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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 2000
REGISTRATION NO. 333-___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------
SOFTLOCK.COM, INC.
(Exact name of registrant as specified in its charter)
7372
(Primary Standard Industrial Classification Code Number)
DELAWARE 84-1130229
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
Five Clock Tower Place, Suite 440, Maynard, Massachusetts 01754
(978) 461-5940
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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KEITH LORIS, PRESIDENT AND CHIEF EXECUTIVE OFFICER
SOFTLOCK.COM, INC.
FIVE CLOCK TOWER PLACE, SUITE 440
MAYNARD, MASSACHUSETTS 01754
(978) 461-5940
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------------------
Copies to:
CLIVE R.G. O'GRADY, ESQ.
MCGUIRE, WOODS, BATTLE & BOOTHE LLP
1750 TYSONS BLVD., SUITE 1800
TYSONS CORNER
MCLEAN, VIRGINIA 22102-3915
Approximate date of commencement of proposed sale to the public: The earlier of
(i) four months after this Registration Statement becomes effective or (ii)
November 1, 2000.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: /X/
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, 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 of 1933, please check the following box
and list the Securities Act of 1933 registration statement number of the earlier
effective registration statement for the same offering. / /
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If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, check the following box and list the Securities Act
of 1933 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(d) under
the Securities Act of 1933, check the following box and list the Securities Act
of 1933 registration statement number of the earliest registration statement for
the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Title of Each Class of Securities Amount to Be Proposed Maximum Proposed Maximum Amount
To Be Registered Registered Aggregate Aggregate Offering of RegistrationFee
Offering Price Per Unit* Price*
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock par value $.01 per 5,312,240 $8.99 $47,757,037 $12,610
share
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Estimated solely for the purpose of determining the registration fee. In
accordance with Rule 457(c), the price shown is based on the average of the
high and low price of our common stock on April 13, 2000 as reported on
the OTC Bulletin Board.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED APRIL 14, 2000
SOFTLOCK.COM, INC. LOGO
5,312,240 SHARES
COMMON STOCK
($.01 PAR VALUE)
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ABOUT OUR COMPANY:
- - We integrate content management and context marketing to allow commercial
websites to securely market and sell digital content.
- - Our headquarters are located at: Five Clock Tower Place, Suite 440 Maynard,
Massachusetts 01754 Telephone: (978) 461-5940
THE OFFERING:
- - This is an offering by the selling shareholders to sell 5,312,240 shares of
our common stock.
- - We will not receive any proceeds from the sale of our common stock by the
selling shareholders.
TRADING SYMBOL:
Our common stock is listed on the over-the-counter bulletin board under the
symbol "SLCK."
THE COMMON STOCK:
On April 13, 2000, the last reported bid price of
our common stock was $8.875.
THE SELLING SHAREHOLDERS:
- - The selling shareholders have advised us that they will sell the shares from
time to time in the open market, on the over-the-counter electronic bulletin
board or any other electronic market or exchange available for the sale of
the common stock or in privately negotiated transactions. See "Plan of
Distribution."
- - The selling shareholders will pay all of their commissions, brokerage fees
and related expenses. We will pay all of the expenses of this offering,
estimated to be approximately $94,610, including up to $20,000 in legal
fees for the selling shareholders.
- - The selling shareholders will not sell any of the shares until the earlier
of (1) four months after the registration statement of which this prospectus
is a part is declared effective or (2) November 1, 2000.
BEFORE MAKING ANY INVESTMENT IN OUR SECURITIES, YOU SHOULD READ AND CAREFULLY
CONSIDER THE RISKS DESCRIBED IN THE RISK FACTORS BEGINNING ON PAGE 1.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. Selling
shareholders may not
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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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SUMMARY
IN THIS PROSPECTUS, THE WORDS "WE," "US" AND "OUR" REFER TO
SOFTLOCK.COM, INC., A DELAWARE CORPORATION, AND ITS SUBSIDIARIES AND
PREDECESSORS, UNLESS THE CONTEXT OTHERWISE REQUIRES. THE FOLLOWING SUMMARY
CONTAINS BASIC INFORMATION ABOUT US. IT MAY NOT CONTAIN ALL OF THE INFORMATION
THAT IS IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING THE
INFORMATION INCORPORATED BY REFERENCE.
We provide integrated content management and context marketing to allow
commercial web sites to securely market and sell digital content. Publishers of
digital content, including research reports, newsletters and electronic books,
use our system to package and securely distribute their products while
protecting their intellectual property. We market digital content through
strategic relationships with many affiliates who offer the digital content on
their web sites. When a prospective consumer accesses the content, the consumer
can preview selected portions of the final product. The consumer can then
instantly purchase access to the complete product 24 hours a day, 7 days a week
via the World Wide Web. The consumer then has permanent access to the product
for the consumer's own use. Consumers are encouraged to pass along the digital
content they have purchased, but recipients can only preview the selected
portions of the final product chosen by the content provider until they go
through the purchase process themselves.
We offer digital content through the SoftLock eMerchandisingTM system,
providing the opportunity to widely market digital content while protecting that
digital content through our patented technology which prevents electronic
shoplifting (piracy) not just during the initial download, but when passed from
one consumer to another. Rather than giving content away or requiring visitors
to subscribe to all of a site's content in advance, publishers can charge for
specific content on demand. The content can be securely sampled, electronically
purchased and redistributed, and our patented technology is designed to keep
intellectual property secure while generating valuable marketing data and sales
revenue. With our product, publishers are able to sell their most compelling and
valuable content and encourage redistribution, which turns the material tendency
to "pass it on" into an additional sales channel.
The address of our principal executive offices is Five Clock Tower
Place, Suite 440, Maynard, Massachusetts 01754.
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RISK FACTORS
You should read this entire prospectus and the documents incorporated
by reference before investing in our common stock. A number of factors may
adversely impact your investment in the common stock, including the following:
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY.
We were formed in 1989 but our operating history only dates back to May
1992. As a result, we have only a limited operating history on which investors
can base an evaluation of our business and prospects, and we are subject to many
of the risks common to enterprises with a limited operating history. Due to our
limited operating history, it will be difficult for you to evaluate whether we
will successfully address these risks. You should consider our prospects in
light of the heightened risks, uncertainties, unexpected expenses, delays and
difficulties frequently encountered by companies in an early stage of
development, particularly companies in new and rapidly evolving markets, such as
online commerce, using new and unproven business models.
WE HAVE A HISTORY OF LOSSES AND NEGATIVE CASH FLOW AND ANTICIPATE CONTINUED
LOSSES, AND THEREFORE, WE MAY NEVER ACHIEVE PROFITABILITY IN THE FUTURE OR
SUSTAIN PROFITABILITY.
We have incurred recurring operating losses and negative cash flow
since our inception and have recorded limited revenues to date. We expect to
continue incurring net operating losses through 2000 as we continue to develop
products and expand our marketing strategy. For example, we incurred a net
operating loss of $6,643,204 for the fiscal year ended December 31, 1999, and
our accumulated retained earnings deficit is $8,721,644 through December 31,
1999. Our planned expenditures are expected to continue growing throughout 2000.
We cannot assure you that we will ever achieve profitability in the future or
sustain profitability, if achieved.
OUR BUSINESS MODEL IS NEW AND UNPROVEN AND MAY FAIL TO GENERATE SUFFICIENT
REVENUE TO BECOME PROFITABLE.
Our business model is new and unproven, and we may not succeed in
generating sufficient revenue to sustain and grow our business. The success of
our business depends on our ability to generate transaction fees in the form of
a percentage of fees charged by our licensees in commercial transactions. The
volume of products and services distributed using our technology may be too
small to support or grow our business. While some companies have licensed our
system, other companies may wish to use other technology based on different
business models, including the payment of a one-time license fee without paying
ongoing transaction fees. Failure to generate revenues from transaction fees,
could have a material adverse affect on our business.
