REOFFER
PROSPECTUS
FOCUS ENHANCEMENTS, INC.
1,441,224 Shares of Common Stock
This Prospectus relates to the offer and sale from time to time of up
to 1,441,224 shares (the "Shares") of common stock, $.01 par value per share
(the Common Stock") of FOCUS Enhancements, Inc. (the "Company"), by the Selling
Stockholders named herein (the "Selling Stockholders"), or by their respective
pledgees, donnees, transferees or other successors in interest that receive such
Shares as a gift, partnership distribution or other non- sale related transfer.
Of the 1,441,224 Shares being offered hereby: (i) 1,092,150 Shares were issued
to JNC Opportunity Fund Ltd. (the "Investor"); (ii) 327,645 Shares are issuable
upon the exercise of warrants (the "Investor Warrants") issued to the Investor;
and (iii) 21,429 Shares are issuable upon the exercise of warrants issued to the
placement agent and its designee (the "Broker Warrants" and, together with the
Investor Warrants, the "Warrants"). The Shares and Warrants were issued by the
Company to the Selling Stockholders on March 3, 1998 in a private placement (the
"March 98 Offering"). To the extent that the Warrants are exercised, the Company
will receive proceeds equal to the exercise price of the Warrants. The Company
will not receive any proceeds from the sale of the Shares by the Selling
Stockholders. The expenses of registration of the Shares which may be offered
hereby under the Securities Act of 1933, as amended (the "Securities Act") will
be paid by the Company.
The Shares covered under the Registration Statement of which this
Prospectus is a part may be offered for sale from time to time by or for the
account of the Selling Stockholders, or their pledgees, donees, transferees or
other successors in interest, in the open market, on the NASDAQ Small Cap Market
or on one or more exchanges on which the Shares are then listed, in privately
negotiated transactions, in an underwritten offering, in a combination of such
methods, or by any other legally available means, at market prices prevailing at
the time of such sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices. The Shares are intended to be sold through
one or more broker-dealers or directly to purchasers. Such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Stockholders, their successors in interest and/or the purchasers of
the Shares for whom such broker-dealers may act as agent or to whom they may
sell as principal, or both (which compensation as to a particular broker-dealer
may be in excess of customary commissions). The Selling Stockholders, their
successors in interest and/or any broker-dealers acting in connection with the
sale of the Shares hereunder may be deemed to be underwriters with the meaning
of Section 2(11) of the Securities Act, and any commissions or other
compensation received by them and any profits realized by them on the resale of
the Shares as principals may be deemed underwriting compensation under the
Securities Act. See "SELLING STOCKHOLDERS" and "PLAN OF DISTRIBUTION."
The Common Stock is traded on the Nasdaq SmallCap Market under the
symbol FCSE. On April 17, 1998, the last sale price of the Company's Common
Stock as reported on the Nasdaq SmallCap Market was $3 per share.
----------------------
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 DEGREE OF RISK. SEE "RISK FACTORS"
AT PAGES 5 THROUGH 7.
----------------------
The date of this Prospectus is April 22, 1998.
<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"). Such 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.
The Company has filed with the Commission a Form S-3 Registration
Statement (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This prospectus, which constitutes part of the Registration
Statement filed by the Company with the Commission under the Securities 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, 1997; (ii) the definitive Proxy
Statement filed with the Commission dated June 20, 1997 provided to stockholders
in connection with the Annual Meeting of Stockholders held on July 25, 1997; and
(iii) 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 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the offering of the
securities offered hereby 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.
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<PAGE>
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: Christopher P. Ricci, telephone (781) 371-2000.
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<PAGE>
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.
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 for PC's
and Macintoshes(R). The Company's proprietary
PC-to-TV video conversion products include
video output devices marketed and sold under
the Company's registered "TView" trademark.
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 Mac OS based
personal computer to any television of any
size with a standard RCA or S-Video
interface. FOCUS' PC-to-TV technology
provides sharp, flicker-free,
computer-generated images on televisions for
multimedia/business presentations,
classroom/training sessions, game playing,
collective viewing of computer applications
and Internet browsing. 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........... 1,441,224 Shares. The Common Stock offered
hereby consists of: (i) 1,092,150 Shares
issued to the Investor; (ii) 327,645 Shares
issuable to the Investor upon the exercise of
the Investor Warrants; and (iii) 21,429
Shares issuable upon exercise of the Broker
Warrants. See "SELLING STOCKHOLDERS."
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.............. To the extent that the Warrants are
exercised, the Company intends to use the net
proceeds for general working capital
purposes. The Company will receive no part of
the proceeds from the sale of the Shares
registered pursuant to this Registration
Statement.
