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As filed with the Securities and Exchange Commission May , 1996
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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INFORMATION RESOURCE ENGINEERING, INC.
(Exact Name of Registrant as Specified in Charter)
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<S> <C>
Delaware 52-1287752
(State of other jurisdiction of incorporation or organization) (I.R.S Employer Identification No. )
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8029 Corporate Drive
Baltimore, MD 21236
(410) 931-7500
(Address, including zip code and telephone number, including area
code of Registrant's Principal Executive Offices and
Principal Place of Business)
Mr. Anthony A. Caputo
Chairman, Chief Executive Officer and President
INFORMATION RESOURCE ENGINEERING, INC.
8029 Corporate Drive
Baltimore, MD 21236
(410) 931-7500
(Name, address, including zip code, and telephone number,
including area code, of Agent for service)
Copies to:
Bruce R. Thaw, Esq.
45 Banfi Plaza
Farmingdale, NY, 11735
(516) 752-1760
Approximate date of commencement of proposed sale to public: From time to time
after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. /x/
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Calculation of Registration Fee
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Titles of Each Proposed Maximum Proposed Maximum
Class of Securities Amount to be Offering Price Per Aggregate Offering Amount of
to be Registered Registered Share(1) Price Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, $.01
par value 300,000 Shares $ 24.75 $7,425,000.00 $ 2,560.00
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</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(c) based upon a price of $24.75 per share which
was the average of the high and low sale prices as reported on the
Nasdaq National Market System on May 24, 1996.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that the Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8
(a), may determine.
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PRELIMINARY PROSPECTUS DATED MAY , 1996
SUBJECT TO COMPLETION
INFORMATION RESOURCE ENGINEERING, INC.
300,000 Shares of Common Stock
The 300,000 Shares of Common Stock (the "Common Shares") of
Information Resource Engineering, Inc. (the "Company") offered hereby are to be
sold for the accounts of the selling securityholders set forth herein (the
"Selling Securityholders"). The Company is registering the Common Shares, at
its expense, pursuant to certain contractual obligations incurred by the
Company in connection with the original issuance of such Common Shares on
November 3, 1995 in a private placement under Section 4(2) of the Securities
Act of 1933, as amended (the "Act"). The Company will not receive any of the
proceeds from the sale of the Common Shares by the Selling Securityholders. See
"Use of Proceeds." The Company estimates that its expenses in the aggregate
will be approximately $27,000 in connection with the offering (the "Offering")
of the Common Shares.
The Common Shares are quoted on the National Market System of the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") under the symbol IREG. On May 24, 1996, the closing sale price of
the Common Shares was $24.75.
The Selling Securityholders directly, through agents designated from
time to time or through dealers or underwriters also to be designated, may sell
the Common Shares offered for sale pursuant to this Prospectus, from time to
time, on terms to be determined at the time of sale. To the extent required,
the purchase price, the public offering price, the names of any such agents,
dealers or underwriters and any applicable commissions or discount with respect
to a particular offer will be set forth in an accompanying Prospectus
supplement. The distribution of the Common Shares of the Selling
Securityholders may be effected in one or more transactions that may take place
in the over-the-counter market, including ordinary broker's transactions,
privately negotiated transactions or through sales to one or more dealers for
resale of such securities as principals, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. Usual and customary or specifically negotiated brokerage
fees, commissions or discounts may be paid by the Selling Securityholders in
connection with such sales.
The Selling Securityholders and any broker-dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Common Shares may be deemed to be "Underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Act"), and any
commissions received by them and any profit on the resale of the Common Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Act. See "Plan of Distribution" for certain indemnification
arrangements.
THE PURCHASE OF THE COMMON SHARES OFFERED BY THIS PROSPECTUS INVOLVES
A SUBSTANTIAL DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER
THE FACTORS SET FORTH UNDER "RISK FACTORS" ON PAGE 6 OF THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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The date of this Prospectus is June __, 1996
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ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission
(the "Commission"), a Registration Statement on Form S-3 under the Securities
Act of 1933, as amended, with respect to the Common Shares being offered
hereby. This Prospectus does not contain all the information set forth or
incorporated by reference in such Registration Statement and the exhibits and
schedules relating thereto, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Common Shares offered by this
Prospectus, reference is made to such Registration Statement and exhibits and
schedules thereto filed as part thereof, which may be examined without charge
at the offices of the Commission and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of such material may be obtained at prescribed rates by mail from the
Public Reference Section of the Commission. Statements contained in this
Prospectus or in any document incorporated by reference in this Prospectus as
to the contents of any contract or other document referred to are not
necessarily complete. In each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 and, in accordance therewith, files periodic
reports, proxy statements and other information with the Commission. The
Registration Statement, reports, proxy statements and other information filed
by the Company with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: New York Regional Office, 7 World Trade Center, New York, NY 10048;
and Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago, IL
60661-2511. Copies of such material may be obtained at prescribed rates by mail
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 0-20634)
pursuant to the Exchange Act are incorporated by reference:
1. The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1995 (the "Annual Report");
2. The Company's Quarterly Report on Form 10-QSB for the
quarterly period ended March 31, 1996;
3. The Company's Current Reports on Form 8-K filed with the
Commission on November 8, 1995, as amended by the Company's Form 8-K/A filed
with the Commission on December 28, 1995; and
4. The description of Common Stock contained in the Company's
Form 8-A Registration Statement filed with the Commission on September 16, 1992
and any amendment or report filed for the purpose of updating those
descriptions.
All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of this
offering shall be deemed to be incorporated by reference in this Prospectus and
to be a part of this Prospectus from the date of filing thereof. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any
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such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the written or verbal request of any such
person, a copy of any or all of the documents which have been incorporated by
reference herein, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference into such documents). Requests for
such documents should be directed to Information Resource Engineering, Inc.,
8029 Corporate Drive, Baltimore, Maryland 21236, Attention: Secretary,
Telephone (410) 931-7500.
The Company furnishes its shareholders annual reports containing
financial statements audited by independent public accountants and will furnish
its shareholders such interim and other reports as it deems appropriate or as
required by regulation.
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PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified
in its entirety by reference to the more detailed information and financial
statements (including the notes thereto) appearing elsewhere in this Prospectus
or incorporated herein by reference.
THE COMPANY
Information Resource Engineering, Inc. (the "Company") is a leading
designer, manufacturer and marketer of network security systems and products
that utilize encryption technology to facilitate secure electronic commerce
transactions and communication over computer networks. The Company's systems
and products emphasize standards-based security, cost effectiveness and ease of
use, and are used by financial institutions, government agencies and large
corporations to secure data transmissions on private and public computer
networks.
