279228.004(B&F)
As filed with the Securities and Exchange Commission on
November 15, 1996. Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________
INNOVUS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction
of
Incorporation or Organization)
87-0461856
(I.R.S. Employer
Identification Number)
2060 E. 2100 South
Salt Lake City, Utah 84109
(801) 463-8200
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
TERRY R. HAAS
President
2060 E. 2100 South
Salt Lake City, Utah 84109
(801) 463-8200
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
_________________
Copies to:
Richard T. Beard
Paul H. Shaphren
Ballard Spahr Andrews & Ingersoll
201 S. Main, Suite 1200
Salt Lake City, Utah 84111
(801) 531-3000
________________
Approximate date of commencement of proposed sale to the
public: From time to time 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, other than securities
offered only in connection with dividend or interest reinvestment
plans, check the following box: xx
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
Title of Each Class of Securities to Be Registered
Common Stock ($0.001 par value)...........
Amount to Be Registered
1,665,841 shares (3)
Proposed Maximum Offering PricePer Share(1)
$5.50
Proposed Maximum Aggregate Offering Price(1)
$9,162,126
Amount of Registration Fee(1)(2)
$2,776.40
(1) Calculated in accordance with Rule 457(c) on the basis of the
closing price of the Registrant's Common Stock on November 8,
1996, as reported by the Nasdaq SmallCap Market.
(2) Registration Fee is calculated on the basis of 1/33 of 1% of
the Proposed Maximum Aggregate Offering Price.
(3) Shares which may be resold by selling stockholders. No
consideration will be received by the Registrant for such shares
being registered hereby. Includes the resale of shares issuable
by the Registrant on conversion of its Series C Preferred Stock
and Series D Preferred Stock.
_________________________________________
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 or until this Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER 15, 1996
PROSPECTUS
1,665,841 Shares
INNOVUS CORPORATION
Common Stock
(par value $.001 per share)
This Prospectus relates to up to 1,665,841 shares of
common stock, par value $.001 per share ("Common Stock"), of
Innovus Corporation, a Delaware corporation (the "Company"),
which may be offered for sale from time to time by certain
stockholders of the Company (the "Selling Stockholders"), or by
their pledgees, donees, transferees or other successors in
interest, to or through underwriters or directly to other
purchasers or through agents in one or more transactions at
varying prices determined at the time of sale or at negotiated
prices (the "Offering"). See "Plan of Distribution." Certain of
the Common Stock being offered by the Selling Stockholders has
been, or will be, acquired by the Selling Stockholders on
conversion of the Company's Series C Preferred Stock or Series D
Preferred Stock. The Series C Preferred Stock is convertible
from time to time by the holders thereof based upon the original
purchase price of $50.00 per preferred share, plus accrued
dividends thereon at 5% per annum, divided by the lower of
(i) $5.45 per share of common stock, or (ii) 75% of the average
closing bid price for the common stock over the five trading days
preceding conversion. The Series D Preferred Stock is
convertible from time to time by the holders thereof based upon
the original purchase price of $50.00 per preferred share, plus
accrued dividends thereon at 5% per annum, divided by $4.00 per
share of common stock. The conversion price for each class of
preferred stock is subject to adjustment. See "Plan of
Distribution."
The Company will not receive any of the proceeds from
the sale of the shares of Common Stock (the "Shares") by the
Selling Stockholders. The expenses of registration under the
Securities Act of 1933, as amended (the "Securities Act") of the
Shares which may be offered hereby will be paid by the Company.
The Common Stock is traded on the Nasdaq SmallCap Market
under the symbol "INUS". On November 8, 1996, the closing bid
and asked prices of the Common Stock were $5.375 and $5.625.
See "RISK FACTORS" on page 4 for information that should
be considered by prospective purchasers of the securities offered
hereby.
_____________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is November 15, 1996
No dealer, salesman or other person has been authorized
to give any information or to make any representation not
contained in or incorporated by reference in this Prospectus and,
if given or made, such information or representation must not be
relied upon as having been authorized by the Company, the Selling
Stockholders or any other person. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy
any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make such an offer in such
jurisdiction. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any
implication that the information herein is correct as of any time
subsequent to the date hereof or that there has been no change in
the affairs of the Company since such date.
__________________
TABLE OF CONTENTS
__________________
Page
AVAILABLE INFORMATION. . . . . . . . . . . . . . . 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . 4
THE COMPANY. . . . . . . . . . . . . . . . . . . . 11
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . 11
SELLING STOCKHOLDERS . . . . . . . . . . . . . . . 12
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . 15
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . 16
EXPERTS. . . . . . . . . . . . . . . . . . . . . . 16
AVAILABLE INFORMATION
The Company is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and
other information concerning the Company filed with the
Commission may be inspected and copied at the public reference
facilities maintained by the Commission at its office at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as
at the Regional Offices of the Commission at Citicorp Center, 300
West Madison Street, Chicago, Illinois 60661 and Seven World
Trade Center, New York, New York 10048. Copies of such material
can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission also maintains a site on the
World Wide Web (http://www.sec.gov) which contains reports, proxy
statements and other information concerning the Company filed
electronically with the Commission. Shares of the Common Stock
are traded on the Nasdaq SmallCap Market. Such reports, proxy
statements and other information can also be inspected and copied
at the offices of the Nasdaq SmallCap Market, 1735 K Street,
N.W., Washington, D.C. 20006.
The Company has filed a registration statement on
Form S-3 (herein, together with all amendments and exhibits
thereto, the "Registration Statement"), under the Securities Act
with respect to the securities offered pursuant to this
Prospectus. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information,
reference is made to the Registration Statement and the exhibits
filed as a part thereof. Statements contained herein concerning
any document filed as an exhibit are not necessarily complete
and, in each instance, reference is made to the copy of such
document filed as an exhibit to the Registration Statement. Each
such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission
pursuant to the Exchange Act (File No. 0-26790) are hereby
incorporated by reference into this Prospectus: (a) the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, (the "Form 10-K"), (b) the Company's Quarterly
Reports on Form 10-Q for the fiscal quarters ended March 31, 1996
(as amended by a Form 10-Q/A), June 30, 1996, and September 30,
1996 (c) Current Reports on Form 8-K dated October 7, 1996 and
November 7, 1996, and (d) the description of the Common Stock
contained in the Company's Registration Statement on Form 8-A.
All other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the
termination of the Offering pursuant to this Prospectus shall be
deemed to be incorporated by reference and to be a part of this
Prospectus from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person
to whom a copy of this Prospectus is delivered, upon oral or
written request of any such person, a copy of any or all of the
documents incorporated herein by reference, other than the
exhibits to such documents (unless such exhibits are specifically
incorporated by reference into the information that this
Prospectus incorporates). Requests should be directed to the
Investor Relations Department, Innovus Corporation, 2060 E. 2100
South, Salt Lake City, Utah 84109, telephone (801) 463-8200.
RISK FACTORS
Each prospective investor should carefully consider the
following factors inherent in and affecting the business of the
Company and this offering before making a decision to purchase
the Common Stock offered hereby.
Limited Operating History and Additional Financings
Since inception, the Company has generated only minimal
revenues. The Company faces the risks and problems associated
with businesses in their early stages and has a limited operating
history on which an evaluation of its prospects can be made.
Such prospects should be considered in light of risks, expenses
and difficulties frequently encountered in the establishment of
commercialization of new products based on innovative
technologies. The Company anticipates that it will attempt to
obtain additional capital during the next twelve months from the
sale of equity or debt securities to sustain operations. There
can be no assurance that such financing will be available or, if
available, will be on terms satisfactory to the Company. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Significant Marketing and Sales Expenditures Required; Software
Sales Not Assured
The Company's software has not been marketed on a large scale
to the corporate and business market. There is no assurance that
the market will accept the software in sufficient quantity to
maintain the Company's operations. The Company has limited
resources to devote to marketing of the software. Regardless of
the technical merits of the software, the Company's limited
marketing resources compared with larger, more established
software companies may substantially reduce the probability of
large scale sales of the software.
