PROSPECTUS
FOCUS Enhancements, Inc.
1,552,750 Shares of Common Stock
This Prospectus relates to 1,552,750 shares of Common Stock, $.01 par
value per share ("Common Stock" or the "Shares"), of FOCUS Enhancements, Inc.
(the "Company", the "Registrant" or "FOCUS") consisting of (i) 242,750 Shares
issued to certain unaffiliated investors in connection with a private offering
in December 1995 (the "December 95 Offering"); (ii) 100,000 Shares issuable upon
exercise of common stock purchase warrants (the "Investor Warrants") issued to
the investors in the December 95 Offering; (iii) 1,100,000 Shares issued to
certain unaffiliated investors in connection with a private offering in March
1997 (the "March 97 Offering"); and (iv) 110,000 Shares issuable by the Company
upon exercise of certain common stock purchase warrants issued to the placement
agent (the "Broker Warrants" and together with the Investor Warrants are
referred to herein as the "Warrants") in connection with the March 97 Offering.
Each Investor Warrant is exercisable for one share of Common Stock and has an
exercise price of $2.063 per warrant. Each Broker Warrant is exercisable for one
share of Common Stock and has an exercise price of $1.6875 per warrant. To the
extent that the Warrants are exercised, the Company will receive proceeds equal
to the exercise price of the Warrants.
All Shares to be registered hereby are to be offered by the selling
stockholders listed herein (the "Selling Stockholders"), and the Company will
receive no proceeds from the resale by the Selling Stockholders of the Shares.
The Company has agreed to indemnify certain of the Selling Stockholders against
certain liabilities, including certain liabilities under the Securities Act of
1933, as amended (the "Act"), or to contribute to payments which such Selling
Stockholders may be required to make in respect thereof.
The Company's Common Stock is listed on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") and traded on the
NASDAQ SmallCap Market under the symbol "FCSE". The last reported bid price of
the Common Stock on the NASDAQ SmallCap Market on May 21, 1997 was $3.21875.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COM-
MISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH D
EGREE OF RISK. SEE "RISK FACTORS" AT PAGES 5 THROUGH 8.
----------------------
It is anticipated that usual and customary brokerage fees will be paid
by the Selling Stockholders on the sale of the Common Stock registered hereby.
The Company will pay the other expenses of this offering. See "PLAN OF
DISTRIBUTION". The offer of 1,552,750 shares of Common Stock by the Selling
Stockholders as described in this Prospectus is referred to as the "Offering".
----------------------
The date of this Prospectus is May 22, 1997.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus in connection with the offer contained in this Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company or the Selling Stockholders. This
Prospectus does not constitute an offer to sell or solicitation of an offer to
buy securities in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create an implication that there
has been no change in the affairs of the Company since the date hereof or the
information contained or incorporated by reference herein is correct at any time
subsequent to the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The Registration
Statement, the exhibits and schedules forming a part thereof and the reports,
proxy statements and other information filed by the Company with the Commission
can be inspected and copies obtained at the public reference facilities
maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: Chicago Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511; and New York Regional Office, Seven
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at its principal office at 450 Fifth Street, N.W., Washington,
D.C. 20549. Such materials may also be accessed electronically by means of the
Commission's home page at http://www.sec.gov. This prospectus, which constitutes
part of a Registration Statement filed by the Company with the Commission under
the Act omits certain information contained in the Registration Statement in
accordance with the rules and regulations of the Commission. Reference is hereby
made to the Registration Statement and the Exhibits relating thereto for further
information with respect to the Company and the Securities offered hereby. Any
statements contained herein concerning provisions of any documents are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an Exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission
pursuant to the Exchange Act, are hereby incorporated in this Prospectus and
specifically made a part hereof by reference: (i) the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996; (ii) the Company's Current
Report on Form 8K/A-1 filed on January 6, 1997 relating to the Company's
acquisition of TView , Inc.; (iii) the Company's Current Report on Form 8-K
filed on January 16, 1997 relating to the sale of securities pursuant to
Regulation S; (iv) the definitive Proxy Statement dated February 18, 1997
provided to stockholders in connection with a Special Meeting of Stockholders
held March 18, 1997; (v) the Company's Current Report on Form 8-K filed on March
3, 1997 relating to the sale of securities pursuant to Regulation S; (vi) the
Company's Quarterly Report on Form 10-QSB for the quarter ended March 31, 1997;
(vii) the preliminary Proxy Statement filed with the Commission on April 30,
1997 in connection with the Annual Meeting of Stockholders to be held on July
25, 1997; and (viii) the description of the Company's Common Stock contained in
the Registration Statement on Form SB-2 File No. 33-60248-B filed with the
Commission on March 29, 1993, as amended. All documents filed by the Company
pursuant to Section 13(a), 13(c), 14 or
(2)
<PAGE>
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Offering of the Shares shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the respective
dates of filing of such documents.
