File No. 333-12781
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SECURITIES AND EXCHANGE COMMISSION
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PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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DELPHI INFORMATION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0021975
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3501 Algonquin Road, Suite 500
Rolling Meadows, Illinois 60008
(847)506-3100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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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 this Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
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<PAGE>
28,321,060 Shares
DELPHI INFORMATION SYSTEMS, INC.
Common Stock
Par Value $.10 Per Share
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This prospectus relates to the resale by certain stockholders
(the "Selling Stockholders") of up to 10,990,560 shares (the "Resale
Shares") of Common Stock, par value $.10 per share (the "Common
Stock"), which currently are outstanding, up to 16,330,500 shares (the
"Redeemable Warrant Shares") of Common Stock issuable on exercise of
Redeemable Warrants (the "Redeemable Warrants"), and up to 1,000,000
shares (the "Agent Warrant Shares," and together with the Resale
Shares and the Warrant Shares, the "Shares") of Common Stock issuable
upon exercise of warrants issued to the Company's placement agent in a
private placement (the "Agent Warrant," and together with the
Redeemable Warrant, the "Warrants"). Each Redeemable Warrant allows
the holder to purchase one share of Common Stock at an exercise price
of $1.50 per share. Each Agent Warrant allows the holder to purchase
one share of Common Stock at an exercise price of $1.00 per share.
The Company will not receive any of the proceeds from the sales of the
Resale Shares, but will receive the entire exercise price upon
exercise of the Warrants.
The offering price for sales of Resale Shares will be established
by the holders of those Shares as they see fit. The exercise price
for the Warrants were established at the time of their issuance.
The total expenses of this registration (excluding commissions,
if any) are estimated at $35,000. The Company will pay all such
expenses.
The Common Stock is traded on the NASDAQ SmallCap Market under
the symbol "DLPH." The closing market price of the Common Stock on
February 11, 1997, was $1-1/2.
THE SHARES ARE HIGHLY SPECULATIVE, INVOLVE A HIGH DEGREE OF RISK
AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. PROSPECTIVE PURCHASERS OF THE SHARES SHOULD
CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER "RISK FACTORS," AS SET
FORTH ON PAGES 3 THROUGH 7.
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
OF THE SECURITIES COVERED BY THIS PROSPECTUS IN ANY STATE TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF;
HOWEVER, IN THE EVENT OF ANY MATERIAL ADVERSE OR FUNDAMENTAL CHANGE,
THIS PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED TO REFLECT SUCH
CHANGE.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is February 12, 1997.
<PAGE>
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . 5
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 5
COMPANY REPORTS TO SHAREHOLDERS . . . . . . . . . . . . . . . . . 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . 5
SUMMARY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 6
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
THE OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . 7
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . 15
DETERMINATION OF OFFERING PRICE . . . . . . . . . . . . . . . . . 16
DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . 17
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . . 19
RECENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 22
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 23
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
TRADEMARKS . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith files annual, quarterly and other reports and
other information with the Commission. The reports and other
information filed by the Company may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549; 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, Suite
1300, New York, New York 10048, and copies of this material may be
obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
ADDITIONAL INFORMATION
The Company has filed with the Commission in Washington, D.C., a
Registration Statement under the Securities Act of 1933 relating to
the Shares offered hereby. This Prospectus, which is part of the
Registration Statement, does not contain all the information set forth
in the Registration Statement, certain items of which are contained in
exhibits and schedules thereto. For further information with respect
to the Company and the Shares, reference is hereby made to such
Registration Statement, exhibits and schedules. Statements contained
in this Prospectus as to the contents of any contract or any other
document are not necessarily complete and, in each such instance,
reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being
qualified by such reference. Copies of the Registration Statement,
together with exhibits and schedules thereto, may be inspected without
charge at the Commission's principal office in Washington, D.C., and
copies of it or any part thereof may be obtained from that office upon
payment of prescribed charges.
COMPANY REPORTS TO SHAREHOLDERS
The Company intends to provide stockholders with quarterly
reports, including unaudited financial statements, regarding the
status and results of operations of the Company. Annual audited
financial statements and proxy statements will be provided within a
reasonable time after the Company's fiscal year end. It is the
Company's intent to hold annual meetings of shareholders generally
within six months following the end of its fiscal year.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company under the
Exchange Act with the Commission are incorporated herein by reference:
(I) the Company's Annual Report on Form 10-K for the fiscal years
ended March 31, 1996 and 1995; (ii) the Company's Quarterly Report on
Form 10-Q for the fiscal quarters ended December 31, 1996, September
30, 1996, and June 30, 1996; and (iii) the description of the Common
Stock contained in Company's Registration Statement filed pursuant to
<PAGE>
Section 12 of the Exchange Act and any amendments and reports filed
for the purpose of updating that description.
All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Shares
made hereby shall be deemed to be incorporated in this Prospectus by
reference and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed
document, as the case may be, which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such
statement. Any such statements so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person to whom
this Prospectus has been delivered, on the written or oral request of
such person, a copy of any or all of the documents (without exhibits)
incorporated by reference into this Prospectus. Requests for such
copies should be directed to Delphi Information Systems, Inc.,
Attention: Corporate Secretary, 3501 Algonquin Road, Suite 500,
Rolling Meadows, Illinois 60008, telephone (847) 506-3100.
SUMMARY INFORMATION
The following summary is qualified in its entirety by the more
detailed information and financial statements appearing elsewhere in
this Prospectus.
