As filed with the Securities and Exchange Commission on August 3, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
Under the Securities Act of 1933
MAGNITUDE INFORMATION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2228828
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
50 Tannery Road
Branchburg, New Jersey 08876
(908) 534-6400
(Address and Telephone Number of Registrant's Principal
Executive Office)(Zip Code)
Agreement with Isidor D. Friedenberg dated March 12, 1999
(83,333 shares of common stock)
Agreement with Jerry Swon dated July 21, 1999
(150,000 shares of common stock)
Agreement with Bruce Deichl dated July 21, 1999
(212,895)
(full title of the plans)
Steven Rudnik, President
50 Tannery Road
Branchburg, New Jersey 08876
(908) 534-6400
(Name, Address and Telephone number, including area code, of agent for service)
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Copies to:
Michael H. Freedman, Esq.
Silverman, Collura & Chernis, P.C.
381 Park Avenue South - Suite 1601
New York, New York 10016
(212) 779-8600
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CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Proposed Proposed
Title of Amount maximum maximum Amount of
securities to to be offering price aggregate registration
be registered registered per share (1) offering price (1) fee
- --------------------------------------------------------------------------------
Common Stock(1) 446,228 $1.03125 $460,172.62 $130.00
- --------------------------------------------------------------------------------
(1) Calculated in accordance with 457(c) using the closing price for the
common stock on July 28, 1999.
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Part I - Information Required in the Section 10(a) Prospectus
The documents containing information specified in Part 1 (plan information
and registrant information) will be sent or given to the consultants as
specified by Rule 428(b)(1). Such documents need not be filed with the
Securities and Exchange Commission either as part of this registration statement
or as prospectuses or prospectus supplements pursuant to Rule 424. These
documents and the documents incorporated by reference in this registration
statement pursuant to Item 3 of Part II of this form taken together constitute a
prospectus that meets the requirements of Section 10(a) of the Securities Act of
1933.
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MAGNITUDE INFORMATION SYSTEMS, INC.
446,228 shares of common stock
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Certain officers, employees and consultants of Magnitude may sell up to
446,228 shares of common stock.
Magnitude will not receive any proceeds from this offering.
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Please see the risk factors beginning on page 7 to read about certain
factors you should consider before buying shares of common stock.
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Magnitude Information Systems's common stock is quoted on the OTC
Bulletin Board under the symbol MAGY. On July 28, 1999 the last sale price of
the common stock as reported on the Bulletin Board was $1.03125.
The mailing address of our principal executive offices is 50 Tannery
Road, Branchburg, New Jersey 08876.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is August 3, 1999.
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TABLE OF CONTENTS
Page
The Company...................................................................6
Risk Factors..................................................................7
Available Information.........................................................9
Incorporation of Certain Documents by Reference...............................9
Selling Securityholders......................................................11
Plan of Distribution.........................................................12
Description of Securities....................................................13
Transfer Agent and Registrar.................................................14
Legal Matters................................................................14
Experts......................................................................14
Indemnification of Directors and Officers....................................14
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The Company
Magnitude Information Systems, Inc., f/k/a Proformix Systems, Inc., was
incorporated as a Delaware corporation on April 19, 1988 under the name
Fortunistics Inc. In 1993, we changed our name to Whitestone Industries, Inc. In
June 1997, we acquired approximately 90% of Proformix, Inc., a private Delaware
company, and changed our name to Proformix Systems, Inc. In December 1998, after
the sale of certain of our assets and a reorganization of our product lines, we
changed our name to Magnitude Information Systems, Inc.
We are a research based software company, delivering the science of
ergonomics to the computerized workplace. Computer ergonomics focuses on
optimizing the design of technology that allows people to successfully interact
with computers. A successful technology delivery system improves the comfort,
productivity, job satisfaction and safety of the computer user, while reducing
the costs of absenteeism and work related disability. Through scientifically
testing, evaluating and verifying new design concepts and systems, we marry
human biology and computer technology to provide both financial and workplace
health benefits to our clients.
We have researched, developed, patented and marketed a variety of
ergonomic hardware products including keyboard tray systems. Starting in
February 1998, we acquired two ergonomic software companies, including Rolina
Corporation (formerly Magnitude LLC) and Vanity Software. Later in November
1998, we entered into a strategic alliance with Office Specialty, a Canadian
corporation, whereby Office Specialty acquired all of our hardware product
rights and related assets.
The Company markets a unique, proprietary, windows-compatible software
suite under the name Proformix EMS(TM)("EMS"). EMS is composed of several
software products which provide a system for evaluation and management of
ergonomic risk factors in the workplace. The software assists in training people
working on computers, monitors computer-use related activities and evaluates a
user's risk exposure and propensity towards injury or loss of effectiveness in
connection with his/her day-to-day work.
In late 1998, Magnitude Information Systems and Aon Ergonomic Services,
a division of Aon Worldwide Resources, entered into a joint venture agreement to
market and sell our EMS software product. Aon Worldwide Resources is a division
of Aon Group, the worldwide insurance brokerage and consulting arm of Aon
Corporation.
Currently, approximately 100 prospective corporate, government,
educational and military organizations are evaluating EMS for organization-wide
use.
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Risk Factors
Substantial Competition.
The computer software industry and products developed for the computer
workplace face intense competition. We will be at a competitive disadvantage in
seeking to compete with other companies having more assets, larger technical
staffs, established market shares and greater financial and operational
resources than us. There can be no assurance that we will be able to meet the
competition and operate profitably.
