As filed with the Securities and Exchange Commission on February 4, 1999
Registration No. 333-69101
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
QUERYOBJECT SYSTEMS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
94-3087939
(IRS Employer
Identification Number)
---------------------------
60 Charles Lindbergh Boulevard
Uniondale, New York 11553
(516) 228-8500(Telephone)
(516) 228-8584 (Telecopier)
(Address, Including Zip Code, and Telephone Number of
Registrant's Principal Executive Offices)
---------------------------
Daniel M. Pess
QueryObject Systems Corporation
60 Charles Lindbergh Boulevard
Uniondale, New York 11553
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(Name, Address, Including Zip Code, and Telephone Number
of Agent for Service)
Copy to:
David J. Adler, Esq.
Kenneth A. Schlesinger, Esq.
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
<PAGE>
---------------------------
Approximate date of commencement of proposed sale to the
public: As soon as practicable after this Registration Statement becomes
effective.
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, check the following box. /X/
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Amount Maximum Maximum Amount of
to be Offering Price Aggregate Registration
Title of Shares to be Registered Registered (1) Per Share Offering Price Fee(4)
-------------------------------- -------------- --------- -------------- ------
<S> <C> <C> <C> <C>
Common Stock issuable upon the 7,000,000 $1.0625(2) $7,437,500 $2,067.63
conversion of outstanding shares
of Series A Convertible Preferred
Stock (the "Series A Stock")
issued in a private placement
consummated in October 1998
(the "October Private Placement")
Common Stock issuable upon the 2,000,000 $1.0625(2) $2,125,000 $590.75
conversion of outstanding shares
of Series B Convertible Preferred
Stock (the "Series B Stock")
issued in a private placement
consummated in November 1998
(the "November Private
Placement")
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Common Stock issuable upon the 4,375,000(2) $.50(3) $2,187,500 $608.13(4)
exercise of Warrants issued in the
October Private Placement (the
"October Warrants")
Common Stock issuable upon the 1,250,000 $.50(3) $625,000 $155.00(4)
exercise of Warrants issued in the
November Private Placement (the
"November Warrants")
Common Stock issuable upon the 54,009 $8.56(3) $462,317 $128.52(4)
exercise of Warrants (the "Interim
Financing Warrants") issued in
connection with an Interim
Financing in June 1997
Common Stock issuable upon the 200,000 $6.00(3) $1,200,000 $333.60(4)
exercise of an Option (the
"Consultant Option") issued to a
consultant in December 1997
Common Stock issuable to 700,000 $1.0625 $743,750 $206.76
Southeast Research Partners, Inc.
("SRP") upon the exercise of an
option (the "October Agent
Option") granted to SRP in
connection with the October
Private Placement and the
conversion of shares of Series A
Stock issuable upon such exercise
Common Stock issuable to SRP 200,000 $1.0625 $212,500 $59.08
upon the exercise of an option
(the "November Agent Option")
granted to SRP in connection with
the November Private Placement
and the conversion of shares of
Series B Stock issuable upon such
exercise
Common Stock issuable upon the 437,500 $.50(3) $218,750 $60.81(4)
exercise of Warrants (the
"October SRP Warrants") issuable
to SRP upon the exercise of the
October Agent Option
Common Stock issuable upon the 125,000 $.50(3) $62,500 $17.38(4)
exercise of Warrants (the
"November SRP Warrants")
issuable to SRP upon the exercise
of the November Agent Option
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Common Stock issuable upon the 150,283 $8.56 $1,286,422 $357.63
exercise of Warrants issued in
Private Placements in 1995 and
1996 (the "Class C and Class D
Warrants")
TOTAL 16,491,792 $16,561,233 $4,604.03
</TABLE>
(1) In the event of a stock split, stock dividend or similar transaction
involving the Common Stock, the shares registered hereby shall
automatically be increased pursuant to Rule 416 of the Securities Act of
1933, as amended (the "Securities Act"), to cover the additional shares of
Common Stock required to prevent dilution. Pursuant to Rule 416, the number
of shares to be registered hereunder is subject to adjustment and could be
greater or less than such estimated amount depending upon factors that
cannot be predicted by the Company at this time, including, among others,
stock splits, stock dividends and similar transactions, the effect of
anti-dilution provisions contained in the warrants and by reason of changes
in the exercise price of the warrants in accordance with the terms thereof.
(2) Estimated in accordance with Rule 457(c) solely for the purpose of
calculating the registration fee based upon the average of the high and low
price of the Company's Common Stock, $.001 par value (the "Common Stock"),
on the Nasdaq SmallCap Market on December 11, 1998.
(3) The exercise price of the October Warrants, the November Warrants , the
October SRP Warrants and the November SRP Warrants is $.50. The exercise
price of the Interim Financing Warrants and the Class C and Class D
Warrants is $8.56. The exercise price of the Consultant Option is $6.00.
(4) Pursuant to Rule 457(g), the registration fee for the common stock
underlying such warrants or options is calculated on the basis of the
exercise price of such warrants or options.
(5) Of such amount, $4,246.40 was previously paid upon the initial filing.
Accordingly, $357.63 will be paid in connection with this filing.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a) may determine.
--------------------
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<PAGE>
We will amend and complete the information in this prospectus. Although we are
permitted by US federal securities laws to offer these securities using this
prospectus, we may not sell them or accept your offer to buy them until the
documentation filed with the SEC relating to these securities had been declared
effective by the SEC. This prospectus is not an offer to sell these securities
or our solicitation of your offer to buy these securities in any jurisdiction
where that would not be permitted or legal.
PROSPECTUS
SUBJECT TO COMPLETION, DATED FEBRUARY 4 , 1999
17,566,792 SHARES OF COMMON STOCK
QUERYOBJECT SYSTEMS CORPORATION
We offered and sold shares of our Series A convertible preferred stock,
Series B convertible preferred stock and warrants to purchase our common stock
in private placements in October and November 1998. We also offered and sold
warrants to purchase shares of our common stock in a private placement in July
1997 and granted an option to purchase shares of our common stock to a
consultant in December 1997. The shares of preferred stock are convertible, and
the warrants and option are exercisable, into an aggregate of 17,566,792 shares
of our common stock. The selling stockholders listed in this prospectus are
offering and selling up to 17,566,792 shares of common stock issuable upon
exercise of the warrants and option and conversion of the preferred stock issued
in such private placements. All proceeds from the sale of the common stock under
this prospectus will go to the selling stockholders. We will not receive any
proceeds from the sale of such common stock. We will, however, receive the
exercise price of the warrants and option at the time their holders may exercise
them.
Our common stock is listed on the Nasdaq SmallCap Market under the symbol
"QUOB" and on the Boston Stock Exchange under the symbol "QOB." The last
reported sale price on the Nasdaq SmallCap Market for our common stock on
February 3, 1999 was $1.06 per share.
The selling stockholders may offer and sell their shares of common stock
through public or private transactions on the Nasdaq SmallCap Market or the
Boston Stock Exchange, at prevailing market prices or at privately negotiated
prices. The selling stockholders may engage brokers or dealers who may receive
commissions or discounts from the selling stockholders. Any broker-dealer
acquiring the common stock from the selling stockholders may sell such
securities in its normal market making activities, through other brokers on a
principal or agency basis, in negotiated transactions, to its customers or
through a combination of such methods. See "Plan of Distribution." We will bear
all expenses in connection with the preparation of this prospectus.
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This investment involves risk. See "Risk Factors" beginning at page 5.
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Neither the Securities and Exchange Commission nor any State securities
commission has determined whether this prospectus is truthful or complete. They
have not made, nor will they make, any determination as to whether anyone should
buy these securities. Any representation to the contrary is a criminal offense.
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The date of this Prospectus is , 1999.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). You may
read and copy any document we file at the SEC's public reference room located at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
further information on the operation of the public reference room by calling the
SEC at 1-800-SEC-0330. Our SEC filings are also available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also request
copies of such documents, upon payment of a duplicating fee, by writing to the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Our common stock is
listed on the Nasdaq SmallCap Market and the Boston Stock Exchange and such
reports and other information may also be inspected at the offices of Nasdaq at
1735 "K" Street, N.W., Washington, D.C. 20006-1500 and the Boston Stock Exchange
at One Boston Place, Boston, Massachusetts 02108.
TABLE OF CONTENTS
WHERE YOU CAN FIND MORE INFORMATION...........................................2
INCORPORATION BY REFERENCE....................................................4
ABOUT THIS PROSPECTUS.........................................................4
RISK FACTORS..................................................................5
Negative Working Capital; Uncertainty Regarding Receipt of Funds From
Private Placements; Need For Additional Funding
Accumulated Deficit; Historical and Projected Future Operating Losses;
Going Concern Qualification in Independent Accountants' Report
Limited Operating History; Lack of Substantial Revenue
Dependence Upon New Products; Uncertain Market Acceptance
Possible Nasdaq Delisting; Potentially Limited Trading Market
Use of Indirect Channel Partners to Increase Sales
Need to Enhance Existing Products, Develop New Products and Adapt to Rapid
Technological Change
Dependence on Significant Customers
Competition
Dependence Upon Key Personnel; Need to Increase Sales, Marketing,
Development and Technical Personnel
Lack of Proprietary Technology Protection; Risks of Infringement
-2-
<PAGE>
Potential Fluctuations in Periodic Results
Risk of Product Defects; Product Liability
International Operations
Possible Volatility of Securities Prices
Possible Adverse Market Effect of Shares Eligible for Future Sale
Issuance of Preferred Stock; Anti-Takeover Provisions
No Dividends.
