FILED PURSUANT TO RULE 424B(3)
REGISTRATION NO. 333-75789
PROSPECTUS
12,855,519 Shares
THE NATIONAL REGISTRY INC.
COMMON STOCK
The stockholders of The National Registry Inc. listed on page 10 may offer
and sell an aggregate of 12,855,519 shares of our common stock under this
prospectus. Of these shares, 940,835 shares of common stock are issuable upon
the exercise of warrants to purchase common stock and 510,499 shares are
issuable upon the exercise of options to purchase common stock. The selling
stockholders may offer and sell the common stock in the over-the-counter market,
in block trades or other types of transactions, at prevailing market prices, or
at privately negotiated prices.
We will not receive any proceeds from the sale of the common stock. We
will receive $903,335 if the warrants are fully exercised and $1,209,635 if the
options are fully exercised.
Our common stock is quoted on the NASDAQ SmallCap Market under the
symbol NRID.
The shares of common stock being offered by this prospectus are highly
speculative and involve a high degree of risk.
WE URGE YOU TO READ THE "RISK FACTORS" SECTION OF THIS PROSPECTUS
BEGINNING ON PAGE 3 WHICH DESCRIBES THE SPECIFIC RISKS ASSOCIATED WITH AN
INVESTMENT IN US AS WELL AS WITH THESE PARTICULAR SECURITIES.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is September 16, 1999.
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PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS OR INCORPORATED IN THIS PROSPECTUS BY REFERENCE. YOU SHOULD READ THE
ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE "RISK FACTORS" SECTION BEGINNING ON
PAGE 3.
We and our wholly-owned subsidiary SAFLINK Corporation, design, develop
and market a suite of data and network security software products. These
products use biometric technologies to more securely and conveniently identify
and authenticate users on personal computers, workstations, the Internet and
servers in networked computer systems. Biometric technologies identify computer
users by electronically capturing a specific biological characteristic of an
individual, such as a fingerprint, voice or facial shape, creating a unique
digital identifier from that characteristic. That identifier is then matched
against users seeking access to valuable information and transactions. Our
products also include software developer kits that allow users to build
applications that use biometric technologies.
We were organized on October 23, 1991 and were the surviving
corporation following the completion of a merger on February 20, 1992 with
Topsearch, Inc., a publicly traded company. Our principal executive office is
located at 2502 Rocky Point Drive, Suite 100, Tampa, Florida 33607, and our
telephone number is (813) 636-0099.
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RISK FACTORS
THE SHARES OF COMMON STOCK BEING OFFERED BY THIS PROSPECTUS ARE HIGHLY
SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE
RISKS DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE
DECIDING TO INVEST IN THESE SECURITIES.
WE HAVE A LIMITED OPERATING HISTORY DURING WHICH WE HAVE ACCUMULATED SUBSTANTIAL
NET LOSSES AND WE MAY SUSTAIN SUBSTANTIAL LOSSES IN THE FUTURE
From our commencement of business in October 1991 through the end of
1997, we were principally engaged in organizational, development and marketing
activities. We have an accumulated net loss of approximately $47.3 million from
our inception through June 30, 1999 and have had revenues of only $9.9 million
during this period. In addition, we continued to accumulate net losses after
that date and we may be unable to generate significant revenues or any net
income in the future.
WE WILL NEED ADDITIONAL FUNDS TO MAINTAIN OUR OPERATIONS AND THE TERMS OF THE
ADDITIONAL FINANCING MAY RESTRICT OUR OPERATIONS
We believe that our existing working capital plus anticipated cash
flows from sales under current contracts may be insufficient to meet our
expected working capital needs after December 31, 1999. We also expect to make
continued investments in researching, developing and engineering our systems,
software and products to remain competitive. If we need additional working
capital and are not generating sufficient additional profitable sales of our
products or services, we may need to issue additional shares of common stock or
securities that are convertible into common stock. Our issuances of these
securities would dilute the interests of our stockholders. Additional financing
may be unavailable to us or only available on terms unacceptable to us. The
terms of available financing may restrict our operations.
ONE STOCKHOLDER HAS THE ABILITY TO CONTROL THE VOTE OF OUR STOCKHOLDERS
RMS Limited Partnership, a Nevada Limited partnership indirectly
controlled by Roy M. Speer, has the ability to decide the vote of our
stockholders. RMS, Francis R. Santangelo and J. Anthony Forstmann are parties to
a voting agreement dated March 1995 and amended in June of this year. This
voting agreement provides for Mr. Santangelo and Mr. Forstmann to vote their
common stock with, and as directed by, RMS. As of September 10, 1999, RMS
beneficially owned 8,021,305 shares of common stock or approximately 43.3% of
our common stock, Mr. Santangelo beneficially owned 1,391,710 shares of common
stock or approximately 7.5% of our common stock, and Mr. Forstmann beneficially
owned 776,250 shares of common stock or approximately 4.2% of our common stock.