NASDAQ TRADING SYMBOL........ FCSE
Information contained or incorporated by reference in this Prospectus contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, which statements can be identified by the use of
forward-looking terminology such as "may," "will," "would," "can," "could,"
"intend," "plan," "expect," "anticipate," "estimate" or "continue" or the
negative thereof or other variations thereon or comparable terminology. The
following matters constitute cautionary statements identifying important factors
with respect to such forward-looking statements, including certain risks and
uncertainties, that could cause actual results to differ materially from those
in such forward-looking statements.
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<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 December 31, 1997, the Company had working
capital of $2,619,300, cash and cash equivalents of $719,851 and was fully drawn
on its line of credit (approximately $720,000 at December 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 1997, the Company received
approximately $6,082,000 in net proceeds from the exercise of warrants, stock
options and the sale of Common Stock. In March 1998, the Company received
approximately $2,800,000 in net proceeds from the sale of Common Stock in the
March 98 Offering.
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 1998, 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. For the year ended December 31, 1997,
approximately 16% of the Company's revenues were derived from sales to a major
distributor, approximately 27% of the Company's revenues were derived from sales
to a major manufacturer of personal computers and its contract manufacturer, and
approximately 11% of the Company's revenues were derived from sales to a major
television manufacturer. Management expects that sales to these customers will
continue to represent a significant percentage of the Company's future revenues.
The Company does not have long-term contracts pursuant to which any customer is
required to purchase any minimum amount of products. There can be no assurance
that the Company will continue to receive orders of the same magnitude as in the
past from existing customers or that it will be able to market its current or
proposed products to new customers. The loss of any major customer by the
Company would have a materially adverse effect on the business of the Company as
a whole.
History of Operating Losses. The Company has experienced limited
profitability since its inception and at December 31, 1997, had an accumulated
deficit of $22,411,611. The Company incurred net losses of $10,772,410 and
$1,986,079 for the years ended December 31, 1996 and 1997, respectively.
There can be no assurance that the Company will be profitable in 1998.
Limited Availability of Capital under Credit Arrangements with Lenders.
The Company maintains a line of credit with Silicon Valley Bank which is fully
drawn ($720,000 was owed to the bank at December 31, 1997). At December 31,
1997, the Company was in violation of certain debt covenants relating to the
line of credit. In addition, the line of credit was scheduled to expire on March
8, 1998. The Company has received a waiver of the covenants from the bank, a
revision of the loan covenants and an agreement to extend the line until June 8,
1998. The Company is currently in discussions with another lender to refinance
this line.
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<PAGE>
The Company also owes $1.5 million to an unaffiliated lender pursuant
to a term note that currently accrues interest at a revolving rate of prime plus
4%, is payable quarterly in arrears at the end of December, March, June, and
September, and was due February 1, 1996. 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.
In the event that the Company is unsuccessful in refinancing its bank
line of credit or that the unaffiliated lender does not extend the due date of
its term note, the Company would be required to repay the amounts outstanding
from working capital or from equity or debt financing.
Market Acceptance. The Company's sales and marketing strategy is
targeted to sales of its PC-to- TV video-graphics products to the Windows and
Mac OS markets, including computer manufacturers, to 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 video-graphics products.
Reliance on Vendors. In the year ended December 31, 1997, approximately
90% of the components for the Company's products were secured and manufactured
on a turnkey basis by two vendors. In the event that either vendor were to cease
supplying the Company, management believes there are alternative vendors for the
components for the Company's products. However, the Company would experience
short-term delays in the shipment of its products.
Dependence on Timely Delivery of the FOCUS Scan 300 Chip. In late 1997,
the Company completed development of an ASIC called the FOCUS Scan 300 Chip
which the Company will incorporate into all of its next generation PC-to-TV
video-graphics products. The Company is relying on an outside vendor to
manufacture its requirements for the Chip. A significant portion of the
Company's anticipated revenues and gross margins for 1998 are dependent on
timely delivery of sufficient quantities of the FOCUS Scan 300 Chip in order to
fill pending and anticipated orders. In the event that the Company does not
receive sufficient quantities of the Chip to fill orders, the Company's revenues
and profitability for 1998 could be adversely effected.
Technological Obsolescence. The Windows and Mac OS 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 Mac OS markets are extremely competitive.
The Company currently competes with other developers of PC-to-TV conversion
products and with video-graphic 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.
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<PAGE>
Component Supply Problems. The Company purchases all of its parts from
outside suppliers and from time to time experiences delays 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 currently
has three patents pending, all with respect to its PC-to-TV video conversion
chips, and anticipates filing another patent application in the second quarter
of this year, 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
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.