OUR REVENUES AND EXPENSES WILL BE DIFFICULT TO PREDICT BECAUSE WE ARE IN THE
EARLY STAGES OF DEVELOPMENT.
Planning the development of our business and accurately predicting our
future revenues and expenses are difficult because our business and the industry
in which we compete is in the early stages of development. We also expect that
there will be intense competition in this industry. Our potential customers and
users have and will continue to have many choices. Our potential customers may
experiment with many different products until it becomes apparent which products
work best. Cancellation or non-renewal of existing or future client contracts,
could materially adversely affect our
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business and financial condition. As a result, our revenues could fluctuate
during any fiscal year, which may, in turn, cause the price at which our common
stock trades to be subject to substantial volatility.
Furthermore, our business model is based on receiving transaction fees.
These fees will be a percentage of fees paid by users or charged by our
licensees from transactions and services that use our technology, and sales of
products incorporating our technology. The amount of these fees in any given
quarter will depend on how quickly our technology is deployed and the volume of
digital commerce transactions that occurs using our product. Variations of these
factors could affect our quarterly operating results. As a result, we may be
particularly affected by changes in general economic conditions that would cause
declines in the level of electronic commerce.
Because the timing of deployment of our technology and the volume of
digital commerce using our technology is outside of our control, it will be
difficult for us to make accurate quarterly revenue projections. If our
revenue projections are not accurate for a particular quarter, our actual
operating results for that quarter could fall below the expectations of
analysts and investors. Our failure to meet these expectations would likely
cause the market price of our common stock to decline.
THE MARKET FOR ONLINE COMMERCE IS NEW AND EMERGING AND IF IT DOES NOT GROW AS
RAPIDLY AS WE ANTICIPATE, OUR PLANNED GROWTH AND FINANCIAL OBJECTIVES WILL NOT
BE MET.
Our business model is based on the growth of online commerce with
respect to digital products and the development of online commerce for the sale
of digital content. The market for the purchase of products and services over
the internet, especially the purchase of information content, is a new and
emerging market. Our future revenues and profits and our business model depends
on the willingness of consumers to conduct online commerce and the demands of
companies for securely distributing proprietary content on the internet. Rapid
growth in the use of and interest in the internet and other online services is a
recent phenomenon. This growth may not continue. A sufficiently broad base of
consumers may not adopt, or continue to use, the internet as a medium of
commerce. Demand for and market acceptance of recently introduced products and
services over the internet is subject to a high level of uncertainty, and there
are few proven products and services. For our revenues to grow, consumers who
have historically used traditional means of commerce will instead, need to elect
to purchase products and services online, and sellers of products and services
will need to adopt or expand use of the internet as a channel of distribution.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL THAT MAY NOT BE AVAILABLE TO US ON
FAVORABLE TERMS, IF AT ALL; THEREFORE, WE MAY HAVE TO SUBSTANTIALLY REDUCE OR
ELIMINATE CURRENT AND PLANNED SOFTWARE PROGRAMS AND OTHER OPERATING PLANS.
We anticipate that we will continue to incur operating losses, negative
cash flows from operations and capital expenditures through 2000 and 2001.
Accordingly, there can be no assurance that the length of time that proceeds
from recent financings will satisfy our cash requirements. Based upon our
current operating plan, we anticipate that our currently available funds will be
sufficient to satisfy our anticipated needs for working capital, capital
expenditures and business expansion through 2000. Our cash requirements,
however, depend upon many factors, including our net cash flows from operations,
the length of time it may take for us to develop a market for our products or
services, the market acceptance of our products and services and the response of
competitors who may develop competing products or services at lower costs. We
currently do not have any commitments for additional financing, and there can be
no assurance that we will be able to secure additional funding sources or that
financing will be made available on terms favorable to us. To the extent that
the proceeds from recent equity financings are insufficient to fund our
activities, we anticipate that it will be necessary to raise additional capital
through
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other means or to substantially reduce or eliminate current and planned software
development programs and other operating plans.
OUR FAILURE TO PROPERLY MANAGE GROWTH, COULD MATERIALLY ADVERSELY AFFECT OUR
BUSINESS.
Our goal is to continue development of an alternative channel for the
sale of digital content through the development of new tools for publishers, a
new transaction processing infrastructure, and a number of related marketing
initiatives in 2000 and 2001. We also may acquire other companies engaged in
synergistic businesses. Such expansion could place a significant burden on our
existing resources, and may require:
- the implementation of additional operating, software
development and financial controls;
- the installation of additional reporting and management
information systems for transaction processing, customer
service, and financial reporting;
- improved coordination among marketing, software
development, and finance functions;
- increased capital expenditures; and
- the retention of additional personnel.
There can be no assurance that we will be able to successfully manage any
substantial business expansion, including attracting and retaining qualified
personnel. A failure to do so could have a material adverse effect on our
financial condition and operating results.
IF WE ARE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS, OUR BUSINESS
COULD SUFFER.
Our success depends in part on our ability to enforce intellectual
property rights for our technology and software, both in the United States and
abroad. In addition to the protection provided by the our patent, our software
is protected by copyright and the use of contractual restrictions (such as
confidentiality agreements) and license agreements that restrict the
unauthorized distribution of our proprietary data. While we have attempted to
limit unauthorized use of our software products or the dissemination of our
proprietary information, there can be no assurance that we will be able to
retain our proprietary software rights or prohibit the unauthorized use of
proprietary information. We may file additional applications for patents,
copyrights and trademarks as management deems appropriate. There can be no
assurance that any patents, copyrights or trademarks we may obtain will be
sufficiently broad to protect our products or that applicable law will provide
effective injunctive remedies to stop infringement on any patents, trademarks or
copyrights that we obtain. In addition, there can be no assurance that any
patent, trademark or copyright that we may obtain will not be challenged,
invalidated, or circumvented, that our intellectual property rights will provide
competitive advantages, or that our competitors will not independently develop
substantially equivalent technologies or products.
WE FACE LEGAL RISKS ARISING OUT OF OUR PROPRIETARY TECHNOLOGY OR THE PATENTS OF
OTHERS.
We face the risk of patent-related suits, including legal actions that
might be pursued to litigate or defend our patent, and the outcomes and expenses
cannot be predicted with confidence. We have developed software technology to
protect intellectual property, but there can be no assurance that such
technology will not be breached, resulting in lost revenues for which we might
be held responsible. Similarly, the software that incorporates our technology
could have adverse consequences that might lead to claims of liability against
us.
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WE MAY SUFFER LOSSES ARISING OUT OF SECURITY BREACHES.
A breach in our network security could result in decreased demand for
our technology by affiliates and content providers or their customers. The
secure and trusted management of proprietary or confidential information over
the Internet is essential to establishing and maintaining confidence. Without
this confidence, potential or current affiliates and content providers may not
use our technology and their customers may not trust and use our licensee's
products. Therefore, security concerns and security breaches could materially
adversely affect our business and operating results. Advances in computer
capabilities, new discoveries or other developments could result in a compromise
or breach of the security technology, including cryptography technology, that we
use to protect customer digital content and transaction data. Security breaches
could damage our reputation and expose us to a risk of loss or litigation. Our
insurance policies may not be adequate to reimburse us for losses caused by
security breaches. We cannot guarantee that our security measures will prevent
security breaches.
DEFECTS IN OUR TECHNOLOGY COULD RESULT IN SUBSTANTIAL LIABILITY.
Defects or errors in current or future products could result in delayed
or failed deployment of our technology, lost revenues, or a delay in or failure
to achieve market acceptance, any of which could seriously harm our business and
operating results. Complex software products like our products often contain
errors or defects, including errors relating to security, particularly when
first introduced or when new versions or enhancements are released. Because this
is a system used for commerce, we believe that standards for reliability and
performance may be very high.