The agreement also provides that RMS will vote for a candidate to the
board of directors nominated by Mr. Forstmann, provided his candidate is
reasonably acceptable to RMS, and that RMS support a decision by Mr. Forstmann
that the director he nominated be removed from office. As of September 10, 1999,
RMS controls approximately 55.0% of the voting shares issued and outstanding and
is in a position to control our general affairs and control the vote on most
matters to be determined by our stockholders, such as electing our directors and
directing our business and policies. If RMS sells the shares of common stock
under this registration statement, RMS may no longer control the vote of the
stockholders.
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OUR COMMON STOCK MAY BE DELISTED FROM THE NASDAQ SMALLCAP MARKET IF WE FAIL TO
COMPLY WITH THE ELIGIBILITY AND MAINTENANCE REQUIREMENTS
On April 20, 1999, we received a letter from the Nasdaq Stock Market,
Inc. notifying us that our common stock was not in compliance with the
requirements of Nasdaq Marketplace Rule 4310 (c) (2), which requires
us to:
o maintain net tangible assets of $2 million; or
o maintain a market capitalization of $35 million; or
o have recorded net income of $500,000 in the most recently
completed fiscal year or in two of the three most recently
completed fiscal years.
By letter dated September 3, 1999, Nasdaq confirmed that we were in
compliance with the maintenance requirements as of June 30, 1999 on a proforma
basis. However, Nasdaq raised concerns about our ability to maintain compliance
and notified us of its desire to continue monitoring our compliance.
We may in the future be out of compliance with the maintenance
requirements. Failure to comply with the Nasdaq listing requirements would
result in the delisting of our common stock from the SmallCap Market. If our
common stock was delisted and excluded from trading on the SmallCap Market, it
could adversely affect the market price of our common stock, the ability of
holders to sell their stock and the ability of potential holders to acquire
common stock.
TECHNOLOGICAL AND MARKET UNCERTAINTY MAY LIMIT OUR ABILITY TO PRODUCE AND SELL
OUR PRODUCTS AND SERVICES
Various problems may impede the development, production, distribution
and marketing of our products and services. We may be limited by our financial
and technical abilities in trying to solve these problems. More advanced or
alternate technology employed by competitors that is unavailable to us could
give those competitors a significant advantage over us. It is possible that
products and services developed by our competitors will significantly limit the
potential market for our products and services or render our products and
services obsolete. In addition, laws, rules, regulations or industry standards
may be adopted which would require us to modify our products or services or
which may otherwise materially adversely affect us.
RAPID CHANGES IN TECHNOLOGY MAY REQUIRE US TO MODIFY OUR PRODUCTS AND SERVICES
Technology employed in our industry is subject to rapid change. Our
future success will depend upon our ability to keep pace with a changing
marketplace. We will have to integrate new technology into our software and
introduce a variety of new products and product enhancements to address the
changing needs of the marketplace.
WE MAY NOT BE ABLE TO SUCCESSFULLY COMPETE IN THE HIGHLY COMPETITIVE MARKET FOR
NETWORK AND INTERNET SECURITY SOFTWARE
We compete in the highly competitive market for network and internet
security software and we expect this competition to intensify as the biometric
industry continues to develop. This security market is dominated by more
traditional non-biometric identification and authorization techniques, such as
cards, keys, passwords and personal information. A number of other companies
currently offer systems in the United States incorporating biometric
identification and authorization technology. In addition, several other
companies produce or are developing other biometric technologies which may
compete with us and our technology and may be integrated into identification and
authorization products and services that are competitive with those we offer.
Some examples of these technologies are: identification by eye retina blood
vessel patterns, hand geometry and signature analysis.
We compete with companies that have substantially greater resources
than us and are better equipped than us. We may be unable to compete
successfully against these companies or their products and services.
Announcements and advances by our competitors concerning new products or
features, governmental or other contracts and developments or disputes relative
to patents or proprietary rights may also have an adverse material impact on our
business, results of operations and prospects.
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WE ARE DEPENDENT ON LICENSES OF SOFTWARE FROM THIRD PARTIES
We have licensed rights to biometric identification and authorization
software under agreements with software algorithm suppliers including Cogent
Systems, Inc., ITT Industries, Inc., Learnout & Hauspie Speech Products N.V.,
Veridicom, Inc. and Visionics Corporation. These rights may be terminated if we
fail to pay required license fees or commit any other material breach of these
agreements. While we believe we are not in default of these agreements as of
September 16, 1999, there is no assurance that defaults will not occur in the
future or that we will make the minimum royalty payments required under these
agreements. Our products can be sold without the biometric identification and
authorization technology we have licensed. However, any loss of the licensed
technologies could substantially impair or entirely preclude our ability to
compete with products including this technology.