THE COMPANY
Delphi is a leading provider of business application software and
services for independent property and casualty insurance agencies,
brokerages, managing general agents and insurance companies in the
United States and Canada. Delphi develops, markets and supports
software products that automate the operations of independent agents.
The Company also has developed and markets an application system that
integrates its application software products with other database
products to help its customers manager their information needs.
In the recent past that Company's management has focused its
efforts on restructuring its organization and re-defining its product
strategy. The Company's strategy is to expand its product offering
from primarily agency automation software products to transaction
based outsourcing services. The Company believes that this strategy
will reduce the overall cost of producing and marketing insurance
products.
The Company's customer list includes a majority of the largest
100 brokerages and top 200 agencies in the United Stated and Canada,
thereby providing a base for the introduction of new products and
<PAGE>
services. The Company's software operates on approximately 75,000
workstations and terminals at more than 4,500 customer sites
representing approximately two-thirds of all workstations and
terminals installed in independent agencies.
The Company is an IBM Industry Remarketer (IR) and markets
systems that operate on the UNIX-based IBM RISC System/6000, IBM
AS/400, and SCO UNIX-based microcomputer hardware platforms. The
Company also supports earlier versions of its software that operate on
Wang and other IBM hardware platforms.
THE OFFERING
Securities Offered Up to 10,990,560 Shares of Common Stock
held by the Selling Shareholders and up
to 17,330,500 Shares of Common Stock
issuable upon exercise of Warrants.
Terms of Redeemable
Warrants . . . . . Exercisable to purchase Common Stock
until April 19, 1999, in the case of
Redeemable Warrants issued in 1996, and
January 16, 2000, in the case of
Redeemable Warrants issued in 1997, at
an exercise price of $1.50 per share.
See "Description of Capital Stock-
Redeemable Warrants."
Redemption of
Redeemable Warrants Redeemable at the option of the Company
at a price of $.01 per share of Common
Stock that is then purchasable at the
present time (in the case of 1996
issuances) and at any time after July
16, 1997 (in the case of 1997
issuances), if the closing bid price for
the Common Stock is above $2.00 per
share for 20 consecutive trading days.
See "Description of Securities-
Redeemable Warrants."
Terms of Agent Warrants. . Exercisable to purchase Common Stock
until May 1, 2000, at an exercise price
of $1.00 per share. The Agent Warrants
are not redeemable at the option of the
Company. See "Description of Capital
Stock - Other Warrants."
Use of Proceeds . . The Company will not receive any of the
proceeds from the sales of Resale
Shares. The Company has not made any
decision with respect to the use of the
proceeds from sales of Warrant Shares.
Risk Factors . . . The Share are a highly speculative
investment. See "Risk Factors."
<PAGE>
RISK FACTORS
THE SHARES ARE HIGHLY SPECULATIVE, INVOLVE A HIGH DEGREE OF RISK
AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD CAREFULLY
CONSIDER THE FOLLOWING RISK FACTORS AS WELL AS ALL OF THE OTHER
MATTERS SET FORTH ELSEWHERE IN THIS PROSPECTUS BEFORE PURCHASING ANY
OF THE SHARES.
The Company's operations are subject to a number of risks, some
of which are summarized below. Accordingly, in addition to the other
information in this Prospectus, the following factors should be
considered carefully in evaluating an investment in the Shares:
Operating Losses and Declining Revenues
- ---------------------------------------
The Company had an accumulated deficit of $40.8 million as of
September 30, 1996. This deficit reflects significant operating
losses by the Company over an extended period of time. There can be
no assurances that the Company will regain profitability. The Company
has experienced losses in each of its last three years and in the
first two quarters of the current fiscal year. The Company attributes
these losses primarily to a soft market, or possibly a changed market,
for insurance agency automation equipment by reason of the relatively
lower profitability of independent agencies during the last several
years as compared with earlier periods, industry-wide consolidation
and customer dissatisfaction with certain products and their concern
regarding the Company's financial condition. The Company has taken
steps to reduce costs, strengthen its management and improve its
product offering so as to be in a position to achieve profitability as
market conditions improve, but no assurances can be given that those
steps will be successful and help the Company achieve profitability.
The Company cannot survive continued operating losses indefinitely,
and consequently, may be forced to raise additional funds or further
restructure its business. Also, see "Risk Factors Potential Accounts
Receivable Writedown."
Dependence Upon Raising Additional Capital
- ------------------------------------------
As of September 30, 1996, the Company had a deficiency of
approximately $8.5 million in working capital. The Company recently
has raised approximately $5.6 million in a private placement of Common
Stock and Redeemable Warrants. The Company may need additional
financing. There can be no assurances, however, that any equity or
debt financing required for working capital needs or to repay
indebtedness will be available or that, even if available, such
financing will be on terms favorable to the Company and its
stockholders or will not be dilative to existing stockholders.
<PAGE>
Acquisitions
- ------------
The Company completed one substantial acquisition and three
smaller acquisitions during fiscal 1993, completed one substantial
acquisition and one smaller acquisition during fiscal 1994 and
completed one smaller acquisition during fiscal 1997. These seven
acquisitions have not been fully integrated with the Company's other
operations and there can be no assurances as to the success of the
integration process. As a result, efforts to continue to attempt to
integrate these acquisitions may involve significant charges to
earnings.