Rapid Technological Change Makes Products Obsolete
The emerging multimedia market and the personal computer
industry in general are characterized by rapidly changing
technology, resulting in short product life cycles and rapid
price declines. The Company must continuously update its
existing products to keep them current with changing technology
and must continuously develop new versions of its products. The
Company's future prospects are highly dependent on the ability of
its planned and future products to timely address new
technologies and achieve market acceptance. There can be no
assurance that the Company will be successful in these efforts.
Competition
The markets for the Company's products are highly competitive
and are characterized by pressures to reduce prices, incorporate
new features and accelerate the release of new product versions.
A number of companies currently offer products that compete
directly or indirectly with one or more aspects of the Company's
products. Competitors could develop a product which competes
with all aspects of the Company's products. Some current and
potential competitors are larger, better established and have
greater financial resources than the Company. Such competitors
may have the ability to more aggressively market and price their
products than the Company. There is no assurance that the
Company will be able to successfully compete in these markets.
Dependence on Key Personnel
The Company's success depends to a significant degree upon
the continued contributions of its key management, product
development, sales, marketing and operations personnel. Although
the Company has employment contracts with its key personnel,
there can be no assurance that such persons will not terminate
their employment to the detriment of the Company. The Company
does not have key man life insurance on any of its personnel
other than David Mock. The insurance policy on the life of Mr.
Mock is leased from such officer on a so-called reverse split
dollar basis, the premiums for which may be higher than the
Company could obtain from a third party. The Company intends to
obtain similar insurance with respect to Mr. Haas. The Company's
future success also depends upon its ability to attract and
retain highly skilled personnel. Competition for such employees
is intense. The loss of any current key employees or the
inability to attract and retain additional key personnel could
have a material adverse effect on the Company's business and
operating results.
Reliance on Distributors; Initiation of New Distribution Channel
The Company's sales and marketing effort has historically
been dependent upon value added resellers (VARs) and other
corporate resellers. The Company's distributors, VARs and
resellers are not controlled by the Company and, generally, the
Company's distribution and reselling agreements are nonexclusive
and may be terminated on short notice by either party without
cause. As a result, there can be no assurance that any
distributor, VAR or reseller will not focus on its other products
or services or discontinue its relationship with the Company.
Furthermore, for the Company to be successful, it must
sufficiently increase its VAR and other distribution networks.
There can be no assurance that the Company can sufficiently
increase its VAR or other networks, or that such networks will be
an effective channel to market and sell the Company's products.
Any substantial reduction in the sales effort or in consummated
sales of the Company's products by its distributors and resellers
would have a material adverse effect on the Company's business,
operating results and financial condition. There can be no
assurance that the Company will not experience inventory rotation
or upgrades or suffer product returns from its distribution
channels in the future. Any such activities could have a
material adverse effect on the Company's business, operating
results and financial condition. See "Business--Sales, Marketing
and Distribution."
Multiple Distribution Channels; Potential for Channel Conflict
The Company has and will continue to devote significant
resources to develop its various distribution channels. The
Company has limited experience with most of its existing
distribution and marketing partners and channels. Sales of the
Company's products through indirect channels may limit the
Company's contact with its end-users. As a result, the Company's
ability accurately to forecast sales, evaluate customer
satisfaction and recognize emerging customer requirements may be
hindered. The Company's strategy of marketing its products
directly to end-users and indirectly through distributors, VARs
and others may result in the various distribution channels
conflicting with one another. Any lack of success in one or more
distribution channels would have an adverse effect on the
Company's business, operating results and financial condition.
See "Business--Marketing and Sales."
Uncertainty of Future Results
Product introduction and market acceptance of new products,
the timing, scope and success of product development projects,
announcements or introductions of new products or technologies by
the Company or its competitors, conditions in the business
computing market in general, and national and global economic
conditions could cause significant variations in the Company's
operating results, including possible declines in profit margins
and earnings per share. The Company's products are typically
shipped shortly after orders are received; consequently, product
order backlog at any time generally is small and product order
backlog at the beginning of any quarter typically will represent
only a small portion of that quarter's expected net revenues.
Volatility of Stock Price; No Dividends
The Company's Common Stock was only sporadically traded prior
to August, 1994. From August, 1994 to November, 1995 the Common
Stock was quoted on the OTC Bulletin Board and since November,
1995 the Common Stock has been quoted on the Nasdaq SmallCap
Market. The Common Stock has experienced significant price and
volume fluctuations. The market price of the Company's Common
Stock could be subject to wide fluctuations in response to
quarter-to-quarter variations in the Company's operating results,
changes in earnings estimates by analysts, announcements of
technological innovations or new products or enhancements by the
Company or its competitors, delays in new product introductions
or enhancements, developments in the Company's relationships with
its customers, strategic partners or suppliers, general
conditions in the computer and software industries, changes in
investment strategy by significant shareholders and other events
or factors, which may be unrelated to the Company. There can be
no assurance that the market price of the Company's Common Stock
will not experience significant fluctuations in the future,
including fluctuations that are unrelated to the Company's
operating performance. The Company has not paid cash dividends
on its Common Stock and does not expect to do so in the
foreseeable future.
Negative Effect of Financial Condition on Competitiveness
The Company's ability to market its software and develop
additional application templates may be limited by the Company's
financial condition. In addition to limitations on funds
available for marketing expenditures, the Company's financial
condition may affect software distributors in determining
whether, or to what extent, to carry the Company's software.
History of Losses; Accumulated Deficit
The Company has expended significant sums to develop its
software. As a result, the Company has consistently reported
significant losses. There can be no assurance that the Company
will be profitable in the future. As of June 30, 1996, the
Company had an accumulated deficit of $8,792,472. Moreover, to
date, a substantial portion of the working capital requirements
of the Company has been provided from the sale of equity
securities. The ability of the Company to continue its
operations successfully is materially dependent upon the
marketing and sales of its products in a profitable manner, and
the raising of any additional capital which it may require in the
future.
Limited Intellectual Property Protection
The Company's success will depend in part on its ability to
protect its technology and preserve its trade secrets. Although
the Company relies primarily upon continuing technological
innovations, trade secrets and know-how to develop and maintain
its competitive position, it also relies on a combination of
copyright and trademark laws, confidentiality procedures and
contractual provisions to protect its proprietary rights. The
Company does not have any patents or patent applications for its
technology. There is no assurance that any aspect of the
Company's technology can be patented, or that any patents will
provide a competitive advantage or will afford protection against
competitors with similar technology, or will not be successfully
challenged or circumvented by competitors. There can be no
assurance that the trade secrecy and other measures taken by the
Company will be adequate to prevent or deter misappropriation of
its technology, or that competitors will not be able
independently to develop technologies having similar functions or
performance characteristics. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights
to the same extent as do the laws of the United States. There
can be no assurance that the Company will have an adequate legal
remedy to prevent or seek redress for future unauthorized
misappropriation of the Company's technology.
The business software development market is characterized by
rapid technological change, with frequent introductions of new
products and technologies. As a result, industry participants
often find it necessary to develop products and features similar
to those introduced by others, increasing the risk that their
products and processes may give rise to claims that they infringe
the patents or copyrights of others. Accordingly, the Company's
current and future products and processes, or uses thereof, may
conflict with patents or copyrights that have been granted or may
be granted to competitors or others. Such competitors or others
could bring legal actions against the Company or its customers,
claiming damages and seeking to enjoin manufacturing, marketing
or use of the affected product or processes. Similarly, the
Company may in the future find it necessary to commence
litigation in order to enforce and protect its proprietary
rights. If the Company becomes involved in any such litigation,
it could consume a substantial portion of the Company's resources
and result in a significant diversion of management attention.
If the outcome of any such litigation were adverse to the Company
or its customers, its business, financial condition and results
of operations could be materially adversely affected. In
addition to any potential liability for damages, the Company or
its customers could be enjoined from continuing to manufacture,
market or use the affected product or process, and could be
required to obtain a license in order to continue such
manufacture, marketing or use. There can be no assurance that
the Company or its customers would prevail in any such action or
that any license required under any such patent would be made
available on acceptable terms, if at all.