Any statement contained herein or in a document incorporated or deemed
to be incorporated herein by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein (or in the applicable Prospectus Supplement), or in any
subsequently filed document that also is or is deemed to be incorporated herein
by reference, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom this Prospectus is delivered, upon the written or oral request of such
person, a copy of any and all of the information that has been incorporated by
reference in this Prospectus (excluding exhibits unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be made to the Company at its
principal executive offices, 142 North Road, Sudbury, Massachusetts 01776,
Attention: Harry G. Mitchell, telephone (508) 371-2000.
(3)
<PAGE>
<TABLE>
<CAPTION>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
more detailed information appearing elsewhere in this Prospectus or incorporated
herein by reference and the financial statements which are incorporated herein
by reference.
<S> <C>
THE COMPANY............................... FOCUS Enhancements, Inc. (the "Company" or "FOCUS")
internally develops, markets and sells worldwide a proprietary line
of PC-to-TV video conversion products and a diversified line of
high-quality, low-cost connectivity devices for Windows(TM) and
MacOS(TM) based personal computers. The Company's proprietary
PC-to-TV video conversion products include video output devices
marketed and sold under the Company's registered brand name,
TView. All of the Company's PC-to-TV conversion products
enable users to transmit at low-cost, high quality, computer
generated images from any DOS, Windows or MacOS based
personal computer to any television of any size with a standard
RCA or S-Video interface. FOCUS's PC-to-TV technology
provides sharp, flicker-free, computer-generated images on
televisions for multimedia/business presentations,
classroom/training sessions, game playing or even collective
viewing of spreadsheets or internet browsing. The Company's
connectivity products provide end users with a sophisticated, yet
inexpensive, local area network for MacOS based personal
computers. Personal computers equipped with the Company's
EtherLAN Ethernet connectivity products can also function as part
of a larger, high speed network that provides communications and
connectivity to MacOS compatible computers. The Company
markets and sells its FOCUS branded consumer products globally
through a network of distributors, volume resellers, mail order,
value added resellers ("VARs") and original equipment
manufacturers ("OEMs").
RISK FACTORS.............................. The Offering involves substantial risk. See "RISK FACTORS".
SECURITIES OFFERED........................ 1,552,750 shares of Common Stock, $.01 par value per share.
OFFERING PRICE............................ All or part of the Shares offered hereby may be sold from time to
time in amounts and on terms to be determined by the Selling
Stockholders at the time of sale.
USE OF PROCEEDS........................... The Company will receive no part of the proceeds from the sale of
the shares registered pursuant to this Registration Statement other
than the exercise price of the Warrants.
NASDAQ TRADING SYMBOL..................... FCSE
</TABLE>
(4)
<PAGE>
RISK FACTORS
An investment in the Securities offered hereby involves a high degree
of risk and should only be purchased by investors who can afford to lose their
entire investment. The following factors, in addition to those discussed
elsewhere in the Prospectus, should be considered carefully in evaluating the
Company and its business.
Future Capital Needs. At March 31, 1997, the Company had working
capital of $1,255,820, cash and cash equivalents of $1,300,717 and was fully
drawn on its $900,000 line of credit (approximately $800,000 at March 31, 1997)
with its bank and its $1.5 million term note with an unaffiliated lender.
Historically, the Company has been required to meet its short- and long-term
cash needs through debt and the sale of Common Stock in private placements in
that cash flow from operations has been insufficient. During 1996, the Company
received approximately $6,116,000 in net proceeds from the exercise of warrants,
stock options and the sale of Common Stock. During the three month period ended
March 31, 1997, the Company received approximately $1,997,000 in net proceeds
from the exercise of warrants, stock options and the sale of Common Stock.