Possible Loss of Entire Investment.
The commons stock offered hereby is highly speculative, involves a high
degree of risk and should not be purchased by any person who cannot afford the
loss of his entire investment. A purchase of our common stock in this offering
would be unsuitable for a person who cannot afford to sustain such a loss.
Dependence Upon Key Personnel.
We are substantially dependent upon the continued services of Steven
Rudnik, our President and Chief Executive Officer. The loss of the services of
Mr. Rudnik through incapacity or otherwise would have a material adverse effect
upon our business and prospects. To the extent that his services become
unavailable, we will be required to retain other qualified personnel, and there
can be no assurance that we will be able to recruit and hire qualified persons
upon acceptable terms. We do not maintain key person life and disability
insurance on the life of Mr. Rudnik.
Possible Volatility of Stock Price.
There can be no assurance that a public market price for the common
stock will continue. The market prices of the common stock may be significantly
affected by factors such as announcements by us or our competitors, as well as
variations in our results of operations and market conditions in general. The
market price may also be affected by movements in prices of stocks in general.
The relatively limited amount of publicly trading shares (float) renders our
securities especially susceptible to sharp price fluctuations.
Penny Stock Regulations
The Securities Enforcement Penny Stock Act of 1990 requires specific
disclosure to be made available in connection with trades in the stock of
companies defined as "penny stocks". The Commission has adopted regulations that
generally define a penny stock to be any equity security that has a market price
of less than $5.00 per share, subject to certain exceptions. Such exceptions
include any equity security listed on NASDAQ and any equity security issued by
an issuer that has (i) net tangible assets of at least $2,000,000, if such
issuer has been in continuous operation for three years; (ii) net tangible
assets of at least $5,000,000, if such issuer has been in continuous
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operation for less than three years; or (iii) average annual revenue of at least
$6,000,000, if such issuer has been in continuous operation for less than three
years. Unless an exception is available, the regulations require the delivery,
prior to any transaction involving a penny stock, of a disclosure schedule
explaining the penny stock market and the risk associated therewith as well as
the written consent of the purchaser of such security prior to engaging in a
penny stock transaction. The regulations on penny stocks may limit the ability
of the purchasers of our securities to sell their securities in the secondary
marketplace. Our common stock is currently considered a penny stock.
The Year 2000.
State of Readiness
We are dependent upon computers to operate our business and therefore
are exposed to Year 2000 ("Y2K") problems. In the fall of 1998, we initiated a
Y2K compliance program with the following objectives: (i) updating and/or
replacing aging hardware; and (iii) assuring company-wide Y2K compliance.
With the assistance of outside consultants, we have identified that the
computer systems used for accounting purposes are not Y2K compliant. In order to
make these systems compliant, we elected to replace the software utilized. The
new software will be installed during the third quarter of 1999.
The total costs for achieving Y2K compliance are estimated to be less
than $10,000. Most of the cost is due to the acquisition of Y2K compliant
software and replacement of certain computer hardware.
Risks
The failure to correct a material Y2K problem could result in an
interruption in, or failure of, certain normal business activities or
operations. Such failures could affect our operations, however, management
believes that any such interruptions would not have a material impact on our
liquidity or financial condition.
Risks Associated with Forward Looking Statements.
This prospectus contains "forward-looking statements" which can be
identified by the use of words such as "intend," "anticipate," "believe,"
"estimate," "project," or "expect" or similar statements. The statements in
"Risk Factors" are cautionary statements. They identify important factors, with
respect to forward-looking statements, that could cause actual results to differ
materially from those forecasted in such statements. All forward-looking
statements in this prospectus are expressly qualified in their entirety by the
cautionary statements in this paragraph.
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Available Information
We are subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange Commission.
Such reports, proxy statements and other information can be inspected and copied
at the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at Room 1204,
Everett McKinley Dirksen Building, 219 South Dearborn Street, Chicago, Illinois
60604; and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Information on the operation of the Public Reference
Room can be obtained by calling the Commission at 1-800-SEC-0330. Such reports
and other information may also be inspected without charge at a website
maintained by the Commission. The address of the website is http://www.sec.gov.
This prospectus does not contain all of the information set forth in
the registration statement of which this prospectus is a part and which we have
filed with the Commission. For further information with respect to us and the
securities offered hereby, reference is made to the registration statement,
including the exhibits filed as a part thereof, copies of which can be inspected
at, or obtained at prescribed rates from the Public Reference Section of the
Commission at the address set forth above. Additional updating information with
respect to us may be provided in the future by means of appendices or
supplements to the prospectus.
We hereby undertake to provide without charge to each person to whom a
copy of this prospectus is delivered, upon written or oral request of such
person, a copy of any and all of the information that has been or may be
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents).
Requests should be directed to Magnitude Information Systems, Inc., 50 Tannery
Road, Branchburg, New Jersey 08876 (908) 534-6400.
Incorporation of Certain Documents by Reference
We hereby refer to the following documents previously filed by
Magnitude Information Systems with the Securities and Exchange Commission, and
incorporate these documents in this prospectus:
(a) Annual Report on Form 10-KSB for its fiscal year ended
December 31, 1998;
(b) Quarterly Report on Form 10-QSB for the periods ended March
31, 1999; and
(c) All other reports filed pursuant to Section 13(a) and 15(d) of
the Exchange Act since our fiscal year ended December 31,
1998.
