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424(b) Prospectus
PROSPECTUS
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PROJECTAVISION, INC.
Up to 21,607,777 shares of Common Stock,
$.0001 par value per share
This Prospectus solely relates to the offer and sale from time to time
of up to 21,607,777 shares (the "Shares") of common stock, par $.0001 value per
share (the "Common Stock") of Projectavision, Inc. (the "Company") by the
various selling stockholders named herein (collectively, the "Selling
Stockholders"), or by their respective pledges, donees, transferees or other
successors in interest that receive such Shares as a gift, partnership
distribution or other non-sale related transfer. Of the 21,607,777 Shares being
offered hereby: (i) up to 8,444,444 Shares are issuable upon conversion of 2,850
shares of the Company's Series F Convertible Preferred Stock, par value $.01 per
share ("Series F Stock" or "Series F Preferred Stock") held by certain of the
Selling Stockholders; (ii) 225,000 Shares issuable upon the exercise of certain
warrants held by those Selling Stockholders who were purchasers of the Series F
Preferred Stock (the "Series F Warrants"); (iii) 125,000 Shares issued in
connection with the Company's settlement of an outstanding litigation, 100,000
of which are issuable upon the exercise of certain options (the "Settlement
Options") issued in connection with the settlement of such litigation; (iv) up
to 4,133,333 Shares issuable to a certain Selling Stockholder in connection with
such Selling Stockholder's purchase of 800,000 Shares of Common Stock (the
"Private Shares") and the issuance to such Selling Stockholder of an option to
purchase up to an additional 3,333,333 Shares under certain circumstances (the
"Purchase Option"); (v) up to 7,200,000 Shares are issuable upon conversion
2,400 Shares of the Company's Series G Convertible Preferred Stock, par value
$.01 per share (the "Series G Stock" or "Series G Preferred Stock") and an
aggregate of 1,200,000 shares of Common Stock issued to the purchasers of the
Series G Preferred Stock in connection with the acquisition of the Series G
Preferred Stock; (vi) 180,000 Shares are issuable upon the exercise of certain
warrants held by the Selling Stockholders also purchased the Series G Stock (the
"Series G Warrants"); and (vii) 100,000 Shares issuable upon exercise of
warrants (the "Other Warrants") issued to the placement agent in connection with
the sale of the Series G Stock to one of the Selling Stockholders. The Series F
Warrants, Series G Warrants and other Warrants are hereinafter collectively
referred to us the "Warrants" and the "Settlement Options, the "Other Options"
and the "Purchase Options" are hereinafter collectively referred to as the
"Options". The Series F Preferred Stock and the Series F Warrants were issued by
the Company to the purchaser thereof on February 17, 1998 in a private
transaction (the "Series F Private Placement"); the Private Shares and Purchase
Option were issued by the Company to the purchaser thereof on May 1, 1998 in a
private transaction (the "Private Share Private Placement"); and 2,000 shares of
the Series G Preferred Stock and 150,000 Series G Warrants were issued to the
purchaser thereof, and the Other Options were issued to the placement agent of
the Series G Preferred Stock, on May 8, 1998 in a private transaction and the
other 400 shares of Series G Preferred Stock were issued in a private
transaction on June 9, 1998 (collectively, the "Series G Private Placement").
The Series F Private Placement, the Private Share Private Placement and the
Series G Private Placement are hereinafter collectively referred to as the "1998
Private Placements."
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The number of Shares ultimately issuable upon the conversion of the
Series F Preferred Stock and Series G Preferred Stock are directly related to
the market price of the Common Stock into which they are convertible. The lower
the price of the Common Stock, the more shares of Common Stock issuable upon
conversion, and the greater the dilution to existing stockholders. See "Risk
Factors -- Potential for Substantial Dilution" and "The Company -- Recent
Financings."
The number of Shares indicated as being issuable upon conversion of or
otherwise with respect to the Series F Preferred Stock and offered hereby
represents an estimate of the number of shares of Common Stock issuable upon
conversion of or otherwise with respect to the Series F Preferred Stock, based
on 200% of the number of shares of Common Stock issuable at a conversion price
of .675 per share and in certain other events described in the Certificate of
Designations, Preferences and Rights of the Series F Preferred Stock ("the
Series F Certificate of Designation"). The number of Shares indicated as being
issuable upon conversion of or otherwise with respect to the Series G Preferred
Stock and offered hereby represents an estimate of the number of shares of
Common Stock issuable upon conversion of or otherwise with respect to the Series
G Preferred Stock, based upon 180% of the number of shares of Common Stock
issuable at a conversion price of $.60 per share and in certain other events
described in the Certificate of Designations, Preferences and Rights of Series G
Preferred Stock (the "Series G Certificate of Designation").
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The Common Stock is quoted on the Nasdaq SmallCap Market under the symbol
"PJTV." The last reported closing bid and asked prices of the Common Stock on
Nasdaq on July __, 1998 were $.__ and $.__ per share.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE PURCHASED
ONLY BY THOSE PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. THE
COMPANY HAS INCURRED SUBSTANTIAL OPERATING LOSSES. SEE "RISK FACTORS" BEGINNING
ON PAGE 3.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
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COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY
STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
The Shares covered under this Registration Statement of which this
Prospectus forms a part may be offered for sale from time to time for the
account of the Selling Stockholders, or their pledgees, donees, transferees, or
other successors in interest, in the open market, on the Nasdaq SmallCap Market
or on one or more exchanges on which the Shares are then listed, in privately
negotiated transactions, in an underwritten offering, in a combination of such
methods, or by any other legally available means, at market prices prevailing
at the time of such sale, at prices related to such prevailing market prices at
negotiated prices or at fixed prices. The Shares are intended to be sold through
one or more broker-dealers or directly to purchasers. Such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Stockholders, their successors in interest and/or purchasers of the
Shares (or whom such broker-dealers may act as agent or to whom they may sell as
principal, or both, and which compensation as to a particular broker-dealer may
be in excess of customary commissions). To the extent required, the number of
Securities to be sold, the respective purchase price and public offering price,
the name of any agent, dealer or underwriter and any applicable commissions or
discounts with respect to a particular offer will be set forth in and
accompanied by a Prospectus Supplement. See "Selling Stockholders" and "Plan of
Distribution."
The Selling Stockholders, their successors in interest and any agents,
dealers or underwriters that participate with the Selling Stockholders in the
distribution of their shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933, as amended (the
"Securities Act"), and any commissions received by them and any profits on the
resale of the Selling Stockholders' shares, may be deemed to be underwriting
commissions or discounts under the Securities Act. Under applicable rules and
regulations promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), any person engaged in a distribution of securities may not
simultaneously bid for or purchase securities of the same class for a period of
two (2) business days prior to the commencement of such distribution. In
addition, and without limiting the foregoing, the Selling Stockholders will be
subject to the applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-2, 10b-5, 10b-6
and 10b-7, in connection with transactions in the Securities during the
effectiveness of the Registration Statement of which this Prospectus forms a
part. All of the foregoing may affect the marketability of the Securities.
The date of this Prospectus is ________________, 1998.
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FORWARD-LOOKING STATEMENTS
Certain information contained herein and/or incorporated by reference
in this Prospectus includes "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), and is
subject to the safe harbor created by the Reform Act. There are several
important factors that could cause actual results to differ materially from
those anticipated by the forward looking statement contained in such
discussions. Additional information as to the risk factors which could affect
the Company's financial results is included in this Prospectus and in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997
and the other documents incorporated by reference herein.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates herein by reference the following documents
heretofore filed with the Commission: the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997; and the Quarterly Report of
the Company for the three (3) months ended March 31, 1998.
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 hereby shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated herein by
reference 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 incorporated herein by reference)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part hereof except as so modified or
superseded.
The Company will provide, without charge to each person to whom a
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference, other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into the information that is incorporated into the Prospectus. Such
written requests should be directed to the Secretary of the Company at Two Penn
Plaza, Suite 640, New York, New York 10121, (212) 971-3000.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
descriptions and financial information and statements appearing elsewhere in
this Prospectus and the documents incorporated herein by reference.
The Company
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The Company, Projectavision, Inc., is in the business of identifying,
developing, patenting, supporting and marketing technical inventions in the
electronic display information industry.
The Company's principal offices are located at Two Penn Plaza, Suite
640, New York, New York 10121, telephone (212) 971-3000.
The Offering
- ------------
Up to 21,607,777 shares of Common Stock are being offered pursuant to
this Prospectus which may be offered from time to time by the Selling
Stockholders for their own account.
Plan of Distribution
- --------------------
The Selling Stockholders, directly or through agents or underwriters,
may offer and sell from time to time all or any part of the Securities held by
them in amounts and on terms to be determined or at quoted prices then
prevailing on the Nasdaq SmallCap Market. See "Selling Stockholders" and "Plan
of Distribution."
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RISK FACTORS
Investment in the Company's securities involves a high degree of risk.
Investors should carefully consider the following factors, among others,
relating to the Company.
ACCUMULATED DEFICIT; NO ASSURANCE OF PROFITABILITY. Until the fourth
quarter of 1997, the Company had been a development stage Company since its
inception in 1988. To date, the Company's sole revenues received have been (i)
$1,000,000 received in 1989 from the United States Advance Research Projects
Agency (then known as the Defense Department Advance Research Projects Agency)
("ARPA") to develop certain projection technology which could be used in a high
definition television projector, (ii) $105,000 in royalty income in 1993 from
licensing agreements, (iii) $200,000 in royalty income in 1995 from licensing
agreement, and (iv) approximately $1,000,000 and $415,000 from sales of its
first product, the Digital Home Theater(TM) for the year ended December 31,
1997, and the three (3) months ended March 31, 1998, respectively. Primarily as
a result of work performed in developing its own and supporting certain other
technologies, the Company has sustained losses aggregating approximately
$47,500,000 from its inception to March 31, 1998. The Company has continued to
incur losses since March 31, 1998. As of December 31, 1997, the Company had
available for Federal income tax purposes net operating loss carryforwards of
approximately $29,500,000. The Internal Revenue Code of 1986, as amended, may
impose certain restrictions of the amount of net operating loss carryforwards
which may be used in any year by the Company.
The Company continues to experience difficulties encountered by any
company first emerging from the development stage, many of which may be beyond
the Company's control. These include, but are not limited to, unanticipated
development, testing, production and marketing problems, costs and competition.
DEPENDENCE ON THIRD-PARTY LICENSES; UNPROVEN PRODUCTS. On March 31,
1997 the Company began shipping its first product, its patented front/rear
projection television computer known as the "Digital Home Theater(TM)." In
connection therewith, the Company has entered into arrangements with third
parties for the manufacture, marketing and distribution of its Digital Home
Theater(TM). The Company has also formed a non-exclusive strategic corporate
partnership and entered into an
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agreement with Texas Instruments pursuant to which Texas Instruments has agreed
to supply its Digital Light Processor (the "DLP") to the Company as a component
part of the Company's Digital Home Theater(TM). The Company has also entered
into contract manufacturing agreements with C-MAC Industries, Inc. and LDM
Technologies, Inc. for the manufacture and assembly of certain other components
of its Digital Home Theater(TM). The Company has also entered into an
agreement with the Boxlight Corporation, an established marketer and distributor
of video display systems to the commercial market. The Company has also retained
the Hamilton Group to provide customer service, as well as to gather and analyze
information regarding consumer reaction to the Digital Home Theater(TM). The
Company is dependent on all of the foregoing arrangements in order to
successfully manufacture, market and distribute the Digital Home Theater(TM).
Moreover, the Company's Digital Home Theater(TM) is presently an unproven
product, and there is no assurance that it will receive acceptance in the
marketplace from its intended users. In addition, the Company may seek other
applications of its technologies, although there can be no assurance that the
Company will be successful in applying its technologies in other areas.
The Company is also currently a party to two (2) royalty bearing,
non-exclusive patent license agreements with respect to its video projection
technologies and presently intends to enter into other similar, patent license
agreements, although there can be no assurances that the patent licenses that
the Company has entered into will be profitable or that the Company will be able
to enter into additional patent licenses on terms and conditions acceptable to
the Company, or at all.
DEPENDENCE ON UNTESTED DEVICE BY SOLE SUPPLIER. The DLP, an essential
part of the Company's Digital Home Theater(TM), is based upon and incorporates a
Digital Micromirror Device ("DMD") that has been developed by Texas Instruments.
