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REGISTRATION NO. 333-52855
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------------
AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LINKON CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 13-3469932
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
140 Sherman Street
Fairfield, Connecticut 06430
(203) 319-3100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
__________________________________
Thomas V. Cerabona
Vice President-Operations
and
Chief Financial Officer
Linkon Corporation
140 Sherman Street
Fairfield, Connecticut 06430
(203) 319-3100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
__________________________________
Copies to:
David I. Albin, Esq.
Finn Dixon & Herling LLP
One Landmark Square, Suite 1400
Stamford, Connecticut 06901
__________________________________
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
__________________________________
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
__________________________________
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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TITLE OF EACH CLASS AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES BE OFFERING PRICE AGGREGATE OFFERING
TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) AMOUNT OF REGISTRATION FEE (2)
<S> <C> <C> <C> <C>
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Common Stock, par value $0.001 4,080,503 $1.344 $5,484,196 $2,401.18
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</TABLE>
(1) Estimated solely for purposes of calculating the amount of the registration
fee, based on the average of the bid and asked prices per share of Common
Stock of the Registrant reported on the National Quotation Bureau "pink
sheets" on August 6, 1998.
(2) The Registrant paid $2,131.37 with the initial filing of this Registration
Statement, based on the average of the bid and asked prices per share of
Common Stock on May 11, 1998. Pursuant to Rule 457(a) of the Securities Act
of 1933, the registration fee payable upon the filing of this Amendment No.
1 to the Registration Statement has been increased to $2,401.18 (an
increase of $269.81), computed on the basis of the average of the closing
bid and asked prices per share of Common Stock of the Registrant on August
6, 1998, with respect to the 680,503 additional shares of the Common Stock
of the Registrant registered hereby.
____________________________________________
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
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4,080,503 SHARES
LINKON CORPORATION
COMMON STOCK, PAR VALUE $0.001 PER SHARE
The 4,080,503 shares of common stock, par value $0.001 per share (the
"Common Stock") offered hereby (the"Offering"), including 1,680,503 shares that
are issuable upon the exercise of warrants held by certain stockholders, are
being sold by certain stockholders of Linkon Corporation, a Nevada corporation
(the "Company"), with principal executive offices located at 140 Sherman Street,
Fairfield, Connecticut 06430, telephone number (203) 319-3100. See "Selling
Stockholders." No underwriter has been retained with respect to this offering.
The Company will not receive any of the proceeds from the Offering. The Company
would, however, receive the appropriate exercise price payable upon issuance
of the 1,680,503 shares of Common Stock eligible for sale hereunder which
underlie warrants. One million of such warrants are held by one stockholder and
have an exercise price of $1.50 per share. The remaining 680,503 of such
warrants are held by 33 different stockholders and have exercise prices ranging
from a high of $3.50 per share to a low of $0.60 per share.
The Common Stock is not listed on either any national securities exchange
or the NASDAQ Stock Market. The Common Stock is listed on the National
Quotation Bureau "pink sheets" under the symbol "LKON."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON P. 2, INFRA.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES
OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Price to Underwriting Proceeds to
Public(1) Discount Selling Stockholders(2)
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Per Share $1.344 N/A $1.344
Total $5,484,196 N/A $5,484,196
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(1) Estimated based on the bid and asked prices per share of Common Stock of
Linkon Corporation reported on the National Quotation Bureau "pink sheets"
on August 6, 1998.
(2) Expenses payable by the Company are estimated to be $41,000 (approximately
$0.01 per share).
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The date of this Prospectus is August 12, 1998.
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RISK FACTORS
In addition to the other information contained in this Prospectus, the
prospective purchaser of the Common Stock offered hereby should carefully
consider the following factors:
ABSENCE OF PROFITABLE OPERATING HISTORY
The Company was created by the merger of Linkon Corporation, a privately-
held New York corporation, and Deals are Good, Inc., a publicly-held Nevada
corporation, in 1990 and, to date, the Company's sales revenues have not been
sufficient to cover its operating costs. The Company has not made a profit
since its creation in 1990, and has accumulated a net loss through the fiscal
year ended January 31, 1998 of approximately $9.8 million. The Company's
operations have been financed principally by a series of equity sales, and there
can be no assurance that the Company will be able to obtain such financing in
the future or that the Company will become profitable and able to finance its
operations through operating revenues.
DEVELOPING MARKET AND TECHNOLOGICAL CHANGE
The market for the Company's products is relatively new and still
developing, and is subject to rapid and material technological change. The
future financial performance of the Company will depend in part on the
development and continuing growth of this market. There can be no assurances
that any of the Company's products will gain sufficient market acceptance for
the Company to become profitable. Current or new competitors may introduce new
products that could adversely affect the Company's competitive position. The
Company believes that, to remain competitive, it must continue to improve its
products and develop and successfully market new products. There can be no
assurance that the Company will be able to do so. The success of new products
depends on a variety of factors, including understanding market needs and being
able to develop products that solve such needs. There can be no assurances that
the Company will be able to identify new product opportunities successfully and
develop and bring to market such new products or that the Company will be able
to respond effectively to technological changes or new products developed by
competitors. Furthermore, even if the Company develops a successful product,
there can be no assurances that the Company will be able to produce and sell
such product on the necessary scale.
WORKING CAPITAL POSITION
As of January 31, 1998, the Company had a working capital deficit (current
assets minus current liabilities) of approximately $815,000. While the
Company's sale of equity securities and refinancing of borrowed money
indebtedness consummated during the first quarter of fiscal 1999 has given the
Company positive working capital on a pro forma basis as of January 31, 1998 of
approximately $1.2 million (see "Recent Developments" below), and actual working
capital as of April 30, 1998 of approximately $570,000, the Company's
prior working capital deficiencies have, at times, rendered the Company unable
to pay certain obligations. Therefore, while the Company's liquidity has
recently been significantly improved from its position in the last few years,
the Company's ability to continue its operations is dependent upon its ability
to generate positive cash flow from operations and/or raise additional funds.
There can be no assurance that the Company will be able to raise any additional
funds, either at an acceptable cost or at all, or generate cash flow from
operations. Furthermore, any funds raised through the issuance of equity will
dilute the Company's outstanding equity. In addition, the Company has $300,000
of borrowed money indebtedness coming due in the fiscal year ending
January 31, 1999 and another $1.1 million of borrowed money indebtedness coming
due in the fiscal year ending January 31, 2001. There can be no assurances that
the Company will be able to repay such indebtedness.
EFFECT OF COMPETITION
The markets in which the Company competes are extremely competitive.
Competitors to the Company's various product lines include, among others:
For the Maestro/TM/ Systems products, Dialogic Corporation, Rhetorex, a
division of the Octel Division of Lucent, Brooktrout Technology, Inc. and
Natural Microsystems, Inc.
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For the Escape/TM/ Platform products, Conversant, a division of Lucent
Technologies, Brite Voice, Intervoice, Periphonics, and Syntellect manufacture
IVR systems.
For the LinkNet/TM/ System products, Dialogic Corporation, Natural
Microsystems, Analogic Corporation and Brooktrout Technology, Inc. have
introduced competing IP telephony hardware/software components. For LinkNet/TM/
Gateway (server) products, Netspeak, Vocaltec, Inter-Tel, Vienna Systems and
other companies, as well as several proprietary products companies, have built
competing IP Telephony gateway products that utilize components from one or more
of the companies listed above.
In addition, the Company believes that competition could further intensify
in the Company's field as the technology becomes more commercially utilized.
