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Rule 424(b)(5)
Registration No. 333-35358
PROSPECTUS SUPPLEMENT
(To Prospectus dated May 25, 2000)
NANOPIERCE TECHNOLOGIES, INC.
14,984,774 shares of common stock
warrants to purchase 10,453,691 shares of common stock
By this prospectus supplement and the related prospectus, we are offering
the following securities:
. 14,984,774 shares of our common stock that includes 4,531,613 shares
of our common stock at a public offering price of $1.65504 per share
and 10,453,161 shares of our common stock that will be issued upon the
exercise of all of the warrants offered in this prospectus supplement;
and
. warrants exercisable to purchase 10,453,161 shares of our common
stock.
You should read this prospectus supplement and the attached prospectus
carefully before you decide to invest.
Our common stock is traded on the over-the-counter market and is quoted on
the OTC Bulletin Board under the symbol "NPCT." The common stock also is traded
on the Frankfurt Stock Exchange under the symbol "NPI" and on the Hamburg Stock
Exchange under the symbol "916132." On October 19, 2000, the last reported sale
price of the common stock on the OTC Bulletin Board was $2.88 per share (rounded
to the nearest penny). See "DESCRIPTION OF COMMON STOCK." There is no market for
the warrants offered by this prospectus supplement and the related prospectus
and you should not expect one to be established in the future.
Investing in our common stock or warrants involves a high degree of risk which
you should consider before you invest. See "RISK FACTORS" beginning on page 5 in
the attached prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved any of these securities or determined if
this prospectus supplement is truthful or complete. Any representation to the
contrary is a criminal offense.
The securities offered by this prospectus supplement and the attached
prospectus are offered by Nanopierce Technologies, Inc.
The date of this prospectus supplement is October 20, 2000.
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TABLE OF CONTENTS
<TABLE>
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Page
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PROSPECTUS SUPPLEMENT
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FORWARD-LOOKING STATEMENTS...................................... S-2
THE OFFERING.................................................... S-2
USE OF PROCEEDS................................................. S-4
PLAN OF DISTRIBUTION............................................ S-5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................. S-5
ABOUT THIS PROSPECTUS SUPPLEMENT................................ S-6
PROSPECTUS
FORWARD-LOOKING STATEMENTS...................................... 2
PROSPECTUS SUMMARY.............................................. 3
RISK FACTORS.................................................... 5
USE OF PROCEEDS................................................. 11
THE COMPANY..................................................... 12
DESCRIPTION OF COMMON STOCK..................................... 20
DESCRIPTION OF WARRANTS......................................... 22
PLAN OF DISTRIBUTION............................................ 23
LEGAL MATTERS................................................... 24
EXPERTS......................................................... 24
AVAILABLE INFORMATION........................................... 24
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................. 25
ABOUT THIS PROSPECTUS........................................... 25
</TABLE>
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FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. We base
these forward-looking statements on our current expectations and projections
about future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about our company, including:
. the rate of market development and acceptance of the interconnect
technology in the industry within which we are concentrating our
business activities;
. the limited revenues and significant operating losses generated to
date;
. the possibility of significant ongoing capital requirements and our
ability to secure financing as and when necessary;
. our ability to compete successfully with the other providers of
interconnect technologies;
. our ability to retain the services of our key management, and to
attract new members of the management team; and
. our ability to obtain and retain appropriate patent, copyright and
trademark protection of our intellectual properties and any of our
products.
You should only rely on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized any person to
provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not making an offer
to sell these securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this prospectus
supplement is accurate as of the date on the front cover of this prospectus
supplement only. Our business, financial condition, results of operations and
prospects may have changed since that date.
The prospectus that accompanies this prospectus supplement contains
important information regarding this offering, and you are urged to read both
the prospectus and this prospectus supplement in full to obtain material
information concerning the shares of our common stock and the warrants to
purchase common stock that are offered in this prospectus supplement and the
accompanying prospectus.
THE OFFERING
General
This offering includes:
. warrants to purchase 453,161 shares of our common stock (the
"Investor warrants") to be issued directly to an institutional
investor;
. warrants to purchase 10,000,000 shares of our common stock (the
"Gemini warrants") to be issued directly to Gemini Investments,
Ltd.; and
. 14,984,774 shares of our common stock that includes 4,531,161
shares of our common stock to be issued directly to an
institutional investor and 10,453,161 shares of our
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common stock that will be issued upon the exercise of all of the
Investor warrants and Gemini warrants.
In addition, under the terms of the securities purchase agreement (the "Purchase
Agreement") dated as of October 20, 2000 between us and the institutional
investor, we may be required to issue additional stock to the institutional
investor. The number of shares, if any, that we may be required to issue is
based on the performance of our common stock and will be covered under a
separate prospectus supplement.
Common Stock
Authorized Capital. Our authorized capital stock consists of 100,000,000
shares of common stock, $.0001 par value per share, and 5,000,000 shares of our
preferred stock, $.0001 par value per share. As of October 16, 2000, we had
36,226,081shares of common stock and no shares of preferred stock issued and
outstanding.
Price Range of Common Stock. The following table sets forth the range of
high and low bid quotations for the common stock of each full quarterly period
during the last three fiscal quarters, rounded to the nearest penny. The
quotations were obtained from information published by the NASD and reflect
interdealer prices, without retail mark-up, mark-down or commissions and may not
represent actual transactions. The average of the closing bid and asked prices
for the common stock on the OTC Bulletin Board was $2.77 on October 19, 2000
(rounded to the nearest penny).
Fiscal Quarter High Low
-------------- ---- ---
September 30, 2000 $1.937 $1.843
June 30, 2000 $ 2.00 $ 1.88
March 31, 2000 $ 6.19 $ 2.44
As of October 16, 2000, there were 274 holders of record of our 36,226,081
outstanding shares of common stock. Based upon information provided to us by
persons holding our common stock for the benefit of others, it is estimated that
we had in excess of 1,250 beneficial owners of our common stock as of October
16, 2000.
Warrants
For a complete description of the terms and conditions of the Investor
warrants and the Gemini warrants that are offered by this prospectus supplement
and the attached prospectus, please refer to the Investor warrants and the
Gemini warrants which are all filed as exhibits to the Current Report on Form 8-
K filed by us on October 20, 2000. The descriptions of the Investor warrants and
the Gemini warrants in this prospectus supplement that follow are qualified in
their entirety by reference to those exhibits.
Investor warrants. The Investor warrants offered by us directly to an
institutional investor entitle the holders to purchase up to 453,161 shares of
common stock at an exercise price per share that is equal to $2.586 at any time
commencing on October 20, 2000, and ending at 5:00 p.m. Eastern Time on October
20, 2005. Any warrants not exercised by that time will become null and void.
The exercise price and number of shares of common stock or other securities
issuable upon exercise of the Investor warrants is subject to adjustment in some
circumstances, including in the event of a stock dividend, recapitalization,
reorganization, merger or consolidation or our distribution to the
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holders of common stock of cash, evidences of our indebtedness or other
distribution of our securities or assets, other than cash dividends or
distributions payable out of earned surplus or net profits for the current or
preceding year. Currently there exists no public market for any warrants and we
can give no assurances that a public market will develop in the future.
Gemini Warrants. The Gemini warrants offered by us to Gemini Investments,
Ltd. entitle the holder to purchase up to 10,000,000 shares of our common stock
at an exercise price per share of $0.25 at any time commencing on October 20,
2000 and ending at 5:00 p.m. Eastern Time on October 20, 2005. Any Gemini
warrants not exercised by that time will become null and void. Gemini
Investments, Ltd., has informed us that it intends to immediately exercise the
Gemini warrants, and it has also agreed not to sell any shares of our common
stock issuable upon the exercise of the Gemini warrants until October 20, 2001.
Gemini Investments, Ltd. currently holds warrants dated December 10, 1999,
to purchase up to 10,000,000 shares of our common stock at an exercise price
share of $0.51 (the "Gemini surrender warrants"). As described herein under
"PLAN OF DISTRIBUTION," Gemini Investments, Ltd. has agreed to surrender,
without exercise, the Gemini surrender warrants.
The exercise price and number of shares of common stock or other securities
issuable upon exercise of the Gemini warrants are subject to adjustment in some
circumstances, including in the event of a stock dividend, recapitalization,
reorganization, merger or consolidation or our distribution to the holders of
common stock of cash, evidences of our indebtedness or other distribution of our
securities or assets, other than cash dividends or distributions payable out of
earned surplus or net profits for the current or preceding year. Currently there
exists no public market for any of our warrants and no assurances can be given
that a public market will develop in the future.