Our failure to discover errors or defects in our products or content
during the development process, could seriously undermine the perceived trust
and security needed for a commercial system and could delay or prevent market
acceptance of digital commerce, resulting in material adverse effects to our
business and operating results.
The development and use of our products and services expose us to
substantial risks of product liability claims because our products and services
are to be used in sensitive and valuable digital commerce transactions and
because we require our partners to comply with our specifications. Although our
agreements typically contain provisions designed to limit our exposure to
product liability claims, it is possible that these limitations of liability
provisions may not be effective as a result of existing or future laws or
unfavorable judicial decisions. A product liability claim brought against us,
even if not successful, would likely be time consuming and costly to defend and
could significantly harm our business and operating results.
COMPETITION IN OUR INDUSTRY IS INTENSE AND CAN LEAD TO REDUCED SALES.
There are many software developers and companies concentrating their
efforts on issues related to the digital distribution of software and content.
New technology and solutions that address these issues are regularly being
proposed and tested. While management believes that our method for the
marketing, distribution and sale of content on the internet is unique, there are
numerous competitive methods and business models under which our prospective
clients could choose to distribute or sell their content. Some of these
alternative methodologies are supported by companies with substantially greater
personnel, financial and technical resources and a more established customer
base than what we possess. There can be no assurance that we will be able to
convince prospective customers of the merits of our system or that we will be
able to compete with these competitors successfully.
The digital rights management solutions market is new, rapidly
evolving, and highly competitive, and we expect this competition to persist and
intensify in the future. Failure to maintain or enhance our
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competitive position could reduce our market share and cause our revenues to
grow more slowly than anticipated or not at all.
Potential competitors may bundle their products or incorporate a
digital rights management component into existing products in a manner that
discourages users from purchasing our products. Furthermore, new competitors or
alliances among competitors may be able to respond more quickly than ourself to
new or emerging technologies and changes in customer requirements.
FAILURE TO PROTECT OUR DOMAIN NAME COULD DECREASE THE VALUE OF OUR TRADEMARKS
AND OTHER PROPRIETARY RIGHTS.
We currently hold the internet domain name "softlock.com," as well as
various other related names. Domain names generally are regulated by Internet
regulatory bodies. The regulation of domain names in the United States and in
foreign countries is subject to change. Recently, new policies regarding
resolution procedures for domain name disputes have been adopted. Furthermore,
regulatory bodies could establish additional top-level domains, appoint
additional domain name registrars or modify the requirements for holding domain
names. As a result, we may not acquire or maintain the "softlock.com" domain
name in all of the countries in which we may conduct business.
The relationship between regulations governing domain names and laws
protecting trademarks and similar proprietary rights is unclear. Therefore, we
could be unable to prevent third parties from acquiring domain names that
infringe or otherwise decrease the value of our trademarks and other proprietary
rights.
IF OUR TECHNOLOGY IS NOT DEPLOYED BY THIRD PARTIES, OUR BUSINESS WILL SUFFER.
Failure of third parties to deploy our technology and create a
market for digital commerce could materially adversely affect our business.
Our business and operating results could suffer to the extent affiliates and
other internet companies choose not to:
- deploy our technology;
- develop infrastructure for the sale and delivery of
digital goods and services;
- generate transaction fees from the sale of digital
content and services; and
- promote brand preference for our products and services.
We may not generate revenue sufficient for business growth unless we
maintain relationships with existing affiliates and content providers and
significantly increase the number of companies that use our technology for the
sale of digital content. Our ability to attract new affiliates and content
providers will depend on a variety of factors, including:
- the performance, reliability and security of our
products and services;
- the scalability of our products and services, the
ability to rapidly increase deployment size from a
limited number of end-users to a very large number of
end-users;
- the cost-effectiveness of our products and services; and
- our ability to market our products and services
effectively.
Our ability to attract new affiliates and content providers may also
depend on the success of our initial products and services and our overall
success. Many potential affiliates and content providers may resist working with
us until our content, products and services have been successfully introduced
into the market and have achieved market acceptance. We may not be able to
attract a critical mass of affiliates
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and content providers that will develop products and services, and our
affiliates and content providers may not achieve widespread deployment of users
that we believe are necessary for success.
In addition, we may not be able to establish relationships with
important potential customers if we have already established relationships with
their competitors. Therefore, it is important that we are perceived as a neutral
and trusted technology and service provider. In addition, we require content
providers to comply with our specifications. Potential affiliates and content
providers may be unwilling to be subject to the control of these specifications.
The development and use of our products and services expose us to
substantial risks of product liability claims because our products and services
are to be used in sensitive and valuable digital commerce transactions and
because we require our partners to comply with our specifications. Although our
agreements typically contain provisions designed to limit our exposure to
product liability claims, it is possible that these limitation of liability
provisions may not be effective as a result of existing or future laws or
unfavorable judicial decisions. A product liability claim brought against us,
even if not successful, would likely be time consuming and costly to defend and
could significantly harm our business and operating results.
FAILURE TO RESPOND TO RAPID TECHNOLOGICAL CHANGE COULD MATERIALLY ADVERSELY
AFFECT OUR BUSINESS.
The market for digital rights management solutions is fragmented and
marked by rapid technological change, frequent new product introductions and
enhancements, uncertain product life cycles, and changes in customer demands. To
succeed, we must develop and introduce, in response to customer and market
demands, new releases of our software that offer features and functionality that
we do not currently provide. Any delays in our ability to develop and release
enhanced or new products could have a material adverse effect on our business
and operating results. In the past, we have experienced delays in new product
releases and may experience similar delays in the future.
IF DIGITAL COMMERCE IS NOT ACCEPTED, OUR BUSINESS MAY SUFFER.
Acceptance and use of the internet for commercial distribution of
digital content may not continue to develop at recent rates, and a sufficiently
broad base of consumers may not adopt and continue to use the internet and other
online services as a medium for digital commerce. Because our transaction fees
are derived from digital commerce transactions, if digital commerce is not
accepted for any reason, our revenues would not grow sufficiently and our
business and operating results could be materially adversely affected.
IF DISTRIBUTION METHODS USING THE INTERNET ARE NOT ACCEPTED, OUR BUSINESS WILL
SUFFER.
We depend on the widespread acceptance of commercial digital
information over the internet and other means. These methods for distribution
of digital information may not be commercially accepted for a number of
reasons, including:
- a failure to develop the necessary infrastructure for
communication of digital information and for payment
processing;
- a failure to develop or deploy enabling technologies,
including compression or broadband technology necessary
for distribution of particular digital content over the
internet;
- reduced demand for paid digital content due to the
widespread availability of free content online and the
ability to use and distribute this content without
restriction; and
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- insufficient speed, access, and server reliability, as
well as lengthy download time for content.
IF STANDARDS FOR DIGITAL RIGHTS MANAGEMENT ARE NOT ADOPTED, OUR REVENUES MAY BE
MATERIALLY ADVERSELY AFFECTED.
If standards for digital rights management are not adopted or complied
with, content providers may delay distributing content until they are confident
that the technology by which the content is to be distributed will be
commercially accepted. Standards for the distribution of various digital content
might not develop or might be found to violate antitrust laws or fair use of
copyright policies. In addition, the failure to develop a standard among device
manufacturers may affect the market for digital goods and services. As a result,
customers may delay purchasing products or services that include our technology
if they are uncertain of commercial acceptance of the standards with which our
technology complies. Consequently, if a standard format for the secure delivery
of content on the Internet is not adopted, or if the standards are not
compatible with our digital rights management technology, our business and
operating results could suffer.
GOVERNMENT REGULATION OF SOFTWARE AND THE INTERNET MAY RESTRICT OUR GROWTH AND
PROFITABILITY.