Reliance Upon Development of Market
The Company has developed products that address the
interactive multimedia business software market. If this market
fails to grow or grows more slowly than the Company currently
anticipates or if the Company is unable to attract sufficient
distributors, the Company's business, results of operations and
financial condition would be materially adversely affected.
Forward Looking Statements and Associated Risks
This Prospectus, including the documents incorporated herein
by reference, contains certain forward-looking statements,
including, among others (i) results of operations (including
expected changes in the Company's gross margin and general,
administrative and selling expenses); (ii) the Company's business
strategy for expanding its presence in the multimedia business
software applications industry; and (iii) the Company's ability
to distinguish itself from its current and future competitors.
These forward-looking statements are based largely on the
Company's current expectations and are subject to a number of
risks and uncertainties. Actual results could differ materially
from these forward-looking statements. In addition to the other
risks described elsewhere in this "Risk Factors" discussion,
important factors to consider in evaluating such forward-looking
statements include (i) the shortage of reliable market data
regarding the multimedia business software market; (ii) changes
in external competitive market factors or in the Company's
internal budgeting process which might impact trends in the
Company's results of operations; (iii) anticipated working
capital or other cash requirements; (iv) changes in the Company's
business strategy or an inability to execute its strategy due to
unanticipated changes in the market; and (v) various competitive
factors that may prevent the Company from competing successfully
in the marketplace. In light of these risks and uncertainties,
many of which are described in greater detail elsewhere in this
"Risk Factors" discussion, there can be no assurance that the
forward-looking statements contained herein will in fact
transpire.
Potential Adverse Effect of Preferred Stock; Anti-Takeover
Effects
In addition to the outstanding Series C Preferred Stock and
Series D Preferred Stock, the Board of Directors has authority to
issue up to 804,900 shares of preferred stock and to fix the
rights, preferences, privileges and restrictions, including
voting rights, of those shares without any further vote or action
by the shareholders. The rights of the holders of the Common
Stock will be subject to, and may be adversely affected by, the
rights of the holders of any Preferred Stock that may be issued
in the future. The issuance of additional Preferred Stock, while
providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company, thereby
delaying, deferring or preventing a change in control of the
Company. Furthermore, such Preferred Stock may have other
rights, including economic rights senior to the Common Stock,
and, as a result, the issuance thereof could have a material
adverse effect on the market value of the Common Stock. The
Company has no present plans to issue shares of Preferred Stock.
The Company has not exempted itself from the Delaware Business
Combination Act ("DBCA"). The DBCA prohibits certain business
combinations with "interested stockholders" unless the
combination, or the transaction in which the interested
stockholder acquired his interest, were approved in advance by
the Board of Directors. The possible application of the DBCA may
further discourage or prevent a change in control of the Company.
See "Description of Capital Stock."
Management of Growth
The Company anticipates significant growth upon acceptance
of its products and intends to pursue rapid growth as part of its
business strategy. This growth strategy will require an increase
in the number of the Company's personnel, particularly skilled
technical, marketing and management personnel. The Company
competes with some of the major computer, communications,
consulting and software companies, as well as information service
departments of major corporations, in seeking to attract
qualified personnel. There can be no assurance that the Company
will be able to attract and retain the personnel necessary to
pursue its growth strategy. Further, the Company will be
required to expand, train and manage its employee base. This
will require an increase in the level of responsibility for both
existing and new management personnel. There can be no assurance
that the management skills and systems currently in place will be
adequate or that the Company will be able to manage its growth
effectively and to assimilate its new employees successfully.
Any failure to adequately manage the Company's growth, could
materially and adversely affect the Company's business, operating
results and financial condition.
Shares Eligible for Future Sale
Sales of substantial amounts of the Company's common stock,
or the availability of such shares for sale, could adversely
affect the price of the Common Stock and the ability of shares to
sell their holdings. The Common Stock offered hereby by the
Selling Stockholders represents up to 30% of the currently
outstanding Common Stock.
Risk of Default on Senior Debt
The Company has obtained a secured line of credit from
Cupertino National Bank. The line of credit allows the Company
to borrow a base amount of $500,000 and to obtain revolving
advances in the future based upon the value of acceptable
inventory and accounts receivable. Amounts borrowed under the
line of credit are secured by substantially all of the Company's
assets, including its inventory, accounts receivable and
technology. If the Company were to default on the line of
credit, the bank would have rights to the Company's technology
and other assets superior to the rights of the Company's
unsecured creditors and stockholders.
THE COMPANY
Innovus Corporation provides a powerful, yet easy to use
software tool, INNOVUS Multimedia, for creating interactive
business multimedia applications and presentations. The
Company's product can seamlessly interact with the user's
existing business applications due to its Microsoft-standards
compliant design. While the nature of projects which can be
created with INNOVUS Multimedia is limited primarily by the
user's imagination, typical examples include computer based
training (CBT) applications; high impact multimedia
presentations; employee orientation and other human resources
systems; electronic catalogs, product information systems and
other sales and marketing applications, all of which integrate
desktop applications with corporate databases in an enhanced,
media rich format. Projects can be created in INNOVUS Multimedia
by intermediate level computer users in a "point and click"
fashion; programmers and developers also find the product useful
and scalable since the underlying engine, accessible to those who
wish to use it, is compliant with Microsoft Visual Basic for
Applications standards. INNOVUS Multimedia is the first
multimedia tool to offer the ease of use of presentation software
combined with the media management of authoring programs and the
power of application development tools. INNOVUS Multimedia
allows the desktop PC user to fill the gap between settling for
standard solutions provided by shrinkwrap applications and
creating customized programs using traditional complex
development and authoring tools.
In addition to the software tool, Innovus Corporation has
begun to release a series of application templates that further
simplify the use of the tool by providing an outline to automate
several common business activities. The Company intends to
expand the family of application templates (See "Risk Factors -
Forward Looking Information). By the end of 1996, the Company
plans to sell at least two CD volumes of business oriented media
objects, such as video, sounds, animations, backgrounds,
interactive buttons and images, to facilitate development of
multimedia projects using INNOVUS Multimedia or other media
applications.
Industry Overview
Increasingly, business information system resources are
incorporating multimedia to enhance efficiency and productivity.
The communications power of multimedia, when combined with other
business computing capabilities, such as databases, networks, and
integration of other business applications, allows users to
create innovative solutions to recurring business activities. In
an industry report dated April, 1996, the Gartner Group, a
leading industry analyst, estimated that the impact of multimedia
on business will be as far-reaching as the introduction of PCs
and LANs in the early 1980s. According to the Gartner Group,
over 70 percent of all multimedia applications will have to be
created and maintained at or below the corporate department
level, rather than by the IS department.
The acceleration of multimedia in the business environment
is evidenced by several significant emerging industry standards,
including Intel's MMX standard for improved business multimedia
PC performance and Microsoft's DirectX enhanced multimedia
software development specification. Several factors influencing
this growing trend include:
Increased power of desktop computers. As the cost of hardware
has continually dropped and the requirements of business software
has increased, the capabilities of typical corporate desktop PCs
has increased. An ever-increasing percentage of desktop PCs are
capable of using 32 bit operating systems such as Windows 95 or
Windows NT. These PCs have the large hard drives, color monitors
and RAM memory required for multimedia.
Rapid expansion of the Intranet and Internet. The rapid
expansion of Intranets and the Internet is driving demand for
tools to manipulate and manage enhanced digital graphic and
multimedia content for use in World Wide Web sites, and
electronic transaction and business information environments.
Increased user knowledge and expectations. As users experience
more software utilizing graphical or multimedia user interfaces,
they demand similar intuitive presentation and point and click
functionality from all business applications.
Proliferation of multimedia capable business networks. Network
technology has continued to evolve to allow for higher bandwidth,
lower cost network communication. Such enabling technology
allows for the deployment of multimedia applications across
corporate networks.
Increased ease of use and re-use of media content. Multimedia
tools and applications can readily use and store media in
standard industry formats without complicated conversion.