USE OF PROCEEDS
Under the terms of the Purchase Agreement, we will receive a gross amount
of $7,500,000 from the sale of 4,531,161 shares of our common stock and the
Investor warrants to the institutional investor.
If all of the Investor warrants are exercised for cash at an exercise price
of $2.586 per share, we expect to receive up to an additional $1,171,874 from
the institutional investor.
Gemini Investments, Ltd., has agreed to apply $675,000 of the commissions
otherwise payable to it in cash toward the immediate exercise of all of the
Gemini warrants. Therefore, the $2,500,000 in cash proceeds that we would
otherwise expect to receive from Gemini Investments, Ltd., on the exercise of
the Gemini warrants at an exercise price of $.025 per share will be reduced by
$675,000.
We intend to use the net proceeds, estimated at $7,010,000 from the sale of
the common stock and Investor warrants (after payment of a commission of
$450,000 to a third party placement agent and payment of expenses which are
estimated to be $40,000) for redeeming all of our outstanding convertible
debentures which, as of October 20, 2000, have an agreed redemption payoff of
approximately $2,372,074.00 and for general corporate purposes, including
funding operations, expanding production, marketing and sales, working capital
and, possibly, to acquire other technologies.
We intend to use the proceeds, if any, from the exercise of the Investor
warrants and the Gemini warrants for general working capital purposes. However,
no assurance can be given that any of the Investor warrants or all of the Gemini
warrants will be exercised, or that they will all be exercised for cash.
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PLAN OF DISTRIBUTION
Of the securities offered in this prospectus supplement and the attached
prospectus, the Investor warrants and the shares of common stock have each been
sold directly to the institutional investor based on the terms of the Purchase
Agreement, and the Gemini warrants have been sold directly to Gemini
Investments, Ltd. pursuant to its agreement with us.
In connection with the sale of our common stock and the Investor warrants
to the institutional investor, we will pay to Gemini Investments, Ltd. cash
commissions of $1,125,000. Of this total and based on an agreement with Gemini
Investments, Ltd., we will apply $675,000 towards the exercise of the Gemini
warrants on behalf of Gemini Investments, Ltd. and, on behalf of Gemini
Investments, Ltd., we will cause to be paid the balance of $450,000 to a third
party placement agent.
Any resales of our common stock, including the common stock issued upon the
exercise of any of the warrants offered in this prospectus, may be made only in
accordance with applicable securities laws.
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 that is incorporated by
reference is an important part of this prospectus supplement and the related
prospectus, and information that we file later with the SEC will automatically
update and supersede this information. We incorporate by reference the documents
listed below and any future filings made with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until we sell all of
the securities offered by this prospectus supplement and the related prospectus
supplement, or after the date of this initial registration statement and before
the effectiveness of the registration statement.
. Annual Report on Form 10-KSB for the fiscal year ended June 30,
1999 that was filed with the SEC on September 28, 1999;
. Quarterly Report on Form 10-QSB for the quarter ended September
30, 1999 that was filed with the SEC on November 12, 1999;
. Quarterly Report on Form 10-QSB for the quarter ended December
31, 1999 that was filed with the SEC on February 11, 2000; and
. Quarterly Report on Form 10-QSB for the quarter ended March 31,
2000 that was filed with the SEC on March 15, 2000;
. Annual Report on Form 10-KSB for the fiscal year ended June 30,
2000 that was filed with the SEC on September 25, 2000; and
. Current Report on Form 8-K that was filed with the SEC on October
20, 2000.
On request we will provide at no cost to each person, including any
beneficial owner, who receives a copy of this prospectus supplement and the
related prospectus, a copy of any or all of the documents incorporated in this
prospectus supplement and the related prospectus by reference. We will not
provide exhibits to any of such documents, however, unless such exhibits are
specifically incorporated by reference into those documents.
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ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement is part of a registration statement on Form S-3
that we have filed with the SEC. This prospectus supplement is only a part of
that registration statement, and does contain all of the information that is
included in the registration statement, several sections of which are not
included at all in this prospectus supplement. The statements contained in this
prospectus supplement, including statements as to the contents of any contract
or other document, are not necessarily complete. You should refer to the
registration statement and to an actual copy of the contract or document filed
as an exhibit to the registration statement for more complete information.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT SELL THESE SECURITIES UNTIL THAT
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO
SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to completion, dated May 23, 2000
PROSPECTUS
NANOPIERCE TECHNOLOGIES, INC.
Common Stock and Warrants to purchase Common Stock
By this prospectus, we may offer, from time to time, the following
securities in an amount that, in the aggregate, will not exceed $30,000,000:
. shares of our common stock; and
. warrants exercisable to purchase our common stock.
We may offer these securities in amounts, at prices and on terms determined
at the time of the offering. This prospectus may not be used to sell any offered
securities unless it is accompanied by a prospectus supplement that describes
the specific terms of the offering and which may add, update or change the
information that is contained in this prospectus. You should read this
prospectus and any prospectus supplement carefully before you decide to invest.
Our common stock is traded on the over-the-counter market and is quoted on
the OTC Bulletin Board under the symbol "NPCT." The common stock also is traded
on the Frankfurt Stock Exchange under the symbol "NPI" and on the Hamburg Stock
Exchange under the symbol "916132." On May 22, 2000, the last reported sale
price of the common stock on the OTC Bulletin Board was $2.56 per share (rounded
to the nearest penny). See "DESCRIPTION OF COMMON STOCK." There is no market for
the warrants offered by this prospectus and you should not expect one to be
established in the future.
Investing in our common stock or warrants involves a high degree of risk
which you should consider before you invest. See "RISK FACTORS" beginning on
page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved any of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is May __, 2000.
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TABLE OF CONTENTS
Page
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FORWARD-LOOKING STATEMENTS...................................................2
PROSPECTUS SUMMARY...........................................................3
RISK FACTORS.................................................................5
USE OF PROCEEDS.............................................................11
THE COMPANY.................................................................12
DESCRIPTION OF COMMON STOCK.................................................20
DESCRIPTION OF WARRANTS.....................................................22
PLAN OF DISTRIBUTION........................................................23
LEGAL MATTERS...............................................................24
EXPERTS.....................................................................24
AVAILABLE INFORMATION.......................................................24
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................25
ABOUT THIS PROSPECTUS.......................................................25
FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities and
Exchange Act of 1934. We base these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to risks, uncertainties, and assumptions about our
company, including:
. the rate of market development and acceptance of the interconnect
technology in the industry within which we are concentrating our
business activities;
. the limited revenues and significant operating losses generated to
date;
. the possibility of significant ongoing capital requirements and our
ability to secure financing as and when necessary;
. our ability to compete successfully with the other providers of
interconnect technologies;
. our ability to retain the services of our key management, and to
attract new members of the management team; and
. our ability to obtain and retain appropriate patent, copyright and
trademark protection of our intellectual properties and any of our
products.
You should only rely on the information contained in this prospectus. We
have not authorized any person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
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PROSPECTUS SUMMARY
The following summary highlights certain information contained throughout
this prospectus. It is not complete and may not contain all of the information
that you should consider before investing in the securities offered by this
prospectus. To understand this offering fully, you should read this entire
prospectus carefully, including the risk factors.
The Company
Nanopierce Technologies, Inc. is in the business of pursuing the strategic
application and development of our patented Particle Interconnect Technology
(the "particle technology"). We have designed and are commercializing our
particle technology as the Nanopierce Connection System (the "connection
system").
Our particle technology is protected by 10 patents, two pending patent
applications and two patent disclosure documents that are currently in
preparation, all of which we now own. The particle technology is based on
modifying a contact surface by depositing on that surface metal-coated
microscopic particles. Generally, the patents and patent applications relate to
hard particles coated with a conductive material such as copper or nickel which
are deposited onto a foundation such as a printed circuit board, a thin plate
onto which electronic components are placed, a socket, connector or conductor to
make electrical connections with what we believe is superior conductivity. See
"THE COMPANY - The particle technology."
Our market strategy is to offer the connection system in products, services
and technology packages into market segments and commercial applications in
which the connection system either has a significant cost advantage or is
enabling, in that it enables electronic manufacturers to successfully produce
products that may not be otherwise possible. We intend to adopt and have begun
to implement a three-part approach to commercialize our particle technology. The
first part of our strategy is to generate royalty revenues by forming strategic
relationships with, or licensing the particle technology to, established
companies in the markets in which the connection system is applicable. The
second part of our strategy is to establish joint ventures with established
industry participants. The third part of our strategy is to organize operating
subsidiaries that produce components or systems utilizing the connection system.
