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As filed with the Securities and Exchange Commission on June 1, 2000
Registration No. 333-_______
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under the
Securities Act of 1933
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DAW TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
UTAH 87-0464280
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
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RONALD W. DAW Copies to:
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DAW TECHNOLOGIES, INC. BRIAN G. LLOYD, ESQ.
2700 SOUTH 900 WEST BRYAN T. ALLEN, ESQ.
SALT LAKE CITY, UTAH 84119 PARR WADDOUPS BROWN GEE & LOVELESS
(801) 977-3100 185 SOUTH STATE STREET, SUITE 1300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND SALT LAKE CITY, UTAH 84111
TELEPHONE NUMBER, INCLUDING AREA CODE, OF (801) 532-7840
AGENT FOR SERVICE)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement as
determined by market conditions.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE PRICE PER OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) FEE(1)
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Common Shares, $.01 par value 11,687,658(2) $1.1875 $13,879,093 $3,664
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(1) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee, based upon the average of the high and low sales prices for
the Common Shares as reported on the Nasdaq National Market on May 26, 2000.
(2) In addition, pursuant to Rule 416 of the Securities Act of 1933, this
Registration Statement covers a presently indeterminate number of Common Shares
issuable upon the occurrence of a stock split, stock dividend, or other similar
transaction.
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 SEC, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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DAW TECHNOLOGIES, INC.
11,687,658 COMMON SHARES
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Daw Technologies, Inc. ("WE," "DAW" or the "COMPANY") is a supplier of
ultra-clean manufacturing environments, or cleanrooms, to the semiconductor
industry. We are a single-source provider of the entire cleanroom system. We
design, engineer, manufacture, install and service certain principal component
systems for advanced cleanrooms. We also provide our customers with services to
integrate the design, installation and servicing of cleanrooms, including
architectural engineering and design, installation, testing, certification, tool
fit-up, and continuing on-site service and support. In addition, we manufacture
products on an OEM basis for various customers requiring precision sheet metal
fabrication or powder-coated epoxy painting.
This Prospectus relates to 11,687,658 of our Common Shares (the
"SHARES"). All of the Shares are to be sold by persons who are existing security
holders of the Company and, as a group, are identified in the section of this
Prospectus entitled "Selling Shareholders" (the "SELLING SHAREHOLDERS"). Of the
Shares, 645,462 are currently owned by one Selling Shareholder, and 472,500 are
issuable upon the exercise of the warrants to purchase Common Shares described
in the section of this Prospectus entitled "Selling Shareholders--The Preferred
Shares and the Warrants" (the "WARRANTS"). The remaining 10,569,696 Shares
represent Common Shares which may be issuable upon conversion by holders of
outstanding shares of our 3% Series A Convertible Preferred Stock (the
"PREFERRED SHARES"). Such 10,569,696 Shares constitute 218% of the Common Shares
that would have been issuable upon conversion of the Preferred Shares had all
480 outstanding Preferred Shares been converted on May 30, 2000.
In addition, pursuant to Rule 416 of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), this Prospectus and the registration statement
of which it is a part cover a presently indeterminate number of Common Shares
issuable upon the occurrence of a stock split, stock dividend, or other similar
transaction.
The Company will not receive any of the proceeds from the sale of the
Shares. In the United States, the Common Shares are listed for trading under the
symbol DAWK on the Nasdaq National Market. On May 30, 2000, the closing sale
price of the Common Shares, as reported by the Nasdaq National Market, was $1.21
per share.
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Consider carefully the risk factors beginning on page 7 in this
Prospectus before investing in the Shares being sold with this
Prospectus.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Dated May 30, 2000
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TABLE OF CONTENTS
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TABLE OF CONTENTS..............................................................................2
ABOUT THIS PROSPECTUS..........................................................................4
PROSPECTUS SUMMARY.............................................................................4
DAW TECHNOLOGIES, INC.......................................................................4
THE OFFERING................................................................................5
FORWARD-LOOKING STATEMENTS.....................................................................7
RISK FACTORS...................................................................................7
RISK FACTORS RELATED TO THE COMPANY GENERALLY...............................................7
We May Continue to Operate at a Net Loss..................................................7
We May Not Be Able to Generate or Raise Sufficient Capital to Meet Present and Future
Obligations...............................................................................7
Our Line of Credit Will Terminate on August 31, 2000, and We May Be Unable to Find
Alternative Financing.....................................................................8
The Interest Rate On Our Line of Credit Is Variable, and We Will Be Negatively Affected
By Any General Increase in Interest Rates.................................................9
Potential Customers May Decide Not to Hire The Company Based On Our Absence of Capital
or Other Real or Perceived Financial Weaknesses...........................................9
Our Balance Sheet Reflects as a Current Asset a Refundable Foreign Tax That We May Not
Be Able To Collect........................................................................9
We Are Dependent on Key Personnel.........................................................9
We Are Dependent Upon A Single Supplier, Or a Limited Group of Suppliers, For Certain
Key Components to Our Products...........................................................10
We May Be Liable Upon Withdrawal From or Termination of Our Multi-Employer Pension Plans.10
Our Operations May Lead to a Substantial Environmental Liability.........................10
RISK FACTORS RELATED TO THE CLEANROOM INDUSTRY.............................................11
We are Highly Dependent On The Semiconductor Industry, Which Is Highly Cyclical..........11
A Few Customers Tend to Account For a Large Percentage of Our Revenue Stream and Often
Do Not Need Our Products/Services On an Ongoing Basis....................................11
Even If the Semiconductor Industry Recovers and Our Orders Increase, We May Continue to
Operate At a Loss Because of Small Profit Margins........................................11
Our Cleanroom Products May Become Obsolete Because of Changes in the Semiconductor
Industry.................................................................................12
We Face Competition From Other Single-Source and Component Providers of Cleanrooms and
Cleanroom Components.....................................................................12
Certain Patents Related to Our Cleanrooms Will Expire in the Near Future, and Pending
Patent Applications May Be Denied........................................................12
RISK FACTORS RELATED TO OUR ATTEMPT TO EXPAND INTO NEW INDUSTRIES..........................13
We May Be Unable to Diversify Our Revenue Base...........................................13
We Have Completed A Limited Number of Orders In the Air-Entrance Business and Are
Uncertain As to Our Competitive Position.................................................14
We Face Competition From Other, More Established Air-Entrance Providers..................14
DILUTION AND OTHER RISKS RELATING TO THE COMMON SHARES.....................................14
The Market Price of Our Common Shares Is Extremely Volatile..............................14
We May Be Delisted From the Nasdaq National Market If the Price of Our Common Shares
Does Not Remain Above One Dollar Per Share...............................................15
Potential Adverse Effect Of Authorized But Unissued Preferred Stock On Holders Of Common
Stock; Anti-Takeover Effects.............................................................15
Most of Our Outstanding Shares Are Free Trading And, If Sold In Large Quantities, May
Adversely Affect the
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Market Price For Common Shares...........................................................16
We Have A Substantial Number of Warrants, Options and Shares of Convertible Preferred
Stock Outstanding........................................................................16
We Have The Right To, and Expect to, Issue Additional Common Shares Without Shareholder
Approval.................................................................................16
We Have Not Paid Any Dividends and Do Not Expect To Pay Dividends In the Near Future.....16
THE COMPANY'S COMMON SHARES...................................................................18
PRICE RANGE OF COMMON SHARES...............................................................18
OUTSTANDING SHARES AND NUMBER OF SHAREHOLDERS..............................................18
DIVIDENDS..................................................................................19
TRANSFER AGENT AND REGISTRAR...............................................................19
USE OF PROCEEDS...............................................................................19
DILUTION......................................................................................19
SELLING SHAREHOLDERS..........................................................................20
BENEFICIAL OWNERSHIP OF SELLING SHAREHOLDERS...............................................20
THE PREFERRED SHARES AND THE WARRANTS......................................................23
THE ADDITIONAL SHARES......................................................................25
PLAN OF DISTRIBUTION..........................................................................25
DESCRIPTION OF COMMON SHARES..................................................................27
LEGAL MATTERS.................................................................................27
EXPERTS.......................................................................................28
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................................28
WHERE YOU CAN FIND MORE INFORMATION...........................................................29
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ABOUT THIS PROSPECTUS
This Prospectus provides you with a general description of the Company,
certain risk factors associated with investment in the Shares, and a description
of the contemplated offering. In addition, you should read the additional
information described under the heading "Incorporation of Certain Documents by
Reference" on page 29 of this Prospectus.
PROSPECTUS SUMMARY
This summary highlights some information from this Prospectus. Because
it is a summary, it necessarily does not contain all of the information
necessary to your investment decision. To understand this offering fully, you
should read carefully the entire Prospectus.
DAW TECHNOLOGIES, INC.
Daw Technologies, Inc. is a Utah corporation engaged in designing ,
engineering, installing and servicing clean manufacture environments for the
semiconductor industry. Daw also provides contract manufacturing business on an
OEM basis for various customers requiring precision sheet metal fabrication or
powder-coated epoxy painting. Unless otherwise specified, all references to
"Daw," "we" or the "Company" in this Prospectus refer to Daw and its
wholly-owned subsidiaries, including Daw Technologies Europe Limited ("DAW
EUROPE"), and Advanced Manufacturing, Inc. ("ADVANCED MANUFACTURING").
Through Daw Technologies, Inc. and Daw Europe, we supply ultra-clean
manufacturing environments, or cleanrooms, to the semiconductor industry. We are
a single-source provider of the entire cleanroom system. We design, engineer,
manufacture, install and service certain principal component systems for
advanced cleanrooms. We also provide our customers with services to integrate
the design, installation and servicing of cleanrooms, including architectural
engineering and design, installation, testing, certification, tool fit-up, and
continuing on-site service and support. We believe that our integrated approach
enables customers to benefit from accelerated cleanroom design and installation,
simplified project control, single-source performance certification and cost
effectiveness.
Cleanrooms are critical to the semiconductor manufacturing process.
Process yields are highly dependent upon controlling contamination levels and
other environmental variables. These variables include the number of particles,
humidity, gasses, vibration, temperature and electro-magnetic fields. To be
competitive, semiconductor manufacturers must meet stringent standards for
cleanliness and environmental control in their fabrication facilities. We
believe that our integrated solution allows us to effectively address the
requirements of efficient cleanroom design and installation. We market our
cleanrooms through a direct sales force to customers building new fabrication
facilities or renovating existing facilities. The majority of our business comes
from repeat sales to these customers.