Multimedia developers can therefore readily obtain media content
from a variety of sources, including the Internet and commercial
clip-art packages, as well as create their own media through the
use of scanners, sound cards, digitized cameras and drawing
tools.
Increased multimedia productivity and efficiency. Demand for
more efficient computer information systems have created a demand
for applications which automate, organize and monitor typical
business functions such as employee training, customer support
and sales force automation. Communication rich multimedia
applications increase the productivity and efficiency of
automated systems.
Company Strategy
The Company's objective is to rapidly penetrate and capture
the business multimedia applications market for users from the
corporate department level to the small to medium enterprise
(SME) market . Key elements of the Company's product market
strategy are:
Product Positioning. The Company is positioning its products as
the business multimedia tool for the individual user in a
business environment. By combining the ease of use of
presentation software with full OLE and ODBC access to business
applications, the Company believes INNOVUS Multimedia presents a
unique opportunity for power users to create applications without
the learning curve of traditional development tools.
Rapid Market Penetration. Beginning in the fourth quarter of
1996, the Company has begun to aggressively market its products
through substantially lowered price points, exciting visual
advertising and direct mail campaigns. The targeted market
includes a broad range of customer profiles, including power
users, developers and current authoring product users, with an
emphasis on the [aggressive] [hip?] user searching for a way to
add the power of multimedia to his other business without the
authoring tool learning curve.
Industry Relationships. The Company is currently discussing
potential joint marketing efforts and other strategic
relationships with key industry participants.
Flexible Software Design. Recognizing that software standards
are constantly in a state of flux, INNOVUS Multimedia was
designed to be inherently flexible and readily modifiable to
accommodate new standards for media and data exchange. Since
many features are enables through external wizards or OLE
automation, revision of the software to accommodate new standards
is simplified, potentially allowing for shorter development
cycles.
Complete Solutions. The Company is positioning itself to be a
leader in business multimedia applications development by
providing a complete family of products for business users. The
Company provides a fully integrated technology solution that
allows customers to standardize on a single methodology for
deploying media-based business applications, on the desktop,
through the server, and over the web. Additionally, the Company
offers custom application development services through a Services
Division to augment the resources of the users and the VAR
channel.
Broad Based Distribution Channels. The Company has established
partners with respect to the following channels of distribution:
direct sales, retail, catalog marketers, VARs and corporate
resellers. The Company plans to leverage these existing
relationships for penetration of its target markets.
Additionally, the Company believes it is well positioned to serve
as a channel partner in that its products add value and usability
to other software companies' existing applications and embedded
technologies.
Design Product Line for Repeat Sales. The Company's current and
planned product line consists of the core software tool,
application templates for specific uses and multimedia content.
The Company believes that each sale of the tool creates a
potential customer for application templates and media content;
each purchaser of content is a potential customer for the tool or
templates; and each purchaser of a template is a potential
customer for other templates and media content. By enabling
power users to readily become developers, the Company believes
INNOVUS Multimedia will be creating a repeat customer base in
addition to the typical upgrade market. (See "Risk Factors --
Forward Looking Statements".)
Exploit Internet Opportunities. The Company believes that the
emergence of the world-wide web/intranet will significantly
increase the market for open environment multimedia development
tools. This emergence is driving demand for development tools to
manipulate and manage enhanced digital graphics and multimedia
content for use in the world wide web sites, and electronic
transaction of business information. The Company's products allow
business managers to develop and deploy fully transactional
applications using the Internet to continuously update and/or
exchange data with remote users.
The INNOVUS Solution
The Company's core software tool allows business managers
and users to automate recurring activities through a multimedia
development tool designed specifically for building easily
modifiable business information systems. For example, the
Company's software can create computer applications that automate
the training and orientation functions which otherwise would
require significant manpower and other corporate resources. It
is the first multimedia tool to offer the ease of use of
presentation software combined with the media management of
authoring programs and the power of application development
tools. Managers, trainers and developers can now build dynamic,
easily modifiable business applications that interface with
commonly used databases without the support of the IS
professional. Unlike multimedia tools that require the user to
convert multimedia text and database files to proprietary
formats, the Company's products give managers OLE integration and
Open Database Connectivity (ODBC) so managers can access files in
their original formats. The Company's software allows corporate
users to distribute applications over a LAN and to interact with
existing data files. Furthermore, once these applications have
been developed, segments or portions can be reused in new
applications, substantially adding to the cost-efficiency
benefits of implementing technology in the context of such
business activities.
The INNOVUS product's user friendly interface allows a
manager or staff member to build full multimedia applications
using the same basic computer skills required to operate
presentation software. Dynamic links allow applications deployed
on a network to be changed by simply updating the central
database. Applications can also incorporate active portions of
other common business software, including spreadsheets, e-mail
and word processors. Additionally, the Company's products offer
complete solutions. Using INNOVUS Multimedia, users will be able
to accelerate their business process automation by using various
INNOVUS application templates. The Company has released, and
will continue to expand, a growing family of application
templates which provide both the logic and content for various
common business activities in the training, human resources,
sales force automation, customer support and product marketing
areas. The Company is also releasing a series of media kits
containing video, audio, images, animations, backgrounds,
graphical buttons and hot spots - essential components of
multimedia applications. (See "Risk Factors - Forward Looking
Information.")
The Innovus Product Line
The Company's software products allow managers to design
friendly multimedia user interfaces that automate time-consuming,
paper-intensive activities and turn them into controlled,
modifiable systems. Using the Company's products, anyone with
basic Microsoft Windows skills can:
- - Design the flow, layout and timing of information.
- - Connect the project to existing databases or create new
data sources, combine video, sound, graphics and text, add quiz
and survey questions, and incorporate other applications.
- - Deploy the project across a network, or package it for a single
workstation.
- - Measure how and by whom the applications are being used.
- - Maintain the system and update changing information.
The Company's software is compatible with the latest and
most advanced PC and multimedia technology. The Company's
software is Windows 95 and Windows NT compatible, indicating that
it can take advantage of advanced features such as OLE and ODBC
support, and is compatible with Windows 3.1. These features
allow INNOVUS Multimedia to operate as a full "front end" to
other OLE compliant applications, allowing the design of training
programs which teach the user how to use other application
software, and which can continue to be available as a refresher
tool as the user attempts to utilize the application in the
course of the business day. INNOVUS Multimedia scripts use a
QuickScript Visual Basic compatible scripting language.
The Company's software products consist of the following:
- - Product Name
- - Description
- - Price
- - Available
- - INNOVUS Multimedia v2.12 (1)
- - Business multimedia & presentations tool includes
Windows 3.1 support as well as Windows 95 & Windows NT 4.X
- - $99
- - Now
- - INNOVUS Multimedia v2.2 (1)
- - Business multimedia & presentations tool, enhanced
Internet/Intranet functionality Windows 95 & Windows NT 4.X only
- - $99
- - Now
- - INNOVUS Multimedia v2.2I
- - Business multimedia & presentations tool, advanced
Internet/Intranet functionality, operates as browser plug-in
- - $99
- - Q2 1997
- - Innovus Media that Works v. 1
- - Buttons & backgrounds
- - $59
- - Q4 1996
- - Innovus Media that Works v. 2
- - Videos & sounds
- - $59
- - Q4 1996
- - Innovus Media that Works v. 3
- - Images
- - $59
- - Q4 1996
- - Electronic Catalog Quickstart Template
- - Quickly develop electronic catalogs and brochures
- - $59
- - Q4 1996
- - Company Bulletin Board Quickstart Template
- - Rapidly create a network based company information system
- - $59
- - Q4 1996
- - Employee Sign in/out Quickstart Template
- - Easy, database driven system for employees and visitors
- - $99
- - Q4 1996
- - Quiz Formats for CBT Quickstart Template
- - T/F, multiple choice, and matching question structure and reusable media
- - $59
- - Q4 1996
- - Employee Benefits Quickstart Template
- - Customizable on-line benefits system
- - $99
- - Q4 1996
- - Employee Safety Quickstart Template
- - Customizable company safety policies and training
- - $99
- - Q4 1996
- - Company Policies Quickstart Template
- - Customizable on-line rules & regulations for employees
- - $99
- - Q4 1996
- - Company History Quickstart Template
- - Creates company history presentation for employees
- - $99
- - Q4 1996
- - Customer Service Quickstart Template
- - Customizable customer service procedures and standards
- - $99
- - Q4 1996
- - QuickStart Notes R4 Training (2)
- - Customizable Lotus Notes training
- - $2995
- - Now
- - QuickStart Employee Orientation (3)
- - Customizable Employee Orientation system
- - $2995
- - Now
- - NotesMaster CBT 5 user license
- - Non-modifiable Lotus Notes training
- - $99
- - Dec 1996
- - NotesMaster CBT 100 user license
- - Non-modifiable Lotus Notes training
- - $999
- - Dec 1996
- - INNOVUS Multimedia CBT
- - INNOVUS Multimedia training
- - $99
- - Dec 1996
(1) Corporate licenses available for 100 users or more @ $50/user
(2) Price is for license starter kit. User licenses required for
implementation beyond one simultaneous user. 10 user pack
list for $495, 100 user pack lists for $3,495
(3) Price is per system location. Additional licenses must be
purchased for each system deployed.