The Company will be relying solely on Texas Instruments to produce the DLP and
there can be no assurance that Texas Instruments will be able or willing to
produce the DLP in significant qualities to satisfy the Company's immediate
and/or long-term needs. Although the Company is also pursuing LCD-based
alternatives to the DLP, there can be no assurance that any such alternatives
will prove to be viable.
DEPENDENCE ON KEY EMPLOYEES. The Company is dependent, to a substantial
degree, on the financial and managerial expertise of its Chairman of the Board,
Mr. Marvin Maslow and its President and Chief Executive Officer, Mr. Martin
Holleran. The loss of the services of either of Mr. Maslow or Mr. Holleran could
have a material adverse effect upon the Company's operations. The Company has
purchased a "key-man" life insurance
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policy on the life of Mr. Maslow in the amount of $500,000, and is the sole
owner and beneficiary of such policy. The Company has also purchased a "key-man"
life insurance policy on the life of Mr. Holleran in the amount of $1,000,000,
and is the sole owner and beneficiary of such policy.
TECHNOLOGICAL CHANGE. The television and video display industry and
other industries and markets in which the Company is pursuing applications of
its technologies are subject to rapid and significant changes. There can be no
assurance that technological changes will not occur that may render the
Company's products and present technologies obsolete.
COMPETITION. The television and video display industry is highly
competitive. The Company's television projection systems will compete with giant
screen, big screen and conventional size televisions sold under a variety of
brand names. Competitive features will include picture quality, image
brightness, clarity, image-size, pricing, product size and design, weight,
technology, brand name recognition and manufacturing, marketing and distribution
capabilities. Most of the Company's competitors and potential competitors have
and will have far greater financial resources, research and development
facilities, manufacturing and marketing experience, distribution and sales
networks, established customer bases, and greater brand name recognition than
the Company currently has. Although there can be no assurances, the Company
expects that it will be able to compete successfully against its competitors on
the basis of its proprietary projection technologies and anticipated patent
portfolio, product size and weight, price and picture quality.
PROPRIETARY RIGHTS. The Company is the owner of five (5) United States
patents and twenty-two (22) foreign patents and has patent applications pending
in numerous industrialized nations around the world. In addition, the Company
has also filed for further patent protection in various foreign countries for
improvement to its technologies and for protection of related technologies.
Notwithstanding the Company's patent or pending patent applications, there can
be no assurance that others have not developed such technologies without the
Company's knowledge, or that pending applications will be allowed, or that
others will not independently develop similar technologies, duplicate the
Company's technologies or design around the patented aspects of the Company's
technologies. In addition, in the event the Company's products are based upon
the DLP developed by Texas Instruments, the Company will also be dependent to a
certain extent on the efficacy of Texas Instruments' patents relative to DLP, of
which there can be no assurance. The Company has not conducted any independent
analysis of such patents owned by Texas Instruments. Even though the Company has
been issued patents, challenges may be instituted by third parties as to the
validity, enforceability and infringement of the patents. The cost of litigation
to uphold the validity and enforcability and prevent infringement of the
Company's patents can be substantial. In the event that others are able to
design around the Company's patents, the Company's business could be materially
and adversely affected.
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In some cases, the Company may rely on trade secrets to protect its
innovations. There can be no assurance that trade secrets will be established or
that others will not independently develop similar or superior technologies. The
Company will require and has required employees, Directors, consultants and
other third parties to whom confidential information has been or will be
disclosed, to agree to keep the Company's proprietary information confidential
and to refrain from using such information in any manner that is adverse to the
Company's interest. However, there can no assurance that such agreements will be
complied with or will be enforceable.
The Company is the owner of the trade name Projectavision, Inc. The mark was
registered by the United States Patent and Trademark Office on February 4, 1997.
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NASDAQ LISTING AND MAINTENANCE REQUIREMENTS. The Company's Common Stock
(along with its Series B Preferred Stock) is traded in the over-the-counter
market on the Nasdaq SmallCap Market. If for any reason, however, the Company's
Common Stock is not eligible for continued listing, Common Stock acquired by the
Selling Stockholders either upon conversion of the Preferred Stock or upon
exercise of Warrants may not be readily marketable. Under the rules of the
National Association of Securities Dealers, Inc. ("NASD"), in order to
qualify for continued quotation of securities on the Nasdaq SmallCap Market, a
company, among other things, must have $2,000,000 in total assets, $1,000,000 in
total capital and surplus, $1,000,000 in market value of public float and a
minimum bid price of $1.00 per share. If the Company is unable to satisfy the
requirement for continued quotation on the Nasdaq SmallCap Market, trading, if
any, in the Common Stock acquired upon the conversion of the Preferred Stock or
upon exercise of the Warrants would be conducted in the over-the-counter market
in what are commonly referred to as the "pink sheets" or on the NASD Electronic
Bulletin Board. As a result, an investor may find it more difficult to dispose
of, or to obtain accurate quotations as to the price of, the Common Stock
issuable upon conversion of the Preferred Stock or upon exercise of the
Warrants.
In addition, if the Common Stock acquired on conversion of the
Preferred Stock or upon exercise of the Warrants are removed from the Nasdaq
SmallCap Market, transactions involving the sale of the Company's Common Stock
could be subject to a rule that imposes additional sales practice requirements
on broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally defined as persons with assets in
excess of $1,000,000 or annual income exceeding
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$200,000 individually or $300,000 together with their spouse). For transactions
covered by this rule, the broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transaction prior to purchase. Consequently, the rule may
restrict the ability of broker-dealers to sell the Company's securities and may
affect the ability of the Selling Stockholders, and purchasers of the Selling
Stockholders' Common Stock to sell the Company's securities in the secondary
market.
RISK OF DELISTING FROM NASDAQ. The Company's Common stock is currently
traded on the Nasdaq SmallCap Market. There are no assurances, however, that the
Company's Common Stock will continue to be included on such market, or that an
active market for such stock will exist. The failure to meet the listing
requirements for the Nasdaq SmallCap Market could result in the Company's Common
Stock being delisted from the Nasdaq Stock Market ("NASDAQ"). The Company
received a letter from The Nasdaq Stock Market on May 27th advising the Company
that unless its shares of Common Stock trade for ten (10) consecutive days for
at least one dollar ($1.00) per share before August 29, 1998, the Company's
shares of Common Stock will be delisted. The Company has the right to submit a
written request to the Nasdaq Stock Market at any time prior to August 29th to
obtain a ruling with respect to the continued listing of the shares of Common
Stock. If the Common Stock is delisted from trading on NASDAQ, trading, if any,
would thereafter be conducted in the over-the-counter market in the so-called
"pink sheets" or the "Electronic Bulletin Board" of the National Association of
Securities Dealers, Inc. (the "NASD") and consequently, an investor will likely
find it more difficult to dispose of, or to obtain accurate quotations as to the
price of, the Common Stock.
In addition, if the Common Stock is not quoted on NASDAQ, or if the
Company does not meet the other exceptions to the penny stock regulations cited
in the risk factor below, trading in the Common Stock would be covered by Rule
15g-9 promulgated under the Exchange Act for non-NASDAQ and non-national
securities exchange listed securities. Under such rule, broker/dealers who
recommend such securities to persons other than established customers and
accredited investors must make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to a transaction
prior to sale. Securities a1so are exempt from this rule if the market price is
at least $5.00 per share.
If the Common Stock becomes subject to the regulations applicable to
penny stocks, the market liquidity for the Common Stock could be adversely
affected. In such event, the regulations on penny stocks could limit the ability
of broker/dealers to sell the Common Stock and thus the ability of purchasers of
the Common Stock to sell their securities in the secondary market.
PENNY STOCK RULES. The Commission has adopted regulations which define
a "penny stock" to be any equity security that has a market price (as defined)
less than $5.00 per share, subject to certain exceptions. For any transaction
involving a penny stock, unless exempt, the rules require the delivery, prior to
the transaction, of a disclosure schedule prepared by the Commission relating to
the penny stock market. The broker-dealer also must disclose the commissions
payable to both the broker-dealer and the registered representative, current
quotations for the securities and, if the broker-dealer is the sole marketmaker,
the broker-dealer must disclose this fact and the broker-dealer's presumed
control of the market. Finally, monthly statements must be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stock. Transactions in a Nasdaq-listed security
would be exempt from all but the sole marketmaker provision for (i) issuers who
have $2,000,000 in tangible assets ($5,000,000 if the issuer has not been in
continuous operation for three years or average annual return of at least
$6,000,000 if the issuer has been in continuous operation for less then three
years), (ii) transactions in which the customer is an institutional accredited
investor and (iii) transactions that are not recommended by the broker-dealer.
In addition, transactions in a Nasdaq security directly with a Nasdaq
marketmaker for such securities would be subject only to the sole marketmaker
disclosure and the disclosure with respect to commissions to be paid to the
broker-dealer and the registered representative.
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The above-described rules do not currently apply to the Company and
would only apply if the Company were to have its securities de-listed from the
Nasdaq Small Cap Market. In such event, the above described rules may materially
adversely affect the liquidity of the market of the Company's securities.
POTENTIAL FOR SUBSTANTIAL DILUTION. As of July 22, 1998, 2,850 Shares
of the Series F Preferred Stock were issued and outstanding and 2,400 Shares of
the Series G Preferred Stock were issued and outstanding. Each share of Series F
Preferred Stock is convertible into such number of shares of Common Stock as is
determined by dividing the stated value ($1,000) of each share of Series F
Preferred Stock (as such value is increased by an annual premium of 8%) by the
then current conversion price of the Series F Preferred Stock (which is
determined, generally, by reference to 75% of the average of the closing market
price of the Common Stock during the five consecutive trading days immediately
preceding the date of determination provided that generally such conversion
price cannot be less than $.50 per Share or, under any circumstances, cannot be
greater than $1.00 per Share). Based on a conversion price of .675 per share for
the stated value of the Series F Preferred Stock, the stated value of the Series
F Preferred Stock would be convertible into approximately 4,222,222 shares of
Common Stock. Similarly, each share of Series G Preferred Stock is convertible
into such number of shares of Common Stock as is determined by dividing the
stated value ($1,000) of each share of Series G Preferred Stock (as such value
is increased by an annual premium of 6%) by the current conversion price of the
Series G Preferred Stock (which is determined, generally, by reference to 70% of
the average of the closing market price of the Common Stock during the five
consecutive trading days immediatety preceding the date of determination
provided that such conversion price cannot be greater than $1.375 per share).
Based upon a conversion price or $.60 per share for the stated value of the
Series G Preferred Stock, the stated value of the Series G Preferred Stock would
be convertible into approximately 4,000,000 shares of Common Stock. The number
of shares issuable upon conversion may be less than or greater than this number,
depending upon (a) the market price of the Common Stock at the time of
conversion, and (b) the Company's ability to maintain its NASDAQ listing. In the
event that the actual conversion price is less than the conversion price used in
the examples above because of a decrease in the market price of the Common
Stock, holders of the Common Stock could experience substantially greater
dilution upon conversion of the Series F and Series G Preferred Stock. Further,
the Company currently has approximately 21,700,000 additional shares of Common
Stock authorized but currently unissued. In the event a decrease in the market
price of the Common Stock requires the Company to issue more shares of Common
Stock than there are currently available upon conversion of the Series F and
Series G Preferred Stock the Company would be required to obtain stockholder
approval to increase the number of authorized shares. The lower the market price
of the Common Stock, the greater the number of shares into which the Series G
and Series F Preferred Stock is convertible and the greater the dilution.
LITIGATION. In April of 1995 (Docket No. 108820/95), the Company and
Jules Zimmerman, Richard Hickok, Dr. Craig Fields, Marvin Maslow, Martin
Holleran and Sherman Langer were sued by Eugene Dolgoff, a founder and former
officer and employee of the Company. Mr. Dolgoff alleged claims for breaches of
his employment agreement, wrongful discharge, tortious interference, libel and
slander, and declaratory relief with respect to the ownership of the Company's
technologies, claiming that he has certain rights with respect to the Company's
technologies, breach of contract with regard to a patent assignment agreement, a
constructive trust or unjust enrichment, or replevin, conversion, the right to
obtain access to corporate
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records, and for a declaration regarding his status as an officer. Mr. Dolgoff
is seeking damages, punitive damages and equitable relief totalling in excess
of $100 million.