The Company's future capital requirements will depend on many factors,
including cash flow from operations, continued progress in its research and
development programs, competing technological and market developments, and the
Company's ability to market its products successfully. During 1997, the Company
may be required to raise additional funds through equity or debt financing, of
which there can be no assurance. Any equity financing could result in dilution
to the Company's then-existing stockholders. Sources of debt financing may
result in higher interest expense. Any financing, if available, may be on terms
unfavorable to the Company. If adequate funds are not available, the Company may
be required to curtail its activities significantly.
Reliance on Major Customers. In the year ended December 31, 1996,
approximately 23% and 15% of the Company's revenues were derived from sales to
Zenith Electronics, Inc. ("Zenith") and Ingram Micro D, a national distributor,
respectively. For the three months ended March 31, 1997, approximately 29% of
the Company's revenues were derived from sales to Ingram Micro D, and
approximately 8% were derived from sales to Zenith. Management expects that
sales to Zenith and Ingram will continue to represent a significant percentage
of the Company's future revenues. In October 1996, the Company entered into a
two-year exclusive agreement with Zenith, under which Zenith must purchase at
least $12,000,000 of PC-to-TV conversion products in 1997 and at least
$30,000,000 of these products in 1998 in order to maintain exclusivity. There
can be no assurances, however, that Zenith will purchase the indicated
quantities. Further, if the contract were to be terminated by Zenith, there
would be a material adverse effect to the Company and its business.
In the year ended December 31, 1996 and for the three months ended
March 31, 1997, approximately 8% and 15%, respectively, of the Company's net
sales were derived from sales of the Company's PC to TV products to Apple
Computer, Inc. ("Apple"). In August 1994, the Company entered into a two year
Master Purchase Agreement with Apple under which Apple agreed to bundle and
distribute the Company's L-TV product with Apple's "Presentation System" product
offering. This agreement expired in August 1996. In the first quarter of 1997,
the Company received significant additional volume orders for the Company's PC
to TV products from Apple for shipment in the first and second quarters of 1997.
The Company believes that in 1997, Apple will be a major customer. Although the
orders are irrevocable and non-cancelable, no assurances can be given that Apple
will take delivery on the products or continue to order products from the
Company.
(5)
<PAGE>
History of Operating Losses. The Company has experienced limited
profitability since its inception. Although the Company reported net income of
$328,761 in the year ended December 31, 1995, the Company incurred net losses of
$3,726,606, $4,458,483 and $9,208,431 in the years ended December 31, 1993, 1994
and 1996, respectively. There can be no assurance that the Company will return
to profitability in 1997.
The Company's independent auditors have included an explanatory
paragraph in their report on the Company's financial statements for the year
ended December 31, 1996 to the effect that the Company's ability to continue as
a going concern is contingent upon its ability to secure financing and attain
profitable operations. In addition, the Company's ability to continue as a going
concern must be considered in light of the problems, expenses and complications
frequently encountered by its entrance into established markets and the
competitive environment in which the Company operates.
Limited Availability of Capital under Credit Arrangements with Lenders.
The Company maintains a $900,000 line of credit with Silicon Valley Bank. As of
March 31, 1997, approximately $800,000 is owed to the Bank under the line of
credit. Pursuant to its agreement with the Bank, the line of credit terminated
in April 1996, and was extended until March 7, 1997. At December 31, 1996, the
Company was in violation of certain debt covenants relating to the line of
credit with its commercial bank. In March 1997, the Company received a waiver of
the covenants from the commercial bank, a revision of the loan covenants and an
agreement to extend the line until March 1998.