Outstanding Options, Warrants and Convertible Preferred Stock
Forward Looking Statements and Associated Risks
Year 2000 Compliance
THE COMPANY...................................................................12
USE OF PROCEEDS...............................................................13
SELLING STOCKHOLDERS..........................................................13
PLAN OF DISTRIBUTION..........................................................20
LEGAL MATTERS.................................................................21
EXPERTS.......................................................................21
ADDITIONAL INFORMATION........................................................21
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<PAGE>
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information we incorporate by reference is
considered to be a part of this prospectus and information that we file later
with the SEC will automatically update and replace this information. We
incorporate by reference the documents listed below and any future filings we
make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"):
(1) Our Annual Report on Form 10-KSB for the year ended December
31, 1997;
(2) Our Quarterly Reports on Form 10-QSB for the quarterly periods
ended March 31, 1998, June 30, 1998 and September 30, 1998;
and
(3) Our Application for Registration of our common stock on Form
8-A dated November 7, 1997.
You may request a copy of these filings (excluding the exhibits to such
filings which we have not specifically incorporated by reference in such
filings) at no cost, by writing or telephoning us at the following address:
QueryObject Systems Corporation
60 Charles Lindbergh Boulevard
Uniondale, New York 11553
Attention: Chief Financial Officer
(516) 228-8500
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information provided or incorporated by
reference in this prospectus or any related supplement. We have not authorized
anyone else to provide you with different information. The Selling Stockholders
will not make an offer of these shares in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
supplement is accurate as of any other date than the date on the front of those
documents.
-4-
<PAGE>
RISK FACTORS
The purchase of our common stock involves a high degree of risk. You
should carefully consider the following risk factors and the other information
in this Prospectus before deciding to invest in our common stock.
Negative Working Capital; Uncertainty Regarding Receipt of Funds From Private
Placements; Need For Additional Funding
At September 30, 1998, we had negative working capital of $1,743,864.
We have had a limited operating history as a software product company, have not
made significant sales of our products and our revenues are difficult to
predict.
We sold securities in private placements in October and November 1998
so that we could continue operations. In the private placements, we received
conditional commitments to purchase $4,500,000 of units consisting of
convertible preferred stock and warrants to purchase common stock, of which
payment for all of the units had been made as of February 1999. We received net
proceeds of $4,121,000 from such private placements. However, given our
continued operating losses, we will need additional financing to continue
operations. Our current projections indicate that if our forecasts are achieved,
we will have enough cash to continue operations until June 1999. As of the date
of this Prospectus, we have no commitments, agreements or understandings
regarding additional financings and we may be unable to obtain additional
financing.
Accumulated Deficit; Historical and Projected Future Operating Losses; Going
Concern Qualification in Independent Accountants' Report
At September 30, 1998, our accumulated deficit was $31,971,100. For the
fiscal years ended December 31, 1996 and 1997, and for the nine months ended
September 30, 1998, we incurred net losses of $4,917,953, $10,563,484 and
$6,104,114, respectively. We have incurred a net loss in each year of our
existence, and have financed our operations primarily through sales of equity
and debt securities. Our expense levels are high and our revenues are difficult
to predict. The independent accountants' report on our financial statements for
the year ended December 31, 1997 states that our recurring losses from
operations and negative cash flow from operating activities raise substantial
doubt about our ability to continue as a going concern. We expect that the
independent accountants' report on our financial statements for the year ended
December 31, 1998 will contain the same qualification.
We expect to incur net losses for the foreseeable future. We may never
achieve or sustain significant revenues or profitability on a quarterly or
annual basis in the future. Our future operating results will depend on many
factors, including:
o product demand
o product and price competition in our industry
o our success in expanding our direct sales force and
establishing indirect channel partners
o our ability to develop and market products and control costs
o the percentage of our revenues that is derived from indirect
channel partners
-5-
<PAGE>
Limited Operating History; Lack of Substantial Revenue
We have a limited operating history as a software product company and
have made only limited sales of our products. Our total revenues for the year
ended December 31, 1997 and for the nine months ended September 30, 1998 were
$1,012,159 and $398,590, respectively. Prior to 1997, our revenues were derived
primarily from contract data analysis services, which we no longer provide.
Dependence Upon New Products; Uncertain Market Acceptance
Substantially all of our revenues for the foreseeable future are
expected to be derived from sales of QueryObject System. Between January 1, 1995
and September 30, 1998, we had software product revenue from only 12 QueryObject
System installations, one of which (sold in 1995) was a pre-production beta
version. We only recently commenced an integrated marketing effort for our
products. Our future financial performance will depend upon the successful
introduction and customer acceptance of QueryObject System and the development
of new and enhanced versions of the product. If we fail to achieve broad market
acceptance of QueryObject System, it would materially adversely affect our
business, operating results and financial condition.
Possible Nasdaq Delisting; Potentially Limited Trading Market
Our common stock is listed on the Nasdaq SmallCap Market and the Boston
Stock Exchange. To remain eligible for listing on the Nasdaq SmallCap Market we
must comply with the following:
o our common stock must have a minimum bid price of $1.00;
o we must have minimum tangible net assets of $2,000,000 or a
market capitalization of $35,000,000 or net income of $500,000
in two of the three prior years; and
o we must have a public float of at least 500,000 shares with a
market value of at least $1,000,000; at least 300 stockholders
must hold our common stock; and at least two market makers
must make a market in it.
Nasdaq has notified us that our common stock will be delisted. We have
requested a hearing to appeal the delisting. The hearing will be held on
February 19, 1999. Our common stock will continue to be listed on Nasdaq at
least until the date of the hearing. We are unable to predict the outcome of the
hearing, but based on our review of the delisting notice, we believe that,
absent additional financing, our common stock will be delisted and that our
common stock may be delisted even if we obtain additional financing.
The Nasdaq notification is based in part on reservations that Nasdaq
has about our ability to regain and sustain compliance with its net tangible
asset requirements. As of September 30, 1998, we had a deficiency of $1,456,798
in net tangible assets. Subsequent to September 30, 1998, we received net
proceeds of $4,121,000 from the October and November 1998 private placements.
Due to actual and anticipated losses subsequent to September 30, 1998, however,
we do not expect to be able to maintain for any sustained period at least
$2,000,000 in net tangible assets. We would be required to enter into a
transaction or transactions to raise additional equity capital to maintain at
least $2,000,000 in net tangible assets. Such additional financing may be
unavailable to us on acceptable terms or at all.
Nasdaq has also advised us that the October and November 1998 private
placements did not receive the requisite approval of the Company's stockholders.
While our stockholders approved a proposal in August 1998 whereby we could issue
an unlimited amount of common stock (and securities exercisable for such common
stock) in a private placement, the purchasers in the October and November 1998
private placements required that we issue preferred stock, which issuance was
not approved by our stockholders. Nasdaq also believes that the issuance of the
common stock underlying the preferred stock was not specifically approved by our
stockholders. Moreover, Nasdaq believes that our stockholders lacked sufficient
information to determine the effect that the October and
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<PAGE>
November 1998 private placements could have on their voting rights and
investment in the Company. Accordingly, our common stock could be delisted from
Nasdaq even if we are able to satisfy the net tangible asset requirement.
If our common stock is delisted from Nasdaq, trading, if any, therein
would thereafter be conducted on the OTC Bulletin Board and the Boston Stock
Exchange. The Boston Stock Exchange will delist our common stock if we have less
than $500,000 in net tangible assets. We will not be able to maintain at least
$500,000 in net tangible assets without additional financing. If our common
stock is delisted from Nasdaq and the Boston Stock Exchange, the common stock
could be considered a penny stock. SEC regulations generally define a penny
stock to be an equity security that is not listed on Nasdaq or a national
securities exchange and that has a market price of less than $5.00 per share,
subject to certain exceptions. The regulations of the SEC would require
broker-dealers to deliver to a purchaser of common stock a disclosure schedule
explaining the penny stock market and the risks associated with it. Various
sales practice requirements are also imposed on broker-dealers who sell penny
stocks to persons other than established customers and accredited investors
(generally institutions). In addition, broker-dealers must provide the customer
with current bid and offer quotations for the penny stock, the compensation of
the broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer's
account. If the common stock is traded on the OTC Bulletin Board and becomes
subject to the regulations applicable to penny stocks, investors may find it
more difficult to obtain timely and accurate quotes and execute trades in the
common stock.
Use of Indirect Channel Partners to Increase Sales
As part of our sales and marketing efforts we are seeking to develop
strategic relationships with indirect channel partners, such as original
equipment manufacturers and value-added resellers, to increase the number of our
customers. We currently are investing, and intend to continue to invest,
significant resources to develop indirect channel partners. Our results of
operations will be adversely affected if we are unable to attract indirect
channel partners to market our products effectively and provide timely and cost
effective customer support and service. If we successfully sell products through
these sales channels, the lower unit prices we expect to receive for such sales
will result in our gross margins being lower than if we had sold those products
through our direct sales force.
Need to Enhance Existing Products, Develop New Products and Adapt to Rapid
Technological Change
The market for our software is characterized by rapid technological
change, frequent new product introductions and evolving industry standards. The
introduction of products embodying new technologies and the emergence of new
industry standards can render existing products obsolete and unmarketable. We
cannot easily estimate the life cycles of our products. Our future success will
depend upon our ability to:
o enhance existing products
o develop and introduce new products that keep pace with
technological developments and emerging industry standards
o address the increasingly sophisticated needs of customers
We may be unable to accomplish these tasks. Any delays in the commencement of
commercial shipments of new products and enhancements could cause potential
customers to delay their decision to purchase our products or to choose to not
purchase our products, which would result in delays in or loss of product
revenues. In such event, our business, operating results and financial condition
would be materially adversely affected.
-7-
<PAGE>
Dependence on Significant Customers
For the fiscal year ended December 31, 1997, one customer accounted for
65%, and for the nine months ended September 30, 1998, one customer accounted
for 55%, of our total revenues. We are unsure if we will realize significant
future revenues from either of these customers. We also expect that for the
foreseeable future a relatively small number of customers and value added
resellers will account for a significant percentage of our revenues. The loss of
any such customer would have a material adverse effect on our operating results
and financial condition.