In April of 1998, the litigation with Mr. Dolgoff was settled and all
of Mr. Dolgoff's claims, and those claims of the Company against Mr. Dolgoff,
were dismissed.
In June of 1995 and August of 1995, two class action suits were filed
against the Company as well as certain of its officers and directors by
stockholders of the Company. In October of 1995 the plaintiffs in the second
action joined as plaintiffs in the first action and the second action was
dismissed without prejudice (Docket No. 95 4867JGK). In July 1996, the class
action suit was dismissed without prejudice and the plaintiffs were given an
opportunity to appeal. The class action suit now alleges numerous violations of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including,
but not limited to, violations of Section 10(b) of the Exchange Act. The suit
also alleges claims for negligent misrepresentation and for common law fraud and
deceit. In response, the Company and the individual defendents have submitted
motions to dismiss the action. These motions are pending before the Court. In
July of 1997 the class action suit was dismissed with prejudice by the U.S.
District Court in New York. Subsequent thereto, the case was settled with the
individual plaintiffs at no cost to the Company other than litigation costs.
Except as set forth above, the Company is not presently a party to any
litigation nor, to the knowledge of management, is any material litigation
threatened against the Company.
Common Stock Eligible for Future Sale. Sales of shares of Common Stock
by existing stockholders under Rule 144 of the Securities Act or through the
exercise of outstanding registration rights, or the issuance of shares of Common
Stock upon conversion of the Series F Preferred Stock, exercise of the Warrants,
and/or exercise of options or other warrants to purchase Common Stock could
materially adversely affect the market price of the Common Stock and could
materially impair the Company's future ability to raise capital through an
offering of equity securities. A substantial number of shares of Common Stock
are available for sale under Rule 144 in the public market and no predictions
can be made as to the effect. If any, that market sales of such shares or the
availability of such shares for future sale will have on the market price of the
Common Stock prevailing from time to time.
9
<PAGE>
THE COMPANY
General
- -------
The Company was formed to capitalize on, and is designed to generate
revenues and profits primarily from, the licensing of its proprietary
technologies and inventions to manufacturers. The Company is in the business of
identifying, developing, patenting, supporting and marketing technologies and
inventions in the electronic display information industry. The Company commenced
shipping its first product, the Digital Home Theater(TM), in March 1997. The
Digital Home Theater(TM) is a versatile, large-screen projection system that
offers consumers both a T.V. and computer display screen in family usable sizes.
The Company's Digital Home Theater(TM) incorporates a 60" rear-projection
television with a front-projection system and a large-screen SVGA computer
monitor, all in one product, which has the capability of producing image sizes
ranging from 60 to 200 inches in diameter. The product, which will initially
retail under the Company's own brand name for approximately $10,000 each, is
designed to be purchased in a three box set and can be taken home and assembled
by the consumer without tools. The Digital Home Theater(TM) integrates Texas
Instruments' DLP projection technology with the Company's patented dual use
"docking station," an innovative cabinet design allowing for interchangeable use
of rear and front projection. The Company has also entered into an agreement
with the Boxlight Corporation, an established marketer and distributor of
commercial video display systems, whom, in 1996. The Company believes that its
agreements with Nobody Beats the Wiz and The Boxlight Corporation will result in
material sales to the Company inasmuch as both of these companies are
established marketers and distributors of video display products in their
respective fields.
In addition to its agreements with Texas Instruments and the Boxlight
Corporation, the Company has contracted with C-MAC Electronic Systems, Inc., a
Canadian-based company that provides sophisticated contract manufacturing
services, to manufacture the projector that houses the Texas Instrument DLP
light engine. The three main components of the DHT, the projector, cabinet and
screen, are assembled and shipped to end-users by the LDM Corporation, an
experienced, private United States concern based in Detroit, Michigan that
specializes in plastic design and molding. The Company has also retained the
Hamilton Group to provide customer service, as well as to gather and analyze
information regarding consumer reaction to the Digital Home Theater(TM).
Finally, although the Company belives that its product has application
in the military market, no agreement has been entered into with respect to this
potential market for the Company's product.
On January 8, 1998, the Company's majority owned subsidiary, Tamarack
Storage Devices, Inc., effected a reverse merger into Grand Enterprises, Ltd.,
a company whose securities are traded on the OTC Bulletin Board, and in
connection therewith, Grand Enterprises, Ltd. changed its name to Manhattan
Scientifics, Inc. As a consequence of this transaction, the Company became the
majority owner of Manhattan Scientifics, Inc. and Tamarack Storage Devices,
Inc. became a wholly-owned subsidiary of Manhattan Scientifics, Inc.
On January 20, 1998, the Company signed a definitive Acquisition
Agreement to acquire all of the assets of Vidikron Industries, S.p.A., including
its American owned subsidiary, Vidikron of America, Inc. ("Vidikron") relating
to Vidikron's manufacturing, marketing, sale and distribution of high-end home
theater products. In accordance with the definitive acquisition agreement, the
Company advanced Vidikron $1,000,000 towards the purchase price on a
non-refundable basis during the first quarter of 1998. In April 1998 the Company
entered into an agreement with Vidikron extending the closing date of the
transaction from April 30, 1998 to July 31, 1998, subject to a further automatic
additional extension of up to an additional sixty (60) days to September 30,
1998 under certain circumstances ("The April Extension"). Pursuant to the April
Extension, the Company had advanced to Vidikron an additional $1,000,000
nonrefundable payment towards the purchase price and agreed to other revised
terms and conditions. The Company does not presently have the funding to effect
the acquisition of Vidikron, although the Company has received and accepted an
investment proposal from a major U.S. Institutional investment firm committing
$5.0 million in equity capital, subject to the Company raising an aggregate of
$15.0 million (inclusive of the institutional union's $5.0 million) and the
satisfaction of a number of other terms and conditions. The Company's agreement
with Vidikron to close the acquisition is expressly subject to the satisfactory
completion by the Company of all due diligence and obtaining the requisite
financing to complete the transaction. There can be no assurance that the
Company will be able to secure the necessary financing, or that it will be able
to satisfy all of the other terms and conditions imposed by the institutional
investor.
10
<PAGE>
Recent Financings
- -----------------
In February, 1996, the Company completed a private placement to
non-U.S. investors in accordance with Regulation S promulgated under the
Securities Act in which it issued an aggregate of $10,000,000 of unsecured
convertible debentures (the "Convertible Debentures") resulting in net
proceeds to the Company of $9,500,000. The Convertible Debentures bore
interest at the rate of 8% per annum, payable quarterly in arrears until the
principal is paid in full or has been converted. After sixty (60) days from
issuance, up to 50% of the Convertible Debentures were convertible into Common
Stock, at the option of the holder, and after ninety (90) days, all or any
portion of the Convertible Debentures were convertible into Common Stock at
the option of the holder. The conversion price of the Convertible Debentures
were equal to 75% of the then current market price per share of the Common
Stock. The Convertible Debentures matured in three (3) years, at which time
any Convertible Debentures then outstanding are repayable by the Company in
cash or in the Company's Common Stock, at the sole option of the Company. The
Company has converted or refinanced the majority of the Convertible
Debentures, as more fully described below.
In June of 1996, the Company issued an aggregate of $7,500,000 of a
newly created Series C Preferred Stock to an Austrian financial institution
pursuant to Regulation D promulgated under the Securities Act, resulting in net
proceeds to the Company of $7,000,000. The net proceeds from the sale of the
Series C Convertible Preferred Stock were used primarily to retire unconverted
portions of the convertible debt issued in February 1996. There currently
remains $625,000 of convertible debt. At the present time, all of the shares of
the Series C Preferred Stock has been converted into the Company's Common Stock.
For a description of the terms and conditions of the Series C Preferred Stock,
see "Description of Capital Stock - Preferred Stock - Series C Preferred Stock."
In connection with the sale of the Series C Preferred Stock the Company
also issued 750,000 common stock purchase warrants to the purchaser of the
Series C Preferred Stock to purchase 750,000 shares of Common Stock; 250,000 of
which are exercisable for three (3) years commencing December 31, 1997 for $5.00
per share; 250,000 of which are exercisable for three (3) years commencing
December 31, 1998 for $3.75 per share; and 250,000 of which are exercisable for
three (3) years commencing December 31, 1999 for $2.50 per share.
In January of 1997, the Company issued an aggregate of 35,000 shares of
6% Series D convertible preferred stock to two foreign institutional investors
for an aggregate purchase price of $3,500,000, resulting in net proceeds to the
Company of $3,500,000. In connection therewith, the Company issued 210,000
common stock purchase warrants to purchase 210,000 shares of common stock at
various prices. These warrants were subsequently extinguished and replaced by
the warrants referred to in the immediately following paragraph.
In October, 1997 the two (2) foreign institutional investors
transferred, with the consent of the Company, all of the Series D Preferred
Stock and common stock purchase warrants issued in connection therewith to two
other institutional investors. In connection with such transfer, the Series D
Preferred Stock was restructured such that each share of Series D Preferred
Stock is now convertible, at the option of the holder, into shares of the
Company's Common Stock as follows: 20% of the Series D Preferred Stock is
convertible on or after February 10, 1998; 20% of the Series D Preferred Stock
is convertible on or after March 10, 1998; 20% of the Series D Preferred Stock
is convertible on or after April 10, 1998; 20% of the Series D Preferred Stock
is convertible on or after May 10, 1998; and the remaining 20% of the Series D
Preferred Stock is convertible on or after June 10, 1998. The Series D Preferred
Stock is convertible into Common Stock at a 25% discount to the then current
market price of the Company's Common Stock at the time of conversion (the
"Series D Conversion Price"). In addition, the two(2) new institutional
investors received an aggregate of 310,000 common stock purchase warrants to
purchase 310,000 shares of common stock at a purchase price of $1.625. The
Company has the right to redeem the Series D Preferred Stock, in whole or in
part, at any time as follows: up to and through February 10, 1998, at par (plus
all accrued dividends thereon); for the next thirty days (i.e., through March
12, 1998) at a redemption premium of 10% (plus all accrued and unpaid dividends
thereon); for the thirty day period subsequent to March 12, 1998 (i.e., through
April 11, 1998) at a redemption premium of 20% (plus all accrued and unpaid
dividends thereon), and after April 11, 1998, the redemption premium shall be
30%.
11
<PAGE>
In July of 1997, the Company issued an aggregate of 1,000 shares of 8%
Series E Convertible Preferred Stock to a foreign, institutional investor for an
aggregate purchase price of $1,000,000, resulting in net proceeds to the Company
of $1,000,000. In connection with such investor purchasing an additional
$500,000 of Series E Preferred Stock as more fully described below, the Series E
Preferred Stock has been restructured such that each share of Series E Preferred
Stock is convertible, at a 25% discount to the then current market price of the
Company's Common Stock at the time of conversion, into shares of the Company's
Common Stock. In connection with the sale of the Series E Preferred Stock the
Company issued 60,000 common stock purchase warrants to purchase 60,000 shares
of Common Stock at an exercise price of $1.625 per share.
In connection with the sale of the Series E Preferred Stock, the
Company also issued an aggregate of 60,000 common stock purchase warrants to
the purchaser of the Series E Preferred Stock to purchase an aggregate of 60,000
shares of Common Stock at an exercise price of $1.625 per share.
In December of 1997 the Company agreed to issue an additional 650
shares of Series E Preferred Stock to the same investor on the same terms and
conditions for $500,000 and 39,000 common stock purchase warrants to purchase
39,000 shares of Common Stock at an exercise price of $1.625.
In December of 1997 the Company also agreed, in consideration of gross
proceeds of $1,600,000, to issue an aggregate of 16,000 more share of Series D
Preferred Stock on the same terms and conditions and 96,000 common stock
purchase warrants to purchase 96,000 shares of Common Stock at an exercise price
of $1.625 per share to the two (2) new institutional investors who acquired the
Series D Preferred Stock in October 1997. In connection with the sale of these
additional shares of Series D Preferred Stock the Company is obligated to pay a
broker's fee of $75,000.
