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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-76045
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PROSPECTUS
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3,175,586 SHARES
VERSANT CORPORATION
COMMON STOCK
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OUR COMMON STOCK CURRENTLY TRADES ON THE NASDAQ SMALLCAP MARKET. LAST REPORTED
SALE PRICE ON NOVEMBER 18, 1999: $5.06 PER SHARE. TRADING SYMBOL: VSNT
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THE OFFERING
o The shares offered in this prospectus will be sold from time to time at
then prevailing market prices, at prices relating to market prices or at
negotiated prices. We are not aware of any underwriting discounts or
commissions in connection with this offering.
o All of the shares of common stock offered in this prospectus are being sold
by the selling security holders named on page 12 of this prospectus. We
will not receive any of the proceeds from the sale of these shares. These
shares are being offered on a continuous basis under Rule 415 of the
Securities Act until at least December 28, 2002 or the earlier sale of the
shares offered hereby.
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THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. PLEASE CAREFULLY CONSIDER THE
"RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SECURITY HOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
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THE DATE OF THIS PROSPECTUS IS NOVEMBER 19, 1999.
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PROSPECTUS SUMMARY
We issued the shares that may be offered using this prospectus in three
transactions in 1998. In July 1998, we acquired Soft Mountain S.A. and issued
245,586 shares of our common stock to the shareholders of Soft Mountain. This
amount was increased by 30,000 shares in November 1999 to resolve a dispute.
These Soft Mountain selling security holders may offer some or all of these
shares using this prospectus. In October 1998, we issued a $3.6 million
convertible secured subordinated promissory note to Vertex Technology Fund Ltd.
This note was convertible into 1,880,000 shares of our common stock, at a rate
of $1.925 per share. In December 1998, we issued 700,000 shares of our common
stock and warrants to purchase 350,000 shares of our common stock to three
SpecialZ Situations Funds. The warrants may be exercised for common stock at an
exercise price of $2.25 per share. The Special Situations Funds may offer some
or all of their common stock, including shares that may be issued upon exercise
of their warrants, using this prospectus. In July 1999, we agreed to modify the
terms of the Vertex convertible note. The note, including accrued interest, has
been converted into 902,946 shares of Series A Preferred Stock. This preferred
stock is convertible into 1,805,892 shares of our common stock, subject to
customary adjustments for stock splits and dividends and other corporate
restructurings. Vertex may offer some or all of these 1,805,892 conversion
shares using this prospectus.
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TABLE OF CONTENTS
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<TABLE>
<S> <C> <C> <C>
Prospectus Summary...................... 2 Selling Security Holders................ 12
Risk Factors............................ 3 Plan of Distribution.................... 13
Use of Proceeds......................... 10 Legal Matters........................... 14
Dividend Policy......................... 10 Experts................................. 14
Where You Can Find More Information..... 10
</TABLE>
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the following risk factors and the other information
in this prospectus before investing in our common stock. Our business and
results of operations could be seriously harmed by any of the following risks.
The trading price of our common stock could decline due to any of these risks,
and you may lose all or part of your investment.
WE HAVE LIMITED WORKING CAPITAL. We incurred a significant reduction in
working capital in 1998. To date, we have not achieved business volume
sufficient to restore profitability and a positive cash flow. We operated at a
net loss of $20 million in 1998 and since December 31, 1998 have continued to
experience operating losses on a year to date basis. Our available cash and
credit facilities may not be sufficient to fund our operations and successfully
implement our business plan, part of which consists of pursuing potential
strategic relationships, acquisitions of companies, products and technologies.
OUR COMMON STOCK MAY BE DELISTED FROM NASDAQ. To maintain our listing on
the Nasdaq SmallCap Market, there are several requirements applicable to all
issuers listed there, including a minimum bid price of one dollar per share and
net tangible assets of $2 million. We might not meet these or other continued
listing requirements in the future. If our common stock were delisted, we may
not be able to satisfy the higher requirements for relisting on either the
Nasdaq National or Nasdaq SmallCap Market. If we were delisted, investors would
find it more difficult to buy, sell or quote our common stock.
OUR EXISTING DEBT BURDEN IS SUBSTANTIAL. At September 30, 1999, we had the
following outstanding borrowings:
(1) $2.4 million under a bank revolving loan, which expires on September
30, 2000; and
(2) $1.5 million under a bank term loan, which expires on March 18, 2001.
We were not in compliance with certain covenants associated with these
loans as of September 30, 1999. The bank has waived this non-compliance only
through this date.
