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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION JULY 8, 1998
REGISTRATION NO.333-57181
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
INTRANET SOLUTIONS, INC.
(Exact name of registrant as specified in charter)
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<S> <C> <C>
MINNESOTA 7373 41-1652566
(State or other jurisdiction (Primary Standard Industrial (I.R.S. employer
of incorporation or organization) Classification Code Number) identification number)
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9625 WEST 76TH STREET, SUITE 150
MINNEAPOLIS, MINNESOTA 55344
(612) 903-2000
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
COPY TO:
PHILIP J. TILTON, ESQ.
MR. ROBERT F. OLSON MASLON EDELMAN BORMAN & BRAND, LLP
INTRANET SOLUTIONS, INC. 3300 NORWEST CENTER
9625 WEST 76TH STREET, SUITE 150 MINNEAPOLIS, MINNESOTA 55402-4140
MINNEAPOLIS, MINNESOTA 55344 (612) 672-8200
(612) 903-2000
APPROXIMATE DATE OF THE COMMENCEMENT OF PROPOSED DISTRIBUTION: From time to time
after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE PRICE(3) REGISTRATION FEE
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common stock, par value
$.01 per share 1,611,000(1) $ 4.625 $ 7,450,875.00 $ 2,525.72
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common stock, par value
$.01 per share 334,900(2) $ 4.625 $ 1,548,912.50 $ 525.06
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(1) Represents the maximum of 1,611,000 shares of common stock issuable upon the
conversion of Series B Convertible Preferred Stock (the "Preferred Stock") at
variable conversion prices. Pursuant to Rule 416 of the Securities Act of 1933,
as amended (the "Securities Act") there are also registered hereby an
indeterminate number of shares of Common Stock that may become issuable by
reason of anti-dilution provisions contained in the certificate of designation
governing the Preferred Stock.
(2) Represents shares of common stock issuable upon the exercise of outstanding
warrants.
(3) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 of the Securities Act based upon a $4.625 per share
average of high and low sales prices of the common stock on the Nasdaq SmallCap
Market on June 15, 1998.
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these 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, DATED JULY 8, 1998
PROSPECTUS
INTRANET SOLUTIONS, INC.
1,945,900 SHARES OF COMMON STOCK
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All of the shares of common stock of IntraNet Solutions, Inc. (the
"Company") offered hereby are issuable upon conversion of Series B Convertible
Preferred Stock (the "Preferred Stock") and upon exercise of warrants (the
"Warrants") to purchase up to 334,900 shares of the Company's common stock (the
"Common Stock") are being sold by certain shareholders of the Company (the
"Selling Shareholders"). This Prospectus also relates, pursuant to Rule 416 of
the Securities Act, to the offer and resale by Selling Shareholders of an
indeterminate number of shares of Common Stock that may become issuable by
reason of anti-dilution provisions contained in the certificate of designation
governing the Preferred Stock. Each share of Preferred Stock is convertible into
shares of the Company's Common Stock, at a conversion rate equal to the quotient
derived by dividing (A) the sum of (i) the stated value of $10,000 and (ii)
accrued but unpaid dividends by (B) the lower of (i) $7.56 or (ii) 84 percent of
the average closing bid price of the Common Stock for the five day period ending
on the date of conversion. Preferred Stock not converted three years after the
date of issuance will be automatically converted into shares of Common Stock,
subject to an aggregate conversion limit of 1,611,000 shares. The Company will
not receive any of the proceeds for the sale of shares by the Selling
Shareholders.
The Common Stock is listed on the Nasdaq SmallCap Market under the
symbol "INRS." On July 7, 1998, the last sale price for the Common Stock as
reported on the Nasdaq SmallCap Market was 5.25.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DESCRIPTION OF CERTAIN
FACTORS WHICH SHOULD BE CONSIDERED BY INVESTORS BEFORE PURCHASING 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 July 8, 1998.
ADDITIONAL INFORMATION
This Prospectus is part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") which the Company has filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act relating to the
securities 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 Commission. For
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further information, reference is made to the Registration Statement. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to herein are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements and other
information with the Commission. Such reports, proxy and information statements
and other information as well as the Registration Statement and Exhibits of
which this Prospectus is a part filed by the Company may be inspected and copied
at the public reference facilities of the Commission, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549, as well as at the following
Regional Offices: 7 World Trade Center, 13th Floor, New York, New York 10048 and
500 West Madison Street--Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Commission by mail at prescribed rates.
Requests should be directed to the Commission's Public Reference Section, Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549. Material
filed by the Company can also be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street N.W., Washington, D.C.
20006. The Company is an electronic filer with the Commission pursuant to and
within the meaning of, Rules 101 and 901 of Regulation S-T. The Commission
maintains a site on the World Wide Web that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's site is :
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference and made a part hereof:
(i) the Company's Annual Report on Form 10-KSB for the fiscal year
ended March 31, 1998; and
(ii) the description of the Company's Common Stock included in its
Registration Statement on Form SB-2 (Registration No. 333-14175) under the
caption "Description of Securities."