In February of 1998, the Company issued an aggregate of 2,850 shares of
Series F Convertible Preferred Stock to a foreign, institutional investor for an
aggregate purchase price of $2,850,000, resulting in net proceeds to the Company
of approximately $2,500,000. In connection therewith, the Company issued an
aggregate of 225,000 Series F warrants to purchase 225,000 shares of Common
Stock at an exercise price of $.97 per share. The Series F Convertible Preferred
Stock is generally convertible with shares of the Company's Common Stock at a
25% discount to the average of the closing market price of the Common Stock at
the time of conversion (plus a conversion premium of 8% per annum of the
principal amount outstanding); provided that the Series F Preferred Stock is
generally not convertible at a price of less than $.50 per share and in no event
is the Series F Preferred Stock convertible at a price of more than $1.00 per
share. In the event that the Company does not consummate a private placement or
at least $10,000,000 of equity securities to effect the Vidikron acquisition or
achieve gross revenues of at least $10,000,000 by June 30, 1998, neither of
which will occur, then the minimum conversion price of $.50 per share will be
eliminated and there shall no longer be a minimum conversion price with respect
to the Series F Preferred Stock; provided, however, that in the event subsequent
to June 30, 1998, either of the foregoing conditions are satisfied, then the
$.50 minimum conversion price will automatically be reinstated. The Series F
Preferred Stock is not convertible into Common Stock until August 16, 1998 and
subsequent to August 16, 1998, in increments of 570 shares of Series F Preferred
Stock every thirty (30) days thereafter. The Company has the right to redeem to
Series F Preferred Stock in whole or in part at any time at a premium of 12.5%
until May 18, 1998, at a premium of 25% until August 16, 1998, and for the
benefit of the bargain thereafter. See "Description of Securities - Series F
Preferred Stock."
In May and July of 1998, the Company issued an aggregate of 800,000
shares of Common Stock to a domestic institutional investor for an aggregate
purchase price of $500,000 resulting in net proceeds to the Company of $500,000.
In addition, the Company issued an option to the institutional investor to
acquire up to an additional 3,333,333 shares of Common Stock, exercisable for
nominal consideration, in the event that upon the resale of 666,667 shares of
Common Stock the institutional investor has not received an average price of at
least $1.00 per share when aggregating the proceeds from the sale of all 666,667
shares.
12
<PAGE>
In May and July of 1998, the Company also issued an aggregate of
1,000,000 shares of Common Stock and 2,000 shares of Series G Convertible
Preferred Stock to an individual investor for an aggregate purchase price of
$2,000,000 resulting in net proceeds to the Company of $1,860,000. In June and
July of 1998, the Company issued an additional 200,000 shares of Common Stock
and 400 shares of Series G Convertible Preferred Stock to an institutional
foreign investor for an aggregate purchase price of $400,000 resulting in net
proceeds to the Company of $372,000. The Series G Preferred Stock is redeemable
by the Company at its option for 120 days after its issuance at a 20% premium.
In addition, the institutional foreign investor has the right to cause the
Company to redeem its Series G Preferred Stock for a 20% premium in the event
that the Company's shares of Common Stock are not listed on the Nasdaq SmallCap
Market or Bulletin Board. The purchasers of the Series G Preferred Stock also
received an aggregate of 180,000 Series G Warrants to purchase 180,000 shares of
Common Stock at an exercise price of $.625 per share. The Company also issued
100,000 common stock purchase warrants to purchase 100,000 shares of Common
Stock exercisable at $.625 per share in connection with the issuance of the
Series G Preferred Stock to the individual investor. All of the Series G
Preferred Stock is convertible commencing on July 1, 1998 at a 30% discount to
the then current market price of the Company's Common Stock at the time of
conversion (plus accrual dividends of 6% per annum) into shares of the Company's
Common Stock, although in no event is the Series G Preferred Stock convertible
at a price of more than $1.375 per share. See "Description of Securities --
Series G Preferred Stock."
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management discussion and analysis should be read in
conjunction with the financial statements and notes thereto.
As of March 31, 1998, the Company had working capital of approximately
$1,107,040. To date, the Company has funded its operations primarily from sales
of capital stock. In May 1998, the Company completed the 1998 Private Placements
for an aggregate of $5,350,000 in gross proceeds, resulting in net proceeds of
approximately $4,860,000 and in connection therewith, issued 666,667 shares of
Common Stock, 2,850 shares of Series F Preferred Stock, and 2,000 shares of
Series G Preferred Stock. The sale of securities was used to fund working
capital, to purchase components with respect to the Digital Home Theater, and to
fund the payment of $2,000,000 towards the acquisition of Vidikron. As of March
31, 1998, the Company had cash and cash equivalents of $899,166.
The Company also intends to rely on arrangements with retailers and
contract manufacturers in connection with meeting the balance of the capital
requirements necessary for the Company to manufacture, market and distribute the
Digital Home Theater. Specifically, the Company has negotiated sixty (60) day
payment terms with all of those entities that manufacture components of the
Digital Home Theater, while at the same time requiring retailers to pay the
Company within 45 days, or alternatively within 30 days with a 2% discount.
Further, the Company's agreement with the Boxlight Corporation, which sells the
Digital Home Theater to the consumer market, requires the Boxlight Corporation
to pay the Company in full upon receipt of the merchandise. The Company emerged
from the development stage in the fourth quarter of 1997 and, through March 31,
1998, its sole revenues have been $1,455,000 in fees and approximately
$1,432,000 from the sale of the Digital Home Theater. Of such fees, $1,000,000
was derived from a government agency to develop certain projection technology
for use in a high definition television projector and the remaining balance,
$455,000, from licensing agreements. The Company has completed research and
development with respect to the Digital Home Theater projector, although certain
engineering refinements are still ongoing, including optimizing picture
brightness for a new rear projection system.
Primarily as a result of work performed in developing its technology,
the Company has sustained losses aggregating approximately $47,500,000 from its
inception to March 31, 1998. The Company has continued to incur losses since
March 31, 1998. As of December 31, 1997, the Company had available for Federal
income tax purposes net operating and capital loss carry-forwards of
approximately $29,500,000. The Internal Revenue Code of 1986, as amended, may
impose certain restrictions on the amount of net operating loss carry-forwards
which may be used in any year by the Company.
13
<PAGE>
SELLING STOCKHOLDERS
The shares being offered for resale by the Selling Stockholders were
acquired in connection with the 1998 Private Placements and the settlement of
the Company's litigation with Eugene Dolgoff and consists of: (i) the shares of
Common Stock issuable upon the conversion of or otherwise with respect to the
Series F Preferred Stock and the Series G Preferred stock; (ii) the Private
Shares, and (iii) upon exercise of the Warrants and the Options. In connection
with the 1998 Private Placements and the settlement of the litigation, the
Company granted the Selling Stockholders certain registration rights pursuant to
which the Company agreed to keep the Registration Statement, of which this
Prospectus is a part, effective until the date that all of such Shares have been
sold pursuant to the Registration Statement. The Company has agreed to indemnify
the Selling Stockholders and each of their officers, directors, members,
employees, partners, agents and each person who controls any of the Selling
Stockholders against certain expenses, claims, losses, damages and liabilities
for any action, proceeding or inquiry by any regulatory or self-regulatory
organization in respect thereof. The Company has agreed to pay its expenses of
registering the Shares under the Securities Act, including registration and
filing fees, blue sky expenses, printing expenses, accounting fees,
administrative expenses and its own counsel fees.
The following table sets forth the name of each Selling Stockholder,
the number of shares of Common Stock beneficially owned by such Selling
Stockholder as of July 22, 1998 and the number of shares being offered by each
Selling Stockholder. The shares being offered hereby are being registered to
permit public secondary trading, and the Selling Stockholders may offer all or
part of the Shares for resale from time to time. However, such Selling
Stockholders are under no obligation to sell all or any portion of such Shares
nor are such Selling Stockholders obligated to sell any shares immediately under
this Prospectus. All information with respect to share ownership has been
furnished by the Selling Stockholders. Because the Selling Stockholders may sell
all or part of their shares, no estimates can be given as to the number of
shares that will be held by any Selling Stockholders upon termination of any
offering made hereby. See "Plan of Distribution".
In the case of the Shares underlying the Series F Preferred Stock, the
number of Shares owned and offered for sale hereby represents an estimate of the
number of shares of Common Stock issuable upon conversion of the Series F
Preferred Stock, based on 200% of the number of shares of Common Stock issuable
at a conversion price of $.675 and in certain other events described in the
Certificate of Designation.
In the case of the Shares underlying the Series G Preferred Stock, the
number of Shares owned and offered for sale hereby represents an estimate of the
number of shares of Common Stock issuable upon conversion of the Series G
Preferred Stock, based on 180% of the number of shares of Common Stock issuable
at a conversion price of $.60 in accordance and in certain other events
described in the Certificate of Designation.
14
<PAGE>
<TABLE>
<CAPTION>
Number of Number of
Shares Shares
Beneficially Beneficially
Owned Number of Owned
Prior to Shares to After this
Name and Address Offering(1) be Offered Offering(1)(2)
- ---------------- ------------ -------------- -------------
<S> <C> <C> <C>
Zanett Lombardier, Ltd. 8,594,444(3)(4) 8,594,444(3)(4) 0
Tower 49
31st Floor
12 E. 47th Street
New York, NY 10017
The Zanett Securities 75,000(5) 75,000(5) 0
Corporation
Tower 49
31st Floor
12 E. 47th Street
New York, NY 10017
Zubair Kazi 7,150,000(6)(7) 7,150,000(6)(7) 0
3671 Sunswept Drive
Studio City, CA 91604
Harbor View Fund, Inc. 4,133,333(8) 4,133,333(8) 0
488 Madison Avenue
New York, New York 10022
Corbin Silverman & Sanseverino 25,000(9) 25,000(9) 0
805 Third Avenue
New York, New York 10022
Eugene Dolgoff 100,000(10) 100,000(10) 0
936 Rosbury Drive
Westbury, New York 11590
Rockwood, Inc. 100,000(11) 100,000(11) 0
200 Park Avenue
New York, New York 10166
RBB Bank
Burgring 16
8010 Graz, Austria 1,430,000(6)(12) 1,430,000(6)(12)
---------- ---------- --------
TOTAL 21,607,777 21,607,777(3)(4)(5)(6)(7) 0
(8)(9)(10)(11)(12)
</TABLE>
- -------------------
(1) Except as set forth in footnotes (4) and (6) below, beneficial ownership is
determined in accordance with Rule 13d-3 of the Exchange Act. The persons
named in the table above have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by them.
(2) Assumes all Shares offered hereby are sold in the Offering.
(3) Includes 150,000 shares of Common Stock issuable upon exercise of the
Series F Warrants.
<PAGE>
(4) The number of shares of Common Stock set forth in the table represents an
estimate of the number of shares of Common Stock to be offered by the
Selling Stockholder, based on 200% of the number of shares of Common Stock
that would have been issuable upon conversion of the Series F Preferred
Stock at a conversion price of $.50 per share (8,444,444 shares). The
actual number of shares of Common Stock issuable upon conversion of the
Series F Preferred Stock is determined by a fomula based on the market
price at the time of conversion, is therefore subject to adjustment and
could be materially less or more than such estimated number depending on
factors that cannot be predicted by the Company. Specifically, at any given
time, the Series F Preferred Stock is convertible into a number of shares
of Common Stock determined by dividing the sum of (a) the stated value of
the Series F Preferred Stock and (b) a premium amount equal to 8% (on an
annualized basis) of the principal outstanding amount of the Series F
Preferred Stock, by the then applicable conversion price (calculated
generally as 75% of the average closing bid price of the Common Stock for
the five (5) consecutive trading days immediately preceding the date of
determination) subject to certain restrictions and adjustments, including a
general prohibition of conversions at less than $.50 per share and an
absolute prohibition of conversions at greater than $1.00 per share. In the
event that the Company does not consummate a private placement of at least
$10,000,000 of equity securities to effect the Vidikron acquisition or
achieve gross revenues of at least $10,000,000 by June 30, 1998, neither of
which will occur, then the minimum conversion price of $.50 per share will
be eliminated and there shall no longer be a minimum conversion price with
respect to the Series F Preferred Stock; provided, however, that in the
event subsequent to June 30, 1998, either of the foregoing conditions are
satisfied, then the $.50 minimum conversion price will automatically be
reinstated. The Shares offered hereby, and included in the Registration
Statement of which this Prospectus is a part, include such additional
number of shares of Common Stock as may be issued or issuable upon
conversion of the Series F Preferred Stock by reason of the floating rate
conversion price mechanism or other adjustment mechanisms described in the
Certificate of Designation for the Series F Preferred Stock pursuant to the
terms of the Series F Preferred Stock and the Series F Warrants, the Shares
of Series F Preferred Stock and the Series F Warrants are convertible or
exercisable by any holder only to the extent that the number of shares of
Common Stock thereby issuable, together with the number of shares of Common
Stock owned by such holder and its affiliates (but not including shares of
Common Stock underlying unconverted shares of Series F Preferred Stock or
unexercised portions of the Series F Warrants) would not exceed 4.99% of
the then outstanding Common Stock as determined in accordance with Section
13(d) of the Exchange Act; provided, however, such 4.99% limitation may be
waived by the holders of the Series G Preferred Stock on 61 days notice to
the Company. Accordingly, the number of Shares set forth in the table for a
Selling Stockholder may exceed the number of Shares that such Selling
Stockholder could own beneficially at any given time through such Selling
Stockholder's ownership of the Series F Preferred Stock and the Series F
Warrants. In that regard, beneficial ownership of such Selling Stockholder
set forth in the table is not determined in accordance with Rule 13d-3
under the Exchange Act. Mr. Claudio Guazzoni, a managing director of Zanett
Lombardier, Ltd., has voting control and investment power with respect to
the securities owned by Zanett Lombardier, Ltd.
