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As filed with the Securities and Exchange Commission on March 25, 1997
File No. _________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-------------------------
BITWISE DESIGNS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 14-1673067
(State of Incorporation) (I.R.S. Employer
Identification Number)
Building 50
Rotterdam Industrial Park
Schenectady, NY 12306
(518) 356-9741
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-----------------
John T. Botti
Chief Executive Officer
Building 50
Rotterdam Industrial Park
Schenectady, NY 12306
(518) 356-9741
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
-----------------
With copies to:
Victor J. DiGioia, Esq.
Brian C. Daughney, Esq.
GOLDSTEIN & DiGIOIA, LLP
369 Lexington Avenue
New York, New York 10017
Telephone (212) 599-3322
Facsimile (212) 557-0295
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plan, 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. |X|
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CALCULATION OF REGISTRATION FEE
===============================================================================
Proposed Proposed
Title of Each Maximum Maximum
Class of Securities Amount to be Offering Aggregate Amount of
Being Registered Registered Price per Offering Registration
(1)(2) Share(3) Price(3) Fee(3)
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Common Stock, $.001 par
value................... 3,400,000 $3.218 $10,941,200 $3,773
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Total................... 3,400,000 $10,941,200 $3,773
===============================================================================
(1) Pursuant to Rule 416, there are registered herewith an additional
indeterminate number of shares of Common Stock that may be become
issuable in connection with the antidilution provisions of the Bitwise
Designs, Inc. 1992 Employee Stock Option Plan and the Non-Executive
Director Stock Option Plan and the options granted thereunder.
(2) Of the total shares of Common Stock being registered, this Registration
Statement includes 3,000,000 shares under the 1992 Employee Stock Option
Plan and 400,000 shares under the Non-Executive Director Stock Option
Plan.
(3) Estimated solely for the purpose of determining the registration fee, in
accordance with Rule 457(h), based on the average of the closing bid and
asked prices of a share of Common Stock as quoted on the Nasdaq SmallCap
Market on March 19, 1997, ($3.218 per share).
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to Section 8(a) may
determine.
================================================================================
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BITWISE DESIGNS, INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-B
Between Registration Statement (Form S-8) and Form of Prospectus
Item Number and Heading Caption in Prospectus
----------------------- ---------------------
1a. General Plan Information Cover; Prospectus Summary; Documents
Incorporated by Reference
1b. Securities to be Offered Cover
1c. Employees Who May Participate Documents Incorporated by Reference
1d. Purchase of Securities Pursuant Securities Covered by this Prospectus
to the Plan and Payment for
Securities Offered
1e. Resale Restrictions Not Applicable
1f. Tax Effects of Plan Participation Documents Incorporated by Reference
1g. Investment of Funds Not Applicable
1h. Withdrawal from the Plan: Not Applicable
Assignment of Interest
1i. Forfeitures and Penalties Documents Incorporated by Reference
1j. Changes and Deductions; Not Applicable
Liens Therefore
2. Information with Respect Available Information; Documents
to the Registrant Incorporated by Reference; Business
3. Incorporation of Certain Documents Incorporated by Reference
Information by Reference
4. Description of Securities Securities Covered by Prospectus,
Part II
5. Interests of Named Experts Part II
and Counsel
6. Indemnification of Directors Part II
and Officers
7. Exemption from Registration
Claimed Not Applicable
8. Exhibits Part II
9. Undertakings Part II
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Part I
This Registration Statement relates to (i) 3,000,000 shares of Common
Stock, $.001 par value, of BITWISE DESIGNS, INC. (the "Company") authorized for
issuance under the Company's 1992 Employee Stock Option Plan. ("Employee Plan")
and (ii) 400,000 shares of Common Stock, $.001 par value, of the Company
authorized for issuance to non-employee directors of the Company under the
Company's Non-Executive Director Stock Option Plan (the "Director Plan").
The documents containing the information specified in Part I for Form S-8
will be sent or given to participants in the Employee Plan and Director Plan, as
specified by Rule 428(b)(1). In accordance with the instructions to Part I of
Form S-8, such documents are not being filed with the Securities and Exchange
Commission as part of the registration statement or as prospectuses or
prospectus supplements pursuant to Rule 424. The foregoing documents and the
documents incorporated by reference in this Registration Statement, taken
together, constitute a Prospectus that meets the requirements of Section 10(a)
of the Securities Act of 1933, as amended.
There is also included, as part of Part I of this Registration Statement,
a re-offer prospectus (the "Re-Offer Prospectus") relating to and to be used in
connection with any re-offer and resale of an aggregate of 3,400,000 shares of
the Company's Common Stock by persons who may be deemed affiliates of the
Company and any shares of Common stock issued or to be issued to such persons
pursuant to the exercise of options granted or shares issued under the Employee
Plan and/or Director Plan; all as permitted by General Instruction C of Form
S-8.
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RE-OFFER PROSPECTUS
This Prospectus covers an aggregate of 3,400,000 Shares of Common Stock
BITWISE DESIGNS, INC.
This Prospectus relates to the offer and sale of an aggregate of 3,400,000
shares (the "Shares") of Common Stock, $.001 par value ("Common Stock") of
Bitwise Designs, Inc. (the "Company"), to be sold from time to time for the
account of certain securities holders ("Selling Security Holders") of the
Company who may be deemed to be "affiliates" of the Company (as defined under
Rule 405 of the General Rules and Regulations of the Securities Act of 1993, as
amended), or by pledgees, donees, transferees or other successors in interest of
the Selling Security Holders. The Shares are issuable to the Selling Security
Holders upon exercise, if any, of the options granted to such persons under the
Company's 1992 Employee Stock Option Plan (the "Employee Plan") and
Non-Executive Director Stock Option Plan ("Director Plan"). Of the Shares
covered by this Prospectus, 3,000,000 Shares are issuable in connection with the
exercise of options under the Employee Plan and 400,000 Shares are issuable in
connection with the exercise of options under the Director Plan.
The Shares may be sold from time to time by the Selling Security Holders,
or by the pledgees, donees or transferees of the Shares. No underwriting
arrangements have been entered into by the Selling Security Holders. The
distribution of the Shares by the Selling Security Holders and/or their
transferees may be effected in one or more transactions that may take place on
the over the counter market, including ordinary brokers transactions, privately
negotiated transactions or through sales to one or more dealers for resale of
the Shares as principals, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. Usual
and customary or specifically negotiated brokerage fees or commissions may be
paid by the Selling Security Holders in connection with such sales. The Selling
Security Holders and intermediaries through whom such Shares are sold may be
deemed "underwriters" within the meaning of the Act, with respect to the Shares
offered. The Common Stock is traded in the over-the-counter market and listed on
the SmallCap Market of the Nasdaq Stock Market ("Nasdaq") under the symbol
"BTWS," and on the Pacific Stock Exchange under the symbol "BTW". On March 19,
1997, the closing bid and asked prices for the Common Stock as reported on
Nasdaq were $3.125 and $3.3125, respectively. See "Price Range of Common Stock
and Certain Market Information," as set forth in the Annual Report on Form
10-KSB for the fiscal year ended June 30, 1996.
The Company will not receive any proceeds from the sale of the Shares by
the Selling Security Holders but will receive proceeds from the exercise of
options granted under the Employee Plan and Director Plan at the time of
exercise, which funds will be used by the Company for working capital purposes.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" Page 9 of this Prospectus
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is March 25, 1997
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TABLE OF CONTENTS
ITEM PAGE
- ---- ----
Available Information 2
Incorporation of Certain Documents
By Reference 3
Prospectus Summary 4
The Offering 6
Certain Other Matters 7
Risk Factors 8
Use of Proceeds 18
Selling Security Holders 19
Plan Of Distribution 26
Description of Securities 26
Legal Matters 27
Experts 27
Additional Information 28
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 and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements and
other information filed by the Company with the Commission pursuant to the
informational requirements of the Exchange Act may be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the following Regional Offices of
the Commission: New York Regional Office, 7 World Trade Center, 13th Floor, New
York, New York 10048; and Chicago Regional Office, Everett McKinley Dirkson
Building, 210 South Dearborn Street, Room 1204, Chicago, Illinois 60604. Copies
of such material may be obtained from the public reference section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates and at the Commission's website at (http//:www.sec.gov).
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1996;
2. The Company's Quarterly Report on Form 10-QSB for the fiscal quarter
ended September 30, 1996;
3. The Company's Quarterly Report on Form 10-QSB for the fiscal quarter
ended December 31, 1996;
4. The Company's Registration on Form 8-A filed May 5, 1992;
5. The Company's Registration on Form 8-A filed August 9, 1994;
6. The Company's Proxy Statement dated December 12, 1996 for the Annual
Meeting originally scheduled for January 16, 1997.
All documents filed by the Company subsequent to the date of this
Prospectus pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and
prior to the filing of a post-effective amendment which indicates that all
Shares offered hereby have been sold or which deregisters all Shares then
remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed modified or
superseded for purposes of this Registration Statement and Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
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 the Registration Statement of which this Prospectus forms a
part.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any document described above (other than exhibits). Requests
for such copies should be directed to Bitwise Designs, Inc., Technology Center,
Rotterdam Industrial Park, Schenectady, New York 12306. The Company's telephone
number is (518) 356-9741.
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PROSPECTUS SUMMARY
The following summary is intended to set forth certain pertinent facts and
highlights from material contained in the body of this Prospectus and the
Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1996,
(the "Form 10-KSB") and the Forms 10-QSB for the quarters ended September 30,
1996 and December 31, 1996 (the "Forms 10-QSB"), all of which are incorporated
herein by reference. The summary is qualified in its entirety by reference to
the more detailed information and consolidated financial statements appearing
elsewhere in this Prospectus and Forms 10-KSB and 10-QSB. Each prospective
investor is urged to read this Prospectus, the Form 10-KSB, and Forms 10-QSB in
their entirety as well as the consolidated financial statements and notes as
may be contained therein.
General
Bitwise Designs, Inc. ("Bitwise"), and its wholly-owned subsidiaries,
Electrograph Systems, Inc. ("Electrograph"), System Solutions Technology, Inc.
("SST") and DJS Marketing Group, Inc. ("DJS") (Bitwise, Electrograph, SST and
DJS are sometimes collectively referred to herein as the "Company") are engaged
in the manufacture and distribution of document imaging systems, computer
systems and related peripheral equipment, components and accessories and
advanced technology industrial computers.