Future Acquisitions
- -------------------
The Company expects to make future acquisitions of complementary
businesses. Acquisitions involve numerous risks, including
difficulties in the integration of business operations, accounting and
financial systems and product offerings of the acquired companies, the
diversion of management's attention from other business concerns,
risks of entering markets in which the Company has no or limited
direct prior experience, and potential loss of key employees of the
acquired company. There can be no assurances as to the successfulness
of future acquisitions. The Company may be required to obtain new
financing for any acquisitions, which could involve the issuance of
substantial additional equity or debt. The issuance of additional
equity, or debt or other securities convertible into equity, could
result in substantial dilution to present investors.
Acceptance of Superbroker Concept
- ---------------------------------
A critical component of the Company's strategy and future
profitability is the funding and introduction of cd.superbroker, a
suite of products and services tailored to large, service-oriented
insurance distribution intermediaries. There can be no assurance of
the funding, acceptance, and successful introduction of such products.
Acceptance of Outsourcing Concept
- ---------------------------------
Historically, independent agencies have not outsourced their
computer and other processing needs to third parties. A critical
component of the Company's strategy and its future profitability is
the introduction of substantial outsourcing products that do not
currently exist and the acceptance of outsourcing by independent
agencies. There can be no assurances that this acceptance will occur.
Completion of cd.connect
- ------------------------
A critical component of the Company's strategy and future
profitability is the successful release of cd.connect, Delphi's work
<PAGE>
flow and transmission product. There can be no assurances of
successful completion or industry acceptance of cd.connect.
New Product Development and Changing Business Strategy
- ------------------------------------------------------
The industry in which the Company competes is characterized by
rapid technological change. The Company's success and profitability
will be dependent on its ability to develop a new application system
product which is compatible with its existing products as well as its
ability to strategically shift its business from selling computer
hardware and application software to becoming a provider of outsourced
processing services. In addition, the Company continually must
develop product enhancements and new products modules that keep pace
with continuing changes in computer hardware and software technology
and satisfy the needs of its customers. The Company is developing a
new application system, Common Delphi, which is currently in beta
testing. To a significant extent, the Company's future operating
results will be dependent upon the success of this product. While the
Company has identified several of the outsourcing services that it
intends to provide, none of these service offerings has been developed
or is ready for marketing. There can be no assurances that the
Company will be successful in adequately addressing changing
technologies, that it can introduce services and products to the
marketplace on a timely basis, or that its new services and new or
enhanced products will be successful in the marketplace. Any failure
to successfully introduce such services and products will materially
impact the Company's existing business and its future profitability.
Potential Accounts Receivable Writedown
- ---------------------------------------
Compared to historical levels, the portion of the Company's
accounts receivable that have been outstanding for 120 days or more is
high, and as of September 30, 1996 was approximately 26% of the
Company's $6.2 million accounts receivable balance. At least a
portion of this amount is attributable to customer dissatisfaction
with recently introduced software versions, and the Company's ability
to collect these accounts receivable will be dependent upon the
Company successfully solving the installation and other problems that
led to the customer dissatisfaction. Should the Company be unable to
satisfy these customer concerns, a portion or all of these amounts may
have to be written off which would adversely affect future
profitability.
Variability of Quarterly Results
- --------------------------------
The Company's revenues fluctuate from quarter to quarter
depending upon, among other things, such factors as overall trends in
the economy, new product introductions by the Company and by other
software vendors, and customer buying patterns. Because the Company
typically ships systems within a short period after the orders are
received and therefore maintains a relatively small backlog, any
<PAGE>
weakening in customer demand can have an almost immediate adverse
impact on revenues and operating results. Moreover, a substantial
portion of the revenues for each quarter is attributable to a limited
number of orders and tends to be realized towards the end of the
quarter. Thus, even short delays or deferrals of sales near the end
of a quarter can cause quarterly revenues to fluctuate substantially.
These factors are intrinsic to the Company's industry and business and
are likely to continue in the future. As a result, quarter to quarter
variations in the Company's business may or may not be suggestive of
future results.
Third Party Software Dispute
- ----------------------------
The Company's products utilize the PFXplus software products,
developed by and licensed from an Australian company, Powerflex
Corporation Pty Ltd. On February 9, 1996 an Australian Federal court
held that the DataFlex programming language of Data Access
Corporation, a competitor of Powerflex, was both copyrightable and
infringed by Powerflex's use in and development of the PFXplus
products. The Company is not a party in this action. Powerflex
indicates it will likely appeal the decision once the Australian court
enters final orders. There is uncertainty as to the scope and extent
of the orders which will be entered in Australia, and whether and to
what extent the orders, decision and underlying issues may ultimately
affect the Company's continued rights to use PFXplus in the U.S. or
elsewhere. The Company is attempting to clarify its position through
negotiations, and is reviewing an existing license with Data Access
for an earlier version of DataFlex to assess what rights it may
provide to the Company as to PFXplus. If the orders entered in
Australia negatively impact the Company's PFXplus license rights or if
Data Access is able to establish similar rights in the U.S., and if
the Company's existing Data Access license does not cover its PFXplus
use, the Company could be required to negotiate a new license with
Data Access, or to stop using the PFXplus products. If that occurs,
the Company could have to incur substantial costs, for which recovery
under existing indemnification provisions may not be available, in
order to redesign its line of products.