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<PAGE>
THE COMPANY
FOCUS Enhancements, Inc. (the "Company" or "FOCUS") internally
develops, markets and sells worldwide a line of proprietary PC-to-TV video
conversion products for PC's and Macintoshes(R). Based on an independent survey
by Frost & Sullivan, the Company is an industry leader in the development and
marketing of PC-to-TV video 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 trademark
"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 Mac OS based personal computer to any television of any size with a
standard RCA or S- Video interface. FOCUS' PC-to-TV technology provides sharp,
flicker-free, computer-generated images on televisions for multimedia/business
presentations, classroom/training sessions, game playing, collective viewing of
computer applications, and Internet browsing.
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 through
third party mail order companies such as MicroWarehouse, Multiple Zones, Global
Direct, PC Connection and CDW.
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, and Toshiba 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.
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 Philips Consumer Electronics and 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 PC to TV video graphics products. Effective
September 30, 1996, the Company consummated the acquisition of TView, Inc., a
developer of PC-to-TV video conversion ASIC 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. On September 30,
1997, the Company sold its line of computer connectivity products.
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
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<PAGE>
118, Kantorenhuis, 2316 XD Leiden, The Netherlands. The Company's general
telephone number is (978) 371- 2000 and its Worldwide Web address is
http://www.focusinfo.com.
USE OF PROCEEDS
The Company will not receive any proceeds from the resale by the
Selling Stockholders of the Shares.
Management intends to use any proceeds from the exercise of the
Warrants for general working capital purposes including expenditures in
connection with the development, sales and marketing of future products for the
Company.
SELLING STOCKHOLDERS
The Shares being offered for resale by the Selling Stockholders were
acquired in connection with the March 98 Offering and include shares of Common
Stock issuable upon exercise of the Warrants. In connection with the March 98
Offering, the Company granted the Selling Stockholders certain registration
rights pursuant to which the Company agreed to keep the Registration Statement,
of which this Prospectus is a part, effective until the date that all of such
Shares have been sold pursuant to the Registration Statement or the Shares are
otherwise eligible for resale pursuant to Rule 144(k) of the Securities Act,
whichever occurs first. The Company has agreed to indemnify the Selling
Stockholders and each of their officers, directors, members, employees,
partners, agents and each person who controls any of the Selling Stockholders
against certain expenses, claims, losses, damages and liabilities (or action,
proceeding or inquiry by any regulator or self-regulatory organization in
respect thereof). The Company has agreed to pay its expenses of registering the
Shares under the Securities Act, including registration and filing fees, blue
sky expenses, printing expenses, accounting fees, administrative expenses and
its own counsel fees.
The following table sets forth the name of each Selling Stockholder,
the number of shares of Common Stock beneficially owned by such Selling
Stockholder as of March 3, 1998 and the number of Shares being offered by each
Selling Stockholder. The Shares being offered hereby are being registered to
permit public secondary trading, and the Selling Stockholders may offer all or
part of the Shares for resale from time to time. However, such Selling
Stockholders are under no obligations to sell all or any portion of such Shares
nor are such Selling Stockholders obligated to sell any Shares immediately under
this Prospectus. All information with respect to share ownership has been
furnished by the Selling Stockholders. Because the Selling Stockholders may sell
all or part of their Shares, no estimates can be given as to the number of
Shares that will be held by any Selling Stockholder upon termination of any
offering made hereby. See "PLAN OF DISTRIBUTION."
<TABLE>
<CAPTION>
Shares Beneficially
Name of Selling Owned Prior to the Shares to be Sold in the Shares Owned After the
Stockholder Offering (1) Offering Offering (1)(2)
- ------------------ ------------------- ------------------------ ----------------------
<S> <C> <C> <C>
JNC Opportunity Fund 1,419,795 1,419,795 - 0 -
Ltd. (3)
Wharton Capital 15,000 15,000 - 0 -
Partners Ltd. (4)
Elizabeth D'Angelis(4) 6,429 6,429 - 0 -
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<FN>
(1) Except as set forth in footnote (5) below, beneficial ownership is determined in accordance with Rule 13d-3
of the Exchange Act. The persons named in the table above have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by them.
(2) Assumes all Shares offered hereby are sold in the Offering.
(3) Includes 327,645 Shares issuable upon exercise of the Investor Warrants. The Investor Warrants are
exercisable until March 3, 2005 if at any time prior to August 25, 1999, the average of the closing bid
prices of the Company's Common Stock during any consecutive 20 trading days is equal to or less than
$2.7469.