Competition
The market for our products is intensely competitive and subject to
rapid technological change. Our competitors include Arbor Software, HNC Software
Inc., Red Brick Systems, Inc., Informix Corp., Oracle Corp., IBM, and Cognos
Inc. Because there are relatively low barriers to entry into the software
market, we expect additional competition from other established and emerging
companies if the business intelligence data delivery software market continues
to develop. Our competitors have:
o longer operating histories
o significantly greater financial, technical and marketing
resources
o greater name recognition
o a larger installed base of customers and products
o well-established relationships with our current and potential
customers
o extensive knowledge of the relational database industry
Our competitors may also be able to offer an integrated hardware and/or software
product that could be more attractive to potential customers. Our competitors
may respond more quickly to new or emerging technologies and changes in customer
requirements, or devote greater resources to the development, promotion and sale
of their products. We also expect that software industry consolidations may
create more formidable competitors, resulting in price reductions that would
reduce gross margins and erode any market share we may attain, any of which
could materially adversely affect our business, operating results and financial
condition.
Dependence Upon Key Personnel; Need to Increase Sales, Marketing, Development
and Technical Personnel
Our future performance depends in significant part upon the continued
service of key technical, sales and senior management personnel. The loss of the
services of one or more of our key employees, in particular, Robert Thompson,
our President and Chief Executive Officer or Daniel M. Pess, our Chief Operating
Officer and Chief Financial Officer, could have a material adverse effect on our
business, operating results and financial condition. We have an employment
agreement with Mr. Thompson that expires in October, 1999, and an employment
agreement with Mr. Pess that expires in May, 1999. We are unsure if we will be
able to agree with either of Messrs. Thompson or Pess on the terms of extensions
to their employment agreements prior to the expiration of these agreements.
Our future success also depends on our continuing ability to attract,
train and retain highly qualified technical, sales, marketing, development and
managerial personnel. Competition for such personnel is intense, and we may be
unable to retain key technical, sales, development and managerial employees or
attract, assimilate or retain other highly qualified technical, sales,
development and managerial personnel in the future. If we are unable to hire
such personnel on a timely basis, our business, operating results and financial
condition could be materially adversely affected.
-8-
<PAGE>
Lack of Proprietary Technology Protection; Risks of Infringement
We rely primarily on a combination of trade secrets, confidentiality
agreements and contractual provisions to protect our proprietary technology. We
license rather than sell our software and require licensees to enter into
license agreements that impose certain restrictions on their ability to utilize
the software. In addition, we seek to avoid disclosure of our trade secrets,
including but not limited to requiring those persons with access to our
proprietary information to execute confidentiality agreements and restricting
access to our source code. These steps afford only limited protection. We have
no patents or patent applications pending. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy aspects of our
products or obtain and use information that we regard as proprietary. Policing
unauthorized use of our products may be difficult and costly, and software
piracy may become a persistent problem. In addition, the laws of some foreign
countries do not protect our proprietary rights to as great an extent as do the
laws of the United States. We are unable to predict whether our means of
protecting our proprietary rights will be adequate or whether competitors will
independently develop the same technology.
From time to time, third parties may assert patent, copyright and other
intellectual property claims against us. If we are unable to license protected
technology that may be used in our products, we could be prohibited from
manufacturing and marketing such products. We also could incur substantial costs
to redesign our products, to defend any legal action taken against us or to pay
damages to any infringed party. Litigation, which could result in substantial
cost to and diversion of our resources, may be necessary to enforce our other
intellectual property rights or to defend ourselves against claimed infringement
of the rights of others.
Potential Fluctuations in Periodic Results
Our revenues may vary significantly from period to period due to the
discretionary nature of business intelligence data delivery software purchases,
and will be difficult to predict. Sales prices of our products range from
$50,000 to over $275,000. As a result, the timing of the receipt and shipment of
a single order can significantly impact our revenues and results of operations
for a particular period. We anticipate that product revenues in any quarter will
be substantially dependent on orders booked and shipped in that quarter, and we
are unable to predict revenues for any future quarter with any significant
degree of certainty.
Risk of Product Defects; Product Liability
Any new products we develop would be subject to significant technical
risks. Our software products are complex and may contain undetected errors or
failures when we first introduce them or when we release new versions of them.
Although we have not experienced material adverse effects resulting from any
errors to date, our products could contain errors. If our products contain
errors, we could experience a loss of or delay in market acceptance. While we
have not experienced product liability claims to date, our product licensing and
support may entail the risk of such claims. A significant product defect or a
successful product liability claim brought against us could have a material
adverse effect on our business, operating results and financial condition.
International Operations
We intend to expand our international operations and to enter
additional international markets, which will require significant management
attention and financial resources and could adversely affect our business,
operating results of financial condition. To expand international sales
successfully, we must establish additional foreign operations, hire additional
personnel and recruit additional international resellers and distributors. If we
are unable to do so in a timely manner, our growth, if any, in international
sales will be limited, and our business, operating results and financial
condition could be materially adversely affected. We anticipate that our
international sales, if any, will be denominated in U.S. dollars. An increase in
the value of the U.S. dollar relative to foreign currencies could make our
products more expensive and, therefore, potentially less competitive in those
markets. Additional risks inherent in our future international business
activities generally include:
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<PAGE>
o unexpected changes in regulatory requirements
o tariffs and other trade barriers
o costs of localizing products for foreign countries
o longer accounts receivable payment cycles
Possible Volatility of Securities Prices
The market price of our common stock has in the past been, and may in
the future continue to be, volatile. For instance, between January 1, 1998 and
February 3, 1999, the closing price of our common stock has ranged between $.50
and $5.50. A variety of events may cause the market price of our common stock to
fluctuate significantly, including:
o quarter to quarter variations in operating results
o adverse news announcements
o the introduction of new products
o market conditions in the industry
In addition, the stock market in recent years has experienced
significant price and volume fluctuations which have particularly affected the
market prices of equity securities of many companies that service the software
industry and which often have been unrelated to the operating performance of
such companies. These market fluctuations may adversely affect the price of our
common stock.
Issuance of Preferred Stock; Anti-Takeover Provisions
Our Board of Directors has the authority, without further action by the
stockholders, to issue 9,000 shares of preferred stock on such terms and with
such rights, preferences and designations, including, without limitation
restricting dividends on our common stock, dilution of the voting power of our
common stock and impairing the liquidation rights of the holders of our common
stock, as the Board may determine without any vote of the stockholders. Issuance
of such preferred stock, depending upon the rights, preferences and designations
thereof may have the effect of delaying, deterring or preventing a change in our
control. In addition, certain "anti-takeover" provisions of the Delaware General
Corporation Law, among other things, may restrict the ability of our
stockholders to authorize a merger, business combination or change of control.
No Dividends.
We have never paid cash dividends on our common stock. We expect to
incur net losses for the foreseeable future.
Outstanding Options, Warrants and Convertible Preferred Stock
We have outstanding options to purchase an aggregate of 5,001,037
shares of our common stock at a weighted average exercise price of $1.63 per
share (including options to purchase 2,614,492 shares at an exercise price of
$.94 per share which are subject to the approval of our stockholders of a
proposal to an increase the number of shares reserved for issuance under our
stock option plan) and outstanding warrants to purchase an aggregate of
3,494,757 shares of common stock at a weighted average exercise price of $4.09
per share. As a result of the October and November 1998 private placements, we
also have outstanding shares of convertible preferred stock that
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<PAGE>
are convertible into an aggregate of 9,900,000 shares of common stock and
outstanding warrants to purchase an aggregate of 6,187,500 shares of common
stock at a conversion price of $.50 per share. The exercise of all of
outstanding warrants and options and/or the conversion of the outstanding
convertible preferred stock would dilute the then-existing stockholders'
percentage ownership of the common stock, and any sales in the public market of
the common stock issuable upon such exercise and conversion could adversely
affect prevailing market prices for the common stock. Moreover, the terms upon
which we would be able to obtain additional equity capital could be adversely
affected because the holders of such securities can be expected to exercise or
convert them at a time when we would, in all likelihood, be able to obtain any
needed capital on terms more favorable to than those provided by such
securities.
Forward Looking Statements and Associated Risks
Certain forward-looking statements, including statements regarding our
expected financial position, business and financing plans are contained in this
prospectus or are incorporated in documents annexed as exhibits to this
prospectus. These forward-looking statements reflect our views with respect to
future events and financial performance. The words, "believe," "expect," "plans"
and "anticipate" and similar expressions identify forward-looking statements.
Although we believe that the expectations reflected in such forward-looking
statements are reasonable, we can give no assurance that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from such expectations are disclosed in this prospectus. All
subsequent written and oral forward-looking statements attributable to us are
expressly qualified in their entirety by the cautionary statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of their dates. We undertake no obligations to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
Year 2000 Compliance
We have commenced an assessment of the readiness of our internal
business information systems for handling the Year 2000 and the Year 2000
compliance of our products. We believe that we will need to modify or replace
portions of our internal business information systems to ensure Year 2000
compliance and we expect that we will successfully address Year 2000 issues
relating to our internal business information systems by the end of fiscal 1999.
We believe that our current products are Year 2000 compliant. However,
it is possible that current or future customers will assert claims against us
with respect to Year 2000 issues and, in the event such claims are asserted and
adjudicated in favor of these customers, our liability could be material. We are
taking steps to identify affected customers and assist them in assessing risks
that may be associated with our products. We may incur increasing costs
regarding customer service related to these actions over the next few years. As
our customer service programs are currently ongoing, we are unsure of the scope
of any resulting Year 2000 issues and potential liability resulting from such
issues. We do not know the potential impact on our business, operating results
and financial condition with respect to these matters.
We have had discussions with our significant vendors, service providers
and large customers to evaluate Year 2000 issues, if any, relating to the
interaction of their systems with our internal systems. We have not yet received
written compliance information from these third parties and we cannot currently
determine when we will receive all of this information . Thus, despite the
initiation of these discussions, we lack the information necessary to estimate
the potential impact of Year 2000 compliance issues relating to these third
parties and their interaction with us and are unsure of when we will receive
such information.