See "THE COMPANY."
The Offering
We may offer, from time to time, up to $30,000,000 of the following
securities:
. shares of our common stock; and
. warrants to purchase our common stock.
Use of Proceeds
Each time that we sell our securities, we will provide a prospectus
supplement that will contain the information about how we intend to use the net
proceeds from each offering. See "USE OF PROCEEDS."
Description of Common Stock
Our authorized capital consists of 100,000,000 shares of common stock,
$.0001 par value per share, and 5,000,000 shares of our preferred stock, $.0001
par value per share. As of March 31, 2000, we
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had 34,435,791 shares of common stock and no shares of preferred stock issued
and outstanding. See "DESCRIPTION OF COMMON STOCK."
Description of Warrants
We may issue warrants to purchase our common stock, either independently or
together with shares of our common stock. We will issue the warrants under
warrant agreements. Currently there exists no public market for our warrants and
no assurances can be given that a public market will develop in the future. See
"RISK FACTORS--No market exists for the warrants" and "DESCRIPTION OF WARRANTS."
Risk Factors
Your investment in the warrants and the common stock offered by this
prospectus and any prospectus supplement involves a high degree of risk. See
"RISK FACTORS" on page 5.
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RISK FACTORS
When deciding whether or not to purchase the securities offered in this
prospectus, you should carefully consider the risks and uncertainties described
below and the other information in this prospectus. If any of the following
risks or uncertainties actually occurs, our business, financial condition and
operating results would likely suffer. In that event, you could lose all or part
of the money you paid to buy our securities.
We have a limited operating history
Our operating history that is relevant to our current business plan is
limited, and we have limited experience or business history marketing the
particle technology and no experience licensing any products that use the
particle technology. We cannot assure you that products using the particle
technology will ever be brought to the market, even if we hire experienced
personnel and go through the product testing process.
Our revenues depend on bringing the particle technology to the marketplace
We do not anticipate generating revenues until products utilizing the
particle technology are developed, marketed, manufactured and brought to the
marketplace. We anticipate that developing our particle technology and products
will be expensive and we cannot predict the time over which this development
will take. The costs that we expect to incur include application engineering
expenses, marketing costs and other general and administrative expenses. Even if
we successfully develop the particle technology, we may be unable to compete
successfully in the marketplace, or the development of the technology may not
generate enough revenue to offset our operating costs.
We have a history of losses because our operating expenses exceed our revenues
We recently have incurred increased operating expenses without a
corresponding increase in revenues. We reported a net loss of $487,092,
$1,137,334 and $3,139,439 for the fiscal years ended June 30, 1997, 1998 and
1999, respectively. Of the net loss in 1999, approximately $2,056,275 was
attributable to non-cash transactions involving the issuance of stock for
services or in lieu of interest payments. As of December 31, 1999, our total
indebtedness was $728,964. As of March 31, 2000, our 26% shareholder, Intercell
Corporation, owed us $123,811. Intercell intends to pay us these funds during
the next fiscal quarter, however, we cannot assure you that we will receive this
payment.
We may not be able to continue as a going concern
Our independent auditors' report on our financial statements as of June
30,1999 includes an explanatory paragraph expressing substantial doubt about our
ability to continue as a going concern. If we are unable to secure significant
additional financing, we may be obligated to seek protection under the
bankruptcy laws and our shareholders may lose their investment.
We only have informal joint ventures or partnerships in place and cannot
guarantee that any formal or additional agreements will be entered into in the
future
We believe that our long-term profitability and growth depends on entering
into licensing or joint venture relationships with various manufacturers to
develop and market products using the particle technology. We have recently had
discussions with several interested parties but have not entered into any formal
agreements to date. We cannot assure you that any additional informal agreements
will ever
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be entered into, or that any formal agreements that we enter into in the future
will be profitable. Our business could be negatively impacted if we fail to
enter into formal agreements or more informal arrangements.
Our inability to establish a market presence with our particle technology could
cause consumers to use alternative technologies
We believe that it is important to establish a market presence for our
particle technology within the next two years. Any delay in establishing the
particle technology could cause prospective customers to use alternative
technologies. To achieve a market presence, we have begun negotiating to enter
into joint ventures, licensing or other similar arrangements with one or more
manufacturers. However, we cannot assure you that these attempts will be
successful. Any loss of our potential customers to alternative technologies
could adversely affect our business and financial condition.
We may be unable to meet our ongoing needs for additional capital
We cannot accurately predict how much money we will need to implement our
strategic business plan or to continue operations. Our future capital
requirements, the likelihood that we can obtain money and the terms of any
financing will be influenced by many different factors, including:
. our revenues;
. the status of competing products in the marketplace;
. our performance in the marketplace;
. our overall financial condition;
. our business prospects;
. the perception of our growth potential by the public, including
potential lenders;
. our ability to enter into joint venture or licensing relationships to
achieve a market presence; and
. our progress in developing, marketing and selling the particle
technology.
While were are confident, based on recent discussions, that we will be able
to obtain adequate financing in a timely fashion, if we cannot obtain adequate
financing or if the terms on which we are able to acquire financing are
unfavorable, our business and financial condition could be negatively affected.
We may have to delay, scale back or eliminate some or all of our development and
manufacturing programs, if any. We may also have to go to third parties to seek
financing, and in exchange, we may have to give up rights to some of our
technologies, patents, potential products or other assets.
We cannot guarantee the quality, performance or reliability of our products
We have no prior experience in taking technology to the manufacturing or
production stage. We plan to have licensees or co-joint venturers manufacture
products using the particle technology. We expect that the customers of these
products will demand quality, performance and reliability. We cannot assure you
that our future licensees or co-joint venturers will be able to meet the quality
control standards that may be established by equipment manufacturers and other
customers of products utilizing the particle technology.
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There may be insufficient demand for our particle technology
We must convince our potential customers that the particle technology is
technologically sound and can be manufactured efficiently and cost-effectively
before connector manufacturers and electronic equipment manufacturers will be
willing to use our technology. To create this consumer demand, we have to
successfully market and sell our new technology. Even after these efforts, our
particle technology may not be viewed by consumers as an improvement over
existing technologies and may not achieve commercial acceptance.
We may be unable to hire and retain key personnel
Our future success depends in part on the continued contributions of our
key technical and senior management personnel. Our success also depends on our
ability to attract and retain additional qualified technical personnel with
experience in manufacturing and personnel with experience in marketing. We may
be unable to attract or retain these necessary personnel. If we fail to attract
or retain skilled employees, or if a key employee fails to perform in his or her
current position, we may be adversely affected.
We may be unable to successfully compete in the marketplace
The interconnect market is highly competitive. We will compete with
suppliers of other interconnect technologies such as Thomas and Betts, Alpha
Metals and major electronic technology manufacturing leaders such as Philips,
Siemens and IBM. We are disadvantaged competing against these competitors in
several different areas, including:
. financial resources;
. technological resources;
. manufacturing capabilities;
. diversity of revenue sources and business opportunities;
. personnel and human resources; and
. research and development capabilities.
Our larger competitors have long-term advantages over us in research and
new product development and have a greater ability to withstand periodic
downturns in the interconnect market because they have diverse product lines
that can provide revenue even when there is a downturn in the interconnect
market.
We are also in competition with new technologies and products that have not
yet been developed. Our ability to compete successfully depends in part on our
capability to upgrade our products and quality control procedures and to adapt
to technological changes and advances in the electronics industry. To compete,
we must make sure that products that are introduced with our technology remain
compatible with evolving generations of electronic components and manufacturing
equipment. We cannot assure you that we will be successful in these endeavors.
Changes in technology could render our particle technology obsolete
The interconnect market is subject to rapid technology changes. New
products are introduced, old products are enhanced and others become obsolete.
The entire interconnect market may be replaced
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by a newer form of technology. To be competitive in this quickly evolving
market, we must develop, market and sell our products on a timely and
cost-effective basis. We also must respond to the ever changing requirements and
demands of our customers. Our success in developing new or enhanced technologies
depends on successful new product selection and integration of our particle
technology into products. Our success will also depend on how quickly
competitors can design and develop competing products and technologies. We
cannot assure that we will be successful in selecting, developing, and marketing
new technologies or that errors or flaws in the new technologies will not
prevent or delay market acceptance. If we cannot introduce technologies and
products that satisfy market demands in a timely manner, we may be negatively
affected.
We may be unable to obtain and retain appropriate patent, copyright and
trademark protection of our products
We protect our intellectual property rights through patents, trademarks,
trade names, trade secrets and a variety of other measures. However, these
measures may be inadequate to protect our intellectual property or other
proprietary information.
