the Selling Security
Holders may offer and sell the Shares in one or more transactions either: (i) by
one or more broker-dealers as agents for the Selling Security Holders at a price
or prices related to the then current market price of the common stock on the
OTC Bulletin Board, with such commission to be paid by the Selling Security
Holders to the broker-dealers as shall be agreed upon by them; or (ii) by the
Selling Security Holders to the broker-dealers (for resale by the broker-dealers
as principals) at a price or prices related to the then current market price of
our common stock, less such discount, if any, as shall be agreed upon by the
Selling Security Holders and the broker-dealers; or (iii) directly, at prices
and on terms to be determined at the time of sale; or (iv) by a combination of
the methods described above. In effecting sales, broker-dealers engaged by the
Selling Security Holders may arrange for other broker-dealers to participate in
resales. Shares may also be offered or sold as described above by pledgees,
donees, transferees, or other successors in interest to the Selling Security
Holders, subject to any appropriate amendment or supplement to this Prospectus.
We will bear the expense of preparation and filing of the registration
statement (of which this Prospectus is a part) and certain other expenses.
Commissions and discounts, if any, attributable to the sale of the Shares will
be borne by the Selling Security Holders.
In connection with distributions of the Shares or otherwise, the
Selling Security Holders may sell Shares short and redeliver the Shares to close
out such short positions. The Selling Security Holders may also enter into
option or other transactions with broker-dealers which require the delivery to
the broker-dealer of the Shares registered hereunder, which the broker-dealer
may resell or otherwise transfer pursuant to this Prospectus. The Selling
Security Holders may also loan or pledge the Shares registered hereunder to a
broker-dealer and the broker-dealer may sell the Shares so loaned or upon a
default the broker-dealer may effect sales of the pledged Shares pursuant to
this Prospectus.
15
<PAGE>
We have agreed to indemnify certain Selling Security Holders and each
of such Selling Security Holder's officers, directors and partners and any
person who controls such Selling Security Holder against liabilities under the
Securities Act, and to contribute to payments such Selling Security Holder and
such persons may be required to make in respect thereof. The Selling Security
Holders may agree to indemnify any broker-dealer or agent that participates in
transactions involving sales of the Shares against certain liabilities under the
Securities Act.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts, or concessions from Selling Security Holders in amounts
to be negotiated in connection with the sale. Such broker-dealers and any other
participating broker-dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales and any such
commission, discount or concession may be deemed to be underwriting discounts or
commissions under the Securities Act. In addition, any securities covered by
this Prospectus which qualify for sale pursuant to Rule 144 may be sold under
Rule 144 rather than pursuant to this Prospectus. The Selling Security Holders
also may be considered "underwriters" within the meaning of the Securities Act.
See the section entitled "Selling Security Holders" for information concerning
the beneficial ownership of our securities by such Selling Security Holders.
LEGAL MATTERS
Certain legal matters with respect to the legality of the Shares
offered pursuant to this Prospectus will be passed upon for us by Rutan &
Tucker, LLP, Costa Mesa, California.
EXPERTS
The financial statements incorporated by reference in this Prospectus
and in the Registration Statement have been audited by BDO Seidman, LLP and by
George F. Rombach, CPA, independent certified public accountants, to the extent
and for the periods set forth in the respective reports of such firms contained
in our Transition Report on Form 10-KSB for the nine months ended December 31,
1998. All such financial statements have been included in reliance upon such
reports given upon the authority of such firms as experts in auditing and
accounting.
16
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Restated and Amended Articles of Incorporation provide that the
liability of our company's directors for monetary damages shall be eliminated to
the fullest extent permissible under California law. This is intended to
eliminate the personal liability of a director for monetary damages in an action
brought by or in the right of our company for breach of a director's duties to
our company or our shareholders except for liability: (i) for acts or omissions
that involve intentional misconduct or a knowing and culpable violation of law;
(ii) for acts or omissions that a director believes to be contrary to the best
interests of our company or our shareholders or that involve the absence of good
faith on the part of the director; (iii) for any transaction for which a
director derived an improper personal benefit; (iv) for acts or omissions that
show a reckless disregard for the director's duty to our company or our
shareholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a director's duties, of a risk
of serious injury to our company or our shareholders; (v) for acts or omissions
that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to our company or our shareholders; and (vi)
for engaging in transactions described in the California Corporations Code or
California case law which result in liability, or approving the same kinds of
transactions.