In October 1994, the Company borrowed $2,500,000 from an unaffiliated
lender to help finance its inventory and accounts receivable under its Master
Purchase Agreement with Apple. The Company issued to this unaffiliated lender
its term note in the aggregate principal amount of $2,500,000. The term note
accrues interest at the revolving rate of prime plus 2%, is payable quarterly in
arrears at the end of December, March, June, and September, and was due February
1, 1996. The term note was originally secured by those specific assets financed
under the agreement with Apple, including accounts receivable, finished goods,
inventory, raw materials, work-in-process and contract rights arising under the
Apple agreement. The Company utilized the proceeds of this term note to finance
purchase orders received from Apple. In January 1996, the Company repaid
approximately $1 million of the amount owed under the term note. On June 28,
1996, the Company negotiated an amendment to the term note with the lender to
extend the due date of the term note to March 31, 1997. Pursuant to the
amendment, the Company granted the lender a second security interest in all the
assets of the Company. The Company is currently negotiating an additional
extension with the lender, however, there can be no assurances that the term
note will be extended on terms favorable to the Company.
Market Acceptance. The Company's sales and marketing strategy is
targeted to sales of its PC-to-TV videographics products to the Windows, MacOS
markets, including computer manufacturers, VGA graphic card developers and VGA
chip developers, as well as to television manufacturers. Although the Company
has to date experienced success in penetrating these markets, there can be no
assurance that the Company's marketing strategy will continue to be effective
and that current customers will continue to buy the Company's products. Market
acceptance of the Company's current and proposed products will depend upon the
ability of the Company to demonstrate the advantages of its products over other
PC-to-TV videographics and connectivity products.
Reliance on Single Vendor. During the year ended December 31, 1996 and
in the first three months ended March 31, 1997, approximately 60% of the
components for the Company's products were secured and manufactured on a turnkey
basis by a single vendor, Pagg Corporation. In the event that the vendor were to
cease supplying the Company, management believes there are alternative vendors
for the components for the
(6)
<PAGE>
Company's products. However, the Company would experience short term delays in
the shipment of its products.
Adverse Effects of Reduced Apple Macintosh Sales. Although in the year
ended December 31, 1996, the Company increased the sales of Windows based
products as a percentage of total sales, a substantial portion of the Company's
sales to date have been derived from products designed for use on MacOS based
personal computers, and the Company expects that sales of products for use with
Macintosh computers may represent up to 35% (including direct sales to Apple) of
its net sales in 1997. Although sales of Macintosh computers have increased from
year to year, there can be no assurance that the Macintosh operating system will
continue to be accepted as a platform for personal computer applications.
Management believes that other computer platforms, such as Windows, have gained
greater acceptance in the Company's markets as these platforms have evolved to
support applications similar to those offered for the Macintosh. In addition,
there can be no assurance that the Company will be able to make timely and
successful introductions of products for other platforms.
Dependence on Timely Delivery of the FOCUS Scan 300 Chip. The Company
is currently completing development of an ASIC called the FOCUS Scan 300 Chip
which the Company expects to incorporate into all of its next generation
PC-to-TV videographics Products. A significant portion of the Company's
anticipated revenues and gross margins for 1997 are dependent on the timely
completion and delivery of the FOCUS Scan 300 Chip. In the event that the Chip
is not available before the end of the second calendar quarter of 1997, the
Company's revenues and profitability for 1997 could be adversely effected.
Technological Obsolescence. The Windows and MacOS markets are
characterized by extensive research and development and rapid technological
change resulting in product life cycles of nine to eighteen months. Development
by others of new or improved products, processes or technologies may make the
Company's products or proposed products obsolete or less competitive. The
Company will be required to devote substantial efforts and financial resources
to enhance its existing products and to develop new products. There can be no
assurance that the Company will succeed with these efforts.
Competition. The Windows and MacOS markets are extremely competitive.
The Company currently competes with other developers of PC-to-TV conversion
products and expects to compete in the future with videographic integrated
circuit developers. Many of the Company's competitors have greater market
recognition and greater financial, technical, marketing and human resources than
the Company. Although the Company is not currently aware of any announcements by
its competitors that would have a material impact on the Company or its
operations, there can be no assurance that the Company will be able to compete
successfully against existing companies or new entrants to the marketplace.
Component Supply Problems. The Company purchases all of its parts from
outside suppliers and from time to time experiences difficulty in obtaining some
components or peripheral devices. The Company attempts to reduce the risk of
supply interruption by evaluating and obtaining alternative sources for various
components or peripheral devices. However, there can be no assurance that supply
shortages will not occur in the future which could significantly increase the
cost, or delay shipment of, the Company's products, which in turn could
adversely affect its results of operations.