Product Descriptions:
INNOVUS Multimedia . INNOVUS Multimedia is the only full
featured business multimedia application development tool
designed for the desktop user to run on Windows 3.x, 95 and NT.
It provides ordinary business users with an easy to use point and
click development environment for media based applications.
INNOVUS Multimedia is designed for the business user and has
implemented an easy to understand yet powerful interface. This
interface provides users with three intuitive views for
designing, developing and timing elements in an application. All
applications developed with Innovus multimedia tools can be
segmented into re-usable sections. Each section can be developed
by different users and imported back into the main application
when completed. This provides managers the ability to use
multiple resources for development. These sections can also be
used to create libraries of functions for reuse in future
projects.
INNOVUS Multimedia provides users with powerful business
connections available for presenting, gathering and storing
information. INNOVUS Multimedia fully supports Microsoft's
business computing standards such as ODBC, OLE and Visual Basic
for Applications scripting. INNOVUS Multimedia supports these
standards to provide users with the ability to extend their
applications beyond the functionality currently associated with
multimedia tools. INNOVUS Multimedia allows users to quickly and
easily interact with multiple corporate databases using ODBC. It
enables the transfer of information between applications and can
launch and control other OLE compliant programs such as
spreadsheets and groupware. The QuickScript , Visual Basic
compatible scripting language, lets users leverage this widely
accepted business standard programming language, rather than
learning archaic, proprietary scripting codes and commands.
Business Application QuickStart Templates. QuickStart Templates
enable companies to rapidly accelerate the adoption of multimedia
within their organizations by providing application shells and
examples for multimedia development. These templates, developed
by the Company, third party VARs and others, provide customers
with a head start in developing and implementing multimedia
enhanced applications. Once completed, these templates become
custom applications that can be distributed over the company's
network, copied onto desktop computer hard drives or burned onto
CD-ROMs for distribution. All of the templates created in
INNOVUS Multimedia include a Windows 95 compliant install and
un-install application, making installation of the completed
projects fast and simple. The Company's Quick Start Templates
contain the essential content for each business activity
addressed. The user or VAR simply adds to or modifies the
existing content to meet his or her specific requirements. Many
of the Quickstart templates in development will be smaller, more
modular and lower in price than the two existing Quickstart
Templates to increase their accessibility to a broader range of
users.
Product Development (Future Products):
INNOVUS Multimedia 3.0. INNOVUS Multimedia 3.0 is an evolution
of INNOVUS Multimedia for Desktops, currently in the development
stage. The product is being developed to provide corporate IS
departments a scalable and extensible multimedia software
development environment for use throughout the entire
organization. The 3.0 product will leverage the wide area
communications capabilities of the Internet by providing
developers the ability to connect to a wide variety of Internet
resources, such as databases, WWW pages and FTP sites, quickly
and easily. It will also include a Netware Directory Services
(NDS) interface for maximized networking capability. Another
important aspect of INNOVUS Enterprise will be the groupware
functions and collaborative development capabilities that will
allow multiple developers to work simultaneously on a single
project, with version control. (See "Risk Factors -- Forward
Looking Statements").
Additional QuickStart templates. The Company plans to release
approximately three new Quickstart templates each quarter during
1997. Several of these are in the early stage of development;
others are being defined. The nature, content and pricing of
these templates will be determined by market demand and the
acceptance of the initial template offerings.
Marketing and Sales
The Company's products are positioned for worldwide
distribution through a combination of direct sales, retail,
catalog marketers, VAR channels, corporate resellers and
strategic relationships. The Company will leverage VARs and
corporate resellers to sell products directly to corporate
department managers and will use direct, catalog marketer and
retail sales to reach individual desktop developers and power
users. The Company's distribution channels are as follows:
Value Added Resellers (VARs). Long term market development and
support requires the establishment of an international VAR
network. The Company plans to continue building its VAR network
by recognizing VARs from existing application-specific areas,
such as Lotus Notes VARs. The Company has established a VAR
network with over 65 VARs having already been through product
training. These are active solutions developers who can use
INNOVUS Multimedia to accelerate the speed and quality of media
applications development for their existing customer base and
extend their services to new customers with this added
capability.
Strategic Relationships. The Company is working to secure
relationships that can provide OEM and software bundling
opportunities which will help to rapidly proliferate the user
base for its INNOVUS Multimedia product. The Company is
currently negotiating partnerships with service providers, VARs,
hardware companies and other software vendors for this purpose.
Direct Sales Activities. The Company is actively promoting
Internet based sales and marketing through its web site
(www.innovusmm.com). The web site has fully implemented
electronic commerce including direct download as well as on-line
ordering with conventional delivery. The Company has established
regional sales offices in Atlanta, New York, Boston, Dallas,
Salt Lake City, and Los Angeles. The primary responsibilities of
these offices is to recruit VARs, contact and develop potential
customer relationships and work directly with major accounts in
each region to accelerate the adoption of the Company's tools for
corporate multimedia application development through various
service and support activities.
Corporate Resellers. The Company has distribution agreements
with well established corporate sales organizations, including
Software Spectrum, Software House International, Stream, ASAP
Software Express, PC Connection, Programmer's Paradise and
MicroWarehouse. Internet based resellers include Software.Net
and @Once Software. The Company intends to expand this area and
is in contract negotiations with additional resellers in Europe
and Australia as well as the United States at this time.
Software Retailers. Egghead Software is in the process of
stocking the INNOVUS Multimedia tool in its stores. INNOVUS
Media packages and CBT products will be placed following the
initial stocking. Other major software retailers are in
negotiations with the Company concerning retail distribution by
year end.
Customers and End Users
The Company markets its products to small and medium sized
businesses as well as corporate departments operating on local
area networks or the Internet. Buyers of the products include
individual users, department managers, managers of specific
business activities and corporate IS departments. The Company is
positioning INNOVUS Multimedia as a powerful new business
productivity tool that enhances the capabilities of other common
business software and improves the efficiency and skills of a
company's employees by automating many common, redundant business
and management processes. The Company's customers may be
subdivided into various vertical markets. The Company serves
these vertical markets in order to address the unique needs
experienced in each of the vertical markets as described below.
The Company's current product line has been designed to
allow its sales and marketing personnel as well as the sales and
marketing personnel of its channel partners to focus on several
vertical market opportunities inside the corporate computing
environment. Products designed for other departments in the
corporation will allow the Company to expand to other market
segments in the future. Current application template products
provide the Company access to theses vertical market segments;
corporate training, human resource departments and sales and
marketing departments. The following are examples of how some of
the Company's products are being used by current vertical market
customers.
Lotus Notes Upgrade Training is an application that teaches end
users how to migrate their Notes applications from the 3.x to the
4.0 version of that product. It includes complete instructions on
the product upgrade functionality and a section designed to be
modified by the Notes support team to customize the specific
application of Notes as used by that company or corporate
department. American Express Stored Value Group is using this
product to facilitate the easy upgrade of thousands of Lotus
Notes end users in their organization. The customer is making
the Company's training program available in their corporate
training centers and also distributing it on their networks as an
on line information system for ongoing support of the Lotus Notes
user groups.