In March 1996, the Company acquired DJS Marketing Group, Inc. a system
integrator, computer reseller and personal computer manufacturer based in
Albany, New York. DJS is an authorized sales and support provider for Novell,
Microsoft Solutions and Lotus Notes, as well as a member of Microage
Infosystems.
In August 1994, the Company acquired Electrograph, a value added
distributor of microcomputer peripherals, components and accessories throughout
the East Coast of the United States. Electrograph distributes products including
nationally recognized brand names such as Mitsubishi, Sony, Hitachi, Magnavox,
NEC, Toshiba, Idek, Nokia and Okidata. Electrograph's products include monitors
(color, large screen, and flat screen), printers, large screen televisions,
CD-ROMS, computer video products, optical storage products, notebook computers
and personal computers. Customers of Electrograph are primarily value-added
resellers, systems integrators, original equipment manufacturers ("OEMs"),
retail stores, smaller distributors and end-user corporations, including Fortune
500 companies with the in-house sophistication and technical ability to select,
use and maintain computers. The Company has entered into a letter of intent to
sell Electrograph. See "Recent Events-Proposed Sale of Electrograph".
Simultaneously with its acquisition of Electrograph, the Company acquired
SST, a value added distributor of advanced technology industrial computers and
computer peripherals. SST has three separate operating divisions: Promark
Technology ("Promark"), SST Technical Services ("TSD") and Electronic Marketing
Associates ("EMA"). Each of these divisions is designed to address a specific
market segment related to SST's customer base. Promark is a value added
distributor of high technology computer and peripheral products to a customer
base
4
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of value added resellers (VARS), systems integrators, commercial and industrial
market OEMs, government agencies, and Fortune 500 companies which perform their
own system integration. TSD provides value added services (such as,
customization and integration of hardware and software systems) for computers or
peripherals sold through Promark including warranty on products which have been
customized or privately labeled. EMA is a manufacturer's representative selling
on a commission only basis for approximately 15 small and medium size
manufacturers of high technology products.
The Company was organized in August 1985 and reincorporated under the laws
of the state of Delaware in May 1992. The Company's executive offices are
located at Technology Center, Rotterdam Industrial Park, Schenectady, New York
12306, and its telephone number is (518) 356-9741.
Recent Events
Proposed Sale of Electrograph
The Company entered into a letter of intent on March 7, 1997 for the sale
of its wholly-owned subsidiary, Electrograph Systems, Inc., for $2,500,000 in
cash to Manchester Equipment Co., Inc. Electrograph will also settle
approximately $600,000 of intercompany liabilities owed by Electrograph to
Bitwise at the closing. Consummation of the transaction is subject to various
conditions including the negotiation and execution of a definitive agreement.
Electrograph was acquired by Bitwise in August 1994 in exchange for 333,333
shares of Bitwise common stock. There can be no assurance this transaction will
be consummated.
5
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THE OFFERING
Common Stock Outstanding
Prior to Offering (1)(2).... 7,344,720 shares
Common Stock Outstanding
After the Offering (3)...... 9,779,589 shares
Risk Factors ..................... This Offering involves a high degree of
risk. See "Risk Factors."
Use of Proceeds .................. All of the proceeds of this Offering will be
paid to the respective Selling Security
Holders and none of the proceeds will be
received by the Company. The Company will
receive proceeds from the exercise of
options which shall be used for working
capital purposes. If all of the 2,434,869
outstanding options, being registered
herein, were exercised, the Company would
receive proceeds of approximately
$8,377,370. See "Use of Proceeds."
Nasdaq Symbol .................... BTWS
Pacific Stock Exchange Symbol..... BTW
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(1) Figures reflect shares outstanding as of March 17, 1997.
(2) Does not include any shares of the 200 issued and outstanding shares of
Series A Preferred Stock. The Series A Stock is not convertible into
Common Stock. Also does not include (i) 3,000,000 shares of Common Stock
reserved for issuance under the Company's Employee Plan, of which
2,234,869 shares have been reserved for currently outstanding options and
765,131 are available for future issuances, and (ii) 400,000 shares of
Common Stock reserved for issuance under the Company's Non-Executive
Director Stock Option Plan of which 240,000 shares are reserved for
currently outstanding options and 160,000 shares are reserved for future
issuances, (iii) 2,332,995 for other outstanding options and warrants
which were not issued under either plan.
(3) Does not include any shares of the 200 issued and outstanding shares of
Series A Preferred Stock. The Series A Stock is not convertible into
Common Stock. Also does not include (i) 765,131 shares of Common Stock
reserved for future issuances under the Company's Employee Plan, and (ii)
160,000 shares of Common Stock reserved for future issuances under the
Company's Director Plan, (iii) 2,332,995 for outstanding options and
warrants which were not issued under either plan.
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CERTAIN OTHER MATTERS
This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted pursuant to
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement. The Registration Statement may be
inspected without charge at the principal office of the Commission in
Washington, D.C. and copies of all or part of them may be obtained from the
Commission upon payment of prescribed fees.
No person has been authorized to give any information or to make any
representation not contained in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy to any person in any jurisdiction where such offer would be
unlawful.
7
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RISK FACTORS
An investment in the Shares of Common Stock offered hereby involves a high
degree of risk. The following factors, in addition to those discussed elsewhere
in this Prospectus should be considered carefully in evaluating the Company and
its business. An investment in the Shares is suitable only for those investors
who can bear the risk of loss of their entire investment.
SAFE HARBOR STATEMENT
Certain statements in this Prospectus constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). The Company desires to avail itself of certain "safe
harbor" provisions of the Reform Act and is therefore including this special
note to enable the Company to do so. Forward-looking statements in this
Prospectus or hereafter included in other publicly available documents filed
with the Securities and Exchange Commission, reports to the Company's
stockholders and other publicly available statements issued or released by the
Company involve known and unknown risks, uncertainties and other factors which
could cause the Company's actual results, performance (financial or operating)
or achievements to differ from the future results, performance (financial or
operating) or achievements expressed or implied by such forward looking
statements. Such future results are based upon management's best estimates based
upon current conditions and the most recent results of operations. These risks
include, but are not limited to risks associated with the market acceptance of
the DocStar product line, further development of the DocStar product line,
recent and historical losses, competition and technological changes and other
risks detailed in the Company's Securities and Exchange Commission filings,
including its Annual Report on Form 10-KSB for the year ended June 30, 1996, and
Registration Statement on Form S-3 declared effective on July 30, 1996, each of
which could adversely affect the Company's business and the accuracy of the
forward-looking statements contained herein.
Significant Losses; Uncertainty of Integration of Recently Acquired and
Introduced Product Lines
The Company incurred a net loss of $2,961,039 for the fiscal year ended
June 30, 1996 and losses of $526,507 and $424,992 for its fiscal quarters ended
September 30, 1996 and December 31, 1996, respectively. The Company anticipates
a further loss for the quarter ending March 31, 1997. For the six months ended
December 31, 1996, the Company incurred a loss of $951,499 ($.13 per share), and
net cash used in operating activities for the six months ended December 31, 1996
totaled $2,793,045. The Company anticipates it will incur a loss for the fiscal
year ending June 30, 1997 primarily due to expenses incurred in the marketing of
its document imaging line DocStar(R). In addition, no assurances can be given
that the operations of DJS and SST will continue to generate income. Moreover,
the Company's prospects should be considered in light of the difficulties
frequently encountered in connection with the establishment of a new business
line and the competitive environment in which the Company operates. There can be
no assurance that the Company will be able to achieve profitable operations in
future operating periods. See "Financial Statements" in the Forms 10-KSB and
10-QSB.
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Need for Additional Financing
The Company's capital requirements have been and will continue to be
significant. The Company has been substantially dependent upon public offerings
and private placements of its securities and on short-term and long-term loans
from lending institutions to fund such requirements. The Company is expending
significant amounts of capital to promote and market DocStar and due to these
expenditures, has incurred significant losses during the first two quarters of
fiscal 1997. There can be no assurance that these losses will not continue
during the remainder of fiscal year 1997 as the Company continues with its
expansion of the DocStar product. There can be no assurance that the amount of
proceeds from the conversion of options being registered in this Prospectus, if
any, together with cash generated from other sources, will be sufficient to
maintain operations or finance further Company development. The Company, in the
future, may need additional funds from loans and/or the sale of equity
securities. No assurance can be given that such funds will be available or, if
available, will be on commercially reasonable terms satisfactory to the Company.
In the event such funds are not available, the Company may be forced to curtail
operations, or, in an extreme situation, cease operations. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS" in the Form 10-KSB and "RECENT DEVELOPMENTS."
Competition
The Company and its subsidiaries are engaged in the highly competitive
businesses of manufacturing and distributing document imaging systems, computer
hardware and software as well as technical support services for such businesses.
All of such businesses are highly competitive. In its document imaging systems
business, the Company competes with such major manufacturers as Panasonic, Sharp
and Canon. All of these companies have substantially more experience and greater
sales, as well as greater financial and distribution resources than those of the
Company. The most significant factors which form the basis upon which the
Company competes are the quality of its products, including advanced
capabilities, ease of use, technical support, service and price. There can be no
assurance the Company can effectively continue to compete in the future. See
"BUSINESS -- Competition" in the Form 10-KSB.
The microcomputer distribution industry, in which the Company is engaged
through Electrograph, is intensely competitive and is characterized by constant
pricing pressures and rapid product performance, improvement and technological
change resulting in relatively short product lives and early product
obsolescence. Competition is primarily based on product lines and availability,
price, delivery and other support services. Competing distributors include other
national distributors, regional distributors and manufacturers' direct sale
organizations, many of which have substantially greater technical, financial and
other resources than the Company. Major wholesale electronic distribution
competitors include Ingram Micro D, Inc., Merisel, Inc., Robec, Inc., Tech Data
Corporation, Entertainment Marketing Inc. and Gates/FA Distributing Inc. The
Company's ability to compete favorably is, in significant part, dependent upon
its ability to control costs, react timely and appropriately to short-term and
long-term trends and competitively price its products while preventing erosion
of its margins, and there is no assurance that the Company will be able to do
so.
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In addition to the competitors and competitive factors described above
with respect to Bitwise and Electrograph, SST also competes with numerous small
and local service companies who provide similar technical services in SST's area
of operation. Further, SST competes with national distributors such as Ingram
and Tech Data Corporation, and regional distributors such as Law Cypress and
Peak Technologies. There can be no assurance SST will be able to successfully
compete in the future.
