As filed with the Securities and Exchange Commission on May 1, 1997
Registration No. 33-99054
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
POST-EFFECTIVE AMENDMENT NO. 1
TO FORM SB-2
ON
FORM S-3
PURSUANT TO RULE 401(e)
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
TELIDENT, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 3661 41-1533060
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification
Number)
ONE MAIN STREET, SOUTHEAST
SUITE 85
MINNEAPOLIS, MINNESOTA 55414
(612) 623-0911
(Address and telephone number, including area code,
of registrant's principal executive offices)
W. EDWARD MCCONAGHAY, PRESIDENT AND CHIEF EXECUTIVE OFFICER
TELIDENT, INC.
ONE MAIN STREET, SOUTHEAST, SUITE 85
MINNEAPOLIS, MINNESOTA 55414
(612) 623-0911
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
AVRON L. GORDON, ESQ.
JEFFREY L. COTTER, ESQ.
BRIGGS AND MORGAN, P.A.
2400 IDS CENTER
MINNEAPOLIS, MINNESOTA 55402
(612) 334-8400
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED
SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER
THE 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: |_|
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: |_|
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
NOTE REGARDING POST-EFFECTIVE AMENDMENT NO. 1
This Post-Effective Amendment No. 1 to Registration Statement on Form
SB-2 (Registration No. 33-99054) (the "Original Registration") on Form S-3 is
intended to cover the sale of 1,004,008 shares of common stock of Telident, Inc.
of the original 2,556,656 shares of such stock covered by the Original
Registration.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy these securities be accepted prior to the time such registration
statement becomes effective. This prospectus shall not constitute an offer to
sell or the solicitation of an offer to buy, nor shall there by any sale of
these securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
such state.
SUBJECT TO COMPLETION, DATED MAY 1, 1997
PROSPECTUS
1,004,008 SHARES
TELIDENT, INC.
COMMON STOCK
This Prospectus relates to 1,004,008 shares of common stock (the
"Shares"), par value $.02 per share (the "Common Stock"), of Telident, Inc. (the
"Company") that may be offered for sale for the account of certain shareholders
of the Company as stated herein under the heading "Selling Shareholders."
Certain of the Shares are issuable or were issued upon the exercise of warrants
and the conversion of debentures held by the Selling Shareholders. No period of
time has been fixed within which the Shares may be offered or sold. The Common
Stock is traded on the Nasdaq SmallCap Market under the symbol "TLDT." On April
25, 1997, the average of the high and low prices of the Common Stock on the
Nasdaq SmallCap Market was $.94 per share. Current market quotations are listed
in THE WALL STREET JOURNAL and many other newspapers of general circulation.
The Selling Shareholders have advised the Company that sales of the
Shares by them, or by their pledgees, donees, transferees or other successors in
interest, may be made from time to time in the over-the-counter market, through
negotiated transactions or otherwise at market prices prevailing at the time of
sale or at negotiated prices. The Shares may be sold by one or more of the
following methods: (a) a block trade in which a broker or dealer so engaged will
attempt to sell the Shares 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; and (c) ordinary brokerage transactions and transactions in
which a broker solicits purchasers. Sales may be made pursuant to this
Prospectus to or through broker-dealers who may receive compensation in the form
of discounts, concessions or commissions from the Selling Shareholders or the
purchasers of shares of Common Stock for whom such broker-dealer may act as
agent or to whom he or she may sell as principal, or both (which compensation as
to a particular broker-dealer may be in excess of customary commissions). One or
more supplemental Prospectuses may be filed pursuant to Rule 424 under the
Securities Act of 1933, as amended (the "Securities Act") to describe any
material arrangements for the sales of the Shares when such arrangements are
entered into by any of the Selling Shareholders and any other broker-dealer that
participate in a sale of the Shares.
The Selling Shareholders and any broker-dealers or other persons acting
on their behalf in connection with the sale of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit realized by such person on the resale of the
Shares as principals may be deemed to be underwriting commissions under the
Securities Act. As of the date hereof, there are no special selling arrangements
between any broker-dealer or other person and any Selling Shareholder.
The Company will receive no proceeds upon the sale of the Shares. See
"Plan of Distribution." Pursuant to the terms of registration rights granted to
the Selling Shareholders, the Company will pay all the expenses of registering
the Shares, except for selling expenses incurred by the Selling Shareholders in
connection with this offering, including any fees and commissions payable to
broker-dealers or other persons, which will be borne by the Selling
Shareholders. In addition, such registration rights provide for certain other
usual and customary terms, including indemnification by the Company of the
Selling Shareholders against certain liabilities arising under the Securities
Act.
THE SHARES INVOLVE CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE
4 OF THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE DATE OF THIS PROSPECTUS IS MAY __, 1997.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company pursuant to the Exchange
Act may be inspected and copied at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, Northwest, Washington, D.C.
20549 and at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can also be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, Northwest, Washington, D.C.
20549, at prescribed rates. The Commission maintains a World Wide Web site that
contains reports, proxy statements and other information regarding registrants
that file electronically with the Commission at http://www.sec.gov. In addition,
the Common Stock is quoted on the Nasdaq SmallCap Market. Reports, proxy
statements and other information concerning the Company can be inspected and
copied at the Public Reference Room of the National Association of Securities
Dealers, Inc., 1735 K Street, Northwest, Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act. This Prospectus does not
contain all of the information, exhibits and undertakings set forth in the
Registration Statement, certain parts of which are omitted as permitted by the
rules and regulations of the Commission. For further information, reference is
hereby made to the Registration Statement which may be inspected and copied in
the manner and at the sources described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the
Commission are incorporated into this Prospectus by reference:
(a) The description of the Company's capital stock contained in
its Registration Statement on Form SB-2 (Registration No.
33-99054), filed with the Commission on November 7, 1995, and
as amended by Pre-Effective Amendment Nos. 1 and 2, filed with
the Commission on December 27, 1995 and January 16, 1996,
respectively.
(b) The Company's Annual Report on Form 10-KSB (File No. 0-20887)
for the year ended June 30, 1996, filed on September 27, 1996.
(c) The Company's Quarterly Reports on Form 10-QSB (File No.