Many of these companies, and other potential competitors, have considerably
greater financial and marketing resources than the Company, and have (or have
the ability to acquire) considerable technical resources.
INTELLECTUAL PROPERTY RISKS
The Company's success will depend in part on its ability to obtain and
maintain patent, trademark and copyright protection for its products, to
preserve its trade secrets and to operate without infringing on the proprietary
rights of third parties. While the Company has obtained a registration for its
TERAVOX(R) trademark from the U.S. Patent and Trademark Office and intends to
seek source code copyright protection on its future operating systems and
utilities, the Company has not to date obtained any patents or registered any
copyrights for any of its products, nor has it historically expended material
effort in utilizing legal procedures to protect its technology. Although the
Company has never been party to a law suit involving its technology, disputes
over intellectual property rights can result in significant and expensive
litigation. Any assertions of intellectual property claims could require the
Company to cease the manufacture and sale of infringing products, to incur
significant litigation costs and to develop non-infringing technology or acquire
licenses to the alleged infringed technology. There can be no assurance that
the Company would be able to obtain such licenses on acceptable terms or to
develop non-infringing technology. In addition, there can be no assurance that
any of the Company's products and processes will not be copied, challenged,
invalidated or circumvented or that any trade secret protections that the
Company may have will provide competitive advantages to the Company.
Furthermore, the laws of certain countries do not protect the Company's
intellectual property rights to the same extent as do the laws of the United
States.
RISKS OF INTERNATIONAL SALES
The Company has sold and intends to sell its products in markets
throughout the world. A number of risks are inherent in international
transactions. International sales may be limited or disrupted by the imposition
of governmental controls, regulations, export license requirements, political
instability, trade restrictions, changes in tariffs and difficulty in satisfying
customers in distant locations. In addition, fluctuations in rates of exchange
between the U.S. Dollar and non-Dollar currencies may have a material adverse
effect on the Company's sales.
YEAR 2000 ISSUE
The "Year 2000 Issue" results from computer programs being written using
two digits, instead of four, to define a given year. Programs running time-
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000, which could result in disruptions to various activities and
operations, miscalculations and even system failures.
The Company has designed all of its currently manufactured software and
hardware to be Year 2000 ready. The Company has commenced an investigation and
is making written inquiry to its suppliers as to whether the component parts of
certain of its products that are supplied by such third parties are Year 2000
compliant. With respect to the Company's own operating systems, the Company is
taking steps to remediate any existing Year 2000 Issues and does not expect the
costs of such efforts to be material.
Based upon preliminary data, the Company does not believe that the Year
2000 Issue will have a material adverse impact on the Company's financial
condition, results of operation or future cash flows. If, however, the
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Company, its suppliers and other third parties with whom the Company maintains
business relations are unable to resolve any arising Year 2000 problems in a
timely manner, risk to the Company's financial condition could result.
Furthermore, the Company is unable to predict the likeliness of Year 2000
problems to utilities, banks and other infrastructure services interfering with
its ability to do business.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends, in large part, upon a small number of key
managerial, engineering, sales and technical personnel, and the loss of certain
key personnel could have an adverse effect on the Company's business. The
Company does not maintain key personnel life insurance on any of its officers or
employees.
DIVIDENDS NOT LIKELY
For the foreseeable future, it is anticipated that earnings (if any) will
be used to finance the operations of the Company and that dividends will not be
paid. The Company's loan agreement with the RG Fund (as defined below), its
principal lender, prohibits the payment of dividends.
SIGNIFICANT STOCKHOLDERS
As of May 29, 1998, the Company's Directors and Executive Officers
beneficially owned in the aggregate approximately 36.2% of the Company's common
stock. In addition, two institutional investors beneficially owned approximately
18.7% and 6.8% of the Company's common stock, respectively. (Because of the
Securities and Exchange Commission's rules on calculating beneficial ownership
percentages, the percentage of the Company's common stock beneficially owned by
all of such parties combined would be somewhat less than if the aforesaid
percentages were merely added together (approximately 53.2%)). This
concentration of common stock in the hands of a small number of individuals and
entities means that there may be limited opportunities for other stockholders to
influence the business and affairs of the Company by the exercise of voting
rights. Furthermore, the aforesaid concentration in shares may cause extreme
fluctuations in the trading volume of the Company's stock in a given period,
which in turn may cause the Company's common stock to suffer market price
fluctuations without regard to the Company's operating results.
POSSIBLE EFFECT OF ADDITIONAL PREFERRED STOCK ISSUANCES
The Certificate of Incorporation of the Company authorizes the issuance of
up to 1,000,000 shares of preferred stock, $0.001 par value per share
("Preferred Stock"). The Board of Directors is authorized to issue shares of
Preferred Stock from time to time in one or more series and, subject to the
limitations contained in the Certificate of Incorporation and any limitations
prescribed by law, to establish and designate series and to fix the number of
shares and the relative rights, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions) and liquidation
preferences of each such series. Currently, no preferred stock is outstanding.
If shares of Preferred Stock with voting rights are issued, such issuance could
affect the voting rights of the holders of the Company's Common Stock by
increasing the number of outstanding shares having voting rights, and by the
creation of special class or series voting rights. In addition, if the Board
authorized the issuance of shares of Preferred Stock with conversion rights, the
number of shares of Common Stock outstanding could potentially be increased.
Also, additional Preferred Stock could have preferences with respect to dividend
and liquidation rights. The Company has no present plans to issue Preferred
Stock.
NO CUMULATIVE VOTING
The Company's Certificate of Incorporation does not provide for cumulative
voting. Therefore, holders of less than a majority of the Company's outstanding
Common Stock have no right to elect any of the Company's directors.
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LIQUIDITY OF STOCK
The Company's Common Stock is currently trading on the National Quotations
Bureau Bulletin Board in the "over-the-counter" market. Thus, only bid and asked
prices between dealers (rather than sales prices) are currently available with
respect to the Common Stock. The fact that the Company is trading on the
National Quotations Bureau Bulletin Board rather than on the National
Association of Securities Dealers Automated Quotations System ("NASDAQ") or an
exchange could have the effect of significantly reducing news coverage of the
Company and might cause the market price of the Common Stock to be lower than it
otherwise would be. Although the Company intends to apply for listing on NASDAQ
as soon as possible, it currently would not qualify to be so listed. Thus,
holders of the Common Stock might not realize the extent of liquidity that they
might were the stock listed on NASDAQ or a national securities exchange. In
addition, there can be no assurances that either the fact of this Registration
Statement or the sale of the Company's Common Stock hereunder will not adversely
effect the market price of the Common Stock.
BROKER-DEALER SALES OF COMPANY'S COMMON STOCK
The Company's Common Stock is covered by a rule under the Exchange Act that
imposes additional requirements on broker-dealers who sell such "penny stock"
to, or effect the purchase of such "penny stock" by, any person in a transaction
in which the purchaser is not an established customer, that does not meet the
requirements of Rule 505 or Rule 506 under the Securities Act, that does not
fall within Section 4(2) under the Securities Act or that is not exempt under
Rule 15g-1 of the Exchange Act. For transactions covered by the rule, prior to
the transaction the broker-dealer must make a special suitability determination
for the purchaser and must have received the purchaser's written agreement to
the transaction prior to the sale. Consequently, the rule may affect the ability
of the broker-dealers to sell the Company's securities and also may affect the
ability of a purchaser in this offering to sell its shares in the secondary
market.