Through Advanced Manufacturing, we also provide contract manufacturing
services on an OEM basis for various customers requiring precision sheet metal
fabrication or powder-coated epoxy painting. Advanced Manufacturing also
designs, manufactures and distributes cleanroom components such as floor, wall
and ceiling systems, and designs, develops and distributes
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proprietary air-entrance systems used in high-volume retail establishments.
Our Intelligent Enclosures division provides mini-environments and tool
enclosure systems for semiconductor capital equipment process tool suppliers.
Tool enclosures and mini-environments control particulates, temperature,
humidity and airborne molecular contamination of the process tool.
Daw's principal office is located at 2700 South 900 West, Salt Lake
City, Utah 84119 U.S.A., and its telephone number is (801) 977-3100.
THE OFFERING
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Common Shares offered by the Selling 11,687,658(1)
Shareholders
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Common Shares outstanding prior to this 13,468,613(2)
offering
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Common Shares outstanding following this 24,510,809(1)(2)
offering, if all Shares are sold
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Use of Proceeds All proceeds of the offering
will be received by the Selling
Shareholders (other than amounts,
if any, received by us upon
exercise of the Warrants).
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Risk Factors You should read the "Risk
Factors," beginning on page 7, as
well as other cautionary
statements throughout this
Prospectus, before investing in
the Shares.
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(1) Assumes (a) exercise of all of the Warrants in exchange for 472,500 Shares
and immediate re-sale of all such Shares, and (b) conversion of all Preferred
Shares in exchange for 10,569,696 Common Shares and immediate resale of such
Shares. The actual number of Shares offered pursuant to the Prospectus and the
actual number of Common Shares outstanding before and after the offering will
vary, and may vary materially, depending upon how many Shares are issued
pursuant to the conversion of the Preferred Shares as described in "Selling
Shareholders--The Preferred Shares and the Warrants."
(2) Does not include 667,950 Common Shares authorized for issuance upon exercise
of outstanding options granted pursuant to Daw's stock option plans, 985,000
Common Shares reserved for the future grant of options under such plans or the
750,000 Common Shares subject to Daw's employee stock purchase plan.
SELLING SHAREHOLDERS
All of the Shares are to be sold by persons who are existing security
holders of the Company. Most of the Shares are to be acquired upon exercise of
472,500 Warrants and conversion of 480 Preferred Shares issued in a private
placement on April 28, 2000. See "Selling Shareholders--The Preferred Shares and
the Warrants." Additionally, one Selling Shareholder acquired 645,462 of the
Shares as consideration for the sale of a business unit to Daw on or about April
22, 1998. See "Selling Shareholders--the Additional Shares."
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For purposes of this Prospectus, we have assumed that 10,569,696 Shares
will be issued to the Selling Shareholders and sold upon conversion of the
outstanding Preferred Shares. Such number represents 218% of the number of
Common Shares that would have been issued had such Preferred Shares been
converted on May 30, 2000. The number of Shares actually issued pursuant to the
conversion of the Preferred Shares may be greater or fewer than 10,569,696
Shares.
For purposes of this Prospectus, the Company has assumed that the number
of Shares issuable upon exercise of each of the Warrants is the number stated on
the face thereof. Nonetheless, the number of Shares issuable upon exercise of
the Warrants, and available for resale hereunder, is subject to adjustment and
could materially differ from the estimated amount depending on the occurrence of
a stock split, stock dividend, or similar transaction resulting in an adjustment
in the number of Shares subject to the terms of the Warrants. Pursuant to Rule
416 of the Securities Act, this Prospectus and the registration statement of
which it is a part (the "REGISTRATION STATEMENT") cover a presently
indeterminate number of Common Shares in the Company issuable upon the
occurrence of a stock split, stock dividend, or other similar transaction.
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FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS VARIOUS FORWARD-LOOKING STATEMENTS. SUCH
STATEMENTS CAN BE IDENTIFIED BY THE USE OF THE FORWARD-LOOKING WORDS
"ANTICIPATE," "ESTIMATE," "PROJECT," "LIKELY," "BELIEVE," "INTEND," "EXPECT," OR
SIMILAR WORDS. THESE STATEMENTS DISCUSS FUTURE EXPECTATIONS, CONTAIN PROJECTIONS
REGARDING FUTURE DEVELOPMENTS, OPERATIONS, OR FINANCIAL CONDITIONS, OR STATE
OTHER FORWARD-LOOKING INFORMATION. WHEN CONSIDERING SUCH FORWARD-LOOKING
STATEMENTS, YOU SHOULD KEEP IN MIND THE RISK FACTORS NOTED IN THE FOLLOWING
SECTION AND OTHER CAUTIONARY STATEMENTS THROUGHOUT THIS PROSPECTUS AND THE
COMPANY'S PERIODIC FILINGS WITH THE SEC THAT ARE INCORPORATED HEREIN BY
REFERENCE. YOU SHOULD ALSO KEEP IN MIND THAT ALL FORWARD-LOOKING STATEMENTS ARE
BASED ON MANAGEMENT'S EXISTING BELIEFS ABOUT PRESENT AND FUTURE EVENTS OUTSIDE
OF MANAGEMENT'S CONTROL AND ON ASSUMPTIONS THAT MAY PROVE TO BE INCORRECT. IF
ONE OR MORE RISKS IDENTIFIED IN THIS PROSPECTUS OR ANY APPLICABLE FILINGS
MATERIALIZES, OR ANY OTHER UNDERLYING ASSUMPTIONS PROVE INCORRECT, THE COMPANY'S
ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE ANTICIPATED, ESTIMATED, PROJECTED,
OR INTENDED.
AMONG THE KEY FACTORS THAT MAY HAVE A DIRECT BEARING ON THE COMPANY'S
OPERATING RESULTS ARE RISKS AND UNCERTAINTIES DESCRIBED UNDER "RISK FACTORS,"
INCLUDING THOSE ATTRIBUTABLE TO OUR DEPENDENCE UPON THE HIGHLY CYCLICAL
SEMICONDUCTOR INDUSTRY, OUR DEPENDENCE ON A FEW CUSTOMERS, CONCERNS ABOUT OUR
ABILITY TO RAISE CAPITAL AND TO REPLACE OUR LINE OF CREDIT, OUR ABSENCE OF
EXPERIENCE IN OTHER LINES OF BUSINESS AND THE COMPETITIVE NATURE OF THE
CLEANROOM BUSINESS.
RISK FACTORS
BEFORE YOU INVEST IN THE SHARES, YOU SHOULD BE AWARE THAT SUCH
INVESTMENT INVOLVES THE ASSUMPTION OF VARIOUS RISKS, INCLUDING THOSE DESCRIBED
BELOW. YOU SHOULD CONSIDER CAREFULLY THESE RISK FACTORS TOGETHER WITH ALL OF THE
OTHER INFORMATION INCLUDED IN THIS PROSPECTUS BEFORE YOU DECIDE TO PURCHASE THE
SHARES.
RISK FACTORS RELATED TO THE COMPANY GENERALLY
WE MAY CONTINUE TO OPERATE AT A NET LOSS.
Daw experienced a net loss of $7,641,000 in 1999, $3,922,000 in 1998 and
$2,259,000 in 1997. Although we are hopeful that the pricing and quantity of our
sales of cleanrooms and other products will increase to the point that we will
earn a net profit, we can provide no assurance that our operations will be
profitable any time in the near or distant future. If we are unable to earn a
profit, we will not be able to make distributions to shareholders in the future
and, at some point, Daw may not be able to continue as a going concern.
WE MAY NOT BE ABLE TO GENERATE OR RAISE SUFFICIENT CAPITAL TO MEET PRESENT AND
FUTURE OBLIGATIONS.
As of March 31, 2000, among other liabilities, we owed $10,499,000 in
accounts payable
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and had an outstanding balance on our revolving line of credit of $5,468,000.
Although, as of March 31, 2000, we had net accounts receivable of $9,853,000 and
other currents assets, and although we recently received net proceeds of
approximately $4,800,000 from our private placement of the Preferred Shares, we
may not be able to convert all such current assets into cash or otherwise pay
off our short-term and long-term indebtedness. In such event, or in the event we
continue to operate at a net loss, are unable to replace our line of credit, or
otherwise need additional funds, we will need to engage in additional financing
activities. If we need additional capital, we may not be able to obtain the
amount of additional capital needed or may be forced to pay an extremely high
price for capital. Factors affecting the availability and price of capital may
include, without limitation, the following:
- market factors affecting the availability and cost of capital
generally;
- the performance of Daw;
- the size of Daw's capital needs;
- the credit history of Daw;
- fluctuations in the size and profitability of the computer chip
market;
- the economics of projects being pursued; and
- industry perception of Daw's ability to compete in the manufacture
and installation of cleanrooms and other markets in which Daw
becomes involved.
If we are unable to obtain sufficient capital or are forced to pay a
high price for capital, we may be unable to continue development of our
cleanroom business, continue expansion into new business lines or otherwise
pursue and fully exploit existing or future development opportunities and may
have to significantly scale back or terminate our operations. In addition,
because of their size, resources, history and other factors, certain competitors
of Daw may have better access to capital than Daw and, as a result, may be able
to exploit opportunities more rapidly, easily or thoroughly than Daw.
OUR LINE OF CREDIT WILL TERMINATE ON AUGUST 31, 2000, AND WE MAY BE UNABLE TO
FIND ALTERNATIVE FINANCING.
As of May 1, 2000, we maintained a revolving line of credit with a
domestic bank for the lesser of $5.0 million or the available borrowing base
(calculated as a percentage of receivables). Such line of credit is
collateralized by certain domestic receivables and inventories. Such line of
credit initially expired on December 31, 1999, but was extended until August 31,
2000 on the condition that terms of the line of credit were modified to our
detriment, including an increase in the rate of interest charged on the line of
credit. Our outstanding balance on such line of credit was $5,258,000 on March
31, 2000, and we do not expect to have sufficient cash available to repay all
amounts owed under the line of credit on August 31, 2000.
Although we are presently seeking alternative sources of financing, we
can provide no assurance that we will be able to find a bank or other entity to
provide a line of credit or alternative financing on satisfactory terms. If we
are unable to find an alternative source of financing on satisfactory terms, we
may be forced to accept extremely restrictive and costly terms in connection
with any additional financing or, if we are unable to obtain financing on any
terms, we may be in breach of the agreements governing our existing line of
credit on August 31, 2000. The bank has available extensive remedies under such
agreements.