The Company's most recently acquired subsidiary, DJS Marketing Group,
Inc., is engaged in the highly competitive business of systems integration,
computer assembly and computer reselling. The Company competes in the computer
market generally with major computer manufacturers such as International
Business Machines, Corp., Apple Computers, Inc., Compaq Computer Corporation,
Gateway 2000 and Dell Computer. The Company also competes with many independent
computer companies, smaller than those mentioned, many of which also have
substantially greater sales, financial resources and experience than those of
the Company. DJS competes with many small and local companies which provide
similar technical services to those offered by DJS. Additionally, DJS must
compete with other computer resellers, many of whom have greater financial and
technical resources. There can be no assurance that DJS will be able to compete
successfully with these competitors.
Security Interests; Restrictive Covenants
The Company has granted security interests with respect to substantially
all of its assets to secure certain of its indebtedness, which will continue
following this offering. In the event of a default by the Company on its secured
obligations, a secured creditor could declare the Company's indebtedness to be
immediately due and payable and foreclose on the assets securing the defaulted
indebtedness. Moreover, to the extent that all of the Company's assets continue
to be pledged to secure outstanding indebtedness, such assets will not be
available to secure additional indebtedness. The Company's loan agreement with
its institutional lender restricts the ability of the Company to incur
additional indebtedness. The terms of such agreement may limit the ability of
the Company to obtain additional financing on terms favorable to the Company or
at all. See "MANAGEMENT'S DISCUSSION AND ANALYSIS" in the Form 10-KSB.
Uncertainty of Widespread Market Acceptance of New Products
The Company introduced its DocStar imaging system products on a limited
scale in the Albany, New York region in December 1994. During the fiscal year
ended June 30, 1995, sales of DocStar system products were only $161,996. For
the fiscal year ended June 30, 1996, sales of DocStar were $1,650,921 and for
the six-months ended December 31, 1997 sales of DocStar were $3,632,098. The
Company introduced the DocStar system on a national level in the third quarter
of fiscal year 1996. Since its introduction on a national level, sales of
DocStar System products have equaled approximately $4,965,000. As is typical
with new products, demand and market acceptance for the DocStar imaging system
is subject to a high level of uncertainty. Achieving widespread acceptance of
this product line will require substantial marketing efforts and the expenditure
of significant funds to create brand recognition and customer demand for such
products. There can be no assurance that adequate marketing arrangements will be
made for such products. Moreover, there can
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be no assurance that these products will ever achieve widespread market
acceptance or increased sales or that the sale of such products will be
profitable. See "BUSINESS" in the Form 10-KSB.
Technological Obsolescence; Recent Decreases in Retail Prices
The computer industry is characterized by extensive research and
development efforts which result in the frequent introduction of new products
and software which render existing products obsolete. The ability of the Company
to compete successfully in the future will depend in large part on its ability
to maintain a technically competent research and development staff and its
ability to enhance and improve existing products and successfully develop and
market new products that meet the changing needs of its customers. Although the
Company is dedicated to continued research and development of its products with
a view towards offering software and hardware enhancements of the DocStar
product line, there can be no assurance that the Company will be able to
continue to develop new products and software on a regular basis which will be
competitive with products offered by other manufacturers. At the present time,
the Company does not have a targeted level of expenditures for research and
development. The Company will evaluate all opportunities but believes the
majority of its research and development will be devoted to enhancements of its
DocStar product line. The Company's efforts to develop new products and software
will be focused almost exclusively upon its DocStar product line, and there can
be no assurance that the Company will be able to successfully develop such new
products and software on a timely basis, if at all. Neither Electrograph, DJS
nor SST perform any significant research or development of products or
technologies. See "BUSINESS -- Research and Development" in the Form 10-KSB.
Lack of Patent Protection
The Company does not currently hold any patents and the technology
embodied in the Company's current products cannot be patented. The Company
relies on confidentiality agreements with its key employees to the extent it
deems such to be necessary. Although the Company intends to file a patent
application for any new products it may develop, to the extent any technology
included in such products is patentable, if any, there can be no assurance that
any patents in fact, will be issued or that such patents will be effective to
protect the Company's products from duplication by other manufacturers. In
addition, there can be no assurance that the Company will be able to afford the
expense of any litigation which may be necessary to enforce its rights under any
patent. Although the Company believes that the products sold by it do not and
will not infringe upon the patents or violate the proprietary rights of others,
it is possible that such infringement or violation has or may occur. In the
event that products sold by the Company are deemed to infringe upon the patents
or proprietary rights of others, the Company could be required to modify its
products or obtain a license for the manufacture and/or sale of such products.
There can be no assurance that, in such an event, the Company would be able to
do so in a timely manner, upon acceptable terms and conditions, or at all, and
the failure to do any of the foregoing could have a material adverse effect upon
the Company. Moreover, there can be no assurance that the Company will have the
financial or other resources necessary to enforce or defend a patent
infringement or proprietary rights violation action. In addition, if the
11
<PAGE> 16
Company's products or proposed products are deemed to infringe upon the patents
or proprietary rights of others, the Company could, under certain circumstances,
become liable for damages, which could also have a material adverse effect on
the Company. See "BUSINESS -- Patent and Trademarks" in the Form 10-KSB.
Dependence on Third-Party Manufacturing and Suppliers
The Company developed the software used in the DocStar product line but
does not manufacture any of the component parts for its products but rather
purchases all components from unaffiliated suppliers. All of the Company's
products (except for those which Electrograph, SST or DJS sell as distributors)
are assembled at the Company's facilities. The Company believes that at the
present time it has sufficient sources of supply of component parts, and that in
the event any existing supplier ceases to furnish component parts to the
Company, alternative sources are available. However, there can be no assurance
that future production capacity of the Company's current suppliers and
manufacturers will be sufficient to satisfy the Company's requirements or that
alternate suppliers and manufacturers will be available on commercially
reasonable terms, or at all. See "BUSINESS -- Suppliers" in the Form 10-KSB.
While Electrograph distributes products of more than 15 U.S. suppliers,
approximately 65% of Electrograph's net sales for its last fiscal year were
derived from products manufactured by Mitsubishi. Although during the last
fiscal year Electrograph's reliance upon Mitsubishi has declined, the loss of
Mitsubishi as a supplier would have a material adverse impact on the business of
Electrograph. See "BUSINESS--ELECTROGRAPH -- Suppliers" in the Form 10-KSB.
SST distributes products of various manufacturers including Kontron, Dolch
Computer, Exabyte, UMAX, Shugart, Ricoh and Idek. The loss of the availability
of products from such manufacturers could have a material adverse effect on the
business of SST. See "BUSINESS--SST" in the Form 10-KSB.
DJS is a systems integrator and computer reseller representing software
and hardware manufacturers such as Novell, Hewlett Packard, Compaq Computer and
Microsoft Solutions. The loss of the right to represent any of these
manufacturers would have a material adverse affect upon the business of DJS. See
"BUSINESS-DJS" in the Form 10-KSB.
Dependence Upon Executive Officers
The success of the Company is largely dependent upon the services of its
Chairman of the Board, Chief Executive Officer and President, John T. Botti and
Ira C. Whitman, its Senior Vice-President. SST is dependent on the services of
Joseph O. Vartabedian, the President of SST. Electrograph is dependent upon the
services of Samuel Taylor, its President. DJS is dependent upon the services of
Thomas Franceski, its President, who has entered into a two-year employment
agreement with DJS which expires in March 1998. The loss of the services of one
or more of these individuals would have a material adverse affect on the
Company's business and prospects. The Company has entered into a five-year
employment agreement with Mr. Botti expiring in June 2000. The Company does not
have
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<PAGE> 17
an employment agreement with Mr. Vartabedian. The Company has obtained, for its
benefit, "key man" life insurance in the amount of $1,000,000 on the lives of
Messrs. Botti and Whitman.
Possible Acquisitions
The Company may at times become involved in discussions with potential
acquisition candidates. There can be no assurance, however, that the Company
will identify and/or consummate an acquisition, or that such acquisitions, if
completed, will be profitable.
To the extent the Company effects a business combination with a
financially unstable company or an entity in its early stage of development or
growth (including entities without established records of sales or earnings),
the Company will become subject to numerous risks inherent in the business and
operations of financially unstable and early stage or potential emerging growth
companies. Although the Company will endeavor to evaluate the risks inherent in
a particular acquired business or industry, there can be no assurance that the
Company will properly ascertain or assess all significant risk factors.
The Company evaluates acquisition candidates by analyzing the target
company's products which complement or expand the Company's product line;
financial stability, including the target company's profitability and cash flow;
and management. The Company's long-term plan is to expand its sales and income
potential by achieving economies of scale as it expands its revenue base.
Technological growth will be considered after the above basic criteria are
evaluated. In addition, should the Company consummate an acquisition, such
acquisition could have an adverse affect on the Company's liquidity and
earnings.
Control by Present Management
John T. Botti and Ira C. Whitman, the Company's Chairman, Chief Executive
Officer and President and Senior Vice-President, respectively, are currently
entitled to elect a majority of the directors of the Company through the
exercise of the rights and preferences accorded holders of the Company's Series
A Preferred Stock. The Series A Preferred Stock allows Messrs. Botti and Whitman
to elect a majority of the Company's Board of Directors, subject to certain
conditions. The Series A Preferred Stock may make the Company a less attractive
acquisition candidate and such power may also discourage or impede offers to
acquire the Company not approved by the Board of Directors, including offers for
some or all of the shares of the Company's Common Stock at substantial premiums
above the then current market value of such shares. See "DESCRIPTION OF
SECURITIES -- Preferred Stock."
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<PAGE> 18
Affects of the Acquisitions of Electrograph, SST and DJS
In addition to the risks associated with the businesses of Bitwise, SST
and DJS on an individual basis, which are described below, the combined entity
presents additional risks solely by virtue of the combination of the four
companies. Upon the consummation of the mergers of SST and Electrograph
completed in August 1994, the Company's size increased substantially and its
operations expanded from one geographical area to three areas in two states. The
acquisition of DJS, completed in March 1996, has also increased the complexities
of operating the Company. See "BUSINESS" in Form 10-KSB.
No Dividends
The Company has not paid any dividends on its Common Stock since its
inception and does not contemplate or anticipate paying any dividends on its
Common Stock in the foreseeable future. Earnings, if any, will be used to
finance the development and expansion of the Company's business. See "DIVIDEND
POLICY" in the Form 10-KSB.
