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FILED PURSUANT TO RULE 424(b)(3)
FILE NO. 333-72797
SELLING SECURITY HOLDER PROSPECTUS
CHEQUEMATE INTERNATIONAL, INC.
DOING BUSINESS AS
C-3D DIGITAL, INC.
492,292 SHARES OF COMMON STOCK
This prospectus is intended only for the sale of shares issued
- to a shareholder of C-3D in a private placement, and
- to another selling security holder who received its shares from
the conversion of debentures and the exercise of warrants.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
The common stock offered hereby involves a high degree of risk.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
The common stock of C-3D is traded on the AMEX under the symbol DDD. On March
20, 2000, the last price for the common stock was $11.63 per share.
The date of this prospectus is March 28, 2000.
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SUMMARY OF THE OFFERING
C-3D has sold convertible debentures to raise capital for its operations. The
total amount of the purchase price for the debentures was $3,250,000. The holder
of the debentures has exercised the conversion rights described in the
debentures and obtained C-3D common stock upon the cancellation of the
debentures.
The purchaser of the debentures also received warrants which, if exercised,
entitle the holder of the warrants to an additional 27,377 shares of common
stock. If all of the warrants are exercised, an additional $390,134 will be paid
to the Company by the owner of the warrants.
The sale of the debentures and the warrants was facilitated by a company that
has also provided other services to C-3D pursuant to a written agreement. A
portion of the compensation exchanged by C-3D for these services consisted of
common stock of C-3D. The contract also provided that C-3D would register these
shares for sale to the public.
The shares that are being offered to you for purchase with this prospectus are
shares which are being sold by the two companies described above, or by
individuals or companies who have purchased the warrants or shares from the two
described companies. Such purchasers, if any, will be named in a post- effective
amendment to this prospectus.
Because the sale of the shares offered to you by this prospectus are owned by
the selling shareholders, the selling shareholders will receive the proceeds of
the sale. The sale of these shares is not intended to raise new capital for
C-3D. However, C-3D will receive proceeds from the exercise of warrants owned by
one of the selling security holders. If all warrants are exercised, C-3D will
receive $390,134. The proceeds generated upon an exercise of the warrants will
be used to pay general operating expenses of C-3D.
Your purchase price for the shares is not fixed, but will typically be
determined by the market price of the stock of C-3D at the time of your
purchase, or as a result of your negotiations with the selling shareholder.
C-3D does not intend to employ any sales representatives in this offering or pay
any commissions. Estimated costs of the offering are $61,000 and include
attorney fees, accounting, registration, printing and distribution costs. C-3D
will pay these costs of the offering.
C-3D's executive offices are located at 330 Washington Boulevard, Suite 507;
Marina del Rey, California 90292. Telephone numbers for the executive offices
are (310) 305-3659 and (801) 322-1111.
ALL SHARE AMOUNTS CONTAINED IN THIS PROSPECTUS ARE EXPRESSED AFTER GIVING EFFECT
TO A FOUR-TO-ONE REVERSE STOCK SPLIT OCCURRING FEBRUARY 2, 2000.
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RISK FACTORS
Before making an investment, you should carefully consider the following risks
and speculative factors, as well as the other information contained in this
prospectus.
1. OUR MAJOR 3D TELEVISION PRODUCT HAS NOT, AS YET, GAINED MARKET
ACCEPTANCE, AND WE HAVE NO ASSURANCE THAT IT WILL. Among the products offered by
C-3D, our current efforts to broadcast television programs in three dimensional
format must be considered novel and experimental. Particular risks of this
business segment would include the narrow range of broadcast programming
available in 3D and the fact that consumers may not be willing to incur the
added expense and effort of subscribing to this programming on a long term
basis. To view a 3D broadcast, viewers watch 3D television programming using
special glasses. This unique product must be considered experimental and there
may not be long term acceptance of this novel concept. You should consider, as a
risk factor, the possibility that you could invest in this offering and not
receive any return of investment, or lose your entire investment if the products
and services are not successfully marketed or are otherwise not commercially
accepted.
2. THE DISRUPTION RESULTING FROM OUR ACQUISITION OF THE STRATA ASSETS
THROUGH JUDICIAL FORECLOSURE PRESENTS CHALLENGES IN CAPTURING AND EXPANDING OUR
STRATA SOFTWARE MARKET. The Strata assets and technology, which are sold or
licensed by the 3D.COM division of C-3D, were acquired through the foreclosure
of purchased secured positions in such assets and technology. The effect of the
business disruption by this acquisition process and the ability of C-3D to
solidify relationships with the prior customer base or to expand the customer
base has yet to be fully determined.