THE INABILITY OF COMPUTER SYSTEMS TO RECOGNIZE REFERENCES TO THE YEAR 2000 COULD
DAMAGE OUR BUSINESS AND RESULTS OF OPERATIONS
We have not fully completed our efforts to ensure that the year 2000
issue will not have a material adverse impact on our business, financial
condition or results of operations. The year 2000 problem is the result of
computer programs being written using two digits rather than four to define the
applicable year. Computer programs that have time-sensitive software or firmware
may recognize a date using 00 as the year 1900 rather than 2000, which could
result in miscalculations or system failures.
We believe that all of the software we have developed for sale to
others is year 2000 compliant. All of the developers of other software that we
have acquired for use in our business have publicly stated that their products
are year 2000 compliant. Our business or results of operations could be
materially adversely affected if our software or software of others used in our
business is not year 2000 compliant.
We have not yet determined the impact that a year 2000 failure suffered
by vendors, customers, suppliers or other third party service providers would
have on us. We believe such a failure could have a material adverse impact on
our business, financial condition and results of operations.
We have not developed a contingency plan for dealing with any of these
failures. Based on the information we have developed to date, we estimate that
the costs of addressing potential problems will not have a material adverse
impact on our financial condition or results of operations. Actual results may
differ materially from those anticipated.
SHARES ELIGIBLE FOR FUTURE SALE COULD ADVERSELY AFFECT OUR ABILITY TO RAISE
CAPITAL AND THE MARKET PRICE FOR OUR STOCK
After this offering, we will have outstanding 18,511,154 shares of
common stock, of which 17,090,034 may be resold in the public market
immediately. In addition, 1,421,120 shares of common stock are available for
resale in the public market under Rule 144.
Sales of shares of common stock in the public market or the perception
that sales would occur could adversely affect the market price of our common
stock. These sales or perceptions of possible sales could also impair our future
ability to raise capital. In part as a result of sales or the perception of the
possibility of sales of common stock under this prospectus and the registration
statement of which this prospectus is a part, the market price for our common
stock is likely to be volatile. It is possible that this volatility will have an
adverse effect on the market price of the common stock.
THERE IS A LIMITED PUBLIC MARKET FOR OUR COMMON STOCK AND WE CANNOT ASSURE YOU
THAT THERE WILL BE ACTIVE PUBLIC TRADING FOR OUR COMMON STOCK IN THE FUTURE
There is a limited public market for our common stock. The average
daily trading volume of our common stock on the NASDAQ SmallCap Market over the
past five years has been approximately 45,400 shares. The public trading market
for our common stock has been limited, and the market price for our common stock
may not necessarily reflect our value. There may not be any active public
trading market for the common stock in the future.
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THE MARKET PRICE OF OUR COMMON STOCK HAS BEEN AND MAY CONTINUE TO BE VOLATILE
The market price of our common stock has been volatile and may be
volatile in the future. The market price of our common stock may be impacted by
events related to technology companies generally. Factors and events, including
the following, may contribute to volatility and may have a significant impact on
the market price of our common stock:
o our announcements or announcements by our competitors
concerning
- new product developments;
- governmental contracts; or
- other contracts;
o developments or disputes relating to patents or proprietary
rights; and
o potential governmental regulation.
WE ARE EXPLORING IMPLEMENTING AN ACQUISITION STRATEGY WITH WHICH WE HAVE NO
EXPERIENCE
We are exploring a growth strategy that could include acquisitions of
companies involved in related businesses including e-commerce and the Internet.
We may not identify appropriate targets and we may not consummate any
transactions. Any growth may result in significant dilution to our existing
stockholders by the issuance of equity based securities. Any acquisitions would
place substantial demands on our management, working capital and financial and
management control systems. Success of any future expansion plans will depend in
part upon our ability to integrate the new business segments and to continue to
improve and expand management and financial control systems and to attract,
retain and motivate personnel equipped to manage corporate changes. We
cannot be sure that we will successfully manage these risks. If we fail to
adequately manage the growth of the business, it could have a severe negative
impact on our financial results and stock price.
OUR SUCCESS WILL BE DEPENDENT ON SIGNIFICANT GROWTH IN THE BIOMETRICS MARKET AND
BROAD ACCEPTANCE OF PRODUCTS IN THESE MARKETS
All of our revenues are derived from the sale of software products that
utilize biometric technologies. These products represent a new approach to
identity verification, which has only been used in limited applications to date.
Biometric security products have not gained widespread commercial acceptance.
Our success depends on the development and expansion of markets for biometric
products both domestically and internationally. Further, our products may not
achieve sufficient market acceptance to ensure our viability. In addition, we
cannot accurately predict the future growth rate of this industry or the
ultimate size of the biometric technology market.