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THE INTEREST RATE ON OUR LINE OF CREDIT IS VARIABLE, AND WE WILL BE NEGATIVELY
AFFECTED BY ANY GENERAL INCREASE IN INTEREST RATES.
The interest rate on our revolving line of credit is presently 3% (to be
increased to 5% on June 1, 2000 if certain conditions are not met) above the
prime rate offered by the lending institution (10.5% as of March 31, 2000). Said
prime rate generally increases in response to an increase in the so-called
"federal funds rate" by the United States Federal Reserve Bank or an increase in
other benchmark interest rates. Analysts predict that interest rates will
increase throughout the 2000 calendar year, and interest rates may increase
dramatically. Any increase in the prime rate of the issuer of our revolving line
of credit (or any subsequent lender) will have an adverse effect, and may have a
material adverse affect, on our financial position.
POTENTIAL CUSTOMERS MAY DECIDE NOT TO HIRE THE COMPANY BASED ON OUR ABSENCE OF
CAPITAL OR OTHER REAL OR PERCEIVED FINANCIAL WEAKNESSES.
We attempt to market our cleanrooms, in part, on the premise that we can
provide an integrated cleanroom solution from design through installation and
certification. We believe that one of the factors potential customers will
consider in determining whether to delegate responsibility for the cleanroom to
us is our financial condition--which affects the customer's perception of our
ability to perform our contracts and stand behind our products. We may lose
existing contracts or fail to obtain contracts because of a customer's
perception that the strength and long term viability of the Company is in doubt.
We are required to post surety bonds as a condition to bid for and
obtain many of our contracts. Our ability to obtain bonding is dependent upon,
among other things, our sureties' analysis of our financial condition. We
believe that we have been limited in obtaining surety bonds in the past due to
the amount of our stockholders' equity and working capital. An insufficient
amount of stockholders' equity or working capital may inhibit our ability to bid
for and obtain large contracts.
OUR BALANCE SHEET REFLECTS AS A CURRENT ASSET A REFUNDABLE FOREIGN TAX THAT WE
MAY NOT BE ABLE TO COLLECT.
Prior to 1999, we withheld and tendered to the government of Israel a
percentage of the revenues we received from customers located in Israel in order
to cover anticipated tax liabilities to the government of Israel with respect to
such sales. We currently believe that we have no tax liability and are entitled
to a refund of all, or substantially all, of the approximately $2,185,000 we
withheld and tendered to Israeli authorities. The $2,185,000 we believe that we
are owed by the government of Israel is carried on our balance sheet as a
current asset under the category "Other Current Assets." We can provide no
assurance that the government of Israel will refund such money. If the
government of Israel does not willingly refund such money in response to our
requests, we will not likely be able to legally compel the government of Israel
to do so.
WE ARE DEPENDENT ON KEY PERSONNEL.
We are highly dependent on the principal members of our management and
technical staff, the loss of whose services might impede our ability to compete.
In addition, our ability to recruit and retain highly qualified technical and
management personnel is critical to our success. Although
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we hope to be successful in recruiting and retaining skilled and experienced
management and technical personnel, we may not be able to recruit and retain
such personnel on acceptable terms, given the competition between numerous
manufacturing and semiconductor-related companies. We have not obtained key man
life insurance on any of our management or technical personnel other than Ronald
W. Daw. The failure to recruit and retain such personnel could materially
adversely affect prospects for our success.
WE ARE DEPENDENT UPON A SINGLE SUPPLIER, OR A LIMITED GROUP OF SUPPLIERS, FOR
CERTAIN KEY COMPONENTS TO OUR PRODUCTS.
Certain of the components and sub-assemblies included in our products
are obtained from a single supplier or a limited group of suppliers. For
example, we currently have one supplier which makes the castings for our floor
systems. In addition, any paint customized for a specific project will generally
be supplied by a single paint company. Disruption or termination of these
sources could have a temporary adverse effect on our operations. Although we may
be able to obtain and qualify alternative sources to supply these products,
there is no assurance we will be able to do so. A prolonged inability to obtain
certain components could have an adverse effect on our operating results and
even a temporary delay could cause the Company to miss installation deadlines,
and possibly permanently damage customer relationships.
WE MAY BE LIABLE UPON WITHDRAWAL FROM OR TERMINATION OF OUR MULTI-EMPLOYER
PENSION PLANS.
We contribute to several multi-employer pension plans for employees
covered by collective bargaining agreements. Employees covered by these plans
are engaged solely in on-site installation of cleanrooms. These plans are not
administered by us, and contributions are determined in accordance with
provisions of negotiated labor contracts. Our contributions to the
multi-employer pension plans totaled approximately $128,000 in 1999, $269,000 in
1998 and $303,000 in 1997. Information with respect to the Company's
proportionate share of the excess, if any, or the actuarially computed value of
vested benefits over the total pension plans' net assets, may not be available
from the plans' administrators. The Multi-Employer Pension Plan Amendments Act
of 1980 (The "MULTI-EMPLOYER ACT") significantly increased the pension
responsibilities of participating employers. Under the provisions of the
Multi-Employer Act, if the plans terminate or we withdraw, we could be subject
to a withdrawal liability.
OUR OPERATIONS MAY LEAD TO A SUBSTANTIAL ENVIRONMENTAL LIABILITY.
All of our manufacturing, installation and other activities is subject
to federal, state, and local environmental laws. Under such laws, we may be
jointly and severally liable with prior property owners for the treatment,
cleanup, remediation, and/or removal of substances discovered on any properties
we own or use which are deemed by the federal and/or state government to be
toxic or hazardous ("HAZARDOUS SUBSTANCES"). Courts or government agencies may
impose liability for, among other things, the improper release, discharge,
storage, use, disposal or transportation of Hazardous Substances. We presently
use some use Hazardous Substances and, although we employ all reasonably
practicable safeguards to prevent any liability under applicable laws relating
to Hazardous Substances, companies that use Hazardous Substances are inherently
subject to substantial risk that environmental remediation will be required.
-10-
<PAGE> 12
RISK FACTORS RELATED TO THE CLEANROOM INDUSTRY
WE ARE HIGHLY DEPENDENT ON THE SEMICONDUCTOR INDUSTRY, WHICH IS HIGHLY CYCLICAL.
Our principal line of business is an integrated systems solutions
provider of cleanrooms and cleanroom component systems for the semiconductor
industry. Major cleanroom expenditures generally occur in conjunction with the
initial construction or substantial renovation of a semiconductor fabrication
facility. Accordingly, our business depends in large part upon the capital
expenditures of semiconductor manufacturers, which in turn depends upon the
current and anticipated demand for computer chips and products using computer
chips. The semiconductor industry is highly cyclical and has often experienced
periodic downturns, which have had a severe adverse effect on the capital
expenditures of semiconductor manufacturers.
Chip sales peaked at $150 billion in 1995, at which time capital
spending by chip manufacturers surged to about $45 billion per year. As chips
sales declined to about $122 billion in 1999, capital spending on new equipment
and facilities plunged to less than $30 billion in 1999. Although the market for
computer chips has improved recently, a downturn in the near future is possible
and, given the cyclical nature of the semiconductor business, a downturn
sometime in the future is likely.
Even if computer chip sales do increase, semiconductor manufacturers may
not correspondingly increase their orders for new or renovated fabrication
facilities. In addition, purchase of cleanrooms and related products by chip
manufacturers typically lags behind an expansion by at least one year. Unless
the semiconductor industry continues to expand, and chip manufacturers
correspondingly expand their need for cleanrooms, we may not be able to generate
a profit in the near or distant future.
A FEW CUSTOMERS TEND TO ACCOUNT FOR A LARGE PERCENTAGE OF OUR REVENUE STREAM AND
OFTEN DO NOT NEED OUR PRODUCTS/SERVICES ON AN ONGOING BASIS.
In the past, we have typically had between one and three customers that
each account for more than 10% of our revenues in each fiscal year. For example,
in 1999, our top three customers accounted for 45% of our revenues, and in 1998,
our top two customers accounted for 27% of our revenues. Moreover, because
purchasers of new cleanrooms (or substantial renovations to existing cleanrooms)
typically do not need the same number of cleanrooms or renovations in subsequent
years, customers who account for a significant amount of our revenues in one
year do not necessarily remain significant in subsequent years. The reduction,
delay or cancellation of orders from, or loss of, one or more significant
customers could have a material adverse effect on our operating results.
Moreover, even if we retain current customers, the viability of our cleanroom
business is dependent upon our ability to find additional customers in the
future.
EVEN IF THE SEMICONDUCTOR INDUSTRY RECOVERS AND OUR ORDERS INCREASE, WE MAY
CONTINUE TO OPERATE AT A LOSS BECAUSE OF SMALL PROFIT MARGINS.
Our gross profit (i.e., the difference between gross revenues and costs
of goods sold) has decreased in each of the last three years. We believe that
the decrease in gross margin in recent years is primarily the result of the
semiconductor industry downturn, which generally resulted in
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<PAGE> 13
fewer contracts available to bid, a significant increase in price competition on
contracts that were awarded, and reduced margins on such contracts. The downturn
has resulted in fewer contracts awarded and those that are awarded being awarded
after a highly competitive bidding process--which places significant downward
pressure on pricing and results in lower margins. We believe that if the
semiconductor industry recovers, such downward pressure on prices and margins
may be reduced. Nonetheless, we can provide no assurance that prices and gross
margins will not continue to decrease. If gross margins and profits continue to
decrease or remain flat, our ability to earn a profit will be adversely
affected.
OUR CLEANROOM PRODUCTS MAY BECOME OBSOLETE BECAUSE OF CHANGES IN THE
SEMICONDUCTOR INDUSTRY.
The semiconductor industry is marked by rapid changes in technology. Any
changes in manufacturing techniques or underlying semiconductor technology may
require a corresponding change in our cleanroom systems. Changes in
manufacturing techniques may also affect cleanroom design and efficiency
requirements. The changes required of our products may require quantitative
changes in the number and size of particles allowed in the cleanroom, in
addition to qualitative changes to protect the manufacturing process from
radiation, impure gasses or other non-particulate contamination. Potential
increasing use of mini-environments or SMIF ("STANDARD MECHANICAL INTERFACE")
tools within the cleanroom will also affect cleanroom design. There can be no
assurance that we will be able to adapt to technological change in the industry.