Protection of Proprietary Information. Although the Company has filed
two patents and expects to file one additional patent in the second quarter of
1997 with respect to its PC-to-TV videographics products, the Company does not
currently have any patents. The Company treats its technical data as
confidential and relies on internal nondisclosure safeguards, including
confidentiality agreements with employees, and on laws
(7)
<PAGE>
protecting trade secrets to protect its proprietary information. There can be no
assurance that these measures will adequately protect the confidentiality of the
Company's proprietary information or that others will not independently develop
products or technology that are equivalent or superior to those of the Company.
While it may be necessary or desirable in the future to obtain licenses relating
to one or more of its products or relating to current or future technologies,
there can be no assurance that the Company will be able to do so on commercially
reasonable terms.
Dependence upon Key Personnel. The Company's success depends, to a
significant extent, upon a number of key employees. The loss of services of one
or more of these employees, especially the Company's Chief Executive Officer and
President, Thomas L. Massie, could have a material adverse effect on the
business of the Company. The Company believes that its future success will also
depend in part upon its ability to attract, retain and motivate qualified
personnel. Competition for such personnel in the computer industry is intense.
Although the Company has not in the past experienced difficulty in attracting
and retaining qualified personnel, there can be no assurance that the Company
will be successful in attracting and retaining such personnel in the future.
THE COMPANY
FOCUS Enhancements, Inc. (the "Company" or "FOCUS") internally
develops, markets and sells worldwide a proprietary line of PC-to-TV video
conversion products and a diversified line of high-quality, low-cost
connectivity devices for Windows(TM) and Mac(TM)OS based personal computers.
Based on an independent survey by PC Data Corp., the Company is an industry
leader in the development and marketing of PC-to-TV conversion products that
make personal computers "TV-ready" and televisions "PC-ready".
The Company's proprietary PC-to-TV video conversion products include
video output devices marketed and sold under the Company's registered brand
name, TView. All of the Company's PC-to-TV conversion products enable users to
transmit at low-cost, high quality, computer generated images from any DOS,
Windows or MacOS based personal computer to any television of any size with a
standard RCA or S- Video interface. FOCUS's PC-to-TV technology provides sharp,
flicker-free, computer-generated images on televisions for multimedia/business
presentations, classroom/training sessions, game playing or even collective
viewing of spreadsheets or internet browsing. The Company's connectivity
products provide end users with a sophisticated, yet inexpensive, local area
network for MacOS based personal computers. Personal computers equipped with the
Company's EtherLAN Ethernet connectivity products can also function as part of a
larger, high speed network that provides communications and connectivity to
MacOS compatible computers.
The Company markets and sells its FOCUS branded consumer products
globally through a network of distributors, volume resellers, mail order, value
added resellers ("VARs") and original equipment manufacturers ("OEMs"). In North
America, the Company markets and sells its products through national
distributors such as Ingram Micro D, D & H, Academic and Nuvo; national volume
resellers such as CompUSA, Computer City, Micro Center, Staples and Egg Head;
and through third party mail order companies such as MicroWarehouse, Multiple
Zones, Global, PC Connection and Tiger Direct.
In addition, the FOCUS branded PC-to-TV products have been selected by
leading personal computer manufacturers to be marketed with the use of their
select brand of personal computers. Compaq, Toshiba and Apple have included the
Company's PC-to-TV products on their selected market price lists, and promote
the FOCUS PC-to-TV products in their box materials.
(8)
<PAGE>
The Company also markets and sells its products internationally in over
30 countries by independent distributors in each country. These independent
distributors market and sell the FOCUS branded products to retailers, mail order
companies, and VARs in their respective countries.
In addition to the FOCUS branded products, the Company markets, sells
or licenses its proprietary PC-to-TV technology to television manufacturers such
as Zenith Electronics, and to personal computer manufacturers such as Apple
Computer. The Company is currently in discussions with several other PC
manufacturers, television manufacturers, VGA chip developers and VGA card
developers globally.
The Company was founded in December 1991, as a Massachusetts
corporation and was reincorporated in Delaware in April 1993. In December 1993,
the Company acquired Lapis Technologies Inc. ("Lapis"), a developer of
high-quality, low-cost Macintosh multimedia graphics products. Effective
September 30, 1996, the Company consummated the acquisition of TView, Inc., a
developer of PC-to-TV video conversion technology. This acquisition has played a
major strategic role in allowing FOCUS to gain a major technological lead over
competitors in the video scan conversion category and has positioned FOCUS as a
leader in PC-to-TV video conversion technology.