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All documents filed by us with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent hereto, but prior to
the termination of the offering of securities made by this prospectus shall be
deemed to be incorporated by reference herein and to be part hereof from their
respective dates of filing.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this prospectus, to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
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Selling Securityholders
This prospectus covers common stock that has been issued to the selling
securityholders, or may be acquired upon exercise of stock options held by the
selling securityholders, named herein or to be supplementally named, as of July
25, 1999. The following table sets forth as of July 25, 1999 certain information
with respect to the selling securityholders. Magnitude Information Systems will
not receive any of the proceeds from the sale of the common stock.
Securities Securities
Owned Prior Securities Owned
to Offering(1) Offered Herein After Offering(2)
-------------- -------------- -----------------
Name of Selling
Securityholder Common Stock Common Stock Amount %
- -------------- ------------ ------------ ------ -
Isidor D. Friedenberg 55,500(3) 83,333 55,500 **
Consultant
Jerry Swon, 433,995(4) 150,000 433,995 4.68%
former president
Bruce Deichl, 409,933(5) 212,895 409,933 4.42%
former director of
Strategic Business
Development
- --------------------
** less than 1%
(1) For purposes of this table, each person listed above is deemed to own
shares of common stock if he has the right to acquire the common stock
within 60 days of July 25, 1999. For purposes of computing the
percentage of outstanding shares of common stock held by each selling
securityholder, any security which they have the right to acquire
within such date is deemed to be outstanding. Except as indicated in
the footnotes to this table and pursuant to applicable community
property laws, we believe, based on information supplied by selling
securityholder, that they have sole voting and investment power with
respect to all the shares of common stock which they own.
(2) For purposes of this table, the number and percentage of common stock
owned after the offering presumes the sale of all the common stock
offered herein.
(3) Includes stock options to purchase 50,000 shares of common stock.
(4) Includes (i) stock options to purchase 409,333 shares of common stock
owned by Jane Swon, Mr. Swon's wife; and (ii) 15,327 shares of common
stock held by Royal Capital, Inc., of which Mr. Swon is a principal.
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(5) Includes stock options to purchase 409,933 shares of common stock.
Plan of Distribution
Each selling securityholder may offer and sell the shares of common
stock from time to time at their discretion on the OTC Bulletin Board, or
otherwise, at prices and at terms then prevailing or at prices related to the
then current market price, or at negotiated prices. The distribution of the
shares of common stock may be effected from time to time in one or more
transactions including, without limitation: (a) a block trade in which the
broker-dealer so engaged will attempt to sell the common stock as agent, but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (d) face-to-face or other direct transactions between the selling
securityholder and purchasers without a broker-dealer or other intermediary. In
effecting sales, broker-dealers or agents engaged by a selling securityholder
may arrange for other broker-dealers or agents to participate. From time to
time, the selling securityholder may pledge, hypothecate or grant a security
interest in some or all of the common stock owned by him, and the pledgees,
secured parties or persons to whom such securities have been hypothecated shall,
upon foreclosure in the event of default, be deemed to be selling
securityholders hereunder. In addition, the selling securityholder may from time
to time sell short the common stock, and in such instances, this prospectus may
be delivered in connection with such short sale and the common stock offered
hereby may be used to cover such short sale.
Sales of the common stock may also be made pursuant to Rule 144 under
the Securities Act of 1933, as amended, where applicable. The selling
securityholders' shares may also be offered in one or more underwritten
offerings, on a firm commitment or best efforts basis. Magnitude Information
Systems will not receive proceeds from the sale of the selling securityholders'
common stock.
From time to time, the selling securityholder may transfer, pledge,
donate or assign its common stock to lenders, family members and others and each
of such persons will be deemed to be a selling securityholder for purposes of
this prospectus. The plan of distribution for the selling securityholders'
shares of common stock sold hereunder will otherwise remain unchanged, except
that the transferees, pledgees, donees or other successors will be selling
securityholders hereunder.
Including, and without limiting the foregoing, in connection with
distributions of the common stock, selling securityholders may enter into
hedging transactions with broker-dealers and the broker-dealers may engage in
short sales of the common stock in the course of hedging the
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positions he assumes. They may also enter into option or other transactions with
broker-dealers that involve the delivery of the common stock to the
broker-dealers, who may then resell or otherwise transfer such common stock. The
selling securityholder may also loan or pledge the common stock to a
broker-dealer and the broker-dealer may sell the common stock so loaned or upon
default may sell or otherwise transfer the pledged common stock.
Under applicable rule and regulations under the Exchange Act, any
person engaged in the distribution of the common stock may not bid for or
purchase shares of common stock during a period which commences one business day
(5 business days, if Magnitude Information Systems' float is less than $25
million or its average daily trading volume is less than $100,000) prior to the
selling securityholder's participation in the distribution, subject to
exceptions for certain passive market making activities. In addition and without
limiting the foregoing, the selling securityholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Regulation M which provisions may
limit the timing of purchases and sales of shares of the common stock by them.
Magnitude Information Systems is bearing all costs relating to the
registration of the shares of common stock (other than fees and expenses, if
any, of counsel or other advisors to the selling securityholders). Any
commissions, discounts or other fees payable to broker-dealers in connection
with any sale of the shares of common stock will be borne by them.
Description of Securities
Our authorized capital stock consists of (i) 30,000,000 shares of
common stock, $.0001 par value per share; (ii) 3,000,000 shares of preferred
stock, $.001 par value, of which 2,500 shares have been designated as cumulative
preferred stock, $.001 par value.