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the date of this
Prospectus and prior to the termination of the offering described herein, shall
be deemed to be incorporated by reference in this Prospectus from the respective
dates those documents are filed. 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
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Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus has been delivered, on the written or oral request of such
person, a copy of any or all of the documents referred to above which have been,
or may be, incorporated in this Prospectus by reference, other than exhibits to
such documents. Request for such copies should be directed to Mr. Jeffrey
Sjobeck, IntraNet Solutions, Inc., 9625 West 76th Street, Suite 150,
Minneapolis, Minnesota 55344.
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RISK FACTORS
Each prospective investor should carefully consider the following
factors, among others, prior to purchasing any of the securities offered hereby.
History of Operating Losses and Accumulated Deficit; Anticipated Future
Losses; Limited Operating History. The Company incurred a loss attributable to
common shareholders of $5,319,861 for the year ended March 31, 1998 and a net
loss of $3,748,464 for the year ended March 31, 1997. The Company had an
accumulated deficit of $9,064,694 at March 31, 1998. The Company intends to
continue to make expenditures related to new product introductions, marketing,
research and development, and administrative infrastructure over the near term.
The likelihood of the Company's success must be considered in light of
the problems, expenses, difficulties, complications and delays frequently
encountered in connection with the establishment of any business. There is no
assurance that the Company can operate profitably or that it will successfully
implement its expansion plans. Additionally, the Company has only a limited
operating history upon which to base an evaluation of its current principal
business and prospects. Operating results for future periods are subject to
numerous uncertainties, and there can be no assurance that the Company will
achieve or sustain profitability on an annual or quarterly basis. The Company's
prospects must be considered in light of the risks encountered by businesses in
the early stage of development, particularly businesses in new and rapidly
evolving markets. Future operating results will depend upon many factors,
including the demand for the Company's products, the level of product and price
competition, the ability of the Company to develop and market new products and
product enhancements, the growth of activity on the Internet, the World Wide Web
and private intranet networks, the success of the Company in attracting and
retaining motivated and qualified personnel, the ability of the Company to
control its costs and general economic conditions. There can be no assurance
that the Company will be successful in addressing such risks.
Significant Capital Requirements; Need for Additional Financing. The
Company's capital requirements in connection with its development and marketing
activities have been and will continue to be significant. The Company has been
dependent upon the proceeds from sales of its securities, as well as various
private loans, to fund its development and marketing activities. There can be no
assurance that such additional funding will be available on terms attractive to
the Company, or at all. Any additional equity financings may be dilutive to
shareholders, and additional debt financing, if available, may involve
restrictive covenants. Collaborative arrangements may require the Company to
relinquish rights to certain of its technologies, products or marketing
territories. In the event that the proceeds of the offering and cash flow prove
to be insufficient to fund operations (due to a change in the Company's plans or
a change or inaccuracy in its assumptions or as a result of unanticipated
expenses, technical difficulties, problems or otherwise), the Company would be
required to seek additional financing sooner than currently anticipated. The
Company has no current arrangement with respect to, or sources of, additional
financing. The inability to obtain additional financing when needed, would have
a material adverse effect on the Company.
Uncertainty of Future Operating Results; Fluctuations in Future
Operating Results. Prior growth rates in the Company's revenue and operating
results are not necessarily indicative of future growth, if any, or of future
operating results. The Company's future operating results may vary substantially
from quarter to quarter and will depend on many factors, including the level of
sales of its proprietary software products, and continued expansion of the
market for corporate intranets. At its current stage of operations, the
Company's quarterly revenues and results of operations may be
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materially affected by the timing of the development, introduction and market
acceptance of the Company's and its competitors' products. Product development
and marketing costs are often incurred in periods before any revenues are
recognized from the sales of products. Operating expenses are higher during
periods in which such product development costs are incurred and marketing
efforts are commenced. In addition, the timing of the Company's receipt of
significant contracts could add to quarter to quarter variation in operating
results. Due to these and other factors, including the general economy, stock
market conditions and announcements by the Company or its competitors, the
market price of the securities offered hereby may be highly volatile.
Intense Competition. The markets for business application software and
computer software generally are intensely competitive. The Company faces
competition from a variety of software vendors, most of whom have substantially
greater financial, technical and marketing resources than the Company, and many
of the Company's competitors currently marketing products in the document
management market are more established than the Company and have the benefits of
pre-existing relationships with potential customers and greater name recognition
than the Company. The Company also faces indirect competition from other systems
integrators and value added resellers. The Company's competitors could introduce
products with more features and lower prices than the Company's products, or
which render the Company's products obsolete. These companies could also bundle
existing or new products with other more established products in order to
compete with the Company. Although the Company believes its product features and
pricing enable it to compete effectively with respect to such factors, there can
be no assurance that the Company will have the financial resources, technical
expertise or marketing, distribution or support capabilities to compete
successfully in the future.
Emerging Markets; Dependence Upon Continued Market Expansion. The
continued expansion of the Company's business is generally dependent on the
continued expansion of the markets for which its products were developed, and
specifically dependent upon the continued growth of activity on the Internet,
the Web and private intranet networks. The intranet market is a relatively new
market and is intensely competitive, highly fragmented and subject to change. As
such, the Company's success will continue to be dependent upon a continuation of
the trend toward network-based computing environments and the continued
willingness of large businesses to reengineer the processes they employ to
create, store, manage and distribute data. Any factors which have an adverse
impact on the continued expansion of these markets generally could have a
material adverse impact on the Company.