Dependence on Insurance Industry
- --------------------------------
Virtually all of the Company's products and services are directed
to the property and casualty insurance industry, primarily to
independent agencies within that industry. The property and casualty
insurance industry has been subject to significant fluctuations in
product demand and pricing. This industry currently is viewed as
being in a soft market, and it is impossible to predict when
conditions will improve. One consequence of a soft market is that the
revenues of independent agencies are down and, correspondingly, their
ability to purchase new or improved software products is reduced. If
this soft market continues, it will most likely negatively affect the
Company's revenues and operating profits.
<PAGE>
Competition
- -----------
The market for automation systems for independent agents is
highly competitive and rapidly changing. Recently, the Company's two
largest competitors, Agena and AMS, merged and have aggressively
increased their marketing efforts, particularly those focused on the
Company and its products, and have substantially greater financial,
marketing and technical resources than the Company. Counter balancing
this to some extent is that the insurance companies that are not
owners of Agena/AMS are increasingly interested in ensuring that an
independent source for software exists.
Proprietary Rights
- ------------------
The Company regards its applications software as proprietary and
attempts to protect it with copyrights, trade secret laws and
restrictions on disclosure and transferring title. Despite these
precautions, it may be possible for third parties to copy aspects of
the Company's products or to obtain and use information the Company
regards as proprietary without authorization. Computer software
generally is not patented, and existing copyright laws afford only
limited practical protection. Any inability to protect or enforce the
Company's proprietary rights could have a materially adverse effect on
the Company.
Dependence on Qualified Personnel
- ---------------------------------
The Company's success depends on retaining the services of its
current management, software and other technical, sales and other
personnel and on its ability to continue to attract and retain
qualified employees. Competition for such qualified personnel is
intense. Although the Company provides incentives to retain its
employees, most personnel are employed at will and there can be no
assurances that the Company will be able to retain its employees or
attract new qualified personnel if required. Several of the Company's
senior managers left during the past year, including its chief
financial officer and chief executive officer (see "Recent Events"),
and it has had to replace most of those managers. The Company's
success in the future will be dependent upon the skills of the new
managers.
Shares Held by Directors and Officers; Charter Provisions
- ---------------------------------------------------------
The directors and executive officers of the Company own or
control Common Stock or Common Stock equivalents (options, warrants
and convertible securities) equal to approximately 21% of Common
Stock. The voting power represented by those shares might enable the
holders to determine whether various proposals submitted to
stockholders (including possible proposals to acquire the Company) are
adopted or defeated. The views of such holders on the desirability of
<PAGE>
such proposals might not coincide with those of other stockholders.
Certain charter provisions could have the effect of delaying or
preventing a change in control of the Company. See "Description of
Capital Stock." In addition, the Company's charter eliminates the
personal monetary liability of its directors for breach of their duty
of care.
Market for Common Stock and Listing Requirements
- ------------------------------------------------
The Common Stock is traded on the Nasdaq SmallCap Market.
Trading volume is relatively small, averaging about 1,000,000 shares
per month during fiscal 1996. The lack of a more liquid market may
prevent holders of Common Stock from disposing of their shares without
depressing the price offered in the market. There are various
requirements for the maintenance of a Nasdaq SmallCap Market listing,
including a minimum capital and surplus of $1 million ($2 million in
the event that the shares trade at less than $1.00 per share). The
Company's capital and surplus was approximately $2.6 million as of
September 30, 1996, although it recently has increased as a result of
a private placement of securities. Nasdaq recently has announced its
intent to increase these listing requirements by 50%. It is unclear
whether or when this change will be implemented.
Shares Eligible for Future Sale
- -------------------------------
The Common Stock that potentially may be offered in the market is
substantial in relation to the Company's historical trading volume.
In addition to the 28,321,060 shares offered hereby, 5,630,500 shares
recently were issued in a private placement. Finally, there were
outstanding at January 31, 1997, options and warrants, other than the
Warrants, then exercisable to purchase approximately 2.8 million
shares of Common Stock at prices below the market price of the Common
Stock on the date of this Prospectus. The Company's optionees
historically have sold all or a part of their optioned shares promptly
after exercise.
Dilution
- --------
Purchasers of the Warrant Shares offered hereby will experience
immediate and substantial dilution in net tangible book value of the
Common Stock. Additional dilution could result from future financings
or the issuance of stock options. See "Dilution."
No Dividends
- ------------
No dividends have been paid on the Common Stock of the Company.
The Company does not intend to pay cash dividends on its Common Stock
in the foreseeable future, and anticipates that profits, if any,
received from operations will be devoted to the Company's future
operations. In addition the payment of dividends by the Company is
<PAGE>
prohibited by the terms of its credit facility. Any decision to pay
dividends will depend upon the Company's profitability at the time,
cash available therefor, and other relevant factors. Investors who
anticipate a need for immediate income from their investment should
not purchase the Shares offered hereby.
THE COMPANY
Delphi is a leading provider of business application software
and services for independent property and casualty insurance agencies,
brokerages, managing general agents and insurance companies in North
America. Delphi develops, markets and supports software products that
automate the operations of independent agents. The Company also has
developed and markets an application system that integrates its
application software products with other database products to help its
customers manage their information needs.
For fifteen years Delphi has provided application software
solutions to large property and casualty agencies. In 1990, to meet
the changing industry dynamics, Delphi began pursuing a strategy of
obtaining market share through the acquisition of other application
software businesses. As a result of these acquisitions Delphi
believes that it has a preeminent market position in the independent
property and casualty insurance agency/broker market.
Delphi's customer list includes a majority of the largest 100
brokerages and top 200 agencies in the United States and Canada, and
provides a base for the introduction of new products and services.