0-20887) for the fiscal quarters ended September 30, 1996,
December 31, 1996 and March 31, 1997, filed on November 14,
1996, February 14, 1997 and April 28, 1997, respectively.
(d) The Company's Definitive Schedule 14A (Proxy Statement) (File
No. 0-20887) filed on October 2, 1996, relating to the
Company's Annual Meeting of Shareholders held on October 29,
1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering hereunder 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 herein or in a document all or any portion of
which is incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document 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.
The Company will provide, without charge, to each person to whom this
Prospectus is delivered, upon written or oral request of any such person, a copy
of any or all of the foregoing documents (other than exhibits to such documents
which are not specifically incorporated by reference in such documents). Written
requests for such copies should be directed to the Company at One Main Street,
Southeast, Suite 85, Minneapolis, Minnesota 55414, Attention: Chief Financial
Officer. Telephone requests may be directed to the office of the Chief Financial
Officer of the Company at (612) 623-0911.
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED BY THE MORE DETAILED INFORMATION AND
CONSOLIDATED FINANCIAL STATEMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS.
UNLESS OTHERWISE INDICATED, INFORMATION IN THIS PROSPECTUS GIVES EFFECT TO A
ONE-FOR-TWO REVERSE STOCK SPLIT WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY
EFFECTED ON JUNE 4, 1996. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. PURCHASERS OF THE COMMON STOCK ARE
CAUTIONED THAT THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE
OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE FACTORS DISCUSSED HEREIN UNDER
THE CAPTION "RISK FACTORS" AND ELSEWHERE IN THE PROSPECTUS.
THE COMPANY
Telident, Inc. (the "Company") designs, manufactures and markets
proprietary hardware and software systems which provide the exact location of a
911 telephone call to emergency dispatchers who receive such calls. The Company
believes that its systems provide information which can shorten the response
time to a 911 call, reduce the costs associated with responses to incorrect
locations and improve the safety of individuals within a private branch exchange
("PBX") telephone system. The Company also manufactures and markets network
hardware that provides switching, selective routing and data interfacing
capabilities to public and private telephone networks and city, county and state
government agencies. The Company also provides its customers with a variety of
emergency information processing and management software systems.
The Company's products utilize existing Enhanced 911 ("E-911")
technology which automatically transmits both the callers telephone number and
address to the nearest emergency dispatcher or public safety answering point
("PSAP"). Currently, more than two-thirds of the telephones in the United States
have access to E-911 service. However, such E-911 service generally does not
have the ability to pinpoint a caller's location within a PBX system without
equipment such as that offered by the Company. Consequently, calls originating
within a PBX transmit only the main PBX telephone number and the main address
where the PBX is physically located. As of the date of this Prospectus, five
states across the U.S. have adopted legislation or enacted regulations mandating
the modification of PBX systems to make them fully compatible with the E-911
system. The Company believes that its patented systems create and manage a
sophisticated database of information to monitor 911 calls within a PBX system
and transmit the precise location, and generally the caller's name, to the PSAP
through the existing E-911 system.
The primary markets for the Company's systems and services include a
wide variety of PBX telephone system owners such as:
* Medium to large corporations * Apartment and condominium buildings
* Colleges and universities * Nursing and retirement homes
* City, county and state governments * Hotels and motels
* Public schools * Hospitals and clinics
According to Dataquest Inc., in 1995, there were approximately 204,000
private telephone systems in the United States with approximately 58,000 of
those systems having more than 100 separate telephone lines. A January 1996
survey of the National Emergency Number Association and the Association of
Public Communications Officers concluded that 5% of all 911 calls or
approximately eight million calls per year, originate within a PBX system.
The Company was incorporated under the Minnesota Business Corporation
Act on July 11, 1983. The Company's executive office is located at One Main
Street, Southeast, Suite 85, Minneapolis, Minnesota 55414, and its telephone
number is (612) 623-0911.
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A
HIGH DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS, IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS
PROSPECTUS, IN CONNECTION WITH AN INVESTMENT IN THE SHARES OF COMMON STOCK
OFFERED HEREBY.
WHEN USED BELOW AND ELSEWHERE IN THIS PROSPECTUS, INCLUDING DOCUMENTS
INCORPORATED HEREIN BY REFERENCE, THE WORDS "BELIEVES," "ANTICIPATES," "INTENDS"
AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. POTENTIAL PURCHASERS
OF THE SHARES OF COMMON STOCK ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF.
OPERATING LOSSES; SUBSTANTIAL DECLINE IN SALES; GOING CONCERN
CONSIDERATIONS. The Company has incurred losses from operations since inception.
Historically, sales of the Company's products have not been sufficient to cover
the Company's operating expenses. As a result, at March 31, 1997, the Company
had an accumulated deficit of $11,748,492. There can be no assurance that the
Company will be able to generate sufficient sales to operate at a profit in the
future, or that it will be able to continue in business. The Company reported
$14,950 in revenues for the third quarter ended March 31, 1997, compared with
$348,437 in the same period in 1996. The substantial decline in revenues for the
three month period ended March 31, 1997 was the result of several factors,
including a significant reduction in the Company's workforce, a change in the
Company's senior management and a slowdown in station translation system sales
by PBX manufacturers and value-added resellers. In addition, the Company
replaced two existing sales people. The Company anticipates that it will take
some time for its new salespeople to become familiar with the Company's
products, during which time sales of such products by these individuals will be
lower than those of the individuals whom they replaced.
In addition, the Company's net losses for the three and nine month
periods ended March 31, 1997, were $1,518,607 and $2,465,341 respectively,
compared with losses of $622,424 and $1,143,196 for the same periods in 1996.
The Company recorded a restructuring charge of $427,000 in the third quarter of
fiscal year 1997 as a result of a reorganization of the Company's personnel and
certain write downs of other assets.
The reports of the Company's independent accountants on the
consolidated financial statements for the years ended June 30, 1995 and 1994,
include an explanatory paragraph relating to an uncertainty regarding the
Company's ability to continue as a going concern. Due to proceeds received by
the Company of $2.89 million from its secondary public offering in August 1996,
the Company's independent accountants' report did not include this explanatory
paragraph for the June 30, 1996 financial statements. However, based upon
year-to-date results, the Company anticipates that the report of its independent
accountants for the year ended June 30, 1997 will contain an explanatory
paragraph regarding an uncertainty about the Company's ability to continue as a
going concern.