Management of Rapid Growth. The Company has experienced rapid growth in
revenues, personnel, research and development activities and the general
expansion of its business. In addition, the Company's markets have evolved and
continue to evolve at a rapid pace. The Company believes that continued growth
in the number and breadth of its product lines and services and in its personnel
will be required to maintain its competitive position. The Company's growth,
coupled with the rapid evolution of its markets, has placed and will continue to
place significant strains on its administrative operations and financial
resources and will increase the demands placed on its internal systems,
procedures and controls. The Company's ability to support, manage and control
its continued growth is also dependent upon, among other things, its ability to
train, supervise and manage increased personnel. There can be no assurance that
the Company's personnel, procedures, staff, internal controls or systems will be
adequate to support such growth or that management will be able to achieve the
rapid, effective execution of the product and business initiatives necessary to
successfully penetrate the markets for the Company's products and services. If
the Company is unable to manage future growth effectively, the Company's
business, operating results and financial condition will be materially adversely
affected.
Dependence on Narrow Product Line; Technology Risks; Risk of Market
Acceptance. To date, the Company has marketed a limited line of its proprietary
software products. The Company's future
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success will depend, to a large extent, on its ability to increase sales from
existing products and derive sales from new products. There can be no assurance
that the Company will be able to further penetrate the market with its existing
products or introduce and gain acceptance of its new products. The market for
Internet software products is highly competitive and characterized by rapid
innovation and technological change. The Company's products were specifically
designed to meet the needs of the document management market, but other
companies have also introduced or announced the development of products designed
to address the same markets as the Company's products. In addition,
technological advances that would make the Company's products less attractive to
current and potential customers could adversely impact the business of the
Company. The Company's plans with respect to the development of new products are
subject to the risks inherent in the development and marketing of complex
software products, including the risks that the release of the product may be
delayed, errors may be found in the product after its release despite extensive
testing, and discovered errors may not be corrected in a timely manner. Further,
the commercial success of the Company's products will depend on the willingness
of potential customers to perform and accept the use of the Company's products
to create, manage and distribute unstructured business-critical data.
Dependence on Development of New Products. The Company's future success
is dependent upon its continued introduction of new software products and its
ability to develop enhancements and upgrades to its existing product line. The
Company devotes significant resources to research and development and believes
it will have sufficient resources to support its research and development
efforts; however, the development of new, technologically advanced products is a
complex and uncertain process requiring high levels of innovation, as well as
the accurate anticipation of technological and market trends. Delays in the
introduction or shipment of new or enhanced products, the inability of such
products to gain market acceptance or problems associated with new or enhanced
products could adversely affect the Company's operating results. The market for
the Company's products is characterized by rapidly changing technology, frequent
new product introductions and product enhancement and evolving industry
standards. The introduction or enhancement of products embodying new technology
or the emergence of new industry standards could render the Company's current
products, or any other products the Company may develop in the future, obsolete
and unmarketable. The Company's ability to anticipate changes in technology,
products and industry standards and to successfully develop and introduce new
and enhanced products on a timely basis will be a significant factor in the
Company's ability to grow and remain competitive. There can be no assurance that
the Company will be successful in introducing new products to respond to
emerging industry trends, and there can be no assurance that the level of
research and development expenses necessary for the Company to remain
competitive will be as currently anticipated or that the Company's revenues will
be sufficient to cover its research and development costs.
Dependence Upon Proprietary Technology; Risk of Infringement. The
Company's success is heavily dependent upon proprietary technology. The Company
has no patents or pending patent applications. In the absence of significant
patent or copyright protection, the Company may be vulnerable to competitors who
attempt to develop functionally equivalent products. Although the Company
believes that it has all rights necessary to market its products without
infringing upon any patents, copyrights or trademarks held by others, there can
be no assurance that conflicting patent, copyright or trademark rights do not
exist. There can be no assurance that third parties will not claim infringement
by the Company with respect to its current or future products. The Company
expects that software product developers will increasingly be subject to
infringement claims as the number of products and competitors in the Company's
industry segment grows and the functionality of products in different industry
segments overlaps. Any such claims, with or without merit, could be
time-consuming, result in costly litigation, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company or at all, which would have a material adverse effect upon the
Company's business, operating results and financial condition. The Company
relies upon
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trade secret protection, confidentiality procedures and contractual provisions
to protect its proprietary information. There can be no assurance that others
will not independently develop substantially equivalent proprietary information
and techniques or otherwise gain access to the Company's trade secrets or
disclose such technology, or that the Company can meaningfully protect its trade
secrets. The Company has applied for trademark registration for the following
marks: Intra.doc!(TM) , INTRANET SOLUTIONS, DOCUMENT REFINERY, WEB REFINERY, and
WEB VAULT. There can be no assurance that any trademarks which have been applied
for but are not yet issued will be issued. In the absence of trademark
protection, the Company may be unable to take advantage of the brand name
recognition it is attempting to build. Further, even if all trademarks applied
for are issued, there can be no assurance that such trademarks will prove
valuable to the Company.
