<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) September 20, 1996
INSCI CORP.
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(Exact name of Registrant as specified in its Charter)
DELAWARE
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(State of other jurisdiction of incorporation)
1-12966 06-1302773
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Commission File No. I.R.S. Employer Identification
Two Westborough Business Park,
Westborough, MA 01581
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Address of principal Zip Code
executive offices
(508) 870-4000
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Registrant's telephone number,
including area code
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ITEM 5. OTHER EVENTS
The Registrant (the "Company") on September 20th, 1996, completed a
Private Placement financing under Regulation "D" for the sum of $1,350,000. The
Company issued 1,350,000 shares of 10% Convertible Preferred Stock to accredited
investors at $1.00 per share. Each 10% convertible share of Preferred Stock is
convertible into a share of Common Stock of the Company for a period of three
years, at a 30% discount to the trading market of the Company's Common Stock at
the ten day average price between the bid and asked at the time of conversion.
The conversion price will be limited to a maximum of $8.00 per share. The 10%
Preferred Stock is automatically converted into shares of Common Stock at the
expiration of the three year term. The Preferred Stock may not be converted for
a period of six months from completion of the offering. The Company has granted
cost free registration rights to the holders of the Preferred Stock who have
converted into Common Stock.
The Company entered into an agreement with Amerivet/Dymally Securities,
Inc. to act as Placement Agent for the 10% Convertible Preferred Stock and paid
as compensation to the Placement Agent 30,000 shares of restricted Common Stock
with cost free registration rights in addition to $23,000 in commissions and
112,000 options to purchase 112,000 shares of Common Stock at $5.00 per share
for a period of 3 years expiring October 1999.
Additionally, the Company paid to the Placement Agent's counsel the sum
of $25,000 for legal fees and expenses.
The Company has filed a Form D with respect to the Placement with the
Securities and Exchange Commission.
Annexed hereto and marked Exhibit 1 is a copy of the of the Term Sheet
with respect to the Offering.
EXHIBIT
(1) Copy of Term Sheet with respect to the Offering.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: Westborough, Massachusetts
September 20, 1996
INSCI CORP.
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(Registrant)
/s/ ROGER KUHN
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ROGER KUHN, CHIEF FINANCIAL OFFICER
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CONFIDENTIAL COPY NUMBER _____________________
RECIPIENTS' NAME: _______________
INSCI CORP.
A DELAWARE CORPORATION ("INSCI")
10% CONVERTIBLE PREFERRED STOCK,
$.01 PAR VALUE PER SHARE ("10% PREFERRED STOCK")
$1.00 PER SHARE
ANNUAL 10% COMMON STOCK DIVIDENDS ARE PAYABLE SEMI-ANNUALLY IN THE
FORM OF COMMON STOCK BASED UPON THE MARKET PRICE AT THE TIME
DIVIDEND PAYMENTS ARE DUE AND PAYABLE;
INSCI HAS THE OPTION IN LIEU OF THE PAYMENT
OF A STOCK DIVIDEND, OF MAKING AN 8%
ANNUAL DIVIDEND PAYMENT IN CASH ON A
SEMI-ANNUAL BASIS.
Minimum: Offering $1,000,000
(1,000,000 shares of 10% Preferred Stock $.01 Par Value $1.00 per share)
Maximum: Offering $1,350,000
(1,350,000 shares of 10% Preferred Stock $.01 Par Value $1.00 per share)
PRIVATE PLACEMENT TERM SHEET AND EXHIBITS
FOR ACCREDITED INVESTORS ONLY
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
RESTRICTED TRANSFERABILITY AND MAY INVOLVE SUBSTANTIAL DILUTION. SEE "RISK
FACTORS"
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH OR APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
REGULATORY AUTHORITY OF ANY STATE NOR HAS THE SECURITIES EXCHANGE COMMISSION OR
ANY STATE REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PRIVATE PLACEMENT TERM SHEET AND THE EXHIBITS HERETO. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THIS PRIVATE PLACEMENT TERM SHEET DOES NOT
CONSTITUTE AN OFFER IS ANY JURISDICTION IN WHICH AN OFFER IS NOT AUTHORIZED.