Common Stock
Holders of common stock are entitled to one vote per share on each
matter submitted to vote at any meeting of shareholders. Shares of common stock
do not carry cumulative voting rights and therefore, holders of a majority of
the outstanding shares of common stock will be able to elect our entire board of
directors. Our board of directors have authority, without action by our
shareholders, to issue all or any portion of the authorized but unissued shares
of common stock, which would have the effect of reducing our shareholders
percentage of ownership and diluting the book value of the common stock.
Shareholders have no preemptive rights to acquire additional shares of
common stock. The common stock is not subject to redemption and carries no
subscription or conversion rights. In the event of our liquidation, the holders
of common stock are entitled to share equally in corporate assets after the
holders, if any, of preferred stock and after satisfaction of liabilities.
Holders of common stock are entitled to receive such dividends as our board of
directors may from time to
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time declare out of funds legally available for such payment and after the
cumulative dividend rights of the cumulative preferred stock have been
satisfied. We have never paid cash dividends on our common stock and do not
anticipate that we will pay dividends in the future.
Preferred Stock
We have authorized 2,500 shares of cumulative preferred stock, of which
10 shares are outstanding. The cumulative preferred stock does not have voting
rights. The cumulative preferred stock ranks above the common stock with respect
to dividend rights, liquidation, dissolution and redemption.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock Securities
Transfer Corp., 16910 Dallas Parkway, Suite 100, Dallas, Texas 75248.
Legal Matters
The legality of the shares offered hereby has been passed upon by
Silverman, Collura & Chernis, P.C. ("SCC"), 381 Park Avenue South, Suite 1601,
New York, New York 10016. Paul Chernis, a partner in SCC, is a one of our
directors and owns 80,000 stock options to acquire common stock.
Experts
Our consolidated financial statements incorporated in this registration
statement by reference to our Annual Report on Form 10-KSB for the year ended
December 31, 1998 have been audited by Rosenberg, Rich, Baker, Berman & Company,
independent auditors, as stated in their report, which is incorporated herein by
reference (which report expresses an unqualified opinion) and have been so
incorporated in reliance upon the report of such firm, given upon their
authority as experts in accounting and auditing.
Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware and
Article 7 of our Certificate of Incorporation contain provisions for
indemnification of our officers, directors, employees and agents. The
Certificate of Incorporation requires us to indemnify such persons to the
fullest extent permitted by Delaware law. Each person will be indemnified in any
proceeding if he acted in good faith and in a manner which he reasonably
believed to be in, or not opposed to, our best interests. Indemnification would
cover expenses, including attorney's fees, judgments, fines and amounts paid in
settlement.
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Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers, and controlling persons, we
have been advised that in the opinion of the 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 us of expense incurred or paid by one of
our directors, officers, or controlling persons 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, we will, unless in
the opinion of its counsel the matter has been settled by a 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 issues.
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PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference
The documents listed below have been filed by us with the Commission
and are incorporated herein by reference:
(a) Annual Report on Form 10-KSB for its fiscal year ended
December 31, 1998;
(b) Quarterly Report on Form 10-QSB for the periods ended March
31, 1999;
(c) All other reports filed by the Company pursuant to Section
13(a) and 15(d) of the Exchange Act since the Company's fiscal
year ended December 31, 1998.
All documents filed by us with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent hereto, but prior to
the termination of the offering of securities made by this prospectus shall be
deemed to be incorporated by reference herein and to be part hereof from their
respective dates of filing.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this prospectus, to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
Item 4. Description of Securities
Our authorized capital stock consists of (i) 30,000,000 shares of
common stock, $.0001 par value per share; and (ii) 3,000,000 shares of preferred
stock, $.001 par value per share, of which 2,500 shares have been designated as
cumulative preferred stock, $.01 par value.
Common Stock
Holders of common stock are entitled to one vote per share on each
matter submitted to vote at any meeting of shareholders. Shares of common stock
do not carry cumulative voting rights and therefore, holders of a majority of
the outstanding shares of common stock will be able to elect our entire board of
directors. Our board of directors have authority, without action by our
shareholders, to issue all or any portion of the authorized but unissued shares
of common stock, which would have the effect of reducing our shareholders
percentage of ownership and diluting the book value of the common stock.
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Shareholders have no preemptive rights to acquire additional shares of
common stock. The common stock is not subject to redemption and carries no
subscription or conversion rights. In the event of our liquidation, the holders
of common stock are entitled to share equally in corporate assets after the
holders, if any, of preferred stock and after satisfaction of liabilities.
Holders of common stock are entitled to receive such dividends as our board of
directors may from time to time declare out of funds legally available for such
payment and after the cumulative dividend rights of the cumulative preferred
stock have been satisfied. We have never paid cash dividends on our common stock
and do not anticipate that we will pay dividends in the future.
Preferred Stock
We have authorized 2,500 shares of cumulative preferred stock, of which
10 shares are outstanding. The cumulative preferred stock does not have voting
rights. The cumulative preferred stock ranks above the common stock with respect
to dividend rights, liquidation, dissolution and redemption.
Item 5. Interests of Named Experts and Counsel
The legality of the shares offered hereby has been passed upon by
Silverman, Collura & Chernis, P.C. ("SCC"), 381 Park Avenue South, Suite 1601,
New York, New York 10016. Paul Chernis, a partner in SCC, is a director of the
Company and owns stock options to purchase 80,000 shares of common stock.