Dependence Upon Key Vendor Relationships. The Company is materially
dependent on Sun Microsystems, Inc. for the supply of hardware products sold as
part of its systems. Any disruption in the relationship between the Company and
Sun Microsystems, Inc. would have an immediate and material adverse impact on
the Company. Although the Company believes that secondary sources are currently
available for similar hardware products, there can be no assurance that suitable
alternative vendor relationships could be established in a timely manner, if at
all. The Company purchased approximately 54%, 68% and 67% of its total product
resale requirements from Sun Microsystems, Inc. in each of the fiscal years
ended 1995, 1996 and 1997, respectively.
Dependence on Key Personnel; Need for Additional Employees. The Company
is currently greatly dependent on the personal knowledge and experience of
Messrs. Olson and Sjobeck. The Company believes that its senior management team
has knowledge which, due to the Company's relatively small size, is personal to
such individuals and has not been institutionalized. As such, the loss of any of
these key personnel could be detrimental to the Company. There can be no
assurance that the loss of the services of Mr. Olson or any of its executive
officers or other key employees would not have a material adverse effect on the
Company. To avoid the negative impact which the loss of a senior manager could
have on the Company, as well as to achieve its business plan, the Company must
hire additional employees at various operational levels. The future development
and success of the Company will depend in part upon its ability to attract and
retain additional personnel with the highly specialized expertise necessary to
provide, engineer, design and support the integration of such products and
services. There can be no assurance that the Company will be able to attract or
retain such personnel or that the hiring and retention of such personnel will
result in the institutionalization of vital information.
Product Defects and Product Liability. The Company's software products
are complex and sophisticated and could from time to time contain design defects
or software errors that could be difficult to detect and correct. Errors, bugs
or viruses may result in the loss of or the delay in market acceptance or the
loss of customer data. The Company's license agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product liability claims; however, it is possible that the limitation
of liability provisions contained in the Company's license agreements may not be
effective under the laws of certain jurisdictions. Although the Company has not
experienced any material adverse effect resulting from any software defects or
errors, there can be no assurance that despite testing by the Company and its
customers, errors will not be found in new products which could result in a
delay or an inability to achieve market acceptance and thus could have a
material adverse impact upon the Company's business, operating results or
financial condition.
Former Shareholder Lien. On July 31, 1995, Technical Publishing
Solutions, Inc., a predecessor in interest to the Company ("TPSI") redeemed 50
percent of the outstanding shares of its common stock from a former shareholder
and director for an aggregate redemption price of $200,000. TPSI paid $150,000
of the purchase price in cash and delivered a the balance of the redemption
price in the form of a promissory note with a face amount of $50,000. The note
requires annual principal
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payments of approximately $10,000 and matures in August 2000. TPSI and the
former shareholder also entered into consulting and non-competition agreements
pursuant to which the Company is obligated to make payments of $10,000 per month
through August 2000. To secure the purchase price of the redeemed shares and
TPSI's monetary obligations under the aforementioned agreements, TPSI granted
the former shareholder a security interest in the redeemed shares. As a result
of the 1996 merger of TPSI with and into the Company, the Company succeeded to
the obligations of TPSI under these agreements. In the event the Company fails
to satisfy its monetary obligations under these agreements, the former
shareholder may be able to assert a claim of ownership interest in the Company.
If the former shareholder is successful in this regard, the value of the shares
of Common Stock may be reduced substantially.
Control by Founder. Mr. Robert F. Olson, the Company's President and
Chief Executive Officer, holds approximately 47 percent of the Company's
outstanding Common Stock and will hold approximately 44 percent of the Company's
outstanding Common Stock, upon the conversion of all shares of Preferred Stock
into an aggregate of 571,428 shares of Common Stock (based on an assumed
five-day average closing bid price of the Company's Common Stock of $6.25), and
without giving effect to the exercisability of the Warrants. As such, Mr. Olson
is able to exercise control over the business policies and affairs of the
Company. Additionally, directors, executive officers and principal shareholders
of the Company, and certain of their affiliates, will beneficially own
approximately 48 percent of the Company's outstanding Common Stock upon the
conversion of all shares of Preferred Stock on the basis described above.
Accordingly, these persons, individually and as a group, effectively control the
Company and can direct its affairs and business, including all determinations
with respect to the acquisition or disposition of assets by the Company, future
issuances of Common Stock or other securities by the Company, and any dividend
payable on the Common Stock. Such concentration of ownership may also have the
effect of delaying, deferring or preventing a change in control of the Company.
Effects of Delisting from Nasdaq SmallCap Market; Lack of Liquidity of
Low Priced Stocks. If the Company fails to maintain the qualification for its
Common Stock to trade on the Nasdaq SmallCap Market, its securities could be
subject to delisting. The Nasdaq Stock Market recently implemented increases in
the quantitative standards for maintenance of listings on the Nasdaq SmallCap
Market. The new standards for continued listing on the Nasdaq SmallCap Market
include maintenance of any of (i) $2,000,000 of net tangible assets, (ii)
$35,000,000 of market capitalization or (iii) $500,000 of net income for two of
the last three years. In the event that the Common Stock is delisted from the
Nasdaq SmallCap Market, trading, if any, in the Common Stock would thereafter be
conducted in the over-the-counter markets in the so-called "pink sheets" or the
National Association of Securities Dealer's "Electronic Bulletin Board."