While we have not incurred any material expenditures in connection with
identifying or evaluating Year 2000 compliance issues, there can be no assurance
that our Year 2000 compliance costs will continue at this level. Most of our
expenses have related to the opportunity cost of time spent by our employees
evaluating our internal business information systems, our products and the
interaction of our internal business information systems with the internal
systems of third parties. Although we are unaware of any material operational
issues or costs associated with preparing our internal business information
systems and products for the Year 2000, we are unsure that we will
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avoid serious unanticipated negative consequences and/or material costs caused
by undetected errors or defects in our technology. Such unanticipated negative
consequences and/or material costs, if incurred, could have a material adverse
effect on our business, operating results or financial condition.
Because we are unaware of any material Year 2000 compliance issues, we
lack a Year 2000-specific contingency plan. If Year 2000 compliance issues are
discovered, we will evaluate the need for one or more contingency plans relating
to such issues. If we are unable to develop and implement appropriate
contingency plans, as needed, in a timely manner, we may experience delays in,
or increased costs associated with, implementation of changes to address any
such issues, which could have a material adverse effect on our business,
operating results or financial condition.
THE COMPANY
We develop and market business intelligence software that helps
business managers to efficiently use data to make strategic decisions. Many
businesses generate, gather and store large amounts of data. This data contains
information that, if extracted effectively and efficiently, can be used to
enhance decisionmaking. While companies have invested heavily in capturing data,
they have only recently begun to focus significant resources on the management
and analysis of that data. We developed our products in response to businesses'
desire to analyze their data.
In the third quarter of 1996, we shifted our focus from using the
software we developed for providing contract data analysis services to selling
the software itself. We have not yet made significant sales of our software
product.
In September 1998, we implemented a plan to reduce our monthly
operating costs, which included the termination of approximately 20% of our
employees.
Our principal executive offices are located at 60 Charles Lindbergh
Boulevard, Uniondale, New York 11553. Our telephone number is (516) 228-8500.
USE OF PROCEEDS
The shares of common stock offered hereby are being registered for the
account of the selling stockholders identified in this prospectus. See "Selling
Stockholders." All net proceeds from the sale of the common stock will go to the
stockholders who offer and sell their shares. We will not receive any part of
the proceeds from such sales of common stock. We will, however, receive the
exercise price of the warrants and options at the time of exercise. If all of
the warrants and options are exercised, we will realize proceeds in the amount
of $10,735,715. Such proceeds will be contributed to working capital and will be
used for general corporate purposes.
SELLING STOCKHOLDERS
The name, address, maximum number of shares of common stock to be sold
and total number of shares of common stock that each selling stockholder owns
that are set forth in the following table have been provided by the selling
stockholders. The selling stockholders may sell all or part of their shares of
common stock registered hereunder.
-12-
<PAGE>
<TABLE>
<CAPTION>
Percent Maximum
Beneficially Number of Shares Percent
Shares Beneficially Owned Shares to Beneficially Beneficially
Owned Prior to Prior to this be Offered Owned after Owned after
this Offering Offering (1) for Resale this Offering this Offering
------------- ------------ ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Robert M. Adams 18,750 (2) * 18,750 0 --
American Friends of Hebron 37,500 (2) * 37,500 0 --
Yeshiva
George W. Aucott 6,250 (2) * 6,250 0 --
J.M.R. Barker Foundation 11,419 (2) * 11,419 0 --
Barker, Lee & Co. 21,309 (2) * 21,309 0 --
Ronald N. Beck 25,000 (2) * 25,000 0 --
Sonia B. Blanch 6,250 (2) * 6,250 0 --
Emil E. Braun 12,500 (2) * 12,500 0 --
J. Jeffrey Brausch 3,125 (2) * 3,125 0 --
Brentwood Associates, L.P. 530,206 (3) 10.2% 68,809 461,397 8.3%
VII
Stuart Berman 36,564 (4) * 26,350 10,214 *
Richard Manners 34,980 (4) * 23,850 11,130 *
Charles R. Buckridge 25,000 (2) * 25,000 0 --
Revocable Trust
Herbert C. Clough 467 (2) * 467 0 --
Aaron Cywiak 6,250 (2) * 6,250 0 --
D. Stake Mill Inc. 6,250 (2) * 6,250 0 --
Phillip S. and Elayne Dauber, 1,818 (2) * 1,818 0 --
Trustees f/b/o PSERD Trust
Jerry A. Dusa Trust 1,818 (2) * 1,818 0 --
Steven H. & Dara M. David 6,250 (2) * 6,250 0 --
Penn W. Davidson 6,250 (2) * 6,250 0 --
Thomas R. Deakman 6,250 (2) * 6,250 0 --
Edwin K. Dimes 6,250 (2) * 6,250 0 --
Albert W. Duffield 6,250 (2) * 6,250 0 --
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Andrew Feiner 46,875 (2) * 46,875 0 --
Harry Friedman Living Trust 6,250 (2) * 6,250 0 --
Gadraz, Inc. 46,875 (2) * 46,875 0 --
Richard Gillett 1,529 (2) * 1,529 0 --
Stuart W. Gold 9,375 (2) * 9,375 0 --
Bruce Greenberg 6,250 (2) * 6,250 0 --
Jeffrey N. Greenblatt 18,750 (2) * 18,750 0 --
Stuart Greenstein 6,250 (2) * 6,250 0 --
Richard L. Grossman 6,250 (2) * 6,250 0 --
Andrew Gyenes 6,250 (2) * 6,250 0 --
Richard Hantke 6,250 (2) * 6,250 0 --
Harsac, Inc. 25,000 (2) * 25,000 0 --
Sara D. Hauser 6,250 (2) * 6,250 0 --
John J. Healy 6,250 (2) * 6,250 0 --
Andrew and Mary Ann Heller 909 (2) * 909 0 --
Terrence Hutton 6,250 (2) * 6,250 0 --
Alan Jablon 37,500 (2) * 37,500 0 --
Ralph & Rosalie Joel 6,250 (2) * 6,250 0 --
Frank T. Juranich, Jr. 6,250 (2) * 6,250 0 --
Owen L. Kilgannon 25,000 (2) * 25,000 0 --
Charles Kleinberg 6,250 (2) * 6,250 0 --
Winthrop Knowlton 16,395(2)(17) * 16,395 0 --
Ronald N. Krinick 6,250 (2) * 6,250 0 --
Marc Lasry 125,000 (2) 2.4% 125,000 0 --
Scott Leach 6,250 (2) * 6,250 0 --
Dwight E. Lee 77,690(2)(18) 1.5% 1,529 0 --
Lenny Corp. 12,500 (2) * 12,500 0 --
Kirk M. Loevner 9,393 (2) * 9,393 0 --
Paul Matusow 9,188 (2) * 9,188 0 --
John McMaster 6,250 (2) * 6,250 0 --
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Jonathan Medved 6,250 (2) * 6,250 0 --
Michael Menkin 6,250 (2) * 6,250 0 --
William J. Motto 3,125 (2) * 3,125 0 --
Howard W. Muchnick 43,750 (2) * 43,750 0 --
William L. Musser 1,529 (2) * 1,529 0 --
Sheila Nagar 6,250 (2) * 6,250 0 --
Namakagon Associates, L.P. 31,199 (2) * 31,199 0 --
Joseph Neuman 25,000 (2) * 25,000 0 --
Ned F. Parson 25,000 (2) * 25,000 0 --
Phoenix Leasing Inc. 2,337 (2) * 2,337 0 --
A.C. Providenti 18,750 (2) * 18,750 0 --
Malladi S. Reddy 18,750 (2) * 18,750 0 --
Lawrence Rothberg 6,250 (2) * 6,250 0 --
Steven R. Rothstein 12,500 (2) * 12,500 0 --
Eric C.Rudin 25,000 (2) * 25,000 0 --
Jerry L. Ruyan 7,250 (2) * 7,250 0 --
Wayne Saker 6,250 (2) * 6,250 0 --
Sargent Capital Ventures, LLC 18,750 (2) * 18,750 0 --
George T. Schirripa 37,500 (2) * 37,500 0 --
Michael Schwartzbard 6,250 (2) * 6,250 0 --
Arthur A. Sharples 909 (2) * 909 0 --
Richard D. Siegal 6,250 (2) * 6,250 0 --
Arthur B. Steinberg & Co. 12,500 (2) * 12,500 0 --
Lionel N. Sterling 16,364 (2) * 16,364 0 --
Jerry W. Stoker 12,500 (2) * 12,500 0 --
Ramie A. Tritt 6,250 (2) * 6,250 0 --
Upland Associates, L.P. 12,234 (2) * 12,234 0 --
US Data Capture, Inc. 6,250 (2) * 6,250 0 --
Jeffrey S. Wilks 6,250 (2) * 6,250 0 --
Donald C. Wright 6,250 (2) * 6,250 0 --
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Zee Consulting West Inc. 50,000 (2) * 50,000 0 --
Defined Benefit Pension Plan
Sanra Zipper 12,500 (2) * 12,500 0 --
Frank C. and Jane M. Zozzorra 6,250 (2) * 6,250 0 --
GKN Securities Corp. 78,870 (5) 1.5% 68,750 10,120 *
David M. Nussbaum 563,125 (6) 9.9% 563,125 0 --
Robert Gladstone 563,125 (6) 9.9% 563,125 0 --
Roger Gladstone 563,125 (6) 9.9% 563,125 0 --
Barington Capital Group, L.P. 125,000 (5) 2.4% 125,000 0 --
Rev-Wood Merchant Partners 200,000 (7) 3.8% 200,000 0 --
Stanley H. Blum 325,000 (8) 6.0% 325,000 0 --
Bulldog Capital Partners, L.P. 650,000 (8) 11.3% 650,000 0 --
Kenneth D. Cole 325,000 (8) 6.0% 325,000 0 --
Dalewood Associates, L.P. 812,500 (8) 13.7% 812,500 0 --
Kenneth Endelson 162,500 (8) 3.1% 162,500 0 --
Alan W. Kaufman 425,000 (9) 7.7% 325,000 100,000 1.9%
Michael F. Kremins 162,500 (8) 3.1% 162,500 0 --
Amy L. Newmark 386,000 (10) 7.0% 325,000 61,000 1.2%
Eli Oxenhorn 556,250 (11) 9.8% 525,000 31,250 *
PAW Partners 1,625,000 (8) 24.1% 1,625,000 0 --
Richard J. Rosenstock 162,500 (8) 3.1% 162,500 0 --
Barry Rubenstein 5,822,156 (12) 57.1% 5,010,000 812,156 15.6%
Seneca Ventures 336,106 (13) 6.2% 292,500 43,606 1.0%
Carl E. Siegel 325,000 (8), 6.0% 325,000 0 --
(14)
David Thalheim 325,000 (8) 6.0% 325,000 0 --
Triple M Realty Corp. 162,500 (8) 3.1% 162,500 0 --
Wheatley Foreign Partners 4,393,594 (15) 48.7% 3,900,000 493,594 9.6%
Wheatley Partners 4,393,594 (15) 48.7% 3,900,000 493,594 9.6%
Woodland Venture Fund 349,600 (13) 6.5% 292,500 57,100 1.1%
Craig Effron 162,500 (14) 3.1% 162,500 0 --
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Lloyd Goldman 162,500 (14) 3.1% 162,500 0 --
Eleanor C. Groetch 81,250 (14) 1.6% 81,250 0 --
Hudson Capital 1,625,000 (14) 24.1% 1,625,000 0 --
Dr. Steven B. Landman 162,500 (14) 3.1% 162,500 0 --
Pension Trust
William R. Rouhana 81,250 (14) 1.6% 81,250 0 --
Roberta S. & Samuel M. 81,250 (14) 1.6% 81,250 0 --
Sorkin
Stourbridge Investments Ltd. 81,250 (14) 1.6% 81,250 0 --
Richard Warren 162,500 (14) 3.1% 162,500 0 --
Steven Wolosky 65,000 (14) 1.3% 65,000 0 --
Southeast Research Partners 731,250 (16) 12.5% 731,250 0 --
Steven Levine 69,875 (16) 1.3% 69,875 0 --
</TABLE>
- ----------------------------------
* Less than one percent
(1) A person is deemed to be the beneficial owner of voting securities that
can be acquired by such person within 60 days after the date hereof
upon the exercise of options, warrants or convertible securities. Each
beneficial owner's percentage ownership is determined by assuming that
options, warrants or convertible securities that are held by such
person (but not those held by any other person) and that are currently
exercisable (i.e., that are exercisable within 60 days from the date
hereof) have been exercised. Unless otherwise noted, the Company
believes that all persons named in the table have sole voting and
investment power with respect to all shares beneficially owned by them.