3. THE PROFITABILITY OF OUR TELEVISION PAY-PER-VIEW BUSINESS WILL BE
DEPENDANT UPON OUR INTEGRATION OF THE ACQUIRED PAY-PER-VIEW ASSETS. Although
management of C-3D has extensive experience in the hotel pay-per-view business,
C-3D has only been conducting the pay-per-view business since December 1998. The
pay-per-view assets and contracts of C-3D have been acquired in two separate
asset acquisitions. These purchases were not acquisitions of complete businesses
with established operating histories, but were acquisitions of certain assets
only. Although the pay-per-view business is generally comprised of
self-contained operations at each hotel location, C-3D must yet be considered to
be in a formative phase of managing the newly acquired assets as a cohesive
business unit, and gaining the acceptance and confidence of the various hotel
site owners. The profitability of the C-3D pay-per-view business division will
be dependant upon our integration of the acquired pay-per-view assets.
4. WE HAVE YET TO GENERATE SIGNIFICANT REVENUES AND ANTICIPATE OUR LOSSES
MAY CONTINUE FOR AN INDEFINITE PERIOD OF TIME. In the nine months ending
December 31, 1999, C-3D had revenues of $2,644,478, with net losses of
$6,709,758. Losses have also been incurred in all prior reporting periods as
set-out in the attached financial statements. While revenues have increased, so
have operating expenses. C-3D cannot make any projection of when or if
profitable operations will be obtained.
5. WELL FINANCED COMPETITORS ARE DEVELOPING AND EXPERIMENTING WITH 3D
TECHNOLOGIES, AND COULD DOMINATE THE 3D TELEVISION MARKET WE ARE PURSUING. There
is substantial competition, both nationally and internationally, in the
electronics and media industries in which C-3D operates.
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Essentially all major television manufacturers are pursuing research and
development projects with 3D television. Virtually all major United States TV
channels have experimented with or have offered some 3D programming on a trial
basis. Each of these companies has assets, and research and development budgets,
greater than that of C-3D. No assurance can be made, despite the best efforts of
management, that other companies may not produce competitive products, services,
or devices at a lower price or that are a better product, which could cause C-3D
to be commercially unprofitable. In the rapidly developing field of 3D video
products, we can give no assurance that the copyrights, patents or pending
patent applications of C-3D will be able to protect us from direct competition
in the area of C-3D's high tech 3D products.
6. WE MUST RAISE ADDITIONAL FUNDS THROUGH PRIVATE DEBT OR THE SALE OF
STOCK IN ORDER TO SUSTAIN OPERATIONS. C-3D's cash requirements have been and
will continue to be significant. We expect we will need to raise additional
funds through private debt or equity financing in order to continue to support
current operations and develop our business plan. No assurance can be made that
C-3D will be able to raise sufficient capital to sustain operations or to meet
its growth projections. If additional funds are raised through the issuance of
equity securities, the percentage ownership of our stockholders at that time
will be reduced. We currently have incurred debt with private lenders and
anticipate incurring additional loan obligations to sustain current operations.
If adequate funds are not available or are not available on acceptable terms, we
may not be able to
- fund then existing operations;
- develop new or enhanced services and related products;
- continue to develop our business plan; and
- otherwise respond to competitive pressures.
As a result, our business, operating results and financial condition could be
materially adversely affected.
7. THE EXPENSE AND FINANCIAL OBLIGATIONS RESULTING FROM THE LITIGATION IN
WHICH WE ARE ENGAGED WILL DIVERT AVAILABLE FUNDS FROM THE IMPLEMENTATION OF OUR
BUSINESS PLAN. As disclosed in our incorporated SEC reports, C-3D or its
subsidiaries have been engaged in certain law suits which have resulted in
ongoing expenditures and may result in financial obligations for the
subsidiaries of C-3D. The former Chairman of C-3D is also named as a defendant
in one of the suits. Such litigation will divert available funds from the
implementation of our business plan.
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FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. This Act provides a "safe
harbor" for such statements to encourage companies to provide prospective
information about themselves so long as such information is identified as
forward-looking and is accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those projected in the information. All statements other than
statements of historical fact made in this prospectus or incorporated by
reference are forward-looking and are beliefs, estimates, intentions and
strategies about the future. Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates," "projects", "predicts" or variations
of such words and similar expressions are intended to identify such
forward-looking statements, but their absence does not mean the statement is not
forward-looking. In particular, the statements regarding the availability of
adequate funding and progress in the development of our various business
segments are forward-looking statements. Forward-looking statements represent
management's current expectations and are inherently uncertain. The failure of
any forward-looking event to occur can cause all forward-looking predictions to
fail. Investors are warned that C-3D's actual results may differ significantly
from management's expectations and, therefore, from the results discussed in
such forward-looking statements. Factors that might cause such differences
include, but are not limited to, the "Risk Factors".
AVAILABLE INFORMATION
C-3D has filed with the Securities and Exchange Commission a registration
statement on Form S-3, together with all amendments and exhibits filed with the
registration statement, under the Securities Act of 1933 with respect to the
securities offered pursuant to this prospectus. For further information,
reference is made to the registration statement. In addition, C-3D is subject to
the informational requirements of the Securities Exchange Act of 1934 and in
accordance therewith files quarterly, annual and periodic reports and other
information with the SEC. The registration statement, such reports and other
information may be inspected and copies may be obtained, at prescribed rates, at
the Public Reference Section of the SEC, Judiciary Plaza, 450 Fifth Street, NW,
Washington, D.C. 20549, as well as the following regional offices: 7 World Trade
Center, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The SEC maintains a Website that contains reports and
other information regarding reporting companies under the Exchange Act,
including C-3D, at http://www.sec.gov.