Consequently, the liquidity of the Company's Common Stock would likely be
impaired, not only in the number of shares which could be bought and sold, but
also through delays in the timing of the transactions, reduction in security
analysts' and the news media's coverage if any, of the Company and lower prices
for the Company's securities than might otherwise prevail.
In addition, if the Company's securities were to become delisted from
trading on the Nasdaq SmallCap Market and the trading price of such securities
were to fall below $5.00 per share, trading in such securities would also be
subject to the requirements of certain rules promulgated under the Exchange Act,
which require additional disclosure by broker-dealers in connection with any
trades involving a stock defined as a penny stock (generally, any non-Nasdaq
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions). Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith, and impose various sales practice requirements on
broker-dealers who sell penny stock to persons other than established customers
and accredited investors (generally institutions). For these types of
transactions, the broker-dealer must make a special suitability determination
for the
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purchase and have received the purchaser's written consent to the transaction
prior to the sale. The additional burdens imposed upon broker-dealers by such
requirements may discourage broker-dealers from effecting transactions in the
Common Stock which could severely limit the market liquidity of such Common
Stock and the ability of purchasers in this offering to sell their shares of
Common Stock in the secondary market.
Demand and Incidental Registration Rights. Certain shareholders and
warrant holders of the Company, including Robert F. Olson, have the right,
subject to certain conditions, to participate in future registrations of the
Company's equity securities or to demand that the Company register up to
approximately 4.3 million shares of Common Stock owned by them as of the date of
this Prospectus. Pursuant to these registration rights, if the Company proposes
to register any of its Common Stock, other than in certain specified instances,
either on its own behalf or for the account of others, such holders are entitled
to notice of such proposed registration and must be given the opportunity to
participate therein. These demand and incidental registration rights are subject
to certain terms and limitations. All such holders have waived their
registration rights with respect to this offering.
Absence of Dividends. The Company has never paid cash dividends on its
Common Stock and does not anticipate paying cash dividends in the foreseeable
future. Moreover, the Company is prohibited from paying any cash dividends under
the terms of its existing credit agreement.
Shares Eligible for Future Sale. Assuming the conversion of all shares
of Preferred Stock into an aggregate of 571,428 shares of Common Stock (based on
a hypothetical five-day average closing bid price of the Company's Common Stock
of $6.25) but without giving effect to the exercise of Warrants, approximately
9,218,000 shares of Common Stock will be outstanding. Of the shares outstanding
after this offering, approximately 4.9 million shares of Common Stock will be
freely tradable by persons who are not affiliates of the Company and 4.2 million
shares will be eligible for public sale under Rule 144, subject in certain cases
to volume and manner of sale limitations. The Company is obligated to issue
approximately 1.4 million shares of Common Stock in the event that currently
outstanding warrants are exercised all of which will be freely tradable without
restriction except for volume restrictions on sales by affiliates pursuant to
Rule 144. The Company may issue up to an additional 2.3 million shares of Common
Stock under its employee stock option plan. The Company may issue additional
options, warrants, or equity securities in the future. The sale, or availability
for sale, of substantial amounts of Common Stock in the public market subsequent
to this offering, or the perception that such sales could occur, could adversely
affect the prevailing market price of the Common Stock and could impair the
Company's ability to raise additional capital through the sale of its equity
securities.
Volatility of Stock Price. The market prices of the Company's
securities have experienced and may continue to experience substantial
volatility. The securities markets have from time to time experienced
significant price and volume fluctuations that may be unrelated to the operating
performance of particular companies. The market prices of the common stock of
many publicly traded technology companies have in the past been, and in the
future are expected to be, especially volatile. Announcements of technological
innovations or new products by the Company or its competitors, developments or
disputes concerning patents or proprietary rights, and economic and other
external factors, as well as period-to-period fluctuations in the Company's
financial results, may have a significant impact on the market price of the
Common Stock.
Possible Issuances of Preferred Stock; Anti-Takeover Effect of
Minnesota Law. Pursuant to the Company's Articles of Incorporation, the
Company's shareholders do not have the right to cumulative voting in the
election of directors. In addition, the Board of Directors has authority to fix
the rights, preferences, privileges and restrictions, including voting rights,
of unissued shares of the Company's capital stock and to issue such stock
without any further vote or action by the shareholders. The rights
9
<PAGE> 11
of the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any preferred stock that may be created and
issued in the future. The issuance of preferred stock could have the effect of
delaying, deferring or preventing a change in control of the Company. In
addition, certain provisions of Minnesota law applicable to the Company could
have the effect of discouraging certain attempts to acquire the Company, which
could deprive the Company's shareholders of opportunities to sell their shares
of Common Stock at prices higher than prevailing market prices and may also have
a depressive effect on the market price of the Company's Common Stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Common
Stock by the Selling Shareholders.