The United States and various foreign governments generally restrict
exports of software products utilizing encryption technology. Changes in export
laws and regulations may impose restrictions on our ability to distribute
products and services internationally, limiting our ability to gain revenue and
grow our business.
The United States Congress or individual states could enact laws
regulating or taxing Internet commerce. In addition, several telecommunications
companies have petitioned the Federal Communications Commission to regulate
internet service providers in a manner similar to long distance telephone
carriers and to impose access fees on these companies. Access fees, sales taxes
or any other taxes or fees could increase the cost of transmitting data over the
internet and reduce the number or amount of transactions from which we earn our
transaction fees.
OUR FAILURE TO ATTRACT AND RETAIN QUALIFIED PROFESSIONALS COULD ADVERSELY AFFECT
OUR BUSINESS PROSPECTS.
Our success depends largely on the skills, experience, and performance
of the members of our senior management and other key personnel. None of our
senior management and other key personnel must remain employed for any specific
time period. Only the President and Chief Executive Officer and Chief Technology
Officer are subject to employment agreements. Our loss of one or more of our
senior management key personnel could significantly harm our business and
operating results. In addition, our future success will depend largely on our
ability to continue attracting, integrating, and retaining highly skilled
personnel. Competition for highly qualified sales and marketing personnel is
intense. We may not be able to hire enough qualified individuals in the future
or in a timely manner. New employees require extensive training and typically
take at least 4 to 6 months to achieve full productivity.
OUR SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE MAY RESULT IN A DECREASE IN
THE PRICE OF OUR COMMON STOCK.
Of the 12,862,841 shares of our common stock issued and outstanding as
of March 31, 2000, 11,157,060 shares are "restricted securities" as that term is
defined under Rule 144 promulgated under the Securities Act of 1933. In
addition, we have outstanding 53,431 shares of Series A Preferred Stock which
are convertible into 5,343,100 shares of common stock. The Series A Preferred
Stock will complete the
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one-year holding period of Rule 144 promulgated under the Securities Act of 1933
in December 2000 through February 2001. We also have outstanding 46,875 shares
of Series B Preferred Stock and warrants which are convertible into 5,312,240
shares of common stock and constitute a portion of the shares offered pursuant
to this registration statement. There are also additional warrants convertible
into common stock outstanding. We filed an application to have our common stock
listed for trading on the Nasdaq SmallCap Market on April 6, 2000. The holders
of the Series B Preferred Stock have agreed not to sell any of these shares
until the earlier of four months after the date the registration statement of
which this prospectus is a part becomes effective or November 1, 2000.
Sales of substantial numbers of shares of common stock by
shareholders pursuant to Rule 144, through the registration statement of
which this prospectus is a part or otherwise could adversely affect the
market price of our securities and make it more difficult for us to sell
equity securities in the future at a time and price which we deem
appropriate. We cannot predict the effect that sales made in the future under
Rule 144, the registration statement of which this prospectus is a part or
otherwise may have on the prevailing market price of our common stock.
Nonetheless, the possibility exists that the sale of these shares may have a
depressive effect on the price of our common stock and may affect our ability
to obtain additional financing on favorable terms in the future, if at all.
LOW VOLUME TRADING AND VOLATILITY IN OUR STOCK PRICE MAY AFFECT YOUR ABILITY TO
SELL OUR COMMON STOCK.
Our common stock, listed for trading on the OTC Bulletin Board, has
traded in only small volumes and has been subject to volatility in price. While
we have applied for listing on the Nasdaq SmallCap Market, no assurance can be
given that the listing application will be accepted, that a more active market
will develop or that a shareholder will be able to liquidate his investment
without considerable delay, if at all. Even should a more active market develop,
the price may remain volatile. There can be no assurance that our trading price
will remain at any particular level, and if the trading price were to fall
sufficiently, many brokerage firms may not be willing to effect transactions in
our securities, particularly because low-priced securities are subject to an SEC
rule that imposes additional sales practice requirements on broker-dealers who
sell low-priced (generally those below $5 per share) securities.
PENNY STOCK REGULATIONS MAY ADVERSELY AFFECT BOTH YOUR ABILITY TO SELL OUR
COMMON STOCK AND THE PRICE OF OUR COMMON STOCK.
If we are unable to meet the Nasdaq listing or maintenance requirements
and the price per share of the common stock were to drop below $5.00 per share,
then the common stock would become subject to certain "penny stock" rules
promulgated by the SEC. Under such rules, broker-dealers who recommend "penny
stocks" to persons other than established customers and accredited investors
must make a special written suitability determination for the purchaser and
receive the purchaser's written agreement to a transaction prior to sale.
Securities are exempt from this rule if the market price is at least $5.00 per
share.
MANAGEMENT EXERCISES SIGNIFICANT CONTROL OVER US.
Our officers and directors own approximately 23% of our outstanding
common stock. As a result, if the officers and directors act together, they
will have significant influence on the outcome of all matters requiring
shareholder approval (including the election and removal of directors and any
merger, consolidation or sale of all or substantially all of our assets) and
significant influence on our management and affairs. That influence could
discourage others from initiating potential merger, takeover or other
8
<PAGE>
change of control transactions. As a result, the market price of our common
stock could be adversely affected.
9
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference forward-looking
statements. We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to risks, uncertainties and assumptions about us,
including, among other things, those described in the "Risk Factors" section of
this prospectus. We caution you that forward-looking statements are necessarily
estimates that reflect the best current judgment of our senior management. These
forward-looking statements involve a number of risks and uncertainties that
could cause actual results to differ materially from those suggested by the
forward-looking statements. We recommend that you consider these forward-looking
statements in light of various important factors, including those set forth in
this prospectus (see "Risk Factors") and other factors set forth from time to
time in the information that we file with the SEC. To identify forward-looking
statements, you should look for words such as "estimate," "project," "intend,"
"expect" or "believe." These forward-looking statements are found at various
places throughout this prospectus and the documents incorporated by reference
herein. You are cautioned not to rely to a great extent on these forward-looking
statements, which speak only as of the date of such documents.
We do not undertake to update these forward-looking statements to
reflect actual results, changes and assumptions or other factors that could
affect these statements. In addition, we may from time to time make additional
or revised forward-looking statements about us or our business or about the
matters described or incorporated by reference in this document.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock
offered by the selling shareholders.
SELLING SHAREHOLDERS
The following table lists the name, position, office or other material
relationship which the selling shareholder has had within the past 3 years with
us, if any, and the amount of securities of each class beneficially owned by
that shareholder before the offering.
The third column in the table below includes common stock issuable upon
exercise of two different warrants. Those shares of common stock underlying the
two different warrants are being registered pursuant to the registration
statement of which this prospectus is a part. The first of the two different
warrants becomes exercisable for one-half of the shares of common stock shown in
the third column of the following table if as of August 15, 2000, the
registration statement of which this prospectus is a part has not been declared
effective and the listing application for the related common stock has not been
accepted. The second warrant becomes exercisable for the second half of the
shares shown in the third column of the following chart if as of November 15,
2000, these two conditions are not met. If the two conditions are met prior to
August 15, 2000, then all of the warrants will terminate and the shares will not
be available for sale pursuant to this prospectus and the related registration
statement. If the two conditions are met after August 15, 2000, but prior to
November 15, 2000, then the second warrant will terminate and only half of the
shares purchasable under the warrants will be available for sale pursuant to
this prospectus and the related registration statement. If the two conditions
are met after November 15, 2000, all of the shares purchasable under the
warrants will be available for sale pursuant to this prospectus and registration
statement.