Encryption technologies are utilized by the Company to prevent
electronic eavesdropping or alteration during electronic data transmission; to
provide message authentication confirming that messages are received in
unaltered form; and to enable user authentication and digital signatures
verifying the identity of the message sender and limiting computer access to
authorized users. The Company offers a choice of encryption algorithms to
provide the level of network security appropriate for each client application.
The Company's clients include seven of the largest banks in the U.S.,
Union Bank of Switzerland, the Society for Worldwide Interbank Financial
Telecommunications ("SWIFT") an international financial clearing house, The
Euroclear System ("Euroclear"), MCI Telecommunications Corporation ("MCI"),
major federal, state and international law enforcement agencies and the U.S.
Department of Treasury. While the network security market has traditionally
been limited to financial institutions and government agencies, the Company
believes that emerging electronic commerce applications, particularly
business-to-bank and business-to-business, provide new market opportunities.
The key elements of the Company's strategy are to: (i) provide clients
with a broad range of network security options; (ii) develop a transaction
services business incorporating the Company's network security technology;
(iii) continue to establish key strategic relationships; and (iv) expand
through acquisition.
In July 1995, the Company introduced "SafeNet(TM)", a comprehensive
new product line that enables secure communication on the Internet. In
September 1995, the Company and MCI jointly announced that SafeNet(TM) will be
available as an option on MCI's Internet access service to provide secure data
transmission capability. Pursuant to an agreement with MCI, the Company
received an initial order of approximately $12.0 million for SafeNet(TM)
products to be delivered over a two year period commencing September 1995.
Further, the Company expects to receive ongoing monthly service revenue upon
commercialization of MCI's secure Internet access service. The Company intends
to leverage its core competency in network security by establishing a
SafeNet(TM) Center from which it will provide network security management
services to SafeNet(TM) subscribers. The Company intends to market such
services to Internet access providers and directly to end users.
In the last 18 months, the Company acquired Connective Strategies,
Inc. ("CSI"), which designs, manufactures and markets communications equipment
enabling data/voice connectivity via the Integrated
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Services Digital Network ("ISDN") and GRETACODER Data Systems AG (formerly
Gretag Data Systems AG)("GDS"), a subsidiary of AT&T International, Inc.
("AT&T"), which designs, manufactures and markets cryptographic equipment.
The Company was originally incorporated in Maryland on April 7, 1983
under the name "Industrial Resource Engineering, Inc." The Company
reincorporated under its present name in Delaware by merging with its
subsidiary in March 1989. The Company's executive offices are located at 8029
Corporate Drive, Baltimore, Maryland 21236, and its telephone number is (410)
931-7500.
All share and per share information included in this Prospectus gives
retroactive effect to a two for one stock split effected by the Company on July
7, 1995.
THE OFFERING
Securities Offered .......... 300,000 shares of Common Stock, $.01 par
value.
Common Shares Currently
Outstanding................. 5,417,329 shares (1).
Proceeds of the Offering.... All of the proceeds from the sale of the
Common Shares offered hereby will be received
by the Selling Securityholders. The Company
will not receive any of the proceeds of this
Offering. See "Use of Proceeds."
Selling Securityholders...... The Common Shares offered hereby are to be
sold for the accounts of the Selling
Securityholders, as set forth herein. In
connection with the Company's private
placement completed on November 3, 1995, the
Company sold to the Selling Securityholders
300,000 shares of Common Stock at an offering
price of $12.50 per share. See "Selling
Securityholders."
NASDAQ Symbol for
the Common Shares ........... IREG
Risk Factors ................ The securities of the Company offered hereby
are speculative and involve a high degree of
risk. See "Risk Factors", for information
investors should consider carefully before
purchasing the Common Stock offered hereby.
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(1) Excludes (i) 394,500 shares reserved for issuance upon the
exercise of options granted under the Company's Stock Option Plan and (ii)
30,000 shares underlying a warrant issued to affiliates of the placement agent
in connection with the Company's recent private placement of Common Stock.
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RISK FACTORS
The shares of Common Stock being offered hereby are speculative in
nature and involve a high degree of risk. Prospective investors should
carefully consider, together with the other information contained in this
Prospectus, the following risk factors inherent in and affecting the business
of the Company:
NO ESTABLISHED HISTORY OF EARNINGS. The Company sustained net losses for
the years ended December 31, 1994 and 1995 and for the three months ended March
31, 1996. Although the Company was profitable in the years ended December 31,
1991, 1992 and 1993, the Company's earnings have decreased significantly over
the last three years. There can be no assurance that the Company will generate
net income in the future. Further, the Company is subject to all the risks
inherent in a relatively new high technology business, including, but not
limited to, risks such as product obsolescence, new limited markets, dependence
upon principal clients and third parties, and dependence upon intellectual
property. Additionally, in October 1995, the Company acquired GDS, which had
operating losses for the years ended December 31, 1993, 1994 and 1995 and for
the three months ended March 31, 1996. The likelihood of the success of the
Company must be considered in light of the problems, expenses and delays
frequently encountered in connection with a new business, the development and
use of new technology, and the competitive environment in which the Company
operates.
RISK OF INTERNATIONAL EXPANSION. On October 31, 1995, the Company acquired
all of the outstanding stock of GDS, a Swiss corporation. Previously, the
Company had not acquired or managed any business units outside the U.S. The
Company has limited experience in business operations outside the U.S. and
there can be no assurance that the Company will be able to compete successfully
in international markets. The Company's international business is subject to a
number of risks, including compliance with special telecommunications
standards, export regulations and restrictions, currency exchange rates,
tariffs and other barriers, difficulties in staffing and managing foreign
subsidiary operations, longer payment cycles, greater difficulty in accounts
receivable collections and specialized inventory requirements applicable to
particular foreign countries or markets. There can be no assurance that these
factors will not have an adverse impact on the Company's future international
sales or operating results. The Company does not currently engage in
international currency hedging transactions. To the extent the Company is
unable to match revenue received in foreign currencies with expenses paid in
the same currency, it may be exposed to possible losses on international
currency transactions.