Safety and Compliance is a training application designed to
educate and test employees on various government requirements
associated with their job responsibilities. This template can be
modified to include sections on personal safety, toxic waste
management, fire prevention, OSHA regulations and Equal
Opportunity Employment practices. A multi-national oil company is
working with the Company to modify this template for refinery
operations and will use the testing and database connectivity to
capture employee results, to bolster compliance verification and
identify training areas which need expansion.
New Employee Orientation is an application designed to be
modified to fit each individual corporate culture. It includes
sections on company structure and mission statements, employee
benefit options, vacation schedules, training opportunities and
available computing resources. Intermountain Health Care
Corporation is using this product to accelerate the process of
making new employees productive in their jobs. This will provide
them a completely automated, cost saving orientation system
connected to all their employee data bases that can be
distributed across their local and wide area networks.
Electronic Policies and Procedures is an application that
provides an on line policy document that can be updated
continuously to meet changes inside the company, new legislation,
or in the business environment. This is an essential tool to the
reengineering process currently under way in much of corporate
America. Associated Foods Corporation is implementing this tool
to help manage their corporate reengineering and to minimize
legal accountability issues associated with proper employee
notification requirements and verification of employee
acceptance.
Electronic Product Information System is an application that
allows companies to distribute new product information and data
updates across company networks and over the Internet. This
template can be modified to link visual product presentations
together with inventory status, product ordering systems and
other on line departmental information that can assist their
Placement Agents in closing a customer sale. This application
recently won the "Best of Show" Award in the "Online Training and
Documentation" Category of Softbank Institutes Interactive 96
Conference and Expo Trade Show in Atlanta. Egghead Software
Corporation has implemented a nation wide sales force automation
system based on this template that allows that company to send
updated product information from an Oracle database to its 700
field sales Placement Agents every day along with customized
training on each new item and then return the results to each
employees performance records.
In addition to this vertical market focus, the Company is
actively selling the core development tool to individual users,
business managers, corporate IS departments and VARs who are
creating numerous other applications to meet their own customer's
demands. Part of the Company's marketing strategy is to look for
opportunities to work with these developers to turn their
solutions into meaningful application templates for resale to the
general business marketplace. This will allow the company to
rapidly expand its product offerings without dedicating its own
resources and open up additional vertical market product and
channel opportunities.
Competition
The markets for the Company's products are highly
competitive and are characterized by pressures to reduce prices,
incorporate new features and accelerate the release of new
product versions. A number of companies currently offer products
that compete directly or indirectly with one or more aspects of
the Company's products. Competitors could develop a product
which competes with all aspects of the Company's products. Some
current and potential competitors are larger, better established
and have greater financial resources than the Company. Such
competitors may have the ability to more aggressively market and
price their products than the Company. There is no assurance
that the Company will be able to successfully compete in these
markets.
The Company has developed a family of multimedia
application products which combine the simplicity of a
presentation program user interface and the media richness of
professional authoring software with all the power and business
functionality of corporate development tools. The Company's core
product allows management to automate recurring activities
through a multimedia development tool designed specifically for
building easily modifiable business information systems. It is
the first multimedia tool to offer the ease of use of
presentation software combined with the media management of
authoring programs and the power of application development
tools. Managers, trainers and developers can now build dynamic,
easily modifiable business applications that interface with all
popular databases without the support of the IS professional.
Unlike multimedia tools that require the user to convert
multimedia text and database files to proprietary formats, the
Company's products give managers OLE integration and Open
Database Connectivity (ODBC) so managers can access files in
their original formats. The Company's software allows corporate
users to distribute presentations over a LAN and import existing
data files. Because of this, management feels the Company is
unique from a competitive standpoint, particularly in light of
the ability of its technology to be used in an open environment
and implemented on a cost effective basis.
There are currently four categories of software products
which attempt to provide business multimedia application
solutions to the corporate market.
Visual development environments such as Visual Basic, Delphi, and
PowerBuilder, are capable corporate tools which integrate well in
network solutions. These are highly technical development tools
generally requiring skilled programmers and protracted
development schedules to create and maintain business
applications. These products have limited native media support
capability.
Multimedia authoring tools such as IconAuthor, AuthorWare, and
MFactory can create and manage sophisticated media presentations
and program logic. They demand a high level graphics artist or
technical user and have limited business functionality or
scalable network deployment capabilities.
Web page design tools such as Microsoft Front Page and Netscape
Gold are strong media and text document managers and work well in
extended network environments, but are limited in their format
support and transaction capabilities and lack back - office
connectivity. These tools focus on web development and fall short
in full business applications.
Computer based training tools such as CBT Express, Toolbook and
Quest are useful project development programs for training and
testing activities which provide much of the presentation logic
for instructional applications. While some of these tools offer
media support, they are generally lacking in scalable network
capabilities, database support, extensibility and business
functionality.
Few of these products can be operated effectively by the
average manager or desktop computer user. They offer no
accelerated vertical solution templates. They are generally cost
prohibitive for wide distribution by managers to desktop users,
and do not provide a single integrated multimedia application
solution that crosses all levels of the corporate network.
Management believes that only the INNOVUS product line
offers this complete solution approach to the business multimedia
application market. Management believes the companies that now
have program development and presentation products would incur
significant expense and programming time in re-engineering those
products to be suitable for desktop business applications. In
particular, the Company is not aware of existing presentation
products that could emulate the ability of INNOVUS Multimedia to
act as an interactive multimedia data without fundamental changes
to the architecture of such competitive products.
Proprietary Rights
The Company regards certain features of its products as
proprietary and relies on a combination of copyright, trademark
and trade secret laws, confidentiality procedures and contractual
provisions to protect its proprietary information. The Company
holds no patents applicable to its business and has no patent
applications pending. The Company seeks to protect its products
and related documentation and other written materials under trade
secret and copyright laws (as described below) which afford only
limited protection. The Company seeks to protect its product
names under trademark and unfair competition laws. Despite the
Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of the Company's products or
obtain and use information that the Company regards as
proprietary.
The Company's software is protected by copyright laws, and
each end-user is granted a license to use either a single copy or
an open network access to the software. The Company has received
copyright protection on its various development tools,
application templates and run time programs. Copyrighted code
includes three DOS based product versions, five Windows 3.x
version products, three Windows 95 version products and three
Windows NT product versions. Copyrights cover authoring and
development products, report generators, media drivers,
peripheral drivers, various program executables and configuration
and install programs. All of these copyrights relate to the
Company's development programs and vertical applications. The
Company may also attempt to obtain limited patent protection for
the architecture of its products, but has not yet determined if
its products contain any patentable inventions. Innovus has
filed for trademark registration for certain of its product and
feature names.
Employees
Innovus currently has 50 full time employees and plans to
hire additional staff as the need arises. Of the total
employees, 7 are engaged in management and administration, 5 in
sales and marketing, 9 in development and 4 in customer support.
None of the Company's employees are represented by a labor union.
The Company believes its relationship with its employees to be
good.
Facilities
In 1995, the Company purchased the building it had
previously been leasing in Salt Lake City, Utah. The building is
approximately 11,760 square feet which includes a complete
software development lab, hardware integration and testing
facilities, computer graphics stations, digital media compression
systems, audio/video edit bay, project authoring systems,
application design equipment and general offices. The building
is subject to a purchase money mortgage to a third party in the
original principal amount of $696,313. The current interest rate
on the mortgage of 8.5% per annum will be adjusted annually
commencing in June, 2000 and the current monthly payments of
$5,658 will be adjusted accordingly based on a 24 year
amortization. A balloon payment for the balance of the mortgage
is due on June 30, 2005. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation."
Company History
The Company was incorporated in 1988 as a Delaware
corporation. Innovus Multimedia, Inc. was founded in 1987, and
acted as a value added reseller of multimedia hardware and
software in the form of stand alone kiosks until 1993.