Continued NASDAQ Quotation
The National Association of Securities Dealers, Inc. has established
certain standards for the initial listing and continued listing of a security on
Nasdaq. The standards for initial listing require, among other things, that an
issuer have total assets of $4,000,000 and capital and surplus of at least
$2,000,000; that the minimum bid price for the listed securities be $3.00 per
share; and that the minimum market value of the public float (the shares held by
non-insiders) be at least $2,000,000. The maintenance standards require, among
other things, that an issuer have total assets of at least $2,000,000 and
capital and surplus of at least $1,000,000; that the minimum bid price for the
listed securities be $1.00 per share; and that the minimum market value of the
"public float" be at least $1,000,000. A deficiency in either the market value
of the public float or the bid price maintenance standard will be deemed to
exist if the issuer fails the individual stated requirement for ten consecutive
trading days. If an issuer falls below the bid price maintenance standard, it
may remain on Nasdaq if the market value of the public float is at least
$1,000,000 and the issuer has $2,000,000 in equity. There can be no assurance
that the Company will continue to satisfy the requirements for maintaining a
Nasdaq listing. If the Company's securities were excluded from Nasdaq, it would
adversely affect the prices of such securities and the ability of holders to
sell them, and the Company would be required to comply with the initial listing
requirements to be relisted on Nasdaq.
In the event that the Company is unable to satisfy Nasdaq's maintenance
requirements, and the requirements of the Pacific Stock Exchange, trading would
be conducted in the "pink sheets" or the NASD's Electronic Bulletin Board. In
the absence of the Common Stock being quoted on Nasdaq, or the Company having
$2,000,000 in net tangible assets, trading in the Common Stock would be covered
by Rule 15g-9 promulgated under the Securities Exchange Act of 1934 for
non-Nasdaq and non-exchange listed securities. Under such rule, broker/dealers
who recommend such securities to persons other than established customers and
accredited investors must make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to a
14
<PAGE> 19
transaction prior to sale. Securities are exempt from this rule if the market
price is at least $5.00 per share.
The SEC has adopted regulations that generally define a penny stock to be
any equity security that has a market price of less than $5.00 per share,
subject to certain exceptions. Such exceptions include an equity security listed
on Nasdaq and an equity security issued by an issuer that has (i) net tangible
assets of at least $2,000,000, if such issuer has been in continuous operation
for three years, (ii) net tangible assets of at least $5,000,000, if such issuer
has been in continuous operation for less than three years, or (iii) average
revenue of at least $6,000,000 for the preceding three years. Unless an
exception is available, the regulations require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the risks associated therewith.
If the Company's Common Stock was subject to the regulations on penny
stocks, the market liquidity for the Common Stock would be severely affected by
limiting the ability of broker/dealers to sell the Common Stock in the public
market. There is no assurance that trading in the Company's securities will not
be subject to these or other regulations that would adversely affect the market
for such securities.
Shares Available for Future Sale; Sales by Affiliates
As of March 24, 1997, approximately 2,0000,000 shares of Common Stock
currently outstanding may be deemed "restricted securities" as that term is
defined under Rule 144 promulgated under the Securities Act of 1933 (the
"Act"), and in the future, may be sold pursuant to a registration under the
Act, in compliance with Rule 144 under the Act, or pursuant to another
exemption therefrom. As currently in effect, Rule 144 provides that, in
general, a person holding restricted securities for a period of two years may,
every three months thereafter, sell in brokerage transactions an amount of
shares which does not exceed the greater of one percent of the Company's then
outstanding Common Stock or the average weekly trading volume of the Common
Stock during the four calendar weeks prior to such sale. Rule 144 also permits,
under certain circumstances, the sale of shares without any quantity
limitations by a person who is not an affiliate of the Company and was not an
affiliate at any time during the 90 day period prior to sale and who has
satisfied a three-year holding period. The Securities and Exchange Commission
has recently adopted changes to Rule 144 which become effective April 29, 1997.
These proposals reduce the holding periods from two and three years, as
explained above, to one and two years. Therefore, commencing one year after the
date of issuance, a holder of restricted stock could commence selling such
shares, subject to the aforementioned volume selling restrictions. Of the
shares of restricted Common Stock outstanding, approximately 800,000 shares
have been held for more than two years. Sales of the Company's Common Stock by
certain present stockholders under Rule 144 may, in the future, have a
depressive effect on the market price of the Company's securities. In addition,
the sale of shares by officers and directors and other affiliated shareholders,
may also have a depressive effect on the market for the Company's securities.
15
<PAGE> 20
Significant Outstanding Options and Warrants
As of March 17, 1997, there were outstanding immediately exercisable
warrants to purchase an aggregate of 2,332,995 shares of Common Stock at
exercise prices ranging from $1.50 to $7.50 per share (with a weighted average
exercise price of $4.22 per share). As of March 17, 1997, the Company also has
outstanding options to purchase 2,474,869 shares of Common Stock, at exercise
prices ranging from $.34 to $7.25 per share, inclusive of the outstanding
options being registered herein. To the extent that outstanding stock options
and warrants are exercised, dilution to the Company's shareholders will occur.
Moreover, the terms upon which the Company will be able to obtain additional
equity capital may be adversely affected, since the holders of the outstanding
options and warrants can be expected to exercise them at a time when the Company
would, in all likelihood, be able to obtain any needed capital on terms more
favorable to the Company than the exercise terms provided by the outstanding
options and warrants.
In July 1996, the Company registered on Form S-3 an aggregate of 3,651,418
shares of Common Stock which included 1,735,707 shares of Common Stock and
1,915,711 shares underlying outstanding warrants and options. The registration
of these securities may adversely affect the Company's ability to obtain future
equity or debt financing because of the significant number of shares available
for resale. Furthermore, the exercise of these warrants and the sale of the
underlying Common Stock (or even the potential of such exercise or sale)
included in the registration statement may have a depressive effect on the
market price of the Company's securities. Whale Securities, LLP ("Whale") a
market maker in the Company's Common Stock, is also the holder of both shares of
Common Stock and warrants in respect of which the underlying shares of Common
Stock were registered in July 1996. The sale of such warrants, or the shares
underlying same, could, under certain circumstances, require Whale to cease
market making activities for up to nine business days in advance of such sales.
The cessation of market making activities by Whale may have an adverse effect on
the market for the shares. In addition, on February 23, 1996, the Company's
Registration Statement on Form S-3 (the "February 1996 Form S-3") was declared
effective by the Securities and Exchange Commission. The February 1996 Form S-3
was filed to registered for sale 1,095,555 shares of Common Stock including (i)
48,805 shares then outstanding and 1,046,750 shares issuable pursuant to the
exercise of outstanding warrants. The exercise of the warrants and/or the sale
of the shares registered thereby may have a depressive effect upon the market
price of the Company's Common Stock.
Tax Loss Carryforwards
At June 30, 1996, the Company has net operating loss carryforwards
("NOLS") for federal income tax purposes of approximately $7,447,000 available
to offset future taxable income. Under Section 382 of the Internal Revenue Code
of 1986, as amended, utilization of prior NOLS is limited after an ownership
change, as defined in Section 382, to an annual amount equal to the value of the
loss corporation's outstanding stock immediately before the date of the
ownership change multiplied by the federal long-term exempt tax rate. Use of the
Company's NOLS could also be limited as a result of grants of stock options
under stock option plans and other events. In the event the Company achieves
profitable operations, any significant limitation on the utilization of NOLS
would have the effect of increasing the
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<PAGE> 21
Company's current tax liability. See Note 6 of Notes to Consolidated Financial
Statements included in the Form 10-KSB.
Authorization of Preferred Stock
The Company's Certificate of Incorporation authorize the issuance of
"blank check" preferred stock with such designation, rights and preferences as
may be determined from time to time by the Board of Directors. The Company has
designated 200 shares as Series A Preferred Stock and, as of the date of this
Memorandum, there were 200 shares of Series A Preferred Stock outstanding.
Moreover, the Board of Directors is empowered, without shareholder approval, to
make additional issuances of preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the voting power
or other rights of the holders of the Company's Common Stock. The holders of the
Series A Preferred Stock have the right to elect a majority of the Board of
Directors. In the event of additional issuances, the preferred stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company. Although the Company has no
present intention to issue any additional shares of its preferred stock, there
can be no assurance that the Company will not do so in the future. See
"DESCRIPTION OF SECURITIES."
NO DIVIDENDS AND NONE ANTICIPATED
The Company has never declared nor paid a dividend on any shares of its
common stock and the Board of Directors intends to continue this policy for the
foreseeable future.
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<PAGE> 22
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Common Stock offered hereby, but will receive proceeds from the exercise of
options. In the event that all of the issued and outstanding 2,234,869 options
under the 1992 Employee Stock Option Plan are exercised, the Company will
receive proceeds of $7,539,870. In the event that all of the issued and
outstanding 230,000 options being registered hereby under the Director Plan are
exercised, the Company will receive proceeds of $837,500. The options have
exercise prices ranging between $.34 and $7.25 per share.
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<PAGE> 23
SELLING SECURITY HOLDERS AND
TRANSACTIONS WITH SELLING SECURITY HOLDERS
This Prospectus relates to the offer and sale by officers, directors and
employees who may be deemed affiliates of the Company who have acquired or will
acquire shares of Common Stock under the Employee Plan or Director Plan. All of
the security holders referred to herein are collectively referred to as the
"Selling Security Holders". As of the date of this Prospectus, options to
purchase 2,234,869 shares of Common Stock have been issued under the Employee
Plan, and options to purchase 240,000 restricted shares of Common Stock have
been issued under the Director Plan. The options have exercise prices ranging
between $.34 and $7.25 per share.
The information set forth below has been provided to the Company by the
Selling Securityholders. The percentages indicated are based upon 7,344,720
shares of Common Stock issued and outstanding as of March 17, 1997.