This prospectus constitutes a part of the registration statement. This
prospectus omits certain of the information contained in the registration
statement. Reference is hereby made to the registration statement and to the
exhibits attached to that document as containing further information with
respect to C-3D and the common stock. Any statements contained in the prospectus
concerning the provisions of any documents are not necessarily complete, and
reference is made to the copy of such document filed as an exhibit to the
registration statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by C-3D with the Commission and are
hereby incorporated by reference into this prospectus:
- - C-3D's Annual Report filed July 15, 1999 for the fiscal year ended March
31, 1999;
- - C-3D's amended Annual Report filed January 13, 2000 on Form 10-KSB for
the fiscal year ended March 31, 1999;
- - C-3D's Form 8-A registration statement filed May 27, 1999;
- - C-3D's Quarterly Report filed August 19, 1999 on Form 10-QSB for the
three months ended June 30, 1999;
- - C-3D's amended Quarterly Report filed January 13, 2000 on Form 10-QSB for
the three months ended June 30, 1999;
- - C-3D's second amended Quarterly Report filed March 2, 2000 on Form 10-QSB
for the three months ended June 30, 1999.
- - C-3D's Quarterly Report filed November 15, 1999 on Form 10-QSB for the
six months ended September 30, 1999;
- - C-3D's amended Quarterly Report filed March 2, 2000 on Form 10-QSB for
the six months ended September 30 1999;
- - C-3D's amended Quarterly Report filed July 9, 1999 on Form 10-QSB for the
nine months ended December 31, 1998;
- - C-3D's Quarterly Report filed February 14, 2000 on Form 10-QSB for the
nine months ended December 31, 1999.
- - C-3D's amended Annual Report filed July 9, 1999 on Form 10-KSB for the
fiscal year ended March 31, 1998;
- - C-3D's Form 8-K report filed on April 14, 1999 relating to the
acquisition of secured interests in the Strata technology and other
matters; and
- - C-3D's Form 8-K report filed on July 22, 1999 regarding certain changes
in management of C-3D and the acquisition of certain hotel pay-per-view
assets and contracts.
All other documents and reports filed pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
in this prospectus and to be made a part hereof from the date of the filing of
such reports and documents.
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Any statement contained in a document incorporated or deemed to be incorporated
in this prospectus by reference shall be deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement contained in the
prospectus, or in any subsequently filed document, is deemed to be incorporated
by reference or modifies or supersedes the statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
C-3D will provide without charge to each person to whom a copy of this
prospectus is delivered, upon the written or oral request of such person, a copy
of any or all documents which are incorporated by reference, not including
exhibits to such documents, unless such exhibits are specifically incorporated
by reference in the document which this prospectus incorporates. Requests should
be directed to Mr. Brad Stolba at C-3D's principal executive offices located at
330 Washington Boulevard, Suite 507; Marina del Rey, California 90292; telephone
numbers (310) 305-3659 and (801) 322-1111.
C-3D DIGITAL, INC.
C-3D is a pioneer in bringing virtual reality to computer and television
screens. C-3D is pursuing activities in four divisions designated as C-3D
Digital III, 3D.Com, C-3D Realeyes, and C-3D Strata. C-3D Digital III is
believed to be the first television network to exclusively offer 3D programming
to satellite dish owners, cable TV subscribers and the patrons of the lodging
industry through a pay-per-view delivery system. 3D.Com is establishing new
entertainment and e-commerce paradigms on the internet. C-3D Realeyes is the
patented hardware technology that turns any TV into a 3D virtual reality
station. The Strata division is based upon the work of a ten year pioneer in 3D
software, providing technologies for content creation and internet delivery.
These four interconnected components - television, the web, hardware and
software - provide C-3D with the critical links between 3D technology and the
consumer. The principal executive offices of C-3D are located at 330 Washington
Boulevard, Suite 507; Marina del Rey, California 90292 , and its telephone
numbers are (310) 305-3659 and (801) 322-1111.
RECENT DEVELOPMENTS
CORPORATE NAME CHANGE
The Company has filed in the state of Utah an application to conduct business
under the assumed name of C-3D Digital, Inc. This name is more in keeping with
C-3D's focus on its entertainment and communications business related to 3D
technology. At the time of the next meeting of shareholders of C-3D, management
contemplates submitting a proposal to amend the Articles of Incorporation to
reflect this new name.
AMEX LISTING
On June 9, 1999, the common stock of C-3D began trading on AMEX. The new trading
symbol for the stock of C-3D is DDD, reflective of C-3D's focus on 3D products
and services.