Delphi's software operates on approximately 75,000 workstations and
terminals at more than 4,500 customer sites representing approximately
two-thirds of all workstations and terminals installed in independent
agencies.
Delphi Systems, Inc., a California corporation, was founded in
1976. In 1983, the Company was formed and acquired all of the
outstanding shares of Delphi Systems, Inc. in an exchange offer. In
June 1987, Delphi Systems, Inc. was merged with and into the Company.
The Company's executive offices are located at 3501 Algonquin Road,
Suite 500, Rolling Meadows, Illinois 60008. Its telephone number is
(847) 506-3100.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sales
of Resale Shares. The Company has not made any decision with respect
to the use of the proceeds from the sales of Warrant Shares
(approximately $28.2 million (net of expenses of $35,000) if all
Warrants are exercised). In all likelihood, the Company will use the
proceeds to fund research and development and investments in
complementary businesses and to improve the Company's liquidity.
Pending utilization of the net proceeds as specified below, the
Company may invest such proceeds in short-term investment grade
interest-bearing investments.
<PAGE>
DETERMINATION OF OFFERING PRICE
The offering price for sales of Resale Shares will be established
by the holders of those shares as they see fit. The exercise price of
the Warrants was negotiated between the Company and the placement
agent for the original Redeemable Warrants on an arms' length basis.
DILUTION
The Company had negative tangible net book value of approximately
$6,290,000 at September 30, 1996, although it subsequently raised
approximately $5.6 million in a private placement. Purchasers of
Warrant Shares and in all likelihood purchasers of Resale Shares will
suffer immediate and substantial dilution.
<PAGE>
PLAN OF DISTRIBUTION
The Resale Shares may be offered for sale at such times, in such
manner and at such prices as the Selling Stockholders see fit. The
Selling Stockholders currently consist of the individuals listed with
respect to the indicated number of shares (which are believed to be
all of the shares owned by such individuals). Except as noted, no
Selling Shareholder is believed to own in excess of 1% of the
Company's outstanding Common Stock.
<TABLE>
<S> <C> <C>
Floyd & Andrea Adelman Trust 25,000 William S. Lapp 25,000
H. Charles and Mary H. Anderson 35,000 Robert Levine 25,000
Craig C. Avery 250,000 Mark T. Lindee 50,000
Robert Ayres 25,000 Paul S. Listul 25,000
Bradley W. Baker 12,500 Kim J. Loftsgarden 25,000
Amy Baratz 25,000 Leland T. Lynch 50,000
Bay Area Micro-Cap Fund, L.P. (1.2%) 360,000 Thomas McLean 25,000
Douglas A. Becker 50,000 Gary L. Manka 50,000
Bellco IV Partnership (4.1%) 1,250,000 Susan M. Michaltez 25,000
Steven Beutler 50,000 John C. Miller 50,000
Charles W. Bidwill, III 25,000 Jon L. Miller 50,000
Bob Inc. 25,000 Tamara K. Mills 25,000
Michael Brandt 25,000 Wayne W. Mills 100,000
Brinson Relationship Funds on behalf of 500,000 Wayne W. Mills, IRA 100,000
the Brinson Post Venture Fund series
(1.6%)
Brook Industries Profit Plan (1.6%) 500,000 Michael T. Mulligan 25,000
Steven Bruggeman 25,000 Okabena Partnership K (3.9%) 1,200,000
Scott C. Bullock 50,000 Robert F. Olson 37,500
Paul S. and Irene M. Burke, Charitable 25,000 Jann L. Olsten 50,000
Remainder Unitrust
Randel S. Carlock 100,000 William O'Neill 25,000
B.J. Cassin 260,170 John G. Ordway, Jr. 50,000
B.J. Cassin, Conservator for 49,990 Daniel S. Perkins, Trustee 50,000
Robert Cassin
Cherubino Investments, S.A. 25,000 Daniel S. and Patrice M. Perkins 50,000
Christianson Investment Company L.P. 50,000 James K. Pfleider 50,000
Clarion Capital Corporation (1.1%) 350,000 Provident Bank as Custodian for the 1,550,000
Perkins Opportunity Fund (5.0%)
Coral Partners II (17.6%) 5,413,115 Dale Ragan 100,000
Cove Investments, L.P. 176,000 Rein & Co., Inc. 50,000
(by K. Marshall Matzinger)
Audrey E. Cox 100,000 Peter Rettman 25,300
Barbara M. Daly 50,000 Richfield Bank & Trust Co. as Trustee 50,000
for Tom McLean Profit Shaing Plan
Arnold Divine 50,000 S.A. Rickrose 25,000
Robert J. Dondelinger 60,000 Ernest C. Roberg 50,000
David Dworsky 25,000 S.A. Robrose 25,000
Jonathan Dworsky 25,000 Rogers Family Trust 300,000
Joseph J. Eibensteiner 25,000 Howard Root 25,000
Bruce H. Elliasen 50,000 Gerardo Rosenklant 25,000
Robert C. & Dolores A. Engelstad 25,000 Raymond D. Rossini 75,000
Richard H. Enrico 65,000 Douglas E. Schmidt 25,000
Henry Fong 50,000 Kenneth A. and Margaret M. Schweiger, 50,000
Trustees
Paul Ginther 15,000 Ronald J. Shimek 50,000
Glenbrook Partners, L.P. 24,000 Mark W. and Sheila E. Siewert 25,000
Thomas P. Gray 25,000 Glenn and Jean Snow 25,000
Randall A. Green 25,000 Michael L. Snow 25,000
Patrica M. Haage 50,000 Richard Swager 100,000
Brennan Hayek 150,000 Norris Thune 25,000
Walter W. Hilgenberg 15,000 Trakehner Holdings, Inc. 75,000
Integrity Development, Inc. 25,000 Dean Verdoes 20,000
David C. Johnston 25,000 Gerald and Nancy Viebrock 25,000
Larry A. Katz 100,000 David L. Voxland 50,000
Paul Kelly 50,000 Frederick D. Watson Trust 25,000
David D. Koentopf 100,000 Jeffrey J. Werbalowsky 50,000
Jeffrey W. Krol & Associates, Ltd. 25,000 Daryl Werneke 30,000
Profit Sharing Plan & Trust
John Kubinski 80,000 Gregory F. Wilbur, IRA 190,000