Percentage
of Shares
Shares/Option Owned
Shares Shares After
Name of Beneficially Owned Offered Owned After Offering
Security Holder Prior to Offering Shares Offering (1)%
John Botti (2) 244,683/760,185 760,185 244,683 3.3
Ira Whitman (3) 277,054/360,185 360,185 277,054 3.7
John Loofborrow (4) 38,350/50,000 50,000 38,350 0
J. Edward Sheridan (5) 0/50,000 50,000 0 0
Dennis Bunt (6) 1,883/94,000 94,000 1,883 0
Steven Mosher(7) 321/7,000 7,000 321 0
Cherlyn Delsignore(8) 222/3,500 3,500 222 0
Deborah Lauer(9) 365/4,000 4,000 365 0
Rochelle Colvin(10) 538/14,000 14,000 538 0
Michael Wolf(11) 616/1,000 1,000 616 0
William Bierlin Jr. (12) 12,653/30,000 30,000 12,653 0
David Patton (13) 17,369/10,000 10,000 17,369 0
Joseph Vartabedian (14) 15,646/80,000 80,000 15,646 0
Richard Hunt (15) 662/10,000 10,000 662 0
Dale Foster (16) 3,083/10,000 10,000 3,083 0
19
<PAGE> 24
Percentage
of Shares
Shares/Option Owned
Shares Offered Shares After
Name of Beneficially Owned Shares Owned After Offering
Security Holder Prior to Offering Offered Offering (1)%
John Cashmark(17) 14,870/10,000 10,000 14,870 0
Dan Briganti(18) 7,653/10,000 10,000 7,653 0
Sam Taylor(19) 1,536/15,000 15,000 1,536 0
Dane Woodworth(20) 0/4,333 4,333 0 0
Michael Castelluccio(21) 0/13,000 13,000 0 0
Thomas Franceski(22) 38,062/125,000 125,000 38,062 0
Darren Franceski(23) 33,063/125,000 125,000 33,063 0
James Plumadore(24) 33,063/125,000 125,000 33,063 0
Raynd Bak(25) 0/8,333 8,333 0 0
Donald Payne(26) 10,000/40,000 40,000 10,000 1.4
William Michalec(27) 0/25,000 25,000 0 0
Nicolle Haggarty(28) 0/2,500 2,500 0 0
Jennifer Bye(29) 0/2,500 2,500 0 0
Leslie Tripp(30) 0/10,000 10,000 0 0
Darrell Monroe(31) 0/3,000 3,000 0 0
Kitty Legum(32) 0/25,000 25,000 0 0
L. Edward Hunt(33) 0/2,500 2,500 0 0
Shellee Hintz(34) 0/5,000 5,000 0 0
Christina Anderson(35) 0/10,000 10,000 0 0
Mary Manjone(36) 0/10,000 10,000 0 0
Timothy Alessi(37) 0/10,000 10,000 0 0
Mark Scyster(38) 0/10,000 10,000 0 0
Barry Steinberg(39) 0/20,000 20,000 0 0
Richard Clowes(40) 0/10,000 10,000 0 0
John Matyka(41) 0/35,000 35,000 0 0
Robert Fallows(42) 0/100,000 100,000 0 0
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<PAGE> 25
Donald Witt(43) 0/833 833 0 0
David Suarez(44) 0/25,000 25,000 0 0
Edward Macomber(45) 0/1,500 1,500 0 0
Virginia Higgins(46) 0/10,000 10,000 0 0
Nick DeSalle(47) 0/3,000 3,000 0 0
Patricia Morrison(48) 0/1,000 1,000 0 0
Irene Forest(49) 0/1,000 1,000 0 0
Kathleen Shepherd(50) 0/2,500 2,500 0 0
David Oberhelman(51) 0/5,000 5,000 0 0
Elizabeth Flatley(52) 0/3,000 3,000 0 0
Cyrus Hatfield(53) 0/5,000 5,000 0 0
Ron Halliday(54) 0/1,000 1,000 0 0
Terry Tinkle(55) 0/8,000 8,000 0 0
Brian Boyd(56) 0/10,000 10,000 0 0
Kathleen Lutz(57) 0/5,000 5,000 0 0
Anthony Bernabeo(58) 0/10,000 10,000 0 0
Kenneth Cherry(59) 0/3,000 3,000 0 0
Walter Shumaker(60) 0/25,000 25,000 0 0
Katherine Bartlett(61) 0/10,000 10,000 0 0
Colin Borrowman(62) 0/5,000 5,000 0 0
Mary Peck(63) 0/1,500 1,500 0 0
Michael Renzi(64) 0/1,500 1,500 0 0
Michele Bursiewicz(65) 0/1,500 1,500 0 0
Mary Donaldson(66) 0/10,000 10,000 0 0
Charles McGoldrick(67) 0/10,000 10,000 0 0
Hans Johnson(68) 0/10,000 10,000 0 0
Carleen Pardus(69) 0/2,500 2,500 0 0
Jeffrey Moeller(70) 0/10,000 10,000 0 0
David Lunceford(71) 0/3,000 3,000 0 0
James Steve(72) 0/10,000 10,000 0 0
TOTALS 2,434,869
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footnotes on next page
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<PAGE> 26
(1) Includes all shares of Common Stock owned by the respective Selling
Security Holder unless otherwise noted.
(2) Mr. Botti is a director and Chief Executive Officer, President and
Chairman of the Company. Includes options to purchase 150,000 shares
exercisable at $2.25 per share exercisable until April 1997 (ii) 10,185
options exercisable at $.34 per share exercisable until July 2000; (iii)
600,000 options exercisable at $1.5625 per share exercisable until June
2000. Includes vested options to purchase 385,185 shares and non-vested
options to purchase 375,000 shares. Does not include 100 shares of Series
A Preferred Stock.
(3) Mr. Whitman is a director and Secretary of the Company. Includes options
to purchase 150,000 shares exercisable at $2.25 per share exercisable
until April 1997; (ii) 10,185 options exercisable at $.34 per share
exercisable until July 2000; (iii) 200,000 options exercisable at $1.5625
per share exercisable until June 2000. Includes vested options to purchase
226,852 shares and non-vested options to purchase 133,333 shares. Does not
include 100 shares of Series A Preferred Stock.
(4) Mr. Loofborrow is a director of the Company. Includes (i) options to
purchase 10,000 shares exercisable at $4.25 per share exercisable until
June 1997; (ii) 10,000 options exercisable at $3.50 per share exercisable
until September 1998; (iii) 10,000 options exercisable at $5.125 per share
exercisable until September 1999; (iv) 10,000 options exercisable at
$4.5313 exercisable until September 2000; (v) 10,000 options exercisable
at $3.3750 exercisable until September 2001.
(5) Mr. Sheridan is a director of the Company. Includes (i) options to
purchase 10,000 shares exercisable at $4.25 per share exercisable until
June 1997; (ii) 10,000 options exercisable at $3.50 per share exercisable
until September 1998; (iii) 10,000 options exercisable at $5.125 per share
exercisable until September 1999; (iv) 10,000 options exercisable at
$4.5313 exercisable until September 2000; (v) 10,000 options exercisable
at $3.3750 exercisable until September 2001.
(6) Mr. Bunt is the Chief Financial Officer of the Company. Includes (i)
options to purchase 15,000 shares exercisable at $3.625 per share
exercisable until September 1997; (ii) 1,000 options exercisable at $3.50
per share exercisable until September 1998; (iii) 25,000 options
exercisable at $2.50 per share exercisable until November 1998; and (iv)
53,000 options exercisable at $1.5625 per share exercisable until June
2000.
(7) Includes (i) 1,000 options exercisable at $3.50 per share until September
1998 and (ii) 3,000 options exercisable at $1.5625 per share until June
2000.
(8) Includes (i) 500 options exercisable at $3.50 per share until September
1998 and (ii) 3,000 options exercisable at $1.5625 per share until June
2000.
(9) Includes (i) 1,000 options exercisable at $3.50 per share until September
1998 and (ii) 3,000 options exercisable at $1.5625 per share until June
2000.
(10) Includes (i) 1,000 options exercisable at $3.50 per share until September
1998 and (ii) 3,000 options exercisable at $1.5625 per share until June
2000; (iii) 10,000 options exercisable at $5.875 until April 2001.
(11) Includes (i) 1,000 options exercisable at $3.50 per share until September
1998.
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<PAGE> 27
(12) Mr. Bierlin is a director of the Company. Includes (i) 10,000 options
exercisable at $5.00 per share until August 1999; (ii) 10,000 options
exercisable at $4.5313 per share until September 2000; and (iii) 10,000
options exercisable at $3.375 per share until September 2001. Does not
include 9,978 shares owned by Mr. Bierlin's spouse.
(13) Includes (i) 10,000 options exercisable at $5.125 per share until August
1999.
(14) Mr. Vartabedian is President of System Solutions Technology, Inc. one of
the Company's subsidiaries. Includes (i) 80,000 options exercisable at
$3.50 per share until August 1999.
(15) Includes (i) 10,000 options exercisable at $5.125 per share until August
1999.
(16) Includes (i) 10,000 options exercisable at $5.125 per share until August
1999.
(17) Includes (i) 10,000 options exercisable at $5.125 per share until August
1999.
(18) Includes (i) 10,000 options exercisable at $5.125 per share until August
1999.
(19) Mr. Taylor is President of Electrograph Systems, Inc. one of the Company's
subsidiaries. Includes (i) 15,000 options exercisable at $1.5625 per share
until June 2000.
(20) Includes (i) 1,000 options exercisable at $1.5625 per share exercisable
until May 1997 and (ii) 3,333 options exercisable at $5.625 until May
1997.
(21) Includes (i) 3,000 options exercisable at $1.5625 per share exercisable
until June 2000; (ii) 10,000 options exercisable at $6.1875 until May
2001.
(22) Includes (i) 100,000 options exercisable at $6.125 per share exercisable
until March 2001 and (ii) 25,000 options exercisable at $7.125 per share
exercisable until March 2001.
(23) Includes (i) 100,000 options exercisable at $6.125 per share exercisable
until March 2001 and (ii) 25,000 options exercisable at $7.125 per share
exercisable until March 2001.
(24) Includes (i) 100,000 options exercisable at $6.125 per share exercisable
until March 2001 and (ii) 25,000 options exercisable at $7.125 per share
exercisable until March 2001.
(25) Includes 8,333 options exercisable at $4.46875 per share exercisable until
April 1997.
(26) Mr. Payne is a director and Chief Operating Officer of the Company.
Includes (i) 10,000 options exercisable at $4.25 per share until June 1997
and (ii) 10,000 options exercisable at $3.50 per share until September
1998; (iii) 10,000 options exercisable at $5.125 per share until September
1999; and (iv) 10,000 options exercisable at 4.5313 per share until
September 2000. Does not include 100,000 warrants exercisable at $1.56 per
share.
(27) Includes 25,000 options exercisable at $5.00 per share exercisable until
September 2001.
(28) Includes 2,500 options exercisable at $5.9375 per share exercisable until
October 2001.