The Restated and Amended Articles of Incorporation also provide that
our company is authorized to provide indemnification to its agents, as defined
in Section 317 of the California Corporations Code, through our Restated and
Amended Bylaws or through agreements with such agents or both, for breach of
duty to our company and our shareholders, in excess of the indemnification
otherwise permitted by Section 317 of the California Corporations Code, subject
to the limits on such excess indemnification set forth in Section 204 of the
California Corporations Code.
Our Restated and Amended Bylaws provide for indemnification of our
officers, directors, employees, and other agents to the extent and under the
circumstances permitted by California law. In all cases where indemnification is
permitted by the Restated and Amended Bylaws, a determination to indemnify such
person must be made when ordered by a court and must be made in a specific case
upon a determination that indemnification is required or proper in the
circumstances. Such determination must be made: (a) by our Board of Directors by
a majority vote of a quorum consisting of directors who were not parties to the
action, suit or proceeding which is the subject of the request for
indemnification, or (b) if such a quorum is not obtainable, or, even if
obtainable, a majority vote of a quorum of disinterested directors so directs,
by independent legal counsel in a written opinion, or (c) by a majority of the
shareholders.
To the extent indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
Certain of the Selling Security Holders and our company each have
agreed to indemnify the other and their respective officers, directors and other
controlling persons against certain liabilities in connection with this
registration, including liabilities under the Securities Act, and to contribute
to payments such persons may be required to make in respect thereof. The
obligation of certain of the Selling Security Holders that have agreed to
indemnify our company is limited to an amount equal to the proceeds such Selling
Security Holder receives from the sale of shares of our common stock pursuant to
this Prospectus.
17
<PAGE>
You should rely only on the information contained in this document or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. This document may be used only when it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
------------------------
TABLE OF CONTENTS
PAGE
----
Available Information.................................................. 2
Incorporation of Certain Documents
By Reference......................................................... 3
Risk Factors........................................................... 4
Use of Proceeds........................................................10
Resales of Shares Covered by this
Prospectus...........................................................10
Selling Security Holders...............................................12
Plan of Distribution...................................................15
Legal Matters..........................................................16
Experts................................................................16
Indemnification of Directors and Officers..............................17
------------------------
2,444,891 Shares
TELENETICS CORPORATION
COMMON STOCK
-----------------
PROSPECTUS
-----------------
November __, 1999
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCES AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with the
Offering described in this Registration Statement:
SEC registration fee............................ $ 1,255
NASD filing fee................................. 0
Printing and engraving expenses................. 2,000
Legal fees and expenses......................... 35,000
Blue Sky fees and expenses...................... 7,500
Accounting fees and expenses.................... 12,000
Miscellaneous................................... 5,000
----------
Total....................................... $ 62,755
All of the above expenses will be paid by the Registrant.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Restated and Amended Articles of Incorporation limit,
to the maximum extent permitted by California law, the personal liability of
directors for monetary damages in an action brought by or in the right of the
Registrant for breach of a director's duties to the Registrant or its
shareholders, except for liability: (i) for acts or omissions that involve
intentional misconduct or a knowing and culpable violation of law; (ii) for acts
or omissions that a director believes to be contrary to the best interests of
the Registrant or its shareholders or that involve the absence of good faith on
the part of the director; (iii) for any transaction for which a director derived
an improper personal benefit; (iv) for acts or omission that show a reckless
disregard for the director's duty to the Registrant or its shareholders in
circumstances in which the director was aware, or should have been aware, in the
ordinary course of performing a director's duties, of a risk of serious injury
to the Registrant or its shareholders; (v) for acts or omissions that constitute
an unexcused pattern of inattention that amounts to an abdication of the
director's duty to the Registrant or its shareholders; and (vi) for engaging in
transactions described in the California Corporations Code or California case
law which result in liability, or approving the same kinds of transactions.
The Registrant's Restated and Amended Articles of Incorporation also
authorize the Registrant to provide indemnification to its agents, as defined in
Section 317 of the California Corporations Code, through the Registrant's
Restated and Amended Bylaws or through agreements with such agents or both, for
breach of duty to the Registrant and its shareholders, in excess of the
indemnification to agents or both, for breach of duty to the Registrant and its
shareholders, in excess of the indemnification otherwise permitted by Section
317 of the California Corporations Code, subject to the limits on such excess
indemnification set forth in Section 204 of the California Corporations Code.
II-1
<PAGE>
The Registrant's Restated and Amended Bylaws provide for
indemnification of the Registrant's officers, directors, employees, and other
agents to the extent and under the circumstances permitted by California law.