MANAGEMENT OF GROWTH. In the past 15 months, the Company acquired CSI and
GDS and in the future the Company may pursue strategic acquisitions in order to
expand its operations, although it does not believe that it is dependent solely
on acquisitions for further growth. The Company's growth is making significant
demands on the Company's management, operations and resources, including
working capital. To manage its growth effectively, the Company will be required
to continue to improve its operational, financial and management information
systems, procedures and controls, to hire and train new employees and to manage
its current employees. Historically the Company's cash flow from operations has
been insufficient to fund its growth. In the event additional capital is
required in excess of cash generated by operations, there can be no assurance
that the Company will be successful in obtaining such additional capital on
acceptable terms, if at all. If such financing is unavailable, the Company may
not be able to achieve its growth objectives. There can be no assurance that
the Company will be able to manage its growth effectively, and the Company's
failure to do so could have a material adverse affect on the Company's business
and financial performance.
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FLUCTUATIONS IN OPERATING RESULTS. The Company may experience significant
fluctuations in its quarterly operating results as a result of a variety of
factors, including the length of the sales cycle, the timing of orders from and
shipments to clients, delays in development and customer acceptance of product
enhancements, product development expenses, new product introductions or
announcements by the Company or its competitors, levels of market acceptance
for new products, the hiring and training of additional staff as well as
general economic conditions. The Company's expense levels are based, in part,
on expectations of future revenues. Some of the orders obtained by the Company
are substantial in size relative to the Company's overall business. Because the
Company generally recognizes revenue upon shipment of finished products, such
recognition may be irregular and uneven, thereby disparately impacting
quarterly results. If revenue levels in a particular quarter do not meet
expectations, operating results will be adversely affected, which may have an
adverse impact upon the market price of the Company's Common Stock.
Historically, the size and timing of the Company's revenues have varied
substantially from quarter to quarter, and the Company expects such variations
to continue in future periods.
POSSIBLE IMPAIRMENT OF INTANGIBLE ASSETS. At March 31, 1996, the Company
had approximately $4.8 million of goodwill and computer software development
costs. The Company's policy is to amortize goodwill over ten years and computer
software development costs over five years beginning with the production
release date. Management periodically evaluates the Company's ability to
recover such intangible assets through projected future cash flows. Ultimate
realization of amounts capitalized by the Company will be dependent on the
continued acceptance of its existing products and the Company's successful
development of new products. Material adverse changes in acceptance of the
Company's products by the market could result in acceleration of the
amortization period and/or write-down of those assets, which may have a
material adverse effect on the Company's earnings.
CONCENTRATION OF BACKLOG. The Company's sales backlog as of March 31, 1996
was approximately $10,823,000 of which 88% was attributable to MCI pursuant to
an agreement dated September 21, 1995. It is anticipated that the equipment
covered by this agreement will be delivered to MCI in quarterly installments
over the twenty-four month period beginning September 1995. The Company's
success is materially dependent upon the continual acceptance by MCI of the
equipment covered by such agreement. Although the Company commenced shipments
to MCI, certain of the products require additional technical enhancements.
There can be no assurance that such enhanced products will meet MCI's
requirements or that MCI will continue to accept the equipment covered by the
agreement.
LIMITED SCOPE OF MARKET FOR COMPANY'S PRODUCT LINE. The Company is
presently engaged in the design, manufacture and marketing of network security
systems and products used to protect data transmissions on computer networks
through the use of encryption technology. The Company is engaged in a
specialized segment of the market for computer security devices, thus the
market for the Company's products may be limited. Price reductions or declines
in the demand for the Company's network security systems and products, whether
as a result of competition, technological change, the public's perception of
the need for security products, developments in the hardware and software
environments in which these products operate, general economic conditions or
other factors, would have a material adverse effect on the Company's operating
results.
TECHNOLOGICAL CHANGE AND POSSIBLE PRODUCT OBSOLESCENCE. The Company
expects technological developments to continue at a rapid pace in the computer
and communications industries, and there can be no assurance that technological
developments will not cause the Company's technology to be rendered obsolete or
non-competitive. The Company's future success, if any, will be dependent upon
its ability to remain
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competitive in the development, manufacture and marketing of computer network
security systems and products through its continued capability to design high
quality products in a cost efficient and timely manner, of which there can be
no assurance.
RESTRICTIONS ON THE EXPORT OF THE COMPANY'S PRODUCTS. The cryptographic
devices designed and/or manufactured by the Company in the U.S. are considered
"auxiliary military equipment" under the U.S. government regulations dealing
with the export of technology. Therefore, the Company must apply for an export
license from the U.S. Department of State prior to exporting any encryption
product to any foreign country except Canada. The Company declines export
orders that it believes will not qualify for an export license. To date, none
of the Company's export license applications has been denied. There is no
assurance, however, the applicable regulations or policies concerning the
export of such technology will not become more restrictive.
For the years ended December 31, 1993, 1994 and 1995 and for the three
months ended March 31, 1996, the percentage of revenues from foreign clients
was 42%, 14%, 34% and 35%, respectively. Prior to the acquisition of GDS, the
majority of these revenues were derived from European distributors and
financial institutions. The Company is not a party to any exclusive contracts
with any European distributors.
INTENSE COMPETITION. The network security industry is relatively new,
highly competitive and subject to rapid technological changes. The success of
the Company will depend, in large part, on the ability of the Company to
establish an advantageous market position. Although the network security market
is fragmented, there are several companies in this field that have been
established longer than the Company, and have much greater financial, research
and marketing resources than those the Company has now, or may have in the
foreseeable future. This risk will increase to the extent that the Company's
competitors include manufacturers of computer equipment and modems to which the
Company's products relate, since such manufacturers may be in a better position
than the Company to develop security products in anticipation of developments
in their computer equipment. Methods of competition in the Company's industry
primarily include direct sales to clients and, from time to time, competitive
bidding. Competitive factors include price, product features, degree of
security and technical specifications, product support and the ability to
deliver engineering enhancements. There can be no assurance that the Company
can continue to compete successfully against new or existing competitors.
NO ASSURANCE AS TO PROTECTION OF INTELLECTUAL PROPERTY; DEPENDENCE ON
PROPRIETARY TECHNOLOGY. The Company's success and ability to compete is
dependent, in part, upon its ability to maintain the proprietary nature of its
technologies. The Company relies on a combination of patent, trade secret,
copyright and trademark law and nondisclosure agreements to protect its
proprietary technology. Although the Company has applied for patents on
certain of its products, no patents have been issued with respect to any of the
Company's products or other proprietary technology and there can be no
assurance that any patents will be issued. The Company intends to rely
substantially on unpatented technology, proprietary information and know-how,
and there can be no assurance that others will not develop such information and
know-how independently or otherwise obtain access to the Company's technology.