DILUTION
As of May 11, 1998, there were outstanding warrants and options to purchase
an aggregate of approximately 3.1 million shares of Common Stock of the Company
at exercise prices ranging from a high of $3.50 per share to a low of $0.5625
per share. In the event of a substantial increase in the market value of the
Company's Common Stock, it is likely that many or all of those warrants and
options would be exercised. Since the exercise prices would be likely to be less
than the market value of the Common Stock, the market value of each share of
Common Stock would be reduced by any such exercise, and holders of Common Stock
would to that extent suffer a dilution of the value of their Common Stock.
CONCENTRATION OF CUSTOMERS
To date, the bulk of the Company's revenues have been concentrated in a
very small number of customers. The Company's two largest customers in fiscal
1998, AT&T and Cat Technologies accounted for approximately 67% and 9% of sales,
respectively. The loss of any one such customer would have a material adverse
effect on the Company's results of operations.
NEVADA GENERAL CORPORATION LAW.
The terms of Chapter 78 of the Nevada Revised Statutes (referenced as the
Nevada General Corporation Law, or the "NGCL"), apply to the Company. Under
certain circumstances, the following provisions of the NGCL may delay or make
more difficult acquisitions or changes of control of the Company. The Company's
Articles of Incorporation and By-laws do not exclude it from such provisions of
the NGCL. Such provisions may make it more difficult to accomplish transactions
that shareholders may believe are in their best interests. Such provisions may
also have the effect of preventing changes in the Company's management.
CONTROL SHARE ACQUISITIONS.
Under Sections 78.378 to 78.3793 of the NGCL (the "Control Share Act"), an
"acquiring person" who acquires a "controlling interest" in an "issuing
corporation" may not exercise voting rights on any "control shares" unless such
voting rights are conferred by a majority vote of the disinterested shareholders
of the issuing corporation at a special meeting of such shareholders held upon
the request and at the expense of the acquiring person. If the control shares
are accorded full voting rights and the acquiring person acquires control shares
with a majority or more of all the voting power, any shareholder, other than the
acquiring person, who does not vote for authorizing voting rights for the
control shares, is entitled to demand payment for the fair value of their
shares, and the corporation must comply with the demand. For the above
provisions, "acquiring person" means (subject to certain exceptions) any person
who, individually or in association with others, acquires or offers to acquire,
directly or indirectly, a controlling interest in an issuing corporation.
"Controlling interest" means the ownership of outstanding voting shares of an
issuing corporation sufficient to enable the acquiring person, individually or
in association with others, directly or indirectly, to exercise (i) one-fifth or
more but less than one-third, (ii) one-third or more but less than a majority,
and/or (iii) a majority or more of the voting power of the issuing corporation
in the election of directors. Voting rights must be conferred by a majority of
the disinterested shareholders as each threshold is reached and/or exceeded.
"Control Shares" means those outstanding voting shares of an issuing corporation
which an acquiring person acquires or offers to acquire in an acquisition or
within 90 days immediately preceding the date when the acquiring person became
an acquiring person. "Issuing corporation" means a corporation that is organized
in Nevada, has 200 or more shareholders (at least 100 of whom are shareholders
of record and residents of Nevada) and does business in Nevada directly or
though an affiliated corporation. The above does not apply if the articles of
incorporation or by-laws of the corporation in effect on the 10th day following
the acquisition of a controlling interest by an acquiring person provide that
said provisions do not apply. The Company's Articles of Incorporation and By-
laws do not exclude it from the restrictions imposed by such provisions.
CERTAIN BUSINESS COMBINATIONS.
Sections 78.411 to 78.444 of the NGCL, (the "Business Combinations Act")
restrict the ability of a "resident domestic corporation" to engage in any
combination with an "interested stockholder" for three years following the
interested stockholder's date of acquiring the shares that cause such
stockholder to become an interested stockholder, unless the combination or the
purchase of shares by the interested stockholder on the interested stockholder's
date of acquiring the shares that cause such stockholder to become an interested
stockholder is approved by the board of directors of the resident domestic
corporation before that date. If the combination was not previously approved,
the interested stockholder may effect a combination after the three-year period
only if such stockholder receives approval from a majority of the disinterested
shares or the offer meets certain fair price criteria. For the above provisions,
"resident domestic corporation" means a Nevada corporation that has 200 or more
shareholders. The provisions of the Business Combinations Act do not apply,
however, to any combination of a resident domestic corporation which does not,
as of the date of acquiring shares, have a class of voting shares registered
with the Securities and Exchange Commission under Section 12 of the Securities
Exchange Act, unless the corporation's original articles of incorporation
provide otherwise. "Interested stockholder", when used in reference to any
resident domestic corporation, means any person, or its subsidiaries, who is (i)
the beneficial owner, directly or indirectly, of 10% or more of the voting
power of the outstanding voting shares of the resident domestic corporation or
(ii) an affiliate or associate of the resident domestic corporation and, at any
time within three years immediately before the date in question, was the
beneficial owner, directly or indirectly, of 10% or more of the voting power of
the then outstanding shares of the resident domestic corporation. The above does
not apply to corporations that so elect in a charter amendment approved by a
majority of the disinterested shares. Such a charter amendment, however, would
not become effective for 18 months after its passage and would apply only to
stock acquisitions occurring after its effective date. The Company's Articles of
Incorporation do not exclude it from the restrictions imposed by such
provisions.
DIRECTORS DUTIES.
Section 78.138 of the NGCL allows directors and officers, in exercising
their respective powers with a view toward the interest of the Company, to
consider the interests of the Company's employees, suppliers, creditors, and
customers, the economy of the state and the nation; the interests of the
community and of society and the long and short-term interests of the Company
and its shareholders, including the possibility these interests may be best
served by the continued independence of the Company in the case of an offer to
acquire the Company. Directors may resist a change or potential change in
control if the directors by a majority vote of a quorum determine that the
change or potential change is opposed to or not in the best interest of the
Company upon consideration of the interests set forth above or if the board has
reasonable grounds to believe that, within a reasonable time, the debt created
as a result of the change in control would cause the assets of the Company or
any successor to be less than the liabilities or would render the Company or any
successor insolvent or would lead to bankruptcy proceedings.
RECENT DEVELOPMENTS
Since the close of the Company's fiscal year ended January 31, 1998, the
Company entered into a number of transactions material to an understanding of
the Company and its prospects. First, the Company entered into a factoring
agreement with Imperial Bank to replace a prior factoring arrangement that the
Company had with Boston
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Financial and Equity Corporation. Second, the Company entered into a series of
transactions, including both debt and equity financings, with Roberts & Green
Inc. ("R&G"), RG Capital Fund, LLC ("RG Fund" and, collectively with R&G, the
"R&G Entities" and certain other parties, and used a portion of the proceeds of
such transactions to repay the Company's indebtedness to the Company's prior
senior lender, IBJS Capital Corporation ("IBJS"). These transactions are
discussed in turn.
FACTORING ARRANGEMENT
On March 19, 1998 the Company entered into an Agreement for Purchase of
Receivables (the "Imperial Factoring Agreement") with Imperial Bank ("Imperial")
pursuant to which the Company may sell to Imperial accounts receivable and other
general intangibles ("Purchased Receivables") that are from time to time
identified by the Company and accepted by Imperial. Upon acceptance by
Imperial, Imperial is obligated to pay the Company 85% of the face value of the
Purchased Receivables (subject to adjustment), retaining the remaining 15% of
the face value of the Purchased Receivable as a reserve until after the
Purchased Receivables are paid by the Company's customers (i.e., the account
debtors). The Company is obligated to pay Imperial (i) a factor fee at a rate
of 1.75% per month on the face amount of each unpaid invoice relating to
Purchased Receivables and (ii) an administrative fee at a rate of 0.5% of the
face amount of each invoice for a Purchased Receivable. Imperial's purchase
from the Company of Purchased Receivables is with full recourse against the
Company. The Company's obligations under the Imperial Factoring Agreement are
secured primarily by its accounts receivable and other general intangibles and
the proceeds thereof. The term of the Imperial Factoring Agreement is one year
and it will automatically be renewed from year to year thereafter unless
terminated by the parties in accordance with its terms.