THE EXPANSION OF THE MARKET FOR OUR PRODUCTS DEPENDS ON A NUMBER OF
FACTORS INCLUDING:
o the cost, performance and reliability of our products and the
products of our competitors;
o customers' perception of the benefits of these products;
o public perceptions of the intrusiveness of these products and
the manner in which firms are using the biometric information
collected;
o public perceptions regarding the confidentiality of private
information; and
o marketing efforts and publicity regarding these products.
The use of biometric products for some applications has been objected
to on civil liberties grounds. Legislation has been proposed to regulate the
use of biometric security products partly in response to these objections.
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IF OUR MARKETING PARTNERS FAIL TO PROMOTE OUR PRODUCTS, WE MAY NOT BE ABLE TO
GENERATE SUFFICIENT REVENUE
A significant portion of our revenues come from sales to marketing
partners such as original equipment manufacturers, distributors, value-added
distributors and resellers. Some of these relationships are formalized in
agreements; however, these agreements are often terminable with little or no
notice or penalty and may be subject to periodic amendment. The failure of our
marketing partners to promote our products would severely limit our ability to
generate revenue. We cannot control the amount and timing of resources that our
marketing partners devote to their activities on our behalf and there is a risk
that these parties may not actively promote our products.
We intend to continue to seek strategic relationships to distribute and
sell some of our products. However, we may be unable to negotiate acceptable
distribution relationships in the future and cannot predict whether current or
future distribution relationships will be successful.
WE HAVE NEVER PAID AND DO NOT EXPECT TO PAY DIVIDENDS
We have not previously paid any dividends on our common stock and
intend to follow a policy of retaining all of our cash flow from operations, if
any, to finance the development and expansion of our business.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained or incorporated by reference in this
prospectus constitute forward-looking statements within the meaning of the
Securities Act or the Securities Exchange Act. These forward-looking statements
involve risks and uncertainties. Words such as "believe," "expect," "intend,"
"plan," "anticipate," "likely," "will," and similar expressions are intended to
identify these forward-looking statements. Our actual results may differ
significantly from the results discussed in these forward-looking statements.
These forward-looking statements are subject to risks, uncertainties
and occurrences which could cause actual results to differ materially from
future results expressed or implied by the statements. See "Risk Factors" above
and our periodic reports and other documents filed with the Securities and
Exchange Commission for further discussions of some of the risks, uncertainties
and other factors applicable to us, our business and the shares proposed to be
sold by this prospectus.
USE OF PROCEEDS
We will not receive any proceeds from any sales by the selling
stockholders of common stock under this prospectus. If all the warrants to
purchase the common stock covered by this prospectus are exercised in full, we
would receive gross proceeds of approximately $903,335. If the options to
purchase the common stock covered by this prospectus are exercised in full, we
would receive gross proceeds of approximately $1,209,635. These amounts would be
added to and used by us for working capital purposes, including for developing,
testing, marketing and selling our products and services.
SELLING STOCKHOLDERS
A total of 12,855,519 shares of common stock are being registered in
this offering for the account of the selling stockholders. Up to 9,722,515
shares of common stock being registered in this offering were originally issued
upon conversion of shares of our Series C preferred stock. The shares issuable
upon conversion of the Series C preferred stock are being registered under
registration rights granted as part of the original issuance of these
securities. Up to 518,920 shares of common stock may be offered after the
exercise of options granted to some of our employees, directors and consultants.
Up to 100,000 shares of common stock may be offered by Clearwater Fund
III, L.P. after its exercise of a warrant to purchase common stock at an
exercise price of $0.625 per share. These warrants are exercisable at any time
and from time to time through February 4, 2002. These shares are being
registered under registration rights granted as part of the original issuance
of these securities. The warrant was issued as part of the sale by Clearwater of
its shares of our Series C preferred stock to RMS Limited Partnership and
Francis R. Santangelo. An outstanding warrant to purchase up to 47,619 shares of
common stock at an exercise price of $15.675 previously held by Clearwater was
cancelled as part of the transaction.
We issued 1,681,670 shares of common stock and warrants to purchase up
to 840,835 shares of common stock in our recent private offering. These warrants
are exercisable at a price of $1.00 per share at any time and from time to time
through July 23, 2001. These shares are being registered under registration
rights granted as part of the original issuance of these securities.