In addition, there can be no assurance that our competitors will not develop
enhancements to, or future generations of, competitive products that will offer
superior performance or features and render our products uncompetitive. Failure
to adapt to changes in the industry or to develop and introduce product
enhancements or to gain customers' acceptance of such products in a timely
fashion would harm our competitive position.
WE FACE COMPETITION FROM OTHER SINGLE-SOURCE AND COMPONENT PROVIDERS OF
CLEANROOMS AND CLEANROOM COMPONENTS.
We compete with a number of companies providing cleanroom products and
services, many of which may have significantly greater financial and capital
resources than ourselves. We compete with other cleanroom component
manufacturers for the manufacture of cleanrooms and components. We compete with
architectural and engineering firms for the provision of cleanroom design and
engineering services. In addition, we compete with specialized cleanroom
integrators for installation and on-site management services. We believe the
principal competitive factors in the cleanroom industry are quality, time to
completion, reliability, responsiveness for design and installation, product
performance and price. With the decline of the semiconductor industry in recent
years, price competition has become particularly fierce and inhibited our
ability to operate profitably. Despite our efforts to match or exceed our
competitors with respect to principal competitive factors, we may be unable to
remain competitive with respect to such factors in the near or distant future.
CERTAIN PATENTS RELATED TO OUR CLEANROOMS WILL EXPIRE IN THE NEAR FUTURE, AND
PENDING PATENT APPLICATIONS MAY BE DENIED.
We currently hold nine United States patents with respect to various aspects of
our cleanroom wall systems, floor systems and air handling systems. Such patents
expire at various times from May
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<PAGE> 14
2007 through January 2010. We also have an application for an additional patent
on file with the U.S. Patent and Trademark Office and certain foreign offices.
Although we believe that the success, if any, of our cleanroom business will
depend more on continued innovation, technical know-how and responsiveness to
client needs than on patented technology, the expiration of existing patents or
denials of pending patent applications may have a negative effect on our
competitiveness. Moreover, we may be forced to incur significant costs to defend
our patent rights. In addition, although we believe that our products do not
infringe any valid existing proprietary rights of others, there can be no
assurance that third parties will not assert infringement claims in the future.
There also may be pending patent applications or issued patents of which we are
not aware that we may need to license or challenge at significant expense. There
can be no assurance that any such license would be available on acceptable
terms, if at all, or that we would prevail in any such challenge.
RISK FACTORS RELATED TO OUR ATTEMPT TO EXPAND INTO NEW INDUSTRIES
WE MAY BE UNABLE TO DIVERSIFY OUR REVENUE BASE.
During 1999, we earned approximately 75% of our revenues from cleanrooms
and related products. Given our dependence on the semiconductor industry and its
cyclical nature, we are attempting to diversify our business to the point that
40% of our revenue is generated from sources other than cleanrooms and related
products, including:
- manufacture and installation of air-entrance systems for large retail
establishments;
- other types of OEM manufacturing that require precision sheet metal
fabrication or specialized powder-coated painting.
During 1999, only 25% of our revenues were from such alternative
sources, and we are considering selling the line of business that accounted for
a substantial portion of our non-cleanroom revenues. See "There Are Numerous
Risk Associated With Our Sleeper Cab Business, Including The Possibility That We
Will Sell It During 2000." We can provide no assurance that we will accomplish
our goal of earning 40% of our revenues from sources other than cleanrooms and
cleanroom products or that, if we do, such alternative lines of business will be
profitable. If we are unable to diversify our lines of business, we will
continue to be extremely dependent upon the highly cyclical semiconductor
industry.
THERE ARE NUMEROUS RISK ASSOCIATED WITH OUR SLEEPER CAB BUSINESS, INCLUDING THE
POSSIBILITY THAT WE WILL SELL IT DURING 2000.
During 1999, we earned 25% of our revenues (substantially all of our
non-cleanroom revenue) through the manufacture and sale of sleeper cabs for
large trucks. We are considering selling such line of business some time during
2000, but can provide no assurance that we will decide to, or will be able to,
sell such line of business during 2000.
If we do sell our sleeper cab business, although we will presumably
receive a one-time payment of cash, stock or other consideration in connection
with such sale, we will lose the revenue stream associated with such line of
business. Moreover, unless we can successfully expand our air-entrance systems
business or other lines of business, we will become wholly-dependent upon the
cleanroom business for our revenues.
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<PAGE> 15
We suffered a loss of approximately $1,333,000 on our sleeper cab
business during 1999. If we determine not to, or are unable to, sell our sleeper
cab business, we will need to continue to expand sales in our sleeper cab
business in order for such line of business to become profitable. The sleeper
cab manufacturing business is very competitive, and we may not be able to expand
sales of our sleeper cab manufacturing services. We can provide no assurance
that our sleeper cab manufacturing business will ever become profitable if we do
not sell it during 2000.
WE HAVE COMPLETED A LIMITED NUMBER OF ORDERS IN THE AIR-ENTRANCE BUSINESS AND
ARE UNCERTAIN AS TO OUR COMPETITIVE POSITION.
As part of our strategy to diversify our business, we recently expanded
our business to include the design, manufacture and installation of air-entrance
systems for large retail establishments. Such air-entrance systems are doorless
(permitting a large number of customers to move in and out easily), but protect
the interior climate from the exterior climate through the use carefully
directed airflow. Revenues from air-entrance systems business were approximately
$100,000 in 1999, representing less than 1% of our gross revenues. As of the
date of this Prospectus, we have limited experience in the air-entrance business
and only two customers. We may not be able to attract additional customers. Our
existing customers may decide not to purchase additional air-entrance systems
from us. If we are unable to expand our air-entrance design, manufacturing and
installation business, we may be forced to discontinue such line of business,
increasing our dependency on the volatile cleanroom manufacturing business.
WE FACE COMPETITION FROM OTHER, MORE ESTABLISHED AIR-ENTRANCE PROVIDERS.
We have only recently entered into the business of manufacturing and
installing air-entrance systems. The market for the production of air-entrance
systems has historically been dominated by a single supplier, which, as the
principal supplier of air-entrance systems for numerous years, has an extensive
network of customer relationships, extensive experience in the business and an
ascertainable performance record. In order for us to expand our air-entrance
manufacturing and installation business beyond its current, infant stage, we
will have to expand our relationship with our current customers and recruit new
customers, most of whom have an existing business relationship with the dominant
supplier in the industry. We may prove unable to either expand the amount of
business we receive from our current customers or attract additional customers.
DILUTION AND OTHER RISKS RELATING TO THE COMMON SHARES
THE MARKET PRICE OF OUR COMMON SHARES IS EXTREMELY VOLATILE.
Our Common Shares are listed on the Nasdaq National Market. Trading in
our Common Shares has been characterized by a high degree of volatility. See
"The Company's Common Shares--Price Range of Common Shares." Trading in our
Common Shares may continue to be characterized by extreme volatility for
numerous reasons, including the following:
- Changes in the strength and profitability of the semiconductor
industry;
- Uncertainty regarding the competitiveness and viability of our
attempt to establish Daw
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<PAGE> 16
in the air-entrance systems and OEM manufacturing industries;
- Dominance of trading in the Common Shares by a small number of
firms;
- Positive or negative announcements by us or our competitors;
- Industry trends, general economic conditions in the United
States or elsewhere, or the general markets for cleanroom
systems and our other products and services;
- The announcement of financial or research and development
results that differ from analyst and investor expectations,
regardless of our health;
- Significant changes in our future prospects; and
- Speculation by short sellers of Common Shares or other persons
who stand to profit from a rapid increase or decrease in the
price of the Common Shares.
WE MAY BE DELISTED FROM THE NASDAQ NATIONAL MARKET IF THE PRICE OF OUR COMMON
SHARES DOES NOT REMAIN ABOVE ONE DOLLAR PER SHARE.
Effective February 12, 1998, Nasdaq adopted a rule requiring that the
minimum bid price for shares of common stock listed on the Nasdaq National
Market equal or exceed $1.00 per share. On October 15, 1999, we received written
notice from Nasdaq advising us that the bid price of our Common Shares was below
$1.00 per share and that, if such problem was not remedied within ninety days,
Nasdaq would delist the Common Shares from the Nasdaq National Market. During
early 2000, the bid price of the Common Shares rose above $1.00 per share and
delisting was avoided. Nonetheless, the market price of our Common Shares has
historically been highly volatile, and we can provide no assurance that the
price of our Common Shares will not again fall below $1.00 per share.
If the bid price of our Common Shares again falls below $1.00, in light
of our previous non-compliance with the $1.00 minimum bid price requirement, it
is reasonable to expect Nasdaq to act promptly to delist our Common Shares
from the Nasdaq National Market. Our Common Shares will likely be eligible for
quotation on the Nasdaq OTC Bulletin Board or other quotation service following
any such delisting. Nonetheless, we can provide no assurance that our Common
Shares will be eligible for trading on any other quotation service. Moreover,
even if our Common Shares are quoted on another service, the fact of being
delisted may lead to a decline in the market price and liquidity of our Common
Shares and increased price volatility.
POTENTIAL ADVERSE EFFECT OF AUTHORIZED BUT UNISSUED PREFERRED STOCK ON HOLDERS
OF COMMON STOCK; ANTI-TAKEOVER EFFECTS.
Our Board of Directors has authority to issue up to 10,000,000 shares of
Preferred Stock and to fix the rights, preferences, privileges and restrictions,
including voting rights, of those shares without any further vote or action by
the shareholders. The rights of the holders of the Common Shares are subject to,
and may be adversely affected by, the rights of the holders of the Preferred
Shares or any shares of Preferred Stock that may be issued in the future. The
issuance of Preferred
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<PAGE> 17
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company, thereby delaying, deferring or preventing a change in
control of the Company. Furthermore, such Preferred Stock may have other rights,
including economic rights senior to the Common Shares, and, as a result, the
issuance thereof could have a material adverse effect on the market value of the
Common Shares.
MOST OF OUR OUTSTANDING SHARES ARE FREE TRADING AND, IF SOLD IN LARGE
QUANTITIES, MAY ADVERSELY AFFECT THE MARKET PRICE FOR COMMON SHARES.
Most of the approximately 13,468,613 Common Shares issued and
outstanding as of May 30, 2000 (i) are free-trading; (ii) have been held for in
excess of one year and therefore, despite being issued as "restricted
securities" may be eligible for resale under Rule 144 promulgated under the
Securities Act ("RULE 144"); or (iii) will be registered for resale pursuant to
the Registration Statement. Although the resale of certain of these shares may
be subject to the volume limitations and other restrictions under Rule 144 (as
described below), the possible resale of the remaining shares may have an
adverse effect on the market price for the Common Shares.