(29) Includes 2,500 options exercisable at $5.625 per share exercisable until
October 2001.
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<PAGE> 28
(30) Includes 10,000 options exercisable at $4.625 per share exercisable until
October 2001.
(31) Includes 3,000 options exercisable at $4.5625 per share exercisable until
November 2001.
(32) Includes 25,000 options exercisable at $4.5625 per share exercisable until
November 2001.
(33) Includes 2,500 options exercisable at $4.5625 per share exercisable until
November 2001.
(34) Includes 5,000 options exercisable at $4.8125 per share exercisable until
January 2002.
(35) Includes 10,000 options exercisable at $6.3750 per share exercisable until
January 2002.
(36) Includes 10,000 options exercisable at $6.1875 per share exercisable until
January 2002.
(37) Includes 10,000 options exercisable at $5.1875 per share exercisable until
February 2002.
(38) Includes 10,000 options exercisable at $5.1875 per share exercisable until
February 2002.
(39) Mr. Steinberg is a former director of the Company who resigned in
September 1996. Includes (i) 10,000 options exercisable at $3.375 per
share exercisable until September 2001 and (ii) 10,000 options exercisable
at $5.125 per share exercisable until December 1999.
(40) Mr. Clowes is a director of the Company. Includes 10,000 options
exercisable at $3.375 per share exercisable until September 2001. Mr.
Clowes also owns 40,000 options granted under the Director Plan which were
previously registered.
(41) Includes 35,000 options exercisable at $5.375 per share exercisable until
November 2000.
(42) Includes 100,000 options exercisable at $4.25 per share exercisable until
September 2000.
(43) Includes 833 options exercisable at $5.875 per share exercisable until May
1997.
(44) Includes 25,000 options exercisable at $5.375 per share exercisable until
January 2001.
(45) Includes 1,500 options exercisable at $5.375 per share exercisable until
January 2001.
(46) Includes 10,000 options exercisable at $6.9375 per share exercisable until
February 2001.
(47) Includes 3,000 options exercisable at $6.9375 per share exercisable until
February 2001.
(48) Includes 1,000 options exercisable at $6.75 per share exercisable until
February 2001.
(49) Includes 1,000 options exercisable at $6.4375 per share exercisable until
February 2001.
(50) Includes 2,500 options exercisable at $6.4375 per share exercisable until
February 2001.
(51) Includes 5,000 options exercisable at $6.75 per share exercisable until
February 2001.
(52) Includes 3,000 options exercisable at $6.50 per share exercisable until
March 2001.
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<PAGE> 29
(53) Includes 5,000 options exercisable at $6.125 per share exercisable until
March 2001.
(54) Includes 1,000 options exercisable at $5.625 per share exercisable until
April 2001.
(55) Includes 3,000 options exercisable at $5.625 per share exercisable until
April 2001 and 5,000 options exercisable at 4.6875 until February 2002.
(56) Includes 10,000 options exercisable at $5.5625 per share exercisable until
April 2001.
(57) Includes 5,000 options exercisable at $6.00 per share exercisable until
April 2001.
(58) Includes 10,000 options exercisable at $6.75 per share exercisable until
May 2001.
(59) Includes 3,000 options exercisable at $5.8750 per share exercisable until
May 2001.
(60) Includes 25,000 options exercisable at $5.8750 per share exercisable until
June 2001.
(61) Includes 10,000 options exercisable at $5.8125 per share exercisable until
June 2001.
(62) Includes 5,000 options exercisable at $4.5625 per share exercisable until
July 2001.
(63) Includes 1,500 options exercisable at $3.6875 per share exercisable until
July 2001.
(64) Includes 1,500 options exercisable at $3.6875 per share exercisable until
July 2001.
(65) Includes 1,500 options exercisable at $3.6875 per share exercisable until
July 2001.
(66) Includes 10,000 options exercisable at $4.00 per share exercisable until
July 2001.
(67) Includes 10,000 options exercisable at $4.00 per share exercisable until
July 2001.
(68) Includes 10,000 options exercisable at $3.25 per share exercisable until
August 2001.
(69) Includes 2,500 options exercisable at $3.875 per share exercisable until
August 2001.
(70) Includes 10,000 options exercisable at $3.75 per share exercisable until
August 2001.
(71) Includes 3,000 options exercisable at $3.375 per share exercisable until
September 2001.
(72) Includes 10,000 options exercisable at $4.8125 per share exercisable until
March 2002.
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<PAGE> 30
PLAN OF DISTRIBUTION
The Shares covered by this Prospectus may be sold from time to time by the
Selling Security Holders, or by their transferees. No underwriting agreement or
arrangements have been entered into by the Company or by the Selling Security
Holders. The distribution of the Shares by the Selling Security Holders may be
effected in one or more transactions that may take place on the Nasdaq Exchange,
including ordinary broker transactions, in the over-the-counter market through
broker-dealers, privately negotiated transactions or through sales to one or
more dealers for resale of the Shares as principals, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. Usual and customary or specifically negotiated brokerage fees
or commissions may be paid by the Selling Security Holders in connection with
such sales. The Selling Security Holders and intermediaries through whom the
Shares may be sold may be deemed "underwriters" under the Securities Act of
1933, as amended, with respect to the Shares sold.
DESCRIPTION OF SECURITIES
The Company is authorized to issue 20,000,000 shares of Common Stock, par
value $.001 per share, and 5,000,000 shares of Preferred Stock, par value $.10
per share. As of March 17, 1997, there were 7,344,720 shares of Common Stock
issued and outstanding and 200 shares of Series A Preferred Stock issued and
outstanding.
Common Stock
Subject to the rights of the holders of any shares of Preferred Stock
which may be issued in the future, holders of shares of Common Stock of the
Company are entitled to cast one vote for each share held at all stockholders'
meetings for all purposes, including the election of directors, subject to the
rights of the holders of Series A Preferred Stock to elect a majority of the
Board of Directors. Directors are elected each year at the Company's annual
meeting of stockholders to serve for a period of one year and until their
respective successors have been duly elected and qualified.
Common stockholders have the right to share ratably in such dividends on
shares of Common Stock as may be declared by the Board of Directors out of funds
legally available therefor. Upon liquidation or dissolution, each outstanding
share of Common Stock will be entitled to share equally in the assets of the
Company legally available for distribution to stockholders after the payment of
all debts and other liabilities, subject to any superior rights of the holders
of Preferred Stock.
Common stockholders have no pre-emptive rights. There are no conversion or
redemption privileges or sinking fund provisions with respect to the Common
Stock. All of the outstanding shares of Common Stock are, and all of the shares
of Common Stock offered hereby will be, validly issued, fully paid and
nonassessable. The Common Stock does not have cumulative voting rights. Holders
of more than 50% of the outstanding Common Stock can elect 100% of the Directors
of the Company, subject to the rights of the holders of outstanding Series A
Preferred Stock.
Preferred Stock
The Board of Directors is authorized to issue shares of Preferred Stock,
$.10 par value per share, from time to time in one or more series. The Board may
issue a series of Preferred Stock having the right to vote on any matter
submitted to stockholders, including, without limitation, the right to vote by
itself as a series, or as a class together with any other or all series of
Preferred Stock. The Board of Directors may determine
26
<PAGE> 31
that the holders of Preferred Stock voting as a class will have the right to
elect one or more additional members of the Board of Directors, or the majority
of the members of the Board of Directors. The Board of Directors has designated
a series of preferred stock as Series A Preferred Stock which has the right to
elect a majority of the Board of Directors. The holders of Preferred Stock which
have the right to elect a majority of the Board of Directors, are able to
control the Company's policies and affairs.
The Board of Directors may also grant to holders of any series of
Preferred Stock preferential rights to dividends and amounts payable in
liquidation. Furthermore, the Board of Directors may determine whether the
shares of any series of Preferred Stock may be convertible into Common Stock or
any other series of Preferred Stock of the Company at a specified conversion
price or rate, and upon other terms and conditions as determined by the Board of
Directors.
Series A Preferred Stock
The Board of Directors has designated 200 shares of Preferred Stock as
Series A Preferred Stock, of which 100 shares have been issued to each of John
T. Botti and Ira C. Whitman, the Chairman and President and Senior Vice
President, respectively, of the Company. The holders of the Series A Preferred
Shares have the right to elect a majority of the Board of Directors as long as
such holder remains, subject to certain conditions, an officer, director and 5%
stockholder of the Company. During such time as the Series A Preferred Stock is
outstanding, the Board of Directors will consist of an odd number of directors,
a majority of whom will be designated as "Preferred Directors" and be elected
solely by the holders of Series A Preferred Stock voting separately as a group.
The holders of the Series A Preferred Stock have a preference on liquidation of
$1.00 per share and no dividend or conversion rights.
The Series A Preferred Stock and the power of the Board of Directors to
issue Preferred Stock with preferential voting, dividend and other rights may
make the Company a less attractive acquisition candidate. Such power may also
discourage or impede offers to acquire the Company not approved by the Board of
Directors, including offers for some or all of the shares of the Company's
Common Stock at substantial premiums above the then current market value of such
shares.
Transfer Agent
The transfer agent for the Company's Common Stock is Continental Stock
Transfer and Trust Company, 2 Broadway, New York, New York 10004.
LEGAL MATTERS
The legality of the offering of the Shares will be passed upon for the
Company by Goldstein & DiGioia, LLP, 369 Lexington Avenue, New York, New York
l00l7.
27
<PAGE> 32
ADDITIONAL INFORMATION
The Company has filed a Registration Statement under the Act with the
Securities and Exchange Commission (the "Commission"), with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement. For further information
with respect to the Company and such securities, reference is made to the
Registration Statement and to the exhibits and schedules filed therewith. Each
statement made in this Prospectus referring to a document filed as an exhibit to
the Registration Statement is qualified by reference to the exhibit for a
complete statement of its terms and conditions. The Registration Statement,
including exhibits thereto, may be inspected without charge to anyone at the
office of the Commission, and copies of all or any part thereof may be obtained
from the Commission's principal office in Washington, D.C. upon payment of the
Commission's charge for copying.
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<PAGE> 33
No dealer, salesman, or any other person has been authorized to give any
information or to make any representations other than those 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. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy, by anyone
in any jurisdiction in which such offer or solicitation is not authorized, or in
which the person making such offer or solicitation is not qualified to do so, or
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.
3,400,000 Shares
BITWISE DESIGNS, INC.