Certain of the Selling Security Holders and the Registrant each have
agreed to indemnify the other and their respective officers, directors and other
controlling persons against certain liabilities in connection with this
registration, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"), and to contribute to payments such persons may be
required to make in respect thereof. The obligation of certain of the Selling
Security Holders that have agreed to indemnify the Registrant is limited to an
amount equal to the proceeds such Selling Security Holder receives from the sale
of shares of common stock pursuant to this registration.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
4.1................................ Restated and Amended Articles of Incorporation of
the Registrant*
4.2................................ Restated and Amended Bylaws of the Registrant*
4.3................................ Certificate of Determination of Rights, Preferences,
Privileges and Restrictions of Series A 7.0%
Convertible Redeemable Preferred Stock of the
Registrant*
4.4................................ Preferred Stock Purchase Agreement dated April 9,
1999 between the Registrant and certain Selling
Security Holders named therein***
4.5................................ Preferred Stock Purchase Agreement dated April 15,
1999 between the Registrant and certain Selling
Security Holders named therein***
4.6................................ Letter Agreement dated October 20, 1998 between
Bibicoff & Associates, Inc. and the Registrant***
4.7................................ Registration Rights Agreement dated July 26, 1999
between the Registrant and Robert McLean***
4.8................................ Registration Rights Agreement dated July 26, 1999
between the Registrant and T. Brent Henderson***
4.9................................ Registration Rights Agreement dated July 26, 1999
between the Registrant and Drew Lance***
II-2
<PAGE>
4.10............................... Registration Rights Agreement dated July 26, 1999
between the Registrant and Hal Tenney***
4.11............................... Form of Certificate for Common Stock Purchase
Warrants issued by the Registrant in connection
with the making of 10% Subordinated Unsecured
Promissory Notes due 2000***
4.12............................... Form of Common Stock Purchase Warrant issued by
the Registrant to investors in connection with the
sale of Series A Preferred Stock***
4.13............................... Form of Common Stock Purchase Warrant issued by
the Registrant to the placement agent in connection
with the sale of Series A Preferred Stock***
5.1................................ Opinion of Rutan & Tucker, LLP****
23.1............................... Consent of BDO Seidman, LLP, independent certified
public accountants
23.2............................... Consent of George F. Rombach, CPA, independent
certified public accountant
23.3............................... Consent of Rutan & Tucker, LLP (contained in the
opinion included as Exhibit 5.1)****
</TABLE>
- ---------------
* Filed as an exhibit to the Registrant's Form 10-KSB for the nine month
transition period ended December 31, 1998 and incorporated herein by
reference.
** Filed as an exhibit to the Registrant's Form 10-KSB for the fiscal year
ended March 31, 1998 and incorporated herein by reference.
*** Filed as an exhibit to the Registrant's Form S-3 filed with the Commission
on July 30, 1999 (Registration No. 333-84125).
**** Replaces draft which was inadvertently filed as an exhibit to the
Registrant's Form S-3 filed with the Commission on July 30, 1999
(Registration No. 333-84125).
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental
change in the information in the registration
statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the
total value of securities offered would not exceed that
which was registered) and any deviation from the low or
II-3
<PAGE>
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price present no
more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration
Statement;
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement
of securities offered, and the offering of the securities at
that time to be the initial BONA FIDE offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering.
(c) The undersigned Registrant hereby undertakes that it will:
(1) For determining any liability under the Securities Act, treat
the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant
under Rule 424(b)(1), or (4), or 497(h) under the Securities
Act as part of this registration statement as of the time the
Commission declared it effective.
(2) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities
offered in the registration statement, and that offering of
the securities at that time as the initial BONA FIDE offering
of those securities.
(e) 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
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lake Forest, State of California, on November 23,
1999.