The Company's principal executive offices are located at 142 North
Road, Sudbury, Massachusetts 01776. Its research and development center is
located at 9275 SW Nimbus Drive, Beaverton, Oregon 97008. The Company's European
sales and marketing office, FOCUS Enhancements B.V., is located at Schipholweg
118, Kantorenhuis, 2316 XD Leiden, The Netherlands. The Company's general
telephone number is (508) 371-2000 and its worldwide web address is
http://www.focusinfo.com.
USE OF PROCEEDS
The Company will receive no part of the proceeds from the resale by the
Selling Stockholders of the Shares. The gross proceeds to be received by the
Company from exercise of all of the Warrants (assuming that all of the Warrants
are exercised) are $391,925, and management intends to use such proceeds for
general working capital purposes including expenditures in connection with the
development, sales and marketing of future products for the Company.
SELLING STOCKHOLDERS
The following table sets forth information concerning the beneficial
ownership of Shares of Common Stock by the Selling Stockholders as of the date
of this Prospectus and the number of such shares included for sale in this
Prospectus assuming the sale of all Shares being offered by this Prospectus. To
the best of the Company's knowledge, none of the Selling Stockholders have held
any office or maintained any material relationship with the Company or its
predecessors or affiliates over the past three years. The Selling Stockholders
reserve the right to reduce the number of Shares offered for sale or to
otherwise decline to sell any or all of the Shares registered hereunder. The
calculation of the number of Shares owned after the Offering assumes that all of
the Shares offered hereby are sold.
(9)
<PAGE>
<TABLE>
<CAPTION>
Shares to be Sold in Offering
-----------------------------
Shares Owned Shares from
Prior to Exercise of Shares Owned
Name of Selling Stockholder Offering Warrants After Offering
-------------------------- ------------ ----------- --------------
<S> <C> <C> <C>
December 1995 Offering
Jon D. Gruber ..................................... 24,000 9,890(1) 0
J. Patterson McBaine .............................. 12,000 4,940(1) 0
Lagunitas Partners L.P. ........................... 176,000 72,500(1) 0
Gruber & McBaine International .................... 30,750 12,670(1) 0
March 1997 Offering
Gerald S. Casilli ................................. 100,000 0 0
Gerald S. Casilli & Jeanne L. Casilli, Trustees UTD
11/95 FBO the Casilli 1995 Unitrust ............... 50,000 0 0
Compass Technology Partners, L.P. ................. 150,000 0 0
Jon D. Gruber & Linda W. Gruber ................... 21,000 0 0
Gruber & McBaine International .................... 20,000 0 0
Lagunitas Partners, L.P. .......................... 59,000 0 0
Heritage Education Trust Inc. ..................... 20,000 0 0
Marjac Investments, Inc. .......................... 30,000 0 0
Marjac Investments 401(k) Plan .................... 10,000 0 0
Safa Trust, Inc. .................................. 20,000 0 0
Howard Miller ..................................... 50,000 0 0
Prism Partners I .................................. 200,000 0 0
Roy & Ruth Rogers Unit Trust ...................... 66,667 0 0
Rogers Family Trust ............................... 200,000 0 0
Brian G. Swift and Suzanne B. Swift, Trustees UTD
3/31/91 FBO Brian and Suzanne Swift 1991 Living
Trust ............................................. 103,333 0 0
Brian G. Swift .................................... 0 66,000(2) 0
Roger L. Batty .................................... 0 22,000(2) 0
Jay L. Hayes ...................................... 0 22,000(2) 0
(10)
<PAGE>
<FN>
(1) Represents shares of Common Stock issuable pursuant to Investor Warrants, each exercisable for Common Stock at $2.063 per share
for three years from the date of issuance.