NEED FOR ADDITIONAL CAPITAL; POTENTIAL INABILITY TO MEET FINANCIAL
OBLIGATIONS. At March 31, 1997, the Company had a working capital deficit of
approximately $35,000. The Company believes that proceeds from an existing line
of credit and collections from operations will be adequate to fund the Company's
working capital requirements through June 30, 1997. As of the date of this
Prospectus, the Company had outstanding approximately $993,000 in 10%
convertible debentures which are due July 15, 1997 (the "Debentures"). The
Company has historically supported its operations through placement of
Debentures and sales of Common Stock. The Company's cash resources are not
sufficient to enable it to retire the Debentures and it is currently negotiating
with the holders thereof to extend or convert the Debentures. The Company is
also considering raising additional capital, selling certain assets, or entering
into joint venture agreements. Any restructuring or extension of Company debt
may have a possible dilutive effect on the Company's shareholders as a result of
the issuance of additional securities. If the Company is unable to obtain
additional capital, and the Debenture holders are unwilling or unable to convert
or extend the Debentures, the Company would be in default on the Debentures.
Failure to refinance the Debentures could result in the reduction or cessation
of the Company's business operations. There can be no assurance that the Company
will be able to convert or extend the Debentures. Further, there can be no
assurance that the Company will be able to raise additional capital, sell
certain assets, or enter into joint venture agreements on terms acceptable to
the Company, if at all.
CHALLENGE TO GROWTH AND PROFITABILITY AND EFFECTS OF RECENT
RESTRUCTURING. The Company has recently taken steps to strengthen its market
position, reduce costs, and re-focus itself on strategies that provide
opportunities for growth and profitability as a result of the operating losses
and substantial decline in sales discussed above. The steps taken to achieve
these goals include, but are not limited to, implementing a $1.2 million
reduction in annual operating expenses, laying-off 35% of its workforce, closing
two regional sales offices, repositioning itself to move toward outsourced
manufacturing and the write-down of certain intangible assets, including good
will. While the Company plans to replace the services performed by the personnel
which have been laid-off with the efforts of in-house sales people, there can be
no assurance that the Company will either have the resources required to
generate an increase in revenues or operate at a profit in the future.
Additionally, there can be no assurance that the recent steps taken by the
Company will improve its market position, sales or revenues. Failure on the part
of the Company to successfully implement these and other reorganization efforts
could result in the cessation of the Company's business operations.
DEPENDENCE ON KEY CUSTOMERS. Sales to one of the Company's customers
amounted to 18% of total product sales for the fiscal year ended June 30, 1996.
This customer also accounted for 3% of the Company's accounts receivable as of
June 30, 1996. Similarly, during the fiscal year ended June 30, 1995, sales to
two customers amounted to 25% and 20% of total product sales, respectively, and
accounted for 24% and 19%, respectively, of the Company's accounts receivable as
of June 30, 1995. During the nine months ended March 31, 1997, no customer had
sales which amounted to more than 10% of total product sales. There can be no
assurance that the Company will be able to create relationships with additional
customers which will result in additional sales of its products. Failure on the
part of the Company to create significant customer relationships would result in
decreased sales revenues and could force the Company to further reduce or cease
its business operations.
QUARTERLY FLUCTUATIONS. A significant percentage of the Company's sales
are to value-added resellers, such as companies that sell PBX equipment, and not
to the end users of the Company's equipment. Although it is difficult to predict
how this impacts the Company's operating results, the Company believes this may
result in variations in quarter to quarter operating results. In addition, the
Company's quarterly operating results may fluctuate as a result of a variety of
factors, including, but not limited to, the timing of orders from and shipments
to customers, the length of the sales cycle, new product introductions by the
Company or its competitors, as well as general economic conditions. For each of
the last three fiscal years, the Company's fourth quarter has tended to generate
the most sales of its products.
COLLECTION OF ACCOUNTS RECEIVABLE; EFFECTS OF NON-COLLECTION. As of
March 31, 1997, 41% of the Company's accounts receivable were over 180 days past
due. The Company's failure to collect substantially all of its accounts
receivable would adversely effect the Company's future earnings and working
capital.
DEPENDENCE ON NEW OR IMPROVED PRODUCTS; TECHNOLOGICAL CHANGES. The
communication products industry is subject to rapid and significant
technological changes and frequent introductions of new competitive products. To
respond to these expected changes and to improve or sustain the marketability of
its products, the Company has periodically been required and will continue to be
required to commit substantial investments for product improvement and
development in order to enhance its existing product line and to successfully
introduce new products. There can be no assurance that the Company will either
have the resources required to make such investments or, assuming it has the
required resources, be able to respond adequately to changes in technology or
changes in the markets for its products. The development of new products or
technologies by the Company's competitors would have a material adverse effect
on the Company's business. See "- Competition." To the extent that the Company
seeks to develop new products, there can be no assurance that such products will
be successfully developed or, if developed, that such products will be
successfully introduced to the marketplace and meet necessary regulatory
requirements.
DEPENDENCE ON KEY PERSONNEL. The development and operation of the
Company have depended and will continue to depend on the efforts and skills of
key management personnel, including its recently-appointed President and Chief
Executive Officer, as well as its ability to attract and retain other key
employees in the future. The Company has not entered into noncompete or
employment agreements with, or purchased life insurance on, any of its
employees.
COMPETITION; PRODUCT ACCEPTANCE; COOPERATION WITH TELEPHONE COMPANIES.
The Company is aware of two competitors which market a product which competes
with the Company's station translation system ("STS") product. These competitive
products are more expensive than the Company's STS product and the Company
believes that such products are only compatible with PBX equipment offered by
certain resellers. The Company believes that its STS product is compatible with
over 90% of the equipment for PBX vendors in the United States.
In addition, there are many other equipment companies serving the
telecommunication industry which are well-established in the marketplace, which
have substantially greater financial, technical and personnel resources than the
Company, and which could be potential competitors of the Company if they chose
to develop competing products. In addition, the telecommunications industry is
subject to rapid technological change and there can be no assurance that the
Company will be able to react and adapt to such changes, or that developments by
competitors will not render the Company's products obsolete or less competitive.