(2) Consists of shares of common stock that are issuable upon the exercise
of warrants (the "Bridge Warrants") issued in connection with a bridge
financing consummated in July 1997 (the "Bridge Financing") or private
placements consummated in 1995 and 1996.
(3) Based on information contained in a report on Schedule 13D (the
"Brentwood 13D") filed jointly by John Walecka and Brentwood Associates
L.P., VII with the Securities and Exchange Commission (the "SEC") on
December 10, 1997. Includes (i) 6,309 shares of common stock that are
issuable upon the exercise of warrants (the "Interim Financing
Warrants") issued in connection with an interim financing consummated
in June 1997 and (ii) 62,500 shares of common stock that are issuable
upon the exercise of Bridge Warrants.
(4) Includes 23,850 shares of common stock that are issuable upon the
exercise of Interim Financing Warrants.
(5) Includes 68,750 shares of common stock that are issuable upon the
exercise of a purchase option (the "Underwriters Purchase Option")
issued in connection with the Company's initial public offering in
November 1997.
(6) Consists of (i) 18,750 shares of common stock that are issuable upon
the exercise of an Underwriters Purchase Option, (ii) 305,000 shares of
common stock that are issuable upon conversion of shares of Series A
Convertible Preferred Stock (the "Series A Preferred Stock"), (iii)
190,625 shares of common stock that are issuable upon the exercise of
warrants (the "Series A Warrants") to purchase common stock issued in
connection with the private placement of Series A Preferred Stock
consummated in October 1998 (the "Series A Private Placement"), (iv)
30,000 shares of common stock that are issuable upon the conversion of
Series B Convertible Preferred Stock (the "Series B Preferred Stock")
and (v) 18,750 shares of common stock that are issuable upon the
exercise of warrants (the
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<PAGE>
"Series B Warrants") issued in connection with the private placement of
Series B Preferred Stock consummated in November 1998 (the "Series B
Private Placement").
(7) Consists of shares of common stock that are issuable upon the exercise
of options.
(8) Consists of shares of common stock that are issuable upon (i)
conversion of shares of Series A Preferred Stock and (ii) exercise of
Series A Warrants.
(9) Consists of (i)100,000 shares of common stock that are issuable upon
the exercise of options, (ii) 200,000 shares common stock that are
issuable upon the conversion of Series A Preferred Stock and (iii)
125,000 shares of common stock that are issuable upon the exercise of
Series A Warrants. Mr. Kaufman has been the Company's Chairman of the
Board since October 1997 and was President and Chief Executive Officer
of the Company from October 1997 to December 1998.
(10) Includes (i) 35,000 shares of common stock that are issuable upon the
exercise of options, (ii) 200,000 shares common stock that are issuable
upon the conversion of Series A Preferred Stock and (iii) 125,000
shares of common stock that are issuable upon the exercise of Series A
Warrants. Ms. Newmark has been a Director of the Company since 1998.
(11) Based upon information contained in a report on Schedule 13D filed by
Eli Oxenhorn with the SEC. Includes (i) 31,250 shares of common stock
issuable upon the exercise of options held by Mr. Oxenhorn, (ii)
200,000 shares of common stock that are issuable upon the exercise of
options held by Rev-Wood Merchant Partners, an entity of which Mr.
Oxenhorn is a general partner, (iii) 200,000 shares common stock that
are issuable upon the conversion of Series A Preferred Stock and (vi)
125,000 shares of common stock that are issuable upon the exercise of
Series A Warrants.
(12) Based upon information contained in a report on Schedule 13D (the
"Wheatley 13D") filed jointly by Barry Rubenstein, Wheatley Foreign
Partners, L.P. ("Wheatley Foreign"), Wheatley Partners, L.P.
("Wheatley"), Seneca Ventures, Woodland Venture Fund, Woodland
Partners, Rev-Wood Merchant Partners and certain other entities with
the SEC and certain other information. Includes (i) 56,250 shares of
common stock issuable upon exercise of options, (ii) 200 shares of
common stock issuable upon exercise of Series A Warrants and (iii)
125,000 shares of common stock issuable upon conversion of shares of
Series A Preferred Stock held by Mr. Rubenstein. Also includes (a)
3,125 shares of common stock issuable upon exercise of warrants held by
Woodland Partners, (b)(i) 112,500 shares of common stock issuable upon
exercise of warrants, (ii) 62,500 shares of common stock issuable upon
conversion of shares of Series A Preferred Stock and (iii) 80,000
shares of common stock issuable upon conversion of shares of Series B
Preferred Stock, all of which is held by Woodland Fund, (c)(i) 112,500
shares of common stock issuable upon exercise of warrants, (ii) 62,500
shares of common stock issuable upon conversion of shares of Series A
Preferred Stock and (iii) 80,000 shares of common stock issuable upon
conversion of shares of Series B Preferred Stock, all of which is held
by Seneca, (d)(i) 1,380,000 shares of common stock issuable upon
exercise of warrants and (ii) 2,208,000 shares of common stock issuable
upon conversion of shares of Series A Preferred Stock, all of which is
held by Wheatley, (e)(i) 120,000 shares of common stock issuable upon
exercise of warrants and (ii) 192,000 shares of common stock issuable
upon conversion of shares of Series A Preferred Stock, all of which is
held by Wheatley Foreign, and (f) 200,000 shares of common stock
issuable upon exercise of options held by Rev-Wood Merchant Partners.
Mr. Rubenstein disclaims beneficial ownership of the securities held by
Woodland Partners, Woodland Fund, Seneca, Wheatley, Wheatley Foreign
and Rev-Wood Merchant Partners, except to the extent of his respective
equity interest therein.
(13) Based upon information contained in the Wheatley 13D and certain other
information. Includes (i) 100,000 shares of common stock issuable upon
conversion of shares of Series A Preferred Stock, (ii) 62,500 shares of
common stock issuable upon the exercise of Series A Warrants, (iii)
80,000 shares of common stock issuable upon conversion of shares of
Series B Preferred Stock, (iv) 50,000 shares of common stock issuable
upon the exercise of Series B Warrants and (v) 3,125 shares of common
stock issuable upon the exercise of warrants.
(14) Consists of shares of common stock that are issuable upon (i)
conversion of shares of Series B Preferred Stock and (ii) exercise of
Series B Warrants.
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<PAGE>
(15) Based upon information contained in the Wheatley 13D and certain other
information. Includes (a)(i) 2,208,000 shares of common stock issuable
upon conversion of shares of Series A Preferred Stock, (ii) 1,380,000
shares of common stock issuable upon the exercise of Series A Warrants
and (iii) 5,879 shares of common stock issuable upon the exercise of
warrants, all of which is held by Wheatley, and (b)(i) 192,000 shares
of common stock issuable upon conversion of shares of Series A
Preferred Stock, (ii) 120,000 shares of common stock issuable upon the
exercise of Series A Warrants and (iii) 371 shares of common stock
issuable upon the exercise of warrants, all of which is held by
Wheatley Foreign. Wheatley Foreign disclaims beneficial ownership of
the securities held by Wheatley.
(16) Consists of (i) shares of common stock that are issuable upon the
conversion of shares of Series A Preferred Stock, (ii) shares of common
stock that are issuable upon the exercise of Series A Warrants, (iii)
shares of common stock that are issuable upon the conversion of shares
of Series B Preferred Stock and (iv) shares of common stock that are
issuable upon the exercise of Series B Warrants.
(17) Includes shares issuable upon the exercise of warrants held by Winthrop
and Erica Knowlton TTEE and PaineWebber CFN FBO Winthrop Knowlton IRA.