(2) Represents shares of Common Stock issuable pursuant to Broker Warrants, each exercisable for Common Stock at $1.6875 per share
for five years from the date of issuance, which Warrants were issued to the placement agent in connection with the March 97
Offering.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
Of the 1,552,750 Shares being registered herein for sale by the Selling
Stockholders, (i) 242,750 Shares were issued to certain unaffiliated investors
in connection with the December 95 Offering; (ii) 100,000 Shares are issuable
upon exercise of the Investor Warrants; (iii) 1,100,000 Shares were issued to
certain unaffiliated investors in connection with the March 97 Offering; and
(iv) 110,000 Shares are issuable upon exercise of the Broker Warrants. All
Shares to be registered hereby are to be offered by certain security holders of
the Company, and, other than the exercise price of the Warrants, the Company
will receive no proceeds from the sale of Shares offered hereby.
The Selling Stockholders may sell the Common Stock registered in
connection with this Offering on the NASDAQ market system or otherwise. There
will be no charges or commissions paid to the Company by the Selling
Stockholders in connection with the issuance of the Shares. It is anticipated
that usual and customary brokerage fees will be paid by the Selling Stockholders
upon sale of the Common Stock offered hereby. The Company will pay the other
expenses of this Offering. The Shares may be sold from time to time by the
Selling Stockholders, or by pledgees, donees, transferees or other successors in
interest. Such sales may be made on one or more exchanges or in the
over-the-counter market, or otherwise at prices and at terms then prevailing or
at prices related to the then current market price, or in negotiated
transactions. The Shares may be sold by one or more of the following: (a) a
block trade in which the broker so engaged will attempt to sell the Shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as principal and
resale by such broker or dealer for its account pursuant to this Prospectus; (c)
an exchange distribution in accordance with the rules of NASDAQ; and (d)
ordinary brokerage transactions. In effecting sales, brokers or dealers engaged
by the Selling Stockholders may arrange for other brokers or dealers to
participate. Brokers or dealers will receive commissions or discounts from
Selling Stockholders in amounts to be negotiated prior to the sale. Such brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Act in connection with such sales. In
addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 of the Act may be sold under Rule 144 rather than pursuant
to this Prospectus.
The Company has agreed to indemnify certain of the Selling Stockholders
against certain liabilities, including certain liabilities under the Act, or to
contribute to payments which a Selling Stockholder may be required to make in
respect thereof.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Sullivan & Worcester LLP, One Post Office Square,
Boston, Massachusetts 02109. John A. Piccione, Esq., a partner at Sullivan &
Worcester LLP, holds options to purchase 30,000 shares of Common Stock and
warrants to purchase 20,000 shares of Common Stock.
(11)
<PAGE>
EXPERTS
The consolidated financial statements of the Company as of and for the
year ended December 31, 1996 appearing in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996, have been audited by Wolf &
Company, P.C. independent accountants as set forth in their report thereon,
which report includes an explanatory paragraph regarding the Company's ability
to continue as a going concern, included therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of FOCUS Enhancements, Inc. as of
and for the year ended December 31, 1995, included in the Annual Report on Form
10-KSB of the Company for the fiscal year ended December 31, 1996 referred to
above have been audited by Coopers & Lybrand L.L.P., independent accountants, as
set forth in their report dated April 11, 1996, which included an explanatory
paragraph related to the Company's ability to continue as a going concern,
accompanying such financial statements, and are incorporated herein by reference
in reliance upon the report of such firm, which report is given upon their
authority as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in such Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the Shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in such Act and will
be governed by the final adjudication of such issue.
(12)
<PAGE>
===============================================================================
No dealer, salesman or other person has been authorized to give any
information or make any representation other than those contained in this
Prospectus. If given or made, such information or representations must not be
relied upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any of the
securities other than the specific securities to which it relates, or as offer
or solicitation to any person in any jurisdiction where such an offer or
solicitation would be unlawful.
TABLE OF CONTENTS
Page
Available Information....................................2
Incorporation of Certain
Documents by Reference.................................2
Prospectus Summary.......................................4
Risk Factors.............................................5
The Company..............................................8
Use of Proceeds..........................................8
Selling Stockholders.....................................8
Plan of Distribution....................................11
Legal Matters...........................................11
Experts.................................................12
Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities ..........................................12
1,552,750 Shares of Common Stock
FOCUS ENHANCEMENTS, INC.
______________
PROSPECTUS
______________
May 22, 1997
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(13)