10
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Outstanding
Number of Shares of Common No. of Shares
Number of Shares of Shares Stock Beneficially
Common Stock Issuable Beneficially Owned
Beneficially Owned Prior Under Shares Owned Prior to Following
Name to Offering(1) Warrants Offered(6) Offering Offering(7)
- ---- -------------- -------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Raptor Global Portfolio, Ltd. (2) 1,875,000 248,920 2,115,820 14.2%
Altar Rock Fund, L.P. (2) 1,875,000 1,080 9,180 14.2%
Ronald A. Santella 62,500 8,333 70,833 *
Anthony Kamin 62,500 8,333 70,833 *
Ritchie Capital Management, LLC (3) 1,750,000 33,333 283,333 9.9%
RC Capital, LLC (3) 1,750,000 33,333 283,333 9.9%
RAM Trading, Ltd. (3) 1,750,000 166,668 1,416,668 9.9%
SI Venture Fund II, L.P. (4) 2,380,500 62,500 531,300 16.0%
Apex Investment Fund IV, L.P. (5) 1,939,450 60,620 514,960 13.5%
Apex Strategic Partners IV, L.L.C. (5) 1,939,450 1,880 15,980 13.5%
</TABLE>
1. Includes shares issued or issuable upon conversion of Series A
and Series B Preferred Stock.
2. Because Raptor Global Portfolio, Ltd. and Altar Rock Fund, L.P.
are affiliates of each other under applicable securities laws,
the percentage of outstanding shares of common stock beneficially
owned includes all of the shares owned by both entities.
3. Because Ritchie Capital Management, LLC, RC Capital, LLC and RAM
Trading, Ltd. are affiliates of each other under applicable
securities laws, the percentage of outstanding shares of common
stock beneficially owned includes all of the shares owned by each
entity. Pursuant to letter agreements between the foregoing
entities and us, these entities disclaim any beneficial ownership
in excess of 9.9%.
4. N. Adam Rin serves as one of our directors and is a managing
member of SI Venture Management II, L.L.C., the general partner
of SI Venture Fund II, L.P.
5. Because Apex Investment Fund IV, L.L.C. and Apex Strategic
Partners IV, L.P. are affiliates of each other under applicable
securities laws, the percentage of outstanding shares of common
stock beneficially owned includes all of the shares owned by both
entities.
6. Includes only shares of common stock issued or issuable upon
conversion of Series B Preferred Stock and exercise of certain
warrants.
7. Because the selling shareholders may offer all or some of the
common stock pursuant to the offering contemplated by this
prospectus, no estimate can be given as to the number of shares
of common stock that will be held by the selling shareholders
after completion of this offering. See "Plan of Distribution."
* less than one percent of our outstanding shares of common stock
11
<PAGE>
PLAN OF DISTRIBUTION
The shares of common stock offered under this prospectus may be sold
from time to time by the selling shareholders or persons to whom the selling
shareholders have assigned or transferred their shares after the date of this
prospectus. We will bear all costs, expenses and fees incurred in connection
with the registration of the shares offered by this prospectus. The selling
shareholders will bear only brokerage commissions, selling commissions,
underwriting fees and stock transfer taxes applicable to the shares sold by such
selling shareholder and all fees and disbursements of counsel for the selling
shareholders in excess of $20,000 attributable to the sale of their shares.
Selling shareholders may sell shares from time to time in one or more
types of transactions, including block transactions, in the over-the-counter
market or in the Nasdaq SmallCap Market, in negotiated transactions, through put
or call options on the shares and through short sales of shares. Shares may be
sold at market prices prevailing at the time of sale or at negotiated prices.
Selling shareholders may sell shares directly to purchasers or to or through
broker-dealers as principals or agents. These broker-dealers may be compensated
through discounts, concessions or commissions from the selling shareholders or
the purchasers of the shares. Selling shareholders also may resell all or a
portion of the shares in open market transactions in reliance upon Rule 144
under the Securities Act of 1933 rather than under this prospectus, provided
they meet the criteria and conform to the requirements of Rule 144. The selling
shareholders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their shares, nor is there an underwriter or coordinating broker
acting in connection with the proposed sale of shares by the selling
shareholders.
In connection with the issuance and sale of the shares of Series B
Preferred Stock that are convertible into the shares offered under this
prospectus, the selling shareholders agreed not to sell any of the shares
until the earlier of four months after the registration statement is declared
effective or November 1, 2000. Each selling shareholder also agreed if it has
not sold all the shares offered hereunder at the time of any underwritten
public offering of our securities and if it chooses not to sell all of its
shares in that underwritten public offering, it would enter into an agreement
pursuant to which that selling shareholder will not transfer or dispose of
its shares for a period specified by the underwriter (but not in excess of
180 days), provided that other shareholders with registration rights and all
of our officers and directors enter into similar agreements.
The selling shareholders and any broker-dealers that act in connection
with the sale of shares might be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act of 1933. We have agreed to indemnify each
selling shareholder against particular liabilities, including liabilities
arising under the Securities Act of 1933 and the selling shareholders have
agreed to indemnify us against certain liabilities, including liabilities
arising under the Securities Act of 1933.
Because selling shareholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act of 1933, the selling
shareholders will be subject to the prospectus delivery requirements of the
Securities Act of 1933. We have informed the selling shareholders that Rule
10b-5 and the anti-manipulative provisions of Regulation M promulgated under the
Exchange Act may apply to their sales in the market.
DESCRIPTION OF SECURITIES TO BE REGISTERED.
Our authorized capital stock consists of 50,000,000 shares of common
stock, par value $.01 per share, and 5,000,000 shares of preferred stock, par
value $.01 per share. The selling shareholders may offer up to 5,312,240 shares
of common stock issuable upon conversion of the Series B Preferred Stock and
exercise of certain warrants pursuant to this prospectus.
12
<PAGE>
As of March 31, 2000, there were 12,862,841 shares of common stock
outstanding and held of record by shareholders.
VOTING RIGHTS. Holders of common stock are entitled to one vote for
each share held on all matters submitted to a vote of shareholders and do not
have cumulative voting rights. Holders of preferred stock are entitled to the
number of votes equal to the number of shares of common stock into which their
preferred stock may be converted.
DIVIDEND RIGHTS AND POLICY. Holders of common stock are entitled to
receive dividends declared by our Board of Directors out of funds legally
available, subject to any preferential dividend rights of any outstanding
preferred stock. We have not paid any cash dividends on our common stock to date
and do not anticipate payment of cash dividends in the future. We are required
to obtain the approval of the holders of the Series A and Series B Preferred
Stock before declaring any dividends on the common stock as long as certain
amounts of the Series A Preferred Stock and Series B Preferred Stock remain
outstanding.
LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding up of
our business, the holders of common stock are entitled to receive our net assets
available after the payment of all debts and other liabilities, subject to the
prior rights of any outstanding preferred stock.
OTHER RIGHTS; EFFECT OF PREFERRED STOCK ISSUANCES. Holders of the
common stock have no preemptive, subscription, redemption or conversion rights.
The outstanding shares of common stock are, when issued in consideration for
payment thereof, fully paid and nonassessable. The rights, preferences and
privileges of holders of common stock are subject to the rights of the holders
of shares of any series of preferred stock which we may designate and issue in
the future.
Our Board of Directors is authorized, without further shareholder
approval, to issue from time to time up to an aggregate of 5,000,000 shares of
preferred stock in one or more series and to fix or alter the designation,
powers, preferences and rights of each such series and the qualifications,
limitations or restrictions thereof, including the dividend rights, dividend
rates, conversion rights, voting rights, rights and terms of redemption
(including sinking fund provisions), redemption price or prices, and liquidation
preferences of any wholly unissued series of preferred stock and to establish
from time to time the number of shares constituting any series or designations
of series and to increase and decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding.
The ability of the Board of Directors to establish the rights of and to
issue substantial amounts of preferred stock without the need for shareholder
approval, while providing desirable flexibility in connection with raising
capital, possible acquisitions or other corporate purposes, may have the effect
of discouraging, delaying or preventing a change in control.