. Trade secrets may become known by third parties. Our trade secrets or
proprietary technology may become known or be independently developed
by competitors.
. Rights to patents and trade secrets may be invalidated. Disputes may
arise with third parties over the ownership of our intellectual
property rights. Patents may be invalidated, circumvented or
challenged, and the rights granted under those patents that provide us
with a competitive advantage may be nullified.
. Problems with future patent applications. Pending or future patent
applications may not be approved, or the scope of the granted patent
may be less than the coverage sought.
. Infringement claims by third parties. Infringement, invalidity, right
to use or ownership claims by third parties or claims for
indemnification may be asserted by third parties in the future. If any
claims or actions are asserted against us, we can attempt to obtain a
license for that third party's intellectual property rights. However,
the third party may not provide a license under reasonable terms, or
may not provide us with a license at all.
. Third parties may develop similar products. Competitors may develop
similar products, duplicate our products or may design around the
patents that are owned by us.
. Laws in other countries may insufficiently protect intellectual
property rights abroad. Foreign intellectual property laws may not
adequately protect our intellectual property rights abroad. Our
failure to protect these rights could adversely affect our business
and financial condition.
. Litigation may be required to protect intellectual property rights.
Litigation may be necessary to protect our intellectual property
rights and trade secrets, to determine the validity of and scope of
the rights of third parties or to defend against claims of
infringement or invalidity by third parties. Such litigation could be
expensive, would divert resources and management's time from our sales
and marketing efforts, and could have a materially adverse effect on
our business, financial condition and results of operations and on our
ability to enter into joint ventures or partnerships with others.
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License rights to particle technology may limit our ability to compete
Before we acquired the patents, patent applications and licenses from the
original owners of the particle technology, the inventor of the particle
technology granted five companies exclusive and non-exclusive licenses to use
the patents and patent applications relating to the particle technology. At this
time, only two of the five licensees are using our technology and none of these
licenses relate to either smart card or smart label technology. These licenses
restrict us as follows:
. Exclusive licenses prevent us from competing against the exclusive
licensees. We cannot compete in the fields in which exclusive licenses
have been granted. An exclusive license was granted in the field of
sockets for use in the automated handling and testing of integrated
circuits, a type of semiconductor in which a number of transistors and
other elements are combined to form a more complicated circuit.
. Non-exclusive licenses allow licensees to compete against us in
certain areas. The licensees with non-exclusive licenses can compete
directly with us or our other future licensees. Non-exclusive licenses
have been granted to use the particle technology for electrically
conductive components, laminate-based and metal-based products and
semiconductor products. If the present licensees decide to compete
with us or our future licensees, this competition could adversely
affect our business.
We do not expect to pay dividends in the foreseeable future
We have never paid cash dividends on our common stock. We do not expect to
pay cash dividends on our common stock at any time in the foreseeable future.
The future payment of dividends directly depends upon our future earnings,
capital requirements, financial requirements and other factors that our board of
directors will consider. Since we do not anticipate paying cash dividends on our
common stock, return on your investment, if any, will depend solely on an
increase, if any, in the market value of our common stock.
No market exists for the warrants
No public market exists to trade the warrants offered in this prospectus
and we do not intend to have the warrants listed on any national securities
exchange or quoted through the NASDAQ automated quotation system. We cannot
assure you that there will be a market to sell the warrants, or the price at
which holders would be able to sell their warrants. The price that holders would
be able to obtain depends on many factors, including our operating results and
the market for similar securities. See "DESCRIPTION OF WARRANTS."
State Blue Sky Laws may prevent sales of securities
Before we or any seller can sell any securities to a purchaser, state
securities laws require that the securities be registered or qualified for sale
in the state where the purchaser resides, or else fall within an exemption from
registration. We will not knowingly sell the securities to purchasers in
jurisdictions in which the securities are not registered or otherwise qualified
for sale or exempt. However, there is a risk that purchasers may buy the
securities in the after-market or may move to jurisdictions in which the
securities are not registered, qualified, or exempt. We cannot guarantee that
any purchaser will be able to effect any required registration or qualification.
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This offering and the sale or exercise of our existing securities could cause
dilution of existing holders of the common stock by decreasing the price of our
common stock
The market price of the common stock could be adversely affected by sales
of substantial amounts of common stock in the public market after this offering,
by the perception that those types of sales could occur or by the fact or
perception of events which would have a dilutive effect on the market for the
common stock. As of March 31, 2000, we had 34,435,791 shares of our common stock
outstanding or 52,470,504 shares of our common stock on a fully diluted basis.
After this offering, we could have up to an additional $30,000,000 market
capitalization of our common stock outstanding, which, based on our stock price
as of March 31, 2000, would represent an additional 5,853,659 shares of our
common stock, which would represent 14.53% of our common stock outstanding or
10.04% of our common stock outstanding assuming the conversion and exercise of
all outstanding securities into shares of our common stock, each as of March 31,
2000. Future transactions with other investors could further depress the price
of our common stock because of additional dilution. See "DESCRIPTION OF
SECURITIES."
Our common stock price could be effected by the ability of holders of our common
stock to sell their stock
The market price of our common stock will be influenced by the ability
of common stock holders to sell their stock.
. Freely Transferable Shares of Common Stock. Of the 34,435,791 shares
of our common stock that were outstanding as of March 31, 2000,
approximately 17,139,466 shares currently are freely transferable and
constitute the "float" in the public market for the common stock.
. Restricted Shares of Common Stock. Of the 34,435,791 shares of our
common stock that were outstanding as of March 31, 2000, approximately
17,296,325 shares of our common stock currently are "restricted" or
"control" securities within the meaning of Rule 144 under the
Securities Act. These restricted securities cannot be sold unless they
are registered under the Securities Act, or unless an exemption from
registration is otherwise available, including the exemption that is
contained in Rule 144. Under Rule 144, a person that is holding our
common stock can sell shares based generally on certain limitations as
described below.
. Affiliates. Any "affiliate," as that term is defined under the
Securities Act, who has beneficially owned our common stock for
at least a year, can sell shares of our common stock subject to
the following volume limitation: in any three-month period, the
affiliate cannot sell more shares of our common stock than the
greater of 1% of the then outstanding shares of common stock or
the average weekly trading volume of the then outstanding shares
of common stock during the four calendar weeks preceding the
sale.
. Non-affiliates. A person who is not deemed our "affiliate" who
has beneficially owned shares of our common stock for at least a
year can sell shares of our common stock subject to the same
volume limitation described above. Alternatively, a person who is
not our "affiliate" who has beneficially owned shares of our
common stock for at least two years can sell shares of our common
stock without regard to this volume limitation. See "DESCRIPTION
OF SECURITIES," and "PLAN OF DISTRIBUTION."
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We could issue preferred stock that could adversely effect the rights of the
common stock holders
We are authorized to issue up to 5,000,000 shares of our preferred stock,
$.0001 par value per share. Our articles of incorporation gives our board of
directors the authority to issue preferred stock without approval of our
stockholders. We may issue preferred stock to finance our operations. We may
authorize the issuance of our preferred stock in one or more series. In
addition, we may set several of the terms of the preferred stock, including:
. dividend and liquidation preferences,
. voting rights,
. conversion privileges,
. redemption terms, and
. other privileges and rights of the shares of each authorized series of
preferred stock.
The issuance of large blocks of preferred stock could have a dilutive
effect on our existing shareholders and it can negatively impact our existing
stockholders' liquidation preferences. In addition, while we include preferred
stock in our capitalization to improve our financial flexibility, we could
possibly issue or preferred stock to third parties as a method of discouraging,
delaying or preventing a change in control in our present management or we could
issue preferred stock that has disproportionate voting rights.
The resale of our common stock by you may be limited because of its low
price which could make it more difficult for broker/dealers to sell our common
stock
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock. Regulations enacted by the SEC
generally define a penny stock as an equity security that has a market price of
less than $5.00 per share, subject to some exceptions. Unless an exception
applies, a disclosure schedule explaining the penny stock market and the risks
associated with investing in penny stocks must be delivered before any
transaction in penny stock can occur.
In addition, if our common stock is not quoted on NASDAQ or if it does not
meet an exception to the penny stock regulations cited above, trading in our
common stock would be covered by Rule 15g-9 promulgated under the Securities
Exchange Act of 1934. Under this rule, broker/dealers who recommend penny stocks
to persons that are not established customers or accredited investors must make
a special determination in writing for the purchaser that the investment is
suitable, and must also obtain the purchaser's written agreement to a
transaction before the sale.