The Company enters into confidentiality and/or license agreements with its
employees and distributors, as well as with its clients and potential clients
seeking proprietary information, and limits access to its software source
codes, documentation and other proprietary information. There can be no
assurance that the steps taken by the Company in this regard will be adequate
to deter misappropriation or independent third-party development of its
technology. Also, no assurance can be given that the Company's products will
not infringe upon the patents of others.
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RISK OF PRODUCT LIABILITY; LIMITED INSURANCE COVERAGE; AND NECESSITY OF
PRODUCT LIABILITY INSURANCE FOR CERTAIN CLIENTS. The sale and installation of
the Company's network security systems and products within the computer
networks of large financial and government institutions and the anticipated
operation of the Company's SafeNet(TM) facility entails a risk of product
liability or other claims. Further, an actual or perceived breach of network or
computer security at one of the Company's clients, regardless of whether such
breach is attributable to the Company's network security systems and products,
could adversely affect the market's perception of the Company and the Company's
financial condition or results of operations. The Company maintains product
liability insurance and umbrella coverage with respect to physical damage
claims to computer networks only, with an aggregate annual liability coverage
limit, regardless of the number of occurrences of $5,000,000. The Company does
not maintain insurance coverage for any claims that may arise from an alleged
failure of the Company's products to adequately secure computer data or
transactions. In the event of litigation against the Company, lack or
insufficiency of insurance coverage could have a material adverse effect on the
Company. Further, certain clients of the Company, government contractors and
others may require minimum product liability insurance coverage as a condition
precedent to purchasing products. Failure to satisfy such insurance
requirements could impede the ability of the Company to achieve broad sales of
its products which would have a material adverse effect on the Company. There
is no assurance that such insurance will be available at a reasonable cost or
will be sufficient to cover all possible liabilities.
DEPENDENCE UPON PRINCIPAL CLIENTS. Presently, the Company has a limited
number of principal clients. The percentage of revenues from the Company's
non-government clients which each accounted for more than 10% of total revenues
in each of the years ended December 31, 1993, 1994 and 1995 were 54%, 11%, and
13% respectively. No client accounted for greater than 10% of total revenues
during the three months ended March 31, 1996. The loss of any of the Company's
principal clients may have a material adverse effect upon the Company.
DEPENDENCE UPON GOVERNMENT SALES. A material portion of the Company's
sales has been to U.S. government agencies such as the Department of Treasury.
The percentage of revenues from sales to U.S. government agencies in each of
the years ended December 31, 1993, 1994 and 1995 and for the three months ended
March 31, 1996 were 12%, 26%, 20% and 3%, respectively. Sales to government
agencies by the Company have been made pursuant to fixed price contracts or
purchase orders. The Company's plans include an expansion of sales efforts to
such government agencies. The Company's future success is highly dependent on
the continued purchase by the government of equipment supplied by the Company
or equipment manufactured by others which contain devices supplied by the
Company. If attempts to reduce government spending as a result of budgetary or
other considerations are successful, such reduction may have an adverse impact
on the Company's sales.
Certain sales of the Company's products are governed by rules regulating
government procurement and contracts. As a consequence, such contracts may be
subject to termination, reduction or modification in the event of changes in
government requirements, reductions in federal spending or other factors.
Accordingly, under certain conditions, the application of such contractual
provisions could have a material adverse effect on the Company's sales. In
addition, government contracts may involve sales with lower profit margins than
similar sales to the commercial market.
DEPENDENCE UPON THIRD PARTY SUPPLIERS AND CONTRACTORS. The Company relies
upon third party contractors for the manufacture of components and
sub-assemblies for its products. There is no assurance that the Company will be
able to obtain and/or maintain satisfactory contractual relations with
qualified
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vendors or suppliers, and the unavailability of such third parties may
substantially decrease the Company's control of the cost, quality and
timeliness of the manufacturing process. At present, the Company is not a party
to any exclusive supply contracts with third party contractors. All purchases
of components or parts for the Company's products are accomplished by the use
of purchase orders issued in the ordinary course of business. While the Company
has not experienced any significant supply problems in the past, and there have
been no materially late deliveries of components or parts, it is possible that
in the future the Company may encounter shortages in parts, components, or
other elements vital to the manufacture, production and sale of its products.
DEPENDENCE UPON KEY PERSONNEL AND ATTRACTION OF QUALIFIED PERSONNEL. The
Company is highly dependent on the services of its Chairman and Chief Executive
Officer, Anthony A. Caputo. There is no assurance that, if the Company should
lose the services of Mr. Caputo, a qualified replacement could be engaged.
While Mr. Caputo currently owns 11.2% of the outstanding Common Stock of the
Company, there is presently no employment contract between Mr. Caputo and the
Company. The Company currently maintains a $1 million key person life insurance
policy on Mr. Caputo. However, there is no assurance that the Company will
continue such insurance coverage.
The network security industry is highly specialized, competition for
qualified employees is intense, and the loss of any such person or the
inability to locate, attract, retain and motivate qualified personnel required
for the expansion of the Company's activities could materially and adversely
affect its business and operations. There can be no assurance that it will be
successful in this regard or, if successful, that the services of such
personnel can be secured on terms deemed favorable to the Company. The Company
has employment agreements with Douglas E. Kozlay, the Company's Principal
Engineer and Charles D. Brown, a Senior Vice President and GDS has an
employment agreement with Dr. Kurt Mueller. The Company has no other written
employment agreements.
CONTINUED CONTROL BY MANAGEMENT; NON-CUMULATIVE VOTING. At the conclusion
of this offering, the present employees, officers and directors of the Company
will continue to own or control a substantial portion of the outstanding Common
Stock of the Company. Therefore, management may remain in a position to
influence the election of all of the Company's directors, the adoption of
proposals to amend the Company's Certificate of Incorporation, the approval of
a merger or consolidation, or the offer or sale of all or substantially all of
the Company's assets without the approval of the purchasers of the Common Stock
being offered hereby. The Company's Certificate of Incorporation does not
provide for cumulative voting.
POSSIBLE VOLATILITY OF STOCK PRICE. The market price for the Common Stock
of the Company has experienced wide fluctuations which have not necessarily
been related to the operating performance of the Company. Factors such as the
Company's operating results and announcements of technical innovations or new
products or services by the Company or its competitors may have a significant
impact on the market price of the Company's Common Stock.