THE INFORMATION CONTAINED HEREIN AND IN ANY ADDITIONAL EXHIBITS HERETO
IS CONFIDENTIAL, CONTAINS NON-PUBLIC INFORMATION, AND IS INTENDED ONLY FOR THE
PERSON WHOSE NAME APPEARS ABOVE AND SUCH PERSON'S ADVISORS, IF ANY.
<TABLE>
<CAPTION>
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Price Estimated Selling Net Proceeds (1)
Commissions (2) & (2)
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<S> <C> <C> <C>
Total Minimum 10% Preferred Stock $1,000,000 $100,000 $1,000,000
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Total Maximum 10% Preferred Stock $1,350,000 $135,000 $1,350,000
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</TABLE>
(1) INSCI will offer the 10% Preferred Stock (in the manner described herein)
(the 10% Preferred Stock, and the Common Stock issuable upon conversion of,
or payment of dividends on the 10% Preferred Stock collectively are herein
referred to as the "Securities") only to "accredited investors" (as that
term is defined in Regulation D promulgated under the Securities Act of
1933, as amended (the "Act")) on a "best efforts, minimum maximum basis. The
minimum Preferred Stock offered hereby, on a minimum 1,000,000 shares and on
a maximum of 1,350,000 shares as to the remaining Preferred Stock offered
hereby, through the efforts of INSCI'S executive officers in those
jurisdictions where sales by an officer or a director of the issuer are
permitted by law. INSCI also reserves the right to pay selling commissions
to selected licensed broker-dealers who are members of the National
Association of Securities Dealers, Inc. ("NASD"), and who are qualified and
eligible to accept such commissions within the state or other jurisdiction
in which such securities are sold and/or such commission is paid. The
Preferred Stock will entitle the holder or holders to convert the shares of
Preferred Stock into shares of Common Stock upon exercise of the right of
conversion. The right of conversion permits the right to convert for a
period of three (3) years from purchase of the Preferred Stock at any time
except for the first six (6) months (180 days from the acceptance of the
subscription.) The subscriber may convert all or any part of its Preferred
Stock $.01 Par Value into shares of Common Stock of INSCI at a 30% discount
to the average market price of the bid and ask for the ten (10) trading days
prior to conversion. The number of shares of Common Stock will be determined
by the share price as quoted by the National Association of Securities
Dealers Automatic Quotation ("NASDAQ") prior to the date of conversion.
INSCI at its option will pay an annual dividend of 10% on a semi-annual
basis of the Preferred Stock in shares of Common Stock or an annual dividend
of 8% in a cash payable on a semi-annual basis. The conversion price will be
limited to a maximum of $8.00 per share after the 30% discount to market
(based upon a maximum conversion price of $11.43 per share). The Preferred
Stock issued herein will be automatically converted by the Company into
shares of Common Stock at the expiration of the three (3) year period (3
years from the purchase of the 10% Preferred Stock). In the event of a
conversion by INSCI, at the expiration of three (3) years, the number of
shares of Common Stock will be determined by the average between the bid and
ask priced for the sixty (60) previously trading days prior to the
expiration date. The offering will only be made to accredited investors (as
the Term is defined in Regulation D promulgated under the Securities &
Exchange Act of 1933) as amended ("The Act").
(2) Net Proceeds do not include expenses of the offering estimated at
approximately $25,000 for legal, accounting, printing and Blue Sky filing
fees. Additionally, Net Proceeds do not include commissions payable to
licensed broker-dealers for sales in states and jurisdictions where
permitted. Commissions on a minimum offering of $1,000,000 will be 30,000
shares of Common Stock and 100,000 options for a period of three (3) years
to purchase 100,000 shares of Common Stock at $5.00 per share. Commissions
on a maximum offering of $1,350,000 will be 30,000 shares of Common Stock
and 100,000 options for a period of three (3) years to purchase 100,000
shares Common Stock at $5.00 per share for the first $1,000,000 of a maximum
offering; on the additional $350,000 of a maximum offering, commissions,
will include $23,000 and an additional 12,000 options for a period of three
(3) years to purchase 12,000 shares of Common Stock at $5 per share.
Commission of cash and additional options on a subscription between the
minimum and maximum offering will be determined on a pro-rata basis. INSCI
will grant cost free Registration Rights for the shares of Common Stock and
the shares underlying the stock options issued to the licensed
broker-dealers that are eligible to receive commissions.