The regulations could limit the ability of broker/dealers to sell our
common stock and thus the ability of purchasers of our common stock to sell our
common stock in the secondary market if our common stock has a market price of
less than $5.00 per share.
USE OF PROCEEDS
Each time that we sell our securities described in this prospectus, we will
provide a prospectus supplement that will contain information about how we
intend to use the net proceeds from each offering.
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Unless otherwise indicated in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of our securities for general
corporate purposes including funding operations, expanding production, marketing
and sales, working capital and, possibly, to acquire other technologies.
However, no assurance can be given that any of our securities will be sold.
THE COMPANY
We were incorporated on June 22, 1996 as Sunlight Systems, Ltd., a Nevada
corporation. Our corporate offices are located at 370 - Seventeenth Street,
Suite 3580, Denver, Colorado 80202, and our telephone number is (303) 592-1010.
Our common stock is traded on the over-the-counter market and is quoted on the
OTC Bulletin Board under the symbol "NPCT." Our common stock is also traded on
the Frankfurt Stock Exchange under the symbol "NPI" and on the Hamburg Stock
Exchange under the symbol "916132."
Overview
We were incorporated as Sunlight Systems, Ltd. From June 22, 1996 through
November 1996, we were engaged in limited activities as a dealer and distributor
of sun tunnels. This business, however, was discontinued and substantially all
assets were sold in November of 1996. From that time until February 1998, we
were generally inactive and reported no significant operating revenues.
On February 26, 1998, we changed our name to Nanopierce Technologies, Inc.
and we acquired the intellectual property rights related to our patented
Particle Interconnect Technology (the "particle technology") from Particle
Interconnect Corporation, a Colorado Corporation, a wholly owned subsidiary of
Intercell Corporation, a Colorado Corporation and our affiliate. In exchange for
the assets of Particle Interconnect Corporation, we issued 7,250,000 shares of
our common stock and 100 shares of our Series A Preferred Stock, convertible
into 7,250,000 shares of common stock to Intercell Corporation. We acquired the
particle technology to pursue a more focused, strategic application and
development of the particle technology.
The particle technology--Nanopierce Connection System
Our particle technology is protected by 10 patents, two patent applications
and two patent disclosure documents that are currently in preparation, all of
which we now own. The particle technology can be used to make highly reliable
electrical connection without the need for soldering or traditional connector
methods. The particle technology is based on modifying a contact surface by
depositing on that surface metal-coated microscopic particles. Generally, the
patents and patent applications relate to hard particles coated with a
conductive material such as copper or nickel which are deposited onto a
foundation such as a printed circuit board, a socket, connector or conductor to
make electrical connections with what we believe is superior conductivity. The
particle technology can be used on many different bases, whether flexible,
rigid, metallic or non-metallic.
The particle technology begins with metallized, treated diamonds or other
hard particles, which have been closely screened to a specified size. The
particles are tightly classified in sizes ranging from 5 microns to 125 microns,
depending upon the product application. These electrically conductive particles
are attached onto contact sites using standard printed circuit board
manufacturing processes. The embedded particles create a surface with many
points that provide numerous parallel electrical paths by allowing electricity
to penetrate through an oxide, which is a non-conductive material, without
requiring the wiping action of conventional contacts. Wiping action refers to
the mechanical removal of oxides by sliding or rubbing the contact surfaces
together. We believe that our non-wiping, oxide penetrating
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particle technology is capable of penetrating surface contamination and oils to
create an effective and reliable electrical contact.
The particles concentrate any contact force that is applied into a very
small area or point. This concentration of contact force gives the particle the
pressure, the force per square unit area, required to pierce oxides and other
contaminants on most surfaces without requiring large amounts of force on the
connector contact. The particle technology allows reliable connections to be
made with as little as 10 grams of force per contact. This low level of force is
sufficient to drive the particles through any oxides on an electrical contact
surface, such as an input/output pad on an individual integrated circuit which
is attached to a supporting surface. Moreover, the particles do insignificant
damage to the mating surface. This provides a long service life in which many
reconnections are possible because there is very little degradation of the
contact surface.
These particles can be applied to a variety of "substrates," which are
foundations that provide a supporting surface, which can be flexible, rigid,
metallic or non-metallic in nature. We have designated our particle technology
in commercial settings as the Nanopierce Connection System (the "connection
system").
Sales and Marketing Strategy
Our market strategy is to offer the connection system in products, services
and technology packages in those market segments and commercial applications in
which the connection system has a significant cost advantage or is enabling, in
that it enables electronic manufacturers to successfully produce products that
may not be otherwise possible. This strategy has, until recently, taken longer
than expected due to litigation which has been resolved in our favor. See
"--Legal Proceedings."
We intend to adopt and have begun to implement a three-part approach to
commercialize our particle technology. The first part of our strategy is to
generate royalty revenues by forming strategic relationships with, or licensing
the particle technology to, established companies in the markets in which we
plan to compete and which generally have high entry barriers, including markets
with entrenched competitors or foreign laws that effectively prohibit
competition. We believe that the licensing of our technology to major industry
partners will increase the speed at which particle technology is implemented and
adopted and will also help to establish "brand" recognition for the particle
technology.
The second part of our strategy is to establish joint ventures with
established industry participants. This strategy is designed to tap into
existing markets and to establish leadership in markets requiring special skills
or high capital investment. We have begun negotiations to establish these joint
ventures. See "--Strategic Alliances" herein.
The third part of our strategy is to organize two operating subsidiaries
that produce components or systems utilizing the connection system in new market
segments which have few or no established competitors and in which we believe we
may be able to dominate with our technology. This strategy is designed to permit
us to become one of the first to act within the emerging markets that are
created by newly available technology advances or improvements. Also, we believe
that we can capture additional value by controlling production in segments that
have low capital requirements. We recently organized one operating subsidiary
(as described below) to produce smart labels, which has low capital requirements
and at the current time has no entrenched competitors. The second subsidiary
that we propose to organize would apply our technology to "semiconductor
wafers," that would eliminate the need for wire bond connections between the
semiconductor and the system. The capital requirements for
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this second subsidiary would be very low and would involve technology that we
believe would be completely new to the worldwide industry.
Implementation Plan
We also intend to implement our sales and marketing strategy through
various proposed divisions in addition to the subsidiaries described above.
Technology Division
The "technology division" will include an application development team that
will play a role analogous to corporate research and development or engineering
by developing new applications for internal and external customers. This team
also will allocate a portion of its resources for technology enhancement.
Business Development Division
Initially, the "business development division" will support all departments
conducting revenue generating activities with sales and marketing. Later, the
smart label subsidiary that was recently organized and the proposed
semiconductor wafer subsidiary will each assume responsibility for its own
marketing, while the business development division will continue to represent
the technology transfer division (as defined below) to the industry. The
business development division will also monitor the industry for acquisition and
other strategic growth opportunities.
Technology Transfer Division
The "technology transfer division" represents a department which will
conduct revenue generating activities based on commercial use of the connection
system outside our company through licensees and other strategic partners. This
division will support our licensees and partners with the installation of the
connection system and the related training and support. Personnel for these
activities will be drawn from the technology division, but costs that are
directly associated with technology transfer activities will be charged to this
division.
Operating Subsidiaries
On January 19, 2000, we incorporated a wholly owned subsidiary, NanoPierce
Card Technologies GmbH, a German corporation in Munich, Germany. The subsidiary
was formed to focus all of our business activities relating to the emerging
smart card and smart label markets, and to better capitalize on our expectations
of these applications, including the licensing of our technology.
We also propose to organize a second subsidiary that would apply our
technology to "semiconductor wafers." This would eliminate the need for wire
bond connections between the semiconductor and the system.
These operating subsidiaries would each act as independent divisions which
will conduct revenue generating activities. Both of the subsidiaries would
support a minimal level of technology and engineering effort and will rely on
the technology transfer division for technology and engineering efforts. This
allocation strategy will minimize redundant technology development efforts among
divisions.
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Smart Cards and Smart Labels
Commencing in January 1999, we successfully introduced our technology to
applications in the manufacturing of smart cards. Of particular significance to
manufacturers of contactless smart cards is the desire to obtain a secure,
efficient connection between the microprocessor chip and the radio antenna in
what are known as dual interface smart cards and contactless smart cards.
Smart cards are plastic, flexible credit-card size devices embedded with a
powerful microchip, designed to store and process information. Reliable
connections in flexible applications are crucial to the card's operation. Smart
cards are used as phone cards, health cards, identification cards, pay
television cards, meter cards, bank cards, transportation tickets, access
control cards and automatic dispenser cards. Contactless smart cards collect the
energy to operate from a radio frequency emitted by a fixed or handheld reader
device; therefore, they do not need a battery.