ABSENCE OF DIVIDENDS. The Company has neither paid nor declared any cash
or other dividends on the Common Stock since its inception and management does
not presently anticipate that dividends will be paid on the Common Stock in the
foreseeable future.
AUTHORIZATION OF PREFERRED STOCK; ANTI-TAKEOVER PROVISIONS. The Company's
Certificate of Incorporation authorizes the issuance of up to 500,000 shares of
"blank check" preferred stock in amounts and with such designations, rights and
preferences as may be determined from time to time by the Board of
10
<PAGE> 13
Directors. Accordingly, the Board of Directors is empowered, without
stockholder approval, to issue preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the voting
power or other rights of the holders of the Company's Common Stock. In the
event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company has no present intention to issue
any additional shares of its preferred stock, there can be no assurance that
the Company will not do so in the future. In addition, the Company is subject
to the anti-takeover provisions of Section 203 of the Delaware General
Corporation Law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. For purposes of Section 203, a
"business combination" includes mergers, asset sales and similar transactions
between the corporation and the interested stockholder, and other transactions
resulting in a financial benefit to the stockholder. An "interested
stockholder" is a person who, together with affiliates and associates, owns 15%
or more of the corporation's voting stock or who is an affiliate or associate
of the corporation and, together with his affiliates and associates, has owned
15% or more of the corporation's voting stock within three years.
SHARES AVAILABLE FOR RESALE. Of the 5,417,329 shares of Common Stock
outstanding as of the date of this Prospectus, approximately 2,078,986 shares
are "restricted securities" as that term is defined by Rule 144 under the
Securities Act of 1933, as amended, and in the future, may be sold in
compliance with Rule 144. All of the foregoing shares deemed to be "restricted
securities", except for approximately 778,000 shares, are now eligible to be
sold in compliance with Rule 144. The 778,000 shares include 447,100 shares
issued in connection with the CSI acquisition, 300,000 shares issued in the
November 3, 1995 Private Placement which are being registered hereby and 30,000
shares issued in the Preferred Stock Conversion. Ordinarily, under Rule 144 a
person holding restricted stock for a period of two years may, every three
months, sell in brokerage transactions an amount equal to the greater of 1% of
the Company's outstanding Common Stock, or, if the Common Stock is quoted on
Nasdaq, the average weekly volume of trading in the Common Stock reported for
the preceding four weeks. After the expiration of three years, stock held by
persons not affiliated with the Company will not be subject to the above
limitations.
No prediction can be made as to the effect, if any, that market sales of
shares of Common Stock or the availability of such shares for sale will have on
the market prices prevailing from time to time. Nevertheless, the possibility
that substantial amounts of shares of Common Stock may be sold in the public
market may adversely affect prevailing market prices of the Common Stock and
could impair the Company's ability to raise capital through the sale of its
equity securities.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Common Shares offered hereby, all of which will be received by the Selling
Securityholders. The expenses of this offering are estimated to be
approximately $27,000, which will be paid by the Company.
11
<PAGE> 14
SELLING SECURITYHOLDERS
The following table sets forth certain information with respect to
persons as to which the Company is registering the Common Shares for resale to
the public. Because the Selling Securityholders may offer all or some part of
the Common Shares pursuant to this Prospectus and because the offering is not
being underwritten on a firm commitment basis, no estimate can be given as to
the amount of securities to be offered for sale by the Selling Securityholders
upon termination of this offering. See "Plan of Distribution.":
<TABLE>
<CAPTION>
Common Stock
Common Stock Maximum Beneficial Ownership
Beneficial Ownership Amount After Offering if
Selling Securityholder Prior to Offering to be Sold Maximum is Sold (1)
---------------------- ----------------- ---------- ---------------
<S> <C> <C> <C>
Nancy Bader and Michael
Leventhal, JTWROS 3,000 2,500 500
Jim Ball Inc. 2,500 2,500 0
George C. Barber 6,000 5,000 1,000
Charles L. Belcher and Arlys
Belcher, JTWROS 2,500 2,500 0
Paul Berger 4,000 2,500 1,500
Herman Bernstein and
Elizabeth Bernstein, TR Herman
and Elizabeth Bernstein Trust 4,500 2,500 2,000
Herman Bhojwani 5,000 5,000 0
BRMCO Partnership 2,500 2,500 0
Peter David Bronson and Maguy
Bronson, JTWROS 5,000 5,000 0
Nancy Chaisson and James J.
Chaisson, JTWROS 12,000 10,000 2,000
Bret D. Chapman 5,000 5,000 0
Everen Clearing Corp. Cust.
FBO Benjamin T. Clark IRA 5,000 5,000 0
Norman H. Cohen, TR Walter
Kaye Trust 3,500 2,500 1,000
Gary W. Cole 18,000 5,000 13,000
Peter Jeffrey Colquhoun, TR
Peter Jeffrey Colquhoun Trust 2,500 2,500 0
</TABLE>
12
<PAGE> 15
<TABLE>
<S> <C> <C> <C>
Anthony Conza 5,000 5,000 0
Vincent Coppola Jr. MD and
Lillian Coppola JTWROS 2,500 2,500 0
Jack J. Curtis and Mildred J.
Curtis, TR Curtis Intervivos 3,500 2,500 1,000
Trust
Ronald A. David and Dona C.
David Ten Ent 5,500 2,500 3,000
Roy A. Dempsey 5,000 5,000 0
Donald J. Dombrowski 8,000 5,000 3,000
Grant J. Donovan 5,000 5,000 0
Lucian Douglass, Jr. 5,000 5,000 0
Gordan J. Dow 5,000 5,000 0
Everen Clearing Corp. Cust
FBO Gordan J. Dow IRA 5,000 5,000 0
John T. Drescher 8,000 5,000 3,000
Edward Ezrick and Helen
Ezrick JTWROS 2,500 2,500 0
Ron Feldman TR Howard Levin
Irrevocable Trust 2,500 2,500 0
John Fernbach 2,500 2,500 0
David E. French 5,500 2,500 3,000
Gail E. Giboney and Robert L.