WE HAVE A SUBSTANTIAL NUMBER OF WARRANTS, OPTIONS AND SHARES OF CONVERTIBLE
PREFERRED STOCK OUTSTANDING.
As of December 31, 1999, there were outstanding warrants and options to
purchase up to 741,500 (667,950 as of May 30, 2000) Common Shares at a weighted
average exercise price of $2.03 per share. The existence of such warrants and
options may hinder future equity offerings by Daw, and the exercise of such
warrants and options may further dilute the interests of all shareholders.
Future resale of the Common Shares issuable on the exercise of such warrants and
options may have an adverse effect on the prevailing market price of the Common
Shares. Furthermore, the holders of warrants and options may exercise them at a
time when we would otherwise be able to obtain additional equity capital on
terms more favorable to the Company.
WE HAVE THE RIGHT TO, AND EXPECT TO, ISSUE ADDITIONAL COMMON SHARES WITHOUT
SHAREHOLDER APPROVAL.
The Company has authorized capital of 50,000,000 Common Shares, par
value $.01 per share, and 10,000,000 shares of Preferred Stock, par value $.01
per share . As of May 30, 2000, there were issued and outstanding 13,468,613
Common Shares and 480 shares of Preferred Stock (convertible into Common Shares
at the rate described in "Selling Shareholders--The Preferred Shares and the
Warrants"). In addition, there are 667,950 Common Shares reserved for issuance
on the exercise or conversion of outstanding warrants, options, and similar
rights to acquire Common Shares. We have no means to control the timing of the
conversion of convertible securities. Our Board of Directors has authority,
without action or vote of the holders of the Common Shares, to issue all or part
of the authorized but unissued shares. Any such issuance will dilute the
percentage ownership of the Company's shareholders and may dilute the book value
of the Common Shares.
WE HAVE NOT PAID ANY DIVIDENDS AND DO NOT EXPECT TO PAY DIVIDENDS IN THE NEAR
FUTURE.
We have not paid, and do not plan to pay, dividends on our Common Shares
in the
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<PAGE> 18
foreseeable future, even if the Company becomes profitable. Earnings, if any,
are expected to be used to advance the Company's activities and for general
corporate purposes, rather than to make distributions to shareholders.
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<PAGE> 19
THE COMPANY'S COMMON SHARES
PRICE RANGE OF COMMON SHARES
Our Common Shares are listed and traded on the NASDAQ Stock Market
(National Market System) under the symbol "DAWK." The following table sets
forth, for the periods indicated, the high and low sale prices for the Company's
Common Shares, as reported on the NASDAQ Stock Market for the quarter ended
March 31, 2000 and the years ended December 31, 1999 and 1998, respectively.
<TABLE>
<CAPTION>
FISCAL YEAR TO END DECEMBER 31, 2000 HIGH LOW
------------- --------------
<S> <C> <C>
1st Quarter $3.625 $0.563
2nd Quarter (through May 31) $2.0625 $1.125
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1999 HIGH LOW
------------- --------------
<S> <C> <C>
1st Quarter $1.969 $1.000
2nd Quarter 1.500 1.094
3rd Quarter 1.469 0.688
4th Quarter 0.813 0.500
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1998 HIGH LOW
------------- --------------
<S> <C> <C>
1st Quarter $1.906 $1.219
2nd Quarter 2.938 1.375
3rd Quarter 2.313 1.219
4th Quarter 1.219 0.656
</TABLE>
The last sale price of the Common Shares, as reported on the NASDAQ
National Market, on May 30, 2000 was $1.21 per share.
OUTSTANDING SHARES AND NUMBER OF SHAREHOLDERS
As of May 30, 2000, the Company had 13,468,613 Common Shares
outstanding, held by 132 shareholders of record, which does not include
shareholders whose shares are held in securities position listings.
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<PAGE> 20
DIVIDENDS
The Company did not pay or declare dividends on its Common Shares during
the years ended December 31, 1999, 1998 and 1997. The Company currently
anticipates that it will retain all available funds to finance its future growth
and business expansion. The Company does not presently intend to pay cash
dividends in the foreseeable future. Under the terms of the Company's revolving
line of credit agreement, the Company has agreed not to pay any dividends during
the terms of such agreement.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Shares is Zions First
National Bank, 10 East South Temple Street, No. 300, P.O. Box 30880, Salt Lake
City, Utah 84130.
USE OF PROCEEDS
All proceeds from any sale of Shares, less commissions and other
customary fees and expenses, will be paid directly to the Selling Shareholders
selling the Shares. Daw will not receive any proceeds from the sale of any of
the Shares. Daw may receive proceeds from the exercise of the Warrants;
however, because the Warrants include a cashless exercise option, Daw may or
may not receive proceeds upon exercise of the Warrants.
DILUTION
The Company's unaudited net tangible book value at March 31, 2000 was
$10,145,000, or approximately $.75 per Common Share outstanding (assuming
13,468,613 Common Shares were outstanding on such date). Investors who purchase
Shares may suffer an immediate dilution of the difference between the purchase
price per Offered Share and approximately $.75.
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<PAGE> 21
SELLING SHAREHOLDERS
BENEFICIAL OWNERSHIP OF SELLING SHAREHOLDERS
The table that begins on the top of the next page sets forth, as of the
date of this Prospectus:
- the name of each Selling Shareholder,
- certain beneficial ownership information with respect to the
Selling Shareholders,
- the number of Shares that may be sold from time to time by each
Selling Shareholder pursuant to this Prospectus, and
- the amount (and, if one percent or more, the percentage) of
Common Shares to be owned by each Selling Shareholder if all
Shares are sold.
Beneficial ownership is determined in accordance with SEC rules and
generally includes voting or investment power with respect to securities. Common
Shares that are issuable upon the exercise of outstanding options, warrants,
convertible Preferred Stock or other purchase rights, to the extent exercisable
within 60 days of the date of this Prospectus, are treated as outstanding for
purposes of computing each Selling Shareholder's percentage ownership of
outstanding Common Shares.
Please note that the documents governing the Preferred Shares and the
Warrants prohibit the conversion of such Preferred Shares or the exercise of
such Warrants if, after such transaction, such holder, together with any of its
affiliates, would beneficially own over 4.999% of the outstanding Common Shares.
This restriction may be waived by each holder on not less than 61 days' notice
to us. Accordingly, the number of Common Shares listed in the table below as
being beneficially owned by each of the Selling Shareholders includes only the
Common Shares that are issuable to each Selling Shareholder upon conversion of
his/its Preferred Shares and exercise of his/its Warrants as of May 30, 2000,
assuming application of the 4.999% limitation. Information regarding the number
of Common Shares that would have been issuable to such Selling Shareholder on
such date if he/it waived the 4.999% limitation, or avoided its affect through a
series of acquisitions and sales, is contained in the footnotes to the
beneficial ownership table.
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<PAGE> 22
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
BENEFICIAL OWNERSHIP OWNED UPON COMPLETION
PRIOR TO OFFERING OF THE OFFERING(1)
------------------------------ -----------------------------
NUMBER OF
NUMBER OF SHARES BEING NUMBER OF
BENEFICIAL OWNER SHARES PERCENT(2) OFFERED SHARES PERCENT
--------------------------------- ---------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
J. Weston Daw 2,209,643(3) 16.4% 2,277,020(4) 2,209,643(3) 16.4%
Ronald W. Daw 2,046,699(5) 15.1% 683,106(4) 2,046,699(5) 15.1%
Deephaven Private Placement
Trading Ltd. 708,725(6) 4.9% 3,984,785(4) 0 --
West End Maccabee Fund, L.P. 708,725(7) 4.9% 3,187,828(4) 0 --
Intelligent Systems, Inc. 645,462 4.7% 645,462 0 --
WETI Global Fund Ltd. 252,525(8) 1.8% 569,255(4) 0 --
West End Maccabee Offshore
Fund Ltd. 101,010(9) * 227,702(4) 0 --
Cardinal Securities, LLC 87,500(10) * 87,500(10) 0 --
Institutional Finance Group, Inc. 25,000(11) * 25,000(11) 0 --
All Selling Shareholders
as a group 6,785,289(12) 44.2%(12) 11,687,658 4,256,342 31.5%
</TABLE>
*Represents less than one percent of the outstanding Common Shares.
(1) Assuming the sale by each Selling Shareholder of all of the Shares
offered hereunder by such Selling Shareholder. There can be no assurance
that any of the Shares will be sold.
(2) The percentages set forth in this column have been computed assuming the
number of Common Shares outstanding equals the sum of (a) 13,468,613,
which is the number of Common Shares outstanding on May 30, 2000, and
(b) Common Shares subject to options, warrants and shares of Preferred
Stock and other purchase rights held by the person(s) with respect to
which such percentage is calculated (including the Warrants), to the
extent exercisable within 60 days of the date of this Prospectus. In
determining how many Common Shares are issuable upon conversion of the
outstanding Preferred Shares and exercise of outstanding Warrants, we
have assumed that all of the outstanding Preferred Shares were converted
and all Warrants were exercised on May 30, 2000, subject to the
application of the 4.999% limitation. This Prospectus and the
Registration Statement covers 218% of the Common Shares that would have
been issued had all of the Preferred Shares been converted on May 30,
2000 assuming that application of the 4.999% provision had been duly
waived. See "--The Preferred Shares and the Warrants."
(3) Represents 2,209,643 issued and outstanding Common Shares presently
beneficially owned by Mr. J.W. Daw. As a result of the application of
the 4.999% limitation, the number of Shares beneficially owned by Mr.
J.W. Daw does not include any of the Shares that would be issued upon
exercise of the Preferred Shares and Warrants had such securities been
converted/exercised on May 30, 2000. If Mr. J.W. Daw were to have waived
the application of the 4.999% limitation as of such date, 1,010,101
Shares would have been issuable
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<PAGE> 23
upon conversion of the Preferred Shares and 75,000 Shares would have
been issuable upon exercise of the Warrants held by him on May 30, 2000.