OWNERSHIP OF OUR EQUITY HAS BECOME CONCENTRATED as a result of the Vertex
note conversion and raising of additional equity. According to Vertex filings
with the SEC, if Vertex converted its preferred shares and exercised all of its
warrants it would own approximately 21% of our common stock (assuming 10,151,277
outstanding shares prior to such conversion and exercise and no other
conversions or exercises). Affiliates of Vertex own 5.8% of our common stock
(assuming 10,151,277 shares outstanding). Another affiliate of Vertex invested
approximately $1,000,000 in preferred shares and warrants in July 1999. If all
of these preferred shares were converted and all warrants exercised, this Vertex
affiliate would own 6.5% of our common shares (assuming 10,151,277 shares
outstanding and no other conversions or exercises) based on recent filings by
Vertex and its affiliates with the SEC. Additionally, another investor in the
preferred stock was introduced to us by Vertex. Its 176,056 shares of preferred
stock and equal number of warrants would convert into 528,168 shares of our
common stock (or 4.9% of our common shares assuming 10,151,277 shares
outstanding prior to exercise or conversion and no other exercises or
conversions). Prior to conversion and exercise, each preferred share votes like
one common share and warrants do not vote. Therefore, prior to conversion Vertex
and the security holders referred to above hold securities representing 16.4% of
the total votes (assuming 10,151,277 outstanding shares). Vertex has not
expressed interest in controlling the Company but is in a position to influence
its management. Vertex and the other preferred stock holders have agreed not to
acquire more than an additional 100,000 shares without our approval while such
investor owns more than 5% of the Company. Such concentration of ownership may
adversely effect the liquidity of the common stock.
OUR REVENUE LEVELS ARE UNPREDICTABLE. Our revenue has fluctuated
dramatically on a quarterly and annual basis, and we expect this trend to
continue. These dramatic fluctuations result from a number of factors,
including:
(1) the lengthy and highly consultative sales cycle associated with our
products
(2) uncertainty regarding the timing and scope of customer deployment
schedules of applications based on the Versant ODBMS
(3) fluctuations in domestic and foreign demand for our products and
services, particularly in the telecommunications and financial
services markets
(4) the impact of new product introductions by us and our competitors
(5) our unwillingness to significantly lower prices to meet prices set by
our competitors
(6) the effect of publications of opinions about us and our competitors
and their respective products
(7) customer order deferrals in anticipation of product enhancements or
new product offerings by us or our competitors
(8) potential customers unwillingness to invest in our products given our
financial instability
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A number of other factors make it impossible to predict our operating
results for any period prior to the end of that period. We ship our software to
a customer at receipt of the customer's order, and consequently, we have little
order backlog. As a result, license revenue in any quarter is substantially
dependent on orders booked and shipped in that quarter. Historically, we record
most of our revenue and book most of our orders in the third month of each
quarter, with a concentration of such revenue and orders in the last few days of
the quarter. We expect this trend to continue. Many of these factors are beyond
our control.
WE MAY NOT BE ABLE TO MANAGE COSTS GIVEN THE UNPREDICTABILITY OF OUR
REVENUE. We expended significant resources in 1997 and 1998 to build our
infrastructure and hire personnel, before reductions, particularly in the
services and sales and marketing sectors, in expectation of higher revenue
growth than actually occurred. Although we have restructured our operations to
reduce operating expenses, we continue to plan for revenue growth in 1999
compared to 1998. Consequently, we will continue to incur a relatively high
level of fixed expenses. Although, in January 1999, we reduced significantly our
worldwide headcount and implemented controls on spending in order to achieve
expense reductions, if expense controls are not achieved or planned revenue
growth does not materialize, our business, financial condition and results of
operations will be materially harmed.
WE RELY ON TELECOMMUNICATIONS AND FINANCIAL SERVICES MARKETS CHARACTERIZED
BY COMPLEXITY AND INTENSE COMPETITION. Historically, we have been highly
dependent upon the telecommunications industry and are becoming increasingly
dependent upon the financial services market. Our success in the
telecommunications and financial service markets is dependent, in part, on our
ability to compete with alternative technology providers and on whether our
customers and potential customers believe we have the expertise necessary to
provide effective solutions in these markets. If these conditions, among others,
are not satisfied, we may not be successful in generating additional
opportunities in these markets. The need for and type of applications and
commercial products for the telecommunications and financial services markets is
continuing to develop, is rapidly changing, and is characterized by an
increasing number of new entrants whose products may compete with those of ours.
As a result, we cannot predict the future growth of these markets, and demand
for object-oriented databases in these markets may not develop or be
sustainable. We also may not be successful in attaining a significant share of
these markets. In addition, organizations in these markets generally develop
sophisticated and complex applications that require substantial customization of
our products. Although we seek to generate consulting revenue in connection with
these customization efforts, we have offered, and may, under certain
circumstances continue to offer, free or reduced price consulting. This practice
has impacted, and will continue to impact, our service margins and will require
that we maintain a highly skilled service infrastructure with specific expertise
in these markets.
OUR PRODUCTS HAVE A LENGTHY SALES CYCLE. Our sales cycle, which varies
substantially from customer to customer, often exceeds nine months and can
sometimes extend to a year or more. Due in part to the strategic nature of our
products and associated expenditures, potential customers are typically cautious
in making product acquisition decisions. The decision to license our products
generally requires us to provide a significant level of education to prospective
customers regarding the uses and benefits of our products, and we must
frequently commit no-fee pre-sales support resources, such as assistance in
performing bench marking and application prototype development. Because of the
lengthy sales cycle and the relatively large average dollar size of individual
licenses, a lost or delayed sale could have a significant impact on our
operating results for a particular period. Although we seek to develop
relationships with best-of-class value-added resellers in the telecommunications
and financial services markets in order to strengthen our indirect sales
activity, we have not yet entered into such relationships and may not be
successful in developing such relationships. In addition, our value-added
resellers may be subject to a lengthy sales cycle for our products.