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RETIREMENT OF CHAIRMAN; APPOINTMENT OF NEW CHAIRMAN AND ADDITIONAL BOARD MEMBER
On August 17, 1999, C-3D announced the retirement of its Chairman, Blaine
Harris. Mr. Harris, age 60, is retiring from his position as Chairman of the
Board of Directors after eight years with Chequemate International, which he
helped establish in 1991.
Succeeding Mr. Harris as Chairman is Mr. J. Michael Heil, who has been the
Company's CEO since September, 1998. Mr. Heil was elected to serve as Chairman
by the board of directors at its meeting on August 16, 1999, and will retain his
position as Chief Executive Officer. J. Michael Heil has over 17 years of
experience in the satellite and broadcast television industry. Prior to joining
C-3D digital, he was President of Skylink America, Inc. and Satellite Cinema.
On September 22, 1999, the board of directors of C-3D approved the appointment
of media marketing expert Daniel R. Thompson as a member of the C-3D Digital
board. Thompson is the founder and head of the influential Hollywood
entertainment agency "A Creative Group" (ACG) which specializes in product
placement, promotional advertising, program sponsorships and distribution.
RELOCATION OF CORPORATE HEADQUARTERS
Effective Monday, September 20, 1999, C-3D relocated its corporate headquarters
to the Los Angeles metropolitan area in Marina del Rey. In conjunction with this
action, C-3D has streamlined its operations by closing its Salt Lake City, Utah
and Chatsworth, California offices. C-3D is retaining its Strata division office
in St. George, Utah, and its Gilbert, Arizona office. The Marina del Rey
corporate office is located in Suite 507 at 330 Washington Boulevard.
STRATA BUSINESS
During calendar year 1998, management of C-3D had been introduced to Strata,
Inc., a St. George, Utah corporation, engaged in software development.
Essentially all of the Strata products are complimentary to the 3-dimensional
business applications of C-3D. C-3D examined various strategies to either
license or acquire the Strata technology as described below. In calendar year
1999, C-3D acquired ownership of the Strata technology. C-3D has begun to
incorporate the Strata technology into its current products and services, and is
marketing, in a new division called C-3D Strata, the principal products formerly
offered by Strata, Inc.
Strata, Inc. is one of the early pioneers in 3D software. The Strata tool line
has been used for such well-known projects as the game "MYST"-C-; television
shows like the "'98 MTV Movie Awards"-C-, "Hercules"-C- and "Xena"-C-; the NBC
dancing peacocks; the Warner Bro.'s and Blockbuster web sites; the films
"Contact"-C-, "5th Element"-C-, "Batman Forever"-C-, and many others.
The Strata division is in the business of providing 3D centric graphical
software applications to professionals and non-professionals alike. The Strata
tools are used to create content for the web, television, feature films,
multimedia and print. Non-professionals use Strata applications for home video,
desktop publishing, visualization and recreation. The Strata division develops,
publishes, packages, markets, sells and supports these software applications.
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The core products offered by the Strata division are the following:
STUDIOPRO. StudioPro is the primary Strata 3D product and is available for Apple
Macintosh, Windows 98 and NT. StudioPro has a retail price of $1,495 and is
available in the US at the "street price" of approximately $950. StudioPro is
used for creating 3D images and animations for the web, video, movies, print,
games and multimedia. StudioPro is well known for being used to create the
graphics for the CD-Rom game Myst-C-. Recently StudioPro has been used on
projects such as the Blockbuster Video Web site, the NBC dancing peacocks and
the movie Contact. An upcoming release will add special stereographic 3D
features. StudioPro has an installed base of approximately 60,000.
VISION 3D. Vision 3D is an entry level 3D product and is based directly on
StudioPro. Vision 3D is presently available only on Apple Macintosh computers.
Vision 3D is priced at $395 retail with a $295 street price. Vision 3D is used
by professionals and non-professionals alike. Vision 3D is used for print, Web,
video and multimedia - as well as recreational purposes. Vision 3D has an
installed base of approximately 40,000.
VIDEOSHOP. VideoShop is a professional quality non-linear video editor and
presently runs only on Apple Macintosh computers. VideoShop is priced at $495
retail with a $395 street price. VideoShop is used primarily for multimedia, web
and desktop video tasks. VideoShop has been bundled on select Macintosh
computers for over five years and has developed an installed base of well over
one million customers through this process.
MEDIAPAINT. MediaPaint is a video painting and effects application. MediaPaint
is available for Apple Macintosh, Windows 98 and NT. MediaPaint is priced at
$695 retail with a $395 street price. MediaPaint is used for professional
projects on the Web, multimedia and broadcast video. MediaPaint has an installed
base of approximately 6,000 users.
On December 10, 1998, C-3D purchased for cash the secured position of Zions
Bank, NA in receivables, certain equipment and general intangibles of Strata,
Inc. The general intangibles collateral interest of Zions Bank would constitute
a first lien position in all or some of the Strata technology. The Company has
also purchased the secured positions of five additional creditors having secured
interests in the Strata technology, including the secured interests in the
registered copyrights of Strata, Inc. in its software intellectual property. The
total debt secured by the interests of these five secured creditors exceeded
$4.0 million. The positions of these secured creditors, other than Zions Bank,
were purchased by the issuance of 353,333 pre-split shares of restricted common
stock of C-3D. All of the described debt was delinquent and the collateral was
subject to foreclosure at the time the secured interests were purchased by C-3D.