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The table below presents information about persons for whom we are
registering the shares for resale to the public. The shares being registered
under the registration statement of which this prospectus is a part will be
sold, if at all, by the selling stockholders listed below:
NUMBER OF
NUMBER OF SHARES
SHARES NUMBER OF BENEFICIALLY
BENEFICIALLY SHARES THAT OWNED AFTER
NAME OWNED MAY BE SOLD OFFERING
- ---- ----------- ------------ ------------
RMS Limited Partnership 8,021,305 7,414,138 607,167(1)
Francis R. Santangelo 1,391,710(2) 1,358,377(3) 33,333(2)
Clearwater Fund III, L.P. 1,100,000(4) 1,100,000(4) 0
J. Anthony Forstmann 776,250 92,917(5) 683,333
Frank M. Devine 331,666 283,333(5) 48,333
Hector J. Alcalde 110,000 50,000(5) 60,000
Jeffrey P. Anthony 366,667 4,167(5) 362,500
Karen M. Blonder 19,863 1,667(5) 18,196
Timothy J. Brown 73,916 833(5) 73,083
Gregory D. Cahue 8,584 417(5) 8,167
Mary L. Collins 18,250 833(5) 17,417
Cherylann M. George 27,832 1,333(5) 26,499
Walter G. Hamilton 61,333 11,666(5) 49,667
Gregory C. Jensen 104,333 1,667(5) 102,666
Colleen M. Madigan 61,333 8,333(5) 53,000
Harvey Mandel 2,500 1,250(5) 1,250
William A. Rogers 833 833(5) 0
Maril Zbik 7,917 1,250(5) 6,667
Abington Capital 150,000 150,000(6) 0
Jim Agate 75,000 75,000(6) 0
Andy Batkin 150,000 150,000(6) 0
Robert Cleary 75,000 75,000(6) 0
Nicholas Colabella 25,002 25,002(6) 0
Richard P. Crane, Jr 150,000 150,000(6) 0
Davos Partners 300,000 300,000(6) 0
David H. Furukawa 75,000 75,000(6) 0
James T. Gallagher 25,002 25,002(6) 0
O. G. Greene 75,000 75,000(6) 0
Michael Hilbert 75,000 75,000(6) 0
Lynn Hinkle 37,500 37,500(6) 0
Caeser Kimmel 75,000 75,000(6) 0
Candice Kimmel 37,500 37,500(6) 0
Karen Kimmel 37,500 37,500(6) 0
Don Klosterman 258,333(2) 225,000(6) 33,333(2)
Anthony J. Knapp, Jr 50,001 50,001(6) 0
Deadbug Partnership 75,000 75,000(6) 0
Nob Hill Capital Associates 30,000 30,000(6) 0
Nob Hill Capital Partners 120,000 120,000(6) 0
Ralph Olson 37,500 37,500(6) 0
Otato Limited Partnership 225,000 225,000(6) 0
Donald P. Scanlon 60,000 60,000(6) 0
James W. Shepperd 112,500(7) 37,500(6) 75,000(7)
Martin Sumichrast 150,000 150,000(6) 0
Willow Creek Capital Partners 150,000 150,000(6) 0
(FOOTNOTES ON NEXT PAGE)
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(1) This amount would represent approximately 3.29% of the outstanding
shares of common stock after completion of the offering covered by this
prospectus.
(2) Includes 33,333 shares of common stock issuable upon exercise of
outstanding options.
(3) Includes 50,000 shares of common stock issuable upon exercise of
outstanding options granted outside of the 1992 Stock Incentive Plan.
(4) Includes 100,000 shares of common stock issuable upon exercise of a
warrant.
(5) Represents shares of common stock issuable upon exercise of outstanding
options granted outside of the 1992 Stock Incentive Plan.
(6) Represents common stock purchased and common stock issuable upon
exercise of warrants purchased as part of a private placement
completed on July 23, 1999.
(7) Includes 75,000 shares of common stock issuable upon exercise of
outstanding options.
J. Anthony Forstmann, Hector J. Alcalde, Frank M. Devine, Francis R.
Santangelo, Jeffery P. Anthony, O. G. Greene and Don Klosterman are members of
our board of directors. Since 1991, Mr. Forstmann has also served in various
capacities including chairman of the board, president and chief executive
officer of our company. Mr. Anthony has been our chairman of the board since
March 1998 and president and chief executive officer since May 1998. James W.
Shepperd is an executive officer. Karen Blonder, Timothy J. Brown, Gregory
Cahue, Mary L. Collins, Cherylann George, Walter Hamilton, Gregory Jensen,
Colleen Madigan, Harvey Mandel, William Rogers and Maril Zbik are present or
former consultants or employees of ours.
DESCRIPTION OF CAPITAL STOCK
The description of our capital stock is subject to Delaware law and to
provisions contained in our amended certificate of incorporation and amended
bylaws. Copies of our certificate of incorporation and bylaws have been filed as
exhibits to the documents incorporated by reference into this prospectus. You
should refer to those documents for a more detailed description of the
provisions summarized below.
As of September 10, 1999, our authorized capital stock consisted of:
o 1,000,000 shares of preferred stock, of which 100,000 shares
of the preferred stock are designated as Series A preferred
stock and are issued and outstanding, and
o 50,000,000 shares of common stock, of which 18,511,154 shares
are issued and outstanding. Holders of our capital stock have
no preemptive or other subscription rights.