On March 26, 1998, the Company executed an addendum to the Imperial
Factoring Agreement that enables the Company to offer to sell to Imperial and
Imperial to elect to buy from the Company the Company's right to payment under
purchase orders given to the Company by its customers. The advance rate with
respect to purchased Company purchase orders is 20% (as opposed to the 85%
advance rate applicable to accounts receivable). The total amount of financing
that can be provided to the Company with respect to the sale of purchase orders
is capped at the lesser of $400,000 or the outstanding reserve amount plus
$200,000.
After entering into the Imperial Factoring Agreement the Company terminated
its factoring arrangement with Boston Financial and Equity Corporation (the
"Boston Financial Factoring Arrangement"). The Company believes that the
Imperial Factoring Agreement represents an improvement from the Boston Financial
Factoring Arrangement. Imperial only reserves 15% of the purchase price of
Purchased Receivables as opposed to the 20% reserve required under the Boston
Financial Factoring Arrangement. The Company's borrowing power on the date of
sale of the Purchased Receivables is further enhanced under the Imperial
Factoring Agreement through the payment of the monthly factoring fee on unpaid
invoices relating to Purchased Receivables as compared to the 2% discounted sale
structure (i.e., a fee of 2% of the dollar amount of Purchased Receivables was
taken by Boston Financial upon the purchase of the Purchased Receivables) used
in the Boston Financial Factoring Arrangement. In addition, the Company's
ability under the addendum to the Imperial Factoring Agreement to obtain
financing in advance of shipment based upon customer purchase orders (as opposed
to accounts receivable) provides the Company with a new source of financing not
previously available under the Boston Financial Factoring Arrangement.
TRANSACTIONS WITH R&G ENTITIES
On April 6, 1998, the Company consummated an equity and debt financing
transaction with the RG Fund. The equity financing piece of the financing
involved the sale, pursuant to a subscription agreement, to the RG Fund and ten
investors designated by the RG Fund to participate in the investment (said ten
investors collectively constituting the "Outside Investors") of an aggregate of
2,400,000 shares of the Company's common stock for an aggregate consideration of
$1,800,000. Funding of the sale to the Outside Investors took place on April 14,
1998. The aforesaid subscription agreement provides, among other things, that
the Company must permit a designee of the RG Fund to be an unpaid advisor to the
Board of Directors of the Company. The RG Fund's
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designee has none of the voting rights conferred upon directors of the Company,
but does have the right to receive notice of and to attend meetings of the Board
of Directors of the Company and committees thereof. The proceeds of the sale of
common stock were used (i) to pay off a $300,000 bridge loan made to the Company
on March 11, 1998, by James Scibelli, an affiliate of the RG Fund, and (ii) for
working capital purposes.
The subscription agreement also contains covenants by the RG Fund in favor
of the Company relating to the voting of shares, additional purchases of common
stock, and resales of shares. The RG Fund is obligated, as long as the Company
is not in default under the RG Note (as defined below) or certain other
agreements with the RG Fund, to vote all shares of Common Stock purchased by it
in accordance with the recommendations of the Board of Directors of the Company.
The RG Fund is also prohibited from purchasing additional shares of the
Company's Common Stock on the open market or from any person or entity other
than the Company without the Company's prior written consent. The voting
agreement and restrictions on purchase remain in effect until such time as the
RG Fund and its affiliates own less than 5% of the Company's outstanding common
stock. In addition, for a period of two years the RG Fund is prohibited from
selling or otherwise transferring or disposing of its shares, except in amounts
that would otherwise be permitted under Rule 144 of the Securities Act without
giving effect to the holding period requirements thereof unless such sale,
transfer or disposition is pursuant to an underwritten public offering of such
shares.
The debt portion of the RG Financing consists of a loan to the Company by
the RG Fund in the principal amount of $1,100,000. The loan is evidenced by a
promissory note issued by the Company to the RG Fund in like principal amount
bearing interest at an annual rate of 8% (the "RG Note"). The RG Note is
unsecured and is payable in full in one lump sum payment on April 6, 2000. As
long as the RG Note remains unpaid, the Company is prohibited, unless it obtains
the prior written consent of the RG Fund, from, among other things, (i) issuing
securities in reliance on Regulation S of the Securities Act, (ii) issuing
securities at a price that is less than 75% of the public trading price of the
Company's Common Stock, (iii) incurring indebtedness for borrowed money other
than in connection with factoring agreements, financed purchases or leases of
equipment (not to exceed $500,000) or existing indebtedness of the Company, (iv)
guarantying obligations of its affiliates, (v) declaring dividends or redeeming
capital stock, or (vi) selling assets outside of the ordinary course of
business. The proceeds of the loan were used by the Company to pay off all
amounts owed by the Company to IBJS, for a cash payment of $1,092,833.40 (which
was approximately $150,000 less than the amount then due on the Debenture).
In addition to the aforesaid debt and equity financings, the Company also
entered into an investment banking and financial advisory services relationship
with R&G, pursuant to which the Company appointed R&G as its exclusive financial
advisor and agreed to (i) pay R&G a monthly advisory fee equal to $5,000 for a
period of eighteen months and (ii) issue to R&G warrants to purchase an
aggregate of 1,000,000 shares of Common Stock at an exercise price of $1.50,
such warrant terminating in eighteen months from the date of issuance.
The 2,400,000 shares of Common Stock issued to the RG Fund and the Outside
Investors and the 1,000,000 shares of Common Stock underlying the warrants
granted to R&G are entitled to the benefit of certain registration rights which,
among other things, require the Company to file a registration statement with
respect to such shares under the Securities Act on or before May 15, 1998, and
to cause said registration statement to become effective as promptly thereafter
as practicable. The Registration Statement of which this Prospectus is a part
satisfies such requirement.
Because of the materiality of the aforesaid events to the Company's
financial position, the reader should consider the Company's balance sheet as
contained in the Company's most recent Quarterly Report on Form 10-QSB
distributed with this Prospectus, in addition to the Company's balance sheet as
set forth in its Annual Report on Form 10-KSB for the fiscal year ended January
31, 1998 (which is also distributed herewith.)
-7-
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-2 (the "Registration
Statement," which term shall include all amendments, exhibits, annexes and
schedules thereto) pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder,
covering the offer and sale of the Common Stock being offered hereby (the
"Shares"). This Prospectus does not contain all the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission, and to which reference is
hereby made. Statements made in this Prospectus as to the provisions of any
contract, agreement or other document referred to in the Registration Statement
are summaries of the material terms of such contracts, agreements and other
documents and are not necessarily complete. With respect to each such contract,
agreement or other document filed or incorporated by reference as an exhibit to
the Registration Statement, reference is made to such exhibit for a more
complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.