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REPRODUCTION OF ANY PORTION OF THESE
MATERIALS IS STRICTLY PROHIBITED
JULY 17, 1996
INFORMATION FOR RESIDENTS OF CERTAIN STATES
NASSA UNIFORM LEGEND
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING. INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
CONFIDENTIAL PRIVATE PLACEMENT TERM SHEET. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE
SECURITIES LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
NOTICE TO CONNECTICUT RESIDENTS
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SECTION 36-485 OF THE
CONNECTICUT UNIFORM SECURITIES ACT BUT WILL BE SOLD IN RELIANCE ON AN EXEMPTION
FROM SUCH REGISTRATION SET FORTH IN SECTION 36-490(b)(9)(A) OF SAID ACT AND
REGULATIONS PROMULGATED THEREUNDER. THE SECURITIES CANNOT BE RESOLD WITHOUT
REGISTRATION UNDER SECTION 36-485 OF SAID ACT OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE PURSUANT TO SECTION 36-490 OF SAID ACT.
NOTICE TO NEW YORK RESIDENTS
THIS MEMORANDUM HAS NOT BEEN REVIEWED BY THE ATTORNEY GENERAL OF THE STATE
OF NEW YORK PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE STATE OF
NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE>
THE OFFERING
THE COMPANY: INSCI Corp. ("INSCI" or the "Company") develops,
markets and supports computer software that utilizes
optical disc storage technology together with
computer hardware to archive, index, retrieve, print
and fax computer generated documents, such as
invoices, statements, reports and transaction data.
The Company's software, marketed under the name
COINSERV, utilizes a customer's existing host
computer and computer network to link powerful
"server" computers, which perform automated document
indexing and optical disk storage functions, with the
customer's existing network of "client" computers,
which are used by the customer's employees to search,
retrieve and distribute archived documents. INSCI
emphasizes sales of its multiple user client/server
software, but also sells software for single user
stand-alone software products together with third
party manufactured hardware, optical storage devices
and server computers. INSCI's COINSERV products
facilitate the storage and retrieval of computer
output data on optical disks as an alternative to
computer paper, computer output microfilm or
microfiche (COM) and magnetic disk storage. COINSERV
computer systems combine high volume optical disk
storage capabilities and high performance indexing
software into both standalone and network based
business computer systems. INSCI provides its
products primarily to commercial, financial,
governmental, educational and other institutions
which utilize the systems to index, store, retrieve
and electronically distribute computer generated
documents such as customer invoices, statements,
reports and transaction data.
SECURITIES BEING OFFERED: The offering consists of a minimum of 1,000,000
shares and a maximum of 1,350,000 shares of 10%
Preferred Stock $.01 par value at $1.00 per share for
a minimum of $1,000,000 and a maximum of $1,350,000.
The 10% Preferred Stock may be converted at the
option of the holder during a three (3) year period
commencing from the acceptance of the subscription by
the Company (the "Anniversary Date"), however, the
10% Preferred Stock may not be converted for a period
of six (6) months from the Anniversary Date, and
thereafter is convertible at a 30% discount to the
current market price of the Common Stock of INSCI at
the time of conversion. The Preferred Stock will be
automatically converted into shares of Common Stock
by the Company three (3) years from the Anniversary
Date. The conversion price per share will be the ten
(10) prior trading day market average between the
closing bid and the closing asked price as quoted on
the NASDAQ, at the time of conversion, and the
conversion price will be limited to a maximum of
$8.00 per share taking into consideration the 30%
discount to market. The holder will receive the
benefit of any increase in the market price in excess
of $11.43 per share.
The 10% Preferred Stock dividends, at the option of
INSCI, will be payable at the Company's discretion
either by an annual Common Stock dividend of 10% in
stock payable on a semi-annual basis, or a 8% annual
cash dividend payable on a semi-annual basis, subject
to the Company's discretion.
The holder upon conversion will be entitled to
receive shares of Common Stock in INSCI which shares
have been granted cost free rights of registration to
the holder.