The Company competes on the basis of product features and cost. To
date, market acceptance of the Company's products has been limited. The
Company's goal is to increase awareness of the benefits of its products and to
continue to develop products which will be accepted by the markets in which the
Company offers such products. There can be no assurance that such market
acceptance of the Company's products will develop.
Further, the attractiveness of the Company's products to end users
depends, in part, on the tariffs filed by local or regional telephone companies.
In addition, the Company and its customers depend upon the good faith
cooperation of local telephone companies for the installation and operation of
its products. If the local tariff environment is not favorable to the Company's
products or if local telephone companies are uncooperative, sale of the
Company's products could be materially and adversely affected.
PRODUCT LIABILITY. The Company's business exposes it to potential
liability inherent in the manufacture and sale of communications equipment. As
of the date of this Prospectus, the Company has $5,000,000 of product liability
insurance. There can be no assurance that such insurance will ultimately prove
adequate to cover asserted product liability claims or that it can be maintained
by the Company on an economical basis. Product liability claims asserted against
the Company could have a material adverse effect on the Company. The Company has
never been named in a product liability claim, and it is not aware of any
threatened product liability claims.
PROTECTION OF INTELLECTUAL PROPERTY. The Company relies upon trade
secrets and patents to protect its proprietary technology. The Company also
requires its employees to execute nondisclosure agreements to preserve its trade
secrets. The Company's success depends, in large part, on its ability to
preserve its intellectual property. There can be no assurance that others will
not independently develop or acquire substantially equivalent technologies or
gain access to the Company's trade secrets. Furthermore, there can be no
assurance that the Company will ultimately be able to protect meaningful rights
in its trade secrets or that the scope of its patent protection will exclude
competitors or provide competitive advantages to the Company.
IMPACT OF SALE OF SECURITIES; SECURITIES ELIGIBLE FOR FUTURE SALE.
There were approximately 6.2 million shares of Common Stock outstanding as of
March 31, 1997. In addition, there were warrants, options and convertible
securities outstanding as of such date to purchase approximately an additional
1.2 million shares of Common Stock which are exercisable at prices ranging from
$1.00 to $6.62 per share. The sale of such securities, the Shares offered
pursuant to this Prospectus, and the sale of additional shares of Common Stock
which may become eligible for sale in the public market from time to time upon
exercise of warrants, options and convertible securities could have the effect
of depressing the market prices for the Common Stock.
LIMITATIONS ON BROKER-DEALER SALES OF COMPANY COMMON STOCK;
APPLICABILITY OF "PENNY STOCK" RULES; NO ASSURANCE OF CONTINUED QUOTATION ON THE
NASDAQ STOCK MARKET. Federal regulations promulgated under the Exchange Act
regulate the trading of so-called "penny stocks" (the "Penny Stock Rules"),
which are generally defined as any security not listed on a national securities
exchange or Nasdaq, priced at less than $5.00 per share and offered by an issuer
with limited net tangible assets and revenues. In addition, equity securities
listed on Nasdaq which are priced at less than $5.00 per share are deemed penny
stocks for the limited purpose of Section 15(b)(6) of the Exchange Act.
Therefore, if, during the time in which the Common Stock is quoted on the Nasdaq
SmallCap Market, the Common Stock is priced below $5.00 per share, trading of
the Common Stock will be subject to the provisions of Section 15(b)(6) of the
Exchange Act, which make it unlawful for any broker-dealer to participate in a
distribution of any penny stock without the consent of the Commission if, in the
exercise of reasonable care, the broker-dealer is aware of or should have been
aware of the participation of a previously sanctioned person. In such event, it
may be more difficult for broker-dealers to sell the Common Stock and purchasers
of shares of Common Stock offered hereby may experience difficulty in selling
their shares in the future in the secondary trading market.
Shares of the Common Stock are currently listed on the Nasdaq SmallCap
Market. The Nasdaq SmallCap Market requires that companies whose securities are
listed thereon maintain certain requirements, including total assets of at least
$2 million, capital and surplus of at least $1 million, minimum bid price per
share of at least $1 and total market value of at least $1 million. As of March
31, 1997, the Company's shareholders' equity was $362,033. On April 25, 1997,
the bid price per share of the Common Stock was $.94 and the Company's total
market value was $5.8 million. Failure on the part of the Company to meet any of
these listing requirements could result in the suspension or termination of the
Common Stock from continued listing on the Nasdaq SmallCap Market. Should the
Common Stock be suspended from trading privileges on such market as a result of
the Company's failure to comply with any of the above, or other applicable
requirements, the Company, prior to re-inclusion, must comply with the
respective requirement prior to continued listing. However, should the Common
Stock be terminated from trading privileges on the Nasdaq SmallCap Market, the
Company, prior to re-inclusion, must comply with the applicable requirements for
initial inclusion on the Nasdaq SmallCap Market which, in some instances, are
more stringent than the requirements for continued listing. There can be no
assurance, therefore, that the Common Stock will continue to be listed on the
Nasdaq SmallCap Market.
In the event that the Common Stock is delisted from the Nasdaq SmallCap
Market and the Company fails other relevant criteria, trading, if any, in shares
of Common Stock would be subject to the full range of the Penny Stock Rules.
Under these rules, broker-dealers must take certain steps prior to selling a
penny stock, which steps include: (i) obtaining financial and investment
information from the investor; (ii) obtaining a written suitability
questionnaire and purchase agreement signed by the investor; and (iii) providing
the investor a written identification of the shares being offered and in what
quantity. If the Penny Stock Rules are not followed by a broker-dealer, the
investor has no obligation to purchase the shares. Accordingly, delisting from
the Nasdaq SmallCap Market and the application of the comprehensive Penny Stock
Rules may make it more difficult for broker-dealers to sell the Common Stock,
purchasers of the shares of Common Stock may have difficulty in selling such
shares in the future in secondary trading markets and the per share price of
such stock would likely be greatly reduced.