OUR CUSTOMER CONCENTRATION INCREASES THE POTENTIAL VOLATILITY OF OUR
OPERATING RESULTS. Notwithstanding our recent efforts to develop new customers,
typically through the use of relatively small licenses, a significant portion of
our total revenue has been, and we believe will continue to be, derived from a
limited number of orders placed by large organizations. The timing of such
orders and their fulfillment has caused, and is likely to cause in the future,
material fluctuations in our operating results, particularly on a quarterly
basis. In addition, our major customers tend to change from year to year. The
loss of any one or more of our major customers or our inability to replace a
customer that has become less significant in a given year with a different major
customer could have a material adverse effect on our business.
WE DEPEND ON OUR INTERNATIONAL OPERATIONS. A significant portion of our
revenue is derived from customers located outside the United States. This
requires that we operate internationally and maintain a significant presence in
international markets. However, our international operations are subject to a
number of risks. These risks include:
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(1) longer receivable collection periods
(2) changes in regulatory requirements
(3) dependence on independent resellers
(4) multiple and conflicting regulations and technology standards
(5) import and export restrictions and tariffs
(6) difficulties and costs of staffing and managing foreign operations
(7) potentially adverse tax consequences
(8) foreign exchange fluctuations
(9) the burdens of complying with a variety of foreign laws
(10) the impact of business cycles and economic instability outside the
United States, including the current economic instability in Asia.
WE MUST DEFEND AGAINST SECURITIES LITIGATION. We and certain of our present
and former officers and directors were named as defendants in four class action
lawsuits filed in the United States District Court for the Northern District of
California, filed on January 26, 1998, February 5, 1998, March 11, 1998 and
March 18, 1998, respectively. On June 19, 1998, a consolidated amended complaint
was filed in this court by the lead plaintiff named by the court. The amended
complaint alleges violations of Sections 10(b) and 20(a) of the Securities
Exchange Act, and Securities and Exchange Commission Rule 10b-5 promulgated
under the Exchange Act, in connection with public statements about our expected
financial performance. The complaint seeks an unspecified amount of damages. We
vigorously deny the plaintiff's claims and have moved to dismiss the
allegations. The plaintiff has filed a response to our motion to dismiss, and we
have filed an opposition to plaintiff's response. The motion to dismiss was
submitted to the court for consideration on November 13, 1998, and the court has
not yet issued a decision. Securities litigation can be expensive to defend,
consume significant amounts of management time and result in adverse judgments
or settlements that could have a material adverse effect on our results of
operations and financial condition.
OUR STOCK PRICE IS VOLATILE. Our revenue, operating results and stock price
have been and may continue to be subject to significant volatility, particularly
on a quarterly basis. We have previously experienced significant shortfalls in
revenue and earnings from levels expected by securities analysts and investors,
which has had an immediate and significant adverse effect on the trading price
of our common stock. This may occur again in the future. Additionally, as a
significant portion of our revenue often occurs late in the quarter, we may not
learn of revenue shortfalls until late in the quarter, which could result in an
even more immediate and adverse effect on the trading price of our common stock.
OUR BUSINESS MAY BE HARMED BY YEAR 2000 PROBLEMS. We and our customers and
suppliers are aware and concerned about the risks associated with Year 2000
computer issues. If our systems do not recognize the correct date when the year
changes to 2000, there could be a material adverse effect on our operations. We
are at risk from both internal and external areas. We have categorized our risk
into the following categories:
(1) internal systems required to operate our business (e.g. operational,
financial, product development, safety and environmental controls);
(2) external supplier systems that are necessary to support our business
requirements (e.g. raw materials, supplies, shipping and delivery
systems, banking, payroll and government systems); and
(3) product warranty exposure with our customer base.
We are currently evaluating our exposure in all these areas. We have been
reviewing our facility, financial and operating systems to identify and assess
the requirements to bring hardware systems and software applications to Year
2000 compliance. We expect to conclude our estimate of exposure to Year 2000
problems, associated costs and required correction plans by the end of August
1999 and to correct any Year 2000 problems by October 31, 1999. We have not
identified any alternative remediation plans in the event Year 2000 issues can
not be adequately corrected. We will define any alternative plans if and when we
discover systems that can not be made Year 2000 compliant. If implementation of
upgrade or replacement systems is delayed or if significant new non-compliance
issues are discovered, our operations could be materially adversely affected.
We have and will continue to make certain investments in software
applications and systems to ensure that we are Year 2000 compliant with respect
to our internal systems. In particular, our purchase of $9 million of property
and equipment during 1997 and 1998 included substantial investments in
management and information systems designed to be Year 2000 compliant.
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We have contracted with an outside independent consulting firm to provide
internal Year 2000 equipment testing and consulting services to assist us in the
process of defining and implementing a Year 2000 compliance project. This
compliance project includes the following phases:
<TABLE>
<CAPTION>
Expected
completion
Name of phase: Description: Status: date:
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<S> <C> <C> <C>
Awareness and Educate the company on the Year 2000 Completed
Assessment Phase project, the potential problems associated
with this date issue, inventory our systems
and products that require compliance testing.
Testing and Test our systems and products and identify Completed
Validation Phase the non-compliant areas, develop remediation
plans, map the conversion process to correct
non-compliant areas and validate the changes
that need to be made to correct non-compliant
areas.