The Company is subject to the periodic reporting and other information
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files annual and quarterly reports, proxy
statements and other information with the Commission. Such reports, proxy
statements, the Registration Statement and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at the Commission's Public Reference Room at 450
Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on
the operation of the Public Reference Room by calling the Commission at 1-800-
SEC-0330. Although the Company currently does not intend to send copies of such
material to its stockholders, copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains an Internet site that contains reports, proxy and information
statements and other information regarding issuers, such as the Company, that
file electronically with the Commission, at (http://www.sec.gov).
INCORPORATION BY REFERENCE
The Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 1998, as previously filed with the Commission, including the
financial statements therein, as well as the Company's Quarterly Report on Form
10-QSB for the fiscal quarter ended April 30, 1998, as previously filed with
the Commission, including the financial statements therein, are hereby
incorporated by reference into this Prospectus.
All other reports filed pursuant to Section 13(a) or 15(d) of the Exchange
Act since January 31, 1998 and prior to the termination of the Offering shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of the Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
-8-
<PAGE>
The Company will furnish without charge to each person (including any
beneficial owner) to whom this Prospectus is delivered, upon his written or
oral request, a copy of any or all of the information that has been incorporated
by reference in this Prospectus but not delivered with this Prospectus. Written
or telephone requests should be directed to the Company, 140 Sherman Street,
Fairfield, Connecticut 06804 (telephone 203/319-3100), Attention: Thomas V.
Cerabona
This Prospectus is accompanied by a copy of the Company's Form 10-KSB filed
with the Commission for the fiscal year of the Company ended January 31, 1998,
as amended, and by a copy of the Company's Proxy Statement used for the
solicitation of stockholders for the annual meeting of stockholders held on July
15, 1998. In lieu of the foregoing, this Prospectus shall be accompanied by a
copy of the Company's Form 10-KSB, together with any amendments thereto, filed
with the Commission for each subsequent fiscal year of the Company during the
duration of this Offering and by a copy of the Company's Proxy Statement used
for the solicitation of stockholders for each subsequent annual meeting of
stockholders held during the duration of this Offering.
The Company shall deliver without charge to each person to whom this
Prospectus is delivered a copy of the Company's latest Form 10-QSB filed with
the Commission with respect to the most recent fiscal quarter which ends after
the end of the latest fiscal year of the Company for which the Company has
delivered the Form 10-KSB as described above. The Company shall also provide
without charge a copy of each Form 8-K, if any, filed with the Commission since
the end of the latest fiscal year of the Company for which certified financial
statements were included in the latest Form 10-KSB filed with the Commission.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the Offering made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or the
solicitation of an offer to buy, the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make an offer or
solicitation. Except where otherwise indicated, this Prospectus speaks as of
the effective date of the Registration Statement. The delivery of this
Prospectus shall not, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the date hereof.
-9-
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares. However, the Company would receive the exercise prices payable upon
issuance of the 1,680,503 shares of Common Stock eligible for sale hereunder
which underlie warrants issued to various stockholders. One million of such
warrants are held by one stockholder and have an exercise price of $1.50 per
share. The remaining 680,503 of such warrants are held by 33 different
stockholders and have exercise prices ranging form a high of $3.50 per share to
a low of $0.60 per share. The Company would use the proceeds from exercise of
these warrants for general working capital purposes. The principal reason for
the Offering is to satisfy certain contractual obligations to the R&G entities
and the Outside Investors. See "Selling Stockholders."
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses of this offering, all
of which are to be paid by the Registrant. All amounts are estimated except for
the Securities and Exchange Commission registration fee.
SEC registration fee............ $ 2,401.18
Accountants' fees and expenses.. 3,000.00*
Attorneys' fees and expenses.... 27,400.00*
Printing expenses............... 4,000.00*
Miscellaneous ................. 4,198.82*
----------
Total...................... $41,000.00*
==========
- ----------
*Estimated amount.
------------
SELLING STOCKHOLDERS
An aggregate of up to 4,080,503 shares of Common Stock may be offered by
the R&G Entities, the Outside Investors and the other holders of the Company's
stock purchase warrants set forth below (referred to from time to time
collectively as the "Selling Stockholders"). Because the Selling Stockholders
may offer from time to time some or all of the Shares that they hold (including
Shares issuable upon exercise of the R&G Warrants and other warrants), no
estimate can be given as to the amount of Shares that will be offered for sale
by the Selling Stockholders hereunder at any particular time. The following
table sets forth certain information with respect to each Selling Stockholder
for which the Company is registering Shares for resale to the public. The
Company will not receive any of the proceeds from the sale of such Shares.
However, the Company would receive an aggregate of $1,500,000 in proceeds from
the exercise of the 1,000,000 R&G Warrants, and prices per share ranging from a
high of $3.50 to a low of $0.60 upon the exercise of various other warrants.
Other than as set forth below, or in "Recent Developments -- Transactions with
R&G Entities" set forth above, there are no material relationships between the
Selling Stockholders and the Company, nor have any such material relationships
existed within the past three years, and the Selling Stockholders do not hold
any other securities of the Company.
-10-
<PAGE>
<TABLE>
<CAPTION>
Maximum Number
of Shares of
Number of Shares of Maximum Number Common Stock Percentage
Common Stock of Shares To Be Owned After Ownership After
Owned Prior to Offered by Selling Completion of the Completion Of the
Selling Stockholder Offering Stockholder Offering(1) Offering(2)(3)
- --------------------- ------------------ ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
R&G Capital Fund, 1,680,000 1,680,000 0 *
LLC
Roberts & Green, 1,000,000(4) 1,000,000(4) 0 *
Inc.
Stephen Cohen 150,000 150,000 0 *
Robert Cerasia 150,000 150,000 0 *
Stephen Allan 150,000 150,000 0 *
Peter J. Moses 100,000 100,000 0 *
Linda Bernstein 50,000 50,000 0 *
Stephen J. Posner 30,000 30,000 0 *
Jason Cohen 25,000 25,000 0 *
Lisa Cohen 25,000 25,000 0 *
Michael Neider 25,000 25,000 0 *
Donald Orenstein 15,000 15,000 0 *
Gabriel Banat 14,628(5) 14,628(5) 0 *
John and Mary Polhemus 7,314(5) 7,314(5) 0 *
James Ackerman 117,027(5) 117,027(5) 0 *
Tom Hanlon 75,000(5) 75,000(5) 0 *
Lawrence Fleischman 4,625(5) 4,625(5) 0 *
Paul Alloca 4,625(5) 4,625(5) 0 *
Donald Kardon 4,625(5) 4,625(5) 0 *
New Dominion LLC 23,125(5) 23,125(5) 0 *
Mark Sisisky 4,625(5) 4,625(5) 0 *
Norman and Rhoda Sisisky 115,625(6) 23,125(5) 92,500 *
Roy Malsky 4,625(5) 4,625(5) 0 *
Lee Distributing Co. 4,625(5) 4,625(5) 0 *
Timothy and Julie Alter 19,814(7) 7,314(5) 12,500 *
Joseph Saline 23,125(5) 23,125(5) 0 *
Stephen Berg 4,625(5) 4,625(5) 0 *
Jeffrey Kleinschmidt 7,314(5) 7,314(5) 0 *
Edmond and Anne O'Donnell 4,625(5) 4,625(5) 0 *
Strategic Growth International 169,237(5) 169,237(5) 0 *
Joanne Santoriello 14,628(5) 14,628(5) 0 *
Jaspin Financial Associates, LLC 25,000(5) 25,000(5) 0 *
Howard Cotler 4,625(5) 4,625(5) 0 *
Stanley Kaplan 4,625(5) 4,625(5) 0 *
Steven and Sarah Cordovano 2,500(5) 2,500(5) 0 *
Jerome Cotler 4,625(5) 4,625(5) 0 *
Timothy and Donald McKinney 4,625(5) 4,625(5) 0 *
Sovereign Merchant Corp. 25,000(5) 25,000(5) 0 *
Richard Sinise 46,250(5) 46,250(5) 0 *
Robert, Anthony and Pauline Luparello 23,125(8) 4,625(5) 0 *
Diane Petrosky and Dorothy Kardon 4,625(5) 4,625(5) 0 *
Diane Petrosky 4,625(5) 4,625(5) 0 *
Alfrederic Hatch 4,625(5) 4,625(5) 0 *
Albert Mosny 9,250(5) 9,250(5) 0 *
Morgan, Parker & Johnson, Inc. 254,666(9) 16,666(5) 238,000 1.8%
</TABLE>
- ----------------
* Less than 1%
(1) Assumes that all shares of Common Stock the disposition of which is being
registered on behalf of such Selling Stockholder are sold pursuant to this
Prospectus and represents the shares of Common Stock owned by such Selling
Stockholder as of the date of this Prospectus that are not being registered
for sale under this Prospectus.