(4) Represent Shares issuable upon exercise of the Broker Warrants. The Broker Warrants are exercisable at a
price of $4.2118 per share until March 3, 2003.
(5) Pursuant to the terms of the Warrants, the Warrants are exercisable by any holder only to the extent that
the number of shares of Common Stock thereby issuable, together with the number of shares of Common Stock
owned by such holder and its affiliates (but not including shares of Common Stock underlying unexercised
portions of the Warrants) would not exceed 9.99% of the then outstanding Common Stock as determined in
accordance with Section 13(d) of the Exchange Act. Accordingly, the number of Shares set forth in the table
for a Selling Stockholder may exceed the number of Shares that such Selling Stockholder could own
beneficially at any given time through such Selling Stockholder's ownership of the Warrants. In that regard,
beneficial ownership of such Selling Stockholder set forth in the table is not determined in accordance with
Rule 13d-3 under the Exchange Act.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
The Shares may be sold or distributed from time to time by the Selling
Stockholders or by pledgees, donees or transferees of, or successors in interest
to, the Selling Stockholders, directly to one or more purchasers (including
pledgees) or through brokers, dealers or underwriters who may act solely as
agents or may acquire Shares as principals, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices, which may be changed. The distribution of the Shares
may be effected in one or more of the following methods: (i) ordinary brokers
transactions, which may include long or short sales, (ii) transactions involving
cross or block trades or otherwise on the NASDAQ SmallCap Market, (iii)
purchases by brokers, dealers or underwriters as principal and resale by such
purchasers for their own accounts pursuant to this Prospectus, (iv) "at the
market" to or through market makers or into an existing market for the Common
Stock, (v) in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected through agents,
(vi) through transactions in options, swaps or other derivatives (whether
exchange listed or otherwise), or (vii) any combination of the foregoing, or by
any other legally available means. In addition, the Selling Stockholders or
their successors in interest may enter into hedging transactions with
broker-dealers who may engage in short sales of shares of Common Stock in the
course of hedging the positions they assume with the Selling Stockholders. The
Selling Stockholders or their successors in interest may also enter into option
or other transactions with broker-dealers that require the delivery by such
broker-dealers of the Shares, which Shares may be resold thereafter pursuant to
this Prospectus.
Brokers, dealers, underwriters or agents participating in the
distribution of the Shares may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders and/or the purchasers
of Shares for whom such broker-dealers may act as agent or to whom they may sell
as principal, or both (which compensation as to a particular broker-dealer may
be in excess of customary commissions).
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The Selling Stockholders and any broker-dealers acting in connection with the
sale of the Shares hereunder may be deemed to be underwriters within the meaning
of Section 2(11) of the Securities Act, and any commissions received by them and
any profit realized by them on the resale of Shares as principals may be deemed
underwiting compensation under the Securities Act. Neither the Company nor any
Selling Stockholder can presently estimate the amount of such compensation. The
Company knows of no existing arrangements between any Selling Stockholder and
any other stockholder, broker, dealer, underwriter or agent relating to the sale
of distribution of the Shares.
Each Selling Stockholder and any other persons participating in a
distribution of securities will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M, which may restrict certain activities of, and limit
the timing of purchases and sales of securities by, Selling Stockholders and
other persons participating in a distribution of securities. Furthermore, under
Regulation M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions subject to specified exceptions or
exemptions. All of the foregoing may affect the marketability of the securities
offered hereby.
Any securities covered by this Prospectus that qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under that Rule rather
than pursuant to this Prospectus.
There can be no assurance that the Selling Stockholders will sell any
or all of the shares of Common Stock offered by them hereunder.
LEGAL MATTERS
The validity of the Shares offered hereby was passed upon for the
Company by Sullivan & Worcester LLP, Boston, Massachusetts 02109. John A.
Piccione, Esq., Secretary of the Company, is also a partner at Sullivan &
Worcester LLP. Mr. Piccione holds warrants to purchase 72,740 shares of Common
Stock.
EXPERTS
The consolidated financial statements of the Company as of and for the
year ended December 31, 1997 appearing in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1997, have been audited by Wolf &
Company, P.C. independent accountants as set forth in their report thereon. 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.
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.
-11-
<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 an 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..........................................9
Selling Stockholders.....................................9
Plan of Distribution....................................10
Legal Matters...........................................11
Experts.................................................11
Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities ..........................................11
1,441,224 Shares of Common Stock
FOCUS ENHANCEMENTS, INC.
______________
PROSPECTUS
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April 22, 1998