Implementation and Convert non-compliant areas with compliant Began August November
Certification Phase products (hardware or software), verify that 1999 1999
all intended changes have been made successfully
and that all planned Year 2000 compliance
changes have been made.
Maintenance Phase This phase puts processes and procedures in Begins December
place to minimize the likelihood that Year 1999
2000 compliance problems will be November 1999
reintroduced into the compliant systems and
products.
</TABLE>
Status:
Awareness and Assessment Phase: We have written and published an awareness
statement to educate our employees, vendors and customers about the Year
2000 issues and potential problems associated with the Year 2000 rollover
problem and what effect this will have on our company and customers. We
have published a statement about our products, testing procedures used and
their Y2k compliance. We have published these statements internally to our
employees and management and will be distributing them via our web site
"versant.com" and by mail to certain vendors and customers by the end of
July 1999. We have identified all internal systems (products and software)
that need to be tested for Year 2000 compliance.
Testing and Validation Phase: We have tested our personal computers and
servers used by our information management systems, engineering development
teams and employees to complete their daily work assignments. The results
were 3 personal computers and two servers failed our Year 2000 test. We
intend to replace both servers and the 486 system with existing Y2k
compliant inventory, and upgrade the remaining two with bios upgrades if
possible, or replace same. In the process of testing our internal business
software programs we have determined that certain operating systems and
financial programs need to be upgraded with Y2k patches to be Y2k
compliant. We have budgeted $50,000 for the upgrade process (software and
labor) and plan to complete the upgrades by November 1999. We will be
testing or seeking validation with respect to Year 2000 compliance
regarding external providers for phone service, security service, utility
service, internet service and air conditioning service. We will then
develop remediation plans to correct non-compliant systems.
In addition to the internal testing, evaluation and remediation project, we
will implement a program that will query our suppliers and providers of
third-party technology that may be integrated with our products to determine if
the suppliers operations', products and services are Year 2000 compliant. We
sent these questionnaires to our third party providers and key suppliers at the
end of June 1999 and will conclude our review by the end of December 1999. Where
practical, we will take the necessary actions to reduce our exposure to
suppliers that are not Year 2000 compliant by finding alternative suppliers.
However, there may be critical suppliers that cannot be substituted and this
could have a material adverse effect on our operations.
Despite the foregoing measures, there can be no assurance that Year 2000
problems will not occur and the consequences of any such problems may be
material to our operations or financial results or prospects.
We believe our products are Year 2000 compliant. However, not every
customer situation can be anticipated, especially in areas that involve third
party products. Extensive testing has been performed on our products and
additional testing will continue as we become aware of our customer's Year 2000
needs and issues. We may see an increase in customer demands for warranty
service. This may create additional service costs that can not be recovered. In
addition, if our products are not Year 2000 compliant, we could face litigation
regarding Year 2000 compliance issues.
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The process to insure our systems and our supplier systems are Year 2000
compliant is expected to be significantly completed by December 31, 1999, with
testing to be done through the remainder of 1999. In addition, we could face
reduced demand for our products through 1999 if customers focus on purchasing
solutions to their Year 2000 problems rather than purchasing our products, which
are not designed to solve Year 2000 problems.
Customer's purchasing plans could be affected by the Year 2000 problem if
they need to expend significant resources to correct their existing systems.
This situation may result in reduced funds available to implement solutions
based upon our products. In addition, some customers may defer the license of
our products until after the Year 2000 while they complete remediation and
testing of their current systems to ensure Year 2000 compliance. A decrease in
demand for our products due to customers' Year 2000 issues would seriously harm
our business and results of operations.
RISKS RELATED TO OUR INDUSTRY
WE FACE INTENSE COMPETITION. The market for our products is intensely
competitive. We believe that the primary competitive factors in our market
include:
(1) database performance, including the speed at which operations can be
executed and the ability to support large amounts of different
information
(2) vendor reputation
(3) the ability to handle abstract data types and complex data
relationships
(4) ease of use
(5) database scalability
(6) the reliability, availability and serviceability of the database
(7) compatibility with customers' existing technology platforms
(8) the ease and speed with which applications can be developed
(9) price and
(10) service and support.
Our current and prospective competitors include companies that offer a
variety of database solutions using various technologies including object
database, object-relational database and relational database technologies.
Competitors offering object and object-relational database management systems
include Oracle Corporation, Computer Associates International, Inc., Object
Design, Inc., Informix and its Illustra Information Technologies, Inc.
subsidiary, Objectivity, Inc., Gemstone Systems, Inc., Poet Software
Corporation, ONTOS, Inc. In addition, our products compete with traditional
relational database management systems, many of which have been or are expected
to be modified to incorporate object-oriented interface and other functionality,
and to leverage Java. The principal competitors in the relational database
market are Oracle, Sybase, Informix, IBM and Microsoft. We expect to face
additional competition from other established and emerging companies as the
object database market continues to develop and expand. In 1997, Oracle released
its Oracle8 product, which, with its object option, provides object-relational
database capabilities, and Computer Associates released their Jasmine ODBMS,
which is a pure object-oriented database. Although we believe that the decision
of relational database vendors to pursue object-relational or object-oriented
approaches validates our belief that object-oriented database solutions will be
increasingly demanded by today's business organizations, we are facing
heightened competition. During the last year we have seen a major shift away
from Smalltalk towards JAVA. In addition Versant is used more and more as a
middle tier persistence layer in multi tier applications This brings us in
direct competition with some of the more established companies in these markets.