We have issued 53,451 shares of Series A Preferred Stock to a group of
five investors and have issued 46,875 shares of Series B Preferred Stock to a
group of ten investors. The shares of common stock offered under this prospectus
will result from the conversion of the Series B Preferred and from the exercise
of certain warrants described in this prospectus.
ANTI-TAKEOVER EFFECTS OF VARIOUS PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE
OF INCORPORATION AND BYLAWS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to some exceptions, Section 203 prohibits a publicly
held Delaware corporation from engaging in
13
<PAGE>
a "business combination" with an "interested shareholder" for a period of three
years after the date of the transaction in which the person became an interested
shareholder, unless the interested shareholder attained that status with the
approval of the Board of Directors or unless the business combination is
approved in a prescribed manner. A "business combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
interested shareholder. Subject to various exceptions, an "interested
shareholder" is a person who, together with affiliates and associates, owns, or
within three years did own, 15% or more of the corporation's voting stock. This
statute could prohibit or delay the accomplishment of mergers or other takeovers
or change in control attempts with respect to us and, accordingly, may
discourage attempts to acquire us.
In addition, various provisions of our Amended and Restated Certificate
of Incorporation, as amended, referred to as our "certificate of incorporation,"
and bylaws, which provisions are summarized in the following paragraphs, may be
deemed to have an anti-takeover effect and may delay, defer or prevent a tender
offer or takeover attempt that a shareholder might consider in its best
interest, including those attempts that might result in a premium over the
market price for the shares held by shareholders.
CLASSIFICATION OF THE BOARD OF DIRECTORS; REMOVAL OF DIRECTORS. Our
certificate of incorporation provides that our directors are divided into 3
classes serving 3 year terms. Our certificate of incorporation also provides
that any director or the entire Board of Directors may be removed only for cause
and by the affirmative vote of the holders of at least 66 2/3% of the voting
power of all then outstanding shares of the voting stock. These provisions may
deter a shareholder from removing incumbent directors and simultaneously gaining
control of the Board of Directors by filling the vacancies created by this
removal with its own nominees.
SHAREHOLDER ACTION; SPECIAL MEETING OF SHAREHOLDERS. Our certificate of
incorporation provides that shareholders may not take action by written consent.
The bylaws further provide that special meetings of shareholders may be called
by:
- shareholders entitled to cast 25% of all votes entitled
to be cast at the meeting who have requested the
meeting in writing and have delivered the request to
us; or
- the Series A Preferred shareholders who own fifteen
percent (15%) of all outstanding voting shares or
- the Series B Preferred shareholders who own fifteen
percent (15%) of all outstanding voting shares.
-
The request must include various additional information about the requesting
shareholders and the matters to be considered at the meeting. The requesting
shareholders are also required to pay us reasonable estimated costs of preparing
and mailing the notice of meeting. Furthermore, no special meeting may be called
to consider any matter which is substantially the same as a matter voted on at
any special meeting of shareholders held during the prior 12 months unless the
meeting is requested by shareholders entitled to cast a majority of all votes
entitled to be cast at the meeting.
ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS FOR ANNUAL
MEETINGS AND DIRECTOR NOMINATIONS. Our bylaws provide that shareholders seeking
to bring business before an annual meeting of shareholders or to nominate
candidates for election as directors must provide timely notice thereof in
writing and must be a shareholder of record of a class of securities entitled to
vote on the business the shareholder is proposing both at the time of giving the
notice and on the record date for the annual meeting. A shareholder's notice
must be given by certified U.S. Mail postage prepaid and return receipt
requested and addressed to our Secretary at our principal executive offices. To
be timely in the case of a shareholder proposal, the notice must be received not
less than 120 days prior to the anniversary of the date of our notice of annual
meeting for the previous year's annual shareholders meeting, unless the date
14
<PAGE>
of the annual shareholders meeting has been changed to be more than 30 calendar
days from the date of the prior year's meeting, in which case such notice by the
shareholder must be received 60 days prior to the annual meeting of
shareholders. To be timely in the case of a director nomination, the
shareholder's notice must be received not less than 120 days prior to the
anniversary of the date of our notice of annual meeting for the previous year's
annual meeting of shareholders:
- on or after April 1st and before May 1st of the year in
which the meeting will be held if the meeting is to be
an annual meeting and the following bullet point is not
applicable; or
- not less than 60 days before an annual meeting, if the
date of the annual meeting has been changed by more
than 30 days; or
- not later than the close of business on the tenth day
following the day on which notice of a special meeting
of shareholders called for that purpose of electing
directors is first given to shareholders. The bylaws
also specify certain requirements as to the form and
content of the shareholder's notice. These provisions
may preclude shareholders from bringing matters before
an annual meeting of shareholders or from making
nominations for directors.
AUTHORIZED BUT UNISSUED SHARES. Our authorized but unissued shares of
common stock and preferred stock are available for future issuance without
shareholder approval, subject to various limitations as may be imposed by the
securities exchange or quotation system on which the shares are listed. These
additional shares may be utilized for a variety of corporate purposes, including
future offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued and unreserved
common stock and preferred stock could make more difficult or discourage an
attempt to obtain control of us by means of a proxy contest, tender offer,
merger or otherwise.
SUPERMAJORITY VOTE ON CERTAIN MATTERS. The Delaware General Corporation
Law provides generally that the affirmative vote of a majority of the shares
entitled to vote on any matter is required to amend a corporation's certificate
of incorporation or bylaws, unless a corporation's certificate of incorporation
or bylaws, as the case may be, requires a greater percentage. Our certificate of
incorporation requires the affirmative vote of the holders of at least 66 2/3%
of the voting power of all the then outstanding shares of voting stock, voting
as a single class, to alter or amend Article 5 (on the Board of Directors),
Article 6 (establishing such supermajority requirement), Article 8 (reserving to
us the right to amend or repeal the Certificate) or Article 9 (limiting
liability and providing for indemnification of directors, officers and
employees) of our certificate of incorporation.
TRANSFER AGENT AND REGISTRAR. Our transfer agent and registrar for the
common stock is Corporate Stock Transfer, Inc.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. The
following documents that we filed with the SEC pursuant to the Securities
Exchange Act of 1934 are incorporated herein by reference and are delivered,
without charge, with this prospectus:
1. Annual Report on Form 10-KSB/A for the fiscal year ended December
31, 1999; and
15
<PAGE>
2. Annual Report on Form 10-KSB for the fiscal year ended December
31, 1999, except for Item 7 of that report and the consolidated
financial statements, which have been amended to include the
conformed signature of the independent accountants.
We also incorporate by reference in this prospectus additional
documents that we may file with the Securities and Exchange Commission under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after
the date of this prospectus. These include periodic reports, such as annual
reports on Form 10-KSB, quarterly reports on Form 10-QSB and current reports on
Form 8-K.
You may obtain the documents incorporated by reference as described
below. You may also request a copy of these filings, at no cost, from us by
writing or telephoning us at:
SOFTLOCK.COM, INC.
CORPORATE SECRETARY
FIVE CLOCK TOWER PLACE, SUITE 440
MAYNARD, MASSACHUSETTS 01754
(978) 461-5940
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549 and its public reference rooms in New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public from
the SEC's website at "http://www.sec.gov."
This prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information or representations provided or
incorporated by reference in this prospectus. We have authorized no one to
provide information other than that provided or incorporated by reference in
this prospectus. We have authorized no one to provide you with different
information. We are not making an offer of shares in any state where the offer
is not permitted. You should not assume that the information in this prospectus
or any document incorporated by reference herein is accurate as of any date
other than the date on the front of the document.
INDEMNIFICATION
Insofar as indemnification arising under Securities Act of 1933 may be
permitted to directors, officers or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has been informed that in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
VALIDITY OF SECURITIES OFFERED
The validity of the common stock offered pursuant to this prospectus
will be passed upon for us by McGuire, Woods, Battle & Boothe LLP, Tysons
Corner, Virginia. McGuire, Woods, Battle & Boothe LLP owns 3,520 shares of the
common stock. No additional shares of common stock will be issued to McGuire,
Woods, Battle & Boothe LLP in connection with this offering.