(2) In each case where shares underlying warrants or other securities are
included as beneficially owned by a person or entity, the percentage of all
shares owned by such person or entity is calculated as if all such
securities owned by such person or entity had been exercised or converted
prior to such calculation.
(3) As of May 29, 1998, the R&G Entities were the beneficial owner of
approximately 18.7% of the Company's Common Stock and the R&G Entities and
the Outside Investors collectively were the beneficial owners of
approximately 23.7% of the Company's Common Stock.
(4) Includes 1,000,000 Shares underlying the R&G Warrants.
(5) Shares acquirable upon the exercise of stock purchase warrants.
(6) 23,125 of such shares are acquirable upon the exercise of stock purchase
warrants.
(7) 7,314 of such shares are acquirable upon the exercise of stock purchase
warrants.
(8) 4,625 of such shares are acquirable upon the exercise of stock purchase
warrants.
(9) 16,666 of such shares are acquirable upon the exercise of stock purchase
warrants.
-11-
<PAGE>
For a complete description of the transaction by which the R&G Entities and
the Outside Investors acquired the Shares, and the contractual rights and
obligations of the R&G Entities and Outside Investors in respect of the Company
and the Shares, see "Recent Developments" above.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 24,900,000 shares
of Common Stock, $0.001 par value per share, and 1,000,000 shares of Preferred
Stock, $0.001 par value per share.
The holders of Common Stock are entitled to one vote per share. The Common
Stock has non-cumulative voting rights, which means that holders of more than
50% of the shares voting for the election of directors can elect all of the
directors and take most other actions submitted to a vote of stockholders, if
they so determine. In such event, the holders of the remaining shares will not
be able to elect any directors or take such other actions. The holders of
Common Stock have no preemptive rights to maintain their respective percentage
ownership interest in the Company or other subscription or conversion rights for
other securities of the company.
The Company has never paid a cash dividend on its Common Stock and the
Company does not contemplate paying any cash dividends on its Common Stock in
the near future. Pursuant to the Company's April 6, 1998 promissory note issued
to the RG Fund, the Company is prohibited from declaring or paying any
dividends, or making a distribution to its stockholders, until the repayment of
all amounts due to the RG Fund thereunder.
PLAN OF DISTRIBUTION
The Shares covered hereby may be offered and sold from time to time by the
Selling Stockholders. The Selling Stockholders will act independently of the
Company in making decisions with respect to the timing, manner and size of each
sale. Such sales may be made in the over-the-counter market or otherwise, at
prices related to the then current market price or in negotiated transactions,
including one or more of the following methods: (a) purchases by a broker-dealer
as principal and resale by such broker or dealer for its account pursuant to
this Prospectus; (b) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; (c) block trades in which the broker-dealer
so engaged will attempt to sell the Shares as agent but may position and resell
a portion of the
-12-
<PAGE>
block as principal to facilitate the transaction; and (d) by sales directly to
purchasers in negotiated transactions. Sales may be made at fixed prices which
may be changed, at market prices prevailing at the time of sale, or at
negotiated prices. The Company has been advised by each Selling Stockholder that
it has not made any arrangements relating to the distribution of the Shares
owned by it covered by this Prospectus. In effecting sales, broker-dealers
engaged by the Selling Stockholders may arrange for other broker-dealers to
participate. Broker-dealers may receive commissions, discounts or other
concessions from the Selling Stockholders and/or the purchasers for whom such
broker-dealers may act as agents or to whom they may sell as principals or
otherwise in amounts to be negotiated (which compensation as to a particular
broker-dealer may exceed customary commissions).
In offering the Shares covered hereby, the Selling Stockholders and any
broker-dealers and any other participating broker-dealers who execute sales for
the Selling Stockholders may be deemed to be "underwriters" within the meaning
of the Securities Act in connection with such sales, and any profits realized by
the Selling Stockholders and the compensation of such broker-dealer may be
deemed to be underwriting discounts and commissions. In addition, any Shares
covered by this Prospectus which qualify for sale pursuant to Rule 144 may be
sold under Rule 144 rather than pursuant to this Prospectus.
The Company has advised each Selling Stockholder that during such time as
it may be engaged in a distribution of Shares covered hereby, it is required to
comply with Rules 10b-6 and 10b-7 under the Exchange Act as described below and,
in connection therewith, that it may not engage in any stabilization activity in
connection with the Company's Common Stock, is required to furnish to each
purchaser and/or broker-dealer through which Shares covered hereby may be
offered copies of this Prospectus and its accompanying documents and reports and
that it may not bid for or purchase any securities of the Company or attempt to
induce any person to purchase any securities of the Company except as permitted
under the Exchange Act. Each Selling Stockholder has agreed to inform the
Company when the distribution of its Shares is completed.
Rule 10b-6 under the Exchange Act prohibits, with certain exceptions,
participants in a distribution from bidding for or purchasing, for an account in
which the participant has a beneficial interest, any of the securities that are
the subject of the distribution. Rule 10b-7 governs bids and purchases made in
order to stabilize the price of a security in connection with a distribution of
the security.
This offering will terminate on the earlier of the third anniversary of the
effective date hereof and the date on which all Shares offered hereby have been
sold by the Selling Stockholders.
In order to comply with certain states' securities laws, if applicable, the
Shares offered hereby will be sold in such jurisdictions only through registered
or licensed brokers or dealers. In addition, the Shares may not be sold in
certain states unless they have been registered or qualified for sale in such
state or an exemption from regulation or qualification is available and is
complied with. The Company intends to use its best efforts to register or
qualify the Shares for resale or to seek an exemption from registration or
qualification in any state required in order to facilitate, as to a particular
sale, the sale of the Shares by the Selling Stockholders.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by Section 78.037 of the Nevada General Corporation Law, the
Company has included in its Restated Articles of Incorporation a provision which
states that a director or officer of the Company shall not be liable to the
Company or its stockholders for damages for acts or omissions resulting in a
breach of fiduciary duty as a director or officer, except if such acts or
omissions involve (a) intentional misconduct, fraud or a knowing violation of
law; or (b) the payment of dividends in violation of Section 78.300 of the
Nevada General Corporation Law.
As permitted by Section 78.751 of the Nevada General Corporation Law,
Article Ninth of the Company's Restated Articles of Incorporation provides for
the indemnification by the Company of each director, officer, employee or agent
thereof to the fullest extent permitted by Nevada law.