These are companies like IBM, SUN and BEA selling Java based tools and
solutions. There is also some movement in the market to buy as much middleware
components as possible from one or just a few suppliers. Because we are offering
just a ODBMS for the time being we may not be able to compete in some of these
situations. This could result and would continue to result in fewer customer
orders, price reductions, reduced transaction size, reduced gross margins and
loss of market share, any of which could have a material adverse effect on our
business, operating results and financial condition and on the market price of
our common stock. Due to the introduction by Oracle and Computer Associates of
competing products with lower prices than the Versant ODBMS, we may not be able
to maintain prices for our products at levels that will enable us to market our
products profitably. Any decrease in per unit prices, as a result of competition
or otherwise, could have a material adverse effect on our business, operating
results and financial condition.
In addition our poor financial performance during 1998 may influence
customers to delay orders or cancel projects to wait and see how we are
performing during the next foreseeable future.
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We are also indirectly facing competition from developers of middleware
products that allow users to connect object-oriented applications to existing
legacy data and RDBMSs. To the extent that these products gain market
acceptance, they may reduce the market for the Versant ODBMS for less complex
object-oriented applications.
Many of our competitors, and especially Oracle and Computer Associates,
have longer operating histories, significantly greater financial, technical,
marketing, service and other resources, significantly greater name recognition,
broader product offerings and a larger installed base of customers than ours. In
addition, many of our competitors have well-established relationships with
current and potential customers of ours. As a result, our competitors may be
able to devote greater resources to the development, promotion and sale of their
products, may have more direct access to corporate decision-makers based on
previous relationships and may be able to respond more quickly to new or
emerging technologies and changes in customer requirements. We may not be able
to compete successfully against current or future competitors, and competitive
pressures could have a material adverse effect on our business, operating
results and financial condition.
WE DEPEND ON SUCCESSFUL TECHNOLOGY DEVELOPMENT. We believe that significant
research and development expenditures will be necessary to remain competitive.
While we believe our research and development expenditures will improve the
Versant ODBMS and result in successful peripheral product introductions, due to
the uncertainty of software development projects, these expenditures will not
necessarily result in successful product introductions. Uncertainties impacting
the success of software development project introductions include technical
difficulties, market conditions, competitive products and consumer acceptance of
new products and operating systems. In particular, we note that we have not yet
achieved commercial acceptance for our Versant Multimedia Access product.
We also face certain challenges in integrating third-party technology with
our products. These challenges include the technological challenges of
integration, which may result in development delays, and uncertainty regarding
the economic terms of our relationship with the third-party technology provider,
which may result in delays of the commercial release of new products.
We face further technology development challenges associated with our
acquisition of Soft Mountain. The Soft Mountain R'Net product offering is still
under development, and there is uncertainty in both the timing of the release
and the market acceptance of the product. Soft Mountain's geographic location in
France generates additional management and integration challenges, because our
product development to date has been performed in California and India.
Developing and marketing our new Versant Enterprise Container for Java
Beans creates new challenges for us. This product, which has not yet been
commercially introduced, represents our first attempt to provide solutions to
the application server market. Although we have worked with BEA to develop
technology that will allow the Versant Enterprise Container to support the BEA
WebLogic application server family, undiscovered bugs or errors may exist that
prevent us from achieving the functionality we seek with the Versant Enterprise
Container. In addition, because Java Bean containers are specific to each
application server vendor and no standards have been adopted for such
containers, we may not be able to take advantage of our development work with
the BEA application server family when developing solutions for other
application server vendors. We do not currently have any agreements or
relationships regarding the Versant Enterprise Container with other application
server vendors, and when our new product is introduced, customers will only be
able to use it with BEA application servers.
WE MUST PROTECT OUR INTELLECTUAL PROPERTY. Despite our efforts to protect
our proprietary rights, unauthorized parties may attempt to copy aspects of our
products, obtain or use information that we regard as proprietary or use or make
copies of our products in violation of license agreements. Policing unauthorized
use of our products is difficult. In addition, the laws of many jurisdictions do
not protect our proprietary rights to as great an extent as do the laws of the
United States. Shrink-wrap licenses may be wholly or partially unenforceable
under the laws of certain jurisdictions, and copyright and trade secret
protection for software may be unavailable in certain foreign countries. Our
means of protecting our proprietary rights may not be adequate, and our
competitors may independently develop similar technology.
To date, we have not been notified that our products infringe the
proprietary rights of third parties, but third parties could claim that our
current or future products infringe such rights. We expect that developers of
object-oriented technology will increasingly be subject to infringement claims
as the number of products, competitors and patents in our industry segment
grows. Any such claim, whether meritorious or not, could be time-consuming,
result in costly litigation, cause product shipment delays or require us to
enter into royalty or licensing agreements.
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Such royalty or licensing agreements might not be available on terms acceptable
to us or at all, which could have a material adverse effect upon our business,
operating results and financial condition.