Of the authorized but unissued shares of common stock as of
September 10, 1999:
o an aggregate of 2,130,030 shares of common stock are reserved
for issuance upon the exercise of options granted or which may
be granted under the 1992 Stock Incentive Plan;
o 510,499 shares of common stock are reserved for issuance upon
the exercise of options granted to some directors, officers,
consultants and employees outside of the 1992 Stock Incentive
Plan;
o 2,379,055 shares of common stock are reserved for issuance
upon conversion of the Series A preferred stock into common
stock; and
o 1,152,522 shares of common stock are reserved for issuance
upon the exercise of outstanding warrants.
COMMON STOCK
Each holder of issued and outstanding shares of common stock will be
entitled to one vote per share on all matters submitted to a vote of our
stockholders. Holders of shares of common stock do not have cumulative voting
rights. Therefore, the holders of more than 50% of the shares of common stock
will have the ability to elect all of our directors.
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Subject to prior rights of any preferred stock then outstanding,
holders of common stock are entitled to share ratably in dividends payable in
cash, property or shares of our capital stock, when, as and if declared by our
board of directors. The common stock will only be entitled to dividends after
the payment of any accrued dividends on any outstanding preferred stock. We do
not currently expect to pay any cash dividends on our common stock.
Upon our voluntary or involuntary liquidation, dissolution or winding
up, any assets remaining after prior payment in full of all of our debts and
liabilities and after prior payment in full of the liquidation preference of the
preferred stock would be paid ratably to holders of common stock.
All outstanding shares of common stock are, and any shares of common
stock to be issued upon conversion of the shares of Series A preferred stock and
exercise of options and warrants will be, fully paid and non-assessable.
PREFERRED STOCK
We are authorized to issue up to 1,000,000 shares of preferred stock,
100,000 shares of which have been designated as Series A preferred stock. Our
board of directors is authorized to fix the voting rights, liquidation
preferences, dividend rights, conversion rights, rights and terms of redemption
and other rights and preferences of the preferred stock without stockholder
approval. Our board of directors may issue shares of preferred stock with voting
and conversion rights that could adversely affect the voting power of the
holders of common stock and may have the effect of delaying, deferring or
preventing a change in control of NRI.
SERIES A PREFERRED STOCK
We have issued and there was outstanding as of September 10,1999,
100,000 shares of the Series A preferred stock. Each share of the Series A
preferred stock may be converted upon the election of its holder into 23.79
shares of common stock, for a total of 2,379,055 shares subject to customary
anti-dilution provisions. The shares of Series A preferred stock will
automatically be converted into common stock upon the date on which our
cumulative gross revenues since April 28, 1992 exceeds $15 million. Cumulative
revenues through June 30, 1999 are approximately $9.9 million. The holders of
Series A preferred stock will not be entitled to vote on any matters submitted
to our stockholders unless provided by law or our certificate of incorporation.
The holders of Series A preferred stock will not at any time be
entitled to any dividends. The shares of Series A preferred stock are not
redeemable at any time.
Upon our liquidation, dissolution or winding up, whether voluntary or
involuntary, the holders of the shares of Series A preferred stock would be
entitled, before any distribution or payment is made upon any other series of
preferred stock or common stock, to be paid an amount equal to $100 per share.
After the payment, the holders of Series A preferred stock will not be entitled
to any further payment. If upon liquidation, dissolution or winding up, the
assets to be distributed to the holders of Series A preferred stock are
insufficient to permit payment to the holders of the preferential amount they
are entitled to, then all of our assets to be distributed at that time will be
distributed to the holders of Series A preferred stock. Upon any liquidation,
dissolution or winding up, after the holders of Series A preferred stock are
paid in full the amounts to which they are entitled to, our remaining net assets
may be distributed to the holders of other series of preferred stock and to the
holders of common stock.
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WARRANTS
We recently sold warrants which entitle their holders to purchase up to
an aggregate of 840,835 shares of common stock at an exercise price of $1.00 per
share. The warrants are exercisable at any time and from time to time for a
period of two (2) years from July 23, 1999. There is no separate market for
these warrants. The warrants may be exercised, either in whole or in part, from
time to time, so long as at least 10,000 shares of common stock are purchased by
a holder in any one exercise.
The number of shares of common stock issuable upon exercise of the
warrants, and the exercise price, are subject to adjustment. Circumstances that
would require an adjustment include:
o the payment by us of dividends on shares of our junior
securities payable in shares of common stock;
o subdivisions, combinations and certain reclassifications of
common stock;
o the distribution to all holders of common stock of debt
securities or assets other than cash dividends, or rights or
warrants to subscribe for or purchase any security with
limited exceptions; and
o the issuance of shares of common stock or rights or warrants
to acquire shares of common stock to all holders of common
stock, for a consideration per share less than the exercise
price of the warrant then in effect.