POSSIBLE DILUTIVE EFFECT OF OUTSTANDING OPTIONS, WARRANTS, CONVERTIBLE
DEBENTURES, AND PREFERRED STOCK. As of March 31, 1997, there were approximately
1.2 million shares of Common Stock reserved for issuance upon the exercise of
stock purchase warrants or options, or the conversion of the Debentures and
shares of preferred stock, at exercise or conversion prices ranging from $1.00
to $6.62 per share. To the extent the trading price of the Common Stock at the
time of exercise or conversion of any such securities exceeds the exercise or
conversion prices, any such exercise or conversion will have a dilutive effect
on the Company's shareholders and could adversely affect the market price of the
Common Stock.
AUTHORIZATION AND ISSUANCE OF PREFERRED STOCK. The Company is
authorized to issue up to 2,500,000 shares of preferred stock. The Company's
Board of Directors (the "Board") has the power to establish the dividend rates,
liquidation preferences, voting rights, redemption and conversion term and
privileges with respect to any series of preferred stock. The issuance of any
shares of preferred stock having rights superior to those of Common Stock may
result in a decrease in the value or market price of the Common Stock and could
further be used by the Board as a device to prevent a change in control of the
Company. The Board's ability to issue shares of preferred stock could also deter
parties from making a bid to acquire the Company and could result in the
Company's shareholders not receiving a premium for their shares. Holders of
shares of preferred stock may have the right to receive dividends, certain
preferences in liquidation and conversion rights. As of March 31, 1997, there
were 150,000 shares of Series I Preferred Stock issued and outstanding. Series I
Preferred Stock has voting rights equal to Common Stock, except as may be
otherwise required by law. In addition, the Company has historically paid
dividends to the holders of shares of its preferred stock.
CONTROL BY MANAGEMENT. As of March 31, 1997, approximately 17.4% of the
Company's outstanding Common Stock is beneficially owned by the Company's
current officers and directors. Accordingly, such persons may be able to
significantly influence the Company's business and affairs. This concentration
of ownership with such persons may have the effect of delaying, deferring or
preventing a change in control of the Company.
ABSENCE OF DIVIDENDS ON COMMON STOCK. The Company has not paid any cash
dividends on shares of its Common Stock since its inception and does not
anticipate paying cash dividends on such stock in the foreseeable future. The
Company presently expects to retain its earnings, if any, to finance the
development and expansion of its business. The declaration or payment by the
Company of dividends, if any, on shares of its Common Stock in the future is
subject to the discretion of the Board and will depend on the Company's
earnings, financial condition, capital requirements and other relevant factors.
MANAGEMENT
The directors and executive officers of the Company are as follows:
Director
Name Since Age Positions With The Company
---------------- ----------- ----- --------------------------------
Mark W. Sheffert 1990 49 Chairman of the Board of Directors
W. Edward McConaghay 1997 47 President and Chief Executive
Officer and Director
Scott R. Anderson 1995 57 Director
Willis K. Drake 1988 73 Director
Richard L. Hencley 1988 69 Director
David F. Durenberger 1996 62 Director
John Sagan 1990 76 Director
Warren S. Tyler 1988 65 Director
John F. Kromer - 35 Vice President Finance and Chief
Financial Officer
Martin D. Moody - 50 Vice President Advanced
Engineering
MARK W. SHEFFERT - Mr. Sheffert has been Chairman of the Board since
May 1994. Mr. Sheffert is also President of Manchester Companies, Inc., a
private investment and management consulting firm formed in 1993. From 1990 to
1993, Mr. Sheffert served as managing partner of Sheffert & Wein, Inc., a
management consulting firm. From September 1982, to October 1989, Mr. Sheffert
served in various executive positions with First Bank System, Minneapolis,
Minnesota, including Chairman and CEO, First Trust Company, FBS Mortgage
Company, FBS Card Services, Inc. and FBS Insurance. Mr. Sheffert currently is
also a member of the board of directors of Kahler Corporation, Periscope
Communications, Inc., Combined Financial Group, Inc., Triad Financial Services,
Inc. and Children's Heartlink. Mr. Sheffert is also the Chairman of the Board of
Medical Graphics Corporation.
W. EDWARD MCCONAGHAY - Mr. McConaghay has been President, Chief
Executive Officer and a director of the Company since April 1, 1997. Between
1996 and 1997, Mr. McConaghay was President and CEO of Digital Technics, Inc., a
telecommunications equipment development company. From 1995 to 1996, Mr.
McConaghay was the principal consultant for Key Indicators, a management
consulting firm specializing in marketing and sales. From 1993 to 1995, Mr.
McConaghay served as Senior Vice President, Sales and Marketing for Deluxe
Corporation. From 1983 to 1993, Mr. McConaghay held various executive positions
with Northern Telecom, Ltd. ("Northern Telecom"), including Vice President,
Marketing for Northern Telecom Asia/Pacific, Secretary to the Executive Office,
Assistant Vice President for company-wide marketing, and Vice President, Sales
for the eastern region. Mr. McConaghay is a director of Medical Graphics
Corporation.
SCOTT R. ANDERSON - Mr. Anderson has been a director of the Company
since July 1995. Mr. Anderson is President and Chief Executive Officer of North
Memorial Health Care in Robbinsdale, Minnesota. Mr. Anderson has been associated
with North Memorial since August 1964, serving 17 years as Executive Vice
President, and since 1981 as its President and Chief Executive Officer. During
his career, Mr. Anderson has served as a member of many committees and boards,
both locally and nationally, and has served as chairman of the board of the
following organizations: Metropolitan Healthcare Council (Council of Hospital
Corporations), Health Employers, Inc., Healthcare Education and Research
Foundation and Medical Alley. Mr. Anderson currently serves as a director of
EMPI, Inc.
WILLIS K. DRAKE - Mr. Drake has been a director of the Company since
1988. Mr. Drake served as Chairman of the Company's Board of Directors from 1989
to August 1993 and has been a private investor for more than the last seven
years. Mr. Drake is a co-founder of Control Data Corporation. In 1969, Mr. Drake
was the founder, Chairman and President of Data Card Corporation, a manufacturer
of high-performance embossing and encoding equipment for the plastic card
industry. When Mr. Drake retired from Data Card in 1983, it had sales in excess
of $100 million. Since his retirement, Mr. Drake has used his entrepreneurial,
management, marketing and technical experiences to assist a variety of
companies. Mr. Drake serves as a director of Analysts International Corporation,
Digi International, U-Ship, Inc. and Innovex, Inc.