Common Stock
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
March 25, 1997
29
<PAGE> 34
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1996;
2. The Company's Quarterly Report on Form 10-QSB for the fiscal quarter
ended September 30, 1996;
3. The Company's Quarterly Report on Form 10-QSB for the fiscal quarter
ended December 31, 1996;
4. The Company's Registration on Form 8-A filed May 5, 1992;
5. The Company's Registration on Form 8-A filed August 9, 1994;
6. The Company's Proxy Statement dated December 12, 1996 for the Annual
Meeting originally scheduled for January 16, 1997.
All documents filed by the Company subsequent to the date of this
Prospectus pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and
prior to the filing of a post-effective amendment which indicates that all
Shares offered hereby have been sold or which deregisters all Shares then
remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed modified or
superseded for purposes of this Registration Statement and Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
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 the Registration Statement of which this Prospectus forms a
part.
Item 4. Description of Securities.
Not Applicable.
Item 5. Interests of Named Experts and Counsel.
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<PAGE> 35
Not Applicable.
Item 6. Indemnification of Directors and Officers.
The General Corporation Law of Delaware provides generally that a
corporation may indemnify any person who was or is a party to or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative in nature,
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
and, in a proceeding not by or in the right of the corporation, judgments, fines
and amounts paid in settlement, actually and reasonably incurred by him in
connection with such suit or proceeding, if he acted in good faith and in a
manner believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reason to believe his conduct was unlawful. Delaware law further provides that a
corporation will not indemnify any person against expenses incurred in
connection with an action by or in the right of the corporation if such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation unless and only to the extent that
the court in which such action or suit was brought shall determine that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for the expenses
which such court shall deem proper.
The By-Laws of the Company provide for indemnification of officers and
directors of the Company to the greatest extent permitted by Delaware law for
any and all fees, costs and expenses incurred in connection with any action or
proceeding, civil or criminal, commenced or threatened, arising out of services
by or on behalf of the Company, providing such officer's or director's acts were
not committed in bad faith. The By-Laws also provide for advancing funds to pay
for anticipated costs and authorizes the Board to enter into an indemnification
agreement with each officer or director.
In accordance with Delaware law, the Company's Certificate of
Incorporation contains provisions eliminating the personal liability of
directors, except for (i) breaches of a director's fiduciary duty of loyalty to
the Company or to its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, and
(iii) any transaction in which a director receives an improper personal benefit.
These provisions only pertain to breaches of duty by directors as such, and not
in any other corporate capacity, e.g., as an officer. As a result of the
inclusion of such provisions, neither the Company nor its stockholders may be
able to recover monetary damages against directors for actions taken by them
which are ultimately found to have constituted negligence or gross negligence,
or which are ultimately found to have been in violation of their fiduciary
duties, although it may be possible to obtain injunctive or equitable relief
with respect to such actions. If equitable remedies are found not to be
available to stockholders in any particular case, stockholders may not have an
effective remedy against the challenged conduct.
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<PAGE> 36
The Company has entered into Indemnification Agreements with each of its
directors and officers (the "Indemnitees") pursuant to which it has agreed to
provide for indemnification, to the fullest extent permitted by law and the
Company's By-Laws, against any and all expenses, judgments, fines, penalties and
amounts paid in settlement arising out of any claim in connection with any
event, occurrence or circumstance related to such individual serving as a
director or officer of the Company. Such indemnification includes the advance of
expenses to the Indemnitees (including the payment of funds in trust therefor
under certain circumstances) and is subject to there not having been determined
that the Indemnitee would not be permitted to be indemnified under applicable
law. The rights of indemnification are in addition to any other rights which the
Indemnitees may have under the Company's Certificate of Incorporation, ByLaws,
the Delaware General Corporation Law or otherwise.
Item 7. Exemption from Registration Claimed.
Not Applicable
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<PAGE> 37
Item 8. Exhibits.
The following exhibits, designated by an asterisk (*), have been
previously filed with the Commission and, pursuant to 17 C.F.R. Section 230.411,
are incorporated by reference to the document referenced in brackets following
the descriptions of such exhibits. All other exhibits are filed herewith.
Exhibit No. Description
- ----------- -----------
2.1* Agreement and Plan of Merger between Bitwise Designs, Inc. and
Electrograph Systems, Inc. dated February 7, 1994
2.2* Agreement and Plan of Merger between Bitwise Designs, Inc. and
Systems Solutions, Inc. dated April 29, 1994
3.1* Certificate of Incorporation of Bitwise Designs, Inc.-Delaware
(Exhibit 3.3.1 to Registration Statement on Form S-18, File No.
33-46246-NY)
3.1.1* Certificate of Designation of Series B Preferred Stock
3.2* By-Laws (Exhibit 3.2 to Registration Statement on Form S-18, File No.
33-46246-NY)
4.1* Form of Common Stock Certificate (Exhibit 4.1 to Registration
Statement on Form S-18, File No. 33-46246-NY)
4.2* Form of Series A Preferred Stock Certificate (Exhibit 4.2 to
Registration Statement on Form S-18, File No. 33-46246-NY)
4.3* Form of Warrant issued to Berkeley Securities Corp. (Exhibit 4.3 to
Registration Statement on Form S-18, File No. 33-46246-NY)
4.4* Form of Warrant issued to certain individuals in April, 1992 (Exhibit
4.4 to Registration Statement on Form S-18, File No. 33-46246-NY)
4.5* Form of Series B Preferred Stock Certificates (Exhibit 4.5 to the
Registration Statement on Form SB-2, File No. 33-76494)
4.6* Form of Warrant to be issued to Berkeley Securities Corp.(Exhibit 4.6
to the Registration Statement on Form SB-2, File No. 33-76494)
5.1 Opinion and Consent of Goldstein & DiGioia LLP re: validity of shares
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<PAGE> 38
10.1* Lease agreement with Rotterdam Industrial Park, dated August 7, 1991
(Exhibit 10.1 to Registration Statement on Form S-18, File No.
33-46246-NY)
10.1.1* Lease warrant waiver agreement (Exhibit 10.1.1 to Registration
Statement on Form S-18, File No. 33-46246-NY)
10.2* Lease with Siemens Credit Corporation for telephone system dated
November 25, 1991 (Exhibit 10.2 to Registration Statement on Form
S-18, File No. 33-46246-NY)
10.3* Lease agreement with Apple Commercial Credit for laser printer, dated
June 23, 1987 (Exhibit 10.3 to Registration Statement on Form S-18,
File No. 33-46246-NY)
10.4* Leases with Adirondack Leasing Associates, Ltd. (Exhibit 10.4 to
Registration Statement on Form S-18, File No. 33-46246-NY)
10.5* Loan agreement with U.S. Small Business Administration and Norstar
Bank, dated April 4, 1991 (Exhibit 10.5 to Registration Statement on
Form S-18, File No. 33-46246-NY)
10.6* Loan agreement with Schenectady Economic Development Corporation,
dated August 7, 1991 (Exhibit 10.6 to Registration Statement on Form
S-18, File No. 33-46246-NY)
10.8* Employment agreement with John T. Botti, dated April, 1992 (Exhibit
10.8 to Registration Statement on Form S-18, File No. 33-46246-NY)
10.9* Employment agreement with Ira C. Whitman, dated April, 1992 (Exhibit
10.9 to Registration Statement on Form S-18, File No. 33-46246-NY)
10.10* 1992 Employee Stock Option Plan (Exhibit 10.10 to Registration
Statement on Form S-18, File No. 33-46246-NY)
10.11* 1992 Non-Executive Director Stock Option Plan (Exhibit 10.11 to
Registration Statement on Form S-18, File No. 33-46246-NY)
10.13* Loan agreement with Norstar Bank dated February 6, 1992 (Exhibit
10.13 to Registration Statement on Form S-18, File No. 33-46246-NY)
10.13.1* Norstar Bank waiver agreement (Exhibit 10.13.1 to Registration
Statement on Form S-18, File No. 33-46246-NY)
10.14* Agreement with Prime Computer, Inc. (Exhibit 10.14 to Registration
Statement
II-5
<PAGE> 39
on Form S-18, File No. 33-46246-NY)
10.15* Agreement with Mentor Computer Graphics Ltd. (Exhibit 10.15 to
Registration Statement on Form S-18, File No. 33-46246-NY)
10.16* Agreement with Robert W. Schwartz, Inc. dated February 10, 1992
(Exhibit 10.16 to Registration Statement on Form S-18, File No.
33-46246-NY)
10.17* Form of Financial Consulting Agreement with the Underwriter (Exhibit
10.17 to the Registration Statement on form SB-2, File No. 33-76494)
10.18* Financing Agreement by and among Maryland Industrial Development
Financing Authority, JED Associates, State National Bank of Maryland,
Electronic Marketing Associates, Inc. (name was changed to System
Solutions Technology, Inc.), Trimarc Systems Incorporated and
Intermec Mid-Atlantic Corporation dated December 11, 1985 (Exhibit
10.18 to the Registration Statement on form SB-2, File No. 33-76494)
10.19* Maryland Industrial Development Financing Authority Limited
Obligation Economic Development Revenue Bond (Exhibit 10.19 to the
Registration Statement on form SB-2, File No. 33-76494)
10.20* Cross-Collateral Security Agreement between NationsCredit
Corporation, Bitwise Designs, Electrograph Systems, Inc. and System
Solutions Technology, Inc. dated July 18, 1995.
10.21* Subcontract dated September 28, 1995 between PRC, Inc.and System
Solutions Technology, Inc.
10.22* Financial Consulting Agreement dated July 17, 1995 between the
Company and Whale Securities, LLP.
10.23* Agreement and Plan of Merger by and among Bitwise Designs, Inc.,
Bitwise DJS, Inc., certain individuals and DJS Marketing Group, Inc.
dated March 6, 1996 (Exhibit 2 to Form 8-K dated March 22, 1996)
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Goldstein & DiGioia LLP: contained in Exhibit 5.1
27 Financial Data Schedule
II-6
<PAGE> 40
Item 9. Undertakings
The undersigned registrant hereby undertakes:
A. (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereto) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) (i) For the purpose of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the Registration
Statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
(5) For purposes of determining any liability under the Securities Act of
1933, each filing of the Company's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating
II-7
<PAGE> 41
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.
B. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of
requirements for filings on Form S-3 and has duly caused this Registration
Statement on Form S-8 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Schenectady, State of New York, on the 24
day of March, 1997.
BITWISE DESIGNS, INC.