Item 6. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware and
Article 7 of our Certificate of Incorporation contain provisions for
indemnification of our officers, directors, employees and agents. The
Certificate of Incorporation requires us to indemnify such persons to the
fullest extent permitted by Delaware law. Each person will be indemnified in any
proceeding if he acted in good faith and in a manner which he reasonably
believed to be in, or not opposed to, our best interests. Indemnification would
cover expenses, including attorney's fees, judgments, fines and amounts paid in
settlement.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers, and controlling persons, we
have been advised that in the opinion of the 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 us of expense incurred or paid by one of
our directors, officers, or controlling persons 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, we will, unless in
the opinion of its counsel the matter has been settled by a controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against
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public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issues.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
5.1 Opinion of Silverman, Collura & Chernis, P.C.
10.1 Agreement with Isidor D. Friedenberg dated March 12, 1999
10.2 Agreement with Jerry Swon and Bruce Deichl dated July 21, 1999
23.1 Consent of Silverman, Collura & Chernis, P.C. (included in
Exhibit 5.1)
23.2 Consent of Rosenberg, Rich, Baker, Berman & Company
ITEM 9. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes;
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to the Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change of such information in the
Registration Statement;
Provided however that paragraphs (a)(1)(i) and (a)(1)(ii) shall not
apply to information contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement.
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(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising 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 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 matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification is against public policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
19
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, therewith duly
authorized, on ______, 1999.
MAGNITUDE INFORMATION SYSTEMS, INC.
By: /s/ Steven D. Rudnik
-------------------------------
Steven D. Rudnik, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below, hereby constitutes and appoints Steven D. Rudnik, his true and
lawful attorney-in-fact, with full power of substitution and resubstitution, for
his and in his name, place and stead, in any and all capacities, to sign any or
all amendments or supplements to this Registration Statement and to file the
same with all exhibits thereto and other documents in connection therewith, with
the Commission, granting unto said attorney-in-fact full power and authority to
do and perform each and every act and thing necessary or appropriate to be done
with respect to this Registration Statement or any amendments or supplements
hereto and about the premises, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact, or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in their respective
capacities with Magnitude Information Systems, Inc. and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Steven D. Rudnik
- -------------------------------- President, CEO and Director August 2, 1999
Steven D. Rudnik (Principal Executive Officer)
/s/ Joerg H. Klaube
- -------------------------------- Chief Financial Officer August 2, 1999
Joerg H. Klaube (Principal Financial Officer)
- -------------------------------- Chairman of the Board July ____, 1999
Michael G. Martin
/s/ Paul Chernis
- -------------------------------- Director July 30, 1999
Paul Chernis
/s/ Peter J. Buscetto
- -------------------------------- Director July 31, 1999
Peter J. Buscetto
/s/ Seymour Kroll
- -------------------------------- Director July 30, 1999
Seymour Kroll
20
<PAGE>
/s/ John Duncan
- -------------------------------- Director July 31, 1999
John Duncan
PROFORM\REGSTATE\PLAN-799
21
Exhibit 5.1
Silverman, Collura & Chernis, P.C.
381 Park Avenue South
Sixteenth Floor
New York, N.Y. 10016
----------
(212) 779-8600
Telecopier (212) 779-8858
EMAIL: [email protected]
PETER R.SILVERMAN *MICHAEL C. BYRNE
ANTHONY M. COLLURA *GERARD J. CROWE
PAUL CHERNIS *MICHAEL H. FREEDMAN
THOMAS J. BYRNE GARY M. MAIR
-------- ALAN M. SOLAR
OF COUNSEL JOHN H. SHIN
RONALD A. BALZANO** -------
*ALSO ADMITTED IN NEW JERSEY
**ALSO ADMITTED IN CONNECTICUT
August 3, 1999
Magnitude Information Systems, Inc.
50 Tannery Road
Branchburg, New Jersey 08876
Re: Registration Statement on Form S-8
Gentlemen:
We have acted as counsel to Magnitude Information Systems, Inc.
("Company"), a Delaware corporation, pursuant to a Registration Statement on
Form S-8, as filed with the Securities and Exchange Commission on August 3, 1999
("Registration Statement"), covering 446,228 shares of the Company's Common
Stock, $.0001 par value ("Common Stock") issued pursuant to certain agreements.
In acting as counsel for the Company and arriving at the opinions as
expressed below, we have examined and relied upon originals or copies, certified
or otherwise identified to our satisfaction, of such records of the Company,
agreements and other instruments, certificates of officers and representatives
of the Company, certificates of public officials and other documents as we have
deemed necessary or appropriate as a basis for the opinions expressed herein.
In connection with our examination we have assumed the genuineness of
all signatures, the authenticity of all documents tendered to us as originals,
the legal capacity of natural persons and the conformity to original documents
of all documents submitted to us as certified or photostated copies.
Based on the foregoing, and subject to the qualifications and
limitations set forth herein, it is our opinion that:
1. The Company has authority to issue the Common Stock in the
manner and under the terms set forth in the Registration Statement.
<PAGE>
Magnitude Information Systems, Inc.
August 3, 1999
Page 2
2. The Common Stock has been duly authorized and when issued,
delivered and paid for by recipients in accordance with their
respective terms, will be validly issued, fully paid and
non-assessable.
We express no opinion with respect to the laws other than those of the
State of New York and Federal Laws of the United States of America, and we
assume no responsibility as to the applicability or the effect of the laws of
any other jurisdiction.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and its use as part of the Registration Statement.