Giboney JTWROS 5,000 5,000 0
Everen Clearing Corp. Cust
FBO Jerome M. Gigliotti IRA 5,000 5,000 0
Emanuel Goldstein and Rose
Goldstein JTWROS 2,500 2,500 0
Leonard Goodfriend and Audrey
Goodfriend JTWROS 5,000 5,000 0
Rose Marie Goodman, Nancy
Ehrlich and Beverly Liggett,
JTWROS 2,500 2,500 0
Thomas J. Hanford 10,000 2,500 7,500
Everen Clearing Corp. Cust
FBO Edmund J. Harris IRA 2,500 2,500 0
</TABLE>
13
<PAGE> 16
<TABLE>
<S> <C> <C> <C>
Barry H. Hellman Retirement
Plan 11,000 5,000 6,000
Andrew Higgins 17,000 5,000 12,000
Harvey Hirsch and Joyce
Hirsch JTWROS 2,500 2,500 0
Francis A. Jackson and Susan
E. Jackson JTWROS 3,000 2,500 500
Jafco Industries Inc. 2,500 2,500 0
Steven L. Johns and Sandra S.
Johns JTWROS 12,000 5,000 7,000
Egon Kahl 7,558 5,000 2,558
Gregory Kaufman and Sharon
Kaufman JTWROS 2,500 2,500 0
David M. Kent 2,500 2,500 0
Vijay Khanchandani and
Manjeeta Khanchandani JTWROS 9,652 2,500 7,152
Joe Kubas 18,000 7,500 10,500
The Kubas Company, Inc. 2,500 2,500 0
Frank Lagalia and Lydia
Lagalia JTWROS 5,000 5,000 0
Al Leiter and Lori Leiter 3,500 2,500 1,000
JTWROS
Everen Clearing Corp. Cust
FBO William F. Marks IRA 8,000 5,000 3,000
David McIvor 5,000 5,000 0
Marilyn F. Miller 5,000 5,000 0
Patricia K. Pabst 5,500 2,500 3,000
Robert S. Pearlman and Rita
J. Pearlman JTWROS 5,000 5,000 0
Sheldon Perl and Ruth Perl
JTWROS 27,500 5,000 22,500
Everen Clearing Corp. Cust
FBO Leslie D. Reagin II IRA 9,000 5,000 4,000
Joseph F. Regan 3,500 2,500 1,000
</TABLE>
14
<PAGE> 17
<TABLE>
<S> <C> <C> <C>
Everen Clearing Corp. Cust
FBO Robert Leon Rogers IRA 2,500 2,500 0
Robert L. Rogers and Norma J.
Rogers JTWROS 2,500 2,500 0
David M. Sanders 10,500 5,000 5,500
Abe Schwartz and Irene
Schwartz JTWROS 7,204 2,500 4,704
James Schwartz and Janice
Schwartz JTWROS 7,000 5,000 2,000
Keith T. Sellers 8,300 5,000 3,300
Yehuda Shechter 2,500 2,500 0
Everen Clearing Corp. Cust
FBO Yehuda Shechter IRA Rollover 5,000 5,000 0
Rajesh K. Soin and Indu Soin
JTWROS 10,000 10,000 0
Joseph A. Spinella 5,000 5,000 0
Gary William Stockton and
Diane Kay Fasel TR Stockton 5,000 5,000 0
Fasel trust
Reynold W. Swanson and Gloria
D. Swanson TR Reynold W. Swanson
and Gloria D. Swanson Rev. Liv.
Trust 2,500 2,500 0
Harvey A. Turell TR Harvey A
and Linda A. Turell Family Trust 15,000 5,000 10,000
Finis E. Wiggins and Dorothy
L. Wiggins JTWROS 2,500 2,500 0
Howard Williamson and
Virginia Williamson JTWROS 4,000 2,500 1,500
Everen Clearing Corp. Cust
FBO Keith D. Wolf IRA Rollover 3,500 2,500 1,000
Stephen Yetzer and Karen
Yetzer TR The Yetzer Family
Trust 5,000 5,000 0
----- ----- -
TOTAL.......................... 449,714 300,000 149,714
</TABLE>
(1) The percentage of the Common Shares of the Company owned individually
by each of the Selling Securityholders after the offering is complete is less
than one percent.
15
<PAGE> 18
Pursuant to the terms of a Registration Rights Agreement between the
Company and the Selling Securityholders, the Company agreed that six months
from the initial closing date of its November 3, 1995 private placement it
would, on one occasion, file a registration statement with the Commission, to
register the Common Shares purchased by the Selling Securityholders in the
private placement. The Company is obligated to keep the registration statement
effective until the earlier of the sale of all of the Common Shares covered
hereby or eighteen months from the effective date of the registration
statement. The Company has agreed to pay all registration expenses in
connection with any requested registration, except that the Selling
Securityholders will pay any fees and expenses of counsel for the Selling
Securityholders and, to the extent that the Selling Securityholders retain an
underwriter with respect to such registration, underwriting discounts,
commissions and fees relating thereto. The Company has agreed to indemnify the
Selling Securityholders against certain liabilities in respect of this
offering, including liabilities under the Act.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Bruce R. Thaw, a Director of the Company, serves as general counsel to
the Company and billed the Company $173,184 for legal fees for representing the
Company in connection with certain legal and regulatory matters in 1995. Mr.
Thaw continues to represent the Company for which he will be paid customary
legal fees and will represent the Company in this offering.
On October 24, 1994, the Company through its wholly owned subsidiary
acquired all of the issued and outstanding capital stock of CSI. The Agreement
and Plan of Merger provided for a share for share exchange with all existing
shareholders of CSI. In addition, the Company issued 65 shares of its Series A
Convertible Preferred Stock, which has a dividend rate of 8.75%, in exchange
for a promissory note issued by CSI to ViaTech Systems, Inc., ("ViaTech") in
the principal amount of $650,000. Accrued interest on said note of $97,126 was
paid by the Company at closing. On December 5, 1995, ViaTech converted such
preferred stock into 65,000 shares of the Company's Common Stock. Mr. Charles
D. Brown, a Senior Vice President of the Company was the Chief Executive
Officer and a principal shareholder of CSI. In connection with the acquisition,
Mr. Brown received 174,546 shares of the Company's Common Stock.
PLAN OF DISTRIBUTION
Any or all of the Common Shares offered hereby may be sold, from time
to time, to purchasers directly by the Selling Securityholders. The Selling
Securityholders and any underwriters, dealers or agents that participate in
the distribution of Common Shares may be deemed to be underwriters under the
Act, and any profit on the sale of the Common Shares by them and any discounts,
commissions or concessions received by them may be deemed to be underwriting
discounts and commissions under the Act. The Common Shares may be sold, from
time to time, in one or more transactions at a fixed offering price, which may
be changed, or at varying prices determined at the time of sale or at
negotiated prices. The distribution of securities by the Selling
Securityholders may be effected in one or more transactions that may take place
on the over-the-counter market, including ordinary broker's transactions.