RICHARD L. HENCLEY - Mr. Hencley has been a director of the Company
since 1988 and has been a private investor since May 1994. Mr. Hencley served as
Chairman of the Company's Board of Directors from August 1993 to May 1994. Mr.
Hencley served as the Company's President and CEO from February 1989 to August
1993, and as its Vice President of Operations from 1988 to February 1989. Prior
to 1988, Mr. Hencley was Senior Vice President and a member of the Board of
Directors of Micro Component Technology, Inc. ("MCT"), a manufacturer of
integrated circuit testing and handling equipment, which position he held for
more than five years. Prior to joining MCT, Mr. Hencley was Senior Vice
President of Corporate Programs and one of the founders of Data Card
Corporation. Mr. Hencley serves as a member of the Board of Directors of Turtle
Mountain Corporation, Teleproducts Corporation, and Minnesota Project
Innovation.
DAVID F. DURENBERGER - Mr. Durenberger has been a director of the
Company since 1996. Since 1995, Mr. Durenberger has acted as a consultant in
Washington, D.C., and currently is a partner in Public Policy Partners, LLC, a
consulting firm which specializes in public affairs and corporate relations
consulting. Mr. Durenberger is also a Senior Fellow for the University of St.
Thomas Graduate School of Business, Minneapolis, Minnesota. Mr. Durenberger
served as a United States Senator for the state of Minnesota from 1978 to 1995.
Mr. Durenberger has over 20 years of public service, and while a U.S. Senator,
served on several committees including the Finance, Select Intelligence, and
Office of Technology committees. In addition, Mr. Durenberger has been the
executive director and chaired numerous committees on both a state and national
level. On November 29, 1995, Mr. Durenberger plead guilty to misdemeanor charges
of falsifying a statement for reimbursement of $425.
JOHN SAGAN - Mr. Sagan has been a director of the Company since 1990.
Mr. Sagan is a private investor and since 1986 has been President of John Sagan
Associates, a financial planning group. Prior to 1986, Mr. Sagan was Vice
President and Treasurer of Ford Motor Company. Mr. Sagan is also past Chairman
of the Board of the Federal Reserve Bank of Chicago and past Chairman of the
Board of Trustees of Ohio Wesleyan University. Mr. Sagan is a member of the
boards of directors for SBCM Derivative Products, LTD, and Chartwell Reinsurance
Co. Mr. Sagan is also a trustee of the YMCA Foundation of Detroit, the United
Methodist Foundation, the Fund for Henry Ford Hospital and Oakwood Hospital of
Dearborn, Michigan.
WARREN S. TYLER - Mr. Tyler has been a director of the Company since
1988. Mr. Tyler was Senior Vice President of Finance and Administration of the
Company from 1988 to November 1994. From 1983 to the present, Mr. Tyler has been
President of Incor Corporation (f/k/a Renartler, Inc.), a management consulting
firm specializing in capitalizing and financing businesses. From 1973 to 1982,
Mr. Tyler served as Vice President of Inn Management, Inc., a management firm
for the hospitality industry, where he was responsible for the operations of up
to 26 motels and hotels operated privately and through various franchises.
JOHN F. KROMER - Mr. Kromer was named Vice-President and Chief
Financial Officer of the Company in October 1994. Mr. Kromer was the Controller
of the Company from June 1992 to October 1994. From August 1988 to June 1992,
Mr. Kromer worked in the transportation industry for Transport Corporation of
America, Inc. ("Transport"), a company with revenues of approximately $100
million. At Transport, Mr. Kromer was responsible for overseeing the accounting
functions and management reporting of that company. Mr. Kromer is a licensed CPA
in the state of Minnesota and is a member of both the American Institute of
Certified Public Accountants and the Minnesota Society of CPAs.
MARTIN D. MOODY - Mr. Moody has been a Vice President of the Company
since August 1989. Mr. Moody was the Director of Engineering of the Company from
November 1988 to August 1989. Prior to November 1988, Mr. Moody was Vice
President of Operations of Aetrium, Inc., a manufacturer of integrated circuit
handling equipment. Mr. Moody was responsible for Aetrium's operations and new
product introductions. At Aetrium, Mr. Moody developed a system of concurrent
engineering, which allowed all divisions to interface during product development
and implementation, as well as implementing a Quality Assurance Program. Mr.
Moody held the position of Product Manager, Special Engineering at Micro
Component Technology, Inc. from 1982 to 1986. Prior to 1982, Mr. Moody was an
engineer in charge of telecommunications for Control Data at the NASA/Langley
site in Virginia.
DIRECTOR COMPENSATION
Directors of the Company are elected for a term of one year and hold
office until the next Annual Meeting of the Company's Shareholders. The officers
of the Company, who are elected at the Annual Meeting of the Board, hold office
until their successors are chosen and qualified or until death, resignation or
removal. Directors of the Company who are not employees of the Company have
historically been paid director's fees of $750 per quarter plus $500 for each
meeting attended, and have been issued an option to purchase 1,000 shares of
Common Stock, exercisable at a price equal to the mean between the bid and ask
price of the Common Stock as of the Annual Meeting date. The Chairman of the
Board has historically been paid $1,000 per month for services performed in that
function, and the Chairman of the Audit and Compensation Committees have each
been paid $1,000 annually. In addition, the Company has historically issued an
option to purchase 10,000 shares of Common Stock to the Chairman of the Board,
exercisable at a price equal to the mean between the bid and ask price of the
Common Stock as of the Annual Meeting date. The Company's directors have
historically been able to elect to take their fee in cash or in shares of Common
Stock. The directors' quarterly fee, the Chairman of the Board's monthly fee and
the annual fee for the Chairman of the Audit and Compensation Committees will
each be doubled when the Company's operations are profitable. The Company is in
the process of reviewing its policy regarding fees paid to its directors, and
has not determined whether it will continue to pay such fees in the future.