John Kubinski, IRA 85,000 Nancy A. Wright 50,000
Ruth Kubinski, IRA 85,000 Richard F. Wulff, Trust 25,000
George S. Lalich 12,500 Wyncrest Capital, Inc. 100,000
Joseph I. Langer 25,000
Steven Z. Lange 12,500
</TABLE>
The Warrant Shares may be purchased from the Company (a) for
$1.50 per share by the holders of the Redeemable Warrants at their
election at any time until April 19, 1999, in the case of Redeemable
Warrants issued in 1996, and January 16, 2000, in the case of
Redeemable Warrants issued in 1997, and until that time are subject to
redemption, and (b) for $1.00 per share by holders of the Agent
Warrants at their election at any time until May 1, 2001. See
"Description of Capital Stock."
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 50,000,000
shares of Common Stock and 2,000,000 shares of Preferred Stock, par
value $.10 per share ("Preferred Stock"). As of September 30, 1996,
the Company had 221 shares of Preferred Stock issued and outstanding.
Common Stock
- ------------
Holders of Common Stock of the Company are entitled to one vote
for each share held of record. The holders of Common Stock are
entitled to receive such dividends, if any, as may be declared from
time to time by the Board of Directors in its discretion from funds
legally available therefor and subject to any prior dividend rights of
the holders of Preferred Stock. Holders of Common Stock do not have
cumulative voting rights in connection with the election of directors.
In the event of liquidation, dissolution, or winding up, holders of
the Company's Common Stock are entitled to share ratably among
themselves in all assets of the Company legally available for
distribution. The Common Stock has no preemptive or subscription
rights, and there are no conversion or redemption rights with respect
to such shares. Each share of Common Stock is fully paid and
nonassessable. As of January 31, 1997, there were 30,720,668 shares
of Common Stock issued and outstanding.
<PAGE>
Redeemable Warrants
- -------------------
As of January 31, 1997, the Company had Redeemable Warrants
outstanding to purchase an aggregate of 16,330,500 shares of Common
Stock.
EXERCISE PRICE AND TERMS. Each Redeemable Warrant entitles the
registered holder to purchase one share of Common Stock at a price
equal to $1.50 per share subject to adjustment in accordance with the
anti-dilution and other provisions described below. The registered
holder of any Redeemable Warrant may exercise such Redeemable Warrant
by surrendering the certificate representing the Redeemable Warrant to
the Company at its principal executive offices, with the subscription
form attached to the Redeemable Warrant properly completed and
executed, together with payment of the exercise price. Each
registered holder's Redeemable Warrants may be exercised at any time
or from time to time in whole or in part at the applicable exercise
price until expiration of the Redeemable Warrants on April 19, 1999,
in the case of Redeemable Warrants issued in 1996, and January 16,
2000, in the case of Redeemable Warrants issued in 1997.
REDEMPTION. The Company can redeem the Redeemable Warrants at a
redemption price of $.01 per share of Common Stock that is then
purchasable at the present time (in the case of the 1996 issuances)
and at any time after July 16, 1997 (in the case of the 1997
issuances), if the closing bid price for the Common Stock is above
$2.00 per share for 20 consecutive trading days subsequent to when the
Redeemable Warrants first are redeemable.
ADJUSTMENTS. The exercise price and the number of shares of
Common Stock issuable upon the exercise of Redeemable Warrants are
subject to adjustment upon the occurrence of certain events, including
stock dividends, stock splits, combinations or similar capital events
affecting the Common Stock. Adjustment would also be made in the
event of a merger or statutory stock exchange in order to enable
holders of Redeemable Warrants to acquire, upon subsequent exercise,
the same securities or property that would have been acquired had the
Redeemable Warrants been exercised immediately prior to any such
capital event. In the event of any capital event or series of capital
events that otherwise would require an increase or change in the kind
of securities or property issuable upon exercise of a Redeemable
Warrant or a decrease in the exercise price of a Redeemable Warrant,
no adjustment shall be made unless and until such increase or
decrease, respectively, exceeds 5%. No adjustment shall be made for
dividends, other than stock dividends, payable on the Common Stock.
TRANSFER, EXCHANGE AND EXERCISE. The Redeemable Warrants are in
registered form and may be presented to the Company for transfer,
exchange or exercise at any time on or prior to their expiration
dates. After the expiration date, all Redeemable Warrants shall
become wholly void and of no value. If the Company is unable to
qualify the Warrant Stock for sale in particular states, holders of
Redeemable Warrants residing in such states will not be able to
<PAGE>
exercise their Redeemable Warrants, and will have no choice but to
sell their Warrants or allow them to expire. The Company currently
does not intend to register the Redeemable Warrants under the Act or
any state securities laws. It is unlikely that a market for the
Redeemable Warrants will develop or continue.