Usual and customary or specifically negotiated brokerage fees, discounts and
commissions may be paid by the Selling Securityholders in connection with such
sales of securities.
The Company will not receive any of the proceeds from the sale by the
Selling Securityholders of the Common Shares offered hereby. All of the filing
fees and the expenses of this Registration Statement will be borne in full by
the Company, other than any fees or expenses of counsel to the Selling
Securityholders and, to the extent that the Selling Securityholders retain an
underwriter with respect to such registration, underwriting fees, discounts and
commissions relating to this offering.
16
<PAGE> 19
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Common Shares may not simultaneously
engage in market making activities with respect to the Common Shares for a
period of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, the Selling Securityholders will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of the Common
Shares by the Selling Securityholders.
In order to comply with certain states' securities laws, if
applicable, the Common Shares will be sold in such jurisdiction only through
registered or licensed brokers or dealers. In certain states the Common Shares
may not be sold unless the securities have been registered or qualified for
sale in such state, or unless an exemption from registration or qualification
is available and is obtained.
The Common Shares originally issued by the Company to the Selling
Securityholders bear legends as to their restricted transferability. Upon the
effectiveness of the Registration Statement of which this Prospectus is a part,
and the transfer by the Selling Securityholders of any of the Common Shares
pursuant thereto, new certificates representing such Common Shares will be
issued to the transferee, free of any such legends unless otherwise required by
law.
In addition to sales pursuant to the Registration Statement of which
this Prospectus is a part, the Common Shares offered hereby maybe sold pursuant
to Rules 144, 144A or 904 under the Securities Act provided the requirements of
such rules, including, without limitation, the holding period and the manner of
sale requirements are met.
LEGAL MATTERS
The validity of the issuance of Common Shares offered hereby will be
passed upon for the Company by the Law Offices of Bruce R. Thaw, 45 Banfi
Plaza, Farmingdale, NY 11735. Bruce R. Thaw is a Director of the Company and
owns 220,000 shares of the Company's Common Stock. Bruce R. Thaw is the son of
Allan Thaw, also a Director of the Company.
EXPERTS
The consolidated financial statements as of December 31, 1994 and 1995
and for the years then ended of Information Resource Engineering, Inc. and
subsidiaries included in the 1995 Form 10-KSB have been incorporated by
reference in this Prospectus and elsewhere in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, to the extent and for the periods set forth in their report
incorporated herein by reference and upon the authority of said firm as experts
in auditing and accounting.
The financial statements of Gretag Data Systems AG as of December 31,
1994 and 1993 and for the years then ended included in Form 8-K/A of
Information Resource Engineering, Inc. dated December 28, 1995, incorporated by
reference in this prospectus have been incorporated herein in reliance upon the
report of Schweizerische Treuhandgesellschaft-Coopers & Lybrand AG, independent
accountants, given upon the authority of that firm as experts in auditing and
accounting.
17
<PAGE> 20
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE
BE ANY SALE OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE. THE
DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Additional Information . . . . . . 2
Incorporation of Certain
Documents By Reference . . . . . . 2
Prospectus Summary . . . . . . . . 4
Risk Factors . . . . . . . . . . . 6
Use of Proceeds . . . . . . . . . . 11
Selling Securityholders . . . . . . 12
Certain Relationships and Related
Transactions . . . . . . . . . . . 16
Plan of Distribution . . . . . . . 16
Legal Matters . . . . . . . . . . . 17
Experts . . . . . . . . . . . . . . 17
</TABLE>
--------------------
INFORMATION RESOURCE
ENGINEERING, INC.
300,000 Shares
-------------------------------
PROSPECTUS
-------------------------------
May , 1996
<PAGE> 21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses relative to this offering,
all of which are to be borne by the Registrant. Expenses other than filing
fees are estimated.
<TABLE>
<S> <C>
Registration Fee $ 2,560
Accounting Fees and Expenses $ 10,000
Legal Fees and Expenses $ 12,000
Printing Fees $ 1,500
Miscellaneous $ 940
---------
Total Expenses $ 27,000
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Delaware General Corporation Law, as amended, provides for the
indemnification of the Company's officers, directors and corporate employees
and agents under certain circumstances as follows:
DEL. CODE ANN. TITLE 8
Sec. 145. Indemnification of officers, directors, employees
and agents; insurance
a) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
b) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise
II - 1
<PAGE> 22
against expenses (including attorneys' fees), actually and reasonably
incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to
the extent that the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
c) To the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in
defense of any action suit or proceeding referred to in subsections
(a) and (b) of this section, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
d) Any indemnification under subsection (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper
in the circumstances because he has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties
to such action, suit or proceedings, or (2) if such a quorum is not
obtainable, or, even, if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
e) Expenses incurred by an officer or director in defending a
civil or criminal action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses incurred by
other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this section
shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled
under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and
as to action in another capacity while holding such office.
g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him
against such liability under this section.
II - 2
<PAGE> 23
h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority
to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of
such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with
respect to the resulting or surviving corporation as he would have
with respect to such constituent corporation if its separate existence
had continued.
i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director, officer, employee
or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have
acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
The Certificate of Incorporation of the Company provides that the
indemnification provisions of Sections 102(b)(7) and 145 of the Delaware
Corporation Law shall be utilized to the fullest extent possible. Further, the
Certificate of Incorporation contains provisions to eliminate the liability of
the Company's directors to the Company or its stockholders to the fullest
extent permitted by Section 102(b)(7) of the Delaware General Corporation Law,
as amended from time to time.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, is permitted to directors, officers or
controlling persons of the Registrant, pursuant to the above mentioned statutes
or otherwise, the Registrant understands that the Securities and Exchange
Commission is of the opinion that such indemnification may contravene federal
public policy, as expressed in said Act, and therefore, may be unenforceable.
Accordingly, in the event that a claim for such indemnification is asserted by
any director, officer or a controlling person of the Company, and the
Commission is still of the same opinion, the Registrant (except insofar as such
claim seeks reimbursement by the Registrant of expenses paid or incurred by a
director, officer of controlling person in successful defense of any action,
suit or proceeding) will, unless the matter has theretofore been adjudicated by
precedent deemed by counsel for the Registrant to be controlling, submit to a
court of appropriate jurisdiction the question whether or not indemnification
by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue. The Underwriter's Warrants provide for
reciprocal indemnification and such provisions are incorporated by reference
herein.