Mr. Knowlton disclaims beneficial ownership of all securities owned by
such entities, except to the extent of his equity interest therein.
(18) Mr. Lee served as a Director of the Company from August 1996 to August
1997. Includes shares issuable upon the exercise of warrants held by
Barker, Lee & Co., J.M.R. Barker Foundation, Namakagon Associates, L.P.
and Upland Associates. Mr. Lee is a general partner of Barker, Lee &
Co., Namagkagon Associates, L.P., and Upland Associates and an officer
of J.M.R. Barker Foundation. Mr. Lee disclaims beneficial ownership of
all securities owned by such entities, except to the extent of his
equity interest therein.
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<PAGE>
PLAN OF DISTRIBUTION
This offering is self-underwritten; neither we nor the selling
stockholders have employed an underwriter for the sale of common stock by the
selling stockholders. We will bear all expenses in connection with the
preparation of this Prospectus. The selling stockholders will bear all expenses
associated with the sale of the common stock.
The selling stockholders may offer their shares of common stock
directly or through pledgees, donees, transferees or other successors in
interest in one or more of the following transactions:
o On any stock exchange on which the shares of common stock may
be listed at the time of sale
o In negotiated transactions
o In the over-the-counter market
o In a combination of any of the above transactions
The selling stockholders may offer their shares of common stock at any
of the following prices:
o Fixed prices which may be changed
o Market prices prevailing at the time of sale
o Prices related to such prevailing market prices
o At negotiated prices
The selling stockholders may effect such transactions by selling shares
to or through broker-dealers, and all such broker-dealers may receive
compensation in the form of discounts, concessions, or commissions from the
selling stockholders and/or the purchasers of shares of common stock for whom
such broker-dealers may act as agents or to whom they sell as principals, or
both (which compensation as to a particular broker-dealer might be in excess of
customary commissions).
Any broker-dealer acquiring common stock from the selling stockholders
may sell the shares either directly, in its normal market-making activities,
through or to other brokers on a principal or agency basis or to its customers.
Any such sales may be at prices then prevailing on Nasdaq or at prices related
to such prevailing market prices or at negotiated prices to its customers or a
combination of such methods. The selling stockholders and any broker-dealers
that act in connection with the sale of the common stock hereunder might be
deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act; any commissions received by them and any profit on the resale of
shares as principal might be deemed to be underwriting discounts and commissions
under the Securities Act. Any such commissions, as well as other expenses
incurred by the selling stockholders and applicable transfer taxes, are payable
by the selling stockholders.
The selling stockholders reserve the right to accept, and together with
any agent of the selling stockholder, to reject in whole or in part any proposed
purchase of the shares of common stock. The selling stockholders will pay any
sales commissions or other seller's compensation applicable to such
transactions.
We have not registered or qualified offers and sales of shares of the
common stock under the laws of any country, other than the United States. To
comply with certain states' securities laws, if applicable, the selling
stockholders will offer and sell their shares of common stock in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the selling stockholders may not offer or sell
shares of common stock unless we have registered or qualified such shares for
sale in such states or we have complied with an available exemption from
registration or qualification.
The selling shareholders have represented to us that any purchase or
sale of shares of common stock by them will comply with Regulation M promulgated
under the Securities Exchange Act of 1934, as amended. In general, Rule 102
under Regulation M prohibits any person connected with a distribution of our
common stock (a "Distribution") from directly or indirectly bidding for, or
purchasing for any account in which he or she has a beneficial interest, any of
our common stock or any right to purchase our common stock, for a period of one
business day before and after completion of his or her participation in the
distribution (we refer to that time period as the "Distribution Period").
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<PAGE>
During the Distribution Period, Rule 104 under Regulation M prohibits
the selling shareholders and any other persons engaged in the Distribution from
engaging in any stabilizing bid or purchasing our common stock except for the
purpose of preventing or retarding a decline in the open market price of our
common stock. No such person may effect any stabilizing transaction to
facilitate any offering at the market. Inasmuch as the selling shareholders will
be reoffering and reselling our common stock at the market, Rule 104 prohibits
them from effecting any stabilizing transaction in contravention of Rule 104
with respect to our common stock.
There can be no assurance that the selling shareholders will sell any
or all of the shares offered by them hereunder or otherwise.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the shares of
common stock offered hereby have been passed upon for the Company by Olshan
Grundman Frome Rosenzweig & Wolosky LLP, 505 Park Avenue, New York, New York
10022. Steven Wolosky, a member of such firm, beneficially owns 65,000 shares of
our common stock.
EXPERTS
The consolidated financial statements of QueryObject Systems
Corporation incorporated in this Prospectus by reference to the Annual Report on
Form 10-KSB for the year ended December 31, 1997 have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants
given on the authority of said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
We have filed with the Commission a Registration Statement on Form S-3
under the Securities Act with respect to the Shares offered hereby. For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
-21-
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this prospectus
and, if given or made, such other information and representations must not be
relied upon as having been authorized by us. This prospectus does not constitute
an offer or solicitation by anyone in any state in which such person is not
authorized, or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation. The delivery of this prospectus at any time does not imply that
the information herein is correct as of any time subsequent to the date hereof.
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information. This prospectus does not offer to sell or
buy any shares in any jurisdiction where it is unlawful.
17,566,792 SHARES
QUERYOBJECT SYSTEMS CORPORATION
COMMON STOCK
PROSPECTUS
, 1999
-22-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses in connection with the issuance and distribution
of the securities being registered, all of which will be paid
by the Registrant, are as follows:
SEC Registration Fee............................. $ 4,246.40
Accounting Fees and Expenses..................... $10,000.00
Legal Fees and Expenses.......................... $25,000.00
Blue Sky Fees and Expenses....................... $10,000.00
Miscellaneous Expenses........................... $20,753.60
----------
Total............................................ $70,000.00
==========
Item 15. Indemnification of Directors and Officers
As permitted by the Delaware General Corporation Law ("DGCL"), the
Company's Certificate of Incorporation, as amended, limits the personal
liability of a director or officer to the Company for monetary damages for
breach of fiduciary duty of care as a director. Liability is not eliminated for
(i) any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payment of
dividends or stock purchase or redemptions pursuant to Section 174 of the DGCL,
or (iv) any transaction from which the director derived an improper personal
benefit.
The Company has also entered into indemnification agreements with each
of its directors and executive officers. The indemnification agreements provide
that the directors and executive officers will be indemnified to the fullest
extent permitted by applicable law against all expenses (including attorneys'
fees), judgments, fines and amounts reasonably paid or incurred by them for
settlement in any threatened, pending or completed action, suit or proceeding,
including any derivative action, on account of their services as a director or
officer of the Company or of any subsidiary of the Company or of any other
company or enterprise in which they are serving at the request of the Company.
No indemnification will be provided under the indemnification agreements,
however, to any director or executive officer in certain limited circumstances,
including on account of knowingly fraudulent, deliberately dishonest or willful
misconduct. To the extent the provisions of the indemnification agreements
exceed the indemnification permitted by applicable law, such provision may be
unenforceable or may be limited to the extent they are found by a court of
competent jurisdiction to be contrary to pubic policy.
Delaware Law
The Company is subject to Section 203 of the DGCL, which prevents an
"interested stockholder" (defined in Section 203, generally, as a person owning
15% or more of a corporation's outstanding voting stock) from engaging in a
"business combination" with a publicly-held Delaware corporation for three years
following the date such person became an interested stockholder, unless: (i)
before such person became an interested stockholder, the board of directors of
the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination; (ii) upon
consummation of the transaction that resulted in the interested stockholder's
becoming an interested stockholder, the interested stockholder owns at least 85%
of the voting stock of the corporation outstanding at the time the transaction
commenced (subject to certain exceptions), or (iii) following the transaction in
which such person became an interested stockholder, the business combination is
approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of 66% of the
outstanding voting stock of the corporation not owned by the interested
stockholder. A "business combination" includes mergers, stock or asset sales and
other transactions resulting in a financial benefit to the interested
stockholder.
The provisions of Section 203 of the DGCL could have the effect of
delaying, deferring or preventing a change in the control of the Company.
II-1
<PAGE>
Item 16. Exhibits.
Exhibit Index
4.5** Form of Warrant issued in connection with the private
placements consummated in October and November 1998
(Incorporated by reference to Exhibit 99-D to the Company's
Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1998.)
4.6** Form of Warrant issued in connection with the private
placement consummated in July 1997 (Incorporated by reference
to Exhibit 4.3 to the Company's Registration Statement on Form
SB-2, No. 333-34667).
4.7** Form of Representative's Purchase Option granted to GKN
Securities Corp. (Incorporated by reference to Exhibit 4.2 to
the Company's Registration Statement on Form SB-2, No.
333-34667).
4.8* Form of Purchase Option granted to Southeast Research Partners
in connection with the private placements consummated in
October and November 1998.
4.9** Certificate of Designations, Preferences and Other Rights and
Qualifications of Series A Convertible Preferred Stock
(Incorporated by reference to Exhibit 99-A to the Company's
Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1998)
4.10** Certificate of Correction to the Certificate of Designations,
Preferences and Other Rights and Qualifications of Series A
Convertible Preferred Stock (Incorporated by reference to
Exhibit 99-B to the Company's Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1998)
4.11** Certificate of Designations, Preferences and Other Rights and
Qualifications of Series B Convertible Preferred Stock
(Incorporated by reference to Exhibit 99-C to the Company's
Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1998)
5* Opinion of Olshan Grundman Frome Rosenzweig & Wolosky LLP with
respect to the securities registered hereunder.
23(a)* Consent of Pricewaterhouse Coopers LLP.
23(c)* Consent of Olshan Grundman Frome Rosenzweig & Wolosky LLP
(included within Exhibit 5).
24(a)** Powers of Attorney (included on the Signature page to the
Registration Statement).
---------------------
* Filed herewith
** Previously filed
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
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, 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 each such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
In accordance with 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 of filing on Form S-3 and authorizes this Registration
Statement to be signed on its behalf by the undersigned, the City of New York,
State of New York, on the 4th day of February, 1999.