EXPERTS
The consolidated financial statements incorporated in the
prospectus, which is part of this registration statement, by reference from
our Annual Report on Form 10-KSB/A for the year ended December 31, 1999 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated
16
<PAGE>
herein by reference (which report expressed an unqualified opinion and includes
an explanatory paragraph referring to the restatement of our 1998 financial
statements), and has been so incorporated in reliance upon the report of such
firm given upon that their authority as experts in accounting and auditing.
17
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN
THIS DOCUMENT OR OTHER INFORMATION TO WHICH THIS 5,312,240 SHARES
DOCUMENT REFERS. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. SOFTLOCK.COM, INC.
COMMON STOCK
TABLE OF CONTENTS ------------------
PAGE PROSPECTUS
Summary...........................................i
Risk Factors......................................1 ------------------
Forward-Looking Statements.......................10
Use of Proceeds...................................10
Selling Shareholders..............................10
Plan of Distribution..............................12
Description of Securities to be Registered........12
Incorporation of Certain Information by
Reference.......................................15
Indemnification...................................16
Validity of Securities Offered....................16
Experts...........................................16
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following expenses will be paid by SoftLock.com, Inc. (the
"Company" or "SoftLock") in connection with the distribution of the shares of
common stock registered hereby (the "Shares"). SoftLock is paying all of the
Selling Shareholders' expenses related to this offering, except the Selling
Shareholders will pay any applicable broker's commissions and expenses, transfer
taxes, as well as fees and disbursements of counsel and experts for the Selling
Shareholders in excess of $20,000. All expenses of the Company, except for the
SEC Registration Fee, are estimated:
<TABLE>
<S> <C>
SEC Filing Fees $12,610
Legal Fees and Expenses $50,000
Accounting Fees and Expenses $15,000
Printing and Engraving $ 5,000
Blue Sky Fees and Expenses $ 5,000
Transfer Agent and Registrar Fees and Miscellaneous $ 5,000
Expenses $ 2,000
--------
Total Expenses $94,610
========
</TABLE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation, through its certificate of incorporation, to eliminate
the personal liability of its directors to the corporation or its shareholders
for monetary damages for breach of fiduciary duty as a director, with certain
exceptions. The exceptions include breach of fiduciary duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, improper declarations of dividends and transactions from which
the directors derived an improper personal benefit. Section 145 of the DGCL
further establishes a corporation's power to indemnify its directors, officers,
employees or agents.
The Company's Amended and Restated Certificate of Incorporation, as
amended (the "Certificate") provides that to the extent permitted by law, the
Company shall fully indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding (whether civil, criminal, administrative or investigative) by reason
of the fact that such person is or was a director or officer of the Company, or
is or was serving at the request of the Company as a director or officer of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding.
The Certificate further provides that Company shall advance expenses
(including attorneys' fees) incurred by a director or officer in advance of the
final disposition of such action, suit or proceeding upon the receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that such director or officer is not entitled
to indemnification.
Our Bylaws further discuss the right to indemnification and provide
each person who was or is a party or is threatened to be made a party to or is
involved in any threatened, pending or completed action,
II-1
<PAGE>
suit or proceeding, whether civil, criminal, administrative or investigative and
whether by or in the right of the Company or otherwise (a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Company or is or was
serving at the request of the Company as a director, officer, employee, partner
(limited or general) or agent of another corporation or of a partnership, joint
venture, limited liability company, trust or other enterprise, including service
with respect to an employee benefit plan, shall be (and shall be deemed to have
a contractual right to be) indemnified and held harmless by the Company (and any
successor to the Company by merger or otherwise) to the fullest extent
authorized by, and subject to the conditions and (except as otherwise provided
herein) procedures set forth in DGCL, as such law may later be amended (but any
such amendment shall not be deemed to limit or prohibit indemnification rights
if such rights would have been permitted by law for acts or omissions occurring
prior to such amendment) against all expenses, liabilities and losses (including
attorneys' fees, judgments, fines, ERISA taxes or penalties and amounts paid or
to be paid in settlement) reasonably incurred by such person in connection with
the proceeding; provided, however, the Company shall indemnify any such person
seeking indemnification in connection with a proceeding initiated by such
persons only if such proceeding was authorized by the Board. Persons who are not
directors or officers of the Corporation and are not so serving at the request
of the Corporation may be similarly indemnified in respect of such service to
the extent authorized at any time by the Board. These indemnification rights
include the right to be paid in advance for expenses upon receipt of an
undertaking to repay all advanced amounts if it is later determined that such
person was not entitled to indemnification and such an undertaking is required
by the DGCL. The Bylaws state that the expenses incurred by other employees and
agents may be paid in advance upon such terms and conditions deemed appropriate
by the Board.
These rights to indemnification and advance payment of expenses are not
exclusive of any other rights to indemnification and shall continue as to a
person who has ceased to be a director, officer, employee, partner or agent.
The Bylaws give the Company the power to purchase and maintain
insurance on behalf of such persons whether or not the DGCL would give the
Company the power to indemnify such persons.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
EXHIBITS.
The following exhibits listed on the Exhibit Index on page [II-7] of
this Registration Statement have been previously filed, are filed herewith, will
be filed by amendment, or are incorporated herein by reference to other filings:
Exhibit
Number Description
3.1 Amended and Restated Certificate of Incorporation, filed with
the State of Delaware on August 3, 1998 (incorporated by
reference to Exhibit 3.1 to the Company's Current Report on
Form 8-K, dated July 28, 1998.)
II-2
<PAGE>
3.2 Amended and Restated Bylaws (incorporated by reference to
Exhibit 5 of the Company's Registration Statement on Form 8-A
filed March 15, 2000.)
3.3 Certificate of Designation of Powers, Preferences and Rights
of the Series A Preferred Stock (incorporated by reference to
Exhibit 99.4 of the Company's Current Report on Form 8-K dated
as of December 30, 1999).
3.4 Amendment No. 1 to Certificate of Designation for Series A
Preferred Stock filed with the Delaware Secretary of State as
of January 13, 2000 (incorporated by reference to Exhibit 99.2
of the Company's Current Report on Form 8-K dated as of
February 10, 2000).
3.5 The Company's Certificate of Correction to Certificate of
Designation of Powers, Preferences and Rights of the Series B
Preferred Stock, (incorporated by reference to Exhibit 99.5 of
the Company's Current Report on Form 8-K dated as of February
10, 2000).
5.1 Opinion of McGuire, Woods, Battle & Boothe LLP.*
10.1 Amended and Restated Shareholders' and Rights Agreement
(incorporated by reference to Exhibit 99.3 of the Company's
Current Report on Form 8-K dated as of February 10, 2000).
10.2 Series B Preferred Stock and Warrant Purchase Agreement by and
among the purchasers listed on the Schedule of Purchasers,
SoftLock, Inc. and SoftLock Services, Inc. (incorporated by
reference to Exhibit 99.4 of the Company's Current Report on
Form 8-K dated as of February 10, 2000).
10.3 Form of Warrant exercisable under certain conditions on August
15, 2000 (incorporated by reference to Exhibit 99.7 of the
Company's Current Report on Form 8-K dated as of February 10,
2000).
10.4 Form of Warrant exercisable under certain conditions on
November 15, 2000 (incorporated by reference to Exhibit 99.8
of the Company's Current Report on Form 8-K dated February 10,
2000).