We are furnishing this opinion to the Company solely for its benefit in
connection with the Registration Statement. It is not to be used, circulated,
quoted or otherwise referred to for any other purpose.
Very truly yours,
SILVERMAN, COLLURA & CHERNIS, P.C.
/s/ Silverman, Collura & Chernis, P.C.
EXHIBIT 10.1
<PAGE>
March 12, 1999
Isidor D. Friedenberg, Esq.
2 Cara Drive
Suffern, New York 10901
Re: Legal Services Agreement
Dear Dore:
This letter will memorialize our agreement regarding the payment to you
for legal services provided and to be provided during calendar year 1999 to
Magnitude Information Systems, Inc., previously known as Proformix Systems,
Inc., (the "Company") in the same manner and scope as you have provided to date
from the beginning of this calendar year.
In consideration of the aforesaid services you shall receive the sum of
$3,000 per month plus a non-accountable expense retainer of $800 per month plus
such additional out of pocket expenses as may be periodically authorized by the
company in advance. All of the foregoing sums shall be due and payable on a
bi-weekly basis.
As consideration for entering into this agreement, you shall receive from
the Company, immediately upon execution of this Agreement, 83,333 shares of the
Company's shares of common stock to be registered by the Company immediately but
no later than 30 days hereafter pursuant to Form S-8 Registration Statement plus
an option to purchase up to 50,000 shares of the Company stock at an exercise
price of $1.00 per share which option shall be exercisable from time to time
during a period of four (4) years from the date hereof and which shares
underlying said option shall be Registered as soon as may be practicable
hereafter either on Form S-8 or such other appropriate registration form or
statement but in no event shall such registration occur any later than 30 days
from the date hereof.
If the foregoing properly reflects our understanding, please so indicate
and date this agreement in the space provided below and return one fully
executed copy for our files. After the counter-execution of this Agreement, we
will issue and forward the necessary Company stock certificates and option form
to you as recited above.
An additional copy of this agreement is enclosed for your convenience.
Very truly yours,
MAGNITUDE INFORMATION SYSTEMS, INC.
BY : /s/ STEVE RUDNIK
-----------------
Steve Rudnik, President
AGREED AND ACCEPTED:
BY: /s/ ISIDOR D. FRIEDENBERG
-------------------------
Isidor D. Friedenberg
Dated: 3/12/99
EXHIBIT 10.2
<PAGE>
RESIGNATION AGREEMENT
THIS RESIGNATION AGREEMENT (this "Agreement") is made this 21st day of
July, 1999 by and between JERRY SWON residing at 5 Kerby Lane, Mendham, New
Jersey 07945 ("Swon"), BRUCE DEICHL, residing at 21 North Maple Avenue, Basking
Ridge, New Jersey 07920 ("Deichl") and MAGNITUDE INFORMATION SYSTEMS, INC., a
Delaware corporation, having its principal offices at 50 Tannery Road, Unit 8,
Branchburg, New Jersey 08876 (the "Company").
WHEREAS, Swon and the Company agree that it is in the best interests of
Swon and the Company to terminate their relationship as provided herein, and;
WHEREAS, Deichl and the Company agree that is in the best interests of
Deichl and the Company to terminate their relationship as provided herein.
NOW, THEREFORE, it is agreed:
1. Resignation. Except as expressly provided in Paragraph 2 below,
simultaneous with the execution of this Agreement, Swon and Deichl have tendered
to the Company their respective resignations, copies of which are attached
hereto as exhibit A and Exhibit B, respectively, effective as of the date hereof
(the "Resignation Date") as directors, officers, consultants and agents of the
Company.
2. Termination of Consultant Agreement. Simultaneous with the execution of
this Agreement, any and all consulting agreements, employment agreements and the
like, whether written or oral, between the Company and Swon and Deichl shall
terminate effective as of the date hereof, except, however, that certain
agreement between the Company and Tax Transfer Corporation of New Jersey, a
corporation in which Deichl has an ownership interest, dated the date hereof,
pursuant to the general terms of which this corporation shall prepare and file
all necessary applications and documents with the New Jersey Economic
Development Authority in order to obtain and then sell the saleable tax
certificates based upon the Company's net operating loss carry forwards shall
survive this Agreement.
3. Restrictive Covenants. Based upon the past service of Swon and Deichl in
the special capacities with the Company, Swon and Deichl have acquired unique
knowledge of the ergonomic software programs, their enhancements and
modifications for use in the workplace business and of the operations and
business of the Company. Swon and Deichl hereby promise and agree that until the
third anniversary date hereof, Swon and Deichl will not (i) engage directly or
indirectly, alone or as a shareholder, partner, director, officer, employee of
or consultant to, any entity engaged directly, or indirectly through any
subsidiary, division or other business unit (individually, an "Entity"), in
development or sales of ergonomic software, designed for use and application in
the workplace, training or peripherals, at wholesale or to end users (the
"Designated Industry"), (ii) divert to any competitor of the Company in the
<PAGE>
Designated Industry any customer of the Company, or (iii) solicit or encourage
any officer, employee or consultant of the Company to leave his or her employ or
consulting arrangement with the Company for employment by or consulting with any
competitor of the Company in the Designated Industry. If at any time the
provisions of this Paragraph 3 shall be determined to be invalid or
unenforceable by reason of being vague or unreasonable as to area, duration or
scope of activity this Paragraph 3 shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and Swon and Deichl agree that
this Paragraph 3 as so amended shall be valid and binding as though any invalid
unenforceable provision had not been included herein.