Our future success will depend in part on our ability to integrate our
products with those of vendors providing complementary products. The Versant
ODBMS must be integrated with compilers, development tools, operating systems
and other software and hardware components to produce a complete end-user
solution. We may not receive the support of these third-party vendors, some of
which may compete with us, to integrate our products with the vendors' products.
WE DEPEND ON OUR PERSONNEL FOR WHOM COMPETITION IS INTENSE. Our future
performance depends in significant part upon the continued service of our key
technical, sales and senior management personnel. The loss of the services of
one or more of our key employees could have a material adverse effect on our
business. Our future success also depends on our continuing ability to attract,
train and motivate highly qualified technical, sales and managerial personnel.
Competition for such personnel is intense, especially in Silicon Valley where
our headquarters are located, and we may not be able to attract, train and
motivate such personnel.
RISKS RELATED TO THIS OFFERING
SALES OF THE SHARES INCLUDED IN THIS PROSPECTUS COULD AFFECT OUR STOCK
PRICE. If the selling security holders sell substantial amounts of our common
stock in the public market using this prospectus, the market price of our common
stock could fall.
EXISTING SHAREHOLDERS COULD INCUR DILUTION AS A RESULT OF FUTURE ISSUANCES
OF OUR COMMON STOCK. To the extent the selling security holders exercise
warrants or convert convertible securities into shares of our common stock,
existing shareholders could experience dilution.
THIS PROSPECTUS CONTAINS FORWARD LOOKING STATEMENTS. These statements
defined by federal securities laws usually contain expressions like "believes",
"expects", "intends" and "anticipates" and involve significant uncertainty.
Actual results may differ significantly.
RISKS RELATED TO OTHER OFFERINGS. We are obligated to register 2,663,505
common shares issuable in connection with the preferred stock offering in July
1999 that raised approximately $2.5 million in additional equity funds for the
Company. A separate registration statement was filed by us in September 1999. To
the extent such selling security holders acquire and or sell our common stock,
other shareholders could experience dilution or adverse effects.
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<PAGE> 10
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock by the
selling security holders.
DIVIDEND POLICY
We have never paid any cash dividends on our stock and we anticipate that,
for the foreseeable future, we will continue to retain any earnings for use in
the operation of our business and do not intend to pay dividends.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act of 1933 with respect to the
shares of common stock offered hereby. 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 Securities and
Exchange Commission. For further information with respect to us and the common
stock offered by this prospectus, please refer to the registration statement.
Statements in this prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is made to
the copy of the contract or document filed as an exhibit to the registration
statement. Each such statement is qualified in all respects by such reference.
Copies of the registration statement may be inspected, without charge, at the
offices of the Securities and Exchange Commission, or obtained at prescribed
rates from the Public Reference Section of the Securities and Exchange
Commission at the address set forth below.
We are subject to the informational requirements of the Securities Exchange
Act of 1934, and, in accordance therewith, we file reports, proxy statements and
other information with the Securities and Exchange Commission. Reports, proxy
statements and other information that we have filed can be inspected and copied
at the public reference facilities of the Securities and Exchange Commission
located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain copies of these materials from the Public Reference
Section of the Securities and Exchange Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The public may obtain information on
the operation of the Public Reference Room by calling the Securities and
Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission
also maintains a World Wide Web site that contains reports, proxy and
information statements and other information that is filed electronically with
it. This Web site can be accessed at http://www.sec.gov.
We will furnish without charge to each person to whom a copy of this
prospectus is delivered, upon such person's written or oral request, a copy of
any and all of the information that has been incorporated by reference into this
prospectus, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference as well. Requests for such copies should
be directed to Versant Corporation, 6539 Dumbarton Circle, Fremont, CA 94555,
Attention: Gary Rhea, Vice President and Chief Financial Officer, telephone:
(510) 789-1500.
IN CONNECTION WITH THIS OFFERING, NO PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS. IF
SUCH INFORMATION IS GIVEN OR REPRESENTATIONS MADE, YOU MAY NOT RELY ON SUCH
INFORMATION OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS
IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THOSE REGISTERED HEREBY, NOR IS IT AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SECURITIES WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. YOU MAY NOT IMPLY FROM THE DELIVERY OF THIS PROSPECTUS, NOR FROM ANY
SALE MADE UNDER THIS PROSPECTUS, THAT OUR AFFAIRS ARE UNCHANGED SINCE THE DATE
OF THIS PROSPECTUS OR THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
CORRECT AS OF ANY TIME AFTER THE DATE OF THIS PROSPECTUS.
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<PAGE> 11
The following documents that we have filed with the Securities and Exchange
Commission are incorporated by reference into this prospectus:
o The registration statement on Form S-3 of which this prospectus is a
part, and the exhibits filed and incorporated by reference with the
Form S-3.
o Our Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission for the fiscal year ended December 31, 1998.
o Our Quarterly Report on Form 10-QSB filed with the Securities and
Exchange Commission for the fiscal quarter ended June 30, 1999.
o The description of our common stock contained in our registration
statement on Form 8-A filed with the Securities and Exchange
Commission on May 31, 1996.
o All other documents we file with the Securities and Exchange
Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act on or after the date of this prospectus and
prior to the termination of this offering.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this prospectus to the extent that a statement contained
herein or in any other subsequently filed document that also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus or the
registration statement.