Subsequently, new management joined the Company, and the Company
de-emphasized its multimedia kiosk business, and focussed on
business oriented multimedia software development. As part of
this transition, the Company hired new software developers,
marketing personnel and others, and secured the equity financing
for research and development necessary to complete its first
version of its Windows software.
In September of 1994, as part of Innovus' transition to a
business oriented multimedia software developer, and to enhance
its capital raising ability, Innovus was acquired by the Company
in a reverse acquisition.
The Company commercially released its core software product
in March of 1996, and since that time has released several
templates that complement that software.
USE OF PROCEEDS
The net proceeds from the sale of the Shares will be
received by the Selling Stockholders. The Company will not
receive any of the proceeds from any sale of the Shares by the
Selling Stockholders.
SELLING STOCKHOLDERS
The table below sets forth information as of November
8, 1996 with respect to the Selling Stockholders, including
names, holdings of shares of Common Stock prior to the offering
of the Shares, the number of Shares being offered for each
account, and the number and percentage of shares of Common Stock
to be owned by the Selling Stockholders immediately following the
sale of the Shares, assuming all of the offered Shares are sold.
The Registration Statement of which this Prospectus is a part was
filed by the Company pursuant to registration rights granted to
the Selling Stockholders and does not necessarily indicate a
present intent to sell Common Stock by the Selling Stockholders.
Shares of Percentage of
Shares of Common Stock Common Stock
Common Stock to be to be
Beneficially Shares of Beneficially Beneficially
Owned Before Common Stock Owned After Owned After
Name the Offering(1) Being Offered the Offering(2) the Offering
Richcourt
$ Strategies, Inc. 499,312 499,312(3) 0 0
Priority
Investments,Inc. 62,016 62,016(4) 0 0
Millenco, L.P. 62,016 62,016(4) 0 0
HBK Cayman L.P. 186,047 186,047(5) 0 0
HBK Offshore
Fund Ltd. 124,031 124,031(6) 0 0
____________________
(1) Calculated based upon the hypothetical conversion of the
Series C Preferred Stock and Series D Preferred Stock to Common
Stock as of November 8, 1996. The actual number of shares of
Common Stock which would be issuable to each Selling Stockholder
on conversion will be based upon the amount of dividends which
have accrued on the Preferred Stock at the time of conversion
and, with respect to the Series C Preferred Stock, the market
price of the Common Stock at the time of conversion. The actual
number may be more or less than the amount listed in the table.
(2) Assumes that the Selling Stockholder sells all Common Stock
being offered.
(3) The actual number of Shares being offered by this Selling
Stockholder will be the number of shares of Common Stock into
which 20,000 shares of Series C Preferred Stock and 20,100 shares
of Series D Preferred Stock are converted.
(4) The actual number of Shares being offered by this Selling
Stockholder will be the number of shares of Common Stock into
which 5,000 shares of Series C Preferred Stock are converted.
(5) The actual number of Shares being offered by this Selling
Stockholder will be the number of shares of Common Stock into
which 15,000 shares of Series C Preferred Stock are converted.
(6) The actual number of Shares being offered by this Selling
Stockholder will be the number of shares of Common Stock into
which 10,000 shares of Series C Preferred Stock are converted.
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale by the
Selling Stockholders of Common Stock to be received by them on
conversion of Series C Preferred Stock or Series D Preferred
Stock which they owned as of the date of this Prospectus. The
Series C Preferred Stock is convertible from time to time by the
holders thereof based upon the original purchase price of $50.00
per preferred share, plus accrued dividends thereon at 5% per
annum, divided by the lower of (i) $5.45 per share of common
stock, or (ii) 75% of the average closing bid price for the
common stock over the five trading days preceding conversion.
The Series D Preferred Stock is convertible from time to time by
the holders thereof based upon the original purchase price of
$50.00 per preferred share, plus accrued dividends thereon at 5%
per annum, divided by $4.00 per share of common stock. If all of
the Series C Preferred Stock and Series D Preferred Stock had
converted into Common Stock at November 8, 1996, the total number
of Shares of Common Stock issued on conversion would have been
approximately 933,421 shares. The actual number of Shares being
offered by the Selling Stockholders maybe more or less than this
amount depending upon the amount of dividends which accrue on the
Preferred Stock prior to conversion into Common Stock and, in the
case of the Series C Preferred Stock, changes in the market price
of the Common Stock. The conversion price for each class of
preferred stock is subject to adjustment upon the occurrence of
stock splits, recapitalization and similar events.
Any distribution of the Shares by the Selling
Stockholders, or by their pledgees, donees, transferees or other
successors in interest, may be effected from time to time in one
or more of the following transactions: (a) to underwriters who
will acquire the Shares for their own account and resell them in
one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at
the time of sale (any public offering price and any discount or
concessions allowed or re-allowed or paid to dealers may be
changed from time to time); (b) through brokers, acting as
principal or agent, in transactions (which may involve block
transactions) on the Nasdaq Stock Market or on one or more
exchanges on which the Shares are then listed, in special
offerings, exchange distributions pursuant to the rules of the
applicable exchanges or in the over-the-counter market, or
otherwise, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices, at negotiated
prices or at fixed prices; (c) directly or through brokers or
agents in private sales at negotiated prices; or (d) by any other
legally available means.
The Selling Stockholders and such underwriters,
brokers, dealers or agents, upon effecting a sale of the Shares,
may be considered "underwriters" as that term is defined by the
Securities Act.
Underwriters participating in any offering made
pursuant to this Prospectus (as amended or supplemented from time
to time) may receive underwriting discounts and commissions,
discounts or concessions may be allowed or re-allowed or paid to
dealers, and brokers or agents participating in such transaction
may receive brokerage or agent's commissions or fees.
At the time a particular offering of the Shares is
made, to the extent required, a Prospectus Supplement will be
distributed which will set forth the amount of the Shares being
offered and the terms of the Offering, including the purchase
price or public offering price, the name or names of any
underwriters, dealers or agents, the purchase price paid by any
underwriter for the Shares purchased from the Selling
Stockholders, any discounts, commissions and other items
constituting compensation from the Selling Stockholders and any
discounts, commissions or concessions allowed or re-allowed or
paid to dealers.
In order to comply with the securities laws of
certain states, if applicable, the Shares will be sold in such
jurisdictions, if required, only through registered or licensed
brokers or dealers. In addition, in certain states the Shares
may not be sold unless the Shares have been registered or
qualified for sale in such state or an exemption from
registration or qualification is available and complied with.
The Company has agreed that it will bear all costs,
expenses and fees in connection with the registration of the
Shares.
LEGAL MATTERS
The validity of the Shares offered hereby are being
passed upon for the Company by Ballard Spahr Andrews & Ingersoll,
Salt Lake City, Utah.
EXPERTS
The consolidated financial statements of the Company
as of December 31, 1994 and 1995 and for each of the three years
in the period ended December 31, 1995 appearing in the Form 10-K
have been audited by Hansen, Barnett & Maxwell, independent
auditors, as stated in their report appearing therein, and have
been incorporated herein by reference in reliance upon the report
of such firm given upon their authority as experts in accounting
and auditing.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is a list of the estimated expenses to
be incurred by the Registrant in connection with the issuance and
distribution of the Shares being registered hereby.
SEC Registration Fee . . . . . . . . . . .$2,790
Accountants' Fees and Expenses . . . . . . 3,000 *
Legal Fees and Expenses. . . . . . . . . .10,000 *
Miscellaneous. . . . . . . . . . . . . . . 1,710 *
TOTAL . . . . . . . . . . . . . . . . $17,500 *
____________________
* Estimated, subject to change.
The Selling Stockholders will not bear any portion of
the expenses of registration of the Shares.