(5) Includes 75,000 shares of Common Stock issuable upon exercise of the
Series F Warrants. Mr. Claudio Guazzoni, an executive officer of The Zanett
Securities Corporation, has voting control and investment power with
respect to the securities owned by The Zanett Securities Corporation.
<PAGE>
(6) The number of shares of Common Stock set forth in the table includes an
estimate of the number of shares of Common Stock to be offered by the
Selling Stockholder, based on 180% of the number of shares of Common Stock
that would have been issuable upon conversion of the issuance of all of the
Series G Preferred Stock at a conversion price of $.60 per share (7,200,000
shares in the aggregate for all holders of Series G Preferred Stock). The
actual number of shares of Common Stock issuable upon conversion of the
Series G Preferred Stock is determined by a fomula based on the market
price at the time of conversion, is therefore subject to adjustment and
could be materially less or more than such estimated number depending on
factors that cannot be predicted by the Company. Specifically, at any given
time, the Series G Preferred Stock is convertible into a number of shares
of Common Stock determined by dividing the sum of (a) the stated value of
the Series G Preferred Stock and (b) a dividend to 6% (on an annualized
basis) of the principal outstanding amount of the Series G Preferred Stock,
by the then applicable conversion price (calculated as 70% of the average
closing bid price of the Common Stock for the five (5) consecutive trading
days immediately preceding the date of determination) subject to an
absolute prohibition of conversions at greater than $1.375 per share. The
Shares offered hereby, and included in the Registration Statement of which
this Prospectus is a part, include such additional number of shares of
Common Stock as may be issued or issuable upon conversion of the Series G
Preferred Stock by reason of the floating rate conversion price mechanism
or other adjustment mechanisms described in the Certificate of Designation
for the Series G Preferred Stock. Pursuant to the terms of the Series G
Preferred Stock and the Series G Warrants, the Shares of Series G Preferred
Stock and the Series G Warrants are convertible or exercisable by any
holder only to the extent that the number of shares of Common Stock thereby
issuable, together with the number of shares of Common Stock owned by such
holder and its affiliates (but not including shares of Common Stock
underlying unconverted shares of Series G Preferred Stock or unexercised
portions of the Series G Warrants) would not exceed 4.99% of the then
outstanding Common Stock as determined in accordance with Section 13(d) of
the Exchange Act; provided, however, such 4.99% limitation may be waived
by the holder of the Series G Preferred Stock on 61 days notice to the
Company. Accordingly, the number of Shares set forth in the table for a
Selling Stockholder may exceed the number of Shares that such Selling
Stockholder could own beneficially at any given time through such Selling
Stockholder's ownership of the Series G Preferred Stock and the Series G
Warrants. In that regard, beneficial ownership of such Selling Stockholder
set forth in the table is not determined in accordance with Rule 13d-3
under the Exchange Act.
(7) Includes 1,000,000 shares of Common Stock issued in connection with the
purchase of the Series G Preferred Stock and 150,000 shares of Common
Stock issuable upon exercise of Series G Warrants.
(8) Includes an option to purchase up to an additional 3,333,333 shares of
Common Stock exercisable for nominal consideration in the event that the
resale of the 666,667 shares included hereon do not result in aggregate
proceeds to the Selling Stockholder of at least $1.00 per share. Mr.
Kenneth Orr, a managing director of Harbor View Fund, Inc. has voting
control and investment power with respect to the securities owned by Harbor
View Fund, Inc.
(9) Represents shares of Common Stock issued in connection with the settlement
of litigation. John Gallagher, Esq., a partner of Corbin Silverman &
Sanseverino has voting control and investment power with respect to the
securities owned by Corbin Silverman & Sanseverino.
(10) Represents 100,000 shares of Common Stock issuable upon the exercise of
100,000 Common Stock purchase options, issued in connection with the
settlement of litigation.
(11) Represents 100,000 shares of Common Stock issuable upon the exercise of
100,000 Warrants. Mr. Sherwood P. Larkin, an executive officer of Rockwood,
Inc., has voting control and investment power with respect to the
securities owned by Rockwood, Inc.
(12) Includes 200,000 shares of Common Stock issued in connection with the
purchase of the Series G Preferred Stock and 30,000 shares of Common Stock
issuable upon exercise of Series G Warrants. Mr. Herbert Strauss, an
officer of RBB Bank, has voting control and investment power with respect
to the securities owned by the RBB Bank.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Through July 31, 1995 the Company made advances of approximately
$219,000 to another entity, whose president at the time was the brother of
Martin Holleran, the Company's President and Chief Operating Officer, in
contemplation of making an investment in such other entity. The Company
ultimately did not make such an investment and the advance was fully reserved
for on the Company's financial statements as of December 31, 1995. In November,
1996, in accordance with the agreement between the Company and the other entity
that was reached at the outset of the transaction, and that had been reviewed
and approved by the disinterested members of the Company's Board of Directors
prior thereto, $109,166 of the advance was repaid to the Company as a final
settlement of the amounts advanced. The Company's policy with respect to
affiliated transactions, which was followed in the instant case, is that all
such transactions are subject to the prior review and approval of the
disinterested members of the Company's Board of Directors.
PLAN OF DISTRIBUTION
The Shares may be sold or distributed from time to time by the Selling
Stockholders or by pledgees, donees or transferees of, or successors in interest
to, the Selling Stockholders, directly to one or more purchasers (including
pledgees) or through brokers, dealers or underwriters who may act solely as
agents or may acquire Shares as principals, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices, which may be changed. The distribution of the Shares
may be effected in one or more of the following methods (i) ordinary brokers
transactions, which may include long or short sales, (ii) transactions involving
cross or block trades or otherwise on the NASDAQ Smallcap Market, (iii)
purchases by brokers, dealers or underwriters as principal and resale by such
purchasers for their own accounts pursuant to this Prospectus, (iv) "at the
market" to or through other market makers or into an existing market for the
Common Stock, or (v) any combination of the foregoing, or by any other legally
available means. In addition, the Selling Stockholders or their successors in
interest may enter into hedging transactions with broker dealers who may engage
in short sales of shares of Common Stock in the course of hedging the positions
they assume with the Selling Stockholders. The Selling Stockholders or their
successors in interest may also enter into option or other transactions with
broker-dealers that require that delivery by such broker-dealers of the Shares,
which Shares may be resold thereafter pursuant to this Prospectus.
Brokers, dealers, underwriters or agents participating in the
distribution of the Shares may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders and/or the purchasers
of Shares for whom such broker-dealers may act as agent or to whom they may sell
as principal, or both (which compensation as to a particular broker-dealer may
be in excess of customary commissions). The Selling Stockholders and any broker-
dealers acting in connection with the sale of the Shares hereunder may be deemed
to be underwriters within the meaning of Section 2(11) of the Securities Act,
and any commissions received by them and any profit realized by them on the
resale of Shares as principals may be deemed underwriting compensation under the
Securities Act. Neither the Company nor any Selling Stockholder can presently
estimate the amount of such compensation. The Company knows of no existing
arrangements between any Selling Stockholder and any other Stockholder, broker,
dealer, underwriter or agent relating to the sale or distribution of the Shares.
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Each Selling Stockholder and any other persons participating in a
distribution of securities will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M, which may restrict certain activities of, and limit
the timing of purchases and sales of securities by, Selling Stockholder and
other persons participating in a distribution of securities. Furthermore, under
Regulation M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions subject to specified exceptions or exemption.
All of the foregoing may affect the marketability of the securities offered
hereby.
Any securities covered by this Prospectus that qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under that Rule rather
than pursuant to this Prospectus.
There can be no assurance that the Selling Stockholders will sell any
or all of the shares of Common Stock offered by them hereunder.
The Company will pay all of the expenses incident to the registration
of the shares of Common stock other than any fees or expenses of any counsel
retained by the Selling Stockholders and any out of pocket expenses incurred by
the Selling Stockholders or any person retained by the Selling Stockholders in
connection with the registration of the shares, fees and expenses of compliance
with state securities or blue sky laws and commissions and discounts of
underwriters, dealers or agents, if any. The espenses payable by the Company are
estimated to be $20,000.
USE OF PROCEEDS
All of the Shares offered hereby are being offered for the account of
the Selling Stockholders. Accordingly, the Company will not receive any of the
proceeds of any sales made hereunder, but will receive the exercise price of any
Warrants exercised by the Selling Stockholders. Any proceeds received from the
exercise of Warrants will be used for working capital and general corporate
expenses.
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DESCRIPTION OF CAPITAL STOCK
The authorized securities of the Company consists of 50,000,000
authorized shares of Common Stock, par value $.0001 per share, 28,425,602
shares of which were outstanding as of July 22, 1998; and 1,000,000 authorized
shares of preferred stock of which 100 shares of Series A Preferred Stock were
outstanding on July 22, 1998, 351,258 shares of Series B Preferred Stock were
outstanding on July 22, 1998, 3,690 shares of Series D Preferred Stock were
outstanding on July 22, 1998, 1,510 shares of Series E Preferred Stock were
outstanding on July 22, 1998, and 2,850 shares of Series F Preferred Stock were
outstanding on July 22, 1998 and 2,000 shares of Series G were outstanding on
July 22, 1998.
Common Stock
- ------------
Holders of Common Stock are entitled to dividends from funds available
therefor when, as and if declared by the Board of Directors of the Company and
are entitled to share ratably in all of the assets of the Company available for
distribution to holders of Common Stock upon the liquidation, dissolution or
winding up of the affairs of the Company after any priority distribution to
which holders of Series B Preferred Stock are entitled has been distributed.
Holders of Common Stock do not have preemptive, subscription or conversion
rights. There are no redemption of sinking fund provisions in the Company's
Restated Certificate of Incorporation. All shares of Common Stock to be sold by
the Company in this Offering will be fully paid and nonassessable.
Holders of Common Stock are entitled to one (1) vote for each share of
Common Stock held on record on matters submitted to a vote of stockholders. The
Common Stock does not have cumulative voting rights.
Preferred Stock
- ----------------
Series A Preferred Stock
------------------------
The Company has issued one hundred (100) shares of Series A Preferred
Stock, par value $.01 per share, to Martin D. Fife in connection with the
Merger. No other shares of Series A Preferred Stock are authorized or
outstanding. The holder of Series A Preferred Stock is entitled to a preference
of $1,000 per share ($100,000 in the aggregate) upon the liquidation,
dissolution or winding up of the affairs of the Company prior to any
distributions to which holders of Common Stock are entitled. After receipt of
such preferential distributions, the holder of Series A Preferred Stock, as
such, will not be entitled to any additional distributions. Except as required
by law, the holder of Series A Preferred Stock is not entitled to vote, receive
dividends and does not have any preemptive, subscription, conversion or
redemption rights.
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Series B Preferred Stock
The Company has issued and outstanding 351,258 shares of Series B
Preferred Stock as of July 22, 1998. The terms of the Series B Preferred Stock
are set forth in the Certificate of Designation and Preferences (the "Series B
Certificate") which is summarized below.
Voting Rights
The Series B Preferred Stock has no voting rights except as provided by
law.