A smart label is a paper thin identification label with a programmable
integrated circuit inside and an antenna connected to it. The smart label
communicates through radio frequency signals with a fixed position or hand held
reader or writer over distances up to one meter. Smart labels collect the energy
to operate from a radio frequency field emitted by a fixed or handheld reader
device; therefore, they do not need a battery. The "substrate," or the
foundation that provides a supporting surface, for a smart label is paper or
plastic yielding a paper-thin flexible label, which can be self-adhesive and can
be printed on. Uses for contactless smart labels include:
. labels applied to shipping or courier parcels;
. airline baggage tags;
. retail labels applied directly by the manufacturer to the product,
. identifying the manufacturer, product type, production lot and a
digital signature to prove genuineness;
. labels for inventory control; and
. labels for rental services, such as libraries and video stores.
We believe that the market for smart cards and smart labels is poised for
explosive growth. However, the lack of a cost-effective and reliable system for
electrical connection of the microchip to the contact plate or antenna is a
critical bottleneck holding the industry back. The industry cannot satisfy the
market demands for cost-effective and reliable contactless smart cards and smart
labels with the current technologies. We believe that the particle technology in
the connection system may be the solution for the industry.
We believe that we are strategically positioned to become a major
participant in the large and growing smart card and smart label market. Current
technologies cannot satisfy the cost and reliability demands of this market. The
connection system can meet the cost and reliability demands because (a) it
provides single-step, low-cost manufacturing procedures; (b) it provides
reliable connection on flexible substrates; and (c) it is thin enough to be used
in the manufacturing of smart labels. Moreover, none of the outstanding licenses
that have been granted with respect to the connection system relate to either
smart card or smart label technology.
Strategic Alliances
In the Spring of 1999, we implemented our strategic business plan by
forming strategic alliances intended to result in joint ventures to develop
applications for our technology in the smart card and smart label industry. In
that regard, we have successfully concluded three strategic alliances with
participants in
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the industry and have also entered into four other informal agreements or
discussions, each as described below. No assurances can be given to you that any
of these agreements will generate revenues for us or will be profitable to us.
MULTITAPE GMBH & CO., KG AGREEMENT
On April 15, 1999, we entered into an application development agreement
with Multitape, GmbH & Co., KG, of Paderborn, Germany to develop an application
of the particle technology on chip module substrate tapes manufactured by
Multitape. Multitape is a major supplier of chip module substrate tapes to
numerous card manufacturers, including most all of the largest card
manufacturers in the world, and continues to supply us with these tapes for
testing with our technology. Should the ongoing tests of the technology on the
substrate tapes and in various electronic applications prove successful to our
satisfaction and to the satisfaction of Multitape, we have agreed with Multitape
to enter into a more formal arrangement to commercialize the opportunity. As a
result of our recent business developments including the completion of a
financing, we anticipate that our business activities with Multitape will
increase.
MEINEN, ZEIGEL & CO. AGREEMENT
On May 17, 1999, we entered into a technology cooperation agreement with
Meinen, Zeigel & Co. ("Meinen"), a company based in Munich, Germany, to develop
applications of our technology for dual interface smart card modules and the
qualification and industrialization of a chip module embedding process on Meinen
equipment. Meinen is a developer, manufacturer and supplier of equipment used in
the production of smart cards. Many of the world's largest smart card
manufacturers utilize Meinen equipment to produce standard smart cards,
contactless smart cards and dual interface cards. When we entered into this
technology cooperation agreement with Meinen, we expected that Meinen would
design new equipment based around the new manufacturing process enabled by
adoption of our technology, which would allow them to design less expensive,
more efficient, higher output, simpler production equipment. Due to internal
corporate changes in Meinen, however, currently we are unable to predict if we
will be able to enter into a formal joint venture agreement with Meinen to
further implement the commercial exploitation of our technology.
ORGA KARTENSYSTEMES, GMBH AGREEMENT
On June 11, 1999, we entered into a technology development agreement with
ORGA Kartensystemes, GmbH ("ORGA"), of Flintbek, Germany, one of the world's
largest smart card manufacturers. ORGA is working with us to apply the
connection system to the design and manufacture of dual interface smart cards,
particularly the connection between antenna and chip modules. We are still in
the process of meeting the testing and qualification standards of ORGA. If the
testing and qualification standards are met, we anticipate that we will enter
into a formal joint venture or direct licensing of ORGA relating to this
application of our technology.
CIREXX CORPORATION AGREEMENT
In addition to the three agreements described above, we have also entered
into an agreement-in-principle to form a joint venture or limited liability
partnership with Cirexx Corporation located in Santa Clara, California. Cirexx
Corporation is a world leader in the quick turn prototype design and production
manufacturer of high technology, digital, radio frequency and analog flexible
circuits and mixed technologies.
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The proposed joint venture or limited liability partnership will be
organized to commercially exploit the connection system in all applications for
which an exclusive license to others has not been issued. We are in the process
of developing a joint marketing plan to address anticipated consumer demand for
the connection technology in Cirexx products and processes and the equipment
modifications and other technical working arrangements that must be made in
order for Cirexx Corporation to be able to market and apply the connection
technology from their facilities.
SCHLUMBERGER SYSTEMES, S.A.
We have entered into a confidential disclosure agreement with Schlumberger
Systemes, S.A. effective July 8, 1999. We are currently in the process of
exchanging information with Schlumberger Systemes, S.A. relating to the
application of our technology to dual interface smart cards and other
applications.
TAIKO DENKI, LTD. PROPOSAL
In addition to the strategic alliances described above, we are in
discussions with other companies in the smart card industry relating to possible
application of our technology to their product lines. Further, we are expanding
the scope of our strategic business activities to now embrace potential
applications of the connection system in the connector market. For example, we
are currently in discussions with Taiko Denki, Ltd. ("Taiko"), one of Japan's
leading connector manufacturers relating to the application of our technology to
the connector products of Taiko. We have submitted a formal proposal to Taiko
relating to the formation of a strategic business relationship. No assurances
can be given that any proposal will be adopted.
Research and Development
To date, we have not incurred any significant amount on research and
development costs and we do not intend to incur any material research and
development costs during the next fiscal year. We hope to avoid incurring
substantial research and development cash requirements by entering into joint
ventures with others for the development of future products utilizing the
particle technology.
Competition
Competition in the electronic connector market is fierce. The principal
competitive factors are product quality, performance, price and service. While
we are unaware of any competitors using hard particles as an interconnect
material, we and our licensees face competition from well established firms with
other interconnect technologies. However, most of these competitors apply their
technologies to very narrow markets or applications and most have had only
limited success in mass commercialization of their technologies.
We will face competition from the development of existing and future
competing technologies. There currently exist approximately 28 different
technologies that can be used to create interconnect solutions, including:
. soldering, which uses an easily melted metal alloy to form a permanent
joint between two parts;
. wire bonding, which uses a wire connection created by applying heat
and pressure;
. dendrite crystals, a pointed crystal used to make connections by IBM;
. gold dot technology, which is connection technologies that use gold
bumps;
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. elastomers, which uses rubber-like synthetic materials; and
. conductive adhesives, which glues two metal surfaces together to form
an electrical connection.
These technologies currently are produced by materials and chemical
suppliers, flexible and rigid printed circuit board manufacturers, as well as
electronics manufacturers who produce their own materials and interconnect
systems. Many of these competitors have substantially greater financial and
other resources than we do. We believe that each existing technology currently
has unacceptable limitations with regard to electrical and mechanical
performance, manufacturability or cost as compared to the particle technology.
However, there are no assurances that our particle technology can successfully
compete with current or future technologies.
Intellectual Property
We will rely on a combination of patents, patent applications, trademarks,
copyrights and trade secrets to establish and protect our proprietary rights in
the particle technology. As previously described, we currently own ten U.S.
patents, which expire from February 14, 2006 to October 15, 2013, two pending
patent applications, two patent applications in preparation and other
intellectual property relating to the particle technology.
Before our acquisition of the particle technology, Louis DiFrancesco, the
inventor of the particle technology or the companies controlled by him granted
the following exclusive and nonexclusive licenses to pursue the patents and
patent applications relating to the particle technology:
. an exclusive license to Exatron Automatic Test Equipment Inc.