On May 5, 1999, C-3D obtained a judgement against Strata in the amount of
$4,798,810.71 and held a foreclosure sale on the collateral, including the
Strata technology, pledged to secure the debt owing on the promissory notes and
leases acquired by C-3D. The judicial sale on the judgement was completed on
Wednesday, June 16, 1999 and C-3D acquired ownership of the collateral.
One other creditor had a security interest junior to that of Zions Bank, and
possibly senior to some of the obligations of the other secured creditors whose
secured positions were purchased by C-3D. The claim of this single intervening
creditor does not exceed $35,000 and does not jeopardize the judicial sale. Such
creditor was advised of the sale and did not appear at the sale to bid against
the security
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interests acquired by C-3D. As a result of the events which transpired at the
June 16th judicial sale, the risk of adverse claims or redemptive rights being
asserted by other creditors of Strata are now considered to be remote, and C-3D
has successfully acquired ownership of the technology previously owned by Strata
.
REVERSE STOCK SPLIT
As of February 2, 2000, C-3D approved a four-to-one reverse stock split
of all issued and outstanding shares which reduced the outstanding shares from
24,541,964 to 6,135,491.
CURRENT FINANCING AND ACQUISITION DISCLOSURES
1. C-3D's cash requirements have been and will continue to be significant.
We expect we will need to raise additional funds through private debt or equity
financing in order to continue to support current operations and develop our
business plan. If additional funds are raised through the issuance of equity
securities, the percentage ownership of our stockholders at that time will be
reduced. We currently have incurred debt with private lenders and anticipate
incurring additional loan obligations to sustain current operations as reflected
in the Financial Statements. Management of C-3D is negotiating the satisfaction
of this debt by issuing shares of common stock that would be restricted shares.
As restricted shares, these shares could not be traded publicly for a one year
period of time. Because of the restricted nature of the shares to be issued, the
price per share at which the stock will be exchanged for the cancellation of the
debt will be discounted from current market prices. Such discounts could be
substantial.
2. Management is considering submitting to shareholder vote a proposal to
amend our Articles of Incorporation to authorize the issuance of preferred
stock. This action would make another source of funding available to C-3D. The
preferred stock which would be issued under the amended Articles of
Incorporation would have rights, preferences or privileges senior to those of
the holders of the common shares.
3. We cannot assure that additional financing will be available on terms
favorable to us, or at all. If adequate funds are not available or are not
available on acceptable terms, C-3D may not be able to
- fund then existing operations;
- develop new or enhanced services and related products;
- continue to develop its business plan; and
- otherwise respond to competitive pressures.
As a result, C-3D's business, operating results and financial condition could be
materially adversely affected.
4. We are exploring and will continue to explore opportunities to add or
acquire;
- technology or products consistent with our current 3D product
lines; and
- additional hotel pay-per-view television assets and contracts.
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As of the date of this prospectus, we are involved in preliminary negotiations
to purchase certain pay-per- view television assets. No assurance can be given
that these discussions will result in completed acquisition transactions.
If we acquire technology or products in the early stage of development or
growth, including technology or products that have not been fully tested or
marketed, we will be subject to numerous risks inherent in developmental
technology, plus the additional high level of risks associated with high
technology industries. Furthermore, these acquisitions may require us to obtain
additional financing, including debt or equity financing. We cannot assure you
that we will be able to obtain financing on commercially reasonable terms or at
all. Moreover, equity financing will result in a dilution to our existing
stockholders. The degree of dilution may be significant. In the case of debt
financing, we run the risks of interest rate fluctuations and insufficiency of
cash flow to pay principal and interest, along with other risks traditionally
associated with incurring indebtedness.
5. Shareholders should understand that C-3D may, and intends to, complete
future debt or equity financing as generally described in this section without
shareholder approval or ratification.
6. The sale of substantial amounts of our common stock in the public market,
or the prospect of such sales, could materially and adversely affect the market
price of the common stock. As of March 21, 2000, C-3D had outstanding 6,758,767
shares of common stock, including shares which were subject to paid subscription
agreements, but not yet issued. In addition, C-3D has issued the warrants and
options that are referred to in this prospectus, and which may be exercised and
result in the issuance of common shares of C-3D.