QUERYOBJECT SYSTEMS CORPORATION
(Registrant)
By: *
--------------------------
Alan W. Kaufman
Chairman of the Board
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
* Chairman of the Board February 4, 1999
- ---------------------------
Alan W. Kaufman
/s/ Robert Thompson President and Chief Executive February 4, 1999
- --------------------------- Officer (Principal Executive
Robert Thompson Officer)
Executive Vice President, Chief February 4, 1999
/s/ Daniel M. Pess Operating Officer and Chief
- --------------------------- Financial Officer (Principal
Daniel M. Pess Financial Officer and Principal
Accounting Officer)
* Director February 4, 1999
- ---------------------------
Andre Szykier
* Director February 4, 1999
Rino Bergonzi
* Director February 4, 1999
- ---------------------------
Irwin Jacobs
* Director February 4, 1999
- ---------------------------
Amy L. Newmark
/s/ Daniel M. Pess February 4, 1999
- ------------------------------------
By: Daniel M. Pess, Attorney-in-Fact
II-4
<PAGE>
Exhibits
Exhibit Index
4.5** Form of Warrant issued in connection with the private
placements consummated in October and November 1998
(Incorporated by reference to Exhibit 99-D to the Company's
Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1998.)
4.6** Form of Warrant issued in connection with the private
placement consummated in July 1997 (Incorporated by reference
to Exhibit 4.3 to the Company's Registration Statement on Form
SB-2, No. 333-34667).
4.7** Form of Representative's Purchase Option granted to GKN
Securities Corp. (Incorporated by reference to Exhibit 4.2 to
the Company's Registration Statement on Form SB-2, No.
333-34667).
4.8* Form of Purchase Option granted to Southeast Research Partners
in connection with the private placements consummated in
October and November 1998.
4.9** Certificate of Designations, Preferences and Other Rights and
Qualifications of Series A Convertible Preferred Stock
(Incorporated by reference to Exhibit 99-A to the Company's
Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1998)
4.10** Certificate of Correction to the Certificate of Designations,
Preferences and Other Rights and Qualifications of Series A
Convertible Preferred Stock (Incorporated by reference to
Exhibit 99-B to the Company's Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1998)
4.11** Certificate of Designations, Preferences and Other Rights and
Qualifications of Series B Convertible Preferred Stock
(Incorporated by reference to Exhibit 99-C to the Company's
Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1998)
5* Opinion of Olshan Grundman Frome Rosenzweig & Wolosky LLP with
respect to the securities registered hereunder.
23(a)* Consent of Pricewaterhouse Coopers LLP.
23(c)* Consent of Olshan Grundman Frome Rosenzweig & Wolosky LLP
(included within Exhibit 5).
24(a)** Powers of Attorney (included on the Signature page to the
Registration Statement).
---------------------
* Filed herewith
** Previously filed
II-5
AMENDED AND RESTATED PURCHASE OPTION
For the Purchase of _____ Units
Consisting of an aggregate of
_____ Shares
of Series A Convertible Preferred Stock
and _____ Common Stock Purchase Warrants
of
QueryObject Systems Corporation
(A Delaware Corporation)
1. Purchase Option.
THIS CERTIFIES THAT, in consideration of $____ paid by or on behalf of
Steve Levine (molders), as registered owner of this Purchase Option, to
QueryObject Systems Corporation ("Company"), Holder is entitled, at any time or
from time to time at or after the date hereof as described in Section 2.4 hereof
to subscribe for, purchase and receive, in whole or in part, up to _____ Units,
each Unit consisting of one share of Series A Convertible Preferred Stock of the
Company ("Series A Shares") and one common stock purchase warrant ("Warrant").
This Purchase Option is issued in connection with the Company's private offering
("Offering" described in the Confidential Term Sheet dated __________________
("Term Sheet"). Each Unit is identical to the units described in the Term Sheet.
If the expiration date (as hereinafter defined) is a day on which banking
institutions are authorized by law to close, then this Purchase Option may be
exercised on the next succeeding day which is not such a day in accordance with
the terms herein. During the period ending on the expiration date, the Company
agrees not to take any action that would terminate the Purchase Option. This
Purchase Option is initially exercisable at _____ per Unit. The term Exercise
Pricer shall mean the initial exercise price or, if adjustments thereto have
been made, the adjusted exercise price.
2. Exercise.
2.1 Exercise Form. In order to exercise this Purchase Option, the
exercise form attached hereto must be duly executed and completed and delivered
to the Company, together with this Purchase Option and payment of the Exercise
Price for the Units being purchased in cash or by certified check or official
bank check for the securities being
<PAGE>
purchased. If the rights represented hereby shall not be exercised at or before
5:00 p.m., New York City time, on the Expiration Date, this Purchase Option
shall become and be void without further force or effect, and all rights
represented hereby shall cease and expire.
2.2 Legend. Unless registered under the Securities Act of 1933, as
amended ("Securities Acts") each certificate for the securities purchased under
this Purchase Option shall bear a legend as follows unless such securities have
been registered under the Securities Act:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended
("Securities Acts") or applicable state law. The securities
may not be offered for sale, sold or otherwise transferred
except pursuant to an effective registration statement under
the Securities Act, or pursuant to an exemption from
registration under the Securities Act and applicable state
law."
2.3 [Reserved]
2.4 Exercise Schedule. This Purchase Option may be exercised as
follows ("Vested Portions"):
(i) Up to 20% of the Units may be purchased during the
three-year period commencing on the date hereof.
(ii) Up to an amount equal to the percentage of the Purchase
Price (as defined in the Term Sheet) called for by the Buyer Representative (as
defined in the Term Sheet) in accordance with the terms of the Term Sheet
("Post-Closing Installments") multiplied by the total number of Units subject to
this Purchase Option may be purchased during the three-year period commencing on
the day such Post-Closing Installment is due and payable ("Post-Closing
Installment Due Date").
(iii) The expiration date of this Purchase Option with respect
to each Vested Portion shall be the third anniversary of the Post-Closing
Installment Due Date related to such Vested Portion.
3. Transfer.
3.1 Restrictions Imposed by the Act. This Purchase Option and the
securities underlying this Purchase Option shall not be transferred unless and
until (i) the Company has received the opinion of counsel for the Holder that
this Purchase Option or the underlying securities, as the case may be, may be
transferred pursuant to an exemption from registration under the Securities Act
and applicable state law, the availability of which
-2-
<PAGE>
is established to the reasonable satisfaction of the Company (the Company hereby
agreeing that the opinion of Graubard Mollen & Miller ("GM&M") shall be deemed
satisfactory evidence of the availability of an exemption), or (ii) a
registration statement relating to such securities, as the case may be, has been
filed by the Company and declared effective by the Securities and Exchange
Commission ("Commission") and compliance with applicable state securities laws.
3.2 Assignment. In order to make any permitted assignment, the Holder
must deliver to the Company the assignment form attached hereto duly executed
and completed, together with this Purchase Option and payment of all transfer
taxes, if any, payable in connection therewith. The Company shall immediately
transfer this Purchase Option on the books of the Company and shall execute and
deliver a new Purchase Option or Purchase Options of like tenor to the
appropriate assignee(s) expressly evidencing the right to purchase the aggregate
number of Units purchasable hereunder or such portion of such number as shall be
contemplated by any such assignment.
4. New Purchase Options to be Issued.
4.1 Partial Exercise or Transfer. Subject to the restrictions in
Section 3 hereof, this Purchase Option may be exercised or assigned in whole or
in part. In the event of the exercise or assignment hereof in part only, upon
surrender of this Purchase Option for cancellation, together with the duly
executed exercise or assignment form and funds sufficient to pay any Exercise
Price and/or transfer tax, the Company shall cause to be delivered to the Holder
without charge a new Purchase Option of like tenor to this Purchase Option in
the name of the Holder evidencing the right of the Holder to purchase the
aggregate number of Units purchasable hereunder as to which this Purchase Option
has not been exercised or assigned.
4.2 Lost Certificate. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Purchase Option and of reasonably satisfactory indemnification, the Company
shall execute and deliver a new Purchase Option of like tenor and date. Any such
new Purchase Option executed and delivered as a result of such loss, theft,
mutilation or destruction shall constitute a substitute contractual obligation
on the part of the Company.
5. Registration Rights.
5.1 Grant of Right. The Company shall register the shares of Common
Stock underlying the Series A Shares and Warrants ("Registrable Securities") for
re-offer and resale by the Holders in a registration statement ("Registration
Statement") filed by the Company as described in the Subscription Agreement
attached to the Term Sheet. The Company shall keep the Registration Statement
effective and current until all the securities
-3-
<PAGE>
registered thereunder are sold or may be sold without any limitation under an
appropriate exemption under the Securities Act and the blue sky laws of the
States.
5.2 Fees and Expenses. The Company shall bear all expenses and pay all
fees incurred in connection with the filing and modification or amendment of the
Registration Statement, exclusive of underwriting discounts and commissions
payable in respect of the sale of the Registrable Securities but including,
without limitation, the fees and expenses of one special counsel, if any, of the
Holders, and of providing reasonable numbers of the prospectus contained therein
to the Holders. Until further notice from a majority of the holders of the
Series A Shares and the Series B Convertible Preferred Stock or from GM&M, GM&M
shall be that counsel.