("Exatron") for use in the field of sockets in the automated handling
and testing of integrated circuits and some non-exclusive rights;
. an exclusive license, that has since been terminated, to MicroModule
Systems, Inc. for use in the field of some Multi-Chip Module thin film
bases, except attached or associated products including integrated
circuits, socket, lids, heat sinks, housings and printed circuit
boards;
. a non-exclusive license to Johnson-Matthey Semiconductor Packagings,
Inc. ("Johnson-Matthey") for use in the field of laminate-based base
products;
. a non-exclusive license to Multiflex, Inc. for use in the field of the
laminate-based bases and metal bases; and
. a non-exclusive license to Myers Consulting, Inc. for use in the field
of laminate-based bases, metal bases, and wafer or semiconductor
products.
These licenses have indefinite terms and, provided that the conditions specified
in the licenses are met, can be terminated by either party by written notice. We
retain the right to exclude all other companies from using our patented
technology without a license. We may license other companies as we choose,
provided the licenses are consistent with the exclusive licenses previously
granted and other licensing restrictions that may appear in the prior licenses.
None of these licenses apply to smart cards or to smart labels.
All but the Exatron and Johnson-Matthey license agreements have been idle
since their acquisition by us and, as a result, have not produced any royalty
fees for us. Royalties under the Exatron agreement are being held and will
continue to be held in an escrow account, and maintenance payments on one
license are being held in a reserve account, outside of our control, until
various legal issues are resolved. Louis DiFrancesco has the right and the
obligation to pursue any royalties due under the Johnson-Matthey license
agreement and, to the extent that he has been unable to obtain judgment and
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payment from Johnson-Matthey on royalties for a six month period that has
already expired, we are obligated to guarantee any unpaid royalty balance and
retain a right to pursue Johnson-Matthey for the unpaid balance. We have not
been advised whether Mr. DiFrancesco has obtained any royalty payments from
Johnson-Matthey and we estimate that the total amount of our guarantee to Mr.
DiFrancesco could be as much as approximately $170,000. See "--Legal
Proceedings."
In addition, a two-year non-exclusive license has been issued to Louis
DiFrancesco. Pursuant to the license, Mr. DiFrancesco is entitled to produce all
sockets for all customers (except for sockets used in the automated handling and
testing of integrated circuits) as well as layer to layer interconnections for
one confidential customer. The license expires two years from its date of
issuance, and is renewable for an additional two year period and will continue
to be renewable for two year periods so long as a minimum payment of $25,000 on
royalties from actual application of the technology are paid. See "--Legal
Proceedings."
In December 1998, MicroModule Systems, Inc. terminated all of its business
operations and sold its assets to an industry associate. MicroModule Systems,
Inc. is currently in liquidation under the United States Bankruptcy Code. As a
result of this, we have terminated the license of MicroModule Systems, Inc.
There can be no assurance that patents will be issued from any of the
pending applications, or that any claims allowed from existing or pending
patents will be sufficiently broad enough to protect our particle technology.
While we intend to vigorously protect our intellectual property rights, there
can be no assurance that any patents held by us will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will provide
competitive advantages to us. Litigation may be necessary to enforce our
patents, patent applications, trade secrets, licenses and other intellectual
property rights, to determine the validity and scope of the proprietary rights
of others or to defend against claims of infringement.
Litigation involving our intellectual property rights could result in
substantial costs and diversion of resources and could have a material adverse
effect on our business and results of operations regardless of the final outcome
of the litigation. Despite our efforts to maintain and safeguard our proprietary
rights, there can be no assurances that we will be successful in doing so or
that our competitors will not independently develop or patent technologies that
are substantially equivalent or superior to our technologies. The semiconductor
and interconnect industries are characterized by uncertain and conflicting
intellectual property claims. We have in the past and may in the future become
aware of the intellectual property rights of others that we may be infringing,
although we do not believe that we are infringing any third-party proprietary
rights at this time. To the extent that we deem it necessary, we may license the
right to use technologies that are patented by others in products that they
manufacture. There can be no assurance we will not in the future be notified
that we are infringing other patent or intellectual property rights of third
parties. In the event of infringement, there can be no assurance that a license
to the technology in question could be obtained on commercially reasonable
terms, if at all, that litigation will not occur or that the outcome of this
litigation will not be adverse to us. The failure to obtain necessary licenses
or other rights, the occurrence of litigation arising out of infringement claims
or an adverse outcome from infringement litigation could have a material adverse
effect on our business. In any event, patent litigation is expensive, and our
operating results could be materially adversely affected by any infringement
litigation, regardless of its outcome.
We intend to protect our trade secrets and proprietary technology, in part,
through confidentiality and non-competition agreements. There can be no
assurance that these agreements will not be breached,
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that we will have adequate remedies for any breach, or that our trade secrets
will not otherwise become known to or independently developed by others.
In addition, the laws of some foreign countries do not offer protection of
our proprietary rights to the same extent as do the laws of the United States.
Government Regulation
We believe that we are in substantial compliance with all material federal
and state laws and regulations governing our limited operations. Compliance with
federal and state environmental laws and regulations did not have a material
effect on our capital expenditures, earnings or competitive position during the
year ended June 30, 1999 or the fiscal quarters ended September 30, 1999 and
December 31, 1999.
Employees
As of May 17, 2000, we had a total of 10 employees. All four of our
principal officers, including Paul H. Metzinger, Dr. Herbert J. Neuhaus, Dr.
Michael E. Wernle and Kristi J. Kampmann, have signed employment agreements with
us. In addition, our newly formed subsidiary, Nanopierce Card Technologies GmbH,
employs four persons, including Dr. Michael E. Wernle, all of whom have signed
employment agreements. None of our employees are represented by a labor union or
are subject to a collective bargaining agreement. We believe that our relations
with our employees are excellent.
Legal Proceedings
We were involved in litigation with Louis DiFrancesco, the inventor of the
particle technology, relating to ownership of our intellectual property and the
rights as to who should receive royalty payments from licenses. Based on a Final
Order, Declaratory Judgment and Injunction entered on November 30, 1999, we own
all of the right, title and interest to the intellectual property that was under
litigation. Mr. DiFrancesco is entitled to royalty payments, maintenance fees
and other amounts from the licensees relating to the patents that were
outstanding as of September 3, 1996 and is granted a license to produce sockets
and for layer to layer interconnections for one customer as described more fully
above under "--Intellectual Property." On March 29, 2000, Mr. DiFrancesco filed
a Notice of Appeal with the Colorado Court of Appeals.
DESCRIPTION OF COMMON STOCK
Our authorized capital stock consists of 100,000,000 shares of common
stock, $.0001 par value per share, and 5,000,000 shares of our preferred stock,
$.0001 par value per share. As of March 31, 2000, we had 34,435,791 shares of
common stock and no shares of preferred stock issued and outstanding.
General
Each share of common stock is entitled to one vote on each matter submitted
to a vote of the stockholders and is equal to each other share with respect to
voting, liquidation and dividend rights. Holders of the common stock are
entitled to receive the dividends, if any, as may be declared by the Board of
Directors out of assets legally available therefor and to receive net assets in
liquidation after payment of all amounts due to creditors and any liquidation
preference due to preferred stockholders. Holders of the common stock have no
conversion rights and are not entitled to any preemptive or
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subscription rights. The common stock is not subject to redemption or any
further calls or assessments. The common stock does not have cumulative voting
rights in the election of directors.
The transfer agent for the common stock is Corporate Stock Transfer, Inc.,
3200 South Cherry Creek Drive, Suite 403, Denver, Colorado 80209.
Dividend Policy
While there currently are no restrictions prohibiting us from paying
dividends to our stockholders, we have not paid any cash dividends on our common
stock, in the past and do not anticipate paying any dividends in the foreseeable
future. Earnings, if any, are expected to be retained to fund our future
operations. There can be no assurance that we will pay dividends at any time in
the future.
Price Range of Common Stock
The common stock presently is traded on the over-the-counter market on the
OTC Bulletin Board maintained by the National Association of Securities Dealers,
Inc. ("NASD"). The NASDAQ symbol for the common stock is "NPCT." The common
stock is also traded on the Frankfurt Stock Exchange under the symbol "NPI" and
on the Hamburg Stock Exchange under the symbol "916132."
The following table sets forth the range of high and low bid quotations for
the common stock of each full quarterly period during the last three fiscal
quarters, rounded to the nearest penny. The quotations were obtained from
information published by the NASD and reflect interdealer prices, without retail
mark-up, mark-down or commissions and may not represent actual transactions. The
average of the closing bid and asked prices for the common stock on the OTC
Bulletin Board was $2.53 on May 22, 2000 (rounded to the nearest penny).