Resales of these shares into public markets may cause the current stock prices
to decline. A substantial number of C-3D's presently outstanding shares of
common stock are "restricted" securities and may be sold in compliance with Rule
144 or Regulation S adopted under the Securities Act, if certain requirements
are met. Rule 144 essentially provides that after one year from the date of
acquisition, a person, including affiliates of C-3D (or persons whose shares are
aggregated), may sell the greater of one percent (1%) of the issued and
outstanding shares of common stock of C-3D or the average weekly trading volume
for the four weeks prior to a sale of stock by a shareholder within any three
month period, provided that certain current public information about C-3D is
available. A person who has not been an affiliate of C-3D (or persons whose
shares are not to be aggregated for the purpose of the resale of the
securities), who has owned restricted shares of common stock for at least two
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above. Therefore, in each three month period after the
date of this offering, a significant number of shares of common stock could be
sold under Rule 144. Also, any shares of common stock currently held by
non-residents of the United States may be sold under Regulation S after a
one-year holding period. Investors should be aware of the possibility that sales
under Rule 144 or shares issued pursuant to Regulation S may, in the future,
have a depressing effect on the price of the common stock.
7. To attract, retain and compensate key individuals for its business, C-3D
has granted, and anticipates granting, favorable stock options to its
management. The company has a significant number of shares which are subject to
management options. Since these options may be exercised at prices lower than
most previously issued shares, or the current market price, their issuance will
most likely result in dilution, as well as a diminution of control to existing
shareholders. None of these options were created by arms-length transactions.
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ORIGIN OF THE SECURITIES TO BE OFFERED
On December 21, 1998, February 9, 1999 and June 4,1999, C-3D entered into
subscription agreements with the Augustine Fund, LP, one of the selling
shareholders. Pursuant to these subscription agreements, C-3D issued a total of
thirteen units. Each unit is comprised of $250,000 in aggregate principal amount
of 8% Convertible Redeemable Debentures and a warrant to purchase shares of
common stock of C-3D. Prior to March 21, 2000, the Augustine Fund exercised its
conversion rights under the debentures and became entitled to receive a total of
623,561 shares of common stock of C-3D. The warrants had not been exercised as
of March 21, 2000.
Pursuant to the 1998 Subscription Agreement, C-3D sold to the Augustine Fund
three units as of December 21, 1998 consisting of $750,000 in principal amount
of the 1998 debentures and a warrant for 6,188 shares at an exercise price of
$14.56 per share. Pursuant to the 1999 Subscription Agreements, C-3D sold to the
selling shareholder eight units as of February 9, 1999 and two units as of June
4, 1999, consisting of $2,500,000 in principal amount of the 1999 debentures.
The total number of shares available under the warrants issued with the 1999
Subscription Agreements is 21,188 at an exercise price of $14.16 per share. As
reflected above, all debentures have now been converted into common stock of
C-3D.
Upon the exercise of the warrants, the Augustine Fund may offer for sale, by use
of this prospectus, the shares of common stock issued under such warrants. The
Augustine Fund may also use this prospectus to sell any shares previously
obtained from the conversion of the debentures.
The 623,561 shares which have been issued for the conversion of the debentures,
the 27,337 shares available under the warrants and the 50,000 shares issued to
Coleman Capital, total 700,898. The total shares reflected on the cover page of
this prospectus is derived from subtracting from 700,878 the 208,606 shares of
stock which have been sold under Rule 144 by the Augustine Fund prior to March
21, 2000.
<TABLE>
<S> <C>
Securities acquired by the Augustine Fund.....................................623,561 shares of common stock
Securities which may be acquired by the Augustine Fund...........................not more than 27,337 shares
of common stock
Securities acquired by Coleman Capital.........................................50,000 shares of common stock
Common Stock Outstanding or
Subscribed for as of March 21, 2000.........................................................6,758,767 shares
Risk Factors.....................................................Any investment in the shares offered hereby
involves a high degree of risk
</TABLE>
The 6,758,767 shares outstanding or subscribed for, as referenced above, does
not include:
- shares of common stock issuable upon exercise of stock options
outstanding as of March 21, 2000; or
- shares of common stock that may be issued under C-3D's Incentive
Stock Option Plan.
12
<PAGE>
USE OF PROCEEDS
The selling shareholders will receive all of the proceeds from the sale of the
common stock offered hereby. C-3D will not receive any of the proceeds from such
sale. However, C-3D may receive as much as $390,134 from the exercise of the
warrants issued to the purchaser of the debentures. These funds, if any, will be
used to satisfy the general operating expenses of C-3D.
This use of proceeds constitutes management's best present projection for the
use of the anticipated proceeds. However, management may alter the use of
proceeds, without further notice, in the exercise of its business judgement.
DETERMINATION OF OFFERING PRICE
The common stock offered by this prospectus may be offered for sale by the
selling shareholders from time to time in transactions on the American Stock
Exchange. Sales may also occur in negotiated transactions or otherwise, at fixed
prices or prices which may be changed based upon market or other conditions, or
at other negotiated prices. As such, the offering price is indeterminate as of
the date of this prospectus.
SELLING SHAREHOLDERS
The selling shareholders are the Coleman Capital Partners Ltd. and the Augustine
Fund L.P., the purchaser of the debentures and the warrants. The following table
contains certain information regarding ownership by Coleman and by the Augustine
Fund, including the number of shares that may be offered for the account of the
selling shareholders or their transferees or distributees, from time to time,
from the conversion of the debentures and exercise of the warrants.