Dividends
Holders of shares of Series B Preferred Stock are entitled to receive,
of, when and as declared by the Board of Directors out of funds legally
available therefor, cumulative annual dividends of $.40 per share or eight
percent (8%) per annum (based upon a liquidation preference of $5.00 per share)
solely in Common Stock. Such dividends shall be payable semi-annually on March
9th and September 9th of each year, to holders of record as of a record date no
more than fifty days prior to such dividend payment date as may be fixed by the
Board. Dividends on the Series B Preferred Stock will be cumulative and will
accrue from the date of initial issuance. Holders of the Series B Preferred
Stock shall not be entitled to any dividends, whether payable in cash, property
or securities, in excess of the full cumulative dividends. The amount of
dividends payable for the initial dividend period or any period shorter than a
full dividend period shall be computed on the basis of a 360-day year of twelve
30-day months.
If the Company pays all or any portion of a dividend in Common Stock,
the number of shares of Common Stock to be issued by the Company in payment of
such portion shall be the dollar amount of such portion divided by the Computed
Price (as defined below) of the Common Stock.
The "Computed Price" of a share of Common Stock, as defined in the
Series B Certificate, means the price equal the average Closing Sale Price of
the Common Stock for the twenty (20) consecutive trading days ending on the
fifth trading day prior to the applicable dividend payment date.
For purposes of this provision, the "Closing Sales Price" of the Common
Stock on any date means the closing sale price (or if no such price is reported,
the closing bid price) on such date as reported in the composite transactions
for the principal United States securities exchange on which the Common Stock is
traded or, if the Common Stock is not listed on a United States national or
regional stock exchange, as reported by NASDAQ or the National
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Quotation Bureau Incorporated, or if the Common Stock is not so listed and such
closing sale price and closing bid are not reported by NASDAQ or the National
Quotation Bureau Incorporated, then such price shall be determined by the Board
in good faith, such determination to be conclusive.
No interest or sum of money in lieu of interest shall be payable in
respect to any dividend payment or payments which may be in arrears.
Under Delaware law, cash dividends may be paid only out of unrestricted
and unreserved earned surplus, except that cash dividends may be paid on the
Series B Preferred Stock, in the absence of earned surplus, out of unrestricted
capital surplus in discharge of cumulative dividends. Stock dividends require
the availability of surplus at least to the extent of the aggregate par value of
the shares issued.
Conversion
Each share of Series B Preferred Stock may be converted by the holder
into one (1) share of Common Stock, subject to adjustment, commencing September
9, 1993.
The conversion rate is subject to adjustment upon the occurrence of
certain events, including (i) the payment of a dividend in shares of Common
Stock to holders of Common Stock or a dividend to holders of Common Stock
payable in shares of the Company's capital stock other than Common Stock; (ii)
the subdivision or combination of outstanding share of Common Stock; (iii)
issuance to all holders of Common Stock of rights and Public Redeemable Warrants
entitling them for a period of not more than forty-five (45) days to purchase
shares of Common Stock (or securities convertible into Common Stock) at a price
per share (or having a conversion price per share) less than the then current
per share market price for such Common Stock; and (iv) the distribution to all
holders of Common Stock of evidences of indebtedness or assets (excluding cash
dividends) or rights or Public Redeemable Warrants (other than those referred to
above). No adjustment of the conversion rate will be required until cumulative
adjustments would require an increase or decrease of at least 1% in the number
of shares of Common Shares into which each share of Series B Preferred Stock is
then convertible. No adjustment of the conversion rate will be made for cash
distributions or cash dividends.
The Company also has the option, exercisable at any time, to increase
the conversion rate, so long as such increase is for a minimum period of twenty
(20) days and is irrevocable during such period and the Company notifies holders
of Series B Preferred Stock at least fifteen (15) days prior to the date on
which the reduced conversion price takes effect.
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In case of any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the surviving
corporation, in case of any statutory exchange of securities with another
corporation, or in case of any sale or conveyance to another corporation of all
or substantially all of the assets of the Company, there will be no adjustment
of the conversion rate but each holder of a share of Series B Preferred Stock
then outstanding will have the right thereafter to convert such share solely
into the kind and amount of securities, cash or other property receivable upon
such consolidation, merger, statutory exchange, sale or conveyance by a holder
of the number of shares of Common Stock into which each such share of Series B
Preferred Stock might have been converted immediately prior to such
consolidation, merger, statutory exchange, sale or conveyance, assuming such
holder of Common Stock failed to exercise his rights of election, if any, as to
the kind or amount of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance (provided, that if
the kind or amount of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance is not the same
for each non-electing share, as to the kind and amount of securities, cash or
other property receivable upon such consolidation, merger, statutory exchange,
sale or conveyance for each non-electing share shall be deemed to be the kind
and amount so receivable per share by plurality of the non-electing share). In
the case of a cash merger of the Company into another corporation or any other
cash transaction of the type mentioned above, the effect of these provisions
would be that the conversion features of the Series B Preferred Stock would
thereafter be limited to converting the Series B Preferred Stock at the
conversion rate in effect at such time into the same amount of cash per share
that such holder would have received had such holder converted the Series B
Preferred Stock into Common Stock immediately prior to the effective date of
such cash merger or transaction. Depending upon the terms of such cash merger or
transaction, the aggregate amount of cash so received on conversion could be
more or less than the liquidation preference of the Series B Preferred Stock.
Liquidation Rights
In the event of any liquidation , dissolution or winding up of the
Company, the holders of shares of Series B Preferred Stock shall be entitled to
receive, from the Company's assets available for distribution to shareholders,
$5.00 per share plus accrued and unpaid dividends to the date fixed for
distribution before any distribution of assets may be made to holders of Common
Stock or any other class of stock of the Company or series thereof ranking
junior to the Series B Preferred Stock with respect to the distribution of
assets. If upon any liquidation, dissolution or winding up of the company, the
amounts payable with respect to
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the Series B Preferred Stock and any other shares of stock of the Company
ranking as to any such distribution on a parity with the Series B Preferred
Stock are not paid in full, the holders of the Series B Preferred Stock and of
such other shares will share ratably in any such distribution of assets of the
Company in proportion to the full respective preferential amounts to which they
are entitled. After payment of the full amount of the liquidating distribution
to which they are entitled, the holders of shares of Series B Preferred Stock
will not be entitled to any further participation in any distribution of assets
by the Company. Such liquidation rights are not triggered by any consolidation
or merger of the Company with or into any other corporations, or by any sale,
transfer or lease of all or substantially all of the Company's assets, provided
that in each case effective provision is made by the resulting and surviving
corporation or otherwise for the protection of the rights of the holders of
Series B Preferred Stock.
Optional Redemption
The Series B Preferred Stock may be redeemed by the Company commencing
September 9, 1994, if the Closing Sales Price of the Common Stock equals or
exceeds $5.00 for twenty (20) trading days within a period of thirty (30)
consecutive trading days ending no more than five days prior to the notice of
redemption. Subject to the foregoing, the Series B Preferred Stock is redeemable
at the option of the Company at any time as a whole or from time to time in
part, on at least 30 and not more than sixty (60) days notice.
The redemption price for each share of Series B Preferred Stock is
$1.00 per share.
On or after the redemption date, dividends will cease to accumulate on
shares of Series B Preferred Stock called for redemption provided that the
redemption price (including any accrued but unpaid dividends to the date fixed
for redemption) has been duly paid or provided for.
If fewer than all of the shares of Series B Preferred Stock are to be
redeemed at any time, the Company will select those to be redeemed pro rata, by
lot or by a substantially equivalent method.
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<PAGE>
Series D Preferred Stock
The Company has issued and outstanding 3,690 shares of Series D
Preferred Stock as of July 22, 1998. The terms of the Series D Preferred Stock
are set forth in the Certificate of Designation of Convertible Series D
Preferred Stock which is summarized below.
Voting Rights
The Series D Preferred Stock has no voting rights except as provided by
law.
Dividends
The holders of the Series D Preferred Stock are entitled to receive if,
when and as declared by the Board of Directors out of funds legally available
therefor, cumulative dividends, payable in cash or common stock of the Company,
par value $.0001 per share (the "Common Stock") at the Company's election, at
the rate of 6% per annum of the Liquidation Value of the Series D Preferred
Stock until and through June 30, 1997, at the rate of 6% per annum of the
Liquidation Value of the Series D Preferred Stock commencing July 1, 1997 until
and through June 30, 1998, and at the rate of 8% per annum of the Liquidation
Value of the Series D Preferred Stock commencing on July 1, 1998 and at any time
thereafter. The Liquidation Value shall be equal to $1,000.00 per share (the
"Dividend Rate"). The dividend is payable annually within seven (7) business
days after each of December 31 and June 30 of each year, commencing December 31,
1996 (each, a "Dividend Declaration Date"). Dividends shall be paid only with
respect to shares of Series D Preferred Stock actually issued and outstanding on
a Dividend Declaration Date and to the holders of record as of the Dividend
Declaration Date. Dividends shall accrue from the first day of the semi-annual
period in which such dividend may be payable. In the event that the Company
elects to pay dividends in Common Stock, each holder of Series D Preferred Stock
shall receive shares of Common Stock equal to the quotient of (i) the Dividend
Rate in effect on the applicable Dividend Declaration Date divided by (ii) the
average of the closing bid quotation of the Common Stock as reported on the
over-the-counter market, or the closing sale price if listed on a national
exchange, for the five (5) trading days immediately prior to the Dividend
Declaration Date (the "Stock Dividend Price").
Conversion
The holders of the Series D Preferred Stock shall have the right to
convert their shares of Preferred Stock into Common Stock at any time.
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<PAGE>
(a) Conversion Price. The Series D Preferred Stock is convertible
into shares of Common Stock based upon the product of (i) the average closing
bid quotation of the Common Stock as reported on the over-the-counter market, or
the closing sale price if listed on a national securities exchange, for the five
(5) trading days immediately preceding the date of the conversion notice
multiplied by (ii).75.
(b) Adjustments to Conversion Price for Stock Dividends and for
Combinations or Subdivisions of Common Stock. If the Company at any time or from
time to time while shares of Series D Preferred Stock are issued and
outstanding shall declare or pay, without consideration, any dividend on the
Common Stock payable in Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by stock split, reclassification or otherwise than by payment of a
dividend in Common Stock or in any right to acquire Common Stock), or if the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
then the Conversion Price in effect immediately
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<PAGE>
before such event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. If the Company shall
declare or pay, without consideration, any dividend on the Common Stock payable
in any right to acquire Common Stock for no consideration, then the Company
shall be deemed to have made a dividend payable in Common Stock in an amount of
shares equal to the maximum number of shares issuable upon exercise of such
rights to acquire Common Stock.
(c) Adjustments for Reclassification and Reorganization. If the
Common Stock issuable upon conversion of the Series D Preferred Stock shall be
changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares as herein
provided), the Conversion Price then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionately
adjusted so that the Series D Preferred Stock shall be convertible into, in lieu
of the number of shares of Common Stock which the holders would otherwise have
been entitled to receive, a number of shares of such other class or classes of
stock equivalent to the number of shares of Common Stock that would have been
subject to receipt by the holders upon conversion of the Series D Preferred
Stock immediately before that change.
Liquidation Preference.
The holders of shares of Series D Preferred Stock will be entitled to
receive, in the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, out of or to the extent of the net
assets of the Company legally available for such distribution, before any
distributions are made with respect to any Common Stock or any stock ranking
junior to the Series E Preferred Stock, $100.00 per share, plus any declared
but unpaid dividends (the "Liquidation Preference"). After payment of the full
amount of the Liquidation Preference, the holders of shares of Series D
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Company.
Series E Preferred Stock
The Company has issued and outstanding 1,510 shares of Series E
Preferred Stock as of July 22, 1998. The terms of the Series E Preferred Stock
are set forth in the Certificate of Designation of Convertible Series E
Preferred Stock which is summarized below.
Voting Rights
The Series E Preferred Stock has no voting rights except as provided by
law.