(4) As required by a Registration Rights Agreement to which this Selling
Shareholder is a party, the number of Shares that may be offered
pursuant to this Prospectus is a number of Shares equal to the sum of
(i) 200% of the number of Common Shares issuable upon conversion in full
on May 30, 2000 of the Preferred Shares owned by such Selling
Shareholder, assuming that dividends had accrued thereon at the rate of
3% for three years, that such accrued dividends had been added to the
stated value of such Preferred Shares and that the 4.999% limitation had
been duly waived, and (ii) the number of Common Shares issuable upon
exercise in full of the Warrants owned by such Selling Shareholder,
assuming that the 4.999% limitation had been duly waived.
(5) Represents Common Shares presently beneficially owned by Mr. R.W. Daw
(including 440,200 owned of record by Mr. R.W. Daw, 1,211,499 owned
jointly with his wife, 219,900 owned by a family limited partnership,
100 held by a minor daughter, and 175,000 underlying presently
exercisable options). As a result of the application of the 4.999%
limitation, the number of Shares beneficially owned by Mr. R.W. Daw does
not include any of the Shares that would be issued upon exercise of the
Preferred Shares and Warrants had such securities been
converted/exercised on May 30, 2000. If Mr. R.W. Daw were to have waived
the application of the 4.999% limitation as of such date, 303,030 Shares
would have been issuable upon conversion of the Preferred Shares and
22,500 Shares would have been issuable upon exercise of the Warrants
held by him on May 30, 2000.
(6) Represents the 708,725 Shares that would be issued upon exercise of the
Preferred Shares and Warrants had such securities been
converted/exercised on May 30, 2000, assuming application of the 4.999%
limitation. Nonetheless, the 4.999% limitation would not prevent
Deephaven from acquiring and selling in excess of 4.999% of our Common
Shares through a series of conversions and sales of the Preferred Shares
and exercises and sales of the Warrants. If Deephaven were to have
waived the application of the 4.999% limitation as of such date,
1,767,677 Shares would have been issuable upon conversion of the
Preferred Shares and 131,250 Shares would have been issuable upon
exercise of the Warrants held by it on May 30, 2000.
(7) Represents the 708,725 Shares that would be issued upon exercise of the
Preferred Shares and Warrants had such securities been
converted/exercised on May 30, 2000, assuming application of the 4.999%
limitation. Nonetheless, the 4.999% limitation would not prevent West
End from acquiring and selling in excess of 4.999% of our Common Shares
through a series of conversions and sales of the Preferred Shares and
exercises and sales of the Warrants. If West End were to have waived the
application of the 4.999% limitation as of such date, 1,414,141 Shares
would have been issuable upon conversion of the Preferred Shares and
105,000 Shares would have been issuable upon exercise of the Warrants
held by it on May 30, 2000.
(8) Includes 18,750 Shares issuable by us upon exercise of Warrants held by
WETI and the 233,775 Shares that would have been issuable had WETI
converted all of its Preferred Shares on May 30, 2000.
(9) Includes 7,500 Shares issuable by us upon exercise of Warrants held by
West End Offshore and the 93,510 Shares that would have been issuable
had West End Offshore converted all of its Preferred Shares on May 30,
2000.
(10) Includes 87,500 Shares issuable by us upon exercise of Warrants held by
Cardinal.
(11) Includes 25,000 Shares issuable by us upon exercise of Warrants held by
Institutional Finance Group, Inc.
(12) Includes the 1,770,985 Shares that would be issued upon exercise of the
Preferred Shares and Warrants had such securities been
converted/exercised on May 30, 2000, assuming application of the 4.999%
limitation. If all Selling Shareholders were to have waived the
application of the 4.999% limitation as of such date or taken steps to
avoid application of the 4.999% limitation through a series of exercises
and immediate sales, 5,294,734 Shares would have been issuable upon
conversion of the Preferred Shares and exercise of the Warrants held by
the Selling Shareholders on May 30, 2000 (increasing the total number of
Common Shares owned by the Selling Shareholders as a group to 10,196,538
Common Shares, or 54% of the outstanding issue following such
conversions and exercises).
-22-
<PAGE> 24
Two of the Selling Shareholders are affiliated with the Company. J.
Weston Daw is a founder of the Company and father of Ronald W. Daw. Ronald W.
Daw is our President, Chief Executive Officer, Acting Chief Financial Officer
and Chairman of the Board.
Deephaven Private Placement Trading Ltd. is a private investment fund
that is owned by all of its investors and managed by Deephaven Capital
Management LLC. Deephaven Capital Management LLC has voting and investment
control over the shares listed above owned by Deepehaven Private Placement
Trading Ltd. Deephaven Capital Management LLC is an indirect subsidiary of
Knight/Trimark Group, Inc. Deephaven Private Placement Trading Ltd. has
represented to us that it acquired our securities listed above in the ordinary
course of business, and that it did not have any agreement or understanding,
directly or indirectly, with any person to distribute the securities at the
time that the securities being registered were acquired.
WEC Asset Management, LLC has voting and investment control over the
shares listed above owned by West End Maccabee Fund, L.P. and West End Macabee
Offshore Fund Ltd. West End Global Management, LLC has voting and investment
control over the shares listed above owned by WETI Global Fund Ltd.
There can be no assurance that any of the Shares offered hereby will be
sold. We believe the persons named in the table above other than Deephaven have
sole voting and investment power with respect to all Shares shown as
beneficially owned by them, subject to community property laws, where
applicable.
THE PREFERRED SHARES AND THE WARRANTS
Number of Shares and Warrants. On April 28, 2000, we entered into a
Convertible Preferred Stock Purchase Agreement (the "PREFERRED STOCK PURCHASE
AGREEMENT") pursuant to which the Selling Shareholders below acquired the
following number of Preferred Shares and Warrants to purchase Common Shares:
<TABLE>
<CAPTION>
Number of Number of Shares
Preferred Subject to
Selling Shareholder Shares Warrants
------------------- --------- ----------------
<S> <C> <C>
Deephaven Private Placement Trading Ltd. 175 131,250(1)
West End Maccabee Fund, L.P. 140 105,000(1)
West End Maccabee Offshore Fund Ltd. 10 7,500(1)
WETI Global Fund Ltd. 25 18,750(1)
J. Weston Daw, 100 75,000(1)
Ronald W. Daw 30 22,500(1)
Cardinal Securities, LLC -- 87,500(2)
Institutional Finance Group, Inc. -- 25,000(3)
</TABLE>
(1) Warrants issued were "Private Placement Warrants" described
below.
(2) Warrants issued were "Cardinal Warrants" described below.
(3) Warrants issued were "IFG Warrants" described below.
Description of the Preferred Shares. The Preferred Shares have a stated
value equal to the sum of $10,000 plus all accrued dividends not previously paid
in cash. Dividends accrue on the stated value at the rate per share of 3% per
annum, payable at our discretion (subject to certain exceptions) in cash or
through increase in the stated value of each Preferred Share. Upon any
liquidation, dissolution or winding-up of the Company, whether voluntary or
involuntary, the holders of the Preferred Shares are entitled to receive the
stated value of the Preferred Shares before any distribution or payment to any
securities junior to the Preferred Shares. The Preferred Shares do not have
voting rights, except as required by law and with respect to a proposal to (a)
alter or change adversely the rights of the Preferred Shares, (b) authorize or
create a class of stock ranking as to dividends and distribution of assets upon
liquidation equal or senior to the Preferred Shares, (c) increase the authorized
number of Preferred Shares, or (d) enter into any agreement to do any of the
foregoing. The Preferred Shares contain standard anti-dilution provisions
pursuant to which the exercise price and number of Common Shares issuable
thereunder is adjusted proportionately in the event of a stock split, stock
dividend, recapitalization or similar transaction.
-23-
<PAGE> 25
Each Preferred Share is convertible into Common Shares at the option of
the holder at any time after the issuance of the Preferred Shares. The
conversion price is the stated value of the Preferred Shares divided by the
lesser of (1) $1.32 per Common Share; or (2) 80% of the average of the five
lowest consecutive market values of the Common Shares during the twenty-five
trading days preceding the date the Preferred Shares are converted. Subject to
certain exceptions, the Preferred Shares will automatically be converted at the
earlier of (a) the first anniversary of the effective date of the Registration
Statement, and (b) the day following any consecutive thirty-day trading period
where, on each day of the period, the market price of the Common Shares exceeds
$2.64. Notwithstanding the foregoing, each holder of the Preferred Shares may
not convert such Preferred Shares or receive Common Shares as a dividend if,
after such transaction, the holder, together with any of its affiliates, would
beneficially own over 4.999% of the outstanding Common Shares. This restriction
may be waived by each holder on not less than 61 days' notice to us.
We are required to redeem each Preferred Share at a specified premium
rate in cash upon the occurrence of one of numerous events identified in our
Articles of Incorporation, including, without limitation, a change of control of
the Company or our failure to cure a breach of any agreements entered into in
connection with the Preferred Stock Purchase Agreement. In addition, the
Preferred Stock Purchase Agreement grants to the purchasers of the Preferred
Shares a right of first refusal with respect to most subsequent stock issuances
during a period extending 540 days following May 1, 2000 and prohibits our
registering any additional Common Shares under the Securities Act for a period
extending 180 days following the effectiveness of the Registration Statement.
Private Placement Warrants. The Warrants issued in the Private Placement
have an exercise price of $1.32 per share (and a cashless exercise option) and
are exercisable at any time on or before April 28, 2003; provided, however, each
holder of a Warrant may not exercise his or its Warrants if, after such
exercise, such holder, together with any of its affiliates, would beneficially
own over 4.999% of the outstanding Common Shares. This restriction may be waived
by each holder on not less than 61 days' notice to us. Such Warrants include
standard anti-dilution provisions pursuant to which the exercise price and
number of Shares issuable thereunder is adjusted proportionately in the event of
a stock split, stock dividend, recapitalization or similar transaction. The
Shares include the Common Shares issuable upon the exercise of such Warrants.
Registration Rights. In connection with the Preferred Stock Purchase
Agreement, we entered into a registration rights agreement pursuant to which we
are obligated to file a registration statement registering for re-sale by the
holders of the Preferred Shares and Warrants the Common Shares issuable upon
conversion thereof. In order to ensure that the Registration Statement covers
all of the Share issuable upon exercise of the Preferred Shares, even if a drop
in the market price of the Common Shares leads to a corresponding increase in
the number of Shares issuable upon conversion, the Registration Statement
registers (i) 200% of the number of Common Shares issuable upon full conversion
on May 30, 2000, of the Preferred Shares owned by each Selling Shareholder,
assuming that dividends had accrued thereon at the rate of 3% for three years,
that such accrued dividends had been added to the stated value of such Preferred
Shares and that the 4.999% limitation had been duly waived, and (ii) the number
of Common Shares issuable upon exercise in full of the Warrants owned by each
Selling Shareholder, assuming the 4.999% limitation had been duly waived.