Other Warrants
- --------------
In connection with a 1996 private placement, the Company issued
to the placement agent a warrant to purchase at an exercise price of
$1.00 per share, 1,000,000 shares of Common Stock. The Agent Warrant
expires May 1, 2001. The Agent Warrant is not subject to redemption
but otherwise is subject to substantially the same terms and
conditions as the Redeemable Warrants.
The Company has other warrants that currently are outstanding.
See footnote 12 to the Company's financial statements for its fiscal
year ended March 31, 1996.
Shares Eligible for Future Sale
- -------------------------------
As of January 31, 1997, the Company had outstanding 30,720,668
shares of Common Stock, not including shares of Common Stock issuable
upon exercise of the Redeemable Warrants, the Agent Warrant,
outstanding options, or other warrants. Of these outstanding shares,
approximately 9 million shares of Common Stock are believed to be
freely tradable without restriction or registration under the Act. In
addition, approximately 5.5 million shares are believed to be held by
"affiliates" of the Company (as that term is defined in the rules and
regulations under the Act). These may be sold only pursuant to a
registration under the Act or pursuant to an exemption from
registration under the Act, including the exemption provided by Rule
144 adopted under the Act. Approximately 22 million (including the
5.5. million) shares of Common Stock are believed to be "restricted
securities" as that term is defined in Rule 144 under the Act
("Restricted Securities") and may not be sold unless such sale is
registered under the Act (e.g., pursuant to this Prospectus), or is
made pursuant to an exemption from registration under the Act,
including the exemption provided by Rule 144. A substantial portion
of the restricted securities are being registered for resale pursuant
to the registration statement of which this Prospectus is a part.
In general, under Rule 144 as currently in effect, a stockholder
(or stockholders whose shares are aggregated) who has beneficially
owned any Restricted Securities for at least two years (including a
stockholder who may be deemed to be an affiliate of the Company), will
be entitled to sell, within any three-month period, that number of
shares that does not exceed the greater of (i) 1% of the then
outstanding shares of Common stock or (ii) the average weekly trading
volume of the Common Stock during the four calendar weeks preceding
the date on which notice of such sale is given to the Securities and
Exchange Commission, provided certain public information, manner of
<PAGE>
sale and notice requirements are satisfied. A stockholder who is
deemed to be an affiliate of the Company, including members of the
Board of Directors and senior management of the Company, will still
need to comply with the restrictions and requirements of Rule 144,
other than the two-year holding period requirement, in order to sell
shares of Common Stock that are not Restricted Securities, unless such
sale is registered under the Act. A stockholder (or stockholders
whose shares are aggregated) who is deemed not to have been an
affiliate of the Company at any time during the 90 days preceding a
sale by such stockholder, and who has beneficially owned Restricted
Securities for at least three years, will be entitled to sell such
shares under Rule 144 without regard to the volume limitations
described above.
Delaware Anti-Takeover Laws
- ---------------------------
The Company is subject to Section 203 of the Delaware General
Corporation Law ("DGCL"), which prevents an "interested stockholder"
(defined in Section 203, generally, as a person owning 15% or more of
a corporation's outstanding voting stock) from engaging in a "business
combination" with a publicly-held Delaware corporation for three years
following the date such person became an interested stockholder,
unless: (i) before such person became an interested stockholder, the
board of directors of the corporation approved the transaction in
which the interested stockholder became an interested stockholder or
approved the business combination; (ii) upon consummation of the
transaction that resulted in the interested stockholder's becoming an
interested stockholder, the interested stockholder owns at least 85%
of the voting stock of the corporation outstanding at the time the
transaction commenced (subject to certain exceptions); or (iii)
following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of 66% of the
outstanding voting stock of the corporation not owned by the
interested stockholder. A "business combination" includes mergers,
stock or asset sales and other transactions resulting in a financial
benefit to the interested stockholder.
The provisions of Section 203 of the DGCL could have the effect
of delaying, deferring or preventing a change in control of the
Company.
Transfer Agent and Registrar
- ----------------------------
The transfer agent and registrar for the Common Stock is
ChaseMellon Shareholder Services.
RECENT EVENTS
Private Placement Offering
- --------------------------
<PAGE>
In May 1996, the Company completed a private placement offering
providing gross proceeds of $10,700,000 to the Company. Under the
terms of the private placement, the Company issued 10,700,000 units
(each, a "Unit") at a price of $1.00 per Unit, each Unit consisting of
one share of common stock and a redeemable warrant to purchase one
share of common stock at an exercise price of $1.50 per share, subject
to certain anti-dilution adjustments. The shares and redeemable
warrants comprising the Units are immediately detachable and
separately transferable. In January 1997, the Company completed a
private placement offering providing gross proceeds of $5,630,500 in
exchange for 5,630,500 Units.
Preferred Stock and Note Conversion
- -----------------------------------
In conjunction with the 1996 private placement, the Company
converted all outstanding shares of Series C Preferred Stock, 16,135
of the 16,356 outstanding shares of Series D Preferred Stock, and all
of the outstanding shares of Series E Preferred Stock into 8,697,594
shares of common stock, and all outstanding Subordinated Convertible
Notes into 1,500,000 Units.