SELLING SHAREHOLDERS
The following table sets forth, as of the date of this Prospectus, the
name of each Selling Shareholder, certain beneficial ownership information with
respect to the Selling Shareholders, and the number of Shares that may be sold
from time to time by each pursuant to this Prospectus. There can be no assurance
that the Shares offered hereby will be sold.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
SHARES SHARES SHARES
BENEFICIALLY BENEFICIALLY BENEFICIALLY
OWNED SHARES OWNED UPON OWNED UPON
PRIOR TO OFFERED COMPLETION OF THE COMPLETION OF THE
SELLING SHAREHOLDER OFFERING HEREBY OFFERING OFFERING(1)
- ---------------------------- -------------- -------- -------------------- -------------------
<S> <C> <C> <C> <C>
Sheffert, Mark(2) 95,028 50,000 45,028 *%
Christianson, William 1,625 1,625 - *
Cossack, Thomas 44,469 1,875 42,594 *
Dosal, Frank 83,715 25,000 58,715 *
Drake, Nancy J. 56,085 11,875 44,210 *
Estlick, Tyron K. 3,500 1,500 2,000 *
Fazio, Anthony 532 532 - *
Freiermuth, Bill and Anita 11,663 3,250 8,413 *
Hammond, Glenn 127,160 37,500 89,660 1.41
Harris III, James S. 8,000 4,000 4,000 *
Ipsen, Jeremy 12,600 12,600 - *
Jenson, Vern 106,281 32,500 73,781 1.16
Kisch, Robert C. 8,477 2,500 5,977 *
Koch, Herbert 83,335 15,001 68,334 1.07
Lally, Jim 3,802 3,802 - *
Laurence, Dean 13,213 6,250 6,963 *
Lewis, Terry 8,000 4,000 4,000 *
Lutz III, Mac W. 11,262 8,500 2,762 *
Lutz, Robert 22,916 22,916 - *
McFarland, Dick 13,050 5,000 8,050 *
Mintz, Michael 50,379 12,500 37,879 *
Murphy, Tim and Sheila 8,179 2,500 5,679 *
Okabena Partnership K(2) 426,333 426,333 - *
Ongaro, Frank 6,469 6,469 - *
Rondou, Robert 9,780 9,780 - *
Roth, Gunther 223,054 223,054 - *
Sander, John C. 44,527 11,875 32,652 *
Sarno, Donald 35,000 5,000 30,000 *
Sausse, Marlyce 3,743 3,743 - *
Shaw, Jerald 785 785 - *
SMC Venture Fund 1989 29,760 12,500 17,260 *
Staat, Nicholas 11,109 11,109 - *
Staat, Phil 5,822 5,822 - *
Staat, Richard 7,812 7,812 - *
Stevens, Allan R. 6,525 4,000 2,525 *
Swanson, Myra 3,976 500 3,476 *
Underwood, Joan 12,083 3,750 8,333 *
Westgor, Wayne 31,250 6,250 25,000 *
</TABLE>
- --------------
*Indicates an amount less than one percent.
(1) Assumes all shares offered hereby are sold.
(2) Includes options or warrants representing the right to purchase within
60 days of the date of this Prospectus shares of Common Stock as
follows: Mr. Sheffert - 62,875 shares and Okabena Partnership K -
150,000 shares.
The Company has agreed to bear all expenses (other than selling
commissions and fees) in connection with the registration and sale of the Shares
being offered by the Selling Shareholders in over-the-counter market
transactions or in negotiated transactions. See "Plan of Distribution." The
Company has filed with the Commission a Registration Statement on Form S-3 under
the Securities Act with respect to the resale of the Shares from time to time in
over-the-counter market transactions or in negotiated transactions. This
Prospectus forms a part of such Registration Statement.
USE OF PROCEEDS
The Shares offered hereby will be sold by the Selling Shareholders. The
Company will receive no proceeds from the sale of the Shares. See "Selling
Shareholders."
PLAN OF DISTRIBUTION
The Shares offered hereby may be offered by the Selling Shareholders
from time to time. The Company will receive no proceeds upon the sale of the
Shares. Sales may be effected by the Selling Shareholders in transactions on The
Nasdaq Stock Market, in negotiated transactions, or in a combination of such
methods of sale, at prices relating to prevailing market prices or at negotiated
prices. The Selling Shareholders may effect such transactions by selling the
Shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts or commissions from the Selling
Shareholders or the purchasers of the Shares for whom such broker-dealers may
act as agents or to whom they sell as principal, or both (which compensation as
to a particular broker-dealer may be in excess of customary commissions).
The Selling Shareholders and any persons who participate in the sale of
the Shares from time to time, may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act. Any commissions paid or
discounts or concessions allowed to any such persons and any profits received on
resale of the Shares, may be deemed to be underwriting compensation under the
Securities Act.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available.
The Company has agreed to indemnify certain Selling Shareholders and
their control persons with respect to certain liabilities in connection with the
sale of the Shares pursuant to this Prospectus, including liabilities under the
Securities Act and the Exchange Act. In addition, certain Selling Shareholders
have agreed to indemnify the Company, its directors, officers, agents and
control persons against certain liabilities incurred as a result of information
provided by the Selling Shareholders for use in this Prospectus. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted pursuant to the foregoing provisions, the Company has been informed
that, in the opinion of the Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
EXPERTS
The financial statements of the Company for the fiscal years ended June
30, 1996, 1995 and 1994 have been audited by McGladrey & Pullen, LLP,
independent accountants, as set forth in their reports thereon. Such financial
statements are incorporated by reference herein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER DESCRIBED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING SHAREHOLDERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE UNDER THIS PROSPECTUS SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR SINCE THE DATE OF ANY DOCUMENTS
INCORPORATED HEREIN BY REFERENCE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES, OR AN OFFER OR SOLICITATION IN ANY STATE TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
---------------------
TABLE OF CONTENTS
---------------------
Page
Available Information................................. 2
Incorporation of Certain Documents
by Reference........................................ 2
Prospectus Summary.................................... 3
Risk Factors.......................................... 4
Management............................................ 8
Selling Shareholders..................................11
Use of Proceeds.......................................12
Plan of Distribution..................................12
Experts...............................................12
1,004,008 SHARES
TELIDENT, INC.
COMMON STOCK
------------
PROSPECTUS
------------
May ___, 1997
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses payable by the
Company in connection with the sale and distribution of the Shares being
registered. All amounts set forth below are estimates.