4. Mutual Releases. The Company hereby releases Swon and Deichl, their
respective heirs, executors and administrators forever, from any and all claims,
except claims as to which Section 102 (b) (7) of the Delaware General
Corporation Law does not permit the elimination of director liability;
conjunctively, Swon and Deichl, their respective heirs, executors,
administrators, and on behalf of their respective affiliates and entities which
they control, hereby release the Company, its directors, officers, employees and
agents forever, from any and all claims.
5. Consideration For Promises and Release. In consideration for their
respective covenants and promises made in Paragraph 3 above and for their
respective releases set forth in Paragraph 4 above, the Company agrees:
(A) to issue to Swon 150,000 shares of Company Common Stock;
(B) In consideration of this covenant and promises made in Paragraph 3
above, his release set forth in Paragraph 4 above and in partial consideration
of the services rendered to the Company pursuant to a certain "Deichl
Agreement", the Company shall issue to Deichl 212,895 shares of Company Common
Stock (the 150,000 and 212,895 shares to be issued to Swon and Deichl are
collectively referred to as the "Agreement Shares");
(C) The Company shall file a registration statement on Form S-8 registering
the Agreement Shares under the Securities Act of 1933, as amended (the "1933
Act") within fifteen (15) days from the date of this Agreement, and ;
(D) To maintain the current medical plan coverage for Swon and Deichl
through August 15, 1999; on condition that Swon and Deichl are in full
compliance with the terms and provisions of this Agreement, the Company shall
continue to maintain such current
<PAGE>
medical plan coverage for Swon and Deichl for the period commencing August 16,
1999 through September 30, 1999 upon the Company's receipt of a payment in the
sum of $2,580, which includes coverage payments for John Swon and Gina Andrew.
6. Issuance/Transfer of Stock Option. The Company shall deliver to Swon and
Deichl, as the case may be, all options to purchase Company Stock heretofore
authorized by the Company's Board of Directors within fifteen (15) days of the
date of this Agreement.
7. Limited License to Utilize Company Offices. The Company hereby grants to
Swon and Deichl a revocable, non-transferable license to have access to and use
those offices located within the Company's principal office located in
Branchburg, New Jersey and heretofore utilized by Swon and Deichl (the "Licensed
Premises") for the period commencing on the date hereof and terminating on
September 30, 1999, subject to the following conditions:
A. Swon and Deichl shall pay to the Company a license fee in the sum of
$9,773, within ten (10) days of the date of this Agreement, subject, however, to
increase in the event Company expenses for the period, July 1, 1999 through
August 15, 1999 exceed the rate of $8,500 per month. The payment of the license
fee shall include provision for utilities, Company office phone usage and car
allowances during such period. Swon and Deichl hereby agree to assume any and
all Company liability for any accrued vacation pay that may be due to Gina
Andrew as of August 15, 1999.
B. In the event that Swon and Deichl desire to remain in the Licensed
Premises for the period commencing August 16, 1999 through September 30, 1999,
they agree to pay to the Company a license fee in the amount of $1,500. The
payment of this license fee shall include provision for utilities only and Swon
and Deichl shall pay to the Company any and all charges for use of the Company
telephones during such period.
C. At the expiration or earlier termination of any applicable license
period, Swon and Deichl shall peacefully deliver to the Company the Licensed
Premises in good order and repair.
D. If Swon and Deichl default in the performance or observance of any
agreement on his or their part, where jointly and severally responsible, to be
performed or observed, and if Swon and Deichl shall fail to cure said default
within seven (7) days after written notice of said default from the Company,
then the Company lawfully may immediately, or at any time thereafter, and
without further notice, terminate this revocable, non-transferable
<PAGE>
license to utilize the Licensed Premises; it is expressly acknowledged and
agreed that nothing contained in this revocable, non-transferable license set
forth in this Paragraph 7 shall be deemed or construed so as to create a
partnership, joint venture, or a relationship of Landlord and Tenant between the
Company on the one hand and Swon and Deichl on the other.
8. Representations and Warranties
A. Swon and Deichl, on behalf of themselves, individually, as well as on
behalf of their affiliates and entities which they control, hereby represent and
warrant to the Company, that to the best of their knowledge, (i) they have set
forth on Exhibit C annexed hereto all of the outstanding stock and option
liabilities to third parties, for which liabilities Swon and Deichl, jointly and
severally, are responsible, as well as any other potential liabilities of the
Company to third parties; (ii) that they are authorized to execute and deliver
this Agreement and to perform any obligations required to be performed
hereunder, and; (iii) that the execution, delivery and performance of this
Agreement shall not violate any agreement or contract to which either party,
their respective affiliates or entities which they control, is a party. The
Company hereby acknowledges its commitment to issue to Joseph Wipfli an option
to purchase 150,000 shares of Company Common Stock at an exercise price of $1.50
per share.
B. The Company hereby represents and warrants to Swon and Deichl that (i)
it is duly authorized and has all requisite corporate authority to execute and
deliver this Agreement in accordance with the terms and provisions set forth
herein, and; (ii) the execution, delivery and performance of this Agreement
shall not violate any agreement or contract to which the Company is a party.