The Common Stock upon conversion and registration
will be subject to a sale restriction, in that a
maximum of 10% of the converted shares may be sold a
month. Subsequent to conversion and registration, if
the trading volume of INSCI Common Stock on the
NASDAQ exceeds 40,000 shares per day for a minimum of
thirty (30) consecutive trading days, the 10% monthly
sales restriction will no longer apply.
TERMS OF THE OFFERING: This offering is being made pursuant to the exemption
from registration provided by Regulation D
promulgated under the Securities Act of 1933, as
amended ("Regulation D"). All purchasers of the
Preferred Stock must be "accredited investors" as
defined in Rule 501 under Regulation D. The minimum
subscription is $25,000. The offering period will
begin as of the date hereof and will terminate on
July 30, 1996 (the "Termination Date"), unless
extended by the Company for consecutive periods of
not more than 30 days each but in no event beyond
November 1, 1996. The date of the Closing (or
Closings) is (or are) referred to as the "Closing
Date" (or "Closing Dates"). Upon receipt of the
minimum offering of $1,000,000, the Company may at
its discretion schedule a Closing Date while the
offering period is ongoing. The Company may then
schedule additional Closing Dates for additional
subscriptions received during the offering period.
All subscription payments with respect to the
Offering will be paid to the Company pending delivery
of a Certificate of 10% Preferred Stock. INSCI
intends to offer the 10% Preferred Stock in states
where INSCI is qualified under applicable Blue Sky
Laws and/or exemptions.
TERMS OF THE
PREFERRED STOCK: GENERAL. The rights, preferences and limitations of
the Preferred Stock are described generally herein
and in the summary (INSCI Corp.'s Certificate of
Amendment to Certificate of Incorporation) attached
hereto as Exhibit 1.
VOTING RIGHTS. Holders of the Preferred Stock will
not be entitled to vote except as otherwise required
by the Delaware General Corporation Law ("DGCL").
DIVIDENDS. The Preferred Stock will pay a stock
dividend of 10% per annum payable on semi-annual
basis, or in the alternative, the Company may elect
to make payment of the dividend as an annual 8% cash
dividend. If the Company elects to make dividends
payable in cash they will be payable semi-annually
out of funds legally available therefor on June 30th
and December 31st, in each year. At the option of the
Company, dividends may be paid in cash or in-kind.
Dividends in-kind shall be paid by delivery of that
number of shares of Common Stock determined by the
average of the trading market price of the shares of
Common Stock during the 10 trading days immediately
preceding a Dividend Payment Date.
CONVERSION. Each share of the Preferred Stock shall
be convertible, from time to time, at the option of
the holder, to the extent of the maximum percentage
of shares of Preferred Stock, initially acquired by
such holder into shares of Common Stock subject to
the initial six (6) month limitation as set forth
herein. Dividends will accrue on and will be paid
through the date of receipt by the Company of a
holder's notice of conversion, as provided for
herein, the Company has the option of making payments
in shares of Common Stock and/or cash dividend. In
the event that shares of Common Stock are paid by the
Company to the holder of the Preferred Stock as a
semi-annual dividend, then in that event the number
of shares of Common Stock paid by the Company will be
determined by the average of the trading market price
of shares of Common Stock during the 10 trading days
immediately preceding a dividend payment date (the
"Conversion Notice"). A Conversion Notice may be
given at any time immediately following the six (6)
month restriction period which expires 180 days after
the purchase of the 10% Preferred Stock. The
Preferred Stock will be automatically converted by
the Company into shares of Common Stock three (3)
years from the Anniversary Date.
LIQUIDATION PREFERENCE. The Preferred Stock shall
carry a liquidation preference in the amount of the
Issue Price. Upon the liquidation and winding up of
the Company for any reason, each holder of shares of
Preferred Stock shall receive, prior to any
distribution in respect of the Common Stock, a
liquidation distribution in the amount of the number
of shares of 10% Preferred Stock owned by such holder
multiplied by the Issue Price, plus the amount of all
accrued but unpaid dividends thereon.