10
<PAGE> 12
SELLING SHAREHOLDERS
The following table sets forth the number of shares of the Common Stock
owned by each Selling Shareholder as of the date hereof and after giving effect
to this offering. All Selling Shareholders have represented to the Company that
they are "accredited investors" as that term is defined in Regulation D
promulgated under the Securities Act of 1933. The Company will not receive any
proceeds from the sale of the Common Stock by the Selling Shareholders.
<TABLE>
<CAPTION>
Shares Shares
Beneficially Owned(1) Shares to Beneficially Owned
Prior to the Offering be Sold After the Offering
--------------------- in the ------------------
Name of Beneficial Owner Number Percentage Offering Number Percentage
- ------------------------ ------ ---------- -------- ------ ----------
<S> <C> <C> <C> <C> <C>
Stark International 805,500(2) 8.5 805,500 --- ---
Shepherd Investments International, Ltd. 805,500(2) 8.5 805,500 --- ---
Bruce Reichert, Trustee 84,619(3) * 84,619 --- ---
Bruce Reichert 26,000(4) * 25,000 1,000 ---
Wyncrest Capital, Inc. 287,445(5) 3.3 42,072 245,371 2.3
David Koentopf 58,263(6) * 1,034 57,299 *
Wayne Mills 281,966(7) 3.1 105,956 176,100 1.7
James Sippl 102,984(8) 1.2 36,250 66,734 *
Boston Financial Partners 50,000(9) * 23,621 --- ---
Edward Wallick 14,335(10) * 3,335 11,000 *
Joseph Buska 8,040(11) * 940 7,100 *
John Feltl 9,405(12) * 9,405 --- ---
Paul R. Kuehn 1,000(13) * 1,000 --- ---
David B. Johnson 1,000(13) * 1,000 --- ---
Eldon C. Miller 334(13) * 334 --- ---
Stanley D. Rahm 334(13) * 334 --- ---
</TABLE>
- -------------------------------
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Shares of Common Stock subject to options, warrants and
convertible securities currently exercisable or convertible, or exercisable
or convertible within 60 days, are deemed outstanding, including for
purposes of computing the percentage ownership of the person holding such
option, warrant or convertible security, but not for purposes of computing
the percentage of any other holder.
(2) Represents shares of Common Stock issuable upon conversion of shares of
Preferred Stock. Each share of Preferred Stock is convertible into shares
of Common Stock at a conversion rate equal to the quotient derived by
dividing (A) the sum of (i) the stated value of $10,000 and (ii) accrued
but unpaid dividends by (B) the lower of (i) $7.56 or (ii) 84 percent of
the average closing bid price of the Common Stock for the five trading days
ending on the date of conversion, subject to an aggregate conversion limit
of 1,611,000 shares, provided that in no event shall a Selling shareholder
be entitled to convert shares of Preferred Stock in excess of that number
of shares of Preferred Stock which, upon giving effect to such conversion,
would cause the aggregate number of shares of Common Stock beneficially
owned by such Selling Shareholder and its affiliates to exceed 4.9% of the
outstanding shares of Common Stock following such conversion. The share
amounts appearing above were calculated with reference to the aggregate
conversion limit of 1,611,000 shares.
(3) Represents shares issuable upon exercise of common stock purchase warrants
granted in connection with the MacGregor-IntraNet merger in July 1996.
(4) Includes 25,000 shares issuable upon exercise of common stock purchase
warrants granted in the July 1996 MacGregor IntraNet merger.
11
<PAGE> 13
(5) Includes 20,000 shares issuable upon exercise of options owned by
Ronald Eibensteiner, a director of the Company and an affiliate of
Wyncrest Capital, Inc. Also includes 42,072 shares issuable to Wyncrest
Capital upon exercise of warrants received by Wyncrest Capital in
connection with bridge financing completed in December 1995 and March
1997, and the MacGregor-IntraNet merger completed in July 1996.
(6) Includes 1,034 shares issuable upon exercise of warrants received in
connection with the MacGregor-IntraNet merger completed in July 1996.
(7) Includes (i) 66,087 shares issuable upon exercise of warrants issued in
connection with the July 1996 MacGregor-IntraNet merger (of which 62,550
were acquired from another warrantholder), (ii) 25,000 shares issuable
upon exercise of warrants received in consideration of bridge financing
provided to the Company in January 1997, and (iii) 17,869 shares issuable
upon exercise of warrants issued for consulting services rendered to the
Company.
(8) Includes 36,250 shares issuable upon exercise of warrants received in
connection with bridge financing provided to the Company in January and
February 1997.
(9) Includes 23,621 shares issuable upon exercise of warrants received in
connection with the July 1996 MacGregor-IntraNet merger.
(10) Includes 3,335 shares issuable upon exercise of warrants received for
consulting services rendered to the Company in July 1997.
(11) Includes 940 shares issuable upon exercise of warrants received for
consulting services rendered to the Company in July 1997.
(12) Includes 9,405 shares issuable upon exercise of warrants received for
consulting services rendered to the Company in July 1997.
(13) Represents stocks is changable upon exercise of warrants received for
consulting services provided to the Company in 1997.
* Less than one percent.