Cardinal Warrants. In connection with the purchase and sale of the
Preferred Shares pursuant to the Preferred Stock Purchase Agreement, Cardinal
Securities, LLC, placement agent
-24-
<PAGE> 26
with respect to certain of the purchasers, acquired 87,500 Warrants as partial
consideration for its services. Such Warrants have an exercise price of $1.72
(and a cashless exercise option) and are exercisable at any time on or before
May 1, 2005. Such Warrants contain standard anti-dilution provisions pursuant to
which the exercise price and number of Common Shares issuable thereunder is
adjusted proportionately in the event of a stock split, stock dividend,
recapitalization or similar transaction. The Shares include the Common Shares
issuable upon the exercise of such Warrants.
IFG Warrants. In connection with the purchase and sale of the Preferred
Shares pursuant to the Preferred Stock Purchase Agreement, Institutional Finance
Group, Inc., placement agent with respect to certain of the purchasers, acquired
25,000 Warrants as partial consideration for its services. Such Warrants have an
exercise price of $1.20 (and a cashless exercise option) and are exercisable at
any time on or before May 1, 2003. Such Warrants contain standard anti-dilution
provisions pursuant to which the exercise price and number of Common Shares
issuable thereunder is adjusted proportionately in the event of a stock split,
stock dividend, recapitalization or similar transaction. The Shares include the
Common Shares issuable upon the exercise of such Warrants.
THE ADDITIONAL SHARES
As of April 21, 1998, Daw entered into an Acquisition Agreement dated
April 1, 1998 with Intelligent Systems Corporation ("INTELLIGENT SYSTEMS") and
Intelligent Enclosures Corporation ("INTELLIGENT ENCLOSURES"), pursuant to which
Daw acquired the net assets of Intelligent Enclosures. Pursuant to such
agreement, Daw issued 27,023 Common Shares to Intelligent Systems on April 22,
1998 and 618,439 on or about April 22, 2000. Such 645,462 Common Shares are
included in the Shares.
PLAN OF DISTRIBUTION
The Selling Shareholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their Common
Shares on any stock exchange, market, or trading facility on which the Common
Shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Shareholders may use any one or more of the
following methods when selling Shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the
Shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the
applicable exchange; ~ privately negotiated transactions; ~ short
sales;
- broker-dealers may agree with the Selling Shareholders to sell a
specified number of
-25-
<PAGE> 27
such Shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The Selling Shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than use this Prospectus.
The Selling Shareholders may also engage in short sales against the box,
puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in connection
with these trades. The Selling Shareholders may pledge their Shares to their
brokers under the margin provisions of customer agreements. If a Selling
Shareholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged Shares.
Broker-Dealers engaged by the Selling Shareholders may arrange for other
broker-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Shareholders (or, if any broker-dealer acts as
agent for the purchaser of Shares, from the purchaser) in amounts to be
negotiated. The Selling Shareholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Shareholders and any broker-dealers or agents that are
involved in selling the Shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. If a Selling Shareholder
notifies us that a material arrangement has been entered into with a
broker-dealer or agent for the sale of Shares through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker or dealer, we will file a prospectus supplement, if required pursuant to
Rule 424(c) under the Securities Act of 1933, setting forth:
o the name of each of the participating broker-dealers,
o the number of Shares involved,
o the price at which the Shares were sold,
o the commissions paid or discounts or concessions allowed to the
broker-dealers, where applicable;
o a statement to the effect that the broker-dealers did not conduct
any investigation to verify the information set out or incorporated
by reference in this prospectus, and
o any other facts material to the transaction.
The Company is required to pay all fees and expenses incident to the
registration of the Shares, including the fees and disbursements of counsel to
the Selling Shareholders. The Company has agreed to indemnify the Selling
Shareholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
-26-
<PAGE> 28
DESCRIPTION OF COMMON SHARES
The Articles of Incorporation of the Company currently authorize the
issuance of up to 50,000,000 Common Shares and 10,000,000 shares of Preferred
Stock. The Common Shares are currently listed on the NASDAQ National Market
System. The board of directors of the Company can authorize the issuance of
additional shares of any class of capital stock, up to the amount of the
authorized capital set forth in our Articles of Incorporation, without further
action by or approval of Daw shareholders.
The holders of Common Shares are entitled to one vote per share on each
matter submitted to a vote at any meeting of shareholders. The holders of Common
Shares do not have cumulative voting rights and, therefore, a majority of the
shares represented, in person or by proxy, at a meeting of shareholders at which
a quorum is present are able to elect all members of the board of directors then
standing for election, and if they do so, minority shareholders would not be
able to elect any members to the board of directors.
The holders of the Common Shares have no preemptive rights to acquire
additional Common Shares or other securities. The Common Shares are not subject
to redemption and carry no subscription or conversion rights. In the event of
liquidation of the Company, the Common Shares are entitled to share equally in
corporate assets after satisfaction of all liabilities of the Company and the
payment of the liquidation preferences of any senior security.
The Common Shares are subject to any voting, dividend, or liquidation
preferences that may be established by the Board of Directors of the Company in
designating a class of Preferred Stock. The Company currently has outstanding
shares of Preferred Stock with rights, privileges, and preferences superior to
those of the Common Shares.
The holders of Common Shares are entitled to receive such dividends as
our board of directors may from time to time declare out of funds legally
available for the payment of dividends, subject to the preferential rights of
the holders of outstanding Preferred Stock. Management anticipates retaining any
potential earnings for working capital and investment in growth and expansion of
the business of the Company and does not anticipate paying dividends on the
Common Shares in the foreseeable future.
The Preferred Shares and Warrants discussed in this Prospectus have not
been registered under the Securities Act and are not being offered or sold
pursuant to this Prospectus. Only the Common Shares issuable upon conversion of
the Preferred Stock or exercise of the Warrants have been registered under the
Securities Act and are being offered or sold pursuant to this Prospectus. See
"Selling Shareholders--The Preferred Shares and The Warrants."
LEGAL MATTERS
The validity of the Shares being offered hereby is being passed upon for
the Company by Parr, Waddoups, Brown, Gee & Loveless, Salt Lake City, Utah.
-27-
<PAGE> 29
EXPERTS
The financial statements and schedules of the Company included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999 and
incorporated by reference in this Prospectus have been audited by Grant Thornton
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are incorporated herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said reports.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
As permitted by SEC rules, this Prospectus does not contain all of the
information that prospective investors can find in the Registration Statement or
the exhibits to the Registration Statement. The SEC permits the Company to
incorporate by reference into this Prospectus information filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
Prospectus, except as superseded or modified by information contained directly
in this Prospectus or in a subsequently filed document that also is (or is
deemed to be) incorporated herein by reference.
This Prospectus incorporates by reference the documents set forth below
that the Company (File No. 0-21818) has previously filed with the SEC pursuant
to the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"). These
documents contain important information about the Company and its financial
condition.
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1999, filed with the SEC on April 14, 2000.
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000, filed with the SEC on May 15, 2000.
(c) The description of the Common Shares contained in the Company's
Registration Statement on Form 8A filed under the Exchange Act on
May 20, 1993, including any amendment or report filed under the
Exchange Act for the purpose of updating such description.
The Company hereby incorporates by reference all reports and other
documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Prospectus and prior to the termination
of this Offering.
-28-
<PAGE> 30
WHERE YOU CAN FIND MORE INFORMATION
The Company files annual, quarterly, and current reports, proxy
statements, and other information with the SEC. You may read and copy any
reports, statements, or other information that the Company files at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the Public Reference
Room. The SEC also maintains an Internet site (http://www.sec.gov) that makes
available to the public reports, proxy statements, and other information
regarding issuers, such as the Company, that file electronically with the SEC.
In addition, the Company will provide, without charge, to each person to
whom this Prospectus is delivered, upon written or oral request of any such
person, a copy of any or all of the foregoing documents (other than exhibits to
such documents which are not specifically incorporated by reference in such
documents). Please direct written requests for such copies to Daw Technologies,
Inc., 2700 South 900 West, Salt Lake City, Utah 84119, Attention: Ronald W. Daw,
Chief Executive Officer. Telephone requests may be directed to the Chief
Executive Officer of Daw at (801) 977-3100.
The Common Shares are quoted on the Nasdaq National Market. Reports,
proxy statements and other information concerning the Company can be inspected
and copied at the Public Reference Room of the National Association of
Securities Dealers, 1735 K Street, N.W., Washington, D.C. 20006.
-29-
<PAGE> 31
================================================================================
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. THIS
PROSPECTUS DOES NOT OFFER TO SELL OR BUY ANY SECURITIES IN ANY JURISDICTION
WHERE IT IS UNLAWFUL. THE INFORMATION IN THIS PROSPECTUS IS CURRENT AS OF MAY
30, 2000.
-----------------------
SUMMARY
TABLE OF CONTENTS
(For a more detailed Table of Contents, see page 2)
HEADING
PAGE
Table of Contents
. . . . . . . . . . . 2 11,687,658 Common Shares
About this Prospectus
. . . . . . . . . . . 4
Prospectus Summary
. . . . . . . . . . . 4
Daw Technologies, Inc.
Forward-Looking Statements 11,687,658 COMMON SHARES
. . . . . . . . . . . 7
Risk Factors
. . . . . . . . . . . 7
The Company's Common Shares
. . . . . . . . . . . 17 ---------------
Use of Proceeds Prospectus
. . . . . . . . . . . 19 ---------------
Dilution
. . . . . . . . . . . 19
Selling Shareholders
. . . . . . . . . . . 20
May 30, 2000
================================================================================
30
<PAGE> 32
================================================================================
Plan of Distribution
. . . . . . . . . . . 25
Description of Common Shares
. . . . . . . . . . . 28
Legal Matters
. . . . . . . . . . . 28
Experts
. . . . . . . . . . . 28
Incorporation of Certain Documents by
Reference
. . . . . . . . . . . 28
Where You Can Find More Information
. . . . . . . . . . . 29
____________________
================================================================================
31
<PAGE> 33
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses of the offering, sale and
distribution of the Shares being registered pursuant to the Registration
Statement. All of the expenses listed below will be borne by the Company. All of
the amounts shown are estimates except the SEC registration fees.