Dividends
The holders of the Series E Preferred Stock are entitled to receive if,
when and as declared by the Board of Directors out of funds legally available
therefor, cumulative dividends, payable in cash or common stock of the Company,
par value $.0001 per share (the "Common Stock") at the Company's election, at
the rate of 8% per annum of the Liquidation Value of the Series E Preferred
Stock. The Liquidation Value shall be equal to $1,000.00 per share (the
"Dividend Rate"). The dividend is payable annually within seven (7) business
days after each of December 31 and June 30 of each year, commencing December 31,
1997 (each, a "Dividend Declaration Date"). Dividends shall be paid only with
respect to shares of Series E Preferred Stock actually issued and outstanding on
a Dividend Declaration Date and to the holders of record as of the Dividend
Declaration Date. In the event that the Company elects to pay dividends in
Common Stock, each holder of Series E Preferred Stock shall receive shares of
Common Stock equal to the quotient of (i) the Dividend Rate in effect on the
applicable Dividend Declaration Date divided by (ii) the average of the closing
bid quotation of the Common Stock as reported on the over-the-counter market, or
the closing sale price if listed on a national exchange, for the five (5)
trading days immediately prior to the Dividend Declaration Date (the "Stock
Dividend Price").
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<PAGE>
Conversion
The holders of the Series E Preferred Stock shall have the right to
convert their shares of Preferred Stock into Common Stock at any time.
(a) Conversion Price. The term Series E Preferred Stock is
convertible into shares of Common Stock based upon the product of (i) the
average closing bid quotation of the Common Stock as reported on the
over-the-counter market, or the closing sale price if listed on a national
securities exchange, for the five (5) trading days immediately preceding the
date of the conversion notice referred to in Section 3(c) below multiplied by
(ii).75.
(b) Adjustments to Conversion Price for Stock Dividends and for
Combinations or Subdivisions of Common Stock. If the Company at any time or from
time to time while shares of Series E Preferred Stock are issued and outstanding
shall declare or pay, without consideration, any dividend on the Common Stock
payable in Common Stock, or shall effect a subdivision of the outstanding shares
of Common Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or if the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, then the Conversion Price in effect
immediately before such event shall, concurrently with the effectiveness of such
event, be proportionately decreased or increased, as appropriate. If the Company
shall declare or pay, without consideration, any dividend on the Common Stock
payable in any right to acquire Common Stock for no consideration, then the
Company shall be deemed to have made a dividend payable in Common Stock in an
amount of shares equal to the maximum number of shares issuable upon exercise of
such rights to acquire Common Stock.
(c) Adjustments for Reclassification and Reorganization. If the
Common Stock issuable upon conversion of the Series E Preferred Stock shall be
changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares as herein
provided), the Conversion Price then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionately
adjusted so that the Series E Preferred Stock shall be convertible into, in lieu
of the number of shares of Common Stock which the holders would otherwise have
been entitled to receive, a number of shares of such other class or classes of
stock equivalent to the number of shares of Common Stock that would have been
subject to receipt by the holders upon conversion of the Series E Preferred
Stock immediately before that change.
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Liquidation Preference.
The holders of shares of Series E Preferred Stock will be entitled to
receive, in the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, out of or to the extent of the net
assets of the Company legally available for such distribution, before any
distributions are made with respect to any Common Stock or any stock ranking
junior to the Series E Preferred Stock, $100.00 per share, plus any declared
but unpaid dividends (the "Liquidation Preference"). After payment of the full
amount of the Liquidation Preference, the holders of shares of Series D
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Company.
Series F Preferred Stock
The Company has issued and outstanding 2,850 shares of Series F
Preferred Stock as of July 22, 1998. The terms of the Series F Preferred Stock
are set forth in the Certificate of Designation of Convertible Series F
Preferred Stock which is summarized below.
Voting Rights
The Series F Preferred Stock has no voting rights except as provided by
law.
Dividends
The holders of the Series F Preferred Stock are entitled to receive if,
when and as declared by the Board of Directors out of funds legally available
therefor, cumulative dividends, payable in cash or common stock of the Company,
par value $.0001 per share (the "Common Stock") at the Company's election, at
the rate of 8% per annum of the Liquidation Value of the Series E Preferred
Stock. The Liquidation Value shall be equal to $1,000.00 per share (the
"Dividend Rate"). The dividend is payable annually within seven (7) business
days after each of December 31 and June 30 of each year, commencing December 31,
1997 (each, a "Dividend Declaration Date"). Dividends shall be paid only with
respect to shares of Series F Preferred Stock actually issued and outstanding on
a Dividend Declaration Date and to the holders of record as of the Dividend
Declaration Date. In the event that the Company elects to pay dividends in
Common Stock, each holder of Series F Preferred Stock shall receive shares of
Common Stock equal to the quotient of (i) the Dividend Rate in effect on the
applicable Dividend Declaration Date divided by (ii) the average of the closing
bid quotation of the Common Stock as reported on the over-the-counter market, or
the closing sale price if listed on a national exchange, for the five (5)
trading days immediately prior to the Dividend Declaration Date (the "Stock
Dividend Price").
<PAGE>
Conversion
In the absence of a default by the Company, the holders of the Series F
Preferred Stock shall not have the right to convert their shares of Preferred
Stock into Common Stock at any time prior to August 16, 1998, at which time the
holder of the Series F Preferred Stock can convert twenty (20%) percent of the
Series F Preferred Stock and an additional twenty (20%) percent of the Series F
Preferred Stock every thirty (30) days thereafter.
(a) Conversion Price. The Series F Preferred Stock is generally
convertible into shares of Common Stock based upon the product of the average
closing bid quotation of the Common Stock as reported on the NASDAQ SmallCap
Market for the five (5) trading days immediately preceding the date of the
conversion below multiplied by (ii).75; provided, however, that in general the
Series F Preferred Stock cannot be converted at a conversion price of less than
$.50 per share and in no event may the Series F Preferred Stock be converted at
a price in excess of $1.00 per share. In the event that the Company does not
consummate a private placement of at least $10,000,000 of equity securities to
effect the Vidikron acquisition or achieve gross revenues of at least
$10,000,000 by June 30, 1998, neither of which will occur, then the minimum
conversion price of $.50 per share will be eliminated and there shall no longer
be a minimum conversion price with respect to the Series F Preferred Stock;
provided however, that in the event subsequent to June 30, 1998, either of the
foregoing conditions are satisfied, then the $.50 minimum conversion price will
automatically be reinstated.
(b) Adjustments to Conversion Price for Stock Dividends and for
Combinations or Subdivisions of Common Stock. If the Company at any time or from
time to time while shares of Series F Preferred Stock are issued and outstanding
shall declare or pay, without consideration, any dividend on the Common Stock
payable in Common Stock, or shall effect a subdivision of the outstanding shares
of Common Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or if the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, then the Conversion Price in effect
immediately before such event shall, concurrently with the effectiveness of such
event, be proportionately decreased or increased, as appropriate. If the Company
shall declare or pay, without consideration, any dividend on the Common Stock
payable in any right to acquire Common Stock for no consideration, then the
Company shall be deemed to have made a dividend payable in Common Stock in an
amount of shares equal to the maximum number of shares issuable upon exercise of
such rights to acquire Common Stock.
(c) Adjustments for Reclassification and Reorganization. If the Common
Stock issuable upon conversion of the Series F Preferred Stock shall be changed
into the same or a different number of shares of any other class or classes of
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares as herein provided), the Conversion
Price then in effect shall, concurrently with the effectiveness of such
reorganization or reclassification, be proportionately adjusted so that the
Series F Preferred Stock shall be convertible into, in lieu of the number of
shares of Common Stock which the holders would otherwise have been entitled to
receive, a number of shares of such other class or classes of stock equivalent
to the number of shares of Common Stock that would have been subject to receipt
by the holders upon conversion of the Series F Preferred Stock immediately
before that change.
<PAGE>
Liquidation Preference.
The holders of shares of Series F Preferred Stock will be entitled to
receive, in the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, out of or to the extent of the net
assets of the Company legally available for such distribution, before any
distributions are made with respect to any Common Stock or any stock ranking
junior to the Series F Preferred Stock, $1000.00 per share, plus any declared
but unpaid dividends (the "Liquidation Preference"). After payment of the full
amount of the Liquidation Preference, the holders of shares of Series F
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Company.
Redemption
The Series F Preferred Stock can be redeemed by the Company in whole or
in part at any time and from time to time. In the event that the Company redeems
the Series F Preferred Stock on or before May 18, 1998, it will be required to
pay a 12.5% premium, in the event that the Series F Preferred Stock is redeemed
after May 18, 1988 but before August 16, 1998, the Company will be required to
pay a 25% premium; therefore, any redemption of the Series F Preferred Stock
shall be at the so-called benefit of the bargain. In addition, under certain
circumstances, the holder of the Series F Preferred Stock shall have the right
to cause the redemption of the Series F Preferred Stock.
Series G Preferred Stock
The Company has issued and outstanding 2,400 shares of Series G
Preferred Stock as of July 22, 1998. Ther terms of the Series G Preferred Stock
are set forth in the Certificate of Designation of Convertible Series G
Preferred Stock which is summarized below.
Voting Rights
The Series G Preferred Stock has no voting rights except as provided by
law.
Dividends
The holders of the Series G Preferred Stock are entitled to receive if,
when and as declared by the Board of Directors out of funds legally available
therefor, cumulative dividends, payable in cash or common stock of the Company,
par value $.0001 per share (the "Common Stock") at the Company's election, at
the rate of 6% per annum of the Liquidation Value of the Series E Preferred
Stock. The Liquidation Value shall be equal to $1,000.00 per share (the
"Dividend Rate"). The dividend is payable annually within seven (7) business
days after each of December 31 and June 30 of each year, commencing December 31,
1997 (each, a "Dividend Declaration Date"). Dividends shall be paid only with
respect to shares of Series G Preferred Stock actually issued and outstanding on
a Dividend Declaration Date and to the holders of record as of the Dividend
Declaration Date. In the event that the Company elects to pay dividends in
Common Stock, each holder of Series G Preferred Stock shall receive shares of
Common Stock equal to the quotient of (i) the Dividend Rate in effect on the
applicable Dividend Declaration Date divided by (ii) the average of the closing
bid quotation of the Common Stock as reported on the over-the-counter market, or
the closing sale price if listed on a national exchange, for the five (5)
trading days immediately prior to the Dividend Declaration Date (the "Stock
Dividend Price").
<PAGE>
Conversion
The holders of the Series G Preferred Stock shall not have the right
to convert their shares of Preferred Stock into Common Stock at any time prior
to July 1, 1998, at which time the holder of the Series G Preferred Stock can
convert the Series G Preferred Stock into Common Stock.
(a) Conversion Price. The Series G Preferred Stock is generally
convertible into shares of Common Stock based upon the product of the average
closing bid quotation of the Common Stock as reported on the NASDAQ SmallCap
Market for the five (5) trading days immediately preceding the date of the
conversion below multiplied by (ii).70; provided, however, that the Series G
Preferred Stock cannot be converted at a conversion price in excess of $1.375
per share.
(b) Adjustments to Conversion Price for Stock Dividends and for
Combinations or Subdivisions of Common Stock. If the Company at any time or
from time to time while shares of Series G Preferred Stock are issued and
outstanding shall declare or pay, without consideration, any dividend on the
Common Stock payable in Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by stock split, reclassification or otherwise than by payment of a
dividend in Common Stock or in any right to acquire Common Stock), or if the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
then the Conversion Price in effect immediately before such event shall,
concurrently with the effectiveness of such event, be proportionately
decreased or increased, as appropriate. If the Company shall declare or pay,
without consideration, any dividend on the Common Stock payable in any right
to acquire Common Stock for no consideration, then the Company shall be deemed
to have made a dividend payable in Common Stock in an amount of shares equal
to the maximum number of shares issuable upon exercise of such rights to
acquire Common Stock.
(c) Adjustments for Reclassification and Reorganization. If the Common
Stock issuable upon conversion of the Series G Preferred Stock shall be changed
into the same or a different number of shares of any other class or classes of
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares as herein provided), the Conversion
Price then in effect shall, concurrently with the effectiveness of such
reorganization or reclassification, be proportionately adjusted so that the
Series G Preferred Stock shall be convertible into, in lieu of the number of
shares of Common Stock which the holders would otherwise have been entitled to
receive, a number of shares of such other class or classes of stock equivalent
to the number of shares of Common Stock that would have been subject to receipt
by the holders upon conversion of the Series G Preferred Stock immediately
before that change.
<PAGE>
Liquidation Preference.