-13-
<PAGE>
As permitted by the Nevada General Corporation Law, Article Tenth of the
Company's Restated Articles of Incorporation allows the Company to maintain
director's and officer's liability for its directors and officers against
certain liabilities. The Company has not, to date, obtained such insurance.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Sklar Warren & Conway LLP, Las
Vegas, Nevada.
EXPERTS
The consolidated financial statements of Linkon Corporation at January 31,
1998 and 1997 and for the years then ended incorporated by reference in this
Prospectus and Registration Statement from the Company's Form 10-KSB for the
period ended January 31, 1998, as amended, have been audited by Radin Glass &
Co., LLP, independent auditors, and are incorporated herein in reliance upon
such report given upon the authority of such firm as experts in auditing and
accounting.
-14-
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS. IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
----------------------------
TABLE OF CONTENTS
PAGE
----
Risk Factors 2
Recent Developments 5
Available Information 8
Incorporation by Reference 8
Use of Proceeds 10
Other Expenses of Issuance and Distribution 10
Selling Stockholders 10
Description of Securities 12
Plan of Distribution 12
Limitation of Liability and Indemnification
Matters 13
Legal Matters 14
Experts 14
----------------------------
UNTIL SEPTEMBER 21, 1998, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
4,082,503 SHARES
LINKON CORPORATION
----------------------------
COMMON STOCK, $0.001 PAR VALUE PER SHARE
----------------------------
PROSPECTUS
AUGUST 12, 1998
----------------------------
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses of this offering, all
of which are to be paid by the Registrant. All amounts are estimated except for
the Securities and Exchange Commission registration fee.
<TABLE>
<S> <C>
SEC registration fee............ $ 2,401.18
Accountants' fees and expenses.. 3,000.00*
Attorneys' fees and expenses.... 27,400.00*
Printing expenses............... 4,000.00*
Miscellaneous ................. 4,198.82*
----------
Total...................... $41,000.00*
==========
</TABLE>
- ----------
*Estimated amount.
-------------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 78.037 of the Nevada General Corporation Law, the
Company has included in its restated Articles of Incorporation a provision which
states that a director or officer of the Company shall not be liable to the
Company or its stockholders for damages for acts or omissions resulting in a
breach of fiduciary duty as a director or officer, except if such acts or
omissions involve (a) intentional misconduct, fraud or a knowing violation of
the law; or (b) the payment of dividends in violation of Section 78.300 of the
Nevada General Corporation Law.
As permitted by Section 78.751 of the Nevada General Corporation Law,
Article Ninth of the Company's Restated Articles of Incorporation provides for
the indemnification by the Company of each director, officer, employee or agent
thereof to the fullest extent permitted by Nevada Law.
As permitted by the Nevada General Corporation Law, Article Tenth of the
Company's Restated Articles of Incorporation allows the Company to maintain
director's and officer's liability for its directors and officers against
certain liabilities. The Company has not, do date, obtained such insurance.
ITEM 16. EXHIBITS
Exhibit Sequential
Number Description of Exhibit Page
- ------ ---------------------- ----------
5 Opinion of Sklar Warren & Conway LLP as to the legality of the
securities being registered (1)
<PAGE>
Exhibit Sequential
Number Description of Exhibit Page
- ------ ---------------------- ----------
10.1 Placement Agent Agreement, dated January 14, 1994, between the Company and
Sloan Securities Corp., including forms of the Company's Warrant
Certificates, issued on January 28, 1994, February 28, 1994 and April 30,
1994 and the October 27, 1994 agreement between said parties amending the
same. (Incorporated by reference to Exhibit 4.3 to the Company's Form 10-
KSB for the fiscal year ended January 31, 1995.) (2)
10.2 Employment Agreement dated May 1, 1996 between the Company and Mr. Lee W.
Hill. (Incorporated by reference to Exhibit 4.4 to the Company's Form 10-
KSB for the fiscal year ended January 31, 1997.) (2)
10.3 Employment Agreement dated May 1, 1996 between the Company and Mr. Charles
Castelli. (Incorporated by reference to Exhibit 4.5 to the Company's Form
10-KSB for the fiscal year ended January 31, 1997.) (2)
10.4 Employment Agreement dated March 15, 1996 between the Company and Mr.
Thomas V. Cerabona (Incorporated by reference to Exhibit 4.6 to the
Company's Form 10-KSB for the fiscal year ended January 31, 1997.) (2)
10.5 Employment Agreement, dated May 1, 1996, between the Company and Mr. Mark
O'Brien. (Incorporated by reference to Exhibit 4.7 to the Company's Form
10-KSB for the fiscal year ended January 31, 1997.) (2)
10.6 Lease Agreement dated March 19, 1991 between the Company and Sherman
Street Limited Partnership. (Incorporated by reference to Exhibit 12
(xiii) to the Company's Registration Statement on Form S-1 (File Number
33-44506) which became effective on August 20, 1992.) (2)
10.7 Contract between the Company and AT&T, dated July 21, 1992, and
subsequently assigned by AT&T to Lucent Technologies on February 1, 1996.
(Incorporated by reference to Exhibit 10.7 to the Company's Form 10-KSB
for the fiscal year ended January 31, 1998.) (2)
10.8 Subscription Agreement, dated April 6, 1998, between the Company and RG
Capital Fund LLC. (Incorporated by reference to Exhibit 10.8 to the
Company's Form 10-KSB for the fiscal year ended January 31, 1996.) (2)
10.9 Form of Subscription Agreement, dated April 14, 1998, between the Company
and each of the Outside Investors party thereto. (Incorporated by
reference to Exhibit 10.9 to the Company's Form 10-KSB for the fiscal year
ended January 31, 1998.) (2)
10.10 Warrant Agreement, dated April 6, 1998, between the Company and Roberts &
Green, Inc. (Incorporated by reference to Exhibit 10.10 to the Company's
Form 10-KSB for the fiscal year ended January 31, 1998.) (2)
10.11 Registration Rights Agreement, dated April 6, 1998, among the Company, RG
Capital Fund LLC and Roberts &Green, Inc. (Incorporated by reference to
Exhibit 10.11 to the Company's Form 10-KSB for the fiscal year ended
January 31, 1998.) (2)
10.12 Investment Banking and Financial Advisory Services Agreement, dated April
6, 1998, between the Company and Roberts & Green, Inc. (Incorporated by
reference to Exhibit 10.12 to the Company's Form 10-KSB for the fiscal
year ended January 31, 1998.) (2)
10.13 Release and Termination Agreement, dated April 6, 1998, between the
Company and IBJS Capital Corporation. (Incorporated by reference to
Exhibit 10.13 to the Company's Form 10-KSB for the fiscal year ended
January 31, 1998.) (2)
10.14 Agreement for Purchase of Receivables, dated March 19, 1998, between the
Company and Imperial Bank. (Incorporated by reference to Exhibit 10.14 to
the Company's Form 10-KSB for the fiscal year ended January 31, 1998.) (2)
10.15 Purchase Order Addendum to Agreement for Purchase of Receivables, dated
March 26, 1998, between the Company and Imperial Bank. (Incorporated by
reference to Exhibit 10.15 to the Company's Form 10-KSB for the fiscal
year ended January 31, 1998.) (2)
II-2
<PAGE>
Exhibit Sequential
Number Description of Exhibit Page
- ------ ---------------------- ----------
10.16 Authorized Distributor Agreement, dated May 26, 1997, between Trigem
Microsystems, Inc. and the Company. (Incorporated by reference to Exhibit
10.16 to the Company's Form 10-KSB for the fiscal year ended January 31,
1998.) (2)
10.17 Commercial Lease, dated June 18, 1997, by and between 140 Sherman Street,
LLC and the Company. (Incorporated by reference to Exhibit 10.17 to the
Company's Form 10-KSB for the fiscal year ended January 31, 1998.) (2)
10.18 Form of Incentive Stock Option Agreement under the Company's 1996 Stock
Option and Performance Incentive Plan. (Incorporated by reference to
Exhibit 10.18 to the Company's Form 10-KSB for the fiscal year ended
January 31, 1998.) (2)
10.19 Form of Non Qualified Stock Option Agreement under the Company's 1996
Stock Option and Performance Incentive Plan. (Incorporated by reference
to Exhibit 10.19 to the Company's Form 10-KSB for the fiscal year ended
January 31, 1998.) (2)
II-3
<PAGE>
Exhibit Sequential
Number Description of Exhibit Page
- ------ ---------------------- ----------
23.1 Consent of Radin Glass & Co. (1)
23.2 Consent of Sklar Warren & Conway LLP (3)
24 Power of Attorney (4)
- ---------
(1) Filed herewith.