Legal fees and expenses................................... $10,000
Accounting fees and expenses.............................. 3,000
Miscellaneous (including listing fees, if applicable)..... 2,000
--------
Total................................................ $ 15,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Minnesota Statutes Section 302A.521 provides that a Minnesota business
corporation shall indemnify any director, officer, employee or agent of a
corporation made or threatened to be made a party to a proceeding, by reason of
the former or present official capacity (as defined) of the person, against
judgments, penalties, fines, settlements and reasonable expenses incurred by the
person in connection with the proceeding if certain statutory standards are met.
"Proceeding" means a threatened, pending or completed civil, criminal,
administrative, arbitration or investigative proceeding, including one by or in
the right of a corporation. Section 302A.521 contains detailed terms regarding
such right of indemnification and reference is made thereto for a complete
statement of such indemnification rights.
Article IX of the Company's Restated Articles of Incorporation
eliminates certain personal liability of the directors of the Company for
monetary damages for certain breaches of the directors' fiduciary duties.
ITEM 16. EXHIBITS
4.1 Specimen form of the Common Stock certificate**
4.2 Form of Warrant issued pursuant to October 1992 Unit
offering***
4.3 Form of Debenture issued pursuant to October 1992 Unit
offering***
4.4 Form of Warrant issued pursuant to May 1993 Unit offering***
4.5 Form of Debenture issued pursuant to May 1993 Unit offering***
4.6 Subscription and Purchase Agreement dated as of August 23,
1993 between the Company and Okabena Partnership K***
4.7 Conversion, Exercise, Subscription and Purchase Agreement
dated as of October 13, 1995 between the Company and Okabena
Partnership K*
4.8 Form of Warrant issued pursuant to October 1995 Unit offering*
4.9 Certificate of Designation of Series I Convertible Preferred
Stock***
4.10 Promissory Note and Security Agreement dated January 11, 1993
between the Company and Willis K. Drake***
4.11 Promissory Note and Security Agreement dated February 3, 1995
between the Company and Norwest Credit, Inc.****
5.1 Opinion of Counsel*
23.1 Consent of Counsel (included in Exhibit 5.1)*
23.2 Consent of Independent Accountants
24.1 Power of Attorney*
- ----------------------
* Incorporated by reference to the Company's Registration Statement on
Form SB-2 (Registration No. 33- 99054), as amended.
** Incorporated by reference to the Company's Registration Statement on
Form S-18 (Registration No. 33- 25992C).
*** Incorporated by reference to the Company's Report on Form 10-KSB for
the year ended June 30, 1994.
**** Incorporated by reference to the Company's Current Report on Form 8-K,
dated December 6, 1994.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the 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 to
such information in the Registration Statement;
provided, however, that the undertakings set forth in paragraphs (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement 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.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the provisions summarized in Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that (1) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance on Rule 430A and contained in the form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time it was
declared effective and (2) for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Minneapolis and State of Minnesota, on May 1,
1997.
TELIDENT, INC.
By /s/ W. Edward McConaghay
-------------------------------------
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons on the
dates and in the capacities indicated.
Signature Title Date
--------- ----- ----
/s/ W. Edward McConaghay President and Chief Executive May 1, 1997
- ----------------------------- Officer and Director (Principal
W. Edward McConaghay Executive Officer)
/s/ Mark W. Sheffert Chairman of the Board of May 1, 1997
- ----------------------------- Directors and Director
Mark W. Sheffert
/s/ John F. Kromer Vice President Finance, Chief May 1, 1997
- ----------------------------- Financial Officer (Principal
John F. Kromer Accounting Officer and Principal
Financial Officer)
/s/ John F. Kromer Director May 1, 1997
- -----------------------------
Scott R. Anderson*
/s/ John F. Kromer Director May 1, 1997
- -----------------------------
Willis K. Drake*
- -----------------------------
David F. Durenberger Director
/s/ John F. Kromer Director May 1, 1997
- -----------------------------
Richard L. Hencley*
/s/ John F. Kromer Director May 1, 1997
- -----------------------------
John Sagan*
/s/ John F. Kromer Director May 1, 1997
- -----------------------------
Warren S. Tyler*
- ---------------
* By John F. Kromer, attorney-in-fact.
EXHIBIT INDEX
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------
4.1 Specimen form of the Common Stock certificate**
4.2 Form of Warrant issued pursuant to October 1992 Unit offering***
4.3 Form of Debenture issued pursuant to October 1992 Unit offering***
4.4 Form of Warrant issued pursuant to May 1993 Unit offering***
4.5 Form of Debenture issued pursuant to May 1993 Unit offering***
4.6 Subscription and Purchase Agreement dated as of August 23, 1993 between
the Company and Okabena Partnership K***
4.7 Conversion, Exercise, Subscription and Purchase Agreement dated as of
October 13, 1995 between the Company and Okabena Partnership K*
4.8 Form of Warrant issued pursuant to October 1995 Unit offering*
4.9 Certificate of Designation of Series I Convertible Preferred Stock***
4.10 Promissory Note and Security Agreement dated January 11, 1993 between
the Company and Willis K. Drake***
4.11 Promissory Note and Security Agreement dated February 3, 1995 between
the Company and Norwest Credit, Inc.****
5.1 Opinion of Counsel*
23.1 Consent of Counsel (included in Exhibit 5.1)*
23.2 Consent of Independent Accountants
24.1 Power of Attorney*
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* Incorporated by reference to the Company's Registration Statement on
Form SB-2 (Registration No. 33-99054), as amended.
** Incorporated by reference to the Company's Registration Statement on
Form S-18 (Registration No. 33-25992C).
*** Incorporated by reference to the Company's Report on Form 10-KSB for
the year ended June 30, 1994.
**** Incorporated by reference to the Company's Current Report on Form 8-K,
dated December 6, 1994.
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the reference to our firm under the caption "Experts" in
the Registration Statement No. 33-99054 (Form S-3) of Telident, Inc. and to the
incorporation by reference therein of our report dated August 26, 1996, with
respect to the financial statements of Telident, Inc. included in its Annual
Report (Form 10-KSB) for the year ended June 30, 1996.
Saint Paul, Minnesota
May 1, 1997
/s/ MCGLADREY & PULLEN, LLP