<TABLE>
<CAPTION>
Name Shares Beneficially Owned Shares Offered Shares Beneficially Owned
Before Offering for Sale After Offering
- -------------------------------------------------------------------------------------------------------------
No. of Percent No. of Shares Percent
Shares
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Augustine Fund, L.P. 442,292 6.5% 442,292 -0- -0-
Coleman Capital Partners Ltd. 50,000 0.7% 50,000 -0- -0-
- --------------------------------------
</TABLE>
The number of shares listed in the table above as beneficially owned by the
Augustine Fund prior to the offering is the total of
- the 623,561 shares to which the Augustine Fund is entitled by
reason of its conversion of all debentures prior to March 21,
2000, less the 208,606 shares sold by the Augustine Fund pursuant
to the Rule 144 transactions prior to March 21, 2000; and
- the 27,337 shares which may be acquired pursuant to the warrants.
13
<PAGE>
Total shares of common stock outstanding for the purpose of this percentage
calculation includes the common stock into which the debentures have been
converted, and the 27,377 shares issuable upon exercise of the warrants, but
does not include shares of common stock issuable on the exercise of outstanding
stock options or shares of common stock that may be granted under C-3D's
Incentive Stock Option Plan.
Coleman Capital has been engaged by C-3D to render certain services for C-3D.
The principal services rendered by Coleman included:
- assisting C-3D in becoming listed on AMEX;
- assisting C-3D in capital raising transactions;
- assisting C-3D in listing its stock on one or more European stock
exchanges; and
- introducing C-3D to U.S. and European brokers, institutional
investors and stock analysts.
The 50,000 shares of the common stock of C-3D to be sold by Coleman pursuant to
this prospectus constitute part of the consideration paid for such services.
Coleman also received a fee of 6% of the gross investment of the Augustine Fund,
and, for a twelve month period ending in December 1999, received an additional
payment of $3,000 per month. Except as disclosed in this paragraph, the selling
shareholders have not had any material relationship with C-3D, or any of its
affiliates, within the past three years.
The selling shareholders have represented to C-3D that they purchased the shares
or units for their own account for investment only and not with a view towards
the public sale or distribution thereof, except pursuant to sales registered
under the Securities Act or exemptions therefrom. In recognition of the fact
that the selling shareholders, even though purchasing the units for investment,
may wish to be legally permitted to sell their shares when they deem
appropriate, C-3D agreed with the selling shareholders to file with the
Commission under the Securities Act the registration statement with respect to
the sale of the shares from time to time in transactions on stock exchanges, in
privately negotiated transactions, or through a combination of such methods of
sale, and has agreed to prepare and file such amendments and supplements to the
registration statement as may be necessary to keep the registration statement
effective until the shares are no longer required to be registered for the sale
thereof by the selling shareholders. The natural persons who control the
Augustine Fund are John Porter, Brian Porter and Thomas Duszynski. Coleman
Capital Partners is controlled by Coleman & Company Securities, a registered
broker/dealer; Douglas Layton and Michael Novielli.
PLAN OF DISTRIBUTION
All of the shares offered may be sold from time to time by the selling
shareholders. Sometimes shares held by shareholders will be sold by their
pledgees, donees, distributees, transferees or other successors-in-interest.
Such additional individuals or entities, if any, will be identified in a
post-effective amendment to this prospectus. The sale of the shares by the
selling shareholders may be effected in transactions on the American Stock
Exchange, in privately negotiated transactions, or through a combination of such
methods of sale. Prices may be fixed, tied to market prices prevailing at the
time of sale, or otherwise negotiated. The selling shareholders may effect the
transactions by
14
<PAGE>
selling the shares directly to purchasers, acting as principals for their own
accounts, or by or through broker-dealers acting as agents for the selling
shareholders, or to broker-dealers who may purchase shares as principals and
thereafter sell such shares from their own account.
Subsequent sales may be on any exchange or market on which such securities are
listed or quoted, in negotiated transactions, through a combination of such
methods of sale, or otherwise. Such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling shareholders
and/or the purchasers of the shares for whom such broker-dealer may act as
agents or to whom they may sell as principals, or both. Such compensation, as to
a particular broker-dealer, may be in excess of customary commissions. Any
broker-dealer may act as a broker-dealer on behalf of the selling shareholders
in connection with the offering of certain of the shares by the selling
shareholders. None of the proceeds from the sale of the shares by the selling
shareholders will be received by C-3D. In addition, any of the shares that
qualify for sale pursuant to Rule 144 promulgated under the Securities Act may
be sold in transactions complying with such Rule, rather than pursuant to this
prospectus.
To the extent required, the amount of the shares to be sold, purchase prices,
public offering prices, the names of any agents, dealers or underwriters, and
any applicable commissions or discounts with respect to a particular offer will
be set forth by C-3D in a prospectus supplement accompanying this prospectus;
or, if appropriate, a post-effective amendment to this registration statement.