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<PAGE> 12
SELLING SECURITY HOLDERS
Special Situations Fund III LP, Special Situations Cayman LP and Special
Situations Technology Fund LP acquired 700,000 shares of common stock, which
they may offer pursuant to this prospectus on December 28, 1998, when they
provided us with $1,443,750 in a private financing. At that time, these funds
also acquired warrants to purchase 350,000 shares of our common stock, and their
share numbers in the following table include the shares issuable upon exercise
of these warrants. None of these funds has had any position, office or other
material relationship with us within the past three years, except that these
funds collectively own more than 10% of our common stock.
Vertex Technology Fund Ltd. acquired its convertible secured subordinated
promissory note when it provided us with $3.6 million in an October 16, 1998
private financing. This note was converted into 902,946 shares of our preferred
stock in July 1999. This preferred stock is convertible into 1,805,892 shares of
our common stock that Vertex may offer pursuant to this prospectus. An affiliate
of Vertex initially became a shareholder of ours in November 1989 and had a
representative on our board of directors from August 1991 to February 1997. See
also, the Ownership Consolidated Risk Factor. Other affiliates of Vertex
acquired preferred stock and warrants in the $2.5 million offering in July 1999.
the common stock issuable upon conversion of these preferred shares or exercise
of the warrants are to be offered in a separate registration statement.
The former shareholders of Soft Mountain, listed in the table below as Soft
Mountain Selling Security Holders, acquired the shares of our common stock that
they may offer pursuant to this prospectus in connection with our acquisition of
Soft Mountain, when they sold their Soft Mountain securities for our common
stock. None of these security holders has had any position, office or other
material relationship with us within the past three years.
The following table sets forth certain information known to us with respect
to the beneficial ownership of the our Common Stock as of June 30, 1999 by each
of the selling security holders named below. The following table assumes each
selling security holder sells all of the shares offered hereby. The selling
security holders may from time to time offer and sell any or all of the shares
pursuant to this prospectus. Because the selling security holders are not
obligated to sell shares, and because selling security holders may also acquire
publicly traded shares of our common stock, we cannot estimate how many shares
each selling security holder will beneficially own after this offering.
Therefore, the number of shares listed in the column entitled shares
beneficially owned after offering reflects only the current share ownership of
the selling security holders. We may update or supplement this prospectus from
time to time to update the disclosure set forth herein.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to Offering Shares Owned After Offering
------------------------ Being --------------------
Name Number Percent(1) Offered Number Percent
- ---- -------- ---------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Special Situations Fund III LP(2) 896,753 7.3% 708,750 188,003 1.9%
Special Situations Cayman LP(2) 295,050 2.4 236,250 58,000 *
Special Situations Technology Fund LP(2) 166,000 1.3 105,000 51,000 *
Vertex Technology Fund Ltd.(3) 1,805,892 14.6 1,805,892 0
SOFT MOUNTAIN SELLING SECURITY HOLDERS
SC Finoris 188,408 1.5 188,408 0
Trinova 51,208 * 51,208 0
Rhone-Alpes Creation 35,860 * 35,860 0
Guillaume Doumenc 110 * 110 0
</TABLE>
--------------------
* Less than 1%.
(1) Based on 10,151,277 shares of our common stock outstanding as of July 12,
1999, plus 1,805,892 additional shares after the conversion of Vertex's
preferred shares; 300,000 additional shares after exercise of Special
Situation's warrants; and 44,108 additional shares if other adjustments are
necessary (a total of 12,331,277).
(2) Includes warrants to purchase 236,250 shares, 78,750 shares and 35,000
shares held by Special Situations Fund III LP, Special Situations Cayman LP
and Special Situations Technology Fund. This information is derived from a
Schedule 13G/A filed by the Special Situations Funds with the Securities
and Exchange Commission on January 4, 1999. As of the date of this
prospectus, the Special Situations Funds may have already sold a
substantial portion of these shares pursuant to this offering.
(3) Represents 1,805,892 shares issuable upon conversion of Vertex's preferred
stock. Does not include 596,367 shares currently held by affiliates of
Vertex, common shares issuable upon exercise of Vertex' warrant for 902,946
shares or common shares issuable to Vertex affiliates in connection with
the preferred stock offering in July 1999.
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<PAGE> 13
PLAN OF DISTRIBUTION
In connection with our acquisition of Soft Mountain, we and the Soft
Mountain selling shareholders entered into a share purchase agreement. In
connection with the financings provided by Vertex and the Special Situation
Funds, we entered into registration rights agreements. The registration
statement of which this prospectus forms a part has been filed pursuant to the
Soft Mountain share purchase agreement and the registration rights agreements.
To our knowledge, none of the selling security holders have entered into any
agreement, arrangement or understanding with any particular broker or market
maker with respect to the shares offered hereby, nor do we know the identity of
the brokers or market makers that will participate in the offering.