The holders of shares of Series G Preferred Stock will be entitled to
receive, in the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, out of or to the extent of the net
assets of the Company legally available for such distribution, before any
distributions are made with respect to any Common Stock or any stock ranking
junior to the Series G Preferred Stock, $1000.00 per share, plus any declared
but unpaid dividends (the "Liquidation Preference"). After payment of the full
amount of the Liquidation Preference, the holders of shares of Series G
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Company.
Redemption
The Series G Preferred Stock can be redeemed by the Company in whole or
in part by the Company giving written notice therof within 120 days after May 7,
1998, provided that the Comnpany actually redeems the Series G Preferred Stock
within thirty (30) days after the giving of said notice. In the event that the
Company redeems the Series G Preferred Stock it will be required to pay a 20%
premium. Up to 400 shares of Series G Preferred Stock are subject to mandatory
redemption by the Company at the Liquidation Preference in the event that the
Company's shares of Common Stock are not listed on the Nasdaq Small Cap Market
or the Nasdaq Bulletin Board.
Public Redeemable Warrants
The Public Redeemable Warrants were issued by the Company pursuant to
an agreement (the "Warrant Agreement") dated as of the effective date of the
initial public offering, July 24, 1990, by and between the Company and
Continental Stock Transfer & Trust Company (the "Warrant Agent"). The following
discussion of certain terms and provisions of the Public Redeemable Warrants
gives effect to the Company's March 1992 two-for-one stock split and is
qualified in its entirety by reference to the detailed
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<PAGE>
provisions of the Warrant Agreement, the form of which has been filed as an
exhibit to the Registration Statement relating to the Company's initial public
offering.
Each Public Redeemable Warrant presently represents the right of the
registered holder to purchase two (2) shares of Common Stock at an exercise
price of $1.50 per share until July 24, 1995, subject to adjustment (the
"Purchase Price"). The Company has the right to reduce the Purchase Price or
increase the number of shares issuable upon the exercise of Public Redeemable
Warrants commencing July 24, 1991. The Public Redeemable Warrants will be
entitled to the benefit of adjustments in the Purchase Price and in the number
of shares of Common Stock and/or other securities deliverable upon exercise
thereof in the event of a stock dividend, stock split, reclassification,
reorganization, consolidation or merger.
Each Public Redeemable Warrant expires on July 23, 1998 (the
"Expiration Date"), subject to extension. The Company may at any time extend the
Expiration Date of all outstanding Public Redeemable Warrants for such increased
period of time as it may determine.
At any time prior to the close of business on the Expiration Date (on
which date the Public Redeemable Warrants become wholly void and of no value),
the Public Redeemable Warrants may be exercised at the office of the Warrant
Agent except as otherwise set forth below.
Under the provisions of the Warrant Agreement, the Company has the
right at any time commencing on the later of January 24, 1991 or six months
after the Separation Date to redeem the Public Redeemable Warrants in whole for
cancellation at a price of $.10 each, by written notice mailed 30 days prior to
the redemption date to each Redeemable Warrant holder at his address as it
appears on the books of the Warrant Agent, such notice only to be given within
15 days following any period of 20 consecutive trading days during which the
average closing bid price for the shares of Common Stock (if then traded on the
National Association of Securities Dealers, Inc. Automated Quotation System or
on a national securities exchange) equals or exceeds $3.94 per share, subject to
adjustments for stock dividends, splits and the like. If the Public Redeemable
Warrants are called for redemption and cancellation, they must be exercised
prior to the close of business on the date of any such redemption and
cancellation or the right to purchase the applicable shares of Common Stock is
forfeited.
No holder, as such, of any Public Redeemable Warrant shall be entitled
to vote or receive dividends or be deemed the holder of shares of Common Stock
for any purpose whatsoever until such Public Redeemable Warrant has been duly
exercised and the
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<PAGE>
Purchase Price has been paid.
The Company is required either to maintain the effectiveness of the
Registration Statement or to file a new registration statement with the
Securities and Exchange Commission, with respect to the securities underlying
the Public Redeemable Warrants prior to the exercise of the Public Redeemable
Warrants and to deliver a prospectus as required by Section 10(a)(3) of the
Securities Act of 1933, as amended, with respect to such securities to all
Redeemable Warrant holders prior to the exercise or redemption of such Public
Redeemable Warrants.
Transfer Agent, Registrar and Warrant Agent
The Company has appointed Continental Stock Transfer & Trust Company, 2
Broadway, New York, NY 10004 as transfer agent and registrar for the Units, the
Common Stock and the Public Redeemable Warrants, and as Warrant Agent under the
Warrant Agreement.
MARKET FOR THE COMPANY'S COMMON EQUITY AND DIVIDENDS
The Company's Common Stock, Public Redeemable Warrants and Series B
Preferred Stock have been quoted on NASDAQ under the following symbols:
Common Stock: PJTV
Public Redeemable Warrants: PJTVW
Series B Preferred Stock: PJTVP
The Common Stock and Public Redeemable Warrants were initially
registered and traded as Units and were not separately transferrable until
August 24, 1991. The Units commenced trading in the over-the-counter market on
the closing of the Company's initial public offering on August 1, 1990.
On February 27, 1992 the Company announced a two-for-one stock split,
effective March 2, 1992. Accordingly, all quoted prices for the Company's
securities commencing with the first quarter of 1992 are adjusted to reflect the
March 1992 two-for-one stock split.
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<PAGE>
The Series B Preferred Stock was initially registered on September 9,
1992 in connection with the Company's Public Redeemable Warrant incentive
program (the "Warrant Incentive Program"). Prior to that time, there was no
public market for the Series B Preferred Stock. Pursuant to the Warrant
Incentive Program, holders of the Company's Public Redeemable Warrants who
exercised their Public Redeemable Warrants within 65 days after September 9,
1992 received one (1) share of Series B Preferred Stock for every three (3)
Public Redeemable Warrants exercised. In connection with the Warrant Incentive
Program, the Company issued 246,452 shares of Series B Preferred Stock.
The Common Stock is quoted on The NASDAQ Small Cap Market. There is no
public trading market for the Company's Series A Preferred Stock and only one
(1) holder thereof. The high and low bid quotations for the Common Stock, Public
Redeemable Warrants and Series B Preferred Stock for each full quarterly period
for the fiscal years ending December 31, 1995, December 31, 1996 and December
31, 1997 and with respect to the Common Stock for the second quarter of 1998
through June 25, 1998 are listed below:
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<PAGE>
PUBLIC
REDEEMABLE SERIES B
COMMON STOCK WARRANTS PREFERRED STOCK
1995 Calendar Quarter Quoted Bid Price Quoted Bid Price Quoted Bid Price
- --------------------- ----------------- ---------------- ----------------
High Low High Low High Low
------ ----- ------ ----- ------ -----
First Quarter 3.67 2.50 4.17 2.67 4.00 3.04
Second Quarter 3.30 1.81 3.17 1.33 3.58 2.29
Third Quarter 3.90 2.54 4.38 2.50 4.13 2.92
Fourth Quarter 5.52 3.44 7.83 5.33 5.83 4.25
PUBLIC
REDEEMABLE SERIES B
COMMON STOCK WARRANTS PREFERRED STOCK
1996 Calendar Quarter Quoted Bid Price Quoted Bid Price Quoted Bid Price
- --------------------- ----------------- ---------------- ----------------
High Low High Low High Low
------ ----- ------ ----- ------ -----
First Quarter 4.56 4.00 5.25 5.00 6.00 5.00
Second Quarter 3.56 2.19 4.00 3.25 4.00 3.00
Third Quarter 4.00 2.81 6.13 4.25 4.50 4.00
Fourth Quarter 3.69 2.56 6.50 5.50 3.50 2.75
PUBLIC
REDEEMABLE SERIES B
COMMON STOCK WARRANTS PREFERRED STOCK
1997 Calendar Quarter Quoted Bid Price Quoted Bid Price Quoted Bid Price
- --------------------- ----------------- ---------------- ----------------
High Low High Low High Low
------ ----- ------ ----- ------ -----
First Quarter 3.47 2.00 5.50 2.00 3.75 2.25
Second Quarter 2.68 1.63 6.50 3.0 3.00 2.00
Third Quarter 2.19 1.50 6.50 3.0 2.75 2.00
Fourth Quarter 2.06 .75 6.50 3.0 2.00 1.06
SERIES B
COMMON STOCK PREFERRED STOCK
1998 Calendar Quarter Quoted Bid Price Quoted Bid Price
- --------------------- ----------------- ----------------
High Low High Low
------ ----- ------ -----
First Quarter 1 7/16 5/8 1 1/2 15/16
Second Quarter
(through July 22, 1998) 1 13/64 -- --
On July 22, 1998, the closing bid and asked prices of Common Stock as
reported on the NASDAQ system were $.375 and $.40 per share, respectively. On
December 3, 1997, the last closing bid and asked prices of Public Redeemable
Warrants as reported on the NASDAQ system were $3.0 and $3.0 per Public
Redeemable Warrant, respectively. Since such date the Redeemable Warrants have
been de-listed from the Nasdaq SmallCap Market. On March 2, 1998, the last
closing bid and asked prices of Series B Preferred Stock on the NASDAQ system
were $15/16 and $1 5/16, respectively. Since such date the Series B Preferred
Stock has been de-listed from the Nasdaq Small Cap Market.
On July 22, 1998, there were 425 holders of record of
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<PAGE>
Common Stock and 23,545,021 shares of Common Stock issued and outstanding; 4
holders of record of Public Redeemable Warrants and 36,143 Warrants issued and
outstanding; and 6 holders of record of Series B Preferred Stock and 351,258
shares of Series B Preferred Stock issued and outstanding.
No cash dividends have been paid by the Company and management does not
anticipate paying cash dividends in the foreseeable future.
32
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock will be passed upon for the
Company by Zukerman Gore & Brandeis, LLP, New York, New York.
EXPERTS
The financial statements incorporated in this prospectus by reference
from the Company's Annual Report on Form 10-K for the year ended December 31,
1997 have been audited by Deloitte & Touche LLP, independent auditors as stated
in their report, which is incorporated herein by reference, which report
expresses an unqualified opinion, have been so incorporated in reliance of the
report of such firm given upon their authority as experts in auditing and
accounting.
AVAILABLE INFORMATION
The Company is subject to the information 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"). Reports, proxy
statements and other information filed by the Company in accordance with the
Exchange Act can be inspected and copies made at the public reference facilities
maintained by the Commission at Room 1204, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, DC 20549, Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, IL 60661 and 7 World Trade Center, New York, NY 10048.
Copies of such material can be obtained at prescribed rates from the public
reference section of the Commission at 450 Fifth Street, N.W., Washington, DC
20549. The Commission maintains a Web-site that contains reports, proxy and
information statements and other information regarding the Company that are on
file with the Commission. The address of the Commission's Web-site is
http://www.see.gov.
The Company has filed with the Commission a Registration Statement on
Form S-3 (including all amendments thereto, the "Registration Statement"), with
respect to the Securities offered hereby. As permitted by the rules and
regulations of the Commission, this Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information about the Company and the Securities
offered hereby, reference is made to the Registration Statement and the exhibits
thereto, which may be examined without charge at the public reference facilities
maintained by the Commission at Room 1204, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, DC 20549, and copies of which may be obtained from the
Commission upon payment of the prescribed fees.
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<PAGE>
No person has been authorized by the Company to give any
information or to make any representation other than as contained in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company. Neither the delivery of
this Prospectus nor any distribution of the shares of the Common Stock issuable
under the terms of this Prospectus, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof.
34
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representations not contained in this Prospectus and if given or
made, such information or representations must not be relied upon as having been
authorized by the Company or any Underwriter. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create any
implication that there has been no change in the affairs of the Company since
the date hereof. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to make such offer or solicitation in such
jurisdiction.
TABLE OF CONTENTS
Page
----
Incorporation of Certain
Documents by Reference....... 1
Prospectus Summary............ 2
Risk Factors.................. 3
The Company................... 10
Selling Stockholders.......... 14
Plan of Distribution.......... 16
Description of
Capital Stock................ 18
Market for the Company's
Common Equity
and Dividends............... 29
Legal Matters................. 33
Experts....................... 33
Available Information......... 33
PROJECTAVISION, INC.
21,607,777 Shares of Common Stock,
Offered by Selling Stockholders
----------------------------
PROSPECTUS
----------------------------
July 28, 1998