THE DELAWARE BUSINESS COMBINATION ACT
Section 203 of the Delaware General Corporation Law imposes a
three-year moratorium on business combinations between a Delaware corporation
whose stock generally is publicly traded or held of record by more than 2,000
stockholders and an interested stockholder or an affiliate or associate of the
corporation unless:
o the board of directors of the corporation approved either the
business combination or the transaction resulting in the
interested stockholder becoming one before its occurrence;
o upon consummation of the transaction resulting in a person
becoming an interested stockholder, the interested stockholder
owns at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced excluding
from the calculation of outstanding shares, shares
beneficially owned by directors who are also officers and some
employee stock plans; or
o the business combination is approved by (a) the board of
directors of the corporation and (b) holders of at least
66-2/3% of the outstanding shares other than those shares
beneficially owned by the interested stockholder at a meeting
of stockholders on or after an interested stockholder becomes
one.
The term business combination is defined generally to include mergers
or consolidations of the corporation or its majority-owned subsidiary, sales,
leases or other transfers or dispositions of the assets or stock of the
corporation or its majority-owned subsidiary and transactions which increase an
interested stockholder's percentage ownership of stock of the corporation or its
majority owned subsidiary. The transaction by which RMS acquired our Series C
preferred stock was approved by our board before its completion.
Section 203 applies to corporations incorporated in the State of
Delaware unless the corporation expressly elects not to be governed by this
legislation. We are therefore subject to Section 203.
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DIRECTOR AND OFFICER LIABILITY PROVISIONS
Our certificate of incorporation contains a provision which eliminates
the personal liability of directors, in their capacities as our directors to us
or our stockholders for monetary damages for a breach of fiduciary duty as a
director to the extent permitted by Delaware law. The provision in our
certificate of incorporation does not change a director's duty of care, but it
does authorize us to eliminate monetary liability for some violations of that
duty, including violations based on grossly negligent business decisions which
may include decisions relating to attempted changes of control of NRI. The
provision does not affect the availability of equitable remedies for a breach of
duty of care, such as an action to enjoin or rescind a transaction involving a
breach of fiduciary duty. However, in some circumstances equitable remedies may
not be available as a practical matter. The provision in our certificate of
incorporation in no way affects a director's liability under the federal
securities laws. In addition, our bylaws indemnify our past and current
directors and officers for, and provides advancements for all expense, liability
and loss reasonably incurred in connection with any threatened, pending or
completed action, suit or proceeding, either civil, criminal, administrative or
investigative, because he is or was a director or officer of NRI.
POSSIBLE EFFECT OF SOME PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW
It is possible that our ability to issue preferred stock and the
provisions of Section 203 of the Delaware General Corporation Law may discourage
other persons from making a tender offer for or acquisitions of substantial
amounts of our common stock. This could have the incidental effect of inhibiting
changes in management and may also prevent temporary fluctuations in the market
price of our common stock which often result from actual or rumored takeover
attempts. In addition, the limited liability provisions in our certificate of
incorporation concerning directors and the indemnification provisions in our
bylaws concerning directors and officers may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty and may
also have the effect of reducing the likelihood of derivative litigation against
directors and officers, even though the action, if successful, might otherwise
have benefitted us and our stockholders. Furthermore, a stockholder's investment
in NRI may be adversely affected if costs of settlement and damage awards
against our directors and officers are paid by us under the indemnification
provisions contained in our bylaws described above.
TRANSFER AGENT
The transfer agent and registrar for our common stock is U.S. Stock
Transfer Corporation, 1745 Gardena Avenue, Glendale, California 91201.
SHARES ELIGIBLE FOR FUTURE SALE
Holders of substantially all of our 18,511,154 outstanding shares of
common stock as of September 10, 1999 may sell their shares publicly or have the
right to require registration of their shares to permit public sales. As of
September 10, 1999, holders of substantially all of the approximately 1,152,522
shares of common stock issuable upon the exercise of outstanding warrants may
sell those shares publicly or have the right to require registration of the
shares to permit public sale. The 2,379,055 shares of common stock issuable upon
conversion of the shares of our Series A preferred stock may also be sold in the
public market subject to certain limitations under Rule 144.
Furthermore, as of September 10, 1999, we had previously granted and
there were outstanding and unexercised under our 1992 Stock Incentive Plan,
options to purchase an aggregate of approximately 1,611,110 shares of common
stock. In addition, there are approximately 518,920 shares of common stock
available for future grants of options under this plan. We have registered under
the Securities Act all of the shares of common stock that may be issued upon
exercise of the these stock options. These shares of common stock will be
eligible for sale by their holders to the general public without further
registration or compliance with the requirements of Rule 144, except that our
affiliates must comply with the volume limitations of Rule 144. In addition, as
of September 10, 1999 we had previously granted outside of the 1992 Stock
Incentive Plan options to purchase an aggregate of approximately 510,499 shares
of common stock to some directors, officers, consultants and employees. We are
registering for re-sale the shares of common stock that may be issued upon
exercise of the stock options as part of the registration statement of which
this prospectus is a part. On September 8, 1999, our board approved, subject to
stockholder approval, increasing the shares of common stock authorized under the
1992 Stock Incentive Plan from 2.5 million shares to 4.5 million shares and
granted, subject to stockholder approval, options to purchase up to 829,000
shares.