9. Additional Covenants. In further consideration of the issuance of the
Agreement Shares and the revocable, non-transferable license set forth in
Paragraph 7 above, which is hereby acknowledged to be good, valuable and
adequate consideration, Swon and Deichl, individually and on behalf of their
respective affiliates and entities they control, agree as follows:
A. Not to say, write, do authorize or otherwise create or publish anything
(or otherwise assist anyone else in doing any of the foregoing) that will in any
way injure the Company or any past or present employee, agent, director or
officer of the Company to interfere with the management of the Company through
any contact with stockholders, directors, employees, vendors and others and not
make any public or private statements or comments that may have the effect of
injuring or disrupting operations of the Company in any way; conjunctively, the
Company hereby covenants to Swon and Deichl that it shall undertake the same
promises expressly set forth in this Paragraph 9A. Notwithstanding the
foregoing, the parties hereto agree to cooperate with, assist and provide
testimony at the request
<PAGE>
of each other or their respective attorneys in any currently pending or future
litigation in involving any party hereto.
B. For all times hereafter, to protect and preserve the confidentiality of
and safeguard the Company's secret or confidential information, knowledge,
ideas, concepts, improvements, discoveries and inventions and to not use,
directly or indirectly, for their benefit or for the benefit of another, or
disclose to another, any of such information, ideas, concepts, improvements,
discoveries or inventions. Confidential information will include, without
limitation, information concerning the Company's financial affairs, business
plans, proprietary statistics, reports, pricing information, customer data and
contracts; confidential information will not include information that is
currently in the public domain.
C. Upon any termination of the revocable, non-transferable license set
forth in Paragraph 7 above, to deliver to the Company all property owned by the
Company and in the possession of Swon and/or Deichl, including without
limitation all computers and related software and equipment, telephones, pagers,
keys, and security pass cards.
D. Except in the case of Gina Andrew, for the period ending on the third
anniversary date hereof, Swon and Deichl will not at any time, directly or
indirectly, without the prior written consent of the Company, (i) induce, entice
or solicit any employee of the Company to leave his or her employment, or (ii)
in any manner use any customer or supplier lists or leads, mail, telephone
numbers, printed material or material of the Company related to the Company's
ergonomic software programs, their enhancements and modifications.
E. The parties agree that any disclosures concerning this Agreement to
third parties shall be limited to the announcement that Swon and Deichl have
resigned.
10. Assignment. Neither party may assign or delegate any of its obligations
under this Agreement without the prior written consent of the other party.
11. Specific Performance. All of the parties hereby acknowledge and agree
that any breach of any promise made in this Agreement would cause irreparable
harm to the other party and that the determination of liquidated damages would
be impossible to calculate; accordingly, all parties hereby further acknowledge
and agree that in the event of any breach of any promise made in this Agreement
would not be subject to adequate remedy at law and therefore, all of the parties
consent to the utilization of injunction to enforce performance in accordance
with the terms and conditions of this Agreement in the Superior Court, Somerset
County and State of New Jersey to which venue the parties consent for any
disputes arising under this Agreement.
<PAGE>
12. Entire Agreement. This Agreement, including Exhibit A, Exhibit B and
Exhibit C annexed hereto and incorporated herein by reference, supersedes all
prior agreements, understandings, contracts and the like between the parties,
whether oral or written, and may not be amended or modified except by a writing
signed by the parties.
In WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the day, month and year first above written.
ATTEST: MAGNITUDE INFORMATION SYSTEMS, INC.
/s/ JOERG KLAUBE By: /s/ STEVEN D. RUDNIK
- -------------------- -------------------------
Joerg Klaube Steven D. Rudnik
Secretary President
WITNESS: /s/ JERRY SWON
- -------------------- -----------------------
Jerry Swon
WITNESS: /s/ BRUCE DEICHL
- -------------------- -----------------------
Bruce Deichl
<PAGE>
EXHIBIT A
Board of Directors
Magnitude Information Systems, Inc.
50 Tannery Road, Unit 8
Branchburg, New Jersey 08876
Gentlemen:
I hereby voluntarily tender my resignation, effective as of the date
hereof and indicated below, from my positions as a director, officer, consultant
and agent of Magnitude Information Systems, Inc. My resignation is not
conditioned upon acceptance by the Magnitude Information Systems, Inc. Board of
Directors.
Very truly yours,
/s/JERRY SWON
-----------------
Jerry Swon
Dated: July 21, 1999
<PAGE>
EXHIBIT B
Board of Directors
Magnitude Information Systems, Inc.
50 Tannery Road, Unit 8
Branchburg, New Jersey 08876
Gentlemen:
I hereby voluntarily tender my resignation, effective as of the date
hereof and indicated below; from my positions as a director, officer, consultant
and agent of Magnitude Information Systems, Inc., except, however, my agreement
with the Company as an independent contractor to obtain the tax certificates
from the New Jersey Economic Development Authority and to arrange for their sale
shall survive this Resignation. My resignation is not conditioned upon
acceptance by the Magnitude Information Systems, Inc. Board of Directors.
Very truly yours,
/s/BRUCH DEICHL
-----------------
Bruce Deichl
Dated: July 21 , 1999
Exhibit 23.2
[LETTERHEAD OF ROSENBERG RICH BAKER BERMAN & COMPANY]
Independent Auditor's Consent
We hereby consent to the incorporation by reference of Form 10-KSB of our report
dated April 7, 1999 relating to the consolidated financial statements of
Magnitude Information Systems, Inc. and Subsidiaries (formerly Proformix
Systems, Inc. and Subsidiaries) in this Registration Statement on Form S-8, and
to the reference to our firm under the caption "Experts".
/s/ Rosenberg Rich Baker Berman & Company
-----------------------------------------
Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
August 2, 1999
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS o SEC PRACTICE SECTION
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