To the extent required, the specific shares of Common Stock to be sold, the
names of the Selling Shareholders, other additional shares of Common Stock
beneficially owned by such Selling Shareholders, the public offering price of
the shares of Common Stock to be sold, the names of any agent, dealer or
underwriter employed by such Selling Shareholders in connection with such sale,
and any applicable commission or discount with respect to a particular offer
will be set forth in an accompanying Prospectus Supplement.
12
<PAGE> 14
PLAN OF DISTRIBUTION
An aggregate of 300 shares of Series B Convertible Preferred Stock were
originally issued to and purchased by certain of the Selling Shareholders at a
price of $10,000 per share in connection with a private placement made by the
Company. Each share of Preferred Stock is convertible into shares of Common
Stock at a conversion ratio equal to the quotient derived by dividing (A) the
sum of (i) the stated value of $10,000 and (ii) accrued but unpaid dividends by
(B) the lower of (i) $7.56 or (ii) 84 percent of the average closing bid price
of the Common Stock for the five day period ending on the date of conversion,
subject to an aggregate conversion limit of 1,611,000 shares. At the expiration
of three years from the original date of issuance of the Preferred Stock or, at
the option of the Company, on the date of the public announcement by the Company
of a public offering of its Common Stock yielding net proceeds of at least $10
million, all outstanding shares of Preferred Stock will automatically convert
into shares of Common Stock, subject to the aggregate conversion limit of
1,611,000 shares referred to above. This Registration Statement is being filed
by, and at the expense of, the Company pursuant to obligations contained in the
Registration Rights Agreement executed in May of 1998.
Warrants for the purchase of 208,504 shares included in this
registration statement are exercisable at $4.00 per share. Warrants for the
remaining 126,396 shares covered by this registration statement are exercisable
at various rates ranging from $2.32 to $8.00.
The Selling Shareholders and/or their pledgees, donees, transferees or
other successors in interest will sell the securities of the Company covered by
this Prospectus to the public on the over-the-counter market, or in negotiated
transactions, or otherwise, at prices and at terms then obtainable.
Broker-dealers either may act as agents for the Selling Shareholders and/or
their pledgees, donees, transferees or other successors in interest for such
commissions as may be agreed upon at the time, or may purchase any of the
securities covered thereby as principals and thereafter may sell such securities
from time to time in the over-the-counter market or in negotiated transactions,
or otherwise, at prices and on terms then obtainable.
LEGAL MATTERS
Certain legal matters in connection with the validity of the securities
offered hereby will be passed upon for the Company by Maslon Edelman Borman &
Brand, LLP, Minneapolis, Minnesota.
EXPERTS
The consolidated financial statements of IntraNet Solutions, Inc. at
March 31, 1998, and for the year then ended, incorporated by reference in this
Prospectus and elsewhere in the Registration Statement have been audited by
Grant Thornton LLP, independent auditors, and at March 31, 1997 and for the
year then ended, by Ernst & Young LLP, independent auditors, and at March 31,
1996, and for the year then ended by Lund Koehler Cox & Company, PLLP,
independent auditors, as set forth in their respective reports thereon (the
Ernst & Young LLP report contains an explanatory paragraph describing
conditions that raise substantial doubt about the Company's ability to continue
as a going concern as of March 31, 1997) incorporated herein by reference, and
are included in reliance upon such reports given upon the authority of such
firms as experts in accounting and auditing.
13
<PAGE> 15
<TABLE>
<CAPTION>
____________________________
<S> <C>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY, INTRANET SOLUTIONS, INC.
AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN 1,945,900
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT SHARES
CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER OF
TO BUY, ANY SECURITIES OFFERED HEREBY TO ANY PERSON IN COMMON STOCK
ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION
WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY _____________________
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME PROSPECTUS
SUBSEQUENT TO THE DATE HEREOF. _____________________
____________________________
TABLE OF CONTENTS
Additional information 1
Incorporation of certain documents 2
by reference
Risk factors 4
Use of proceeds 10
Selling shareholders 11
Plan of distribution 13
Legal matters 13
Experts 13 JULY 8, 1998
</TABLE>
14
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance and distribution
of the securities registered hereby, other than underwriting discounts and fees,
are set forth in the following table:
Securities and Exchange Commission
Registration Fee $ 3,051
Accounting Fees 3,000
Nasdaq Listing Fee 7,500
Legal Fees and Expenses 8,000
Miscellaneous 2,000
-------
Total $23,551
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is governed by Minnesota Statutes Chapter 302A. Minnesota Statutes
Section 302A.521 provides that a corporation shall indemnify any person made or
threatened to be made a party to any proceeding by reason of the former or
present official capacity of such person against judgments, penalties, fines,
including, without limitation, excise taxes assessed against such person with
respect to an employee benefit plan, settlements, and reasonable expenses,
including attorney's fees and disbursements, incurred by such person in
connection with the proceeding, if, with respect to the acts or omissions of
such person complained of in the proceeding, such person has not been
indemnified by another organization or employee benefit plan for the same
expenses with respect to the same acts or omissions; acted in good faith;
received no improper personal benefit and Section 302A.255, if applicable, has
been satisfied; in the case of a criminal proceeding, had no reasonable cause to
believe the conduct was unlawful; and in the case of acts or omissions by
persons in their official capacity for the corporation, reasonably believed that
the conduct was in the best interests of the corporation, or in the case of acts
or omissions by persons in their capacity for other organizations, reasonably
believed that the conduct was not opposed to the best interests of the
corporation. Subdivision 4 of Section 302A.521 of the Minnesota Statutes
provides that a company's articles of incorporation or bylaws may prohibit such
indemnification or place limits upon the same. The Company's articles and bylaws
do not include any such prohibition or limitation. As a result, the Company is
bound by the indemnification provisions set forth in Section 302A.521 of the
Minnesota Statutes.