The shares of common stock covered by this prospectus may be offered and
sold from time to time by the selling security holders. The selling security
holders will act independently from us in making decisions with respect to the
timing, manner and size of each sale. The selling security holders may not sell
any of the shares that are subject to this prospectus, and selling security
holders could sell their shares in a private transaction or other transaction
that is exempt from the registration requirements of the Securities Act. We have
been advised by the selling security holders that they have not, as of the date
hereof, entered into any arrangement with a broker-dealer for the sale of
shares. In effecting sales, broker-dealers engaged by the selling security
holders may arrange for other broker-dealers to participate. Broker-dealers will
receive commissions or discounts from the selling security holders in amounts to
be negotiated immediately prior to the sale.
In offering the shares, the selling security holders and any broker-dealers
who execute sales for the selling security holders may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. Any profits realized by the selling security holders and the compensation
of a broker-dealer may be deemed to be underwriting discounts and commissions.
In addition, any securities covered by this prospectus that qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather
than pursuant to this prospectus.
The selling security holders have advised us that, during such time as they
may be engaged in a distribution of the shares of common stock included herein,
they will comply with Rules 10b-6 and 10b-7 under the Exchange Act. In
connection with these rules, the selling security holders have agreed not to
engage in any stabilization activity in connection with any of our securities,
to furnish copies of this prospectus to each broker-dealer through which the
shares of common stock included in this prospectus may be offered, and not to
bid for or purchase any of our securities or attempt to induce any person to
purchase any of our securities except as permitted under the Exchange Act. The
selling security holders have also agreed to inform us and broker-dealers
through whom sales may be made under this prospectus when the distribution of
the shares is completed.
We will bear the costs, expenses and fees in connection with the
registration of the shares of common stock offered by this prospectus.
Commissions and discounts, if any, attributable to the sales of shares of common
stock using this prospectus will be borne by the selling security holders. The
selling security holders may agree to indemnify any broker-dealer or agent that
participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act.
We have advised the selling security holders that the anti-manipulation
rules under the Exchange Act may apply to sales of shares of common stock in the
market and to the activities of selling security holders. Each selling security
holder has advised us that during such time as it may be engaged in the attempt
to sell shares of common stock included in this prospectus, it will:
o not engage in any stabilization activity in connection with any of our
securities;
o not bid for or purchase any of our securities or any rights to acquire
our securities, or attempt to induce any person to purchase any of our
securities or rights to acquire our securities, other than as
permitted under the Exchange Act;
o not effect any sale or distribution of the shares of common stock
until after this prospectus has been appropriately amended or
supplemented, if required, to set forth the terms thereof; and
o effect all sales of shares of common stock in broker's transactions
through broker-dealers acting as agents, in transactions directly with
market makers or in privately negotiated transactions where no broker
or other third party, other than the purchaser, is involved.
Pursuant to the Soft Mountain share purchase agreement and the registration
rights agreements, no selling security holder may sell any of the shares of
common stock offered using this prospectus in the event and during
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<PAGE> 14
such period as we determine, based upon the advice of outside counsel, that
unforeseen circumstances, including pending negotiations relating to, or the
consummation of, a transaction, would require additional disclosure of material
information by us in the registration statement the confidentiality of which we
have a bona fide business purpose to preserve or which unforeseen circumstances
would render us unable to comply with Securities and Exchange Commission
requirements. Such suspension shall exist for only so long as any such
suspension exists for other similarly restricted Versant shareholders.
Each selling security holder has agreed that it will not effect any sales
of the shares offered hereby any time after he or it has received notice from us
to suspend sales as a result of a stop order or the occurrence or existence of
any suspension event or so that we may correct or update the registration
statement.
This offering will terminate as to the Special Situations Funds on December
28, 2002 or the date on which all shares offered have been sold by the Special
Situations Funds or are eligible for sale under Rule 144(k) of the Securities
Act. This offering will terminate as to Vertex on October 15, 2001 or the date
on which all shares offered have been sold by Vertex or are eligible for sale
under Rule 144(k) of the Securities Act. This offering will terminate as to each
Soft Mountain selling security holder on the earlier of one year after the date
of this prospectus or the date on which all shares offered have been sold by the
Soft Mountain selling security holders.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Fenwick & West LLP, Two Palo Alto Square,
Suite 800, Palo Alto, California 94306.
EXPERTS
The financial statements and schedule incorporated by reference in this
registration statement on Form S-3 have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference in reliance upon the authority of
said firm as experts in giving said reports. Reference is made to said report,
which includes an explanatory paragraph with respect to the uncertainty
regarding the Company's ability to continue as a going concern as discussed in
Note 1 to the financial statements.
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<PAGE> 15
================================================================================
VERSANT CORPORATION
3,175,586 Shares of
Common Stock
--------------------
PROSPECTUS
--------------------
IN CONNECTION WITH THIS OFFERING, NO PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS. IF
SUCH INFORMATION IS GIVEN OR REPRESENTATIONS MADE, YOU MAY NOT RELY ON SUCH
INFORMATION OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS
IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THOSE REGISTERED HEREBY, NOR IS IT AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SECURITIES WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. YOU MAY NOT IMPLY FROM THE DELIVERY OF THIS PROSPECTUS, NOR FROM ANY
SALE MADE UNDER THIS PROSPECTUS, THAT OUR AFFAIRS ARE UNCHANGED SINCE THE DATE
OF THIS PROSPECTUS OR THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
CORRECT AS OF ANY TIME AFTER THE DATE OF THIS PROSPECTUS.
================================================================================