II - 3
<PAGE> 24
ITEM 16. EXHIBITS
1 None
2 None
4 Specimen of Common Stock Certificate
of Registrant (1)
5 Opinion of Counsel as to the legality
of securities being registered
8 None
15 None
23A Consent of Bruce R. Thaw, Counsel to
the Company
23B Consent of KPMG Peat Marwick LLP, Certified
Public Accountants.
23C Consent of Schweizerische Treuhandgesellschaft
Coopers & Lybrand AG, Certified Public Accountants
24 Power of Attorney - See signature pages
25 None
26 None
27 None
28 None
(1) Filed as an exhibit to the Registration Statement on
Form S-1 (File No. 33-52066) of the Registrant and
incorporated herein by reference.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include any
additional or changed material information with respect to the plan of
distribution.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II - 4
<PAGE> 25
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to any charge provision, by-law contract,
arrangements statute, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(5) That, for the purpose of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
II - 5
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized at Baltimore, Maryland on the 30th day of May, 1996.
INFORMATION RESOURCE ENGINEERING, INC.
By:/s/Anthony A. Caputo
----------------------------------
ANTHONY A. CAPUTO, Chairman
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENT, that each of the undersigned whose
signature appears below constitutes and appoints Anthony A. Caputo and David A.
Skalitzky, and each of them (with full power of each of them to act alone), his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution for him and on his behalf, and in his name, place and stead,
in any and all capacities to execute and sign any and all amendments or
post-effective amendments to this registration statement, or subsequent
registration statements related to the shares registered hereby and to file the
same, with all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof and the
Registrant hereby confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C>
/s/ Anthony A. Caputo Chairman, Chief Executive Officer, May 30, 1996
- --------------------------------- President (Principal Executive Officer)
ANTHONY A. CAPUTO
/s/ Jill Leukhardt Senior Vice President, Director May 30, 1996
- ---------------------------------
JILL LEUKHARDT
/s/ David A. Skalitzky Vice President of Finance and May 30, 1996
- --------------------------------- Administration, Secretary/Treasurer
DAVID A. SKALTIZKY (Principal Financial and Accounting Officer)
/s/ Douglas E. Kozlay Director May 30, 1996
- ---------------------------------
DOUGLAS E. KOZLAY
/s/ Bruce R. Thaw Director May 30, 1996
- ---------------------------------
BRUCE R. THAW
/s/ Allan Thaw Director May 30, 1996
- ---------------------------------
ALLAN THAW
/s/ Ira A Hunt, Jr. Director May 30, 1996
- ---------------------------------
IRA A. HUNT, JR.
</TABLE>
II - 6
<PAGE> 27
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page No.
<S> <C> <C>
5 Opinion of Counsel as to the legality of
securities being registered
23A Consent of Bruce R. Thaw, Counsel to
the Company
23B Consent of KPMG Peat Marwick LLP,
Certified Public Accountants.
23C Consent of Schweizerische Treuhandgesellschaft
Coopers & Lybrand AG, Certified Public Accountants
</TABLE>
<PAGE> 1
EXHIBIT 5
Opinion of Counsel as to legality of
securities being registered
<PAGE> 2
Law Offices
BRUCE R. THAW
45 Banfi Plaza
Farmingdale, NY 11735
(516) 752-1760
May 30, 1996
Information Resource Engineering, Inc.
and its Selling Stockholders
8029 Corporate Drive
Baltimore, MD 21236
To whom it may concern :
We have acted as counsel for Information Resource Engineering, Inc., a
Delaware corporation (the "Company") and certain Selling Stockholders in
connection with the proposed issuance and sale by certain Selling Stockholders
of 300,000 shares of Common Stock, $.01 par value (the "Common Stock").
As counsel to the Company, we have examined the minute books of the
Company, together with copies of its certificate of incorporation, as amended,
and By-laws. We have also examined the proposed Registration Statement on Form
S-3 (Securities and Exchange Commission File No. 33- ), and the exhibits
to said Registration Statement. Based upon the foregoing, and our examination
of such other documents as we deemed pertinent, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing
and in good standing under and by virtue of the laws of the State of Delaware.
2. The authorized capital of the Company consists of (i) 500,000 shares
of Preferred Stock, par value $.01 per share, and (ii) 15,000,000 shares of
Common Stock, par value $.01 per share, of which 5,417,329 shares are issued
and outstanding, fully paid and non-assessable shares of Common Stock of the
Company as of this date.
3. The 300,000 shares being offered by the Selling Stockholders and
which are the subject of the Registration Statement have been duly authorized
and the shares when sold and transferred by the Selling Stockholders and
delivered against payment therefor will be legally issued and outstanding,
fully paid and non-assessable.
Very truly yours,
/s/ Bruce R. Thaw
BRUCE R. THAW
<PAGE> 1
EXHIBIT 23A
Consent of Bruce R.Thaw, Counsel to Registrant
<PAGE> 2
[LETTERHEAD OF LAW OFFICES OF BRUCE R. THAW]
CONSENT OF COUNSEL
I hereby consent to be named in the Registration Statement on Form S-3,
filed by Information Resource Engineering, Inc., (the "Registrant") as the
attorney, who will pass upon legal matters for the Registrant in connection
with the sale of the Shares of the Registrant.
Farmingdale, New York
May 30, 1996
/s/ Bruce R. Thaw
-----------------------
BRUCE R. THAW
<PAGE> 1
EXHIBIT 23B
Consent of KPMG Peat Marwick LLP,
Certified Public Accountants
<PAGE> 2
Exhibit 23B
Consent of Independent Auditors
The Board of Directors
Information Resource Engineering, Inc.:
We consent to the use of our report dated March 15, 1996 included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1995
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the Prospectus.
KPMG PEAT MARWICK LLP
Baltimore, Maryland
May 30, 1996
<PAGE> 1
EXHIBIT 23C
Consent of Schweizerische Treuhandgesellschaft
Coopers & Lybrand AG, Certified Public Accountants
<PAGE> 2
Exhibit 23C
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-3 of our report dated August 31, 1995, on our audits of the financial
statements of Gretag Data Systems AG as of December 31, 1994 and 1993 and for
each of the years then ended included in Form 8-K/A of Information Resource
Engineering, Inc. dated December 28, 1995. We also consent to the reference to
our Firm under the caption "Experts".
Schweizerische Treuhandgesellschaft-
Coopers & Lybrand AG
J. Grand K.C. Barraclough