President and Chief Executive Officer
- -------------------------------------
On August 26, 1996, the Company announced the resignation of M.
Denis Connaghan, the President and Chief Executive Officer of the
Company. He will remain as a Director of the Company and will provide
consulting services to the Company in the future. The Company has
instituted a search process to fill the position of Chief Executive
Officer. The Company has retained the services of Joseph Oddo to
advise it during the period that it is seeking a new Chief Executive
Officer. Mr. Oddo also was elected as a Director of the Company and
Chairman of the Company's Executive Committee.
Restructuring
- -------------
On August 29, 1996, the Company implemented a significant
downsizing program. As a part of the downsizing, the Company reduced
its work force by one-third. The Company believes that this
downsizing will effect a substantial reduction in costs and will
assist it in its attempt to achieve profitability.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock being
registered hereby are being passed upon for the Company by Schiff
Hardin & Waite, Chicago, Illinois.
EXPERTS
<PAGE>
The financial statements of the Company incorporated by reference
in this Prospectus to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance
upon the authority of said firm as experts in accounting and auditing
in giving said report.
TRADEMARKS
Certain product names mentioned in this Prospectus are trademarks
of other corporations. UNIX is a registered trademark of Unix System
Laboratories, Inc. RISC System/6000 and AS/400 are registered
trademarks of International Business Machines Corporation. Wang is a
registered trademark of Wang Laboratories, Inc. SCO is a registered
trademark of The Santa Cruz Operation, Inc.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the amount of fees and expenses
to be incurred in connection with the secondary offering of the Common
Stock registered hereby, other than brokerage fees. The Company will
bear all of such costs.
Registration fee under Securities Act $9,155.52
of 1993 . . . . . . . . . . . . . . .
Blue sky legal fees and expenses . . 4,000.00
Legal fees and expenses . . . . . . . 15,000.00
Accounting fees . . . . . . . . . . . 3,000.00
Miscellaneous . . . . . . . . . . . . 3,844.48
-----------
Total . . . . . . . . . . . . . . . . $ 35,000.00
ITEM 16. EXHIBITS.
4.1 Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1991).
4.2 Bylaws of the Company, as amended (incorporated by reference
to Exhibit 3.2 to the Company's Registration Statement on
Form S-1 (No. 33-14501) effective July 1, 1987).
4.3 Form of Redeemable Warrant (incorporated by reference to
4.12 of the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996).
5 Opinion of Schiff Hardin & Waite regarding legality.*
23.1 Consent of Schiff Hardin & Waite (included in its opinion
filed as Exhibit 5 hereto).
23.2 Consent of Arthur Andersen LLP.*
24 Power of Attorney. See page II-4 of the original
Registration Statement.
_________________
*Filed herewith.
<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 Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Rolling Meadows, State of
Illinois, on February 3, 1997.
DELPHI INFORMATION SYSTEMS, INC.
By /s/ James A. Harsch
-------------------------------
James A. Harsch
Vice President - Administration
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on
behalf of the registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Yuval Almog* Director, Chairman of the Board February 3, 1997
--------------------------------- (Principal Executive Officer)
(Yuval Almog)
/s/ James A. Harsch Vice President - Administration, February 3, 1997
--------------------------------- Chief Financial Officer
(James A. Harsch) (Principal Accounting Officer)
/s/ William Baumel* Director February 3, 1997
---------------------------------
(William Baumel)
/s/ Larry G. Gerdes* Director February 3, 1997
---------------------------------
(Larry G. Gerdes)
/s/ Joseph Oddo* Director February 3, 1997
---------------------------------
(Joseph Oddo)
_____________
* /s/ James A. Harsch
- -----------------------
(James A. Harsch)
</TABLE>
EXHIBIT 5
SCHIFF HARDIN & WAITE
A Partnership Including Professional Corporations
- ---------------------------------------------------
7200 Sears Tower, Chicago, Illinois 60606-6473
Telephone (312) 876-1000 Facsimile (312) 258-5600
W. Brinkley Dickerson, Jr.
(312) 258-5633
February 12, 1997
Delphi Information Systems, Inc.
3501 Algonquin Road, Suite 500
Rolling Meadows, Illinois 60008
Ladies and Gentlemen:
We have acted as special counsel to Delphi Information
Systems, Inc., a Delaware Corporation (the "Company"), in connection
with the registration on Form S-3 under the Securities Act of 1933, as
amended (the "Act"), of 28,321,060 shares of the Company's Common
Stock, par value $.10 par share (the "Shares"), to be resold by the
Selling Stockholders. We have examined such documents, records and
matters of law as we have deemed necessary for the purposes of this
opinion, and based thereon, we are of the opinion that the Shares have
been duly authorized and are either validly issued, fully paid and
nonassessable or, in the case of Shares issued upon exercise of
warrants, will be validly issued, fully paid and nonassessable when
issued in accordance with their terms.
We hereby consent to the filing of this opinion as Exhibit 5
to Registration Statement No. 333-12781 on Form S-3 filed by the
Company with the Securities and Exchange Commission under the Act.
SCHIFF HARDIN & WAITE
By /s/ W. Brinkley Dickerson, Jr.
-------------------------------
W. Brinkley Dickerson, Jr.
EXHIBIT 23.2
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
RE: Delphi Information Systems, Inc.
Form S-3 for Registration of 28,321,060 Shares of Common Stock
As independent public accountants, we hereby consent to the use
of our reports (and all references to our Firm) included in or
made a part of this registration statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 5, 1997