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the
State of Delaware provides that a corporation may indemnify its
officers, directors, employees and agents (or persons who have
served, at the corporation's request, as officers, directors,
employees or agents of another corporation) against the expenses,
including attorneys' fees, actually and reasonably incurred by
them in connection with the defense of any action by reason of
being or having been directors, officers, employees or agents, if
such person shall have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests
of the corporation, and with respect to any criminal action or
proceedings, had no reason to believe his conduct was unlawful,
except that if such action shall be in the right of the
corporation, no such indemnification shall be provided as to any
claim, issue or matter as to which such person shall have been
adjudged to have been liable to the corporation unless and only
to the extent that the Court of Chancery of the State of
Delaware, or any other court in which the suit was brought, shall
determine upon application that, in view of all the circumstances
of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
The Company's Certificate of Incorporation, as
amended, has the following indemnification provisions:
ARTICLE VII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Corporation shall indemnify any and all persons who may
serve or who have served at any time as directors or officers, or
who, at the request of the board of directors of the Corporation,
may serve, or at any time have served as directors or officers of
another corporation in which the Corporation at such time owned
or may own shares of stock, or which it was or may be a creditor,
and the respective heirs, administrators, successors, and
assigns, against any and all expenses, including amounts paid on
judgment, counsel fees, and amounts paid in settlement (before or
after suit is commenced), actually or necessarily by such persons
in connection with the defense or settlement or any claim,
action, suit, or proceeding in which they, or any of them, are
made parties, or a party, or which may be assessed against them
or any of them, by reason of being or having been directors or
officers of the Corporation, or such other corporation, to the
full extent permitted by the General Corporation Law of Delaware
as it amy from time to time be amended.
The Company's By-laws similarly provide that the
Company shall indemnify its officers and directors to the fullest
extent permitted by the Delaware Law.
Item 16. Exhibits.
Exhibit
Number Description
3.1 Certificate of Incorporation (incorporated by reference to
Exhibit 3.1 to Registration Statement on Form S-1, Reg. No.
33-79714)
3.2 Bylaws (incorporated by reference to Exhibit 3.2 to
Registration Statement on Form S-1, Reg. No. 33-79714)
3.3 Certificate of Amendment of Certificate of Incorporation
(incorporated by reference to Exhibit 3.3 to Annual Report on
Form 10-K for the year ended December 31, 1994)
4.1 Specimen copy of Common Stock Certificate
(incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-1, Reg. No. 33-79714)
5.1 Opinion of Ballard Spahr Andrews & Ingersoll*
23.1 Consent of Hansen, Barnett & Maxwell*
23.2 Consent of Ballard Spahr Andrews & Ingersoll (included in
Exhibit 5.1)
24.1 Power of Attorney (included in Part II of Registration
Statement)
* Filed herewith
Item 17. Undertakings.
A. 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:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933, as amended (the
"Act");
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the Registration
Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) 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;
provided, however, that paragraphs (A)(1)(i) and
(A)(1)(ii) do not apply if the Registration Statement is on Form
S-3, Form S-8 or Form F-3, and the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the
Securities and Exchange Commission (the "Commission") by the
Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any
liability under the Act, 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.
B. The undersigned Registrant hereby undertakes that for
purposes of determining any liability under the Act, each filing
of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) 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.
C. Insofar as indemnification for liabilities arising
under the Act 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 Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant 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.
D. The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under
the Act, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Act shall be deemed to be part of this Registration Statement as
of the time it was declared effective.
(2) For the purpose of determining any liability
under the Act, each post-effective amendment that contains a form
of prospectus 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, the Registrant certifies that it has reasonable
grounds to believe that it meets all of the requirements for
filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Salt Lake City, State
of Utah on November __, 1996.
INNOVUS CORPORATION
By: /s/
Terry Haas
Chief Executive Officer
Pursuant to the requirements of the Securities Act of
1933, as amended, this Registration Statement has been signed by
the following persons in the capacities and on the dates
indicated.
KNOW ALL MEN BY THESE PRESENTS, that each person
whose signature appears below in so signing also makes,
constitutes and appoints Terry Haas and David Mock, and each of
them, as true and lawful attorneys-in-fact and agents with full
power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities to execute and cause
to be filed with the Securities and Exchange Commission any and
all amendments (including pre-effective and post-effective
amendments) to this Registration Statement, with exhibits thereto
and other documents in connection therewith, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully as to all intents and
purposes as he might or could do in person, and hereby ratifies
and confirms all that said attorneys-in-fact and agents or their
or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
Signature Title Date
/s/ President (Principal November __, 1996
Terry Haas Executive Offier) and
Director
/s/ Executive Vice President November __, 1996
David Mock Chief Financial Officer
(Principal Financial
Officer), Director
/s/ Director November __, 1996
Michael DeBloois
/s/ Director November __, 1996
Brenda Cornell
/s/ Director November __, 1996
Kenneth Woolley
/s/ Director November __, 1996
Jay Misra
/s/ Director November __, 1996
David Broadbent
EXHIBIT INDEX
Exhibit
Number Description Page
3.1 Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 to Registration Statement
on Form S-1, Reg. No. 33-79714)
3.2 Bylaws (incorporated by reference to Exhibit 3.2 to
Registration Statement on Form S-1, Reg. No. 33-79714)
3.3 Certificate of Amendment of Certificate of
Incorporation (incorporated by
reference to Exhibit 3.3 to Annual Report on
Form 10-K for the year ended December 31, 1994)
4.1 Specimen copy of Common Stock Certificate
(incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-1, Reg.
No. 33-79714)
5.1 Opinion of Ballard Spahr Andrews & Ingersoll*
23.1 Consent of Hansen, Barnett & Maxwell*
23.4 Consent of Ballard Spahr Andrews & Ingersoll
(included in Exhibit 5.1)
24.1 Power of Attorney (included in Part II of
Registration Statement)
* Filed herewith
305616.001(B&F)
Exhibit 5.1
November 15, 1996
Board of Directors
Innovus Corporation
2060 E. 2100 South
Salt Lake City, Utah 84109
Re: Innovus Corporation
Registration Statement on Form S-3
Gentlemen:
We have acted as counsel to Innovus Corporation, a
Delaware corporation (the "Company"), in connection with the
preparation and filing of a Registration Statement on Form S-3
(the "Registration Statement"), to be filed on or about November
6, 1996, pertaining to the public resale of up to 2,134,833
shares of the Company's common stock, $.001 par value (the
"Shares") issuable by the Company on conversion of the Series C
Convertible Preferred Stock and Series D Convertible Preferred
Stock.
We have reviewed the Certificate of Incorporation and
Bylaws of the Company, as amended, resolutions of the board of
directors of the Company, the Registration Statement and such
other documents as we have deemed appropriate. As to factual
matters we have relied upon certificates supplied to us by
officers of the Company. In rendering the opinion expressed
herein, we have assumed, without investigation, the validity of
all documents and the accuracy of all information supplied to us
by the Company. All capitalized terms used herein and not
otherwise defined have the meaning ascribed to them in the
Registration Statement.
Based upon the foregoing, we are of the opinion that
the Shares being registered pursuant to the Registration
Statement will be, upon the conversion of the Series C
Convertible Preferred Stock in accordance with the terms set
forth in the Certificate of Designation filed with the Delaware
Secretary of State on October 4, 1996, as amended, or the Series
D Convertible Preferred Stock in accordance with the terms set
forth in the Certificate of Designation filed with the Delaware
Secretary of State on November 1, 1996, as amended, legally
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and the reference to this
firm under "Legal Matters" in the Prospectus contained in the
Registration Statement.
Very truly yours,
BALLARD SPAHR ANDREWS & INGERSOLL
Exhibit 23.1
HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
Member of AICPA Division of Firms
SEC Practice Section
Member of Summit International Associates
(801) 532-2200
Fax (801) 532-7944
345 East 300 South, Suite 200
Salt Lake City, Utah 84111-2693
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Innovus Corporation
We have issued our report dated February 21, 1996 on the
consolidated financial statements of Innovus Corporation and
Subsidiary as of December 31, 1995 and 1994, and for each of the
three years in the period ended December 31, 1995, which are
included in the Form 10-K of Innovus Corporation dated December
31, 1995. We consent to the incorporation by reference of our report
in the Registration Statement of Innovus Corporation on Form S-3.
We also consent to the use of our name and the statements with
respect to us as appearing under the heading "Experts" in the
Registration Statement.
HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
November 15, 1996