Fiscal Quarter High Low
-------------- ---- ---
March 31, 2000 $6.19 $2.44
December 31, 1999 $2.25 $1.81
September 30, 1999 $0.41 $0.34
While a limited market did exist for the common stock under our former
names of Mendell-Denver Corporation and Sunlight Systems, Ltd., it was so
insignificant in volume that it was not representative of a true market or a
realistic market valuation of the common stock. Accordingly, any information
relating to former market activity is deemed immaterial and has not been
included herein. This information can be obtained from the NASD by anyone
interested in this type of historical data.
As of March 31, 2000, there were 135 holders of record of our 34,435,791
outstanding shares of common stock. Based upon information provided to us by
persons holding our common stock for the benefit of others, it is estimated that
we had in excess of 1,000 beneficial owners of our common stock as of March 31,
2000.
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DESCRIPTION OF WARRANTS
General
We may issue warrants to purchase our common stock. We may issue warrants
independently or together with our common stock and the warrants that we issue
may be attached to or separate from those offered securities. We will issue the
warrants under warrant agreements that may include a bank, trust company or
other financial institution as a warrant agent. The warrant agent would act
solely as our agent in connection with the warrants being offered and it will
not assume any obligation or relationship of agency or trust for or with any
holders or beneficial owners of warrants.
The applicable prospectus supplement will describe the following terms,
where applicable, of warrants in respect of which this prospectus is being
delivered:
. The title of the warrants;
. The designation, amount and terms of the common stock for which the
warrants are exercisable;
. The price or prices at which the warrants will be issued;
. The aggregate number of warrants;
. Any provisions for adjustments in the number or amount of shares of
common stock receivable upon exercise of the warrants or the exercise
price of the warrants;
. The price or prices at which the common stock purchasable upon
exercise of the warrants may be purchased;
. The conditions, if any, under which we may purchase the warrants;
. The date on and after which, if any, the warrants and the common stock
purchasable upon exercise of the warrants are separately transferable;
. Other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants;
. The date on which the right to exercise the warrants shall commence,
and the date on which the rights shall expire; and
. The maximum or minimum number of warrants which may be exercised at
any time.
No market for warrants
Currently there exists no public market for any warrants and no assurances
can be given that a public market will develop in the future. See "RISK FACTORS
- No market exists for the warrants."
Exercise of Warrants
Each warrant will entitle the holder of warrants to purchase for cash the
amount of shares of common stock at the exercise price as shall in each case be
set forth in, or be determinable as set forth in, the prospectus supplement
relating to the warrants offered by that prospectus supplement. Warrants may be
exercised at any time up to the close of business on the expiration date set
forth in the prospectus supplement relating to the warrants offered in that
prospectus supplement. Any warrants not exercised by that time will become void.
Warrants may be exercised as set forth in the prospectus supplement
relating to the warrants being offered by that prospectus supplement. Upon
receipt of payment and the warrant certificate properly completed and duly
executed at the office indicated in the prospectus supplement, we will, as soon
as practicable, forward the shares of common stock purchasable upon such
exercise. If less than all of the warrants represented by the warrant
certificate are exercised, a new warrant certificate will be issued for the
remaining warrants.
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PLAN OF DISTRIBUTION
The terms of any offering of the securities described in this prospectus
will be set forth in the applicable prospectus supplement. We may sell the
securities offered in this prospectus:
. directly to purchasers;
. through agents;
. through dealers;
. through underwriters;
. directly to our stockholders; or
. through a combination of any of these methods of sale.
We may effect the distribution of the securities offered in this prospectus
from time to time in one or more transactions either:
. at a fixed price or prices, which may be changed;
. at market prices prevailing at the time of sale;
. at prices related to the prevailing market prices; or
. at negotiated prices.
We may directly solicit offers to purchase the securities offered in this
prospectus. Agents that we designate from time to time may also solicit offers
to purchase the securities offered in this prospectus. The applicable
prospectus supplement will set forth the name of any agent that we designate,
that is involved in the offer or sale of the securities offered in this
prospectus and who may be deemed to be an "underwriter" as that term is defined
in the Securities Act, and any commissions payable by us to an agent named in
the prospectus supplement will also be disclosed in that prospectus supplement.
If we utilize a dealer in selling the securities offered in this
prospectus, we will sell those securities to the dealer, as principal. The
dealer, who may be deemed to be an "underwriter" as that term is defined in the
Securities Act, may then resell those offered securities to the public at
varying prices to be determined by that dealer at the time of resale.
If we utilize an underwriter or underwriters in the offer and sale of the
securities described in this prospectus, we will name each underwriter that is
to be utilized in the applicable prospectus supplement,
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which will be used by each underwriter to make resales of the securities offered
in this prospectus. In connection with the sale of the securities, underwriters
may receive compensation from us in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of securities for
whom they may act as agent. Also, underwriters may receive warrants as
additional underwriting compensation.
Underwriters may also sell securities to or through dealers, and those
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent. Any underwriting compensation paid by us to
underwriters or agents in connection with the offering of securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers, will be set forth in the applicable prospectus supplement, as well as
any warrants received by them as additional underwriting compensation. Dealers
and agents participating in the distribution of the securities may be deemed to
be underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of the securities may be deemed to be
underwriting discounts and commissions.
Underwriters, dealers and agents may be entitled, under agreements entered
into with us, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act. Certain of the
underwriters, dealers and agents and their affiliates may be customers of,
engage in transactions with and perform services for us and our subsidiaries in
the ordinary course of business.
If so indicated in the prospectus supplement, we will authorize agents and
underwriters or dealers to solicit offers by certain purchasers to purchase
securities from us at the public offering price set forth in the prospectus
supplement pursuant to delayed delivery contracts providing for payment and
delivery on a specified date in the future. These contracts will be subject to
only those conditions set forth in the prospectus supplement, and the prospectus
supplement will set forth the commission payable for solicitation of such
offers.
LEGAL MATTERS
Some of the legal matters relating to the securities to be offered by this
prospectus will be passed upon for us by the law firm of Kutak Rock LLP, Denver,
Colorado.
EXPERTS
Our financial statements incorporated herein by reference have been so
incorporated in reliance upon the report of Gelfond Hochstadt Pangburn & Co.,
independent certified public accountants, which expresses an unqualified opinion
and includes an explanatory paragraph relating to our ability to continue as a
going concern, given upon their authority as experts in auditing and accounting.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Exchange Act and,
therefore, we file reports and other information with the SEC. Those reports and
other information can be obtained at or from:
. the SEC's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549, information about which can be obtained by
calling the SEC at 1-800-SEC-0330;
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. the SEC's New York regional office at Seven World Trade Center, 13th
Floor, New York, New York 10048;
. the SEC's Chicago regional office at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and
. the Internet site maintained by the SEC at http://www.sec.gov, which
contains reports, proxy and information statements and other
information regarding us and other registrants that file
electronically with the SEC.
Some locations may charge prescribed or modest fees for copies.
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 that is incorporated by
reference is an important part of this prospectus, and information that we file
later with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 until we sell all of the securities offered by this prospectus, or
after the date of this initial registration statement and before the
effectiveness of the registration statement.
. Annual Report on Form 10-KSB for the fiscal year ended June 30, 1999
that was filed with the SEC on September 28, 1999;
. Quarterly Report on Form 10-QSB for the quarter ended September 30,
1999 that was filed with the SEC on November 12, 1999;
. Quarterly Report on Form 10-QSB for the quarter ended December 31,
1999 that was filed with the SEC on February 11, 2000; and
. Quarterly Report on Form 10-QSB for the quarter ended March 31, 2000
that was filed with the SEC on March 15, 2000.
On request we will provide at no cost to each person, including any
beneficial owner, who receives a copy of this prospectus, a copy of any or all
of the documents incorporated in this prospectus by reference. We will not
provide exhibits to any of such documents, however, unless such exhibits are
specifically incorporated by reference into those documents.
ABOUT THIS PROSPECTUS
We filed the registration statement using a "shelf" registration process.
Under this process, we may, from time to time, offer any combination of the
offered securities described in this prospectus in one or more offerings up to a
total dollar amount of $30,000,000. The price to be paid for our offered
securities will be determined at the time of the sale. Each time that we offer
our securities, we will provide a supplement to this prospectus detailing
specific information about each proposed sale.
This prospectus is part of a registration statement on Form S-3 that we
have filed with the SEC. This prospectus is only a part of that registration
statement, and does contain all of the information that is included in the
registration statement, several sections of which are not included at all in
this prospectus. The statements contained in this prospectus, including
statements as to the contents of any contract or other document, are not
necessarily complete. You should refer to the registration statement and to an
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actual copy of the contract or document filed as an exhibit to the registration
statement for more complete information. The registration statement may be
obtained from the SEC through one of the methods described above in "AVAILABLE
INFORMATION."
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