(2) Incorporated by reference as aforesaid.
(3) Included in the opinion of Sklar Warren & Conway LLP under Exhibit 5.
(4) Incorporated by reference to Exhibit 2 to the initial filing of this
Registration Statement.
________________________________
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes the following:
(1) File, during any period in which securities are offered or sold
hereunder, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, to treat each post-
effective amendment as a new registration statement of the securities offered
and that offering of the securities at that time as the initial bona fide
offering of those securities.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the latter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-2 and has duly caused the Registration
Statement to be signed on its behalf by the undersigned, in the Town of
Fairfield, State of Connecticut on August 10, 1998.
LINKON CORPORATION
By: /s/ Thomas V. Cerabona
----------------------------------------
Name: Thomas V. Cerabona
Title: Vice President-Operations and
Chief Financial Officer
Pursuant to requirements of the Securities Act of 1933, this Registration
Statement was signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Lee W. Hill
- ------------------------- President and Director August 10, 1998
Lee W. Hill (Principal Executive Officer)
/s/ Thomas V. Cerabona
- ------------------------- Chief Financial Officer August 10, 1998
Thomas V. Cerabona (Principal Financial
Officer)
- -------------------------
Joao Manuel Da M.V. Carvalho Director August 10, 1998
*
- ------------------------- Director August 10, 1998
Charles Castelli
*
- ------------------------- Director August 10, 1998
Daniel Zwiren
* By /s/ Thomas V. Cerabona
----------------------
Thomas V. Cerabona, Attorney-in-fact
</TABLE>
II-5
<PAGE>
Exhibit Index
Number Description of Exhibit
- ------ ----------------------
5 Opinion of Sklar Warren & Conway LLP as to the legality of the
securities being registered
23.1 Consent of Radin Glass & Co.
II-6
<PAGE>
EXHIBIT 5
August 12, 1998
Linkon Corporation
140 Sherman Street
Fairfield, Connecticut 06430
Re: Linkon Corporation -- Registration Statement on Form S-2 (No. 333-53855)
------------------------------------------------------------------------
Ladies and Gentlemen:
We have acted as special Nevada counsel to Linkon Corporation, a Nevada
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission of a registration statement on Form S-2
(No. 333-53855), as amended by Amendment No. 1 dated August 12, 1998 (as so
amended, the "Registration Statement"), of the Company, covering the offer and
sale of up to four million eighty thousand five hundred and three (4,080,503)
shares of the Common Stock of the Company, $0.001 par value per share (the
"Shares"), including two million four hundred thousand (2,400,000) Shares which
were sold pursuant to a subscription agreement, dated April 6, 1998, among the
Company, RG Capital Fund, LLC, a New York limited liability company ("RG"), and
other investors designated by RG, and which are currently issued and outstanding
(the "Issued Shares"), and one million six hundred eighty thousand five hundred
and three (1,680,503) Shares that are issuable upon the exercise of certain
warrants (the "Warrant Shares"), all of which Shares are to be sold by certain
selling stockholders (the "Selling Stockholders").
In rendering the opinions set forth herein, we have examined executed
copies, telecopies or photocopies of: (i) the Registration Statement; (ii) the
Certificate of Incorporation of the Company, as amended, certified by the Nevada
Secretary of State; (iii) the By-laws of the Company, as amended, certified by
the Secretary of the Company; (iv) a specimen stock certificate representing the
Warrant Shares, (v) resolutions of the Board of Directors of the Company
authorizing, among other things, the issuance of the Shares, certified as of the
date hereof by the Secretary of the Company; and (vi) such other records,
documents, certificates and other instruments as in our judgment are necessary
or appropriate as a basis for the opinions expressed below. We have further
assumed that at no time has the issued and outstanding capital stock of the
Company, including without limitation, capital stock to be issued (whether
reserved for issuance or not) pursuant to any options, warrants or other
agreements entitling the holders thereof to receive capital stock in the
Company, exceeded the authorized capital stock of the Company. We have not
reviewed, and express no opinion as to, any instrument or agreement referred to
or incorporated by reference in the documents, (i) through (vi) above.
<PAGE>
Linkon Corporation
August 12, 1998
Page 2
In our examination of such documents we have assumed the genuineness of
all signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such copies. In rendering the opinions
hereafter, we have relied upon the certificates of all public officials and
corporate officers with respect to the accuracy of all matters contained
therein, and such documents and instruments as we have deemed appropriate. As to
any facts material to this opinion letter which we did not independently
establish or verify, we have relied upon statements and representations of
officers and other representatives of the Company, including, but not limited
to, the officer's certificate delivered to us on this date.
Based upon the foregoing, and in reliance thereon, and subject to the
qualifications, assumptions, and exceptions heretofore and hereinafter set
forth, we are of the opinion that: (1) the Issued Shares have been duly
authorized and validly issued, and are fully paid and nonassessable; (2) the
Warrant Shares, assuming, (i) the conformity of the certificates representing
such Shares to the specimen thereof examined by us, and (ii) the due execution
and delivery of such certificates, when issued in accordance with the terms of
such warrants, for the consideration expressed therein, will be duly and validly
issued, fully paid and nonassessable.
We do not express, or purport to express, any opinion with respect to
the laws of any jurisdiction other than the General Corporation Law of the State
of Nevada.
This opinion letter is intended solely for the use of the addressees in
connection with the filing of the Registration Statement. It may not be relied
upon by any other person or for any other purpose, or reproduced or filed
publicly by any person, without the written consent of this firm.
Notwithstanding the foregoing, we hereby consent to the filing of this letter as
an exhibit to the Registration Statement and further consent to the use of our
name under the heading "Legal Matters" in the Registration Statement and the
prospectus which forms a part thereof. In giving this consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder by the Securities and Exchange Commission.
This opinion is given as of the date hereof and we assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter occur or come to our attention or any changes in law which may
hereafter occur.
Very truly yours,
/s/ Sklar Warren & Conway LLP
SKLAR WARREN & CONWAY LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference of our report dated
April 6, 1998 in the Prospectus constituting part of this Registration Statement
on Form S-2, which appears on page F-2 of the Annual Report on Form 10-KSB of
Linkon Corporation for the fiscal year ended January 31, 1998, as amended, and
to the reference to our Firm under the caption "Experts" in such Prospectus.
/s/ Radin Glass & Co., LLP
Radin Glass & Co., LLP
Certified Public Accountants
New York, New York
August 12, 1998