<TABLE>
<CAPTION>
ITEM AMOUNT
---- ----------
<S> <C>
SEC Commission registration fees $ 3,664
NASD registration fees $35,000(1)
Accounting fees and expenses $ 5,000
Legal fees and expenses $15,000
Blue Sky fees and expenses $ 2,000
Printing Expenses $ 2,000
Miscellaneous Expenses $ 2,336
TOTAL: $65,000
</TABLE>
(1) Estimated assuming that all Shares are issued during two calendar quarters
during the year 2000.
Item 15. Indemnification of Directors and Officers
The Company's Articles of Incorporation provide that, to the extent
permitted by the Utah Revised Business Corporation Act (the "REVISED ACT"), a
director of the Company shall not be personally liable to the Company or its
shareholders for monetary damages for any action taken or any failure to take
any action as a director.
In addition, the Company's Bylaws provide that officers and directors of
the Company shall be indemnified in a manner consistent with the terms of the
Revised Act. The provisions of the Revised Act governing indemnification of
officers and directors of the Company are, and provide, as follows:
Section 16-10a-902 ("SECTION 902") of the Revised Act provides that a
corporation may indemnify any individual who was, is, or is threatened to be
made a named defendant or respondent (a "PARTY") in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal (a "PROCEEDING"), because he is or
was a director of the corporation or, while a director of the corporation, is or
was serving at its request as a director, officer, partner, trustee, employee,
fiduciary or agent of another corporation or other person or of an employee
benefit plan (an "INDEMNIFIABLE DIRECTOR"), against any obligation incurred with
respect to a Proceeding, including any judgment, settlement, penalty, fine or
reasonable expenses (including attorneys' fees), incurred in the Proceeding if
his conduct was in good faith, he reasonably believed that his conduct was in,
or not opposed to, the best interests of the corporation, and, in the case of
any criminal Proceeding, he had no reasonable cause to believe his conduct was
unlawful; provided however, that, pursuant to Subsection 902(4), (i)
indemnification under Section 902 in connection with a Proceeding by or in the
right of the corporation is limited to payment of reasonable expenses (including
attorneys' fees) incurred in connection with the Proceeding and (ii) the
corporation may not indemnify an Indemnifiable Director in connection with a
Proceeding by or in the right of the corporation in which the Indemnifiable
Director was adjudged liable to the corporation, or in connection with any other
Proceeding charging that the Indemnifiable Director derived an improper personal
benefit, whether or not involving
II-1
<PAGE> 34
action in his official capacity, in which Proceeding he was adjudged liable on
the basis that he derived an improper personal benefit.
Section 16-10a-903 ("SECTION 903") of the Revised Act provides that,
unless limited by its articles of incorporation, a corporation shall indemnify
an Indemnifiable Director who was successful, on the merits or otherwise, in the
defense of any Proceeding, or in the defense of any claim, issue or matter in
the Proceeding, to which he was a Party because he is or was an Indemnifiable
Director of the corporation, against reasonable expenses (including attorneys'
fees) incurred by him in connection with the Proceeding or claim with respect to
which he has been successful.
In addition to the indemnification provided by Sections 902 and 903,
Section 16-10a-905 ("SECTION 905") of the Revised Act provides that, unless
otherwise limited by a corporation's articles of incorporation, an Indemnifiable
Director may apply for indemnification to the court conducting the Proceeding or
to another court of competent jurisdiction. On receipt of an application and
after giving any notice the court considers necessary, (i) the court may order
mandatory indemnification under Section 903, in which case the court shall also
order the corporation to pay the director's reasonable expenses to obtain
court-ordered indemnification, or (ii) upon the court's determination that the
director is fairly and reasonably entitled to indemnification in view of all the
relevant circumstances and regardless of whether the director met the applicable
standard of conduct set forth in Section 902 or was adjudged liable as described
in Subsection 902(4), the court may order indemnification as the court
determines to be proper, except that indemnification with respect to certain
Proceedings resulting in a director being found liable as described in
Subsection 902(4) is limited to reasonable expenses (including attorneys' fees)
incurred by the director.
Section 16-10a-904 ("SECTION 904") of the Revised Act provides that a
corporation may pay for or reimburse the reasonable expenses (including
attorneys' fees) incurred by an Indemnifiable Director who is a Party to a
Proceeding in advance of the final disposition of the Proceeding if (i) the
director furnishes the corporation a written affirmation of his good faith
belief that he has met the applicable standard of conduct described in Section
902, (ii) the director furnishes to the corporation a written undertaking,
executed personally or in his behalf, to repay the advance if it is ultimately
determined that he did not meet the required standard of conduct, and (iii) a
determination is made that the facts then known to those making the
determination would not preclude indemnification.
Section 16-10a-907 of the Revised Act provides that, unless a
corporation's articles of incorporation provide otherwise, (i) an officer of the
corporation is entitled to mandatory indemnification under Section 903 and is
entitled to apply for court ordered indemnification under Section 905, in each
case to the same extent as an Indemnifiable Director, (ii) the corporation may
indemnify and advance expenses to an officer, employee, fiduciary or agent of
the corporation to the same extent as an Indemnifiable Director, and (iii) a
corporation may also indemnify and advance expenses to an officer, employee,
fiduciary or agent who is not an Indemnifiable Director to a greater extent than
the right of indemnification granted to Indemnifiable Directors, if not
inconsistent with public policy, and if provided for by its articles of
incorporation, bylaws, general or specific action of its board of directors or
contract.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons pursuant to
the foregoing provisions, the Registrant has been informed that in the opinion
of the Securities and Exchange Commission such indemnification is contrary to
public policy as expressed in the Securities Act and, therefore, is
unenforceable.
II-2
<PAGE> 35
Item 16. Exhibits.
The following exhibits required by Item 601 of Regulations S-K promulgated under
the Securities Act have been included herewith or have been filed previously
with the SEC as indicated below.
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE/
EXHIBIT NO. DESCRIPTION FILED HEREWITH (AND SEQUENTIAL PAGE #)
------------- -------------------------------- ---------------------------------------------
<S> <C> <C>
3.1 Articles of Amendment to Filed herewith.
Articles of Incorporation of
the Company
4.1 Restated Articles of Incorporated by reference to the Company's
Incorporation the Company Annual Report on Form 10-KSB for the year
ended December 31, 1994,
filed with the Commission
on March 31, 1995.
4.2 Articles of Amendment to Same as Exhibit No. 3.1.
Articles of Incorporation of
the Company
4.3 Form of Warrant issued to Filed herewith.
purchasers of Series A
Preferred Shares
5 Opinion of Parr, Waddoups, To be filed by amendment.
Brown, Gee & Loveless as to
legality of securities offered
10.1 Convertible Preferred Stock Filed herewith.
Purchase Agreement dated April
28, 2000.
10.2 Registration Rights Agreement Filed herewith.
23.1 Consent of Grant Thornton LLP To be filed by amendment.
23.2 Consent of Parr, Waddoups, Included in Exhibit No. 5.
Brown, Gee & Loveless
24 Powers of Attorney Included on Page II-6 of the Registration
Statement.
</TABLE>
-----------------------
Item 17. Undertakings.
(a) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made of the
securities registered hereby, a post-effective amendment to this Registration
Statement:
(i) To include any Prospectus required by section 10(a)(3) of the Securities
Act;
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of this 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 this 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 Commission 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;
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<PAGE> 36
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Company hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company,
the Company has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company 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 Securities Act and will be governed by the final
adjudication of such issue.
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<PAGE> 37
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Salt Lake City, State of Utah, on May 30, 2000.
DAW TECHNOLOGIES, INC.
By: /s/ Ronald W. Daw
____________________________________________
Ronald W. Daw
President, Chief Executive Officer, Acting
Chief Financial Officer and
Chairman of the Board
POWER OF ATTORNEY AND ADDITIONAL SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature to this
Registration Statement appears below hereby constitutes and appoints Ronald W.
Daw as his true and lawful attorney-in-fact and agent, with full power of
substitution, to sign on his behalf individually and in the capacity stated
below and to perform any acts necessary to be done in order to file all
amendments and post-effective amendments to this Registration Statement, and any
and all instruments or documents filed as part of or in connection with this
Registration Statement or the amendments thereto and each of the undersigned
does hereby ratify and confirm all that said attorney-in-fact and agent, or his
substitutes, shall do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Ronald W. Daw President, Chief Executive Officer, May 30, 2000
---------------------------- Acting Chief Financial Officer and
Ronald W. Daw Chairman of the Board
(Principal Executive Officer and
Principal Financial Officer of the
Company)
/s/ Robert G. Chamberlain Director May 30, 2000
-----------------------------
Robert G. Chamberlain
/s/ Charles L. Bates, Jr. Director May 30, 2000
-----------------------------
Charles L. Bates, Jr.
/s/ James S. Jardine Director May 30, 2000
-----------------------------
James S. Jardine
Robert J. Frankenberg Director May 30, 2000
-----------------------------
Robert J. Frankenberg
Virginia G. Giovale Director May 30, 2000
-----------------------------
Virginia G. Giovale
</TABLE>
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<PAGE> 38
EXHIBIT INDEX
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE/
EXHIBIT NO. DESCRIPTION FILED HEREWITH (AND SEQUENTIAL PAGE #)
------------- -------------------------------- ---------------------------------------------
<S> <C> <C>
3.1 Articles of Amendment to Filed herewith.
Articles of Incorporation of
the Company
4.1 Restated Articles of Incorporated by reference to the Company's
Incorporation the Company Annual Report on Form 10-KSB for the year
ended December 31, 1994,
filed with the Commission
on March 31, 1995.
4.2 Articles of Amendment to Same as Exhibit No. 3.1.
Articles of Incorporation of
the Company
4.3 Form of Warrant issued to Filed herewith.
purchasers of Series A
Preferred Shares
5 Opinion of Parr, Waddoups, To be filed by amendment
Brown, Gee & Loveless as to
legality of securities offered
10.1 Convertible Preferred Stock Filed herewith.
Purchase Agreement dated April
28, 2000.
10.2 Registration Rights Agreement Filed herewith.
23.1 Consent of Grant Thornton LLP To be filed by amendment
23.2 Consent of Parr, Waddoups, Included in Exhibit No. 5.
Brown, Gee & Loveless
24 Powers of Attorney Included on Page II-6 of the Registration
Statement.
</TABLE>
-----------------------
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