As permitted by Section 302A.251 of the Minnesota Statutes, the Articles of
Incorporation of the Company provide that a director shall have no personal
liability to the Company and its shareholders for breach of his fiduciary duty
as a director, to the fullest extent permitted by law.
II-1
<PAGE> 17
ITEM 16. EXHIBITS.
NUMBER DESCRIPTION
------ -----------
4(1) Certificate of Designation of Series B Preferred Stock
4(2) Securities Purchase Agreement dated May 6, 1998, by and among
the Company, Stark International and Shepherd Investments
International, Ltd.
4(3) Registration Rights Agreement dated May 6, 1998, by and among
the Company, Stark International and Shepherd Investments
International, Ltd.
5 Opinion of Maslon Edelman Borman & Brand, LLP
23(1) Consent of Grant Thornton LLP
23(2) Consent of Ernst & Young LLP
23(3) Consent of Maslon Edelman Borman & Brand, LLP (included in
Exhibit 5)
23(4) Consent of Lund Koehler Cox & Company, PLLP
24 Power of Attorney (included on Page II-3)
_______________
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; (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; and (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;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(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.
II-2
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of
Minneapolis, State of Minnesota, on July 6, 1998.
INTRANET SOLUTIONS, INC.
Registrant
By: /s/ Robert F. Olson
-------------------------------------
Name: Robert F. Olson
Title: President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Robert F. Olson and Jeffrey J. Sjobeck,
each or either of them, his or her true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him or her and in his or
her name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
and to file the same with all exhibits thereto, and other documents in
connection therewith with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his or her substitutes,
may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 6th day of July, 1998 by
the following persons in the capacities indicated:
SIGNATURE TITLE
/s/ Robert F. Olson President, Chief Executive
- ---------------------------------- Officer (Principal Executive
Robert F. Olson Officer) and Chairman of the
Board
/s/ Jeffrey J. Sjobeck Chief Financial Officer (Chief
- ---------------------------------- Financial Officer and
Jeffrey J. Sjobeck Accounting Officer) and
Director
/s/ Ronald E. Eibensteiner Director
- ----------------------------------
Ronald E. Eibensteiner
/s/ David Koentopf Director
- ----------------------------------
David Koentopf
/s/ Paul R. Anderson Director
- ----------------------------------
Paul R. Anderson
/s/ Kenneth J. Holec Director
- ----------------------------------
Kenneth H. Holec
/s/ Steven C. Waldron Director
- ----------------------------------
Steven C. Waldron
II-3
<PAGE> 19
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF DOCUMENT PAGE NO.
4(1) Certificate of Designation of Series B Preferred Stock*
4(2) Securities Purchase Agreement dated May 6, 1998, by and among
the Company, Stark International and Shepherd Investments
International, Ltd.*
4(3) Registration Rights Agreement dated May 6, 1998, by and among
the Company, Stark International and Shepherd Investments
International, Ltd.*
5 Opinion of Maslon Edelman Borman & Brand, LLP.*
23(1) Consent of Grant Thornton LLP
23(2) Consent of Ernst & Young LLP.
23(3) Consent of Maslon Edelman Borman & Brand, LLP (included in
Exhibit 5).
23(4) Consent of Lund Koehler Cox & Company, PLLP
24 Power of Attorney (included on Page II-3).
*Previously filed.
II-4
<PAGE> 1
EXHIBIT 23(1)
We have issued our report dated June 1, 1998 accompanying the
consolidated financial statements of IntraNet Solutions, Inc. and subsidiaries
included in the Annual Report on Form 10-KSB for the year ended March 31, 1998
which is incorporated by reference in this Registration Statement. We consent
to the incorporation by reference in the Registration Statement (Amendment No.
1 to Form S-3) of the aforementioned report and to the use of our name as it
appears under the caption "Experts."
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
July 7, 1998
<PAGE> 1
EXHIBIT 23(2)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-57181) and
related Prospectus of IntraNet Solutions, Inc. for the registration of shares
of its common stock and to the incorporation by reference therein of our report
dated June 30, 1997, with respect to the consolidated financial statements of
IntraNet Solutions, Inc. included in its Annual Report (Form 10-KSB) for the
year ended March 31, 1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
July 7, 1998
<PAGE> 1
EXHIBIT 23(4)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated May 14, 1996 included in the
Company's Annual Report on Form 10-KSB for the year ended March 31, 1998 into
this Registration Statement on Form S-3.
/s/ LUND KOEHLER COX & COMPANY, PLLP
Minneapolis, Minnesota
July 7, 1998