The selling shareholders may be deemed to be statutory underwriters under the
Securities Act. Also any broker-dealers who act 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 on their sale of the shares as principal may be deemed to be
underwriting discounts and commissions under the Securities Act. C-3D has agreed
to bear all expenses, other than selling commissions and fees and stock transfer
taxes, in connection with the registration and sale of the shares being offered
by the selling shareholders. C-3D has agreed to indemnify the Augustine Fund
against certain liabilities, including liabilities under the Securities Act.
Offers or sales of the shares have not been registered or qualified under the
laws of any country, other than the United States. To comply with certain
states' securities laws, if applicable, the shares will be offered or sold in
such jurisdictions only through registered or licensed brokers or dealers.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the shares may be limited in its ability to engage
in market activities with respect to such shares. In addition and without
limiting the foregoing, the selling shareholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder, which
provisions may limit the timing of purchases and sales of any of the shares by
the selling shareholders. The foregoing may affect the marketability of the
shares.
There can be no assurance that the selling shareholders will sell any or all of
the shares offered by them hereunder.
15
<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
C-3D is presently authorized to issue 500,000,000 shares of its common stock. As
of March 21, 2000, and after giving account to the four-to-one reverse split,
there were 6,758,767 issued, outstanding and subscribed for shares. The holders
of common stock are entitled to one vote per share on each matter submitted to a
vote at any meeting of shareholders. Shares of common stock do not carry
cumulative voting rights and, therefore, a majority of the outstanding shares of
common stock will be able to elect the entire Board of Directors. If they do so,
minority shareholders would not be able to elect any members to the Board of
Directors.
Shareholders of C-3D have no preemptive rights to acquire additional shares of
common stock or other securities. The common stock is not subject to redemption
and carries no subscription or conversion rights. In the event of liquidation of
C-3D, the shares of common stock are entitled to share equally in corporate
assets after satisfaction of all liabilities. The shares, when issued, will be
fully paid and non-assessable.
WARRANTS
The warrants entitle the holder to purchase 6,188 shares of common stock of C-3D
at a price of $14.56 per share and 21,188 shares of common stock of C-3D at a
price of $14.16 per share. The shares of common stock underlying the warrants,
when issued upon exercise of the warrants, in whole or in part, will be fully
paid and nonassessable.
The warrants contain provisions that protect the holder against dilution by
adjustment of the exercise price. Such adjustments will occur in the event,
among others, of a merger, stock split or reverse stock split, stock dividend or
recapitalization. The holder of the warrants will not possess any rights as a
shareholder of C-3D until such holder exercises the warrants.
For the life of the warrants, the holder thereof has the opportunity to profit
from a rise in the market price of the common stock without assuming the risk of
ownership of the shares of common stock issuable upon the exercise of the
warrants. The warrant holder may be expected to exercise the warrants at a time
when C-3D would, in all likelihood, be able to obtain any needed capital by an
offering of common stock on terms more favorable than those provided for by the
warrants. Furthermore, the terms on which C-3D could obtain additional capital
during the life of the warrants may be adversely affected.
LIMITATION ON LIABILITY AND DISCLOSURE OF COMMISSION'S POSITION
ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The by-laws of C-3D provide for indemnification of C-3D's directors and officers
to the fullest extent permitted by law. Insofar as indemnification for
liabilities under the Securities Act may be permitted to directors, officers or
controlling persons of C-3D pursuant to C-3D's Articles of Incorporation, as
amended, by-laws and Utah law, C-3D has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in such
Act and is, therefore, deemed to be unenforceable by the Commission.
16
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby has been passed upon for C-3D by
Bruce L. Dibb, P.C.; Salt Lake City, Utah.
EXPERTS
The consolidated financial statements of the Company incorporated for the year
ended March 31, 1999, have been audited by Jones, Jensen & Co. as set forth in
their report for that period. Such consolidated financial statements are
incorporated in this prospectus in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing. Quarterly reports,
as incorporated through December 31, 1999, are submitted upon an unaudited
basis.
17
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THIS OFFERING; AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY C-3D. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, THE SHARES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF C-3D SINCE
THE DATE HEREOF.
<TABLE>
<CAPTION>
- -----------------
TABLE OF CONTENTS PAGE
<S> <C>
Summary of the Offering.......................................................2
Risk Factors..................................................................3
Available Information.........................................................5
Incorporation of Certain Documents by Reference...............................6
Recent Developments...........................................................7
Origin of the Securities to be Offered.......................................12
Use of Proceeds..............................................................13
Determination of Offering Price .............................................13
Selling Shareholders.........................................................13
Plan of Distribution.........................................................14
Description of Securities....................................................16
Limitation on Liability and Disclosure of Commission Position on
Indemnification for Securities Act Liabilities........................16
Legal Matters................................................................17
Experts......................................................................17
</TABLE>
492,292 SHARES OF
COMMON STOCK
CHEQUEMATE INTERNATIONAL, INC.
P R O S P E C T U S
March 28, 2000