5.3 Indemnification by Company. The Company shall indemnify the
Holder(s) of the Registrable Securities to be sold pursuant to any Registration
Statement hereunder, the officers and directors of each Holder and each person,
if any, who controls such Holders within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act or any state securities law
or regulation, against all loss, claim, damage, expense or liability (including
all reasonable attomeys' fees and other expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever incurred by
the indemnified party in any action or proceeding between the indemnitor and
indemnified party or between the indemnified party and any third party or
otherwise) to which any of them may become subject under the Securities Act, the
Exchange Act or any other statute or at common law or otherwise under the laws
of foreign countries, arising from such Registration Statement or based upon any
untrue statement or alleged untrue statement of a material fact contained in (i)
any preliminary prospectus, the Registration Statement or prospectus (as from
time to time each may be amended and supplemented); (ii) any post-effective
amendment or amendments or any new Registration Statement and prospectus in
which is included the Registrable Securities; or (iii) any application or other
document or written communication (collectively called "application") executed
by the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Registrable Securities under the securities
laws thereof or filed with the Commission, any state securities commission or
agency, Nasdaq or any securities exchange; or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, unless such statement or omission is made in reliance
upon, and in conformity with, written information furnished to the Company by
and with respect to such registered holders expressly for use in any preliminary
prospectus, the Registration Statement or prospectus, or any amendment or
supplement thereof, or in any application, as the case may be. The Company
agrees promptly to notify such registered holders of the commencement of any
litigation or proceedings against the Company or any of its officers, directors
or controlling persons in connection with the issue and sale or resale of the
Registrable Securities or in connection with the Registration Statement or
prospectus.
-4-
<PAGE>
6. Exercise Price Adjustments. The exercise price payable upon the exercise of
this Option shall be adjusted in the same manner as the "Conversion Price" is
adjusted in the Company's Certificate of Designations, Preferences and Rights of
the Company's Series A Preferred Stock.
7. Reservation. The Company shall at all times reserve and keep available out of
its authorized capital, such number of shares of Common Stock or other
securities, properties or rights required for the issuance of the Units and the
securities underlying the Units. The Company covenants and agrees that, upon
exercise of this Purchase Option and payment of any exercise price therefor, all
Series A Shares issuable upon such exercise shall be duly and validly issued,
fully paid and non-assessable and not subject to preemptive rights of any
stockholder.
8. Certain Notice Requirements.
8.1 Holder's Right to Receive Notice. Nothing herein shall be construed
as conferring upon the Holders the right to vote or consent or to receive notice
as a stockholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of this Purchase Option and its exercise, any of the
events described in Section 8.2 shall occur, then, in one or more of said
events, the Company shall give written notice of such event at least fifteen
days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled to such
dividend, distribution, conversion or exchange of securities or subscription
rights, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of the
closing of the transfer books, as the case may be.
8.2 Events Requiring Notice. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if the Company shall take a record of the holders of its Series A Shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution, or (ii) the Company shall offer to all the holders of its Common
Stock any additional Series A Shares of capital stock of the Company or
securities convertible into or exchangeable for Series A Shares of capital stock
of the Company, or any option, right or warrant to subscribe therefor, or (iii)
a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation or merger) or a sale of all or substantially all
of its property, assets and business shall be proposed.
8.3 Notice of Chance. If any event occurs which would require a notice
to be sent to holder of Series A Shares of Preferred Stock or Warrants sold
pursuant to the Term Sheet during the time this Purchase Option is outstanding,
the Company shall also send such notice to the Holder(s) hereof.
-5-
<PAGE>
8.4 Transmittal of Notices. All notices, requests, consents and other
communications under this Purchase Option shall be in writing and shall be
deemed to have been duly made on the date of delivery if delivered personally or
sent by overnight courier, with acknowledgment of receipt to the party to which
notice is given, by confirmed facsimile, or on the fifth day after mailing if
mailed to the party to whom notice is to be given, by registered or certified
mail, return receipt requested, postage prepaid and properly addressed as
follows: (i) if to the registered Holder of this Purchase Option, to the address
of such Holder as shown on the books of the Company, or (ii) if to the Company,
to its principal executive office.
9. Miscellaneous.
9.1 Amendments. The Company and Southeast Research Partners, Inc.
("SERP") may from time to time supplement or amend this Purchase Option without
the approval of any of the Holders in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company and SERP may deem
necessary or desirable and which the Company and SERP deem shall not adversely
affect the interest of the Holders. All other modifications or amendments shall
require the written consent of the party against whom enforcement of the
modification or amendment is sought.
9.2 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Purchase Option.
9.3 Entire Agreement. This Purchase Option (together with the other
agreements and documents being delivered pursuant to or in connection with this
Purchase Option) constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof, including the Purchase Option dated _______________ to purchase
______ Series A Shares issued to SERP.
9.4 Binding Effect. This Purchase Option shall inure solely to the
benefit of and shall be binding upon, the Holder and the Company and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Purchase Option or any provisions
herein contained.
9.5 Governing Law; Submission to Jurisdiction. This Purchase Option
shall be governed by and construed and enforced in accordance with the laws of
the State of New York, without giving effect to conflict of laws. The Company
hereby agrees that any action, proceeding or claim against it arising out of, or
relating in any way to this Purchase Option
-6-
<PAGE>
shall be brought and enforced in the courts of the State of New York or of the
United States of America for the Southern District of New York, and irrevocably
submits to such jurisdiction, which jurisdiction shall be exclusive. The Company
hereby waives any objection to such exclusive jurisdiction and that such courts
represent an inconvenient forum. Any process or summons to be served upon the
Company may be served by transmitting a copy thereof by registered or certified
mail, return receipt requested, postage prepaid, addressed to it at the address
set forth in Section 8 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the Company in any action, proceeding or claim.
The Company agrees that the prevailing party(ies) in any such action shall be
entitled to recover from the other party(ies) all of its reasonable attorneys'
fees and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
[Intentionally left blank]
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<PAGE>
9.6 Waiver, Etc. The failure of the Company or the Holder at any time
to enforce any of the provisions of this Purchase Option shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Purchase Option or any provision hereof or the right of the
Company or any Holder thereafter to enforce each and every provision of this
Purchase Option. No waiver of any breach, non-compliance or non-fulfillment of
any of this Purchase Option. No waiver of any breach, non-compliance or
non-fulfillment of any of the provisions of this Purchase Option shall be
effective unless set forth in a written instrument executed by the party or
parties against whom or which enforcement of such waiver is sought; and no
waiver of any such breach, non-compliance or non-fulfillment shall be construed
or deemed to be a waiver of any other or subsequent breach, non-compliance or
non-fulfillment.
9.7 Execution in Counterparts. This Purchase Option may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement, and shall become
effective when one or more counterparts has been signed by each of the parties
hereto and delivered to each of the other parties hereto.
9.8 Exchange Agreement. As a condition of the Holder's receipt and
acceptance of this Purchase Option, Holder agrees that, at any time prior to the
complete exercise of this Purchase Option by Holder, if the Company and SERP
enter into an agreement ("Exchange Agreement") pursuant to which they agree that
all outstanding Unit Purchase Options will be exchanged for securities or cash
or a combination of both, then Holder shall agree to such exchange and become a
party to the Exchange Agreement.
IN WITNESS WHEREOF, the Company has caused this Purchase Option to be
signed by its duly authorized officer as of the ___ day of ______________.
QUERYOBJECT SYSTEMS CORPORATION
By:___________________________________
Name: Daniel M. Pess
Title: Executive Vice President and
Chief Financial Officer
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<PAGE>
Form to be used to exercise Purchase Option:
QueryObject Systems Corporation
60 Charles Lindbergh Boulevard
Uniondale, New York 11903
Attention:
Date:________________
The undersigned hereby elects irrevocably to exercise the within
Purchase Option and to purchase _______ Units of QueryObject Systems Corporation
and hereby makes payment of $____________ (at the rate of $ per Unit) in payment
of the Exercise Price pursuant thereto. Please issue the securities underlying
this Purchase Option in accordance with the instructions given below.
--------------------------------
Signature
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Purchase Option in every particular
without alteration or enlargement or any change whatsoever.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name ___________________________________________________
(Print in Block Letters)
Address ___________________________________________________
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<PAGE>
Form to be used to assign Purchase Option:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the
within Purchase Option):
FOR VALUE RECEIVED, ________________________________________ does
hereby sell, assign and transfer unto ________________________________ the right
to purchase _____ Units of QueryObject Systems Corporation ("Company") evidenced
by the within Purchase Option and does hereby authorize the Company to transfer
such right on the books of the Company.
Dated: __________________
----------------------------------
Signature
NOTICE: The signature to this form must correspond with the name as
written upon the face of the within Purchase Option in every particular without
alteration or enlargement or any change whatsoever.
-10-
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
505 PARK AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 753-7200
February 4, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: QueryObject Systems Corporation
Commission File No. 333-69101
Registration Statement on Form S-3
Gentlemen:
Reference is made to the Registration Statement on Form S-3 dated May
5, 1998, as amended, (the "Registration Statement"), filed with the Securities
and Exchange Commission by QueryObject Systems Corporation, a New York
corporation (the "Company"). The Registration Statement relates to the resale of
an aggregate of 17,566,792 shares (the "Shares") of the Company's Common Stock,
$.001 par value (the "Common Stock") issuable upon exercise of outstanding
warrants or options or conversion of preferred stock.
We advise you that we have examined original or copies certified or
otherwise identified to our satisfaction of the Certificate of Incorporation and
By-laws of the Company, minutes of meetings of the Board of Directors and
stockholders of the Company, the Registration Statement, and such other
documents, instruments and certificates of officers and representatives of the
Company and public officials, and we have made such examination of the law as we
have deemed appropriate as the basis for the opinion hereinafter expressed. In
making such examination, we have assumed the genuineness of all signatures, the
authenticity of all
<PAGE>
February 4, 1999
Page 2
documents submitted to us as originals, and the conformity to original documents
of documents submitted to us as certified or photostatic copies.
Based upon the foregoing, we are of the opinion that:
The Shares have been duly authorized and reserved for and when issued
in accordance with the terms of the warrants, options or preferred stock will be
legally paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and we further consent to the reference to this firm
under the caption "Legal Matters" in the Registration Statement and the
Prospectus forming a part thereof. We advise you that a member of this firm
holds securities which are exercisable or convertible into Shares.
Very truly yours,
/S/ OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
--------------------------------------------------
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
February 19, 1998, which is incorporated by reference in QueryObject Systems
Corporation's Annual Report on Form 10-KSB for the year ended December 31, 1997.
We also consent to the reference to us under the headings "Experts" in such
Prospectus.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Melville, New York
February 4, 1999