REGISTRATION RIGHTS: The Company will use its best efforts on or before
October 31, 1996 or 90 days from closing of the
offering period, whichever is later in time, to file
a registration statement with the Securities and
Exchange Commission with respect to the shares of the
Company's Common Stock issuable upon the payment of
dividends on, or conversion of, the 10% Preferred
Stock, or upon exercise of the stock options issued
to a licensed-broker dealer eligible to receive
commissions, and use its best efforts to cause such
registration statement to become effective not later
than 90 days following the date of filing and remain
effective for a period of not less than 36 months
from the effective date thereof. INSCI agrees to file
the registration statement without cost or expense to
the holder of the Preferred Stock. Additionally, such
holders of the Common Stock will have cost free
piggyback registration rights for a period of three
years from the date of the Company's acceptance of
the Subscription.
SUBSCRIPTION AGREEMENT: Subscriptions for the Preferred Stock must be made
pursuant to a Subscription Agreement (the
"Subscription Agreement") (annexed hereto)
containing, among other provisions, representations
and warranties by the investor and the Company,
restrictions on transferability of the Securities,
the registration rights referred to above, and
indemnification relating to breaches of
representations and warranties.
OUTSTANDING INSCI
COMMON STOCK: Total shares of outstanding Common Stock prior to the
offering 3,898,691.1 Total shares of outstanding
Common Stock after the offering 4,067,441.2
Prospective investors should refer to the information
contained in the Financial statements contained in
the Company's Form 10-K for the fiscal year ended
March 31, 1996. (See Exhibits 2).
SELLING COMMISSIONS: INSCI will offer the 10% Preferred Stock on a minimum
1,000,000 share, maximum 1,350,000 share offering.
The 10% Preferred Stock will be offered through the
efforts of the Company's executive officers in those
jurisdictions where sales by an officer or a director
of the issuer are permitted by law. Commissions are
payable to a licensed broker-dealer who is a member
in good standing of the National Association of
Securities Dealers, Inc. ("NASD") and who is
qualified and eligible to receive such commissions
within the state or other jurisdiction in which such
securities are sold and/or such commission is to be
paid. In a minimum offering of $1,000,000 the Company
will pay a commission of 30,000 shares of Common
Stock and 100,000 options for a period of three (3)
years to purchase 100,000 shares of Common Stock at
$5.00 per share. Commission on a maximum offering of
$1,350,000 will be 30,000 shares of Common Stock and
100,000 options for a period of three years to
purchase 100,000 shares of Common Stock at $5.00 per
share for the first $1,000,000, on the additional
$350,000, the commission will be $23,000 and an
additional 12,000 options for a period of three (3)
years to purchase 12,000 shares at $5.00 per share.
Commissions on a subscription between the minimum and
maximum offering (the additional $350,00) will be
determined on a pro rata basis. INSCI has agreed to
grant cost-free registration rights for shares of
Common Stock and shares of Common Stock underlying
the options paid as commission as set forth herein.
USE OF PROCEEDS: Upon completion of this offering the Company will use
the net proceeds after deducting expenses payable by
the Company including legal fees and Blue Sky fees
for acquisition costs and general working capital
purposes.
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1 As of June 11, 1996, does not give effect to (I) 625,000 shares of Common
Stock issuable upon exercise of the Company's outstanding common stock
purchaser warrants; (ii) 83,335 shares of Common Stock issuable upon
exercise of the Company's outstanding 1993 Warrants; (iii) Approximately
3,998,864 shares of Common Stock issuable upon the exercise of outstanding
options granted pursuant to the Company's stock option plans in addition to
other options granted by the Board of Directors; (iv) 187,500 shares of
Common Stock issuable upon exercise of warrants granted to the underwriters
of the initial public offering of the Company's securities. (v) Excludes
shares of Common Stock issuable upon the payment of dividends on 10%
Preferred Stock; (vi) Up to 1,200,000 shares of Common Stock issuable upon
exercise of options granted to the Company's Chief Executive Officer
pursuant to the Company Stock Option Plan plus shares issuable upon exercise
of additional options which may be granted pursuant to anti-dilution
provisions; or (vii) shares of Common Stock issuable upon the conversion of
the 10% Preferred Stock which may be issued to investors to repay the
accrued and unpaid interest on the 10% Preferred Stock or; (viii) the
conversion of the 10% Preferred Stock.
2 Assuming completion of the maximum Offering and conversion of the 10%
Preferred Stock at the maximum conversion price of $8.00 per share.
Otherwise does not give effect to Common Stock and options payable as
commissions in connection with this offering, or the items listed in note
(1), which immediately precedes this item.
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