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If any of the shares of common stock mentioned above were sold, whether
under a registration statement, through a transaction undertaken in compliance
with Rule 144 or through another transaction, the public market, if any, of our
common stock could be adversely affected.
RULE 144
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares of our common stock for at least one year would be
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of:
o 1% of the number of shares of common stock then outstanding,
which will equal approximately 185,100 shares immediately
after this offering; or
o the average weekly trading volume of the common stock on the
Nasdaq National Market System during the four calendar weeks
preceding the filing of a notice on Form 144 concerning the
sale.
Sales under Rule 144 are also subject to other requirements regarding
the manner of sale, notice filing and the availability of current public
information about us.
RULE 144(k)
Under Rule 144(k), a person who is not considered to have been our
affiliate at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years, would
be entitled to sell these shares under Rule 144(k) without following the
requirements described above. Therefore, unless otherwise restricted, these
shares may be sold immediately.
PLAN OF DISTRIBUTION
The selling stockholders may offer their shares of common stock at
various times in one or more of the following transactions:
o on the NASDAQ SmallCap Market;
o in the over-the-counter market;
o in transactions other than on the NASDAQ SmallCap Market or in
the over-the-counter market;
o in privately negotiated transactions;
o in connection with short sales of our shares;
o by pledge to secure debts and other obligations;
o in connection with the writing of non-traded and
exchange-traded call options, in hedge transactions and in
settlement of other transactions in standardized or
over-the-counter options; or
o in a combination of any of the above transactions.
The selling stockholders may sell their shares of common stock at
market prices prevailing at the time of sale, at prices related to the
prevailing market prices, at negotiated prices or at fixed prices.
When the selling stockholders sell their shares of common stock, we
will prepare a prospectus supplement if necessary. A prospectus supplement would
list the number of shares of common stock being offered and the terms
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of the offering, including the proposed selling price to the public. The selling
stockholders may use broker-dealers to sell their NRI shares. If this happens,
broker-dealers will either receive discounts or commissions from the selling
stockholders, or they will receive commissions from purchasers of NRI shares for
whom they acted as agents.
In connection with this registration of common stock, we will pay all
of the expenses, including fees and expenses relating to required Securities
and Exchange Commission and Nasdaq filings and in compliance with applicable
state securities or blue sky laws. We will not pay underwriting discounts and
selling commissions, or the fees and expenses of any counsel or other advisors
for the selling stockholders.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document we file at the SEC's public reference rooms in Washington,
D.C., Chicago, Illinois or New York, New York. Please call the SEC at (800)
SEC-0330 for further information on the public reference rooms. Our SEC filings
are also available to the public at the SEC's web site at http://www.sec.gov.
This material can also be read at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
The SEC allows us to incorporate by reference the information we file
with them. This means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act:
o Annual report on Form 10-K for the year ended December 31,
1998;
o Quarterly reports on Form 10-Q for the quarters ended March
31, 1999 and June 30, 1999;
o Current report on Form 8-K, filed on July 26, 1999; and
o The description of our common stock contained in Item 1 of our
Form 8-A filed with the SEC on October 19, 1992.
We will provide a copy of each of the documents incorporated by
reference upon your request at no cost. You may request a copy of these filings
by writing or telephoning us at the following address:
The National Registry Inc.
c/o Investor Relations
2502 Rocky Point Drive
Suite 100
Tampa, Florida 33607
(813) 636-0099
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This prospectus is a part of a registration statement we filed with the
SEC. You should rely only on the information or representations provided in this
prospectus and in the documents incorporated by reference. We have authorized no
one to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus is accurate as of any date other
than the date on the front of the document.
EXPERTS
Our financial statements appearing in the annual report on Form 10-K
for the year ended December 31, 1998 were audited by Ernst & Young LLP,
independent auditors, as indicated in their report in our annual report on Form
10-K. We are incorporating their report by reference in this prospectus. Those
financial statements are incorporated in this prospectus by reference in
reliance upon the report given upon the authority of Ernst & Young as experts in
accounting and auditing.
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TABLE OF CONTENTS
PAGE
Prospectus Summary .............................................. 1
Risk Factors .................................................... 2
Special Note Regarding Forward Looking Statements ............... 7
Use of Proceeds ................................................. 7
Selling Stockholders ............................................ 7
Description of Capital Stock .................................... 9
Shares Eligible for Future Sale ................................. 12
Plan of Distribution ............................................ 13
Where You Can Find More Information ............................. 14
Experts ......................................................... 15
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