23.1 Consent of Independent Accountants*
23.2 Consent of McGuire, Woods, Battle & Boothe LLP (included in
opinion filed as Exhibit 5.1)
24 Power of Attorney (included in signature page to this
registration statement)
* Included herewith
II-3
<PAGE>
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. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective 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.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the Registration Statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
SEC by the Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
(c) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934 and where interim financial information required to be presented by Article
3 of Regulation S-K is not set forth in the prospectus, to deliver or cause to
be delivered to each person to whom the prospectus is sent or given the latest
quarterly report that is specifically incorporated by referenced in the
prospectus to provide such interim financial information.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and has duly caused this registration
statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Maynard, State of Massachusetts, on
this 14th day of April, 2000.
SOFTLOCK.COM, INC.
By: /s/ Keith Loris
----------------------------------------------
Keith Loris, President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or amendment thereto has been signed by the following
persons in the capacities and on the date indicated. Each person whose signature
appears below hereby appoints any of Keith Loris, Douglas R. Johnson, Francis J.
Knott and Scott Griffith and each of them singly, such person's true and lawful
attorneys, with full power to them and each of them to sign, for such person and
in such person's name and capacity indicated below, any and all amendments to
this registration statement, hereby ratifying and confirming such person's
signature as it may be signed by said attorney to any and all amendments.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Keith Loris
- ------------------------------ Director, President April 14, 2000
Keith Loris and Chief Executive Officer
/s/ Douglas R. Johnson
- ------------------------------ Executive Vice President April 14, 2000
Douglas R. Johnson and Chief Financial Officer
(principal accounting and
financial officer)
/s/ Francis J. Knott
- ------------------------------ Chairman of the Board April 14, 2000
Francis J. Knott
/s/ Geoffrey de Lesseps
- ------------------------------ Director April 14, 2000
Geoffrey de Lesseps
/s/ Richard N. Gold
- ------------------------------ Director April 14, 2000
Richard N. Gold
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Scott Griffith
- ------------------------------ Director April 14, 2000
Scott Griffith
/s/ Jonathan Schull
- ------------------------------ Director April 14, 2000
Jonathan Schull
/s/ Leigh Michl
- ------------------------------ Director April 14, 2000
Leigh Michl
/s/ N. Adam Rin
- ------------------------------ Director April 14, 2000
N. Adam Rin
</TABLE>
II-7
<PAGE>
EXHIBITS INDEX
Exhibit
Number Description
3.1 Amended and Restated Certificate of Incorporation, filed with
the State of Delaware on August 3, 1998 (incorporated by
reference to Exhibit 3.1 to the Company's Current Report on
Form 8-K, dated July 28, 1998.)
3.2 Amended and Restated Bylaws (incorporated by reference to
Exhibit 5 of the Company's Registration Statement on Form 8-A
filed March 15, 2000.)
3.3 Certificate of Designation of Powers, Preferences and Rights
of the Series A Preferred Stock (incorporated by reference to
Exhibit 99.4 of the Company's Current Report on Form 8-K dated
as of December 30, 1999).
3.4 Amendment No. 1 to Certificate of Designation for Series A
Preferred Stock filed with the Delaware Secretary of State as
of January 13, 2000 (incorporated by reference to Exhibit 99.2
of the Company's Current Report on Form 8-K dated as of
February 10, 2000).
3.5 The Company's Certificate of Correction to Certificate of
Designation of Powers, Preferences and Rights of the Series B
Preferred Stock, (incorporated by reference to Exhibit 99.5 of
the Company's Current Report on Form 8-K dated as of February
10, 2000).
5.1 Opinion of McGuire, Woods, Battle & Boothe LLP.*
10.1 Amended and Restated Stockholders' and Rights Agreement
(incorporated by reference to Exhibit 99.3 of the Company's
Current Report on Form 8-K dated as of February 10, 2000).
10.2 Series B Preferred Stock and Warrant Purchase Agreement by and
among the purchasers listed on the Schedule of Purchasers,
SoftLock, Inc. and SoftLock Services, Inc. (incorporated by
reference to Exhibit 99.4 of the Company's Current Report on
Form 8-K dated as of February 10, 2000).
10.3 Form of Warrant exercisable under certain conditions on August
15, 2000 (incorporated by reference to Exhibit 99.7 of the
Company's Current Report on Form 8-K dated as of February 10,
2000).
10.4 Form of Warrant exercisable under certain conditions on
November 15, 2000 (incorporated by reference to Exhibit 99.8
of the Company's Current Report on Form 8-K dated February 10,
2000).
16 Letter on Change in Certifying Accountant (incorporated by
reference to Exhibit 16 of the Company's Current Report on
Form 8-K dated as of January 7, 2000).
23.1 Consent of Independent Accountants*
<PAGE>
23.2 Consent of McGuire, Woods, Battle & Boothe LLP (included in
opinion filed as Exhibit 5.1)
24. Power of Attorney (included in signature page to this
registration statement)
* Included herewith
<PAGE>
April 14, 2000
Page 1
EXHIBIT 5.1
MCGUIRE, WOODS, BATTLE & BOOTHE LLP
TYSONS CORNER
1740 TYSONS BOULEVARD, SUITE 1800
MCLEAN, VIRGINIA 22102-3892
(703) 712-5000 FAX (703) 712-5050
April 14, 2000
Board of Directors
SoftLock.Com
Five Clock Tower Place, Suite 440
Maynard, Massachusetts 01754
Ladies and Gentlemen:
We are acting as counsel to SoftLock.Com, a Delaware corporation (the
"Company"), in connection with the preparation, execution and filing with the
Securities and Exchange Commission (the "Commission"), under the Securities
Act of 1933, as amended (the "Act"), of a Registration Statement on Form S-2
(the "Registration Statement") relating to the offer and sale pursuant to the
Registration Statement, by the Selling Shareholders identified in the
Registration Statement, of up to 5,312,240 shares (the "Shares") of Common
Stock, par value $0.01 per share, of the Company. The Shares are issuable
upon conversion of the Series B Preferred Stock and upon the exercise of two
different Warrants (the "Warrants"), as further described in the Registration
Statement. This opinion letter is furnished to you for filing with the
Commission pursuant to Item 601 of Regulation S-K promulgated under the Act.
In reaching the opinion stated in this letter, we have reviewed originals
of copies of the Registration Statement, the Articles of Incorporation and
Bylaws of the Company, both as amended to date, and such other documents as
we have considered relevant. We have assumed that (i) all information
contained in all documents reviewed by us is correct, (ii) all signatures on
all documents reviewed by us are genuine, (iii) all documents submitted to us
as originals are true and complete copies of the originals thereof, (iv) each
natural person signing any document reviewed by us had the legal capacity to
do so and (v) each natural person signing in a representative capacity any
document reviewed by us had authority to sign in such capacity.
Based upon the foregoing, it is our opinion the Shares, when issued in
the manner described in the Registration Statement, will be duly and validly
issued, fully paid and nonassessable.
<PAGE>
April 14, 2000
Page 2
The opinion expressed above is limited to matters governed by the laws
of the State of Delaware. We express no opinion herein about the effect of
federal or state securities laws or the laws of any other jurisdiction.
We hereby consent to the use of this opinion letter as Exhibit 5.1 to
the Registration Statement and to the use of our name under the heading
"Validity of Securities Offered" therein. In giving this consent, we do not
admit that we are in the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Commission
promulgated thereunder.
This opinion letter speaks as of the date hereof. We disclaim any duty
to advise you regarding any change subsequent to the date hereof in, or to
otherwise communicate with you with respect to, the matters addressed therein.
Very truly yours,
/s/ MCGUIRE, WOODS, BATTLE & BOOTHE LLP
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of SoftLock.com, Inc. on Form S-2 of our report dated March 13, 2000 (which
report expresses an unqualified opinion and includes an explanatory paragraph
relating to the restatement of the Company's 1998 financial statements)
appearing in the Annual Report on Form 10-KSB/A of Softlock.com, Inc. for the
year ended December 31, 1999 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
April 14, 2000