March 24, 1997 By: /s/ John T. Botti
---------------------------------
John T. Botti
Chairman of the Board, President
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below substitutes and appoints John T. Botti, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement on Form S-8, and to file and same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Capacity Date
--------- -------- ----
/s/ John T. Botti Chairman of the Board, March 24, 1997
- ---------------------- President Chief Executive
John T. Botti Officer
/s/ Ira C. Whitman Senior Vice-President March 24, 1997
- ---------------------- and Director
Ira C. Whitman
/s/ John W. Loofbourrow Director March 24, 1997
- ----------------------
John W. Loofbourrow
II-9
<PAGE> 43
/s/ Donald J. Payne Chief Operating Officer March 24, 1997
- ---------------------- Executive Vice President
Donald J. Payne and Director
/s/ J. Edward Sheridan Director March 24, 1997
- ----------------------
J. Edward Sheridan
/s/ Richard F. Clowes Director March 24, 1997
- ----------------------
Richard F. Clowes
/s/ Dennis H. Bunt Chief Financial March 24, 1997
- ---------------------- Officer and Principal
Dennis H. Bunt Accounting Officer
/s/ William E. Bierlin, Director March 24, 1997
Jr.
- -----------------------
William E. Bierlin, Jr.
II-10
<PAGE> 44
EXHIBIT INDEX
The following exhibits, designated by an asterisk (*), have been
previously filed with the Commission and, pursuant to 17 C.F.R. Section 230.411,
are incorporated by reference to the document referenced in brackets following
the descriptions of such exhibits. All other exhibits are filed herewith.
Exhibit No. Description
- ----------- -----------
2.1* Agreement and Plan of Merger between Bitwise Designs, Inc. and
Electrograph Systems, Inc. dated February 7, 1994
2.2* Agreement and Plan of Merger between Bitwise Designs, Inc. and
Systems Solutions, Inc. dated April 29, 1994
3.1* Certificate of Incorporation of Bitwise Designs, Inc.-Delaware
(Exhibit 3.3.1 to Registration Statement on Form S-18, File No.
33-46246-NY)
3.1.1* Certificate of Designation of Series B Preferred Stock
3.2* By-Laws (Exhibit 3.2 to Registration Statement on Form S-18, File No.
33-46246-NY)
4.1* Form of Common Stock Certificate (Exhibit 4.1 to Registration
Statement on Form S-18, File No. 33-46246-NY)
4.2* Form of Series A Preferred Stock Certificate (Exhibit 4.2 to
Registration Statement on Form S-18, File No. 33-46246-NY)
4.3* Form of Warrant issued to Berkeley Securities Corp. (Exhibit 4.3 to
Registration Statement on Form S-18, File No. 33-46246-NY)
4.4* Form of Warrant issued to certain individuals in April, 1992 (Exhibit
4.4 to Registration Statement on Form S-18, File No. 33-46246-NY)
4.5* Form of Series B Preferred Stock Certificates (Exhibit 4.5 to the
Registration Statement on Form SB-2, File No. 33-76494)
4.6* Form of Warrant to be issued to Berkeley Securities Corp.(Exhibit 4.6
to the Registration Statement on Form SB-2, File No. 33-76494)
5.1 Opinion and Consent of Goldstein & DiGioia LLP re: validity of shares
<PAGE> 45
10.1* Lease agreement with Rotterdam Industrial Park, dated August 7, 1991
(Exhibit 10.1 to Registration Statement on Form S-18, File No.
33-46246-NY)
10.1.1* Lease warrant waiver agreement (Exhibit 10.1.1 to Registration
Statement on Form S-18, File No. 33-46246-NY)
10.2* Lease with Siemens Credit Corporation for telephone system dated
November 25, 1991 (Exhibit 10.2 to Registration Statement on Form
S-18, File No. 33-46246-NY)
10.3* Lease agreement with Apple Commercial Credit for laser printer, dated
June 23, 1987 (Exhibit 10.3 to Registration Statement on Form S-18,
File No. 33-46246-NY)
10.4* Leases with Adirondack Leasing Associates, Ltd. (Exhibit 10.4 to
Registration Statement on Form S-18, File No. 33-46246-NY)
10.5* Loan agreement with U.S. Small Business Administration and Norstar
Bank, dated April 4, 1991 (Exhibit 10.5 to Registration Statement on
Form S-18, File No. 33-46246-NY)
10.6* Loan agreement with Schenectady Economic Development Corporation,
dated August 7, 1991 (Exhibit 10.6 to Registration Statement on Form
S-18, File No. 33-46246-NY)
10.8* Employment agreement with John T. Botti, dated April, 1992 (Exhibit
10.8 to Registration Statement on Form S-18, File No. 33-46246-NY)
10.9* Employment agreement with Ira C. Whitman, dated April, 1992 (Exhibit
10.9 to Registration Statement on Form S-18, File No. 33-46246-NY)
10.10* 1992 Employee Stock Option Plan (Exhibit 10.10 to Registration
Statement on Form S-18, File No. 33-46246-NY)
10.11* 1992 Non-Executive Director Stock Option Plan (Exhibit 10.11 to
Registration Statement on Form S-18, File No. 33-46246-NY)
10.13* Loan agreement with Norstar Bank dated February 6, 1992 (Exhibit
10.13 to Registration Statement on Form S-18, File No. 33-46246-NY)
10.13.1* Norstar Bank waiver agreement (Exhibit 10.13.1 to Registration
Statement on Form S-18, File No. 33-46246-NY)
10.14* Agreement with Prime Computer, Inc. (Exhibit 10.14 to Registration
Statement
<PAGE> 46
on Form S-18, File No. 33-46246-NY)
10.15* Agreement with Mentor Computer Graphics Ltd. (Exhibit 10.15 to
Registration Statement on Form S-18, File No. 33-46246-NY)
10.16* Agreement with Robert W. Schwartz, Inc. dated February 10, 1992
(Exhibit 10.16 to Registration Statement on Form S-18, File No.
33-46246-NY)
10.17* Form of Financial Consulting Agreement with the Underwriter (Exhibit
10.17 to the Registration Statement on form SB-2, File No. 33-76494)
10.18* Financing Agreement by and among Maryland Industrial Development
Financing Authority, JED Associates, State National Bank of Maryland,
Electronic Marketing Associates, Inc. (name was changed to System
Solutions Technology, Inc.), Trimarc Systems Incorporated and
Intermec Mid-Atlantic Corporation dated December 11, 1985 (Exhibit
10.18 to the Registration Statement on form SB-2, File No. 33-76494)
10.19* Maryland Industrial Development Financing Authority Limited
Obligation Economic Development Revenue Bond (Exhibit 10.19 to the
Registration Statement on form SB-2, File No. 33-76494)
10.20* Cross-Collateral Security Agreement between NationsCredit
Corporation, Bitwise Designs, Electrograph Systems, Inc. and System
Solutions Technology, Inc. dated July 18, 1995.
10.21* Subcontract dated September 28, 1995 between PRC, Inc.and System
Solutions Technology, Inc.
10.22* Financial Consulting Agreement dated July 17, 1995 between the
Company and Whale Securities, LLP.
10.23* Agreement and Plan of Merger by and among Bitwise Designs, Inc.,
Bitwise DJS, Inc., certain individuals and DJS Marketing Group, Inc.
dated March 6, 1996 (Exhibit 2 to Form 8-K dated March 22, 1996)
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Goldstein & DiGioia LLP: contained in Exhibit 5.1
27 Financial Data Schedule
<PAGE> 1
LETTERHEAD OF
GOLDSTEIN & DIGIOIA LLP
369 Lexington Avenue
New York, New York 10017
Telephone No. 212.599.3322
Facsimile No. 212.557.0295
March 24, 1997
Bitwise Designs, Inc.
Technology Center
Rotterdam Industrial Park
Schenectady, New York 12306
Re: Bitwise Designs, Inc.
Registration Statement on Form S-8
Filed on March 24, 1997
Dear Sir/Madam:
We have reviewed a Registration Statement on Form S-8 (the "Registration
Statement") filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), by Bitwise Designs, Inc., a
Delaware corporation (the "Company"), on March 27, 1997. The Registration
Statement has been filed for the purpose of registering for offer and sale under
the Act of an aggreagte of (i) 3,000,000 shares (the "Shares") of the Company's
common stock, $.001 par value (the "Common Stock") issuable under the Company's
1992 Employee Stock Option Plan (the "Employee Plan"), which Shares are issuable
pursuant to the exercise of options (the "Plan Options") granted under the
Employee Plan and (ii) 400,000 shares (the "Non-Employee Director Shares") of
Common Stock issuable pursuant to exercise of options granted under the
Non-Executive Director Stock Option Plan by a non-employee Director of the
Company (the "Non-Employee Options").
We have examined the Company's Certificate of Incorporation as amended,
By-Laws and such documents, corporate records and questions of law as we have
deemed necessary solely for the purpose of enabling us to render the opinions
expressed herein. On the basis of such examination, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing and in
good standing under the laws of the State of Delaware, with corporate power to
conduct the business which it conducts as described in the Registration
Statement.
<PAGE> 2
Bitwise Designs, Inc.
March 24, 1997
Page 2
2. The Company has an authorized capitalization of 25,000,000 shares of
capital stock consisting of 20,000,000 shares of Common Stock, $.001 par value,
and 5,000,000 shares of Preferred Stock, $.10 par value, of which 200 shares are
designated Series A Preferred Stock, all of which are issued and outstanding.
3. The Shares have been duly authorized and when issued in accordance with
the Employee Plan Options or Non-Employee Options, sold and paid for as
described in the Registration Statement, will be validly issued, fully paid and
non-assessable.
4. The Plan Options, when issued pursuant to the terms and conditions of
the Plan, as described in the Registration Statement, will constitute legal and
binding obligations of the Company in accordance with their terms.
5. The Non-Employee Director Options have been duly authorized and when
issued in accordance with the Non-Employee Options, sold and paid for as
described in the Registration Statement, will be validly issued, fully paid and
non-assessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to reference to our firm under the caption "Legal
Opinion" in the Prospectus forming a part of the Registration Statement.
Very truly yours,
GOLDSTEIN & DIGIOIA LLP
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Bitwise Designs, Inc.:
We consent to the use of our report, included in the June 30, 1996 Annual Report
on Form 10-KSB of Bitwise Designs, Inc., incorporated herein by reference.
/s/ KPMG Peat Marwick LLP
Albany, New York
March 24, 1997