TELENETICS CORPORATION
By: /S/ MICHAEL A. ARMANI
-----------------------------------------
Michael A. Armani, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/S/ MICHAEL A. ARMANI President, Chief November 23, 1999
- ----------------------------- Executive Officer,
Michael A. Armani Chairman of the Board
and Director (Principal
Executive Officer)
/S/ DAVID L. STONE Chief Financial Officer November 23, 1999
- ----------------------------- (Principal Financial and
David L. Stone Principal Accounting
Officer)
* Secretary and Director November 23, 1999
- -----------------------------
Shala Shashani
* Director November 23, 1999
- -----------------------------
George Levy
* Director November 23, 1999
- -----------------------------
Edmund P. Finamore
* Director November 23, 1999
- -----------------------------
Thomas Povinelli
* By: /S/ MICHAEL A. ARMANI
------------------------
Attorney-In-Fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
--- -----------
5.1 Opinion of Rutan & Tucker, LLP (including consent)
23.1 Consent of BDO Seidman, LLP, independent certified public
accountants
23.2 Consent of George F. Rombach, CPA, independent certified
public accountant
II-6
Exhibit 5.1
November 23, 1999
Telenetics Corporation
25111 Arctic Ocean
Lake Forest, California 92630
Re: Registration Statement on Form S-3 re 2,444,891 Shares
of Common Stock (Registration No. 333-84125)
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Ladies and Gentlemen:
We have acted as counsel to Telenetics Corporation, a California
corporation (the "Company"), in connection with the filing of a Registration
Statement to which this opinion is an Exhibit (the "Registration Statement")
with respect to the offer and sale of up to an aggregate of 2,444,891 shares of
the Company's Common Stock, no par value per share (the "Shares"), of which (i)
656,414 shares (the "Resale Shares") were issued by the Company pursuant to the
exercise of certain then outstanding warrants and options to purchase shares of
the Company's common stock and pursuant to the acquisition of certain assets of
Sierra Digital Communications, Inc., (ii) up to 1,031,593 shares (the "Warrant
Shares") are issuable upon exercise of certain outstanding warrants (the
"Warrants"), and (iii) up to 756,884 shares (the "Convertible Shares") are
issuable upon conversion of shares of the Company's Series A 7.0% Convertible
Redeemable Preferred Stock (the "Preferred Stock"), all as described in the
Registration Statement, by the holders thereof (the "Selling Security Holders").
We are familiar with the corporate actions taken and proposed to be taken
by the Company in connection with the authorization, issuance and sale of the
Resale Shares, Warrant Shares and Convertible Shares and have made such other
legal and factual inquiries as we deem necessary for purposes of rendering this
opinion.
We have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as copies, the authenticity of the originals of
such copied documents, and, except with respect to the Company, that all
individuals executing and delivering such documents were duly authorized to do
so.
Based on the foregoing and in reliance thereon, and subject to the
qualifications and limitations set forth below, we are of the opinion that:
<PAGE>
Telenetics Corporation
November 23, 1999
Page 2
1. The Resale Shares have been duly authorized and validly issued and are
fully paid and non-assessable.
2. The Warrant Shares to be issued upon exercise of each Warrant have been
duly authorized and reserved and, when issued upon exercise of the applicable
Warrant, in accordance with its terms, including payment of the applicable
exercise price, will be validly issued, fully paid and non-assessable.
3. The Convertible Shares to be issued upon conversion of each share of
Preferred Stock have been duly authorized and reserved and, when issued upon
conversion of the applicable shares of Preferred Stock in accordance with its
terms, including payment of the applicable conversion price, will be validly
issued, fully paid and non-assessable.
You have informed us that the Selling Security Holders may sell the Resale
Shares, the Warrant Shares and the Convertible Shares from time to time on a
delayed or continuous basis. This opinion is limited to the laws referred to
above as in effect on the date hereof and to all facts as they presently exist.
We hereby consent to the use of our name under the caption "Legal Matters"
in the Prospectus forming a part of the Registration Statement and to the filing
of this opinion as Exhibit 5.1 to the Registration Statement. In giving this
consent, we do not admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the General Rules and Regulations of the Securities and Exchange Commission.
Very truly yours,
/S/ RUTAN & TUCKER, LLP
2
Exhibit 23.1
CONSENT OF BDO SEIDMAN, LLP, INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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Telenetics Corporation
Lake Forest, California
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated March 18,
1999, except as to Note 14, which is as of April 15, 1999, relating to the
financial statements of Telenetics Corporation appearing in the Company's
Transition Report on Form 10-KSB for the nine months ended December 31, 1998.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/S/ BDO SEIDMAN, LLP
Orange County, California
November 23, 1999
Exhibit 23.2
CONSENT OF GEORGE F. ROMBACH, CPA, INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors
Telenetics Corporation
I consent to incorporation by reference in the Prospectus constituting a
part of this Registration Statement of my report dated July 13, 1998, relating
to the financial statements of Telenetics Corporation appearing in the Company's
Transition Report on Form 10-KSB for the nine months ended December 31, 1998.
I also consent to my reference under the caption "Experts" in the
Prospectus.
/S/ GEORGE F. ROMBACH, CPA
Lake Forest, California
November 23, 1999
